Baker Aviation, LLC and Baker Aviation Maintenance, LLC v. Double H International Holdings, Inc.
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Opinion
In the Court of Appeals Second Appellate District of Texas at Fort Worth ___________________________ No. 02-22-00342-CV ___________________________
BAKER AVIATION, LLC AND BAKER AVIATION MAINTENANCE, LLC, Appellants
V.
DOUBLE H INTERNATIONAL HOLDINGS, INC., Appellee
On Appeal from the 96th District Court Tarrant County, Texas Trial Court No. 096-293033-17
Before Kerr, Bassel, and Walker, JJ. Memorandum Opinion by Justice Kerr MEMORANDUM OPINION
This case involves an Aircraft Lease, Charter, and Management Agreement
gone wrong, resulting in dueling breach-of-contract and other claims between an
aircraft owner and the company that managed and chartered the plane on the owner’s
behalf. In seven issues, Appellants Baker Aviation, LLC (Baker)—a full-service
aircraft-charter and -management company—and Baker Aviation Maintenance, LLC
(BAM)—whose name is self-explanatory—appeal from an adverse judgment
following a jury trial and the trial court’s rulings on postverdict motions in which the
trial court disregarded certain jury findings and entered judgment wholly in favor of
Appellee Double H International Holdings, Inc.
We will reverse (1) those parts of the judgment that turn on Double H’s
position that Baker owed it a fiduciary duty as a matter of law, including the forfeiture
award that is based on what we hold is a nonexistent fiduciary duty on these facts;
(2) the judgment’s erroneous matter-of-law finding that Baker committed the first
material breach; (3) the judgment against Baker for fraud; (4) the judgment awarding
damages against BAM for negligence; and (5) the award of attorney’s fees to Double
H, and we will render the judgment the trial court should have on these issues. We
will remand to the trial court the issues of Baker’s attorney’s fees and what to do with
the funds that Double H has on deposit with the trial court’s registry.
2 I. Background
A. Lead-up to the July 2014 Aircraft Lease, Charter and Management Agreement between Baker and Double H.
Baker was formed in 2008, with Stan Baker as its president,1 to provide charter
services to those looking to rent a plane and management services for aircraft owners.
To become a charter operator, an entity such as Baker must be FAA-certified under
what is referred to as “Part 135,” a comprehensive set of federal aviation regulations
covering air charter and commercial operations. See 14 C.F.R Part 135. Baker became
certified in 2011.
Before deciding in 2014 to buy their own jet, Richard Hall and his father, Lewis
Hall, had occasionally chartered aircraft through Baker for their business travel.
Already familiar with Stan, the Halls thus approached him for help, and Stan referred
them to a broker who ultimately located a 1996 Dassault Falcon 2000 jet. The Halls
formed Double H to buy the Falcon from then-owner P51 Holdings, LLC.
The Halls and Stan had discussed the Halls’ intent to charter the plane out to
others to generate revenue. Richard testified that Stan’s projections “basically came
out to that we could break even or maybe make a little bit of money” and that Stan
represented that the Halls “could reasonably expect” to cover their expenses. Richard
confirmed that Stan did not promise that the Halls “were going to make any money.”
1 To avoid confusion, we will refer to the human participants by their first names.
3 Indeed, underscoring the vagaries of the charter business, Double H trial witness
Scott Dupree—a pilot who in 2016 took over managing the Falcon from Baker, who
had experience in the charter business, and who was part of the buyer group to which
the Halls later sold the plane—explained that in the charter business, “[i]f you break
even, you’re making money.”
B. The Agreement’s terms.
At almost thirty pages, the Agreement was comprehensive. Both parties had
counsel, and Stan testified that he had seen “this exact same agreement from multiple
other charter operators” and that Baker’s was “[i]dentical” to theirs.
The Agreement recites that Double H “wishes to lease the Aircraft to Baker
Aviation . . . in order for Baker Aviation to conduct charter operations . . . using the
Aircraft” and “to otherwise engage Manager [Baker] to provide its services in
connection with the management, operation, administration, and maintenance of the
Aircraft on [Double H’s] behalf and with respect to [Double H’s] own operations of
the Aircraft.” In addition to placing the plane into Baker’s charter fleet, Double H
also contracted to be able to use it on “Owner Charters”—where Double H would
use the plane for its own business purposes—and “Owner Flights”—where Double
H (the Halls) would use it for personal travel. The Agreement collectively referred to
third-party charters and owner charters as “Charter Flights” and defined “Revenue
Flights” as “commercial air transportation provided to third parties.”
4 Section 1, defining the “Scope of Agreement,” included a provision within
subsection 1.1 that “[Baker] shall have full and exclusive possession, use, enjoyment,
command and operational control of the Aircraft for each specified [one-year] lease
period.” Under subsection 1.4, which outlined Baker’s management services, Baker
agreed to provide “timely billing, revenue collection, recordkeeping, reporting,
budgeting and other bookkeeping, accounting and administrative functions as set
forth herein or as reasonably requested by [Double H].” Per subsection 7.1, Double H
had the right to examine and audit any “financial, flight, maintenance and/or any
other records or documents relating to the Aircraft or [Baker’s] performance required
hereunder (whether financial or operational).”2
The following provisions are also pertinent here:
2.2. Termination With or Without Cause . . . . [T]his Agreement may be terminated immediately by either Party in the event of a default as specified in Article 10 below, or by either Party without cause with thirty (30) days written notice to the other Party.
....
2.5. Effect of Termination . Any moneys or other property due from either of the Parties to the other shall be promptly paid or delivered to the Party entitled thereto upon the effective date of termination; provided, however, that termination of this Agreement shall not relieve any Party of its obligations in respect of the Aircraft arising prior to the effective date of such termination, whether asserted before or after such termination.
2 Double H never exercised its audit rights while the Agreement was extant.
5 8.1. Owner’s Payment Obligations. Within 20 days after the end of each mo[n]th during the [lease term], [Baker] shall deliver to [Double H]: (a) a reasonably detailed accounting statement . . . setting forth and reconciling the amounts payable to each Party during the previous month . . . , including the (i) Operating Costs[3] and Fixed Cost[s],[4] (ii) the Charter Revenues, (iii) net revenues payable to [Double H] in accordance with 8.2.1, . . . and (b) the amount, if any, payable to [Double H] by [Baker] as set forth on such Monthly Statement.
8.2.1. Charter Revenue Payment to Owner for Revenue Flights .
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In the Court of Appeals Second Appellate District of Texas at Fort Worth ___________________________ No. 02-22-00342-CV ___________________________
BAKER AVIATION, LLC AND BAKER AVIATION MAINTENANCE, LLC, Appellants
V.
DOUBLE H INTERNATIONAL HOLDINGS, INC., Appellee
On Appeal from the 96th District Court Tarrant County, Texas Trial Court No. 096-293033-17
Before Kerr, Bassel, and Walker, JJ. Memorandum Opinion by Justice Kerr MEMORANDUM OPINION
This case involves an Aircraft Lease, Charter, and Management Agreement
gone wrong, resulting in dueling breach-of-contract and other claims between an
aircraft owner and the company that managed and chartered the plane on the owner’s
behalf. In seven issues, Appellants Baker Aviation, LLC (Baker)—a full-service
aircraft-charter and -management company—and Baker Aviation Maintenance, LLC
(BAM)—whose name is self-explanatory—appeal from an adverse judgment
following a jury trial and the trial court’s rulings on postverdict motions in which the
trial court disregarded certain jury findings and entered judgment wholly in favor of
Appellee Double H International Holdings, Inc.
We will reverse (1) those parts of the judgment that turn on Double H’s
position that Baker owed it a fiduciary duty as a matter of law, including the forfeiture
award that is based on what we hold is a nonexistent fiduciary duty on these facts;
(2) the judgment’s erroneous matter-of-law finding that Baker committed the first
material breach; (3) the judgment against Baker for fraud; (4) the judgment awarding
damages against BAM for negligence; and (5) the award of attorney’s fees to Double
H, and we will render the judgment the trial court should have on these issues. We
will remand to the trial court the issues of Baker’s attorney’s fees and what to do with
the funds that Double H has on deposit with the trial court’s registry.
