]
COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-11-00092-CV
H.E.B., L.L.C. APPELLANT
AND APPELLEE
V.
HORACE T. ARDINGER, JR. APPELLEES
AND WESTLAND CAPITOL INC. AND APPELLANTS
----------
FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY
----------
OPINION
----------
I. INTRODUCTION
Appellant and Cross-Appellee H.E.B., L.L.C. appeals the final judgment
awarding Appellee and Cross-Appellant Horace T. Ardinger, Jr. $1,300,405.04.
Ardinger appeals the trial court‘s denial of his requests for declaratory relief and
for attorneys‘ fees. We will affirm the trial court‘s judgment in its entirety.
II. FACTUAL AND PROCEDURAL BACKGROUND
A. H.E.B., Curtis Somoza, and Envoii Technologies, LLC
H.E.B. is a limited liability company that was formed in 1997. Its original
members included Scott Haire, Steve Evans, and Frank Barker.1 Haire has been
H.E.B.‘s managing member since 1997. He owned 98% of H.E.B. at its
formation but only 60% at the time of trial. Haire explained that H.E.B. primarily
―manages different businesses‖ and ―invests in distressed companies.‖
In May 2003, Envoii Healthcare, LLC, an entity owned and controlled by
H.E.B., acquired certain technology assets from the bankruptcy estate of Envoii,
Inc., a company developed by Michael Tolson in the 1990s. Shortly thereafter,
Envoii Healthcare sold most of those assets—the Envoii platform; five patents;
and several licensed applications, including a payment processing application, a
Fujitsu application, and the ―disappearing email‖ application—to Envoii
Technologies, LLC, an entity formed and wholly owned by H.E.B. to acquire and
hold the Envoii technology.2
The Envoii platform was not yet ―commercially usable‖ when Envoii
Technologies acquired it in the summer of 2003.3 Haire realized that he needed
1
Hence the abbreviation ―H.E.B.‖
2
According to Haire, when H.E.B. bought the Envoii platform and the
―disappearing email‖ application, the goal of the technology was ―[t]o be able to
send an email with encrypted data in it so that you could erase the email if you
chose to later on.‖
3
Envoii Healthcare hired Tolson to continue developing the technology.
2
to raise capital to get the Envoii platform ―up and running,‖ and it was in this
context that he was introduced to Curtis Somoza in August 2003. Haire met with
Somoza on two separate occasions to discuss the Envoii platform—once in
Florida and once at Somoza‘s 27,000-square-foot house in California. Somoza
claimed to be a ―bond trader‖ and expressed interest in the ―disappearing email‖
application. Haire came away from his meetings with Somoza with the
impression that he was very wealthy and had been successful in his business
ventures.
On October 1, 2003, Envoii Technologies and the Curtis D. Somoza Living
Trust4 entered into a subscription agreement whereby the Somoza Trust agreed
to pay Envoii Technologies $1 million in exchange for a 25% membership
interest in Envoii Technologies.5 The Somoza Trust paid Envoii Technologies
$550,000 on October 2, 2003, and agreed to pay the remainder of the funds
pursuant to two notes. The $550,000 paid on October 2, 2003, was the only
money paid to Envoii Technologies under the subscription agreement.
Interested in acquiring control of Envoii Technologies, Somoza
approached Haire not long after entering into the October 2003 subscription
agreement and inquired about purchasing a greater interest in Envoii
4
Somoza created the Somoza Trust in October 2002 to receive and
manage assets for the benefit of Somoza during his lifetime.
5
The Somoza Trust also agreed to pay Envoii Technologies $50,000 in
exchange for the license to develop the ―disappearing email‖ technology.
3
Technologies. In December 2003, the Somoza Trust agreed to pay H.E.B. $9
million in exchange for a 45% equity interest in Envoii Technologies. Under this
letter agreement, the Somoza trust paid H.E.B. $100,000 and H.E.B. credited the
Somoza Trust with a prior license payment of $250,000, totaling payments in the
amount of $350,000 towards the 45% interest. The letter agreement also called
for the Somoza Trust to pay H.E.B. $650,000 upon the execution of a formal
purchase agreement. Haire executed a formal purchase agreement on behalf of
H.E.B. on January 28, 2004, which acknowledged the prior payments totaling
$350,000 and also required the payment of $650,000 upon its execution, but
Haire rescinded his signature because the Somoza Trust paid H.E.B. only
$500,000 of the required $650,000. The formal purchase agreement thus fell
apart, and Haire traveled to California to ―throw Somoza out of Envoii
Technologies.‖
But Somoza and Haire renegotiated, and H.E.B. and the Somoza Trust
entered into a February 9, 2004 letter agreement whereby the Somoza Trust
agreed to purchase not just a 45% interest in Envoii Technologies, but the
remaining 75% interest held by H.E.B. (70%) and Tolson (5%). On March 8,
2004, H.E.B. (by Haire) and Digitally Secured Communications, Inc.6 (DSC) (by
Somoza) formalized the February letter agreement by executing an ―Agreement
and Closing Memorandum for Purchase of Membership Interests‖ (the March
6
Somoza formed DSC to make this acquisition, and he substituted DSC as
the purchaser at the ―last minute.‖ Haire had never heard of DSC.
4
2004 purchase agreement).7 The March 2004 purchase agreement
acknowledged that H.E.B. had received ―Initial Payments‖ ―from [DSC]‖ totaling
$850,000 (the $350,000 plus the $500,000 paid by the Somoza Trust under the
prior agreements that had fallen through), and it credited DSC with that amount
towards the purchase price. In addition to future payments, the March 2004
purchase agreement required DSC to pay to H.E.B. $1,300,405.04 at closing.8
H.E.B. was paid that amount, but not by DSC; Persistence Capital LLC, an entity
used by Somoza to funnel monies stolen from investors, directed the payment to
H.E.B. out of its escrow account.9 DSC consequently acquired the remaining
75% interest in Envoii Technologies and, thus, control of the company.10 H.E.B.
spent the $1,300,405.04.
In September 2004, H.E.B. sued Somoza, the Somoza Trust, and DSC in
California state court after DSC failed to make the next payment due under the
March 2004 purchase agreement—$1,250,000 on August 2, 2004. In November
7
Although the parties sometimes referred to H.E.B. as owning 70% of
Envoii Technologies, the March 2004 purchase agreement reflects that H.E.B.
owned 45% of Envoii Technologies and SAH, LLC, an entity of which Haire was
the ―sole manager member,‖ owned 25% of Envoii Technologies. Tolson also
agreed to sell his 5% interest in Envoii Technologies.
8
The total amount to be paid to H.E.B. for the 75% membership interest in
Envoii Technologies ranged from $5 million to $8 million.
9
Persistence Capital filed for bankruptcy in California in September 2005.
10
H.E.B. did not negotiate for a lien on the Envoii Technology membership
interests transferred, nor did it condition the transfer of the interests on payments
by DSC (or some other Somoza-controlled entity).
5
2004, H.E.B. placed DSC into involuntary bankruptcy in California. H.E.B. and
DSC (through Somoza) attempted to negotiate a resolution to both actions,
entering into and proposing numerous settlement agreements between February
2005 and mid-2006, but all fell through.
On May 16, 2006, the FBI issued an announcement stating that Somoza
had been arrested on charges that he and Robert Coberly, Jr. had ―defrauded
dozens of victims out of more than $68 million through an investment scheme.‖
According to a criminal complaint, Somoza had allegedly ―orchestrated a Ponzi
scheme‖ in which he solicited individuals to invest in Persistence Capital, which
was supposed to use the funds to purchase pools of life insurance policies, but
only $4.7 million of the approximately $68 million collected from investors was
used to purchase several pools of life insurance policies. The other $64 million
supported Somoza‘s lavish lifestyle. Somoza was indicted in federal court on
numerous counts, including conspiracy, wire and mail fraud, and promotional
money laundering.11
In July 2006, H.E.B. filed an adversary complaint in the involuntary
bankruptcy action against DSC for rescission of the March 2004 purchase
agreement. Several months later, in November 2006, after further negotiations,
H.E.B. and DSC entered into a ―Rescission and Settlement Agreement‖ whereby
11
The Securities and Exchange Commission had previously settled a suit
with Somoza and Coberly involving allegations that they had cheated investors
out of approximately $6.7 million as part of a prime note fraud.
