Scott Pelley P.C. v. Michael C. Wynne, John Hunter Smith, & M&S Wynne Family Ltd.

SCOTT PELLEY P.C., THE PELLEY FAMILY LIMITED PARTNERSHIP,AND SCOTT PELLEY, INDIVIDUALLY, Appellants v. MICHAEL C. WYNNE, JOHN HUNTER SMITH,AND M&S WYNNE FAMILY LIMITED PARTNERSHIP, Appellees

No. 05-15-01560-CV

Court of Appeals Fifth District of Texas at Dallas

August 28, 2017

On Appeal from the 15th Judicial District Court Grayson County, Texas

Trial Court Cause No. CV 11-1026

MEMORANDUM OPINION

Before Justices Francis, Lang, and Lang-Miers

Opinion by Justice Lang

This case involves a complicated web of claims, counterclaims, and cross-claims respecting the dissolution of the law partnership of Nall, Pelley, Wynne & Smith in Sherman, Texas. Appeals and cross-appeals were perfected with a total of five briefs, reply briefs, and cross-briefs filed in this case as well as a substantial trial court record. The record consists of nineteen volumes of clerk's record¹ and fifteen volumes of reporter's record.² There are a total of thirteen issues on appeal and three issues on cross-appeal submitted to us. The appeals andcross-appeals are from a trial court judgment generally in favor of Michael C. Wynne and John Hunter Smith on their counterclaims and cross-claims for breach of contract, an accounting, and attorneys' fees.

As a preliminary matter, we note that, on appeal, the parties generally assert their issues without identifying the particular parties to which each issue and cross-issue pertains. Nor do they distinguish their issues based on the particular parties who asserted or defended against the claims, counterclaims, or cross-claims in the trial court. Accordingly, based on our review of the record, including the parties' claims, counterclaims, and cross-claims, the trial court's findings of fact and conclusions of law, and the trial court's final judgment, we identified below the appropriate parties to each issue and cross-issue on appeal.

First, Scott Pelley P.C. appeals the portion of the trial court's final judgment in favor of Wynne and Smith on its claims for repudiation, breach of contract, conversion, theft, damages under the Texas Theft Liability Act, and breach of fiduciary duty. Scott Pelley P.C. raises four issues on appeal, arguing: (1) as to its claims for repudiation and breach of contract, the trial court erred "in its [c]onclusions of [l]aw" that Wynne and Smith did not (a) repudiate the 2008 Agreement, nor (b) breach the 2008 Agreement; (2) as to its claims for conversion, theft, and damages under the Texas Theft Liability Act, the trial court erred when it concluded that Wynne and Smith did not convert or steal (a) the 2010 bonus in the amount of $52,139.79, or (b) the $50,000 Cobb fee or the $391,722 LJH fee; (3) as to its claim for breach of fiduciary duty, the trial court erred when it concluded that Wynne and Smith did not breach their duties of loyalty and care; and (4) as to its claims for conversion and theft, the trial court erred when it denied its motion to compel the return of misappropriated funds.

Second, The Pelley Family Limited Partnership appeals the portion of the trial court's final judgment in favor of the M&S Wynne Family Limited Partnership on The Pelley FamilyL.P.'s claim for partition of the property. In one issue, The Pelley Family L.P. argues the trial court did not have jurisdiction to render any orders in its final judgment related to the partition of the real property.

Third, Scott Pelley, individually,³ appeals the portion of the trial court's judgment in favor of Wynne and Smith on their cross-claims for breach of contract, seeking specific performance, and voluntary judicial winding up of the partnership. Pelley raises seven issues on appeal arguing: (1) as to Wynne's and Smith's cross-claims for breach of contract, the trial court erred when it concluded that Wynne and Smith were entitled to the equitable remedy of specific performance; (2) as to Wynne's and Smith's cross-claims seeking specific performance, the evidence is legally insufficient to support the trial court's implied finding of fact that Wynne proved he was ready, willing, and able to perform his obligations; (3) as to Wynne's and Smith's cross-claims seeking specific performance, the trial court erred when it concluded against Pelley on his "unclean hands" defense; (4) as to Wynne's and Smith's cross-claims for voluntary judicial winding up of the partnership, the trial court erred when it concluded that the Texas Business Organizations Code did not apply and instead, applied the Texas Family Code; (5) as to Wynne's and Smith's cross-claims for voluntary judicial winding up of the partnership, the trial court erred when it concluded that (a) Wynne did not owe Pelley attorneys' fees for the work Pelley performed on the Gibbs Estate and Shankles Estate cases, and (b) the "reasonable compensation theory" did not apply to the Gibbs Estate and Shankles Estate cases; (6) as to Wynne's and Smith's cross-claims for voluntary judicial winding up of the partnership, the trial court erred when it concluded (a) the "reasonable compensation theory" did not apply for the determination of the law firm's assets, and (b) the challenge of Pelley to the referral fee paid toJohn Nix in the Skyberg case was without merit; and (7) as to Wynne's and Smith's cross-claims for voluntary judicial winding up of the partnership, the trial court erred in its determination of the law firm's "wrapping up expenses" because the evidence is legally insufficient to support the trial court's finding of fact that expenses totaled $310,982.

