Castellano v. Fragozo, 311 F.3d 689 (5th Cir. 11/20/2002)

• Decision Date: 20 November 2002
• Docket Number: No. 00-50591.,00-50591.
• Citation: 311 F.3d 689
• Parties: ALFRED CASTELLANO Plaintiff-Appellee, v. CHRIS FRAGOZO, Etc.; ET AL., Defendants, Chris FRAGOZO, Individually and in his Official Capacity as a San Antonio Police Officer; Maria SANCHEZ, Individually, Defendants-Appellants.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 689

311 F.3d 689

ALFRED CASTELLANO Plaintiff-Appellee, v. CHRIS FRAGOZO, Etc.; ET AL., Defendants Chris FRAGOZO, Individually and in his Official Capacity as a San Antonio Police Officer; Maria SANCHEZ, Individually, Defendants-Appellants.

No. 00-50591.

United States Court of Appeals, Fifth Circuit.

November 20, 2002.

Timothy B. Soefje (argued), Thorton, Summers, Bichlin, Dunham & Brown, San Antonio, TX, for Plaintiff-Appellee.

Nathan Mark Ralls (argued), Chaves, Gonzales & Hoblit, San Antonio, TX, Audrey Mullert Vicknain, Chaves, Gonzales & Hoblit, Corpus Christi, TX, for Defendant-Appellant.

Before BARKSDALE and STEWART, Circuit Judges, and DUVAL, District Judge.¹

DUVAL, District Judge:

This legal saga began eighteen years ago. The central issues in this suit for malicious prosecution under 42 U.S.C. § 1983 are: (1) whether the jury instructions constituted reversible error, (2) whether there was sufficient evidence to support the jury's verdict in favor of the plaintiff, and (3) whether there was sufficient evidence to support the award of both economic and compensatory damages. The trial court affirmed the jury's verdict in all respects. For the following reasons, we AFFIRM.

I. Background Facts

A. Castellano's Arrest and Criminal Trial for Arson

Alfred Castellano ("Castellano") is the owner of Fred's Fish Fry ("Fred's"), a collection of fast food restaurants in San Antonio, Texas, which he and his father started in 1963. On October 31, 1984, one of Fred's restaurants ("Fred's No. 7") was destroyed by fire. After investigation, the San Antonio fire department concluded that the fire had been the result of an "inside arson." That conclusion was based, initially, on evidence gathered at the scene of the fire by Alfred Castro ("Castro"), a San Antonio arson investigator (and former defendant in this action), which included jars of gasoline, a disconnected natural gas line from the water heater, and two wrenches found inside Fred's No. 7. Castro's initial opinion was later confirmed by allegations made and evidence produced by Maria Sanchez ("Sanchez"),² a former Fred's employee, and Chris Fragozo ("Fragozo"),³ a San Antonio police officer who worked off-duty as a security officer for Fred's, consisting of: (1) tapes of conversations allegedly held between Sanchez and Castellano wherein Castellano implicated himself in the arson of Fred's No. 7 and (2) Sanchez's sworn testimony that Castellano had tried on previous occasions to burn the restaurant. With that evidence, Castro concluded that there was probable cause to believe Castellano was responsible for the fire.

On November 8, 1984, Castellano was arrested, at his office, for committing arson on Fred's No. 7. After entering his place of business, the police immediately grabbed Castellano, placed him in handcuffs, searched his person and office, and took him to the police station. Thereafter, Castellano remained handcuffed and was seated in a room while he waited to be fingerprinted. When the press arrived, the police left Castellano in handcuffs while they slowly paraded him through the crowd of reporters towards the front door. Throughout this ordeal, Castellano was not given the opportunity to call his family or business associates to warn them of the allegations before the story appeared on the evening news.

At the time of his arrest, Castellano was a respected business man, was serving on the Fire and Police Civil Service Commission, and was active in community politics. Following his arrest, however, he was asked to resign his position on the Commission. The story and its permutations intermittently appeared on the evening news and in the newspaper for a over a year.

At his criminal trial, the evidence implicating Castellano in the arson was, for the most part, twofold. First, there was the testimony of Sanchez who testified that: (1) in the days before the fire, Castellano confided in her that he intended to burn Fred's No. 7 and that he attempted to burn the restaurant on prior occasions; (2) Castellano instructed her to purchase Halloween items for the restaurants — specifying that there should be a candle in Fred's No. 7; and (3) she related Castellano's plan to burn Fred's No. 7 to Fragozo, who suggested that she tape record her conversations with Castellano so she would not be blamed for the fire. Those recorded conversations, containing statements allegedly made by Castellano implicating himself in the arson and other arson attempts, were admitted as evidence of Castellano's guilt. Also introduced as evidence was the fact that, at the time of the arson, Fred's No. 7 was operating at a loss and Castellano had recently increased his insurance on the restaurant.

