Wei Shao Heironimus, Derivatively on Behalf of Mid-American Supply Corp. v. Xiaosha Tian

• Court: Court of Appeals of Texas
• Decided: August 1, 2022
• Docket: 05-21-00174-CV
• Status: Published

Opinion

Reversed and Remanded and Opinion Filed August 1, 2022

S In The Court of Appeals Fifth District of Texas at Dallas No. 05-21-00174-CV

WEI SHAO HEIRONIMUS, DERIVATIVELY ON BEHALF OF MID- AMERICAN SUPPLY CORP., Appellant V. XIAOSHA TIAN, Appellee

On Appeal from the 162nd Judicial District Court Dallas County, Texas Trial Court Cause No. DC-19-16583

MEMORANDUM OPINION Before Justices Partida-Kipness, Pedersen, III, and Nowell Opinion by Justice Nowell Wei Shao Heironimus, derivatively on behalf of Mid-American Supply Corp.,

appeals from the trial court’s order granting Xiaosha Tian’s plea to the jurisdiction

and dismissing her case. In two issues, appellant argues the trial court erred by

granting the plea to the jurisdiction despite the existence of a fact issue and the trial

court abused its discretion by excluding testimony from her translators. Appellee

raises several issues in response, including that the record is incomplete and a

complete record is required for review of appellant’s complaints. We reverse the trial court’s order granting the plea to the jurisdiction and remand this case to the trial

court for further proceedings.

BACKGROUND Appellant’s original petition alleges she is the minority shareholder of Mid-

American, and her former husband, appellee, is the majority shareholder who owns

a 65 percent interest in Mid-American. Mid-American owned several Chinese

subsidiaries, and all profits generated by these subsidiaries were to flow back to Mid-

American. She alleges appellee began diverting profits from one of Mid-American’s

subsidiaries to his own wholly owned entity. Appellant brought derivative claims on

behalf of Mid-American for breach of fiduciary duty, conversion, violations of the

Texas Theft Liability Act, and money had and received.

Appellee filed a plea to the jurisdiction arguing appellant lacks standing to

assert claims derivatively on behalf of Mid-American because she owns no interest

in the entity. Appellee’s motion states that appellant and appellee entered into an

agreement written in Mandarin whereby appellant assigned all of her interest in Mid-

American to him to secure a $4 million loan (the Loan Agreement), and, when

appellant failed to repay the loan, her shares were assigned to appellee. Accordingly,

any right to assert claims on behalf of Mid-American now rests with appellee.

Appellant responded and argued, among other things, that the Loan

Agreement’s assignment states that, in the event of default, she assigned 35 percent

of her Mid-American shares rather than all of her shares; the Loan Agreement did

–2– not divest appellant of standing to file a derivative suit because she retained shares

of Mid-Atlantic. Appellant’s response includes her own declaration, which states

that “the share pledge portion of the Loan Agreement only seeks to assign 35 percent

of my Mid-American shares.” Several documents are attached to appellant’s

declaration: (1) the Loan Agreement written in Mandarin, (2) an English translation

of the Loan Agreement, and (3) a declaration of Qi Cheng who states he translated

the Loan Agreement into English.1 Appellant did not draft the English translation

attached to her declaration; it is unknown who drafted the translation attached to

appellant’s declaration.

Appellant’s response to the plea to the jurisdiction also includes a declaration

from Xiaolin Zhou. Zhou was born in China, obtained his undergraduate degree in

China, graduated from Harvard Law School, and is a partner in a law firm in New

York. His declaration states in part: “I have read the Subject Loan Agreement both

in its original Mandarin language and the certified English translation. A plain

reading of the Subject Loan Agreement transfers only 35% of the Borrower’s

shares,” assuming the Loan Agreement is enforceable.

1 The record shows and it is uncontested that Qi Cheng’s declaration and translation were not properly submitted as part of appellant’s response to the plea to the jurisdiction. After submitting Qi Cheng’s declaration, appellant’s lawyers learned that Qi Cheng may not have performed any translation in this case. Additionally, Qi Cheng never appeared to testify before the trial court. Appellant’s reply brief concedes: “We don’t know who performed the translation attached to Qi Cheng’s declaration. It may have been Qi Cheng; it may not.” The reply brief continues: “Wei withdrew her reliance on Qi Cheng’s affidavit.” –3– In his reply to appellant’s response, appellee provided his own declaration in

which he states he owns 100 percent of the shares of Mid-American. His declaration

states that, in late 2013, he and appellant decided they did not want to continue being

in business together. In 2014, appellant decided to open her own business called

HaiDe’er (Tianjin) Technology Development Company (HaiDe’er). To start her

company, appellant wanted to borrow 30 million Chinese Yuan, which was worth

approximately $4.8 million. The parties entered into the Loan Agreement in which

HaiDe’er would receive the money, and, at appellant’s option, appellant could treat

