Opinion
No. 08-01-00468-CV.
October 16, 2003.
Appeal from the 161st District Court of Ector County, Texas (TC# B-93,999).
Attorney(s) for Appellant: Hon. Jeffrey S. Alley, Scott, Hulse, Marshall, Feuille, Finger Thurmond, P.C., 201 E. Main, 11th Fl., El Paso, TX 79902.
Attorney(s) for Appellee: Hon. C. H. Hal Brockett, Jr., Brockett Lindemood, P.O. Box 1841, Midland, TX 79702.
Before Panel No. 1: LARSEN, McCLURE, and CHEW, JJ.
MEMORANDUM OPINION
This appeal arises from a judgment in favor of a minority shareholder in a shareholder's derivative suit. The majority shareholder raises three issues on appeal: (1) the evidence is legally and factually insufficient to support the jury's finding that he received $1,500,000 in excess compensation; (2) the trial court erred by admitting evidence regarding prior litigation between the parties; and (3) the trial court erred in awarding attorney's fees. We affirm.
Factual Background
Robert C. Palmer purchased Avalon Vocational-Technical Institute in 1986 for $50,000. John Biggar contacted Palmer in 1988, seeking to purchase Avalon. Palmer and Biggar entered into a contract for sale whereby Biggar agreed to give Palmer $50,000 and a $25,000 promissory note in exchange for a 90 percent interest in Avalon. The contract also provided that Avalon would pay Palmer a consulting fee of $2,200 a month for thirty-six months. Palmer testified that the $2,200 consulting fee was actually part of the purchase price of the 90 percent interest. He claimed that Biggar wanted to structure the deal this way so that part of the purchase price would be tax deductible. Palmer stated that he was not obligated to provide any consulting services to receive his $2,200 monthly fee. Palmer also stated that the fee was not intended to be a distribution of profits from Avalon.
Pursuant to the contract for sale, Biggar incorporated Avalon as a "Subchapter S" corporation. Biggar also caused Avalon to purchase or establish several other schools. Biggar purchased or established yet other schools for himself and did not bring those schools into Avalon's corporate structure.
Shortly after Avalon was incorporated, Palmer and Biggar decided to change the school's location. To accomplish this objective, they formed another entity, Brawn Corporation, for the purpose of purchasing a new building for the school. Biggar and Palmer each owned 50 percent of Brawn. To finance the building's purchase, Palmer provided $200,000 in certificates of deposit as collateral. Biggar did not contribute any collateral. Avalon rented the building from Brawn.
Palmer testified that Biggar approached him in 1991 about getting into the oil business. Palmer was already in the oil business. Palmer told Biggar that Biggar would have to put up the money to go into the oil business because Palmer had already pledged his $200,000 in certificates of deposit as collateral for the building. Biggar would send checks to Palmer, and Palmer would deposit those checks in Brawn's account and then purchase oil property with the money. Some of the checks sent by Biggar were drawn from an Avalon bank account; others were drawn from accounts of other schools that Biggar operated. Palmer did not consider the checks from Avalon to be distributions of profits to him.
The accountant for Palmer and Brawn testified that she allocated the checks that came from Avalon to Brawn's paid-in capital account. Because they were 50/50 shareholders in Brawn, Biggar and Palmer would have each been entitled to 50 percent of the paid-in capital account upon the corporation's liquidation.
Palmer eventually purchased Biggar's interest in Brawn. After Palmer took over Brawn, Avalon stopped making its rental payments on the building. Palmer sued Avalon and got a judgment for $223,220.
Palmer testified that neither he nor Biggar was involved in the day-to-day operations of Avalon. Biggar hired someone to run the day-to-day affairs of Avalon and non-Avalon schools.
According to Palmer and his accountant, the only funds that Palmer ever received from Avalon were his consulting fees and funds to reimburse him for the income tax he had to pay on his share of Avalon's reported profits. Biggar and Palmer did not reach an agreement about the amount of compensation, if any, that Biggar would receive. At trial, Palmer stated an opinion about what would have been reasonable compensation for Biggar:
Q: [D]o you have an opinion about what a reasonable compensation rate would be for a director of a school, if you would have been a director?
A: Yes.
Q: Well, what was that?
A: Well, my idea was anywhere — I have talked to several schools. And it is anywhere from $75,000.00 to $100,000.00, $125,000.00.
Q: Let's take $100,000.00 as a reasonable compensation for work Mr. Biggar was doing that you weren't doing, right?
A: That is correct.
Biggar testified that Avalon became profitable once he started running it. But by 1992, Avalon began posting losses. According to Biggar, the losses were caused not by mismanagement but by changes in government financial aid programs, which had a negative effect on trade schools throughout the country. Biggar testified that he and his wife reinvested approximately $350,000 in Avalon. According to Biggar, Palmer refused to put any more money into Avalon because he considered it a bad investment. By 1995, all the Avalon schools were closed.
