Preview
Filed
12 J anuary 13 P3:26
Gary Fitzsimmons
District Clerk
Dallas District
NO. DC-10-01167
SIERRA INVESTMENT ASSOCIATES, IN THE DISTRICT COURT OF
Plaintiff,
Vv DALLAS COUNTY, TEXAS
WILSON OFFICE INTERIORS, LLC;
THE WILSON GROUP, LTD.; ROBERT
BLOMSTROM; B. DONALD HILL, JR.,
Defendants. 298" JUDICIAL DISTRICT
PLAINTIFF’S FIFTH AMENDED PETITION
TO THE HONORABLE JUDGE OF SAID COURT:
COMES NOW Sierra Investment Associates, Plaintiff, complaining of Wilson Office
Interiors, LLC, The Wilson Group, Ltd., Robert Blomstrom, and B, Donald Hill, Jr., Defendants,
and for cause of action would show as follows:
I
PARTIES
il Sierra Investment Associates (“Sierra”) is a Texas general partnership. Sierra has
heretofore made a general appearance in this case.
1.2 Wilson Office Interiors, LLC (“Wilson Office”) is a Delaware limited liability
company. Wilson Office has heretofore made a general appearance in this case.
1.3 The Wilson Group, Ltd. (“Wilson Group”) is a Nevada corporation. Wilson
Group has heretofore made a general appearance in this case.
1.4 Robert Blomstrom (“Blomstrom”) is an individual residing in Tarrant County,
Texas. Blomstrom has heretofore made a general appearance in this case.
PLAINTIPY’S FIFTH AMENDED PETITION PAGE |
4927838, 1
15 B. Donald Hill, Jr. (Hill) is an individual residing in Collin County, Texas. Hill
has heretofore made a general appearance in this case. Suit is brought against Hill in his
individual capacity and as an officer, director, shareholder, and trustee of Wilson Group.
il.
JURISDICTION AND VENUE
2.1 The Court is vested with jurisdiction in this case because the case involves claims
for damages in an amount in excess of $10,000, and because the events and transactions upon
which the claims are based occurred in substantial part in Dallas County, Texas.
2.2 The Court is vested with venue in this case because the case involves the breach
of contracts performable in Dallas County, Texas, because the case involves tort claims arising
from events and transactions which occurred in substantial part in Dallas County, Texas, because
Wilson Office has its principal business office in Texas within Dallas County, Texas, and
because all defendants have been properly joined in this case.
Ill.
DISCOVERY LEVEL
Sierra designates Discovery Level 2 to control the discovery process in this case,
pursuant to Rule 190.3 of the Texas Rules of Civil Procedure.
Iv.
BREACHES OF CONTRACT
COUNT 1
4.1 Sierra entered into a written lease agreement with Wilson Group in 1993 for the
use and occupancy of the commercial warehouse located at 1540 Champion Drive in Carrollton,
Texas. Multiple written lease extension agreements were executed by Wilson Group and Sierra
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 2
49278381
prior to 2004, extending that lease through April, 2006. In August, 2005, that lease was assigned
to, and assumed by, Wilson Office pursuant to a written assignment agreement. In that
assignment agreement, Wilson Office specifically and expressly agreed to assume and pay all
amounts due or becoming due under that lease. Because of and through such contractual
covenant, Sierra was a third party beneficiary of the assignment agreement. In June, 2007, a
written lease extension agreement concerning that lease was executed by Wilson Office, wherein
Wilson Office specifically and expressly agreed to make an interim payment of operating
expenses, and other payment items, due or accrued under the lease. That lease extension
agreement extended the lease through January, 2008, and amended the lease to require an interim
expense reimbursement and payment in December, 2007.
4.2 The 2007 lease extension agreement also constituted an acknowledgment of the
existence and justness of Sierra’s claim for reimbursement of operating expenses, sufficient
under Section 16.065 of the Texas Civil Practice & Remedies Code, and constituted a new and
collateral promise and contract to pay the accrued operating expenses, as well as a modification
of the lease to state a specific date for the interim payment of accrued lease expenses. The
written lease extension agreement, dated June 26, 2007, was executed by Wilson Office pursuant
to authority granted to Wilson Office by Wilson Group in the assignment agreement.
Additionally, the lease extension contains an unequivocal acknowledgement of the existence of
Wilson Office’s obligation to pay all amounts due or accrued under the lease, to be submitted
and detailed by Sierra in the form of an audit. Wilson Office’s obligation was to pay those sums
on or before December 1, 2007. The 2007 lease extension agreement clearly expresses a
willingness and obligation of Wilson Office to pay the accrued lease expenses and to honor the
PLAINTIFE’S FIFTH AMENDED PETITION PAGE 3
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audit results. The amount of the audit results and expenses due or accrued were readily
ascertainable, as admitted by each of the Defendants in their pleadings.
4.3 When presented in 2007 with a written interim audit statement of amounts due
under the lease for operating expenses, and Sierra’s demand for payment, both Wilson Office
and Wilson Group failed and refused to pay or otherwise perform, immediately or within the
period for cure under the concerned agreements, in knowing breach of the lease as extended and
amended, the assignment agreement, and the written lease extension agreements with Sierra.