Fourth, Scott Pelley P.C. and Pelley appeal the trial court's alleged, implied order denying their motion for "criminal contempt and [seeking to impose] sanctions." Specifically, Scott Pelley P.C. and Pelley raise one issue, arguing the trial erred when it concluded that a witness did not commit perjury.

Fifth, Scott Pelley P.C., The Pelley Family L.P., and Pelley (collectively "the Pelley parties") appeal the portion of the trial court's judgment imposing joint and severable liability as to Wynne's and Smith's counterclaims against Scott Pelley P.C. and The Pelley Family L.P. In one issue, they argue the trial court erred when it pierced the corporate veil.

Finally, in a cross-appeal, Wynne and Smith appeal the portion of the trial court's final judgment in favor of Pelley on their cross-claims for breach of fiduciary duty and request for appellate attorneys' fees. Wynne and Smith raise three cross-issues arguing: (1) as to their cross-claims for breach of fiduciary duty, the trial court erred when it concluded that Pelley did not breach his fiduciary duties; (2) as to their cross-claims for breach of fiduciary duty, the evidence is factually insufficient to support the trial court's finding of fact that Pelley did not breach his fiduciary duties; and (3) as to their requests for appellate attorneys' fees, the trial court abused its discretion when it failed to include contingent attorneys' fees on appeal in the judgment.

The trial court's final judgment is reversed and remanded, in part, and affirmed, in part.

I. FACTUAL AND PROCEDURAL CONTEXT

We separate our discussions of the factual history from the procedural history and describe each of them, for the most part, in chronological order. The factual backgroundincludes some of the statements and evidence in the extensive record on appeal and the trial court's findings of fact.

A. Factual Context

In 1983, Wynne graduated from law school and began working for the law firm of Nall, Stagner & Pelley. In 1987, he became a partner and the law firm's name became Nall, Pelley & Wynne.

In the 1990s, Pelley and Wynne purchased and renovated the property located at 707 West Washington Street, Sherman, Texas 75092 (the "Washington Street building"). The law firm and its employees moved to that building. On December 1, 1994, a joint venture was created so that Pelley and Wynne each owned 50% of the Washington Street building. On January 1, 2000, Pelley transferred his interest in the joint venture to The Pelley Family L.P. Scott Pelley P.C. was the general partner of The Pelley Family L.P. Similarly, on June 15, 2009, Wynne sold his interest in the Washington Street building to the M&S Wynne Family L.P. Wynne was the president of M&S Wynne Property Management L.L.C., which was the general partner of the M&S Wynne Family L.P.

Smith began working for the law firm in 2003 and became a partner in 2008. The law firm of Nall, Pelley, Wynne & Smith⁴ was a general partnership between Pelley, Scott Pelley P.C., Wynne, and Smith.⁵ Nall, Pelley, Wynne & Smith rented the Washington Street building from the joint venture, which it occupied as its office.

Pelley, Wynne, and Smith, in their individual capacities, signed a written agreement (the "2008 Agreement"), which was effective as of January 1, 2008 and for all years thereafter. The2008 Agreement set out a monthly draw that each partner would receive and how all law firm revenue would be distributed. It also described how distributions were to be made to Pelley and Wynne for the Gibbs Estate and Shankles Estate cases, which were Nall, Pelley & Wynne assets prior to the 2008 Agreement. It also stated that "the Yelderman [m]atters and Highway 59 matter occurred prior to the creation of [] Nall, Pelley, Wynne [&] Smith."

On January 21, 2011, the partners met to consider modifying the 2008 Agreement because the amount of income earned by Pelley was less than his "proposed 2010 end-of-year distribution" (the "2010 bonus") and it was apparent that the same situation was going to occur in 2011. During that meeting, Pelley indicated that he was inclined to "give back" a portion of his 2010 bonus.

In early February 2011, the partners met again. During that meeting, Pelley stated he was going to give Smith a portion of his 2010 bonus, even though they all agreed that Pelley was entitled to it under the terms of the 2008 Agreement. After the meeting, Smith told Wynne that he did not feel right about accepting "all of the...