JNS Enterprise, Inc. v. Dixie Demolition, LLC

430 S.W.3d 444, 2013 WL 3791502, 2013 Tex. App. LEXIS 8785
CourtCourt of Appeals of Texas
DecidedJuly 17, 2013
DocketNo. 03-10-00664-CV
StatusPublished
Cited by17 cases

This text of 430 S.W.3d 444 (JNS Enterprise, Inc. v. Dixie Demolition, LLC) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
JNS Enterprise, Inc. v. Dixie Demolition, LLC, 430 S.W.3d 444, 2013 WL 3791502, 2013 Tex. App. LEXIS 8785 (Tex. Ct. App. 2013).

Opinion

OPINION

JEFF ROSE, Justice.

In this case arising from a salvage operation in Rockdale, Texas, appellants JNS Enterprise, Inc. and Leesboro Corporation appeal the district court’s imposition of “death penalty” sanctions against them based on the district court’s finding that they had fabricated documents at issue in the ease. We will modify the district court’s award of appellate fees, but affirm the remainder of the judgment.

Background

JNS, which is in the business of buying and selling steel salvage, hired Airways Recycling Group, LLC, to help it locate salvage business opportunities in the United States. Airways identified just such an opportunity in connection with a defunct Alcoa power plant in Rockdale, Texas. Appellee Dixie Demolition, LLC owned the salvage rights in the Alcoa plant and was under contract with Alcoa to demolish the plant and abate all environmental liabilities at the site by a date certain. Dixie agreed to sell its salvage rights in the Alcoa plant to Airways for $10 million, requiring $8 million up front and the remaining $7 million later. Airways, in turn, agreed to sell those same salvage rights to JNS for $11,275,000. JNS paid Airways $4,275,000 as a deposit and then sought to finance the remainder through its investors, including appellant Leesboro. Ultimately, however, JNS failed to pay Airways the remaining purchase amount and, as a result, Airways defaulted on its purchase agreement with Dixie. Dixie eventually terminated its contract with Airways and sold the salvage to other buyers, appellees Velez Trucking, Inc. and AAR Incorporated. Airways then terminated its contract with JNS.

After Dixie terminated its contract with Airways and removed JNS from the plant site, JNS investor Leesboro sued JNS, Dixie, Airways, and other defendants for various claims stemming from the breach of an alleged “performance guarantee” that Leesboro asserted was included, as a condition of its investment, in the two salvage contracts it alleged it had entered into with JNS regarding the Alcoa plant. The first contract between Leesboro and JNS, dated May 30, 2008, covered the sale of nonferrous salvage from the plant and the other contract, dated June 2, 2008, covered the sale of ferrous salvage from the plant. Both contracts included the following provision regarding an attached “promissory document”:

Seller (JNS) warrants Leesboro Corporation, based on the signed promissory document (Exhibit “A”) dated May 29, 2008 by Claude Hendrickson, CEO of Dixie Demolition LLC, Conrad Bar, president of Airway Recycling Group LLC and Sonny Nguyen, CEO of JNS Enterprise, guaranteeing the performance of this contract with commencing [448]*448operation date of June 1, 2008, completing approximately 3 months after the startup date, until all tonnage agreed on this contract.”

Thereferenced “Exhibit A,” which was purportedly attached to both contracts, guarantees that if JNS or Airways default on their contracts with Dixie, Leesboro has the right to purchase salvage material directly from Dixie:

May 29, 2008
Gentlemen,
This is [to] confirm that you have, or will be depositing funds totaling $2,500,000.00 for the purchase of scrap steel and copper from [JNS], which is being salvaged from the ALCOA Rock-dale, Texas facility. In the event that [JNS] and Airways default in their obligations regarding the procurement of the salvaged materials, and such default or defaults remain uncured after notice, and [JNS] is unable to perform on its sale of the material, you shall have the right to purchase 5000 tons of scrap steel for $2,000,000 and $500,000 of scrap copper at the then market value. You shall be purchasing the first such material available at the project site. The funds on deposit will be applied to the purchase.
DIXIE DEMOLITION, LLC, an Alabama limited liability company
By: /s/ Claude Hendrickson, Manager
AIRWAYS RECYCLING GROUP, LLC, a Nevada limited liability company
By: /s/ Conrad Bar, Manager
[JNS] ENTERPRISE, INC., a California corporation
By: /s/ Sonny Nguyen, President

As indicated above, the performance guarantee purported to be signed by representatives of Dixie, Airways, and JNS, respectively.

Arguing in its original petition that it required this “performance guarantee” to invest with JNS and then relied on its terms when it paid JNS $3 million for salvage rights, Leesboro asserted claims for breach of the performance guarantee against Dixie, JNS, and Airways; fraud in the inducement and fraudulent concealment against Airways, Dixie, Hendrickson, and Bar; and constructive trust of the salvage materials from the Alcoa plant.

At some point during the first year of this litigation, JNS settled with Leesboro and then joined Leesboro as a plaintiff. In JNS and Leesboro’s petition against the remaining defendants, Leesboro asserted claims for breach of the performance guarantee, fraud, fraud in the inducement, fraudulent concealment, and interference with contract — again, all based on breach of the alleged performance guarantee. JNS, in turn, asserted a claim against Airways for breach of its purchase agreement and claims against both Airways and Dixie for breach of the performance guarantee.

In response to discovery requests made during the course of litigation, Leesboro and JNS produced the May and June 2008 contracts, with their attached performance guarantee, and their corporate representatives testified in deposition about those contracts. And in response to further discovery requests, a district court order compelling production of certain documents, and a $12,000 sanction for not having done so previously, Leesboro produced its communications with JNS and all Lees-boro computers used to create or edit the contracts and performance guarantee at issue in the case. A neutral third-party forensics examiner agreed upon by all the parties examined and retrieved data from these computers. Dixie then hired its own computer forensics expert to examine and analyze that data. Dixie’s expert conclud[449]*449ed that there was no evidence from the data to show that the contracts and performance guarantee “existed at the time they are dated.” Additional discovery in the case revealed evidence supporting the expert’s conclusion that the contracts and performance guarantee were created after the dates on which they were purportedly signed. For example, there was evidence showing that Leesboro representative Michael Lee was not in the United States when the June 3, 2008 JNS/Leesboro contract was purportedly signed in New Orleans, Louisiana — both of these contracts include a notarized acknowledgment that the contracts were signed in front of witnesses in New Orleans, Louisiana on May 31 and June 3, 2008 respectively. Further, email between Leesboro and JNS suggest that the parties were still negotiating the terms of their agreements after June 3, 2008. Finally, during deposition, Leesboro representative Michael Lee admitted that it was “a possibility” that the JNS/Lees-boro contracts were created in August 2008 and then backdated to support Lees-boro’s claims.

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Cite This Page — Counsel Stack

Bluebook (online)
430 S.W.3d 444, 2013 WL 3791502, 2013 Tex. App. LEXIS 8785, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jns-enterprise-inc-v-dixie-demolition-llc-texapp-2013.