AMERICAN AKAUSHI ASSOCIATION INC v. TWINWOOD CATTLE COMPANY INC (2025)

OPINION

This contract and fraud dispute concerns the actions of a Texas cattle breed association regarding a unique breed of cattle originating in Japan and known as Akaushi. The trial court rendered judgment against the breed association, American Akaushi Association, Inc. (“AAkA”), based on a jury verdict finding AAkA liable to Twinwood Cattle Company, Inc. (“Twinwood”) for contract, fraud, and related damages exceeding $25,000,000. The judgment also holds appellants HeartBrand Holdings, Inc. (“HeartBrand”) and Ronald Beeman (“Beeman”) jointly and severally liable for certain damages. All parties to this appeal challenge the judgment in at least some respect.

For reasons explained below, we hold:

1. Twinwood released some—but not all—of its breach of contract and fraud claims. The trial court erred by allowing the jury to consider the released parts of those claims because they were invalid, and this error probably led to an improper judgment. Further, even though the error affects only part of the matter in controversy, we conclude that the affected part is not separable without unfairness to the parties. Tex. R. App. P. 44.1(b). We reverse the judgment as explained below and remand Twinwood's claims for a new trial.

2. The unreleased parts of Twinwood's breach of contract and fraud claims are not barred by the statute of limitations.

3. Separately from the release issue, appellants have not demonstrated any reversible error regarding the trial court's rejection of their other affirmative defenses.

4. Separately from the release issue, AAkA is not entitled to rendition of a take-nothing judgment on the breach of contract and fraud claims, either as to liability or damages, for any of the reasons it advances.

5. HeartBrand and Beeman are entitled to rendition of a take-nothing judgment on alter ego and conspiracy theories.

6. As a matter of law, Twinwood did not breach the 2016 Settlement Agreement. The trial court did not err in granting Twinwood summary judgment on appellants’ counterclaim for breach of that agreement. Accordingly, AAkA is not entitled to any attorney's fees on its unsuccessful breach of contract claim.

We reverse and render in part, and we reverse and remand in part for proceedings consistent with this opinion.

Background

A. Facts

In 1994, Dr. Albert Wood and Hal Holmes imported to Texas from Japan eleven head of Akaushi cattle—eight cows and three bulls. The parties refer to the eleven Akaushi head as the “Foundation Herd.” Dr. Wood, Holmes, and another man, Dr. Antonio Calles, had an interest in HeartBrand Cattle Co.—known as “Old HeartBrand”—which was formed to develop the Akaushi breed in the United States. Akaushi cattle are believed to produce richly marbled beef with healthier, unsaturated fats.

Between approximately 2000 and 2006, Dr. Calles oversaw the breeding of the Foundation Herd and its full-blood progeny, largely through embryo transfer technology and artificial insemination.¹ He collected DNA samples in triplicate and maintained detailed genetic pedigrees on each animal to help ensure the breed's purity.

Appellant Beeman operated a meat harvesting and packing business known as Eddy Packing, which started working with Old HeartBrand in early 2002 to slaughter Akaushi cattle and harvest the beef. Eddy Packing loaned money to Old HeartBrand, which provided a lien on its cattle as collateral. In 2006, when Old HeartBrand suffered financial setbacks, Beeman created appellant HeartBrand, which acquired Old HeartBrand, including all of its animals, real estate, and genetic records. Dr. Calles became HeartBrand's president. At the time of trial, Beeman was HeartBrand's chairman.

By 2009, HeartBrand's Akaushi business consisted largely of selling Akaushi cattle to interested cattle producers on a restricted basis. Those producers agreed to sell their Akaushi progeny back to HeartBrand at various floor prices. In connection with this program, HeartBrand formed appellant AAkA, a for-profit Akaushi breed association of which HeartBrand is a member and 100% owner. Among its functions, AAkA was to register Akaushi cattle and maintain registration records in an official herd book. An application to register a particular animal was required to include a copy of a DNA test confirming the applicant animal's Akaushi genetics. Upon registration, an Akaushi animal would be issued a certificate of registration. There are three categories of registrants: (1) “full-blood,” which means an animal that is 100% descended from the Foundation Herd; (2) “pure-bred,” which means an animal that possesses 15/16ths of its genes from full-blood Akaushi cattle; and (3) “Akaushi cross,” which includes other descendants of full-blood Akaushi cattle eligible for registration with AAkA.

Akaushi cattle producers entering into a contractual relationship to buy cattle from HeartBrand were required to join AAkA, register all their Akaushi cattle with AAkA, and comply with AAkA's rules and regulations. Additionally, producers were restricted from selling or distributing any of the purchased cattle, their progeny, or the cattle's derived genetics to any parties other than AAkA's members.

Twinwood is a cattle producer. In August 2009, Twinwood purchased from HeartBrand 210 head of Akaushi cattle, consisting of 200 full-blood Akaushi cows and ten full-blood Akaushi bulls (the “210 Head”). Twinwood and HeartBrand signed a Full-Blood Contract containing terms similar to those referenced above. In particular: (1) HeartBrand warranted that the 210 Head were full-blood Akaushi cattle; (2) Twinwood was required to join AAkA; and (3) Twinwood agreed that it would not sell, dispose of, or distribute any of its breeding stock, offspring, or embryos, or the semen or ovum derived therefrom, to anyone who was not an AAkA member; nor would Twinwood permit anyone who was not an AAkA member to use its breeding stock, offspring, or embryos, or the semen or ovum derived therefrom, for any breeding.

Before HeartBrand delivered the 210 Head, Twinwood sent its representative, Abel Gonzales, to a meeting with Beeman, Dr. Calles, Bubba Bain (AAkA's Executive Director), and Bill Fielding (HeartBrand's Chief Executive Officer). The topics discussed included: AAkA's creation and that Twinwood would join AAkA; that DNA “parent verification” would benefit AAkA members;² that HeartBrand had the information needed for DNA parent verification and that it would be uploaded to a contemplated database to be operated by AAkA; and that Twinwood would receive registration certificates showing that its 210 Head are full-blood Akaushi and parent-verified by DNA testing.

This last item—registration certificates confirming that all 210 Head were parent-verified by DNA analysis as full-blood Akaushi—was particularly important to Twinwood. Twinwood's ultimate mission was to produce and sell high-quality, 100% full-blood Akaushi genetics. According to Gonzales, Twinwood needed registration certificates on the 210 Head to get its genetic program started. Gonzales testified that he clearly expressed during the meeting Twinwood's goal to be a genetic seed-stock seller, although, at that time, Twinwood was restricted by the Full-Blood Contract to selling its Akaushi genetics only to other AAkA members.

In November 2009, Bain sent a letter to all Akaushi breeders, including Twinwood, announcing AAkA's formation and soliciting membership applications. The letter stated, “[t]he association has been established to promote the Akaushi breed as well as maintain and verify the purity of the breed, the performance of the offspring and the quality of the final retail product.” Further, AAkA was “compiling all cattle records and integrating them with the GPS (Genetic Performance Solutions LLC) data system,” which, when completed, would provide each AAkA member “access to the system” and enable all members “to retrieve information on their cattle as well as compare their individual information with that of the entire breed.”³ AAkA's website advertised “DNA verification on every animal” and emphasized, “Remember without a DNA verified pedigree and a certificate of registration, ‘she's just another cow and he's just another bull.’ ” Twinwood joined AAkA in December 2009 and paid its base membership dues of $100 each year through 2017.

Meanwhile, Dr. Calles continued collecting DNA samples from HeartBrand's cattle. In August 2010, Dr. Calles and JoJo Carrales (HeartBrand's Executive Director) took 3,379 samples to a lab for DNA sequencing. These 3,379 samples included all of Twinwood's 210 Head, including their “dams and grand dams, sires and grand sires.”

Around this time, Dr. Calles resigned from HeartBrand and became an independent consultant. He consulted with HeartBrand for three months. In October 2010, the DNA sequencing company informed AAkA that 122 of the 3,379 samples needed to be “resubmitted.” Before Dr. Calles left HeartBrand, he sent Beeman and Jordan Beeman—Beeman's son and the new president of HeartBrand—a summary of recommended actions to resolve the genetic testing issues. According to Dr. Calles, when he left HeartBrand, DNA samples for “all animals” were available for testing.

In July 2011, Bain told all breeders, including Twinwood, that AAkA was nearing the end of the long process “to have complete, verified pedigrees on as much of the Foundation Herd as possible, going all the way back to 1994.”

After Twinwood received the 210 Head, it followed mating protocols to maintain genetic diversity in its herd and submitted registration applications with DNA samples to AAkA as calves were born.

Twinwood assigned a project coordinator, Dr. Greg Kaase—an independent contractor—to secure registration certificates. AAkA provided certificates for all 210 Head in December 2011. All the certificates reflected that the Akaushi breed percentage was 100%, and each animal had an official registration number. Many of the certificates stated “Parent-Verified” following a DNA ID number:

Eighty-one of the certificates did not contain this language, however:

Twinwood believed that the certificates reflected DNA parent verification for previous generations in all of its animals’ pedigrees.

Several years passed. When HeartBrand sold an Akaushi bull to a producer without any restrictions such as those contained in Twinwood's Full-Blood Contract, Twinwood sought to void the contract based on a “most favored nations” clause. The parties resolved this dispute in a July 2016 agreement (the “2016 Settlement Agreement”). This agreement terminated the Full-Blood Contract, thus eliminating contractual restrictions that previously prevented Twinwood from selling its Akaushi genetics to anyone other than AAkA members. The 2016 Settlement Agreement also contained release language, which is important to the issues in this appeal.

After the Full-Blood Contract was terminated, Twinwood sought to expand its seed-stock Akaushi business by selling the genetic material of its Akaushi herd on an unrestricted basis. Twinwood believed its prospects would be improved by registering its cattle with another Akaushi breed association, the American Wagyu Association (“AWA”). Twinwood had considered but decided against joining AWA in 2009 when it purchased the 210 Head from HeartBrand. But Dr. Calles, who Twinwood hired as a consultant in 2016, recommended that Twinwood now register its cattle with AWA because dual registration with AAkA and AWA could potentially double Twinwood's customer base.

To obtain AWA registrations, Twinwood began sending AWA the AAkA certificates on its cattle. In July 2016, AWA informed Twinwood that to register its animals as full-blood Akaushi, AWA required copies of the DNA parent verification reports issued by the lab that performed the tests, GeneSeek. AWA would not register Twinwood's cattle as full-blood Akaushi without confirming through lab reports the applicant's pedigree back to the Foundation Herd. Twinwood forwarded AWA's request to AAkA along with a spreadsheet identifying the animals for which lab reports were requested. This list included all of the 210 Head and their progeny as of July 2016.

By November 2016, AWA registered as full-blood Akaushi fifteen of Twinwood's original 210 Head. AWA would not register more, however, because there were “gaps in the pedigrees” of the remaining cattle. That is, some of the dams and granddams of Twinwood's 210 Head were not registered with AWA, and GeneSeek had not provided lab reports verifying the Akaushi parentage of those ancestor animals. Twinwood requested AAkA to authorize GeneSeek to release to AWA the parent verification lab reports for the relevant ancestors of Twinwood's cattle. In December 2016 and January 2017, AAkA agreed to release the requested information, but only as to cattle Twinwood owned. AAkA refused to provide parent verification information on ancestral cattle Twinwood did not own “as a matter of policy.”

Subsequently, Twinwood decided to terminate its AAkA membership. On May 16, 2017, AAkA wrote Twinwood that it would make Twinwood's membership “inactive.”

The next day, Gonzales emailed AAkA, noting that the AAkA certificates for many of Twinwood's cattle did not include language that the registered animal was “parent-verified.” Gonzales attached a list and requested revised certificates showing that the animals were parent-verified. AAkA informed Gonzales on May 17 that twenty-three cattle on the list Gonzales provided were parent-verified, but sixty animals “qualified to an Akaushi sire only” because they were “out of a handful of dams that do not have a DNA profile” as “[t]here was not a sample for them in 2010 when we began the DNA testing.”

In June 2017, Gonzales sent AAkA copies of the 81 registration certificates issued in 2011 that lacked the “parent-verified” language and requested that the certificates be amended to indicate parent verification. On August 22, 2017, Twinwood received new AAkA certificates. Twenty-four of them now stated “Parent-Verified,” but fifty-seven of them stated “Sire Qualified” next to the DNA ID number. All the certificates still said, “Breed %: 100.” Twinwood told AAkA it needed these certificates to reflect that the cattle were parent-verified, but AAkA responded, “[f]or these certificates, sire qualified is what is reflected in the Association's records. We cannot alter the certificates to reflect something other than what is in our records.” According to Twinwood, it first learned in 2017 that AAkA had issued registration certificates in 2011 for its original 210 Head without having confirmed by DNA testing that all 210 cattle were full-blood Akaushi.

B. Court Proceedings

Twinwood sued AAkA in April 2018 for breach of contract. It amended its petition in September 2018 to add (1) a fraud claim against AAkA, (2) tortious interference claims against HeartBrand and Beeman, (3) conspiracy claims against all three defendants, and (4) a claim for exemplary damages. Twinwood also alleged that HeartBrand was liable for AAkA's wrongful conduct under an alter ego theory.

Twinwood's contract claims are based on duties allegedly owed under its membership agreement with AAkA (“Membership Agreement”). The claims essentially fall into two categories. In its first breach of contract theory, Twinwood argued that AAkA failed to comply with applicable duties because it registered all of the 210 Head as full-blood Akaushi without having first procured DNA testing to verify each animal's pedigree as 100% descended from the Foundation Herd (“First Breach Theory”). Specifically, AAkA registered 119 of the 210 Head as full-blood Akaushi in 2011 but did not verify their DNA parentage before registration. None of the 119 cattle are currently registered with AWA as full-blood Akaushi, nor are they likely to receive AWA registration because DNA samples of their dams or granddams do not exist. In one of its trial exhibits, PX445, Twinwood categorized the 210 Head into three groups: A, B, and C. Group C was comprised of the 119 cattle to which the First Breach Theory applies, and we refer to them as “Group C Cattle.”

Twinwood's second breach theory applies to a separate group of the 210 Head consisting of 65 cattle. Twinwood's exhibit identified them as Group B, and we refer to this group as “Group B Cattle.” Twinwood asserted that AAkA failed to comply with its duty to provide pedigree information for those animals (including their ancestors) dating back to the Foundation Herd (“Second Breach Theory”). The Second Breach Theory is based on AAkA's refusal in 2017 to authorize GeneSeek to release summary lab reports applicable to Group B Cattle ancestors that Twinwood did not own. The Group B Cattle are not currently registered with AWA as full-blood Akaushi, but they could be registered if AAkA provided the requested lab reports.

To summarize, the First Breach Theory is that AAkA breached the Membership Agreement because it registered the Group C Cattle as full-blood Akaushi without verifying their parentage through DNA testing. The Second Breach Theory is that AAkA breached the Membership Agreement because, although it verified the Akaushi parentage of the Group B Cattle through DNA testing, it refused to provide laboratory test results for certain ancestors of the Group B Cattle so they could be registered with AWA. None of the animals in Group C Cattle are included within Group B Cattle.⁴

In support of its fraud claim, Twinwood asserted that AAkA misrepresented that all cattle in its registry were “100% DNA parent verified” when AAkA knew this to be untrue and that it concealed the truth from Twinwood.

Appellants asserted affirmative defenses, including release and statute of limitations. They also filed a counterclaim for breach of the 2016 Settlement Agreement. Before trial, Twinwood successfully sought summary judgment on appellants’ counterclaim. Appellants sought summary judgment on their affirmative defenses of release and limitations, but the motion was denied.

After a one-month trial, the jury found, as relevant:

1.  AAkA failed to comply with a contractual duty to procure and provide DNA parent-verified pedigrees on Twinwood animals registered with AAkA.

2.  The date by which AAkA failed to comply was August 22, 2017.

3.  AAkA concealed its failure to comply.

4.  The date by which Twinwood discovered or could have discovered the failure to comply with reasonable diligence was November 8, 2019.

5.  AAkA's failure to comply was not excused by waiver.

6.  Twinwood is entitled to contract damages of:

a. lost profits sustained in the past: $4.4 million;

b. lost future profits: $7 million; and

c. lost herd value: $10.5 million.5

7.  AAkA committed fraud against Twinwood through false statements of fact, promises of future performance made with an intent at the time the promise was made not to perform as promised, or failure to disclose material facts.

8.  Twinwood should have discovered, with the exercise of reasonable diligence, AAkA's fraud by November 8, 2019.

9.  AAkA concealed its fraud.

10. Twinwood discovered or could have discovered AAkA's fraud by November 8, 2019.

11. Twinwood's out-of-pocket damages resulting from AAkA's fraud was $1.3 million.

17. The harm to Twinwood by AAkA's fraud is supported by clear and convincing evidence.

18. AAka is liable for $3.3 million in exemplary damages for its fraud.

19. AAkA, HeartBrand, and Beeman conspired to commit fraud.

20. HeartBrand was responsible for AAkA's conduct (alter ego).

The trial court signed a final judgment in accordance with the jury's verdict except in one respect. The court ruled that the jury's damage awards for lost future profit and lost herd value were duplicative, and thus Twinwood could recover only one of them. Affording Twinwood the greater recovery, the judgment did not award Twinwood lost future profit. Thus, the judgment awards to Twinwood: (1) $14.9 million in actual damages for AAkA's breach of contract, for which HeartBrand is jointly and severally liable; (2) $1.3 million in actual damages for AAkA's fraud, for which HeartBrand and Beeman are jointly and severally liable; (3) $2.6 million in exemplary damages against AAkA for fraud; and (4) attorney's fees.

All parties timely appealed.⁶

Issues Presented 7

AAkA and HeartBrand present twenty-four issues. Nine issues relate to their affirmative defenses; two issues challenge the evidence supporting liability for breach of contract and fraud; seven issues relate to expert opinions and actual damages; two issues challenge exemplary damages; three issues challenge joint and several liability; and a final issue relates to recovery of pre-judgment interest during Covid-19 delays.

Beeman's nine issues overlap with AAkA's and HeartBrand's issues regarding release, statute of limitations, evidentiary sufficiency to support fraud liability and damages, conspiracy, and pre-judgment interest. Because many of their issues converge, we refer to AAkA, HeartBrand, and Beeman collectively as “appellants” when discussing their joint contentions.

