Mamoon N. Alahmad v. Ismail "Sam" Abukhdair

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH

NO. 02-12-00084-CV

MAMOON N. ALAHMAD APPELLANT

V.

ISMAIL ―SAM‖ ABUKHDAIR APPELLEE

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FROM THE 342ND DISTRICT COURT OF TARRANT COUNTY

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MEMORANDUM OPINION1

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I. INTRODUCTION

Appellant Mamoon N. Alahmad (hereinafter Mike) and Appellee Ismail

―Sam‖ Abukhdair created a business together for the purpose of purchasing a

convenience store; they subsequently decided to dissolve their business

relationship and entered into a ―buyout‖ transaction concerning the convenience

store; the buyout transaction involved several documents, including a dissolution
1
See Tex. R. App. P. 47.4.
agreement, a deed of trust, and a security agreement. Sam sued Mike, alleging

fraud by material misrepresentation and by omission concerning the buyout

transaction and the associated documents. Mike counterclaimed for breach of

the various aspects of the buyout transaction. A jury found for Sam on the fraud

claims and awarded actual damages to Sam; the jury also found by clear and

convincing evidence that the harm to Sam resulted from intentional fraud and

awarded exemplary damages to Sam. The jury found for Mike on his

counterclaim against Sam and awarded Mike actual damages in the same

amount as the exemplary damages that it awarded to Sam. The trial court

signed a judgment on the jury‘s verdict, crediting the jury‘s award to Mike against

the total amount Mike owed to Sam based on the jury‘s award to Sam.

Mike perfected this appeal and in six issues argues that the trial court

erred by not granting him a new trial because the evidence is legally and factually

insufficient to support the jury‘s findings. Mike also contends that the trial court

erred by offsetting the damage awards. We will affirm.

II. FACTUAL AND PROCEDURAL BACKGROUND

Mike and Sam were the only two witnesses at trial. They gave divergent

testimony on the facts surrounding the lawsuit, as set forth below.

A. Relationship Between Mike and Sam

1. Mike’s Testimony

Mike testified that he and Sam met at a social event in California in 2004

while Mike was a branch manager at U.S. Bank. Sam came to the bank where

2
Mike worked. At the meeting, Sam talked with Mike about Sam‘s portfolios and

real estate transactions. U.S. Bank later fired Mike; Mike testified that they used

the excuse that he had allegedly looked at a family member‘s account, which

was a violation of U.S. Bank‘s policies, but Mike believed that he was fired

because there had been a change in upper management.

Mike testified that he did not tell Sam anything about his business

background before he went into business with Sam. Mike denied giving Sam a

copy of his résumé2 but admitted telling Sam that he had an MBA.3 Mike testified

that he had disclosed to Sam that he had some financial problems in his past and

that he had filed bankruptcy.

2. Sam’s Testimony

Sam also testified that he and Mike met in California in 2004 at a social

event. Mike told Sam that he was a ―banker, investment expert‖; that he had

worked for Morgan Stanley, Wells Fargo, and the Meyers Group; and that he was

working for U.S. Bank. Mike solicited Sam‘s banking and investment business,

and Sam opened two accounts—a business checking account, in which he

deposited $15,000, and an investment account, in which he deposited

$100,000—with Mike‘s bank. Sam said that Mike provided him with investment

advice regarding his funds.

2
A copy of Mike‘s résumé was admitted into evidence during his testimony.
3
Mike testified that he had received his MBA via correspondence from
Columbus University.

3
 After Mike was terminated from U.S. Bank, he hand-delivered his résumé

to Sam at Sam‘s business in Sacramento.4 At that point, Mike was looking for a

job, and Sam wanted to know his qualifications. Sam testified that he felt like

Mike was qualified to purchase a convenience store based on his résumé and his

knowledge about businesses. Mike did not tell Sam that he had filed for

bankruptcy. Sam testified that would have made a difference in his decision to

partner with Mike.

B. Purchase of the Convenience Store

1. Mike’s Testimony

Mike said that he originally looked for a convenience store in Arizona and

that Sam told him that they should look in Texas because Sam has relatives in

Texas. Mike responded, ―Sure, great, great. Great friend of mine, a guy with 29

years plus experience in the convenience stores and the real estate, I said,

[‗]Why not.[‘]‖ Mike testified that they decided on a convenience store in

Arlington known as LD‘s Shortstop and that they both participated in the

negotiations.5 Mike testified that both he and Sam did the due diligence prior to

the purchase; they reviewed the store‘s financial statements, visited the store

multiple times, met with the owner, looked at the taxes and sales reports, and

4
Sam testified that over the course of his lifetime, he had purchased four or
five convenience stores in California.
5
In Mike‘s deposition, he stated that Sam decided on the store, that he
(Mike) had no active role, and that he was just going along and following the
leader (Sam).

4
―watched inventories and traffic.‖ When asked whether he had investigated the

taxes or researched what was done on the liens against the property, Mike

testified that was why they had hired attorneys. Mike said he followed Sam‘s

lead on the purchase because Sam had over two decades of experience. Mike

denied providing Sam with his opinion of what the store was worth.