the money as either a loan to HaiDe’er or as a redemption/purchase price for all of

her stock in Mid-American. Appellee’s declaration states that, when appellant did

not repay the loan by the agreed-upon deadline, appellee “made an election to treat

the payment to her as payment for the redemption or purchase of her shares. I am

the owner of 100% of the shares of Mid-American.” Appellant “does not own any

shares in Mid-American.” Appellee further declares that the Loan Agreement “does

not say that Heironimus agrees to transfer 35% of her shares in Mid-American. There

was never any thought or discussion that Heironimus would transfer less than all of

her shares to me. Through [the Loan Agreement] Heironimus assigned her entire

35% share in Mid-American to me.”

Appellee also provided a declaration from a translator named Jiayin Jenny

Zheng. Zheng’s declaration provides her qualifications as a translator. A written

copy of her translation is attached to her declaration. After reading the Loan

–4– Agreement, Zheng concluded appellant pledged all of her equity in Mid-American

as collateral and transferred her entire share.

The trial court held a hearing on the plea to the jurisdiction; the hearing took

place on multiple days over the course of several months. One of the hearings was

on August 13, 2020. Zheng testified on August 13, and her testimony was consistent

with her declaration. Although appellant previously provided a declaration from Qi

Cheng and a translation of the Loan Agreement purportedly from Qi Cheng, Qi

Cheng did not appear at the hearing. Rather, appellant sought to present a new expert

witness, Daniella Peng, at the hearing.

During the August 13 hearing, the trial court judge stated she wanted to ask

Qi Cheng questions about his translation. She stated: “That’s what I intended by this

continuation of the hearing. . . . Maybe I wasn’t clear. I wanted to know from him,

did you translate the same document [appellee] translated.” After some additional

conversation, appellant’s counsel volunteered to have “our translator speak today,

who’s reviewed the translation and can provide the Court with that testimony.” The

judge asked why Cheng was not testifying and appellant’s counsel responded that

Cheng was not available and counsel “thought that it would not be an issue at all” to

have a different translator testify. The judge replied that having a different translator

testify “is an issue because it’s [Cheng’s] declaration that’s on trial here . . . I’m

going to say it’s the fault of the Court. I perhaps did not make myself clear as to why

I wanted to have the continuation of this hearing. There were objections to the

–5– evidence. The Court intended to admit the evidence and say get these two people

before the Court under oath and let the Court hear from them.”

The judge did not allow Peng to testify because she concluded Peng’s

testimony was “not relevant. That’s - - you know, the translator that’s being

presented by the Plaintiff has not filed anything that the Court is looking at to see if

there’s a fact dispute.” Appellant’s counsel explained that because Cheng was not

available, counsel found someone else from the same translation company who

could testify. If the court wanted to hear from Cheng, then appellant needed to

continue the hearing until a time when Cheng was available. When appellant offered

to have Peng provide a translation as an alternative to Cheng, the judge stated she

did not want to hear from Peng. The judge only wanted to consider the translations

from Cheng and Zheng. The trial court continued the hearing again.

The trial court subsequently granted the plea to the jurisdiction without

considering any evidence from Peng. This appeal followed.

MISSING RECORD

We first must determine whether we have an adequate record upon which to

resolve this appeal. In his brief, appellee argues appellant waived appellate relief by

failing to provide a record from hearings on April 21, 2020 and August 20, 2020.2

“Our appellate rules are designed to resolve appeals on the merits, and we

must interpret and apply them whenever possible to achieve that aim.” Michiana

2 Appellant’s request for preparation of reporter’s record recites that hearings were held on these dates. –6– Easy Livin’ Country, Inc. v. Holten, 168 S.W.3d 777, 784 (Tex. 2005). To that end,

appellate courts presume that pretrial hearings are non-evidentiary, and the trial court

considered only the evidence filed with the clerk. Id. at 783. “A reporter’s record is

necessary only for evidentiary hearings; ‘for nonevidentiary hearings, it is

superfluous.’” Crawford v. XTO Energy, Inc., 509 S.W.3d 906, 910 (Tex. 2017)

(quoting Holten, 168 S.W.3d at 782). “If all the evidence is filed with the clerk and

only arguments by counsel are presented in open court, the appeal should be decided

on the clerk’s record alone.” Holten, 168 S.W.3d at 782.

If “the proceeding’s nature, the trial court’s order, the party’s briefs, or other

indications show that an evidentiary hearing took place in open court, then a

complaining party must present a record of that hearing to establish harmful error.”

Id. at 783. When a party alleges that a hearing was evidentiary, that allegation must

be specific. Id. “Merely asserting that the trial court ‘considered evidence at the

hearing’ is not enough—trial courts do that when a hearing is conducted entirely on

paper, or based solely on affidavits and exhibits filed beforehand. Instead, there must

be a specific indication that exhibits or testimony was presented in open court beyond

that filed with the clerk.” Id.

