Opinion issued June 28, 2018




                                    In The

                             Court of Appeals
                                   For The

                        First District of Texas
                           ————————————
                            NO. 01-16-00897-CV
                          ———————————
   APMD HOLDINGS, INC., APMD, INC., CJT FINANCIAL INC., CJT
     MINING, INC., GREGORY MAYFIELD AND NEWELL FRED
                     ANDERSON, Appellants
                                      V.
  PRAESIDIUM MEDICAL PROFESSIONAL LIABILITY INSURANCE
  COMPANY AND PRAESIDIUM ALLIANCE GROUP, LLC, Appellees


                  On Appeal from the 113th District Court
                           Harris County, Texas
                     Trial Court Case No. 2012-21802


                                OPINION

     In this case, appellees, Praesidium Medical Professional Liability Insurance

Company (“PMPLIC” or “the insurance company”) and Praesidium Alliance Group,
LLC (collectively, “Praesidium”), sought to establish a medical malpractice liability

insurance company incorporated in Delaware. Praesidium signed a “Memorandum

of Agreement” with appellant APMD Holdings, Inc., which required, among other

things, that APMD Holdings contribute 10 million shares of convertible preferred

stock of Anderson Mining Corporation to serve as capital surplus for the insurance

company.     After the Delaware Department of Insurance (“DDOI” or “the

Department”) failed to approve the licensure of the insurance company, Praesidium

sued APMD Holdings, Inc., APMD, Inc., CJT Financial, Inc., CJT Mining, Inc.,

Gregory Mayfield, and Newell Fred Anderson (collectively, “APMD”) for breach

of contract, fraud, and breach of fiduciary duty. After a bench trial, the trial court

awarded $4,081,710 in damages to Praesidium, along with $342,000 in attorney’s

fees, post-judgment interest, and costs.

      In six issues, APMD contends that (1) the trial court abused its discretion in

granting final judgment against the defendants and finding that the Memorandum of

Agreement was a valid and enforceable contract; (2) the Memorandum of

Agreement was not breached by any party; (3) Praesidium Alliance Group did not

suffer any damages; (4) the trial court abused its discretion in awarding legal

damages; (5) the evidence was insufficient to establish fraud; and (6) the evidence

was insufficient to establish breach of fiduciary duty.

      We affirm.


                                           2
                                     Background

      Gary Schneidmiller, the chief executive officer of Praesidium Alliance Group

(“Praesidium Alliance”), has worked in the insurance industry since the early 1970s,

and he has extensive experience with medical malpractice insurance and insurance

in the health-care context. In the early 2000s, he brought together experts from the

medical, legal, and actuarial fields to create the Praesidium Guild, which had the

goal of using a particular underwriting model to make medical malpractice insurance

policies and premiums more equitable. Praesidium Alliance, an Ohio limited

liability company, was formed out of the Praesidium Guild, and its ultimate goal was

eventually to create an insurance company—PMPLIC—that would use

Schneidmiller’s underwriting model.

      In preparation for creating PMPLIC, Schneidmiller consulted with numerous

professionals in different fields, including legal experts, actuaries, incorporators, and

experts concerning the Delaware insurance statutes.              The only thing that

Schneidmiller was missing was a source for the insurance company’s capital surplus,

a “long-term reservoir,” which was required by the state to assure that the company’s

policyholders would be protected.

      Around 2005 or 2006, Schneidmiller was introduced to Gregory Mayfield,

one of the appellants in this case, who had business and financial experience.

Mayfield became friends with both Schneidmiller and his son, Eric Schneidmiller,


                                           3
and Mayfield worked toward securing financing for the insurance company’s capital

surplus. Mayfield became the chief executive officer of APMD Holdings, a mining

company that, along with APMD, Inc., owned mining claims, primarily for gold and

silver, on land in Nevada. Fred Anderson was the president of these companies. In

August 2007, Mayfield notified the Schneidmillers that he had discovered a

mechanism that could work for supplying the capital surplus: using convertible

preferred shares of a corporation that could be redeemed by the corporation for cash

if the insurance company needed to access its capital surplus. In a letter dated

August 13, 2007, Mayfield told Eric Schneidmiller, Praesidium Alliance’s chief

operating officer, that because preferred stock is considered liquid securities, this

financing scenario should be acceptable, “but we will need to have the approval of

the State Insurance Commission before moving forward with this transaction.”

      Two weeks later, on August 27, 2007, Mayfield sent the following letter to

Eric Schneidmiller:

      This shall confirm our oral agreement between us and Praesidium
      Alliance Group, LLC. . . .
      It is our intent to merge the respective resources with Praesidium
      Alliance Group, LLC to result in Praesidium Medical Professional
      Liability Insurance Company or such names as secures regulatory
      approval, which will be a Public Company with initial ownership at
      fifty-one percent (51%) PAG, LLC and forty-nine (49%) us. We shall
      provide Praesidium Medical Professional Liability Insurance Company
      with ten million (10,000,000) shares of Convertible Preferred Stock at
      a par value of five US dollars ($5.00) from Anderson Mining
      Corporation [APMD Holdings] as designated “Capital Surplus” of

                                         4
      Praesidium Medical Professional Liability Insurance Company. The
      net assets (assets in excess of Liabilities) of Anderson Mining Corp.
      exceed fifty million US dollars ($50,000,000) by many multiples and
      we shall entertain any reasonable assurances required by the
      responsible regulatory agency charged with supervision of Praesidium
      Medical Professional Liability Insurance Company, on or before the
      registration.
      If all parties, including the regulatory agencies are in agreement, we
      shall commence the process of doing the formalities of the Stock
      issuance in the first week of October 2007. Our aim is to match
      Praesidium Alliance Group, LLC’s target of commencing operations of
      Praesidium Medical Professional Liability Insurance Company this
      year.

