LJ Charter, LLC C.N. Schwarz, III, R & S Aircraft Investments, LLC, CNS Ventures, LLC, and Starflite Management Group, Inc. v. Air America Jet Charter, Inc.

• Court: Court of Appeals of Texas
• Decided: December 15, 2009
• Docket: 14-08-00534-CV
• Status: Published

Opinion

Affirmed as Modified and Memorandum Opinion filed December 15, 2009.

In The

Fourteenth Court of Appeals

___________________

NO. 14-08-00534-CV

LJ Charter, L.L.C., Charles N. Schwarz, Jr., Charles N. Schwarz, III, and CNS Ventures, L.L.C., Appellants

V.

Air America Jet Charter, Inc., Appellee

On Appeal from the 165th District Court

Harris County, Texas

Trial Court Cause No. 2004-33390

MEMORANDUM OPINION

            This case involves a commercial dispute over the use of a hangar at the City of Houston’s Hobby Airport.  The trial court entered a judgment in favor of appellee and cross-appellant, Air America Jet Charter, Inc. (“Air America”), which both sides challenge on appeal.  We modify the trial court’s judgment and affirm as modified.

Factual and Procedural Background

            Appellant and cross-appellee LJ Charter, L.L.C. (“LJ Charter”) is owned by appellants and cross-appellees Charles N. “Buzzy” Schwarz, Jr. (“Buzzy Schwarz”) and Charles N. “Trey” Schwarz, III (“Trey Schwarz”).[1]  LJ Charter was a private aircraft management company that held a valuable asset: a lease from the City of Houston (“City”) on a “135” hangar (located on Larson Street and it will be referred to as either the “Larson Street Hangar” or just the “Hangar”) located at Hobby Airport.[2]  LJ Charter’s lease ran through December, 2000.  Under City requirements, to lease a 135 hangar such as the Larson Street Hangar, the lessee had to hold a 135 certificate from the Federal Aviation Administration (“FAA”).  A 135 certificate is the license that enables an entity to engage in the business of chartering private aircraft.  A 135 certificate lists the specific types of aircraft the FAA has determined the entity has the capability to safely fly.  LJ Charter owned two aircraft: a Learjet and a King Air 90, but it did not possess a 135 certificate.  Prior to the events directly at issue in this litigation, LJ Charter had avoided the City’s requirement that the Hangar lessee hold a 135 certificate by bringing a company into the Hangar that did have a 135 certificate.[3]  For reasons not disclosed in the record, that relationship ended and LJ Charter faced the prospect of losing the Larson Street Hangar if it did not find a replacement.  After lengthy negotiations with another charter company fell through, LJ Charter approached Air America.

            Air America is a small charter company owned by Blair McCarter, Jr.  It held a 135 certificate from the FAA.  Air America also operated two planes (a Learjet and a Navajo, both leased from another company owned by McCarter) and was operating out of another hangar at Hobby Airport operated by Fletcher Aviation.  One disadvantage of operating out of the Fletcher Hangar was Air America had to pay close to retail prices for its aviation fuel.  In the summer/fall of 2000, LJ Charter and Air America entered into discussions over Air America moving into the Larson Street Hangar.  Aware that LJ Charter’s lease ended in December 2000, McCarter expressed a lack of interest in moving into the new hangar only to face the prospect of moving again a short time later.  LJ Charter convinced McCarter that the move would be a good thing for both parties because (1) the Larson Street Hangar had a tank farm and therefore Air America would be able to obtain its aviation fuel for wholesale rather than retail prices; (2) the Schwarzes represented they knew a lot of people in the “business” and could bring additional aircraft into the Larson Street Hangar,[4] which would then be available for Air America to charter; and (3) they had connections with the City and were working on extending the lease into the future.  The sales pitch was successful and ultimately, on October 14, 2000, the two companies entered into the “Charter Aircraft Services Management Agreement” (the “Agreement”).  Included in the Agreement was Exhibit “A” setting forth additional obligations under the Agreement.  Paragraph 7 of Exhibit “A” provides:

If at any time during the term of this Agreement, [LJ Charter] should (for any reason whatsoever) not want [Air America] in it’s Hangar, [LJ Charter] will pay $25,000.00 to [Air America] for a relocation fee, provided there are no Hangar sales pending as stated above in Paragraph six (6).[5]

            To help get the City’s approval of the new relationship and thereby keep LJ Charter in control of the valuable Larson Street Hangar, John Weatherly, LJ Charter’s attorney, drafted a letter to the Houston Airport Systems’ Properties Division.  In that letter, Weatherly wrote: “in an effort to comply with what we believe to be the City’s request, my clients have structured a business arrangement with Air America Charter, Inc. (“Air America”) concerning the operation of the Leased Premises.  Specifically, L.J. Charter and Air America have entered into a Joint Venture Charter Aircraft Services Management Agreement (the “Joint Venture Agreement”) concerning operation of the Leased Premises.”

            The relationship between the two companies was rocky from the beginning.  First, the LJ Charter King Air 90 was not airworthy and was unavailable for charters during the entire time period the two companies shared the Hangar.  Next, LJ Charter did not live up to all of the duties it was supposed to fulfill under the terms of the Agreement.  These included arranging fuel deliveries, maintaining the facility and the equipment, and paying half of the various expenses.  In addition, LJ Charter did not bring additional aircraft into the Hangar.  Finally, the LJ Charter Learjet began experiencing mechanical problems and eventually it also became unavailable for charters.  The Schwarzes decided it was not worth the expense to make the Learjet flyable and they ultimately sold it.  Therefore, starting sometime in 2002, there were no LJ Charter aircraft available for Air America to charter.

