Henry S. Miller Co. v. Bynum

• Decision Date: 08 March 1990
• Docket Number: No. 01-88-00926-CV,01-88-00926-CV
• Citation: 797 S.W.2d 51
• Parties: HENRY S. MILLER CO. v. Douglas BYNUM and Starfire Engineering, Inc., d/b/a Tiffany's Hair Styles. (1st Dist.)
• Court: Texas Court of Appeals

Page 51

797 S.W.2d 51

HENRY S. MILLER CO. v. Douglas BYNUM and Starfire Engineering, Inc., d/b/a

Tiffany's Hair Styles.

No. 01-88-00926-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

March 8, 1990.

Rehearing Denied Sept. 13, 1990.

Joseph O. Slovacek, Houston, for appellant-relator.

John C. Riddle and George M. Bishop, Houston, for appellee-respondent.

Before EVANS, C.J., and DUGGAN and O'CONNOR, JJ.

OPINION

EVANS, Chief Justice.

This is an appeal from a judgment for the plaintiff in a Deceptive Trade Practices action.

Douglas Bynum, Jr. and Starfire Engineering, Inc., d/b/a Tiffany's Hair Styles ("Bynum"), sued defendants, Richard E. Dover ("Dover") and Henry S. Miller Company ("Miller"), alleging various violations of the Deceptive Trade Practices Act. Tex.Bus. & Com.Code Ann. sec. 17.41 et seq. (Vernon Supp.1988). Bynum alleged that Miller, a commercial leasing agent representing a Mr. Riddle and Dover, offered him space in the Wood Winds Shopping Center as a prospective site for his beauty shop. According to Bynum, Miller represented the Wood Winds Center: (1) was a Riddle development; (2) was "almost fully occupied"; (3) would have only "first class" establishments; and (4) was a "Riddle" center with standardized tenant regulations, high quality construction, and good maintenance. Bynum asserted that, on the basis of these representations, he leased space in April 1984 for the operation of his beauty shop. During the two years that followed, he discovered that Miller's representations were false. He said the center's restrictions and rules were unevenly and inconsistently applied and did not affect all occupants uniformly. Moreover, the center's occupancy rate did not conform to what he had been told, and the center was not operated as a "first class" center. During his occupancy, numerous problems occurred: the center was poorly maintained; there was "soft and runny" tar in the parking lot; there were frequent water interruptions, flooding, and breaks in the main water lines due to poor construction; and stacks of debris and construction materials were left on site for long periods of time. He also discovered that Riddle was not the owner and developer of the center, and that Riddle did not even own the parking lot. As a consequence of these problems, Bynum had to sell his beauty shop business in January 1986. He alleged nonrefundable leasehold expenses of $33,511, lost capital investment after depreciation of $60,426, and $212,448 in lost profits.

Miller filed a cross-claim against the other defendants seeking indemnity and contribution. The cause was submitted to the court without a jury, which rendered judgment in favor of Bynum against all defendants except Dover, who had been dismissed before trial. The court's judgment awarded Bynum $60,426 as actual damages and additional damages of $120,852. Because the judgment did not dispose of Miller's cross-action against Dover, it was interlocutory in nature. The court later entered a final judgment disposing of all parties and issues in the case. That judgment is the subject of this appeal.

In separate findings of fact and conclusions of law, the trial court found that Miller made misrepresentations to Bynum. Miller, among other things, stated:

(a) that the Wood Winds Shopping Center would be a John C. Riddle Development;

(b) that the center would be a "first class" shopping center;

(c) that the center was almost "wholly leased out";

(d) that the regulations of the center would be applied to all tenants, including Bynum, in a uniform manner;

(e) that construction debris would be cleaned from the center at least daily;

(f) that the center would be advertised to induce more prospective customers of Bynum's to use the center;

(g) that the amount of rent was justified in light of the quality and quantity of services the center would provide; and

(h) that the center, including the parking lot, was wholly owned by John C. Riddle and John Riddle Interests.

The trial court found that Bynum relied upon these and other representations, which were either made verbally by Miller or in sales brochures and a tenant's package given to Bynum by one of Miller's sales agents. The court found that Bynum would not have entered into the lease but for these representations, which were false, misleading, or deceptive, and knowingly made in reckless disregard for the truth. The court further found that John C. Riddle and John Riddle Interests, through their exclusive sales agent, Henry S. Miller Company, made these same representations to Bynum, upon which he relied; that but for such representations, he would not have entered into the lease; and that such representations were false, misleading, or deceptive, and knowingly made in reckless disregard for the truth. The court found that Bynum had suffered damages in the amount of $60,426.