      Gary Schneidmiller testified that, upon being presented with Mayfield’s

August 2007 proposal, he researched APMD’s business plan, the geologists who had

certified the mining deposits, APMD’s support staff, which included a prominent

Houston law firm, and APMD’s financial statements, which showed “2.2 billion on

their books” and indicated that this amount would increase over time because APMD

Holdings was still acquiring mining rights.      Schneidmiller and his team at

Praesidium Alliance were “satisfied that APMD was legitimate and that this was a

legitimate offer.” Schneidmiller had discussions with Anderson, in which Anderson

told him about APMD’s plans for a “very large acquisition” in the near future, and

Praesidium Alliance ultimately decided to move forward with Mayfield’s proposal.

      On December 21, 2007, Schneidmiller, on behalf of Praesidium Alliance, and

Mayfield, on behalf of APMD Holdings, signed a “Memorandum of Agreement”

(“the Agreement”). The Agreement stated:

                                        5
      Whereas, the ALLIANCE and APMD on August 27, 2007 agreed to
      merge their respective resources (as outlined in paragraph 2.A) to result
      in Praesidium Medical Professional Liability Insurance Company
      (hereinafter “CORPORATION”); and,
      Whereas, The CORPORATION is being prepared for incorporation in
      the State of Delaware as a stock company (C-Corporation); and,
      Whereas, the ALLIANCE and APMD wish to reduce to writing therein
      various oral agreements and written assurances to each other;
      NOW, THEREFORE, the parties do mutually agree to the following
      provisions as the sole shareholders, namely ALLIANCE and APMD of
      the CORPORATION.

The parties agreed that PMPLIC’s certificate of incorporation would authorize

PMPLIC to issue twenty-five million shares of common stock. PMPLIC would

issue 12,240,000 shares to Praesidium Alliance for its contribution of “Intellectual

Properties” and 11,760,000 shares to APMD Holdings for its contribution of “10

Million shares of convertible Preferred stock at a par value of $5 of Anderson Mining

Corporation.” The agreement stated that APMD Holdings’ “contribution is to serve

as ‘designated Capital Surplus’ (herein meaning not to be used or encumbered by

the CORPORATION for operational expenses, and additionally as defined and

interpreted by the Delaware Department of Insurance)” and that APMD Holding

could, at any time, redeem all or part of the shares at $5.00 per share.

      The Memorandum of Agreement also specified that Praesidium Alliance

would elect three members to serve on PMPLIC’s Board of Directors—Gary

Schneidmiller, Eric Schneidmiller, and Dr. Robert Felter, who would serve as the


                                          6
“resident director” in accordance with Delaware Department of Insurance

requirements—and APMD Holdings would elect two members to serve on the

Board—Mayfield and Anderson. The Agreement also included provisions stating

that Praesidium Alliance “agrees and acknowledges that a condition of the

contribution by APMD to the ‘designated Capital Surplus’ is to eventually result in

the CORPORATION qualifying to be a public company and supports this as a

strategic objective of the CORPORATION” and that the Memorandum of

Agreement “is the full and complete agreement of the ALLIANCE and APMD as

shareholders of the CORPORATION and all other matter[s] not expressly stated

herein shall not be construed to be subject to this memorandum of agreement.”

      PMPLIC was incorporated in Delaware on December 27, 2007.                 The

Certificate of Incorporation provided that PMPLIC would have authority to issue

twenty-five million shares of stock.     The five individuals mentioned in the

Memorandum of Agreement—Gary and Eric Schneidmiller, Dr. Felter, Mayfield,

and Anderson—were all elected to PMPLIC’s Board of Directors. By unanimous

consent, PMPLIC’s Board of Directors approved the issuance of 12,240,000 shares

of stock to Praesidium Alliance in exchange for “Intellectual properties and ‘Trade

Secret’ knowhow, including insuring systems and processes,” $100,000 cash, and

“such future cash as may be required by the Delaware Department of Insurance up

to $1,000,000.” The Board also approved the issuance of 11,760,000 shares of stock


                                         7
to APMD Holdings in exchange for 10 million shares of convertible preferred stock,

$5.00 par value per share of Anderson Mining Corporation “as designated Capital

Surplus as more fully described in the ‘Memorandum Agreement of the

Shareholders’ effective December 21, 2007.” On December 28, 2007, APMD

Holdings issued a stock certificate reflecting that it had issued ten million shares of

convertible preferred stock, $5.00 par value, to PMPLIC. PMPLIC, in turn, issued

a stock certificate on December 31, 2007, reflecting that it had issued 11,760,000

shares to APMD Holdings.1

      Gary Schneidmiller testified that PMPLIC could not have obtained a license

to sell insurance without having capital surplus in place and that, as of the end of

2007, he believed APMD Holdings had issued its stock certificate in good faith and

that “those 10 million shares had a $5 par value,” thus establishing a $50,000,000

capital surplus. Having incorporated PMPLIC, Praesidium moved forward with its

attempt to obtain a license for PMPLIC with the Department, and it made a

submission to the Department in February 2008. As part of its submission, PMPLIC

had to demonstrate that it had a sufficient capital surplus, and it notified the

Department that its ten million convertible shares in Anderson Mining Corporation,




1
      Gary Schneidmiller testified that, per an e-mail conversation with Mayfield,
      PMPLIC did not deliver the stock certificate to APMD Holdings, but instead kept it
      for “safekeeping.”
                                           8
worth $5.00 per share upon redemption by the company, would serve as its capital

surplus.

