Kajima Int'l v. Formosa Plastics Corp.

Citation15 S.W.3d 289
Decision Date23 March 2000
Docket NumberNo. 13-98-266-CV,13-98-266-CV
CourtCourt of Appeals of Texas

On appeal from the 135th District Court of Calhoun County, Texas.

Before Justices Hinojosa, Yanez, and Rodriguez


Opinion by Justice Rodriguez.

Kajima International, Inc. (Kajima) sued Formosa Plastics Corporation, USA and Formosa Plastics Corporation, Texas (Formosa) for fraud, breach of contract, quantum meruit, and negligent misrepresentation arising from work performed by Kajima at Formosa's expansion plant in Point Comfort, Texas. In a bifurcated trial, a jury found Kajima entered into one of five contracts with Formosa as a result of fraud by Formosa and, using two methods of calculation, awarded damages to Kajima in the amounts of $2,157,293 and $1,900,000. The jury found no material breach of any of the five contracts, but awarded Kajima $3,700,000 for quantum meruit. The jury further awarded Kajima $4,675,000 in attorneys' fees and $1,540,000 in exemplary damages.

The trial court ordered certain jury answers disregarded, including: the $1,900,000 fraud recovery, the $3,700,000 in quantum meruit damages, the award of $4,675,000 in attorneys' fees, and questions eleven, twelve, and thirteen,1 which the jury did not answer. The court also included an award of $525,776 as unpaid retainage on three contracts. The resulting judgment totaled $5,591,066.65, including prejudgment interest. Kajima filed a motion for mistrial, which the trial court denied, and a motion for new trial, which was overruled by operation of law. On appeal, Kajima raises nine issues. We reverse and remand.

Kajima, an industrial construction company, submitted several bids for work on Formosa's expansion plant project located in Point Comfort, Texas. Formosa awarded Kajima five contracts, some involving piping work in the olefins area and others involving piping and equipment setting work in the polypropylene plant. Each contract specified a schedule of performance. The general terms and conditions common to all contracts permitted Kajima to work overtime only if Kajima or its subcontractors delayed the work, and provided no additional compensation for such work.

Performance took much longer than provided for in the contracts, causing Kajima's costs to exceed the contract amount paid by Formosa. Kajima asserts it was required to spend this money as a result of delays caused by Formosa. In addition, Kajima asserts Formosa fraudulently induced it to enter into the contracts and make artificially low bids on the contracts by withholding information relating to the design and drawings of the polypropylene plant. Kajima further asserts Formosa provided Kajima with a false schedule concerning the olefins plant which failed to reveal that multiple contractors would be working in the same location at the same time doing incompatible work. Moreover, according to Kajima, Formosa engaged in a "string along" fraud scheme in which Formosa made repeated false promises to compensate Kajima for delays, disruptions, bid omissions, and additional costs in order to keep Kajima working.

Formosa counters that Kajima spent in excess of the contract prices because of Kajima's own bidding and contract administration mistakes. Formosa asserts the drawings were adequate for building and bidding, and when problems arose, Kajima was paid pursuant to the contract. Formosa further contends that Kajima knew other contractors would be working within its area, and that any conflict in scheduling was the result of Kajima's own mismanagement.

By its first issue, Kajima complains the trial court erroneously refused to submit a broad form fraud question. Kajima's proposed jury question broadly asked whether Formosa committed fraud against Kajima; however, the trial court limited the fraud question to whether Kajima entered into the contracts as a result of fraud by Formosa. By limiting the jury's consideration to fraud in the inducement of the five written contracts, Kajima contends the trial court precluded the jury from considering Formosa's acts of fraud to "string along" Kajima after the work was under way. As articulated by Kajima, "[it] was deprived of any submission to the jury concerning Formosa's fraudulent inducement of conduct that was not contractually required and that occurred subsequent to the execution of the original contracts."

The standard of review for an alleged error in the jury charge is abuse of discretion. See Texas Dept. of Human Serv. v. E.B., 802 S.W.2d 647, 649 (Tex. 1990). An abuse of discretion occurs when the trial court acts without reference to any guiding principle. See id.; Dico Tire, Inc. v. Cisneros, 953 S.W.2d 776, 797 (Tex. App.--Corpus Christi 1997, writ denied). A trial court must submit all questions raised by the pleadings and evidence in its charge to the jury. See Tex. R. Civ. P. 278; Hyundai Motor Co. v. Rodriguez ex rel. Rodriguez, 995 S.W.2d 661, 663 (Tex. 1999). When feasible, jury questions should be in broad form, accompanied by appropriate instructions and definitions. See Hyundai, 995 S.W.2d at 663-64. To determine whether an alleged error in the jury charge is reversible, we consider the pleadings, the evidence presented at trial, and the charge in its entirety. See Island Recreational Dev. Corp. v. Republic of Tex. Sav. Ass'n, 710 S.W.2d 551, 555 (Tex. 1986). Error in the charge is reversibleonly if harmful, that is, if it caused or was reasonably calculated to cause, and probably did cause, the rendition of an improper judgment. See Tex. R. App. P. 44.1(a)(1).

The elements of fraud are: (1) a material misrepresentation was made; (2) it was false; (3) when the representation was made, the speaker knew it was false or the statement was recklessly asserted without any knowledge of its truth; (4) the speaker made the false representation with the intent that it be acted on by the other party; (5) the other party acted in reliance on the misrepresentation; and (6) the party suffered injury as a result. See DeSantis v. Wackenhut Corp., 793 S.W. 2d 670, 688 (Tex. 1990).

In the present case, Kajima pleaded that "Formosa withheld material information from Kajima and engaged in improper conduct with regard to Kajima both before and after submission of bids and execution of the Contracts." Kajima further pleaded that Formosa engaged in a scheme of wrongful conduct through numerous misrepresentations or material omissions, and made "misrepresentations concerning its intention to reasonably compensate for delays and disruptions when, in reality, it possessed no such intention." Kajima also pleaded the occurrence of the specific elements of fraud without indicating that such fraud was committed only in the inducement of the written contracts. No special exceptions to the pleadings were filed; consequently, we construe the pleadings liberally in favor of the pleader. See Handy Andy, Inc. v. Ruiz, 900 S.W.2d 739, 742 (Tex. App.--Corpus Christi 1994, writ denied) (citing Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 186 (Tex. 1977)). We conclude Kajima's pleadings adequately raised the issue of fraud arising after execution of the contracts.

We next examine the evidence supporting the requested fraud question. Calvin Howton, an on-site project engineer for Kajima, provided evidence of Formosa's post-contract fraud. Howton testified that, in order to catch up to the targeted schedule from delays caused by other contractors and Formosa, Kajima was required to hire more people, work overtime, and perform twenty-four hour shifts, and did so pursuant to Formosa's demands and assurances that they would be compensated for the additional costs. Ronald Robichaux, Formosa's senior engineer in charge of new projects in the maintenance department, stated in a videotaped deposition that if a contractor made a claim for extras, Formosa would try to get the contractors to do the work, without authorizing payment. Kajima also provided evidence that it was not paid for the additional costs or overtime and that it suffered damages as a result. We conclude there is some evidence that: (1) Formosa promised to compensate Kajima for overtime and additional costs; (2) this promise or representation was false; (3) when the promise was made, Formosa knew it was false or made such promise recklessly without any knowledge of its truth; (4) Formosa made this promise with the intent that it be acted on by Kajima; (5) Kajima relied upon said promise or misrepresentation; and (6) Kajima suffered injury as a result. Thus, there is some evidence of fraud occurring after the execution of the contract.

Formosa cites Formosa Plastics Corp., USA v. Presidio Engineers & Contractors, 960 S.W.2d 41, 46-47 (Tex. 1998), for the proposition that the only type of fraud claim which can exist in a contract setting is a claim for fraud in the inducement of contracts. We find no language in Presidio to support such an interpretation. In Presidio, the supreme court reviewed an opinion...

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