In its cross-appeal, Twinwood raises a single issue: the trial court erred in setting aside the jury's lost future profit award as duplicative of lost herd value.

Discussion

Release

We begin with appellants’ contention that Twinwood released its contract and fraud claims. This argument is based on release language contained in two documents: (1) the 2016 Settlement Agreement, and (2) Twinwood's 2009 application for AAkA membership, which is part of the Membership Agreement defined in the jury charge. Appellants argue that these releases bar all of Twinwood's claims as a matter of law, and the trial court erred by denying their motion for summary judgment and motion for directed verdict on this affirmative defense.⁸

A. Standard of Review

Release is an affirmative defense. See Tex. R. Civ. P. 94. To prevail on this defense, appellants had to conclusively prove that Twinwood released its contract and fraud claims. See Geheb v. TransCanada Keystone Pipeline, LP, No. 09-17-00107-CV, 2018 WL 4779040, at *2 (Tex. App.—Beaumont Oct 04, 2018, no pet.) (mem. op.). In the challenged rulings, the trial court determined that Twinwood's contract and fraud claims were not released as a matter of law. We review such legal rulings de novo. See id.

B. Applicable Law

A release is a writing providing that a duty or obligation owed to one party is discharged immediately or on the occurrence of a condition. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993); In re OSG Ship Mgmt., Inc., 514 S.W.3d 331, 344 (Tex. App.—Houston [14th Dist.] 2016, no pet.); Nat'l Union Fire Ins. Co. v. Ins. Co. of N. Am., 955 S.W.2d 120, 127 (Tex. App.—Houston [14th Dist.] 1997), aff'd sub nom., Keck, Mahin & Cate v. Nat'l Union Fire Ins. Co., 20 S.W.3d 692 (Tex. 2000). A release extinguishes a claim or cause of action and bars recovery on the released matter. Dresser Indus., 853 S.W.2d at 508; OSG Ship Mgmt., 514 S.W.3d at 344.

To release a claim effectively, the releasing instrument must “mention” the claim to be released. Victoria Bank & Trust Co. v. Brady, 811 S.W.2d 931, 938 (Tex. 1991). Claims not clearly within the subject matter of the release are not discharged, even if they exist when the release is executed. Id. It is not necessary, however, for the parties to “anticipate and explicitly identify each potential cause of action relating to the release's subject matter.” Keck, Mahin & Cate, 20 S.W.3d at 698. Although releases generally contemplate claims existing at the time of execution, a valid release may also encompass unknown claims and damages that develop in the future. Id.; see also McLernon v. Dynegy, Inc., 347 S.W.3d 315, 338-39 (Tex. App.—Houston [14th Dist.] 2011, no pet.).

Like all agreements, a release is subject to the rules of contract construction. Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990). Our primary task is to determine the true intentions of the parties as expressed in the writing. Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex. 2011). “The scope of coverage of a release is determined by the terms of the agreement between the parties.” Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 851 (Tex. App.—Houston [14th Dist.] 2001, pet. denied). We must consider the entire writing in order to harmonize and give effect to the provisions of the contract so that none will be rendered meaningless. Italian Cowboy Partners, Ltd., 341 S.W.3d at 333. We afford contract terms their plain, ordinary, and generally accepted meaning unless the instrument shows the parties used terms in a technical or different sense. Tamasy v. Lone Star Coll. Sys., 635 S.W.3d 702, 709 (Tex. App.—Houston [14th Dist.] 2021, no pet.). Here, no party claims that the relevant release language is ambiguous, and we agree it is not. An unambiguous contract should be enforced as written. In re Davenport, 522 S.W.3d 452, 457 (Tex. 2017). We review the interpretation of an unambiguous contractual provision de novo. See URI, Inc. v. Kleberg County, 543 S.W.3d 755, 763 (Tex. 2018).

C. 2016 Settlement Agreement

We first consider whether and to what extent Twinwood released its contract and fraud claims against appellants by the 2016 Settlement Agreement, which terminated the Full-Blood Contract between Twinwood and HeartBrand. Effective June 9, 2016, it contained the following release language:

2.4 For the Consideration, Twinwood hereby RELEASES, ACQUITS, AND FOREVER DISCHARGES HeartBrand and all of its affiliated companies, administrators, agents, representatives, officers, directors, employees, owners, parent entities, partners, subsidiaries, assigns, predecessors-in-business or interest, and other successor and related companies from All Claims. THIS AGREEMENT IS SPECIFICALLY INTENDED TO OPERATE AND TO BE APPLICABLE EVEN IF IT IS ALLEGED, CHARGED, OR PROVED THAT ALL OR SOME OF THE CLAIMS OR DAMAGES RELEASED WERE CAUSED AS A WHOLE OR IN PART BY ANY ACT, OMISSION, NEGLIGENCE, GROSS NEGLIGENCE, BREACH OF CONTRACT, INTENTIONAL CONDUCT, VIOLATION OF STATUTE OR COMMON LAW, BREACH OF WARRANTY (EXPRESS OR IMPLIED), PRODUCT DEFECT, STRICT LIABILITY, OR ANY OTHER CONDUCT WHATSOEVER OF THESE RELEASED PERSONS AND ENTITIES.

The 2016 Settlement Agreement defined the term “All Claims” and other key terms as set forth below. We also emphasize in bold a relevant temporal exception. The agreement stated:

1.7 “Relationship” means that set of facts, transactions, occurrences, events, actions, and omissions related to or arising out of the negotiation, formation, execution, performance, or lack of performance of the Full-Blood Contract.

1.8 The “Dispute” means all actual and potential disputes, claims, controversies, and causes of action that arise out of or relate, directly or indirectly, to the Full-Blood Contract or to the Relationship. Notwithstanding the foregoing definition, “Dispute” DOES NOT INCLUDE any disputes, claims, controversies, and causes of action arising out of or resulting from acts, omissions, or events occurring after the Effective Date of this Agreement, including the enforcement of this Agreement.

1.9 “All Claims” means all existing, future, known, and unknown claims, demands, and causes of action, pending or threatened, for all existing, future, known and unknown damages and remedies (1) that arise out of or relate to the Full-Blood Contract, the Relationship, and/or the Dispute; or (2) that have been brought or that could have been brought by or on behalf of the parties in any court, tribunal, administrative proceeding, or forum, in the United States of America or anywhere else, based on acts, omissions, or other conduct relating to the Full-Blood Contract and/or the Dispute occurring prior to the Effective Date of this Agreement. Under this definition, “All Claims” includes, but is not limited to, all claims, demands, lawsuits, debts, accounts, covenants, agreements, actions, cross-actions, liabilities, obligations, implied obligations, losses, costs, expenses, remedies, and causes of action of any nature, whether in contract, tort, or any other legal theory, or based upon fraud or misrepresentation, breach of duty or common law, or arising under or by virtue of any judicial decision, statute, or regulation, for past, present, future, known, and unknown injuries, property or economic damage, and all other losses and damages of any kind, including, but not limited to, the following: all actual damages; all exemplary and punitive damages; all penalties of any kind; including, without limitation, any tax liabilities or penalties; damage to business reputation, lost profits or good will; consequential damages, damages ensuing from loss of credit; and prejudgment and postjudgment interest, costs, and attorneys’ fees. This definition further includes, but is not limited to, all elements of damages, all remedies, and all claims, demands, and causes of action that are now recognized by law or that may be created or recognized in the future by any manner, including, without limitation, by statute, regulation, or judicial decision. “All Claims” DOES NOT INCLUDE any disputes, claims, controversies and causes of action arising out of or resulting from acts, omissions, or events occurring after the Effective Date of this Agreement and DOES NOT INCLUDE breaches of this Agreement.

Appellants contend that by signing the 2016 Settlement Agreement Twinwood released its claims against HeartBrand, AAkA, and Beeman because all claims are within the release's scope and are based on events occurring before the 2016 Settlement Agreement's effective date, June 9, 2016. Twinwood responds that its claims against AAkA fall outside the 2016 Settlement Agreement's scope, and in any event, its claims against all appellants are based on acts or events that occurred after June 9, 2016.

The release language in the 2016 Settlement Agreement is broad and specifically intended to be construed as such. Twinwood and HeartBrand agreed that the 2016 Settlement Agreement “shall be liberally construed to give all those released the broadest possible protection.” HeartBrand and Twinwood used expansive language consistent with effectuating this stated intent. For example, the key definitional terms include phrases such as “related to” and “arising out of,” which are construed broadly. See Branch Law Firm L.L.P. v. Osborn, 532 S.W.3d 1, 19-20 (Tex. App.—Houston [14th Dist.] 2016, pet. denied); Grant Prideco, Inc. v. Empeiria Conner L.L.C., 463 S.W.3d 157, 161-62 (Tex. App.—Houston [14th Dist.] 2015, no pet.). “Related” means “[c]onnected in some way; having a relationship to or with something else.” See Related, Black's Law Dictionary (12th ed. 2024); see also Transcor Astra Grp. S.A. v. Petrobras Am. Inc., 650 S.W.3d 462, 470-71 (Tex. 2022) (interpreting “related to” to encompass a broad range of claims); Shanley v. First Horizon Home Loan Corp., Nos. 14-07-01023-CV, 14-08-00060-CV, 2009 WL 4573582, at *10-11 (Tex. App.—Houston [14th Dist.] Dec. 8, 2009, no pet.) (mem. op.). The phrase “arising out of” is similarly expansive and means that there is a causal connection or relation—i.e., but-for causation—though not necessarily direct or proximate causation. See, e.g., Utica Nat'l Ins. Co. of Tex. v. Am. Indem. Co., 141 S.W.3d 198, 202-03 (Tex. 2004); AutoNation USA Corp. v. Leroy, 105 S.W.3d 190, 195-96 (Tex. App.—Houston [14th Dist.] 2003, no pet.); McCarthy Bros. Co. v. Cont'l Lloyds, Ins. Co., 7 S.W.3d 725, 729-30 (Tex. App.—Austin 1999, no pet.). The use of such language illustrates the parties’ intent to be “inclusive rather than exclusive.” See, e.g., Branch Law Firm L.L.P., 532 S.W.3d at 19-20.

The “related to” and “arising out of” terminology used in defining the key terms—the “relationship,” the “dispute,” and “all claims”—affords those terms a broad meaning. In addition, the definition of “all claims” includes “existing, future, known, and unknown” claims and causes of action, “for all existing, future, known and unknown damages and remedies.” Similar release language has been described as “the broadest type of general release.” See Transcor Astra Grp. S.A., 650 S.W.3d at 471-72. Thus, the 2016 Settlement Agreement laid to rest not only any known or unknown claims or disputes that arose out of or related to the Full-Blood Contract, it released known and unknown claims or disputes arising out of or related to the “relationship” and the “dispute.” Significantly, the “relationship” is not limited to the relationship between Twinwood and HeartBrand but includes all “facts, transactions, occurrences, events, actions, and omissions” that relate to or arise out of the “negotiation, formation, execution, performance, or lack of performance of the Full-Blood Contract.” Twinwood's relationship with AAkA, for instance, is related to or arose out of the performance of the Full-Blood Contract because Twinwood was required to join AAkA under that contract.⁹

Pertinent authority guides our analysis and confirms the broad reach of comparable release language. Memorial Medical Center of East Texas v. Keszler stands for the proposition that a general release of claims relating to the parties’ “relationship” will be enforced as written, even if that is the only mention of a given claim in the document. See 943 S.W.2d 433, 435 (Tex. 1997). In Keszler, Memorial brought a “corrective action” against Keszler and revoked his privileges after he was found guilty of tampering with government records. Id. at 434. Keszler sued Memorial and the parties reached a settlement that released claims based on the parties’ relationship:

Keszler ․ does hereby RELEASE, ACQUIT and FOREVER DISCHARGE [Memorial] ․ from any and all claims, demands, actions, and causes of action of any kind whatsoever ․ which [Keszler] has or might have, known or unknown, now existing or that might arise hereafter or which have not yet accrued, directly or indirectly attributable to or in any way arising out of corrective action taken by [Memorial] against [Keszler] and any other matter relating to [Keszler's] relationship with [Memorial], including but not limited to his relationship as a member of the staff or as a physician having clinical privileges, it being the intent of [Keszler] to release all claims of any kind or character which he might have against [Memorial] ․

Id. After the settlement, Keszler sued Memorial for damages for injuries he suffered because of exposure to a toxic sterilizing agent Memorial used during his employment, which was unrelated to the claim that the parties had settled. Id. The supreme court concluded that this claim was released because it was “mentioned” in the release when Keszler agreed to release all claims relating to his “relationship” with Memorial, and his claim for toxic exposure during his employment at Memorial was related to his relationship with Memorial. Id.

In Keck, Mahin & Cate, the supreme court considered a release that applied to “all demands, claims or causes of action” between the parties. 20 S.W.3d at 696. There, the supreme court considered whether an insured's release of attorney's fees was limited to unpaid fees or applied to all malpractice claims attributable to legal services rendered during a specified period. Id. at 697. The dispute centered on the recitals and the following two paragraphs in the release. Id. The recitals at the beginning of the release stated the law firm, KMC, performed legal services for Granada for which Granada owes KMC “a substantial sum for outstanding and unpaid invoices for professional legal services rendered,” and KMC and Granada “desire to resolve the issue of the Unpaid Fees to their mutual satisfaction.” The parties agreed as follows:

1. KMC hereby releases, and by these presents does hereby release, acquit and forever discharge Granada, its agents, servants, employees, officers, directors, affiliates and all persons, natural or corporate, in privity with them or any of them from any demands, claims or causes of action of any kind which KMC had or might have, directly or indirectly attributable to the Unpaid Fees owed to KMC by Granada for professional legal services rendered between June 1, 1988 and April 1, 1992, it being intended to release Granada from any obligation to pay such Unpaid Fees.

2. Granada hereby releases and by these presents does hereby release, acquit and forever discharge KMC, its agents, servants, employees, partners, affiliates and all persons, natural or corporate, in privity with it, from any and all demands, claims or causes of action of any kind whatsoever, statutory, at common law or otherwise, now existing or that might arise hereafter, directly or indirectly attributable to the rendition or [sic] professional legal services by KMC to Granada between June 1, 1988 and April 1, 1992.

Id.

Relying on Victoria Bank & Trust Co. v. Brady, the court of appeals concluded the agreement did not release KMC from the legal malpractice claims because the release was limited to claims for unpaid fees. See id. at 697-98. The court of appeals construed the release narrowly and concluded that the references to “Unpaid Fees” in the recitals and paragraph 1 were an implied limitation on the claims mentioned and released in paragraph 2. Id.

KMC challenged the court of appeals’ decision and argued paragraph 2 set out KMC's consideration and released any and all claims Granada may have against KMC “directly or indirectly attributable to the rendition [of] professional legal services by KMC.” Id. at 697. The supreme court agreed with KMC and concluded Brady did not control the construction of the release at issue:

The present release is clearly broader than the one in Brady. It is not expressly limited to a specific claim or transaction but rather purports to cover “all demands, claims or causes of action of any kind whatsoever.” Nothing in Brady forbids such a broad-form release. Brady simply holds that the release must “mention” the claim to be effective. It does not require that the parties anticipate and identify each potential cause of action relating to the release's subject matter.

Id. at 698 (internal citations omitted). The court concluded the release was sufficient to release all legal malpractice claims against KMC attributable to legal services rendered to Granada “between June 1, 1988 and April 1, 1992.” Id. at 697. The Keck, Mahin & Cate court also rejected the court of appeals’ limitation of the release to issues related to Unpaid Fees:

The court of appeals’ construction imposes a symmetry that is simply absent from the agreement's language. While the recitals in this release are concerned primarily with the issue of Granada's unpaid legal fees, they do not convey an intent to limit the consideration to KMC for the forgiveness of those fees. The recitals merely state the parties’ general desire “to resolve the issue of Unpaid Fees to their mutual satisfaction.” Paragraphs 1 and 2 then explain the parties’ mutual satisfaction—KMC forgives all unpaid legal bills; Granada releases all claims relating to KMC's legal services rendered during a specific time period. Because the release forgives KMC for any legal malpractice it may have committed during this period, the court of appeals erred in holding to the contrary.

Id. at 698.

Here, reading the release language as a whole, including the temporal exception in the definitions of “dispute” and “all claims,” the parties agreed to release certain claims and further agreed that other claims would be excepted from the release. Examining the factual bases of Twinwood's contract and fraud claims leads us to conclude that all of them fall within the broad scope of the 2016 Settlement Agreement's release language. However, some legal theories arise or result from acts, omissions, or events that occurred after June 9, 2016, and thus come within the temporal exception. Consequently, Twinwood released some claims as a matter of law when it signed the 2016 Settlement Agreement but did not release other claims. We discuss each claim.

1. First Breach Theory

The essence of Twinwood's First Breach Theory is that AAkA certified the Group C Cattle as full-blood, 100% Akaushi without having verified their Akaushi parentage through DNA testing. According to Twinwood, AAkA had a contractual duty to perform or procure DNA testing on all applicants for registration and to register as full-blood Akaushi only those animals that could be matched to a full-blood registered sire and dam through DNA verification.¹⁰ The record reflects that Twinwood joined AAkA in 2009. There is no dispute that in 2011 AAkA issued registration certificates for all 210 Head, including the Group C Cattle. The registration certificates indicated that each registered animal was 100% full-blood Akaushi. However, some certificates were marked “Parent-Verified” and others were not. As it turned out, AAkA did not have DNA samples for some dams of the Group C Cattle. Consequently, AAkA issued registration certificates for the Group C Cattle without having confirmed Akaushi parentage by DNA tests.

A contractual breach occurs when a party fails to perform a contractual obligation when performance is due. See Mays v. Pierce, 203 S.W.3d 564, 575 (Tex. App.—Houston [14th Dist.] 2006, pet. denied). Under the First Breach Theory, when Twinwood submitted applications to register its cattle, AAkA was supposed to verify the Akaushi parentage by DNA testing before issuing registration certificates. Only if Akaushi parentage was confirmed by testing would AAkA register the applicant animals as full-blood Akaushi. The Membership Agreement, therefore, called for periodic performance when registration applications were submitted, and performance was due before the registration certificates were issued (or within a reasonable time, at the latest). Assuming for purposes of this issue that AAkA had the contractual duty Twinwood contends it did, AAkA breached that duty in 2011 when it issued registration certificates for the Group C Cattle certifying them as full-blood Akaushi without having verified parentage by DNA testing.