6
H.E.B. agreed to pay DSC $850,000 in exchange for a 75% ownership interest in
Envoii Technologies. H.E.B. paid the $850,000 and reacquired the 75%
ownership interest in Envoii Technologies, which included ―control of the source
code and the patents that were a part of it at the time that [it was] sold.‖12
B. Ardinger, Somoza, and Litigation
Interested in investment opportunities, Ardinger first met Somoza at his
California house in 2003, where they discussed bond trading and insurance. In
July 2003, Ardinger loaned to or invested with Somoza $5,000,000, based on an
expected return of 5% per month. Somoza paid Ardinger the expected returns—
$250,000 per month from July to December 2003—but unbeknownst to Ardinger,
the funds paid to him were either his own or came from other bilked ―investors.‖13
In October 2003, Ardinger lent Somoza another $5,000,000 to purchase a
90-day CD to use towards leveraged bond trading. Ardinger received his
expected returns, but Somoza did not use any of the $5,000,000 for bond
trading.14
12
H.E.B. subsequently entered into an agreement with the Persistence
Capital bankruptcy trustee to acquire the remaining 25% interest.
13
Somoza did not invest any of the $5,000,000 in bonds. He used
approximately $4,800,000 of the funds to settle with investors involved in the
prime note scheme.
14
Ardinger claimed that at this point, he had no reason to suspect that
Somoza was lying to him; Ardinger had received the expected returns on his
investments, but he did not realize that the returns were his own money.
7
In December 2003, Ardinger entered into a joint venture agreement with
Persistence Capital and contributed $5,000,000 towards a supposed investment
in pools of life insurance. None of the $5,000,000 was used to purchase any
pools of life insurance.
Soon thereafter, on March 9, 2004, Ardinger and Somoza (on behalf of the
Somoza Trust and other entities, including Persistence Capital) entered into a
―Master Agreement‖ whereby Ardinger agreed to contribute $10,000,000 to
Westland Capital, Inc.—a company owned equally by Ardinger and Somoza, of
which Ardinger was supposedly president—to ―finance the acquisition of rights in
other pools of life insurance.‖15 Through Ardinger Business Development, Inc.,
an entity controlled by Ardinger and used for business investments, Ardinger
caused $10,000,000 to be transferred into Westland‘s bank account on March
11, 2004. That same day, without authorization from Ardinger or Westland‘s
board of directors, Somoza transferred $10,000,000 from Westland‘s bank
account to a Persistence Capital escrow account. The next day, on March 12,
2004, Somoza transferred $1,300,405.04 of the $10,000,000 from Persistence
Capital‘s escrow account to H.E.B.‘s account as a payment pursuant to the
March 2004 purchase agreement between H.E.B. and DSC.
15
The Master Agreement provided, ―No funds shall be transferred from
Westland without the written approval of the President and a majority of the
Board of Directors.‖ Ardinger, Somoza, and Coberly were on its board of
directors.
8
By mid-2005, the FBI had begun to investigate Somoza. Ardinger spoke to
the FBI on several occasions and learned that Somoza had used much of
Ardinger‘s investment monies to fund Somoza‘s extravagant lifestyle.16 Ardinger
conducted his own investigation and attempted to recover some of the stolen
monies. Lance Ouellette, Ardinger‘s stepson, who began working with Ardinger
in 2001 and was involved in various aspects of Ardinger‘s companies, recalled
that it was not until June or July 2007 that he learned about the $1,300,405.04
paid to H.E.B. from the Persistence Capital escrow account.17
In November 2007, Ardinger sued the trustee of the Persistence Capital
bankruptcy proceeding and obtained an order declaring that title to the
$1,300,405.04 that Somoza caused to be transferred from the Persistence
Capital escrow account to H.E.B. in March 2004 never passed from Ardinger to
Persistence Capital. In March 2008, Ardinger and Westland sued H.E.B. to
recover the $1,300,405.04, alleging claims for money had and received and
unjust enrichment, among others.18 After a bench trial, the trial court found that
16
Ardinger told the FBI that he had received a return of approximately
$3,375,000 on his principal investments of $25,000,000 with Somoza. He also
confirmed ―that it was never his intent that any of his investment monies be used
for any purpose other than bond trading or the purchase of insurance policies.‖
17
Ardinger‘s lawyers located H.E.B.‘s California lawsuit against DSC and
Somoza in November 2005. But Ouellette testified at trial that the complaint did
not put him on notice that the $1,300,405.04 had been stolen from Ardinger.
18
Ardinger and Westland also sued—and obtained a default judgment
against—DSC and Somoza, in his individual capacity and as trustee of the
Somoza Trust.
9
―[i]n equity and good conscience, HEB should be required to return
[$1,300,405.04] to Mr. Ardinger, the lawful owner of these funds.‖ The trial court
entered numerous other findings of fact and conclusions of law, many of which
are challenged by H.E.B. on appeal, and declined to award Ardinger declaratory
relief and attorneys‘ fees. H.E.B. and Ardinger appeal.
III. BALANCING THE EQUITIES—MONEY-HAD-AND-RECEIVED ISSUES
In what we construe to be its second, third, fourth, and fifth issues, H.E.B.
(1) challenges the trial court‘s conclusions of law numbers 3, 4, 9, 13, 24, 25, 31,
34, 37, 38, 39, 40, and 43; (2) argues that the evidence is legally and factually
insufficient to support the trial court‘s findings of fact numbers 14, 15, 16, 19, 22,
42, 44, 47, 48, 69, 70, 73, 79, 80, 81, and 82; (3) complains of Ardinger‘s alleged
failure to secure findings of fact or conclusions of law to support his discovery
rule defense; and (4) contends that the trial court abused its discretion by
awarding Ardinger judgment on his money-had-and-received claim.
A. Standard of Review
A claim for money had and received is equitable in nature. Stonebridge
Life Ins. Co. v. Pitts, 236 S.W.3d 201, 203 n.1 (Tex. 2007). ―‘[T]he expediency,
necessity, or propriety of equitable relief‘ is for the trial court, and its ruling is
reviewed for an abuse of discretion.‖ Wagner & Brown, Ltd. v. Sheppard, 282
S.W.3d 419, 428–29 (Tex. 2008). But findings of fact entered in a case tried to
the court are reviewable for legal and factual sufficiency of the evidence to
support them by the same standards that are applied in reviewing evidence
10
supporting a jury=s answer, while conclusions of law may be reviewed to
determine their correctness based upon the facts. Ortiz v. Jones, 917 S.W.2d
770, 772 (Tex. 1996); Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994);
Wood Care Ctrs., Inc. v. Evangel Temple Assembly of God of Wichita Falls, Tex.,
307 S.W.3d 816, 823 (Tex. App.—Fort Worth 2010, pet. denied). Thus, the
traditional standards of review regarding evidentiary sufficiency overlap the
abuse of discretion standard. In cases involving overlapping standards of review,
Texas courts have reasoned that a reviewing court must first determine
(1) whether the trial court had sufficient information upon which to exercise its
discretion and then (2) whether the trial court erred in applying that discretion.
See Edwards v. Mid-Continent Office Distribs., L.P., 252 S.W.3d 833, 835 n.6,
836 (Tex. App.—Dallas 2008, pet. denied); El Paso Cnty. Hosp. Dist. v. Gilbert,
64 S.W.3d 200, 203–04 (Tex. App.—El Paso 2001, pet. denied). We apply that
framework in this case.
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
11
determining whether there is legally sufficient evidence to support the findings
under review, we must consider evidence favorable to the findings if a
reasonable factfinder could and disregard evidence contrary to the findings
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).
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)
(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).
A trial court exercises broad discretion in balancing the equities in a case
seeking equitable relief. Edwards, 252 S.W.3d at 836. To determine whether a
trial court abused its discretion, we must decide whether the trial court acted
without reference to any guiding rules or principles; in other words, we must
decide whether the act was arbitrary or unreasonable. Low v. Henry, 221
S.W.3d 609, 614 (Tex. 2007); Cire v. Cummings, 134 S.W.3d 835, 838–39 (Tex.
2004). An appellate court cannot conclude that a trial court abused its discretion
merely because the appellate court would have ruled differently in the same
12
circumstances. E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549,
558 (Tex. 1995); see also Low, 221 S.W.3d at 620.
B. Law
Money had and received is an equitable action that may be maintained to
prevent unjust enrichment when one person obtains money which in equity and
good conscience belongs to another. Staats v. Miller, 150 Tex. 581, 584, 243
S.W.2d 686, 687 (1951); Everett v. TK-Taito, L.L.C., 178 S.W.3d 844, 860 (Tex.