In August 2006 during the negotiations to purchase LD‘s Shortstop, Mike

sent an email6 to Laurie D‘Alleva, the owner of LD‘s Shortstop, stating that they

needed to find a way not to flag the 2003 property tax lien;7 otherwise, it would

raise ―so many red flags.‖ Mike explained to Laurie that he was worried about

raising red flags to the attorneys, specifically Legacy Bank‘s attorneys and the

broker‘s attorneys. At trial, Mike denied that he was hiding tax liens from Sam

and that he had signed a side agreement with Laurie to hide from Sam the

problem with the unpaid 2003 property taxes. When Plaintiff‘s Exhibit 7 was

admitted, showing a September 6, 2006 agreement between Mike and Laurie

that required Laurie to pay a portion of the unpaid 2003 property taxes and that

required Mike to pay the remainder, Mike testified that the signature on the

document was not his.

Victor Waid, Sam‘s attorney in Sacramento, hired Jeff Hacker to represent

Mike and Sam in the transaction to purchase LD‘s Shortstop. Mike testified that

6
The email was admitted into evidence as Plaintiff‘s Exhibit 3.
7
Mike testified that the problem with the 2003 taxes was disclosed when
they received the commitment letter from the title company.

5
they entered into a partnership agreement in September 2006 to form SAMIK,

LLC and that he owned 49.5%. To make sure that the store could continue to

sell beer and wine, Mike testified that they held on to the seller as a one-percent

owner. Mike testified that he and Sam bought LD‘s Shortstop and the real estate

on which it was located. He said that they bought the corporation ―as is‖ in order

to ―hold on to everything the way that it was, the [Texas Alcoholic Beverage

Commission] license, the lottery, and the tobacco license.‖

When Legacy Bank—which was the holder on the note for LD‘s

Shortstop—found out there was a change in ownership, it called the note, and

Mike and Sam had to pay it off; Mike loaned Sam $300,000, and Sam paid the

remaining $888,000. When Mike loaned Sam $300,000 for the Legacy Bank

note, Mike said that he and Sam had an oral agreement that Mike‘s payment

included his half of the attorney‘s fees to Legacy Bank.

After the purchase, Mike ran the day-to-day operations of the convenience

store. Early in November 2006, Mike sent Sam $12,000, which represented his

share of the net profit. In December 2006, Mike sent Sam more money because

the store was continuing to show a profit. Mike testified that he did not remember

the amount of sales taxes that he had paid during the period that he was at the

store. Plaintiff‘s Exhibit 29 was thereafter admitted, which contained sales tax

reports for the time period covering October 10, 2006 through April 2, 2007.

Mike testified that the reports show total sales of zero and total taxes due of zero,

that Laurie had filed the reports in October 2006 and January 2007, that Mike

6
had filed the reports in November and December 2006 and February 2007, and

that Sam had filed the report dated April 2, 2007.8 Sam‘s last name is misspelled

in the April sales tax filing; Mike denied that he had filed that return. Despite

showing zero sales and zero sales tax due, Mike testified that the sales tax that

he had paid could have been in excess of $5,000 but was less than $10,000.

Although Mike had testified previously in his deposition that he did not

remember any problems after they bought the store, he testified at trial regarding

numerous problems with the store. Mike found out in early 2007 that there was a

problem with TABC. Mike immediately contacted Sam. The problem was not

fixed while Mike was there, but Mike testified that the store did not lose its liquor

license. Mike testified that from day one, there were problems with issuing

money orders. Mike denied writing money orders for himself for personal

reasons without reimbursing the store. Sam completed paperwork to obtain a

new permit to sell money orders, but it never got approved. Mike testified that

they lost the tobacco license in early March 2007 because he had purchased

cigarettes from a person who was working for Sam‘s Club. Mike testified that the

tobacco license was re-obtained two weeks later while he was still at the store.

2. Sam’s Testimony

Sam and Mike began discussing the idea of purchasing a convenience

store early in 2006 after Mike mentioned that he had worked at a Shell gas

8
No sales tax return was filed in March, presumably that is why the April 2,
2007 return shows that a late fee was paid.

7
station in Roosevelt and was familiar with the business. Mike mentioned to Sam

that he was researching the internet for business locations in Arizona and Texas.

Mike told Sam that he had a friend and some uncles who had bought

convenience stores in Dallas and were making good money, so he was going to

explore that area for a location.

Mike invited Sam to come to Texas to look at some stores and give him

advice on different locations. Sam came to Texas twice with Mike and looked at

five or six stores.

Before the purchase, Mike brought Sam some numbers from LD‘s

Shortstop, including some tax returns and numbers from the various businesses

within the business, including gas sales, grocery sales, Laundromat sales, eight-

liner income, check-cashing income, and rental income from a store next to LD‘s

Shortstop. Mike told Sam that they could net $40,000 per month from all of the

different businesses within the business. Mike also told Sam that he estimated

that if they bought at $3 million, they would make a profit of $1 million once the

deal closed because the real estate was worth $3.9 to $4 million. Based on the

numbers that Mike had presented to Sam, Sam believed that this was plausible.

Sam did not independently research the numbers that Mike had brought to him;

Sam trusted Mike‘s judgment. Sam did not personally inquire into things like

property taxes; Mike was handling all of the due diligence, including investigating

liens on the property, liens on the business, taxes owed, and utilities owed. Mike

told Sam that he was looking into those things. Mike did not tell Sam that there

8
were unpaid taxes on the property totaling $80,000. Sam testified that would

have been a red flag for him; he would have insisted on having the taxes paid

before the purchase. Sam did not have any conversations with Laurie before he

agreed to purchase the business.

