

Opinion issued November 17, 2011.


In The
Court of
Appeals
For The
First District
of Texas
————————————
NO. 01-10-00668-CV
———————————
Westside
Wrecker Service, Inc., Appellant
V.
Patricia
Davis Skafi d/b/a Master Auto Body Shop and d/b/a North Loop Towing and Dwight
Cannon d/b/a D.C. Wrecker, Appellees

 

 
On Appeal from the 269th District Court
Harris County, Texas

Trial Court Case No. 2006-13881
 

 
O P I N I O N
Westside
Wrecker Service, Inc. challenges the trial court’s judgment awarding damages
for unpaid storage and towing fees to Patricia Davis Skafi, d/b/a Master Auto
Body Shop and d/b/a North Loop Towing, and Dwight Cannon, d/b/a D.C. Wrecker. A
jury found that Westside breached an oral contract with Skafi and Cannon, the
parties had formed a partnership, and Westside breached various partnership
duties to Skafi and Cannon. The trial court disregarded the jury’s liability
findings on breach of contract and partnership duties, as well as some of the
jury’s damages findings, but it entered judgment for Skafi and Cannon for
unpaid towing and storage fees and attorney’s fees.
In six issues, Westside contends
that the trial court erred by awarding damages in the absence of a liability
finding; there is no evidence to support Skafi and Cannon’s damages; and challenges
the trial court’s award of attorney’s fees. In five issues, Skafi and Cannon
contend that the trial court erred in disregarding the jury’s finding that
Westside had failed to comply with its agreement “to timely pay for storage and
free tows” performed by Skafi and Cannon because the statute of frauds does not
bar enforcement of the parties’ oral agreement; the trial court erred in
granting judgment notwithstanding the verdict because the jury’s partnership
finding was supported by legally sufficient evidence of the statutory
partnership factors and the statute of frauds does not apply to the jury’s
partnership finding; “[i]f the jury’s partnership finding is reinstated on
appeal, this case should [be] remand[ed] for an accounting of Mr. Cannon’s
partnership damages”; and respond to Westside’s challenges to the damages and
attorney’s fees awarded. 
We reverse the trial court’s
judgment with respect to Westside,[1] and enter judgment that
Skafi and Cannon take nothing on their claims against Westside. 
Background
          In
2004, the City of Houston initiated the “SAFEClear” program to establish a
system for the prompt removal of disabled vehicles from Houston’s freeways, and
it divided the freeways within the city into coverage segments, which would be
assigned to specific tow truck operators for removal of disabled vehicles. Tow
truck operators were permitted to submit bids for the job, and the winning
bidders were awarded five-year contracts to provide exclusive towing services
for the highways in their coverage area. 
The four tow truck companies and
their principals involved in this suit are: (1) Richard King, president of Westside,
(2) Dwight Cannon, doing business as D.C. Wrecker, (3) Patricia Skafi, doing
business as Master Auto Body Shop and North Loop Towing, and (4) Rex Owens, owner
of Corporate Auto Sales and Miller Paint & Body.[2] In anticipation of the SAFEClear
bidding process, King, Cannon, Skafi, and Owens discussed how their businesses
could work together in pursuing SAFEClear contracts. The substance of these
discussions and the nature of the parties’ agreements are at the crux of this
dispute. While much of what the parties did and did not agree upon is disputed,
the parties did agree that Westside would bid on SAFEClear segments 21–24,
Corporate Auto would bid on segments 25–26, and Cannon and Skafi would not
submit bids but would be identified as subcontractors in Westside’s and
Corporate Auto’s bids. 
The bid packages submitted by
Westside and Corporate Auto advertised the group’s collective experience: “We
are four wrecker companies[;] collectively, we have over 100 years of
experience in the wrecker/storage industry.” The package also identified the group’s
cumulative equipment and assets. The city awarded the SAFEClear contracts for
highway segments 21–24 to Westside and the contracts for segments 25–26 to
Corporate Auto. Cannon and Skafi were subcontractors under Westside’s and
Corporate Auto’s SAFEClear contracts. Westside and Corporate Auto were subcontractors
under each other’s SAFEClear contracts. 
After winning the bids, Westside,
Corporate Auto, Cannon, and Skafi continued to try to hammer out their working
relationship. Owens prepared a draft partnership agreement that made Westside
and Corporate Auto partners. The draft agreement was not well received. Cannon
and Skafi were offended that they were not included as partners, and King stated
that Westside did not want to enter into a partnership with anyone else. Ultimately,
the parties abandoned their efforts to enter into a written agreement. As
Cannon described it: “[I]t seemed like everything that anybody wrote up, one or
two people in the group didn’t agree with it. . . . I mean, we just never got
anything that anybody could agree [to] in writing.”
But the parties continued to work
together in connection with the SAFEClear contracts. Westside, Corporate Auto,
Cannon, and Skafi agreed on a rotation system that gave them equal time
servicing each of the SAFEClear segments awarded to Westside and Corporate
Auto, and they each paid an equal one-fourth share of the SAFEClear bid price
and related expenses. The rotation system was intended to give each of them an equal
opportunity to earn revenues from their participation in SAFEClear—“to keep the income as fair as it could be.” Skafi
and Cannon provided Westside and Corporate Auto cashier’s checks for their one-fourth
share of the bid fee. Three checks contained the following statement: “as
partner in City of Houston Major Freeway Tow.” The foursome hired Denny Messer
to serve as their SAFEClear manager, and they agreed to each pay an equal share
of his $120,000 salary. 
Disputes arose between the parties
during the performance of the SAFEClear contracts. Westside hoped to realize
increased storage business as a result of working with the other members of the
group. Westside’s president, King, believed that Cannon and Skafi had agreed to
close their storage lots and deliver storage cars to Westside in exchange for
payment of towing charges and a commission on revenue. Cannon and Skafi did not
feel they had bound themselves to any specific obligation to close their
storage lots or deliver storage cars to Westside. Cannon and Skafi believed
that Westside was not paying them properly for storage cars that they did deliver
to Westside. They also believed that Westside was not reimbursing them for
“free tows” provided under the SAFEClear program, for which Westside and
Corporate Auto received yearly reimbursements from the city.[3]
Westside complained that, once the city
implemented the “free tow” system, the other towers’ drivers stopped coming to
work on time during their rotations and wandered outside of their segment area
in search of higher paying tows. According to Westside, the poor performance of
the other towing companies’ drivers caused the city to threaten to take away
its SAFEClear contracts. This concerned Westside because Westside had no
ability to control the other towing companies’ drivers.
Ten months after the city awarded
the SAFEClear contracts, Westside and Corporate Auto agreed that they would
stop providing services on each other’s segments and concentrate on their own
segments instead. Westside remained dissatisfied with Cannon’s and Skafi’s
