Reverse and Render; Opinion Filed August 21, 2013.




                                                         In The
                                                   Court of Appeals
                                            Fifth District of Texas at Dallas

                                                      No. 05-11-00769-CV

   TIMOTHY BARTON, JMJ HOSPITALITY, L.L.C. AND JMJ HOLDINGS, L.L.C,
                             Appellants
                                V.
  RESORT DEVELOPMENT LATIN AMERICA, INC., ALIBER GARCIA AND ELIUD
                         GARCIA, Appellees

                                On Appeal from the 116th Judicial District Court
                                             Dallas County, Texas
                                    Trial Court Cause No. DC-07-10870-F

                                                      OPINION
                                      Before Justices Moseley, Bridges, and Lang
                                              Opinion by Justice Moseley
          Appellants Timothy Barton, JMJ Hospitality, L.L.C., and JMJ Holdings, L.L.C. appeal an

adverse judgment in favor of appellees Resort Development Latin America, Inc. (f/k/a JMJ

Development Mexico, Inc.),1 Aliber Garcia, and Eliud Garcia, which was entered following a

jury verdict. Appellees’ damages are based on lost profits. In their issues on appeal, appellants

argue, among other things, that there is no evidence of causation to support the jury’s damage

awards and no evidence showing the existence and amounts of lost profits with reasonable

certainty. We agree. Therefore, we reverse the trial court’s judgment awarding damages to

appellees and render judgment that appellees take nothing.

     1
      During the time giving rise to the events that are the subject of this litigation, appellee Resort Development Latin America, Inc. was
known as JMJ Development Mexico, Inc. We will refer to the entity as JMJ Development Mexico.
                                       I.      BACKGROUND

       Barton, Aliber, and Eliud formed JMJ Development Mexico to develop real estate

projects in Mexico. The parties’ focus was on developing high-end resorts. In April 2006,

Aliber and Eliud identified two properties on the Riviera Maya for possible development: the

“Shabshab Property” where they sought to develop a resort under the W Hotel brand, and the

“Preciado Property” where they sought to develop a resort under the St. Regis Hotel brand. It

was intended that each resort development would include a hotel as well as villas and

apartments.

       As discussed in more detail below, over the next several months the Garcias entered into

a non-binding proposal with an entity concerning the possible purchase of the Shabshab Property

and a non-binding letter of intent (LOI) with an investor who was interested in investing part of

the equity needed to develop the W Hotel project. They also received non-binding letters of

interest from the entity that owned both the W Hotel and the St. Regis Hotel brands, Starwood

Hotels & Resorts Worldwide, Inc. (Starwood).

       In the spring of 2006, several months after Aliber and Eliud began working to pursue

opportunities for JMJ Development Mexico, Barton formed a new company, appellee JMJ

Hospitality. There is some evidence that on or about July 15, 2006, Barton and JMJ Hospitality

contacted Mexican landowners and instructed them not to deal with Aliber and Eliud anymore;

instead, the landowners should deal with Barton and JMJ Hospitality.             Aliber and Eliud

presented evidence that two Mexican landowners then suspended negotiations with JMJ

Development Mexico and a third ceased negotiations. Neither the Garcias nor JMJ Development

Mexico ever acquired the properties they had considered developing as resorts.

       Appellees sued appellants for breach of fiduciary duty, breach of contract, tortious

interference with existing and prospective contracts, and conspiracy.        They alleged that

                                               –2–
appellants’ actions caused them to lose the opportunities to develop the Shabshab and Preciado

Properties. Appellees presented expert testimony from Bruce Goodwin to support their request

for damages.

          The jury found that Barton breached his fiduciary duty to JMJ Development Mexico; that

at least one appellant interfered with JMJ Development Mexico’s contract to buy real estate in

Mexico; and that at least one appellant intentionally interfered with a prospective contractual or

business relationship of JMJ Development Mexico. The jury awarded JMJ Development Mexico

$7 million for lost profits sustained in the past and $0 for lost profits it would sustain in the

future.

          The jury also found that Barton failed to comply with the shareholder agreement with the

Garcias; on that basis, the jury awarded the Garcias $0 for lost profits sustained in the past and

$3 million for lost profits that, in all reasonable probability, they would sustain in the future. The

trial court rendered a final judgment based on the jury’s verdict.

                                                       II.        ISSUES ON APPEAL

          In their ninth issue, appellants assert that appellees failed to present legally sufficient

evidence related to the issue of causation and the trial court erred by submitting damages

questions to the jury. In their tenth issue, appellants assert the evidence is legally and factually

insufficient to support the jury’s damages awards. They argue the only testimony and evidence

offered by appellees regarding damages was based on and the result of pure speculation and

conjecture. Because these two issues are closely related, we discuss them together. In doing so,

we reject appellees’ argument that appellants failed to preserve their ninth issue for appeal. 2

   2
       Appellants’ motion to vacate, modify, correct or reform final judgment, or for new trial, included the following arguments:
                The only remaining remedy for alleged injury by breach of fiduciary duty was to recover economic damages caused
          by the alleged breach of fiduciary duty. Plaintiffs did not prove economic damages from the alleged breach of fiduciary
          duty.
                ...