Sam and Mike formed a limited liability company called SAMIK, LLC 9 to

purchase LD‘s Shortstop from Laurie for $3,135,000, and SAMIK, LLC assumed

the debt of approximately $2.4 million that was owed to Legacy Bank and

Business Loan Express. Sam gave Laurie a cashier‘s check for $450,000, and

Mike provided a $239,000 cashier‘s check. There was another note for the

leased equipment in the Laundromat for approximately $80,000, which Sam and

Mike agreed to pay. Sam did not know of any other debts. Sam‘s understanding

for why they bought the business, LD‘s Shortstop, rather than the assets of the

business was that they were not qualified to assume the two loans; Mike assured

Sam that if they kept paying the two loan payments, the banks would not call the

notes.

After the purchase, Mike moved from California to Texas to run the day-to-

day business. Sam received a call on March 7, 2007 from the store manager

saying that Mike had been arrested and that all tobacco products had been

seized from the store. Sam came to Texas and asked Mike what had happened;

9
Sam testified that he believed that Mike had created SAMIK, LLC to act as
an agent to LD‘s Shortstop; he was surprised to learn that the only listing for
SAMIK is a name change from a previous corporation and that it was created in
2000.

9
Mike told him that he had been buying cigarettes from Sam‘s Club. Sam also

first learned during this trip that they could not sell money orders. Mike told Sam

that a customer had purchased five $50 money orders, that the money order

company had found that suspicious, and that they had pulled out the money

order machine because of misuse. Sam testified that they were able to sell

lottery tickets for a while, but then that license was eventually revoked because

the license was under the old ownership and Mike did not get a new permit to sell

lottery tickets.

C. Dissolution of Business Relationship

1. Mike’s Testimony

After the loss of the tobacco license, Mike and Sam reached an agreement

to end their business relationship. Mike testified that Sam offered him $709,000

to buy out his portion of the partnership; Mike agreed to this offer and executed

an agreement of dissolution on March 30, 2007.10 The terms of the dissolution

agreement required Mike to loan Sam $300,000 to assist Sam in the payoff of the

loan existing with Legacy Bank. Mike testified that he had loaned Sam $300,000

and that he had a copy of the official check, but the check was not admitted into

evidence.

10
Mike believed that by signing the dissolution agreement he had sold,
assigned, transferred, released, and granted to Sam any and all interest that
Mike had owned in SAMIK, LLC. Mike admitted that when he sold his interest,
he was no longer a partner in SAMIK, LLC, despite the statement to the contrary
that was included and sworn to in his original answer and counterclaim.

10
 Mike testified that he had fulfilled all of his obligations under the dissolution

agreement. Mike initially denied that at the time of the dissolution, the

convenience store inventory was short by $32,401; the dissolution agreement

provided that at the time of the buyout, ―the inventory value shall be no less than

$144,260.00 at cost‖ and that should the inventory be less than that, the

difference would be subtracted from the amount Sam owed Mike for the buyout.

Mike later conceded that Sam was entitled to a $32,000 credit for the difference

in the inventory11 and a $12,000 credit for a payment that Sam had made to

Legacy Bank.12 Under the dissolution agreement, Mike was also required to

have the Ballard system installed on the gas pumps to bring them up to code.

Mike testified that he had made arrangements to have the Ballard system

installed, but at the time he left, the system had not been installed; Mike was not

aware that Sam had paid $7,000 to have the Ballard system installed. Mike

testified that he had paid all of the utility bills and all of the water bills. Mike

11
Mike testified that they had recovered $16,000 on the cigarettes that
were seized but that the cigarettes had not been recovered as of the dissolution
on March 30, 2007. Mike admitted that the dissolution agreement did not provide
any benefit for him if the confiscated cigarettes were later recovered.
12
Plaintiff‘s Exhibit 26, a letter from Jeff Hacker to Sam setting forth certain
credits and indebtedness, was admitted into evidence during Sam‘s testimony.
The letter lists over $72,000 worth of credits. Mike testified that the letter
mistakenly adds the $72,000 worth of credits to the amount due from Sam. It
would also appear that the letter mistakenly identified both the $12,000 payment
made to Legacy Bank and the $23,000 gas payment as having been paid by
Mike.

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testified that the fuel bills were paid automatically through the business account

that was supposed to be under his name.

Mike testified that under the dissolution agreement he had agreed to pay

all of the taxes for the period when he was running the store and that at the time

of the dissolution, all of the taxes that had been incurred had been paid. Mike

testified that the store was still paying $4,000 per month on the unpaid 2003

property taxes at the time of the dissolution. When he and Sam took over the

business, Mike believed that the sales tax had been paid. He testified that he did

not learn that until a couple of weeks before the trial that the unpaid sales taxes

from October 1, 2005 through June 30, 2007 totaled $765,000. Mike could not

recall how much sales tax he had paid since he had left on March 29, 2007.

Mike testified that he was not aware of any personal property taxes and that no

real estate taxes were due while he worked at the store.

Mike testified that he had not been paid any of the $709,000 owed to him

by Sam. Mike‘s attorney Jeff Hacker sent Sam a demand letter dated August 7,

2007, requesting that Sam pay Mike.

At the conclusion of Mike‘s testimony, Sam offered Defendant‘s Exhibits 3

(bill of sale), 5 (the deed of trust), and 8 ($300,000 promissory note signed by

Sam). On cross-examination, Mike could provide no explanation for why the first

time a signed version of the $300,000 promissory note (Defendant‘s Exhibit 8)

appeared was the Monday of the week of trial; he said that the copy had been

with his attorney ―for a while.‖ Mike conceded that Defendant‘s Exhibit 5, the

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deed of trust, does not mention a $300,000 promissory note and that the

signature page of Defendant‘s Exhibit 8 containing Sam‘s signature is darker

than the other pages of the note. Mike denied creating a signed signature page

as a way to strengthen his case at the last minute. Mike testified that he had

watched Sam sign the documents in Hacker‘s office and that he had left the

documents at Hacker‘s office because some of the documents needed to be

recorded.