The court appointed Don Washburn, a certified public accountant, to audit Avalon's books. The court instructed Washburn to make several determinations, including: (1) the amount of Avalon funds spent to operate trade schools not owned by Avalon; (2) the amount of Avalon funds spent for personal expenses of Biggar and his family; (3) the amount of compensation, wages, earnings, dividends, bonuses, and salaries paid to Biggar and Biggar's family by Avalon; and (4) the amount of compensation, wages, earnings, dividends, bonuses, and salaries paid to Palmer by Avalon. Washburn prepared a written report addressing these issues.
Washburn determined that Avalon's funds were used for the operation of trade schools owned solely by Biggar. Biggar managed the Avalon school, other schools owned by Avalon, and schools not owned by Avalon from his Austin office. Washburn determined that Avalon paid the salaries of all the employees at the Austin office, as well as other expenses that benefitted both Avalon and non-Avalon schools. Washburn concluded that the non-Avalon schools did not reimburse Avalon for some of these expenses.
As for whether Avalon funds were used for the personal expenses of Biggar and his family, Washburn determined that Avalon paid over $37,000 on Biggar's personal credit card bills. Washburn was able to determine that approximately $4,300 of this amount was attributable to expenses incurred for Avalon. Over $14,000 was attributable to expenses for non-Avalon schools and personal expenses of Biggar and his family. From the records available to him, Washburn could not determine whether the remaining amount was attributable to Avalon's expenses or to expenses of non-Avalon schools, Biggar, or Biggar's family. Washburn also noticed that Avalon's general ledger contained additional credit card charges of approximately $17,000 for which Biggar could not provide the supporting bills. Biggar testified that the credit card bills paid by Avalon were for legitimate expenses he incurred on behalf of Avalon.
Regarding Biggar's compensation, Washburn testified that Biggar was paid as a consultant and that he received a total of $2,547,148.36 in compensation from Avalon between 1989 and 1993. In addition to this compensation, Avalon's general ledger and 1992 tax return listed a property and cash distribution to shareholders in the amount of $477,866.36. Biggar would have been entitled to receive 90 percent of this amount, or approximately $430,000. Washburn testified that it was possible Biggar received this money in addition to the compensation he received in 1992. Washburn could not find a check to Biggar for his portion of the $477,866.36, nor was he able to determine if it was a cash transaction. Palmer told Washburn that he did not know anything about the $477,866.36 distribution of profits and that he did not receive his 10 percent of that amount.
When he drafted his report, Washburn did not state an opinion about whether Biggar's compensation was reasonable or excessive. At trial, however, he stated that he did have an opinion on the matter. Over Biggar's objection, Washburn testified, "Well, as I look at audits and the tax returns and the net income that was produced from Avalon, the compensation exceeded that in many years. So I don't feel it was reasonable at all the amount of compensation that was being drawn out."
Regarding compensation to Biggar's family, Washburn determined that Biggar's wife, daughters, and son received a total of $354,022.81 from 1990 to 1993.
Washburn concluded that Palmer received a total of $149,640 from Avalon between 1989 and 1993. This amount included the consulting fees that Palmer received pursuant to the contract for sale.
Eugene Nini testified as an expert witness for Biggar. Biggar retained Nini to determine whether Biggar received 90 percent of the profit distributions from Avalon and Palmer received 10 percent of those distributions, in accordance with their respective ownership interests in the corporation. Nini predicated his analysis on Washburn's report.
Nini testified that according to IRS rules and generally accepted accounting principles, money received from an S Corporation by its owners is classified as one of three things: (1) It may be a loan; (2) it may be compensation; or (3) if it is not one of the other two, it must be a distribution of profits. Nini characterized the funds that Avalon contributed to Brawn as profit distributions to Biggar and Palmer. He also characterized the remaining $149,640, including the consulting fees, received by Palmer from Avalon as profit distributions. After adding Palmer's half of the Brawn funds to $149,640, Nini concluded that Palmer received total profit distributions from Avalon of $237,545.
Nini accepted Washburn's finding that Biggar received $2,547,148.36 from Avalon. He testified that a reasonable salary for running a company the size of Avalon would be $200,000 a year. Therefore, to determine the amount Biggar received in profit distributions, Nini deducted $1,000,000, which represented $200,000 in salary for five years (1989-93). To the remaining amount, he added Biggar's half of the Brawn funds. Nini testified that the resulting sum — $1,635,053 — represented the amount of profit distributions received by Biggar.
Thus, by Nini's calculations, Biggar received 87 percent of Avalon's profit distributions, and Palmer received 13 percent. Nini also testified that Biggar operated Avalon in an appropriate and businesslike manner.