2 I. Background
A. Lead-up to the July 2014 Aircraft Lease, Charter and Management Agreement between Baker and Double H.
Baker was formed in 2008, with Stan Baker as its president,1 to provide charter
services to those looking to rent a plane and management services for aircraft owners.
To become a charter operator, an entity such as Baker must be FAA-certified under
what is referred to as “Part 135,” a comprehensive set of federal aviation regulations
covering air charter and commercial operations. See 14 C.F.R Part 135. Baker became
certified in 2011.
Before deciding in 2014 to buy their own jet, Richard Hall and his father, Lewis
Hall, had occasionally chartered aircraft through Baker for their business travel.
Already familiar with Stan, the Halls thus approached him for help, and Stan referred
them to a broker who ultimately located a 1996 Dassault Falcon 2000 jet. The Halls
formed Double H to buy the Falcon from then-owner P51 Holdings, LLC.
The Halls and Stan had discussed the Halls’ intent to charter the plane out to
others to generate revenue. Richard testified that Stan’s projections “basically came
out to that we could break even or maybe make a little bit of money” and that Stan
represented that the Halls “could reasonably expect” to cover their expenses. Richard
confirmed that Stan did not promise that the Halls “were going to make any money.”
1 To avoid confusion, we will refer to the human participants by their first names.
3 Indeed, underscoring the vagaries of the charter business, Double H trial witness
Scott Dupree—a pilot who in 2016 took over managing the Falcon from Baker, who
had experience in the charter business, and who was part of the buyer group to which
the Halls later sold the plane—explained that in the charter business, “[i]f you break
even, you’re making money.”
B. The Agreement’s terms.
At almost thirty pages, the Agreement was comprehensive. Both parties had
counsel, and Stan testified that he had seen “this exact same agreement from multiple
other charter operators” and that Baker’s was “[i]dentical” to theirs.
The Agreement recites that Double H “wishes to lease the Aircraft to Baker
Aviation . . . in order for Baker Aviation to conduct charter operations . . . using the
Aircraft” and “to otherwise engage Manager [Baker] to provide its services in
connection with the management, operation, administration, and maintenance of the
Aircraft on [Double H’s] behalf and with respect to [Double H’s] own operations of
the Aircraft.” In addition to placing the plane into Baker’s charter fleet, Double H
also contracted to be able to use it on “Owner Charters”—where Double H would
use the plane for its own business purposes—and “Owner Flights”—where Double
H (the Halls) would use it for personal travel. The Agreement collectively referred to
third-party charters and owner charters as “Charter Flights” and defined “Revenue
Flights” as “commercial air transportation provided to third parties.”
4 Section 1, defining the “Scope of Agreement,” included a provision within
subsection 1.1 that “[Baker] shall have full and exclusive possession, use, enjoyment,
command and operational control of the Aircraft for each specified [one-year] lease
period.” Under subsection 1.4, which outlined Baker’s management services, Baker
agreed to provide “timely billing, revenue collection, recordkeeping, reporting,
budgeting and other bookkeeping, accounting and administrative functions as set
forth herein or as reasonably requested by [Double H].” Per subsection 7.1, Double H
had the right to examine and audit any “financial, flight, maintenance and/or any
other records or documents relating to the Aircraft or [Baker’s] performance required
hereunder (whether financial or operational).”2
The following provisions are also pertinent here:
2.2. Termination With or Without Cause . . . . [T]his Agreement may be terminated immediately by either Party in the event of a default as specified in Article 10 below, or by either Party without cause with thirty (30) days written notice to the other Party.
....
2.5. Effect of Termination . Any moneys or other property due from either of the Parties to the other shall be promptly paid or delivered to the Party entitled thereto upon the effective date of termination; provided, however, that termination of this Agreement shall not relieve any Party of its obligations in respect of the Aircraft arising prior to the effective date of such termination, whether asserted before or after such termination.
2 Double H never exercised its audit rights while the Agreement was extant.
5 8.1. Owner’s Payment Obligations. Within 20 days after the end of each mo[n]th during the [lease term], [Baker] shall deliver to [Double H]: (a) a reasonably detailed accounting statement . . . setting forth and reconciling the amounts payable to each Party during the previous month . . . , including the (i) Operating Costs[3] and Fixed Cost[s],[4] (ii) the Charter Revenues, (iii) net revenues payable to [Double H] in accordance with 8.2.1, . . . and (b) the amount, if any, payable to [Double H] by [Baker] as set forth on such Monthly Statement.
8.2.1. Charter Revenue Payment to Owner for Revenue Flights . For all Revenue Flights operated by [Baker] pursuant to this Agreement, [Baker] shall be entitled to retain 15% of all “Charter Revenue ” defined as the actual flight hours calculated in tenths of an hour multiplied by the hourly charter rate.[5] The balance of the Charter Revenue plus the amount . . . of the fuel surcharge bill[6] to the charter customer shall be paid to [Double H].
3 “Operating Costs” were defined in subsection 8.1.1 as including fuel costs, maintenance costs, service-program hourly costs, and any costs of complying with applicable regulatory requirements. 4 Subsection 8.1.2 defined “Fixed Costs” as comprising $3,000 in monthly management fees, $3,000 per month for hangar storage, nearly $39,600 for monthly pilot salaries and benefits, any actual cost of required flight-crew training, and almost $23,600 for an annual insurance premium. 5 Baker’s expert testified that “85-15 is a pretty standard split” in the charter industry and that calculating and paying based on “actual flight hours” is a “pretty typical agreement” for “pure charter.” 6 Because Double H had to pay all fuel costs under the Agreement no matter who was using the plane, in order to ameliorate those costs to Double H, Baker had third-party charter customers pay a fuel surcharge designed, ideally, to meet or exceed the actual fuel cost, the price of which—like gasoline—is highly variable even over short amounts of time. Stan testified that the purpose of the fuel surcharge, “an industry-wide mechanism,” is “simply to lower the impact of high fuel prices to the aircraft owner.”
6 10.1. Events of Default. As part of and in addition to the termination rights set forth in Article 2 above, this Agreement may be terminated immediately upon written notice by the non-defaulting party in the event of any of the following “Events of Default”:
Failure by either Party to make payments due hereunder within thirty (30) days after receipt of written notice from the other party;
Violation by either Party of any other term, representation or warranty set forth in this Agreement at any time during the Term, together with a failure to cure within seven (7) days after receipt of written notice of such violation; . . .
10.2. Remedies. Upon an Event of Default[,] the non-defaulting party shall have the right, but not the obligation, to:
Immediately terminate this Agreement upon written notice to the other party;
Declare immediately due and payable all sums owed the other party to it under this Agreement;
Pursue any other remedy now or hereafter available at law or in equity.
In the event a Party takes any action pursuant to this Section, such Party shall be entitled to recover its reasonable attorneys’ fees and expenses.
16. No Partnership
Nothing herein contained shall be deemed to create a joint venture or partnership between the Parties. All persons furnished by [Baker] for the performance of services or work under this Agreement shall at all times and for all purposes be considered [Baker’s] employees or agents . . . .
C. During the prepurchase inspection, which BAM conducted for Double H, a portion of a wing’s leading edge is damaged; BAM covers all the repair costs; Double H closes its purchase from P51.
7 Double H used BAM to inspect the Falcon before completing its purchase in
August 2014. During the inspection process, the leading edges of the wings were
heated as part of a test, but some overheating resulted in buckling on a portion of one
of them. BAM assumed all responsibility for making the needed repairs, at its cost,
and Double H and P51 agreed that the damage would not be considered a
“Discrepancy” under their contract. The “Aircraft Repair Sideletter Agreement”
signed by Double H, P51, and BAM contained no downward adjustment to the
original sales price, and nothing in the record otherwise suggests that Double H
renegotiated the sales price because of this incident. At trial, Richard agreed that he
had signed a release—the sideletter agreement—covering the leading-edge issue.