We begin with the presumption that the April 21, 2020 and August 20, 2020

hearings were non-evidentiary and the trial court only considered evidence filed with

the clerk. See Constant v. Gillespie, No. 05-20-00734-CV, 2022 WL 1564555, at *8

(Tex. App.—Dallas May 18, 2022, no pet. h.) (mem. op.); (citing Holten, 168

–7– S.W.3d at 783). In his brief, appellee states that on April 21 the trial court heard

evidence and appellant’s counsel, Joshua Sandler, “testified during the proceedings

on April 21, 2020[,] expanding on the facts in his declaration.” A declaration from

Sandler is attached to “Plaintiff Mid-American Supply Corp.’s Objections to

Evidence Proffered in Defendant’s Plea to the Jurisdiction Reply Brief and Sur

Reply.” In that declaration, Sandler explains the circumstances surrounding

appellant obtaining the declaration of Qi Cheng.

Although appellee’s brief states Sandler testified on April 21, during oral

argument for this appeal, appellee’s counsel clarified for this Court that Sandler was

not placed under oath during the hearing. Rather, he engaged in a question-and-

answer exchange with the trial court judge. While the requirement may be waived,

“an attorney’s statements must be made under oath to be considered evidence.”

Ugwa v. Ugwa, No. 05-17-00633-CV, 2018 WL 2715437, at *3 (Tex. App.—Dallas

June 6, 2018, no pet.) (mem. op.) (quoting Banda v. Garcia, 955 S.W.2d 270, 272

(Tex. 1997) (per curiam)). Here, no one contends the oath requirement was waived

and so we presume any statements made by Sandler to the trial court were not

evidence. See id. Appellee does not provide any other specific allegations that the

trial court heard evidence on April 21. However, transcripts in the record from

subsequent hearings indicate the trial court considered affidavits and declarations on

April 21. We conclude the record does not indicate the trial court considered

evidence beyond documents filed in the clerk’s record on April 21, 2020.

–8– Appellee also asserts the trial court held an evidentiary hearing on August 20,

2020, at which appellant presented evidence to show good cause for her failure to

submit a timely translation of the Loan Agreement; appellee does not specify what

evidence allegedly was presented. We consider appellee’s assertion that appellant

presented evidence at the August 20 hearing to be similar to the argument the

supreme court rejected in Michiana. The supreme court stated that an allegation that

the trial court considered evidence is not sufficient and does not meet appellee’s

burden. See Holten, 168 S.W.3d at 783.

We conclude appellee has not overcome the presumption that the pretrial

hearings on the plea to the jurisdiction were non-evidentiary and the trial court

considered only the evidence filed with the clerk. See Constant, 2022 WL 1564555,

at *8 (citing Holten, 168 S.W.3d at 783). Accordingly, we conclude that appellant

brought forth an adequate appellate record on which we can resolve this appeal on

its merits and consider the substantive issues raised. See Holten, 168 S.W.3d at 784.

PLEA TO THE JURISDICTION

A. Standard of Review A plea to the jurisdiction “may challenge the pleadings, the existence of

jurisdictional facts, or both.” Tex. Dep’t of Criminal Justice v. Rangel, 595 S.W.3d

198, 205 (Tex. 2020) (quoting Alamo Heights Indep. Sch. Dist. v. Clark, 544 S.W.3d

755, 770 (Tex. 2018)). If a plea “challenges the pleadings, we determine if the

pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to

–9– hear the cause.” Id. (quoting Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d

217, 226 (Tex. 2004)). But when a plea to the jurisdiction challenges the existence

of jurisdictional facts, we look beyond the pleadings and consider evidence

submitted by the parties “when necessary to resolve the jurisdictional issues raised,”

even if the evidence implicates both the court’s jurisdiction and the merits of a claim.

Id. (quoting Miranda, 133 S.W.3d at 227); see also see also The Univ. of Tex. at

Austin v. Hayes, 327 S.W.3d 113, 116 (Tex. 2010) (“When a plea to the jurisdiction

challenges the existence of jurisdictional facts, the trial court must review the

relevant evidence to determine whether a fact issue exists”). For a plea that

challenges the existence of jurisdictional facts, our standard of review generally

mirrors that of a traditional summary judgment: a plaintiff must raise a genuine issue

of material fact to overcome the challenge to the trial court’s jurisdiction. Rangel,

595 S.W.3d at 205. When determining whether the plaintiff has met that burden, “we

take as true all evidence favorable to” the plaintiff and “indulge every reasonable

inference and resolve any doubts in the [plaintiff’s] favor.” Id. (quoting Miranda,

133 S.W.3d at 228). If the evidence and allegations create a fact question regarding

jurisdiction, then a court cannot grant a plea to the jurisdiction, and the factfinder

must resolve the fact issue. Id. But “if the relevant evidence is undisputed or fails to

raise a fact question on the jurisdictional issue,” a court rules “on the plea to the

jurisdiction as a matter of law.” Id.