Procedural History
Palmer brought this suit in 1993. See Biggar v. Palmer, Nos. 08-97-00511-CV 08-97-00512-CV, slip op. at 2 (Tex.App.-El Paso Dec. 9, 1999, no pet.) (not designated for publication). Avalon subsequently filed counterclaims against Palmer. See id. at 2-3. After rendering judgment in favor of Palmer on the derivative suit, the trial court severed Avalon's counterclaims from that suit. See id. at 3. On appeal, this Court reversed and remanded, concluding that the trial court abused its discretion by severing the counterclaims from the derivative suit. See id. at 7.
On remand, only Palmer's derivative suit was tried; the counterclaims were nonsuited. The jury found that Biggar received $1,500,000 in excess compensation, members of Biggar's family received $86,000 in excess compensation, Avalon paid $27,000 in Biggar's personal expenses, and Avalon paid $7,500 in expenses for non-Avalon schools. The jury also found that Palmer had or would incur reasonable and necessary attorney's fees in the amounts of $50,000 for preparation and trial of the case, $5,000 for an appeal in a court of appeals, $4,000 for responding to a petition for review, and $3,000 for additional work if a petition for review is granted.
The court rendered judgment against Biggar in the amount of $1,534,500, plus auditor's fees in the amount of $14,050, and pre — and post-judgment interest. The court also ordered that Palmer recover attorney's fees in the amounts found by the jury from Biggar and Avalon, jointly and severally.
The court apparently disregarded the jury's finding that Biggar's family received $86,000 in excess compensation.
Excess Compensation
Jury question 1A asked the jury whether Biggar breached his fiduciary duty by "[d]rawing salary, administrative fees, and administrative wages in excess of a reasonable compensation for the duties performed." The jury answered "yes" to this question. Jury question 2A asked the amount of "[e]xcess compensation" Biggar received. The jury answered "$1,500,000" to this question. In his first issue on appeal, Biggar argues that the evidence is legally and factually insufficient to support the jury's finding that he received $1,500,000 in excess compensation. We disagree.
Legal Sufficiency
To determine whether the evidence is legally sufficient, we consider all the record evidence in the light most favorable to the party who prevailed at trial, indulging every reasonable inference from the evidence in that party's favor. Merrell Dow Pharms. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). Evidence is legally insufficient when there is a complete absence of evidence of a vital fact, the court is barred by rules of law or of evidence from giving weight to the only evidence offered to prove a vital fact, the evidence offered to prove a vital fact is no more than a mere scintilla, or the evidence conclusively establishes the opposite of the vital fact. Id.
Biggar asserts that expert testimony was required to establish the amount of any excess compensation, that there is a complete absence of expert testimony supporting the jury's finding of $1,500,000 in excess compensation, and that the only expert testimony on point conclusively establishes that Biggar's compensation was not excessive.
According to Washburn's report, Biggar received a total of $2,547,148.36 in consulting fees from Avalon between 1989 and 1993. Although he did not state an opinion regarding how much of this amount was excessive, he did testify that Biggar's compensation exceeded the net income produced by Avalon in many years and that it was therefore unreasonable.
Biggar argues that Washburn's testimony is insufficient to support the jury's finding of $1,500,000 in excess compensation because the testimony does not give an exact figure, an approximate amount, or even a range for the excessiveness. Thus, according to Biggar, there is a complete absence of evidence on this vital fact. Washburn's testimony, however, was not the only expert testimony on this issue.
Nini testified that a reasonable salary for running a company the size of Avalon would be $200,000 a year. Biggar asserts that Nini also testified that none of the non-salary compensation received by Biggar was unreasonable or excessive. Biggar argues that Nini's testimony therefore conclusively establishes that Biggar's compensation was not excessive. We disagree with Biggar's characterization of Nini's testimony.
As noted above, Nini accepted Washburn's finding that Biggar received $2,547,148.36 from Avalon. From that amount, he deducted $1,000,000, which represented $200,000 in salary for five years. To the remaining amount, he added $87,905, which represented Biggar's share of the funds deposited in Brawn's capital account. Nini testified that after performing these calculations, he "c[a]me up with distributions of profits, dividends, whatever you want to call it in an S Corporation. Mr. Biggar received . . . $1,635,053.00." According to Nini, the terms "distribution of profits" and "dividend" are synonymous. But he made clear that "distribution of profits" and "compensation" are not the same.
From this summary of Nini's testimony, it is apparent that Nini believed $1,000,000 was the total amount of compensation that Biggar could have reasonably received between 1989 and 1993. He characterized the remaining amount that Biggar received as distributions of profit. Contrary to the assertion in Biggar's brief, Nini did not testify that this remaining amount was compensation — reasonable, excessive, or otherwise.
In his appellate brief, Biggar asserts, "Dr. Nini . . . testified that none of Mr. Biggar's other, non-salary compensation was unreasonable or excessive." For this assertion, he cites defense exhibits 10 and 15 and pages 115 to 135 of volume five of the reporter's record. The pages in the reporter's record contain Nini's description of how he calculated the percentages of Avalon's profit distributions received by the parties. Exhibit 10 is a chart prepared by Nini, showing Avalon's profits and losses. Exhibit 15 is a chart that sets out the calculations that Nini described in his testimony.