D. While awaiting FAA approval for Baker to add the Falcon into its Part 135 charter program, Double H has some modifications made to the plane and uses it in the interim for Owner Flights, which do not need a Part 135 certification.
Before approving a plane for Part 135 use, the FAA conducts a “very major
[structural] inspection” that includes the “fuselage, wings, tail, landing gear, basically
the entire aircraft,” a process that can—and did here—take “months.” That process
had not been completed when, in October 2014, Double H decided to have winglets
installed to help with fuel efficiency and add extra lift, which would allow the plane to
more easily use smaller airports.
Because Baker was not among the few shops in America authorized to install
the winglets purchased by Double H, Baker outsourced the work to West Star
8 Aviation in Illinois and arranged for a one-time FAA ferry permit to transport the
plane. 7 When the plane arrived at West Star, an overweighting condition based on
improperly secured ballast was discovered. After consulting with Dassault (the
Falcon’s manufacturer), West Star inspected the potentially affected areas and
provided Baker with logbook entries saying that it had found “no faults” and “no
defects.” According to Stan, there was no “damage” to the plane as that word is
commonly understood in the aviation industry.8 Thus, although Baker’s trial position
was that it had no contractual duty under subsection 4.4.4 of the Agreement to notify
Double H “if the Aircraft . . . is damaged”—because there was no damage to
disclose—Stan stated that he told Double H of the occurrence in a phone call to
Lewis (who did not testify at trial). Richard testified that Double H first learned of the
West Star incident after filing suit.
For most of 2015, while Baker was awaiting Part 135 certification for the
Falcon, the Halls used the plane “pretty often”—some 200 hours altogether—for
A ferry permit is required when flying an aircraft that is not in its normal 7
condition. The Falcon was not in its normal condition at that time because it did not have an interior in it due to the Halls’ having decided to refurbish the interior, including changing the carpeting—a seemingly small change that required resubmitting paperwork to the FAA and caused further delay in the Part 135 approval. Richard agreed that Double H’s modifications were partly to blame for the Part 135 certification’s being delayed until late in 2015. 8 BAM’s director of maintenance testified that although some nonmajor floorboard repairs were made, “[f]loorboards are not structural” and thus that type of repair is not “structural damage to the aircraft that needs to be reported to the FAA.”
9 personal business and vacation travel and paid Baker the cost of these Owner Flights
per the Agreement. In late 2015, the plane received its Part 135 certification and was
then available for charters; the first charter flight occurred in December 2015.
Between then and June 2017, Baker used the Falcon for a total of 71 charter flights.
E. Double H begins falling behind on payments as early as March 2016; Baker continues to use the plane in its charter program but eventually files a lien against the plane for unpaid invoices; Double H terminates the Agreement without cause in June 2017 and sues shortly afterward.
Double H did not pay Baker’s February 2016 invoice, for which payment was
due 20 days later under the Agreement, marking the first time Double H did not
timely pay a bill. From July 2016 on, Baker’s invoices to Double H remained “pretty
consistently” unpaid.9 Stan testified that he discussed the unpaid invoices with
Richard several times and that Double H never disputed the billed amounts or raised
any dissatisfaction with Baker as a reason for not paying those invoices. Stan also
testified that Richard told him that “the reason he was not paying invoices was due to
financial difficulties.” There were “[n]o complaints throughout the entirety of the
relationship,” according to Stan, a statement that’s roughly consistent with Richard’s
9 Stan testified that the Halls were among a group of several business partners who had a total of three aircraft chartered with Baker and that the relationship among those business partners in mid-2016 seemed to be “deteriorating.”
10 testimony that Double H learned of Baker’s alleged breaches of contract and other
alleged misconduct only after it filed this lawsuit.10
Because of Double H’s accrued unpaid bills, Baker filed a lien against the
Falcon to ensure payment. Then on June 21, 2017, Double H’s lawyer sent its “notice
of termination of the Aircraft Lease, Charter, and Management Agreement without
cause pursuant to paragraph 2.2” and filed suit less than two weeks later.
Double H’s original petition, filed on July 3, 2017, alleged—among other
things—that Baker had “wrongfully and tort[i]ously” retained possession of the plane
and placed the lien after knowing of Double H’s “multiple complaints and concerns
and its desire to terminate the Agreement.” 11 By then, Double H’s outstanding
balance owed to Baker had ballooned to $382,464.20, as shown on Baker’s July 7,
2017 invoice. An August 4, 2017 final invoice to Double H added another
$11,701.76—consisting of the $3,000 monthly hangar fee, maintenance expenses, and
pilot severance pay—bringing Double H’s debt to $394,165.96.
10 Richard did testify, without elaboration, that Double H had complained about “how the bills were starting to get larger and what was the reason for that.” He also testified that he had spoken with Stan about the outstanding balance and said that “if we weren’t going to make money, we weren’t going to continue to charter,” in contrast to Dupree’s earlier-quoted testimony: “If you break even, you’re making money . . . [i]n the charter business.”
At trial, Stan testified that at the time of placing the lien—a time when he 11
perceived that the Halls “seem[ed] to have financial problems”—he was unaware that Double H was disputing anything about the billings: “I didn’t know there was going to be a dispute until they filed a lawsuit.” Baker released its lien when Double H deposited $382,464.20 into the court’s registry in August 2017.
11 F. Claims and counterclaims; the charge and the jury’s verdict.
After being sued, Baker counterclaimed for the unpaid invoices, alleging breach
of contract, quantum meruit, and unjust enrichment and seeking a constructive trust
and its attorney’s fees. Double H’s live pleading at the time of trial included claims
against Baker for breach of fiduciary duty, breach of contract, fraudulent inducement,
invalid lien, 12 and attorney’s fees, and a claim against BAM for negligence.13
A four-day jury trial ensued in November 2021. Double H argued for damages
consisting of—
• $466,358.01 comprising disputed charter revenue ($232,387.64) 14 and
disputed fuel costs ($233,970.37) spanning the December 2015 charter flight
through the final one in June 2017;
12 The jury found in Baker’s favor on that claim. 13 Double H had also sued BAM for fiduciary-duty breach and Stan and his sister Angela—who handled Baker’s charter sales—individually, but because those claims were dropped before the case went to the jury, we need not further mention them. 14 Part of Double H’s damage summary included a total of $76,100 in overnight fees that charter clients paid Baker when a trip was not a one-day turnaround. Double H claimed that Baker should have included those overnight fees when calculating the Charter Revenue to which Double H was entitled to 85%, but the Agreement defined Charter Revenue simply as “the actual flight hours calculated in tenths of an hour multiplied by the hourly charter rate.” The Agreement said nothing about Baker’s having to account for or share any non-Charter Revenue payments such as overnight fees or anything else Baker received beyond actual flight hours calculated in tenths of an hour multiplied by the hourly charter rate (plus the fuel surcharge).
12 • $223,150.94 in maintenance-log-system (“CAMP”) 15 charges and
maintenance charges for which Double H could not find complete
maintenance-log records, 16 spanning September 2014 through Summer
2017;
• $144,000, representing the alleged diminution-in-value difference between
what Double H expected to receive from selling the Falcon and what the
buyer paid; 17 and
• $354,111.67 in charges from August 2014 through June 2017 consisting of
the $3,000 monthly management fee paid to Baker from the Agreement’s
inception; hangar fees during times when the plane was at West Star, not at
Baker;18 monthly charges for wiping down and cleaning the plane and for
stocking it with drinks; several expenses exceeding $10,000 that required
prior written approval; and certain other miscellaneous expenses.
15 CAMP is an acronym for Continuous Airworthy Maintenance Program. 16 Baker’s director of maintenance had offered, at no cost, to correct any logging errors that could be identified—a process that he testified could be done in a day— but Double H declined.
Double H sought this diminished-value amount not only as damages for 17
BAM’s negligence but also as one of the six identical categories of contract and fraud damages against Baker.