Such conduct also constituted a breach of the acknowledgment contract under Section 16.065 of
the Texas Civil Practice & Remedies Code. Following the expiration of the term of the lease in
2008, Sierra again made written demand upon Wilson Office and Wilson Group for
reimbursement of all accrued and unpaid operating expenses, rent, and hold over rent, Again
both Wilson Office and Wilson Group refused to make any reimbursement. Such failures and
refusals by Wilson Group and Wilson Office have proximately and directly caused Sierra to
suffer and incur damages in an amount of $470,000.00, for which Sierra hereby seeks recovery
and judgment as a contract party and/or as a third party beneficiary.
44 Sierra has performed all conditions precedent to its contract claims, or all such
conditions precedent have occurred.
COUNT 2
4.5 Sierra incorporates by reference the allegations and claims set forth in Paragraph
4.1 through 4.4 above.
4.6 While in the possession
of the premises at 1540 Champion Drive, employees of
Wilson Office and Wilson Group, and invitees of Wilson Office and Wilson Group, physically
damaged portions of the property and the improvements to the property. Such physical damage
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 4
4927838.)
was far in excess of normal wear and tear, Such physical damage was not repaired or remediated
by Wilson Office or Wilson Group prior to the end of the term of the lease as extended, nor did
Wilson Office or Wilson Group pay or reimburse Sierra for such physical damage or the costs of
remediation, immediately or within the period for cure, as they were contractually obligated to
do under the lease and the 2005 assignment agreement. Such physical damage and costs of
remediation have caused Sierra to suffer and incur damages in the amount of $80,000.00, for
which Sierra hereby seeks recovery and judgment as a contract party and/or as a third party
beneficiary.
COUNT 3
BREACH OF CONTRACT UTILIZING BLOMSTROM/HOBART ACCOUNTING
4.7 Sierra repeats and incorporates by reference the allegations and claims set forth in
Paragraphs 4.1 through 4.6 above.
4.8 Pleading to the extent necessary in the alternative, Sierra would show that Wilson
Group, Wilson Office, Hill and Blomstrom each assert and claim that the operating expense
reimbursement duc from them to Sierra under the lease was due in a series of installments
commencing in 1994. Sierra disagrees with the specific installment contentions and accounting
methods of Wilson Office and Wilson Group. Sierra affirmatively avers that the 2007 lease
extension agreement modified the lease to require a December 2007 payment of accrued
expenses. However, in the alternative, if such assertions and claims of said defendants are found
to have any merit or legal substance, then Sierra would show that the payments made by Wilson
Group and/or Wilson Office to Sierra since 1994 should be applied first to the oldest installment
due at the time of the payment. Sierra further affirmatively avers that it has the legal right to
apply one or more of such payments to such claims of Sierra as Sierra elects. Sierra refers to
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 5
4927838.1
these accounting methods as the “Blomstrom/Hobart Accounting Methods”. Utilizing the
Blomstrom/Hobart Accounting Methods, and applying all payments to the oldest installment duc
as claimed by Wilson Group, Wilson Office, Blomstrom and Hill, results in all lease expenses,
rent, and hold over rent being paid through July, 2006. Rent, hold over rent and expenses in an
amount of $470,000.00 are unpaid and due for the period commencing August 1, 2006 and
continuing through the present. Such amount of $470,000.00 is due and owing under the original
lease document as extended and modified, the successive lease extension agreements, and the
2005 assignment agreement. The failure of Wilson Group and Wilson Office to pay such
amount timely and in full constitutes breach of contract, for which Sierra hereby secks recovery
and judgment as a contract party and/or as a third party beneficiary.
COUNT 4
49 Sierra repeats and incorporates by reference the allegations in claims set forth in
Paragraphs 4.1 through 4.8 above.
4,10 Pleading to the extent necessary in the alternative, Sierra would show that Wilson
Group, Wilson Office and Hill, by their conduct in refusing to pay the expenses set forth in
Sierra’s audit demand and in disclaiming any duty or obligation to make such payment, have
therefore and thereby repudiated that lease extension agreement extending the lease through
January, 2008 and modifying the lease.
4.11 As the result of the repudiation, Wilson Group, Wilson Office and Hill owe “hold
over” rent pursuant to Paragraph 18 of the original lease agreement in an amount of 150% of the
pre-existing monthly rent of $17,541.25, such hold over rent commencing on May 1, 2006 and
continuing through January 2008. Thus, Sierra has suffered damages in the amount of
$470,000.00 for “hold over” rent and unpaid expenses. The failure of Wilson Group, Wilson
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 6
49278384
Office and Hill to pay such amount timely and in full constitutes a breach of contract for which
Sierra hereby seeks recovery and judgment as a contract party and/or as a third party beneficiary.
Vv.