A releasing instrument must “mention” the claim to be released. Victoria Bank & Trust Co., 811 S.W.2d at 938. “Mentioning” a claim, however, does not require the parties to “anticipate and explicitly identify each potential cause of action relating to the release's subject matter.” Keck, Mahin & Cate, 20 S.W.3d at 698. A valid release may encompass unknown claims and damages that develop in the future. Id.

The release language in the 2016 Settlement Agreement sufficiently mentions Twinwood's First Breach Theory. AAkA's registration of the Group C Cattle as full-blood Akaushi without verifying their Akaushi parentage by DNA testing falls within the scope the 2016 Settlement Agreement's definition of “relationship” because it is based on a set of facts, transactions, occurrences, events, actions, or omissions related to or arising out of the performance of the Full-Blood Contract. AAkA's alleged duty to register only DNA parent-verified cattle is based on AAkA's rules and exists only because the Membership Agreement to which Twinwood and AAkA were bound resulted from Twinwood's contractual duty to join AAkA under the Full-Blood Contract. Additionally, Twinwood's First Breach Theory falls within the 2016 Settlement Agreement's definition of the “dispute” because it is a dispute, claim, or cause of action that arises out of or relates, directly or indirectly, to the Full-Blood Contract or the “relationship.” Likewise, the First Breach Theory is subsumed within the scope of “all claims” because it arose out of or is related to the Full-Blood Contract, the “relationship,” and the “dispute.” Although the alleged damages underlying Twinwood's First Breach Theory would not necessarily have been known as of June 9, 2016, the defined term “all claims” includes known or unknown claims and known or unknown damages. For these reasons, the claims released by the 2016 Settlement Agreement include Twinwood's First Breach Theory as a matter of law.

Twinwood argues that all of its claims, including the First Breach Theory, are based on acts or omissions that occurred after June 9, 2016. Twinwood cites the jury's findings in question two that the date by which AAkA failed to comply with the Membership Agreement was August 22, 2017,¹¹ and in question four that AAkA concealed its breach until November 8, 2019.

August 22, 2017 was the date when AAkA provided Twinwood with amended or revised registration certificates—twenty-four of which stated “Parent-Verified,” and fifty-seven of which stated “Sire Qualified” next to the DNA ID number. Relying on this finding and evidence, Twinwood reasons that its First Breach Theory is based on acts occurring after June 9, 2016. But AAkA's act of providing revised registration certificates in 2017 was not a new violation of the Membership Agreement as to the cattle it previously registered without DNA parent verification, nor did it relate to a new time for performance, nor did it cause a new and distinct legal injury. AAkA breached the contract in 2011 when it issued registration certificates without having confirmed by DNA testing that all 210 cattle were full-blood Akaushi and remained in breach from 2011 forward in time. There is no evidence that it ever brought itself into compliance. In fact, compliance was impossible because the reason AAkA did not verify parentage of Group C Cattle in the first place is because it lacked DNA samples for certain dams of those cattle. This constituted one breach for each of the 119 animals in Group C Cattle. If in 2017, for instance, Twinwood had submitted new applications for registration of new animals, and if AAkA had registered those animals as full-blood Akaushi without confirming parentage by DNA tests, then such an act could constitute a new and different breach occurring after June 9, 2016.

Nothing about our conclusion conflicts with the jury findings. The jury did not find that AAkA breached the contract “on” August 22, 2017; rather, it found that the date “by which” AAkA breached the contract was August 22, 2017. If there is evidence that AAkA breached the Membership Agreement before August 22, 2017, then such evidence can support the jury's finding. We conclude that the evidence supporting the First Breach Theory, viewed in the light most favorable to Twinwood, supports a finding that AAkA breached the Membership Agreement in 2011 when it issued the original registration certificates for Group C Cattle.

2. Second Breach Theory

Twinwood's Second Breach Theory is that AAkA failed to provide pedigree information in the form of DNA parent verification summary lab reports for ancestors of Group B Cattle. After Twinwood signed the 2016 Settlement Agreement, it began efforts to register its Akaushi cattle with AWA. To that end, Twinwood requested from AAkA pedigree information on all of its cattle in July 2016. Twinwood wanted AAkA to provide, or authorize GeneSeek to provide, copies of DNA parent verification summary lab reports because AWA needed that information to verify the lab results before registering Twinwood's cattle as full-blood Akaushi. AAkA provided the requested pedigree information as to some but not all of Twinwood's cattle, and AWA issued registration certificates for only fifteen of Twinwood's 210 Head. AWA informed Twinwood in November 2016 that it could not register the remainder at that time due to “gaps” in the ancestral pedigree of those animals. AWA said that some of the dams and granddams of Twinwood's animals were not registered with AWA and therefore could not be verified as full-blood Akaushi without the lab reports. AWA sent this request to AAkA, which responded in December 2016 that it would provide the information on the “cows that Twinwood owns.” In response to follow-up requests, AAkA told Twinwood in January 2017 that it refused to provide “genetic information concerning cattle not owned by Twinwood ․ as a matter of policy.” The information AWA said it needed pertained to the dams and granddams of Twinwood's 210 Head that were owned by HeartBrand and were not registered with AWA. AWA would not register the Group B Cattle as full-blood Akaushi without lab reports confirming Akaushi parent verification of their ancestral dams and granddams. Twinwood made another request for this information in February 2017. There is no evidence that AAkA ever provided the requested pedigree information or authorized GeneSeek to provide it.

We conclude that this theory falls within the 2016 Settlement Agreement's temporal exception to the release. We discuss in detail below the evidence offered in support of the Second Breach Theory, but again assuming for purposes of this issue that the claimed duty exists, the acts, omissions, or events supporting the Second Breach Theory occurred after June 9, 2016. Thus, Twinwood's Second Breach Theory is not released by the 2016 Settlement Agreement as a matter of law.

3. Fraud

We next address to what extent, if any, Twinwood released its fraud claim by the 2016 Settlement Agreement.

We first identify the material facts Twinwood contends that AAkA either misrepresented or failed to disclose, and when those misrepresentations or omissions occurred. The court instructed the jury that a misrepresentation means either a false statement of fact or a promise of future performance made with an intent, at the time the promise was made, not to perform as promised. E.g., Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143, 157-58 (Tex. 2015); Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434-35 (Tex. 1986).

Twinwood's fraud claim is based on AAkA's representations that all of the cattle contained within its registry were 100% DNA parent-verified when it knew this to be untrue. Although AAkA's misstatements occurred multiple times over multiple years (beginning in 2011 and continuing to 2017) and took various forms, all of the misstatements are iterations of this same essential fact. Among the misrepresentations were the registration certificates from 2011 showing Twinwood's cattle as 100% Akaushi when AAkA knew that some cattle had not been, and could not be, parent-verified by DNA tests. Also, AAkA made various marketing claims that all cattle in its database were 100% DNA parent-verified “without exception” when it knew that not all cattle met that standard. Some of the misrepresentations were made before June 9, 2016, and some occurred afterward.

Twinwood presented evidence that, in reliance on AAkA's misrepresentations that all of the 210 Head had been DNA parent-verified, it invested money into its cattle genetics program beginning after June 9, 2016 and continuing until 2019. The jury found that Twinwood incurred $1,300,000 in out-of-pocket operational losses in reliance on AAkA's fraud during this time period.

Twinwood released AAkA from “all claims.” Based on the definition of “all claims,” Twinwood's fraud claim against AAkA is mentioned in the 2016 Settlement Agreement and released if, at a minimum, it “arise[s] out of or relate[s] to the Full-Blood Contract, the Relationship, and/or the Dispute.” AAkA's misrepresentations constitute a “set of facts, ․ occurrences, events, [and] actions” that relate to or arise out of performance of the Full-Blood Contract because the relationship between AAkA and Twinwood would not have existed but for the Full-Blood Contract, and AAkA would not have been in a position where its misstatements mattered to Twinwood if Twinwood had not been required to join AAkA in performance of the Full-Blood Contract. The misstatements are “connected in some way”¹² or have a relationship to performance of the Full-Blood Contract. Thus, the wrongful conduct at issue is included within the definition of “relationship.” Further, the fraud claim is included within the definition of “all claims” because it arises out of or relates to the Full-Blood Contract and the relationship. We therefore conclude that Twinwood's fraud claim is included within the scope of the 2016 Settlement Agreement's release provision. Twinwood released that claim as a matter of law unless it also comes within the temporal exception contained in the definition of “all claims.”

“All claims” does not include disputes, claims, controversies, and causes of action “arising out of or resulting from acts, omissions, or events occurring after” June 9, 2016.¹³ As just discussed, the fraud claim's inclusion within the scope of the release provision depends on whether it arises out of or relates to defined terms. In contrast, whether the fraud claim is removed from the scope of the release by the temporal exception depends on when the wrongful acts occurred.

AAkA's false statements occurred over an extended period, both before and after June 9, 2016. Like the release provision itself, the temporal exception uses the broad phrase “arising out of.” Accordingly, a claim need only be causally connected in some way or have a relationship to post-June 9, 2016 acts or events to be excepted from the release. Twinwood's fraud claim, in part, arises out of or results from some false statements by AAkA occurring after June 9, 2016. To that extent, the fraud claim comes within the temporal exception and is not released. The 2016 Settlement Agreement bars proof of false statements occurring before June 9, 2016 in support of the fraud claim, but it does not bar proof of false statements occurring after that date. See Keck, Mahin & Cate, 20 S.W.3d at 698 (release may bar proof of some elements of a claim but not bar proof of other elements). Thus, Twinwood's fraud claim is released in part by the 2016 Settlement Agreement as a matter of law, but it is not released to the extent it arises out of or results from acts, omissions, or events occurring after June 9, 2016.

4. Whether the 2016 Settlement Agreement applies to AAkA and Beeman

Twinwood asserts that the release language in the 2016 Settlement Agreement does not apply to its claims against AAkA and Beeman because the agreement was between Twinwood and HeartBrand and does not mention AAkA or Beeman.

A release discharges only those persons or entities that it names or specifically identifies. McMillen v. Klingensmith, 467 S.W.2d 193, 196 (Tex. 1971). Parties can therefore claim protection under a release only if the release refers to them by name or with such descriptive particularity that their identity is not in doubt. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 420 (Tex. 1984), superseded by statute on other grounds, Sky View at Las Palmas, LLC v. Mendez, 555 S.W.3d 101, 107 n.7 (Tex. 2018).

In the 2016 Settlement Agreement, Twinwood released HeartBrand and “all of its affiliated companies, administrators, agents, representatives, officers, directors, employees, owners, parent entities, partners, subsidiaries, assigns, predecessors-in-business or interest, and other successor and related companies from All Claims.” (Emphasis added). It is undisputed that AAkA is a HeartBrand subsidiary and that Beeman was a HeartBrand director at the relevant time.

The 2016 Settlement Agreement's inclusion of HeartBrand subsidiaries in the paragraph specifying the released parties is sufficient to mention AAkA. See Stafford v. Allstate Life Ins. Co., 175 S.W.3d 537, 543 (Tex. App.—Texarkana 2005, no pet.) (holding that release applicable to any “subsidiaries, affiliates, partners, predecessors and successors in interest and assigns” sufficiently identified subsidiary so that subsidiary was released); see also Quiroz v. Jumpstreet8, Inc., No. 05-17-00948-CV, 2018 WL 3342695, at *3 (Tex. App.—Dallas July 9, 2018, pet. denied) (mem. op.) (holding that a release was enforceable by parent company of the named party because the release applied to party's “parent, subsidiaries, affiliates, other related entities, ․”); Atlantic Lloyds Ins. Co. v. Butler, 137 S.W.3d 199, 219 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (holding that release including “affiliated companies [and] parent companies” sufficiently identified the parent so that the parent was released); Frazer v. Tex. Farm Bureau Mut. Ins. Co., 4 S.W.3d 819, 824 (Tex. App.—Houston [1st Dist.] 1999, no pet.) (holding documents that released Texas Farm Bureau Mutual Insurance Company “and its affiliated companies” sufficiently identified Texas Farm Bureau Underwriters such that its identity was not in doubt).¹⁴ Thus, there can be no doubt that the release language applies to AAkA as a HeartBrand subsidiary.

Likewise, there is no reasonable doubt that the release language applies to Beeman as a director. E.g., Duncan, 665 S.W.2d at 420; cf. Kalyanaram v. Burck, 225 S.W.3d 291, 300 (Tex. App.—El Paso 2006, no pet.) (unnamed “employees” included in release was sufficiently descriptive to apply to particular employees); Vera v. N. Star Dodge Sales, Inc., 989 S.W.2d 13, 18 (Tex. App.—San Antonio 1998, no pet.) (op. on reh'g) (holding that release encompassed not only the plaintiff's claims against the car dealership, but also its employees who were associated with the sale of the car); Winkler v. Kirkwood Atrium Office Park, 816 S.W.2d 111, 114 (Tex. App.—Houston [14th Dist.] 1991, writ denied) (op. on reh'g).

Citing Duncan, Twinwood contends that because appellants cannot show that a stranger would have no doubt that AAkA or Beeman was described by the release, they cannot claim protection under its terms. See Duncan, 665 S.W.2d at 419-20. Unlike in Duncan, however, the release at issue does not merely refer to a “general class” of actors. See id. (release naming “any other corporations or persons whomsoever” was insufficiently specific to discharge every potential member of that general class). As the above authority confirms, the release language identifies related entities and persons and is sufficient to operate to their benefit even if they are not specifically named.

We hold that Twinwood's release of HeartBrand, its “subsidiaries,” and its “directors” in the 2016 Settlement Agreement sufficiently identifies AAkA (a HeartBrand subsidiary) and Beeman (a HeartBrand director) as released parties. Accordingly, our holdings above regarding the extent to which the contract and fraud claims are released apply equally to HeartBrand, AAkA, and Beeman.

D. The 2009 AAkA Membership Application

We have concluded that Twinwood released some claims but not others by the 2016 Settlement Agreement. Next, we consider whether the claims not released by that agreement were released under a second document, the 2009 Membership Application.

Twinwood agreed in the 2009 Membership Application to release any claims in connection with AAkA, including any claims based on AAkA's rules and regulations:

[Twinwood] hereby make[s] application to the American Akaushi Association for membership to be issued in the name given above. [Twinwood] agree[s] to be bound by and abide by the Rules of the Association and Amendments or Modifications thereto which may, from time to time, be adopted. By signing this application for membership, [Twinwood] irrevocably waives any claim against and grants an absolute release to the American Akaushi Association, any member, employee or agent of the Association, for any act or omission in connection with the Association, including but not limited to, any enforcement of the rules and regulations presently in effect or hereafter adopted by the Association. (Emphasis added).

In part of AAkA's and HeartBrand's second issue, and in part of Beeman's third issue, appellants argue that the above prospective release language—which releases claims based on rules and regulations presently enacted or “hereafter adopted” by AAkA—bars Twinwood's contract and fraud claims, to the extent they are not released by the 2016 Settlement Agreement. Appellants jointly contend that the trial court erred by granting Twinwood's motion for directed verdict on the release defense because it wrongly concluded that the 2009 Membership Application was an unconscionable adhesion contract.

Although appellants present this issue as a specific attack on the trial court's ruling on a motion for directed verdict, that was not the only context in which appellants sought judgment based on the 2009 Membership Application release. In their post-trial motion for judgment notwithstanding the verdict, appellants argued that they were entitled to judgment as a matter of law based on the 2009 Membership Application's release language because prospective releases are enforceable and because the 2009 Membership Application is not an adhesion contract.

Twinwood filed a response in which it urged that the release clause was unenforceable for two reasons: (1) “no liability” or “opt out” provisions such as those in the 2009 Membership Application are unenforceable because they result in an illusory agreement; and (2) prospective releases of intentional torts such as fraud are unenforceable on public policy grounds. In support of its first point, Twinwood cited Arabella Petroleum Co. LLC v. J.H. Baldwin, Jr., No. 04-11-00370-CV, 2012 WL 2450803, at *5 (Tex. App.—San Antonio June 27, 2012, pet. denied) (mem. op.); Spellman v. Lyons Petroleum, Inc., 709 S.W.2d 295, 297 (Tex. App.—Houston [14th Dist.] 1986, writ ref'd n.r.e.); and Sterling Computer Systems of Texas, Inc. v. Texas Pipe Bending Co., 507 S.W.2d 282, 283 (Tex. App.—Houston [14th Dist.] 1974, writ ref'd). These cases generally support the proposition that an “opt out” provision purporting to give one party the unilateral right to avoid its contractual obligations renders the contract illusory and invalid for want of mutuality. E.g., Sterling Computer, 507 S.W.2d at 282; see In re Palm Harbor Homes, Inc., 129 S.W.3d 636, 644 (Tex. App.—Houston [1st Dist.] 2003, orig. proceeding); see also In re 24R, Inc., 324 S.W.3d 564, 567 (Tex. 2010) (“A promise is illusory if it does not bind the promisor, such as when the promisor retains the option to discontinue performance.”).

The trial court signed an order denying appellants’ motion for judgment notwithstanding the verdict, without stating its reasons. Generally, an appellant must attack all independent grounds that fully support a complained-of ruling or judgment. Akhtar v. Leawood HOA, Inc., 525 S.W.3d 814, 819 (Tex. App.—Houston [14th Dist.] 2017, no pet.); Speck v. Dry Bones Coffee House, No. 01-09-00605-CV, 2009 WL 4358039, at *3 (Tex. App.—Houston [1st Dist.] Dec. 3, 2009, no pet.) (mem. op.). If the appellant does not do so, we must affirm even if the trial court gives an incorrect reason for its ruling. See Guar. Cnty. Mut. Ins. Co. v. Reyna, 709 S.W.2d 647, 648 (Tex. 1986) (per curiam). “Any error in the challenged basis for the order is rendered harmless where there is an unchallenged, alternate basis for the appealed order.” Akhtar, 525 S.W.3d at 819.

Appellants complain on appeal that the trial court erroneously ruled that the 2009 Membership Application was an adhesion contract and for that reason erred in rejecting their release defense based on that document. But appellants have not addressed Twinwood's argument that the release language constitutes a “no liability” or “opt out” clause, rendering the 2009 Membership Application illusory. Because appellants do not address this argument, which might have supported the trial court's post-trial ruling, we conclude that any error in the challenged ruling is harmless. See id. Therefore, appellants are not entitled to judgment based on the release clause in the 2009 Membership Application.