App.—Fort Worth 2005, no pet.); Amoco Prod. Co. v. Smith, 946 S.W.2d 162,
164 (Tex. App.—El Paso 1997, no writ) (stating that cause of action for money
had and received belongs conceptually to doctrine of unjust enrichment); see
also Edwards, 252 S.W.3d at 837 n.7 (acknowledging that courts use term
―money had and received‖ interchangeably with other terms for similar claims,
including assumpsit, unjust enrichment, and restitution). The action is not based
on wrongdoing; rather, it looks only to the justice of the case and inquires
whether the defendant has received money that rightfully belongs to another.
Amoco, 946 S.W.2d at 164. As the supreme court has reasoned,
[A] cause of action for money had and received is ‗less restricted
and fettered by technical rules and formalities than any other form of
action. It aims at the abstract justice of the case, and looks solely to
the inquiry, whether the defendant holds money, which . . . belongs
to the plaintiff.‘
Staats, 150 Tex. at 584–85, 243 S.W.2d at 687 (citing U.S. v. Jefferson Elec.
Mfg. Co., 291 U.S. 386, 402, 54 S. Ct. 443, 449 (1934)).
13
C. Consideration for $1,300,405.04
In its second issue, H.E.B. argues that conclusion of law number 3 is
legally erroneous. Conclusion of law number 3 states,
3. A third party transferee, such as HEB, who receives
money from a fraudster (like Somoza/DSC) but provides no value for
the money (sale transaction was rescinded and voided and stock
returned) is in no better position tha[n] the fraudster in defeating a
claim by the rightful owner for recovery of the money wrongfully
obtained. []
In its third issue, H.E.B. argues that the evidence is legally and factually
insufficient to support the trial court‘s findings of fact numbers 69, 70, 73, and 80,
which state,
69. The $850,000 transferred by HEB was the sole
consideration and value provided by HEB for the return of the 75%
membership interest in Envoii. The Rescission Agreement states
that the ―consideration‖ is ―therein stated,‖ and makes no mention of
any refund, credit, or the $1.3M payment by Persistence Capital to
HEB. The Rescission Agreement also does not reference any
damages to the disappearing email technology or any other software
or technology in Envoii‘s possession.
70. HEB did not return the $1.3M to Somoza, DSC,
Persistence Capital or any other person or entity and did not, after
giving effect to the Rescission Agreement, give any consideration or
value in exchange for the 75% membership interest in Envoii.
73. In the fall of 2007, Mr. Ardinger learned that his $1.3M
had been transferred to HEB for no consideration.
80. On March 12, 2008, less than eighteen months after the
Rescission Agreement was executed, less than one year after HEB
transferred the last part of the $850,000 to Commercial Escrow
Services, Inc. pursuant to the Rescission Agreement, less than six
months after Mr. Ardinger discovered that his $1.3M had been
transferred to HEB for no consideration, and less than one month
after prevailing against Persistence Capital regarding title to
14
Mr. Ardinger‘s $1.3M, Mr. Ardinger and Westland filed the present
lawsuit.[19]
H.E.B. directs us to caselaw addressing post-transfer disputes between
strangers over money, as opposed to a chattel, and contends that courts ―are
consistent in their protection of innocent third parties and the free flow of
commerce.‖ Specifically, ―[o]ne who purchases stolen property from a thief, no
matter how innocently, acquires no title in the property; title remains in the
owner.‖ Olin Corp. v. Cargo Carriers, Inc., 673 S.W.2d 211, 216 (Tex. App.—
Houston [14th Dist.] 1984, no writ). Thus, ―[t]he general rule is that the owner of
stolen property can recover it or its value from anyone who has received it and
exercised dominion over it.‖ Sinclair Houston Fed. Credit Union v. Hendricks,
268 S.W.2d 290, 295 (Tex. Civ. App.—Galveston 1954, writ ref‘d n.r.e). But
money ―is an exception to the general rule. This [is] because of the necessity
that money pass freely in commercial transactions.‖ Id. It is well settled that
legal title to money passes with delivery to a person who acquires it in good faith
and for valuable consideration. Id.; see Tri-State Chem., Inc. v. W. Organics,
Inc., 83 S.W.3d 189, 195 (Tex. App.—Amarillo 2002, pet. denied) (reasoning that
―as to personalty other than money, a thief cannot pass good title‖ (emphasis
added)). H.E.B. argues that the trial court‘s conclusions are inconsistent with this
caselaw because ―[t]here was no failure of consideration at the time of the March
19
As to finding of fact number 80, H.E.B. only challenges the portion that
states that ―Mr. Ardinger discovered that his $1.3M had been transferred to HEB
for no consideration.‖
15
2004 Purchase Agreement.‖ H.E.B. also challenges the sufficiency of the
evidence to support the trial court‘s findings as they relate to the lack of
consideration. H.E.B.‘s arguments miss the mark.
There is no dispute that H.E.B. provided consideration to DSC as part of
the March 2004 purchase agreement—H.E.B. sold a 75% membership interest in
Envoii Technologies in exchange for (1) ―Initial Payments‖ ―from [DSC]‖ totaling
$850,000 and (2) $1,300,405.04 at closing (and the promise of future payments).
If this were the extent of the transactional history between H.E.B. and DSC over
the 75% membership interest in Envoii Technologies, then there would be little
doubt that Ardinger would have no right to recover the stolen $1,300,405.04 from
H.E.B. See Tri-State Chem., 83 S.W.3d at 195; Sinclair, 268 S.W.2d at 295. But
something happened in November 2006 that affected Ardinger‘s right to recover
the stolen $1,300,405.04: H.E.B. and DSC agreed to rescind the March 2004
purchase agreement and settle its disputes.20 Upon rescission, the rights and
liabilities of the parties are extinguished; any consideration paid is returned,
together with such further special damage or expense as may have been
reasonably incurred by the party wronged; and the parties are restored to their
respective positions as if no contract had ever existed. See Sharabianlou v.
20
In H.E.B.‘s ―Complaint for Rescission of Contract,‖ H.E.B. prayed ―[f]or an
Order of Rescission, declaring that the [March 2004 purchase agreement] is, as
declared by this Court, null and void, ab initio, effective as of and from March 8,
2004, and that as a result thereof, the Sellers remain and are the owners and
holders of 75% of the Members Interest in Envoii Technologies, LLC.‖ The
bankruptcy court approved the rescission and settlement agreement.
16
Karp, 181 Cal. App. 4th 1133, 1145, 105 Cal Rptr. 3d 300, 310 (2010)
(―Rescission extinguishes the contract . . . , terminates further liability, and
restores the parties to their former positions by requiring them to return whatever
consideration they have received.‖); see also Johnson v. Cherry, 726 S.W.2d 4, 8
(Tex. 1987); Smith v. Nat’l Resort Cmtys. Inc., 585 S.W.2d 655, 660 (Tex. 1979);
Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 855 (Tex. App.—Houston [14th
Dist.] 2001, pet. denied). Indeed, in conclusion of law number 18, which is
unchallenged, the trial court concluded that ―[b]ecause rescission ‗undoes‘ the
agreement, any consideration received under the contract must be restored.‖
[Emphasis added.]
Notwithstanding the unambiguous terms of the rescission and settlement
agreement, which provide that ―DSC agrees to stipulate to judgment for
rescission,‖ Haire agreed at trial that the rescission and settlement agreement
―undid,‖ ―unwound,‖ and ―made null and void‖ the March 2004 purchase
agreement. H.E.B. thus reacquired from DSC the 75% ownership interest in
Envoii Technologies, but it returned only $850,000. As Haire testified, H.E.B.
reacquired the 75% membership interest in Envoii Technologies and repaid the
$850,000 that the March 2004 purchase agreement credited towards DSC‘s
purchase of the 75% membership interest in Envoii Technologies, but H.E.B.
kept the $1,300,405.04 that was also paid as consideration under the terms of
17
the March 2004 purchase agreement.21 Therefore, unless the record
demonstrates that H.E.B. agreed to part with some form of consideration in
exchange for retaining the $1,300,405.04 that it was previously paid for the 75%
membership interest in Envoii Technologies, then H.E.B. retained the
$1,300,405.04 for no consideration. If that is the case, the rule that legal title to
money passes with delivery to a person who acquires it in good faith and for
valuable consideration cannot shelter H.E.B. from Ardinger‘s equitable claim to
recover the stolen $1,300,405.04. See Staats, 150 Tex. at 584–85, 243 S.W.2d
at 687 (reasoning that claim for money had and received ―aims at the abstract
justice of the case‖).