2. Sam’s Testimony

Sam testified that after the tobacco incident, he and Mike came to an

agreement for Sam to buy out Mike. Mike‘s attorney, Jeff Hacker, prepared the

dissolution agreement. On March 30, 2007, Mike and Sam signed the dissolution

agreement, and Sam executed a deed of trust, a security agreement, and a

promissory note for $709,000 and became the sole owner of the property. The

note was due June 30, 2007. Sam testified that he had not paid Mike the

$709,000 owed under the promissory note because Mike owed him money.

Sam testified that SAMIK, LLC was dissolved on March 30, 2007, and that

IMA10, LLC started in its place; IMA10, LLC owned the same things that SAMIK,

LLC had owned before it was dissolved; SAMIK, LLC had owned the store but

not the property, which was owned by Mike and Sam. Sam testified that

although Laurie had owned a one-percent share of SAMIK, LLC, she did not sign

off on the dissolution agreement because Jeff Hacker did not include her name

among the signature blocks. Sam‘s understanding was that SAMIK, LLC had

13
ceased to exist and that Laurie therefore did not own any interest in the new

corporation. Sam testified that he never agreed to pay the back property taxes if

Laurie would agree to the dissolution.

Beginning April 1, 2007, when Sam took over, there were no records for

the store. Sam testified that he had not seen any indication that sales taxes were

paid during the time that Mike ran the business. Mike did not tell Sam that there

was a problem with the sales tax; Sam first learned that sales taxes had not been

paid when he received letters from the State Comptroller in May 2010. Due to

the nonpayment of the sales taxes for the time prior to April 1, 2007 when Sam

took over the store,13 the State Comptroller came to the store, seized the cash

that was in the register, and emptied Sam‘s bank account of $48,000. Sam

testified that the State Comptroller assessed the prior sales taxes against IMA10,

LLC. Sam said that he holds Mike responsible for the sales taxes incurred during

the period before April 1, 2007.

The inventory on the date that Sam took over was supposed to be

$144,000, but it was only $111,000. The $111,000 inventory included $23,000

worth of fuel that Mike had not paid for and for which he did not reimburse Sam.

When Sam took over the store on April 1, 2007, there were unpaid utility bills in

the amount of $11,000. Mike was supposed to have paid for the Ballard system

to be installed so that the hoses on the gas pumps would meet code

13
Sam testified that after he took over the convenience store, he reported
all the sales and paid all of the taxes due on those sales.

14
enforcement; Mike had paid a deposit but did not pay the $7,200 balance, which

Sam had to pay.

After April 2007 and before June 30, 2007, when Sam‘s note to Mike

became due, Sam learned that property taxes for 2003, which totaled $22,000,

had not been paid. Under the dissolution agreement, Mike was required to pay

the property taxes for January through March 2007; Sam testified that Mike also

did not pay the prorated property taxes of $10,000. Sam also learned that

personal property taxes from 2003 through 2006 had not been paid, which

totaled $61,000. Mike also had not paid the personal property taxes from

January through March 2007, which totaled $2,000. When Sam saw Laurie in

August 2009, he asked why she had not paid the property tax and the personal

property tax, and she said that Mike had agreed to pay for those personally.

Laurie showed Sam a document that Mike had signed, agreeing to pay for the

taxes; thus, Sam believed that Mike was responsible for the taxes. Sam testified

that Tarrant County filed a lawsuit against Sam and Mike for the property taxes

and that the lawsuit had been resolved because he (Sam) negotiated to pay

$5,000 down and to pay $1,000 per month toward the back taxes.

Sam also learned that they were ―having some serious problem[s]

acquiring a TABC license‖ and that Mike had not applied for a license as of the

date that Sam took over the store‘s operations. Sam was informed that he could

not get a liquor license because he was not a Texas resident. He was told to

create a corporation and have a Texas resident as a manager; he did that and

15
named Omar Subhi as manager. Sam testified that he had to hire an attorney to

create a new corporation to satisfy TABC in order to obtain a liquor license. 14

Sam testified that he is now the sole owner of the new corporation, SuperTrak

Arlington, Inc., and its only asset is the store; Sam owns the property. Sam said

that he had secured a liquor license as of the time of the trial.

Sam also obtained a new license to sell tobacco and replaced the tobacco

that had been confiscated.

Sam testified that under the dissolution agreement, Mike was supposed to

loan Sam $300,000 to pay off the Legacy Bank note, which had been called once

Legacy Bank found out that there was a change of ownership; Mike came up with

$280,000. Sam paid Legacy Bank $888,000 by taking out loans against his

house in California and other properties in order to come up with the money.

Sam paid $8,200 for the attorney‘s fees; Mike did not pay Sam for his half of the

attorney‘s fees.

Sam said that if he had known about all of the issues that he had learned

about after the dissolution, he would not have agreed to the buyout.

