Rauscher Pierce Refsnes, Inc. v. Great Southwest Sav., F.A.

• Citation: 923 S.W.2d 112
• Decision Date: 02 May 1996
• Docket Number: No. 14-94-00748-CV,14-94-00748-CV
• Parties: RAUSCHER PIERCE REFSNES, INC., Appellant, v. GREAT SOUTHWEST SAVINGS, F.A. and Windtree Financial Corporation, d/b/a Windtree Mortgage Services, Appellees. (14th Dist.)
• Court: Court of Appeals of Texas

Page 112

923 S.W.2d 112

RAUSCHER PIERCE REFSNES, INC., Appellant, v. GREAT SOUTHWEST SAVINGS, F.A. and Windtree Financial

Corporation, d/b/a Windtree Mortgage Services, Appellees.

No. 14-94-00748-CV.

Court of Appeals of Texas,

Houston (14th Dist.).

May 2, 1996.

Thomas G. Yoxall, Dallas, Martin R. Griffin, Dallas, for appellant.

Steven A. Leyh, Houston, Deborah Essig Taylor, Houston, Nancy Manderson, Houston, for appellees.

Before MURPHY, C.J., and AMIDEI and ANDERSON, JJ.

OPINION

AMIDEI, Justice.

Rauscher Pierce Refsnes, Inc. ("RPR") appeals from a bench trial judgment in a contract suit in favor of Great Southwest Savings F.A. ("GSW") in the sum of $325,961.40 plus attorney fees in the sum of $108,000.00. The trial court granted take nothing judgments in favor of appellee Windtree Financial Services ("Windtree") against suits by appellant RPR and by appellee GSW. No notice of limitation of appeal was given by RPR with respect to Windtree, who is joined in this appeal. Appellant RPR contends in eighteen points of error: (1) there is no evidence or legally insufficient evidence to sustain the findings of the trial court, (2) the evidence conclusively establishes that GSW waived or is estopped from complaining of any breach of contract or fiduciary duty by RPR, (3) the evidence is insufficient to support the court's award of damages, (4) the court erred in failing to offset the damages, (5) the court erred in failing to mitigate damages, and (6) the court erred in awarding GSW attorney fees. We affirm.

In June, 1990, RPR and GSW entered into a contract, which consisted of letter agreements and oral agreements. RPR, by letter dated June 1, 1990, addressed to GSW, agreed to represent GSW as exclusive agent and broker in a transaction involving the purchase of some loans. RPR committed to GSW that it would deliver $10 million in "FHA Insured Title I Property Improvement Loans." This letter concluded, in part, "Howard, RPR must be appointed exclusive agent for this transaction ... and all funds will be cleared through RPR for immediate settlement." This letter proposal was accepted by GSW by letter to RPR dated June 5, 1990. The parties agreed that the loans were to be existing, previously originated and funded, seasoned loans (over six months old) and the loans would be investment grade, good quality, "A" grade loans. "A" grade loans are existing loans, over six months old, with no defaults in payments ("performing"). A loan package of eighteen loans was sent to GSW by Standard Pacific Credit Corporation of Irvine, California, after GSW wired RPR the purchase price of $303,641.64 and RPR wired the money to Standard Pacific. RPR selected Windtree as a reviewing agent to review the loans for suitability. Windtree was paid by GSW for this service.

Unknown to GSW at the time, Standard Pacific "table funded" all the loans when they received the money from RPR. "Table funding" means that Standard Pacific used GSW's money to close the loans. That is, when Standard Pacific received the money from GSW to purchase the eighteen loans, it disbursed the funds to people who had signed up for improvement loans. None of the loans were insured by FHA as Title I loans; none of the loans were "seasoned" (over six months old); and none of the loans were of grade "A" investment quality (testimony by an expert was that the loans were "Grade C" paper, or inferior quality loans). Six of the loans were never "funded" with GSW's money because the checks to the borrowers from Standard Pacific bounced; these loans were in default when they were sent to GSW. At the time of trial, the evidence showed that out of the eighteen loans sent to GSW, seven were in total default, three had been paid in full, and eight were delinquent. A chart showing the balances due on the principal, interest, and expenses of all the loans was introduced into evidence and received without objection by RPR. The total amount due as principal on the loan package on the date of trial was $242,967.85. The total loss, including interest and other expenses, was $328,572.02.