At a specific time not disclosed in the record, the Schwarzes purchased a new plane, a Westwind.  A large amount of trial time was spent discussing this Westwind.  According to the testimony, the Westwind was a nicer aircraft than a Learjet: it had a larger, more luxurious passenger compartment, and, most important, a larger fuel capacity.  There was testimony that Air America anticipated the Westwind would be added to its 135 charter certificate as a replacement for the lost Learjet.  This did not occur.  Instead, the Schwarzes decided to place ownership of the Westwind into another company they owned: R & S Aircraft Investments, L.L.C. (“R & S”).  In addition, the Schwarzes decided to not place the R & S Westwind on Air America’s 135 charter certificate but instead placed it on that of a competitor: Starflite Management Group, Inc. (“Starflite”).  There was testimony this decision was made because Starflite already had Westwinds on its 135 certificate and Air America did not, and to add a Westwind to the Air America certificate would have required a significant financial investment.[6]  There was also testimony that the R & S Westwind, while not on Air America’s 135 charter, was available for Air America to charter at a ten percent commission rather than the standard fifteen percent commission LJ Charter owed Air America for the chartering of its aircraft under the Agreement.[7]  Finally, despite the fact the R & S Westwind was not on Air America’s charter, there was testimony it was frequently fueled and stored at the Larson Street Hangar and the bill for such services was never paid.

On July 6, 2003, Trey Schwarz used Air America’s Learjet to fly his father-in-law to Kansas.  He specifically asked Air America to bill him for that flight, which it did.  The total invoice for the flight came to $5,980.00.  Trey Schwarz never paid that invoice.

Ultimately, the biggest issue between Air America and LJ Charter was the Hangar lease.  The original lease term ran out at the end of December 2000, and the City extended the lease on a month-to-month basis.  As a result, there were periodic discussions between Air America, primarily Mike Edwards, Air America’s vice president, and Trey Schwarz, regarding the status of the lease negotiations between the City and LJ Charter.  Each time, Trey Schwarz reported he was taking care of it.  Air America accepted those representations until August 2003, when it received notice from the City that it had to vacate the Larson Street Hangar by August 31, 2003.  At that point, Trey Schwarz asked Air America to stick with LJ Charter as he was working diligently with the City to work out the lease situation.  Through continuing discussions with Trey Schwarz, combined with the fact that after August 31, 2003, the City never moved to force Air America to vacate the Hangar, Edwards believed that LJ Charter had worked out a new lease with the City.  This belief lasted until Air America received a Feb. 19, 2004 letter from Trey Schwarz informing Air America that LJ Charter was terminating its relationship with Air America and that Air America had to vacate the Larson Street Hangar by March 30, 2004.

This notice to vacate the Hangar was the end result of Buzzy and Trey Schwarz deciding the economics of the deal with Air America were not working out.  According to Buzzy Schwarz, the discussions between father and son probably started some six months before Air America was ultimately kicked out of the Hangar.  Those discussions also involved the City.  A September 3, 2003 email from Jim Murff at the City to Trey Schwarz revealed that McCarter was calling the City to discuss the status of the Hangar lease and Murff did not want to discuss that situation with McCarter until he had talked to Trey Schwarz.  These discussions between the City and the Schwarzes continued and on January 4, 2004, Lucy Ortiz of the City’s aviation department informed Trey Schwarz that the Larson Street Hangar lessee must actually be the holder of the 135 certificate.  Trey Schwarz replied that he understood and that he would work on a different plan.

Trey Schwarz testified this different plan did not include Air America.  In addition, Trey Schwarz testified that in January 2004 he was already in negotiations with Starflite about Starflite moving into the Hangar and that he did not inform Air America of those conversations.  On February 18, 2004, Trey Schwarz told Ortiz that he wanted Starflite to be the name on the Hangar lease.  In addition, Trey Schwarz told Ortiz: “I would ask that this remain confidential until I can personally meet with Blair McCarter as there is more than a business relationship with Air America.”  Trey Schwarz testified he did not inform Air America of this decision at that time.  On March 1, 2004 Ortiz emailed the new lease, bearing the name of Starflite as the lessee, to Trey Schwarz.  Ortiz asked that if he agreed with the lease, to have Starflite execute three copies and then return the lease to her.  Trey Schwarz admitted that the City sent the lease to him because he was the person negotiating with the City for Starflite.  Ortiz also wrote that, “in accordance with your instructions, [she] changed the name of the Lessee and are now copying you on any notices required to be given under the lease.”

Ortiz testified during trial by video deposition.  She testified the City requires the lessee of a 135 hangar to actually hold the FAA 135 certificate.  According to Ortiz, during a meeting sometime in 2000 involving the City, LJ Charter, and Air America over the Larson Street Hangar, the City informed LJ Charter and Air America that they could enter into some kind of joint venture and form a company and that company would have to hold the 135 certificate.

Ortiz also testified as to how Trey Schwarz had such influence on the transfer of the Larson Street Hangar from LJ Charter to Starflite.  She explained that the City works with the current lessee when it is time to enter into a new lease for a hangar.  According to Ortiz, for the Hangar to not revert back to the control of the City and then be put out for lease according to the City’s preferred order of leasing,[8] the same entity has to remain in control of the lease.  So, according to Ortiz, the City would have been willing to put the lease in Air America’s name as long as the Schwarzes, or a company owned by the Schwarzes, owned an interest in Air America.  However, Trey Schwarz never asked for the lease to be put in Air America’s name, but instead he asked that Starflite be the named lessee and he represented to the City that CNS Ventures, L.L.C. (“CNS”), another company owned by Buzzy Schwarz and Trey Schwarz, owned an interest in Starflite.[9]  Finally, Ortiz testified that Trey Schwarz conducted all of the negotiations for Starflite to move into the Larson Street Hangar.

