Court Opinion

ID: 4568717
Source: CourtListenerOpinion
Date Created: 2020-09-23 06:12:35.253422+00
Date Added: 2024-06-11T08:46:42.487311
License: Public Domain

AFFIRMED as MODIFIED and Opinion Filed September 17, 2020

                                            S   In The
                                 Court of Appeals
                          Fifth District of Texas at Dallas
                                       No. 05-18-00799-CV

     JONATHAN CORNWELL AND SHADD MCKINNEY, Appellant
                            V.
   DIANA SCOTHORN, STEWART SCOTHORN, THE BENEFIT LINK,
           INC., AND SCOTHORN AERO, INC., Appellee

                   On Appeal from the 429th Judicial District Court
                                Collin County, Texas
                       Trial Court Cause No. 429-05287-2016

                           MEMORANDUM OPINION
        Before Chief Justice Burns, Justice Molberg, and Justice Partida-Kipness
                            Opinion by Chief Justice Burns1
         Jonathan Cornwell and Shadd McKinney appeal the trial court’s judgment

awarding Diana and Stewart Scothorn $183,890.18 on their claim of promissory

estoppel against Cornwell and McKinney and awarding McKinney $17,427.86 for

credit card expenses and loss of credit reputation. In nine issues, Cornwell and

McKinney argue the trial court erred “by including the jury’s promissory estoppel

    1
     The Honorable David Bridges, Justice, participated in the submission of this appeal; however, he did
not participate in the issuance of this opinion due to his death on July 25, 2020. Chief Justice Burns has
reviewed the record and the briefs in this cause.
finding and associated damages” against them; the evidence does not support the

jury’s answers to the question regarding promissory estoppel, the question regarding

the Scothorn’s estoppel defense, and the question regarding Cornwell and

McKinney’s fraud; the trial court erred in not awarding Cornwell and McKinney

equitable relief and awarding the Scothorns costs; the evidence conclusively

established the jury’s award of damages was excessive; and the trial court erred in

denying Cornwell and McKinney’s motion for new trial. As modified, we affirm

the trial court’s judgment.

      In December 2016, the Scothorns filed suit against Cornwell and McKinney.

The facts as set forth in the Scothorns’ fourth amended petition are as follows.

Legacy Aeronautics is a closely-held corporation, and Diana is the majority

shareholder. Diana is also the sole shareholder of The Benefit Link, Inc., a Medicare

supplement insurance company. In April 2015, the Scothorns were introduced to

Cornwell and McKinney at church. Cornwell and McKinney had left positions in

the aeronautics industry and were seeking investors to start Legacy. In discussions

with the Scothorns, Cornwell and McKinney identified customers and contracts they

had or were reasonably certain to have. The Scothorns agreed to provide the initial

capital, which was all that was supposed to be required to fund initial operations,

and no extended or continuing contributions were contemplated.

      In August 2016, the parties signed a written agreement that confirmed Diana

owned eighty percent of Legacy, and Cornwell and McKinney each owned ten

                                        –2–
percent. The agreement was made retroactive back to the inception of Legacy in

April 2015. At all times, Cornwell and McKinney ran Legacy’s daily operations.

      Despite the Scothorns’ initial understanding that they would only make the

initial equity contribution, Cornwell and McKinney continued to request additional

funds. Cornwell and McKinney indicated that there were substantial deals in place

or in Legacy’s pipeline that required additional funds to be fulfilled. Between April

2015 and October 2016, the Scothorns advanced approximately $2.35 million to

Cornwell and McKinney directly or indirectly through direct payments or purchases

made on behalf of Cornwell and McKinney and Legacy. Of this amount, $1.7

million went to Cornwell and McKinney and/or Legacy, $37,700 was spent on

equipment purchases by Legacy, and $626,000 was used to pay for Legacy’s

staffing.

      By October 2016, the Scothorns became weary of Cornwell and McKinney’s

repeated requests for additional advances. Following Cornwell and McKinney’s

representations that they were working twenty-four hours a day and not getting paid,

the Scothorns offered the help of a Benefit Link employee, Micah Lynch, who

requested financial information to create a budget and provide operational structures

and support. By late October or early November, operations had not improved and

Cornwell and McKinney were requesting additional funds. By that time, Lynch had

determined Legacy had accounts payable of a million dollars and was unable to fund

                                        –3–
its operations. Lynch also had a difficult time getting complete information from

Cornwell and McKinney.

      The Scothorns discovered that, although Legacy was not profitable and at

times insolvent, Cornwell and McKinney collectively paid themselves direct

compensation in excess of $240,000 during the partial year 2015 and more than

$300,000 during 2016. Cornwell and McKinney did not account for the payments

as wages or distributions; instead, when Legacy received funds, Cornwell and

McKinney dispersed the funds to themselves. At the same time, Cornwell and

McKinney did not make any distributions to the Scothorns, Legacy was incurring

additional debt to third-party vendors for contract labor, and Cornwell and

McKinney were charging personal expenses to Legacy. In November 2016, the

Scothorns requested documentation of Legacy’s expenses, but Cornwell and

McKinney failed to provide support for the expenses or documentation as to the

necessity of the expenses as they related to Legacy’s business. On November 14,

2016, Cornwell and McKinney indicated they would not continue to run Legacy

without additional cash from the Scothorns. On November 17, 2016, Cornwell and

McKinney notified the Scothorns that (1) they had “secured” the leased space rented

by Legacy, (2) they would seek other employment, (3) the company credit card was

past due and could not be paid, (4) all equipment owned by Legacy was located in

the leased space, and (5) approximately $60,000 in accounts receivable remained to

be collected by Legacy for work already completed. Based on the foregoing, the

                                       –4–
Scothorns filed suit alleging causes of action for breach of fiduciary

duty/constructive fraud, fraud/fraudulent inducement, money had and received, alter

ego, conversion, conspiracy, breach of contract, and promissory estoppel. The

Scothorns also requested the appointment of a receiver.

      Cornwell and McKinney filed an answer denying that all conditions precedent

had occurred and asserting the following affirmative defenses: duress, lack of

consideration, fraud, ratification, waiver, and estoppel or quasi-estoppel. Cornwell

and McKinney also asserted that the Scothorn’s claims were barred by the business

judgment rule and the Scothorns’ damages were caused by themselves or others.