drivers. Four months later, Westside sent Skafi a termination notice and sent
Cannon a letter demanding that his company pay Westside certain fees, repair
non-operational GPS on Cannon’s trucks as required by the city’s contracts, and
comply with rules previously adopted by the parties, if it wished to continue
to service Westside’s SAFEClear segments. Westside later terminated Cannon from
its SAFEClear segments. According to Cannon and Skafi, Westside did not
terminate them for performance reasons. Rather, after the city eliminated the
fees it originally charged for the SAFEClear contracts, Westside no longer
needed them to contribute to the SAFEClear expenses and eliminated their
subcontracts to maximize its own profits.
Skafi and Cannon brought this
action, alleging claims for breach of fiduciary duty, breach of contract, and promissory
estoppel, and requesting injunctive relief and an accounting. Skafi and Cannon
pled that their business arrangement with Westside and Corporate Auto was a
joint venture. Westside denied Skafi and Cannon’s allegations and pled affirmative
defenses including the statute of frauds, prior breach, and failure to mitigate.
Westside also pled offset and brought counterclaims against Skafi and Cannon
for breach of contract and a declaratory judgment that Westside was never a partner
with Skafi or Cannon, that Skafi and Cannon had no rights or interest in
Westside’s SAFEClear contracts, and that the parties’ oral agreement was
terminable at will.
After a seven-day trial, the jury
made numerous findings regarding the agreements and interactions between the
parties. The jury rejected Westside’s recollection of the parties’ agreement,
finding that (1) Skafi had not agreed to close her storage lot, (2) neither
Skafi nor Cannon had agreed to require their drivers to tow all non-repairable
vehicles to Westside’s storage lot, and (3) the parties had not agreed that the
parties could terminate the agreement at any time for any reason. The jury also
rejected Westside’s failure to mitigate defense.
With respect to the jury question
on Westside’s compliance with the parties’ agreements, the charge instructed
the jury that the parties had agreed to the following: (1) Skafi and Cannon
would be subcontractors for Westside on its SAFEClear segments; (2) all parties
would require their drivers to comply with the city’s tow truck ordinances and
regulations, the SAFEClear program rules, and the terms of the SAFEClear
contract between the city and Westside or Corporate Auto; (3) each party would
pay their fair share of reasonable dispatch and administrative charges incurred
by Westside; and (4) Westside would timely pay for storage and free tows
performed by Skafi and Cannon on Westside’s SAFEClear segment. The jury found
that Skafi and Cannon complied with the parties’ agreements but Westside did
not. No damage question was predicated on the breach of contract findings, but
the jury separately awarded Skafi and Cannon damages for unpaid storage fees and
awarded Cannon damages for unpaid free tows.
The jury charge also asked whether
Westside created a partnership with Skafi, Cannon, and Corporate Auto to
conduct the SAFEClear business, to which the jury answered “yes.” The jury then
found that Westside breached its duties of loyalty and care to Skafi and
Cannon, and it awarded lost profit damages to Skafi on this basis. No question
was submitted on damages to Cannon as a result of Westside’s breach of these
duties.[4] The jury also found that
Westside failed to comply with its fiduciary duty to Skafi and Cannon.[5] But it found that Skafi
suffered no damages as a result of this breach, and the charge did not include
a question on breach of fiduciary damages to Cannon. Predicated on findings
that Westside breached its duties of loyalty, care, or as a fiduciary, the jury
found that the harm to Skafi and Cannon resulted from malice or fraud and
awarded exemplary damages to both.[6] The jury found that Skafi
and Cannon complied with their fiduciary duty to Westside. The jury also
awarded attorney’s fees. 
The parties filed numerous
post-judgment motions. Westside filed a motion to disregard some or all of the
jury’s findings on the grounds that no partnership existed as a matter of law,
the statute of frauds bars Skafi and Cannon’s recovery, the evidence was not
legally sufficient to support the damages awards, the lost profits and unpaid
fee awards could not support exemplary damages, and the attorney’s fees award
should be denied or reduced. Skafi and Cannon moved for interlocutory judgment
on the jury verdict, appointment of a receiver over the partnership, and an
accounting and appointment of a Master in Chancery to serve as an auditor.
Skafi and Cannon also sought leave for a post-trial amendment of their breach
of contract pleadings to include unpaid towing fees or, alternatively, to plead
such damages as unjust enrichment.
The trial court granted Westside’s
motion to disregard the jury’s answers with respect to question four
(Westside’s breach of contract) and questions eight through twenty (existence of
a partnership, breach of duties of loyalty, care and as a fiduciary, Skafi’s
lost profits, and exemplary damages). This ruling left only three jury findings
in place: the unpredicated damages questions regarding unpaid storage and
towing (questions twenty-five and twenty-six) and the attorney’s fees question
(question twenty-seven).[7] The trial court denied
Skafi and Cannon’s motion for post-trial amendment of their pleadings to
include a claim for unpaid towing fees but nevertheless awarded Cannon the unpaid
towing fees found by the jury.[8] In its final judgment, the
trial court ordered that Westside pay Skafi and Cannon the unpaid storage and
towing fees found by the jury, together with pre- and post-judgment interest
and attorney’s fees. The trial court did not award exemplary damages or Skafi’s
lost profits.
After the judgment, Westside moved for
(1) a take-nothing judgment in its favor notwithstanding the jury verdict, (2) new
trial or, alternatively, remittitur, and (3) modification, correction, or
reformation of the judgment. The trial court denied Westside’s post-judgment
motions. 
Standard of Review
          Westside
raises a legal sufficiency challenge to the jury’s findings relating to the
existence of a partnership and to unpaid storage and towing damages. When a
party attacks the legal sufficiency of the evidence to support an adverse jury
finding on an issue for which it did not have the burden of proof at trial, it
must show that no evidence supports the jury’s adverse finding. Exxon Corp. v. Emerald Oil & Gas
Co., L.C., 348 S.W.3d 194, 215
(Tex. 2011). Evidence is legally sufficient to support a jury finding if it
“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)). In reviewing the legal sufficiency of the
evidence supporting a jury finding, we “credit favorable evidence if reasonable
jurors could, and disregard contrary evidence unless reasonable jurors could
not.” Id. (quoting City of
Keller, 168 S.W.3d at 827).
The remaining disputes on appeal
focus not on the sufficiency of the evidence to support the jury’s findings but
on the legal effect of the jury’s findings. These are questions of law, which
we review under a de novo standard. See
Nguyen v. Yovan, 317 S.W.3d 261, 267 (Tex. App.—Houston [1st Dist.] 2009,
pet. denied) (holding that whether contract falls within statute of frauds is
question of law, which we review de novo).
Westside’s Appeal
A.      The trial court erred in awarding Skafi
and Cannon damages for unpaid towing and storage fees 
 