      During the licensing process, the Department contacted Praesidium and

requested audited financial statements from APMD Holdings. Praesidium passed

this request on to APMD Holdings. Schneidmiller testified that the Department

officials “wished to have confirmation directly from APMD that [it] had the assets

and that the 50 million [capital surplus] was established.” He also stated that the

Department made inquiries concerning APMD’s assets, its ability to convert those

assets into cash, and how much time that conversion would take.

      In April 2008, Mayfield wrote the following letter to an official at the

Department:

      In response to your request of April 15, 2008, to Praesidium Medical
      Professional Liability Insurance Company (PMPLIC), this letter is to
      assure you and the Delaware Department of Insurance, that APMD
      Holdings, Inc. (APMD), is committed to honoring the cash conversion
      provision of the “Convertible Preferred Shares” held by PMPLIC.
      APMD has more than sufficient assets to convert the shares of
      “Convertible Preferred Stock” of the Corporation, an amount in cash
      equal to the Redemption Price. The ten million “Convertible Preferred
      Stock” owned by PMPLIC shall at all times have a par value of Five
      U.S. Dollars ($5.00) per share, for a total of Fifty Million U.S. Dollars
      ($50,000,000). This conversion into cash shall occur within a
      maximum of sixty (60) days from our receipt for Redemption by
      PMPLIC.

Despite Mayfield’s assurances, the Department still required audited financial

statements, and Gary Schneidmiller continued to request these statements, only to


                                         9
be told that APMD Holdings was in the process of finishing the statements. APMD

Holdings never presented audited financial statements to Praesidium or to the

Department.2 Schneidmiller testified that without an independent verification of

APMD Holdings’ financial viability, the Department would not approve PMPLIC’s

application for licensure.     Ultimately, PMPLIC withdrew its application for

licensure, and it never obtained a license to operate as an insurance company.

      In March 2009, Schneidmiller, on behalf of PMPLIC, wrote a letter to

Anderson, informing him that, upon the Department’s request, PMPLIC was

exercising its option to redeem all ten million shares of its convertible preferred stock

for a total cash redemption value of $50,000,000. In response, PMPLIC received a

letter from APMD Holdings’ attorney denying Schneidmiller’s redemption request

because, in its view, PMPLIC was “not the holder of any shares of Class C

Convertible Preferred Stock.” Counsel stated:

      A.     No consideration was ever given for the Class C Convertible
      Preferred Stock. It does not appear that there was a separate agreement
      governing the exchange of common stock in [PMPLIC] for preferred
      stock in APMD. However, based on the resolutions, it is clear that the
      intention was that APMD was to receive 11,760,000 shares of common
      stock of [PMPLIC] which was never received.
      B.    The Class C Convertible Preferred Stock did not exist at the time
      of the exchange agreement, if any. If there was an agreement to
      exchange common stock for preferred stock, and even if APMD had
      received valid consideration, the agreement to exchange would have

2
      Mayfield testified that, during his tenure as the CEO of APMD Holdings, he never
      saw any audited financial statements for the company.
                                           10
      existed on or about December 2007. The preferred stock was not in
      existence until the Amendment was filed on April 2, 2008.3 Under
      Delaware corporate law, the preferred stock cannot be issued until it
      existed, and at best you would have an agreement to enter into an
      agreement.
      C.     APMD does not have the ability to honor a redemption under the
      terms of the preferred stock or under Delaware corporate law. Even if
      you were the valid holder of the preferred stock, under the terms of the
      preferred stock as set forth in the Amendment, APMD does not have
      the funds legally available for a redemption.

APMD Holdings thus “cancel[ed] any and all agreements between [PMPLIC] and

APMD,” Anderson and Mayfield resigned from all officer and director positions

with PMPLIC, and APMD cancelled the stock certificate issued to PMPLIC.

      Four months later, in September 2009, Anderson sent a letter to Gary

Schneidmiller stating,

      Please accept this letter as our acknowledgement that we are in
      agreement that in fact the transaction between our two companies did
      take place. However, that transaction was disrupted by intervening
      events. We would like to work [on] reconstructing our relationship so
      we can move forward for the benefit of both our companies.
      We look forward to finalizing this transaction in a manner, which is
      positive for all parties.
3
      On April 2, 2008, APMD Holdings executed a corporate resolution amending its
      certificate of incorporation as it related to the classes of shares that it had authorized.
      This resolution authorized 10,000,000 shares of Class C Convertible Preferred
      Stock at $5.00 per share par value and included detailed information concerning
      when and how APMD Holdings could redeem these shares. The resolution also
      authorized 40,000,000 shares of Class D “Preferred Stock” with no par value. Gary
      Schneidmiller testified that APMD Holdings originally issued shares to PMPLIC in
      December 2007, but in April 2008, APMD Holdings “broke [its] preferred class into
      two sections so [it] wouldn’t be stuck with a convertible preferred.” He stated,
      “[T]he shares that PMPLIC owns stayed in that class which [APMD] call[s] Class
      C.”
                                              11
Schneidmiller testified that Praesidium continued working with APMD to try to

establish the capital surplus for PMPLIC, but the parties were unable to do so.

Praesidium sought other investors and sources of revenue for the capital surplus.