After Air America was evicted from the Larson Street Hangar, Air America filed suit against several people and entities: LJ Charter, CNS, Starflite, Buzzy Schwarz, Trey Schwarz, Jeff Ware, and David Trigg.[10]  Air America asserted numerous causes of action including breach of contract, quantum meruit, breach of fiduciary duty, fraud, tortious interference with contract, and conspiracy.  LJ Charter filed a counterclaim asserting causes of action for breach of contract, fraud, tortious interference with contract, conversion, the placement of an improper lien on an aircraft, and conspiracy.  In addition, LJ Charter sought to pierce the corporate veil and hold McCarter personally liable.

Prior to trial, R & S settled with Air America for $31,478.00.  Between the verdict and the entry of judgment, Starflite, Ware, and Trigg (collectively “Starflite”) settled with Air America for $30,000.00 cash and fifty hours of flying time valued at $1,000.00 per hour.

During the formal charge conference Air America made the following stipulation: “We don’t dispute that these people are agents of those two companies and I will stipulate that they were.  So I don’t think those need to go to the jury.”  Counsel for LJ Charter then asked if Air America “will stipulate that at all times material the answers to those two questions — what is it, 28 and 29?”  Counsel for Air America agreed it applied to all four persons mentioned in the proposed questions 28 and 29 and based on this stipulation, those questions were removed from the charge.[11]  In Air America’s Cross-Appellant’s Reply Brief, Air America discussed the scope of this stipulation:

Appellants/Cross-Appellees proposed a jury question inquiring as to whether Trey Schwarz and Buzzy Schwarz were at all times agents of LJ and CNS Ventures, LLC.  Air America stipulated to that fact, as acknowledged by Appellants, and no such question was submitted.  Air America, however, did not stipulate that the Schwarzes were at all times acting within the course and scope of their agency or that all of their actions were not for their own purposes.

The case was submitted to the jury in a lengthy jury charge containing a total of 32 questions.  The jury determined that:

(1) both LJ Charter and Air America breached the Agreement;

(2) neither party’s failure to comply was excused;

(3) LJ Charter suffered no breach of contract damages;

(4) Air America’s breach of contract damages were $25,000 sustained in the past;

(5) Trey Schwarz orally agreed to pay Air America for charter services;

(6) McCarter did not orally agree to pay LJ Charter for charter services;

(7) No answer as the question was predicated on a “Yes” answer to Question 6;

(8) There was an oral agreement for Trey Schwarz to act as Air America’s agent for lease negotiations with the City;

(9) Trey Schwarz breached his fiduciary duty to act as Air America’s agent;

(10) Air America’s damages resulting from Trey Schwarz’s breach of fiduciary duty: $11,780 past value of the agency and $11,780 lost future profits.

(11) The Agreement formed a joint venture between Air America and LJ Charter;

(12) LJ Charter is estopped to deny the existence of a joint venture;

(13) LJ Charter breached the joint venture fiduciary duty;

(14) Air America’s joint venture fiduciary duty damages: $25,000 value of the goods and services sustained in the past, $11,780 lost profits sustained in the past, and $11,780 future lost profits;

(15) Starflite, Trigg, Ware, CNS, Buzzy Schwarz, and Trey Schwarz tortiously interfered with the Agreement;

(16) That interference was not excused or justified;

(16A) No answer because this question was predicated on a “Yes” answer to Question 16;

(17) Air America’s tortious interference damages were $11,780 that would be sustained in the future;

(18) Air America and McCarter intentionally interfered with the contract between Starflite and the City;

(19) That interference was justified;

(20) No answer because the question was predicated on a “No” answer to Question 19;

(21) LJ Charter, Buzzy Schwarz, and Trey Schwarz committed common law fraud against Air America;

(22) Air America and McCarter did not commit fraud against LJ Charter;

(23) Air America’s fraud damages were: (a) the difference between the value of the Agreement as represented and the actual value of the Agreement that would be sustained in the future: $11,780; (b) past unjust enrichment to Starflite: $11,780; and (c) future unjust enrichment to Starflite: $47,120;

(24) No answer because the question was predicated on a “Yes” answer to Question 22;

(25) This question had multiple parts: (a) David Trigg, Ware, and Buzzy Schwarz conspired with Trey Schwarz to breach Trey Schwarz’s fiduciary duty owed to Air America (Question 10); (b) David Trigg, Ware, Buzzy Schwarz, and Trey Schwarz conspired with LJ Charter to breach the joint venture fiduciary duty owed to Air America (Question 14); (c) David Trigg, Ware, Buzzy Schwarz, and Trey Schwarz conspired to tortiously interfere with the Agreement (Question 17); and (d) David Trigg, Ware, Buzzy Schwarz, and Trey Schwarz conspired to commit fraud (Question 23);

(26) No answer because the question was predicated on a “Yes” answer to Question 22;

(27) McCarter did not place a fraudulent lien;

(28) and (29) were intentionally left blank;

(30) Air America’s attorney’s fees: $80,000;

(31) LJ Charter’s attorney’s fees: $25,000;

(32) No malice as to LJ Charter’s conduct;

(33) No malice as to Air America and McCarter’s conduct.

Following numerous post trial motions, the trial court entered an Order on Post-Verdict Motions.  In this order, the trial court granted appellants’ motion to elect remedy.  The trial court then disregarded the jury’s answer to Question 10 (the damages for Trey Schwarz’s breach of agency fiduciary duty) because the trial court found those damages were duplicative of the damages found in response to Question 14 (damages for breach of joint venture fiduciary duty).  The trial court also disregarded the jury’s answer to Question 17, tortious interference with contract damages, because the trial court found they were duplicative of the damages awarded in response to Question 23, the fraud damages.  The trial court then entered judgment in favor of Air America and against LJ Charter for $144,240.00 in damages and $80,000.00 in attorney’s fees plus post-judgment interest.[12]

Discussion

On appeal, the parties bring multiple issues challenging the trial court’s judgment.  We initially address those issues raised by appellants, we then address Air America’s issues.

