Levine v. Steve Scharn Custom Homes, Inc.

• Decision Date: 02 October 2014
• Docket Number: No. 01–12–00229–CV.,01–12–00229–CV.
• Citation: 448 S.W.3d 637
• Parties: Jonathan LEVINE and Samantha Levine, Appellants v. STEVE SCHARN CUSTOM HOMES, INC., Steve Scharn, and NewFirst National Bank, Appellees.
• Court: Texas Court of Appeals

448 S.W.3d 637

Jonathan LEVINE and Samantha Levine, Appellants

v.STEVE SCHARN CUSTOM HOMES, INC., Steve Scharn, and NewFirst National Bank, Appellees.

No. 01–12–00229–CV.

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

Oct. 2, 2014.

Michael Durrschmidt, Michael D. Conner, Melissa Nicholson Sternfels, Hirsch & Westheimer, P.C., Houston, TX, for Appellants.

Richard L. Tate, Kristin K. Reis, Tate Moerer & King, LLP, Richmond, TX, Mike Johanson, Greg Laughlin, Johanson & Fairless, L.L.P., Sugar Land, TX, for Appellees.

Panel consists of Justices KEYES, HIGLEY, and MASSENGALE.

OPINION

LAURA CARTER HIGLEY, Justice.

Appellants, Jonathan and Samantha Levine, sued Steve Scharn Custom Homes, Inc. (SSCHI), Steve Scharn, and NewFirst National Bank for various claims relating to construction of a new home.¹ SSCHI counter-sued for breach of contract and defamation. NewFirst counter-sued seeking sanctions for the claims filed against it. The trial court granted summary judgment against the Levines on some of their claims against NewFirst. A jury later determined that the Levines had breached the contract with SSCHI first and awarded damages to SSCHI. It also determined that the Levines had defamed SSCHI. The Levines did not prevail on any of their claims against SSCHI or NewFirst. After trial, the trial court awarded sanctions in favor of NewFirst and against the Levines.

On appeal, the Levines argue that (1) the trial court abused its discretion by denying their request for a jury instruction on SSCHI's defamation claim, (2) the evidence is legally insufficient to support the jury's determination that the Levines defamed SSCHI, (3) the evidence is legally insufficient to support the jury's damage award for defamation, (4) the evidence establishes as a matter of law that SSCHI breached the construction contract first, (5) the jury's determination that the Levines breached first is against the great weight and preponderance of the evidence, (6) the Levines are entitled to recover their damages against SSCHI, (7) the Levines are entitled to recover their attorneys' fees against SSCHI, (8) the trial court erred by granting summary judgment on their claims against NewFirst, and (9) the trial court abused its discretion by awarding sanctions in favor of NewFirst.

We affirm.

Background

The Levines bought two lots in a development in Fort Bend County with plans to build a home on the lots. The first builder they hired, M & A Construction, laid the foundation for the home. Problems with the foundation were identified, and the Levines terminated their contract with M & A Construction.

The Levines subsequently met Scharn, the president and part owner of SSCHI, and ultimately entered into a contract with SSCHI to complete the construction of their home. The Levines had money to cover most of the cost of construction of the home, but not all of it. They needed to obtain a loan for the remainder of the cost of construction. Scharn recommended NewFirst to the Levines.

The Levines ultimately entered into a loan agreement with NewFirst. Under the terms of the loan agreement, one of the prerequisites for NewFirst to authorize a loan to the Levines for the construction of their home was that the Levines had to open an account with NewFirst and deposit $814,990.35 in the account. The loan agreement provided that the deposited amount would be used to pay for the costs of construction of the home. Only once the deposited amount was fully dispersed would NewFirst issue any funds under the loan agreement. The loan agreement also provided that no fiduciary relationship existed between the parties.

When the Levines deposited their money in the NewFirst account, NewFirst placed a hold on the account, which prevented the Levines from withdrawing money from the account for any purposes other than the construction of the home. The deposit agreement creating the NewFirst bank account provided that one signature was required for a withdrawal.

Along with the construction agreement, the Levines and SSCHI signed an agreement concerning builder and mechanic liens. The agreement required SSCHI to provide the Levines with receipts. Specifically, it provided,

[SSCHI] shall furnish [the Levines] proper receipts and releases from any and all materialmen from whom any material is obtained by [SSCHI] for use in said improvements, and from all sub-contractors, as well as from each and all the workmen who have worked thereon, to the end that no liens may be fixed upon said premises save and except the express liens herein created.