CONVERSION
In the process of vacating the premises at 1540 Champion Drive, Wilson Office,
Blomstrom and persons acting under the direction and supervision of Blomstrom intentionally
removed from the premises property of Sierra, some of which had been permanently attached to
and incorporated within the structure. Such conduct constitutes intentional conversion of the
property of Sierra, and proximately and directly caused Sierra to suffer and incur damages. The
conversion was knowing, intentional and malicious. Wilson Office and Blomstrom have paid
Sierra $7,500.00 in compensation for such converted items.
Vi.
PROMISSORY FRAUD AND FRAUDULENT INDUCEMENT
6.1 in connection with the negotiation and execution of the June, 2007 lease
extension agreement, Wilson Office and Blomstrom knowingly and intentionally falsely
promised performance and payments which they at the time of the execution of such agreement
had no intention of performing. In June, 2007, Wilson Office and Blomstrom promised the
reimbursement of expenses incurred by Sierra prior to August, 2005, and when such promises
were made Wilson Office and Blomstrom had no present intent of ever making such
reimbursements. Such false promises of performance were made by Blomstrom, acting with
authority or apparent authority, in the course and scope of his actions as an officer and managing
representative of Wilson Office. Wilson Office benefitted from the fraud, and by and through
Blomstrom, knew of the fraud. Wilson Office also ratified the conduct of Blomstrom. Wilson
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 7
4927838.1
Office is therefore responsible and liable for all damages incurred by Sierra and caused by such
false promises and fraudulent inducement.
6.2 Such false promises of performance constitute promissory fraud and fraudulent
inducement. Sierra reasonably and justifiably relied to its detriment upon such false promises of
performance, and thereby suffered additional economic damages. Among such damages, and
without limitation, was unpaid “hold over” rent and unpaid expenses in the amount of
$470,000.00, under Section 18 of the lease. Sierra was induced by the false promises of
Blomstrom and Wilson Office to enter into the 2007 lease extension agreement, and, among
other things, thereby receive or accrue rent in an amount substantially less than the hold over rent
required by Section 18 of the lease. But for the false promises of performance of Blomstrom and
Wilson Office, Sierra would not have executed the June, 2007 lease extension agreement. Sierra
seeks economic damages with respect to such promissory fraud and fraudulent inducement
against Wilson Office in the amount of $470,000.00.
6.3 The false promises and the fraudulent inducement of Blomstrom and Wilson
Office were committed knowingly, intentionally and with legal malice. Accordingly, Sierra
seeks punitive and exemplary damages against Wilson Office in the amount of $940,000.00.
VIL
IMPROPER DISTRIBUTIONS AND DISREGARD
OF THE CORPORATE STRUCTURE
7A Hill has improperly distributed to himself retained earnings and other capital from
Wiison Group, without paying, and without making adequate provision for the payment of,
amounts due to Sierra, or which Hill knew would become due to Sierra, under the lease for the
property at 1540 Champion Drive, as said lease was extended and modified. Hill has stripped
PLAINTIFE’S FIFTH AMENDED PETITION PAGE 8
4927838.
and denuded Wilson Group of all of its assets and net worth, and rendered it inadequately
capitalized and financially incapable of fulfilling its contractual obligations to Sierra, and also
financially incapable of paying any liability or judgment assessed against Wilson Group in this
case. The stripping and denuding of Wilson Group of all its assets and net worth has thereby
worked an injustice upon Sierra. The stripping and denuding of Wilson Group was knowingly
and intentionally directed by Hill. In the 2005 assignment agreement, Wilson Group and Hill
falsely promised to pay all rent and honor and perform all other obligations under the lease, but
had no present intent of so doing. In negotiating the 2007 lease extension agreement,
Wilson Office and Hill knowingly and intentionally concealed from Sierra the business divorce
which was ongoing between Hill and Wilson Office. Sierra first discovered the fraudulent
actions and intent of Wilson Group and Hill on or after July 1, 2007.
72 By such conduct, Hill has knowingly and intentionally used the corporate
structure of Wilson Group as a sham to perpetrate an actual fraud upon Sierra, for the direct and
personal benefit of Hill. By such conduct, Hill and Wilson Group have perpetrated an actual
fraud upon Sierra. Moreover, Hill has used the corporate structure of Wilson Group as a mere
business conduit of Hill personally. As such, because of such actions and intent, and because of
such improper distributions, under the common law of Texas Hill is personally obligated to pay
all of the amounts due and owing by Wilson Group to Sierra, or repatriate such amounts to
Wilson Group, for recapture and payment to Sierra. Additionaily, the corporate structure of
Wilson Group should be disregarded, and judgment for all of the liabilities and obligations of
Wilson Group, and for all damages in favor of Sierra and against Wilson Group and/or Wilson
Office as determined in this case, should be assessed against and imposed upon Hill individually
and personally.
