City of Fort Worth v. Pippen

• Decision Date: 02 April 1969
• Docket Number: No. B--1107,B--1107
• Citation: 439 S.W.2d 660
• Parties: The CITY OF FORT WORTH, Petitioner, v. Harvey G. PIPPEN et al., Respondents.
• Court: Texas Supreme Court

Page 660

439 S.W.2d 660

The CITY OF FORT WORTH, Petitioner, v. Harvey G. PIPPEN et al., Respondents.

No. B--1107.

Supreme Court of Texas.

April 2, 1969.

Rehearing Denied May 7, 1969.

S. G. Johndroe, Jr., City Atty., Jerome H. Parker, Jr., Asst. City Atty., Fort Worth, for petitioner.

Richard Owens, Walter S. Fortney, Fort Worth, Robert F. Salmon, Linden, Arthur Lee Moore, Fort Worth, for respondents.

REAVLEY, Justice.

The City of Fort Worth, in acquiring numerous tracts of property for its streets and airport, placed funds in the hands of Rattikin Title Company with instructions for insuring title and closing the transactions with the sellers. The City's land agent, Herman F. Hall, obtained city authorization of one price while making a settlement with the seller to take a lesser amount. The difference Hall obtained from Rattikin Title Company through its vice-president, Harvey G. Pippen. The jury found that Pippen knew of Hall's conversion of the City's money. The trial court decided that neither Pippen nor Rattikin were liable to the City, and entered judgment for the City against only Hall.

The Court of Civil Appeals held both Pippen and Rattikin to be liable but remanded the case in order to allow them to prove an offset to their liability. 430 S.W.2d 239. We agree with the Court of Civil Appeals on the issues of liability but render judgment here for the City.

These transactions took place in connection with a number of city projects conducted in the years 1959 through 1964. Hall was an experienced and trusted city employee. He negotiated in each instance a price which the landowner would accept for the title or damages to his land. No contract was signed between the City and the landowner, and no other employee of the City knew of the price which the landowner had actually agreed to take. Hall then reported a different agreement to the land department of the City, and a recommendation was put through channels to the City Council to obtain authorization to conclude the trade for the larger sum. The City placed the matter in Rattikin's hands by informing the title company that the City had decided to purchase the certain tract of land, requesting a title policy, and apprising Rattikin that the City's check would shortly be transmitted for the certain consideration. The check would follow with accompanying identification and instructions as to disbursement.

In some cases there were fences, shrubs or buildings which had to be removed from the acquired property. It was the policy of the City always to make the landowner responsible for moving his own improvements and to pay him an agreed sum for this item of damage when the removal was completed. However, Hall violated this policy and said nothing to the landowner about this measure of the consideration. Hall's trade with the landowner, where construction was required, was for a payment for the land together with Hall's promise to see that the construction or moving of improvements was accomplished.

The closing of these transactions and disbursement of the money was under the control of Pippen, who was the vice-president of Rattikin. He would prepare a 'seller's statement' which showed the trade as the seller understood it. On the other hand a 'purchaser's statement' would be prepared for the City according to the version of the trade in its letter of instructions to Rattikin. The money which did not go to the seller or to a construction company for work actually done, went into the hands of Hall.

After the closing, Pippen would write to the City and transmit the deed, title policy and 'purchaser's statement' along with Rattikin's bill for closing costs which included the price of the title insurance and an escrow fee.

The City finally discovered the discrepancies in 1964 and filed this suit in 1965, alleging that in 64 particular transactions, the funds of the City had been deposited with Rattikin as escrow agent and trustee of the City, that the money had been accepted in trust, and that the trust had been violated by wrongful delivery and unauthorized disbursements to Hall. The City sought actual damages of $90,519.69, together with exemplary damages. Trial before a jury began on August 25, 1966, and continued until the verdict was returned on October 4, 1966. The jury answered 192 special issues, and found that all except four of 92 particular checks were converted by Hall to his own use and benefit. The jury further found that at the time each of these title company checks was issued by Pippen, he knew that Hall was converting the proceeds. Exemplary damages were found against Pippen in the amount of $10,000, but no exemplary damages were assessed against Rattikin.