                                                                      –3–
                                III.        STANDARD OF REVIEW AND APPLICABLE LAW

        When, as here, appellants attack the legal sufficiency of an adverse finding on an issue on

which they did not have the burden of proof, they must demonstrate that no evidence supports

the finding. Doyle v. Kontemporary Builders, Inc., 370 S.W.3d 448, 453 (Tex. App.—Dallas

2012, pet. denied) (citing Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983)). There is “no

evidence” when (a) there is a complete absence of evidence of a vital fact, (b) the court is barred

by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact,

(c) the evidence offered to prove a vital fact is no more than a mere scintilla, or (d) the evidence

conclusively establishes the opposite of the vital fact. See City of Keller v. Wilson, 168 S.W.3d

802, 810 (Tex. 2005). “The final test for legal sufficiency must always be whether the evidence

at trial would enable reasonable and fair-minded people to reach the verdict under review.” Id. at

827. We review the evidence in the light most favorable to the verdict, crediting favorable

evidence if reasonable jurors could and disregarding contrary evidence unless reasonable jurors

could not. See id. at 820-21.

        Lost profits are damages for the loss of net income to a business, reflecting income from

the lost business activity, less expenses that would have been attributable to that activity.

Examination Mgmt. Servs., Inc. v. Kersh Risk Mgmt., Inc., 367 S.W.3d 835, 840 (Tex. App.—

Dallas 2012, no pet.). The calculation of lost-profit damages must be based on net profits, not on

gross revenue or gross profits. Id. (citing Holt Atherton Indus. v. Heine, 835 S.W.2d 80, 83 n.1

             All that was shown in the evidence was business judgment with no, or insufficient consequential evidence to show a
        causal connection with any damage.
              ...
              Plaintiffs had no economic damages arising from Defendants’ alleged conduct. The jury’s award of damages to [JMJ
        Development Mexico] and future damages to the Garcia Brothers was based on speculative opinion testimony that a resort
        hotel development would occur with factors favoring the best possible outcome, for a development project that was not
        built and for non-existent future resort hotel developments, for which no reasonable probability was shown. The reality is
        that the Plaintiffs never developed any luxury resort real estate development projects, so the “past lost profits” and “future
        lost profits” damages awarded by the jury resulted in a windfall to the Plaintiffs, which defeats the statutory purpose of
        compensatory damages . . . .
   We conclude appellants’ motion was sufficiently specific to make the trial court aware of their complaint. See TEX. R. APP. P. 33.1(a).



                                                                    –4–
(Tex. 1992)). Although recovery for lost profits does not require that the loss be susceptible to

an exact calculation, a party seeking to recover lost profits must prove the loss through

competent evidence with reasonable certainty. ERI Consulting Eng’rs, Inc. v. Swinnea, 318

S.W.3d 867, 876 (Tex. 2010) (quoting Holt Atherton Indus., 835 S.W.2d at 84); Exel Transp.

Servs., Inc. v. Aim High Logistics Servs., LLC, 323 S.W.3d 224, 232 (Tex. App.—Dallas 2010,

pet. denied) (quoting Szczepanik v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994) (per

curium)).    What constitutes reasonably certain evidence of lost profits is a fact-intensive

determination. Swinnea, 318 S.W.3d at 876 (quoting Holt Atherton Indus., 835 S.W.2d at 84).

“[At] a minimum, opinions or estimates of lost profits must be based on objective facts, figures,

or data from which the amount of lost profits can be ascertained.” Id.; Excel Transp. Servs., Inc.,

323 S.W.3d at 232 (quoting Szczepanik, 883 S.W.2d at 649).

       If no evidence is presented to prove lost profits with reasonable certainty, the trial court

must render a take-nothing judgment as to lost-profits damages. See, e.g., Tex. Instruments, Inc.

v. Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 281 (Tex. 1994) (concluding there was no

evidence to prove lost profits with reasonable certainty and affirming trial court’s order granting

judgment notwithstanding the verdict as to the lost-profits damages); Examination Mgmt. Servs.,

Inc., 367 S.W.3d at 847-48.

                              IV.    THE W HOTEL PROJECT

       Appellees’ alleged damages arise from the failure to develop two projects: a W Hotel

and resort on the Shabshab Property and a St. Regis Hotel and resort on the Preciado Property.

We begin with the development of a proposed W Hotel project on the Shabshab Property.

       Our review of the evidence as to the likelihood that the underlying transactions necessary

for the development of a W Hotel to have taken place, evidence of changing economic factors

during the relevant time period, and evidence of damages resulting from the failure to develop a

                                               –5–
W Hotel and resort on the Shabshab Property—even when viewed in the light most favorable to

the jury’s verdict—makes it clear appellees did not prove the existence or amount of lost profits

with reasonable certainty and that the “opinions or estimates of lost profits” upon which

appellees rely are not based on “objective facts, figures, or data from which the amount of lost

profits can be ascertained.” Swinnea, 318 S.W.3d at 876; Exel Transp. Servs., Inc., LLC, 323

S.W.3d at 232.

    A. Uncertainty Regarding the Necessary Underlying Transactions

        1. Evidence

    In December 2004, Shabshab contracted to sell the property to Inland Immobiliaria, S.A. for

$7.7 million, to be paid by August 30, 2005, at the latest. The contract also provided for a “final

contract for sale and purchase must be executed . . . by August 30, 2005, at the latest, provided

that the [seller] deems the purchase price to be paid satisfactorily.” The contract required a

portion—$200,000—of the purchase price to be paid in January 2005; the contract stated that “in

the event the final contract for this commitment is not executed within the time and form agreed

upon,” Shabshab would keep the $200,000 as “indemnization for the harm and damage incurred

as a result of this breach . . . .”