Stan testified that the $3,000 monthly hangar fee was a flat cost from which 18
Baker was not contractually called upon to deduct, say, $100 if the plane was elsewhere one day out of thirty.
13 Thus, Double H sought total damages of $1,187,620.62. On Baker’s breach-of-
contract counterclaim, Baker sought the amount of Double H’s unpaid bills:
$394,165.96.
The jury charge included questions asking whether Baker had breached the
Agreement (Question 1); if so, whether its breach had been excused by Double H’s
prior material breach (Question 2); a conditional contract-damages question with six
components 19 but a single line for a dollar amount (Question 3); whether Baker had
committed fraud by misrepresentation and, if so, a damages question with those same
six components (Questions 4 and 5); and a question asking whether Baker had
complied with its fiduciary duty to Double H and instructing the jury that “[b]ecause a
relationship of trust and confidence existed between them, as [Double H’s] agent,
Baker owed [Double H] a fiduciary duty” (Question 7). Baker objected to that
instruction “because it presumes that an agency relationship exists and presumes that
a relationship of trust and confidence exists.” The charge also asked about BAM’s
negligence in Questions 8, 9, and 10.
19 Those categories were (1) the difference between the revenue Baker received for using Double H’s aircraft and the credit Baker gave to Double H for that use; (2) the aircraft’s diminution in value; (3) the reasonable value of Double H’s loss of the aircraft’s use; (4) the amount of any expenses or charges for the aircraft’s maintenance or operation that were not performed or not completely and correctly documented by Baker; (5) the value of unreturned equipment; and (6) the cost to Double H to obtain possession of the aircraft after terminating the Agreement.
14 On Baker’s counterclaim, the jury was asked, in Questions 13 through 15,
whether Double H had breached the Agreement, whether any breach was excused by
Baker’s prior material breach, and (conditionally) what Baker’s damages were.
Ten of twelve jurors found that both Baker and Double H had failed to comply
with the Agreement and that neither side’s failure was excused by the other’s
“previous failure to comply with a material obligation of the same agreement.”20
Without the option to differentiate among Double H’s six damages categories, the
jury awarded Double H the single sum of $247,762.64 for Baker’s failure to comply
and awarded Baker the entirety of Double H’s unpaid invoices, $394,165.96, for
Double H’s failure to comply.
The jury further found that Baker had committed fraud, awarding Double H
$849.16 in damages, and that Baker did not comply with its fiduciary duty to Double
H. The jury found that BAM was negligent and awarded Double H $140,000 on that
claim.
G. The trial court’s judgment.
After a flurry of postverdict motions from both sides, the trial court entered its
final judgment. The judgment granted Double H’s motion for judgment
notwithstanding the verdict (JNOV) by disregarding the jury’s finding in Question
14 that Double H’s failure to comply with the Agreement was not excused because, in
The trial court did not instruct the jury on the meaning of “material.” 20
15 the trial court’s view, Baker’s prior material breach—the date or form of which the
judgment did not identify—excused Double H’s performance as a matter of law. For
the same reason, the trial court disregarded the jury’s $394,165.96 award to Baker on
its counterclaim in Question 15 as “unnecessary.” The judgment awarded Double H
$247,762.64 as contract damages and $849.16 for fraud, as well as $140,000 for
BAM’s negligence.
The trial court also granted Double H’s postverdict motion for “disgorgement
or equitable forfeiture” and ordered that Double H recover an additional $350,000 as
“forfeiture of benefits or gains received by Baker, said forfeiture being fair, just and
equitable as a penalty for Baker’s clear and serious breach of its fiduciary duties to
[Double H] as found by the jury.” The judgment released to Double H the funds it
had deposited into the court’s registry and awarded to Double H its attorney’s fees
and costs. The trial court simultaneously entered findings of fact and conclusions of
law on the forfeiture issue.
Baker’s and BAM’s motion for new trial was overruled by operation of law, and
this appeal followed.
II. Fiduciary Duty
Baker’s first two issues go to the trial court’s agreeing with Double H’s position
that Baker owed it a matter-of-law fiduciary duty that was breached (Issue 1) and
ought to forfeit $350,000 for that breach as the trial court ordered (Issue 2). We agree
with Baker that the trial court erred by concluding—and by instructing the jury—that
16 “[b]ecause a relationship of trust and confidence existed between them, as [Double
H’s] agent, Baker owed [Double H] a fiduciary duty.” As we discuss below, it did not.
Additionally, or alternatively, because it was disputed, the question of a
fiduciary relationship’s existence was for the jury to decide, but Double H failed to
submit such an issue even after Baker objected to its absence. Our disposition of
Issue 1 necessarily resolves Issue 2. Accordingly, we sustain both issues, reverse the
fiduciary-breach judgment and the trial court’s concomitant forfeiture award, and
render judgment for Baker on these issues, as explained below.
A. The Agreement did not conclusively establish a fiduciary relationship.
The existence of a fiduciary duty is foundational to recovering for its breach.
See Mary E. Bivins Found. v. Highland Cap. Mgmt. L.P., 451 S.W.3d 104, 113 (Tex.
App.—Dallas 2014, no pet.); see also Lindley v. McKnight, 349 S.W.3d 113, 124 (Tex.
App.—Fort Worth 2011, no pet.) (setting forth elements of fiduciary-breach claim).
Texas recognizes two categories of fiduciary relationships: formal and informal.21 See
Meyer v. Cathey, 167 S.W.3d 327, 330–31 (Tex. 2005). In certain formal relationships—
such as those between partners, between attorneys and clients, between realtors and
clients, etc.—fiduciary duties are owed as a matter of law. Johnson v. Bearfoot Cos.,
21 Double H does not argue, and the trial court did not conclude, that the parties had an informal fiduciary relationship arising from a preexisting relationship of trust and confidence.
17 No. 02-23-00366-CV, 2024 WL 2202033, at *7 (Tex. App.—Fort Worth May 16,
2024, no pet.) (mem. op.) (citing cases).
Because a fiduciary relationship requires the duty-owing party to place someone
else’s interests above its own, Texas courts are reluctant to recognize these
relationships. Lindley, 349 S.W.3d at 124 (first citing Crim Truck & Tractor Co. v.
Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex. 1992); and then citing Jones v.
Thompson, 338 S.W.3d 573, 583 (Tex. App.—El Paso 2010, pet. denied)). Particularly
in cases involving arm’s-length business transactions, “[i]n order to give full force to
contracts, we do not create [a fiduciary] relationship lightly.” Schlumberger Tech. Corp. v.
Swanson, 959 S.W.2d 171, 177 (Tex. 1997); see also Associated Indem. Corp. v. CAT
Contracting, Inc., 964 S.W.2d 276, 288 (Tex. 1998) (rejecting existence of claimed
fiduciary duty arising from indemnity agreement that was “an arms-length transaction
entered into for the parties’ mutual benefit”).
Of course, if a contract creates an explicit principal–agent relationship (or one
of the other relational forms that enjoy recognized formal fiduciary status), that is a
different matter—one far more favorable to a plaintiff—so in defending its judgment
Double H proposes that an agency relationship was established as a matter of law
because it “was express and undisputed.” We can agree neither with these adjectives
nor with the trial court’s conclusion of law that “[i]t was the agency relationship
established by the [Agreement] between [Double H] and Baker that formed the
18 fiduciary relationship which was the basis for the jury’s finding of breach of fiduciary
duty.”22
“An agent is one who ‘consent[s] to act on the principal’s behalf and subject to
the principal’s control’ when the principal has ‘authoriz[ed] . . . the agent to act on his
behalf.’” Finley Res., Inc. v. Headington Royalty, Inc., 672 S.W.3d 332, 343 (Tex. 2023)
(quoting Cmty. Health Sys. Pro. Servs. Corp. v. Hansen, 525 S.W.3d 671, 691 (Tex. 2017)).
“Agency is a relationship which must be proved and cannot be presumed to exist.”