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 9
A927838.1
73 Wilson Group is a Nevada corporation. At all times relevant to this case, Hill was
an officer, director and shareholder of Wilson Group. Under Sections 78.010(1)(c) and 78.590
of the Nevada Revised Statutes, Hill was a trustee of Wilson Group and its assets. Because of
the actions and conduct of Wilson Group and Hill detailed in paragraphs 7.1 and 7.2 above,
Wilson Group and Hill have made improper distributions in knowing and intentional violation of
Sections 78.300 and 78.595 of the Nevada Revised Statutes and Hill is personally liable to Sierra
for the amount of such improper distributions. Such conduct also renders Hill as the alter ego of
Wilson Group under Section 78.747 of the Nevada Revised Statutes. As such, Hill, acting as the
alter ego of Wilson Group, is personally liable under Section 78.747 of the Nevada Revised
Statutes to Sierra for all of the contractual obligations of Wilson Group to Sierra, The three
criteria listed in Section 78,747(2) Nevada Revised Statutes all exist in this case, as a matter of
law, Under Sections 1.102, 1.104 and 1.105 of the Texas Business Organizations Code, Nevada
statutory law is applicable in this case.
VI.
CONDITIONS PRECEDENT
Pursuant to Rule 54, T.R.C.P., Sierra affirmatively avers that all conditions precedent to
its recovery and right to judgment have been performed or have occurred.
Ix.
NOTICE AND ESTOPPEL
The concerned 1993 lease, as extended, contains thirty day cure periods in Section
15(a)(1) and (2) and Section 16(a) of said lease. None of the defendants in this case ever gave
Sierra any notice of default in the form required by Section 21 of the lease sufficient to
commence the cure period. Therefore, under the doctrines of estoppel by contract and quasi-
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 10
4927838 1
estoppel, defendants are estopped and precluded from asserting Sierra’s breach of the lease, or
failure to comply with any condition precedent under the lease as extended, in this case.
Defendants are estopped from denying, and estopped from disregarding, the express cure periods
contained in the lease, and are estopped from asserting any right inconsistent with the cure
periods and the duties of notice contained in the lease.
xX
ATTORNEY’S FEES
Pursuant to the concerned lease, and pursuant to Chapter 38 of the Texas Civil Practice
and Remedies Code, Sierra is entitled to recover from Wilson Group, Wilson Office and Hill all
attomey’s fees and legal expenses incurred by Sierra in the prosecution of this case. Sierra secks
recover of all attorney’s fees and costs incurred by Sierra in the prosecution of this case.
XL.
ALTERNATIVE PLEADINGS
To the extent, if any, that the facts, allegations, and claims set forth in this pleading
conflict with one another, they are plead in the alternative, as authorized by Rule 48 of the Texas
Rules of Civil Procedure.
XI,
PRAYER
WHEREFORE, such premises considered, Sierra respectfully prays that upon final trial
or hearing in this case:
a. Sierra recover judgment against Wilson Office and Wilson Group for damages in
an amount of $470,000.00 for breach of contract;
PLAINTIFF’S FIFTH AMENDED PETITION PAGE It
4927838.1
Sierra recover further judgment against Wilson Office for economic damages in
an amount of $470,000.00 for promissory fraud;
Sierra recover further judgment against Wilson Office for punitive and exemplary
damages in an amount of $940,000.00.
Sierra further recover judgment against Wilson Group and Hill, jointly and
severally, for economic damages in the amount of $470,000.00 for improper
distributions from Wilson Group to Hill and in disregard of the corporate structure
of Wilson Group;
Sierra recover further judgment against Wilson Office, Wilson Group and Hill,
for all attorney’s fees incurred by Sierra in the prosecution of this case;
Sierra recover further judgment against Wilson Office, Wilson Group and Hill for
pre-judgment and post-judgment interest;
Sierra recover further judgment against Wilson Office, Wilson Group and Hill for
all costs of this action; and
Sierra recover further judgment against Wilson Office, Wilson Group and Hill for
such other and further relief, at law or in equity, as to which Sierra proves itself
entitled.
PLAINTIFF'S FIFTH AMENDED PETITION PAGE 12
4927838,1
Respectfully submitted,
7Led
GLAST, PHI AIRS & MURRAY
By:
Charles C. Frederiksen
State Bar No. 07413300
14801 Quorum Drive, Suite 500
Dallas, Texas 75254
(972) 419-8300 (Telephone)
(972) 419-8329 (Fax)
cfrederiksen@gpm-law.com
CERTIFICATE OF SERVICE
I certify that on January 1%, 2012, a true and correct copy of this document was served
on the following in accordance with the TEXAS RULES OF CIVIL PROCEDURE.
Via Telecopy & CM/RRR Via Telecopy & CM/RRR
Ritch Roberts, Esq. Evelyn A. Yaeger, Esq.
John Helms, Esq. Jean A. Hobart, Esq.