The jury was asked about the reasonableness of Biggar's compensation, not his distributions of profit. A jury has discretion to award damages within the range of evidence presented at trial. Price Pfister, Inc. v. Moore Kimmey, Inc., 48 S.W.3d 341, 352 (Tex.App.-Houston [14th Dist.] 2001, pet. denied); see also Neiman-Marcus Group v. Dworkin, 919 F.2d 368, 372 (5th Cir. 1990) ("While the jury may not pull figures out of a hat, its verdict does not fail for mere lack of exhaustive or dispositive evidence so long as a rational basis exists for calculation."). Furthermore, a jury may choose to believe all or part of the testimony of a witness. See Garcia v. Dependable Shell Core Machs., Inc., 783 S.W.2d 246, 248 (Tex.App.-Corpus Christi 1989, no writ); Chase v. Faulk, 297 S.W.2d 341, 344 (Tex.Civ.App.-El Paso 1956, writ ref'd n.r.e.).
In this case, the jury could have believed Washburn's report and testimony, in which Washburn stated that the entire $2,547,148.36 received by Biggar was described as consulting fees in Avalon's records. The jury also could have believed the testimony of Biggar's own expert, Nini, that $1,000,000 would have been reasonable compensation for Biggar. The difference between the $2,547,148.36 characterized as compensation by Washburn and the $1,000,000 characterized as reasonable compensation by Nini is $1,547,148.36. This figure is remarkably close to the $1,500,000 in excess compensation found by the jury. See Neiman-Marcus, 919 F.2d at 372 (upholding damages award of $790,000 because there was evidence that the damages exceeded $1 million).
We note that Washburn testified that Biggar may have received an approximately $430,000 profit distribution in 1992, in addition to his compensation. Nini did not include this money in calculating Biggar's total profit distributions.
We conclude that the testimony of Washburn and Nini is legally sufficient to support the jury's finding that Biggar received $1,500,000 in excess compensation. Because the finding is supported by expert testimony, we need not address Biggar's argument that expert testimony is always required to establish the amount of excess compensation.
Factual Sufficiency
Biggar next argues that the evidence is factually insufficient to support the jury's finding of $1,500,000 in excess compensation. To determine whether the evidence is factually sufficient, we must examine all the evidence that supports and contradicts the finding. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Edmunds v. Sanders, 2 S.W.3d 697, 703 (Tex.App.-El Paso 1999, pet. denied); Hickey v. Couchman, 797 S.W.2d 103, 109 (Tex.App.-Corpus Christi 1990, writ denied). We must reverse if the evidence supporting the finding is so slight, or the evidence against it is so strong, that the finding is clearly wrong and unjust. Cain, 709 S.W.2d at 176; Hickey, 797 S.W.2d at 109. When there is conflicting evidence, the jury's verdict is generally regarded as conclusive. Edmunds, 2 S.W.3d at 703. We cannot substitute our conclusions for those of the jury, interfere with the jury's resolution of conflicts in the evidence, or pass on the weight or credibility of the evidence. Id.
In his factual sufficiency challenge, Biggar focuses exclusively on Palmer's testimony that $75,000 to $125,000 would have been reasonable compensation for Biggar. He argues that Palmer's testimony is insufficient because it relates only to what would have been reasonable compensation for Palmer, rather than Biggar. He also argues that the testimony is insufficient because Palmer is not an expert, he lacked personal knowledge of the reasonable compensation, and his opinion did not have a rational basis.
We find it unnecessary to address these arguments. Even without considering Palmer's testimony, the record contains ample evidence to support the jury's finding that Biggar received $1,500,000 in excess compensation. See In re Marriage of Rutland, 729 S.W.2d 923, 933 (Tex.App.-Dallas 1987, writ ref'd n.r.e.) (concluding that the court need not decide whether certain testimony was incompetent because the evidence was legally and factually sufficient without considering that testimony). As noted in our discussion of legal sufficiency, Biggar's own expert testified that a total of $1 million would have been reasonable compensation for Biggar. The jury also saw and heard evidence that Biggar received $2,547,148.36 from Avalon. This evidence is not so slight as to make the jury's calculation of $1,500,000 in excess compensation clearly wrong or unjust. Biggar does not point us to any contrary evidence. Accordingly, we conclude that the evidence is factually sufficient to support the jury's finding.
The first issue is overruled.
Evidence of Prior Judgments and Previous Trials
In his second issue, Biggar argues that the trial court erred by admitting evidence of judgments that Biggar had obtained against Avalon. He also argues that the court erred by admitting evidence of the previous trials in this case. We conclude that any error in this regard has not been preserved.
In the following discussion, the judgments Biggar obtained against Avalon will be referred to as "the prior judgments," and the previous trials in this cause will be referred to as "the previous trials."