E. Conclusion Regarding Release Defense

We hold that the release language in the 2016 Settlement Agreement applies to Twinwood, HeartBrand, AAkA, and Beeman. By the 2016 Settlement Agreement, Twinwood released its First Breach Theory but did not release its Second Breach Theory. We reach both conclusions as a matter of law. Because Twinwood's First Breach Theory was released, the trial court erred in denying appellants’ motion for directed verdict in part and in allowing the jury to consider that invalid theory as part of question one. Twinwood's Second Breach Theory, in contrast, is a valid theory for recovery for breach of contract, and the trial court did not err in denying appellants’ motions seeking judgment as a matter of law on that theory. We also hold that Twinwood's fraud claim is not released to the extent it arises out of or results from false statements made after June 9, 2016. To the extent the fraud claim is based on false statements made before June 9, 2016, it is an invalid theory because of the release. We further hold that appellants are not entitled to judgment regarding any part of Twinwood's remaining breach of contract or fraud claims based on the 2009 Membership Application. We reach all of our conclusions on release as a matter of law, and there are no fact questions regarding appellants’ release defense.¹⁵

We sustain in part and overrule in part AAkA's and HeartBrand's first issue and Beeman's third issue, and we overrule AAkA's and HeartBrand's second issue. Our resolution of these issues makes it unnecessary to reach AAkA's and HeartBrand's third through fifth issues, and Beeman's issue 7(a). See Tex. R. App. P. 47.1.

Statute of Limitations

As an alternative to their release defense, appellants contend that Twinwood's contract and fraud claims are barred by the statute of limitations.¹⁶ The applicable limitations period for contract and fraud claims is four years. Tex. Civ. Prac. & Rem. Code §§ 16.004, 16.051. Twinwood was required to file its lawsuit within four years of the date its contract and fraud claims accrued. See United Healthcare Servs., Inc., 570 S.W.3d 323, 335, 337 (Tex.App.-Hous. (1st Dist.) 2018).

Appellants argue: (1) Twinwood's claims accrued more than four years before Twinwood filed this suit on April 23, 2018; (2) no tolling doctrine applies to either claim; (3) the jury's tolling findings are unsupported by evidence; and (4) the trial court committed charge error regarding contract limitations.

A breach of contract claim accrues when the contract is breached—i.e., when a party fails or refuses to do something that it has promised to do. Archer v. Tregellas, 566 S.W.3d 281, 288 (Tex. 2018); Cosgrove v. Cade, 468 S.W.3d 32, 39 (Tex. 2015); Garden Ridge, L.P. v. Clear Lake Ctr., L.P., 504 S.W.3d 428, 446 (Tex. App.—Houston [14th Dist.] 2016, pet. denied); Tamimi Global Co., Ltd. v. Kellogg Brown & Root, L.L.C., 483 S.W.3d 678, 685 (Tex. App.—Houston [14th Dist.] 2015, pet. denied). “Under this rule, a cause of action for breach of contract accrues at the moment the contract is breached.” Archer, 566 S.W.3d at 288.

Twinwood's unreleased contract theory, the Second Breach Theory, is based solely on acts and events occurring less than four years before Twinwood filed suit. The Second Breach Theory would have accrued at the earliest in December 2016, when AAkA refused to provide parent verification information on ancestral cattle Twinwood did not own “as a matter of policy.” Twinwood filed this lawsuit in April 2018, within the four-year limitations period applicable to contract claims. Thus, Twinwood's Second Breach Theory was timely and is not barred by limitations.

Appellants concede that Twinwood's fraud claim is not barred by limitations to the extent it is based on any misrepresentations occurring after April 23, 2014. As we have determined, Twinwood's fraud claim is valid only with respect to misrepresentations occurring after June 9, 2016, the date of the release in the 2016 Settlement Agreement. Therefore, all of Twinwood's remaining unreleased claims are not barred by limitations as a matter of law. We overrule HeartBrand's and AAkA's seventh issue and Beeman's first issue.

Contract — Second Breach Theory

We next consider whether any of appellants’ additional arguments for rendition of judgment have merit. Appellants present several reasons why Twinwood cannot recover on its breach of contract claim as a matter of law. We limit our analysis of these points to the liability elements applicable to the Second Breach Theory. We also address appellants’ challenges to damages below.

A. Jury Charge Arguments

Jury question one stated:

Did AAA fail to comply with the Membership Agreement with respect to AAA's duty, if any, to procure and provide DNA parent verified pedigrees on Twinwood animals registered with the AAA?[17]

In deciding whether the parties reached an agreement, you may consider what they said and did in light of the surrounding circumstances including any earlier course of dealing. You may not consider the parties’ unexpressed thoughts or intentions.

You may also consider a trade custom and usage, if any, if you find that such trade custom or usage existed. However, a trade custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express language of the contract. A trade custom or usage exists if it is a practice so generally or universally well-known and used in the industry that the parties to a contract are charged with knowledge of its existence to such an extent as to raise the presumption that the parties contracted with reference to it.

Answer “Yes” or “No.”

Answer: Yes

The court instructed the jury that “Membership Agreement” means “the agreement between the parties defined by the membership application, the membership rules, and the services Twinwood reasonably could expect to receive as a result of its membership including all renewals.”

AAkA and HeartBrand assert two charge complaints relevant to question one. First, they contend the trial court erred by combining contested matters of contract formation and breach into a single question.¹⁸ They rely on the Pattern Jury Charges, in which the committee recommends separating those inquiries when the parties dispute whether they agreed to a specific term. See Comm. on Pattern Jury Charges, State Bar of Tex., Tex. Pattern Jury Charges: Business, PJC 101.1 (2016). AAkA contends that it did not agree to the duties that Twinwood contends underlie the Second Breach Theory.

The trial court has considerable discretion to determine proper jury instructions. See Thota v. Young, 366 S.W.3d 678, 687 (Tex. 2012). Although the committee recommends that a distinct question on contract formation be given separately before a breach question in some cases, the committee also notes that a question combining issues of existence and breach of contract may be appropriate in certain instances. See id. cmt. AAkA has not demonstrated that submitting the contract formation and breach issues in a single question was an abuse of discretion in this case.

Second, AAkA challenges in part the definition of “Membership Agreement,” contending that the jury was told to consider Twinwood's unilateral expectations as part of an unwritten agreement regardless whether AAkA agreed with those expectations. This argument attacks the charge definition's final clause: “ ‘Membership Agreement’ means the agreement between the parties defined by the membership application, the membership rules, and the services Twinwood reasonably could expect to receive as a result of its membership including all renewals.” (Emphasis added).

A contract requires a meeting of the minds based on what the parties said and did; it cannot be grounded on subjective or unexpressed expectations or intentions. See Parker Drilling Co. v. Romfor Supply Co., 316 S.W.3d 68, 75 (Tex. App.—Houston [14th Dist.] 2010, pet. denied); see also McAllen Hosps., L.P. v. Lopez, 576 S.W.3d 389, 393 (Tex. 2019). Appellants’ argument overlooks the court's additional instructions accompanying question one, including: “[i]n deciding whether the parties reached an agreement, you may consider what they said and did, in light of the surrounding circumstances including any earlier course of dealing. You may not consider the parties’ unexpressed thoughts or intentions.” AAkA does not contend that this instruction constitutes an incorrect statement of law, nor does AAkA challenge the court's instruction that the jury may consider trade custom. We construe a jury charge as a whole and presume the jury followed properly worded instructions. See Mem'l Hermann Health Sys. v. Gomez, 649 S.W.3d 415, 423-24 (Tex. 2022); Columbia Rio Grande Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 862 (Tex. 2009).

The challenged phrase—“the services Twinwood reasonably could expect to receive as a result of its membership including all renewals”—must be construed in light of the court's direction for the jury not to consider unexpressed thoughts or intentions. Read in this way, the court did not permit the jury to find that the Membership Agreement included a term to which AAkA did not consent because the “services Twinwood reasonably could expect to receive as a result of its membership” must be based only on “what the parties said and did in light of surrounding circumstances,” including trade custom (if the jury found any existed), but may not be based on “the parties’ unexpressed thoughts or intentions.”

Appellants’ reliance on McAllen is misplaced. There, nurses suing a hospital for breach of contract contended that the parties’ course of dealing showed the hospital intended to pay them a fixed salary, rather than an hourly rate. See McAllen, 576 S.W.3d at 391-92. The unchallenged jury instruction told the jury that it could consider surrounding circumstances and the parties’ course of dealing in determining whether the hospital breached its agreement with the nurses, but that the jury could not consider “the parties’ unexpressed thoughts or intentions.” Id. at 391. The jury found that the hospital breached its agreement to pay the nurses a fixed salary and awarded the nurses damages accordingly. See id. But the supreme court reversed and rendered a take-nothing judgment in the hospital's favor because the course of dealing did not show that “the employer and its employees had a meeting of the minds on a fixed amount of pay.” Id. at 391.

Here, the Membership Agreement was not contained in a single document; there was no merger or integration provision; and there was substantial evidence of trade custom applicable to breed associations like AAkA as well as the course of dealing between the parties, which showed a meeting of the minds. Gonzales testified that Twinwood relied on AAkA rules, magazines, publications, and how AAkA conducted its business in deciding each year whether to renew its membership with AAkA. Further, Bubba Bain testified that not all the services AAkA agreed to provide its members were discussed in its rules and that some of these services “could be” advertised on its website and publications. The jury was entitled to consider this evidence in light of the unchallenged instruction. Thus, the facts of this case are distinguishable from the facts of McAllen.

In light of this evidence, we conclude that appellants have not demonstrated that the challenged part of the Membership Agreement definition was an abuse of discretion. We overrule AAkA's and HeartBrand's jury charge issues.

Having overruled the jury charge complaints relevant to the contract claim, we consider AAkA's and HeartBrand's legal sufficiency challenges based on the charge as given. See Duradril, L.L.C. v. Dynomax Drilling Tools, Inc., 516 S.W.3d 147, 160-62 (Tex. App.—Houston [14th Dist.] 2017, no pet.).

B. Duty and Breach

AAkA and HeartBrand also argue that Twinwood cannot recover as a matter of law under the Second Breach Theory because there is no evidence of a contract formed on the terms alleged by Twinwood and, alternatively, there is no evidence of breach.¹⁹

When reviewing the legal sufficiency of the evidence, we consider the evidence in the light most favorable to the challenged finding and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 823 (Tex. 2005). We credit favorable evidence if a reasonable factfinder could and disregard contrary evidence unless a reasonable factfinder could not. See id. at 827. Our task is to determine whether the evidence at trial would enable reasonable and fair-minded people to find the facts at issue. See id. As long as the evidence at trial “would enable reasonable and fair-minded people to differ in their conclusions,” we will not substitute our judgment for that of the factfinder. See id. The factfinder is the only judge of witness credibility and the weight to give to testimony. See id.

To establish a claim for breach of contract, a plaintiff must prove the following elements: (1) a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages sustained by the plaintiff as a result of the breach. Smith v. Smith, 541 S.W.3d 251, 259 (Tex. App.—Houston [14th Dist.] 2017, no pet.). As the party alleging breach of contract, Twinwood had the burden of proving all elements. TRO-X, L.P. v. Anadarko Petroleum Corp., 548 S.W.3d 458, 464-65 (Tex. 2018).

By answering question one in Twinwood's favor, the jury found that the Membership Agreement included a duty to “procure and provide DNA parent verified pedigrees on Twinwood animals registered with” AAkA. Under its Second Breach Theory, Twinwood contends that AAkA failed to comply with its duty to provide pedigree information for Group B Cattle because it refused to authorize GeneSeek to release summary lab reports applicable to those animals’ ancestors that Twinwood did not own. To be supportable, the jury's finding must be based on the Membership Agreement, which was defined in the charge as the membership application, the membership rules, and the services Twinwood reasonably could expect to receive as a result of its membership.

As defined by the charge, the Membership Agreement was partly expressed in writing. The jury, however, could have considered some terms implied based on what the parties said and did in light of surrounding circumstances including any earlier course of dealing. The jury also could consider any trade custom it found to exist, so long as that custom did not vary, control, impair, restrict, or enlarge the express written terms. While a contract can have both written and implied terms, the implied terms must not contradict the express terms of the written contract, and they must arise from the parties’ mutual assent as inferred from their words, conduct, and the circumstances. See Mann, Frankfort, Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 850 (Tex. 2009) (mutual assent is present in a contract regardless of whether it is based on express or implied promises).

We analyze the record for evidence supporting the finding that AAkA had the contractual duty described. Bain sent a letter to all Akaushi breeders, including Twinwood, in November 2009, which formally announced AAkA's formation. In the letter, AAkA stated the purpose of the association was to “promote the Akaushi breed as well as maintain and verify the purity of the breed, the performance of the offspring and the quality of the final retail product.” AAkA informed Twinwood that, to assist the members in tracking the performance of their cattle, AAkA was “compiling all cattle records and integrating them with the GPS (Genetic Performance Solutions, LLC) data system.” This system, once completed, would provide each association member “access to the system and [the ability] to retrieve information on their cattle as well as compare their individual information with that of the entire breed.” In a September 2011 email to Twinwood, Bain further explained that part of AAkA's activities included DNA processing, parent verification, and uploading pedigree information to the database of seventeen generations of Akaushi cattle. Access to this database by members, Bain testified, was one of the rights and privileges of association membership. Bain also testified that AAkA performed DNA processing on registered animals and that the purpose of DNA parent verification was to protect lineages.

According to Dr. Calles, the lab reports that Twinwood requested contained the same information that was available on the GPS data system, except that the DNA report would appear on lab letterhead. As Dr. Calles testified, AAkA provided access to that information to another breeder, Legendary, whose cattle have been registered with AWA.

Tracy Holbert testified as an expert witness for Twinwood. Holbert is a 40-year cattleman and co-owns a registered cattle seed-stock company, as well as a livestock consulting company. He testified regarding his extensive experience with breed associations. He compared AAkA's structure and functions with twenty to twenty-five other breed associations. Holbert explained several aspects of industry custom applicable to breed associations. For example, he said the first task of breed associations is to record ancestral pedigrees because buyers care if the seller's animal has accurate ancestral pedigree records. One of AAkA's goals is to use DNA testing to verify the applicant's genetic population back to the Foundation Herd. Breeders can get parent-verified registration certificates only from breed associations, which are supposed to act in the best interests of their members and promote the breed. Holbert explained that breed associations other than AAkA will provide summary lab reports documenting ancestral pedigrees on request.

Another expert witness, Robert Weaber, testified that breed associations routinely exchange information. He explained that a motivation for breeders to join a breed association is the collective work to build out and understand the genetics of the entire breed population. He described summary lab reports as documents that state a particular trio of animals was tested for parent verification and the result. He explained that breed associations are more concerned about protecting what he called “high density genotype” information; but they are generally not worried about sharing summary lab reports—those are freely shared because they protect breed pedigrees. Weaber knew of no breed association other than AAkA that refused to share the type of summary lab report that Twinwood requested.

Reasonable and fair-minded people could infer from this evidence that a trade custom exists in the breed association industry of providing the type of pedigree information that Twinwood requested because, as the charge defined “trade custom,” it is a practice so generally or universally well-known and used in the industry that AAkA and Twinwood are charged with knowledge of its existence to such an extent as to raise the presumption that they contracted with reference to it. See City of Keller, 168 S.W.3d at 827. The industry custom described in the testimony does not contradict any written terms in the rules or membership application. The court did not assume the existence of a custom, and the charge did not require the jury to consider one. Therefore, we conclude that the existence of the duty underlying the Second Breach Theory is supported by legally sufficient evidence.

We also conclude that a reasonable factfinder could have found that AAkA failed to comply with its duty under the Second Breach Theory. On July 14, 2016, Twinwood sent an email to AAkA requesting a copy of the lab reports showing the results of DNA tests for each animal in Group B Cattle. AWA would not register Twinwood's cattle as full-blood Akaushi without reviewing the lab report results. Dr. Calles had no reason to think the requested information would not be forthcoming because he believed, based on his personal involvement with developing the genetics and progeny of the Foundation Herd, that the DNA data existed. There was no indication that AAkA did not have the requested pedigree information.

By November 2016, AWA reported to Twinwood and AAkA that it had begun registering some of Twinwood's animals but had determined that it lacked DNA parent verification information on some of the dams and granddams of Group B Cattle. AWA would not register the remainder of Group B Cattle without parent verification on the ancestral animals. AAkA responded on December 1, 2016, that it “would be glad to provide this information on the cows that Twinwood owns.” Twinwood sent a follow-up request on December 22, 2016. On January 18, 2017, AAkA wrote Twinwood that it would not provide the information for animals that Twinwood did not own “as a matter of policy.” The ancestor animals for which the information was lacking were owned by HeartBrand. During trial, Dr. Calles testified that AAkA refused to authorize the lab, GeneSeek, to release pedigree information for the ancestors of the 65 animals in Group B Cattle.

Twinwood's witnesses testified that typical trade association guidelines are to treat all members equally. But other witnesses testified that AAkA gave preferential treatment to Legendary relative to Twinwood and that Jordan Beeman, Ronald Beeman's son, is president and a board member of both Legendary and HeartBrand. For example, AAkA gave Legendary information that allowed it to record calves with AWA or record genetic material/progeny with AWA of cattle not owned by Legendary. Similarly, AAkA authorized GeneSeek to give summary lab reports to AWA to register animals Legendary did not own. Twinwood wanted the same type of lab reports to better record their animals’ pedigrees with AWA. According to Twinwood's witnesses, there is no difference between the information Twinwood requested and the information AAkA gave to Legendary. AAkA provided the pedigree information to Legendary but refused it to Twinwood.

Reasonable and fair-minded people could infer from this evidence that AAkA failed to comply with the Membership Agreement with respect to its duty to procure and provide DNA parent-verified pedigree information to Twinwood regarding Group B Cattle. Twinwood's Second Breach Theory is a legally viable basis for recovery in contract and is supported by legally sufficient evidence. We overrule AAkA's and HeartBrand's eighth issue.