Manuel Diaz, Esq. GIBSON, MCCLURE,
HeLms, RoBerTs & Diaz, LLP WALLACE & DANIELS, LLP
6060 North Central Expwy, Suite 560 8080 North Central Expwy, Suite 1300
Dallas, Texas 75206 Dallas, Texas 75206
ATTORNEYS FOR DEFENDANTS ATTORNEYS FOR DEFENDANTS
THE WILSON GROUP, LTD., and ROBERT BLOMSTROM and
B. DONALD HILL, JR. WILSON OFFICE INTERIORS, LLC
fl
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Us Ultes bs
Charles C. Frederiksen
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PLAINTIFF'S FIFTH AMENDED PETITION PAGE 13
4927838.1
Preview
Filed 12 J anuary 13 P3:26 Gary Fitzsimmons District Clerk Dallas District NO. DC-10-01167 SIERRA INVESTMENT ASSOCIATES, IN THE DISTRICT COURT OF Plaintiff, Vv DALLAS COUNTY, TEXAS WILSON OFFICE INTERIORS, LLC; THE WILSON GROUP, LTD.; ROBERT BLOMSTROM; B. DONALD HILL, JR., Defendants. 298" JUDICIAL DISTRICT PLAINTIFF’S FIFTH AMENDED PETITION TO THE HONORABLE JUDGE OF SAID COURT: COMES NOW Sierra Investment Associates, Plaintiff, complaining of Wilson Office Interiors, LLC, The Wilson Group, Ltd., Robert Blomstrom, and B, Donald Hill, Jr., Defendants, and for cause of action would show as follows: I PARTIES il Sierra Investment Associates (“Sierra”) is a Texas general partnership. Sierra has heretofore made a general appearance in this case. 1.2 Wilson Office Interiors, LLC (“Wilson Office”) is a Delaware limited liability company. Wilson Office has heretofore made a general appearance in this case. 1.3 The Wilson Group, Ltd. (“Wilson Group”) is a Nevada corporation. Wilson Group has heretofore made a general appearance in this case. 1.4 Robert Blomstrom (“Blomstrom”) is an individual residing in Tarrant County, Texas. Blomstrom has heretofore made a general appearance in this case. PLAINTIPY’S FIFTH AMENDED PETITION PAGE | 4927838, 1 15 B. Donald Hill, Jr. (Hill) is an individual residing in Collin County, Texas. Hill has heretofore made a general appearance in this case. Suit is brought against Hill in his individual capacity and as an officer, director, shareholder, and trustee of Wilson Group. il. JURISDICTION AND VENUE 2.1 The Court is vested with jurisdiction in this case because the case involves claims for damages in an amount in excess of $10,000, and because the events and transactions upon which the claims are based occurred in substantial part in Dallas County, Texas. 2.2 The Court is vested with venue in this case because the case involves the breach of contracts performable in Dallas County, Texas, because the case involves tort claims arising from events and transactions which occurred in substantial part in Dallas County, Texas, because Wilson Office has its principal business office in Texas within Dallas County, Texas, and because all defendants have been properly joined in this case. Ill. DISCOVERY LEVEL Sierra designates Discovery Level 2 to control the discovery process in this case, pursuant to Rule 190.3 of the Texas Rules of Civil Procedure. Iv. BREACHES OF CONTRACT COUNT 1 4.1 Sierra entered into a written lease agreement with Wilson Group in 1993 for the use and occupancy of the commercial warehouse located at 1540 Champion Drive in Carrollton, Texas. Multiple written lease extension agreements were executed by Wilson Group and Sierra PLAINTIFF'S FIFTH AMENDED PETITION PAGE 2 49278381 prior to 2004, extending that lease through April, 2006. In August, 2005, that lease was assigned to, and assumed by, Wilson Office pursuant to a written assignment agreement. In that assignment agreement, Wilson Office specifically and expressly agreed to assume and pay all amounts due or becoming due under that lease. Because of and through such contractual covenant, Sierra was a third party beneficiary of the assignment agreement. In June, 2007, a written lease extension agreement concerning that lease was executed by Wilson Office, wherein Wilson Office specifically and expressly agreed to make an interim payment of operating expenses, and other payment items, due or accrued under the lease. That lease extension agreement extended the lease through January, 2008, and amended the lease to require an interim expense reimbursement and payment in December, 2007. 4.2 The 2007 lease extension agreement also constituted an acknowledgment of the existence and justness of Sierra’s claim for reimbursement of operating expenses, sufficient under Section 16.065 of the Texas Civil Practice & Remedies Code, and constituted a new and collateral promise and contract to pay the accrued operating expenses, as well as a modification of the lease to state a specific date for the interim payment of accrued lease expenses. The written lease extension agreement, dated June 26, 2007, was executed by Wilson Office pursuant to authority granted to Wilson Office by Wilson Group in the assignment agreement. Additionally, the lease extension contains an unequivocal acknowledgement of the existence of Wilson Office’s obligation to pay all amounts due or accrued under the lease, to be submitted and detailed by Sierra in the form of an audit. Wilson Office’s obligation was to pay those sums on or before December 1, 2007. The 2007 lease extension agreement clearly expresses a willingness and obligation of Wilson Office to pay the accrued lease expenses and to honor the PLAINTIFE’S FIFTH AMENDED PETITION PAGE 3 49278381 audit results. The amount of the audit results and expenses due or accrued were readily ascertainable, as admitted by each of the Defendants in their pleadings. 