Court Opinion

ID: 4045547
Source: CourtListenerOpinion
Date Created: 2016-09-28 23:53:37.467263+00
Date Added: 2024-06-11T14:29:54.896626
License: Public Domain

ACCEPTED
                                                                                   04-15-00260-CV
                                                                       FOURTH COURT OF APPEALS
                                                                            SAN ANTONIO, TEXAS
                                                                               9/4/2015 1:00:14 PM
                                                                                    KEITH HOTTLE
                                                                                            CLERK

                      No. 4-15-00260-CV
        _____________________________________________
                                                           FILED IN
             IN THE FOURTH COURT OF APPEALS 4th COURT OF APPEALS
                                                 SAN ANTONIO, TEXAS
                    SAN ANTONIO, TEXAS          9/4/2015 1:00:14 PM
        _____________________________________________
                                                  KEITH E. HOTTLE
                                                               Clerk
                           KAFAI LEE,

                                                                  Appellant,
                                V.

              KENNETH LAU, CONNIE ANDREWS,
              CHINA ROSE MANAGEMENT, LLC,
                  AND CHINA ROSE, LTD.

                                                                 Appellees.
        ____________________________________________

           Appealed from the 45th Judicial District Court of
                       Bexar County, Texas
                     Cause No. 2012-CI-12940
        _____________________________________________

                    APPELLANT’S BRIEF
        _____________________________________________

                                     PRINS LAW FIRM
                                     4940 Broadway, Suite 108
                                     San Antonio, Texas 78209
                                     (210) 820-0833
                                     (210) 820-0929 [fax]
                                     taprins@prinslaw.com

                                     Todd A. Prins
                                     State Bar No. 16330400
                                     ATTORNEY FOR APPELLANT
                                     KAFAI LEE
ORAL ARGUMENT REQUESTED
                IDENTITY OF PARTIES AND COUNSEL

Appellant                          Kafai Lee

Appellant’s Counsel                Todd A. Prins
                                   State Bar No. 16330400
                                   PRINS LAW FIRM
                                   4940 Broadway, Suite 108
                                   San Antonio, Texas 78209
                                   (210) 820-0833
                                   (210) 820-0929 [Fax]
                                   taprins@prinslaw.com

                                   Kenneth Lau, Connie Andrews, China
Appellees                          Rose Management, LLC and China
                                   Rose, Ltd.

Appellees’ Counsel                 Sylvan S. Lang, Jr.
                                   State Bar No. 11898700
                                   LANG LAW FIRM, P.C.
                                   13409 N.W. Military Hwy., Ste 210
                                   San Antonio, Texas 78231
                                   Telephone: (210) 479-8899
                                   Facsimile: (210) 479-0099
                                   Sylvan@langfirm.com
                                   Attorney for Kenneth Lau & Connie
                                   Andrews

                                   Thomas G. Kemmy
                                   State Bar No. 11254600
                                   LAW OFFICE OF THOMAS G.
                                   KEMMY
                                   322 W. Woodlawn Avenue
                                   San Antonio, Texas 78212
                                   Telephone: (210) 735-2233
                                   Facsimile: (210) 736-9025
                                   tkemmy@sbcglobal.net
                                   Attorney for China Rose Management,
                                   LLC and China Rose, Ltd.
                               2
                                              TABLE OF CONTENTS

Identity Of Parties And Counsel .......................................................................................... 2
Table of Authorities ............................................................................................................. 4
Statement of the Case .......................................................................................................... 7
Statement on Oral Argument ............................................................................................... 8
Issues Presented for Review ................................................................................................ 8
Statement of Facts ............................................................................................................. 10
Summary of the Argument ................................................................................................ 13
Standard of Review ........................................................................................................... 14
Arguments & Authorities .................................................................................................. 15
   Issue 1: The Trial Court Improperly Reversed The Jury’s Negative Finding To Jury
   Question No. 5 Because There Was Sufficient Evidence To Support The Jury’s
   Finding. .......................................................................................................................... 15
   Issue 2: The Trial Court Improperly Reversed The Jury’s Negative Finding In Jury
   Questions Nos. 7b And 8b Because There Was Sufficient Evidence To Support The
   Jury’s Finding................................................................................................................. 18
   Issue 3: The Trial Court’s Findings Of Fact And Conclusions Of Law Do Not Support
   The Final Judgment Because The Trial Court Failed Make Findings As To Appellant’s
   Statute Of Limitations Defense. ..................................................................................... 19
   Issue 4: The Trial Court Abused Its Discretion When It Ordered Appellant To Forfeit
   His Partnership Interest In China Rose, Ltd. Because Such A Remedy Is Not Available
   In Texas. ......................................................................................................................... 22
   Issue 5: The Trial Court Improperly Awarded $452,000 In Actual Damages Because
   There Was Legally And Factually Insufficient Evidence To Support Such A Finding. 26
   Issue 6: By Awarding Both Forfeiture And Actual Damages, The Trial Court Granted
   Appellees And Impermissible Double Recovery. .......................................................... 27
   Issue 7: The Trial Court Erred When It Awarded Appellees Attorney’s Fees Because
   Such A Remedy Is Not Available For Breach Of Fiduciary Duty. ............................... 28
CONCLUSION AND PRAYER ....................................................................................... 34

                                                                   3
                                        TABLE OF AUTHORITIES

Cases

Allison, v. Harrison, 156 S.W.2d 137 (Tex. 1941) ..................................................23

Brown & Brown of Tex., Inc. v. Omni Metals, Inc., 317 S.W.3d 361, 2010 Tex.

   App. LEXIS 2338, *96 (Tex. App. Houston [1st Dist.] 2010, no pet.) ...............32

Burrow v. Acre, 997 S.W.2d 229 (Tex. 1999) ............................................ 22, 23, 25

Cale’s Cleane Scene Carwash, Inc. v. Hubbard, 76 S.W.3d 784 (Tex. App.—

   Houston [14th Dist.] 2002, no pet.) .....................................................................14

Crawford v. McDonald, 88 Tex. 626, 33 S.W. 325 (1895) .....................................20

De La Rosa v. Kaples, 812 S.W.2d 432 (Tex. App.-San Antonio 1991, writ denied)

   ..............................................................................................................................31

Deutsch v. Phillips Petroleum Co., 56 Cal. App. 3d 586, (Cal. App. 2d Dist. 1976)

   ..............................................................................................................................24

Dobson v. Dobson 594 S.W.2d 177 (Tex. App. —Houston [1st Dist.] 1980) .........25

Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238 (Tex. 1985) ..................22

ERI Consulting Eng’rs., Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) .......... 23, 24

G.R.A.V.I.T.Y. Enters. v. Reece Supply Co., 177 S.W.3d 537, 2005 Tex. App.