D. Jury’s Findings and Trial Court’s Judgment

After hearing the above evidence, with respect to the buyout transaction of

March 30, 2007, the jury found that Mike had committed fraud against Sam by

material misrepresentation, that Mike had committed fraud against Sam by

14
Sam testified that he is not requesting attorney‘s fees for obtaining the
liquor license.

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material omission, that a relationship of confidence and trust had existed

between Mike and Sam before the buyout, and that Mike had not complied with

his fiduciary duty to Sam. The jury awarded Sam actual damages of $949,000.

The jury also found by clear and convincing evidence that the harm to Sam had

resulted from intentional fraud and awarded Sam exemplary damages of

$709,000. The jury further found on Mike‘s counterclaim for breach of contract

that Sam had failed to comply with the terms of the buyout transaction and

awarded Mike actual damages of $709,000. The trial court awarded attorney‘s

fees to Mike and entered a judgment on the jury‘s damage awards to the parties.

III. LEGALLY AND FACTUALLY SUFFICIENT EVIDENCE SUPPORTS
THE JURY’S FINDINGS

A. Standards of Review

1. Legal Sufficiency

We may sustain a legal sufficiency challenge only when (1) the record

discloses a complete absence of evidence of a vital fact, (2) the court is barred

by rules of law or of 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 a vital

fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998),

cert. denied, 526 U.S. 1040 (1999); Robert W. Calvert, “No Evidence” and

“Insufficient Evidence” Points of Error, 38 Tex. L. Rev. 361, 362–63 (1960). In

determining whether there is legally sufficient evidence to support the finding

17
under review, we must consider evidence favorable to the finding if a reasonable

factfinder could and disregard evidence contrary to the finding unless a

reasonable factfinder could not. Cent. Ready Mix Concrete Co. v. Islas, 228

S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168 S.W.3d 802, 807, 827

(Tex. 2005).

Anything more than a scintilla of evidence is legally sufficient to support the

finding. Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex. 1996);

Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex. 1996). When the evidence offered

to prove a vital fact is so weak as to do no more than create a mere surmise or

suspicion of its existence, the evidence is no more than a scintilla and, in legal

effect, is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.

1983). More than a scintilla of evidence exists if the evidence furnishes some

reasonable basis for differing conclusions by reasonable minds about the

existence of a vital fact. Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co., 77 S.W.3d

253, 262 (Tex. 2002).

2. Factual Sufficiency

When reviewing an assertion that the evidence is factually insufficient to

support a finding, we set aside the finding only if, after considering and weighing

all of the evidence in the record pertinent to that finding, we determine that the

credible evidence supporting the finding is so weak, or so contrary to the

overwhelming weight of all the evidence, that the answer should be set aside and

a new trial ordered. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986)

18
(op. on reh‘g); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Garza v. Alviar,

395 S.W.2d 821, 823 (Tex. 1965).

B. Legally and Factually Sufficient Evidence Supports Jury’s Finding that
Mike Committed Fraud by Material Misrepresentation

In his first issue, Mike argues that the trial court erred by failing to grant his

motion for new trial because there was no evidence or insufficient evidence to

support the jury‘s finding that he committed fraud by material misrepresentation.

To recover under a fraud claim, the following elements must be proven:

(1) a material representation was made; (2) the representation was false; (3)

when the misrepresentation was made, the speaker knew it was false or made it

recklessly without any knowledge of the truth and as a positive assertion; (4) the

speaker made the misrepresentation with the intent that the other party should

act upon it; (5) the party acted in reliance on the misrepresentation; and (6) the

party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758

(Tex. 2001) (orig. proceeding); Formosa Plastics Corp. USA v. Presidio Eng’rs &

Contractors, Inc., 960 S.W.2d 41, 47 (Tex. 1998). When no objection is made to

a jury instruction, evidence to support a finding based on the instruction should

be assessed in light of the instruction given. Wal-Mart Stores, Inc. v. Sturges, 52

S.W.3d 711, 715 (Tex. 2001).

The court‘s charge, which was not objected to by Mike, instructed the jury

on the elements of fraud in Question No. 1, asking whether Mike had committed

19
fraud against Sam by material misrepresentation. The word ―misrepresentation‖

was defined as ―a false statement of fact.‖ The jury answered ―yes.‖

The agreement of dissolution contains the following affirmative statement:

Mike warrants and represents, as a material part of this
Agreement, that all unpaid and owing debts, expenses, claims,
taxes, and other fees incurred on behalf of the business between
September 1, 2006 and April 1, 2007 (with the exception of the first
lien held by Legacy Texas Bank and any potential liability resulting
from the pending lawsuit against the business, Laurie D‘Alleuva [sic],
et al[.]), shall be or has been paid in full by Mike Alahmad prior to
April 1, 2007; . . . .

Mike testified at trial that at the time of the dissolution, all of the taxes that

had been incurred had been paid. But Sam‘s exhibits, including Plaintiff‘s Exhibit

31—a sales tax statement from Susan Combs, the Texas Comptroller of Public

Accounts—show that the sales tax ―liability is for reporting periods October 1,

2005 through June 30, 2007‖ in the amount of $751,835.23. Due to the

nonpayment of these sales taxes for the time prior to April 1, 2007, when Sam

took over the store, the State Comptroller came to the store, seized the cash that

was in the register, and emptied Sam‘s bank account of $48,000.

The jury also heard testimony that Mike knew about the delinquent 2003

property taxes while he was negotiating the purchase of the convenience store.