I.         Appellants’ Issues on Appeal

A.             Does the judgment violate the One Satisfaction Rule?

Under the One Satisfaction Rule, a plaintiff is entitled to only one recovery for any damages suffered.  Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000).  The rule applies when multiple defendants commit the same act as well as when defendants commit technically different acts that result in a single injury.  Id.  If there is only one injury, even if it is based on several overlapping and varied theories of liability, a plaintiff will only be permitted one recovery.  Buccaneer Homes of Alabama, Inc. v. Pelis, 43 S.W.3d 586, 590 (Tex. App.—Houston [1st Dist.] 2001, no pet.).  In this election of remedy context, whether the rule applies to reduce a plaintiff’s recovery is determined by the injury, not the cause of action.  Nowak v. Pellis, 248 S.W.3d 736, 741 (Tex. App.—Houston [1st Dist.] 2007, no pet.).  The One Satisfaction Rule also describes the situation where a nonsettling defendant claims a credit toward a plaintiff’s damages from a payment made by a jointly liable settling defendant.  Casteel, 22 S.W.3d at 391.

In their first issue, appellants contend the trial court’s judgment violates both aspects of the One Satisfaction Rule.  First, they argue the trial court allowed Air America to recover multiple damages for a single injury.  Second, appellants assert the trial court erred in not giving LJ Charter a credit for the total amount of the two settlements Air America negotiated with some of the defendants.  In appellants’ view, since they contend Air America suffered only a single injury, there was no requirement of a jury determination that the settling defendants were jointly and severally liable for the application of the settlement credits.  We address each contention in turn.

1.      The Standard of Review

The standard of review for a trial court’s decision to apply the One Satisfaction Rule is abuse of discretion.  See Oyster Creek Financial Corp. v. Richwood Investments II, Inc., 176 S.W.3d 307, 326 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (applying abuse of discretion standard of review to the trial court’s application of settlement credits).  A trial court abuses its discretion by acting arbitrarily, unreasonably, or without consideration of guiding principles.  Walker v. Gutierrez, 111 S.W.3d 56, 62 (Tex. 2003).

2.      Did the judgment award Air America a double recovery for a single injury?

Appellants contend that while Air America asserted numerous causes of action, the reality was that Air America brought a lawsuit alleging alternative legal theories seeking to recover for only a single injury.  Appellants argue the trial court erred when it did not further reduce Air America’s recovery in response to appellants’ motion to elect a remedy thereby allowing Air America an impermissible double recovery.

In examining whether Air America suffered only a single injury and thus received a double recovery, appellants assert we should consider the following: (1) the alleged existence of only a single contract, the Agreement; (2) appellants’ contention that Air America pled the same damages for each cause of action found in Air America’s Seventh Amended Petition; (3) their contention that the damage questions in the jury charge are identical; and finally (4) appellants allege that during trial Air America made no effort to distinguish their damages among the different causes of action.  In response, Air America asserts the trial court’s judgment properly awarded it separate and distinct damages under each cause of action.

Initially, we disagree with appellants that since there may have been only a single contract at issue in Air America’s lawsuit, this inevitably leads to the conclusion that the judgment includes a double recovery.[13]  Appellants emphasize Air America’s statement in its brief that all actions brought by Air America were connected with breaches of the Agreement.  However, the fact that all of the causes of action are in some manner connected to the Agreement does not mean that Air America suffered only a single injury: impairment of rights under that contract.

We turn now to the damages actually awarded in the judgment.  First, the judgment awarded Air America $25,000 for breach of contract.  Air America contends this award is supported by the evidence that LJ Charter did not pay the $25,000 “relocation fee” required by paragraph 7 of Exhibit “A” to the Agreement and thus constitutes an element of damages separate and distinct from all other damages awarded in the judgment.  We agree.[14]

The situation becomes less clear when examining the remaining damages in the judgment.  The judgment includes damages for LJ Charter’s breach of the joint venture fiduciary duty.  These damages were broken down as follows: (1) $25,000 for lost past value of fiduciary services; (2) $11,780 for lost past profits; and (3) $11,780 for lost future profits for a total of $48,560.  The judgment also includes damages for LJ Charter’s fraudulent conduct.  These damages were apportioned as: (1) $11,780 as the difference in value as represented and the actual value of the contract in the future; and (2) $58,900 for unjust enrichment, for a total of $70,680.

Air America, without distinguishing between causes of action, asserts these damages are compensation for the following specific injuries: (1) lost profits as a result of the failure to provide aircraft for charter both in the past and in the future; (2) increased fuel costs; (3) lost profits suffered by Air America as a result of the eviction; and (4) unjust enrichment resulting from the eviction.  Air America further explains that the unjust enrichment award was based on the profits Starflite received as a benefit from LJ Charter’s fraudulent conduct once Air America was evicted from the Hangar and Starflite moved in.