Johnson v. Owens, 629 S.W.2d 873, 875 (Tex. App.—Fort Worth 1982, writ ref’d n.r.e.);
see also Buchoz v. Klain, 184 S.W.2d 271, 271 (Tex. 1944) (“The law does not presume
agency, and he who alleges it has the burden of proving it.”). The “critical element of
agency” is the principal’s right to control the agent’s actions. Maida Dev., LLC v.
Tarantino Props., Inc., No. 07-16-00014-CV, 2016 WL 4135050, at *4 (Tex. App.—
Amarillo Aug. 2, 2016, pet. denied) (mem. op.) (citing Novam. Steel, Inc. v. Delta Brands,
Inc., 231 S.W.3d 499, 511 (Tex. App.—Dallas 2007, no pet.), and also noting that mere
subjective trust in another does not alone indicate a fiduciary relationship). In
connection with the control element, “the principal must have control of both the
22 We note that “even in an agency relationship . . . , courts take all aspects of the relationship into consideration when determining the nature of fiduciary duties flowing between the parties.” Nat’l Plan Adm’rs v. Nat’l Health Ins. Co., 235 S.W.3d 695, 700 (Tex. 2007). For example, a real-estate agent is a fiduciary when handling a client’s property sale but not necessarily when arranging for a maid service to spruce up the house ahead of time or when asking what the purchaser might pay to retain the seller’s patio furniture.
19 means and details of the process by which the agent is to accomplish his task in order
for an agency relationship to exist.” McAfee, Inc. v. Agilysys, Inc., 316 S.W.3d 820,
829 (Tex. App.—Dallas 2010, no pet.).
Here, the trial court erred by concluding that the Agreement expressed or
evinced an agency relationship that was fiduciary in nature. We can look to the
Agreement’s Section 16 for the basics of Double H’s and Baker’s relationship:
“Nothing herein contained shall be deemed to create a joint venture or partnership
between the Parties. All persons furnished by [Baker] for the performance of services
or work under this Agreement shall at all times and for all purposes be considered
[Baker’s] employees or agents . . . .” Neither this provision nor any other set Baker up
as Double H’s agent, impressed with a legal duty to place Double H’s interests above
its own.23 Indeed, Section 16 undercuts Double H’s position: it makes plain that those
working with, for, or on Baker’s behalf were Baker’s agents. Moreover, when asked to
23 And if such a duty had existed, nothing indicates its proscribed limits. Must Baker have favored steering clients to Double H’s aircraft for charter flights, as opposed to one of the other planes Baker had under similar contract? At oral argument, Double H answered no to that broad question and posited more narrowly that the Agreement’s provisions requiring Baker to disclose and account for charter revenues and other funds yielded a fiduciary obligation to do so fully and correctly— candidly conceding, however, that drawing the line between pure breach of contract and breach of fiduciary duty was difficult. Particularly given Texas courts’ reluctance to impose fiduciary duties when none are explicit and when a contract is at arm’s length, we are untroubled in concluding that the remedies for accounting or payment flaws are here grounded entirely in contract. “[A] contractual obligation does not generally give rise to a fiduciary duty.” Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 203 (Tex. 2002).
20 identify “any [specific] provision in that contract that creates a fiduciary relationship,”
Richard could not do so, conceding that there was “not specifically a fiduciary duty”
in the Agreement.
The Agreement placed Baker—not Double H—squarely in charge of a breadth
of matters: during the lease term, Baker had “full and exclusive possession, use,
enjoyment, command and operational control of the Aircraft”; Baker “retain[ed] the
ultimate authority and responsibility for hiring and use of any Flight Crew” in its
charter operations; and the flight crew “remain[ed] the employees, independent
contractors[,] or agents of [Baker].” True, Double H had the contractual right to say
yes or no to proposed charter flights or to proposed repairs exceeding a certain
amount, but that is a far cry from exerting the type of control needed to establish a
principal–agent relationship as a matter of law. See, e.g., Dow Chem. Co. v. Bright,
89 S.W.3d 602, 607–08 (Tex. 2002) (discussing control element, which plaintiff alleged
that premises owner possessed over contractor whose negligence caused injury, and
stating that “it is not enough that the premises owner has merely a general right to
order the work”).
And it is of no help to Double H that its contracting counterparty had superior
knowledge of the aviation industry and promised to account for revenue and expenses
under the Agreement. People enter arm’s-length contracts every day assuming that
others to whom business is entrusted will live up to their promises; all things being
equal, a disappointed party’s remedy is to seek damages for breach of those
21 contractual promises. See In re Est. of Kuykendall, 206 S.W.3d 766, 771 (Tex. App.—
Texarkana 2006, no pet.) (“The mere fact that one subjectively trusts another does
not, alone, indicate that confidence is placed in another in the sense of a fiduciary
duty.”).
Because the Agreement did not create a fiduciary duty to disclose and account
correctly to Double H—which had unfettered audit rights—or to generally place
Double H’s economic interests above Baker’s own, the trial court erred in its
fiduciary-breach legal conclusion and judgment.
B. Double H did not seek a jury finding on the duty’s existence.
Neither the Agreement nor the record shows an “express” fiduciary
relationship as a matter of law, as we explained above, and it was not “undisputed,” in
Double H’s framing, that Baker was Double H’s fiduciary. Without a matter-of-law
fiduciary relationship, Double H had the burden to obtain a favorable jury finding on
one’s existence.24 See Nat’l Plan Adm’rs, 235 S.W.3d at 700–04; Jang Won Cho v. Kun Sik
Kim, 572 S.W.3d 783, 794 (Tex. App.—Houston [14th Dist.] 2019, no pet.) (op. on
reh’g) (“If the existence of a formal fiduciary relationship is disputed, then a question
should be submitted in the jury charge inquiring whether the formal fiduciary
relationship existed at the time of the transaction at issue, or with respect to the
24 We include this alternative reason for reversing the fiduciary-breach aspects of the judgment but stress that our primary reason lies in the Agreement’s not creating an agency relationship giving rise to a fiduciary duty as a matter of law, which was the trial court’s stated legal conclusion underpinning the judgment.
22 transaction at issue, or both.”). Even after Baker raised the issue during the charge
conference—objecting to the trial court’s instruction that “Baker owed Double H a
fiduciary duty” because the instruction presumed an existing relationship of trust and
confidence—Double H declined to submit a question on which it had the burden of
proof and did not object to its omission. That strategy has consequences.
“[W]hen a disputed and essential issue is omitted over the objection of a party,
the appellate court must find that the [other] party waived that element and by so
doing did not meet the burden placed on him by law.” Winfield v. Renfro, 821 S.W.2d
640, 657 (Tex. App.—Houston [1st Dist.] 1991, writ denied) (op. on reh’g). An
objection such as Baker’s “places the burden of submitting a correct question on the
party with the burden of proof, . . . and the result of that party’s failure to submit a
correct question after objection is waiver of the ground of relief.” Mangum v. Turner,
255 S.W.3d 223, 227 (Tex. App.—Waco 2008, pet. denied); see also Chambers Cnty. v.
Pelco Constr. Co., No. 01-18-00832-CV, 2020 WL 7776078, at *14 (Tex. App.—
Houston [1st Dist.] Dec. 31, 2020, pets. denied) (mem. op. on reh’g) (“Because
Chambers County properly objected to the omission of a condition-precedent
question, Pelco, having failed to submit such an issue after objection, has waived its
recovery for breach of the contract.”). Double H waived breach of fiduciary duty as a
ground of relief by failing to submit the threshold issue—whether the duty existed—
despite Baker’s alerting Double H and the trial court to this missing element. We
sustain Baker’s first issue.
23 C. The trial court’s forfeiture award falls by the wayside.
In its second issue, Baker argues that the trial court erred by ordering it to
forfeit $350,000 to Double H as a remedy for Baker’s “clear and serious” breach of
fiduciary duty. In light of our conclusion that the fiduciary-breach judgment must be
reversed, we need not detail Baker’s analysis of the forfeiture-related arguments
because Double H cannot recover anything for an alleged breach of a nonexistent
duty, and we sustain Baker’s second issue. See Tex. R. App. P. 47.1 (stating that the
appellate court must hand down a written opinion as brief as practicable but that
addresses every issue raised and necessary to the appeal’s final disposition).