The jury even saw a document titled, ―Letter Agreement between Mamoon

Alahmad and Laurie D‘Alleva,‖ which states that it is a supplemental agreement

to the contract of sale for LD‘s Shortstop. The letter agreement was signed by

only Laurie and Mike; Laurie agreed to pay for a portion of the delinquent 2003

20
property taxes, and Mike agreed to pay the remainder. Despite this letter

agreement, Mike testified that he did not sign a side agreement with Laurie

D‘Alleva to hide the problem with the 2003 taxes from Sam and that the signature

on the document was not his. Instead, Mike testified at trial that at the time of the

dissolution, he was still making payments through the store of $4,000 per month

on the delinquent 2003 property taxes. Sam testified that he did not learn about

the delinquent 2003 property taxes until he took over the business after the

dissolution, at which time $21,000 in back property taxes remained unpaid.

Finally, although Mike testified that he had fulfilled all of his obligations

under the dissolution agreement, he conceded that the inventory did not meet the

dollar value required in the dissolution agreement and conceded that Sam was

entitled to a credit for the difference. And although Mike testified that he had paid

all of the utility bills, that the fuel bills were automatically paid through an account

under his name, and that he had paid for the Ballard system to be installed for

the fuel pumps, Sam testified that the inventory included $23,000 worth of fuel

that Mike had not paid for; that there was $11,000 worth of utility bills that were

unpaid when Sam took over the store; and that although Mike had paid a deposit

for the Ballard system, a $7,000 balance remained, which Sam had to pay.

Having considered evidence favorable to the finding of fraud by material

misrepresentation if a reasonable factfinder could and having disregarded

evidence contrary to the finding of fraud by material misrepresentation unless a

reasonable factfinder could not, we hold that more than a scintilla of evidence

21
supports the jury‘s finding that Mike committed fraud against Sam by material

misrepresentation because Mike made numerous material misrepresentations

that were false, he knew they were false, he made the misrepresentations with

the intent that Sam should act upon them, and Sam acted in reliance on the

misrepresentations and suffered injury. See Formosa Plastics Corp. USA, 960

S.W.2d at 48–49 (holding that testimony at trial provided more than a scintilla of

evidence supporting appellee‘s contention that appellant intentionally made

representations that it never intended to keep in order to induce appellee to enter

into the contract at a low bid price and that appellee relied on the

misrepresentations to its detriment); Drury Sw., Inc. v. Louie Ledeaux #1, Inc.,

No. 04-12-00837-CV, 2013 WL 5812989, at *6 (Tex. App.—San Antonio Oct. 30,

2013, no pet. h.) (holding evidence legally sufficient to support jury‘s finding that

appellant fraudulently induced appellee into entering into lease by making

knowing misrepresentations). After considering and weighing all of the evidence

in the record pertinent to the finding of fraud by material misrepresentation, we

hold that the credible evidence supporting the finding is not so weak, or so

contrary to the overwhelming weight of all the evidence, that the jury‘s answer

should be set aside and a new trial ordered. See W.L. Lindemann Operating Co.

v. Strange, 256 S.W.3d 766, 780–81 (Tex. App.—Fort Worth 2008, pet. denied)

(holding evidence legally and factually sufficient to support finding that appellant

committed fraud against appellee). We hold that legally and factually sufficient

evidence supports the jury‘s finding that Mike committed fraud by material

22
misrepresentation, and thus the trial court did not abuse its discretion by denying

Mike‘s motion for new trial on this ground. We overrule Mike‘s first issue.15

C. Legally and Factually Sufficient Evidence Supports Jury’s Finding
Awarding Actual Damages of $949,000 to Sam

In his fourth issue, Mike argues that the trial court erred by failing to grant

his motion for new trial because there was no evidence or insufficient evidence to

support the jury‘s finding awarding Sam actual damages of $949,000.

The jury has the discretion to award damages within the range of evidence

presented at trial, so long as a rational basis exists for the jury‘s calculation. See

id. at 787. Here, the jury‘s award of $949,000 corresponds closely with Sam‘s

testimony about the amounts that Mike had failed to pay under the terms of the

dissolution agreement. The following chart summarizing Sam‘s testimony was

admitted into evidence:

15
Mike‘s second issue challenges the jury‘s finding that Mike also
committed fraud by material omission, and his third issue challenges the jury‘s
finding that a fiduciary relationship existed between Mike and Sam. The jury‘s
$949,000 damage award was conditioned upon an affirmative finding on the
fraud-by-material-misrepresentation question or the fraud-by-material-omission
question or the breach-of-a-fiduciary-relationship question. Because we have
found the evidence legally and factually sufficient to support the jury‘s answer to
the fraud by the material misrepresentation question, we need not address
Mike‘s second or third issues. See Tex. R. App. P. 47.1 (requiring appellate
court to address only issues necessary to final disposition of appeal); see also
Barnett v. Coppell N. Tex. Court, Ltd., NTC, 123 S.W.3d 804, 820–21 (Tex.
App.—Dallas 2003, pet. denied).

23
Inventory deficiency ($144,000 per contract, but actually $111,000) $33,000
Ballard system 7,000
2003 real estate taxes 21,000
2003 – 2006 personal property taxes 61,000
Jan. – March 2007 real estate taxes 10,000
Jan. – March 2007 personal property taxes 2,000
Attorney fees re: Legacy Bank (Mike‘s half) 16
8,000[ ] 4,000
Utility bills 11,000
Fuel bill 23,000
Sales taxes & penalties per State Comptroller 765,000
TOTAL $941,000 $937,000

Although the chart summarizing Sam‘s testimony includes only $937,000 of

payments made by Sam on Mike‘s behalf, Mike conceded during his case in

chief that Sam was entitled to a credit for a $12,000 payment that Sam had made

to Legacy Bank, which is in addition to the amounts set forth in Sam‘s chart.