In its first issue, Westside
contends, in part, that the parties’ oral agreement is barred by the statute of
frauds and, although the trial court properly disregarded the jury’s breach of
contract finding on that basis, it erred in awarding Skafi and Cannon towing
and storage damages because there was no liability finding left to support the
damages. In their fourth and second issues, Skafi and Cannon argue that the trial
court erred in disregarding the jury’s breach of contract findings because the
statute of frauds does not apply. They also argue that the jury findings on
towing and storage damages may stand alone and need not be supported by a separate
liability finding. 
1.       Skafi’s and Cannon’s damages arise from
their agreement with Westside regarding towing and storage 
 
Jury
question twenty-five asked:
What
sum of money, if any, if paid now in cash, by Westside, would fairly and
reasonably compensate Dwight Cannon for the following?
 
.
. .
 
a.                
Unpaid free tows from January 1, 2005 to September 30, 2008.
 
b.                
Unpaid storage from January 1, 2005 to November 30, 2005.
 
Similarly, question twenty-six
asked:
What sum of money, if any,
if paid now in cash, by Westside, would fairly and reasonably compensate
Patricia Davis Skafi for unpaid storage from January 1, 2005, to October 31,
2005?
 
Although these questions were not expressly
predicated on the jury’s answer to question four—the breach of contract question—a relationship is evident on the face of the charge. Question four
instructed the jury that the parties had made a number of agreements, among
them: “Westside agreed to timely pay for storage and free tows performed by Ms.
Skafi and M[r]. Cannon on Segments 21 through 24.” It then asked if Westside
failed to comply with the agreement, to which the jury answered “yes.”
          Skafi
and Cannon argue that, as the instruction to question four indicates, they
proved this agreement as a matter of law. Therefore, they assert, there was no
need to predicate the jury’s damages awards in questions twenty-five and
twenty-six on the jury’s answer to question four. Skafi and Cannon further contend
that the damages questions subsume a liability finding because they ask what
sum “if any” would compensate Skafi and Cannon. Finally, they assert that
Westside failed to object to the submission of questions twenty-five and
twenty-six without predication on a finding in question four that Westside
breached its agreement.
A liability finding is essential to
the award of damages unless liability is established as a matter of law or
uncontested. See Fire Ins. Exch. v. Sullivan, 192 S.W.3d 99, 107 (Tex. App.—Houston
[14th Dist.] 2006, pet. denied); Mitchell v. Bank of Am., N.A., 156 S.W.3d 622, 627 (Tex. App.—Dallas
2004, pet. denied); Turner v. Lone Star Indus., Inc., 733 S.W.2d 242,
246 (Tex. App.—Houston [1st Dist.] 1987, writ ref’d n.r.e.). Under
certain circumstances, the court of appeals may deem a finding in support of
the trial court’s judgment. See Tex. R. Civ. P. 279; Gulf States Utils. Co. v. Low, 79 S.W.3d
561, 565 (Tex. 2002); see also Emerson Elec. Co. v. Am. Permanent Ware
Co., 201 S.W.3d 301, 318
(Tex. App.—Dallas 2006, no pet.) (refusing to imply DTPA liability finding to
support award of additional damages found in unpredicated jury question on lost
good will). But we need not decide whether questions twenty-five and twenty-six could
stand alone without the liability finding in question four or whether a
liability finding should be deemed solely on the basis of questions twenty-five
and twenty-six because Skafi and Cannon rely on the same basis for liability
with respect to all three questions: Westside’s agreement to pay for towing and
storage, which is set forth in the instructions to question four. Skafi and
Cannon do not argue an alternative basis for recovering the towing and storage
damages.[9]
Thus, if the statute of frauds bars enforcement of Westside’s
alleged agreement to pay Skafi and Cannon for storage and free tows, the jury’s
findings on all damages must be disregarded.
2.       The statute of frauds bars Skafi’s and Cannon’s recovery of
unpaid storage and “free tow” damages
 
          Under
the statute of frauds, a promise or agreement that cannot be fully performed
within one year is not enforceable unless there is a writing signed by the
party against which enforcement is sought. Tex.
Bus. & Com. Code § 26.01(a), (b)(6).  Because there is no written agreement between
the parties on the subject, the issue is whether the parties’ oral agreement regarding
storage fees and “free tow” reimbursements is subject to the statute of frauds.
Westside contends that the parties tied the duration of their agreements to the
five-year term of Westside’s SAFEClear contract with the city.[10] Therefore, Westside
asserts, the agreements were for a term longer than one year and are barred by
the statute of frauds. Skafi and Cannon argue that Westside’s obligation to pay
for free tows and storage arose out of their at-will subcontractor relationship
with Westside and the city. They argue that such at-will agreements can be
fully performed within one year and, therefore, are not barred by the statute
of frauds.
The problems with Skafi and
Cannon’s position are two-fold. First, the jury found that the parties could
not terminate their agreement at-will. Although Skafi and Cannon now point to
Westside’s contention at trial that it could terminate the agreement at-will, Skafi
and Cannon took the position at trial that Westside could not terminate their
agreement at-will. The jury agreed with Skafi and Cannon, and no party has challenged
this finding on appeal. The parties and this Court are therefore bound by the
jury’s finding. E.g., Abatement Inc. v. Williams, 324 S.W.3d 858, 862 (Tex. App.—Houston
[14th Dist.] 2010, pet. denied) (“unchallenged jury findings are binding”); Carbona
v. CH Med., Inc., 266 S.W.3d 675, 687 (Tex. App.—Dallas 2008, no pet.) (same).
Second, Skafi and Cannon both
testified that their agreement with Westside was intended to run for the
five-year term of Westside’s SAFEClear contracts, unless the city terminated
the SAFEClear contract sooner. Skafi testified that she expected the group of
four’s business arrangement to last for five years unless the city terminated
the SAFEClear contracts earlier, which was a concern due to litigation over the
SAFEClear program. She also testified that Westside breached the parties’
agreement by terminating her before the end of the five-year term. Cannon
provided similar testimony:  
A.      The day that we shook hands and agreed to
a deal, it was for a five-year city contract or until the contract ended. . . .
[I]f we weren’t happy at the end of that time, I could go and start all over
and bid again, or whatever the process would be with the city.”
 
Q.      So the business deal that you are
describing, each party, according to you, contemplated that it would last for
five years?
 
