Date: 05-13-2022

Case Style:

David Hyman and Renee Matturro v. KD Resources, LLC

Case Number: 01-20-00059-CV

Judge: Peter Kelly

Court:

Court of Appeals For The First District of Texas

On appeal from The 129th District Court of Harris County

Plaintiff's Attorney:

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Defendant's Attorney: Mark J. Oberti

Description:

Houston, Texas - Employment lawyer represented Appellants with a breach of contract claim.

This is an employment dispute arising from the termination of Miles Hyman
in June 2008 by KD. In 2012, Hyman sued KD alleging that it was in breach of
contract for failing to pay severance according to his employment contract. Hyman
alleged that the contract entitled him to a $200,000 annual salary and $1 million in
damages based on his termination. KD answered that there was no employment
contract between Hyman and KD, and to the extent a signed employment contract
existed, the individual who signed it did not have actual or apparent authority to do
so for the company. Alternatively, KD alleged that Hyman was fired for cause,
which precluded severance under the agreement.
While the lawsuit was pending, Hyman died. His heirs (hereinafter the
“Hyman Parties”) pursued his breach of contract claim.1 The parties proceeded to a
bench trial in October 2019.
A. Stipulated Facts
The parties stipulated to the following facts: KD was a startup business
formed in Houston to produce oil from wells in south Texas. Barry Kostiner
originally owned two-thirds of the business and Jim Dorman Sr. and Jim Dorman
Jr. owned the remaining one-third. Hyman was aware of the ownership division.
Between the Dormans, Dorman Sr. owned 28% of the company and Dorman Jr.
1 KD does not dispute that the Hyman Parties have standing to pursue the claim.
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owned 5%. Robert Kinsey, Vice President in Charge of Operations, ran the
company. While Hyman alleges that he had an employment contract with KD, no
other KD employees had employment contracts with the company.
In December 2007, Kinsey hired Hyman to be one of KD’s first employees.
At the time, Hyman lived in Toronto, Canada and was in his mid-50s. He had no
oil and gas experience. Hyman moved to Houston and lived and worked from
Kinsey’s house until Hyman rented an apartment and KD rented office space.
While he was employee with KD, Hyman’s salary was $55,000.
In December 2007, Hyman, who attended law school in Canada, helped
Kinsey attempt to negotiate an employment contract with another entity. Hyman
kept a draft of the contract that was later produced in this case. A month after
Hyman helped with the employment contract, Kinsey admitted to Hyman that he
had embezzled from his previous employer. Hyman also learned that Kinsey was
embezzling from KD. Hyman worked with Kinsey to attempt to block a
background check on Kinsey that would have revealed that Kinsey did not hold an
engineering degree he purported to hold. Hyman did not reveal his knowledge
about Kinsey until after he was terminated from KD.
In June 2008, Hyman was fired by KD. In November 2008, Kinsey was fired
from KD for embezzlement. KD was purchased by new owners. By 2009, neither
Kostiner nor the Dormans had any ownership interests in KD.
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In November 2011, Hyman recorded a telephone conversation with Dorman
Jr. in which he claimed he had an employment contract with KD that entitled him
to severance pay. Hyman told Dorman Jr. that he did not have a copy of the
contract. He told Dorman Jr. that he was going to send a blank copy for Dorman Jr.
to sign. Hyman alleged that his employment contract was based on an employment
contract that he had previously drafted for Kinsey, and Hyman sent an unsigned
version for Dorman Jr. to sign.
Hyman filed suit in June 2012. Two months later, he spoke with Dorman Jr.
again. Dorman Jr. told Hyman that he did not remember signing the employment
contract and that he did not remember Kostiner telling him to sign it either.
Dorman Jr. told Hyman that when Dorman Jr. worked for the company, he did not
have the authority to sign it.
B. Trial Testimony
The parties dispute whether Hyman was entitled to severance upon
termination from KD. Specifically, they dispute whether a valid employment
contract existed between Hyman and the company. They also dispute whether the
basis for Hyman’s termination precluded him from severance under the alleged
agreement.
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1. Testimony regarding the existence of an agreement
In his deposition in 2013, Hyman testified that he had an employment
agreement with KD that specified that he received $200,000 annually. He testified
that he was entitled to severance after he was terminated by KD in June 2008.
Since his termination, he had remained unemployed.
Hyman recalled that he signed the contract around January 2008. He gave it
to Dorman Jr., but Dorman Jr. did not sign it then. Hyman testified that Dorman Jr.
told him that he needed Kostiner’s approval to sign it. Hyman testified that
Kostiner told him several times that he had instructed Dorman Jr. to sign the
contract and give it back to Hyman. Kostiner told Hyman that securities
regulations involving another entity prohibited him from signing the agreement. In
November 2011, Hyman called Dorman, Jr. and told him that he had an
employment contract with KD that KD had not honored. Hyman said he had no
original and no copies of the agreement, so he told Dorman Jr. that he would send
