Katy Int'l, Inc. v. Jinchun Jiang

451 S.W.3d 74

KATY INTERNATIONAL, INC. f/k/a/ Emer International, Inc., Mengghui Zhang and Binghua Jiang, Appellants

v.Jinchun JIANG, Appellee.

No. 14–13–00615–CV.

Court of Appeals of Texas, Houston (14th Dist.).

Oct. 21, 2014.

Rehearing Overruled Dec. 2, 2014.

Brianne Watkins, Houston, for Appellants.

Terry B. Joseph, David M. Lodholz, Houston, for Appellee.

Panel consists of Justices CHRISTOPHER, JAMISON, and McCALLY.

OPINION

MARTHA HILL JAMISON, Justice.

Appellee Jinchun Jiang is a former shareholder of Emer International, Inc. (now known as Katy International, Inc.). He filed suit against appellants Emer International and its remaining shareholders, Mengghui Zhang and Binghua Jiang, for breach of contract.¹ In eight issues, appellants challenge the trial court's final judgment and sanctions order. We reverse the judgment against Zhang and Binghua and render judgment in their favor because we conclude they are not personally liable for breach of the subject contract as a matter of law. We affirm the trial court's judgment in all other respects and overrule appellants' issue complaining of the trial court's sanctions order.

Background

Zhang, Binghua, and Jinchun were shareholders of Emer International, a Texas corporation in the oilfield equipment industry. Emer International also had investments in other companies, including Jinxi Axle Company. After Jinchun informed Binghua he wanted to leave the company, the parties entered into a series of agreements to effectuate Jinchun's separation. Three of the agreements are relevant to this appeal, which we discuss below.

I. Agreements Relevant to this Appeal

A. Emer International Inc. Capital Allocation Preliminary Plan (Plan)

This document outlines a plan to divide Emer International's accounts receivable, fixed assets, debts, and taxes among Zhang, Binghua, and Jinchun. It includes a section entitled “Investments in other companies,” which states: “Investment in Jinxi Axle Company, Ltd[.]: After [Jinxi Axle] goes public, the shares will be cashed-out and each party will receive one third of the total respectively according to the Securities Commission regulations.” The Plan is signed by Zhang, Binghua, and Jinchun.

B. Agreement

In the document entitled simply “Agreement,” the “undersigned, being all the shareholders and directors of Emer International [Zhang, Binghua, and Jinchun]” agreed to terms regarding Jinchun's withdrawal from Emer International. The parties agreed that Jinchun would sell his share of the company retroactive to December 2003.² After the effective date, Jinchun was not responsible for “new business operation[s or] activities” of the company and would not be “entitled to the business and financial gains or ... responsible for any los[s]es or liabilities generated by or from” them. Jinchun and the company subsequently would “work out the details of purchase and sale of [Jinchun's] shares ... as well as other relevant issues.”

C. Stock Purchase Agreement

In this agreement between Jinchun and Emer International, Jinchun agreed to sell his stock in Emer International to the company for nearly $500,000. Zhang signed this agreement on behalf of Emer International.

II. 2006 Lawsuit and Settlement

Jinchun sued appellants in 2006. He alleged that Emer International had paid him only approximately $60,000 of the nearly $500,000 owed him under the Stock Purchase Agreement. He brought claims against Emer International for breach of contract and against Zhang and Binghua for tortious interference with contract. The lawsuit settled in July 2007, and the parties signed a “Full and Final Release Agreement” pursuant to which appellants agreed to pay Jinchun nearly $500,000 in exchange for a release of:

all claims and causes of action being asserted [or which might have been asserted] in [the 2006 lawsuit] and arising from the circumstances and occurrences made the basis of [Jinchun's] claims as more particularly described in the pleadings, including ... any and all unknown claims which have resulted or may result from the alleged acts or omissions of [appellants].

III. This Lawsuit

Jinchun alleges the parties performed all the requirements under the Plan, except for selling Emer International's stock in Jinxi Axle after it went public and paying Jinchun for his share. Instead, as alleged, Emer International pledged the stock as collateral for a loan and, when it failed to pay back the loan, purportedly transferred the stock to the lender. Jinchun sued appellants for breach of contract.

During the course of litigation, the trial court granted Jinchun's motion to compel discovery of documents relating to the transfer of the Jinxi Axle stock and its value. Jinchun subsequently filed a motion for sanctions. The trial court granted the motion and ordered appellants to pay $1,000 in attorney's fees. After a trial on the merits, the jury found, among other things, that appellants had breached the Plan, the breach was not excused, and Jinchun was entitled to damages of 23.04 RMB³ per share of the Jinxi Axle stock.