The City sought a judgment on that verdict of $60,011.20 actual damages against Pippen and Rattikin, together with $10,000 exemplary damages as against Pippen. Hall was also a party defendant and judgment was rendered against him on the verdict, from which he took no appeal. However, the trial court entered judgment n.o.v. in favor of Pippen and Rattikin on August 15, 1967. In the judgment the trial court found as a matter of law that the evidence showed Hall to be the agent of the City with authority to do what he did in connection with the closing of the transactions, and that 'after the plaintiff had received its deed and title policy the plaintiff had no further interest or title in the escrowed funds, and so cannot maintain this action for conversion thereof.'

The Court of Civil Appeals at first reversed and rendered judgment for the City against Rattikin and Pippen according to the jury verdict, but on rehearing remanded the case for Pippen and Rattikin to have an opportunity to plead and prove, as an offset to their liability, such benefits as the City may have received from the use of the funds by Hall.

All three of these parties applied to this Court for writ of error. The application of the City, contending that judgment should have been rendered for it, was granted. Because that application was granted, the applications of Pippen and Rattikin were also granted.

LIABILITY OF PIPPEN

Pippen argues first that there is no evidence that he 'had any information or any reason to think that money was being embezzled by Hall from the City of Fort Worth.' An examination of a few of these transactions will demonstrate why the jury found otherwise.

On November 3, 1959, the City wrote to Rattikin a letter in this customary form: 'This is an application for a title policy on Lots 16 and Lot 17, Block 147, Clark's Addition, which the City has agreed to purchase from Mrs. Ora Bell Brooks for a cash consideration of $2,500.00.' The City's check to Pattikin for $2,500 is dated November 4, 1959, and carries the notation: 'Purchase of Lots 16 & 17, Block 147, Clark's Addition from Ora Bell Brooks.' A 'purchaser's statement' dated November 9 was prepared by Pippen to report the details of closing to the City. It shows the purchase price as $2,500. The title policy, prepared on Pippen's instructions, was for the same amount of $2,500. But the 'seller's statement,' which is signed by Mrs. Brooks, shows her amount due as $2,100. The $400 difference, disbursed by Rattikin's check to J. Hall Construction Company for 'construction work,' is not shown on either statement.

In the case of J. H. Bailey, the City explained that its check for $862.40 was to pay '$191.00 for land; $671.40 for relocation of fences, loss of trees and damages to the remainder.' The City's statement shows these figures, but the seller's statement shows only $259 for 'damages etc.' together with the $191 for land. Bailey testified at the trial that his agreement was for payment of the total $450, as his statement reflected. The difference, $412.40, was paid by Rattikin's check to T. & H. Construction Co. on April 12 for 'construction.' Bailey said that he knew nothing of T. & H. Construction Co., that no construction was done, and that he had a fence but moved it himself.

C. B. Holden received $300 for damages, but the City paid Rattikin $400 for this purpose. The two statements show those respective amounts, and the $100 left in Rattikin's hands was paid by it to J. & H. Construction Co. Mrs. Holden testified that there was no construction and no word about J. & H. Construction Co. She also told in these words of an incident at the closing in Pippen's office: 'Mr. Holden raised up the first two sheets of paper and was reading at the bottom of the third sheet, when Mr. Pippen reached over and snatched the paper from his hands and told him he wasn't supposed to read it, it was all legal.'

The City sent a check for $62,340 to Rattikin for the A. Hall trade with this explanation: 'Payment for land is $48,000.00, $8,000.00 for improvements and $6,340.00 for estimated gravel and cancellation of lease agreement with truck farmer.' The trade was closed by Pippen on March 21, 1962. He made a closing statement for the City showing the payment of $48,000 plus $14,340 for improvements and gravel. He issued the City a title policy for the $48,000. However, the seller's statement shows payment of only $55,000, as follows: Land $42,000; Improvements $8,000; Gravel $5,000. A. Hall was paid in full on this lesser basis. This left $7,340 in Rattikin's account, which was paid within a month by four checks as follows: $1,000 to M. & H. Construction Company 'for moving barn,' $3,000 to M. & H. Construction Co. for 'construction,' $2,000 to A. Hall for 'proceeds of sale,' and $1,340 to A. Hall for 'bal. proceeds of sale.' The seller, August Hall, was not related to Herman Hall. A. Hall testified that he sold his land and improvements for $55,000, that he knew nothing of M. & H. Construction Co., and that the two checks to A. Hall dated after the closing were never seen by him.

These transactions were all closed by Pippen; and the checks were drawn, the title policies issued, and the papers prepared according to his direction. The...