The Record
Many references were made throughout the trial to the previous trials that occurred
in this case. From our review of the record, it appears that the first reference to the previous trials was made by Biggar's counsel while he was cross-examining Palmer. The next reference to the previous trials was also made by Biggar's counsel, this time while he was cross-examining Washburn. Counsel asked, "[Y]ou testified in the first trial of two that Mr. Palmer lost on appeal, and that is why we are back here again?"
The first reference to the prior judgments occurred during opening statements, when Palmer's counsel stated, "We believe that the evidence is going to show that unknown to Mr. Palmer, that Mr. Biggar goes down to Austin, Texas, where he lives, and he files a lawsuit of John Biggar against — ." Biggar's counsel interrupted at this point to state, "[W]e are going to object to the introduction of this evidence as a collateral source and collateral — ." The court overruled the objection. Palmer's counsel proceeded to tell the jury that Biggar filed a lawsuit against Avalon, served himself as registered agent, and obtained a judgment, all in an effort to prevent Palmer from recovering on his claims.
Both the prior judgments and the previous trials were discussed when Palmer's counsel examined Biggar. Counsel asked, "And it is true, is it not, sir, that after this claim was brought by Mr. Palmer, that you went out and sued your own corporation, didn't you?" Biggar's counsel interjected, "Your Honor, again, I need to object. This is a collateral attack on a prior Court's judgment." The court instructed counsel to approach the bench, at which time Biggar's counsel continued:
He is going to attempt now to make a collateral attack on a judgment that is entitled to full faith and credit. The Travis County judgment is over four years old and no attempt was made to appeal it. And this is a . . . behind the door attack on this judgment and I will object to any further testimony.
The trial court overruled the objection, but granted Biggar a running objection to this line of questioning. Palmer's counsel propounded the question to Biggar again, and Biggar admitted that he filed the suit and took the judgment against Avalon. Counsel asked the question again and got the same answer.
Over Biggar's collateral attack objection, the court admitted Palmer's Exhibit 32, which contains documents related to two suits filed by Biggar against Avalon. In the first suit, Biggar alleged that Avalon owed him $1,429,477 for unpaid compensation and for payments he made and expenses he incurred on Avalon's behalf. The exhibit includes a judgment that states Biggar and Avalon settled this suit and that awards Biggar $1,429,477 pursuant to the parties' agreement. In the second suit, Biggar alleged that Avalon, through Palmer's derivative suit, had obtained a judgment against him. Biggar requested a declaratory judgment that his judgment against Avalon and Avalon's judgment against him should be setoff. The exhibit contains a declaratory judgment granting Biggar's requested relief.
Later, Palmer's counsel and Biggar engaged in the following colloquy:
Q: Okay. And you will acknowledge . . . that back in May of 1996, we had this trial here and that there was a judgment after that that was against you for getting paid excessive compensation; correct?
A: And the trial — and the federal appeals court sent it back because it was not right.
Q: They didn't send it back. It didn't have anything to do with that. They said there was improper severance, didn't they, sir?
At this point, Biggar's counsel stated: "I want to object, Your Honor. Now [Palmer's counsel] is testifying." The court overruled the objection, and Palmer's counsel asked, "But you understand that, don't you?" Biggar answered, "I know that we have had two trials and on both of them I have won, and we are back here for the third time."
After this exchange, Palmer's counsel and Biggar engaged in a lengthy back-and-forth about who won in the trial and appellate courts and about what the appellate decision said. At one point, Palmer's counsel stated, "[W]e talked about you coming . . . in here to trial court and you lose the two cases. Then you went down and that is when . . . you filed this lawsuit down in Austin. Served yourself and took a judgment against the company; isn't that correct?" No objection was lodged, and Biggar answered "Yes."
When Palmer's counsel finished questioning Biggar, Biggar's counsel moved for a mistrial, stating:
[T]he court's allowance of the introduction into evidence of the judgment taken by Mr. Biggar personally against Avalon is so prejudicial and so outside the scope of Texas law, . . . that a mistrial is appropriate in the case.
Clearly what [Palmer's counsel] has been allowed to do is make a collateral attack on a judgment that is entitled to full faith and credit and take a back door approach to this judgment. I believe that the evidence on this has been so prejudicial and so inflammatory to the position of the Defendant, that the mistrial is the only way to cure this — what I believe is an obvious disregard for the law in Texas.
In his motion for new trial, Biggar argued that the court erred by admitting the testimony and exhibits regarding the prior judgments. He asserted, "There was no jury issue to which this evidence related. It acted to inflame and bias the jury and its admission was calculated to, and probably did result in a different outcome had it not been admitted."