A.      That’s correct, or until the contract
ended.
 
Skafi and Cannon attempt on appeal
to make a distinction between their agreement with Westside and their
“subcontractor relationship as to the [c]ity,” but they did not pursue any liability
theory at trial that would allow them to recover from Westside on the basis of
their at-will subcontract with the city. All of the testimony links the
parties’ relationship and obligations to each other with the term of the
SAFEClear contracts.[11] The right to recover for
“free tows” is directly referable to the SAFEClear contracts.
Skafi and Cannon rely on Clear Lake City Water Authority v. Clear
Lake Utilities Co., 549 S.W.2d 385, 390 (Tex. 1977) to support their
contention that their agreements with Westside constituted “continuing
contracts” that were terminable at-will. In Clear
Lake City Water Authority, the Court observed that “contracts which
contemplate continuing performance (or successive performances) and which are
indefinite in duration can be terminated at the will of either party.” Id. The issue in Clear Lake City Water Authority was not a statute of frauds issue
but, rather, whether the water authority could lawfully terminate its written
contract with a utilities provider when the contract did not contain a
provision addressing duration. Id. at
388. The Court held that, if the water authority could not terminate its
contract with the utility provider at will, the contract resulted in an
improper restriction on the water authority’s exercise of its governmental
powers. Id. at 391. Such a contract
would be void ab initio. Id. The
Court then concluded that, because the parties could not have intended their
contract to be void, the parties must have intended their contract to be
terminable at will. Id. at 392.
Here, however, there is no
contention that the contract would be void ab initio if it were not terminable
at-will, and the parties’ agreement was not “indefinite in duration.” Both
Cannon and Skafi testified that they intended their agreement with Westside to
last for five years, unless the SAFEClear contracts were terminated sooner.
Although the city had a contractual right to terminate the SAFEClear contracts, the possibility of early termination does not convert
the parties’ five-year contracts into contracts of indefinite duration. A contract
for performance that is intended to span a period of more than one year falls
within the statute of frauds even if the contract may be terminated within one
year upon the happening of some event other than completed performance.[12] See Gilliam v. Kouchoucos, 340 S.W.2d 27, 29 (Tex. 1960) (holding
that ten-year employment contract providing for termination upon death of
employee was subject to statute of frauds); SBC Operations, Inc. v. Bus. Equation, Inc., 75 S.W.3d 462, 466 (Tex. App.—San
Antonio 2001, pet. denied) (stating that contract for services for period of
more than one year was governed by statute of frauds despite possibility that
service provider could be terminated within one year); Collins v. Allied
Pharmacy Mgmt., Inc., 871
S.W.2d 929, 934 (Tex. App.—Houston [14th Dist.] 1994, no writ) (holding that employment
contract for three years was within statute even though under agreement
employee could be terminated at any time for cause); Mann v. NCNB Texas
Nat'l Bank, 854 S.W.2d 664,
668 (Tex. App.—Dallas 1992, no writ) (concluding that loan agreement with three-year
repayment term was within statute notwithstanding possibility that debtor would
repay loan within year from its making); Guffey v. Utex Exploration Co.,
376 S.W.2d 1, 5 (Tex. Civ. App.—San Antonio 1964, writ ref’d n.r.e.) (holding
that twenty-year gas contract was within statute of frauds even though contract
could be terminated if wells ceased to produce gas within first year). 
Here, Skafi and Cannon asserted,
and the jury found, that Westside did not have the right to terminate their
agreement at-will. Although their agreement could have been terminated within
the first year upon the happening of some event—specifically, the city’s termination of the SAFEClear program—that possibility does not constitute full
performance as contemplated by the parties and does not remove the parties’
agreement from the statute of frauds. See
Gilliam, 340 S.W.2d at 29; SBC Operations, 75 S.W.3d at 466; Collins, 871 S.W.2d at 934; Mann, 854 S.W.2d at 668; Guffey, 376 S.W.2d at 5. Enforcement
of the parties’ oral agreements regarding storage and “free tows” is barred by
the statute of frauds.
Because there is no enforceable
contractual obligation for Westside to pay Skafi and Cannon for storage and
free tows, there is no basis upon which the trial court could have held
Westside liable for the storage and free tow damages it awarded. We hold that
the trial court erred in awarding these damages. We therefore sustain
Westside’s first issue as it relates to enforcement of the parties’ agreements
and the availability of towing and storage fee damages.[13]
C.      Skafi and Cannon may not recover attorney’s fees 
 
In its fourth issue, Westside
challenges the trial court’s award of attorney’s fees on the ground that Skafi
and Cannon are not prevailing parties. A party can recover attorney’s fees
under section 38.001(8) only if he or she is the “prevailing party” and
recovers actual damages on a breach of contract claim. See Tex. Civ. Prac. &
Rem. Code Ann. §38.001(8) (West 2008) (allowing a party who prevails on
a breach of contract claim to recover his or her attorney’s fees); Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997); Crounse
v. State Farm Mut. Auto. Ins. Co., 336 S.W.3d 717, 720 (Tex. App.—Houston [1st
Dist.] 2010, pet. denied). We have held that Skafi and Cannon cannot recover
their breach of contract damages. They therefore cannot recover attorney’s fees
under Chapter 38. See Green Int'l, 951 S.W.2d at 390; Crounse,
336 S.W.3d at 720. 
We therefore sustain Westside’s fourth issue.[14]
Skafi and Cannon’s Cross-Appeal
          In
their second issue, Skafi and Cannon assert that the trial court erred in
disregarding the jury’s findings on the existence of a partnership (question
eight) and the related questions on breach of duty (questions nine, ten, twelve,
and eighteen), damages (questions eleven, thirteen, fourteen, and fifteen) and
exemplary damages (questions sixteen, seventeen, nineteen, and twenty). Skafi
and Cannon contend that the jury’s partnership finding is supported by legally
sufficient evidence of the parties’ conduct, in conformance with the
requirements of the Texas Revised Partnership Act. They further argue that the
statute of frauds does not apply because a partnership may be formed by actions
without an agreement. Alternatively, they argue that the statute of frauds does
not apply because the partnership agreement could have been performed within
one year. Westside takes the opposite position on each of these arguments.  
A.      Evidence of a partnership
          The
parties agree that the former Texas Revised Partnership Act governs this
partnership dispute. See Act of May 31, 1993, 73d Leg., R.S.,
ch. 917, § 1, 1993 Tex. Gen. Laws 3887, 3890 (Revised Statutes art. 6132b–2.02(a)
to 2.03(a), expired Jan. 1, 2010) (TRPA).[15]  Under TRPA, five factors may be considered to
determine whether a partnership was created:
(1)     receipt or
right to receive a share of profits of the business;
 
(2)     expression of intent
to be partners in the business;
 
(3)     participation
or right to participate in control of the business;
 
(4)     sharing or
agreeing to share:
 
(A) losses of the business; or
 
(B) liability for claims by third
parties against the business; and
 
(5)     contributing
or agreeing to contribute money or property to the business.
 