      Cornwell and McKinney also filed counterclaims and third-party claims and

asserted the following version of the facts. Cornwell and McKinney formed Legacy

in April 2015 and granted Stewart a twenty-percent interest in exchange for start-up

capital on an as-needed basis. At all times, Cornwell and McKinney made it clear

that they lacked capital, the business was not likely to attain profitability for some

time, and they would need additional funds to conduct operations while the business

developed.   Cornwell and McKinney were to receive a salary for conducting

Legacy’s operations and, as funds were needed, they were to inform Stewart, and

Stewart would advance the funds. At that time, Stewart did not disclose or mention

that his wife, Diana, was involved in Legacy’s business or that she was providing

the funds to meet Legacy’s operating requirements.           Instead, Cornwell and

McKinney were led to believe they were dealing with Stewart as their fellow

                                         –5–
shareholder. In July 2015, Stewart made advances of $189,420.12 and $150,000. In

August 2015, after only a few months of operations and despite being told at the

outset that additional funds would be needed to fund Legacy’s operations until it

became profitable, Stewart expressed frustration about the funds needed to operate

Legacy. Stewart made it clear that, unless he was given a higher percentage of

ownership, he would refuse to provide further financial support to Legacy. Cornwell

and McKinney offered to change the ownership structure to make Stewart a sixty

percent owner, and Stewart continued to fund Legacy as needed.

      Stewart served as corporate officer in charge of the finances for Legacy, while

Cornwell and McKinney conducted day-to-day operations.               Cornwell and

McKinney discussed financial expenditures with Stewart, and Stewart cleared the

expenditures before payments were made.        In this role, Stewart made further

advances to Legacy as follows: $86,000 on December 3, 2015; $85,000 on

December 18, 2015; $100,000 on March 12, 2016; $100,000 on March 24, 2016;

$100,000 on April 10, 2016; and $75,000 on April 20, 2016. During this time period,

Cornwell and McKinney provided Stewart with details on the amounts Legacy was

paying and, in his capacity as chief financial officer, Stewart approved the

expenditures.

      During this same time period, Cornwell and McKinney continued to develop

Legacy’s business and pursue new clients. Cornwell and McKinney developed a

business strategy to pursue government contracts through a federal small business

                                        –6–
set-aside program. On August 17, 2016, Cornwell and McKinney discussed with

Stewart the opportunity to serve as the prime contractor on a federal contract with

Bell Helicopter serving as the sub-contractor. Cornwell and McKinney discussed

similar opportunities with Bell Helicopter, Raytheon, and Lockheed Martin, and

they kept Stewart informed about these opportunities.

      In April 2016, Stewart required five percent of all revenue generated be paid

to his charitable foundation. Stewart also required that $100,000 per month be repaid

to Stewart as “ruminative compensation for Capital initially invested.” If not paid,

this “ruminative compensation” was to “earn interest of 50% per month” and

“accumulate and compound” until paid. Stewart also told Cornwell and McKinney

they could recover some of the percentages taken from them by meeting certain

weight loss demands.

      In August 2016, Cornwell and McKinney discussed with Stewart transferring

his ownership to his wife, Diana. Stewart remained a corporate officer of Legacy,

and Cornwell and McKinney continued to deal with Stewart, not Diana.

Nevertheless, on September 19, 2016, The Benefit Link sent documents to the Texas

Secretary of State purporting to name Diana as the sole shareholder of Legacy, which

she never was. At no time did Cornwell or McKinney receive any consideration for

any part of their original forty percent ownership interest in Legacy.

      Although Cornwell and McKinney’s relationship with Stewart continued to

deteriorate, Cornwell and McKinney continued to do their jobs and generate revenue

                                         –7–
through purchase orders and sales contracts. Cornwell and McKinney further

pursued promising prospective business relations with Bell Helicopter, Lockheed

Martin, and others for government small business set-aside contracts

      However, as early as October 2016, the Scothorns began discussions with

their attorney concerning Legacy and directed Micah Lynch, as an employee of The

Benefit Link, to review Legacy’s finances. The Scothorns also suggested Marcus

Young, another employee of The Benefit Link, for a position at Legacy. Cornwell

and McKinney cooperated with these efforts and were given no indication that the

Scothorns were planning to end their involvement and support of Legacy.

      At a November 4, 2016 meeting, Stewart demanded that Cornwell and

McKinney sign a stock agreement and promissory note that would obligate Cornwell

and McKinney to pay $3,500,000 each to the Scothorns. This amount exceeded

anything the Scothorns advanced to Legacy, and Cornwell and McKinney had never

agreed to be personally liable for funds contributed, loaned, or advanced to Legacy.

When Cornwell and McKinney refused to sign, the Scothorns proceeded with their

plans to shut down Legacy.

      On November 6, 2016, at the direction of the Scothorns, Lynch made demand

for all documents related to Legacy’s business operations, including vendor

information, customer information, log-in and password information, accounts

payable, existing lease agreements, and purchase orders. Two days later, Stewart

emptied Legacy’s bank accounts, effectively suspending Legacy’s operations.

                                        –8–
      Cornwell and McKinney came to believe the Scothorns had decided to shut

down Legacy and form a new competing company, Scothorn Aero, Inc. (SAI). On

November 22, 2016, Diana filed papers with the Texas Secretary of State forming

SAI. Prior to that, SAI developed a website and a business plan using third-party

vendors.     Young, who received training and information regarding Legacy’s

business, became SAI’s executive director. SAI is wholly owned by Stewart and

Diana, and both they and Lynch serve as officers of SAI. Based on these facts,

Cornwell and McKinney asserted claims of breach of fiduciary duty/knowing

participation, fraud, tortious interference with existing and prospective business

relations, aiding and abetting/civil conspiracy/ratification, respondeat superior/vice

principal, and attorney’s fees.

      At a jury trial in April 2018, Stewart testified he met McKinney at a time when

he was the chief executive officer of The Benefit Link and Diana was the owner.

McKinney said he wanted to tell Stewart about getting into business making cabinets

and galleys for commercial and private jets. McKinney said Cornwell was his friend

and was extremely experienced within the industry and had twenty-five years of

experience. Stewart met with Cornwell and McKinney, and they told Stewart they

had existing clients from their company that was going out of business. Cornwell

and McKinney said they had “in the neighborhood of $10 million in contracts that

they wanted to get,” and they just needed more space and more equipment to get the

contracts.   They asked Stewart to invest, but he said he was not interested.