Biggar's Appellate Arguments
On appeal, Biggar contends that the evidence of the prior judgments and previous trials was irrelevant. See Tex.R.Evid. 402. Alternatively, he argues that if the evidence was relevant, its probative value was substantially outweighed by the danger of unfair prejudice. See Tex.R.Evid. 403. Biggar also argues that it was particularly unfair for the trial court to admit this evidence because the court sustained Palmer's objection when Nini attempted to testify about findings the court had made in the previous trials and, on the court's own motion, instructed the jury not to consider findings made in the previous trials.
Preservation of Error
To preserve error in the admission of evidence, the complaining party must make a timely objection. Beall v. Ditmore, 867 S.W.2d 791, 793 (Tex.App.-El Paso 1993, writ denied); Atlantic Richfield Co. v. Misty Prods., Inc., 820 S.W.2d 414, 421 (Tex.App.-Houston [14th Dist.] 1991, writ denied); see also Tex.R.App.P. 33.1(a)(1); Tex.R.Evid. 103(a)(1). The party waives the complaint if essentially the same evidence is presented at another point in the trial without objection. Richardson v. Green, 677 S.W.2d 497, 501 (Tex. 1984); Atlantic Richfield, 820 S.W.2d at 421. In addition, if the complaint on appeal is not the same as the objection lodged at trial, nothing is preserved for review. Rogers v. Stell, 835 S.W.2d 100, 101 (Tex. 1992); G.T. Mgmt., Inc. v. Gonzalez, 106 S.W.3d 880, 885 (Tex.App.-Dallas 2003, no pet. h.); Texas Dep't of Transp. v. Olson, 980 S.W.2d 890, 898 (Tex.App.-Fort Worth 1998, no pet.).
Prior Judgments
During the trial, Biggar's only objection to evidence of the prior judgments was that the evidence amounted to a collateral attack. Biggar argues that his collateral attack objections preserved his complaints on appeal that the evidence was irrelevant and unfairly prejudicial. He asserts that "the objection for 'collateral attack' pertained to Mr. Palmer's strategy of indirect attack at trial. Because the judgment was not void, it only follows that the evidence proffered in connection with the indirect attack was irrelevant, prejudicial, and confusing."
"Collateral attack" means an attempt to avoid, impeach, or overturn a judgment in an incidental proceeding not provided by law for the express purpose of attacking the judgment. Black'S Law Dictionary 179 (6th abridged ed. 1991). Biggar's trial objections tracked this definition. The trial judge could not reasonably be expected to infer from these plain collateral attack objections that the evidence was also inadmissible on the grounds of irrelevance and unfair prejudice. Because Biggar's complaints on appeal do not comport with his objections at trial, nothing is preserved for review.
Biggar also argues that he raised the relevance issue by arguing in his motion for new trial that "[t]here was no jury issue to which this evidence related." For reasons of fairness and judicial economy, a litigant should raise complaints when there is an opportunity to cure them. Beall, 867 S.W.2d at 793-94. This is why timely objections are required. Id. There is no judicially efficient way to cure a complaint regarding the admission of evidence, when the complaint is raised for the first time after judgment has been rendered. Therefore, Biggar's relevance complaint was untimely.
Even if the issue were preserved, the evidence was relevant because Palmer alleged in his fourth amended petition that Biggar violated his fiduciary duty by obtaining the judgment. See San Antonio Traction Co. v. Higdon, 58 Tex. Civ. App. 83, 86-87, 123 S.W. 732, 734 (Tex.Civ.App. 1909, writ ref'd) (holding that relevancy is determined by the pleadings, not by the issues actually submitted to the jury).
Biggar also suggests that his mistrial motion and motion for new trial raised the unfair prejudice issue because they included words such as "prejudicial" and "inflammatory." Assuming for purposes of argument that use of these words alone was sufficient to apprise the trial judge of a Rule 403 objection, the objection was nevertheless untimely for the same reason that the relevance objection was untimely.
Previous Trials
Biggar complains of three instances when the jury was informed that he lost the first trials in this case. In the first instance, Palmer's counsel said, "[Y]ou will acknowledge . . . that back in May of 1996, we had this trial here and that there was a judgment after that that was against you for getting paid excessive compensation; correct?" No objection was lodged here. Immediately after Biggar answered this question, the second instance occurred. Palmer's counsel said, "They didn't send it back. It didn't have anything to do with that. They said there was improper severance, didn't they, sir?" Biggar objected to this question on the ground that Palmer's counsel was testifying. The third instance occurred when Palmer's counsel said, "[W]e talked about you coming . . . in here to trial court and you lose the two cases. Then you went down and that is when . . . you filed this lawsuit down in Austin. Served yourself and took a judgment against the company; isn't that correct?" No objection was lodged here.
Biggar's objection that Palmer's counsel was testifying does not comport with his argument on appeal that evidence of the previous trials was irrelevant and unduly prejudicial. Moreover, Biggar did not object at all to two of the three instances about which he complains on appeal. For these reasons, his complaints are not preserved for review. We also note that Biggar's counsel was the first to inform the jury about the results of the previous trials when he asked Washburn, "[Y]ou testified in the first trial of two that Mr. Palmer lost on appeal, and that is why we are back here again?"