Discussion

Appellants complain in six issues that (1) the Plan is not an enforceable contract as a matter of law; (2) the Stock Purchase Agreement constituted an accord and satisfaction of the Plan; (3) Jinchun's claims in this lawsuit are barred by the release in the 2006 lawsuit; and (4) Jinchun did not present legally and factually sufficient evidence of his interest in the Jinxi Axle stock, to show that the corporate form should be disregarded to hold the shareholders individually liable, or of the value of the Jinxi Axle stock. In their remaining two issues, appellants argue the trial court abused its discretion in awarding sanctions to Jinchun and if this court reverses the judgment, Jinchun is not entitled to attorneys' fees.

We conclude no evidence supports the trial court's entry of judgment against Zhang and Binghua, reverse that portion of the judgment, and render a take nothing judgment in their favor. We affirm the judgment in all other respects. For reasons discussed below, we further overrule appellants' issue complaining of the trial court's sanctions order.

I. Standards of Review Applied to Motions for JNOV and New Trial

In their first six issues, appellants do not challenge a specific ruling by the trial court. However, appellants raised these issues below in a “Motion for Judgment Notwithstanding the Judgment and/or Motion for New Trial.” We interpret these issues as a challenge to the trial court's denial of that motion.⁴ See, e.g., Synergy Mgmt. Group, L.L.C. v. Thompson, 398 S.W.3d 843, 845 (Tex.App.-Eastland 2012, no pet.).

We review a trial court's ruling on a motion for JNOV under a legal-sufficiency standard.⁵ See City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex.2005) (“[T]he test for legal sufficiency should be the same for summary judgments, directed verdicts, judgments notwithstanding the verdict, and appellate no-evidence review.”); see also Envtl. Procedures, Inc. v. Guidry, 282 S.W.3d 602, 626 (Tex.App.-Houston [14th Dist.] 2009, pet. denied). When reviewing the legal sufficiency of the evidence, we review the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller, 168 S.W.3d at 822. We credit favorable evidence if a reasonable factfinder could do so, and disregard contrary evidence unless a reasonable factfinder could not do so. Id. at 827.

The evidence is legally sufficient if it would enable a reasonable and fair-minded person to reach the verdict under review. Id. Evidence is legally insufficient when (1) there is a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of the vital fact. Id. at 810. To the extent that the trial court's ruling on a JNOV is based on a question of law, we review that aspect of the ruling de novo, applying the rule that a motion for JNOV should be granted when (1) the evidence is conclusive and one party is entitled to recover as a matter of law, or (2) a legal principle precludes recovery. JSC Neftegas–Impex v. Citibank,

N.A.,

365 S.W.3d 387, 396 (Tex.App.-Houston [1st Dist.] 2011, pet. denied); COC Servs., Ltd. v. CompUSA, Inc., 150 S.W.3d 654, 662 (Tex.App.-Dallas 2004, pet. denied).

A factual sufficiency challenge must be raised in a motion for new trial. See Tex.R. Civ. P. 324(b)(2), (3) ; Daniels v. Empty Eye, Inc., 368 S.W.3d 743, 749 (Tex.App.-Houston [14th Dist.] 2012, pet. denied). Appellants' factual sufficiency challenge was included in its combined JNOV and new trial motion. In reviewing the factual sufficiency challenge, we must consider and weigh all the evidence. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex.2003). We can set aside a verdict only if the evidence is so weak or if the finding is so against the great weight and preponderance of the evidence that it is clearly wrong and manifestly unjust. Id. We may not substitute our own judgment for that of the trier of fact. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex.1998). The amount of evidence necessary to affirm a judgment is far less than that necessary to reverse a judgment. Jones v. Smith, 291 S.W.3d 549, 555 (Tex.App.-Houston [14th Dist.] 2009, no pet.).

II. Enforceability of the Plan

In their first issue, appellants argue that the Plan is not an enforceable contract because the parties did not have a meeting of the minds as to its essential terms and it was not supported by consideration. The jury found that the Plan “constituted an agreement whereby Jinchun [and appellants] agreed to the disposition of an investment in Jinxi Axle Company ... and the distribution of the proceeds.”

A. Terms of Plan Not Indefinite

Appellants argue the parties did not have a meeting of the minds as to...