III. Baker’s Contract Claim; Prior Material Breach
Our resolution of Baker’s third issue exemplifies the dangers of not securing a
jury finding about which party committed the first material breach when both sides
point fingers at the other for not complying with a contract. See Mustang Pipeline Co. v.
Driver Pipeline Co., 134 S.W.3d 195, 200 (Tex. 2004) (noting that problems with
competing contract-breach claims can be avoided by instructing the jury “to decide
who committed the first material breach”). The jury here found that Double H failed
to comply with the Agreement and that Double H’s failure to comply was not
excused by Baker’s prior material breach, which the jury charge described, for each
side, as a “previous failure to comply with a material obligation of the same
agreement.” In answer to Question 15, the jury awarded Baker $394,165.96 for
24 Double H’s breach. But in the judgment, the trial court granted Double H’s motion to
disregard the jury’s answer to Question 14, stating:
Based upon the jury’s answers and the evidence heard by the Court, the Court determines that the jury’s answer to question No. 14 should be disregarded, it being the judgment of the Court that the evidence shows and the jury’s answers to questions 1, 2 and 3 confirm that [Double H’s] performance was excused as a matter of law because [Baker’s] prior material breach of the agreement excused [Double H’s] performance of the same agreement contrary to the jury’s answer to question No. 14. Accordingly, the jury’s answer to question no. 14 is disregarded as well as the jury’s answer to question no. 15, the answer to question no. 15 being unnecessary for the jury to have answered in light of the Court’s determination that its answer to question 14 was contrary to law under the evidence admitted by the Court. [Emphasis added.]
That ruling left the trial court free to enter judgment based on the jury’s mirror-
image findings that Baker had breached the Agreement and that Baker’s breach was
not excused by Double H’s prior material breach. The trial court did not specify what
it considered to have been Baker’s prior material breach nor when that breach
occurred.
A. Applicable law
Upon a party’s motion and reasonable notice, a trial court may disregard a jury
verdict and render a JNOV if no evidence supports the jury finding on an issue
necessary to liability or if a directed verdict would have been proper. See Tex. R. Civ.
P. 301; Tiller v. McLure, 121 S.W.3d 709, 713 (Tex. 2003); Fort Bend Cnty. Drainage Dist.
v. Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991). A directed verdict is proper only under
limited circumstances: (1) when the evidence conclusively establishes the movant’s
25 right to judgment or negates the opponent’s right or (2) when the evidence is
insufficient to raise a material fact issue. Prudential Ins. of Am. v. Fin. Rev. Servs., Inc.,
29 S.W.3d 74, 77 (Tex. 2000); Playoff Corp. v. Blackwell, 300 S.W.3d 451, 454 (Tex.
App.—Fort Worth 2009, pet. denied) (op. on reh’g).
To determine whether the trial court erred by rendering a JNOV, we test legal
sufficiency by viewing the evidence in the light most favorable to the verdict. See
Ingram v. Deere, 288 S.W.3d 886, 893 (Tex. 2009); Wal-Mart Stores, Inc. v. Miller,
102 S.W.3d 706, 709 (Tex. 2003). This means we must credit evidence favoring the
jury verdict if reasonable jurors could and must disregard contrary evidence unless
reasonable jurors could not. See Tanner v. Nationwide Mut. Fire Ins., 289 S.W.3d 828,
830 (Tex. 2009); Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007).
We will uphold the trial court’s JNOV if no evidence supports the jury’s finding on a
vital fact or if the evidence conclusively establishes the opposite of a vital fact. City of
Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). “[E]very reasonable inference
deducible from the evidence is to be indulged in” support of the jury’s finding.
Bustamante v. Ponte, 529 S.W.3d 447, 456 (Tex. 2017) (quoting Merrell Dow Pharm., Inc. v.
Havner, 953 S.W.2d 706, 711 (Tex. 1997)).
B. Analysis
Here, without a jury finding on which party first materially breached the
Agreement, the jury’s findings favorable to Double H give us no information from
which to deduce that Double H proved, as a matter of law, the affirmative defense
26 that Baker materially breached first. See Bartush-Schnitzius Foods Co. v. Cimco Refrigeration,
Inc., 518 S.W.3d 432, 436 (Tex. 2017) (noting that materiality of a contract breach is
ordinarily a fact issue and may be decided as a matter of law only if reasonable jurors
could reach only one verdict and also noting that nonmaterial breach does not excuse
the other party from future performance but gives rise only to a claim for damages);
Earth Power A/C & Heat, Inc. v. Page, 604 S.W.3d 519, 524–25 (Tex. App.—Houston
[14th Dist.] 2020, no pet.) (stating that prior material breach is an affirmative defense
that must be pleaded and proved and holding that party’s failure to submit jury
question on materiality of other party’s alleged breach waived the defense where prior
material breach was not conclusively proved).
Double H’s contract-damages categories spanned different time periods,
alleged different breaches, and sought to recover different amounts. Although Double
H argues that the jury’s global damages award of $247,762.64 in answer to Question
3 must have reflected Baker’s charter-revenue underpayments that began in
December 2015—and thus necessarily a prior material breach by Baker predating
Double H’s own breaches—neither the record nor the verdict bears that out, for
several reasons.
First, Double H’s Exhibit A1-A laid out a total of $466,358.01 in disputed
charter revenue ($232,387.64) and disputed fuel costs ($233,970.37). Neither amount
matches the jury’s answer to Question 3, so we would be speculating to conclude that
the jury’s award was based entirely on any part of Exhibit A1-A. See Drury Sw., Inc. v.
27 Louie Ledeaux #1, Inc., 350 S.W.3d 287, 292 (Tex. App.—San Antonio 2011, pet.
denied) (op. on reh’g) (holding that “a reviewing court is not permitted to speculate
on how the jury actually arrived at its award.”).
Second, Double H argued for other contract damages that likewise differed
from the $247,762.64 award: (a) $223,150.94 in total CAMP charges and unverified
maintenance charges from September 2014 forward, as shown on Double H’s Exhibit
B; (b) $354,111.67 in charges from August 2014 through June 2017 consisting of the
$3,000 monthly management fee, along with other charges that Double H disputed
and that it summarized in its Exhibit C; and (c) $144,000 for the plane’s diminished
value. Again, pointing to any of this as conclusive evidence of Baker’s prior material
breach is unmerited under the appropriate standard of review.
Third, because the jury’s award to Double H was significantly less than the over
$1 million in collective contract damages it sought through the end of the parties’
relationship in the summer of 2017, it is impossible to say with any confidence how
much, if any, of those damages were incurred before Double H’s presumed March
2016 breach25—or at any particular point in time, for that matter—much less whether
Baker breached the Agreement in a material way before Double H did. We sustain
this part of Baker’s third issue.
From the jury’s awarding Baker the entire $394,165.96 of Double H’s 25
indebtedness, we can deduce that Double H’s first material breach probably came when it failed to timely pay the February 2016 invoice by March 20, 2016.
28 When a trial court errs by entering a JNOV or disregarding a jury finding, we
generally reverse and render judgment unless the appellee presents by cross-points
grounds sufficient to vitiate the jury’s verdict or to prevent an affirmance of the
judgment had one been entered on the verdict. Dudley Constr., Ltd. v. Act Pipe &
Supply, Inc., 545 S.W.3d 532, 538 (Tex. 2018); see also Wal-Mart Stores, Inc., 102 S.W.3d
at 710; Jackson v. Ewton, 411 S.W.2d 715, 717 (Tex. 1967). Because Double H did not
present any such cross-points, rendition on Baker’s third issue is the appropriate
result. But it follows that the appropriate resolution of the competing contract
damages is to net them out, rather than stripping Double H of a recovery altogether,
because Baker does not argue that Double H’s breach was not excused as a matter of
law—or, put differently, Baker does not argue that Double H committed the first
material breach as a matter of law. Because Rule 43.2(c) authorizes us to render the
judgment that the trial court should have entered, we will render judgment that Baker
recover $146,403.32 ($394,165.96 – $247,762.64) in contract damages. 26 See Tex. R.
