

                                                             11th
Court of Appeals
                                                                  Eastland,
Texas
                                                                        Opinion
 
Sunshine Mining and
Refining Company
Appellant
Vs.      
            No. 11-02-00108-CV B 
Appeal from Dallas County
Ernst & Young, L.L.P.
Appellee
 
This
appeal arises from a suit filed by a publicly-traded mining company against its
former independent auditing firm. 
Sunshine Mining and Refining Company (Sunshine) has mined silver and
other minerals for many years, primarily from the Sunshine Mine located in
Idaho.  Prior to 1999, Sunshine had not
reported a profit in the previous 10 years as a result of depressed silver
prices.  Sunshine=s net losses for 1994 to 1998 were
$4,900,000, $15,500,000, $25,900,000, $19,300,000, and $64,800,000,
respectively.[1]  Sunshine remained in business during this
period by raising operating funds through various equity and debt
offerings.   
Sunshine
undertook efforts in the spring of 1999 to raise up to $68,500,000 by making an
offering of preferred stock to European investors (the spring stock
offering).  Sunshine retained the
services of various investment banking advisors to underwrite and market the
spring stock offering.  Sunshine planned
to market the spring stock offering by making a series of presentations to
potential investors throughout Europe beginning on June 1, 1999.   Sunshine intended to use approximately
$27,000,000 of the money raised from the spring stock offering to retire
previously issued bonds which were to mature in March of 2000.  Sunshine intended to use the additional
money raised from the spring stock offering as equity in a recently acquired
mine located in Argentina known as the Pirquitas Mine.   




Prior to
1999, Ernst & Young, L.L.P. (Ernst & Young) had served as Sunshine=s independent auditing firm since 1984.   Ernst & Young agreed to assist Sunshine
with the spring stock offering in an engagement letter that it forwarded to
Sunshine on May 17, 1999.    However,
Ernst & Young subsequently announced its resignation as Sunshine=s auditing firm on May 27, 1999.  Ernst & Young based the resignation on
its desire to pursue other client opportunities which it considered more
appealing.  Ernst & Young did not
cite any improprieties committed by Sunshine or its personnel in announcing the
decision.  
Sunshine
asserts that Ernst & Young=s abrupt resignation was wrongful under numerous theories of
liability.  Sunshine further alleges
that the resignation resulted in a chain of events which ultimately caused
Sunshine to file bankruptcy.  Sunshine
contends that the initial effect of Ernst & Young=s resignation was the cancellation of the
spring stock offering.   The investment
banking advisors retained by Sunshine cancelled the spring stock offering upon
learning of the resignation.  The
advisors believed that the resignation of Sunshine=s auditing firm within a few days of the
stock offering would have had a detrimental effect on the stock offering=s success. 
They also wanted to thoroughly investigate the reasons for the
resignation before proceeding with the stock offering.  
Sunshine
subsequently attempted a stock offering in the fall of 1999 (the fall stock
offering).  The fall stock offering was
not successful.  Sunshine contends that,
if the spring stock offering had occurred as originally planned, it would have
been successful because of favorable market conditions which no longer existed
in the fall.   Sunshine further contends
that a successful stock offering would have provided it with sufficient funds
to extinguish the bond indebtedness which matured in the spring of 2000 and
thus stave off bankruptcy while waiting out the depressed silver market.   




Sunshine
seeks consequential damages of approximately $250,000,000 in this action.   The damages which Sunshine seeks fall into
the following three categories:  (1) Aout-of-pocket@ expenses of $3,600,000; (2) Alost profits@
damages of $132,000,000; and (3) Alost goodwill@
damages of at least $111,016,000.  The
out-of-pocket damages are expenses which Sunshine contends that it incurred
with respect to the spring and fall stock offerings and the subsequent
bankruptcy proceedings.  The lost profits
damages are based on Sunshine=s estimate of the profits it would have realized from the future
development of the Pirquitas Mine.  
Sunshine=s lost goodwill damages are based on the
decline in Sunshine=s
market capitalization occurring after Ernst & Young=s resignation.[2]
Ernst
& Young filed a motion for summary judgment which the trial court
granted.  The motion sought summary
judgment on the issues of causation and damages on both no-evidence and
traditional summary judgment grounds. 
Ernst & Young asserted that there is no evidence that its
resignation caused Sunshine to suffer the damages which Sunshine seeks.  Ernst & Young further alleged that the
evidence conclusively establishes that its resignation did not cause any
damages to Sunshine.  The motion additionally
challenged the methodology used by Sunshine to calculate damages.  Sunshine brings four points of error on
appeal.  We affirm.
We begin
our consideration of this appeal by addressing the trial court=s rulings on Ernst & Young=s objections to Sunshine=s summary judgment evidence.  Sunshine responded to Ernst & Young=s motion for summary judgment by filing
several affidavits and other evidentiary items.  Ernst & Young filed numerous objections to various items
included in Sunshine=s
summary judgment evidence.  As set forth
below, there is a question as to whether or not the trial court made effective
rulings on Ernst & Young=s summary judgment objections.  
Sunshine=s third and fourth points of error preserve
for appellate review Sunshine=s complaints regarding adverse rulings which the trial court possibly
may have made on Ernst & Young=s summary judgment objections.        The trial court did not enter specific
rulings on Ernst & Young=s objections to Sunshine=s summary judgment proof.  However, the AFINAL SUMMARY JUDGMENT@ entered by the trial court states as follows:
After considering the competent evidence
before the Court,1 the applicable law, the live pleadings, and the
arguments of counsel, the Court finds that Defendant=s motion should be and hereby is granted.  (Emphasis in original)
 