      In 2010, two of Praesidium Alliance’s minority investors sued Praesidium

Alliance, the Schneidmillers, and three other defendants for fraud arising out of the

failed APMD deal. The case proceeded to arbitration, and in 2012, an arbitration

panel ultimately awarded the plaintiffs $2,000,000 in damages plus interest and costs

against Praesidium Alliance, the Schneidmillers, and the other defendants. As of the

date of the trial in the underlying case, in July 2016, Praesidium Alliance and the

Schneidmillers owed $3,181,710 on this arbitration award. Schneidmiller testified

that Praesidium Alliance paid around $300,000 in attorney’s fees and that he spent

around $600,000 in out-of-pocket expenses to start up PMPLIC. He also testified

that he had not been able to work in the insurance industry in the four years since

the arbitration award had been entered and that his average salary had been around

$200,000 per year, for a total of around $800,000 in lost wages.

      Praesidium sued APMD for breach of contract, breach of fiduciary duty, and

fraud. Through a reverse merger occurring after the events that formed the basis of

Praesidium’s lawsuit, APMD Holdings and APMD, Inc. became subsidiaries of CJT




                                         12
Financial, Inc. and CJT Mining, Inc.4 After this merger occurred, an independent

audit of CJT Financial and its subsidiary, APMD Holdings, was conducted and

demonstrated that from APMD Holdings’ inception in 2006 through the end of 2012,

the company had never made any money.

      After a bench trial, the trial court awarded $4,081,710 in damages, $342,200

in attorney’s fees, post-judgment interest, and costs to Praesidium.           The final

judgment did not state the causes of action on which the trial court found in favor of

Praesidium, instead only stating that Praesidium was “awarded judgment in the

amount of $4,081,710.00 against Defendants [APMD].” Despite both parties filing

proposed findings of fact and conclusions of law, the trial court did not enter findings

and conclusions. APMD filed a motion for new trial, which was overruled by

operation of law. This appeal followed.

                                 Standard of Review

      In a bench trial in which the trial court does not file findings of fact or

conclusions of law, we imply all findings of fact necessary to support the judgment.5


4
      All four entities, along with Mayfield and Anderson, were defendants in the trial
      court and are appellants in this appeal.
5
      Praesidium filed proposed findings of fact and conclusions of law before trial, and
      APMD filed proposed findings and conclusions with its written brief submitted after
      the close of evidence. The trial court did not file findings of fact and conclusions
      of law. APMD did not, however, file a notice of past due findings of fact and
      conclusions of law. See TEX. R. CIV. P. 297. APMD’s failure to file a notice of past
      due findings and conclusions waives any appellate complaint concerning the trial
      court’s failure to file such findings and conclusions. See Guillory v. Boykins, 442
                                           13
Puntarelli v. Peterson, 405 S.W.3d 131, 134 (Tex. App.—Houston [1st Dist.] 2013,

no pet.) (citing BMC Software, Belg., N.V. v. Marchand, 83 S.W.3d 789, 795 (Tex.

2002)); see Wood v. Kennedy, 473 S.W.3d 329, 334 (Tex. App.—Houston [14th

Dist.] 2014, no pet.). These implied findings of fact have the same weight as a jury’s

verdict. Puntarelli, 473 S.W.3d at 134. When the appellate record includes the

reporter’s record and the clerk’s record, implied findings are not conclusive and may

be challenged for legal and factual sufficiency. Wood, 473 S.W.3d at 334. We

review the sufficiency of the evidence supporting the findings by applying the same

standards that we use in reviewing the legal or factual sufficiency of the evidence

supporting jury verdicts. Puntarelli, 473 S.W.3d at 134 (citing Catalina v. Blasdel,

881 S.W.2d 295, 297 (Tex. 1994)).

      In reviewing the legal sufficiency of the evidence, we consider whether the

evidence presented at trial would enable reasonable and fair-minded people to reach

the verdict under review. Id. (quoting City of Keller v. Wilson, 168 S.W.3d 802, 827

(Tex. 2005)). We credit favorable evidence if a reasonable fact-finder could and

disregard contrary evidence unless a reasonable fact-finder could not. Id. We

consider the evidence in the light most favorable to the challenged finding, indulging

every reasonable inference that supports that finding, but we may not disregard


      S.W.3d 682, 694 (Tex. App.—Houston [1st Dist.] 2014, no pet.); Am. Realty Trust,
      Inc. v. JDN Real Estate-McKinney, L.P., 74 S.W.3d 527, 530 (Tex. App.—Dallas
      2002, pet. denied).
                                         14
evidence that allows only one inference. Id. at 135. If the evidence falls within the

zone of reasonable disagreement, we may not substitute our judgment for that of the

fact-finder. Id. at 134. The fact-finder is the sole judge of the credibility of the

witnesses and the weight to give to their testimony. Id. at 135; see Zenner v. Lone

Star Striping & Paving, L.L.C., 371 S.W.3d 311, 315 (Tex. App.—Houston [1st

Dist.] 2012, pet. denied).

      In reviewing the factual sufficiency of the evidence, we consider all of the

evidence supporting and contradicting the finding. Puntarelli, 405 S.W.3d at 135

(citing Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989)). We

will set aside the verdict only if the finding is so contrary to the overwhelming weight

of the evidence as to be clearly wrong and unjust. Id. (citing Cain v. Bain, 709

S.W.2d 175, 176 (Tex. 1986)).

                                 Breach of Contract

      In its first issue, APMD contends that the trial court abused its discretion in

granting final judgment against it because the Memorandum of Agreement was not

a valid and enforceable contract. In its second issue, APMD contends that, if the

Memorandum of Agreement was a valid contract, it was not breached. In its third

and fourth issues, APMD argued that Praesidium Alliance did not suffer any

damages as a result of a breach of the Agreement and that the trial court abused its

discretion in awarding legal damages of $4,032,000.


