Date: 10-21-2011

Case Style: Lucky Dawg Movers, Inc. v. Wee Haul, Inc.

Case Number: 05-10-00222-CV

Judge: Douglas S. Lang

Court: Texas Court of Appeals, Fifth District on appeal from the 134th Judicial District Court, Dallas County

Plaintiff's Attorney: Hance W. Burron, III

Defendant's Attorney: Tom Carse and Lorin M. Subar

Description: This is an appeal from a jury verdict in favor of Lucky Dawg Movers, Inc. f/k/a Wee Haul of Atlanta, Inc. d/b/a Apartment Movers See Footnote 1 against Wee Haul, Inc. d/b/a Apartment Movers (“Wee Haul”). The jury awarded Lucky Dawg $35,725.26 in damages after finding Wee Haul engaged in deceptive trade practices, that is, false, misleading, and deceptive acts or practices upon which Lucky Dawg relied. See Tex. Bus. & Com. Code Ann. § 17.46 (West 2011). In a single issue, Lucky Dawg contends George B. Killick, president and director of Wee Haul, should be jointly and severally liable along with Wee Haul for the final judgment. Lucky Dawg raises two arguments in that regard. First, Lucky Dawg asserts that Killick should be jointly and severally liable under Texas Tax Code section 171.255 because the damages found by the jury were “in the nature of a debt,” and at the time “the debt” was incurred, Wee Haul's corporate privileges and charter had been forfeited. See Tex. Tax Code Ann. § 171.255 (West 2008) (corporate officers and directors personally liable for certain debt of corporation that has lost privileges). Second, Lucky Dawg asserts Killick should be jointly and severally liable with Wee Haul because Killick filed an assumed name certificate for “Wee Haul Inc.,” he was allegedly doing business under the assumed name, and, under Texas Rule of Civil Procedure 28, an individual doing business under an assumed name may be sued in the assumed name for purposes of enforcing against him a substantive right. We decide against Lucky Dawg on its sole issue and affirm the trial court's judgment.

I. Background

Wee Haul is a Texas corporation that provides residential moving services. It was founded in 1978 by Killick. In March 1996, Wee Haul lost its corporate privileges and forfeited its charter for failure to file a required franchise tax report. See id. §§ 171.251 (forfeiture of corporate privileges); 171.301, 171.309 (forfeiture of corporate charter). Wee Haul's privileges and charter were reinstated in August 2008 when the required reports were filed. See id. § 171.312.

Lucky Dawg is a Georgia corporation, was purchased by Charles Manry in June 2006, and became a franchisee of Wee Haul pursuant to a “Master License Agreement” (“MLA”) signed by both Manry and Killick. Killick signed in his capacity as Wee Haul's president. In April 2006, Killick filed an assumed name certificate for “Wee Haul Inc.” See Footnote 2 and he testified at trial he “had been contemplating” changing Wee Haul's business form to a sole proprietorship.

Under the MLA, Lucky Dawg agreed, inter alia, to pay Wee Haul a monthly royalty equal to five percent of Lucky Dawg's gross revenues and Wee Haul agreed to assist Lucky Dawg with training, supply training manuals, and provide Lucky Dawg with a “pricing methodology” for calculating the price to charge customers for some of the services Lucky Dawg was to offer. Lucky Dawg filed suit against Wee Haul and Killick, individually, in August 2007 contending Wee Haul failed to comply with the provisions of the MLA. Among the claims Lucky Dawg asserted both against Wee Haul and Killick in its live pleading, the fourth amended petition, were claims for fraud in the inducement, slander, tortious interference with prospective business relationships, breach of good faith and fair dealing, violations of the Texas Deceptive Trade Practices Act (“DTPA”), and a declaratory judgment that Lucky Dawg had full right to use the name “Apartment Movers” in certain counties. Lucky Dawg also asserted in the fourth amended petition a claim only against Wee Haul for breach of contract and a separate claim only against Killick under tax code section 171.255 alleging that, because Wee Haul's corporate privileges and charter had been forfeited “at all relevant times,” Killick was personally liable.