                                         –9–
McKinney was “very persistent,” so Stewart said he would “pray about it” and ask

his wife about it.

      At a subsequent meeting, Cornwell and McKinney discussed with Stewart

orders or business “in the tens of millions” and a profit margin of thirty percent.

They discussed “Two and a half million dollars in revenue with $750,000 in profit

for the first year.” At another meeting, Cornwell and McKinney said they could start

the business with $180,000 to get the necessary equipment and secure the space.

Once they got new business, there would be a down payment on the work, “so you

have cash flow that automatically comes in.” Regarding ownership, Stewart was to

receive a twenty-percent interest for “that one $180,000.” Stewart gave Cornwell

and McKinney each a check for $15,000 in return for twenty-percent ownership and

a return based on the “$750,000 in profit the first year, two and a half million dollars

in sales.” Stewart also gave Cornwell a $150,000 check to secure premises for the

business and buy equipment. Stewart testified they “never talked about them having

any kind of huge salary because there was no way that you could ever do the numbers

to justify that.” Specifically, Stewart testified he did not agree that Cornwell and

McKinney could each be paid $180,000 per year, and he did not agree on a specific

amount for Cornwell’s and McKinney’s salaries.

      As part of the investment, Cornwell and McKinney provided Stewart a

Branding Plan that memorialized in writing “some of the most significant things that

we both agreed on and thought this would be important.” The Plan discussed filling

                                         –10–
a “void in the current VIP aviation marketplace” for cabinetry and galleys by

“starting our business debt-free and having long-term reoccurring business.” The

Plan contained a “three-year financial projection sales of two and a half million, net

profit $750,000.” The Plan stated, “we can meet our competitors [sic] prices if we

want to because we will have less overhead and no debt.”

      In August 2015, Stewart agreed to fund money for projects that were delayed

and for equipment, and he told Cornwell and McKinney they would have to increase

the percentage of interest that he and Diana had. In an email, Cornwell and

McKinney agreed to give Stewart and Diana a sixty percent interest and take a

twenty percent interest each. Stewart testified this agreement was not formalized.

According to what Cornwell and McKinney were telling Stewart, in August 2015

“Everything from a profit margin and from the revenue side was going as expected.”

      Stewart testified that, in December 2015, TBL Staffing was started at the

request of Cornwell and McKinney and was funded by The Benefit Link. Stewart

testified the idea was to “create a profit center” by providing staffing to Legacy that

Legacy would have to pay for anyway. For “maybe the first few weeks,” Legacy

paid for the staffing provided by TBL Staffing, but “after that, they didn’t pay

anymore.” McKinney came to Stewart and said he had “a payment that’s missing

again” and asked Stewart to “bail us out.” Stewart “agreed to put more money in”

and put in $85,000. About two weeks later, McKinney needed money to bid a new

                                        –11–
project. Stewart agreed to advance more money but told Cornwell and McKinney

they would “have to revisit the equity structure again.”

      Over the next few months, Cornwell and McKinney did not pay TBL Staffing

and, by April 2016, Legacy owed TBL Staffing “about $625,000.” Stewart was

“really upset” and “wrote a very terse letter” to Cornwell and McKinney telling them

to “please go ahead and straighten up.” Cornwell and McKinney told Stewart they

were “going to get some kind of payment plan worked out by TBL,” and Stewart

was “comfortable going forward.” Stewart also told Cornwell and McKinney he

“needed to see all the checks or any withdrawals out of the account and any deposits

coming in, because [he] had virtually no clue what was going on.” In response,

Stewart received emails containing “some” of the information, but he “did not

receive all of the expenses.” For a couple of months, the emails continued but

Cornwell and McKinney then told Stewart “they got a little too busy to be able to do

this anymore.” TBL Staffing was shut down and, at that time, Legacy owed TBL

Staffing $625,747. Stewart testified this amount came from The Benefit Link and

Diana and Stewart.

      Throughout 2016, Stewart met with Cornwell and McKinney once or twice a

month, and Cornwell “would put up a spreadsheet” on cash flow, projects in

progress, and costs.    However, “there were no documents that were given.”

Regarding profit margins, Stewart still understood “what they told me, which was

everything was 30 percent.” In August 2016, McKinney had gone to a “women-

                                        –12–
owned, small business administration conference” and met somebody from Bell

Helicopter and learned of “a set-aside contract for women-owned or, at least, for

small business.” Cornwell and McKinney asked Stewart to “switch over all the

ownership directly into Diana’s name” and “kind of change the entire partnership to

reflect that to get a signed agreement.” Cornwell sent Stewart a text on August 16

saying that the solicitation on the Bell Helicopter contract was due on August 17 or

18 and asking Stewart to “get these documents done.” On August 17, 2016, the

parties signed an agreement “reflecting that Diana was now 80 percent shareholder,”

Stewart was “zero,” and Cornwell and McKinney “were 10 percent each.”

      At this same time, Cornwell and McKinney again asked for more money “to

clean up some of the other projects that they had” before “gear[ing] up for the

government contracting part.” Stewart agreed to give Cornwell and McKinney more

money. Later in August, “because this was a done deal, according to [McKinney],

the $111 million contract, [Cornwell and McKinney] had asked if they could earn

back an additional 10 percent.” Stewart testified he and Diana were “ecstatic

knowing that we could have something that could actually give us return on money

we invested now for a considerable amount of time and not received anything.”

Stewart knew that both Cornwell and McKinney wanted to lose weight, so Stewart

said to them, “what if we just say in January, if you guys have lost this weight, you

guys can get your additional 10 percent.” The weight loss agreement was made a

part of a signed agreement.

                                       –13–
      By October 2016, Cornwell and McKinney were “bidding on Department of

Defense stuff” and “got really, really busy,” so Stewart asked Lynch to “come in and

take a look and help.” Lynch “had a background in really turning things around,”

and Lynch was able to run some advertisements and “get some candidates in to send

over to Legacy” to help. One of the candidates was Young. As Lynch worked on a

budget with Cornwell, Cornwell provided Lynch with spreadsheets that Stewart

“was familiar with seeing.” However, these spreadsheets, for the first time, showed

Cornwell’s and McKinney’s salaries. Lynch “couldn’t make any sense of the

numbers when she was looking at it.” At one time, “the accounts payable would be

$30,000,” and the “next time it was $300,000,” then “it worked its way up to 900-

and-some-odd thousand, and finally a million-one.”