                                          15
A.    Contract Formation

      The essential elements of a breach of contract claim are (1) the existence of a

valid contract; (2) performance or tendered performance by the plaintiff; (3) breach

of the contract by the defendant; and (4) damages sustained as a result of the breach.

B & W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.—Houston [1st Dist.]

2009, pet. denied). A breach of the contract occurs when a party fails or refuses to

do something it has promised to do. Id. (quoting Mays v. Pierce, 203 S.W.3d 564,

575 (Tex. App.—Houston [14th Dist.] 2006, pet. denied)); see Garcia v. Sasson, 516

S.W.3d 585, 592 (Tex. App.—Houston [1st Dist.] 2017, no pet.).

      Parties form a binding contract when the following elements are present:

(1) an offer, (2) an acceptance in strict compliance with the terms of the offer,

(3) meeting of the minds, (4) each party’s consent to the terms, and (5) execution

and delivery of the contract with the intent that it be mutual and binding. Winchek

v. Am. Express Travel Related Servs. Co., 232 S.W.3d 197, 202 (Tex. App.—

Houston [1st Dist.] 2007, no pet.). The determination of meeting of the minds is

based on the objective standard of what the parties said and did and not on their

subjective state of mind. Baroid Equip., Inc. v. Odeco Drilling, Inc., 184 S.W.3d 1,

17 (Tex. App.—Houston [1st Dist.] 2005, pet. denied).

      For the contract to be enforceable, the terms of the contract must be

sufficiently certain to enable a court to determine the rights and responsibilities of


                                         16
the parties. Winchek, 232 S.W.3d at 202 (citing T.O. Stanley Boot Co. v. Bank of El

Paso, 847 S.W.2d 218, 221 (Tex. 1992)); see Fort Worth Indep. Sch. Dist. v. City of

Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000) (“In general, a contract is legally

binding only if its terms are sufficiently definite to enable a court to understand the

parties’ obligations.”). The Texas Supreme Court has stated:

      [A]n agreement to make a future contract is enforceable only if it is
      “specific as to all essential terms, and no terms of the proposed
      agreement may be left to future negotiations.” It is well settled law that
      when an agreement leaves material matters open for future adjustment
      and agreement that never occur, it is not binding upon the parties and
      merely constitutes an agreement to agree.

Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846; Gen. Metal Fabricating Corp. v.

Stergiou, 438 S.W.3d 737, 744 (Tex. App.—Houston [1st Dist.] 2014, no pet.).

Essential terms are “those terms that the parties ‘would reasonably regard as vitally

important elements of their bargain.’”         Stergiou, 438 S.W.3d at 744 (quoting

Potcinske v. McDonald Prop. Invs., Ltd., 245 S.W.3d 526, 531 (Tex. App.—Houston

[1st Dist.] 2007, no pet.)). The material terms of a contract are determined on a case-

by-case basis. McCalla v. Baker’s Campground, Inc., 416 S.W.3d 416, 418 (Tex.

2013) (per curiam). Texas courts favor validating contracts rather than voiding

them, but we may not create a contract where none exists, and we generally may not

add, alter, or eliminate essential terms. Stergiou, 438 S.W.3d at 744–45.

      In this case, Gary Schneidmiller, on behalf of Praesidium Alliance, and Greg

Mayfield, on behalf of APMD Holdings, signed a “Memorandum of Agreement” on
                                          17
December 21, 2007. The Agreement recited that, on August 27, 2007, the parties

had agreed to “merge their respective resources” to create PMPLIC, which was

“being prepared for incorporation in the State of Delaware as a stock company (C-

Corporation),” and that the parties “wish[ed] to reduce to writing therein various oral

agreements and written assurances to each other.” The Memorandum of Agreement

provided that PMPLIC would be governed by by-laws that would be filed at the time

of incorporation and that could be modified by a majority vote of the Board of

Directors or the shareholders. The Agreement provided that PMPLIC’s certificate

of incorporation shall authorize the company to issue 25,000,000 shares of one class

of common stock, in accordance with Delaware regulations. The Agreement set out

the required consideration by both parties: Praesidium Alliance shall contribute

“Intellectual Properties” and would receive 12,240,000 shares of stock in PMPLIC,

for 51% ownership of the insurance company, and APMD Holdings shall contribute

“10 Million shares of convertible Preferred stock at a par value of $5 of Anderson

Mining Corporation [APMD Holdings]” in exchange for 11,760,000 shares of stock

in PMPLIC, for 49% ownership of the company.

      The Agreement further provided that APMD Holdings’ contribution would

“serve as ‘designated Capital Surplus’ (herein meaning not to be used or encumbered

by [PMPLIC] for operational expenses, and additionally as defined and interpreted

by the Delaware Department of Insurance).” APMD Holdings could “at any time


                                          18
redeem all or part of the preferred shares” that it had contributed at a value of $5.00

per share. The Agreement also specified that PMPLIC’s Board of Directors would

include five members, three selected by Praesidium Alliance and two selected by

APMD Holdings. The Agreement then named Praesidium Alliance’s selections—

Gary Schneidmiller, Eric Schneidmiller, and Dr. Robert Felter, who would satisfy

the Delaware Department of Insurance’s “resident director” requirement—and

APMD Holdings’ selections—Greg Mayfield and Fred Anderson. The Agreement

also contained a provision in which Praesidium Alliance “agrees and acknowledges

that a condition of the contribution by APMD to the ‘designated Capital Surplus’ is

to eventually result in [PMPLIC] qualifying to be a public company and supports

this as a strategic objective of [PMPLIC].” Finally, the Agreement included a

provision stating that it was “the full and complete agreement of [Praesidium

Alliance] and APMD as shareholders of [PMPLIC] and all other matter[s] not

expressly stated herein shall not be construed to be subject to this memorandum of

agreement.”