4.3 When presented in 2007 with a written interim audit statement of amounts due under the lease for operating expenses, and Sierra’s demand for payment, both Wilson Office and Wilson Group failed and refused to pay or otherwise perform, immediately or within the period for cure under the concerned agreements, in knowing breach of the lease as extended and amended, the assignment agreement, and the written lease extension agreements with Sierra. Such conduct also constituted a breach of the acknowledgment contract under Section 16.065 of the Texas Civil Practice & Remedies Code. Following the expiration of the term of the lease in 2008, Sierra again made written demand upon Wilson Office and Wilson Group for reimbursement of all accrued and unpaid operating expenses, rent, and hold over rent, Again both Wilson Office and Wilson Group refused to make any reimbursement. Such failures and refusals by Wilson Group and Wilson Office have proximately and directly caused Sierra to suffer and incur damages in an amount of $470,000.00, for which Sierra hereby seeks recovery and judgment as a contract party and/or as a third party beneficiary. 44 Sierra has performed all conditions precedent to its contract claims, or all such conditions precedent have occurred. COUNT 2 4.5 Sierra incorporates by reference the allegations and claims set forth in Paragraph 4.1 through 4.4 above. 4.6 While in the possession of the premises at 1540 Champion Drive, employees of Wilson Office and Wilson Group, and invitees of Wilson Office and Wilson Group, physically damaged portions of the property and the improvements to the property. Such physical damage PLAINTIFF'S FIFTH AMENDED PETITION PAGE 4 4927838.) was far in excess of normal wear and tear, Such physical damage was not repaired or remediated by Wilson Office or Wilson Group prior to the end of the term of the lease as extended, nor did Wilson Office or Wilson Group pay or reimburse Sierra for such physical damage or the costs of remediation, immediately or within the period for cure, as they were contractually obligated to do under the lease and the 2005 assignment agreement. Such physical damage and costs of remediation have caused Sierra to suffer and incur damages in the amount of $80,000.00, for which Sierra hereby seeks recovery and judgment as a contract party and/or as a third party beneficiary. COUNT 3 BREACH OF CONTRACT UTILIZING BLOMSTROM/HOBART ACCOUNTING 4.7 Sierra repeats and incorporates by reference the allegations and claims set forth in Paragraphs 4.1 through 4.6 above. 4.8 Pleading to the extent necessary in the alternative, Sierra would show that Wilson Group, Wilson Office, Hill and Blomstrom each assert and claim that the operating expense reimbursement duc from them to Sierra under the lease was due in a series of installments commencing in 1994. Sierra disagrees with the specific installment contentions and accounting methods of Wilson Office and Wilson Group. Sierra affirmatively avers that the 2007 lease extension agreement modified the lease to require a December 2007 payment of accrued expenses. However, in the alternative, if such assertions and claims of said defendants are found to have any merit or legal substance, then Sierra would show that the payments made by Wilson Group and/or Wilson Office to Sierra since 1994 should be applied first to the oldest installment due at the time of the payment. Sierra further affirmatively avers that it has the legal right to apply one or more of such payments to such claims of Sierra as Sierra elects. Sierra refers to PLAINTIFF'S FIFTH AMENDED PETITION PAGE 5 4927838.1 these accounting methods as the “Blomstrom/Hobart Accounting Methods”. Utilizing the Blomstrom/Hobart Accounting Methods, and applying all payments to the oldest installment duc as claimed by Wilson Group, Wilson Office, Blomstrom and Hill, results in all lease expenses, rent, and hold over rent being paid through July, 2006. Rent, hold over rent and expenses in an amount of $470,000.00 are unpaid and due for the period commencing August 1, 2006 and continuing through the present. Such amount of $470,000.00 is due and owing under the original lease document as extended and modified, the successive lease extension agreements, and the 2005 assignment agreement. The failure of Wilson Group and Wilson Office to pay such amount timely and in full constitutes breach of contract, for which Sierra hereby secks recovery and judgment as a contract party and/or as a third party beneficiary. COUNT 4 49 Sierra repeats and incorporates by reference the allegations in claims set forth in Paragraphs 4.1 through 4.8 above. 4,10 Pleading to the extent necessary in the alternative, Sierra would show that Wilson Group, Wilson Office and Hill, by their conduct in refusing to pay the expenses set forth in Sierra’s audit demand and in disclaiming any duty or obligation to make such payment, have therefore and thereby repudiated that lease extension agreement extending the lease through January, 2008 and modifying the lease. 