Accordingly, we hold that the jury‘s actual damage award of $949,000 to Sam is

supported by legally and factually sufficient evidence and that the trial court did

not abuse its discretion by denying Mike‘s motion for new trial on this ground.

See id. at 788 (holding evidence sufficient to support jury‘s damage award). We

overrule Mike‘s fourth issue.

D. Legally and Factually Sufficient Evidence Supports Jury’s Finding
Awarding Exemplary Damages of $709,000 to Sam

In his fifth issue, Mike argues that the trial court erred by failing to grant his

motion for new trial because there was no evidence or insufficient evidence to

16
This number and the total at the bottom of the chart were stricken
through, and the numbers reflected in the column were written in by hand.

24
support the amount of exemplary damages that the jury awarded to Sam—

$709,000—or to support a finding of malice.

Exemplary damages may be awarded only if the claimant proves by clear

and convincing evidence that the harm with respect to which the claimant seeks

recovery of exemplary damages results from fraud, malice, or gross negligence.

Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a) (West Supp. 2013). ―Clear and

convincing‖ evidence means ―the measure or degree of proof that will produce in

the mind of the trier of fact a firm belief or conviction as to the truth of the

allegations sought to be established.‖ Id. § 41.001(2) (West 2008). This

intermediate standard falls between the preponderance standard of civil

proceedings and the reasonable doubt standard of criminal proceedings. In re

G.M., 596 S.W.2d 846, 847 (Tex. 1980); State v. Addington, 588 S.W.2d 569,

570 (Tex. 1979).

This higher burden of proof alters the appellate standard of legal

sufficiency review. In evaluating the evidence for legal sufficiency, we must

determine whether the evidence is such that a factfinder could reasonably form a

firm belief or conviction that its finding was true. State v. K.E.W., 315 S.W.3d 16,

20 (Tex. 2010); Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue, 271 S.W.3d

238, 248 (Tex. 2008). We review all the evidence in the light most favorable to

the finding. U-Haul Int’l, Inc. v. Waldrip, 380 S.W.3d 118, 138 (Tex. 2012);

Hogue, 271 S.W.3d at 248. We resolve any disputed facts in favor of the finding

if a reasonable factfinder could have done so. K.E.W., 315 S.W.3d at 20; Hogue,

25
271 S.W.3d at 248. We disregard evidence contrary to the finding unless a

reasonable factfinder could not. K.E.W., 315 S.W.3d at 20; Hogue, 271 S.W.3d

at 248. The factfinder, not this court, is the sole judge of the credibility and

demeanor of the witnesses. In re J.O.A., 283 S.W.3d 336, 346 (Tex. 2009).

This higher burden of proof also alters the appellate standard of factual

sufficiency review. In evaluating the evidence for factual sufficiency, we

determine whether, on the entire record, a factfinder could reasonably form a firm

conviction or belief that its finding was true. In re H.R.M., 209 S.W.3d 105, 108

(Tex. 2006). If, in light of the entire record, the disputed evidence that a

reasonable factfinder could not have credited in favor of the finding is so

significant that a factfinder could not reasonably have formed a firm belief or

conviction in the truth of its finding, then the evidence is factually insufficient. Id.

Here, question 8 in the court‘s charge was conditioned upon an affirmative

finding to one of the two fraud questions—fraud by material misrepresentation

and fraud by material omission—and upon a finding of actual damages, and it

asked whether the jury found by clear and convincing evidence that the harm to

Sam resulted from intentional fraud. Question number 9 then asked what

amount of money, if any, should be awarded as exemplary damages and set

26
forth the relevant Alamo Nat’l Bank v. Kraus17 factors for the jury‘s

consideration.18

In order to determine whether the amount of exemplary damages awarded

was reasonable, we consider the factors set forth in Alamo National Bank v.

Kraus, which include the nature of the wrong, the character of the conduct

involved, the degree of culpability of the wrongdoer, the situation and sensibilities

of the parties concerned, and the extent to which such conduct offends a public

sense of justice and propriety. See, e.g., Zorrilla v. AYPCO Const. II, LLC, No.

13-12-00359-CV, 2013 WL 5506697, at *14 (Tex. App.—Corpus Christi Oct. 3,

2013, no pet. h.) (quoting Khorshid, Inc. v. Christian, 257 S.W.3d 748, 767 (Tex.

App.—Dallas 2008, no pet.)).

As set forth above, the jury heard considerable evidence that Mike had

fraudulently misrepresented to Sam that all expenses and taxes that were due

while he was operating the business had been paid. Sam testified that he

learned only after he had agreed to buy Mike out of the business for $709,000,

that Mike had failed to pay 2003 property taxes, had failed to pay property taxes

since 2003, had failed to pay sales taxes, had failed to pay personal taxes, had

failed to install the Ballard System on the gas pumps, had failed to re-obtain a

liquor license, had failed to pay utility bills, had failed to pay for gas that was

17
616 S.W.2d 908, 910 (Tex. 1981).
18
Mike did not object to the court‘s charge.

27
delivered; he also learned that the inventory was not what Mike had represented

it to be. Sam also testified to the financial harm he suffered from Mike‘s conduct,

including having to mortgage his home to pay off the Legacy Bank loan. From

Sam‘s testimony and the documentary evidence supporting it, the jury could have

reasonably determined that Mike‘s conduct indicated a pattern of deceptive

dealings with Sam and that his conduct was offensive to public notions of

fairness and propriety and showed a degree of culpability on Mike‘s part that

rendered an award of $709,000 in exemplary damages reasonable. The

exemplary damages award is less than the actual damage award to Sam of

$949,000, which is unchallenged on appeal.