The second issue is overruled.
Attorney's Fees
In his third and final issue, Biggar argues that the trial court erred in awarding attorney's fees to Palmer. We conclude that any error in this regard is not preserved.
The Record
Palmer requested an award of attorney's fees in his fourth amended petition. Specifically, the petition states, "Plaintiff's successful prosecution of this action will result in a substantial benefit to Defendant Avalon and, therefore, Plaintiff is entitled to reimbursement for expenses, including reasonable attorney's fees." The record does not contain any special exceptions to Palmer's petition.
Question 3 in the court's charge asked the jury what sum of money, if any, it found to be the reasonable and necessary attorney's fees incurred by Palmer in pursuit of his derivative claims. Biggar objected to Question 3, arguing:
The Defendant objects to the submission of Question Number 3 for reasonable attorney's fees, for Mr. Palmer has pursued this case clearly under the Texas Business Corporation Act. The law is that a Defendant who successfully defends a stockholder's derivative suit at the time is entitled [to] recovery of reasonable attorney's fees. In the Business Corporation Act this same provision is not found for a Plaintiff who successfully prosecutes a claim. And I do not believe . . . the evidence supports the submission of Question Number 3 on Plaintiff's attorney's fees.
The jury found reasonable and necessary attorney's fees of $50,000 for preparation and trial of the case, $5,000 for an appeal in a court of appeals, $4,000 for responding to a petition for review, and $3,000 for additional work if a petition for review is granted. The court granted a judgment for these fees against Biggar and Avalon, jointly and severally.
In his motion for judgment notwithstanding the verdict, Biggar asserted that the evidence was legally insufficient "to sustain the award of attorney's fees in the judgment in that there is no finding, or any implied finding supported by the evidence, to show that this action benefitted the corporation." In his motion for new trial, he argued that the evidence was factually insufficient for the same reason.
Biggar's Appellate Arguments
Biggar argues that the trial court erred in awarding attorney's fees for two reasons. First, Biggar argues that the fees, if any, should have been awarded solely against Avalon, rather than against Biggar and Avalon jointly and severally. Second, Biggar argues that Palmer waived attorney's fees by failing to submit a special jury question, asking whether a substantial benefit had been conferred upon Avalon.
Common Fund Doctrine
When Palmer commenced this suit, the Business Corporation Act provided only for a winning defendant to recover attorney's fees. See Act of May 25, 1973, 63rd Leg., R.S., ch. 545 § 37, 1973 Tex. Gen. Laws 1508, 1508-09 (rewritten 1997) (current version at Tex. Bus. Corp. Act Ann. art. 5.14 (Vernon 2003)). But a Bar Committee Comment stated, "" winning plaintiff is entitled to attorney's fees and expenses under common law and equitable principles which the Committee believes requires no codification in the Act." See Tex. Bus. Corp. Act Ann. art. 5.14 cmt. (Vernon 2003).
The current version of the Business Corporation Act expressly provides that in a shareholder's derivative suit the court may order the corporation to pay the plaintiff's attorney's fees if the court finds that the suit has resulted in a substantial benefit to the corporation. See Tex. Bus. Corp. Act Ann. art. 5.14(J)(1)(a) (Vernon 2003).
One of the common law and equitable principles that allows recovery of attorney's fees is the common fund doctrine. See Knebel v. Capital Nat'l Bank, 518 S.W.2d 795, 799-801 (Tex. 1974). As applied to a shareholder's derivative suit, the common fund doctrine permits a plaintiff to recover attorney's fees from the corporation if the plaintiff's suit secures a substantial benefit for the corporation. Martin-Simon v. Womack, 68 S.W.3d 793, 798 n. 3 (Tex.App.-Houston [14th Dist.] 2001, pet. denied); Bayoud v. Bayoud, 797 S.W.2d 304, 315 (Tex.App.-Dallas 1990, writ denied); Bayliss v. Cernock, 773 S.W.2d 384, 386-87 (Tex.App.-Houston [14th Dist.] 1989, writ denied). The doctrine is founded upon the principle that a person who preserves or protects a common fund benefits all those who have an interest in the fund, that the others benefitted should bear their just share of the expenses, and that the most equitable way to share the expenses is to make the expenses a charge on the common fund. Knebel, 518 S.W.2d at 799.
Joint and Several Award
Based on the above-stated rationale for the common fund doctrine, Biggar argues that the court should have only awarded attorney's fees against Avalon, and not against him individually. We can find nothing in the record to show that Biggar made this argument to the trial court.
