Fisher Controls Intern., Inc. v. Gibbons

• Decision Date: 19 October 1995
• Docket Number: No. 01-94-0009-CV,01-94-0009-CV
• Citation: 911 S.W.2d 135
• Parties: FISHER CONTROLS INTERNATIONAL, INC., Appellant, v. Bill GIBBONS, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 135

911 S.W.2d 135

FISHER CONTROLS INTERNATIONAL, INC., Appellant, v. Bill GIBBONS, Appellee.

No. 01-94-0009-CV.

Court of Appeals of Texas Houston (1st Dist.).

Oct. 19, 1995.

Thomas G. Gee, Jane Nenninger, Margaret N. McGann, Houston, Robert A. Hall, Elizabeth B. Kamin, Woodard M. Carstarphen, Houston, for Appellant.

Guy E. Matthews, Houston, Gerald H. Buttrill, Andrew L. Jefferson, Houston, for Appellee.

Before COHEN, MIRABAL and TAFT, JJ.

OPINION

COHEN, Justice.

Bill Gibbons sued Fisher Controls International, Inc. (Fisher) asserting tort claims arising from his purchase of a corporation that was Fisher's independent sales representative in Alaska. His fraud and Deceptive Trade Practice Act claims were submitted to a jury, which found in his favor on both; the trial court granted Fisher's motion for j.n.o.v. on the DTPA claim only. The trial court rendered judgment for Gibbons for approximately $4.62 million, including $3.3 million in punitive damages. We reverse and render judgment that Gibbons take nothing.

Fisher sells valves and instruments through independent sales companies throughout North America. Fisher's standard representative agreement provides for a one year term.

Gibbons earned college degrees in mechanical engineering and business and then went to work for Fisher. In 1974, he left and became a sales engineer in Houston for Puffer-Sweiven, Inc., Fisher's largest independent sales representative. Gibbons was still employed in that capacity when, in late 1984, Bill Johnson--the president and owner of Alaska Controls, Inc. (ACI), the Fisher representative in northern Alaska--decided to retire at the expiration of ACI's representative agreement with Fisher. Johnson requested that Fisher help find a buyer for ACI. Hal Tompkins, the president of Puffer-Sweiven, approached Gibbons about it in November, and arranged for Gibbons to meet with Fisher's agents, Jack Carey and John Weekley. The deal Gibbons and Johnson negotiated called for Gibbons to pay a portion of the purchase price for ACI in cash, and the balance by a note to Johnson secured by ACI stock, payable over a five-year period.

Because the note to Johnson was for five years, Gibbons proposed to Fisher that its representative agreement with ACI be renewed to extend for five years, rather than for the typical one year term. Fisher refused. Ultimately, Fisher and ACI signed a three year contract. With that one exception, the agreement Fisher and Gibbons, acting as ACI's president, signed on April 1, 1985, was the typical form contract for Fisher's sales representatives.

Gibbons embarked upon an ambitious effort to expand ACI's business in Alaska. That effort initially enjoyed a degree of success in 1985; although ACI's costs and expenses had increased dramatically, sales revenues had also greatly increased. Late that year and in early 1986, however, oil prices dropped from approximately $32 a barrel to approximately $12 a barrel. ACI's business suffered a commensurate decline; over 90 percent was oil-related. ACI's condition worsened during the rest of 1986 and 1987.

By letter dated January 25, 1988, Fisher notified ACI that it would not renew ACI's sales representative agreement when it expired on March 31, 1988. Fisher and Gibbons thereafter agreed that ACI would continue to be a representative for an additional four months. On June 23, 1988, Fisher terminated that agreement and stated the following reasons: (1) a bank had seized most of ACI's assets, and was going to sell them; (2) ACI no longer had offices, phones, facilities, or employees to conduct its business or service the needs of customers owning Fisher products; (3) ACI had told customers that Fisher products re-manufactured by a third party were new and unused Fisher products; (4) sales had "decreased tremendously" and customer complaints had increased; and (5) ACI owed Fisher $200,000, which was past due.

Fisher later signed a representative agreement with a new company. Gibbons sold what was left of ACI to third parties and returned to Texas. This suit followed, in June 1990.

We first address Gibbons' cross-point of error, in which he contends the trial court erred in granting Fisher's motion for j.n.o.v. and setting aside the jury's verdict on his DTPA claim.