The evidence at trial established that, as a result of LJ Charter’s tortious conduct, Air America experienced lost profits in the past because it was denied the opportunity to charter aircraft while still occupying the Hangar.  In addition, the evidence established that the City evicted Air America from the Hangar as a result of the machinations of LJ Charter and Air America incurred increased fuel costs as a result.  In addition, the evidence established that, as a result of the eviction, Air America experienced lost past and future profits.  Finally, the evidence established that as a result of LJ Charter’s tortious conduct, Starflite was able to take over the lease of the Hangar and was unjustly enriched because it was thereby able to earn greater profits than it would have but for LJ Charter’s wrongful conduct.  See Sandare Chemical Co., Inc. v. Wako Int’l, Inc., 820 S.W.2d 21, 24 (Tex. App.—Fort Worth 1991, no writ) (noting that evidence of a defendant’s profits may constitute evidence of a plaintiff’s lost profits).  Based on the above, we conclude the breach of joint venture fiduciary duty and fraud damages included in the judgment compensate Air America for the same injuries.  Therefore, Air America’s causes of action for breach of joint venture fiduciary duty and fraud constitute alternative theories of liability based on proof of the same facts and the judgment’s award of damages for both is an impermissible double recovery in violation of the One Satisfaction Rule.  See Lundy v. Masson, 260 S.W.3d 482, 506 (Tex. App.—Houston [14th Dist.] 2008, pet. denied) (concluding the plaintiff received a double recovery as he established separate theories of liability, breach of fiduciary duty and fraud, based on the same facts).  When a plaintiff establishes separate theories of liability based on the same facts and fails to elect between them, the appellate court should render judgment on the finding affording the greatest recovery.  Id.  Accordingly, because Air America did not elect its remedy, we hold that the trial court should have made the election for Air America and limited Air America’s recovery to the damages awarded for its fraud claim because that awarded the greatest recovery.  We sustain that portion of appellants’ first issue arguing the judgment amount should be reduced because it resulted in a double recovery for Air America.

3.         Should the trial court have reduced the judgment amount through the application of settlement credits?

In the Order on Post-Verdict Motions, the trial court determined LJ Charter was not entitled to any settlement credit.  First, the trial court concluded LJ Charter was not entitled to a credit for the R & S pre-trial settlement because the agreement was limited to claims separate and distinct from those presented to the jury and there was no showing R & S was jointly and severally liable for any common damages.  Next, the trial court determined the Starflite post-verdict settlement agreement included a claim for damages for which the settling and non-settling defendants were found jointly and severally liable (Jury Question 15, intentional interference with written contract).  However, it went on to conclude LJ Charter was not entitled to a credit because of the trial court’s ruling on Defendant’s Motion to Elect Remedy.  In that ruling, the trial court prohibited Air America from recovering on its intentional interference with contract claim (Questions 15 and 17) because the damages were duplicative of the fraud damages found in response to Question 23.  On appeal, LJ Charter contends the trial court should have given it a credit for the total amount of both settlements because Air America suffered only a single injury and thus there was no requirement that the settling parties be found jointly and severally liable.  We disagree.

a.      The R & S Pre-Trial Settlement.

Air America’s settlement with R & S was made prior to the trial.  As revealed by the language of the settlement agreement, the settlement was for fuel and storage for the R & S jet and resolved Air America’s quantum meruit claim brought exclusively against R & S.  The allocation in the settlement agreement is determinative.  See Mobil Oil Corp. v. Ellender, 968 S.W.2d 917, 928 (Tex. 1998) (holding that a non-settling party is entitled to a settlement credit for the entire amount of a settlement unless a settlement agreement allocating damages is tendered to the trial court).  Because no other defendant could have been liable for these damages, and the settlement agreement specifically allocated the settlement to the fuel and storage damages, we hold the trial court did not abuse its discretion when it determined appellants were not entitled to a credit for the amount of the R & S settlement payment.  Id.; CTTI Priesmeyer, Inc. v. K & O Ltd. Partnership, 164 S.W.3d 675, 685 (Tex. App.—Austin 2005, no pet.).

b.      The Starflite Post-Verdict Settlement.

The Texas Supreme Court’s decision in Casteel controls the determination of whether appellants are entitled to a settlement credit as a result of the Starflite settlement.  CTTI Priesmeyer, 164 S.W.3d at 685.  Under Casteel, a non-settling defendant is only entitled to a settlement credit based on the damages for which all defendants are jointly liable.  Casteel, 22 S.W.3d at 391.  Here, because Starflite, Ware, and David Trigg were not parties to the Agreement, they could not be jointly liable for the breach of contract damages.  CTTI Priesmeyer, 164 S.W.3d at 685.  The result is the same for the fraud damages.  While the jury found Ware and David Trigg were conspirators to the fraud, Starflite was not.  Therefore, under Casteel, since Starflite could not be jointly and severally liable with appellants for these damages, appellants are not entitled to a credit for the amount of the Starflite settlement.  Casteel, 22 S.W.3d at 391.  We overrule that part of appellants’ first issue asserting the trial court abused its discretion when it refused to apply settlement credits to the judgment amount.

B.              Is the evidence supporting the judgment legally and factually sufficient?

We turn now to appellants’ issues challenging the sufficiency of the evidence supporting the judgment.[15]

1.         The Standard of Review.

When both legal and factual sufficiency challenges are raised on appeal, we must first examine the legal sufficiency of the evidence.  City of Houston v. Cotton, 171 S.W.3d 541, 546 (Tex. App.—Houston [14th Dist.] 2005, pet. denied).  In a legal sufficiency review, we must view the evidence in the light most favorable to the verdict and indulge every reasonable inference that supports the verdict.  City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005).  We must credit evidence that supports the judgment if reasonable jurors could and disregard contrary evidence unless reasonable jurors could not.  See id. at 807, 827.  If the evidence falls within the zone of reasonable disagreement, we cannot substitute our judgment for that of the fact finder.  Id. at 822.  The trier of fact is the sole judge of the witnesses’ credibility and the weight to be given their testimony.  Id. at 819.  Unless there is no favorable evidence, or if the contrary evidence renders supporting evidence incompetent, or conclusively establishes the opposite, we must affirm.  See id. at 810–11.  “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.  This court may sustain a legal sufficiency, or no evidence, point only if the record reveals one of the following: (1) the complete absence of a vital fact; (2) the court is barred by rules of law or of evidence 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 scintilla; or (4) the evidence established conclusively the opposite of the vital fact.  Id. at 810.  When the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is less than a scintilla and, in legal effect, is no evidence.  See Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004).