In its conclusions of law, the court found that Henry S. Miller Company had violated the Deceptive Trade Practices Act, in that it had: (a) caused confusion or misunderstanding as to the source, sponsorship, approval, or certification of its services; (b) caused confusion or misunderstanding as to its affiliation, connection, or association with John C. Riddle and John Riddle Interests; (c) represented that goods and services of the shopping center had sponsorship, approval, characteristics, uses, benefits, or qualities that they did not have; (d) represented that goods and services of the shopping center were of particular standard, quality, or grade when they were of a lesser standard, quality, or grade; and (e) represented that the lease agreement conferred rights, remedies, and obligations it did not have.

The court further concluded that it was unnecessary for the plaintiff to send prior written notice to the defendants, if such was not done, because of the possibility of the statute of limitations barring the plaintiff's claim. The court found that John C. Riddle and John Riddle Interests violated the Deceptive Trade Practices Act for each of the same reasons as specified for Miller, and that they also breached express warranties in their lease and sales brochures, as well as implied warranties to provide the highest quality management at the Wood Winds Shopping Center.

On this appeal, Miller does not challenge any of the trial court's findings of misrepresentations, which constitute violations of the Deceptive Trade Practices Act. Thus, we must consider those facts as having been established as a matter of law, and as establishing a basis of liability under the Deceptive Trade Practices Act. Miller contends only that there is no evidence or insufficient evidence to prove it had knowledge of the falsity of such representations.

In its first four points of error, Miller contends that the evidence is legally and factually insufficient to support the trial court's award of damages in the amount of $60,426. Miller's contention, in essence, is that the trial court's damage award cannot be sustained because Bynum failed to offer any evidence showing that his claimed expenditures were reasonable and necessary.

Under the Deceptive Trade Practices Act, an aggrieved consumer is entitled to an award of "actual damages." Tex.Bus. & Com.Code Ann. sec. 17.50(b)(1) (Vernon 1987). The term "actual damages" has been defined as those damages recoverable at common law. W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex.1988). In a Deceptive Trade Practices action, damages are awarded to compensate the consumer for the "actual loss" sustained as a result of the defendant's conduct. Kish v. Van Note, 692 S.W.2d 463, 466 (Tex.1985). Damages in such a case will usually be measured either by the "benefit of the bargain" theory, i.e., the difference between the value represented and any value actually received, or the "out-of-pocket" theory, i.e., the difference between the value lost and any value received. Bankston, 754 S.W.2d at 128. But, as the concurring opinion in Bankston explains, these remedies are not exclusive, and a court may adopt a measure that is the most appropriate for the particular case. Id.; Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 367 (Tex.1987); see also Tex.R.Civ.P. 301.

Under the express terms of his lease, Bynum was required to pay rentals of $17,280 per year, or a total of $34,560 for the first two years of his five-year lease. He testified that in order to meet the requirements of his lease and to open his beauty salon, he was required to make expenditures totaling $64,676, of which amount he was reimbursed $8,622 by Miller. Bynum offered a chart showing his gross receipts during the first 21 months of his operation. He said the beauty shop made a profit for a couple of months, but that these profits ceased because of business disruptions. He finally sold his business for $23,000. Bynum testified, without objection, that after he subtracted the $23,000 sales price from the amount of his total capital investment, his net capital loss, after depreciation, was $60,426. Bynum explained that his net capital loss represented the amount he had been required to put into the lease venture, less the amount he had received from the venture. Miller did not controvert this testimony.

When a consumer makes a purchase in reliance upon misrepresentations actionable under the Deceptive Trade Practices Act, the actual damages recoverable under the Act are to be determined by the "total loss" sustained by the consumer as a result of the deceptive trade practice. Gibbs v. Main Bank of Houston, 666 S.W.2d 554, 560 (Tex.App.--Houston [1st Dist.] 1984, no writ). The consumer's "total loss" may be established by showing the total amount of the consumer's payments, less any profits or other benefits remaining in the consumer's hands. Id.; see also Woo v. Great Southern Acceptance Corp., 565 S.W.2d 290 (Tex.Civ.App.--Waco 1978, writ ref'd n.r.e.). The consumer's net economic loss is a proper measure of...