        The Shabshab–Inland contract also provided for Shabshab to provide clear title to the

property “free of all liens, limitations of ownership . . . .” Indeed, by signing the contract

Shabshab declared that the property was “free of all liens, charges or limitations of ownership,

guarantees in favor of third parties, or disputes of any nature . . . .” The only evidence in the

record indicates this declaration was not true; the Shabshab Property had title problems and was

the subject of title litigation with a Spanish or Mexican company referred to in the record as

OHL, as well as title litigation with an American corporation, The Kor Group.




                                               –6–
          It is undisputed that the “final contract for sale” referenced by the Shabshab–Inland

contract was never executed; that the purchase price was never paid; and that Inland never

obtained title—clear or otherwise—to the Shabshab Property. There is some evidence the

contract expired on August 30, 2005, according to its terms, and no evidence it did not do so.

          Nevertheless, some eight months later, on April 4, 2006, JMJ Development Mexico

proposed to acquire the Shabshab Property from Inland for $12.5 million. The proposal, which

Inland “accepted,” provided for execution of a final contract “[w]ithin a maximum time period of

thirty days . . . .” Under the proposal, JMJ Development Mexico promised to pay $2.5 million

within ninety days, after conducting its due diligence, “if no issues arise therefrom.” The

remaining $10 million would, at Inland’s option, either be paid at closing or Inland would

contribute that receivable to the development and become an investor in the project for that

amount. The proposal also specified that the date of payment “will be subject to the resolution of

the lawsuit that the property is involved in with the U.S. corporation, The Kor Group.”3

          It is undisputed that a final contract was not executed within thirty days of April 4, 2006,

that JMJ Development Mexico did not pay $2.5 million to Inland within ninety days of that date,

that the litigation with The Kor Group was not resolved, and that JMJ Development Mexico did

not acquire the Shabshab Property. There is some evidence this proposal expired according to its

terms on July 3, 2006, and no evidence it did not.

          Nevertheless, the Garcias, on behalf of JMJ Development Mexico, sent a proposed LOI

dated July 5, 2006, to Andrea Vezzani, a potential investor who was interested in developing a

W Hotel project. In the LOI, JMJ Development Mexico stated it had “reached an agreement” to

acquire the Shabshab Property for $3.5 million in cash and a $10 million investor’s share in the

development, and that it was “preparing the definitive agreements.” JMJ Development Mexico

   3
       The proposal did not mention the OHL litigation concerning title to the Shabshab Property.



                                                                     –7–
also stated it “is also currently in negotiations with the Starwood Hotels and Resorts Worldwide

for The Project to be a W Hotel and Villa resort.” Vezzani signed the LOI on or about July 14,

2006. The LOI stated it was not binding and was only an expression of the parties’ interests.

          Upon receipt of the signed LOI from Vezzani, Aliber e-mailed Barton stating, in part,

that when agreements with the seller of the Shabshab Property are signed, “the law suits with

KOR and OHL need to be resolved simultaneously. When do you think we could set up a

meeting . . . to define how the issue will get resolved?” There is no evidence the lawsuits were

ever resolved, or on what terms they could have been resolved.4

          In June 2006, the Garcias obtained a letter from Starwood expressing an interest in

evaluating a management agreement for a W Hotel on the Shabshab Property, if JMJ

Development Mexico acquired the property. The letter stated it was only an “expression of our

interests to further evaluate these opportunities, and does not create any legally binding

obligation on Starwood. You should not rely on this letter . . . .”

          2. Analysis

          Taken together and viewed in the light most favorable to the jury’s verdict, the evidence

does not show with any reasonable certainty that a W Hotel would have been built on the

Shabshab Property.                Awarding lost profit damages based on these facts would be to

impermissibly allow appellees to collect damages for a speculative transaction.

          To conclude JMJ Development Mexico would ever have developed a W Hotel resort on

the Shabshab Property, we would be required to stack assumption upon assumption, which we

will not do. See Glattly v. Air Starter Components, Inc., 332 S.W.3d 620, 633-35 (Tex. App.—

Houston [1st Dist.] 2010, pet. denied) (citing Holt Atherton, 835 S.W.2d at 85-86; Atlas Copco

     4
       Aliber testified Barton told him that he (Barton) thought the OHL lawsuit could be resolved. Barton testified the only way he saw to
resolve the OHL suit was to bring OHL in as an investor. There was no evidence that OHL would have become an investor, or on what terms it
would have become an investor.



                                                                  –8–
Tools, Inc. v. Air Power Tool & Hoist, Inc., 131 S.W.3d 203, 208-09 (Tex. App.—Fort Worth

2004, pet. denied); Capital Metro. Transp. Auth. v. Cent. of Tenn. Ry. & Navigation Co., Inc.,

114 S.W.3d 573, 581-82 (Tex. App.—Austin 2003, pet. denied)) (assumptions without

supporting evidence insufficient for lost profit damages); see also Teleresource Corp. v. Frontier

Computer Corp., No. 05-99-01134-CV, 2000 WL 799074, at *11 (Tex. App.—Dallas June 22,

2000, pet. denied) (not designated for publication) (“Despite the mathematical precision with

which [witness] calculated Frontier’s damages, we conclude there is little, if any, factual basis

for the assumptions underlying many of his figures.”). We would have to assume that, among

other things, (1) despite the expiration of the Shabshab-Inland contract, Inland would still have

acquired the property from Shabshab; (2) despite the expiration of the non-binding proposal,