4.11 As the result of the repudiation, Wilson Group, Wilson Office and Hill owe “hold over” rent pursuant to Paragraph 18 of the original lease agreement in an amount of 150% of the pre-existing monthly rent of $17,541.25, such hold over rent commencing on May 1, 2006 and continuing through January 2008. Thus, Sierra has suffered damages in the amount of $470,000.00 for “hold over” rent and unpaid expenses. The failure of Wilson Group, Wilson PLAINTIFF'S FIFTH AMENDED PETITION PAGE 6 49278384 Office and Hill to pay such amount timely and in full constitutes a breach of contract for which Sierra hereby seeks recovery and judgment as a contract party and/or as a third party beneficiary. Vv. CONVERSION In the process of vacating the premises at 1540 Champion Drive, Wilson Office, Blomstrom and persons acting under the direction and supervision of Blomstrom intentionally removed from the premises property of Sierra, some of which had been permanently attached to and incorporated within the structure. Such conduct constitutes intentional conversion of the property of Sierra, and proximately and directly caused Sierra to suffer and incur damages. The conversion was knowing, intentional and malicious. Wilson Office and Blomstrom have paid Sierra $7,500.00 in compensation for such converted items. Vi. PROMISSORY FRAUD AND FRAUDULENT INDUCEMENT 6.1 in connection with the negotiation and execution of the June, 2007 lease extension agreement, Wilson Office and Blomstrom knowingly and intentionally falsely promised performance and payments which they at the time of the execution of such agreement had no intention of performing. In June, 2007, Wilson Office and Blomstrom promised the reimbursement of expenses incurred by Sierra prior to August, 2005, and when such promises were made Wilson Office and Blomstrom had no present intent of ever making such reimbursements. Such false promises of performance were made by Blomstrom, acting with authority or apparent authority, in the course and scope of his actions as an officer and managing representative of Wilson Office. Wilson Office benefitted from the fraud, and by and through Blomstrom, knew of the fraud. Wilson Office also ratified the conduct of Blomstrom. Wilson PLAINTIFF'S FIFTH AMENDED PETITION PAGE 7 4927838.1 Office is therefore responsible and liable for all damages incurred by Sierra and caused by such false promises and fraudulent inducement. 6.2 Such false promises of performance constitute promissory fraud and fraudulent inducement. Sierra reasonably and justifiably relied to its detriment upon such false promises of performance, and thereby suffered additional economic damages. Among such damages, and without limitation, was unpaid “hold over” rent and unpaid expenses in the amount of $470,000.00, under Section 18 of the lease. Sierra was induced by the false promises of Blomstrom and Wilson Office to enter into the 2007 lease extension agreement, and, among other things, thereby receive or accrue rent in an amount substantially less than the hold over rent required by Section 18 of the lease. But for the false promises of performance of Blomstrom and Wilson Office, Sierra would not have executed the June, 2007 lease extension agreement. Sierra seeks economic damages with respect to such promissory fraud and fraudulent inducement against Wilson Office in the amount of $470,000.00. 6.3 The false promises and the fraudulent inducement of Blomstrom and Wilson Office were committed knowingly, intentionally and with legal malice. Accordingly, Sierra seeks punitive and exemplary damages against Wilson Office in the amount of $940,000.00. VIL IMPROPER DISTRIBUTIONS AND DISREGARD OF THE CORPORATE STRUCTURE 7A Hill has improperly distributed to himself retained earnings and other capital from Wiison Group, without paying, and without making adequate provision for the payment of, amounts due to Sierra, or which Hill knew would become due to Sierra, under the lease for the property at 1540 Champion Drive, as said lease was extended and modified. Hill has stripped PLAINTIFE’S FIFTH AMENDED PETITION PAGE 8 4927838. and denuded Wilson Group of all of its assets and net worth, and rendered it inadequately capitalized and financially incapable of fulfilling its contractual obligations to Sierra, and also financially incapable of paying any liability or judgment assessed against Wilson Group in this case. The stripping and denuding of Wilson Group of all its assets and net worth has thereby worked an injustice upon Sierra. The stripping and denuding of Wilson Group was knowingly and intentionally directed by Hill. In the 2005 assignment agreement, Wilson Group and Hill falsely promised to pay all rent and honor and perform all other obligations under the lease, but had no present intent of so doing. In negotiating the 2007 lease extension agreement, Wilson Office and Hill knowingly and intentionally concealed from Sierra the business divorce which was ongoing between Hill and Wilson Office. Sierra first discovered the fraudulent actions and intent of Wilson Group and Hill on or after July 1, 2007. 72 By such conduct, Hill has knowingly and intentionally used the corporate structure of Wilson Group as a sham to perpetrate an actual fraud upon Sierra, for the direct and personal benefit of Hill. By such conduct, Hill and Wilson Group have perpetrated an actual fraud upon Sierra. Moreover, Hill has used the corporate structure of Wilson Group as a mere business conduit of Hill personally. As such, because of such actions and intent, and because of such improper distributions, under the common law of Texas Hill is personally obligated to pay all of the amounts due and owing by Wilson Group to Sierra, or repatriate such amounts to Wilson Group, for recapture and payment to Sierra. Additionaily, the corporate structure of Wilson Group should be disregarded, and judgment for all of the liabilities and obligations of Wilson