E.L. & ASSOCIATES, INC., Appellant
JORGE H. PABON, RUTH PABON, WILLIAMS SOLIS, AND RUTHIE'S 5022, LLC, Appellees
Appeal from the 80th District Court Harris County, Texas
Trial Court Cause No. 2011-30394
consists of Justices Boyce, Busby, and Wise.
William J. Boyce Justice.
& Associates, Inc. ("EL&A") sued two of its
former directors and their adult son after EL&A lost a
lease for a restaurant it operated and the directors' son
opened a nearly identical restaurant in the same location. A
jury found that the directors, Jorge H. Pabon and Ruth Pabon,
breached their fiduciary duties to EL&A. The jury further
found that the Pabons' son, William Solis, assisted in
the Pabons' breaches of fiduciary duty. The jury awarded
no damages to EL&A.
appeal, EL&A contends that the jury's zero damages
award was the result of the trial court's improper
submission of a mitigation instruction as part of the damages
question; EL&A contends a mitigation instruction should
not have been submitted because there was no evidence
supporting any failure to mitigate by EL&A. More
specifically, EL&A contends that the only evidence of any
potential mitigation involved actions that would have
predated its damages. EL&A contends that a party cannot
be required to mitigate damages before they occur.
we conclude that a party may be required to mitigate damages
before those damages occur if the party has knowledge of a
breach and the impending damages resulting from that breach,
was formed in 1999 for the purpose of opening up two
locations of a Mexican restaurant called "Ruthie's
Mexicana." Efrain Lopez was the president of EL&A
and the Pabons were officers and directors. Efrain owned 55
percent of EL&A; the Pabons collectively owned the
remaining 45 percent. Efrain and the Pabons orally agreed
that Efrain would provide the startup capital for the
restaurants and that the Pabons would be responsible for
running the restaurants, including securing the restaurant
location leases and serving as guarantors for the leases.
dispute forming the basis of this lawsuit surrounds the lapse
of the lease for the Ruthie's Mexicana Sugar Land
location. Jorge Pabon signed a 10-year lease for the Sugar
Land location of Ruthie's Mexicana in 1999; that lease
identified the tenants as "George and Ruth Pabon DBA
Ruthie's Mexicana" and the guarantors as
"George and Ruth Pabon." Later that year, Jorge and
the Sugar Land landlord amended the lease to change the
tenant name to "E. L. and Associates DBA Ruthie's
Mexicana." All other lease terms remained the same.
Pabons opened the restaurants and ran them for the next 10
years. The lease for the Sugar Land location came up for
renewal in October 2009. Shortly before the renewal deadline,
the Pabons indicated to Efrain and Efrain's son, George
Lopez, that they no longer desired to continue the business
venture as part of EL&A. To that end, the Pabons sent
Efrain a letter 10 days before the lease renewal deadline
offering to purchase all outstanding shares in EL&A.
time, George was managing Efrain's interest in EL&A
on Efrain's behalf. George declined the Pabons' offer
to purchase Efrain's interest. Instead, George secured
from the landlord a lease renewal form. Jorge allegedly told
George he did not want to sign it because Jorge was
attempting to negotiate better renewal terms with the
landlord. The lease was not renewed before the deadline, but
instead continued on a month-to-month basis until February
the approximately 16 months that the Sugar Land restaurant
was on a month-to-month lease, neither the Pabons nor Efrain
(or George on Efrain's behalf) signed a renewal lease for
EL&A. George later testified that Jorge repeatedly
represented during that time period that he was attempting to
negotiate better lease terms.
was presented that the Pabons and their son, William Solis,
began preparations during this period to open a different
Mexican restaurant in the same location. Solis filed an
assumed name record with the Fort Bend County Clerk the day
before the lease expired in October 2009 identifying the
address of his business as the same address as the Sugar Land
Ruthie's Mexicana, and identifying the assumed business
name for the new business as "Ruthie's Mexican
Grill." Likewise, Jorge emailed the landlord for the
Sugar Land location in March 2010 requesting that a new lease
be prepared for Solis's signature for a business called
"Ruthie's Mexican Grill."
August 2010, the Pabons again made an offer to Efrain; this
time, they offered to buy Efrain's interest in EL&A
or to sell their own interest to him. That same month, Jorge
wrote to Efrain and George that the restaurant lease renewals
required immediate attention and that "[t]he current
circumstances preclude me from signing any personal
guarantees on either lease." Jorge further indicated in
that letter that "[t]he president of the company and
majority owner is the one most indicated to contact the
landlords and work the appropriate terms and conditions for
approval by the corporation."
December 2010, the Pabons' personal attorney informed the
landlord for the Sugar Land restaurant that there was "a
majority shareholder involved with significantly more
financial involvement [than] the current personal
guarantor." The landlord then demanded that Efrain, as
the majority shareholder, become the personal guarantor for
the new lease, and required a number of personal and
financial documents from Efrain. The landlord stated that the
lease would terminate in February 2011 if not renewed by
Efrain before then.
Pabons sent Efrain a letter expressing concern about the
impending lease termination and again stated that
"Efrain as the President of the company and majority
owner needs to take care of this situation." Efrain did
not produce the requested documents or become the personal
guarantor on the lease. Accordingly, the landlord locked the
doors of the restaurant on February 28, 2011.
resigned her position with EL&A on March 1, 2011. On
March 15, 2011 - approximately two weeks after EL&A was
locked out of the restaurant location - Solis signed a new
lease for the same location. Jorge resigned his position with
EL&A on March 19, 2011. The Pabons signed as guarantors
for Solis's lease on April 12, 2011. Shortly thereafter,
Solis opened a Mexican restaurant at the former Ruthie's
Mexicana location, calling it "Ruthie's
sued the Pabons in May 2011 and added Solis and Ruthie's
5022, LLC as defendants in early 2012. EL&A
originally asserted numerous causes of action against the
defendants including fraud, breach of contract, breach of
fiduciary duty, and conversion. At the conclusion of trial,
EL&A abandoned all causes of action other than its claims
that the Pabons breached fiduciary duties owed to EL&A
and that Solis and his company assisted in the Pabons'
breaches of fiduciary duty. The jury found that the Pabons
breached their fiduciary duties to EL&A, and that Solis
assisted in the breach. The jury further determined, however,
that EL&A suffered no past or future lost profits damages
due to the loss of the Sugar Land restaurant. The trial court
signed a take-nothing judgment against all defendants on
April 24, 2015, and EL&A appealed.
trial court must "submit the questions, instructions,
and definitions" that are "raised by the written
pleadings and the evidence." Tex.R.Civ.P. 278. A trial
court has broad discretion in submitting jury questions.
DeWolf v. Kohler, 452 S.W.3d 373, 394 (Tex.
App.-Houston [14th Dist.] 2014, no ...