Trial of the case commenced a year after Wee Haul's corporate charter had been reinstated. The jury was charged only on claims for breach of contract, violations of the DTPA, tortious interference with business relationships, and fraud. Of the claims against Killick, the jury found in Lucky Dawg's favor only on the fraud claim, but awarded no damages for that claim. Also, on the claims against Wee Haul, the jury found in Lucky Dawg's favor only on the DTPA claim. In Question No. 6 of the jury charge, the jury was instructed to assess damages, if any, on that claim by considering the following:

a. The difference, if any, between, the value of the [MLA] as it was received and the value it would have had if it had been as represented sustained in the past.


ANSWER:

$-----------

b. The difference, if any, between the value of the [MLA] as it was received and the value it would have had if it had been as represented that, in reasonable probability, will be sustained in the future.


ANSWER:

$-----------

c. Reasonable and necessary expenses incurred in attempting to have Wee Haul, Inc. act as represented sustained in the past.


ANSWER:

$-----------

d. Reasonable and necessary expenses incurred in attempting to have Wee Haul, Inc. act as represented that, in reasonable probability, will be sustained in the future.


ANSWER:

$-----------

e. Lost profits that were natural, probable, and foreseeable consequences of Wee Haul['s] conduct sustained in the past.


ANSWER: $-----------

f. Lost profits that were natural, probable, and foreseeable consequences of Wee Haul, Inc.'s conduct that, in reasonable probability, will be sustained in the future.


ANSWER:

$-----------


g. Lost investment in the business sustained in the past.

ANSWER:

$-----------


The jury awarded damages of $35,725.26 only regarding the element described in instruction “a.” and “0" as to the other elements.

Following the jury's verdict that assessed damages solely against Wee Haul, Lucky Dawg filed a motion for judgment and request for additional findings. In the motion, Lucky Dawg requested three particular actions by the trial court. First, it was requested that judgment be rendered on the jury's finding that Wee Haul had engaged in deceptive trade practices and for the damages assessed. Second, it was requested that the trial court find Killick to be jointly and severally liable for the judgment against Wee Haul pursuant to section 171.255. Third, it was requested that Killick “be bound by such admission” that he “had filed an Assumed Name Certificate reflecting that he was operating under the assumed name Wee Haul, Inc.” and, accordingly, be held jointly and severally liable with Wee Haul, Inc., the named defendant. The trial court rendered judgment on the jury's verdict, but denied Lucky Dawg's request for additional findings and to hold Killick jointly and severally liable with Wee Haul.

II. Request for Additional Findings

Lucky Dawg's sole issue stems from the trial court's denial of Lucky Dawg's request for the additional findings. In its motion for judgment and request for additional findings, Lucky Dawg argued the findings concerning Killick were supported by legally and factually sufficient evidence and were in accordance with Texas Rule of Civil Procedure 279.

A. Standard of Review

A trial court's failure to respond to a request for required findings of fact is error and presumed harmful unless the record before the appellate court affirmatively shows the complaining party has suffered no harm. See Tex. R. Civ. P. 296; Willms v. Am. Tire Co., Inc., 190 S.W.3d 796, 801 (Tex. App.-2006, pet. denied). Generally, findings of fact by a trial court are required only in bench trials or cases where part of the case is tried before the bench. See Tex. R. Civ. P. 296 (bench trials); Hot-Hed, Inc. v. Safehouse Habitats (Scotland), Ltd., 333 S.W.3d 719, 734 (Tex. App.-Houston [1st Dist.] 2010, pet. denied) (findings of fact not required where trial was to jury and court made no factual determinations); Toles v. Toles, 45 S.W.3d 252, 264 n.5 (Tex. App.-Dallas 2001, pet. denied) (when part of case is tried to jury and part to court, findings of fact may be requested on court-decided issues). They are not appropriate on issues tried to a jury except in extremely limited circumstances. See Tex. R. Civ. P. 279 (to supply omitted elements of an issue submitted to jury); Tri v. J.T.T., 162 S.W.3d 552, 557-58 (Tex. 2005) (applying rule 279).

B. Application of Law to Facts

Lucky Dawg argues two theories under which Killick should be jointly and severally liable for the judgment. First, Lucky Dawg asserts Killick should be liable pursuant to section 171.255 of the tax code because the “debt” due Lucky Dawg was incurred at a time when Wee Haul had forfeited its corporate privileges. Second, Lucky Dawg asserts Killick should be liable because he allegedly did business under the assumed name “Wee Haul, Inc.” However, the record shows Lucky Dawg tried all issues to the jury and no request was made that the jury be charged on either of these issues. Nor was either issue tried before the court. As provided by rule of civil procedure 279, the trial court may make findings of fact following a jury trial where only some of the elements of an issue were submitted to the jury, the party with the burden of proof on the incomplete issue did not request the missing element, the opposing party did not object to the missing element, the issue consisted of more than one element, the missing element is “necessarily referable” to the issue, and the evidence is factually sufficient to support a finding on the missing element. Tex. R. Civ. P. 279. However, the record in this case discloses no context contemplated by rule 279.