   LEXIS 6266, *18-19 (Tex. App. -- Dallas 2005, no pet.) ...................................30

Gerdes v. Kennamer, 155 S.W.3d 541 (Tex.App.—Corpus Christi 2004, no pet.) 22

Gereb v. Smith-Jaye, 70 S.W.3d 272, 273 (Tex. App.-San Antonio 2002, no pet.)28

                                                               4
Holland v. Wal-Mart Stores, Inc. 1 S.W.3d 91 (Tex. 1999)....................................29

Holley v. Watts, 629 S.W.2d 694 (Tex. 1982) .........................................................14

Kinzbach Tool Co. v. Corbett-Wallace Corp., 160 S.W.2d 509 (Tex. 1942) .........23

Marin Real Estate Partners, L.P. v. Vogt, 373 S.W.3d 57 (Tex. App.—San

   Antonio, 2011, no pet.) ........................................................................................28

Massey v. Columbus State Bank, 35 S.W.3d 697, 2000 Tex. App. LEXIS 7624

   (Tex. App. -- Houston [1st Dist.] 2000, pet. denied) .................................... 31, 32

McCullough v. Scarbrough, Medlin & Assocs., 435 S.W.3d 871 (Tex. App.—

   Dallas, 2014, pet. denied) ....................................................................................29

McGuire v. Kelley, 41 S.W.3d 679 (Tex. App.—Texarkana 2001, no pet.) .... 29, 30

Nationwide Mut. Ins. Co. v. Holmes, 842 S.W.2d 335, 1992 Tex. App. LEXIS

   3188 (Tex. App. San Antonio 1992, writ denied). ..............................................33

O’Flaherty v. Belgum 115 Cal. App. 4th 1044 (Cal. App. 2d Dist. 2004) ..............24

Ritchie v. Rupe, 443 S.W.3d 856 (Tex. 2014) .........................................................17

Scharer v. John’s Cars, Inc., 776 S.W.2d 228 (Tex. App.—El Paso 1989, writ

   denied) ........................................................................................................... 14, 15

Schiller v. Elick, 240 S.W.2d 997 (Tex. 1951) ........................................................23

See In re Estate of Corriea, 719 A.2d 1234 (D.C. 1998) ........................................24

Snepp v. United States, 444 U.S. 507 (1980) ...........................................................24

                                                             5
Tamez v. Tamez, 822 S.W.2d 688 (Tex. App.—Corpus Christi, 1991, writ denied)

   ..............................................................................................................................21

Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828 (Tex. 2009) .......... 14, 19

Turner v. Turner, 385 S.W.2d 230, 1964 Tex. LEXIS 630, *8, 8 Tex. Sup. J. 112

   (Tex. 1964) ...........................................................................................................32

Vickery v. Comm’n for Lawyer Discipline, 5 S.W.3d 241 (Tex. App.—Houston [1st

   Dist.] pet. denied) .......................................................................................... 20, 21

Western Reserve Life Assurance Co. of Ohio v. Graben, 233 S.W.3d 360 (Tex.

   App.—Fort Worth, 2007, no pet.) .......................................................................29

Statutes

Tex. Civ. Prac. & Rem. C. § 38.001 ........................................................................33

TEX. CIV. PRAC. & REM. Code §16.004(a)(5). .........................................................19

Rules

Tex. R. App. P. 38.1(e) ..............................................................................................8

Tex. R. App. P. 39.1(d) ..............................................................................................8

TEX. R. CIV. P. 299 ...................................................................................................21

                                                               6
                                  STATEMENT OF THE CASE

         Appellant/Plaintiff/Counter-Defendant, Kafai Lee (“Lee” or “Appellant”)

sued Kenneth Lau, Connie Andrews, Appellees/Defendants/Counter-Plaintiffs

(“Lau”, “Andrews”, or “Appellees”), and Golden Wok, Ltd., seeking declaratory

relief that Lee was a one-third owner in the partnership that owns a Golden Wok

Restaurant located on Marbach Road in San Antonio, Texas. (Appx. 4: Plaintiff's

Original Petition).

         Lau, Andrews, and Golden Wok, Ltd., asserted counter-claims against

Lee, alleging tortious interference with existing and prospective contractual

relations and wrongful diversion of funds.1 (1 C.R. at 11). Further, Lau and

Andrews alleged Lee breached his fiduciary duties of loyalty, honesty, fidelity,

and good faith. China Rose Management, LLC and China Rose, Ltd., (“China

Rose, LLC”, “China Rose, Ltd”, or “Appellees”), as intervenors, also asserted

cross-claims against Lee for tortious interference with contracts, breach of

fiduciary duties, and conversion. (1 C.R. at 17, 985).

         After a trial on the merits, the Court submitted the case to the jury. The

jury returned a verdict that was partially in Lee’s favor. (6 C.R. at 2031) Despite

the verdict, the Court signed and entered the Final Judgment in this case on

 1
   Golden Wok, Ltd. has been dismissed from the lawsuit and is not the subject of this appeal. (6CR40).
 2
   This standard of review applies to points of error 1, 2, and 5.
 3
   Issue: 1 supra at pp. 9-11.
 4
   Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991) (holding that when a party pursues several
                                                        7
February 26, 2015 which reversed some of the jury’s findings and granted full

relief to Appellees. (6 C.R. at 2089).

                      STATEMENT ON ORAL ARGUMENT

      Oral Argument and discussion of the facts and the applicable precedent

would significantly aid the Court in deciding this case. See Tex. R. App. P.

38.1(e), 39.1(d). Furthermore, the trial court’s award of forfeiture of a partnership

interest for breach of fiduciary duty is a novel remedy that has never been awarded

in Texas. For these reasons, Appellant requests oral argument.

                       ISSUES PRESENTED FOR REVIEW

      Issue 1:        The trial court improperly reversed the jury’s negative finding

to jury question No. 5 because there was sufficient evidence to support the jury’s

finding.