App. P. 43.2(c).
Baker also asks, as part of its third issue, that we remand the limited issue of its
entitlement to attorney’s fees under Sections 10.1 and 10.2 of the Agreement, which
in light of our holding we will do.
26 Baker’s motion for judgment in the trial court sought that net amount.
29 IV. Double H’s Fraud Claim
In its fourth issue, Baker asserts that the judgment awarding Double H
$849.16 for Baker’s fraud lacked legally sufficient evidence to support the jury’s
liability finding. We agree.
A. Standard of review; applicable law
We may sustain a legal-sufficiency challenge—that is, a no-evidence
challenge—only when (1) the record bears no evidence of a vital fact, (2) the rules of
law or of evidence bar the court from giving weight to the only evidence offered to
prove a vital fact, (3) the evidence offered to prove a vital fact is no more than a mere
scintilla, or (4) the evidence establishes conclusively the opposite of a vital fact. Shields
Ltd. P’ship v. Bradberry, 526 S.W.3d 471, 480 (Tex. 2017); see also Ford Motor Co. v.
Castillo, 444 S.W.3d 616, 620 (Tex. 2014) (op. on reh’g); Uniroyal Goodrich Tire Co. v.
Martinez, 977 S.W.2d 328, 334 (Tex. 1998) (op. on reh’g). We consider the evidence
under the same standard set out above for reviewing the JNOV. See Cent. Ready Mix
Concrete Co., 228 S.W.3d at 651; City of Keller, 168 S.W.3d at 807, 827. That is, we
indulge “every reasonable inference deducible from the evidence” in support of the
challenged finding. Gunn v. McCoy, 554 S.W.3d 645, 658 (Tex. 2018). But when the
evidence offered to prove a vital fact is so weak that it creates no more than a mere
surmise or suspicion of its existence, the evidence is no more than a scintilla and, in
legal effect, is no evidence. King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751 (Tex.
2003); Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983).
30 B. Analysis
Although a party can commit fraud by nondisclosure, see, e.g., Schlumberger Tech.,
959 S.W.2d at 181, and although Double H’s live pleading asserted—and much of its
focus at trial involved—a “failure to disclose,” Double H presented to the jury,
through the charge, only the theory that Baker had knowingly or recklessly made
material misrepresentations, intending that Double H act on them and on which
Double H relied to its detriment. The jury was not charged on fraud by omission or
failure to disclose. The charge defined “misrepresentation” as (a) a false statement of
fact; or (b) a promise of future performance made with an intent, at the time the
promise was made, not to perform as promised; or (c) a statement of opinion based
on a false statement of fact; or (d) a statement of opinion that the maker knows to be
false; or (e) an expression of opinion that is false, made by one who has, or purports
to have, special knowledge of the subject matter of the opinion. “Special knowledge”
was in turn defined as knowledge or information superior to that possessed by the
other party and to which the other party did not have equal access. See Comm. on
Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges: Business PJC 105.2,
105.3A–105.3E (2018).
The supreme court has interpreted “special knowledge” to mean knowledge of
specific facts that underlie a false opinion and has held that this can support an
affirmative-misrepresentation claim. Trenholm v. Ratcliff, 646 S.W.2d 927, 930–31 (Tex.
1983) (holding that real-estate developer’s knowingly false and specific assurances to
31 land developer that nearby trailer park had been sold and would soon be closing went
beyond nonactionable opinion or prediction). The speaker must be saying something
that he knows to be false and must be giving an opinion based on those known false
facts. “Special or one-sided knowledge may support the conclusion that a statement is
one of fact, not opinion, and the comparative levels of the speaker’s and the hearer’s
knowledge are relevant considerations in determining the nature of the statement.” S.
Cent. Jurisdictional Conf. of United Methodist Church v. S. Methodist Univ., 674 S.W.3d 334,
378 (Tex. App.—Dallas 2023, pet. filed) (citing Italian Cowboy Partners v. Prudential Ins.
Co. of Am., 341 S.W.3d 323, 338 (Tex. 2011)); see also Nancarrow v. Whitmer, 463 S.W.3d
243, 252 (Tex. App.—Waco 2015, no pet.) (“[P]redictions about the future that are
made with present knowledge that the statements are false are actionable
misrepresentations.”). Whether expressing an opinion about a future event’s
happening constitutes fraud requires taking into account such “[r]elevant
circumstances” as “the statement’s specificity and the comparative levels of the
speaker’s and the hearer’s knowledge.” Paull v. Cap. Res. Mgmt., Inc., 987 S.W.2d 214,
219 (Tex. App.—Austin 1999, pet. denied) (citing Transp. Ins. Co. v. Faircloth,
898 S.W.2d 269, 276 (Tex. 1995)). On the other hand, pure expressions of opinion
will not support a fraud claim. Faircloth, 898 S.W.2d at 276; Trenholm, 646 S.W.2d at
930.
In its opening statement, Double H forthrightly informed the jury that Baker
never promised that Double H would make money or break even, only that breaking
32 even was a “reasonable expectation.” Richard described the prepurchase conversation
with Stan similarly:
Q. Okay. And did Stan Baker make any representations to you and your father about what to expect in terms of revenue once the plane started being chartered?
A. Yes. We -- Actually, before we ever even bought the plane, we came to Stan’s office and set down with him, and he had on his computer worked up some, you know, basic projections and the -- the projections basically came out to that we could break even or maybe make a little bit of money.
Q. Okay. And Mr. Baker didn’t -- you heard me tell the members of the jury -- didn’t promise you you were going to make any money, did he?
A. No.
Q. But he represented to you that you could reasonably expect that you were going to cover your expenses?
A. Yes.[27]
We conclude that these statements do not rise to the level of fraudulent
misrepresentation—that is, that Stan knew he was lying or spoke recklessly when
telling Richard that he could expect to break even or that Stan made some specific
statements from a position of superior knowledge—but were instead mere predictions
or opinion. Nothing in the record establishes that Stan misrepresented or recklessly
opined about what Double H could reasonably expect to receive from charter income,
27 Stan testified that the discussion about projections did not occur until 2016, years after Double H bought the Falcon, explaining that “[f]inances did not seem to be an issue” at first and that the Halls “had a lot of money.”
33 nor did Stan testify about comparable experience with other clients’ charter operations
and revenue. We sustain Baker’s fourth issue.
V. BAM’s Negligence; Damages
In a fifth issue, BAM argues that the negligence judgment should be reversed
for several reasons, including that Double H’s diminution-in-value evidence was
legally insufficient—the applicable review standard we have recited above—to
support the $140,000 award in the judgment. As set out below, we agree with BAM
on this sub-issue and thus need not reach its arguments on the economic-loss rule or
release. See Tex. R. App. P. 47.1.
A. Applicable law on owners’ value opinions
A corporate representative of an entity that owns personal property is
competent to opine on the property’s value, but only “as long as he testifies about
matters within his knowledge.” Taiwan Shrimp Farm Vill. Ass’n, Inc. v. U.S.A. Shrimp
Farm Dev., Inc., 915 S.W.2d 61, 71 (Tex. App.—Corpus Christi–Edinburg 1996, writ
denied). The Texas Supreme Court later expanded on this notion:
We hold that the Property Owner Rule is limited to those witnesses who are officers of the entity in managerial positions with duties related to the property, or employees of the entity with substantially equivalent positions and duties. Further, the Property Owner Rule falls within the ambit of Texas Rule of Evidence 701 and therefore does not relieve the owner of the requirement that a witness must be personally familiar with the property and its fair market value, but the Property Owner Rule creates a presumption as to both.