On this record, we conclude the trial court did not err in failing to make these requested findings. See Tex. R. Civ. P. 279, 296; Balusik v. Kollatschny, No. 01-99-01342-CV, 2002 WL 1822360, *5 (Tex. App.-Houston [1st Dist.] 2002, no pet.) (op. on reh'g, not designated for publication) (concluding trial court did not err in failing to issue appellant's requested findings of fact and conclusions of law regarding certain issues where case was tried to the jury and trial court did not decide those issues). We also conclude, on the merits, Lucky Dawg's contentions cannot be sustained.

III. Texas Tax Code Section 171.255

A. Applicable Law

Section 171.255 of the tax code provides as follows:

(a) If the corporate privileges of a corporation are forfeited for the failure to file a report or pay a tax or penalty, each director or officer of the corporation is liable for each debt of the corporation that is created or incurred in this state after the date on which the report, tax, or penalty is due and before the corporate privileges are revived.

***

(c) A director or officer is not liable for a debt of the corporation if the director or officer shows that the debt was created or incurred:

(1) over the director's objection; or

(2) without the director's knowledge and that the exercise of reasonable diligence to become acquainted with the affairs of the corporation would not have revealed the intention to create the debt.

***

Tex. Tax Code Ann. § 171.255.

From the time Manry and Killick entered into the MLA through when this suit was filed, the tax code defined “debt” as “any legally enforceable obligation measured in a certain amount of money which must be performed or paid within an ascertainable period of time or on demand.” See Act of May 30, 1987, 70th Leg., R.S., ch. 324, § 1, 1987 Tex. Gen. Laws 1734, 1735, repealed by Act of May 2, 2006, 79th Leg., 3rd C.S., ch. 1, § 5, 2006 Tex. Gen. Laws 1, 23-24 (effective January 1, 2008); Taylor v. First Cmty. Credit Union, 316 S.W.3d 863, 867 (Tex. App.-Houston [14th Dist.] 2010, no pet.) (applying repealed definition of “debt” in case in which debt incurred in 2004 and 2005 and suit filed in 2007); see also Cain v. State, 882 S.W.2d 515, 516 n.1 (Tex. App.-Austin 1994, no writ) (“In legal usage, the word “debt” refers ordinarily to a liquidated money obligation that is legally enforceable by the owner; that is to say, the legally enforceable obligation must be for a sum certain in money.”).

B. Application of Law to Facts

There is no dispute that Wee Haul's actions that the jury found to be “false, misleading, or deceptive” occurred at a time when Wee Haul had lost its corporate privileges for failure to file its franchise tax report. Killick was aware of the loss of corporate privileges before the time he signed the MLA. However, in dispute is whether the claim that Lucky Dawg asserted and the damage award constitute a “debt” within the scope of the statute.

Lucky Dawg argues the judgment rendered by the trial court was a “debt” within section 171.255 because the judgment was based on conduct that took place when corporate privileges were forfeited and was intentional, that is, knowingly false, misleading, or deceptive. Also, Lucky Dawg contends the claim it brought was for a “sum certain,” that is, $35,725.26, the amount of royalties paid to Wee Haul pursuant to the MLA. That sum was found by the jury to be the damage sustained by Lucky Dawg as measured by the difference between the value of the MLA as it was received and the value it would have had if it had been as represented. On the other hand, Wee Haul and Killick argue that the judgment is not a debt within section 171.255 because the jury determined the amount of damages only after considering four different damage elements described in the charge. Accordingly, Wee Haul and Killick maintain the debt was not for a liquidated sum, but “was more in the nature of a tort.”