Inland would have sold the Shabshab Property to JMJ Development Mexico; (3) the title disputes

on the Shabshab Property would have been resolved and JMJ Development Mexico would have

obtained clear title; (4) Vezzani would have provided equity funding along the lines of the non-

binding LOI; (5) Vezzani would have agreed to provide the remainder of the needed equity

funding, or JMJ Development Mexico would have found another equity investor; (6) JMJ

Development Mexico would have found a lender willing to provide the debt funding needed for

the project; and (7) Starwood would have agreed to put a W Hotel on the Shabshab Property and

the terms on which it would have done so. In addition, we would have to assume that the terms

of each of these transactions were such as would allow the development—including the other

transactions involved—to go forward. None of these assumptions are supported by facts in the

record and, therefore, they cannot form the basis for appellees’ damages award. Szczepanick,

883 S.W.2d at 650 (evidence without evidentiary foundation is purely speculative and

conclusory and is no evidence of lost profit damages).




                                               –9–
          Even Goodwin, appellees’ expert, acknowledged he assumed the speculative W Hotel

project would have been completed when he performed his damages analysis. He testified: “the

land transaction was moving effectively down the trajectory toward completion, that the

impediments that might exist should be able to be resolved, that the market conditions at that

time were exceedingly strong, that the brand and the management fit the concept and the

location, that the occupancies and the average room rates projected were consistent with other

luxury hotels in Mexico. . . .”5 None of his assumptions are supported by the evidence.

          We conclude the evidence concerning the underlying transactions necessary for the

development of a W Hotel—even when viewed in the light most favorable to the jury’s verdict—

does not prove with reasonable certainty that JMJ Development Mexico would ever have

completed such a development, and thus does not prove the existence or amounts of lost profits

with reasonable certainty. See Swinnea, 318 S.W.3d at 876; Exel Transp. Servs., Inc., LLC, 323

S.W.3d at 232. Rather, appellants’ projection that they suffered lost-profit damages is “without

any evidentiary foundation and therefore, is purely speculative and conclusory.” Szczepanik, 883

S.W.2d at 650; Total Clean, L.L.C. v. Cox Smith Matthews, Inc., 330 S.W.3d 657, 667 (Tex.

App.—San Antonio 2010, pet. denied).

     B. Subsequent Economic Developments

          1. Evidence

          In addition to appellees’ failure to present any evidence showing the W Hotel project

would have been constructed in the absence of appellants’ actions, appellees failed to account for

the changing economic conditions—the recession—that occurred during the time they projected

to develop the W Hotel. Appellees’ expert, Goodwin, acknowledged in his testimony that

     5
       Appellees did not intend that Goodwin would testify about whether Barton’s actions likely derailed the deal. Counsel for appellees
represented to the Court that Goodwin’s testimony assumed that the deal was going forward and Goodwin was only intended to calculate the
amount of the loss if the deal occurred. In his testimony, Goodwin did not offer any evidence about causation.



                                                                –10–
Mexico was not spared from the economic recession, and by “the end of the first quarter of 2008,

pretty much everything had stopped.” At the time the recession occurred, because the W Hotel

project “would have been just starting out, in all likelihood the project would be suspended and -

- and put on hold for a period of time, which I would assume now in hindsight is probably three

to five years.” The project would have been mothballed. Goodwin believed the project could

have resumed “at the end of 2011 or beginning of 2012, I’m not - - I’m not prepared to say.”

          2.     Analysis

          Profits are largely speculative, not reasonably certain, and cannot be recovered, if they

result “from an activity dependent on uncertain or changing market conditions.”                Tex.

Instruments, Inc., 877 S.W.2d at 279. The successful development of the W Hotel project was

dependent on, among other things, the economic climate remaining favorable to such a

development, as the market apparently was when JMJ Development Mexico first began working

on the development in 2006.         However, the undisputed evidence in the record shows the

economic climate changed; the recession caused “pretty much everything” to stop and the W

Hotel project “in all likelihood” would have been mothballed for three to five years. Because of

the uncertain and changing market conditions in which the appellees proposed to develop the W

Hotel project, the lost profits they seek to recover were speculative and not reasonable certain.

See id.

    C. Problems with Damage Computations and Testimony

          Even if we were to assume that appellees showed the W Hotel likely would have been

developed and developed on the time-frame they originally projected, appellees’ evidence of the

amount of their “lost profit” damages resulting from their failure to develop the W Hotel project

is legally insufficient.




                                                –11–
          Appellees’ evidence as to the amount of its damages consists of two exhibits, Plaintiffs’

Exhibits 94 and 93 (PX 94 and PX 93), and the testimony of Aliber and Goodwin.

          PX 94 is a financial projection, as of October 15, 2006, of the income anticipated from

the development, operation, and eventual sale of the W Hotel. In response to his attorney’s

inquiry as to who prepared the financial projections, Aliber testified “I personally did a lot of

work.” Aliber gave this financial projection—less the front page—to Vezzani, the possible

investor in the project, before Vezzani signed the letter of intent dated July 5, 2006.