      The Memorandum of Agreement thus set out the goal of the agreement: the

creation and incorporation of PMPLIC, which would eventually become a public

insurance company. It set out the corporate structure of PMPLIC, including who

would serve on the Board of Directors. It set out the consideration required from

both Praesidium Alliance and APMD Holdings and what each party would receive


                                          19
in exchange for that consideration. It stated that APMD Holdings’ contribution of

ten million shares of convertible preferred stock of Anderson Mining Corporation

was to be used as PMPLIC’s capital surplus, and not to cover its operational

expenses, as required by the Delaware Department of Insurance, and the Agreement

provided that each share had a redemption value of $5.00 per share. The Agreement

does not contemplate the execution of any further documents or agreements between

the parties in the future. No terms in the Agreement were left open for future

negotiation. See Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846 (stating that if

agreement leaves material matters open for future negotiation which never occurs,

agreement is not binding on parties and is merely “agreement to agree”).

      On appeal APMD argues that the August 13, 2007 letter from Mayfield to

Schneidmiller, in which Mayfield cautioned that “we will need to have the approval

of the State Insurance Commission before moving forward with this transaction,”

demonstrates that the parties had a “clear intent” that only the Department’s approval

“could allow the transaction to move forward.” APMD also argues, “[I]t is more

reasonable that the parties intended to execute a more comprehensive contract in the

future after the licensing application was approved.”         The Memorandum of

Agreement itself, however, does not bear out this reading. It does not state that the

Department’s approval of PMPLIC’s submission for licensure was a condition

precedent to forming a binding agreement between Praesidium Alliance and APMD


                                         20
Holdings. Moreover, the Agreement provided that APMD’s consideration—the ten

million shares of convertible preferred stock of Anderson Mining Corporation—was

to serve as PMPLIC’s designated capital surplus, a requirement in order to transact

business as an insurance company in Delaware. See, e.g., DEL. CODE. ANN. tit.18,

§ 511 (West 2018) (setting out capital funds and surplus requirements for companies

involved in selling different types of insurance). It follows that APMD Holdings

would have to make its contribution to PMPLIC before PMPLIC could seek

licensure from the Department. Waiting until after the Department had approved

PMPLIC’s license to execute a “more comprehensive” contract between the parties

would serve no purpose. See Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d

310, 311–12 (Tex. 2005) (stating that, in construing contracts, we ascertain and give

effect to parties’ intentions as expressed in document, we consider entire writing,

and we attempt to give effect to all provisions by analyzing provisions with reference

to entire agreement).

      APMD also argues that the Memorandum of Agreement does not address the

material matter of how redemption of the APMD shares would occur, and because

the Agreement does not address this, the Agreement is therefore not an enforceable

contract. The Memorandum of Agreement does not specify the procedures that

PMPLIC would need to follow in order to redeem its ten million shares of

convertible preferred stock, nor does it specify the procedures that APMD would


                                         21
need to follow once it received notice that PMPLIC wished to redeem its shares.

However, the Memorandum of Agreement addressed redemption by providing that

APMD Holdings could “at any time redeem all or part of the preferred shares of

[APMD Holdings] at $5.00 per share.” This provision was material and essential to

the agreement between the parties, as it established the value of each share of APMD

Holdings that PMPLIC would hold as its capital surplus, should PMPLIC need to

convert those shares to cash. See Stergiou, 438 S.W.3d at 744 (defining “essential

term” as “those terms that the parties ‘would reasonably regard as vitally important

elements of their bargain’”). Provisions regarding the precise steps that the parties

would need to take to effect a redemption of the shares were not essential to the

parties’ bargain.

      APMD further argues that the parties understood that redemption of

PMPLIC’s shares of APMD would occur only if five “preconditions” were met:

(1) PMPLIC obtained an insurance license; (2) PMPLIC sold insurance policies;

(3) PMPLIC paid claims; (4) PMPLIC depleted its cash surplus; and (5) the

Department required PMPLIC to use its capital surplus to pay claims. APMD argues

that because PMPLIC never obtained a license, issued policies, or paid claims to

insureds, Praesidium and PMPLIC “never delivered on their obligations” and they

failed to provide consideration, leading to the conclusion that no contract between

the parties existed.


                                         22
      As we have stated, the Memorandum of Agreement set out the consideration

that Praesidium and PMPLIC would provide: Praesidium was to contribute the

intellectual properties that would form the basis of PMPLIC’s business model, and

PMPLIC would issue 11,760,000 shares—for a 47% ownership interest in

PMPLIC—to APMD upon APMD’s issuance of 10,000,000 shares of convertible

preferred stock. Gary Schneidmiller testified that both of these things occurred.