TRPA art. 6132b–2.03(a); Ingram v. Deere, 288 S.W.3d 886,
896. (Tex. 2009); see also Tex. Bus. Org. Code Ann. § 152.052(a) (West 2010) (identifying same factors
for creation of a partnership). Skafi and Cannon contend that the parties,
through their conduct, satisfied each of these five factors.
In Ingram, the
Supreme Court of Texas held that, unlike the common law, TRPA did not require
proof of each of these elements to establish a partnership. Ingram, 288 S.W.3d at 896. Instead, all
of these factors should be considered in determining whether a partnership
exists and no single factor is determinative. Id. at 896–97. Under this totality-of-the-circumstances test, even
conclusive evidence of only one factor normally will not be sufficient to
establish the existence of a partnership. Id.
at 898. On the other hand, conclusive evidence of all five factors will
establish a partnership as a matter of law. Id.
TRPA also lists circumstances that, alone, do not indicate
that a person is a partner in a business, including the right to a share of
profits as compensation to an employee or independent contractor or the right
to a share of gross returns or revenues. TRPA art. 6123b–2.03(b)(1)(B), (b)(3);
Carpenter v. Phelps, No. 01-09-00203-CV, 2011 WL 1233312, at *7–8 (Tex.
App.—Houston [1st Dist.] Mar. 31, 2011, no pet.); see also Tex. Bus. Org. Code Ann. §
152.052(b). The jury question
on the existence of a partnership largely tracks the language of TRPA with
respect to the factors to consider and the circumstances that cannot, alone,
indicate the existence of a partnership.
          1.       Sharing profits 
          Shared rights to profits and to
control the business are generally considered the most important factors in
establishing the existence of a partnership. Ingram, 288 S.W.3d at 896; see
also Big Easy Cajun Corp. v. Dallas Galleria Ltd., 293 S.W.3d 345, 348
(Tex. App.—Dallas 2009, pet. denied) (“The most important of these factors are
sharing profits and participating in the control of the business.”). It is
undisputed that the parties did not share or account for the profits from their
individual SAFEClear operations. There is no evidence that the four companies
pooled their profits and then divided them among themselves or were entitled to
an accounting regarding each other’s profits.[16]  The parties’ profits varied because of
difference in their individual expenses and individual revenues from the
services they provided on the SAFEClear segments. 
Skafi and Cannon contend that the parties’ equal sharing of certain
expenses and their rotation system intended to keep revenues “fair” essentially
amounted to sharing profits, stating that “the difference between equalized revenue and the equal
sharing of expenses generated net profits to each party from the parties’
SAFEClear business (and from which each party then paid their individual
expenses).” They cite the following evidence in support of this contention:
·       
testimony from King
that each of the parties was responsible for paying twenty-five percent of the
SAFEClear fees charged by the city; 
·       
testimony from Owens
that each of the parties was responsible for twenty-five percent of the
SAFEClear fees, Messer’s salary, dispatch costs, rent and other miscellaneous
expenses associated with the SAFEClear segments;
·       
testimony from Skafi
that they divided the SAFEClear coverage areas into four segments for each of
the parties to rotate through “so that everybody had an equal opportunity as to
what was being available out there” and that this agreement was something that
would “equalize the revenue between the four”; and
·       
testimony from Cannon
that they divided the SAFEClear coverage areas into four segments for the
parties to rotate through so that they would each have an equal opportunity to
work the more valuable and less valuable areas and that this agreement was “a
way to equalize revenues” from the SAFEClear coverage areas.
We conclude that this evidence does not demonstrate a sharing
of profits for reasons relating to both sides of a profits calculation:
expenses and revenues. First,
the evidence demonstrates that the parties did not share all of the expenses for their SAFEClear-related
operations. Instead, each company bore some of its own expenses, including
purchasing its own equipment, installing GPS on its trucks, and paying its
drivers. See Ingram, 288 S.W.3d  at 898–99 (holding that there was no evidence
of profit sharing when, even assuming right to share in gross revenues, there
was no evidence that party’s claimed contribution to expenses was sufficient to
satisfy all of alleged partnership’s expenses, leaving only profits to split).
Second, while the parties’ intentions were that each party
would have an equal opportunity to earn revenues from the SAFEClear segments, we
are not persuaded that the evidence establishes that the parties’ revenues
actually were equal or that the parties had any right to equalization of their
individual revenues.
To the contrary, the evidence is that each party retained its own individual revenues
from their own work. Cannon testified, “We shared the freeway to keep the
income as fair as it could be, but we didn’t share amongst ourselves, no.” King
and Cannon both testified that the parties’ revenues and profits were
determined by the work they performed individually and not by any pooling of
revenues or profits. Skafi’s damage model is also consistent with each party
retaining the revenues earned from its individual performance of services
rather than any sharing of revenues. In short, the parties shared in an
opportunity but not in profits.
The first factor suggests the absence of a partnership.
          2.       Expression of intent to be partners
When considering whether the parties expressed an intent to
be partners, courts look at the parties’ speech, writings, and conduct. Ingram,
288 S.W.3d at 899. “Evidence of expressions of intent could include, for
example, the parties’ statements that they are partners, one party holding the
other party out as a partner on the business’s letterhead or name plate, or in
a signed partnership agreement.” Id.
at 900. This inquiry is “separate and apart from the other factors” and should
only include evidence not specifically probative of the other factors. Id. at 899–900. 
Skafi and Cannon point to the following evidence that they
assert demonstrates an expression of intent to be partners: 
·       
Skafi and Cannon
included the phrase “as partner in City of Houston Major Freeway Tow Agreement”
on three checks, one of which was to Westside. 
·       
Owens testified that
he called everyone in the group of four “loose partners” because “Richard King
and myself had the full responsibility to the City of Houston[,] and Mr. Cannon
and Mr. Skafi did not have that responsibility.”
·       
When asked whether
the group expressed that they were partners and who made such expressions,
Skafi responded: 
Myself, Mr. Cannon, Mr. Skafi, we discussed —  Mr. Owens — you know, we all discussed the
fact that we were all sharing — Mr. King — that we all shared everything
equally. We shared the expenses, we shared the responsibilities of
participating in this program equally.
·       
Cannon testified: “We
had came to an agreement that we would have a four-way partnership, 25 percent,
in the SAFEClear program only, nothing else[.]” He also testified that King
identified him and Skafi as “a partner in our group” to others at SAFEClear
operators’ meeting.
·       
Owens drafted a
partnership agreement for the group. 
Skafi and Cannon’s  printed statement on checks is evidence of
their own intent to be partners but is not evidence that Westside expressed an
intent to be partners. See Hoss v. Alardin, 338 S.W.3d 635,
644 (Tex. App.—Dallas 2011, no pet.) (“Moreover, ‘there must be evidence that both parties expressed their intent to
be partners.’”) (quoting Ingram, 288
S.W.3d at 900) (emphasis added in Hoss).
There is no evidence that Westside acknowledged, or even noticed, this
statement on the checks. To the contrary, King, Owens, Cannon, and Messer each
testified that King told the other members of the foursome that Westside had no
intention of being partners with anyone. The evidence is that King was emphatic
about Westside not wanting to be in a partnership. 
Similarly, Owens’s testimony that he considered the group to
be “loose partners” is no evidence of an expression of intent to be partners by
Westside. See Hoss, 338 S.W.3d at
644. Additionally, his testimony cuts against the existence of a partnership by
indicating that the group did not bear equal responsibility for SAFEClear
services because he and King, alone, were responsible to the city. He further
explained his answer by stating that the parties “operated as four different
companies.” Finally, Owens, like King, testified that he did not understand the
foursome to have formed a partnership. 
Owens’s draft partnership agreement does not constitute
evidence of an expression of intent to be partners for two reasons. First, King
rejected the agreement, announcing that Westside did not want to be partners
with anyone. Second, the draft partnership agreement would have created a
partnership only between Westside and Corporate Auto. Skafi’s and Cannon’s
companies were not included as parties to the draft agreement. The trial testimony