      Issue 2:        The trial court improperly reversed the jury’s negative finding

in jury questions Nos. 7b and 8b because there was sufficient evidence to support

the jury’s finding.

      Issue 3:        The trial court’s findings of fact and conclusions of law do not

support the final judgment because the trial court failed make findings as to

appellant’s statute of limitations defense.
                                              8
      Issue 4:     The trial court improperly ordered Appellant to forfeit his

partnership interest in China Rose, Ltd. because such a remedy is not available in

Texas.

      Issue 5:     The trial court improperly awarded $452,000 in actual damages

because there was legally and factually insufficient evidence to support such a

finding.

      Issue 6:     By awarding both forfeiture and actual damages, the trial court

granted Appellees an impermissible double recovery.

      Issue 7:     The trial court erred when it awarded Appellees attorney’s fees

because such a remedy is not available for breach of fiduciary duty.

                                         9
                            STATEMENT OF FACTS

      Appellant, Kafai Lee, and Appellees, Kenneth Lau and Connie Andrews, are

partners in various business entities that operate Chinese food restaurants in San

Antonio and Austin. (Appx. 4: Plaintiff's Original Petition).    The entities most

important to this appeal are Golden Wok, Ltd., who was a defendant and counter-

plaintiff before it was dismissed from the lawsuit, and Appellee China Rose, Ltd.

(6 C.R. at 2087).

      Golden Wok, Ltd. is owned by general partner Golden Wok Management,

LLC whose sole members are Kenneth Lau and Connie Andrews, and limited

partner Golden Wok Holdings, LLP whose sole partners are also Lau and

Andrews. (9 R.R.; D's Exh. 39). Golden Wok, Ltd. owns and operates the Golden

Wok restaurant on Marbach Road in San Antonio (“Golden Wok—Marbach”). (4

R.R. at 11:3-6) At trial, Kafai Lee sought a declaratory judgment entitling him to a

1/3 interest in Golden Wok—Marbach. (6 C.R. at 2029, 2031). The jury found that

the parties did not agree to be partners in Golden Wok—Marbach, and Appellant

does not appeal the jury’s finding on this issue. Id.

      China Rose, Ltd. is owned by general partner China Rose Management,

LLC, whose managers are Lee, Lau and Andrews, and limited partner, China Rose

Holdings, LLP, whose partners are also Lee, Lau and Andrews in equal 1/3 shares.

(9 R.R., D's Exh. 36) China Rose, Ltd. owns and operates four restaurants in San
                                          10
Antonio that are operated by third-party restaurant managers.          Pursuant to

restaurant management agreements, the restaurant managers are obligated to pay

monthly fees to China Rose, Ltd. (9 R.R., D's Exh. 1-3).

      China Rose, Ltd. and China Rose Management, LLC, as intervenors, joined

Lau and Andrews, as counter-plaintiffs, alleging inter alia breach of fiduciary duty

against Lee. In support of their claim for breach of fiduciary duty, Appellees

alleged: 1) Lee breached his fiduciary duty when he opened a competing Wok Inn

restaurant at Loop 1604 and Culebra Road; 2) Lee breached his fiduciary duty

when he, on behalf of China Rose, Ltd., amended three of the restaurant

management agreements to allow those the restaurant managers to pay reduced

monthly fees over time; and 3) Lee breached his fiduciary duty when Lee

subsequently terminated the restaurant management agreements and moved the

agreements, and income due thereunder, to his own company CHR, LLC. (1 C.R.

at 25, 985).

      Points 1) and 2) above were submitted to the jury for determination. (6 C.R.

at 2029, 2031). With respect to point 3), Lee stipulated that he breached his

fiduciary duty to Appellees when he terminated the restaurant management

agreements and moved the agreements and income to CHR, LLC. Lee argued,

however, that such conduct did not harm or injure Appellees because the

terminations were voided, any money Lee diverted to CHR, LLC was immediately

                                        11
returned to China Rose, Ltd., and that Lee in no way profited from his conduct. (5

R.R. at 98: 5-14). The jury was therefore asked whether Lee intended to cause

Appellees injury, and whether Appellees were in fact injured, as a result of Lee’s

conduct. (6 C.R. at 2029, 2031).

      According to the jury, Lee did not breach his fiduciary duty when he opened

the competing Wok Inn or when he amended the restaurant management

agreements. (6 C.R. at 2031). The jury also found that while Lee intended to harm

Lau, Andrews, and China Rose, Ltd. when he terminated the restaurant

management agreements and moved the agreements and income to CHR, LLC,

such conduct did not actually harm the Appellees. Id.

      Despite the verdict, the trial court entered judgment n.o.v. granting

Appellees full relief (the “Final Judgment”). (6 C.R. at 2089). Specifically, the

Final Judgment reversed the jury’s verdict and found 1) Lee breached his fiduciary

duty when he amended the restaurant management agreements; and 2) Lee’s

subsequent termination of the restaurant management agreements and movement

of the agreements and income to CHR, LLC caused Appellees harm. The Final

Judgment awarded actual damages in the amount of $452,000 plus attorney’s fees.

Id. The Final Judgment also required Lee to forfeit his ownership interest in China

Rose, Ltd. and China Rose Management, LLC. Lee now appeals the trial court’s

Final Judgment. Id.

                                        12
                      SUMMARY OF THE ARGUMENT

       The trial court erred when it reversed the jury’s findings and entered a

Final Judgment granting full relief to Appellees.         Specifically, the Court

disregarded the jury’s findings that Appellant did not breach his fiduciary duty;

that Appellees, Lau, Andrews, and China Rose Ltd., suffered no damage

resulting from Appellant’s alleged breach of fiduciary duty; and ordered

Appellant to forfeit his ownership interest in China Rose, Ltd. and China Rose

Management, LLC. The Court further awarded actual damages to Appellees,

Lau, Andrews and China Rose, Ltd., in the amount of $452,000, even though no

evidence was introduced at trial to support the award. Finally, in connection with

the stipulated breach of fiduciary duty claim, the Court awarded Appellees, Lau,

Andrews, and China Rose, Ltd. $8,552.50 in attorney’s fees as actual damages

incurred prior to the initiation of the lawsuit, plus a combined total of $158,095

in attorney’s fees incurred through trial for the court-entered breach of fiduciary

duty finding.