To preserve a complaint for appellate review, the complaining party must present the complaint to the trial court with sufficient specificity to make the trial court aware of the complaint. Tex.R.App.P. 33.1(a)(1). Although Biggar complained of the attorney's fee award in his motion for judgment notwithstanding the verdict and motion for new trial, he did not argue, as he does now on appeal, that the common fund doctrine only allows the award to be rendered against Avalon. Accordingly, this complaint is not preserved. See Rogers, 835 S.W.2d at 101; see also Luna v. Southern Pac. Transp. Co., 724 S.W.2d 383, 384 (Tex. 1987) (holding that complaint regarding judgment's apportionment of damages was not preserved because the issue was not raised in a motion for new trial); Wyler Indus. Works, Inc. v. Garcia, 999 S.W.2d 494, 509 (Tex.App.-El Paso 1999, no pet.) (holding that complaint regarding prejudgment interest was not preserved because it was not urged in the trial court); Holland v. Hayden, 901 S.W.2d 763, 765 (Tex.App.-Houston [14th Dist.] 1995, writ denied) (holding that complaint regarding a double award of attorney's fees was not preserved because the only complaint made in the motion for new trial was that the evidence was insufficient to support the award).
Substantial Benefit
Biggar argues that Palmer waived his right to an award of attorney's fees because he failed to request a special question regarding whether his suit conferred a substantial benefit upon Avalon. Biggar relies on Bayliss for this argument. See 773 S.W.2d at 386-87.
Bayliss was a shareholder's derivative suit in which the plaintiffs relied on the common fund doctrine to obtain attorney's fees. See id. The plaintiffs argued that the trial court erred by sua sponte disregarding the jury's finding as to the amount of reasonable attorney's fees. The appellate court held that to recover attorney's fees under the common fund doctrine, the plaintiffs were required to request a special question as to whether a substantial benefit was conferred on the corporation. Id. at 387. Because they did not do so, they waived their right to recover attorney's fees under that doctrine. Id. The court further held that the jury's finding as to reasonable attorney's fees provided no basis for recovery. Id. Accordingly, the finding was immaterial, and the trial court did not err by disregarding it. Id.
The procedural posture of this case is different from that of Bayliss. In Bayliss, the parties seeking attorney's fees were the appellants and they were complaining of the trial court's refusal to award the fees. In this case, the party opposing attorney's fees is the appellant and he is complaining of the trial court's grant of fees. The appellant has the burden of preserving complaints for review.
To preserve error in the jury charge, a party must make the trial court "aware of the complaint, timely and plainly." State Dep't of Highways Pub. Transp. v. Payne, 838 S.W.2d 235, 241 (Tex. 1992). Moreover, Rule 278 of the Texas Rules of Civil Procedure explains how to preserve error regarding the failure to submit a question:
Failure to submit a question shall not be deemed a ground for reversal of the judgment, unless its submission, in substantially correct wording, has been requested in writing and tendered by the party complaining of the judgment; provided, however, that objection to such failure shall suffice in such respect if the question is one relied upon by the opposing party.
Thus, to preserve his complaint regarding the failure to submit a question on substantial benefit, Biggar had to request that the question be submitted or object to the failure to submit it.
Biggar's only objections regarding the charge on attorney's fees were that the Business Corporation Act did not provide for a plaintiff to recover attorney's fees and that the evidence did not support submitting an attorney's fee question to the jury. Biggar made no mention of the failure to submit a question on substantial benefit. Because he did not raise his appellate complaint in the trial court, the complaint is not preserved for review. See Oechsner v. Ameritrust Texas, 840 S.W.2d 131, 135 (Tex.App.-El Paso 1992, writ denied) ("A party is confined to the jury instruction objection made at trial; any variant complaint on appeal is waived."); see also Pitman v. Lightfoot, 937 S.W.2d 496, 535-36 (Tex.App.-San Antonio 1996, writ denied) (holding that complaint that attorney's fees should have been awarded on a pro rata basis was not preserved because only objection to the charge on this issue related to whether there was evidence of reasonableness of fee).
We also note that Biggar challenged the award of attorney's fees in his motions for judgment notwithstanding the verdict and for new trial on the ground that the evidence was insufficient to establish that Palmer's suit benefitted Avalon. This argument does not comport with Biggar's appellate complaint that Palmer waived his right to attorney's fees by failing to request a special question on substantial benefit.
Biggar argues that he did not have to object to the failure to submit the substantial benefit question because Palmer failed to plead for attorney's fees under the common fund doctrine. He asserts that it would be unfair to require a defendant to make objections to the jury charge regarding every conceivable theory of recovery when the plaintiff failed to plead these theories properly. This argument is not supported by the record.
Palmer's petition states, "Plaintiff's successful prosecution of this action will result in a substantial benefit to Defendant Avalon and, therefore, Plaintiff is entitled to reimbursement for expenses, including reasonable attorney's fees." This language was sufficient to put Biggar on notice that Palmer was seeking attorney fees under the theory that his suit would provide a substantial benefit to Avalon. The third issue is overruled.
Conclusion
For the reasons stated herein, Biggar's issues are overruled, and the judgment of the trial court is affirmed.