      Also in October, Stewart advanced Cornwell and McKinney another $70,000

“for labor and materials on a job that they were getting.” As part of making Legacy

a woman-owned business, McKinney went to the bank to add Diana and Stewart as

signatories on Legacy’s checking account. Prior to October 2016, Stewart did not

have access to the checking account. Stewart accessed Legacy’s bank account and

found “a number of charges that were questionable.”

      Stewart testified he and Diana invested a total of $1,793,102 in Legacy.

Stewart did not know about “the $15,000 each [Cornwell and McKinney] took out a

month” and only learned of the payments in discovery. Stewart also learned

Cornwell and McKinney had a debit card that “they were charging all kinds of

                                       –14–
things” on, including “Pediatric dentists, $2,000 Kroger bills, $2,000 hotel bills,

$800 dinners, all sorts of personal things.”

      In late October 2016, McKinney called Stewart to tell him the Bell Helicopter

deal was not going to happen. At a subsequent meeting, Stewart presented Cornwell

and McKinney with a promissory note after working with his attorney to “draft

something up trying to figure out if [Cornwell and McKinney] would be

accountable.” Stewart testified that, even though the amount of the promissory note

was $3.5 million, “it was really just a negotiating point.” Stewart arrived at the $3.5

million figure by adding together the “million and a half” the Scothorns had invested

and the approximately $2 million Legacy had “in terms of revenue.” Cornwell and

McKinney said they would get an attorney to look at the promissory note, and

Stewart agreed. After going to see an attorney, Cornwell and McKinney “came back

and said we are not going to sign any note in any way.” Stewart told Cornwell and

McKinney there had to be “some document” showing they “were involved in this

process,” and it had to be a promissory note. Stewart said he did not care what the

amount of the note was, and he told Cornwell and McKinney to “go ahead and figure

that out.” Stewart testified he never reached an agreement with Cornwell and

McKinney.

      When asked if he owed a fiduciary duty to Legacy, Stewart testified that, from

August 17, 2016 when he signed a document making him chief financial officer of

Legacy until November 22 when he resigned, “the title of chief financial officer

                                        –15–
owed a fiduciary duty, but I did not have any of the documents or the ability to

operate in that position given the information that I had.” When asked what he was

asserting in the lawsuit that Cornwell and McKinney did wrong, Stewart responded:

      They did not–they had a fiduciary duty to the company and to its
      shareholders, and they breached that in many ways by not operating the
      company in its best interest. They were definitely working on their own
      self interest, making sure that they got paid. If you wanted to walk
      through each one of the statements and look, you can notice, you know,
      there were other things that obviously didn’t get paid if you had a
      million dollars in payables, but you did pay yourself. And none of that
      makes sense when you’re a president and CEO of a accompany. You
      have an obligation to make sure that the company is operating at its
      best, and let the shareholder know what’s going on. I had no clue what
      was going on until we got [Lynch] involved. That was never any
      information that was given to me. That’s something that should be on
      the forefront at all points in time. But I also would never have invested
      the first dime had I known this was the kind of integrity.

      Now, I mean, I don’t think that I had any of that information. It’s kind
      of like I didn’t know what I didn’t know, but I do know what I know
      now. And I believed what they told me before. I believed everything
      that they said was true. It all made sense to me. They just continued to
      induce us to go ahead and put more money in, based on what they told
      us was happening in the business, and, in fact, that was not the case.

Stewart testified he and Diana sought to recover $1,793,102.

      On cross-examination, Stewart agreed the document he signed made him chief

financial officer retroactively from the inception of the company. Stewart admitted

he received an email on August 17, 2016, from the accountant for Legacy and The

Benefit Link containing a correction to form 1125-E that was being provided to the

IRS. The form was titled “Compensation of Officers” and showed Cornwell was

paid $120,000 and McKinney was paid $119,000. Stewart testified he “never saw

                                       –16–
this document.” Stewart testified that, “if [Cornwell and McKinney] requested pay,

they got paid.”

      Allyn Needham, an economic consultant, performed a lost profits analysis on

Legacy. Relying on a projection of five years’ worth of future sales for Legacy

provided by McKinney, Needham testified Legacy lost between $7 million and $9

million in profits over a five-year period from 2017 to 2021. Needham testified that

Legacy never made any profit, and Legacy did not have any money to keep operating

unless the Scothorns or someone put money in.         In response to questioning,

Needham agreed that the Scothorns never got a return on their investment in Legacy.

      The jury found the Scothorns substantially relied to their detriment on

promise(s) made by Cornwell and McKinney, this reliance was foreseeable by

Cornwell and McKinney, and the Scothorns were entitled to damages of

$201,318.04. The jury also found Stewart did not comply with his fiduciary duties

owed to legacy while he was chief financial officer of Legacy, but Stewart’s conduct

was excused. The jury found Stewart committed fraud against Cornwell and

McKinney, his fraud was not excused, and McKinney was entitled to $9427.86 in

out-of-pocket damages and $8000 in damages for loss of credit reputation.

      In April 2018, the trial court entered a final judgment awarding the Scothorns

$183,890.18, a sum the court arrived at by subtracting the damages awarded to

McKinney, $17,427.86, from the damages awarded to the Scothorns, $201,318.04.

                                       –17–
The judgment also awarded the Scothorns their costs against Cornwell and

McKinney.

      Cornwell and McKinney filed a motion for new trial asserting the jury’s fraud

and breach of fiduciary duty findings against Stewart negated or barred the finding

of promissory estoppel against Cornwell and McKinney, the evidence was legally

and factually insufficient to support the jury’s findings , and the trial court erred in

failing to award Cornwell and McKinney equitable relief and in awarding costs

against Cornwell and McKinney. Cornwell and McKinney also filed a motion to

modify the final judgment in which they argued, among other things, the Scothorns

were not entitled to recover expenses of litigation, including postage, photocopies,

and delivery services. The trial court granted Cornwell and McKinney’s motion in

part, reduced the costs awarded to the Scothorns by $184, and denied the motion in

all other respects. This appeal followed.