          The front page of PX 94—the page Aliber did not give to Vezzani—is entitled

“SUMMARY INCOME TO JMJ DEVELOPMENT MEXICO, INC. FROM ‘W’ HOTEL

PROJECT ON THE RIVIERA MAYA,” and is a spreadsheet setting forth various sources of

income projected to flow to JMJ Development Mexico from the project.                Portions of the

spreadsheet appear to be based on information on the other pages of PX 94. According to the

first page of PX 94, JMJ Development Mexico projected that if it built, held, and ultimately sold

the W Hotel project on the Shabshab Property, it would receive income of over $73 million over

a ten and one-half year of time. Using a discount rate of ten percent, it computed the present

value of that income to be almost $34.5 million as of October 15, 2006.

          PX 93, prepared by appellees’ expert Goodwin, is also an income projection for the W

Hotel project. It consists of two pages; the first page is the same spreadsheet as the first page of

Aliber’s PX 94, along with some handwritten notes by Goodwin. Goodwin said that Aliber told

him the projections were created by Aliber and people in Barton’s Dallas office. Goodwin had

no other knowledge of the basis or accuracy of the information in PX 94. The second page of

PX 93, entitled “BG6 SUMMARY INCOME TO JMJ DEVELOPMENT MEXICO, INC. FROM



   6
       BG are Goodwin’s initials.



                                                –12–
‘W’ HOTEL PROJECT ON THE RIVIERA MAYA,” is, in general, the spreadsheet from the

first page of Aliber’s PX 94, as revised by Goodwin to reflect his own opinions.

           Based mostly on the second page of PX 93, Goodwin’s testimony was that JMJ

Development Mexico would have received income of over $33 million from developing,

holding, and selling the W Hotel project. Using the same ten percent discount factor as was used

in PX 94, the present value of that income stream as of October 15, 2006, was $18,640,737.79.

After accounting for JMJ Development Mexico’s payment of 30 percent of that amount pursuant

to a license agreement,7 Goodwin’s opinion was that “Garcia Brothers” (actually JMJ

Development Mexico)8 suffered damages in the amount of 70 percent of that projected,

discounted amount, or $13,048,516.46.

           However, both PX 94 and PX 93 projected that JMJ Development Mexico would have

received $2,964,000 from the W Hotel development in October 2006, as follows:

    A $1 million land brokerage fee. Aliber testified this fee was to be paid at the closing for the

     land purchase.9 As noted above, whether JMJ Development Mexico would ever have

     acquired the Shabshab Property is speculation, as is the purchase price for any such

     acquisition.10            Thus, the $1 million spread between them does not represent an actual




     7
       JMJ Development Inc. held the United States trademark for “JMJ Development,” which JMJ Development Mexico desired to use. Thus
JMJ Development Mexico had entered into a licensing agreement agreeing to pay JMJ Development Inc. thirty percent of any and all “net
revenues and fees (after subcontracting Third Parties’ costs) derived . . . from Real Estate Development activities.” Aliber’s PX 94 did not make
allowance for the license agreement.
     8
        PX 93 states that $13,048,516.46 would be received by the “Garcia Brothers,” not JMJ Development Mexico. Goodwin testified this
amount would have been received by JMJ Development Mexico. Goodwin did not provide any testimony about damages specific to Aliber and
Eliud, apart from damages to JMJ Development Mexico.
     9
        It appears this amount represents the difference between the $12.5 million purchase price stated in JMJ Development Mexico’s proposal
to Inland (Aliber actually testified $12.5 million was the sale price from Shabshab to Inland) and the $13.5 million amount of the land costs set
forth in the non-binding LOI between JMJ Development Mexico and Vezzani.
     10
         It is undisputed that that the proposed land transaction between JMJ Development Mexico and Inland was not then—or ever—
enforceable. It is also undisputed that Inland never acquired title to the Shabshab Property (and thus did not have title to convey), and that when
Inland agreed to JMJ Development Mexico’s proposal, it did not have the legal right to obtain title from Shabshab. Additionally, the JMJ
Development Mexico–Inland proposal required the resolution of the litigation concerning title of the Shabshab Property, which had to be resolved
before the hotel could be developed. There is no evidence that litigation was resolved, or what such a resolution would cost.



                                                                     –13–
        transaction, and its use in the exhibits and in Aliber’s and Goodwin’s testimony is no more

        than ipse dixit.

       $350,000 in “Equity Funding Fees” with respect to the Hotel portion of the development.

        Goodwin testified this amount represented “fees for the (sic) Vezzani, for lack of a better

        term commission . . . .” Aliber testified the fee represents an amount charged “by a party that

        assists the project in finding and–finding and obtaining investors for the project.”11 Based on

        PX 94, the fee represented five percent of $7 million in equity for the development.

        However, PX 94 calls for shareholder investments totaling $14.2 million. Further, in the

        non-enforceable LOI, Vezzani talks about providing only $5 million in equity funding (i.e.,

        funding for 2006 only), with a “right of first refusal” to fund the project’s additional equity

        requirements.              There is no evidence that JMJ Development Mexico could close the

        agreement discussed in the Vezzani LOI or that Vezzani would fund any additional amounts

        of equity, and there is no evidence as to whether JMJ Development Mexico could find the

        additional equity financing, or from whom and on what terms.                                                These are matters of

        speculation.

       $1,590,000 in “Debt Funding Fees” with respect to the hotel portion of the development.