a blank version for Dorman Jr. to sign. Hyman testified that after the call, he sent
the unsigned agreement to Dorman Jr., but Dorman Jr. never signed or returned it.
At some point after learning that Dorman Jr. would not sign the blank agreement,
Hyman found a copy of the fully executed agreement on an old computer at his
apartment in Toronto. He testified that he was not sure if he still had the old
computer.
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In February 2012, Hyman emailed Dorman Jr. a copy of the fully executed
agreement and asked him to sign an affidavit saying that Kostiner, the majority
owner of the company, told Dorman Jr. to sign it in 2008. When Dorman Jr.
refused, Hyman suggested that Dorman Jr. “find a way where you can—you can
write something and backdate it before the gag order.”
Hyman filed suit in June 2012 seeking nearly five years of severance pay
under the alleged employment agreement, at $200,000 per year, plus other alleged
damages. He did not attach a copy of the agreement to the lawsuit. In May 2013,
KD received the document for the first time in advance of Hyman’s deposition.
Dorman Jr. testified that during the time he had an ownership interest in KD,
Hyman asked him to sign an employment contract that Hyman created. Dorman Jr.
testified that he told Hyman at the time that he lacked authority to sign it for KD.
Dorman Jr. owned five percent of the company. He did not recall ever signing the
agreement. Dorman Jr. testified that he would have needed Kostiner’s approval to
sign it. Dorman Jr. did not remember Kostiner telling him to sign the agreement or
giving any sort of approval to do so.
Kostiner testified in his deposition that he could not recall ever telling
Dorman Jr. to sign the employment agreement between KD and Hyman. He
testified that he would not have done so because, “[t]hat makes no sense. The
company had no financial resources to do something like that. . . . The company
7
was not solvent. Those types of numbers were greater compensation than the CEO,
the president, and any affiliates. It doesn’t make any sense. It’s not possible.”
2. Testimony regarding Hyman’s Termination
Brody testified that in June 2008, he was working with Hyman when Hyman
pulled out a large knife and began running its blade up and down his own arm.
Brody had not previously seen Hyman do that, and he felt that Hyman was trying
to threaten or intimidate him. Brody told Kinsey about the incident later that
evening. Kinsey told Brody that it was the last straw, and, the next day, Hyman
was terminated. According to Brody, Hyman’s job performance was poor, even
before the knife incident.
Hyman testified that he performed his job satisfactorily. According to
Hyman, he regularly carried a knife. He often scratched his skin with a knife
because of a skin condition. He claimed that when he pulled out the knife around
Brody, he was scratching his arms because airborne pollen in Houston aggravated
his skin condition.
C. Judgment
In October 2019, the trial court signed a final judgment in favor of KD
Resources. Hyman filed a timely request for findings of fact and conclusions of
law and a timely notice of appeal. We abated the appeal for entry of findings of
fact and conclusions of law. The trial court entered them in June 2021.
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Among other things, the trial court found that Hyman’s breach of contract
claim failed because as a matter of fact and law no employment agreement ever
existed between Hyman and KD. Alternatively, even if an employment agreement
signed by Dorman Jr. existed, the court found that Dorman Jr. did not have
authority to bind the company when he signed it. The trial court also found that
Hyman’s breach of contract claim fails because Hyman was terminated for cause,
as defined in the alleged employment agreement. Therefore, no severance was due.
The trial court found that Hyman was not a credible witness.
Sufficiency of the Evidence
On appeal, the Hyman Parties challenge the legal and factual sufficiency to
support the trial court’s holding that KD did not breach a contract with Hyman.
A. Standard of Review
In an appeal from a bench trial, the trial court’s findings of fact have the
same weight as a jury verdict. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.
1994); Nguyen v. Yovan, 317 S.W.3d 261, 269–70 (Tex. App.—Houston [1st Dist.]
2009, pet. denied). When the appellate record contains a reporter’s record, findings
of fact on disputed issues are not conclusive and may be challenged for the
sufficiency of the evidence. Sixth RMA Partners, L.P. v. Sibley, 111 S.W.3d 46, 52
(Tex. 2003). We review the trial court’s findings of fact under the same standard
9
used to determine whether sufficient evidence exists to support a jury finding. See
Catalina, 881 S.W.2d at 297; Nguyen, 317 S.W.3d at 269–70.
In a factual sufficiency review, we consider and weigh all the evidence. See
Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986); Arias v. Brookstone, L.P., 265
S.W.3d 459, 468 (Tex. App.—Houston [1st Dist.] 2007, pet. denied). When a party
challenges an adverse finding on an issue on which it had the burden of proof at
trial, the party must show on appeal that the adverse finding is against the great
weight and preponderance of the evidence. Dow Chem. Co. v. Francis, 46 S.W.3d
237, 241 (Tex. 2001).
When considering whether the evidence is legally sufficient to support a
challenged finding, we must consider the evidence that favors the finding if a
reasonable fact finder could do so, and disregard contrary evidence unless a