      In their first issue, Cornwell and McKinney argue the trial court erred by

including the jury’s promissory estoppel finding and associated damages against

them when the jury’s fraud and fiduciary duty findings against Stewart negate the

finding of promissory estoppel against Cornwell and McKinney. In particular,

Cornwell and McKinney argue the Scothorns “should not be allowed to benefit all

the while participating in fraud against” Cornwell and McKinney. Cornwell and

McKinney, in a single sentence, assert that “the same argument can be made

regarding the finding that Appellee Stewart Scothorn breached his fiduciary duty.”

                                         –18–
      In support of their assertions in their first issue, Cornwell and McKinney cite

one case: El Paso Healthcare System, Ltd. v. Piping Rock Corp., 939 S.W.2d 695

(Tex. App.—El Paso 1997, writ denied). In that case, El Paso Healthcare System

(EPHS) sought to develop a medical office building and enlisted the help of Piping

Rock, a developer. Id. at 697. The parties entered an agreement providing that

Piping Rock would execute an agreement to purchase the land for the proposed

building from EPHS and then contribute the land to the partnership as its capital

contribution. Id. For its contribution, EPHS agreed to execute a Build and Lease

Agreement under which it would lease all of the office space from the partnership

upon completion of the building. Id. The agreement required Piping Rock to obtain

and close a nonrecourse short-term construction loan no later than April 1, 1990. Id.

at 698. The construction loan was to fund all costs of building construction. Id.

      Piping Rock had the option to terminate the partnership without liability if the

construction loan and the purchase of the land were not accomplished by April 1,

1990. Id. Piping Rock never obtained the construction loan, nor did it close the land

purchase contract. Id. The parties nevertheless continued to work on the project

together. Each party claims that the other induced it to continue. Id. at 699. EPHS

presented evidence that it allowed Piping Rock to stay on the project because Piping

Rock continually represented that it was close to closing a construction loan. Id.

EPHS asserted that it agreed to temporarily fund construction costs after April 1,

1990, not because it wanted to induce Piping Rock to complete the project without

                                        –19–
financing, but in reliance and anticipation on forthcoming financing. Id. Piping

Rock presented evidence that after April 1, 1990, EPHS asked Piping Rock to

continue with the construction even though there was no loan in place and agreed to

fund the construction costs, including Piping Rock’s costs, in order to complete the

project. Id. Several Piping Rock requests to EPHS, dated after April 1, 1990, for

payment of significant construction costs incurred, including Piping Rock’s

developer overhead, provided evidence that Piping Rock relied to its detriment on

EPHS’s promise to pay construction costs. Id.

      Piping Rock filed suit against EPHS alleging, among other things, a

promissory estoppel claim. Id. at 698. EPHS counterclaimed against Piping Rock

for breach of the Agreement, fraudulent inducement, negligent misrepresentation,

intentional interference with contract and breach of fiduciary duty. Id. The jury

found that Piping Rock breached the Agreement and intentionally interfered with

EPHS’s contract to sell the medical office building but found no damages for EPHS

on either cause of action. Id. The jury found for Piping Rock on its promissory

estoppel claim and awarded $440,000 in damages for Piping Rock’s developer

overhead and $48,000 in costs for clearing a “staging area” next to the construction

site. Id. The jury failed to find for either party on any other cause of action. Id.

      On appeal, EPHS argued, among other things, that the doctrine of unclean

hands barred Piping Rock from recovering on its promissory estoppel claim. Id. at

700. In making this argument, EPHS pointed to the jury’s findings that Piping Rock

                                         –20–
breached the original Agreement and that Piping Rock interfered with EPHS’s

contracts to sell the medical office building. Id. The court noted it was undisputed

that Piping Rock failed to obtain financing as required in the Agreement. Id. The

court then stated the following, which Cornwell and McKinney quote in their brief:

      A party may not predicate an estoppel in his favor on, or assert such
      estoppel for the purpose of making effective, obtaining the benefit of,
      or shielding himself from the results of his own fraud, and, similarly,
      he may not do so with respect to his own dereliction of duty, violation
      of law, wrongful act, or other inequitable conduct in the transaction in
      question.
Id. However, the court noted, Piping Rock was not seeking to enforce favorable

provisions of the contract the jury found it had breached. Id. Instead, Piping Rock

was seeking to enforce promises EPHS allegedly made outside the agreement. Id.

The court had already found evidence in the record sufficient to determine that

EPHS’s promises were made to induce Piping Rock to remain on the project despite

any breach. Id. The court determined that an equitable unclean hands defense could

not be based on the very breach EPHS essentially excused by making the subject

promises in order to keep Piping Rock on the job. Id. The court concluded that

enforcing Piping Rock’s equitable promissory estoppel claims in this context did not

offend equity. Id.

      Thus, Piping Rock addressed whether an unclean hands defense barred

recovery on a promissory estoppel claim. Piping Rock does not stand for the

proposition that Stewart’s fraud in this case negated the Scothorns’ promissory

estoppel claims. See id. To the extent the jury found Stewart committed fraud and
                                       –21–
damaged McKinney $9427.86 in out-of-pocket damages and $8000 in damages for

loss of credit reputation, we cannot conclude this finding precluded the jury from

also finding that the Scothorns were entitled to damages of $201,318.04 on their

promissory estoppel claim against Cornwell and McKinney. See id. As to Cornwell

and McKinney’s argument that “the same argument can be made” regarding the

jury’s finding that Stewart breached his fiduciary duty, we note that the jury found

Stewart’s breach of fiduciary duty was excused, and Stewart breached a fiduciary

duty owed to Legacy, not Cornwell and McKinney. We overrule Cornwell and

McKinney’s first issue.

      In their second issue, Cornwell and McKinney argue the evidence is legally

and factually insufficient to support the jury’s answer to Question 16 regarding

promissory estoppel. Specifically, Cornwell and McKinney argue there is no

evidence that they “would provide a return to [the Scothorns] of the funds advanced,

that the funds advanced would only be used for initial operations, or that Legacy

would not incur debt.”

