Miles Homes Div., Insilco Corp. v. Smith

• Decision Date: 17 May 1990
• Docket Number: No. 09-88-236,09-88-236
• Citation: 790 S.W.2d 382
• Parties: MILES HOMES DIVISION, INSILCO CORPORATION, Appellant, v. Leonard E. SMITH and Wife Christine Smith, Appellees. CV.
• Court: Texas Court of Appeals

Page 382

790 S.W.2d 382

MILES HOMES DIVISION, INSILCO CORPORATION, Appellant, v. Leonard E. SMITH and Wife Christine Smith, Appellees.

No. 09-88-236 CV.

Court of Appeals of Texas Beaumont.

May 17, 1990.

Rehearing Denied June 21, 1990.

Brack Jones, Jr., Homer Stephenson, Moore, Landrey, Garth & Jones, Beaumont, for appellant.

Thomas P. Roebuck, Jr., Beaumont, for appellees.

OPINION

BURGESS, Justice.

Leonard E. Smith and Christine Smith (Smith) sued Miles Homes Division, Insilco Corporation (Miles) for fraud, negligence, and violations of the Deceptive Trade Practices Act. Judgment entered on the jury verdict awarded Smith $50,733 actual damages for fraud, $250,000 exemplary damages, and $50,000 attorneys fees with additional attorneys fees in the event of appeal. Miles raises twenty points of error on appeal. We address these points out of order.

The Smiths purchased a build-it-yourself home from Miles in 1982. They executed a Retail Installment Contract and a Builder's and Mechanic's Lien Contract with Power of Sale. The house was never completed. Smith alleged misrepresentations in Miles' sales brochures and statements made by John Erickson, Miles' sales representative, regarding the value of the structure on completion, availability of permanent financing and the amount of monthly payments.

When considering legal sufficiency or "no evidence" points, we consider only the evidence, and reasonable inferences therefrom, which viewed in its most favorable light supports the finding and disregard all evidence and inferences to the contrary. Garza v. Alviar, 395 S.W.2d 821 (Tex.1965). If there is any probative evidence to support the finding, the point must be overruled. Id. In a factual sufficiency challenge, we consider all of the evidence including that which is contrary to the verdict. In re King's Estate, 150 Tex. 662, 244 S.W.2d 660 (1951). We may sustain a factual sufficiency point only if we determine that the finding of a vital fact is so contrary to the great weight and preponderance of the evidence as to be clearly wrong and unjust. Id.

Points of error seventeen through nineteen aver the legal and factual insufficiency of the evidence that John Erickson was Miles' agent and not an independent contractor. Erickson was a salesman exclusively for Miles. Miles provided him with job training. Appellant concedes he had the authority to explain products, financing, materials, delivery and credit. He negotiated the sale for Miles and executed the contract on its behalf. The contract did not state that the sales representative's authority was subject to any limitations. The sales representative contract between Miles and Erickson states the salesman shall have sole control over the manner and means of solicitation and sales and be an independent contractor. It also provided for submission of all advertising copy for prior approval and stated the salesman shall make full disclosure of all material facts concerning Miles Homes. Miles received the benefit of the transaction. There is sufficient evidence Erickson acted as Miles' agent in procuring the Smith contract.

Miles contends Erickson's status as an independent contractor was fixed by the written agreement, citing Newspapers, Inc. v. Love, 380 S.W.2d 582 (Tex.1964). That case involved a suit for personal injuries arising from an accident. Here, Miles held Erickson out as its representative and accepted the benefits of the transaction induced by fraud. See Duval County Ranch Co. v. Wooldridge, 667 S.W.2d 887 (Tex.App.--Austin 1984, writ dism'd w.o.j.) Points of error seventeen, eighteen and nineteen are overruled.

Point of error one argues there is no evidence to support the jury finding of $50,733 actual damages. The measure of damages for fraud at common law is the difference between the value of that which he has parted with and received. Leyendecker & Associates, Inc. v. Wechter, 683 S.W.2d 369 (Tex.1984). Smith contends actual damages are determined by adding the debt owed to Miles, the value of the encumbered land, the amount expended on the slab, and the cost of completion, less the fair market value of the property as it now exists. This method of calculation is incorrect because it considers both the cost of completion and the lower value of the property due to its incomplete state. Smith owes $36,883 on the property. The value of the encumbered land is $3,500. Smith expended $1,500 installing the slab. The fair market value of the property is $19,600, leaving actual damages in the amount of $22,283. Point of error one is sustained.