       The Court erred in awarding the relief set forth in the Final Judgment

because the relief: 1) is not supported by the evidence; 2) impermissibly

disregards the jury’s findings; 3) constitutes a “double recovery” in favor of

Appellees; and 4) impermissibly awards attorney’s fees. Accordingly, the Court

                                         13
abused its discretion when it entered the Final Judgment and the appellate court

should reverse the trial court’s ruling and render judgment in favor of Appellant.

                                        STANDARD OF REVIEW2

          The appellate court reviews a judgment notwithstanding the verdict under a

“no-evidence” standard, meaning the appellate court credits evidence favoring the

jury verdict if reasonable jurors could, and disregards contrary evidence unless

reasonable jurors could not. Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d
828, 830 (Tex. 2009). In determining a “no-evidence” point, all testimony must be

considered in the light most favorable to the Appellant and every reasonable

intendment deductible from the evidence is to be indulged in the Appellant’s favor.

Scharer v. John’s Cars, Inc., 776 S.W.2d 228, 231 (Tex. App.—El Paso 1989, writ

denied).

          The trial judge may not render a judgment n.o.v., even though the great

weight and preponderance of the evidence might be to the contrary. Id. at 230-31.

That is, a trial court may not disregard a jury’s negative finding and substitute its

own affirmative finding unless the evidence conclusively establishes the

affirmative finding as a matter of law. Holley v. Watts, 629 S.W.2d 694, 696 (Tex.

1982); Cale’s Cleane Scene Carwash, Inc. v. Hubbard, 76 S.W.3d 784, 786 (Tex.

App.—Houston [14th Dist.] 2002, no pet.). Therefore, the only way for the trial

 2
     This standard of review applies to points of error 1, 2, and 5.
                                                            14
court to properly disregard the jury’s verdict in this case, is if the evidence

conclusively established, as a matter of law, that Appellant breached his fiduciary

duty to Appellees and, as a result, that Appellee’s suffered substantial injury.

Scharer at 231. Because there is more than a scintilla of evidence establishing that

Appellant did not breach his fiduciary duty to Appellees and that Appellees were

not damaged, the verdict must be upheld and the trial court’s judgment should be

reversed.

                       ARGUMENTS & AUTHORITIES

Issue 1: The trial court improperly reversed the jury’s negative finding to jury
question No. 5 because there was sufficient evidence to support the jury’s finding.

      In Question No. 5, the Court asked the jury:

      “With regard to the ‘First Amendment’ to the three restaurant management
      agreements that reduced the monthly payments from each of the three
      China Rose restaurant managers, did Kafai Lee fail to comply with his
      fiduciary duty to Kenneth Lau, Connie Andrews, and China Rose, Ltd?”

      The jury answered “No.” (6 C.R. at 2039).

      The First Amendments were implemented, in part, to extend three

restaurant management agreements whose terms were for only six months. (9

R.R. D’s Exh. 1-3).      The First Amendments also contained a contractual

provision that would allow restaurant managers to pay reduced monthly

management fees over an extended period of time (the “step-down” provision).
                                         15
(9 R.R.; Ds’ Ex. 18 and 19). Lee testified that the step-down provision was

implemented to reward restaurant managers who performed well over time at

their respective restaurants by allowing them to use a portion of the management

fees which would otherwise go the China Rose, Ltd., to repair the aging

restaurant facilities and equipment. (3 R.R. at 33: 1-18).

      The evidence shows that Appellees were aware of and consented to the

First Amendment. First, the jury heard evidence that Appellee Lau implemented

a six-month term in the original restaurant management agreements in order to

test the performance of the newly hired restaurant managers, suggesting that if

the managers performed well, their contract would be extended. (3 R.R. at 33:

16-18, 161: 8-18; 4 R.R. at 101: 13-231). Second, the jury heard testimony that

the Appellant Lee informed Lau about the First Amendments and Lau did not

object. (3 R.R. at 32: 8-19; 4 R.R. 101: 20-21). Third, the First Amendments

were entered into in 2008 (Ds’ Ex. 18 and 19; 3 R.R. 161: 5-9), years before the

dispute between parties ever began, suggesting that Appellees, who were in

control of China Rose’s books and records (3 R.R. at 193:20-194:6; 4 R.R. at

112:7-13, 125:16-18), knew about and agreed to the First Amendments.    Fourth,

China Rose, Ltd. continued to receive restaurant management fees for years after

the original restaurant management agreements expired (4 R.R. 130:6-11),

suggesting Appellees knew of and agreed to the First Amendments which

                                         16
extended the term of the parties’ original agreement with the restaurant managers

by approximately ten years (9 R.R.; Ds’ Ex. 18 and 19; 3 R.R. at 6-15).

      Finally, evidence was introduced to the jury showing that, as manager of

China Rose Management, LLC, (China Rose, Ltd.’s general partner), Appellant

was fully authorized to enter into the First Amendments (9 R.R. Ds’ Ex. 36 at 4;

9 R.R. Ds’ Ex. 38 at 3.); See also Ritchie v. Rupe, 443 S.W.3d 856, 900 (Tex.

2014) (holding the business judgment rule shields managers from liability for

rational decisions made for the company’s benefit).

      In light of this evidence, the jury found that Appellant did not breach his

fiduciary duty when he executed the First Amendments with the restaurant

managers.    (6 C.R. at 2039).      Nevertheless, the Court substituted its own

judgment for that of the jury’s, disregarded the jury’s negative finding, and

affirmatively found that Appellant did in fact breach his fiduciary duty to

Appellees Lau, Andrews, and China Rose, Ltd. (6 C.R. at 2089). In light of the

evidence presented at trial, reasonable minds could have concluded that

Appellant’s conduct did not constitute a breach of fiduciary duty. Tanner at 830.

Therefore, the trial court erred when it disregarded the jury’s findings to question

No. 5 and the trial court’s Final Judgment should be reversed.

                                         17
Issue 2: The trial court improperly reversed the jury’s negative finding in jury
questions nos. 7b and 8b because there was sufficient evidence to support the
jury’s finding.