The trial court=s footnote stated:
 




The Court considered Defendant=s Objections to Sunshine (sic) Summary
Judgment Evidence, Plaintiff=s Response to Defendant=s Objections to Summary Judgment Evidence, and Defendant=s Reply in Support of Its Objections to
Summary Judgment Evidence.
 
Ernst & Young argues
that the foregoing statement constitutes a ruling in its favor on all of its
objections to Sunshine=s
summary judgment evidence.  Ernst &
Young cites Frazier v. Yu, 987 S.W.2d 607 (Tex.App. B Fort Worth 1999, pet=n den=d), in support of this proposition.
The
defendant in Frazier moved for a no-evidence motion for summary judgment
and objected to the plaintiff=s summary judgment proof.  In
granting the defendant=s
motion for summary judgment, the trial court=s order stated that the court had reviewed the Acompetent@ summary judgment proof. 
Frazier v. Yu, supra at 610.  The
Fort Worth Court of Appeals held that the inclusion of this phrase created an
inference that the trial court implicitly sustained all of the defendant=s objections to the plaintiff=s summary judgment evidence.  The court relied upon the concept of implied
rulings embodied in TEX.R.APP.P. 33.1(a)(2)(A) in reaching its holding.  
Several
courts have expressed their disagreement with the holding in Frazier for
a variety of reasons.  See Allen v.
Albin, 97 S.W.3d 655, 662 (Tex.App. B Waco 2002, no pet=n); Well Solutions, Inc. v. Stafford, 32 S.W.3d 313, 317 (Tex.App. B San Antonio 2000, no pet=n); Dolcefino  v. Randolph, 19 S.W.3d 906, 926 (Tex.App. B Houston [14th Dist.] 2000, pet=n den=d).   As noted in Trusty v.
Strayhorn, 87 S.W.3d 756, 760 (Tex.App. B Texarkana 2002, no pet=n h.), many of the cases which have criticized Frazier are
factually distinguishable because their respective summary judgment orders did
not include the statement that the trial court had reviewed the Acompetent” summary judgment evidence.  Instead, these cases involve summary
judgment orders which are silent with respect to the trial court=s treatment of summary judgment
objections.   They reject Frazier=s finding of an implicit ruling on summary judgment evidence on the
rationale that a ruling on a summary judgment motion does not necessarily imply
a ruling on an objection to summary judgment evidence.