Group, and for all damages in favor of Sierra and against Wilson Group and/or Wilson Office as determined in this case, should be assessed against and imposed upon Hill individually and personally. PLAINTIFF'S FIFTH AMENDED PETITION PAGE 9 A927838.1 73 Wilson Group is a Nevada corporation. At all times relevant to this case, Hill was an officer, director and shareholder of Wilson Group. Under Sections 78.010(1)(c) and 78.590 of the Nevada Revised Statutes, Hill was a trustee of Wilson Group and its assets. Because of the actions and conduct of Wilson Group and Hill detailed in paragraphs 7.1 and 7.2 above, Wilson Group and Hill have made improper distributions in knowing and intentional violation of Sections 78.300 and 78.595 of the Nevada Revised Statutes and Hill is personally liable to Sierra for the amount of such improper distributions. Such conduct also renders Hill as the alter ego of Wilson Group under Section 78.747 of the Nevada Revised Statutes. As such, Hill, acting as the alter ego of Wilson Group, is personally liable under Section 78.747 of the Nevada Revised Statutes to Sierra for all of the contractual obligations of Wilson Group to Sierra, The three criteria listed in Section 78,747(2) Nevada Revised Statutes all exist in this case, as a matter of law, Under Sections 1.102, 1.104 and 1.105 of the Texas Business Organizations Code, Nevada statutory law is applicable in this case. VI. CONDITIONS PRECEDENT Pursuant to Rule 54, T.R.C.P., Sierra affirmatively avers that all conditions precedent to its recovery and right to judgment have been performed or have occurred. Ix. NOTICE AND ESTOPPEL The concerned 1993 lease, as extended, contains thirty day cure periods in Section 15(a)(1) and (2) and Section 16(a) of said lease. None of the defendants in this case ever gave Sierra any notice of default in the form required by Section 21 of the lease sufficient to commence the cure period. Therefore, under the doctrines of estoppel by contract and quasi- PLAINTIFF'S FIFTH AMENDED PETITION PAGE 10 4927838 1 estoppel, defendants are estopped and precluded from asserting Sierra’s breach of the lease, or failure to comply with any condition precedent under the lease as extended, in this case. Defendants are estopped from denying, and estopped from disregarding, the express cure periods contained in the lease, and are estopped from asserting any right inconsistent with the cure periods and the duties of notice contained in the lease. xX ATTORNEY’S FEES Pursuant to the concerned lease, and pursuant to Chapter 38 of the Texas Civil Practice and Remedies Code, Sierra is entitled to recover from Wilson Group, Wilson Office and Hill all attomey’s fees and legal expenses incurred by Sierra in the prosecution of this case. Sierra secks recover of all attorney’s fees and costs incurred by Sierra in the prosecution of this case. XL. ALTERNATIVE PLEADINGS To the extent, if any, that the facts, allegations, and claims set forth in this pleading conflict with one another, they are plead in the alternative, as authorized by Rule 48 of the Texas Rules of Civil Procedure. XI, PRAYER WHEREFORE, such premises considered, Sierra respectfully prays that upon final trial or hearing in this case: a. Sierra recover judgment against Wilson Office and Wilson Group for damages in an amount of $470,000.00 for breach of contract; PLAINTIFF’S FIFTH AMENDED PETITION PAGE It 4927838.1 Sierra recover further judgment against Wilson Office for economic damages in an amount of $470,000.00 for promissory fraud; Sierra recover further judgment against Wilson Office for punitive and exemplary damages in an amount of $940,000.00. Sierra further recover judgment against Wilson Group and Hill, jointly and severally, for economic damages in the amount of $470,000.00 for improper distributions from Wilson Group to Hill and in disregard of the corporate structure of Wilson Group; Sierra recover further judgment against Wilson Office, Wilson Group and Hill, for all attorney’s fees incurred by Sierra in the prosecution of this case; Sierra recover further judgment against Wilson Office, Wilson Group and Hill for pre-judgment and post-judgment interest; Sierra recover further judgment against Wilson Office, Wilson Group and Hill for all costs of this action; and Sierra recover further judgment against Wilson Office, Wilson Group and Hill for such other and further relief, at law or in equity, as to which Sierra proves itself entitled. PLAINTIFF'S FIFTH AMENDED PETITION PAGE 12 4927838,1 Respectfully submitted, 7Led GLAST, PHI AIRS & MURRAY By: Charles C. Frederiksen State Bar No. 07413300 14801 Quorum Drive, Suite 500 Dallas, Texas 75254 (972) 419-8300 (Telephone) (972) 419-8329 (Fax) cfrederiksen@gpm-law.com CERTIFICATE OF SERVICE I certify that on January 1%, 2012, a true and correct copy of this document was served on the following in accordance with the TEXAS RULES OF CIVIL PROCEDURE. Via Telecopy & CM/RRR Via Telecopy & CM/RRR Ritch Roberts, Esq. Evelyn A. Yaeger, Esq. John Helms, Esq. Jean A. Hobart, Esq. Manuel Diaz, Esq. GIBSON, MCCLURE, HeLms, RoBerTs & Diaz, LLP WALLACE & DANIELS, LLP 6060 North Central Expwy, Suite 560 8080 North Central Expwy, Suite 1300 Dallas, Texas 75206 Dallas, Texas 75206 ATTORNEYS FOR DEFENDANTS ATTORNEYS FOR DEFENDANTS THE WILSON GROUP, LTD., and ROBERT BLOMSTROM and B. DONALD HILL, JR. WILSON OFFICE INTERIORS, LLC fl | Us Ultes bs Charles C. Frederiksen me = PLAINTIFF'S FIFTH AMENDED PETITION PAGE 13 4927838.1