In arguing the judgment is a “debt” under section 171.255, Lucky Dawg relies on three cases: Cain , 882 S.W.2d 515 (Tex. App.-Austin 1994, no writ), Skrepnek v. Shearson Lehman Brothers, Inc., 889 S.W.2d 578 (Tex. App.-Houston [14th Dist.] 1994, no pet.), and State v. Triax Oil & Gas, Inc., 966 S.W.2d 123 (Tex. App.-Austin 1998, no pet.). In Cain, the State brought suit against a corporation and one of the officers regarding expenses incurred by the State in plugging certain of the corporation's oil wells. Cain, 882 S.W.2d at 516. The process began prior to the suit when the Texas Railroad Commission authorized the expenditure of State funds to pay the expense of plugging the wells. Id. At the time the expenditure was authorized, the corporation was in good standing. Id. However, by the time the funds were expended to plug the wells, the corporation had forfeited its corporate charter. Id. The trial court rendered judgment against the corporate officer pursuant to section 171.255 for the amount of the expenses the State incurred in plugging the wells. Id. at 515-16. On appeal, the corporate officer asserted error in applying section 171.255 because he claimed the debt for which he was held liable, the amount of funds the State expended to plug the wells, was created or incurred prior to the forfeiture of the corporate charter when the Commission authorized the expenditure of State funds. Id. at 516. The court of appeals concluded the authorization of the expenditure amounted to an unliquidated obligation and only upon the State expending funds for plugging the wells did the obligation become liquidated. Id. at 519. Accordingly, the court of appeals affirmed the judgment. Id. at 520.

Triax involved similar facts. In Triax, the State sued a corporation and two of its officers to recover, among other things, the expenses associated with plugging certain of the corporation's abandoned oil and gas wells. Triax, 966 S.W.2d at 125. The cost of plugging the wells was authorized by the Railroad Commission's order, and then, the State plugged the wells after the corporation forfeited its corporate privileges. Id. Although the corporate privileges were not revived, the trial court found the officers were not liable. Id. at 125-26. The State appealed. Id. Noting the “events at issue” occurred after the corporate privileges were forfeited, the court of appeals concluded the officers were liable under section 171.255 for “any debt [the corporation]” incurred in connection with the plugging of the wells, and reversed the trial court's judgment. Id. at 126.

In Skrepnek, Shearson, a stock brokerage firm, sued, among others, the corporation and one of its officers for fraud and personal liability pursuant to section 171.255. Skrepnek, 889 S.W.2d at 579. The evidence showed an employee who had authority to make investment decisions for the corporation requested Shearson purchase specific securities on behalf of the corporation. Id. at 579, 580. Shearson did so, but the corporation failed to pay Shearson for the securities. Id. at 579. After collections efforts failed, Shearson sold the stock at a loss of $33,566.77 and filed suit. Id. At the time of the stock purchase and sale of the stock, the corporation's charter was forfeited. Id. at 582. The court of appeals affirmed the judgment holding the corporate officer liable for the stock sale loss pursuant to section 171.255. Id.

We disagree with Lucky Dawg's assertion that these cases support its argument that Killick should be jointly and severally liable with Wee Haul for the damages assessed by the jury. The cases are distinguishable.

In each case, the debt, the plugging costs in Cain and Triax and the stock sale loss in Skrepnek, was created or incurred after the corporation lost its corporate privileges and charter. Here, in contrast, the damages sustained as a result of Wee Haul's deceptive acts were assessed only when the jury returned its verdict. By then, Wee Haul's corporate charter and privileges had been reinstated. While evidence of Lucky Dawg's payment of $35,725.26 in royalties to Wee Haul was in the record and the jury awarded that same amount in damages, we conclude Lucky Dawg's claim was nevertheless unliquidated and not a “sum certain of money” because the jury arrived at the award of damages only after considering four measures of damages. See Cain, 882 S.W.2d at 516 n.1. To the extent Lucky Dawg asserts that Killick should be jointly and severally liable pursuant to section 171.255 of the tax code, we decide that argument against Lucky Dawg.

