Facciolla v. Linbeck Const. Corp.

• Decision Date: 26 March 1998
• Docket Number: No. 06-96-00091-CV,06-96-00091-CV
• Citation: 968 S.W.2d 435
• Parties: JAMES V. FACCIOLLA, JVF, Inc., and Town & Country Construction Company, Appellants; Kenneth R. Pearson and Kirwin L. Drouet, Cross-Appellants, v. LINBECK CONSTRUCTION CORP., MAXXAM, Inc., SHRP Management, Inc., and SHRP Acquisition, Inc., Appellees.
• Court: Texas Court of Appeals

Page 435

968 S.W.2d 435

JAMES V. FACCIOLLA, JVF, Inc., and Town & Country Construction Company, Appellants Kenneth R. Pearson and Kirwin L. Drouet, Cross-Appellants, v. LINBECK CONSTRUCTION CORP., MAXXAM, Inc., SHRP Management Inc., and SHRP Acquisition, Inc., Appellees.

No. 06-96-00091-CV.

Court of Appeals of Texas Texarkana.

Submitted Feb. 12, 1998.

Decided March 26, 1998.

Richard P. Hogan, Jr., David W. Holman, Holman, Hogan, DuBose, Townsend, Houston, George P. Hardy, III, Hardy & Johns, Houston, G. Wesley Urquhart, Houston, Francis I. Spagnoletti, Spagnoletti & Associates, Houston, for Appellants Facciolla, JVF, Town & Country.

Solace Kirkland Southwick, Thomas M. Farrell, Mayor, Day, Caldwell, Keeton, Houston, for Cross-Appellants Pearson and Drouet.

M. Susan Hardie, Hayden Burns, Burns, Wooley, Marseglia, Houston, for Appellee Linbeck.

Thomas M. Farrell, Mayor, Day, Caldwell, Keeton, Houston, for Appellees, MAXXAM and SHRP, Inc.

Gerald T. Holtzman, Holtzman, Urquhart, Moore, Houston, for Appellee Sam Houston Race Park, Ltd., et al.

Before CORNELIUS, C.J., and GRANT and ROSS, JJ.

OPINION

ROSS, Justice.

I. Nature of the Case:

The appellant, James Facciolla, and the related businesses which he owns, JVF, Inc. and Town & Country Construction Company (referred to collectively as "Facciolla"), alleged various breach of contract and tort claims against a number of persons and entities involved in the development and construction of the Sam Houston Race Park horse racing facility in Houston, Texas. Facciolla appeals the failure of the trial court to submit to the jury certain claims and requested instructions against various defendants, including MAXXAM, Inc. (MAXXAM), Linbeck Construction Company (Linbeck), Kirwin Drouet (Drouet), and Kenneth Pearson (Pearson). Facciolla also appeals the jury verdict as to the defendant Linbeck, arguing that the failure of the jury to find liability against Linbeck was against the great weight and preponderance of the evidence.

Two of the other defendants, Pearson and Drouet, also appeal the judgment against them, claiming that Facciolla cannot recover both in contract and in tort for one injury.

II. Facts:

Texas legalized pari-mutuel horse racing in 1987. TEX.REV.CIV. STAT. ANN. art. 179e, et seq. (Vernon Supp.1998). After a failed attempt to secure a racing permit, Pearson and Drouet, along with other investors, formed a limited partnership, Sam Houston Race Park Ltd. (SHRP Ltd.), to seek a license. The general partner of SHRP Ltd. was a corporation, SHRP, Inc. Drouet and Pearson each owned 25% of the stock in SHRP, Inc., and other investors owned the remaining 50%. In June 1990, Robert Harter, another named defendant in this suit, acquired 25% of the stock of SHRP, Inc., thereby placing 75% of the stock in the hands of Drouet, Pearson, and Harter.

Also in June 1990, a written agreement was reached between Facciolla and SHRP Ltd. for Facciolla to perform construction consulting services for the partnership. This agreement was later reconfirmed in a letter in March 1991.

On April 3, 1991, SHRP Ltd. entered into an agreement with Linbeck which provided that, in exchange for a $100,000.00 investment in SHRP Ltd., SHRP Ltd. would negotiate in good faith with Linbeck for Linbeck to serve as construction manager/builder of the track. Linbeck would be given the contract for construction services only if its bid was competitive with other bids received.

The Texas Racing Commission held hearings on the SHRP Ltd. race track proposal on May 20-21, 1991. Facciolla testified at these hearings and told the Commission that he would be serving as the construction manager of the race track, which was his understanding at the time of the hearings.

In July 1991, Facciolla sent a proposal to Pearson outlining his requirements to serve as construction manager of the track. SHRP and Pearson rejected the proposal as uncompetitive. The Racing Commission issued a license to SHRP Ltd. on August 12, 1991. Pearson told Facciolla in January 1992 that neither he nor his companies would be used by SHRP Ltd. as the construction manager, but that Linbeck would be used instead.