Castellano vehemently denied the accuracy of the tape and claimed that Sanchez and Fragozo altered the tapes in an act of revenge. He also introduced an expert witness who testified that the tape was a fraud-created by manipulating conversations between Sanchez and Castellano.

At the conclusion of the criminal trial, the jury convicted Castellano of arson and he was sentenced to five years probation. He subsequently filed three writs of habeas corpus — the third of which was granted by the Texas Criminal Court of Appeals. At the writ hearing, the court heard uncontradicted testimony from Clemencia Jiminez ("Jimenez"), an employee of Fred's that: (1) Sanchez told her, before Castellano's conviction, about the plan to tape record Sanchez's conversations with Castellano and alter them to implicate him in the arson and asked her to corroborate Sanchez's story with the district attorney; (2) after Castellano's conviction, Sanchez told her she "had gotten" Castellano without her help; and (3) Fragozo attempted to enlist her as a witness against Castellano.⁴

The findings of fact issued by the habeas judge following the hearing were adopted by the Texas Criminal Court of Appeals, and included Finding of Fact No. 3 that Fragozo "attempted to enlist Clemencia Jiminez as a witness against [Castellano] and aided Maria Sanchez in altering the tape recordings offered into evidence. The tapes were altered to appear that [Castellano] was admitting to the arson when in fact he had no knowledge of its commission" and Finding of Fact No. 6 that "Sanchez and Fragozo collaborated together and without their testimony and the altered tapes, there is insufficient evidence to sustain a finding of guilt in this case."⁵

Castellano's conviction was overturned and his case was remanded for a new trial in 1993. On remand, however, the district attorney dismissed the case for "lack of evidence" and Castellano's record was later expunged.

B. Civil Suit for Malicious Prosecution

On September 23, 1994, Castellano filed the instant civil action in the District Court of the 288th Judicial District, Bexar County Texas for malicious prosecution under 42 U.S.C. § 1983 against Fragozo, individually and in his capacity as a San Antonio Police Officer, Sanchez, Castro, and others. Castellano claimed that the defendants maliciously prosecuted him in violation of his First, Fourth, Fifth, Sixth, Eighth, and Fourteenth Amendment rights and contended that he had suffered a myriad of damages, including injury to his feelings, reputation, mental health, and character. Castellano also complained that he had been "severely impaired in his social and mercantile standing" and continued to suffer great embarrassment, humiliation, and anguish. Finally, Castellano asserted that his business had lost clientele, profits, and good standing as a direct and proximate result of the criminal prosecution.

The case was subsequently removed to federal court where it was referred to a magistrate judge. Thereafter, on Sanchez's motion for summary judgment, the court dismissed Castellano's malicious prosecution claims based on the Fifth, Sixth, Eighth, and Fourteenth Amendments. Relying on Albright v. Oliver⁶ and Johnson v. Louisiana Department of Agriculture,⁷ however, the court sustained Castellano's malicious prosecution claims based on alleged violations of his First and Fourth Amendment rights. The court also determined that Castellano's third amended complaint contained sufficient allegations to support his malicious prosecution claim under the Fourth Amendment.⁸

The trial was held in April of 2000. As to his individual damages, Castellano testified that he: (1) was embarrassed from the exposure his case received in the media — even after his conviction was overturned, (2) was asked to resign from his civil service position, (3) was unable to obtain loans to expand his business, and (4) was denied coverage for fire insurance. Castellano also stated that at the time of the fire, he was attempting to franchise his business. He had started a construction company, developed a concept of constructing inexpensive prefabricated buildings, and expended resources hiring legal counsel, preparing literature, and obtaining a license in California. However, Castellano explained that since his conviction for arson, he had been unable to franchise his business and stated that his personal losses stemming therefrom "could have been in the millions."

Also testifying at trial was Castellano's economist, Gene Trevino ("Trevino"), who opined as to the measure of damages Castellano suffered, individually, as a result of his failure to franchise his business after the arson conviction.⁹ Specifically, Trevino testified that Castellano's personal economic loss as a result of his inability to franchise his business was $1,200,000. He further explained that this amount was based on the assumption that Fred's would have been able to franchise at a rate of one restaurant a year for twelve years and, as such, Castellano could have increased his personal salary by an additional $100,000 per year for each of those years.¹⁰

Jiminez and Louis Cantu ("Cantu"), both employees of Fred's, also testified at the trial. Jiminez testified that (1) Sanchez...