H.E.B. argues that the evidence conclusively shows that it gave valuable
consideration for the $1,300,405.04 because (a) H.E.B. and DSC negotiated, and
the bankruptcy court approved, ―equitable adjustments to the relative
considerations to be exchanged under‖ the rescission and settlement agreement;
(b) H.E.B. ―paid back‖ $850,000 toward the $1,300,405.04 in exchange for the
return of the 75% membership interest in Envoii Technologies; and (c) the
rescission and settlement agreement involved a settlement and mutual covenant
of releases between H.E.B. and DSC.
21
The March 2004 purchase agreement stated that the initial payments
($850,000) ―are part of [DSC‘s] purchase of the Interests from [H.E.B. and
Tolson], in addition to the payments required by this Agreement.‖ Both Haire and
Henry Simon, an attorney who has represented Haire or his companies for years,
acknowledged this at trial.
18
The rescission and settlement agreement is governed by and construed in
accordance with California law. ―A settlement agreement is a contract, and the
legal principles which apply to contracts generally apply to settlement contracts.‖
Weddington Prods., Inc. v. Flick, 60 Cal. App. 4th 793, 810, 71 Cal. Rptr. 2d 265,
276 (1998). California recognizes the objective theory of contracts, under which
―[i]t is the objective intent, as evidenced by the words of the contract, rather than
the subjective intent of one of the parties, that controls interpretation.‖ Founding
Members of the Newport Beach Country Club v. Newport Beach Country Club,
Inc., 109 Cal. App. 4th 944, 956, 135 Cal. Rptr. 2d 505, 514 (2003).
The rescission and settlement agreement states that the parties have
entered into it ―for the consideration therein stated‖ and provides that it ―contains
the entire understanding between the Parties concerning the subject matter
contained herein.‖ It states that ―DSC agrees . . . to transfer its seventy-five (75)
percent ownership interest in Envoii Technology, LLC . . . to HEB to be held in
escrow until the Payment Terms are met.‖ The payment terms call for H.E.B. to
pay to DSC $850,000 by March 24, 2007, pursuant to a particular schedule,
which H.E.B. did. Nowhere in the rescission and settlement agreement does it
state that H.E.B. exchanged anything for the $1,300,405.04.22 Thus, the
unambiguous terms of the rescission and settlement agreement do not support
H.E.B.‘s contentions that it gave consideration to retain the $1,300,405.04 in the
22
Haire even agreed at trial that the rescission and settlement agreement
does not characterize the payments as a refund of the $1,300,405.04.
19
form of ―equitable adjustments‖ or by ―pa[ying] back‖ $850,000 towards the
$1,300,405.04.23
H.E.B.‘s other argument—that the consideration for the $1,300,405.04
involved the mutual covenant of releases between H.E.B. and DSC—is equally
unpersuasive. The rescission and settlement agreement indeed provides that
each party agrees to release the other from ―any and all claims or causes of any
kind relating to the contractual agreements made the basis of the Lawsuit,‖ but
there is nothing therein indicating that H.E.B. retained the $1,300,405.04 in
exchange for DSC‘s release. Along the line of mutual releases, the record does
demonstrate that on the same date that the bankruptcy court approved the
rescission and settlement agreement, the court dismissed the involuntary
bankruptcy proceeding that H.E.B. had initiated against DSC. That was a mutual
release as contemplated by the rescission and settlement agreement.
23
There is also no evidence that the bankruptcy court ―approved‖ any
claimed equitable adjustments to the considerations exchanged. The
$1,300,405.04 is not mentioned in the rescission and settlement agreement nor
was it addressed at the settlement hearing. The only discussion at the
settlement hearing of the consideration exchanged was the following:
THE COURT: So the payment is basically a return of consideration.
MR. KUHNER: It‘s a lesser amount --
THE COURT: Yeah, but in that nature.
MR. KUHNER: That‘s right.
THE COURT: Okay. Okay.
20
H.E.B. additionally contends that California rescission law, like Texas,
takes into account not just the consideration previously exchanged but also
subsequent damage or injury to the consideration or parties involved and that
―[w]hile Envoii was in the possession and control of Somoza (via DSC), the value
of its technology and patents was diminished due to mismanagement by Somoza
and DSC.‖ Thus, according to H.E.B., consideration in the form of damage to the
membership interest accounted for H.E.B.‘s retention of the $1,300,405.04. The
only part of the rescission and settlement agreement that relates to H.E.B.‘s
devaluation argument is section 8.01, titled ―EXPLANATION OF DELAY IN
PROSECUTION OF PATENT(S),‖ which provides as follows:
8.01 The Parties understand that certain patents identified as
part of the March 8, 2004 contract, a listing of which is attached
hereto as Exhibit ―C‖ continue to pend before the United States
Patent and Trademark Office (―USPTO‖). Each Party, upon request
of the other or the USPTO, will provide due and adequate
explanation regarding the prior legal proceedings in state and
federal bankruptcy court and the consequent effect of delaying the
prosecution of the patent applications.
This part of the rescission and settlement agreement merely provides that certain
patents remain pending and that upon request, each party will provide an
explanation of legal proceedings related to the ―effect of delaying the prosecution
of the patent applications.‖ Section 8.01 is no evidence that H.E.B. retained the
$1,300,405.04 in consideration for damage to the 75% membership interest
reacquired from DSC.
21
Contrary to the terms of the rescission and settlement agreement, Haire
testified that the 75% membership interest reacquired by H.E.B. was ―devalued‖
because Somoza failed to prosecute the patents involved in the original
transaction with H.E.B. and because licenses were cancelled. But there was no
evidence from any source of any particular amount of damages attributable to the
devaluation of the 75% membership interest, let alone in the specific amount of
$1,300,405.04. In other words, H.E.B. did not establish a link between the
―devalued‖ membership interest that it reacquired and its retention of
$1,300,405.04. Further, the parol evidence rule prevented the trial court from
giving any legal effect to Haire‘s testimony because it either varied or conflicted
with the unambiguous terms of the fully integrated rescission and settlement
agreement. See Johnson v. Driver, 198 S.W.3d 359, 364 (Tex. App.—Tyler
2006, no pet.) (―The parol evidence rule is not a rule of evidence, but a rule of
substantive law that bars the court from consideration of evidence violative of the
rule, even though it is admitted without objection.‖). To the extent that H.E.B.
argues that it retained $1,300,405.04 on account of its reacquisition of a
―devalued‖ 75% membership interest in Envoii Technologies, the record does not
support that specific contention.
We hold that the trial court did not err by entering conclusion of law
number 3 and that the evidence is legally and factually sufficient to support
findings of fact numbers 69, 70, 73, and 80. We overrule these parts of H.E.B.‘s
second and third issues.
22
D. Statute of Limitations and Accrual
1. Challenged Conclusions and Findings
In its second issue, H.E.B. challenges conclusions of law numbers 38, 39,
and 40, arguing that Ardinger‘s claim for money had and received is governed by
the two-year statute of limitations and was time barred. Those conclusions state,
38. Texas courts, including the Fort Worth Court of Appeals,
have held that money had and received is in the nature of an action
for debt and is thereby controlled by the four-year statute of
limitations. []
39. An action for money had and received is a quasi-
contractual action, and contractual actions are governed by a four-
year statute of limitations. []
40. HEB cites two cases that supposedly hold that a claim
for money had and received is subject to a two-year statute of
limitations, Elledge v. Friberg-Cooper Water Supply Corp., 240
S.W.3d 869 (Tex. 2007), and Verizon Employee Benefits Comm. v.
Frawley, 655 F.Supp.2d 644 (N.D. Tex. 2008). Neither case
supports HEB‘s proposition. Elledge dealt with a claim for unjust
enrichment and held only that unjust enrichment claims are
governed by a two-year statute of limitations. Elledge, 240 S.W.3d
at 870. The Elledge court does not even discuss the claim for
money had and received. Verizon dealt with an ERISA claim against
an employee for recoupment of overpaid employee benefits. The
federal court merely compared the ERISA claim to a claim for money
had and received on the basis that it [bore] the most similarity‖ to the
ERISA claim for recoupment. Thus, the federal court merely
speculated in dicta as to what it thought Texas law might be, were it
actually considering a claim for money had and received, which it
was not.