        Aliber described this as “a similar fee [to the equity funding fee] paid to the party that assists

        the project in obtaining bank loans for the construction of the project.” Aliber agreed that

        these fees are “not always part of the deal.”                                 Based on PX 94, the Debt Funding fee

        constitutes three percent of a proposed $53 million in debt necessary for the project. There is

        no evidence in the record that JMJ Development Mexico would have obtained that financing

        or from whom it would come, and no evidence as to the terms on which such financing might


        11
             Goodwin testified this fee is “occasionally” paid to a developer. Aliber acknowledged that the fee is not standard, and it is “sometimes”
paid.



                                                                         –14–
     be offered. Based on this record, whether JMJ Development Mexico would have earned the

     Debt Funding Fees is a matter of speculation.

    $24,000 for “Pre-Development Expenses – 2006” with respect to the Hotel portion of the

     development. By Aliber’s own definition this amount represents funds received to cover

     costs and operations related to the development—not profits.12

            In addition to the speculative nature of the transactions and terms of the agreements that

are the basis for PX 94 and PX 93, the amounts included in both projections for the land

brokerage fee, the equity funding fee, and the debt funding fee are all income, not profits. There

is no indication of the expenses that would be involved in accomplishing—if they were

accomplished—the transactions giving rise to those income items.

            The two spreadsheets also project receipt of the four additional fees, paid in monthly

portions during 2007 and 2008:

    A $1,232,312.44 “Development Fee 50% Margin” with respect to the Hotel portion of the

     development. Aliber testified this fee, calculated as a percentage of the construction costs

     and divided into monthly payments13 over the period involved in implementing the project,

     “is for the developer to be able to cover staff costs, coordination of the different activities

     that have to be involved in the process of implementing the project.”

    $92,423 for “Project Site Coordination & Supervision 15% Margin” with respect to the Hotel

     portion of the development. Aliber testified this amount was included because, “[i]n addition

     to the group of people that work in the coordination of the activities, there’s specific activity




     12
        Aliber testified the “pre-development expenses” represent reimbursement for initial costs involved in such activities as conceptualizing
and preparing design plans (without detailed engineering or architectural work), obtaining permits, and paying legal fees.
     13
          This fee was to be received in monthly installments, with 40 percent to be received in 2007 and 60 percent in 2008.



                                                                      –15–
     at the site to supervise and coordinate the physical activities that are being implemented on a

     day-to-day basis.”14

    $1,961,925 for “JMJ/MEX Marketing Supervision” with respect to the hotel portion of the

     development, as well as $2,982,140 for “JMJ/MEX Marketing Supervision” for the villas and

     apartments portion of the development. Aliber described these fees as “included in the

     projections to coordinate the activities of the marketing effort and the sales effort of the units

     that would be sole as real estate product.”15

            As shown above, these fees are also payments to cover costs and operations related to the

development—not profits.16

            There also is no evidence that PX 93 accounts for expenses associated with developing

and operating the W Hotel. See, e.g., Holt Atherton Indus., 835 S.W.2d at 84 (proof of “lost

income” is not proof of lost profits); Examination Mgmt. Servs., Inc., 367 S.W.3d at 841; Excel

Transp. Servs., Inc., 323 S.W.3d at 232 (correct measure of damages are net profits, “what

remains in the conduct of business after deducting from its total receipts all of the expenses

incurred in carrying on the business.”). Although PX 94 included some information about

expenses (although it certainly did not include all expenses associated with the W Hotel project),

there is no indication PX 93 includes any of that information. Further, PX 93’s title, “BG

SUMMARY INCOME TO JMJ DEVELOPMENT MEXICO, INC. FROM “W” HOTEL

PROJECT ON THE RIVIERA MAYA,” indicates it only includes projected income figures—

not profits.

     14
          This fee was to be received in monthly installments, with 40 percent to be received in 2007 and 60 percent in 2008.
     15
        These fees were projected to be received in monthly installments. For the hotel portion of the project, 63 percent of the Marketing
Supervision fee was projected to be received in 2007, with 37 percent received in 2008. For the villas and apartments portion of the project, 52
percent of the Marketing Supervision fee was to be received in 2007, with 48 percent received in 2008.
     16
       According to both PX 94 and PX 93, these amounts were projected to be paid to JMJ Development Mexico at the rate of $276,385 per
month during 2007 and $246,015 per month during 2008.




                                                                      –16–
       Thus, even when viewed in the light most favorable to the jury’s verdict, appellees’

PX 94, PX 93, and the testimony surrounding them does not prove the existence or amount of

lost profits with reasonable certainty; the “opinions or estimates of lost profits” upon which

appellees rely are not based on “objective facts, figures, or data from which the amount of lost

profits can be ascertained.” Swinnea, 318 S.W.3d at 876; Exel Transp. Servs., Inc., LLC, 323

S.W.3d at 232.

   D. Problems with “Profit Sharing” Projections in Particular

       1. Evidence

       There are two entries in both PX 94 and PX 93 that specifically relate to “profits.” Both

projections indicate JMJ Development Mexico would have received “Profit Shares” with respect

to both the villas and apartments portion and the hotel portion of the development. Aliber’s

testimony provided the clearest description of what “Profit Shares” meant:

               The investors that participate in a project of this nature are looking to
       make a profit. Okay? That’s why they are investing in the project. A level of
       profitability is agreed upon with the investor that will satisfy him as a minimum
       profitability, and once the project has provided him with that level of profitability
       and paid him his initial investment, the project continues generating money.