reasonable fact finder could not. See City of Keller v. Wilson, 168 S.W.3d 802, 827
(Tex. 2005). We view the evidence in the light most favorable to the trial court’s
finding and indulge every reasonable inference to support it. Id. at 822. Because it
acts as the fact finder in a bench trial, the trial court is the sole judge of the
credibility of the witnesses and the weight to be given their testimony. Golden
Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003); see also Wise v.
Conklin, No. 01-13-00840-CV, 2015 WL 1778612, at *3 (Tex. App.—Houston
[1st Dist.] Apr. 16, 2015, no pet.) (mem. op.) (“In a bench trial, the trial court is the
10
sole judge of the witnesses’ credibility, and it may choose to believe one witness
over another; a reviewing court may not impose its own opinion to the contrary.”).
If 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 fact finder.
City of Keller, 168 S.W.3d at 822.
When a party attacks the legal sufficiency of an adverse finding on an issue
on which it had the burden of proof, the party must show on appeal that the
evidence establishes, as a matter of law, all vital facts in support of the issue. Dow
Chem., 46 S.W.3d at 242. In reviewing a “matter of law” challenge, the reviewing
court must first examine the record for evidence that supports the finding, while
ignoring all evidence to the contrary. Id. If no evidence supports the finding, the
reviewing court will then examine the entire record to determine whether the
contrary proposition is established as a matter of law. Id. The issue should be
sustained only if the contrary proposition is conclusively established. Id.
B. Analysis
The evidence is legally and factually sufficient to support the trial court’s
finding that KD did not breach a contract with Hyman. A successful breach of
contract claim requires proof of the following elements: (1) the existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach of
contract by the defendant; and (4) damages sustained resulting from the breach.
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B & W Supply, Inc. v. Beckman, 305 S.W.3d 10, 16 (Tex. App.—Houston [1st
Dist.] 2009, pet. denied).
There was legally and factually sufficient evidence to support that no
contract existed. Hyman testified that he signed an employment contract around
January 2008. He testified that he struggled to get Dorman Jr. to sign it, and he did
not remember exactly when Dorman Jr. did so. Initially, Dorman Jr. told Hyman he
could not sign it without Kostiner’s approval. Hyman testified that he spoke with
Kostiner who gave permission to Dorman Jr. to sign the contract. Hyman claimed
that Kostiner could not sign the contract due to SEC restrictions.
Hyman testified that he reached out to Dorman Jr. three years after Hyman
was terminated from KD. He asked Dorman Jr. if he had a copy of Hyman’s
employment contract. Dorman Jr. did not. Hyman then found a copy on an old
computer. He testified that he did not have the computer at the time of his
deposition.
Dorman Jr. testified that he could not recall signing an employment contract
between KD and Hyman. He testified that he would have needed Kostiner’s
approval to enter into a contract to pay Hyman $200,000 per year. Dorman Jr.
testified that several years after Hyman was fired from KD, Hyman reached out to
see if Dorman Jr. had a copy of an alleged employment contract between KD and
Hyman. Dorman Jr. told him that he did not. Then Hyman attempted to get
12
Dorman Jr.’s signature on an affidavit stating that an employment contract had
existed. Dorman Jr. did not sign it. Hyman told Dorman Jr. of his breach of
contract claim against KD. Dorman Jr. told him that it did not sound recoverable.
Kostiner testified that he did not remember directing Dorman Jr. to sign the
contract. According to Kostiner, the company did not have the financial resources
to enter into a contract to pay Hyman the amount listed in the purported agreement
because the company was not solvent. He testified that a salary of $200,000 a year
was more than the CEO, president, and any affiliates were compensated. While
employed, Hyman was not paid $200,000 annually. He was paid $55,000 per year.
The trial court found that Hyman was not a credible witness. The trial court
was entitled to credit Kostiner and Dorman Jr.’s testimony over Hyman’s. See
Golden Eagle Archery, 116 S.W.3d at 761 (trial court is free to judge the
credibility of witnesses and the weight to be given their testimony). Kostiner and
Dorman Jr. did not recall signing the purported employment agreement. Kostiner
testified that doing so would have been unreasonable given the company’s
financial situation and the compensation given to top executives. Dorman Jr.
testified that he heard from Hyman years after Hyman was terminated. When
Dorman Jr. told Hyman that he did not have the agreement, Hyman found a copy
on an old computer. Hyman asked Dorman Jr. to sign an affidavit stating that he
had previously signed an employment agreement. Dorman Jr. refused.
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Viewing the evidence in the light most favorable to the trial court’s finding,
the evidence is legally and factually sufficient to support the finding that there was
no contract between KD and Hyman. The trial court did not err in holding that
there was no breach of contract because the Hyman Parties failed to establish the
existence of a valid contract between Hyman and KD.
We overrule the Hyman Parties’s sole issue on appeal.

Outcome: We affirm the judgment of the trial court.

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