      In determining whether there is legally sufficient evidence to support the

jury’s decision, we view the evidence in the light most favorable to the verdict,

crediting favorable evidence if reasonable jurors could, and disregarding contrary

evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d
802, 807 (Tex. 2005); Lamajak, Inc. v. Frazin, 230 S.W.3d 786, 793 (Tex. App.—

Dallas 2007, no pet.). To evaluate the factual sufficiency of the evidence supporting

                                       –22–
the finding, we consider all the evidence and will set aside the verdict only if the

evidence supporting the jury finding is so weak or so against the overwhelming

weight of the evidence that the finding is clearly wrong and unjust. See Cain v. Bain,

709 S.W.2d 175, 176 (Tex. 1986); Dyson v. Olin Corp., 692 S.W.2d 456, 457 (Tex.

1985); Lamajak, 230 S.W.3d at 793.

      The elements of a promissory estoppel claim are (1) a promise, (2)

foreseeability of reliance thereon by the promisor, and (3) substantial detrimental

reliance by the promisee. Trevino & Assocs. Mech., L.P. v. Frost Nat. Bank, 400
S.W.3d 139, 146 (Tex. App.—Dallas 2013, no pet.); see English v. Fischer, 660
S.W.2d 521, 524 (Tex. 1983); Fretz Constr. Co. v. S. Nat’l Bank of Houston, 626
S.W.2d 478, 480 (Tex. 1981). To show detrimental reliance, the plaintiff must

demonstrate that he materially changed his position in reliance on the promise.

Trevino, 400 S.W.3d at 146; see English, 660 S.W.2d at 524 (finding no promissory

estoppel when plaintiff could not show he would not have taken his detrimental

actions if defendant had not made promise).

      Cornwell and McKinney assert, in part, that a “fourth element” of promissory

estoppel must be proven: that injustice can be avoided only by enforcing the

defendant’s promise, citing Collins v. Walker, 341 S.W.3d 570, 573–74 (Tex.

App.—Houston [14th Dist.] 2011, no pet.) (elements of promissory estoppel are: (1)

a promise, (2) foreseeability of reliance by the promisor, (3) substantial and

                                        –23–
reasonable reliance by the promisee to its detriment, and (4) enforcing the promise

is necessary to avoid injustice).

      Question 16 of the jury charge asked, “Did the Scothorns substantially rely to

their detriment on promise(s) made by any of those listed below, and was this

reliance foreseeable by that person?” The jury answered “Yes” for both Cornwell

and McKinney. Cornwell and McKinney did not object to the jury charge question

on promissory estoppel. To preserve an appellate complaint premised on a defective

jury charge, a party must “point out distinctly the objectionable matter and the

grounds of the objection.” TEX. R. CIV. P. 274. “Any complaint as to a question,

definition, or instruction, on account of any defect, omission, or fault in pleading, is

waived unless specifically included in the objections.” Id. If a party fails to lodge

an objection to the jury charge that timely and plainly makes the trial court aware of

the complaint, error is not preserved and the complaint is waived on appeal. Ford

Motor Co. v. Ledesma, 242 S.W.3d 32, 43 (Tex. 2007); see also TEX. R. CIV. P. 278.

Because Cornwell and McKinney failed to object to the jury charge question on

promissory estoppel, their argument concerning a “fourth element” is waived. See

TEX. R. CIV. P. 274.

      Stewart testified Cornwell and McKinney discussed orders or business “in the

tens of millions,” a profit margin of thirty percent, and “Two and a half million

dollars in revenue with $750,000 in profit for the first year.”          Cornwell and

McKinney said they could start the business with $180,000 to get the necessary

                                         –24–
equipment and secure the space. Once they got new business, there would be a down

payment on the work, “so you have cash flow that automatically comes in.”

Regarding ownership, Stewart was to receive a twenty-percent interest for “that one

$180,000.” Stewart gave Cornwell and McKinney each a check for $15,000 in

return for twenty-percent ownership and a return based on the “$750,000 in profit

the first year, two and a half million dollars in sales.” Stewart also gave Cornwell a

$150,000 check to secure premises for the business and buy equipment. Stewart

testified they “never talked about them having any kind of huge salary because there

was no way that you could ever do the numbers to justify that.” Stewart testified he

did not agree that Cornwell and McKinney could each be paid $180,000 per year,

and he did not agree on a specific amount for Cornwell’s and McKinney’s salaries.

      Cornwell and McKinney provided Stewart a Branding Plan that memorialized

in writing “some of the most significant things that we both agreed on and thought

this would be important.” The Plan discussed filling a “void in the current VIP

aviation marketplace” for cabinetry and galleys by “starting our business debt-free

and having long-term reoccurring business.” The Plan contained a “three-year

financial projection sales of two and a half million, net profit $750,000.” The Plan

stated, “we can meet our competitors [sic] prices if we want to because we will have

less overhead and no debt.”

      Based on Cornwell and McKinney’s promises, the Scothorns ultimately

advanced more than $1.7 million in cash. Although the Scothorns never received

                                        –25–
any money from Cornwell, McKinney, or Legacy, Cornwell and McKinney paid

themselves $15,000 a month without telling the Scothorns. We conclude this

evidence was legally and factually sufficient to support the jury’s answer to Question

16 regarding promissory estoppel. City of Keller, 168 S.W.3d at 807; Cain, 709
S.W.2d at 176; English, 660 S.W.2d at 524. We overrule Cornwell and McKinney’s

second issue.

      In their third issue, Cornwell and McKinney argue the evidence is insufficient

to   support the jury’s affirmative answer to Question 19, which asked whether

Stuart’s breach of fiduciary duties owed to Legacy was excused. Question 19 also

provided the following instruction:

      A party’s conduct is excused if the other party is estopped from
      complaining about the unauthorized conduct. A party is estopped from
      complaining of the unauthorized conduct if when, with knowledge of
      the facts has [sic] so conducted himself as to lead the other party to
      believe that he would not have acted as he did.