      In Jury Question Nos. 7b and 8b, the jury found that Appellant Lee did not

cause Appellants Lau, Andrews, or China Rose, Ltd. substantial injury or harm

when Lee terminated the China Rose restaurant management agreements and

moved those agreements and income to his limited liability company, CHR,

LLC. (6 C.R. at 2041-2042).

      To support this finding, the jury heard evidence that the China Rose

 restaurant management agreements were never actually put into effect, any

 money Appellant diverted to CHR, LLC was immediately returned, and that

 Appellant in no way profited from the cancellation of the China Rose restaurant

 management agreements. (3 R.R. at 47:1 - 49:10, 123:10-15, 164:9-20; 4 R.R.

 33:3-34:18, 129:6-130:19 , 136:16-137:2). Appellees also could not articulate

 any injury or damages they suffered as a result of the termination and transfer

 of the China Rose restaurant management agreements. (4 R.R. at 34:15-18,

 108:9-16, 129:18-130:19).

      In light of the evidence, the jury found that that Appellant Lee did not

cause Appellees Lau, Andrews, or China Rose, Ltd. substantial injury or harm

when Lee moved the China Rose restaurant management agreements and income

to CHR, LLC. (6 C.R. at 2041). Nevertheless, the Court substituted its own

                                         18
judgment for that of the jury’s, disregarded the jury’s negative finding, and

affirmatively found that Lee’s conduct substantially injured or harmed Lau,

Andrews, and China Rose, Ltd. (6 C.R. at 2090-2091). In light of the evidence

presented at trial, reasonable minds could have concluded that Lee’s conduct did

not substantially injure or harm Lau, Andrews, or China Rose, Ltd. Tanner at

830. Therefore, the trial court erred when it disregarded the jury’s findings to

questions numbers 7b and 8b, and the trial court’s final judgment should be

reversed.

Issue 3: The trial court’s findings of fact and conclusions of law do not support
the Final Judgment because the trial court failed make findings as to Appellant’s
statute of limitations defense.

      Appellant raised the statute of limitations as an affirmative defense in

response to Appellees’ claim for breach of fiduciary duty. (4 C.R. at 1444). As it

relates to this appeal, Appellees allege that Appellant breached his fiduciary duty

when he executed the First Amendments to the restaurant management

agreements. (1 C.R. at 88-89). However, because the First Amendments were

executed in February, 2008 (9 R.R.; Ds’ Ex. 18 and 19), and Appellees’ failed to

file their counterclaim until December 19, 2012, Appellees’ claim is barred by

the four-year limitations period.       See TEX. CIV. PRAC. & REM. Code

§16.004(a)(5).

                                         19
          At trial, the parties agreed that all affirmative defenses would be

determined by the trial court after the jury returned its verdict. (4 R.R. at 51:6-

24). Because the jury found that Appellant did not breach his fiduciary duties (6

C.R. at 2037), there was no need for the trial court to address Appellant’s

affirmative defenses. However, once the trial court reversed the jury’s decision,

it was required to make findings as to Appellant’s statute of limitations defense

which, despite Appellant’s request, it failed to do. (6 C.R. at 42; 6 R.R. at 18:21 -

19:17).

      Public policy favors the validity of judgments.             See Crawford v.

McDonald, 88 Tex. 626, 33 S.W. 325, 328 (1895). When a court makes findings

of fact, but inadvertently omits an essential element of a ground of recovery or

defense, the presumption of validity will supply the omitted element by

implication. Vickery v. Comm’n for Lawyer Discipline, 5 S.W.3d 241, 252 (Tex.

App.—Houston [1st Dist.] pet. denied). However, if the record demonstrates the

trial judge deliberately omitted the element, the presumption is refuted and the

element cannot logically be supplied by implication. Id. In other words, the

presumption of validity is rebutted where the record suggests the trial court was

aware of the omission and its alleged significance, yet deliberately omitted the

element from its written findings. Id. at 253.

                                          20
      If a ground of recovery or defense is entirely omitted, i.e., if the trial court

omits every element of the particular ground of recovery or defense, this is some

evidence the court did not rely on the ground or defense in reaching its decision.

Id. “In such case, the omission is deemed to be deliberate; ‘the judgment may

not be supported upon appeal by a presumed finding upon any ground of

recovery or defense, no element of which has been included in the findings of

fact . . .’.” Id. citing TEX. R. CIV. P. 299. Refusal of the court to make a finding

requested shall be reviewable on appeal. TEX. R. CIV. P. 299.

      Here, the trial court was asked twice to make rulings on Appellant’s statute

of limitations defense—first before the charge was submitted to the jury (5 R.R.

at 51:6-23), and again in Appellant’s request for findings of fact and conclusions

of law. (6 C.R. at 2095). Because the trial court’s findings of fact omit every

element of Appellant’s statute of limitations defense, the Final Judgment cannot

be supported on appeal because the affirmative defense, though properly before

the trial court, was not even considered. The trial court’s failure to make findings

regarding Appellant’s limitations defense constitutes reversible error because it

has prevented Appellant from adequately presenting the matter on appeal.

Vickery at 256, citing Tamez v. Tamez, 822 S.W.2d 688, 692-93 (Tex. App.—

Corpus Christi, 1991, writ denied). Therefore, the trial court’s Final Judgment

should be reversed.

                                          21
Issue 4: The trial court abused its discretion when it ordered Appellant to forfeit
his partnership interest in China Rose, Ltd. because such a remedy is not available
in Texas.

      Forfeiture is an equitable remedy. Burrow v. Acre, 997 S.W.2d 229, 245

(Tex. 1999). Awards of equitable remedies are reviewed under an abuse of

discretion standard. See Gerdes v. Kennamer, 155 S.W.3d 541, 545 (Tex.App.—

Corpus Christi 2004, no pet.). A court abuses its discretion if it acts without

reference to any guiding rules or principles. Downer v. Aquamarine Operators,

Inc., 701 S.W.2d 238, 241 (Tex. 1985).

      Prior to submitting the Court’s charge to the jury, Appellant stipulated that

he breached his fiduciary duty to Appellees when he terminated the China Rose

restaurant management agreements and moved those agreements and income to

Appellant’s own company, CHR, LLC. (5 R.R. at 26:8-12, 28:3-8).         Appellant

did not stipulate that he caused Appellees any damages and, in fact, had argued

that he did not. (5 R.R. at 26:13-27:4). The issue of damages was submitted to

the jury and the jury found that Appellees did not suffer substantial harm or

injury as a result of Appellant’s conduct. (6 C.R. at 2042).           The Court

disregarded the jury’s finding and ordered that Appellant forfeit his ownership

interest in China Rose, Ltd. and China Rose Management, LLC. (6 C.R. at

2091).