To recover under the DTPA, one must be a "consumer," which means the claimant must have sought or acquired goods or services by purchase or lease, and must show that these same goods or services formed the basis for the DTPA complaint. Melody Home Mfg. Co. v. Barnes, 741 S.W.2d 349, 351-52 (Tex.1987); Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex.1981). The DTPA defines "goods" as "tangible chattels or real property purchased for use," and it defines services as "work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods." TEX.BUS. & COM.CODE ANN. § 17.45(1)(2) (Vernon 1987). The DTPA excludes those transactions that convey wholly intangible property rights. Texas Cookie Co. v. Hendricks & Peralta 747 S.W.2d 873, 876 (Tex.App.--Corpus Christi 1988, writ denied). See also Meineke Discount Muffler v. Jaynes, 999 F.2d 120, 125 (5th Cir.1993). The question of whether a plaintiff is a consumer under the DTPA is a question of law for the trial court. Holland Mortgage & Inv. Corp. v. Bone, 751 S.W.2d 515, 517 (Tex.App.--Houston [1st Dist.] 1987, writ ref'd n.r.e.).

ACI purchased an intangible property right, to wit, the right to act as Fisher's sales representative under the "Representative Agreement." The purchaser of such an intangible business right is usually not a "consumer" under the DTPA, unless qualifying "collateral services" are an objective of the transaction and not merely incidental to the purchase. Texas Cookie Co., 747 S.W.2d at 876-77. In other words, the goods or services acquired must form the basis of the DTPA claim. Cameron, 618 S.W.2d at 539.

In the present case, ACI did not purchase a "franchise," with typical associated collateral services, such as is described in Texas Cookie Co., 747 S.W.2d at 877. Rather, ACI merely contracted to be a "sales, engineering and service representative" for Fisher products in Alaska. ACI did not pay a franchise fee, or any other type of fee, for this representation right. ACI was to solicit orders for Fisher products, transmit the orders to Fisher, and receive a commission when the customer paid Fisher. ACI could also buy Fisher products at a discount and resell them on its own behalf. At ACI's expense, it could attend training sessions provided by Fisher, if ACI deemed it appropriate. ACI specifically agreed, in connection with its performance under the "Representative Agreement," that it would not "describe itself other than as a sales representative of the Fisher Companies."

We hold, as a matter of law, that the few "collateral services" Fisher agreed to provide ACI under the contract were merely incidental to the transaction, rather than being an objective of the transaction. Therefor, ACI is not a "consumer" under the DTPA with regard to the claims asserted as to the "Representative Agreement." ¹ See Johnson v. Walker, 824 S.W.2d 184, 187 (Tex.App.--Fort Worth 1991, writ denied) (plaintiff was not a DTPA consumer because his agreement to become an insurance sales agent did not involve purchase of goods and services, but merely the intangible right to sell the defendant's products); Nelson v. Data Terminal Sys., Inc., 762 S.W.2d 744, 747 (Tex.App.--San Antonio 1988, writ denied); Cameron, 618 S.W.2d at 539; Meineke, 999 F.2d at 125.

Further, even if ACI was a "consumer" under the DTPA, this does not make Gibbons, individually, a "consumer." Gibbons merely signed the "Representative Agreement" as President of ACI, a corporation. See Crossland v. Canteen Corp., 711 F.2d 714, 720-21 (5th Cir.1983) (where principal shareholder of a corporation negotiated for and signed a franchise agreement in his individual capacity and immediately assigned it to his corporation and the corporation paid all consideration for the franchise, the individual shareholder did not "purchase" the franchise and the franchise was not a "good" or "service" under the DTPA; therefore the shareholder was not a "consumer" entitled to bring suit.).

We believe the present case is distinguishable from authorities relied on by Gibbons, such as United Postage Corp. v. Kammeyer, 581 S.W.2d 716 (Tex.Civ.App.--Dallas 1979, no writ), and Wheeler v. Box, 671 S.W.2d 75 (Tex.App.--Dallas 1984, writ ref'd n.r.e.). In Kammeyer, the goods acquired, stamp vending machines, were the subject of the misrepresentations, and those misrepresentations were the basis for the claim. 581 S.W.2d at 721. In Wheeler, the business purchased included both tangible personal property and specific services, such as the promise to provide at least 10 days of training, and the failure to provide these services was the basis of the claim. 671 S.W.2d at 77-78.

We hold the trial court did not err in ruling, as a matter of law, that Gibbons was not a consumer. Gibbons' cross-point of error is overruled.

In points of error three and four, Fisher asserts that the evidence is legally and factually insufficient to support the jury's finding of fraud. In reviewing legal sufficiency, we consider only the evidence and inferences, when viewed in their most favorable light, that tend to support the finding and disregard all evidence and inferences to the contrary. Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988). In reviewing factual insufficiency, we consider all the evidence and sustain the point only if the evidence is so weak or so against the great weight and preponderance of the evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).

The elements of fraud are (1) that the defendant made a material representation; (2) that was false; (3) that the defendant knew it was false when...