Cornwell and McKinney argue “there is a lack of legal and factual sufficiency of the

evidence with regards to question number 19 of the Charge of the Court.” In support

of this argument, Cornwell and McKinney argue courts have held that “[e]stoppel

arises where, by the fault of one, another is induced to change his or her position for

the worse,” citing Avary v. Bank of America, N.A., 72 S.W.3d 779, 788 (Tex. App.—

Dallas 2002, no pet.). Cornwell and McKinney cite Avary in asserting the elements

of an estoppel defense are (i) a false representation or concealment of material facts,

(ii) made with knowledge, actual or constructive, of those facts, (iii) with the

                                        –26–
intention that it should be acted on, (iv) to a party without knowledge or means of

obtaining knowledge of the facts, (v) who detrimentally relies on the representations.
Id. Cornwell and McKinney argue there is no evidence Stewart’s conduct in which

he failed to comply with his fiduciary duties changed his position for the worse based

upon the actions of Cornwell and McKinney. Further, they argue the testimony

shows there were numerous meetings between Stewart and Cornwell and McKinney,

and all major decisions were made with Stewart’s approval.

      Thus, Cornwell and McKinney rely on the elements of an “estoppel defense”

in making their arguments. However, as the Scothorns point out, Question 19

submitted the defense of quasi estoppel. Quasi-estoppel is a term applied to certain

legal bars, such as ratification, election, acquiescence, or acceptance of benefits.

Forney 921 Lot Dev. Partners I, L.P. v. Paul Taylor Homes, Ltd., 349 S.W.3d 258,

268 (Tex. App.—Dallas 2011, pet. denied); Steubner Realty 19, Ltd. v. Cravens

Road 88, Ltd., 817 S.W.2d 160, 164 (Tex. App.—Houston [14th Dist.] 1991, no

writ). It is a long-standing doctrine applied to preclude contradictory positions: it

precludes a person from asserting, to another’s disadvantage, a right inconsistent

with a position previously taken. Lopez v. Munoz, Hockema & Reed, L.L.P., 22
S.W.3d 857, 864 (Tex. 2000); see Schauer v. Von Schauer, 138 S.W. 145, 149–50

(Tex. Civ. App.—Austin 1911, writ ref’d) (“Where a person has, with knowledge of

the facts, acted or conducted himself in a particular manner, or asserted a particular

claim, title, or right, he cannot afterwards assume a position inconsistent with such

                                        –27–
act, claim or conduct to the prejudice of another.”). The doctrine applies when it

would be unconscionable to allow a person to maintain a position inconsistent with

one in which he acquiesced. Lopez, 22 S.W.3d at 864; Atkinson Gas Co. v. Albrecht,

878 S.W.2d 236, 240 (Tex. App.—Corpus Christi-Edinburg 1994, writ denied);

Vessels v. Anschutz Corp., 823 S.W.2d 762, 765–66 (Tex. App.—Texarkana 1992,

writ denied). Unlike equitable estoppel, quasi-estoppel does not require a showing

of a false representation or detrimental reliance. Forney 921, 349 S.W.3d at 268;

Steubner Realty 19, Ltd., 817 S.W.2d at 164.

      Stewart testified that, from August 17, 2016, when he signed a document

making him chief financial officer of Legacy until November 22 when he resigned,

“the title of chief financial officer owed a fiduciary duty, but I did not have any of

the documents or the ability to operate in that position given the information that I

had.” The document Stewart signed made him chief financial officer retroactively

from the inception of the company. However, Stewart testified he “had no clue what

was going on until we got [Lynch] involved.” Stewart believed everything that

Cornwell and McKinney said was true, and they continued to induce the Scothorns

to put more money into Legacy.

      Throughout 2016, Stewart met with Cornwell and McKinney once or twice a

month, and Cornwell “would put up a spreadsheet” on cash flow, projects in

progress, and costs.    However, “there were no documents that were given.”

                                        –28–
Regarding profit margins, Stewart still understood “what they told me, which was

everything was 30 percent.”

      Prior to October 2016, Stewart did not have access to Legacy’s checking

account. Stewart accessed Legacy’s bank account and found “a number of charges

that were questionable.” Stewart did not know about “the $15,000 each [Cornwell

and McKinney] took out a month” and only learned of the payments in discovery.

Stewart also learned Cornwell and McKinney had a debit card that “they were

charging all kinds of things” on, including “Pediatric dentists, $2,000 Kroger bills,

$2,000 hotel bills, $800 dinners, all sorts of personal things.”

      Thus, although the record shows Stewart did not fulfill his fiduciary duties to

Legacy, the record also shows that Cornwell and McKinney concealed financial

information from Stewart and made false representations concerning Legacy’s fiscal

condition that Stewart relied on to his detriment. Stewart and Diana invested a total

of $1,793,102 in Legacy, and they did not receive any return on their investment in

Legacy. Thus, even accepting Cornwell and McKinney’s framing of the issue, there

was sufficient evidence establishing that estoppel excused Stewart’s breach of his

fiduciary duty to Legacy. See Avary, 72 S.W.3d at 788. More to the point, the

evidence was legally and factually sufficient to support the jury’s answer to Question

19 on the basis of quasi estoppel. See City of Keller, 168 S.W.3d at 807; Cain, 709
S.W.2d at 176; Forney 921, 349 S.W.3d at 268; Steubner Realty 19, Ltd., 817
S.W.2d at 164. We overrule Cornwell and McKinney’s third issue.

                                         –29–
      In their fourth issue, Cornwell and McKinney argue the trial court erred in not

awarding them equitable relief based on the jury’s finding Stewart breached his

fiduciary duty. A trial court’s decision regarding equitable relief is reviewed under

an abuse of discretion standard and may only be overturned if the decision was

arbitrary or unreasonable. Hill v. Shamoun & Norman, LLP, 544 S.W.3d 724, 742

(Tex. 2018). Specifically, Cornwell and McKinney argue the Scothorns “emptied

Legacy’s bank account in the amount of $47,000,” and they should have been

awarded this amount as equitable relief. Cornwell and McKinney ignore the fact

that the jury found Stewart did not fulfill his fiduciary duty to Legacy, not to them,

and the jury correctly found Stewart’s breach of fiduciary duty was excused. Under

these circumstances, we cannot conclude the trial court abused its discretion in not

awarding Cornwell and McKinney $47,000 in equitable relief.              We overrule

Cornwell and McKinney’s fourth issue.