Fraud

Next, appellants assert numerous legal arguments they say entitle them to rendition of judgment on Twinwood's fraud claim. As with the contract claim, we limit our analysis in this section to the liability elements and only to the extent the fraud claim is not released. We address appellants’ damages arguments separately below.

To prevail on its fraud claim, Twinwood had to show: (1) AAkA made a false material representation; (2) AAkA knew the representation was false or made it recklessly as a positive assertion without any knowledge of its truth; (3) AAkA intended to induce Twinwood to act upon the representation; and (4) Twinwood justifiably relied upon the representation and suffered injury as a result.²⁰ See, e.g., JPMorgan Chase Bank, N.A. v. Orca Assets G.P., L.L.C., 546 S.W.3d 648, 653 (Tex. 2018). Again, Twinwood's fraud claim is based on AAkA's representations that all of the cattle contained within its registry were DNA parent-verified when it knew this fact was false (or that AAkA failed to disclose that all cattle in its registry were not DNA parent-verified). This was a misrepresentation concerning the 119 animals in Group C Cattle because they were not DNA tested.

Appellants argue that the jury's fraud finding lacks legally sufficient evidentiary support because: (1) there is no evidence of justifiable reliance by Twinwood; (2) the challenged statements are not actionable as fraud; and (3) there is no evidence that any material misstatements by AAkA proximately caused Twinwood's out-of-pocket damages.²¹ We address each contention.

A. Whether evidence of reliance is legally sufficient

To establish reliance, “the plaintiff must show that it actually relied on the defendant's representation and, also, that such reliance was justifiable.” Orca Assets, 546 S.W.3d at 653. Justifiable reliance generally presents a question of fact, but this element can be negated as a matter of law when circumstances exist under which reliance cannot be justified. See id. (citing Nat'l Prop. Holdings, L.P. v. Westergren, 453 S.W.3d 419, 424 (Tex. 2015) (per curiam)). This is so because, in an arm's length transaction, the party alleging fraud must have exercised ordinary care to protect its own interests, and its failure to do so is not excused merely by confidence in the honesty or integrity of the other party. See id.; Westergren, 453 S.W.3d at 425; Comcast Corp. v. Hous. Baseball Partners LLC, 627 S.W.3d 398, 417-18 (Tex. App.—Houston [14th Dist.] 2021), aff'd sub nom., McLane Champions LLC v. Hous. Baseball Partners, LLC, 671 S.W.3d 907, 910 (Tex. 2023).

Appellants’ reliance arguments focus on two email exchanges, one in 2011 and another in 2013, and Twinwood's alleged sophistication as a cattle breeder. According to appellants, the 2011 and 2013 emails from AAkA to Twinwood (or its alleged agent) are conclusive evidence of “red flags” showing that Twinwood knew as a matter of law by those dates that AAkA did not test the DNA of every registered animal because the emails indicate that DNA samples did not exist for some dams of Twinwood's cattle. See Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010); see also Orca Assets, 546 S.W.3d at 655-58. For this reason, appellants assert, Twinwood could not have justifiably relied on the challenged misrepresentations after June 9, 2016.

1. 2011 Email

Twinwood hired a consultant, Dr. Greg Kaase, to assist with securing registration certificates for the 210 Head. In August 2011, Dr. Kaase emailed AAkA with questions about registration certificates for a handful of animals. In response, AAkA stated as to two animals: “No DNA profile, will research why.” As to three other animals, AAkA said: “Sire verified, no DNA on dam.”

Read in context, the email's language is subject to interpretation. This is especially so for two animals, because AAkA said it was “researching” why there was no “DNA profile.” This statement does not necessarily establish that no DNA ever existed for those two animals or that they were not DNA tested for parentage. Regarding the other three animals, AAkA said they were “sire verified” and there was “no DNA” on the dam. Even assuming that statement is subject to only one reasonable reading and conclusively proves that Dr. Kaase knew in 2011 that three animals had not been DNA parent-verified, that fact would not negate justifiable reliance as to the entire 119 animals in Group C Cattle.

More important, the August 2011 email pre-dated AAkA's issuance of the certificates, which did not occur until December 2011. Many of those initial certificates did not include the term “parent-verified,” while others did. Yet, all of the registration certificates expressly stated “100% Akaushi,” and none of them stated “sire verified.”²² Moreover, AAkA told Twinwood that it was still “working on” the DNA verification process, and several of the registration certificates were later updated to reflect that the animal was “parent-verified.”

Still further assuming that the 2011 email conclusively demonstrated Dr. Kaase's knowledge that five animals had not been, and could not be, DNA tested, we do not agree with appellants that Dr. Kaase's knowledge was conclusively proven to be imputed to Twinwood. There is evidence that Dr. Kaase was Twinwood's independent contractor, as opposed to an employee agent. Dr. Kaase was employed by Texas AgriLife Extension Service. The contract between Twinwood and AgriLife stated that AgriLife was an independent contractor and its employees were “not employees, officers or agents of Twinwood.” A contract providing that a person is an independent contractor “is determinative of the relationship absent evidence that the contract is a mere sham or subterfuge” designed to conceal the parties’ true legal status. Farlow v. Harris Methodist Fort Worth Hosp., 284 S.W.3d 903, 911 (Tex. App.—Fort Worth 2009, pet. denied) (citing Newspapers, Inc. v. Love, 380 S.W.2d 582, 588-90, 592 (Tex. 1964)); Weidner v. Sanchez, 14 S.W.3d 353, 373 (Tex. App.—Houston [14th Dist.] 2000, no pet.). Generally, an independent contractor's knowledge is not imputable to the principal. See Hawaii Props., Inc. v. Reyna, No. 13-94-00272-CV, 1997 WL 33760921, at *3 (Tex. App.—Corpus Christi-Edinburg Apr. 30, 1997, pet. denied) (mem. op., not designated for publication). To impute Dr. Kaase's knowledge to Twinwood despite the independent contractor relationship, appellants had to prove conclusively (or secure a jury finding) that Dr. Kaase had actual or apparent authority to act as Twinwood's agent. See Suarez v. Jordan, 35 S.W.3d 268, 272-73 (Tex. App.—Houston [14th Dist.] 2000, no pet.) (stating, absent actual or apparent authority, an agent cannot bind a principal); see also Schott Glas v. Adame, 178 S.W.3d 307, 315 (Tex. App.—Houston [14th Dist.] 2005, pet. denied); Walker Ins. Servs. v. Bottle Rock Power Corp., 108 S.W.3d 538, 549 (Tex. App.—Houston [14th Dist.] 2003, no pet.) (law does not presume agency relationship exists; party asserting agency relationship exists has the burden of proof). Here, there is no evidence or jury finding that Twinwood bestowed upon Dr. Kaase actual or apparent authority to bind Twinwood. See United Residential Props., L.P. v. Theis, 378 S.W.3d 552, 564-54 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (collecting cases finding agent had no actual or apparent authority to bind principal).

Thus, in light of the circumstances known to Twinwood, and reading the record in the light most favorable to Twinwood, the 2011 email to Dr. Kaase does not show as a matter of law that Twinwood was not justified in relying on AAkA's post-June 9, 2016 representations that all registered Akaushi cattle are DNA parent-verified. E.g., Orca Assets, 546 S.W.3d at 654 (noting that justifiable reliance is generally a fact question and can only be negated as a matter of law when circumstances exist under which reliance cannot be justified); cf. also Control & Applications LLC Hous. v. Abdallah, No. 01-20-00239-CV, 2022 WL 3650133, at *11-12 (Tex. App.—Houston [1st Dist.] Aug. 25, 2022, no pet.) (mem. op.).

2. 2013 Emails

Appellants also point to AAkA's March 2013 emails to Gonzales, which they contend informed him that DNA samples on three dams were lacking. One email stated that three dams were “not tested” and notes “no samples available.” A separate email included a slide presentation reflecting that certain DNA samples of three of the Foundation Herd dams were unavailable for testing. However, the presentation at issue concerned DNA samples available in 2013 for testing on genetic disorders (as opposed to DNA samples that had been or could be used for pedigree verification purposes), and the animals listed in that presentation actually had DNA profiles on file with AAkA. AAkA's March 2013 communications do not show conclusively that Twinwood could not justifiably rely on AAkA's post-June 9, 2016 representations that all cattle in its registry were 100% DNA parent-verified.

3. Twinwood's characteristics and abilities

Appellants also suggest that Twinwood's alleged sophistication as a cattle breeder renders it unlikely that Twinwood actually relied on AAkA's misstatements, particularly in light of the 2011 and 2013 email exchanges. “In measuring justifiability, we must inquire whether, given a fraud plaintiff's individual characteristics, abilities, and appreciation of facts and circumstances at or before the time of the alleged fraud, it is extremely unlikely that there is actual reliance on the plaintiff's part.” Grant Thornton, 314 S.W.3d at 923 (internal quotations and alterations omitted).

There was ample evidence, however, that Twinwood's purchase of the 210 Head was its first foray into elite cattle breeding. For example, Gonzales testified that his background and experience was in the turf grass arena, that he was not involved in the acquisition of the 210 Head from HeartBrand, that he was named head of cattle operations once the 210 Head were purchased despite his lack of experience, and that he learned about the Akaushi breed and its special characteristics through AAkA's personnel and Dr. Calles when Twinwood first purchased its herd from HeartBrand. Although Twinwood had around “thirty to fifty” head of other cattle before it purchased the 210 Head, there is no indication in the record that it had experience running a cattle breeding business. And Twinwood hired consultants to advise it regarding the Akaushi purchase and breeding.

Thus, the jury could have found that Twinwood relied on AAkA's misstatements. See Control & Applications, 2022 WL 3650133, at *11-12. The evidence pertaining to Twinwood's relative sophistication and unique characteristics, abilities, and appreciation of circumstances is not so strong as to support a conclusion as a matter of law that Twinwood did not justifiably rely on AAkA's post-June 9, 2016 misstatements.

For these reasons, we conclude that appellants failed to show as a matter of law that Twinwood could not have justifiably relied on AAkA's challenged representations.

B. Whether AAkA's statements are actionable as fraud

Appellants next assert that AAkA's representations were unactionable promises of future performance. A promise of future performance constitutes an actionable misrepresentation only if “the promise was made with no intention of performing at the time it was made.” E.g., Formosa Plastics Corp. USA v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998). In support of this argument, appellants characterize the challenged representations as promises by AAkA that Twinwood would receive fully DNA-verified pedigrees for its 210 Head once AAkA completed its DNA-registration process. Such a promise, according to appellants, was not a promise of future performance made with no intention of performing at the time it was made.

We reject this contention for two reasons. First, it misstates the content of the challenged misrepresentations. Second, when AAkA represented after June 9, 2016 that all of the cattle in its registry were DNA tested for Akaushi parentage, it knew that fact was not true. AAkA knew that it had not performed DNA tests to verify parentage of all the 210 Head, despite its representations to the contrary. Thus, AAkA's representations were material misstatements of fact. This is sufficient to support the fraud finding because, under the jury charge, the jury could have found fraud based on a material misrepresentation of fact regardless whether there is evidence of a promise of future performance that AAkA made with no intention of performing. Appellants’ argument provides no basis to render judgment in their favor on Twinwood's fraud claim.

C. Whether the causation evidence is legally sufficient

Texas law recognizes two measures of damages for common law fraud: out-of-pocket damages and benefit-of-the-bargain damages. Zorrilla v. AYPCO Constr. II, LLC, 469 S.W.3d 143, 153 (Tex. 2015); Siddiqui v. Fancy Bites, LLC, 504 S.W.3d 349, 374 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). The jury declined to award benefit-of-the-bargain damages but awarded $1,300,000 in out-of-pocket damages. Appellants contend that Twinwood failed to prove that its out-of-pocket damages resulted from any fraudulent statements by AAkA. See, e.g., Orca Assets, 546 S.W.3d at 653.

Out-of-pocket damages are measured by the difference between the value expended versus the value received, allowing the injured party to recover based on the actual injury suffered. Zorrilla, 469 S.W.3d at 153. Such damages are designed to put the injured party in as good an economic position as it would have occupied had it not been entangled in the transaction involving the fraud. Id. Texas allows reliance damages under this measure. See Solutioneers Consulting Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 386-87 (Tex. App.—Houston [14th Dist.] 2007, no pet.).

Appellants contend that Twinwood cannot recover reliance damages because it presented no “causal link” between the fraud and its out-of-pocket calculation. Appellants cite Restatement (Second) of Torts section 549, which provides in pertinent part:

(1) The recipient of a fraudulent misrepresentation is entitled to recover as damages against the maker the pecuniary loss to him of which the misrepresentation is a legal cause, including

a. the difference between the value of what he has received in the transaction and its purchase price or other value given for it; and

b. pecuniary loss suffered otherwise as a consequence of the recipient's reliance upon the misrepresentation.

Restatement (Second) of Torts § 549 (1977). Quoting the comments, appellants urge that reliance damages are limited to situations “[1] when a buyer in reliance upon the misrepresentation uses the subject matter of the sale in the belief that it is appropriate for a use for which it is harmfully inappropriate or [2] when he has incurred expenses in preparation for a use of the article for which it would have been appropriate if the representation had been true.” Id. cmt. a. According to appellants, “the subject matter of the relationship between AAkA and Twinwood is services, not the animals themselves.” Therefore, appellants continue, Twinwood cannot recover reliance damages for the “preparation for a use of the animals.”

Appellants’ argument overlooks subsection (1)(b), which expressly states that damages may include “pecuniary loss suffered otherwise as a consequence of the recipient's reliance upon the misrepresentation.” Id. § 549(1)(b). Here, there was ample evidence presented that Twinwood relied on AAkA's representations that all animals in its DNA registry were dual-parent-verified—and, consequently, that Twinwood's animals were or would be likewise so verified—in investing significant sums of money after June 9, 2016 in developing its seed-stock model of operations.

In sum, we conclude that appellants are not entitled to rendition of judgment on the unreleased fraud claim for the reasons they advance. We overrule AAkA's and HeartBrand's fifteenth issue and Beeman's second issue.

Alter Ego

In AAkA's and HeartBrand's nineteenth, twentieth, and twenty-first issues, they challenge the jury's alter ego finding that HeartBrand is liable for AAkA's conduct.

Jury question twenty-one asked:

Is HeartBrand responsible for the conduct of AAA?

HeartBrand is “responsible” for the conduct of AAA if after the termination of the Full Blood Contract —

AAA was organized and operated as a mere tool or business conduit of HeartBrand; there was such unity between AAA and HeartBrand that the separateness of AAA had ceased; and HeartBrand caused AAA to be used for the purpose of perpetrating and did perpetrate an actual fraud on Twinwood primarily for the direct personal benefit of HeartBrand.

In deciding whether there was such unity between AAA and HeartBrand that the separateness of AAA had ceased, you are to consider the total dealings of AAA and HeartBrand including—

1. the degree to which AAA's property had been kept separate from that of HeartBrand;

2. the amount of financial interest, ownership, and control HeartBrand maintained over AAA; and

3. whether AAA had been used for personal purposes of HeartBrand.

or

HeartBrand used AAA for the purpose of perpetrating and did perpetrate an actual fraud on Twinwood primarily for the direct personal benefit of HeartBrand after termination of the Full Blood Contract.

Answer “Yes” or “No.”

Answer: Yes

Based on this finding, the judgment holds HeartBrand jointly and severally liable for Twinwood's contract and fraud damages caused by AAkA. The jury could have answered the alter ego question affirmatively based on either of two independent instructions,²³ but both require evidence that HeartBrand used AAkA to perpetrate an actual fraud on Twinwood “primarily for the direct personal benefit” of HeartBrand. Among their arguments, appellants contend that, to the extent HeartBrand caused AAkA to perpetrate an actual fraud on Twinwood after the 2016 Settlement Agreement, there is no legally sufficient evidence that HeartBrand did so primarily for its direct personal benefit.²⁴ We limit our sufficiency discussion to the “direct personal benefit” argument because we find it dispositive. See Tex. R. App. P. 47.1.

We measure the sufficiency of the evidence to support the jury's finding in response to question twenty-one using the charge submitted to the jury because no party objected to the relevant language. See Green v. Dall. Cnty. Schs., 537 S.W.3d 501, 506 (Tex. 2017) (per curiam); GHP Nail Sys., LLC v. Benelux Cosmetics B.V., 651 S.W.3d 574, 579 (Tex. App.—Houston [14th Dist.] 2022, no pet.). The jury is the sole judge of the credibility of the witnesses and the weight to be given to their testimony. City of Keller, 168 S.W.3d at 819. Jurors are free to credit one witness's testimony and disbelieve another's, and appellate courts cannot overturn a jury verdict merely because we might reach a different result. Id. Therefore, we assume that the jury resolved all conflicts in favor of its verdict, crediting favorable evidence if a reasonable juror could and disregarding contrary evidence if a reasonable juror could have disbelieved it. Id.

Under Texas law, a corporation is presumed to be a separate entity from its officers and shareholders. Richard Nugent & CAO, Inc. v. Est. of Ellickson, 543 S.W.3d 243, 266 (Tex. App.—Houston [14th Dist.] 2018, no pet.). Consequently, corporate owners and shareholders generally are not responsible for corporate obligations. Exceptions exist, however, and certain legal doctrines will permit “piercing” the corporate veil to hold owners or shareholders liable for corporate debts. See Keyes v Weller, 692 S.W.3d 274, 278 (Tex. 2024).

One such doctrine is known as alter ego. Generally, alter ego will not apply to disregard the corporate form absent exceptional circumstances. Richard Nugent & CAO, Inc., 543 S.W.3d at 266. Disregarding the corporate structure involves two considerations: (1) the relationship between the entities; and (2) whether the entities’ use of limited liability was illegitimate. U.S. KingKing, LLC v. Precision Energy Svcs., Inc., 555 S.W.3d 200, 213-14 (Tex. App.—Houston [1st Dist.] 2018, no pet.). Thus, to pierce the corporate veil and impose liability specifically under an alter-ego theory, the plaintiff must demonstrate (1) that the entity on which it seeks to impose liability is the alter ego of the debtor, and (2) that the corporate fiction was used for an illegitimate purpose, that is, to perpetrate an actual fraud on the plaintiff primarily for the defendant's direct personal benefit. See id.; Tex. Bus. Orgs. Code § 21.223(b). With the exception of the “direct personal benefit” element, we presume without deciding that the evidence supports the other requirements.