The
language used by the trial court in the instant appeal is virtually identical
to the language at issue in Frazier. 
Nevertheless, we decline to infer an implicit ruling by the trial court
sustaining any or all of Ernst & Young=s objections to Sunshine=s summary judgment evidence. 
The trial court obviously considered Ernst & Young=s summary judgment objections as reflected by
the court=s express statement to this effect.  However, we are unable to determine the
trial court=s rulings on the objections from its
statement that it considered the Acompetent” evidence.  The use of
this term does not indicate that the trial court actually excluded any of
Sunshine=s summary judgment evidence from
consideration.  We hold that, absent a
clear indication that the trial court actually excluded an item of summary
judgment evidence, its inclusion in the record should be presumed.   Otherwise, appellant is placed in the
position of having to present appellate complaints about essentially unknown
evidentiary rulings.   We do not address
the merits of Sunshine=s
third and fourth points of error because the record does not reflect that the
trial court actually excluded any items of Sunshine=s summary judgment evidence.
The trial
court granted Ernst & Young=s motion for summary judgment without specifying the grounds upon which
it relied in granting the motion. When a trial court=s order granting summary judgment does not
specify the ground or grounds relied upon for its ruling, summary judgment will
be affirmed on appeal if any of the summary judgment grounds advanced by the
movant are meritorious.  Dow Chemical
Company v. Francis, 46 S.W.3d 237, 242 (Tex.2001); Carr v. Brasher, 776 S.W.2d
567, 569 (Tex.1989).
The trial
court must grant a no-evidence motion for summary judgment unless the
non-movant produces evidence that raises a genuine issue of material fact on
the challenged element of his claim or defense.  TEX.R.CIV.P. 166a(i). The appellate court reviews evidence
presented in response to a motion for a no-evidence summary judgment in the
same way it reviews evidence presented in support of, or in response to, a
motion for traditional summary judgment: 
it accepts as true evidence favorable to the non-movant and indulges
every reasonable inference and resolves all doubts in favor of the non-movant.
Hight v. Dublin Veterinary Clinic, 22 S.W.3d 614, 619 (Tex.App. - Eastland
2000, pet=n den=d); see American Tobacco Company, Inc. v. Grinnell, 951 S.W.2d 420, 425
(Tex.1997);  Nixon v. Mr. Property
Management Company, Inc., 690 S.W.2d 546, 548-49 (Tex.1985).  The appellate court reviews, however, only
evidence presented by the non-movant. 
Rule 166a(i); Hight v. Dublin Veterinary Clinic, supra at 618-19.  If the non-movant presents more than a
scintilla of evidence on the disputed element, a no-evidence summary judgment
is improper.  Hight v. Dublin Veterinary
Clinic, supra;  Denton v. Big Spring
Hospital Corporation, 998 S.W.2d 294, 298 (Tex.App. - Eastland 1999, no pet=n); 
cf.  Merrell Dow Pharmaceuticals,
Inc. v. Havner, 953 S.W.2d 706 (Tex.1997), cert. den=d, 523 U.S. 1119 (1998).




A trial court must grant a traditional motion for
summary judgment if the moving party establishes that no genuine issue of
material fact exists and that he is entitled to judgment as a matter of
law.  TEX.R.CIV.P. 166a(c); Lear
Siegler, Inc. v. Perez, 819 S.W.2d 470, 471 (Tex.1991).  Once the movant establishes a right to a
summary judgment, the non-movant must come forward with evidence or law that
precludes summary judgment.  City of
Houston v. Clear Creek Basin Authority, 589 S.W.2d 671, 678-79 (Tex.1979).  When reviewing a summary judgment, the
appellate court takes as true evidence favorable to the non-movant.  American Tobacco Company, Inc. v. Grinnell,
supra at 425; Nixon v. Mr. Property Management Company, Inc., supra at 548-49.
Sunshine=s first point of error is directed at the
summary judgment grounds which address 
causation.  Ernst & Young=s motion for summary judgment listed the
following grounds pertaining to causation: (1) A[p]ursuant to TEX.R.CIV.P. 166a(i), there is no evidence that [Ernst
& Young] was the cause of any injury or damages or that there was any
actual injury or damages”; and (2) A[p]ursuant to TEX.R.CIV.P. 166a(c)...Ernst & Young did not cause
Sunshine any compensable injury or damages.” 
We agree with Ernst & Young=s contention that there is no evidence that it caused the damages which
Sunshine seeks.
As noted
previously, Sunshine contends that Ernst & Young=s resignation set in motion a series of
events which led to Sunshine filing bankruptcy.   The pivotal link in this chain of events is Sunshine=s contention that the spring stock offering
would have been successful if Ernst & Young had not abruptly resigned.   All of the damages sought by Sunshine are
premised on this contention. 
Accordingly, there must be some evidence that the spring stock offering
would have been successful in order for Sunshine to establish the causal link
for the damages it seeks.  