      With regard to the five “preconditions” identified by APMD, Brian Collins,6

a defendant in the trial court representing himself pro se, questioned Schneidmiller

about an email he had sent to Fred Anderson on August 13, 2008, after the

Department had requested audited financial statements from APMD but before the

Department demanded conversion of PMPLIC’s shares of APMD to cash as a

requirement for licensing PMPLIC. Schneidmiller stated in this email, “The APMD

shares owned by Praesidium Insurance can only be redeemed if and when the

domicile’s regulator [i.e., the Department] in effect takes over the company and calls

in additional cash resources to pay for claims.”           Collins then questioned

Schneidmiller about the “preconditions” that must occur before APMD’s shares



6
      In addition to suing the APMD entities, Anderson, and Mayfield, Praesidium also
      sued Collins, an investor in APMD Holdings who assisted Anderson and Mayfield
      in attempting to reach a deal with Praesidium after Praesidium demanded
      redemption of its shares in APMD Holdings. In its final judgment, the trial court
      ordered that Praesidium take nothing on its claims against Collins. Collins is,
      therefore, not a party to this appeal.
                                          23
could be redeemed and whether they occurred in this case. Schneidmiller testified

that, in the usual case in which an entity has become licensed to sell insurance,

Collins was correct that those “preconditions” are the five steps that must occur

before the insurance company can be required to tap into its capital surplus. He

testified that these conditions were not relevant to this particular case because

PMPLIC never obtained a license to sell insurance, due to APMD’s failure to

provide audited financial statements to the Department or to otherwise assure the

Department that it had the assets to serve as the capital surplus. He also testified that

the Department had the right to demand that APMD redeem its shares for cash to

ensure that the capital surplus was in place prior to issuing a license to PMPLIC, and

the Department made such a demand in this case after APMD did not provide

documentation of its ability to redeem the shares.

      Under these circumstances, failure to comply with the five “preconditions”

identified by APMD does not equate to a failure of consideration or a failure to

“deliver on [Praesidium’s] obligations.” The Memorandum of Agreement set out

the consideration owed by each party. Praesidium and PMPLIC complied with these

requirements. They presented evidence that, despite APMD’s representations that it

had the financial means to be able to convert its shares to cash, it did not and could

not do so, which led to the ultimate withdrawal of PMPLIC’s application for

licensure and the inability of PMPLIC to operate as an insurance company as


                                           24
contemplated by the Memorandum of Agreement. We therefore do not agree with

APMD that Praesidium failed to provide consideration. See TMC Worldwide, L.P.

v. Gray, 178 S.W.3d 29, 37 (Tex. App.—Houston [1st Dist.] 2005, no pet.)

(“Consideration is a present exchange bargained for in return for a promise. It

consists of either a benefit to the promisor or a detriment to the promisee.”) (quoting

Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 496 (Tex. 1991)); see also

Burges v. Mosley, 304 S.W.3d 623, 628 (Tex. App.—Tyler 2010, no pet.)

(“Consideration is a fundamental element of every valid contract.”).

      We conclude that the terms of the Memorandum of Agreement were

sufficiently clear and definite for a court to ascertain the rights and responsibilities

of the parties. See Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846; Winchek, 232

S.W.3d at 202. Furthermore, the Memorandum of Agreement is specific as to the

essential terms, and the Agreement does not leave any material matters open for

future negotiation. See Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846; Stergiou,

438 S.W.3d at 744. We therefore conclude that the Memorandum of Agreement is

a binding and enforceable contract, and is not an unenforceable “agreement to agree”

in the future. See Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846. We hold that the

trial court did not err by impliedly finding that the Memorandum of Agreement

constituted a valid and enforceable contract.




                                          25
B.    Evidence of Breach

      APMD argues that Praesidium presented insufficient evidence that APMD

breached the Memorandum of Agreement because APMD actually contributed a

stock certificate for ten million shares of convertible preferred stock in APMD

Holdings to PMPLIC. Praesidium argues that, although APMD provided preferred

stock to PMPLIC, that stock was not convertible because APMD Holdings lacked

the assets to redeem the shares and convert them to cash, should that become

necessary, as it agreed to do in the Memorandum of Agreement. We agree with

Praesidium.

      The Memorandum of Agreement obligated APMD Holdings to contribute, as

consideration, ten million shares of “convertible preferred stock at a par value of $5”

of APMD Holdings that would serve as PMPLIC’s capital surplus. The Agreement

further provided that the shares were redeemable by APMD Holdings “at any time”

for a value of $5.00 per share. APMD Holdings delivered a stock certificate to

PMPLIC reflecting that it had issued ten million shares of convertible preferred

stock, $5.00 par value, to PMPLIC on December 28, 2007.

      APMD Holdings provided assurances, both throughout the negotiation

process and while the Department was considering PMPLIC’s application for

licensure, that it had sufficient assets to be able to convert the shares into cash if

called upon to do so. After the parties had signed the Memorandum of Agreement


                                          26
and PMPLIC submitted its application for licensure, the Department requested

audited financial statements from APMD Holdings to make sure that it had the

ability to convert the shares into cash. Greg Mayfield wrote a letter assuring a

Department official that APMD Holdings was “committed to honoring the cash

conversion provision of the ‘Convertible Preferred Shares’ held by PMPLIC,” that

APMD Holdings had “more than sufficient assets” to convert the shares into a cash

amount equal to the redemption price, that the ten million shares had a par value of

$5.00 per share “for a total of Fifty Million U.S. Dollars,” and that the conversion

into cash would occur within sixty days maximum from APMD’s receipt of

PMPLIC’s notice of redemption.

      Praesidium subsequently learned that since APMD had begun operating in

2006, it had never had any revenue and had never made a profit. Similarly, in May

2009, after Schneidmiller had requested redemption of PMPLIC’s ten million shares,

APMD Holdings’ counsel denied the request and listed several reasons for doing so,

including stating that “APMD does not have the ability to honor a redemption under

the terms of the preferred stock” and that “APMD does not have the funds legally

available for a redemption.”

      APMD argues on appeal that the Memorandum of Agreement did not require

any party to contribute $50,000,000 in cash. The Memorandum of Agreement did

require APMD Holdings to issue to PMPLIC ten million shares of “convertible


                                        27
preferred stock” in APMD Holdings as capital surplus, which could be redeemed for

a price of $5.00 per share, for a total redemption price of $50,000,000, if all ten

million shares were redeemed. Praesidium presented evidence that while APMD

Holdings issued ten million shares of “convertible preferred stock” to PMPLIC,

APMD, contrary to its repeated representations, never had sufficient assets such that

it could actually convert the shares into cash, an essential term of the parties’ bargain.