      In their fifth issue, Cornwell and McKinney argue the evidence is legally and

factually insufficient to support the jury’s answer to Question 8, which asked

whether they committed fraud against the Scothorns.            Again, Cornwell and

McKinney ignore the fact that the jury also found their fraud was excused. Further,

the trial court’s judgment does not refer to the jury’s finding that Cornwell and

McKinney committed fraud or make any award based on the finding of fraud.

      A trial court may disregard a jury finding only if it is unsupported by evidence,

a condition not met in this case, or if the issue is immaterial. Spencer v. Eagle Star

                                        –30–
Ins. Co. of Am., 876 S.W.2d 154, 157 (Tex. 1994) (citing C. & R. Transport, Inc. v.

Campbell, 406 S.W.2d 191, 194 (Tex. 1966)). A question is immaterial when it

should not have been submitted, or when it was properly submitted but has been

rendered immaterial by other findings. Id.; Chambers v. Equity Bank, SSB, 319
S.W.3d 892, 902 n.15 (Tex. App.—Texarkana 2010, no pet.) (where questions

disregarded by trial court were rendered immaterial by jury’s other finding, court

would not address sufficiency of evidence in support of jury’s answers to those

questions). Here, the jury’s finding that Cornwell and McKinney committed fraud

was rendered immaterial by the jury’s finding that the fraud was excused, and the

trial court properly disregarded the finding of fraud and did not incorporate that

finding into the final judgment. See Spencer, 876 S.W.2d at 157. Accordingly, we

need not address the sufficiency of the evidence to support the finding of fraud. See

Chambers, 319 S.W.3d 892, 902 n.15. We overrule Cornwell and McKinney’s fifth

issue.

         In their sixth issue, Cornwell and McKinney argue the trial court erred in

awarding costs against them. As a general rule, the successful party to a suit shall

recover of his adversary all costs incurred therein. TEX. R. CIV. P. 131. A successful

party is one who gets a judgment from a competent court vindicating a civil claim

of right. Hasty Inc. v. Inwood Buckhorn Joint Venture, 908 S.W.2d 494, 502 (Tex.

App.—Dallas 1995, writ denied). The allocation of costs is a matter for the trial

court’s discretion and cannot be overturned on appeal, absent an abuse of discretion.

                                        –31–
Nolte v. Flournoy, 348 S.W.3d 262, 270 (Tex. App.—Texarkana 2011); Madison v.

Williamson; 241 S.W.3d 145, 157 (Tex. App.—Houston [1st Dist.] 2007, pet.

denied).

      In making their argument, Cornwell and McKinney renew their argument that

the breach of fiduciary duty finding against Stewart negated the finding against them

for promissory estoppel and point out that they prevailed in a summary judgment

proceeding prior to trial. We have already rejected the argument that Stewart’s

breach of fiduciary duty negated the promissory estoppel finding against Cornwell

and Scothorn. Further, in this proceeding, the jury found the Scothorns’ damages

were $201,318.04, McKinney was entitled to $9427.86 in out-of-pocket damages

and $8000 in damages for loss of credit reputation, and the trial court entered a final

judgment awarding the Scothorns $183,890.18. Under these circumstances, we

conclude the trial court did not abuse its discretion in awarding the Scothorns their

costs. See Nolte, 348 S.W.3d at 270; Madison; 241 S.W.3d at 157. We overrule

Cornwell and McKinney’s sixth issue.

      In their seventh issue, Cornwell and McKinney argue the trial court erred in

awarding the amount of costs submitted in the Scothorns’ amended bill of cost.

Specifically, Cornwell and McKinney argue $773.50 for legal document services

was an expense of litigation that was not recoverable. At oral argument, counsel for

the Scothorns agreed to the $773.50 reduction in costs. Accordingly, we sustain

Cornwell and McKinney’s seventh issue.

                                        –32–
      In their eighth issue, Cornwell and McKinney argue the evidence conclusively

establishes the jury’s award of damages is excessive. In support of this issue,

Cornwell and McKinney submit a single sentence: “Based upon the arguments

above, the jury’s award of $201,318.04 against Appellants is excessive based on the

evidence presented at trial.” An appellant’s failure to cite legal authority or provide

substantive analysis of a legal issue results in waiver of the complaint. Fredonia

State Bank v. General Am. Life Ins. Co., 881 S.W.2d 279, 284 (Tex. 1994).

Accordingly, we need not further address Cornwell and McKinney’s eighth issue.

      In their ninth issue, Cornwell and McKinney argue the trial court erred in

denying their motion for new trial. Again, aside from citing authority for the

propositions that (1) “denying a motion for new trial is appealable” and (2) the

standard of review is abuse of discretion, Cornwell and McKinney fail to provide

any substantive analysis of the issue other than the assertion that the trial court erred

“for the reasons set forth in the above sections.” We conclude Cornwell and

McKinney have also waived this complaint. See id. We need not further address

Cornwell and McKinney’s ninth issue.

      We reform the trial court’s judgment to delete the award of $773.50 in costs

to the Scothorns. As modified, we affirm the trial court’s judgment.

                                             /Robert D. Burns, III/
                                             ROBERT D. BURNS, III
180799F.P05                                  CHIEF JUSTICE

                                         –33–
                                    S
                            Court of Appeals
                     Fifth District of Texas at Dallas
                                   JUDGMENT

JONATHAN CORNWELL AND                          On Appeal from the 429th Judicial
SHADD MCKINNEY, Appellants                     District Court, Collin County, Texas
                                               Trial Court Cause No. 429-05287-
No. 05-18-00799-CV           V.                2016.
                                               Opinion delivered by Chief Justice
DIANA SCOTHORN, STEWART                        Burns. Justices Molberg and Partida-
SCOTHORN, THE BENEFIT LINK,                    Kipness participating.
INC., AND SCOTHORN AERO,
INC., Appellees

       In accordance with this Court’s opinion of this date, the judgment of the trial
court is MODIFIED as follows:

      the award of $773.50 in costs to Diana Scothorn and Stewart Scothorn
      is deleted.

It is ORDERED that, as modified, the judgment of the trial court is AFFIRMED.

      It is ORDERED that appellees Diana Scothorn, Stewart Scothorn, The
Benefit Link, Inc., and Scothorn Aero, Inc. recover their costs of this appeal from
appellants Jonathan Cornwell and Shadd McKinney.

Judgment entered this 17th day of September 2020.

                                        –34–