IV. Liability for Doing Business Under Assumed Name and Rule 28 A. Applicable Law

Texas Rule of Civil Procedure 28 provides that “[a]ny partnership, unincorporated association, private corporation, or individual doing business under an assumed name may . . . be sued in its partnership, assumed or common name for the purpose of enforcing . . . against it a substantive right.” Tex. R. Civ. P. 28. See Seidler v. Morgan, 277 S.W.3d 549, 553 (Tex. App.-Texarkana 2009, pet. denied) (“Before the use of a common name is adequate under Rule 28, there must be a showing that the named entity is in fact doing business under that common name.”); see also Chilkewitz v. Tyson, 22 S.W.3d 825, 829 (Tex. 1999) (“at some point before judgment, the plaintiff must amend the petition to add the correct legal name of the actual defendant.”) “Judgment shall not be rendered against one who was neither named nor served as a party defendant.” See Werner v. Colwell, 909 S.W.2d 866, 869 (Tex. 1995) (citing Tex. R. Civ. P. 124). When an individual is doing business under an assumed name, a judgment rendered against the unincorporated association is binding on the individual. Holberg & Co. v. Citizens Nat'l Assurance Co., 856 S.W.2d 515, 517 (Tex. App.-Houston [1st Dist.] 1993, no writ). See also Nw. Sign Co. v. Jack H. Brown & Co., 680 S.W.2d 808, 809 (Tex. 1984) (per curiam) (record showed corporation had fair notice of suit because it was sued in its assumed name and service was on registered agent for corporation).

B. Application of Law to Facts

Lucky Dawg alleges Killick “was doing business under the assumed name of Wee Haul, Inc.” According to Lucky Dawg, because Killick “did business” under the assumed name, this suit against Wee Haul is also one against Killick. Therefore, “a judgment rendered against 'Wee Haul, Inc.' should also be a judgment rendered against Killick.” Finally, Lucky Dawg argues the issue of Killick being sued under the assumed name was tried by consent. In response, Wee Haul and Killick argue Lucky Dawg sued Killick only in his individual capacity and no claim was ever made that he was liable based on the “assumed name” theory. According to Wee Haul and Killick, Lucky Dawg maintained that posture throughout trial. Therefore, they contend, Killick cannot be jointly and severally liable.

The record contains the assumed name certificate Killick signed for “Wee Haul Inc.” that was filed and recorded in April 2006, two months before the MLA was signed. At the time the MLA was signed, Killick knew Wee Haul had lost its charter and corporate privileges in 1996. However, Killick did not tell Manry about that. Nevertheless, Killick signed the MLA in his capacity as Wee Haul's president. The record reflects Killick testified at trial that he “signed . . . [the] assumed name certificate” because he “had been contemplating changing it to a sole proprietorship to keep down bookkeeping efforts, requirements.” (Emphasis added.) Further, Killick testified he did not tell Manry about his “contemplation” of changing Wee Haul to a sole proprietorship business form. However, Lucky Dawg has pointed to no evidence in the record, and we can find none, that shows that Killick was, in fact, “doing business” as Wee Haul Inc.

The record before us also contains an original petition filed in August 2007 and a fourth amended petition filed in January 2009. In the original petition, Lucky Dawg sued Killick in his individual capacity and asserted claims for fraud in the inducement and slander. No claim was stated based on an assumed name allegedly used by Killick. In the fourth amended petition, Lucky Dawg again sued Killick in his individual capacity for fraud in the inducement and slander, and added claims against him for tortious interference with business relationships, a declaratory judgment that Lucky Dawg had full right to use the name “Apartment Movers” in certain counties, violations of the DTPA, breach of good faith and fair dealing, and pursuant to section 171.255. Lucky Dawg did not, however, include in the amended petition a claim based upon Killick's use of an assumed name. Further, other than a reference to Wee Haul as “Killick's company” made at trial during questioning, Lucky Dawg offered no evidence supporting a claim against Killick under an assumed name and even consented to a jury charge that identified Killick separately from Wee Haul. On the record before us, we conclude the trial court did not err in denying Lucky Dawg's motion to make the judgment against Wee Haul joint and several against Killick on this theory. See Seidler, 277 S.W.3d at 553-54 (concluding defendants, Morgan doing business as Fish Creek Ranch and Morgan Land and Cattle Partners, also doing business as Fish Creek Ranch, not liable where no evidence existed that Morgan or Morgan land conducted any business under assumed name and suit not brought against assumed name). * * *

See: http://www.5thcoa.courts.state.tx.us/files/05/recent/100222F.HTM

Outcome: Having concluded the judgment against Wee Haul should not be joint and several against Killick under either tax code section 171.255 or rule of civil procedure 28, we decide Lucky Dawg's sole issue against it and affirm the trial court's judgment.

Plaintiff's Experts:

Defendant's Experts:

Comments: