Huynh v. Phung, No. 01-04-00267-CV (Tex. App. 2/16/2007)
| Decision Date | 16 February 2007 |
| Docket Number | No. 01-04-00267-CV.,01-04-00267-CV. |
| Parties | LANG VAN HUYNH AND SONNY K. HUYNH, Appellants v. THO THI PHUNG, Appellee. |
| Court | Texas Court of Appeals |
Panel consists of Chief Justice RADACK and Justices TAFT and NUCHIA.
Appellants, Lang Van Huynh ("Lang") and Sonny Van Huynh ("Sonny") (together "the Huynhs"), appeal from a judgment for fraud and breach of contract in favor of appellee, Tho Thi Phung ("Tho"). We determine whether the trial court erred because (1) the evidence is legally insufficient to support fraud; (2) the award of actual damages was improper; and (3) the award of exemplary damages violated constitutional due process or was factually insufficient. We modify the judgment to reduce the amount awarded to $20,000 in actual damages against the Huynhs, jointly and severally, and affirm the judgment as so modified, conditioned on a remittitur of $100,000 of the $200,000 exemplary damages awarded against each of the Huynhs. In the event that a remittitur is not filed with the Clerk of this Court within 20 days from the date of this opinion, we will reverse the judgment and remand the case to the trial court for a new trial.
Tho sued to recover damages against the Huynhs for breach of contract and fraud, alleging that she had entered into an agreement with the Huynhs to invest $20,000 in the Huynhs' business in exchange for repayment of the loan and a percentage of profits. The Huynhs pleaded novation as an affirmative defense, claiming that they were not liable to Tho because she had substituted the debt that was the subject of her cause of action for a promissory note executed by a third party.
The evidence at trial showed that in either November or December of 1996, the Huynhs asked Tho to invest $ 100,000 in a shrimping dock business ("the business"). The Huynhs told Tho that once they had enough capital, they would purchase the business for $800,000 and then re-sell it within three months for $1,000,000.
Tho agreed to invest $20,000 on the condition that, within approximately three months, she would receive her initial investment back plus 10% of the projected $200,000 profit. After the three months had passed, Tho requested repayment from the Huynhs several times, but was denied. On or around June 1, 1997, Lang signed a $20,000 check ("the check") in repayment of Tho's initial investment, but that check was not paid by the bank because of insufficient funds. At the time of the trial, Tho neither had been repaid the $20,000 investment, nor had she received the money from the expected proceeds of the sale.
At trial, the Huynhs characterized the money exchange as a loan to another person, not an investment in their business. Specifically, the Huynhs claimed that Tho loaned money to Thomas Nguyen and that Lang was merely a guarantor. As evidence of this, the Huynhs introduced a promissory note that had handwritten comments in Vietnamese at the bottom. They claimed that this note, along with the additional comments, released Lang from the loan and therefore constituted a novation. However, Tho introduced the original note, which did not contain the additional handwriting at the bottom.
The jury found in favor of Tho on the breach-of-contract and fraud causes of action. The jury awarded out-of-pocket damages in the amount of $20,000, benefit-of-the-bargain damages in the amount of $20,000, and exemplary damages of $2,500,000. Tho elected to recover for fraud, instead of breach of contract, and voluntarily remitted exemplary damages to $200,000 per defendant, pursuant the statutory exemplary-damages cap. See Tex. Civ. Prac. & Rem. Code Ann. § 41.008 (Vernon 2002).
In the trial court's initial judgment, it awarded $20,000 in actual damages and $4,732.98 in interest against the Huynhs, jointly and severally, and $200,000 in exemplary damages against Sonny and Lang individually. Then, in its first amended judgment, the trial court awarded $20,000 in actual damages and $2,394.52 in interest, reducing interest to five percent. The exemplary-damages award remained the same.
Tho filed a motion to disregard the jury findings and to modify the judgment, stating that the "jury misunderstood the questions and mistakenly entered an amount less than intended" and that the "jury misguidedly took Plaintiff's counsel's suggestions literally." In a second amended judgment, the trial court awarded $40,000 in actual damages and $5,090.41 in interest against the Huynhs, jointly and severally, and $200,000 in exemplary damages against Sonny and Lang individually.
In points of error one and two, the Huynhs allege that the trial court erred because there is no evidence to support the jury's liability finding on fraud and breach of contract.
A legal-sufficiency point must be sustained (1) when there is a complete absence of a vital fact; (2) when rules of law or evidence preclude according weight to the only evidence offered to prove a vital fact; (3) when the evidence offered to prove a vital fact is no more than a scintilla; or (4) when the evidence conclusively establishes the opposite of the vital fact. Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997). Legal-sufficiency review in the proper light must credit favorable evidence if reasonable jurors could and disregard contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). If the evidence would enable reasonable and fair-minded persons to differ in their conclusions, then jurors must be allowed to do so. Id. at 822. A reviewing court cannot substitute its judgment for that of the trier of fact, so long as the evidence falls within this zone of reasonable disagreement. Id. Although the reviewing court must "consider evidence in the light most favorable to the verdict and indulge every reasonable inference that would support it[,] . . . if the evidence allows of only one inference, neither jurors nor the reviewing court may disregard it." Id. Fraud must be proved at trial by a preponderance of the evidence. Browder v. Eicher, 841 S.W.2d 500, 502 (Tex. App.-Houston [14th Dist.] 1992, writ denied); see Tex. Civ. Prac. & Rem. Code Ann. § 41.003(a) (Vernon 2003); Sparks v. Dawson, 47 Tex. 138 (1877); Frankfurt v. Wilson, 353 S.W.2d 490, 496 (Tex. Civ. App. Dallas 1961, no writ).1
The following elements are required to prove fraud:
(1) a material misrepresentation was made; (2) the misrepresentation was either known to be false when made or was asserted without knowledge of its truth; (3) the misrepresentation was intended to be acted upon; (4) the misrepresentation was relied upon; and (5) the misrepresentation caused injury. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001).
A party to a contract has a duty to abstain from inducing another to enter the contract through the use of fraudulent misrepresentations. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001). A promise to do an act in the future is actionable fraud when made with the intention, design, and purpose of deceiving and with no intention of performing the act. Formosa Plastics Corp. v. Presidio Eng'rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). Thus, to prove fraud in the inducement, a plaintiff must present evidence that is "relevant to [the defendant's] intent at the time the representation was made." Id. at 48. Failure to perform, standing alone, is not evidence of intent not to perform when the promise was made. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986). That fact, however, is a circumstance to be considered with other facts to establish intent. Id. Because intent to defraud is usually not susceptible to direct proof, it may be proven by circumstantial evidence. Id. Slight circumstantial evidence of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent. Id.
In point of error one, Lang argues that "[b]ecause the only representation alleged and proved was the intent to repay a loan in the future, there is no evidence of fraud." Specifically, Lang argues that "[t]here is no evidence that [Lang] did not intend to perform at the time the promise was made."
Viewed in a light favorable to the judgment, the evidence showed that the Huynhs represented to Tho that they would repay the $20,000 investment and 10 percent of the profit made from selling the business within approximately three months. They did not repay Tho the initial $20,000 within the time promised, and they did not pay Tho $20,000 in proceeds from the sale of the business because no such sale occurred. When Lang gave a check to Tho in repayment of Tho's $20,000 initial investment with the Huynhs, the check was returned for insufficient funds. Although Lang contends that the check was merely collateral, and not repayment for an investment with Tho, Lang nonetheless testified to the jury he did not have the money in the account when he wrote the check.
In addition, Lang contended that in a meeting on July 4, 1997, Tho agreed to shift liability from Lang to Thomas. Lang testified that David Nguyen, Tho's son, prepared a promissory note to reflect the novation of the security agreement. Thomas testified that he added a notation to the promissory note at the request of Lang and Tho because Lang could not read English. Lang introduced into evidence a promissory note that included a notation that stated in Vietnamese, At trial, Tho introduced the original note that did not contain...
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