Sunshine=s summary judgment evidence supporting the
allegation of a successful stock offering consisted of the affidavits of its
officers and its investment banking advisors. 
These individuals declared their belief 
that the spring stock offering would have been successful had Ernst
& Young not abruptly resigned.  The
summary judgment record also included the names of investors who had agreed to
attend the stock presentations. 
Sunshine additionally points to its history of  successful offerings in the past as evidence that the spring
stock offering would have been successful. 
However, Sunshine=s summary judgment evidence does not identify any investors who would
have purchased stock at the spring stock offering had it occurred as
planned.  Furthermore, there is no
evidence that investors would have purchased a sufficient amount of Sunshine=s stock in order for the stock offering to be
considered successful.
The Dallas
Court of Appeals addressed a similar situation in City of Dallas v. Villages of
Forest Hills, L.P., Phase I, 931 S.W.2d 601 (Tex.App. B Dallas 1996, no writ).  The City of Dallas entered into an agreement
to loan funds to an apartment complex owner (Villages).  City of Dallas v. Villages of Forest Hills,
L.P., Phase I, supra at 602-03. 
Villages intended to use the funds to rehabilitate an apartment
complex.    City of Dallas v. Villages
of Forest Hills, L.P., Phase I, supra at 602-03.   After receiving notification from the city that the loan had
been approved, Villages entered into a syndication agreement whereby Villages
would receive syndication fees from the sale of limited partnership units.   City of Dallas v. Villages of Forest Hills,
L.P., Phase I, supra at 603. Villages subsequently filed suit against the city
as a result of the loan not being funded. 
Villages sought lost syndication fees as an element of damages.  City of Dallas v. Villages of Forest Hills,
L.P., Phase I, supra at 606-07.  The
trial court denied a recovery for lost syndication fees on the basis that they
were too speculative to be recoverable.  
City of Dallas v. Villages of Forest Hills, L.P., Phase I, supra at
606-07.  In affirming the trial court=s denial of a recovery for lost syndication
fees, the Dallas Court of Appeals noted that no evidence was offered regarding
investors willing to purchase the partnership units. 
In
Richter, S.A. v. Bank of America National Trust and Savings Association, 939
F.2d 1176, 1188 (5th Cir. 1991), the jury made a damage award to a claimant for
the lost opportunity to sell an interest in a partnership.   The claimant offered testimony in support
of its claim that it would have been able to sell its partnership interest to a
particular purchaser for a specified price. 
However, there was no evidence that the potential purchaser had ever
made an offer to purchase the partnership interest.  The appellate court held that the seller=s testimony regarding its expectations of a
successful sale failed to substantiate the damage award with the requisite degree
of certainty.  




The sales
of partnership interests in City of Dallas and Richter, S.A. are
similar to the facts in this appeal because they involved equity offerings in
business ventures to third-party investors. 
The success or failure of such undertakings is entirely dependent upon
the purchasing decisions of third parties. 
City of Dallas and Richter, S.A. require the existence of
evidence identifying investors who would have been willing to purchase the
ownership shares in order for the claimant to obtain damages based on lost
sales opportunities.  We believe this
evidentiary requirement is reasonably applied in this case.  Proof of causation cannot turn upon
speculation or conjecture.  Leitch v.
Hornsby, 935 S.W.2d 114, 119 (Tex.1996); Fitzgerald v. Antoine National Bank,
980 S.W.2d 228, 231 (Tex.App. B Houston [14th Dist.] 1998, no pet=n).  Sunshine=s stock offering was an inherently
speculative undertaking given its historically deteriorating financial
condition and the depressed silver market. 
Without evidence identifying investors willing to purchase a sufficient
amount of Sunshine=s
stock for the offering to be successful, the evidence supporting Sunshine=s theory of causation was too speculative to
permit a finding that Ernst & Young caused the damages which Sunshine
seeks. Therefore, there is no evidence that Ernst & Young caused the
damages which Sunshine seeks in this action. 
Appellant=s first point of error is overruled.  
Our
determination that there is no evidence supporting Sunshine=s theory of causation is dispositive of this
appeal.  We note in this regard that we
have not reached Ernst & Young=s summary judgment grounds attacking the methodology used by Sunshine
to calculate damages for lost goodwill and lost profits.[3]  The judgment of the trial court is affirmed.
 
W. G.
ARNOT, III
CHIEF
JUSTICE
 
June 12, 2003
Panel consists of: Arnot, C.J., and
Wright, J., and McCall, J.




     [1]Sunshine=s net losses for
1998 reflected a $50,400,000 Awrite down@ of its investment in the Sunshine Mine.


     [2]The term Amarket
capitalization@ refers to the cumulative value of Sunshine=s outstanding shares of stock.  The price of Sunshine=s stock dropped significantly after the date of Ernst
& Young=s resignation (May 27, 1999).  As a result of this drop, Sunshine=s
market capitalization decreased from $105,466,000 as of May 27, 1999, to
$15,000,000 in August of 2001. 
Accordingly, $90,466,000 of the lost goodwill calculation of
$111,016,000 is attributable to the decline in Sunshine=s market price. 



     [3]With respect to Sunshine=s
claims for lost goodwill damages, Ernst & Young contends that it is
improper to base a claim for lost goodwill on the decrease of a company=s market capitalization.  Ernst & Young also attacks the evidentiary support for Sunshine=s lost goodwill claim. 
Ernst & Young asserts that Sunshine=s
lost profits claim is too speculative to permit a recovery because the claim is
dependent upon a rise in the price of silver which may not occur in the
foreseeable future.  