Giving due deference to the jury‘s role in determining the weight and

credibility to be given a witness‘s testimony and applying the above standards of

review, we hold that the amount of exemplary damages awarded by the jury is

reasonable; the award is not so against the great weight and preponderance of

the evidence as to be manifestly unjust. See id.

Concerning Mike‘s challenge to the sufficiency of the evidence to support a

malice finding by the jury, because Sam‘s recovery of exemplary damages was

predicated on a finding by the jury of intentional fraud, Sam was not required to

prove malice. See Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a)(1) (specifically

enumerating fraud as one of three separate grounds that can be proven to obtain

an award of exemplary damages); cf. Huynh v. Phung, No. 01-04-00267-CV,

2007 WL 495023, at *11 (Tex. App.—Houston [1st Dist.] Feb. 16, 2007, no pet.)

28
(mem. op.) (stating that the jury‘s finding of fraud included an implicit finding of

malice). Because we hold that the evidence is legally and factually sufficient to

support the amount of the exemplary damage award to Sam, the trial court did

not abuse its discretion by denying Mike‘s motion for new trial on this ground.

We overrule Mike‘s fifth issue.

IV. MIKE’S COUNTERCLAIM AND THE ONE-FINAL-JUDGMENT RULE REQUIRE
SUBTRACTION OF THE DAMAGE AWARDS

The final judgment includes the following provision under the heading

―Offsetting Awards and Limitations on Execution‖:

Having herein awarded actual and exemplary damages to
Plaintiff/Counter-Defendant Abukhdair, totaling Nine Hundred Forty-
Nine Thousand Dollars and No Cents ($949,000.00), and Seven
Hundred and Nine Thousand Dollars and No Cents ($709,000.00),
respectively, as well as actual damages and attorney‘s fees to
Defendant/Counter-Plaintiff Alahmad, totaling Seven Hundred and
Nine Thousand Dollars and No Cents ($709,000.00), and Forty-
Three Thousand, One Hundred Eighty-Seven Dollars and Fifty
Cents ($43,187.50[]), respectively, the Court hereby finds that the
total amount awarded herein to Defendant/Counter-Plaintiff Alahmad
partially offsets the total amount awarded herein to Plaintiff/Counter-
Defendant Abukhdair, leaving only the Remainder of Nine Hundred
and Five Thousand, Eight Hundred and Twelve Dollars and Fifty
Cents ($905,812.50), subject to enforcement, execution[,] and
collection; it is, therefore,

ORDERED, ADJUDGED[,] and DECREED that only the
Remainder of the total amount of actual and exemplary damages
awarded herein to Plaintiff/Counter-Defendant Abukhdair is subject
to enforcement, execution[,] and collection; . . . .

In his sixth issue, Mike argues that the trial court erred by allowing

offsetting awards and limitations of execution. Specifically, Mike argues that

29
Sam did not plead for a setoff as an affirmative defense and therefore was not

entitled to a setoff.

A counterclaim is defined as a ―claim, which, if established will defeat or in

some way qualify a judgment to which the plaintiff is otherwise entitled . . . [and]

embraces both setoff and recoupment‖ or a ―claim presented by a defendant in

opposition to or deduction from the plaintiff‘s claim.‖ See CDB Software, Inc. v.

Kroll, 992 S.W.2d 31, 35–36 (Tex. App.—Houston [1st Dist.] 1998, pet. denied).

Where both the plaintiff and defendant are entitled to recover differing amounts

from each other, the court is required to determine which party is entitled to the

greater recovery and render judgment for that party in the amount of the excess.

See Chilton Ins. Co. v. Pate & Pate Enters., Inc., 930 S.W.2d 877, 894 (Tex.

App.—San Antonio 1996, writ denied); see also Tex. R. Civ. P. 301 (permitting

only one final judgment in any cause).

Here, Mike pleaded a counterclaim, which if proven, by its very definition

―embraces both setoff and recoupment‖ and will be deducted from any award

given to the plaintiff Sam. Because the jury awarded damages to Sam (on the

claims raised in his petition) and to Mike (on his counterclaim), the trial court was

required under both the definition of counterclaim and the one-final-judgment rule

to deduct the lesser damages, which were given to Mike on his counterclaim,

from the greater damages awarded to Sam on his fraud claim. See Tex. R. Civ.

P. 301; Chilton Ins. Co., 930 S.W.2d at 894–95. We therefore hold that the trial

30
court did not err by rendering judgment for Sam in the amount of the excess, and

we overrule Mike‘s sixth issue.19

V. CONCLUSION

Having overruled the issues necessary for final disposition of the appeal,

we affirm the trial court‘s judgment.

/s/ Sue Walker
SUE WALKER
JUSTICE

PANEL: DAUPHINOT, WALKER, and MEIER, JJ.

DELIVERED: January 30, 2014

19
We note that case law over the years has not consistently applied the
legal definitions of the words ―setoff,‖ ―offset,‖ and ―recoupment‖ but instead has
used the words interchangeably. We need not, however, delve into this
inconsistency to resolve Mike‘s sixth issue because it can be resolved, as set
forth above, by applying the definition of ―counterclaim‖ and the one-final-
judgment rule.

31