Since we sustain point of error one, we do not reach points of error two, three, four, and sixteen.

Points of error five through seven and nine through fourteen attack the sufficiency of the evidence to support an action for fraud. The elements of fraud are:

(1) that a material representation was made; (2) that it was false; (3) that, when the speaker made it, he knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by the party; (5) that the party acted in reliance upon it; (6) that he thereby suffered injury.

Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex.1983). Miles argues the alleged representations were not of past or existing material facts but were mere statements of opinion. Miles' brochures state Miles would help its customers get long-term financing. They also stress their product builds equity. Mr. Smith testified Erickson told them they would be able to obtain permanent financing on the completed home and the monthly payments on the permanent loan would not exceed $400. He stated they in fact could not obtain permanent financing and the monthly payments would exceed $700. Mr. Erickson testified he made the representation about the monthly payment, but conditioned the representation on the financing of substantially less than the amount provided for in the contract. Smith denied Erickson disclosed the condition. Smith stated he relied on the brochures and Erickson's representations in entering the contract. There is sufficient evidence to support an action for fraud. Points of error five through seven and nine through fourteen are overruled.

Point of error fifteen argues Smith failed to plead and obtain jury findings that the value of the building supplies received was less than the value as represented. The sales brochures characterized the product as more than raw lumber and nails, but a home. The proper measure of recovery discussed under point of error one does not require such findings. Further, Miles did not raise this objection to the broad jury question on actual damages and thus presents nothing for review. TEX.R.CIV.P 274. Point of error fifteen is overruled.

Point of error eight urges there are no jury findings which support an action for fraud. Miles argues there is no jury finding that Miles or its salesman knew that any of the representations found by the jury to be false were false at the time they were made, or that they were made recklessly and without knowledge of the truth. The jury question asked:

Do you find from a preponderance of the evidence that the Defendant, MILES HOMES DIVISION OF INSILCO CORPORATION, committed fraud in committing any of the foregoing acts or omissions to which you have answered "We Do".

Miles did not object to the submission of this issue or to the attached definition of fraud on the grounds that one or more of the elements necessary to sustain the ground of recovery was omitted from the charge. Any omitted element is thus deemed found by the court in such manner as to support the judgment. TEX.R.CIV.P. 279. Point of error eight is overruled.

Point of error twenty avers the award of exemplary damages is excessive. Miles contention that exemplary damages are statutorily limited to twice the amount of actual damages by TEX.BUS. & COM.CODE ANN. sec. 27.01 (Vernon 1968) is without merit. This fraud statute neither supersedes the common law rule nor provides an exclusive remedy for the recovery of damages in an action based on fraud in a transaction involving real estate. Ratcliff v. Trenholm, 596 S.W.2d 645 (Tex.Civ.App.--Tyler 1980, writ ref'd n.r.e.). We need not address Miles' claim that section 27.01 might be applicable to transactions of this type.

The amount of exemplary damages awarded rests largely in the discretion of the jury; unless the award is so large as to indicate it is the result of passion, prejudice or corruption, or that evidence has been disregarded, the verdict of the jury is conclusive and will not be set aside as excessive. Morgan v. Arnold, 441 S.W.2d 897 (Tex.Civ.App.--Dallas 1969, writ ref'd n.r.e.). Factors to consider in determining whether an award of exemplary damages is reasonable include (1) the nature of the wrong, (2) the character of the conduct involved, (3) the degree of culpability of the wrongdoer, (4) the situation and sensibilities of the parties concerned, (5) the extent to which such conduct offends a public sense of justice and propriety. Alamo National Bank v. Kraus, 616 S.W.2d 908 (Tex.1981). Miles argues if the award of actual damages was not supported by the evidence, this award must also be excessive. We disagree. Exemplary damages are not necessarily multiples of actual damages. The ratio of actual damages to exemplary damages is not so great as to render the exemplary damages excessive in light of the facts of the case. See Lee County Nat'l Bank v. Nelson, 761 S.W.2d 851 (Tex.App.--Beaumont 1988, writ denied). Point of error twenty is overruled.

Point of error one is sustained. We do not reach points of error two, three, four, or sixteen. The remaining points of error are overruled. If remittitur of $28,450 is filed within fifteen days, the judgment will be reformed to show actual damages of $22,283. If such remittitur is not filed, then the judgment shall be reversed and...