               And after that stage, after that moment in which he has been paid back his
       profitability and his initial investment, then there is an agreement reached in
       which the additional cash that the project generates is divided between the
       investor and the developer at whatever the percentage is agreed upon, and that
       varies project by project to whatever the two parties agree. Usually the investor
       takes the larger portion and the developer is left with a smaller portion. And this
       line item refers to the profit sharing that would exist down the line, once the
       investor has been repaid, in the additional cash generated by the project.

In other words, the projected “profit share” for each portion of the development was calculated

by taking the total projected income of that portion, subtracting the amount of the investors’

original investment in that portion of the development as well as an agreed minimum return on

that investment, and multiplying the remainder by a percentage amount agreed to by the

investors and the developer as being payable to the developer, with the rest going to the investor.

                                               –17–
          Both PX 94 and PX 93 projected receiving a “Profit Share” of $5,791,031 in April 2009

for the villas and apartments portion of the development.                                     With respect to the amount of

projected profit share for the hotel portion of the development, however, the two exhibits and

their sponsoring witnesses differ significantly. Aliber’s PX 94 projected that amount to be

$58,541,176. PX 93, prepared by Goodwin, projected that amount to be $18,161,531, or about

$40 million less. 17 Goodwin’s explanation of the difference between his and Aliber’s figures is

as follows:

          these models are effectively a summary that captures all the income source from
          the projections that Mr. Aliber Garcia made [PX 94]. I looked at those
          projections and I reviewed them, and I saw some areas that I felt I wanted to take
          a more conservative approach. So I made some adjustments. I lowered some
          occupancies, I lowered some average room rates, and I made some adjustments in
          lowering prices per square meter on some of the residential real estate. So as a
          result of that, as opposed to the $58 million profit share that appears in the hotel
          portion of [Aliber’s] model, my numbers turned out to be $18 million.

          With respect to the calculations of “all the income source” from the hotel portion of the

project, there is no evidence as to what numbers Aliber used in his PX 94 for occupancy rates,

average room rates, or the “prices per square meter on some of the residential real estate.” There

is no evidence as to what numbers Goodwin used instead of Aliber’s numbers. And there is no

evidence as to the rationale for the numbers used by either, except for Goodwin’s statements that

he “felt [he] wanted to take a more conservative approach” but that the “occupancies and the

average room rates projected were consistent with other luxury hotels in Mexico . . . .”18




     17
         Both PX 94 and PX 93 projected receipt of the profit share in annual payments—between April 2011 and April 2017—in differing
amounts. Both spreadsheets projected the largest—by far—of those payments to be received in April of 2017. From Aliber’s PX 94, it appears
the larger size of the last payment is based on the anticipated sale of the hotel in 2017; Aliber projected that sale to net over $130 million.
     18
       These same problems exist with respect to the calculation of the profit share for the villas and apartments portion of the development.
Although PX 94 and PX 93 present the same numbers, there is no evidence of the basis for those numbers.



                                                                   –18–
       2. Analysis

       The “profit share” components of appellees’ damage calculations hinge on the terms of

agreements with investors; it must account for the amount of investors’ investments, their agreed

minimum return on investment, and an agreement as to the division between the developer and

the investor(s) of any income received in excess of those amounts. All of these numbers also are

unknown because no agreements with investors were executed. Moreover, the “profit share”

components of the damage calculations are based, in part, on estimated average occupancy rates

and average room rates over a ten or eleven year period, on a hotel that had not been built on

property that had not been acquired. And a significant component of those projected damages

are based on the future sale of that unbuilt hotel, some eleven years after Aliber’s projections

were made in PX 94 and at least six years after Goodwin’s projections were made in PX 93.

Lastly, the evidence regarding the “profit share” components in PX 94 and PX 93 do not take

into account the delay in development—admitted to by Goodwin—resulting from the downturn

in the Mexican economy.

       For these reasons, we conclude the estimates and opinions as to any projected profits

from the W Hotel development that would have been shared by JMJ Development Mexico are

not based on objective facts, figures, or data from which the amount of lost profits can be

ascertained. See Swinnea, 318 S.W.3d at 876.

   E. Conclusion

       We conclude the evidence concerning the underlying transactions necessary for the

development of a W Hotel—even when viewed in the light most favorable to the jury’s verdict—

does not prove with reasonable certainty that JMJ Development Mexico would ever have

completed such a development or on what terms such a development would have been

completed; thus, the evidence does not prove the existence or amounts of lost profits with

                                               –19–
reasonable certainty. See Swinnea, 318 S.W.3d at 876; Exel Transp. Servs., Inc., LLC, 323

S.W.3d at 232. Rather, appellants’ projection that they suffered lost-profit damages is “without

any evidentiary foundation and therefore, is purely speculative and conclusory.” Szczepanik, 883

S.W.2d at 650; Total Clean, L.L.C., 330 S.W.3d at 667.

          Further, the “opinions or estimates of lost profits” upon which appellees rely are not

based on “objective facts, figures, or data from which the amount of lost profits can be

ascertained.” Swinnea, 318 S.W.3d at 876; Exel Transp. Servs., Inc., LLC, 323 S.W.3d at 232.

Moreover, the calculations and opinions based on those calculations mix purported “profit”

numbers with numbers that undisputedly constitute “income.” And the calculations do not take

into account the expenses involved in earning that income, including (at least as to part of the

income) the effect of the thirty percent royalty agreement.

          Therefore, we conclude appellees presented no reliable, non-speculative evidence of their

lost-profit damages for the W Hotel project.