34 Reid Rd. Mun. Util. Dist. No. 2 v. Speedy Stop Food Stores, Ltd., 337 S.W.3d 846, 849 (Tex.
2011); 28 see Custom Transit, L.P. v. Flatrolled Steel, Inc., 375 S.W.3d 337, 352–53 (Tex.
App.—Houston [14th Dist.] 2012, pets. denied) (noting appellant’s concession that
corporate owner seeking diminished-value damages for improperly stored steel coils
was qualified to opine on damages as owner who occupied managerial position with
duties related to the coils and as one personally familiar with market value of prime
versus less-than-prime steel).
Not long after Speedy Stop, the supreme court provided further guidance,
holding that property-owner testimony, as the “functional equivalent of expert
testimony,” cannot establish valuation based “solely on a property owner’s ipse dixit.”
Nat. Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 159 (Tex. 2012). “An owner may
not simply echo the phrase ‘market value’ and state a number to substantiate his
diminished[-]value claim; he must provide the factual basis on which his opinion
rests.” Id.; see also Hous. Unlimited, Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d
820, 829 (Tex. 2014) (quoting City of San Antonio v. Pollock, 284 S.W.3d 809, 818 (Tex.
2009), in explaining that an opinion is conclusory if “no basis for the opinion is
offered” or “the basis offered provides no support”).
28 In Speedy Stop, the supreme court noted that although the valuation affiant had experience, knowledge, and expertise in real-estate values generally and was generally familiar with the store’s business operations, he did not demonstrate his personal familiarity with the store property at issue and its fair market value, and thus the trial court did not abuse its discretion by excluding his damages opinion under Rule of Evidence 701. 337 S.W.3d at 852.
35 B. Analysis
Double H’s responsive briefing on appeal clarifies that (despite much talk at
trial about the pre-purchase leading-edge damage) it sought damages only for the
overweighting issue and asserts without further analysis that “witnesses testified that
the loss in value was $140,000, which is consistent with the jury’s verdict.” But
Richard was the only witness to put a dollar figure on the claimed diminution in value;
Dupree, who later managed the aircraft and helped sell it, testified that “the buyer
paid less for the airplane than they would have absent the damage” but did not
quantify that allegedly lesser amount.
Richard testified that (1) he had to disclose the damage history to the eventual
purchaser, who paid $3 million for plane; and (2) after disclosing that history, he
received “[a]bout $144,000” less than he expected. But Richard also testified that he
had had “no experience in owning or operating an aircraft” and agreed that he was
“not an expert in aircraft valuation,” was “not an expert in the diminution of value or
the loss of value as a result of damage to an aircraft,” and was “not an expert in
assessment of damages.” We thus hold that Richard’s testimony was legally
insufficient to support the $140,000 jury verdict and judgment for BAM’s negligence.
See City of Keller, 168 S.W.3d at 812–13. We sustain the appellants’ fifth issue.
VI. The Attorney’s-Fees Award to Double H
Baker’s sixth issue challenges the trial court’s judgment awarding Double H
over $190,000 in reasonable and necessary attorney’s fees, arguing that Section 10 of
36 the Agreement trumps Section 38.001 of the Texas Civil Practice & Remedies Code.
See Act of May 17, 1985, 69th Leg., R.S., ch. 959, § 1, 1985 Tex. Gen. Laws 3242,
3278–79 (amended 2021) (current version at Tex. Civ. Prac. & Rem. Code Ann.
§ 38.001) (“A person may recover reasonable attorney’s fees from an individual or
corporation, in addition to the amount of a valid claim and costs, if the claim is
for . . . an oral or written contract.”). We agree that, based on our analysis above,
Double H is not entitled to recover its attorney’s fees under the Agreement, and
because its breach-of-contract claim is the only one that would allow for an
attorney’s-fees recovery, we sustain Baker’s sixth issue.
Texas follows the “American Rule,” which calls for each party to pay its own
way in attorney’s fees “unless authorized by statute or contract.” In re Nat’l Lloyds Ins.
Co., 532 S.W.3d 794, 809 (Tex. 2017) (orig. proceeding); see also Epps v. Fowler,
351 S.W.3d 862, 865 (Tex. 2011) (explaining that attorney’s-fees award must be
“specifically provided for by statute or contract”). Although Civil Practice and
Remedies Code Section 38.001 authorizes an attorney’s-fees recovery in a claim for
breach of contract, “[p]arties are free to contract for a fee-recovery standard either
looser or stricter than Chapter 38’s.” Intercont’l Grp. P’ship v. KB Home Lone Star L.P.,
295 S.W.3d 650, 653 (Tex. 2009). When a contract provides for a standard that differs
from Chapter 38, courts will apply the parties’ chosen metrics in deciding whether to
37 award attorney’s fees. Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d
469, 485 (Tex. 2019).
The Agreement contains a provision addressing attorney’s fees that is tied to
several detailed “Events of Default” within Section 10. One of those events in
subsection 10.1—and the only one theoretically applicable here to support Double
H’s recovery—is “[v]iolation by either Party of any other term, representation or
warranty set forth in this Agreement at any time during the Term,” although that
sentence has a condition: “together with a failure to cure within seven (7) days after
receipt of written notice of such violation.” Subsection 10.2 of the Agreement goes on
to provide that “[u]pon an Event of Default, the non-defaulting party shall have the
right . . . to . . . [p]ursue any other remedy now or hereafter available at law or in
equity” and “[i]n the event a Party takes any action pursuant to this Section, such Party
shall be entitled to recover its reasonable attorneys’ fees and expenses.” [Emphasis
added.] To recover attorney’s fees, then, Double H must have taken legal action
because of a specific event of default; a general claim for breach of contract in and of
itself does not fall within the Agreement’s terms.
Although Double H’s contract claim asserted a series of alleged violations, to
constitute a defined event of default, Double H had to have given Baker written
notice of the Agreement’s violation and allowed Baker a seven-day cure period. In its
two-paragraph response to Baker’s sixth issue, Double H does not claim to have ever
38 given Baker notice and right to cure, nor does it contend that some other subsection
10.1 event of default existed that would allow for its attorney’s fees. Indeed, its only
response to Baker’s contract-based analysis is to claim entitlement to attorney’s fees
“based on multiple theories, including under the Agreement due to Baker Aviation’s
breach, pursuant to section 37.009 of the Texas Civil Practice & Remedies Code
(Uniform Declaratory Judgments Act),[29] and pursuant to Chapter 38 of the Texas
Civil Practice & Remedies Code.” We find Double H’s argument unpersuasive and
sustain Baker’s sixth issue.
VII. Partial Remand
Baker’s seventh and final issue seeks a partial reversal and remand “to the
extent the attorney fee award to Double H is not reversed and rendered.” Based on
our disposition above, Double H is not entitled to recover attorney’s fees. Thus, we
overrule as unnecessary this part of Baker’s final issue. See Tex. R. App. P. 47.1.
We will sustain the part of Baker’s final issue that asks for a remand so that the
trial court can reconsider its order that the funds currently held in the court’s registry
should be released to Double H.
29 Double H’s only declaratory-judgment claim involved its assertion that Baker’s lien was invalid and unenforceable, but the jury did not find that the lien was invalid and the final judgment did not include any declaratory relief.
39 VIII. Conclusion
Having sustained Baker’s dispositive issues, we reverse the trial court’s
judgment and render judgment that Double H take nothing on its breach-of-fiduciary-
duty claim, on its fraud claim, on its negligence claim against BAM, and on its claim
for attorney’s fees. We render judgment that Baker recover $146,403.32 on its breach-
of-contract claim and remand for reconsideration the issues of Baker’s entitlement to
attorney’s fees and Double H’s funds in the trial court’s registry.
/s/ Elizabeth Kerr Elizabeth Kerr Justice
Delivered: August 15, 2024
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Cite This Page — Counsel Stack
Baker Aviation, LLC and Baker Aviation Maintenance, LLC v. Double H International Holdings, Inc., Counsel Stack Legal Research, https://law.counselstack.com/opinion/baker-aviation-llc-and-baker-aviation-maintenance-llc-v-double-h-texapp-2024.