                                         22
      Where an agent who breaches his fiduciary duty has profited or benefitted

from a transaction, the principal is entitled to equitable relief, such as rescission,

profit disgorgement, or fee forfeiture, without having to show that the breach

caused damages. Burrow at 239-40; Kinzbach Tool Co. v. Corbett-Wallace

Corp., 160 S.W.2d 509, (Tex. 1942). Profit disgorgement is appropriate when a

fiduciary uses his position to gain a benefit for himself at the expense of the

principal. Schiller v. Elick, 240 S.W.2d 997, 999 (Tex. 1951). Further, an agent

who breaches his fiduciary duty may forfeit some or all of the fees incurred in the

transaction. Burrow at 240-41. Finally, the Court may rescind a transaction

accomplished by a breach of the agent’s fiduciary duty. See e.g. Allison, v.

Harrison, 156 S.W.2d 137, 140 (Tex. 1941).

      In support of its award of forfeiture, the trial court relied on ERI

Consulting Eng’rs., Inc. v. Swinnea, 318 S.W.3d 867 (Tex. 2010) (Appx. 3 -

Findings of Fact and Conclusions of Law at ¶31). In ERI Consulting, the Court

held that when a business partner breaches his fiduciary duty by fraudulently

inducing another partner to buy out his interest, the consideration received in the

transaction may be subject to forfeiture. ERI Consulting at 882. While this case

deals with a partnership dispute, it does not stand for the proposition that

forfeiture of a partnership interest is an appropriate remedy for breach of

fiduciary duty.    ERI Consulting merely stands for the proposition that any

                                          23
consideration received by virtue of an agent’s breach of fiduciary duty is subject

to forfeiture as an equitable remedy. Id. Because Appellant did not profit from

his alleged breach, and Appellant’s partnership interests were not obtained in

connection with any alleged breach, forfeiture of his partnership is outside the

scope of the relief contemplated in ERI Consulting.

      It is also important to note that the breaching fiduciary in ERI Consulting,

Larry Snodgrass, was allowed to keep his partnership interest. ERI Consulting at

871. This is because fee forfeiture is generally not considered punitive to a

defendant fiduciary. See In re Estate of Corriea, 719 A.2d 1234, 1241 (D.C.

1998) (explaining that fee forfeiture is not punitive in nature). Asset forfeiture,

however, flouts the safeguards that prevent equitable remedies from exacting

punitive measures and therefore can easily exceed the defendant’s gain. Snepp v.

United States, 444 U.S. 507, 515-516, (1980) (holding that constructive trust

remedies “[conform] relief to the dimensions of the wrong…since the remedy

reaches only funds attributable to the breach, it cannot saddle the [fiduciary]

agent with exemplary damages out of all proportion to his gain.”). It is well

established that courts generally discourage asset forfeiture.      O’Flaherty v.

Belgum 115 Cal. App. 4th 1044, 1059 (Cal. App. 2d Dist. 2004), citing Deutsch

v. Phillips Petroleum Co., 56 Cal. App. 3d 586, 592 (Cal. App. 2d Dist. 1976)

(“[T]he law abhors forfeiture.”).

                                         24
      Never in Texas has a court required a partner to forfeit his ownership

interest in his company as an equitable remedy for breach of fiduciary duty. In

fact, when faced with the opportunity to order such forfeiture, Texas courts have

refused to do so. Dobson v. Dobson 594 S.W.2d 177, 181 (Tex. App. —Houston

[1st Dist.] 1980) (holding that a breach of a partnership agreement does not lead

to loss of a partner’s interest even if the breach is committed in bad faith.)

      Courts have ordered fee forfeiture and profit disgorgement as an equitable

remedy against fiduciaries that profit from their breach of fiduciary duty. See

Burrow at 240. In this case, however, the jury found that Appellant did not profit

from the termination of the China Rose restaurant management agreements, or by

moving those agreements and income to CHR, LLC (6 C.R. at 2042).

Furthermore, Appellant’s ownership interest in the China Rose entities was

obtained in 2004, years before the breach in question (9 R.R.; Ds’ Ex. 32-38),

meaning Appellant’s ownership interest was not a byproduct of his breach of

fiduciary duty, and thus cannot be the subject of a forfeiture remedy. For these

reasons, in addition to the jury’s finding of no substantial harm or injury, there

was no equitable basis, much less legal precedent, which would permit the Court

to order Appellant to forfeit his ownership interest in China Rose, Ltd. and China

Rose Management, LLC. Therefore, the Court abused its discretion when it

                                          25
ordered Appellant to forfeit his ownership interest in the China Rose entities and

the Final Judgment should be reversed.

Issue 5: The trial court improperly awarded $452,000 in actual damages because
there was legally and factually insufficient evidence to support such a finding.

          The jury found that Appellant did not breach his fiduciary duty to

Appellees when he executed the First Amendments to the restaurant management

agreements and, as a result, the jury did enter an award of damages on the issue.

(6 C.R. at 2039).             However, when the trial court reversed the jury’s finding, it

awarded Appellees $452,000 in actual damages. (6 C.R. at 2091). The trial court

calculated actual damages by multiplying the difference in the reduced

management fees received by China Rose, Ltd. under the step-down provision by

the number of months the restaurant managers began to pay reduced fees through

the date of trial. (Appx. 3 - Findings of Fact and Conclusions of Law at ¶ 9).

The trial court’s damages award should be reversed because, as discussed above,

there is more than a scintilla of evidence to support the jury’s verdict that

Appellant did not breach his fiduciary duty to Appellees when he executed the

First Amendments.3 The damages award should also be reversed because it is

unsupported by the evidence presented at trial.

 3
     Issue: 1 supra at pp. 9-11.
                                                  26
      At trial, Appellee Connie Andrews testified that one of the restaurant

managers, Sun Yo Guan, was behind in her monthly payments to China Rose,

Ltd. (4 R.R. at 106:19-107:10). Ms. Andrews also testified that she did know

how many monthly payments Sun Yo Guan had missed since she became a

manager in 2007. (4 R.R. at 108:3-8). Essentially, the trial court’s calculation of

damages requires Appellant to pay the difference of the reduced monthly

management fees regardless of whether the restaurant managers actually paid

those fees. In other words, the trial court calculated actual damages based on the

amount the restaurant managers were supposed to pay under the step-down

provision, not what the managers have actually paid.           No evidence was

introduced at trial setting forth the amount of fees the restaurant managers owed

after the step-down provision took effect and no evidence at was introduced at

trial showing the amount each of the managers actually paid. Therefore, there is

insufficient evidence to support the trial court’s award of damages and the Final

Judgment should be reversed.