In reviewing the factual sufficiency of the evidence, we must examine the entire record, considering both the evidence in favor of, and contrary to, the challenged findings.  See Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex. 1998); Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).  When a party challenges the factual sufficiency of the evidence supporting a finding for which it did not have the burden of proof, we may set aside the verdict only if it so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.  See Ellis, 971 S.W.2d at 407; Nip v. Checkpoint Systems, Inc., 154 S.W.3d 767, 769 (Tex. App.—Houston [14th Dist.] 2004, no pet.).  When a party attacks the factual sufficiency of an adverse finding on which it had the burden of proof, it must demonstrate on appeal that the adverse finding is against the great weight and preponderance of the evidence.  Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001).  The amount of evidence necessary to affirm is far less than the amount necessary to reverse a judgment.  GTE Mobilnet of S. Tex. v. Pascouet, 61 S.W.3d 599, 616 (Tex. App.—Houston [14th Dist.] 2001, pet. denied).  We are not a factfinder.  Ellis, 971 S.W.2d at 407.  Accordingly, we may not pass upon the witnesses’ credibility or substitute our judgment for that of the jury, even if the evidence would support a different result.  Id.  If we determine the evidence is factually insufficient, we must detail the evidence relevant to the issue and state in what regard the contrary evidence greatly outweighs the evidence in support of the verdict; we need not do so when affirming a jury’s verdict.  Gonzalez v. McAllen Med. Ctr., Inc., 195 S.W.3d 680, 681 (Tex. 2006) (per curiam).

2.         Does the merger clause in the Agreement preclude Air America’s claim for common law fraud?

In their fourth issue, appellants argue there is legally and factually insufficient evidence of the reliance element of fraud because the Agreement contains a merger clause.

To recover for common law fraud, a plaintiff must prove: (1) a material representation was made by the defendant; (2) the representation was false; (3) when the defendant made the representation, he knew it was false or made it recklessly without knowledge of the truth and as a positive assertion; (4) the defendant made the representation with the intention that it should be acted upon by the party; (5) the party acted in reliance upon it; and (6) the party thereby suffered injury.  Lund, 260 S.W.3d at 492.

A merger clause is a “provision in a contract to the effect that the written terms may not be varied by prior or oral agreements because all such agreements have been merged into the written document.”  Ikon Office Solutions, Inc. v. Eifert, 125 S.W.3d 113, 125 n.6 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (quoting Black’s Law Dictionary 989 (6th ed. 1990)).  A merger clause “that clearly expresses the parties’ intent to waive fraudulent inducement claims, or one that disclaims reliance on representations about specific matters in dispute, can preclude a claim of fraudulent inducement.”  Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171, 181 (Tex. 1997).

The merger clause in the Agreement provides:

This Agreement constitutes the entire agreement of the parties hereto and supercedes any prior understandings or written or oral agreements between the parties respecting the subject matter hereof, and may only be modified in writing executed by all of the parties hereto.

Citing this court’s Eifert opinion, appellants contend the above merger clause defeats the reliance element of fraud as a matter of law and therefore the trial court erred when it entered judgment awarding damages for fraud.  We disagree.

            In Eifert, after extensive negotiations, the owner of a successful copier business sold the business to Ikon in exchange for Ikon stock and an employment agreement with Ikon.  Id. at 118–19.  Much of the negotiations focused specifically on the terms of the owner’s employment agreement.  Id. at 126.  Then, reflecting that history of extensive negotiations, the employment agreement had a merger clause that, in addition to standard merger clause language, contained the following: “[N]o commitments have been made relative to bonuses, guarantees or any other special provisions, except as specifically identified herein.”  Id. at 120.  Eventually, the owner became disenchanted with the way Ikon was running the merged businesses and filed suit alleging Ikon committed fraud with respect to his employment agreement.  Id. at 122.  The jury found in favor of the owner and the trial court entered judgment accordingly.  Id. at 123.  On appeal, this court determined the merger clauses in the acquisition and employment agreements disclaimed reliance on any representations about specific matters in dispute and therefore precluded any fraud claims based on representations outside of those two agreements.  Id. at 128.

While appellants argue the merger clauses in Eifert and the Agreement are substantially similar, we disagree.  The merger clause in the Agreement does not clearly expressly the parties’ intent to waive any fraud claims.  In addition, unlike the merger clause in Eifert, the merger clause in the Agreement does not contain a specific clause disclaiming reliance on representations concerning matters in dispute in this litigation.  Therefore, we conclude the merger clause in Eifert is distinguishable and hold the Agreement’s merger clause does not preclude Air America’s common law fraud claim.  We overrule appellants’ fourth issue.

3.         Did the judgment improperly award unjust enrichment damages to Air America?

In their fifth issue appellants, while claiming to challenge the sufficiency of the evidence, actually contend the trial court erred when, based on the jury’s answer to Question 23, it awarded Air America damages for unjust enrichment, a cause of action which appellants claim Air America did not plead.  In response, Air America argues that (1) unjust enrichment is an appropriate measure of damages for fraudulent conduct; and (2) its pleadings were adequate to support the submission of Question 23 to the jury.  We agree with Air America.

A party may recover under the unjust enrichment theory when a person has obtained a benefit from another by fraud, duress, or the taking of an undue advantage.  Heldenfels Brothers, Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).  In its seventh amended petition, Air America asserted two common law fraud causes of action against LJ Charter, one for misrepresentations prior to moving into the Hangar and one for misrepresentations after moving into the Hangar.  As part of both causes of action, Air America alleged: “this fraudulent conduct has resulted in a benefit to Defendant Starflite in increased recapture of fuel costs it has experienced and will experience while in the Hangar ($1,381,341), or in the alternative, the amount of profits it has made and will make while in the Hangar ($819,229.17).”  Because appellants did not file special exceptions to Air America’s petition, we must construe the petition liberally in Air America’s favor.  Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 897 (Tex. 2000).  Liberally construing Air America’s petition as we must, we conclude Air America pleaded information specific enough to provide appellants with notice of the damages it was seeking pursuant to its common law fraud cause of action.  Id.  We overrule appellants’ fifth issue.