Praesidium thus presented evidence that the “convertible preferred stock” did not

have the value that APMD Holdings had agreed to provide.

      We therefore hold that Praesidium presented legally and factually sufficient

evidence that APMD Holdings breached the Memorandum of Agreement by failing

to provide ten million shares of “convertible preferred stock” that could be converted

into cash on demand. See Puntarelli, 405 S.W.3d at 134–35; see also Garcia, 516

S.W.3d at 592 (stating that breach of contract occurs when party fails or refuses to

do something it has promised to do).

C.    Evidence of Damages

      APMD contends on appeal that Praesidium failed to present sufficient

evidence that any breach by APMD caused Praesidium’s injuries. Specifically, it

argues that the arbitration award entered against Praesidium and the Schneidmillers,

among other defendants, was the result of a lawsuit filed against Praesidium by two

other investors, and was not “in any way related to Mayfield, Anderson, Collins, or


                                           28
APMD.” APMD also argues that no language in the Memorandum of Agreement

required any party to contribute $50,000,000 in cash, and it therefore contends that

the trial court abused its discretion in awarding legal damages to Praesidium.

      Gary Schneidmiller testified that, even after PMPLIC withdrew its submission

for licensure and after APMD Holdings denied PMPLIC’s request for redemption of

its shares, he continued to work with APMD to “salvage” the deal and to find a

method by which APMD could provide the capital surplus for PMPLIC. Praesidium

was unable to reach another deal with APMD Holdings, and eventually it sought

other sources of funding for the capital surplus. Schneidmiller testified that, in May

2010, two minority investors in Praesidium Alliance sued Praesidium Alliance, the

Schneidmillers, and three other defendants, for fraud arising out of the failed

transaction with APMD Holdings and the failure of PMPLIC to obtain a license in

Delaware. An arbitration panel found that Praesidium Alliance made “material

misrepresentations and omissions of material facts” including that “APMD

Holdings, Inc. did not have Fifty Million Dollars ($50,000,000) of gold in ready

saleable form,” that the Schneidmillers did not act in good faith because they “did

not use adequate due diligence in verifying the assets of APMD Holdings, Inc.,” and

that the Schneidmillers did not act in Praesidium Alliance’s best interests or use

ordinary care by failing “to use due diligence in verifying the assets of APMD

Holdings, Inc.”


                                         29
      The arbitration panel awarded the claimants a total of $2,000,000 in damages,

representing the claimants’ respective investments in Praesidium Alliance. The

panel also awarded the claimants pre-judgment interest on this award and costs.

Gary Schneidmiller testified that as of July 2016, the date of the trial in the

underlying case, the defendants owed $3,181,710 on the arbitration award.

Schneidmiller testified that he, his son, and Praesidium Alliance were sued “because

APMD never came up with the $50 million capital reserve.” Schneidmiller also

testified that, as a result of the investors’ suit against Praesidium Alliance, the

defendants paid around $300,000 in attorney’s fees, and he spent around $600,000

in out-of-pocket expenses to start PMPLIC.

      In its final judgment, the trial court awarded Praesidium $4,081,710 in

damages. This amount equals the amount Praesidium owed on the arbitration award,

the amount Praesidium spent on attorney’s fees to defend itself in the arbitration

proceeding, and the amount of out-of-pocket expenses spent in starting PMPLIC.

Praesidium presented evidence from which the trial court could conclude that

APMD’s breach of the Memorandum of Agreement caused Praesidium’s damages.

We hold that legally and factually sufficient evidence supports the damages award

in favor of Praesidium. See Puntarelli, 405 S.W.3d at 134–35; B & W Supply, Inc.,

305 S.W.3d at 16 (stating that element of breach of contract is that plaintiff sustains

damages resulting from defendant’s breach).


                                          30
      We overrule APMD’s first four issues.7

                                       Conclusion

      We affirm the judgment of the trial court.




                                                  Evelyn V. Keyes
                                                  Justice

Panel consists of Justices Keyes, Brown, and Lloyd.




7
      In its fifth and sixth issues, APMD Holdings challenges the sufficiency of the
      evidence establishing fraud and breach of fiduciary duty. In its final judgment
      following a bench trial, the trial court awarded Praesidium $4,081,710 in damages
      against APMD, but it did not specify the cause of action to which these damages
      related. The trial court did not file findings of fact and conclusions of law. We have
      held that sufficient evidence supports the trial court’s award as damages for breach
      of contract. Because Praesidium’s theories of fraud and breach of fiduciary duty
      would not afford it any greater relief than its breach of contract theory, which is
      sufficient to support the trial court’s judgment, we need not address APMD
      Holdings’ fifth and sixth issues concerning the fraud and breach of fiduciary duty
      claims. See, e.g., Madison v. Williamson, 241 S.W.3d 145, 159 (Tex. App.—
      Houston [1st Dist.] 2007, pet. denied) (stating that when party tries case on alternate
      theories and factfinder returns favorable findings on two or more theories, party has
      right to judgment on theory entitling it to greatest or most favorable relief); see also
      Wood v. Kennedy, 473 S.W.3d 329, 334 (Tex. App.—Houston [14th Dist.] 2014, no
      pet.) (stating that when trial court does not file findings and conclusions after bench
      trial, appellate court must affirm judgment if judgment “can be upheld on any legal
      theory that finds support in the evidence”).
                                             31