                                       IV.        THE ST. REGIS HOTEL PROJECT

          We next turn to the other transaction that forms the basis for appellees’ alleged

damages—the development of a St. Regis Hotel project on the Preciado Property.

          Appellees presented even less evidence supporting their request for damages associated

with the St. Regis Hotel project than they did for the W Hotel. In June 2006, the Garcias

obtained a non-binding letter from Starwood Hotels expressing an interest in a St. Regis Hotel on

the Preciado Property, if JMJ Development Mexico acquired the property.19 However, JMJ

Development Mexico did not present any evidence as to any discussions, proposals, or letters of

intent—much less any binding commitments—concerning this development.


     19
        Like the letter involving a W Hotel on the Shabshab Property, this letter stated it was only an “expression of our interests to further
evaluate these opportunities, and does not create any legally binding obligation on Starwood. You should not rely on this letter . . . .”



                                                                   –20–
           JMJ Development Mexico failed to prove with reasonable certainty that it ever would

have obtained clear title to the Preciado Property, and on what terms such title would have been

obtained; that it would have found investors to fund the project and on what terms those

investors would have participated; or that it ever would have obtained an agreement with

Starwood to operate a St. Regis Hotel on the Preciado Property, or on what the terms Starwood

would have agreed to such an operation. Further, JMJ Development Mexico again assumed that

the economic recession would not have impacted its development plans.

           Even if we assumed the transaction would have occurred and the St. Regis Hotel would

have been built and operated, appellees presented no financial evidence of lost-profits for the St.

Regis Hotel project. Rather, Goodwin simply testified that he thought JMJ Development Mexico

damages arising from the failure to develop the St. Regis resort were fifty percent of its damages

arising from the W Hotel development.20 Based on this “analysis,” Goodwin estimated JMJ

Development Mexico sustained $6.5 million in damages—which appears again to be a lost-

income calculation, not a lost profits calculation—for the St. Regis Hotel project. Goodwin’s

estimate also appears to assume JMJ Development Mexico successfully would have secured

financing, acquired the property, and received a commitment from Starwood to build a St. Regis

Hotel on the Preciado Property, and assumed that the recession would not have mothballed the

project for several years. It also appears Goodwin did not consider the effects of the thirty

percent royalty agreement with JMJ Development Inc. with respect to at least part of the St.

Regis hotel income projections. The evidence in the record does not support these assumptions.




     20
        Goodwin testified: “So I looked . . . at the proposed W, which is directly adjacent to what was to be the proposed St. Regis, and as a very
conservative estimate, I said I think they are damaged at least to the 50-percent level that they would be damaged on the first deal.”



                                                                     –21–
       Viewing the evidence in the light most favorable to the jury’s verdict, we conclude

appellees failed to provide any competent evidence showing lost profits for the St. Regis Hotel

project. There is no evidence the hotel ever would have been built and Goodwin’s “conservative

estimate” that JMJ Development Mexico was damaged “at least to the 50-percent level that they

would be damaged on the” W Hotel project is not “based on objective facts, figures or data” and

does not constitute reasonably certain evidence of lost profits. See Swinnea, 318 S.W.3d at 876.

                                        V.       CONCLUSION

       Because there was no reliable, non-speculative evidence of appellees’ lost profits for

either the W Hotel or St. Regis Hotel project, we conclude the jury’s findings that JMJ

Development Mexico sustained $7 million for lost profits in the past and the Garcias would

sustain $3 million for lost profits in the future is not supported by legally sufficient evidence.

We sustain appellants’ ninth and tenth issues.

       We reverse the trial court’s judgment awarding damages to appellees for lost profits and

render judgment that appellees take nothing on their claim for lost profits. Because we conclude

appellees are not entitled to lost profits, appellees have not recovered any damages. We need not

address appellants’ remaining issues. See TEX. R. APP. P. 47.1.



                                                    /Jim Moseley/
                                                    JIM MOSELEY
110769F.P05                                         JUSTICE




                                                 –22–
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

TIMOTHY BARTON, JMJ                                  On Appeal from the 116th Judicial District
HOSPITALITY, L.L.C. AND JMJ                          Court, Dallas County, Texas
HOLDINGS, L.L.C, Appellants                          Trial Court Cause No. DC-07-10870-F.
                                                     Opinion delivered by Justice Moseley.
No. 05-11-00769-CV         V.                        Justices Bridges and Lang participating.

RESORT DEVELOPMENT LATIN
AMERICA, INC., ALIBER GARCIA AND
ELIUD GARCIA, Appellees

    In accordance with this Court’s opinion of this date, the judgment of the trial court is
REVERSED and judgment is RENDERED that:
    Appellees RESORT DEVELOPMENT LATIN AMERICA, INC., ALIBER
    GARCIA, AND ELIUD GARCIA take nothing on their claims against appellants
    TIMOTHY BARTON, JMJ HOSPITALITY, L.L.C. AND JMJ HOLDINGS,
    L.L.C.

     It is ORDERED that appellants TIMOTHY BARTON, JMJ HOSPITALITY, L.L.C.
AND JMJ HOLDINGS, L.L.C recover their costs of this appeal from appellees RESORT
DEVELOPMENT LATIN AMERICA, INC., ALIBER GARCIA AND ELIUD GARCIA.


Judgment entered this 21st day of August, 2013.




                                                  /Jim Moseley/
                                                  JIM MOSELEY
                                                  JUSTICE




                                              –23–