4.         Did appellants waive their sixth issue on appeal?

In their sixth issue, appellants assert there is legally and factually insufficient evidence that LJ Charter breached the agreement and that Air America suffered $25,000 damages as a result of that breach.  On appeal, an appellant’s brief must contain a clear and concise argument for the contentions made with appropriate citations to authorities and the record.  Tex. R. App. P. 38.1(h).  Failure to do so results in waiver of the issue on appeal.  Here, while appellants included this issue in their points of error, they failed to address this issue within the body of their brief.  Accordingly, appellants have waived this issue on appeal and therefore, we overrule their sixth issue.

5.         Was LJ Charter entitled to recover attorney’s fees?

In their eighth issue, appellants point out that, in response to Question 31, the jury found that LJ Charter’s reasonable attorney’s fee was $25,000.00.  Appellants then argue that because Air America recovered fewer damages than it had originally sought, the trial court should have included the $25,000.00 attorney’s fees in the judgment.  However, to recover attorney’s fees under section 38.01 of the Civil Practice & Remedies Code, the Texas Supreme Court has determined that the party must first recover contract damages.  Green Intern., Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997).  Since the jury determined that LJ Charter suffered no damages as a result of Air America’s breach of the Agreement, the trial court properly denied LJ Charter any recovery of attorney’s fees.  Id.  Accordingly, we overrule appellants’ eighth issue.

6.         Was the evidence factually sufficient on those issues where appellants bore the burden of proof?

Under their ninth issue, appellants bring a multitude of separate challenges to the sufficiency of the evidence supporting the jury’s answers to questions on which appellants had the burden of proof.  These include: (a) the jury’s finding in answer to Question 3 that LJ Charter suffered no damages as a result of Air America’s breach of the Agreement; (b) the jury’s finding in answer to Questions 6 and 7 that McCarter did not orally agree to pay LJ Charter for charter services; (c) the jury’s finding in answer to Questions 22 and 24 that Air America and McCarter did not commit fraud; (d) the jury’s finding in answer to Question 26 that McCarter was not responsible for the conduct of Air America; and (e) the jury’s finding in answer to Question 27 that McCarter did not place a fraudulent lien against LJ Charter’s aircraft.  In bringing these issues, appellants failed to cite to any legal authorities.  As mentioned above, an appellant’s brief must contain a clear and concise argument for the contentions made with appropriate citations to authorities and the record.  Tex. R. App. P. 38.1(h).  Failure to do so results in waiver of the issue on appeal.  Accordingly, we conclude appellants have waived appellate review of each of the above points.  We overrule appellants’ ninth issue.

II.        Air America’s Cross-Appeal

A.        Are Trey Schwarz and Buzzy Schwarz directly liable for fraud damages imposed against LJ Charter?

In its second cross-point,[16] Air America contends the trial court should have held Trey Schwarz and Buzzy Schwarz jointly and severally liable for the fraud damages imposed against LJ Charter.  Air America makes two arguments in support of its argument Trey and Buzzy Schwarz should be held jointly and severally liable.  First, Air America asserts Buzzy and Trey Schwarz are directly liable for the fraud.  Second, Air America argues that since, in answer to Question 23, the jury found that both Trey and Buzzy Schwarz were part of a civil conspiracy to commit fraud, they must be held jointly and severally liable for the fraud damages.  We need only address Air America’s direct liability argument.

It is the general rule in Texas that company agents are individually liable for fraudulent or tortious acts committed while in the service of their limited liability company.  Sanchez v. Mulvaney, 274 S.W.3d 708, 712 (Tex. App.—San Antonio 2008, no pet.).  The jury, in response to Question 21, found that both Trey Schwarz and Buzzy Schwarz committed fraud against Air America.  Therefore, since Trey Schwarz and Buzzy Schwarz committed fraud, the judgment should have held them, along with LJ Charter, jointly and severally liable for the fraud damages.  Accordingly, we sustain Air America’s second cross-point on appeal.

B.        Should the final judgment be modified to award Air America damages for Trey Schwarz’s failure to pay for air charter services?

Air America claimed that Trey Schwarz orally agreed to pay Air America for air charter services when he used Air America’s plane to fly his ill father-in-law.  In connection with that claim, Question 5 was submitted to the jury: “Did Trey Schwarz orally agree to pay Air America for charter services?”  The jury answered “yes” to that question.  On appeal, Air America contends the evidence of the value of those air charter services and Trey Schwarz’s failure to pay for them, was uncontroverted at trial and therefore no further questions had to be submitted to the jury in order for the final judgment to impose $5,980.00 damages against Trey Schwarz.  We agree.

Having reviewed the record, we can find no evidence disputing: (1) the value of the air charter services provided by Air America; or (2) Patricia Toman’s testimony that Air America invoiced Trey Schwarz $5,980.00 for those services and that he never paid that invoice.  When facts are undisputed or conclusively established, there is no need to submit those issues to the jury.  XCO Production Co. v. Jamison, 194 S.W.3d 622, 633 (Tex. App.—Houston [14th Dist.] 2006, pet. denied) (citing Sullivan v. Barnett, 471 S.W.2d 39, 44 (Tex. 1971)).  We conclude that, as a result of the jury’s answer to Question 5 and the undisputed evidence as to the value of the services and Trey Schwarz’s failure to pay, the trial court erred when it did not include the $5,980.00 damages in the judgment.  See Tex. R. Civ. P. 301 (“The judgment of the court shall conform to the pleadings, the nature of the case proved and the verdict, if any, and shall be so framed as to give the party all the relief to which he may be entitled either in law or in equity.”).  We sustain Air America’s third cross-point on appeal.