23
H.E.B. also challenges conclusion of law number 43,24 which addresses accrual
for purposes of Ardinger‘s claim for money had and received and provides,
43. Ardinger had no legal remedy, i.e., no cause of action,
against HEB until HEB executed the Rescission Agreement on
November 8, 2006, made final payment under the Rescission
Agreement on March 28, 2007, and was returned the consideration
(the 75% membership interest in Envoii) it had received for
Ardinger‘s $1.3M. []
H.E.B. argues that a claim for money had and received is subject to the
two-year statute of limitations because a claim for unjust enrichment, which by
definition includes a cause of action for money had and received, is governed by
the two-year statute of limitations. See Elledge v. Friberg-Cooper Water Supply
Corp., 240 S.W.3d 869, 870–71 (Tex. 2007). Regarding accrual, it argues that a
claim for money had and received accrues when money is ―had and received‖
and that Ardinger‘s claim therefore accrued when H.E.B. ―had and received‖ the
stolen $1,300,405.04 in March 2004. Ardinger responds that the four-year
statute of limitations applies to a claim for money had and received and that his
claim accrued when H.E.B. executed the rescission and settlement agreement in
November 2006 but retained the $1,300,405.04.
―A legal injury must be sustained . . . before a cause of action arises‖ for
limitations purposes. Atkins v. Crossland, 417 S.W.2d 150, 153 (Tex. 1967); see
S.V. v. R.V., 933 S.W.2d 1, 4 (Tex. 1996) (―As a rule, we have held that a cause
24
In its third issue, H.E.B. challenges finding of fact number 79, which is
duplicative of conclusion of law number 43.
24
of action accrues when a wrongful act causes some legal injury . . . .‖).
Assuming without deciding that the two-year statute of limitations applies to
Ardinger‘s claim for money had and received, his claim was not time barred
because he brought the action against H.E.B. within two years of when it
accrued—at earliest, in November 2006, when H.E.B. executed the rescission
and settlement agreement and was returned the 75% membership interest in
Envoii Technologies but retained the $1,300,405.04 for no consideration.
Ardinger‘s claim against H.E.B. did not accrue before this time because, as
alluded to above, H.E.B. acquired the stolen $1,300,405.04 for consideration (the
75% membership interest in Envoii Technologies), and until H.E.B. rescinded the
March 2004 purchase agreement and retained the $1,300,405.04 for no
consideration, H.E.B. had not committed a wrongful act that caused Ardinger a
legal injury. See Tri-State Chem., 83 S.W.3d at 195; Sinclair, 268 S.W.2d at 295.
But when H.E.B. reacquired the 75% membership interest in Envoii Technologies
and retained the $1,300,405.04 for no consideration, Ardinger‘s claim accrued
because H.E.B. caused Ardinger legal injury. See Atkins, 417 S.W.2d at 153;
see also Tri-State Chem., 83 S.W.3d at 195; Sinclair, 268 S.W.2d at 295.
Accordingly, Ardinger‘s March 2008 suit against H.E.B. was not time barred.
We hold that the trial court did not err by entering conclusion of law
number 43. To the extent that conclusions of law numbers 38, 39, and 40 are
erroneous, they are harmless because we assumed for purposes of our analysis
that the two-year statute of limitations applied to Ardinger‘s claim. See Tex. R.
25
App. P. 44.1(a); BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794
(Tex. 2002) (―If the reviewing court determines a conclusion of law is erroneous,
but the trial court rendered the proper judgment, the erroneous conclusion of law
does not require reversal.‖). We overrule this part of H.E.B.‘s second and third
issues.
2. Lack of Findings and Conclusions for Discovery Rule
Defense
In what we construe to be its fourth issue, H.E.B. complains of Ardinger‘s
alleged failure to secure findings of fact or conclusions of law to support his
discovery rule defense to the two-year statute of limitations. Above, we assumed
for purposes of our analysis that the two-year statute of limitations applied to
Ardinger‘s money-had-and-received claim, and we held that the trial court did not
err by entering conclusion of law number 43—that Ardinger‘s money-had-and-
received claim did not accrue until November 2006. Because Ardinger filed his
claim against H.E.B. in March 2008, his discovery rule defense is not implicated,
and we need not address H.E.B.‘s arguments pertaining to it. See Tex. R. App.
P. 47.1. We overrule H.E.B.‘s fourth issue.
E. Unconscionable Loss and Unjust Enrichment
In its second issue, H.E.B. argues that the trial court erred by entering
conclusions of law numbers 24 and 25,25 which provide,
25
In its third issue, H.E.B. challenges finding of fact number 81, which is
duplicative of conclusions of law numbers 24 and 25.
26
24. HEB will be unjustly enriched if not required to restore
the $1.3M received as it provided nothing for these funds. []
25. Ardinger would suffer an unconscionable loss—the
$1.3M—if HEB is permitted to keep Ardinger‘s funds. []
H.E.B. contends that Ardinger has no right to the $1,300,405.04 because
the funds came from Westland, not Ardinger. In finding of fact number 19,
however, the trial court found that Ardinger ―contributed $10,000,000 to
Westland‘s Bank of America account, via transfer from Ardinger Business
Development, Inc.‘s JP Morgan Private Bank account, controlled by Mr. Ardinger.
Mr. Ardinger later reimbursed Ardinger Business Development, Inc. for these
funds. As such, the entirety of this $10,000,000 was funded by Mr. Ardinger.‖26
[Emphasis added.] The record also demonstrates that Ardinger sued the trustee
of the Persistence Capital bankruptcy proceeding and obtained an order
declaring that title to the $1,300,405.04 that Somoza caused to be transferred
from the Persistence Capital escrow account to H.E.B. in March 2004 never
passed from Ardinger to Persistence Capital. The trial court‘s conclusion of law
number 77, which is unchallenged, reflects this.
26
In its brief, H.E.B. listed finding of fact number 19 in the title of its third
issue challenging the legal and factual sufficiency of the evidence to support the
trial court‘s findings of fact, but it provided no argument for that specific ground.
Accordingly, to the extent that H.E.B. argues the evidence does not support
finding of fact number 19, H.E.B. waived that argument for appellate review. See
Tex. R. App. P. 38.1(i) (requiring brief to contain clear and concise argument for
the contentions made with appropriate citations to authorities); Fredonia State
Bank v. Gen. Am. Life Ins. Co., 881 S.W.2d 279, 284 (Tex. 1994) (discussing
―long-standing rule‖ that issue may be waived due to inadequate briefing).
27
Citing several cases that rely on the same proposition, H.E.B. also argues
that ―equity dictates that as between two innocent parties, the party that must
suffer the loss is the one who mistakenly created the situation and was in the
best position to have avoided it.‖ See Holden Bus. Forms Co. v. Columbia Med.
Ctr. of Arlington Subsidiary, L.P., 83 S.W.3d 274, 278 (Tex. App.—Fort Worth
2002, no pet.); Lincoln Nat’l Life Ins. Co. v. Brown Schools, Inc., 757 S.W.2d 411,
413–15 (Tex. App.—Houston [14th Dist.] 1988, no pet.). This is an exception to
the general rule of restitution that ―a party who pays funds under a mistake of fact
may recover restitution of those funds if the party to whom payment was made
has not materially changed his position in reliance thereon.‖ See Bryan v.
Citizens Nat’l Bank in Abiline, 628 S.W.2d 761, 763 (Tex. 1982). The exception
in the Holden and Lincoln decisions is inapposite because Ardinger did not sue
H.E.B. to recover money that he mistakenly paid to H.E.B. Ardinger sued H.E.B.
to recover money that was stolen by Somoza, a fraudster; used by a Somoza-
controlled entity in furtherance of a separate business agreement and
consequently acquired by another entity, H.E.B.; but then retained by H.E.B. for
no consideration after the underlying agreement that brought the funds to H.E.B.
was rescinded. In no way does this set of circumstances implicate the exception
addressed in Holden and Lincoln.
Referencing its consideration argument, H.E.B. also argues that it was not
unjustly enriched but also ―not enriched at all.‖ This argument is unpersuasive in
28
light of our analysis above that H.E.B. retained the $1,300,405.04 for no
consideration.
We hold that the trial court did not err by entering conclusions of law
numbers 24 and 25. We overrule this part of H.E.B.‘s second and third issues.