While construction was ongoing, only one lien was filed on the property. That lien was filed by mistake and was removed as soon as the error was brought to the attention of the party that filed the lien.

Once the parties had entered into the construction agreement and the loan agreement, SSCHI began construction on the home. Construction started around mid-June 2007. Eventually, disputes arose about the quality of SSCHI's work and its conformity with the construction plans. In November, the Levines sent SSCHI a letter, through their counsel, explaining the numerous complaints they had about the construction. On January 4, 2008, the Levines formally terminated the construction contract.

While construction was ongoing, SSCHI obtained three draws from NewFirst on the Levines' account. These three draws totaled $475,355.38. Before it requested each draw on the Levines' bank account from NewFirst, SSCHI presented the Levines with a Contractor's Disbursement Disclosure for Residential Construction. Each disbursement disclosure provided, “The following is the information required to be provided under the Texas Property Code in connection with this payment request on the above-described project.” Near the bottom of the page, the document identified the date it was received by the Levines and, below that, contained the signatures of the Levines.

The Levines were also presented with a similar document, entitled Lender's Disbursement Disclosure for Residential Construction. This disclosure provided, “The following is the information required to be provided under the Texas Property Code in connection with a payment request on the above-described project.” It also identified the date it was received by the Levines and, below that, contained the signatures of the Levines.

The Levines brought suit against SSCHI and NewFirst in February 2008. The Levines asserted a number of claims against SSCHI, including breach of contract. SSCHI counter-claimed for breach of contract against the Levines. The central dispute at trial was who breached the contract first. The jury found that both parties breached the contract but that the Levines breached first and that SSCHI's breach was excused.

By at least November 2008, the Levines were receiving complaints from the neighbors to the Levines' lots that the uncompleted structure was an eyesore and a nuisance. Jonathan Levine sent an email to one of the residents, John Hettig, with the subject line “10 Sovereign Circle–The House That Crooks Ruined.” The body of the email stated,

I can only apologize for the inconvenience and welcome you to look up Levine versus Steve Scharn Custom Home builders, Mark Millis and the Millis Development Company, New First Bank as well as Royal Palm Homes Inc., Ron Scharn, and Ron Scharn's Wife's Insurance Company in the Fort Bend civil court if you would like to know about the injustice occurring in our community. Also look up Levine versus Mark Blake and M and A Custom Homes. Hopefully you will also share it with everyone else. You should also talk to Dr. Jalal as well. I can only say that you are very fortunate to have had a[n] honest builder. We have had 2 crooks.

In response, Hettig stated, “Thanks .... My concern is not with your business but [the] value of Sovereign Shores! Unfortunately, your house has become a major detriment.”

Scharn learned of this email from Hettig. Specifically, Scharn testified at trial as follows:

Q. All right. And do you know why Dr. Levine sent this e-mail?

A. No, sir.

Q. Okay. So, the—you're just assuming he's talking about you? You don't know that he's talking about you?

A. I know that he's talking about me.

Q. Why do you know that he's talking about you?

A. Because I had a conversation with Mr. Hettig, who told me.

Q. He told you what?

A. That he was talking about me in an e-mail.

After learning of the email, SSCHI filed a defamation counter-claim against the Levines. The Levines argued, among other things, that they were not referring to SSCHI as a crook, that the claim was barred by the group libel doctrine, and that the email was substantially true. The jury found that Jonathan Levine published the email, that the email was defamatory as to SSCHI, and that the statement was false.

The Levines also brought claims against NewFirst. They asserted claims of breach of fiduciary duty, breach of contract, conversion, fraudulent inducement, negligence, and gross negligence. The thrust of these claims was that NewFirst owed the Levines a fiduciary duty and that NewFirst breached the fiduciary duty when it released the draws to SSCHI. The Levines also argued that their signatures on the disbursement disclosures did not constitute proper authorization to withdraw the funds. For the third draw, the Levines asserted that they did not sign the disbursement disclosures and that their signatures were forged.

NewFirst subsequently filed a traditional and no-evidence motion for summary judgment on all of the Levines' claims against it. The trial court fully granted summary judgment on the Levines' conversion and fraud in the inducement claims against NewFirst. For the Levines' breach of contract, breach of fiduciary duty, negligence and gross negligence claims, the trial court granted summary judgment as those claims related to the first two draws but denied summary judgment on those claims as they related to the last draw.

During trial, Jonathan Levine agreed that his and his wife's claim against...