In evaluating whether legally sufficient evidence shows that HeartBrand used AAkA to commit actual fraud “primarily” for HeartBrand's “direct personal benefit,” we note that the legislature has not defined those terms. Therefore, we turn to this court's instructive precedent. In Hong v. Havey, we stated that evidence that the individual defendant “controlled [the corporation] and made all of the corporation's business decisions” did not satisfy section 21.223 “absent additional evidence showing the individual defendant perpetrated an actual fraud primarily for the defendant's personal benefit.” 551 S.W.3d 875, 888 (Tex. App.—Houston [14th Dist.] 2018, no pet.). We observed that cases holding the evidence sufficient to support the “primarily for the direct personal benefit” element involved evidence that funds “derived from the corporation's allegedly fraudulent conduct were pocketed by or diverted to the individual defendant” or at least put to personal use by the defendant. See id. at 885.²⁵ We held the evidence insufficient in Hong because it did not show “that the unpaid real estate commission owed to United Texas Realtors was pocketed by or diverted to [the owner]” or “a direct personal benefit to [the owner] from the alleged fraud, nor [did] the evidence show that the alleged fraud was perpetrated primarily to benefit [the owner].” Hong, 551 S.W.3d at 885.

We also reversed an alter-ego finding in Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 388 (Tex. App.—Houston [14th Dist.] 2007, no pet.). There, we held the evidence of primary and direct personal benefit legally insufficient because the record did not show what the owner did with the fraudulently misappropriated funds, including, for example, whether he deposited them into his own personal account or used them to purchase personal items or to pay personal debts. Id.

We have also stated that the use of a company to perpetrate an actual fraud for the direct personal benefit of the owner must have some connection to the transaction at issue. See Hong, 551 S.W.3d at 887; Viajes Gerpa, S.A. v. Fazeli, 522 S.W.3d 524, 533-34 (Tex. App.—Houston [14th Dist.] 2016, pet. denied); Solutioneers Consulting, Ltd., 237 S.W.3d at 389-90. This requirement is reflected in the jury charge instructions in the present case because the evidence must show that HeartBrand caused AAkA to be used to perpetrate an actual fraud on Twinwood primarily for HeartBrand's direct personal benefit.

When, however, funds resulting from actual fraud are not used primarily for the defendant owner's direct personal benefit, courts have refused to hold the owner defendant personally liable under an alter ego theory. See Gulf View Private Inv., Inc. v. GC Sys., ––– S.W.3d ––––, ––––, 2024 WL 4498111, at *26 (Tex. App.—San Antonio Oct. 16, 2024, no pet. h.); Hong, 551 S.W.3d at 886 (discussing Morgan v. Fuller, No. 07-15-00314-CV, 2016 WL 2766106, at *2-3 (Tex. App.—Amarillo May 11, 2016, no pet.) (mem. op.) and Scott v. McKay, No. 12-02-00195-CV, 2003 WL 21998629, at *2 (Tex. App.—Tyler Aug. 20, 2003, no pet.) (mem. op.)). For example, when evidence shows that fraudulently procured funds were used to satisfy the corporation's financial obligations, this court has refused to find that the fraud was perpetrated primarily for the direct personal benefit of an individual. See Hong, 551 S.W.3d at 886; Solutioneers Consulting, Ltd., 237 S.W.3d at 389.

Here, the “conduct” for which the jury found HeartBrand responsible could have been AAkA's breach of contract or fraud because question twenty-one was not predicated on the jury's response to any prior question. Additionally, based on the jury instructions and our earlier holding that Twinwood partially released its contract and fraud claims, evidence supporting the “primarily for the direct personal benefit” element must have occurred after June 9, 2016. Thus, the question is whether HeartBrand caused AAkA to perpetrate an actual fraud on Twinwood for HeartBrand's direct personal benefit by: (1) its breach of contract under the Second Breach Theory—the refusal to authorize release of summary lab reports regarding ancestors of the Group B Cattle; or (2) AAkA's post-June 9, 2016 fraud in misrepresenting that all animals registered as full-blood Akaushi had been DNA parent-verified.

As the above authority illustrates, alter ego veil-piercing typically is upheld when the company owner or shareholder uses the company to perpetrate a fraud to divert company funds directly to the owner. These are not our facts. The present circumstances do not show that HeartBrand directly pocketed or diverted funds from AAkA. Cf. Hong, 551 S.W.3d at 885-86 (collecting cases). There is no evidence that any funds derived from AAkA's actual fraud were diverted to HeartBrand, or even that AAkA derived any funds at all from any actual fraud (except perhaps for Twinwood's AAkA membership fees). Unlike cases upholding owner liability under an alter-ego theory, we see no evidence that any money, including the membership fees, was diverted from AAkA to HeartBrand. And HeartBrand is not a guarantor of AAkA's obligations.

Twinwood argues that it and HeartBrand were competitors in the industry and that HeartBrand wrongfully used its subsidiary, AAkA, as a tool for its own competitive gain. According to Twinwood, AAkA, under HeartBrand's control, registered and certified HeartBrand's animals without necessarily verifying Akaushi parentage through DNA testing, in violation of AAkA's rules. This practice resulted in “impacted pedigrees that affected the ability of Twinwood to reach their program operations at the benefit of HeartBrand.” Further, when Twinwood wanted to register its cattle with AWA, AAkA (under HeartBrand's direction) refused to release the requested summary lab reports for the ancestors of some of Twinwood's cattle. HeartBrand then secured a “strong financial benefit” from being able to use cattle that did not conform to AAkA's rules both in selling its meat and genetics, to the detriment of Twinwood.

As we appreciate the essence of Twinwood's argument, it asserts that HeartBrand used AAkA to impede Twinwood's potential success as a cattle breeder and competitor in the seed-stock industry. According to Twinwood, AAkA gave HeartBrand special treatment, which enabled HeartBrand to gain financially because it could use improperly registered animals in its USDA-certified meat program, as well as by selling offspring. Twinwood observes that Beeman agreed that AAkA was “critical to HeartBrand's success” in its meat program, explaining that in the year before trial, HeartBrand sold ten million pounds of Akaushi beef, valued at “probably around $40 million.” Yet, when HeartBrand's competitor, Twinwood, wanted to register its cattle with AWA in an attempt to expand its presence in the seed-stock industry, AAkA refused to provide access to DNA parent verification on cattle not owned by Twinwood in its animals’ pedigrees in breach of the Membership Agreement.

We have found no case discussing the issue, but we assume without deciding that a parent company's use of a subsidiary to gain a market advantage over the parent's competitor may satisfy the “direct personal benefit” element of the alter ego doctrine under certain circumstances. To be sure, HeartBrand was positioned to potentially benefit by directing AAkA to withhold authorization to release the lab reports, thus impairing Twinwood's ability to sell Akaushi genetics. But there is no evidence linking any particular revenue of HeartBrand to AAkA's actual fraud against Twinwood. See Solutioneers Consulting, Ltd., 237 S.W.3d at 389. The money HeartBrand made in the relevant industry after 2016 may have been achieved based on any number of market forces. Without evidence quantifying to a reasonable degree of certainty an amount HeartBrand derived as a direct result of using AAkA to perpetrate an actual fraud on Twinwood, the benefit to HeartBrand is simply too speculative or indirect to support the alter-ego finding.

Viewing the evidence in the light most favorable to the jury's verdict and indulging every reasonable inference that would support it, we conclude that Twinwood did not present legally sufficient evidence to support the jury's finding that HeartBrand was responsible for AAkA's conduct. Because legally sufficient evidence does not support the finding that HeartBrand used AAkA to perpetrate an actual fraud primarily for its direct personal benefit, HeartBrand cannot be held liable for AAkA's wrongful conduct under an alter-ego theory. We sustain AAkA's and HeartBrand's twentieth issue.

Conspiracy

In response to question nineteen, the jury found that AAkA, HeartBrand, and Beeman were part of a conspiracy to commit fraud that damaged Twinwood. Consistent with this finding, the judgment holds AAkA, HeartBrand, and Beeman jointly and severally liable for Twinwood's fraud damages.

Appellants contend that neither HeartBrand nor Beeman could have conspired with AAkA as a matter of law.²⁶ We agree.

Generally, a corporation cannot conspire with its own management personnel or employees when they act within the scope of their employment or in an agency relationship. Bayou Terrace Inv. Corp. v. Lyles, 881 S.W.2d 810, 815 (Tex. App.—Houston [1st Dist.] 1994, no writ); see Vosko v. Chase Manhattan Bank, N.A., 909 S.W.2d 95, 100 n.7 (Tex. App.—Houston [14th Dist.] 1995, writ denied) (holding a corporation cannot conspire with itself, no matter how many of its agents may participate in the corporate action). This is because the acts of a corporation's agents are deemed to be the acts of the corporation itself. See Holloway v. Skinner, 898 S.W.2d 793, 795 (Tex. 1995); Vosko, 909 S.W.2d at 100 n.7.

Applying this principle, we conclude that Beeman, as a director of AAkA at the relevant time, could not have conspired with AAkA as a matter of law. There is no contention or evidence that Beeman acted outside the scope of his agent authority at any time. Thus, the part of the judgment holding Beeman jointly and severally liable for fraud damages is error.

This court has also held that a parent and its wholly owned subsidiary cannot conspire with each other. Bank One, Tex., N.A. v. Stewart, 967 S.W.2d 419, 446 n.26 (Tex. App.—Houston [14th Dist.] 1998, pet. denied) (op. on reh'g); Vosko, 909 S.W.2d at 100 n.7; Atl. Richfield Co. v. Misty Prods., Inc., 820 S.W.2d 414, 420 (Tex. App.—Houston [14th Dist.] 1991, writ denied) (“As a matter of law, a parent corporation cannot conspire with its fully owned subsidiary.”). Texas intermediate appellate courts, however, are not uniform in recognizing this principle, and our holdings may constitute a minority view. In Atlantic Richfield, this court cited Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752, 104 S.Ct. 2731, 81 L.Ed.2d 628 (1984), a United States Supreme Court case interpreting the Sherman Act, a federal antitrust statute. Several of our sister courts of appeals, however, have construed Copperweld as inapplicable outside of the antitrust context and have held that a prohibition against holding a parent and subsidiary liable for conspiracy does not apply to common law conspiracies. See, e.g., Grizzle v. Tex. Commerce Bank, 38 S.W.3d 265, 284 (Tex. App.—Dallas 2001) (noting disagreement among Texas courts), rev'd in part on other grounds, 96 S.W.3d 240 (Tex. 2002); Holloway v. Atl. Richfield Co., 970 S.W.2d 641, 644 (Tex. App.—Tyler 1998, no pet.); Atl. Richfield Co. v. Long Trusts, 860 S.W.2d 439, 447 (Tex. App.—Texarkana 1993, writ denied); Metro. Life Ins. Co. v. La Mansion Hotels & Resorts, Ltd., 762 S.W.2d 646, 652 (Tex. App.—San Antonio 1988, writ dism'd) (“We are here concerned with an alleged conspiracy under common law theories. Under the common law, a parent corporation and its subsidiary are separate legal entities.”). This disagreement among intermediate appellate courts has existed for some time, and the Supreme Court of Texas has not decided the question.

Twinwood asserts that this court's law is incorrect, but we are bound by horizontal stare decisis to follow this court's precedent unless it is changed by the en banc court. See Chase Home Fin., L.L.C. v. Cal. W. Reconveyance Corp., 309 S.W.3d 619, 630 (Tex. App.—Houston [14th Dist.] 2010, no pet.) (stating that, absent a decision from a higher court or this court sitting en banc that is on point and contrary to the prior panel holding or an intervening and material change in the statutory law, this court is bound by the prior holding of another panel of this court). Thus, under the principles enumerated in Bank One, Vosko and Atlantic Richfield, HeartBrand cannot be liable for the fraud damages caused by AAkA under a conspiracy doctrine. We sustain AAkA's and HeartBrand's twenty-second issue and Beeman's sixth issue.

Damages

A. Contract Damages

AAkA and HeartBrand challenge the legal sufficiency of the evidence to support contract damages. Because we have determined that Twinwood's Second Breach Theory is a valid legal theory, and that the liability elements are supported by some evidence, we will consider whether Twinwood presented legally sufficient evidence supporting damages under this theory.

1. Some evidence supports damages under the Second Breach Theory.

Dr. Calles testified that AAkA's failure to provide the pedigree information requested for Group B Cattle ancestors harmed Twinwood because the lack of parent verification leaves pedigree gaps, and Twinwood cannot represent the genetics of non-certified cattle as full-blood. Legendary, in contrast, was given full access to that information for cattle it did not own and its cattle are being registered with AWA.

Bruce Arendale, a certified public accountant, testified as Twinwood's damage expert. He prepared damage models for past and future lost profit, as well as lost herd value. Arendale calculated Twinwood's financial harm resulting from not having DNA verified pedigrees. His “Program Operations” damage model contemplated Twinwood's ability to sell full-blood Akaushi genetics—semen and embryos—and live animals, which is possible only if the cattle are parent-verified full-blood Akaushi.²⁷ Cattle without DNA parent-verified pedigrees back to the Foundation Herd cannot be represented as full-blood Akaushi and thus have only “commercial” value, meaning they are worth less because they can only be sold for meat. Arendale's lost profit model shows the volume of genetics sales Twinwood could have reached but for AAkA's conduct. Based on Twinwood's lost ability to sell Akaushi genetics as a seed-stock producer, Arendale calculated the profit Twinwood lost in the past from 2017-2021 at $6,286,276, and the anticipated future lost profit from 2022-2026 at $9,961,461.²⁸

Tracy Holbert testified that Arendale's Program Operations model is consistent with Holbert's industry experience and is conservative. A seed-stock breeder's ability to demonstrate a verified pedigree is important. Seed-stock cattle are registered with breed associations and have documented pedigrees so that their ancestry can be tracked. Seed-stock producers supply genetics to the commercial cattle industry. If cattle cannot be verified as full-blood Akaushi back to the Foundation Herd, then the cattle has only commercial value. Holbert was highly confident that Twinwood's expected sales numbers represented in the Program Operations lost profit damage model would have been achieved if Twinwood had parent-verified certifications for its cattle.

Weaber also agreed that Arendale's assumptions for the Program Operations model were reasonable and consistent with his industry experience. Because some of Twinwood's cattle have unverified ancestors in their pedigrees, they will not be registered as full-blood Akaushi by AWA without lab reports confirming parent verification on the ancestor animals. Weaber agreed that Twinwood's cattle are worth less if they do not have parent verification all the way back to the Foundation Herd.

We conclude the evidence is legally sufficient to support a damage award for breach of contract under the Second Breach Theory and that appellants have not shown entitlement to rendition of judgment on this basis.

2. Appellants’ foreseeability and certainty arguments lack merit.

Appellants further contend that Twinwood's consequential damages resulting from AAkA's breach of contract were neither foreseeable nor proven with reasonable certainty.

Texas law requires that consequential damages be foreseeable at the time of contracting. Signature Indus. Servs., LLC v. Int'l Paper Co., 638 S.W.3d 179, 186 (Tex. 2022); accord Basic Cap. Mgmt., Inc. v. Dynex Com., Inc., 348 S.W.3d 894, 901 (Tex. 2011) (“Foreseeability is a fundamental prerequisite to the recovery of consequential damages for breach of contract.”). “[C]onsequential damages are not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach.” Signature Indus. Servs., 638 S.W.3d at 186 (quotation omitted). A loss that is not the probable consequence of the breach, from the breaching party's perspective at the time of contracting, is not foreseeable. Id.

Appellants rest their foreseeability arguments on the mistaken position that we must measure foreseeability only from the time that Twinwood first applied for AAkA membership in 2009. The jury charge, however, defined the parties’ Membership Agreement to encompass “the membership application, the membership rules, and the services Twinwood could reasonably expect to receive as a result of its membership including all renewals” (emphasis added). Because Twinwood renewed its membership annually through 2017, the jury was permitted to consider the membership services Twinwood reasonably expected to receive throughout its membership term in measuring foreseeability. See Duradril, L.L.C., 516 S.W.3d at 160-62 (explaining that legal sufficiency challenges are evaluated based on charge as given). “We have no doubt that a simple agreement to renew ․ an identified contract, where no new terms are added, is sufficient to incorporate the provisions of the old ․ contract into a new agreement on the same terms as the former agreement.” Int'l Motorists Assn. v. Aguilar, 402 S.W.2d 516, 519-20 (Tex. Civ. App.—Austin 1966, writ dism'd).

We focus only on whether Twinwood's damages resulting from the Second Breach Theory were foreseeable. The Second Breach Theory is based on a breach or breaches that did not occur until after June 9, 2016.

The record reflects that, in February 2016, AAkA attempted to reach an agreement with AWA regarding the disclosure of genetic information so that both associations’ members could more easily register their animals with either association. In July 2016, Twinwood requested that AAkA provide parent verification information on Group B Cattle to AWA so that Twinwood could register its animals with AWA. Twinwood made clear to AAkA in requesting the lab reports that it needed that information to register these cattle with AWA. Twinwood's request occurred when Twinwood was an AAkA member in good standing. Thus, when AAkA refused to authorize release of the reports, it would have been reasonably foreseeable to AAkA that AWA would not issue registrations to Twinwood for the cattle at issue.

Next, appellants contend that Twinwood failed to prove its lost profit with reasonable certainty. Consequential damages must be “proved with reasonable certainty.” Phillips v. Carlton Energy Grp., LLC, 475 S.W.3d 265, 278 (Tex. 2015). Although proof need not be exact, it cannot be speculative. Id. When a loss is too remote and dependent on too many contingencies or too speculative, then it is not recoverable. See Signature Indus. Servs., 638 S.W.3d at 187. However, the “reasonable certainty requirement is intended to be flexible enough to accommodate the myriad circumstances in which claims for lost profits arise.” Phillips, 475 S.W.3d at 278 (internal quotations omitted). Uncertainty as to the amount of legal damages is permissible, while uncertainty as to the fact of legal damages is fatal to recovery. See id. at 279-80.