F. Additional Challenged Conclusions of Law
1. Conclusions of Law Numbers 4 and 31
Conclusions of law numbers 4 and 31 provide,
4. The claim for money had and received allows someone
who has funds stolen to recoup those stolen funds from anyone who
received it, even a third party who received it in good faith for
value. []
31. ―[T]he unjust enrichment for the purposes of
restitution… comes by way of receiving that which actually belongs
to another. It does not matter that the ultimate recipient paid
value….‖ []
H.E.B. argues that conclusions of law numbers 4 and 31 are erroneous because
unlike with a chattel, one may not recover money from a third party who received
it in good faith and for value. We agree that the law provides that legal title to
money passes with delivery to a person who acquired it in good faith and for
valuable consideration. See Tri-State Chem., 83 S.W.3d at 195; Sinclair, 268
S.W.2d at 295. But it is apparent that conclusions of law numbers 4 and 31 are
meant to address the unique facts of the money-had-and-received claim that are
at issue in this case—one in which, using the above lingo, a person (H.E.B.)
acquired ―money‖ ($1,300,405.04 and $850,000) for ―valuable consideration‖
(75% membership interest in Envoii Technologies) pursuant to an underlying
29
agreement that was rescinded, but the person (H.E.B.) not only reacquired the
―valuable consideration‖ (75% membership interest in Envoii Technologies)
originally exchanged but also kept for no consideration part of the ―money‖
($1,300,405.04) received pursuant to the underlying—but now rescinded—
agreement. Thus, considered in light of the specific facts of this case,
conclusions of law numbers 4 and 31 are not erroneous. To the extent that the
conclusions are considered in a vacuum and are erroneous, they are harmless.
See Tex. R. App. P. 44.1(a); BMC Software, 83 S.W.3d at 794. We overrule this
part of H.E.B.‘s second issue.
2. Conclusions of Law Numbers 9 and 13
Conclusions of law numbers 9 and 13 provide,
9. Whether HEB acquired money in good faith or
wrongfully is irrelevant in a claim for money had and received
because the action is not premised on wrongdoing. []
13. Whether money was obtained lawfully by the defendant
is likewise irrelevant; an action for money had and received is proper
when the money was obtained wrongfully from the rightful owner. []
H.E.B. argues that conclusions of law numbers 9 and 13 misstate the law of
money had and received because money-had-and-received claims ―do, indeed,
take into account issues of good faith/bad faith or lawful/unlawful conduct in
balancing the equities and determining whether money, in equity and good
conscience, belongs to another.‖ But the trial court also entered conclusion of
law number 26, which is unchallenged, and states that ―[t]hough wrongful
behavior by the defendant is not required to hold a defendant liable to restore
30
plaintiff‘s funds, the court may consider lack of innocence in balancing the
equities in a claim for money had and received.‖ The trial court also concluded in
conclusion of law number 10, which is unchallenged, that ―the sole inquiry for the
court is whether the defendant holds money that in equity and good conscience
belongs to the plaintiff.‖ These conclusions indicate that the trial court did not
disregard evidence of H.E.B.‘s ―good faith/bad faith or lawful/unlawful‖ conduct
when it balanced the equities and determined whether the $1,300,405.04, in
equity and good conscience, belonged to Ardinger. At worst, conclusions of law
numbers 9 and 13 are little more than attempts at referencing the well-
established rule that a money-had-and-received claim looks to the justice of the
case and inquires whether the defendant received money that rightfully belongs
to another instead of basing recovery on the defendant‘s wrongdoing. See
Amoco, 946 S.W.2d at 164. Consequently, as with conclusions of law numbers 4
and 31, to the extent that conclusions of law numbers 9 and 31 are considered
apart from the trial court‘s other conclusions of law, they are harmless error. See
Tex. R. App. P. 44.1(a); BMC Software, 83 S.W.3d at 794. We overrule this part
of H.E.B.‘s second issue.
3. Conclusion of Law Number 37
Conclusion of law number 37 states,
37. It does not matter that HEB allegedly spent the
$1.3M. []
31
H.E.B. argues that the trial court erred by entering conclusion of law
number 37 because H.E.B.‘s expenditure of the $1,300,405.04—and alleged
detrimental reliance on DSC‘s purported lawful payment—is not irrelevant when
addressing the equities of Ardinger‘s money-had-and-received claim. In Pickett
v. Republic National Bank of Dallas, the supreme court held that the defendant
was liable under a money-had-and-received claim even though it no longer held
the money. 619 S.W.2d 399, 400 (Tex.), cert. denied, 454 U.S. 1125 (1981).
We construe conclusion of law number 37 as an attempt to express this point of
law, not a conclusion that the trial court did not consider detrimental reliance, if
any, by H.E.B. when weighing the equities.27 We overrule this part of H.E.B.‘s
second issue.
4. Conclusion of Law Number 34
Conclusion of law number 34 provides,
34. An action for conversion can arise even when a
defendant acquires property lawfully. []
H.E.B. argues that we should disregard conclusion of law number 34 because it
relates to conversion, a claim rejected by the trial court and not relevant to any
other findings of fact or conclusions of law. The trial court erred by entering
conclusion of law number 34, but it was harmless because the conclusion does
27
A federal district court cited Pickett and reasoned, ―The fact that
[Appellee] no longer possesses the money is irrelevant.‖ Newington Ltd. v.
Forrester, No. 3:08-CV-0864-G ECF, 2008 WL 4908200, at *5 (N.D. Tex. Nov.
13, 2008) (mem. op.). This could be the source of the language used in
conclusion of law number 37.
32
not relate to Ardinger‘s recovery against H.E.B. See Tex. R. App. P. 44.1(a);
BMC Software, 83 S.W.3d at 794. We overrule the remainder of H.E.B.‘s second
issue.
G. Additional Challenged Findings of Fact
1. Finding of Fact Number 14
Finding of fact number 14 provides as follows:
14. In March 2004, Somoza completed his review of the
accounting provided to him regarding the $720,000 paid to Envoii
and HEB from the Somoza Trust, and raised several objections
regarding the propriety of payments made by HEB. One of the
disputed payments concerned a $15,000 fee paid to HEB‘s attorney,
Henry Simon, for introducing Somoza to HEB. The parties
negotiated further and agreed on March 8, 2004 at a meeting in Los
Angeles, California that the transaction would continue but that
Somoza would be given a $349,594.96 price reduction as full
satisfaction of Somoza‘s objections regarding the accounting for the
$720,000, and the parties agreed to a new Membership Interest
Purchase Agreement (the “Purchase Agreement”) between HEB and
Somoza’s company, Digitally Secured Communications, Inc.
(“DSC”). The Purchase Agreement called for HEB (and one of its
employees) to be paid between $5 million and $8 million for the
remaining 75% membership interest in Envoii, including a credit in
the amount of $850,000 for the amounts previously paid by the
Somoza Trust to HEB and $1,300,405.04 to be paid to HEB (the
―$1.3M‖) at the execution of the Purchase Agreement. The next
payment of $1,250,000 was due to HEB on August 2, 2004. DSC
failed to make that payment or any other payment due under the
Purchase Agreement.
[Emphasis added.] H.E.B. argues that the finding ―suggests‖ that it was involved
in the decision to substitute DSC for the Somoza Trust as the ―Buyer‖ but that the
evidence actually shows that Somoza substituted DSC as the ―Buyer‖ in the final
hours preceding the March 2004 purchase agreement‘s execution.
33
Notwithstanding that we fail to see the significance of H.E.B.‘s challenge to
finding of fact number 14, the record is undisputed that Somoza‘s substitution of
DSC as the purchaser was a ―last-minute change made by Somoza.‖ Neither
finding of fact number 14 nor the record contains any suggestion that H.E.B. had
anything to do with Somoza‘s decision to substitute DSC for the Somoza Trust.
Finding of fact number 14 merely sets out some of the circumstances
surrounding H.E.B. and DSC‘s entering into the March 2004 purchase
agreement. The evidence is legally and factually sufficient to support finding of
fact number 14. We overrule this part of H.E.B.‘s third issue.
2. Finding of Fact Number 15
Finding of fact number 15 provides as follows:
15. Less than 24 hours prior to the execution of the
Purchase Agreement, Somoza substituted a new company, DSC, as
the purchaser. At the time, Somoza represented to HEB that DSC
already held the 25% ownership interest which had been held by the
Somoza Trust. Somoza also represented to HEB that he was the
president and sole shareholder of DSC and that DSC would become
the manager of Envoii.