–10– In this case, the plea to the jurisdiction challenges the existence of

jurisdictional facts.

B. Peng’s Excluded Testimony On August 10, 2020, appellant filed “Plaintiff’s Supplemental Briefing in

Opposition to Defendant’s Plea to the Jurisdiction,” which states: “As requested by

the Court, Ms. Heironimus designates Daniella Peng as Plaintiff’s witness to testify

on the translation of the Loan Agreement.” Peng attended the August 13 hearing.3

Counsel for appellant informed the trial court that Peng worked for the same

translation company as Cheng and her “translation is going to be the same” as

Cheng’s translation. The trial judge stated she did not want to hear from a new

translator; she wanted to hear from Cheng. The judge stated Peng’s testimony was

not relevant to the plea to the jurisdiction proceedings, and Peng was not permitted

to testify. Relevance was the only ground the judge provided for excluding Peng’s

testimony.4

The trial court’s determination that Peng’s testimony was not relevant is in

error. Evidence is relevant if it has any tendency to make a fact more or less probable

than it would be without the evidence and the fact is of consequence in determining

the action. TEX. R. EVID. 401. Peng’s testimony regarding the correct translation of

3 The record indicates the August 13 hearing was held via Zoom. 4 Appellee argues the trial court “closed the evidence” during the April 21 hearing. However, when appellant offered Peng as a witness, appellee did not object to her testimony on the basis that evidence had been closed, and the trial court did not exclude her testimony on that basis. We limit our consideration of the judge’s exclusion of the testimony to the ground presented at the hearing. –11– the Loan Agreement was relevant to determining whether appellant retains any

ownership of Mid-American because whether appellant has standing to derivatively

pursue her claims is dependent upon whether she retains any interest in Mid-

American. When, as here, the plea to the jurisdiction challenges the existence of

jurisdictional facts, the trial court “must review the relevant evidence to determine

whether a fact issue exists.” The trial court failed to do so when it did not consider

Peng’s testimony even though appellant designated Peng as her expert and made her

available to testify at the August 13 hearing.5 See Hayes, 327 S.W.3d at 116 (“When

a plea to the jurisdiction challenges the existence of jurisdictional facts, the trial court

must review the relevant evidence to determine whether a fact issue exists.”). By not

doing so, the trial court abused its discretion.

We do not reverse a judgment unless the trial court’s erroneous exclusion of

evidence “probably caused the rendition of an improper judgment.” TEX. R. APP. P.

44.1(a)(1). The central issue to resolve the plea to the jurisdiction in this case was

whether appellant retained any interest in Mid-American. But the trial court judge

failed to consider evidence from Peng regarding that issue. If Peng had testified that

appellant continued owning an interest in Mid-American, her testimony may have

created a fact issue, precluding the trial court from granting the plea to the

5 Appellee argues that Peng was not credible or reliable and, therefore, her testimony about the Loan Agreement was not admissible and could not have raised a fact question. We make no comment about whether Peng was credible or reliable. Our determination is limited to whether Peng’s testimony about the Loan Agreement was relevant. –12– jurisdiction. On this record, we conclude the trial court’s error probably caused the

rendition of an improper judgment.

Because the trial court erred by determining Peng’s testimony was not

relevant to the plea to the jurisdiction proceedings, we reverse the trial court’s order

and remand the cause to the trial court. We sustain appellant’s second issue.

CONCLUSION In light of our resolution of appellant’s second issue, we need not consider her

first issue or whether the trial court erred by excluding evidence from David Kamen.

See TEX. R. APP. P. 47.1.

We reverse the trial court’s order granting the plea to the jurisdiction and

remand this cause to the trial court for further proceedings.

210174f.p05 /Erin A. Nowell// ERIN A. NOWELL JUSTICE

–13– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT

WEI SHAO HEIRONIMUS, On Appeal from the 162nd Judicial DERIVATIVELY ON BEHALF OF District Court, Dallas County, Texas MID-AMERICAN SUPPLY CORP., Trial Court Cause No. DC-19-16583. Appellant Opinion delivered by Justice Nowell. Justices Partida-Kipness and No. 05-21-00174-CV V. Pedersen, III participating.

XIAOSHA TIAN, Appellee

In accordance with this Court’s opinion of this date, the order of the trial court granting appellee’s plea to the jurisdiction is REVERSED and this cause is REMANDED to the trial court for further proceedings.

It is ORDERED that each party bear its own costs of this appeal.

Judgment entered this 1st day of August, 2022.

–14–