Appellants argue that Twinwood's lost profits are fatally uncertain. We conclude, however, that the evidence supporting Twinwood's lost profits as summarized above is sufficient to support a fact finding that Twinwood incurred lost profits as a reasonable consequence of AAkA's breach of the Membership Agreement. Appellants’ contrary arguments disregard the testimony of Holbert, Dr. Calles, and Weaber, discussed above, that the jury reasonably could have accepted. Weaber in particular explained that a market exists for Twinwood's contemplated sale of frozen genetics and that appellants’ efforts to minimize that market's size should not be credited. Further, appellants’ expert, Jeffrey Andrien, testified that demand for cattle genetics is growing and that sales increased dramatically from 2015 to 2019. At best, appellants complain about uncertainty of the amount of legal damages, rather than uncertainty as to the fact of legal damages. Accord id. Appellants are not entitled to rendition of judgment on the ground that Twinwood's lost profit damages lacked reasonable certainty.

3. Twinwood's expert testimony was reliable.

In a final legal challenge to the evidence supporting appellants’ contract damages, appellants assert that Twinwood's expert testimony was unreliable because it was conclusory and incompetent.

An expert's opinion admitted without objection may be probative evidence even it its basis is unreliable; an opinion offered with no basis or with a basis that provides no support, however, “is merely a conclusory statement and cannot be considered probative evidence, regardless of whether there is no objection.” See Hous. Unlimited Inc. Metal Processing v. Mel Acres Ranch, 443 S.W.3d 820, 829 (Tex. 2014). Appellants complain that Twinwood's experts based their opinions on “arbitrary assumptions and cherry-picked comparisons.” However, HeartBrand and AAkA acknowledge in their briefing that: (1) Arendale's “lost-herd-value damages ․ came from his estimated sales prices for hundreds of Twinwood breeding cattle”; (2) Holbert based his opinions on “auction data from ‘elite programs’ in non-Akaushi breeds”; and (3) Arendale's estimate of Twinwood's Akaushi semen sales relied on Holbert's knowledge of an Angus seed-stock company that had sold that much Angus semen. Thus, Twinwood's expert opinion evidence was not conclusory, and their opinions provided some evidence to support Twinwood's damages model. See id.; cf. also Gunn v. McCoy, 554 S.W.3d 645, 662-63 (Tex. 2018) (explaining that if conflicting evidence underlies an expert's opinion, it is “normally the province of the jury to determine which evidence to credit”). Appellants have provided no basis for rendering judgment based on a complete lack of probative evidence of damages.

In sum, we conclude the evidence is legally sufficient to support a damage award for breach of contract under the Second Breach Theory and that appellants have not demonstrated entitlement to rendition of judgment based on their damages challenges. E.g., Guevara v. Ferrer, 247 S.W.3d 662, 670 (Tex. 2007) (noting that, when there is legally sufficient evidence of some damages, it is not appropriate to render judgment and the proper remedy is to either suggest a remittitur or remand for a new trial). We overrule AAkA's and HeartBrand's issues nine, ten, and, in part, eleven.

B. Fraud Damages

Appellants argue that the jury's $1,300,000 award for Twinwood's out-of-pocket expenses resulting from fraud is unsupported by legally sufficient evidence. Acknowledging that the jury awarded Twinwood less than it requested, appellants contend that any amount for out-of-pocket reliance damages is legally unsupported because the expenses described by Arendale were not limited to costs related solely to Twinwood's Akaushi business.

Out-of-pocket damages measure the injured party's recovery based on the actual injury suffered and are designed to put the injured party in as good an economic position as it would have occupied had it not been entangled in the transaction involving the fraud. Zorrilla, 469 S.W.3d at 153; Parkway Dental Assocs., P.A. v. Ho & Huang Props., L.P., 391 S.W.3d 596, 607-08 (Tex. App.—Houston [14th Dist.] 2012, no pet.); see also Yeng v. Zou, 407 S.W.3d 485, 491 (Tex. App.—Houston [14th Dist.] 2013, no pet.).

Arendale calculated that Twinwood spent $2,609,243 on its cattle between 2017 and 2019 in reliance on AAkA's fraudulent statements. Arendale stated that the out-of-pocket expenses included in his calculations ²⁹ would have been avoided but for AAkA's false statements that every animal it registered was DNA-tested. Further, he said that if Twinwood had not relied on AAkA's misstatements about DNA testing, Twinwood would not have retained Dr. Calles ³⁰ and thus could have avoided his salary. Although Arendale acknowledged on cross-examination that some of the expenditures in his calculations did not actually come out of Twinwood's pocket, the jury took this into consideration in determining the appropriate damage amount. The jury awarded approximately half of the amount Twinwood requested.

There is evidence that the expenses Arendale described included amounts spent on Twinwood's Akaushi cattle in reliance on AAkA's misstatements. Appellants do not contend that none of the expenses applied to Twinwood's Akaushi cattle, only that Arendale included more expenses than he should have. The jury took this evidence into account. Thus, we conclude that the record contains some legally sufficient evidence supporting an award for out-of-pocket damages resulting from fraud. Appellants are not entitled to rendition of judgment on Twinwood's fraud claim on legal insufficiency of damages grounds, and we overrule AakA's and HeartBrand's sixteenth issue and Beeman's fifth issue.

Twinwood's Alleged Breach of the 2016 Settlement Agreement

In their twenty-third issue, AAkA and HeartBrand contend that the trial court erred in granting summary judgment to Twinwood on their counterclaim for breach of the 2016 Settlement Agreement, depriving them “of a basis to recover their attorney's fees.”

AAkA and HeartBrand contend that the 2016 Settlement Agreement did not apply to Twinwood's claims as a matter of law. We have determined that, as a matter of law, the 2016 Settlement Agreement applies and releases some of Twinwood's claims. Appellants contend that we should render judgment on the jury's finding awarding AAkA's reasonable and necessary attorney's fees ³¹ or hold that “a fact issue was presented” regarding these fees and remand. We disagree.

The only way in which AAkA contends Twinwood breached the 2016 Settlement Agreement is by filing a lawsuit after having released its claims in the agreement. The trial court properly rejected this argument.

The 2016 Settlement Agreement provided appellants with a release defense, as we have held today, but it contains no covenant not to sue by Twinwood. Thus, the trial court did not err in granting summary judgment against appellants on their counterclaim. See Westergren, 453 S.W.3d at 428-29 (“Although the release provides an affirmative defense to future suits, we cannot construe it as including a covenant not to sue where, in fact, the plain language does not bar future suits.”); see also James Constr. Grp., LLC v. Westlake Chem. Corp., 594 S.W.3d 722, 764-66 (Tex. App.—Houston [14th Dist.] 2019), aff'd in part, rev'd in part, 650 S.W.3d 392 (Tex. 2022); Dresser Indus. v. Page Petroleum, 853 S.W.2d 505, 508; Lehmann v. Har-Con Corp., 76 S.W.3d 555, 565 (Tex. App.—Houston [14th Dist.] 2002, no pet.). “The released parties only would have such a claim if the contract in question also contained language in which the releasing parties agreed not to file suit based upon any of the released claims.” Westergren v. Nat'l Prop. Holdings, L.P., 409 S.W.3d 110, 141-42 (Tex. App.—Houston [14th Dist.] 2013), rev'd on other grounds, Westergren, 453 S.W.3d at 428-29.

A party is not entitled to recover attorney's fees under chapter 38 to the extent it prevails against a breach of contract claim on an affirmative defense of release. See N. Star Water Logic, LLC v. Ecolotron, Inc., 486 S.W.3d 102, 107 (Tex. App.—Houston [14th Dist.] 2016, no pet.) (party cannot recover fees for successfully defending breach of contract claim). Therefore, AAkA is not entitled to its requested attorney's fees under chapter 38 as damages for its counterclaim for breach of the 2016 Settlement Agreement.

Appellants claim alternatively that AAkA is entitled to its attorney's fees pursuant to AAkA's rule 1300, which requires members who file suit against the Association to reimburse it for attorney's fees, court costs, and other expenses. When Twinwood filed its lawsuit against AAkA on April 23, 2018, however, it was no longer a member of the association. Thus, this rule provides no basis for AAkA to recover its attorney's fees against Twinwood.³²

We overrule AAkA's and HeartBrand's twenty-third issue.

Disposition

We have determined that the trial court erred in part by denying appellants’ motion for instructed verdict on the release defense. Twinwood's breach of contract and fraud claims were included within the scope of the 2016 Settlement Agreement's release provision. The First Breach Theory was not excepted from the release by its temporal requirement; but the Second Breach Theory was excepted, and the fraud claim was excepted in part. By rejecting the release defense in full, the trial court erroneously submitted all contract and fraud theories to the jury when some were invalid because they were barred by the release and should have been eliminated from jury consideration.

We must determine whether AAkA was harmed by these errors, and if so, the proper remedy. Generally, a trial court's error is harmful if it either (1) probably caused the rendition of an improper judgment or (2) probably prevented the appealing party from properly presenting the case to the court of appeals. Tex. R. App. P. 44.1(a)(1); Horton v. Kansas City So. Rwy. Co., 692 S.W.3d 112, 138 (Tex. 2024). Appellants invoke the first prong of this test and argue that the court's error in denying the motion for instructed verdict on the release defense (and later denying their motion for judgment notwithstanding the verdict) probably led to an improper judgment. Tex. R. App. P. 44.1(a)(1). The question is whether the error “probably” caused harm. See Horton, 692 S.W.3d at 138. Under rule 44.1(a)(1), an error in submitting an invalid liability theory to the jury probably causes an improper judgment when it results in a recovery that is legally barred. See Tex. R. Civ. P. 301 (judgment shall conform to the pleadings and the nature of the case proved and shall afford relief to which party is entitled in law or equity); see also Excel Corp. v. McDonald, 223 S.W.3d 506, 508 (Tex. App.—Amarillo 2006, pet. denied).

In certain circumstances, the erroneous submission of an invalid theory together with proper submission of a valid theory can result in presumed harm. See Horton, 692 S.W.3d at 139-40; Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex. 2000). AAkA does not argue that the trial court's erroneous release ruling was presumptively harmful, so we do not address presumptive harm under Casteel. Instead, when presumed harm does not apply, our duty is to “determine in light of the entire record whether the error was in fact harmful” under rule 44.1. Horton, 692 S.W.3d at 142; see Bed, Bath & Beyond v. Urista, 211 S.W.3d 753, 757 (Tex. 2006). Thus, we are to determine whether the trial court's error in submitting invalid theories to the jury probably caused an improper judgment.

We must consider the entire record, including as relevant, the parties’ pleadings, the specific theories asserted, whether the challenged theory was critical to the case, the evidence admitted and excluded, the relative strength and weakness of the evidence, whether the theory was “hotly” or “vigorously” contested, the jury charge “in its entirety,” including all instructions and questions, and counsels’ closing arguments. See Horton, 692 S.W.3d at 138 n.23.

A. Contract Claim

The First Breach Theory was critical to Twinwood and hotly disputed. The record contains substantial evidence supporting this theory, particularly damages evidence. We discussed Arendale's damage calculations above. The First Breach Theory relates to the 119 animals in Group C Cattle, which comprise the majority of the animals of the 210 Head and, consequently, underlies the bulk of Twinwood's claimed contract damages. The damage figures representing lost profits from Program Operations, however, cumulated the claimed damages applicable to Twinwood's entire herd of cattle. Based on the record before us, greater damages would have applied to Group C Cattle simply because that group consisted of the most animals. Additionally, the contract damage question expressly instructed the jury to consider particular damage elements that related to the invalid First Breach Theory. When a jury is instructed to base a finding on an unsupported theory or allegation, harm is more likely. See id. at 145.

Twinwood emphasized the invalid First Breach Theory heavily during closing argument. It argued that AAkA breached the Membership Agreement because it registered Twinwood's cattle as full-blood Akaushi without verifying the parentage of all animals by DNA testing. A principal theme of the case was that by joining AAkA, Twinwood was supposed to receive, but did not receive, a DNA-verified pedigree on all its cattle.

The trial court submitted the breach of contract claim in a single broad-form question, which permitted the jury to find that AAkA failed to comply with the Membership Agreement based on evidence supporting the First Breach Theory, the Second Breach Theory, or both. The jury found that AAkA failed to comply with the Membership Agreement and awarded damages for: (1) $4,400,000 in lost profits sustained in the past; (2) $7,000,000 in lost profits that in reasonable probability will be sustained in the future; and (3) $10,500,000 for the difference in value of the herd. Although the jury awarded less than requested for these elements, the verdict was substantial. The trial court disregarded the future lost profits award because it found that element duplicative of the award for difference in herd value and afforded Twinwood the greater recovery. The final judgment thus awards Twinwood $14,900,000 against AAkA for breach of contract.

Based on our review of the entire record, we think it highly probable that the jury's contract damage award included amounts applicable to the invalid First Breach Theory as well as the valid Second Breach Theory. The erroneous submission to the jury of the First Breach Theory, therefore, likely resulted in a judgment that includes some recovery that is legally barred because it relates to a released claim. We thus conclude that the trial court's error regarding the release defense as applicable to the breach of contract claim probably caused the rendition of an improper judgment. Tex. R. App. P. 44.1(a)(1).

Because the First Breach Theory is invalid and resulted in an improper judgment, AAkA was harmed by the trial court's error and is entitled to rendition of judgment in part as to Twinwood's First Breach Theory. We cannot discern, however, what portion of the damages found by the jury are applicable only to the Second Breach Theory. And we cannot determine the extent to which the jury's liability and damages findings rested on the invalid First Breach Theory, nor can we “parse through the elements to allocate damages” for which AAkA properly may be held liable. See Richard Nugent and CAO, Inc., 543 S.W.3d at 269. “[W]hen there is some evidence of damages, but not enough to support the full amount, it is inappropriate to render judgment.” Id. (quoting Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. Nat'l Dev. & Research Corp., 299 S.W.3d 106, 124 (Tex. 2009)); see also Indian Oil Co. v. Bishop Petroleum Inc., 406 S.W.3d 644, 660 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). In this situation, we may remand to the trial court for a remittitur or for a new trial. Richard Nugent and CAO, Inc., 543 S.W.3d at 269. Here, remittitur is not appropriate because the damages evidence was unsegregated. See id. (when damages could not be allocated between amounts for which the defendant was liable and amounts for which he was not, remittitur was not a suitable remedy). Further, because contract liability is contested in this case, we cannot order a new trial solely on the issue of unliquidated damages. See Tex. R. App. P. 44.1(b).

Accordingly, (1) we reverse the portion of the judgment awarding Twinwood recovery on the breach of contract claim, together with the interest and attorney's fee awards to Twinwood related to the contract recovery; (2) we render judgment in favor of AAkA on the First Breach Theory; and (3) we remand the breach of contract claim for a new trial and other consistent proceedings on both liability and damages.³³ Tex. R. App. P. 43.2(c), (d); see O.C.T.G., LLP v. Laguna Tubular Prods. Corp., 557 S.W.3d 175, 188 (Tex. App.—Houston [14th Dist.] 2018, pet. dism'd by agr.); Richard Nugent & CAO, Inc., 543 S.W.3d at 269; see also Clear Lake Water Auth. v. Kirby Lake Devel., Ltd., 123 S.W.3d 735, 753 (Tex. App.—Houston [14th Dist.] 2003, pet. denied) (holding that submission of invalid theories resulted in harmful error; reversing and remanding for new trial).

We must address an additional issue regarding the scope of a new trial on the contract claim. In part of their sixth issue, AAkA and HeartBrand argue that the trial court erred by directing a verdict for Twinwood on appellants’ affirmative defenses of ratification, quasi-estoppel, and accord and satisfaction—all of which pertained to the contract claim. They contend that they pleaded and presented evidence supporting these defenses. The evidence cited, however, pertains only to the First Breach Theory, which, as we have held, was released. Because the only contract theory at issue for a new trial is the Second Breach Theory, and because these affirmative defenses are not relevant to that theory, appellants have not demonstrated any reversible error. Therefore we affirm the trial court's rulings granting a directed verdict on the affirmative defenses of ratification, quasi-estoppel, and accord and satisfaction. We overrule AAkA's and HeartBrand's sixth issue.

B. Fraud Claim

The jury also found that AAkA committed fraud against Twinwood and awarded $1,300,000 in out-of-pocket operational losses incurred in reliance on AAkA's fraud. The trial court should not have allowed the jury to find fraud based on any evidence of misrepresentations occurring before June 9, 2016 because the fraud claim was released to the extent it was based on acts occurring before that date.

After reversing a judgment, an appellate court can limit the scope of remand to the part affected by the error if that part is separable without unfairness to the parties. Nat'l City Bank of Ind. v. Ortiz, 401 S.W.3d 867, 884 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) (op. on reh'g) (citing Tex. R. App. P. 44.1(b)); see Jerry L. Starkey, TBDL, L.P. v. Graves, 448 S.W.3d 88, 113 (Tex. App.—Houston [14th Dist.] 2014, no pet.).³⁴

We have ordered the breach of contract claim remanded for a new trial. Whether to also remand the fraud claim presents a challenging question, but we conclude that Twinwood's breach of contract claim cannot be separated from the fraud claim without unfairness to the parties. As presented by Twinwood, there appears to be a material connection between the breach of contract damages and the out-of-pocket reliance damages for fraud. In particular, we note that the out-of-pocket expenses are incorporated within the lost profit damage model to some extent, in that (1) the out-of-pocket expenses Twinwood claims it incurred do not exclude amounts invested in the Group B Cattle, and (2) to the extent the expenses were paid during 2017-2019, they are necessarily subsumed within the lost profit damages relevant to the Second Breach Theory for those three years. This is because, for the years 2017 through 2019, the lost profit damage model deducts exactly the amount of out-of-pocket expenses allegedly incurred each year from the expected revenues, resulting in a lost profit figure.

Appellants contend that Twinwood cannot recover damages under both breach of contract and fraud theories because there is only one injury and the contract and fraud damages are duplicative.³⁵ See Bay, Ltd. v. Mulvey, 686 S.W.3d 401, 406 (Tex. 2024); Sky View at Las Palmas, LLC v. Mendez, 555 S.W.3d 101, 106-07 (Tex. 2018). We do not address the argument at this time because the claims must be retried. Further, we cannot tell from this record whether the jury's out-of-pocket reliance damages for fraud were based on misstatements that were barred by the release or may have overlapped with breach of contract damages applicable to the sixty-five animals comprising Group B Cattle. The damages are too interwoven to separate without unfairness to the parties, who should have the opportunity to re-try both claims before a new jury that can decide all liability and damage issues together. See generally Jerry L. Starkey, 448 S.W.3d at 113 n.34 (holding fraud claims could not be separated from other claims for new trial without unfairness because damages overlapped); cf. State Dep't of Highways & Pub. Transp. v. Cotner, 845 S.W.2d 818, 819 (Tex. 1993) (claims are not properly severable if they “involve the same facts and issues”).