Issue 6: By awarding both forfeiture and actual damages, the trial court granted
Appellees and impermissible double recovery.

      By awarding forfeiture of Appellant’s ownership interest in China Rose,

Ltd. and China Rose Management, LLC in addition to the award of actual

damages, the Court granted Appellees a “double recovery” of damages.

                                         27
Whether Appellees received a double recovery is a question of law, and

therefore in reviewing the issue, the Appellate Court conducts a de novo review.

Marin Real Estate Partners, L.P. v. Vogt, 373 S.W.3d 57, 75 (Tex. App.—San

Antonio, 2011, no pet.)

      “A double recovery exists when a plaintiff is awarded more than

one recovery for the same injury. ‘Texas law does not permit double recovery.’”

The prohibition against double recovery is a corollary to the one satisfaction rule,

which provides that a plaintiff may recover only for the damages suffered as a

result of a particular injury.” Id. at 76 (internal citations omitted).

      Here, the trial court reversed the jury’s verdict and found Appellant liable

for breach of fiduciary duty for executing the First Amendments to China Rose

restaurant management agreements (6 C.R. at 2091). However, the trial court

awarded both forfeiture and actual damages for the same tortious conduct. Id.

Thus, the trial court granted Appellees an impermissible double recovery, and the

Final Judgment should be reversed.

Issue 7: The trial court erred when it awarded Appellees attorney’s fees because
such a remedy is not available for breach of fiduciary duty.

      The trial court's decision to award attorney's fees is reviewed de novo on

appeal. Gereb v. Smith-Jaye, 70 S.W.3d 272, 273 (Tex. App.-San Antonio 2002,

no pet.). In its Findings of Fact and Conclusions of Law, the trial court incorrectly

                                           28
relied on several cases: McGuire v. Kelly; G.R.A.V.I.T.Y. Enters.v. Reece Supply

Co.; Massey v. Colombus; and Nationwide Mut'; Ins. Co. v. Holmes. (Appx. 3,

Findings of Facts and Conclusions of Law at ¶39, 41, 42).         The    trial      court

awarded Appellees $8,552.50 in attorney’s fees as actual damages incurred prior to

the lawsuit and an additional $158,095.00 in attorney’s fees incurred through trial

as a result of Lee’s breach of fiduciary duty (6 C.R. at 2091-2092). The trial court

abused its discretion in granting this award because, after disregarding the jury’s

answer, the court found Appellant liable for breach of fiduciary only, and no rule,

statute, or case permits the award of attorney’s fees in a case for breach of

fiduciary duty. See Holland v. Wal-Mart Stores, Inc. 1 S.W.3d 91, 95 (Tex. 1999).

In fact, Texas case law specifically prohibits an award of attorney’s fees for breach

of fiduciary duty. See McCullough v. Scarbrough, Medlin & Assocs., 435 S.W.3d
871, 917 (Tex. App.—Dallas, 2014, pet. denied); Western Reserve Life Assurance

Co. of Ohio v. Graben, 233 S.W.3d 360, 377 (Tex. App.—Fort Worth, 2007, no

pet.) (“Attorney’s fees are not available for a breach of fiduciary duty claim.”)

      To support the Court’s award of attorney’s fees, Appellees relied on a

Texas appellate court case, McGuire v. Kelley, 41 S.W.3d 679 (Tex. App.—

Texarkana 2001, no pet.) (6 C.R. at 25:2-16). In McGuire, the Court awarded

Kelley attorney’s fees for breach of contract under Chapter 38 of the Texas Civil

Practice & Remedies code even though she elected to recover actual and

                                         29
exemplary damages under her claim for breach of fiduciary duty. Id. at 682-683.

In McGuire, the jury found McGuire liable to Kelly for breach of contract, breach

of fiduciary duty, and fraud. Id. Under the One Satisfaction Rule4, however,

Kelley was required to elect recovery on only one theory of liability. Id. Even

though Kelley elected to recover under her breach of fiduciary duty claim, the

Court awarded her statutory attorney’s fees because the jury also found McGuire

liable for breach of contract. Id.

       This case is distinguishable from McGuire because the only finding against

Appellant was for breach of fiduciary duty. No other cause of action or theory of

recovery was presented to the jury for determination and neither the trial court

nor the jury found Appellant liable for breach of contract or any other unlawful

conduct (6 C.R. at 2031-2044). Because Appellant was found liable on a breach

of fiduciary duty claim only, Appellees are not entitled to recover attorney’s fees.

Therefore, the Court abused its discretion when it awarded attorney’s fees and the

Final Judgment should be reversed.

       In G.R.A.V.I.T.Y., the Dallas Court of Appeals analyzed whether a party who

did not recover damages could be entitled to attorney's fees. G.R.A.V.I.T.Y. Enters.

v. Reece Supply Co., 177 S.W.3d 537, 546, 2005 Tex. App. LEXIS 6266, *18-19

(Tex. App. -- Dallas 2005, no pet.). The Court held that attorneys fees should not
 4
  Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991) (holding that when a party pursues several
 causes of action arising from the same course of conduct by the defendant and resulting in a single injury, the
 plaintiff is limited to one satisfaction.)
                                                        30
be awarded, and further analyzed whether a party could be awarded attorneys fees

for defending a breach of contract claim. Id. citing De La Rosa v. Kaples, 812
S.W.2d 432 (Tex. App.-San Antonio 1991, writ denied). De la Rosa allows for an

exception to the general rule of non-recovery where a claim and counterclaim (on a

breach of contract claim) where "the matters encompassed by the claim and

counterclaim are indistinguishable, where they arose from the same transactions,

where the same facts required to prosecute the claim are required to defend against

the counterclaim." De la Rosa at 434. Here, Appellant submitted only one issue to

the jury for consideration, and it was not for breach of contract. The matters

encompassing Appellant's claim and Appellee's counterclaims are very

distinguishable, and do not rely on the same facts to prosecute and defend the

claims. Therefore, the trial court's reliance on G.R.A.V.I.T.Y. was improper, and an

award of attorneys fees based on this case should be reversed.