[Emphasis added.] H.E.B. argues that the evidence conclusively demonstrates
that the Somoza Trust, not DSC, owned the 25% membership interest in Envoii
Technologies that was purchased in October 2003. Although the rescission and
settlement agreement reflected that the Somoza Trust continued to own a 25%
ownership interest in Envoii Technologies, Somoza testified in his January 2006
deposition that DSC owned a 25% membership interest in Envoii Technologies in
34
March 2004 because the Somoza Trust had transferred that interest to DSC.28
Also, the March 2004 purchase agreement, which is between H.E.B. and DSC,
states that the ―Sellers and Buyer are the owners and holders of a total of 100%
of the Member‘s Interests . . . in Envoii Technologies.‖ We hold that the evidence
is legally and factually sufficient to support finding of fact number 15, and we
overrule this part of H.E.B.‘s third issue.
3. Finding of Fact Number 42
Finding of fact number 42 provides as follows:
42. The FBI Affidavit did not mention Haire, HEB,
Mr. Ardinger‘s $1.3M, or any transactions involving DSC, which
highlights the difficulty of discovering the full extent of Somoza‘s
fraud.
H.E.B. argues that the evidence conclusively demonstrates that ―the $10,000,000
(source of the $1.3M), as well as the other $15,000,000, for a total of all $25
million, was addressed in the FBI Affidavit and discussed with Ardinger‖ and,
therefore, ―[a]s a matter of common sense, Ardinger‘s discussion with the FBI
about the stolen $25 million highlights that Ardinger knew all $25 million had
been stolen, including the $1.3M.‖ The stolen $1,300,405.04 was part of the
funds that Ardinger invested with Somoza, but that does not make it a matter of
―common sense‖ that Ardinger knew that Somoza had taken the $1,300,405.04
and used it to pay H.E.B. The FBI affidavit does not mention H.E.B., Haire, DSC,
or the $1,300,405.04. We hold that the evidence is legally and factually sufficient
28
This portion of the deposition excerpt was admitted at trial.
35
to support finding of fact number 42, and we overrule this part of H.E.B.‘s third
issue.
4. Findings of Fact Numbers 44 and 47
H.E.B. challenges findings of fact numbers 44 and 47, which provide,
44. Henry Simon spoke to the FBI regarding Somoza‘s
arrest and knew, or assumed, that Somoza had funded the $1.3M
payment by Persistence Capital to HEB with funds stolen from
Mr. Ardinger.
47. Mr. Simon, at the time he sent the above-quoted e-mail
on June 19, 2006, had read the FBI Affidavit, making him certain
that Somoza had stolen from Mr. Ardinger the $1.3M paid by
Persistence Capital to HEB. Neither Mr. Simon, Haire or HEB ever
contacted or informed Mr. Ardinger that HEB had received funds
stolen from Mr. Ardinger.
H.E.B. argues that the evidence is legally and factually insufficient to support
these findings because they contradict finding of fact number 42. Specifically,
H.E.B. questions how the trial court could find that Simon knew after reading the
FBI affidavit that Somoza stole the $1,300,405.04 paid to H.E.B. while also
finding that Ardinger did not know about the stolen $1,300,405.04 after reading
the same FBI affidavit. Simon testified at one point that he did not know that
Somoza stole the $1,300,405.04 from Ardinger. However, the evidence also
shows that Simon learned that DSC‘s $1,300,405.04 payment (through Somoza)
under the March 2004 purchase agreement was made to H.E.B. using the
Persistence Capital escrow account; that by June 2006, Simon had read the FBI
affidavit and the May 2006 press release, ―all of which reflected Persistence
Capital as being the entity through which the monies had been stolen in
36
connection with the insurance pool fraud‖; and, significantly, that it was possible
that someone had told him in the summer of 2006 that the $1,300,405.04 used to
pay H.E.B. came from Ardinger. In regard to being told that the $1,300,405.04
came from Ardinger, Simon testified, ―I would think that somebody probably told
me that after the indictment in some way, but I don‘t know who.‖ As the
factfinder, the trial court was entitled to resolve the conflicts in Simon‘s testimony
in favor of Ardinger. See City of Keller, 168 S.W.3d at 820. We hold that the
evidence is legally and factually sufficient to support the trial court‘s findings of
fact numbers 44 and 47. We overrule this part of H.E.B.‘s third issue.
5. Finding of Fact Number 48
Finding of fact number 48 states,
48. Fearing a ―Mad dog attack‖ by defrauded investors,
HEB did not want to implicate the Persistence Capital Bankruptcy
because it would require notice to other creditors, including many
defrauded insurance pool creditors like Mr. Ardinger.
As with several other findings, H.E.B. challenges this finding not for what it
specifically states but for what it ―suggests.‖ H.E.B. argues that the finding
suggests that H.E.B. had a duty to notify DSC‘s creditors about the involuntary
proceeding involving DSC and H.E.B. even though they had no such duty under
law. The record demonstrates that the finding is actually meant to reference a
June 2006 email drafted by Simon in which he told Somoza‘s counsel that he
was ―fine‖ with rescinding the March 2004 purchase agreement but ―want[ed] to
get all the paperwork done ASAP before we run into a ‗Mad dog‘ attack from one
37
or more of the allegedly defrauded insurance pool creditors‖ involved in the
Persistence Capital bankruptcy. The finding is also supported by the following
exchange at trial between Simon and Ardinger‘s attorney in which Simon
acknowledged that he was concerned about defrauded insurance pool investors
attempting to recoup losses from whatever source they could, including from
Envoii Technologies‘ assets:
Q. And there‘s a reference of -- that economics are fine
and that you‘re okay with that. And then the next sentence says,
quote, ―I do, however, want to get all the paperwork done asap
before we run into a mad dog attack from one or more of the
allegedly defrauded insurance pool creditors,‖ end of quote. Do you
see that?
A. I do.
...
Q. Did you believe at that particular time that H.E.B.
needed to get a deal done very quickly because of the potential risk
associated with the defrauded insurance pool creditors looking to be
paid from whatever source they could find?
A. Yes, I thought they were the -- what I had been told or
what I called the defrauded insurance pool creditors were people
that had given Somoza money believing he was making investments
for them, which he did not, and they were -- they were very angry.
Conroy told me how angry they were, and it seemed very likely to
me that if they got wind of the transaction with Digitally Secured
Communications they would intervene.
Q. And they would do anything they could to make sure
that any consideration that was going to Mr. Somoza or under his
control would be directed to them, right?
A. I might say in the event -- they didn‘t do that, but that
was what my fear was, yes.
38
We overrule this part of H.E.B.‘s third issue.
6. Findings of Fact Numbers 16 and 22
As with finding of fact number 19, H.E.B. listed findings of fact numbers 16
and 22 in the title of its third issue challenging the legal and factual sufficiency of
the evidence to support the trial court‘s findings of fact, but it provided no
argument for those two specific grounds.29 Accordingly, to the extent that H.E.B.
challenges the legal and factual sufficiency of the evidence to support findings of
fact numbers 16 and 22, H.E.B. waived those arguments for appellate review.
See Tex. R. App. P. 38.1(i); Fredonia State Bank, 881 S.W.2d at 284. We
overrule this part of H.E.B.‘s third issue.
H. Abuse of Discretion
In what we construe to be its fifth issue, H.E.B. argues that even if we
overrule its challenges to the trial court‘s findings and conclusions, as we have
done, the trial court still abused its discretion by awarding judgment in favor of
29
Findings of fact numbers 16 and 22 state,
16. The $1.3M payment under the Purchase Agreement to
HEB was not made by DSC; instead, it was made by Persistence
Capital, LLC of which Somoza was a member and controlled.
22. On March 12, 2004, without written authorization from
or knowledge of Mr. Ardinger (Westland‘s President) or Westland‘s
board of directors, Somoza transferred $1.3M of Ardinger‘s
$10,000,000 from Persistence Capital‘s Bank of America escrow
account to HEB‘s account at Branch Banking & Trust Company as
partial payment under the Purchase Agreement.
39
Ardinger on his money-had-and-received claim.30 H.E.B. repeats many, if not all,
of the arguments that we have already addressed—and rejected—in reviewing
the trial court‘s findings and conclusions.