SHRP Ltd. had trouble raising the millions of dollars needed to finance the construction of the proposed track, and the project remained dormant for nearly two years. In May 1993, MAXXAM began to look at the possibility of investing in the track. MAXXAM brought in Salomon Brothers, an investment banking firm, to evaluate the track as an investment and assist MAXXAM in obtaining the financing needed. As part of this process, Salomon and MAXXAM performed a due diligence investigation of the track to assess the potential investment. SHRP Ltd. obtained $75 million for the financing of the track through a deal underwritten by Salomon Brothers where MAXXAM obtained 100% of the stock in SHRP, Inc. in exchange for the cash. SHRP, Inc. remained a general minority partner of SHRP Ltd.

Construction began and was completed on time as required by the Texas Racing Commission deadline. The track opened on April 29, 1994.

When Facciolla failed to get the construction contract, he sued those whom he felt were responsible for choosing to use Linbeck. The defendants include MAXXAM, the purchaser of the largest interest in the race track and the 100% owner of the general partner (SHRP, Inc.) operating the race track partnership. However, at the end of Facciolla's evidence, the court granted a directed verdict on all claims asserted against MAXXAM. The defendants also included Linbeck, who Facciolla claims invested $100,000.00 to obtain construction work that was "promised" to Facciolla. Other defendants include Harter, Pearson, and Drouet, three of the original partners in the track. Other race track entities, including Sam Houston Race Park, Ltd., SHRP Management, Inc., and SHRP Acquisition, Inc., filed for bankruptcy protection and were severed from the suit.

The jury found that Facciolla and SHRP Ltd., acting through its general partner SHRP, Inc., did have an agreement whereby Facciolla would serve as construction manager of Sam Houston Race Park. The jury also found that SHRP Ltd., acting through its general partner, SHRP, Inc., breached that agreement. Also, the jury found that SHRP, Inc., Drouet, and Harter intentionally interfered with the agreement, wrongfully interfered with prospective contractual relations, engaged in a civil conspiracy and, along with defendant Pearson, committed fraud against Facciolla. SHRP, Inc. was found liable in the amount of $400,000.00 for breach of contract damages. SHRP, Inc., Drouet, and Pearson were found jointly and severally liable for damages in the amount of $400,000.00 for noncontract (fraud) damages. That sum was reduced to $300,000.00 by a $100,000.00 settlement from Harter. In addition, $550,000.99 in exemplary damages were awarded against SHRP, Inc. The final judgment was signed on June 18, 1996. SHRP, Inc. did not appeal the judgment against it, and the judgment is now final. Drouet and Pearson did appeal the $300,000.00 award against them, and that appeal will be discussed below.

Other facts pertinent to the points of error will be discussed as necessary under each point.

III. Facciolla's Claims:

A. MAXXAM Allegedly Ratified SHRP, Inc.'s Tortious Actions:

In his first two points of error, Facciolla alleges that the trial court erred in granting a directed verdict in favor of MAXXAM because Facciolla claims that the trial record supports MAXXAM's liability for ratification of the various acts of SHRP, Inc.'s breach of contract.

1. Standard of Review:

In reviewing a directed verdict, we examine the evidence in the light most favorable to the party suffering an adverse judgment. S.V. v. R.V., 933 S.W.2d 1, 8 (Tex.1996); Brinegar v. Porterfield, 705 S.W.2d 236, 237 (Tex.App.--Texarkana 1986), aff'd, 719 S.W.2d 558 (Tex.1986). We must indulge every proper inference from the evidence against the trial court's action in withdrawing the case from the jury. Echols v. Wells, 510 S.W.2d 916, 919 (Tex.1974). It is error for the trial court to instruct a verdict when a material issue is raised by the evidence. Id. If there is any conflicting evidence of a probative nature in the record, a determination of the issue is for the jury. Air Conditioning, Inc. v. Harrison-Wilson-Pearson, 151 Tex. 635, 253 S.W.2d 422, 425 (1952). An instructed verdict is proper if the evidence is insufficient to raise a fact issue as to one or more fact propositions that must be established for the opponent to be entitled to judgment. Edlund v. Bounds, 842 S.W.2d 719, 723-24 (Tex.App.--Dallas 1992, writ denied). Where no evidence of probative force on an ultimate fact element exists, or where the probative force of slight testimony is so weak that only a mere surmise or suspicion is raised as to the existence of essential facts, the trial court has the duty to instruct the verdict. University Nat'l Bank v. Ernst & Whinney, 773 S.W.2d 707, 709-10 (Tex.App.--San Antonio 1989, no writ); Guynn v. Corpus Christi Bank & Trust, 589 S.W.2d 764, 770 (Tex.Civ.App.--Corpus Christi 1979, writ dism'd).

2. Background:

Facciolla argues that MAXXAM ratified conduct including breach of contract, fraud, tortious or wrongful interference with a contract, or civil conspiracy by awarding the construction contract to Linbeck when the contract had been promised to Facciolla. Facciolla points to three facts which demonstrate that more than a scintilla of evidence existed to show that MAXXAM ratified this conduct: (1) that Linbeck's involvement was contemplated during the time when negotiations were ongoing for the purchase of the race track's assets by MAXXAM; (2) that Linbeck's construction possibilities went hand-in-hand with its $100,000.00 investment; and (3) that MAXXAM abided by and operated under the contract with Linbeck, to the detriment of the promise to Facciolla.

In response, MAXXAM claims that it was merely an...