      Next, the trial court relied on Massey v. Colombus State Bank, which held

"attorney's fees incurred in responding to false and defamatory grievances filed

with regulatory agency recoverable as damages." Massey v. Columbus State Bank,

35 S.W.3d 697, 2000 Tex. App. LEXIS 7624 (Tex. App. -- Houston [1st Dist.]

2000, pet. denied). In Massey, the bank brought suit against Massey for complaints

with the Texas Department of Banking, an unfounded grievance with the State Bar

of Texas against the Bank's Board chairman and outside counsel, a groundless

                                        31
complaint with the Texas State Board of Public Accountancy, and a complaint with

the Sheriff's Department of Colorado County, Texas. Id. at *10. As a result of these

numerous actions, the bank, prior to its litigation against Massey for defamation,

"was forced to spend $104,000. responding to and defending against all of these

complaints and grievances." Id. The Court of Appeals upheld the award of

attorney's fees incurred while responding to those grievances. Id.

      Here, the trial court's award of attorney's fees is improper because the

Appellees' attorney's fees did not arise from prior litigation. See, e.g. Brown &

Brown of Tex., Inc. v. Omni Metals, Inc., 317 S.W.3d 361, 400, 2010 Tex. App.

LEXIS 2338, *96 (Tex. App. Houston [1st Dist.] 2010, no pet.); Turner v. Turner,

385 S.W.2d 230, 234, 1964 Tex. LEXIS 630, *8, 8 Tex. Sup. J. 112 (Tex.

1964)(plaintiff may recover in a separate suit for his reasonable and necessary

expenses of the prior litigation). Further, Appellants actions do not rise to the same

level of maliciousness as was the case in Massey. Therefore, the trial court erred

when it relied on Massey in its award of attorney's fees, and should be reversed.

      The trial court further relied on Nationwide Mut'l Ins. Co. v. Holmes, in the

premise that the award of attorney's fees is proper "where such expenses are the

natural and proximate cause of another's bad faith and wrongful conduct." . (Appx.

3, Findings of Facts and Conclusions of Law at ¶39, 41, 42); Nationwide Mut. Ins.

Co. v. Holmes, 842 S.W.2d 335, 1992 Tex. App. LEXIS 3188 (Tex. App. San

                                         32
Antonio 1992, writ denied). In Holmes, Holmes was sued for injuries resulting

from a car accident, and when his insurance carrier Nationwide indicated that it

would not settle the claim, upon Nationwide's advice, Holmes hired an attorney to

protect his interests. Id. at 337. The suit against Holmes went to trial and

Nationwide provided representation; however, Nationwide, knowing that Holmes

was obligated to pay his retained attorney $7500 upon commencement of trial,

failed to notify Holmes that it would indemnify him for any judgment in excess of

the policy limits. Id. at 337-38. Holmes sued Nationwide for violation of the DTPA

and received a favorable judgment, including recovery of the attorney's fees. Id. at

338. The court noted that Holmes did not incur the attorney's fees in defending

himself in the original suit, but rather incurred the expenses because of

Nationwide's wrongful conduct. Id.

      Holmes is distinguishable because Appellees did not recover damages under

the DTPA, and the expenses they incurred were not the      natural   and proximate

cause of Appellant's wrongful act (his breach of fiduciary duty); the expenses were

the natural and proximate cause of being sued by Appellant. See 2 R.R. 208:7-17.

As such, the trial court erred in awarding Appellant's attorney's fees under Holmes.

      Finally, the trial court relied on Tex. Civ. Prac. & Rem. C. § 38.001, et. seq.,

authorizing recovery of attorney's fees in suits for breach of contract. There was no

                                         33
award for Appellant's breach of contract. Therefore, the trial court erred, and its

award of attorneys fees should be reversed.

                         CONCLUSION AND PRAYER

      This Court must reverse the judgment made by the trial court because the

trial court abused its discretion when it disregarded the jury’s negative finding and

substituted its own affirmative finding.      The trial court erred by incorrectly

awarding relief to Appellees that: 1) was not supported by the evidence introduced

at trial; 2) impermissibly disregarded the jury’s findings; 3) constituted “double

recovery” in favor of Appellees in violation of the one satisfaction rule; and 4)

incorrectly awarded attorney’s fees for breach of fiduciary duty.          Appellant

respectfully prays that this Court reverse the Final Judgment of the trial court and

render judgment in favor of the Appellant.

                                              Respectfully submitted,

                                              PRINS LAW FIRM
                                              4940 Broadway, Ste. 108
                                              San Antonio, Texas 78209
                                              Telephone: (210) 820-0833
                                              Telecopier: (210) 820-0929

                                              By:__________________________
                                                   TODD A. PRINS
                                                   State Bar No. 16330400
                                                   Email:
                                                   taprins@prinslaw.com

                                         34
                         CERTIFICATE OF SERVICE

      I certify that on September 4, 2015, Appellant’s Brief was served on the

following counsel of record via email and facsimile.

Sylvan S. Lang, Jr.                       Thomas G. Kemmy
LANG LAW FIRM, P.C.                       LAW OFFICE OF THOMAS G.
13409 N.W. Military Hwy., Ste 210         KEMMY
San Antonio, Texas 78231                  322 W. Woodlawn Avenue
Telephone: (210) 479-8899                 San Antonio, Texas 78212
Facsimile: (210) 479-0099                 Telephone: (210) 735-2233
                                          Facsimile: (210) 736-9025
Attorney for Kenneth Lau & Connie         Attorney for China Rose, Ltd. and China
Andrews                                   Rose Managment, LLC

                                            PRINS LAW FIRM

                                            4940 Broadway, Ste. 108
                                            San Antonio, Texas 78209
                                            Telephone: (210) 820-0833
                                            Telecopier: (210) 820-0929

                                            By:_______________________
                                                 TODD A. PRINS
                                                 State Bar No. 16330400
                                                 Email:
                                                 taprins@prinslaw.com
                                 APPENDIX

Tab 1:   Final Judgment Order by the Trial Court (6 CR at 2031)

Tab 2:   The Jury Charge and Verdict (6 CR at 2089)

Tab 3:   Trial Court's Findings of Fact and Conclusions of Law

Tab 4:   Plaintiff's Original Petition

                                         36