We have reviewed the entire record that the trial court considered in
weighing the equities involved in this case. There is evidence that supports
Ardinger‘s claim for money had and received and evidence that does not support
Ardinger‘s claim. But in balancing all of the equities of the case, there is one
piece of evidence that the trial court reasonably could have assigned
considerable weight in favor of Ardinger: H.E.B. rescinded the March 2004
purchase agreement but kept the $1,300,405.04 instead of returning it to DSC,
which unchallenged conclusion of law number 18 indicates was required of
H.E.B. An abuse of discretion does not occur when the trial court bases its
decisions on conflicting evidence and some evidence of substantive and
probative character supports its decision. Unifund CCR Partners v. Villa, 299
S.W.3d 92, 97 (Tex. 2009); Butnaru v. Ford Motor Co., 84 S.W.3d 198, 211 (Tex.
2002). That is precisely the case here. Accordingly, we hold that the trial court
neither acted without reference to any guiding rules or principles, nor acted
arbitrarily or unreasonably—and therefore did not abuse its discretion—by
awarding judgment for Ardinger on his claim for money had and received. See
30
In its third issue, H.E.B. challenges finding of fact number 82, which
states, ―In equity and good conscience, HEB should be required to return $1.3M
to Mr. Ardinger, the lawful owner of these funds.‖ H.E.B. directs us to this, its fifth
issue, for its argument under this ground.
40
Low, 221 S.W.3d at 614; Staats, 150 Tex. at 584, 243 S.W.2d at 687. We
overrule H.E.B.‘s fifth issue and the remainder of its third issue.
IV. COLLATERAL ATTACK
In what we construe to be H.E.B.‘s first issue, it argues that the trial court
erred by allowing Ardinger to collaterally attack the DSC bankruptcy court order
approving the rescission and settlement agreement between H.E.B. and DSC.
A collateral attack is an attempt to avoid the binding force of a judgment in
a proceeding not instituted for that purpose, but in order to obtain some specific
relief against which the judgment currently stands as a bar. Sweetwater Austin
Props., L.L.C. v. SOS Alliance, Inc., 299 S.W.3d 879, 885 (Tex. App.—Austin
2009, pet. denied). Collateral attacks on final judgments are generally disallowed
because it is the policy of the law to give finality to the judgments of the courts.
Browning v. Prostok, 165 S.W.3d 336, 345 (Tex. 2005).
Ardinger‘s claim against H.E.B. for money had and received is not an
impermissible collateral attack on the DSC bankruptcy court order because
Ardinger did not attempt to avoid or alter the binding force of the bankruptcy court
order. Instead, Ardinger sought to recover $1,300,405.04 from H.E.B. because
H.E.B. retained those funds for no consideration after executing the rescission
and settlement agreement. We overrule H.E.B.‘s first issue.
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V. DECLARATORY JUDGMENT
In his first issue, Ardinger argues that the trial court erred by not granting
his request for declaratory relief. Ardinger had sought a declaration that his
―rights and interests in the $1,300,405.04 at issue in this case are superior to the
rights of HEB[,] and HEB is without any legal right to retain such funds.‖
The supreme court recently clarified that the Uniform Declaratory
Judgment Act (UDJA) is ―preventative‖ in nature—it is generally intended as a
means of determining the parties‘ rights when a controversy has arisen but
before a wrong has been committed. Etan Indus., Inc. v. Lehmann, No. 10-0318,
2011 WL 6276308, at *4 (Tex. Dec. 16, 2011) (citing Cobb v. Harrington, 144
Tex. 360, 367, 190 S.W.2d 709, 713 (1945)); Redwine v. AAA Life Ins. Co., 852
S.W.2d 10, 17 (Tex. App.—Dallas 1993, no writ) (reasoning that UDJA is not
available to settle disputes already pending before a court); see also Tex. Civ.
Prac. & Rem. Code Ann. § 37.004 (West 2008).
Here, Ardinger argued throughout trial and in this appeal that he did not
suffer a legal injury at H.E.B.‘s hands until H.E.B. executed the rescission and
settlement agreement and retained the $1,300,405.04 for no consideration.
Having then suffered a legal injury, Ardinger sued H.E.B. in March 2008 to
recover $1,300,405.04 that Ardinger contended, in equity and good conscience,
belonged to him. Thus, at no point during this litigation has Ardinger sought
declaratory relief to determine his right to the $1,300,405.04 before a wrong had
been committed against him. Rather, he has essentially sought declaratory relief
42
to supplement his claim against H.E.B. for money had and received. 31 That is
not the type of relief that the UDJA is intended to provide. Accordingly, we hold
that the trial court did not err by denying Ardinger‘s claim for declaratory relief,
and we overrule Ardinger‘s first issue.
VI. ATTORNEYS’ FEES
A. Ardinger’s Attorneys’ Fees
In part of his second issue, Ardinger argues that the trial court abused its
discretion by not awarding him reasonable and necessary attorneys‘ fees
pursuant to his requested declaratory relief. Having determined that the trial
court did not err by denying Ardinger‘s request for declaratory relief, we hold that
the trial court did not abuse its discretion by declining to award Ardinger
attorneys‘ fees pursuant to his requested declaratory relief. See Tex. Civ. Prac.
& Rem. Code Ann. § 37.009 (West 2008) (providing that trial court may award
reasonable and necessary attorneys‘ fees ―as are equitable and just‖).
In the other part of his second issue, Ardinger argues that the trial court
abused its discretion by not awarding him attorneys‘ fees for prevailing on his
claim for money had and received. Texas law does not allow recovery of
attorneys‘ fees unless authorized by statute or contract. Tony Gullo Motors I,
L.P. v. Chapa, 212 S.W.3d 299, 310 (Tex. 2006). Ardinger does not argue that
31
Nor did Ardinger seek to recover under a contract. See MBM Fin. Corp.
v. Woodlands Operating Co., L.P., 292 S.W.3d 660, 667 (Tex. 2009) (reasoning
that UDJA provides relief in contract cases before or after there has been a
breach).
43
his claim for money had and received is either a statutory or a contract action.
The only support that Ardinger cites for this issue is Amoco. See 946 S.W.2d at
166. In that case involving a money-had-and-received claim, the appellate court
reasoned that ―[a]n award of attorney‘s fees in such a case may under some
circumstances be appropriate, but we find it to be within the discretion of the trial
court.‖ Id.
We do not have to decide today whether a party may recover attorneys‘
fees on a claim for money had and received because even assuming that a trial
court may award attorneys‘ fees on that claim, the trial court here nonetheless
did not abuse its discretion. In Amoco, the appellate court held that the trial court
did not abuse its direction by refusing to award attorneys‘ fees because ―the
overpayment to appellees was due to Amoco‘s own error rather than a breach or
any wrongdoing on the part of appellees.‖ Id. Similarly, along those equity lines,
in this case, the trial court could have reasonably considered several of the
equities that weighed in favor of H.E.B.—including that Ardinger had invested
$25,000,000 with Somoza by March 2004 and had concerns about his
investments around that same time but did not check Westland‘s bank records
for over a year—and declined to award Ardinger attorneys‘ fees. Accordingly,
assuming without deciding that the trial court could award attorneys‘ fees, we
hold that the trial court did not abuse its discretion by denying Ardinger‘s request
for attorneys‘ fees pursuant to his claim for money had and received. We
overrule the remainder of Ardinger‘s second issue.
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B. H.E.B.’s Attorneys’ Fees
In what we construe to be its sixth issue, H.E.B. argues that the trial court
abused its discretion by not awarding H.E.B. attorneys‘ fees because Ardinger
did not prevail on his claim for declaratory relief. The UDJA does not require an
award of attorneys‘ fees to the prevailing party; rather, the statue ―affords the trial
court a measure of discretion in deciding whether to award attorney fees or not.‖
Bocquet v. Herring, 972 S.W.2d 19, 20 (Tex. 1998). Considering that Ardinger
merely sought declaratory relief to supplement his claim against H.E.B. for
money had and received, the primary claim pursued by Ardinger, we hold that
the trial court could have reasonably determined that it would not have been
equitable and just to award H.E.B. reasonable and necessary attorneys‘ fees as
the prevailing party on the declaratory relief action. See Tex. Civ. Prac. & Rem.
Code Ann. § 37.009. We overrule H.E.B.‘s sixth issue.
VII. CONCLUSION
Having overruled all of H.E.B.‘s issues, we affirm the trial court‘s judgment
awarding Ardinger $1,300,405.04. Having overruled Ardinger‘s cross-issues, we
affirm the trial court‘s judgment declining to award Ardinger declaratory relief and
attorneys‘ fees.
BILL MEIER
JUSTICE
PANEL: WALKER, MEIER, and GABRIEL, JJ.
DELIVERED: March 22, 2012
45