was their companies were to be subcontractors under the agreement, which
limited subcontractors’ rights to “participation in the daily operation of towing
and recovery partnership” and stated that they had “no financial rights,
interest, or claim to the Major Freeways Towing Agreement or its segments
awarded by the City of Houston to Corporate Auto [] and Westside [].” 
Skafi’s testimony that the group’s discussions of shared
expenses, participation, and responsibility constituted discussion of a partnership
is relevant to show whether the parties shared expenses or control but not to whether
the parties expressed an intent to be partners. As the Supreme Court of Texas
has observed, “[E]vidence of profit or loss sharing, control, or contribution
of money or property should not be considered evidence of an expression of
intent to be partners. Otherwise, all evidence could be an ‘expression’ of the
parties’ intent, making the intent factor a catch-all for evidence of any of
the factors, and the separate ‘expression of intent’ inquiry would be
eviscerated.” Ingram, 288 S.W.3d  at 900. 
Cannon’s testimony that they had an agreement for a four-way
partnership and that King referred to them as partners is undercut by two considerations.
First, a reasonable fact finder could not give weight to Cannon’s testimony that
their agreement was to form a partnership without additional evidence as to the
basis of his conclusion. A lay witness’s conclusion as to whether or not a
partnership has been formed is not competent evidence of the formation of a
partnership. See Hoss, 338 S.W.3d at 644–45 (citing
Ben Fitzgerald Realty Co. v. Muller, 846 S.W.2d 110, 121 (Tex. App.—Tyler
1993, writ denied)); see also Torres
v. Kelley, No. 13-04-00313-CV,
2007 WL 528849, at *3 (Tex. App.—Corpus Christi Feb. 22, 2007, no pet.) (mem.
op.)). Cannon’s testimony is legally competent evidence of his own
understanding of the agreement. But it is not evidence of the other parties’
understanding. There is no evidence that King stated at that meeting that
Westside intended to form a partnership, or even that Cannon stated such an
intent and King remained silent.[17]
Without the factual basis for Cannon’s conclusion that the group had formed a
partnership, Cannon’s conclusory opinion is not evidence that King expressed an
intent to be partners. See Hoss, 338 S.W.3d at 644–45 (holding that plaintiff’s testimony
that he and defendant “specifically agree[d] to be partners” was conclusory and
therefore no evidence of an expression of intent to be partners under TRPA); Torres, 2007 WL 528849, at *3 (analyzing
the existence of a partnership under TRPA and stating, “While it is true that
both parties and their attorneys made numerous statements about a partnership
to be formed, such conclusory statements are no evidence of the formation of a
partnership contract. Mere personal belief there may be a partnership is not
probative evidence.”).
 Second, King’s
alleged identification of Skafi and Cannon as partners at a SAFEClear
operator’s meeting is not necessarily indicative of an intent to be partners in
the legal sense. The testimony indicates that King and Owen referred to Skafi
and Cannon as partners in order that Skafi and Cannon would be allowed to
attend a SAFEClear operator’s meeting with them. Courts have consistently held
that “merely referring to another person as ‘partner’ in a situation where the
recipient of the message would not expect the declarant to make a statement of
legal significance is not enough.” Ingram,
288 S.W.3d at 900; see also Hoss, 338 S.W.3d at 644–45; AIG Risk Mgmt. Inc. v. Motel 6 Operating
L.P., 960 S.W.2d 301, 307 (Tex. App.—Corpus Christi 1997, no pet.) (holding
that letter in which AIG offered to work with Motel 6 in “partnership” to
achieve Motel 6’s risk management objectives did not suggest offer to form legal
partnership but, rather, emphasized AIG’s willingness and interest in working
cooperatively with Motel 6). This is because the term “partner” is regularly
used in common vernacular and may be used in a variety of ways. Ingram, 288 S.W.3d at 900. We must look
to the words used, the context in which the statement was made, and the
identity of the speaker to determine if such a statement constitutes legally
significant evidence of an expression of intent. Id. 
In Ingram, the
Court found that Deere’s testimony that Ingram represented that “this was a joint
venture, or that we were partners, or we were doing this together” constituted
no evidence that Ingram expressed an intent to be partners. Id. at 901. The Court observed that
Deere did not have an accurate understanding of the legal meaning of a partnership
and that the other evidence did not indicate an expression of intent: the
business did not change its name to identify Deere as a partner; Deere did not
sign the business’s lease, was not named on the business’s bank account, never
signed a signature card for the bank account, and never filed taxes
representing that he was a co-owner of the clinic; and Deere maintained his own
insurance. Id.
 Here too, none of four towing businesses
changed their name to reference each other, nor did any party register an
assumed name so that they could “do business as” the partnership. To the
contrary, Cannon testified that Westside could not “do business as” the
partnership. Westside, not any alleged partnership entity, was the sole party
to its SAFEClear contracts with the city. The parties did not share a bank
account or have signatory authority on each other’s bank account. No party
filed a partnership return for the alleged partnership between the foursome. Finally,
each party maintained only separate insurance for their own business. For the
same reasons articulated by the Court in Ingram,
we conclude that there was no evidence of an expression of intent to be
partners. See Ingram, 288 S.W.3d  at 900–901; see also Hoss, 338
S.W.3d at 645 (holding that there was no evidence of expression of intent when
one party identified the other as a “partner” to customers but there was no
evidence as to why that showed an expectation that the term carried legal significance);
DeNucci v. Moretti, No. 03-98-00114-CV, 1999 WL 250141, at *6 (Tex. App.—Austin
Apr. 29, 1999), dism’d after settlement, No. 03-98-00114-CV, 1999 WL 603589 (Tex. App.—Austin Aug. 12,
1999, no pet.) (stating that “although DeNucci admitted to referring to Moretti
as his “partner” numerous times, mere legal conclusions by a lay witness do not
prove the existence of a partnership.”) (mem. op., not designated for
publication).
This factor also suggests that the parties did not form a
partnership.
          3.       Sharing control of business
          As noted above, sharing of control,
like sharing of profits, is typically given particular importance in the
analysis of whether a partnership exists. See
Ingram, 288 S.W.3d at 896; Big Easy Cajun, 293 S.W.3d  at 348. The trial testimony of all four
purported partners was that each party ran its own business. Owens testified
that the parties “operated as four different companies.” Cannon testified, “Mr.
King ran Westside Wrecker Service, and Mr. Owens run his. I run mine, as I
always have, M[s]. Skafi run hers. This was only for a freeway deal. He handled
his own drivers, trucks[;] I handled mine.” Skafi testified she ran her towing
business after her husband fell ill in 2005 and that, when King and Messer
approached her and suggested that Messer take control over her operations, she
objected that she did not want a “drill sergeant” running her drivers. Owens
also testified that none of the four parties had any ability to act on behalf
of or bind the others. 
Although Messer handled a number of tasks that were performed
for the benefit of all four tow companies with respect to the SAFEClear
segments, a shared employee is not the same as shared control. The right to
control a business is the right to make executive decisions. See Ingram, 288 S.W.3d at 901–02; Tierra Sol
Joint Venture v. City of El Paso,
155 S.W.3d 503, 508 (Tex. App.—El Paso 2004, pet. denied); Price v. Wrather, 443 S.W.2d 348, 351–52 (Tex. Civ. App.—Dallas
1969, writ ref’d n.r.e.); Guerrero v. Salinas, No. 13–05–323–CV, 2006 WL 2294578, at *11 (Tex. App.—Corpus
Christi Aug. 10, 2006, no pet.) (mem. op.). There is no evidence that any of
the parties had any right to make executive decisions that extended beyond the
operation of their own individual company. See
Ingram, 288 S.W.3d at 901–02; Hoss, 338 S.W.3d at 645–46 (holding
that exercise of control over some subordinate employees was no evidence of
right of control over business operations); Big
Easy Cajun, 293 S.W.3d at 349 (holding that there was no evidence of shared
control when one party provided administrative services to the other); Knowles v. Wright, 288 S.W.3d 136, 147
(Tex. App.—Houston [1st Dist.] 2009, pet. denied) (concluding that testimony
that parties sometimes made decisions together was no evidence of control when
one party had no ability to control decisions or actions of other party’s
business decisions). 
Skafi and Cannon also rely on Cannon’s testimony that the
parties intended to work out their differences democratically:
Q.      And
as far as running the meetings of the group of four, was this a [d]emocratic
process? Was it supposed to be a [d]emocratic process?
 