Moreover, Twinwood emphasized evidence of fraudulent misstatements dating back to 2011, and it is impossible to tell how much of this evidence affected the jury or how the fraud verdict may have differed, if at all, if the jury was limited to considering only the post-June 9, 2016 misrepresentations.

Because appellants are entitled to judgment as a matter of law in part on the fraud claim, and for the reasons just discussed, (1) we reverse the portion of the judgment awarding Twinwood recovery on the fraud claim, together with the associated awards for interest and exemplary damages;³⁶ (2) we render a take-nothing judgment in favor of AAkA on Twinwood's fraud claim to the extent it is based on acts, omissions, or events occurring before June 9, 2016; and (3) we remand the fraud claim for a new trial and other consistent proceedings on both liability and damages.

Given our conclusion that the breach of contract and fraud claims should be remanded under rule 44.1(b), we need not consider whether the trial court's error regarding the fraud claim probably caused an improper judgment under rule 44.1(a)(1) independently of the error regarding the breach of contract claim.

In assessing the proper relief, we make clear that we have considered whether it is appropriate to render judgment in part on appellants’ arguments that, if successful, would entitle any or all of them to judgment as a matter of law. See Tex. R. App. P. 43.3 (requiring an appellate court, when reversing a trial court's judgment, to render the judgment the trial court should have rendered unless remand is required for further proceedings or in the interests of justice); see also Bradleys’ Elec., Inc. v. Cigna Lloyds Ins. Co., 995 S.W.2d 675, 677 (Tex. 1999) (“Generally, when a party presents multiple grounds for reversal of a judgment on appeal, the appellate court should first address those points that would afford the party the greatest relief.”); Zaidi v. Shah, 502 S.W.3d 434, 445 (Tex. App.—Houston [14th Dist.] 2016, pet. denied). We have determined that AAkA is entitled to rendition of judgment in part on the contract and fraud theories, and that HeartBrand and Beeman are entitled to rendition of judgment on the vicarious liability theories of alter ego and conspiracy. Other than as discussed herein, we have concluded that appellants are not entitled to judgment in their favor as a matter of law for any of the reasons they have advanced.

Conclusion

We have sustained in part appellants’ issues relating to the release, concluding that portions of Twinwood's breach of contract and fraud claims were released as a matter of law. The trial court erred by allowing the jury to consider the released parts of those claims because they were invalid. Even though this error affects only part of the matter in controversy, we conclude that the affected part is not separable without unfairness to the parties. Tex. R. App. P. 44.1(b). We accordingly reverse the judgment and render, in part, a take-nothing judgment on some of Twinwood's claims as explained above, and we sever and remand Twinwood's remaining claims for a new trial. We also hold that the statute of limitations does not bar these claims.

We further hold that AAkA is not entitled to rendition of judgment on the unreleased breach of contract and fraud claims, either as to liability or damages, for any of the other reasons it advances.

We render a take-nothing judgment in HeartBrand's and Beeman's favor. Neither HeartBrand nor Beeman is responsible for Twinwood's fraud damages caused by AAkA under a conspiracy theory as a matter of law. Further, HeartBrand is not responsible for Twinwood's damages caused by AAkA under an alter-ego theory.

Finally, we conclude, that, as a matter of law, Twinwood did not breach the 2016 Settlement Agreement. The trial court did not err in granting Twinwood summary judgment on appellants’ counterclaim for breach of that agreement. Accordingly, AAkA is not entitled to any attorney's fees on its unsuccessful breach of contract claim.

Our disposition makes it unnecessary to address appellants’ and Twinwood's remaining issues. Tex. R. App. P. 47.1.

The judgment is reversed, judgment is rendered in part as set forth above, and the case is remanded. We further release HeartBrand's surety,³⁷ SureTec Insurance Company and Market Insurance Company, from liability on the supersedeas bond. See In re Guardianship of Hollis, No. 14-13-00659-CV, 2014 WL 5685570, at *5 (Tex. App.—Houston [14th Dist.] Nov. 4, 2014, no pet.) (mem. op.); Amwest Surety Ins. Co. v. Graham, 949 S.W.2d 724, 727 (Tex. App.—San Antonio 1997, writ denied) (surety on a bond to secure payment of a reversed judgment is released as a matter of law and is not liable for a judgment rendered upon remand).

Appendix:

The Parties’ Issues Presented AAkA/HeartBrand Issues

1.  Did Twinwood settle and release its contract and fraud claims against Appellants in the Settlement/Release entered into between HeartBrand and Twinwood, thus barring Twinwood's claims against Appellants as a matter of law?

2.  Does the prospective release in Twinwood's Membership Application to AAkA bar Twinwood's claims against AAkA as a matter of law?

3.  If Twinwood's recovery is not barred as a matter of law by either the Settlement/Release or the prospective release in the Membership Application to AAkA, did the trial court err in directing a verdict at the jury charge stage on Appellants’ affirmative defense of settlement and release, thereby depriving Appellants of presenting a fact issue to the jury?

4.  Did the trial court abuse its discretion in excluding Appellants’ evidence regarding the Settlement/Release when Twinwood proffered the Settlement/Release as an exhibit without limitation and questioned witnesses about the termination of the restrictions in the Full-Blood Contract, but Appellants were not allowed to elicit testimony about the release obtained in exchange for that termination, thus causing the jury to have a skewed version of the facts?

5.  Did the trial court err in instructing the jury in the charge not to consider the prospective release in Twinwood's Membership Application?

6.  Did the trial court err in directing a verdict on Appellants’ affirmative defenses of ratification, quasi-estoppel, accord and satisfaction, and release based on the Membership Application and other evidence?

7.  Are Twinwood's contract and fraud claims barred by limitations and not saved by any tolling doctrine? Alternatively, does the trial court's charge error in failing to ask the jury to find the “earliest date” or instruct the jury on actual and apparent authority require a new trial? Alternatively, do the jury's illogical tolling findings fail as a matter of law or at least necessitate a new trial?

8.  Are Appellants entitled to judgment as a matter of law on Twinwood's breach of contract claim? Alternatively, does the trial court's charge error in defining “membership Application” or imbedding the formation question within the breach question require a new trial?

9.  Did Twinwood fail to prove injury or damages as a matter of law?

10. Are Twinwood's consequential damages for breach of contract unrecoverable as a matter of law?

11. Did Twinwood's expert witnesses provide legally or factually insufficient evidence of injury or damages due to their opinions being unreliable (foundationally, methodologically, and connectively), unsubstantiated, and unqualified?

12. Alternatively, are Appellants entitled to a new trial because the trial court abused its discretion in admitting the testimony of Twinwood's experts over Appellants’ objections?

13. Alternatively, does the trial court's charge error in failing to instruct the jury on a time/place to determine the difference in value damages constitute charge error necessitating a new trial?

14. Did Twinwood's recovery in both contract and fraud violate the One-Satisfaction Rule?

15. Is there legally insufficient evidence to support Twinwood's fraud claims?

16. Are Twinwood's purported out-of-pocket losses for fraud unrecoverable as a matter of law?

17. Does the exemplary damages fraud finding against AAkA fail as a matter of law?

18. Did the trial court commit jury charge error by failing to charge the jury on vice-principal status in the exemplary damages question against AAkA and predicating exemplary damages on common law fraud, which included reckless fraud?

19. Can HeartBrand be jointly and severally liable to Twinwood on the basis of alter ego when Twinwood released all claims against HeartBrand under the Settlement/Release and the damages for which HeartBrand is being held liable are not limited to “after the termination of the full-blood contract”?

20. Is there legally sufficient evidence to support the alter ego finding?

21. Is Twinwood estopped as a matter of law from pursuing an alter ego claim?

22. Did the trial court err, as a matter of law, in holding HeartBrand and Beeman conspired with AAkA to commit fraud when AAkA is a wholly-owned subsidiary of HeartBrand and Beeman is chairman of both?

23. Did the trial court err in granting summary-judgment on Appellants’ counterclaim for breach of the Settlement/Release when release was established as a matter of law (thus entitling AAkA to its attorneys’ fees) or at least created a fact issue for the jury?

24. Did the trial court err in awarding Twinwood pre-judgment interest for the delay of the trial due to Covid?

Ronald Beeman Issues

1. Whether Twinwood's fraud claim is barred by limitations?

2. Whether Twinwood's fraud claim is supported by legally sufficient evidence?

3. Whether Twinwood's fraud and conspiracy claims are barred by release?

4. Whether Twinwood's fraud and conspiracy claims are barred by the rule against duplicative recoveries?

5. Whether Twinwood failed to prove any out-of-pocket damages?

6. Whether Twinwood can hold Ronald Beeman and HeartBrand liable for a conspiracy with AAkA?

7. Whether a new trial is warranted because:

a. there is a fact issue on release, or

b. the trial court should have instructed the jury on orthodox agency principles?

8. Whether Twinwood is entitled to prejudgment interest for the delay in the trial setting caused by the COVID pandemic?

Twinwood Cross-Appellant Issue

Did the trial court err when it signed a final judgment that omitted and failed to award Twinwood damages based on the jury's finding of $7 million in future lost profits resulting from AA[k]A's breach of contract on grounds that this damage award is duplicative?

FOOTNOTES

1.   Dr. Calles has a doctorate in genetics and animal breeding.

2.   “Parent verification” means verifying by DNA analysis that a sire, dam, and calf all share the same DNA markers.

3.   The GPS data system later became known as “Digital Beef.”

4.   Twinwood designated the remaining twenty-six cattle of the 210 Head as “Group A.” They are not at issue for purposes of this appeal.

5.   The charge defined lost herd value as the difference, if any, between the value of the herd if AAkA had procured and provided Twinwood with proof of complete DNA parent-verified pedigrees on all Twinwood animals registered with AAkA, and the value of the herd based on the information and documentation actually provided by AAkA.

6.   This case was abated for AAkA's and HeartBrand's federal bankruptcy proceedings on August 9, 2022, but the federal bankruptcy court lifted the stay for purposes of this appeal, and we reinstated the case on September 1, 2022. We abated this case again, by agreement of the parties, from October 25, 2022 until January 10, 2023. We abated the case a third time after ordering the parties to mediation on September 14, 2023. We reinstated the appeal on November 16, 2023, after the parties notified the court that mediation was unsuccessful.

8.   Because appellants timely presented this legal defense in the trial court and obtained an adverse ruling, error is preserved. See Daniels v. Empty Eye, Inc., 368 S.W.3d 743, 749 (Tex. App.—Houston [14th Dist.] 2012, pet. denied). The trial court also denied appellants’ motion for judgment notwithstanding the verdict and motion for new trial, in which they argued that the 2016 Settlement Agreement released Twinwood's claims.

9.   Further, the Full-Blood Contract was an exhibit to the 2016 Settlement Agreement. “When a release refers to a related document, that document should be considered when reviewing a release.” Schomburg v. TRW Vehicle Safety Sys., Inc., 242 S.W.3d 911, 913 (Tex. App.—Dallas 2008, pet. denied). That the Full-Blood Contract was attached to the 2016 Settlement Agreement bolsters appellants’ arguments that Twinwood's claims are related to or arise out of the Full-Blood Contract.

10.   This duty is based in part on certain written rules applicable to AAkA, including Rule 700, which provides: “DNA-Marker and Blood-Type Testing: a. Each animal for which a Registration or Transfer application is or has been received by the Association and each animal owned by a member participating in any Association program shall be subjected to a DNA-marker type test to verify accuracy of parentage or a blood-type test to determine that the animal or related animals are pure.”

11.   Question two states:Find the date by which the AAA failed to comply with the Membership Agreement with respect to AAA's duty to procure and provide DNA parent verified pedigrees on Twinwood animals registered with the AAA.

12.   See supra at 20 (defining “related”).

13.   Claims arising out of or resulting from acts occurring after June 9, 2016 are also excluded from the definition of the “dispute.”

14.   Even if the 2016 Settlement Agreement's reference to “subsidiaries” of HeartBrand was not of sufficient descriptive particularity to identify AAkA as a released party, the Full-Blood Contract mentions AAkA eleven times, and it was an exhibit to the 2016 Settlement Agreement. When a release refers to a related document, that document should be considered when reviewing the release. Schomburg, 242 S.W.3d at 913.

15.   Our conclusions are based on a plain reading of the 2016 Settlement Agreement in light of the evidence. We reject appellants’ alternative argument that fact questions exist necessitating a new trial and jury submission on the release defense.

16.   Appellants preserved this defense by timely pleading it and raising it in a motion for summary judgment and in their motion for judgment notwithstanding the verdict. See Tex. R. App. P. 33.1.

17.   The charge referred to the association as “AAA.” On appeal, the association refers to itself as “AAkA.”

18.   Appellants objected to question one on this basis, so error is preserved. See Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817, 829-30 (Tex. 2012).

19.   Appellants preserved error by challenging the legal sufficiency of the evidence to support the jury's breach finding in their motion for judgment notwithstanding the verdict.

20.   Under the jury charge, the fraud finding could be based on (1) a false statement of fact, (2) a promise of future performance made without intent to perform, or (3) the failure to disclose a material fact.

21.   Appellants challenged the legal sufficiency of the evidence to support the jury's fraud findings in their motion for judgment notwithstanding the verdict, so error is preserved.

22.   Twinwood correctly notes that it was not until August 22, 2017 that it received from AAkA certificates showing that certain cattle were only “sire qualified.”

23.   See Tex. Pattern Jury Charges: Business, PJC 108.2, 108.3.

24.   AAkA and HeartBrand timely asserted this argument in their motion for judgment notwithstanding the verdict, so error is preserved. See Tex. R. App. P. 33.1.

25.   We cited Simplified Development Corp. v. Garfield, No. 14-06-00526-CV, 2008 WL 399433, at *5-6 (Tex. App.—Houston [14th Dist.] Feb. 14, 2008, pet. denied) (mem. op.); Farr v. Sun World Savings Association, 810 S.W.2d 294, 297-98 (Tex. App.—El Paso 1991, no writ); TransPecos Banks v. Strobach, 487 S.W.3d 722, 736 (Tex. App.—El Paso 2016, no pet.); Bates v. de Tournillon, No. 07-03-00257-CV, 2006 WL 265474, at *3 (Tex. App.—Amarillo Feb. 3, 2006, no pet.) (no evidence the individual defendant “personally made any use of the items” he removed from the company). See also Stover v. ADM Milling Co., No. 05-17-00778-CV, 2018 WL 6818561, at *10 (Tex. App.—Dallas Dec. 28, 2018, pet. denied) (mem. op.) (evidence existed of direct personal benefit because money diverted from corporation directly to shareholders); Clement v. Blackwood, No. 11-16-00087-CV, 2018 WL 826856, at *6 (Tex. App.—Eastland Feb. 8, 2018, pet. denied) (mem. op.) (holding that LLC was formed and existed exclusively to benefit its owners; fraud by owners of LLC directly benefited owners because it allowed them to keep family ranch property); Rather v. AAA Well Servs., LLC, No. 05-17-00262-CV, 2018 WL 3198396, at *4 (Tex. App.—Dallas June 29, 2018, no pet.) (mem. op.).

26.   Appellants timely raised this argument in their motion for judgment notwithstanding the verdict.

27.   The Program Operations lost profit figures excluded the twenty-six cattle in Group A and their progeny because Twinwood cannot generate profit from the genetics of those animals. Of the twenty-six cattle in Group A, only four were alive at the time of trial. Twinwood bred thirty-two cattle from those twenty-six cattle. The progeny can be (and are) registered with AWA, but they do not add to the genetic diversity of the group.

28.   He also calculated lost herd value as of November 2019 and May 2021, which he described as the “lost herd value for Twinwood's cattle not being parent verified but for the actions of the defendants.”

29.   We reference Arendale's calculations in PX426, which is Twinwood's Program Operations damage model.

30.   Gonzales testified that Dr. Calles was an important part of Twinwood's breeding program and was going to be in charge of Twinwood's genetics operations—i.e., Twinwood's Program Operations.

31.   Question twenty-three of the jury charge asked, “What is a reasonable fee for the necessary legal services of AAA's attorneys?” The charge instructed the jury that a reasonable fee “is the reasonable hours worked, and to be worked, multiplied by a reasonable hourly rate for that work.” It also instructed to jury not to include “fees that relate solely for the representation of any party defendant other than the AAA.” The jury found trial court representation fees of $5,657,424, and various additional fees for different stages of appellate representation.

32.   Under Texas law, a party generally may recover attorney's fees only if authorized by statute or contract. E.g., Rohrmoos Venture v. UTSW DVA Healthcare, LLP, 578 S.W.3d 469, 483-84 (Tex. 2019); Wheelabrator Air Pollution Control, Inc. v. City of San Antonio, 489 S.W.3d 448, 453 n.4 (Tex. 2016).

33.   Our resolution of this issue makes it unnecessary to address Twinwood's cross-issue regarding the trial court's omission of $7 million in future lost profits resulting from AAkA's breach of contract claim. See Tex. R. App. P. 47.1.

34.   Texas Rule of Appellate Procedure 44.1(b) provides:(b) Error Affecting Only Part of Case. If the error affects part of, but not all, the matter in controversy and that part is separable without unfairness to the parties, the judgment must be reversed and a new trial ordered only as to the part affected by the error. The court may not order a separate trial solely on unliquidated damages if liability is contested.Tex. R. App. P. 44.1(b).

35.   This is AAkA's and Heartbrand's issue fourteen and Beeman's issue four.

36.   Because we are reversing the portion of the judgment awarding relief for fraud, we must also reverse the exemplary damage award that is based on the fraud finding. E.g., Hunt v. Baldwin, 68 S.W.3d 117, 133 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) (noting that there can be no recovery for punitive damages in the absence of an award of actual damages); see also Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex. 1995) (stating that recovery of punitive damages requires a finding of an independent tort with accompanying actual damages). We do not reach the merits of appellants’ challenges to the exemplary damage award (AAkA's and HeartBrand's issue seventeen), and the matter of exemplary damages is remanded as well.

37.   AAkA tendered a cash deposit in lieu of supersedeas in the nominal amount of $100.

Kevin Jewell, Justice