Conclusion

            We affirm the trial court’s judgment in favor of Air America on Air America’s breach of contract cause of action based on the Agreement.  Having sustained part of appellants’ first issue on appeal and Air America’s second and third cross-points on appeal, we modify the judgment as follows:  (1) Air America’s recovery for breach of joint venture fiduciary duty is deleted as a violation of the One Satisfaction Rule; (2) Air America shall recover $5,980.00 from Charles N. “Trey” Schwarz, III for breach of the oral agreement to pay for air charter services; and (3) LJ Charter, L.L.C., Charles N. “Buzzy” Schwarz, Jr., and Charles N. “Trey” Schwarz, III, shall be jointly and severally liable for Air America’s common law fraud damages.  Having modified the judgment, we affirm the judgment as modified.  

                                                                        /s/        John S. Anderson

                                                                                    Justice

Panel consists of Chief Justice Hedges and Justices Anderson and Boyce.

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[1] Appellants and cross-appellees are LJ Charter, L.L.C., Charles N. “Buzzy” Schwarz, Jr., Charles N. “Trey” Schwarz, III, and CNS Ventures, L.L.C.  Where necessary, we refer to them collectively as appellants.

[2] There was testimony during the trial that hangars located at Hobby Airport are in short supply and there is a long waiting list of parties interested in leasing a hangar when one becomes available.

[3] It is not clear from the record how this arrangement was sufficient to avoid the City terminating the lease.  City representatives testified during trial such an arrangement never met the requirement as the City had always required that the lessee be the actual holder of the FAA 135 certificate.

[4] The Larson Street Hangar could hold up to six aircraft the size of a Learjet.

[5] Paragraph 6 addressed what would occur if Air America chose not to exercise its right of first refusal and a third party purchased LJ Charter’s leasehold interest in the Hangar.

[6] While Air America did not dispute the fact it did not have a Westwind on its charter certificate, there was testimony by McCarter that he was willing to pay the price to add the Westwind to Air America’s 135 charter and was never given the option to do so.

[7] It was revealed during trial that it is common practice for a charter company, when the aircraft under its direct control are unavailable, to use a third-party charter company’s aircraft.  Under that scenario, the third party’s charters take priority and it will only make an aircraft available if it does not need it.  As might be expected, there was disputed testimony as to (1) how often Air America asked to charter the R & S Westwind, and (2) how often the R & S Westwind was available when Air America did ask to charter it.

[8] According to Ortiz, Full Base Operators have first priority for leasing a newly available hangar.  The record does not disclose exactly what constitutes a Full Base Operator.  However, the record is clear that neither Air America nor LJ Charter were Full Base Operators.

[9] The trial testimony and exhibits revealed that CNS Ventures, L.L.C. never acquired an ownership interest in Starflite.  In addition, Ortiz testified she was not aware of what minimum ownership interest was sufficient to meet the City’s requirements.

[10] Jeff Ware and Jerri Trigg each own a fifty percent interest in Starflite.  David Trigg, Jerri Trigg’s husband, owned no interest in Starflite, but was heavily involved in the day-to-day operations of Starflite as a consultant.

[11] The proposed questions 28 and 29 are not found in the appellate record.

[12] The damages were broken down as follows: (1) breach of contract: $25,000.00; (2) breach of joint venture fiduciary duty: (a) lost past value of fiduciary services: $25,000.00, (b) lost past profits: $11,780.00, and (c) lost future profits: $11,780.00; and (3) common law fraud: (a) difference in actual value as represented and actual value of contract in future: $11,780.00, (b) past unjust enrichment: $11,780.00, and (c) future unjust enrichment: $47,120.00.

[13] We also disagree there was only a single contract at issue in the litigation.  In addition to the Agreement, Air America alleged there was an oral contract between Air America and Trey Schwarz for the provision of air charter services.  By affirmatively answering Question 5, the jury agreed with Air America.  We address this oral contract in section II(B) below.

[14] The award of damages for breach of contract supports the judgment’s award of Air America’s attorney’s fees, which have not been challenged on appeal.

[15] In issue 2, appellants challenge the legal and factual sufficiency of the evidence supporting the jury’s answers to questions 11, 13, and 14.  These questions all relate to Air America’s breach of joint venture fiduciary duty cause of action.  In their third issue, appellants challenge the legal and factual sufficiency of the evidence supporting the jury’s answers to questions 8, 9, and 10.  These questions relate to Air America’s cause of action against Trey Schwarz for breach of his fiduciary duty as an agent of Air America.  In their seventh issue, appellants challenge the legal and factual sufficiency of the evidence supporting questions 15 and 17, which relate to Air America’s tortious interference cause of action.  Each of these issues challenge the sufficiency of the evidence supporting causes of action which were not included in the trial court’s judgment or have been excluded from the modified judgment on appeal.  Since we affirm the judgment holding LJ Charter liable for breach of the Agreement and fraud, we need not address the above issues because they are not included in the modified final judgment.  See BBQ Blues Texas, Ltd. v. Affiliated Business Brokers, Inc., 183 S.W.3d 543, 546 (Tex. App.—Dallas 2006, no pet.). 

[16] Because we have already determined that Air America’s breach of joint venture fiduciary duty and fraud causes of action both sought compensation for a single injury, we need not address Air America’s first cross-point on appeal asserting Trey and Buzzy Schwarz should have been held jointly and severally liable for the breach of joint venture fiduciary duty damages.