A.      It
was supposed to be, and it tried to be. Sometimes it was more of a yelling
match; but all in all, we were able to work out most of our differences.
 
Even
reading this testimony as supporting a contention that the parties attempted to
run group meetings democratically, there is no evidence that the group ever
made any executive decision about the operation of the four towing companies in
such a manner. See Ingram, 288 at
901–02. Here again, the evidence indicates that parties attempted to work
together as separate business entities seeking to share in a particular, mutually-beneficial
business opportunity but did not work together to exercise shared control over
a single, united partnership entity or over each others’ individual business
entities.
This factor suggests the absence of a partnership.
4.       Sharing
losses or liability
The evidence demonstrates that the parties did not share
losses or liability. When asked whether he might share any liability for
Westside’s drivers, Cannon testified, “We never had that kind of agreement.” He
further stated that their agreement was not the kind of agreement where
Westside could be doing business in the name of their alleged partnership. Owens
also testified that the parties did not share liabilities. King likewise
testified that the parties never shared losses or liabilities for debts. And each
party maintained its own separate liability insurance. While the parties shared
certain expenses, sharing specific expenses is not evidence of sharing losses
or liabilities. See Ingram, 288
S.W.3d  at 902 (holding that sharing of
revenue and contribution of specific portion of revenue to expenses was not
evidence of shared losses when party had no liability for losses in excess of
predetermined contribution to expenses).
This factor does not support the existence of a partnership.
5.       Contributing money or property to the
business
          Skafi and Cannon rely on their sharing
SAFEClear expenses as evidence that they contributed money or property to the
business. They also note that the four companies’ equipment and assets were
identified in the SAFEClear bid packages. 
While the sharing of these expenses is consistent with a partnership
between the parties, it is equally consistent with the possibility that the four
towing companies agreed to share the cost of obtaining a particular business
opportunity—participation in the SAFEClear program—in which they would all
participate equally, but as individual companies. Cf. Smith v. Deneve, 285 S.W.3d 904, 915 (Tex. App.—Dallas
2009, no pet.) (holding that evidence that party made contributions toward
mortgage payment on house was not evidence that he contributed to partnership
to buy, fix-up and sell house for profit when he was also living in house and
mortgage payment was equally consistent with conclusion that other party owned
house and he paid rent); Resendez v. Maloney, No. 01-08-00954-CV, 2010
WL 5395674, at *7 (Tex. App.—Houston [1st Dist.] Dec. 30, 2010, pet. denied)
(mem. op.) (holding that plaintiff failed to satisfy partial performance as
exception to statute of frauds bar against alleged ten-year partnership
agreement because evidence of companies working together on twenty-three prior
events was equally consistent with companies merely working together without
partnership agreement). Additionally,
sharing in expenses does not necessarily constitute contributing money or
property to a partnership. For example, in Ingram,
the evidence showed that the party claiming a partnership had agreed to have a
certain amount deducted from his share of the organization’s revenues to cover
expenses, but that evidence was not discussed with respect to contribution, of
which the Texas Supreme Court concluded there was no evidence. See Ingram, 288 S.W.3d  at 899, 902–03. 
The payments made by Skafi’s and Cannon’s towing companies were not made
to an alleged partnership entity; they were made to Westside and Corporate Auto.
The checks expressly noted, however, that they were issued “as partner in City of Houston Major
Freeway Tow Agreement.” We conclude that this is some evidence that Skafi and
Cannon contributed money to the alleged partnership by issuing payments of
SAFEClear fees purportedly made on behalf of the partnership.
Like the shared expenses, the listing of all four towing
companies’ assets on the SAFEClear bids is equally consistent with the
possibility that four separate companies were working together to obtain a
business opportunity in which they might each partake. There is no evidence that
the parties transferred ownership or any interest in their individual assets to
a partnership entity or that any of the four towing companies had a right to possess
or use assets belonging to one of the others.  
Under this factor alone, there is some evidence of a
partnership.
6.       Conclusion
          TRPA defines a partnership as “an
association of two or more persons to carry on a business for profit as
owners.” TRPA art. 6132b–2.02(a); Ingram,
288 S.W.3d at 894; see also Tex. Bus. Org. Code Ann. § 152.051(b). But
the parties did not associate for the purpose of carrying on a single business
in which they each held an ownership interest; instead, the four separate
businesses agreed to work together for their mutual, but individually realized,
benefit. Such coordinated business efforts do not, alone, create a partnership
under Texas law. See Ingram, 288
S.W.3d at 894; see also Tex. Bus. Org. Code Ann. § 152.056 (“A
partnership is an entity district from its partners.”). The parties did not
share profits, losses, or liabilities. Although the parties shared an employee,
each party maintained exclusive control over his or her own business
operations. There is no evidence that King or any other representative of
Westside ever expressed an intent to be partners with Skafi and Cannon;
instead, there is uncontested evidence that King told the others that Westside
would not form a partnership with anyone. There is, however, some evidence that
Skafi and Cannon contributed money to the alleged partnership. 
Considering this evidence in its totality, we conclude that the evidence
is not legally sufficient to support the jury’s finding that Westside created a
partnership with Skafi and Cannon. See
Ingram, 288 S.W.3d  at 899–904
(applying totality-of-the-circumstances test); see also Hoss, 338 S.W.3d at 650 (holding that
evidence was legally insufficient to support partnership finding when there was
no evidence of four out of five TRPA factors and only weak evidence on the
fifth factor); Big Easy Cajun, 293 S.W.3d at 349 (applying
totality-of-the-circumstances test to determine that there was no evidence to
support existence of a partnership). This conclusion negates the predicate for
Skafi’s and Cannon’s claims for breach of fiduciary duty and breach of the
duties of care and loyalty. See Hoss, 338 S.W.3d at 650 (“Our
conclusion that the jury’s finding of a partnership between Hoss and Alardin
was supported by legally insufficient evidence negates the predicate for
Alardin’s recovery for breach of fiduciary duty, so we need not consider Hoss’s
remaining issues on appeal.”). We therefore hold that the trial court properly
disregarded the jury’s answers to questions eight (partnership), nine (duty of
loyalty), ten (duty of care), eleven (Skafi’s breach of duty of care and loyalty
damages), twelve (fiduciary duty), thirteen (Skafi’s breach of fiduciary duty
damages), fourteen and fifteen (mitigation of Skafi’s damages).
Because we conclude that there is
not legally sufficient evidence to support the jury’s determination that Westside
created a partnership with Skafi and Cannon, we do not reach Skafi and Cannon’s
contention that a partnership can be formed by conduct in the absence of an
agreement when such an agreement would be barred by the statute of frauds. Cf. Carpenter, 2011 WL 1233312, at *8 (when agreement concerning real
property was barred by statute of frauds, there was no basis for partnership
between parties to develop the real property). 

B.      Exemplary
damages
Although Skafi and Cannon assert that the trial court erred
in disregarding the jury’s answers to the questions on exemplary damages
(questions sixteen, seventeen, nineteen, and twenty), they make no argument
specific to exemplary damages. The implication is that if the partnership
finding is reinstated, so too must the exemplary findings be reinstated.[18]
We have held that the trial court properly disregarded the jury’s partnership
finding. A party may not recover exemplary damages unless the party also
recovers actual damages on a claim for which exemplary damages are available. Jim
Walter Homes, Inc. v. Reed,
711 S.W.2d 617, 618 (Tex. 1986); El-Khoury v. Kheir, 241 S.W.3d 82, 89
(Tex. App.—Houston [1st Dist.] 2007, pet. denied). Because neither Skafi nor
Cannon are entitled to recover actual damages, they are not entitled to recover
exemplary damages. See El-Khoury, 241 S.W.3d at 89.
We overrule Skafi and Cannon’s fourth issue.[19]
Conclusion
          The trial court erred in awarding
Skafi and Cannon damages for unpaid towing or storage because the alleged
agreement creating liability for those damages is unenforceable under the statute
of frauds. The trial court properly disregarded the jury’s partnership-related
findings because the evidence is not legally sufficient to support the
existence of a partnership between Westside and Skafi or Cannon. We reverse the
trial court’s judgment with respect to Westside and enter judgment that Skafi
and Cannon take nothing on their claims against Westside. 
 
                                                                   Harvey
Brown
                                                                   Justice

 
Panel
consists of Justices Jennings, Sharp, and Brown.
 




[1]
          Paragraph seven of the trial
court’s judgment grants a take-nothing judgment on Skafi and Cannon’s claims
against Richard King. This portion of the judgment has not been attacked on
appeal and is affirmed.


[2]
          Corporate Auto Sales is not a
party to this appeal.


[3]
          As originally envisioned, the
SAFEClear program required drivers of disabled vehicles to pay a flat fee of
$75 to the tow truck operator. This aspect of the program was unpopular with
voters, and the program was revamped to require tow truck operators to tow
disabled cars off the freeway and to a side street at no cost to the driver.
The city agreed to reimburse the operators for these “free tows” at a rate of
$50 per tow. Thus, Westside and Corporate Auto received reimbursements from the
city for the free tows provided in their respective SAFEClear segments. They
could then reimburse Cannon and the Skafis for their “free tows.”


[4]
          This may be a result of the
trial court’s mid-trial ruling excluding Cannon’s lost profits damage model.
Neither party challenges that ruling on appeal.


[5]
          The jury charge required the
jury to find a breach of the duties of loyalty and care, placing the burden of
proof on the plaintiffs for these questions. But the jury charge required the
jury to find compliance with the fiduciary duty, placing the burden of proof on
the defendant for this question.


[6]
          Because the jury charge contains
no questions for damages to Cannon resulting from Westside’s breaches of its
duties of loyalty, care, and as a fiduciary, it is unclear what harm to Cannon
could support the exemplary damage award to him.


[7]
          The remaining jury questions are
questions in which the jury found that Skafi and Cannon did not breach their
agreements or duties and questions that were not answered due to the answer to
the corresponding predicate question.


[8]
          No party argues on appeal that
this award does not conform to the pleadings.


[9]
          At oral argument, counsel for
Skafi and Cannon indicated that Westside’s obligation to pay Skafi and Cannon
for storage fees and Cannon for free tows was part of their subcontractor
relationship with Westside. This theory was not submitted to the jury. The only
jury question on breach of contract was question four, which globally addressed
the parties’ various alleged promises in a single question.


[10]
        The SAFEClear contracts were eventually
extended to a five-and-one-half-year term, but the testimony generally references
the original five-year term. 


[11]
        The evidence demonstrated that, at
the time the agreements were reached, the parties expected to continue all of
their obligations to each other for the term of the SAFEClear contract. There
is no controverting evidence indicating that the parties contemplated a
different or lesser term for any “side deal.”


[12]
        By
contrast, contracts in which the contemplated performance may or may not span a
period of more than one year fall outside the statute of frauds. Compare Young v. Ward, 917 S.W.2d 506, 510–11 (Tex. App.—Waco 1996,
no writ) (contract for performance for length of one party’s life was outside
statute of frauds because, if party died within one year, contract would have
been fully performed within one year), with
Chevalier v. Lane’s, Inc.,
213 S.W.2d 530, 532–33 (Tex. 1948) (employment contract for specified period in
excess of one year was within the statute of frauds despite possibility that
employee could die within one year). This is because the statute of frauds applies to “an agreement which is
not to be performed within one year” rather than an agreement that may not be
terminated within one year. Tex. Bus. & Com. Code Ann. § 26.01 (West
2009). Termination of a contract may
occur in the absence of completed performance, but such a termination does not
alter the applicability of the statute of frauds to the contract. See Gilliam v. Kouchoucos, 340
S.W.2d  27, 28–29 (Tex. 1960); Young,
917 S.W.2d at 511.


[13]
        In light of our holding on this
issue, we need not reach Westside’s second issue—relating to the absence of a liability finding with
respect to the existence of a partnership—or its third issues—challenging the sufficiency of Skafi and Cannon’s
damages evidence. We likewise overrule Skafi and Cannon’s first and second
issues, which, respectively, challenge the trial court’s decision to disregard
the jury’s breach of contract finding and assert that the damages question
subsumes a liability finding.


[14]
        In light of our holding on this
issue, we need not reach Westside’s fifth and sixth issues, raising other
challenges to the attorney’s fees award. We also need not reach Skafi and
Cannon’s third issue relating to the reasonableness of the attorney’s fees and
the failure to segregate.


[15]
        TRPA expired on January 1, 2010.
After that date, the Texas Business Organizations Code applied to all partnerships, “regardless of
their formation date.” Ingram v. Deere,
288 S.W.3d 886, 905 n.4 (Tex. 2009). Both TRPA and the TBOC identify the same
five factors for determining whether parties have formed a partnership. Compare Tex.
Bus. Orgs. Code Ann. § 152.052(a) (West Supp. 2011), with TRPA art.
6132b–2.03. Because the parties argue under TRPA, and the factors are the same
under TBOC, we will discuss the parties’ arguments with respect to TRPA and
include citations to the relevant provision of the TBOC.
 


[16]
        Texas courts have recognized a
distinction between a right to a share of revenues and a right to a share of
profits in this context. See Ingram,
288 S.W.3d at 899 (citing Schlumberger
Tech. Corp. v. Swanson, 959 S.W.2d 171, 176 (Tex. 1997)). 


[17]         To the contrary, Owens testified that
no one used the word “partner” at that meeting or in any group discussions before
he drafted a proposed partnership agreement. King likewise testified that no
one used the word “partnership” before Owens brought his draft agreement to the
group. Messer, who was also present at the group’s initial meetings, testified
that no one mentioned the term “partnership” before Owens brought his proposed
partnership agreement to a meeting. Owens testified that, when he drew up a
proposed partnership agreement, he made only Corporate Auto and Westside
partners and brought the agreement to Westside alone because he felt that Skafi
and Cannon were subcontractors who should not be included in the discussions.
And, as noted above, King rejected Owens’s proposed partnership agreement,
informing all four parties that Westside would not form a partnership with any
other party. 


[18]
        Even if Skafi and Cannon had
prevailed on their contractual claims, exemplary
damages are not available for breach of contract. See Tony Gullo Motors I, L.P.
v. Chapa, 212 S.W.3d 299, 304 (Tex. 2006). 


[19]
        Because of our holding on this
issue, we need not reach Skafi and Cannon’s fifth issue, requesting remand in
the event the partnership finding were reinstated.