Michael Castanon worked for RPR at the time this loan transaction was processed by RPR. He was in charge of handling all the details of the transaction. He contacted Standard Pacific and made all the arrangements for closing the deal. It was subsequently discovered that Michael Castanon had been a founder and director of Standard Pacific and was acting as chairman of the board for Standard Pacific when the loan was closed. None of the information concerning the relationship of Castanon and Standard Pacific was communicated to GSW prior to sending the check for the loans to RPR.

Appellant admits that the six "unfunded" loans (i.e., the ones for which no loan proceeds were paid to the borrowers because of bad checks issued by Standard Pacific) were a proximate cause of GSW's loss. Appellant claims there is no evidence or insufficient evidence to show a breach of contract or fiduciary duty by RPR regarding the twelve "funded" loans (the twelve loans that were "funded" with the money received from GSW and used by Standard Pacific to pay loan proceeds to the borrowers). Specifically, in points of error one, two, three and four, appellant argues that the trial court had no evidence or legally insufficient evidence that RPR agreed to ensure the quality, credit-worthiness, and insurability of the loans. Appellant also argues in point of error one that RPR was only a "middleman" and had no fiduciary duty. We disagree.

This was a bench trial and the trial judge prepared findings of fact and conclusions of law. A statement of facts was also prepared by the court reporter. Because we have a statement of facts, the trial court's findings of fact are not conclusive. Middleton v. Kawasaki Steel Corp., 687 S.W.2d 42, 44 (Tex.App.--Houston [14th Dist.] 1985) writ ref'd n.r.e. per curiam, 699 S.W.2d 199 (Tex.1985). In reviewing the trial court's findings of fact for legal and factual sufficiency of the evidence supporting them, we apply the same standards as we apply in reviewing the sufficiency of the evidence supporting a jury's finding. Okon v. Levy, 612 S.W.2d 938, 941 (Tex.Civ.App.--Dallas 1981, writ ref'd n.r.e.). Thus, in reviewing appellant's legal insufficiency points, we may consider only the evidence and inferences, viewed in their most favorable light, that tend to support the trial court's finding, disregarding all evidence to the contrary. Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988). If there is any evidence of probative force to support the finding, we must uphold the finding. See Sherman v. First Nat'l Bank, 760 S.W.2d 240, 242 (Tex.1988). In reviewing appellant's claim of factual insufficiency, we must examine all of the evidence. Lofton v. Texas Brine Corp., 720 S.W.2d 804, 805 (Tex.1986). We may set aside the finding only if it is so against the great weight and preponderance of the evidence that it is clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); Superior Derrick Services v. Anderson, 831 S.W.2d 868, 871 (Tex.App.--Houston [14th Dist.] 1992, writ denied).

The relationship between a broker and its customer is that of principal and agent. Magnum Corp. v. Lehman Brothers Kuhn Loeb, Inc., 794 F.2d 198, 200 (5th Cir.1986). An agent is one who consents to act on behalf of, and subject to, the control of another, the principal, who has manifested consent that the agent shall so act. Moody v. EMC Services, Inc., 828 S.W.2d 237, 241 (Tex.App.--Houston [14th Dist.] 1992, writ denied); Republic Bankers Life Ins. Co. v. Wood, 792 S.W.2d 768, 778 (Tex.App.--Fort Worth 1990, writ denied); RESTATEMENT (SECOND) OF AGENCY § 1 (1958). Agency is a consensual relationship, and the agency or broker/customer relationship does not come into existence until the order has been placed and the broker has consented to execute it. Hill v. Bache Halsey Stuart Shields Inc., 790 F.2d 817, 824 (10th Cir.1986); Robinson v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 337 F.Supp. 107, 111 (N.D.Ala.1971), aff'd, 453 F.2d 417 (5th Cir.1972); RESTATEMENT (SECOND) OF AGENCY § 15 (1958). See also Hand v. Dean Witter Reynolds Inc., 889 S.W.2d 483, 492-93 (Tex.App.--Houston [14th Dist.] 1994, writ denied).

If a broker, under his contract with his principal, is charged with no responsibility and is not obligated to exercise any discretion, but his duty consists merely of bringing the parties together so that, between themselves, they may negotiate a sale, and the sale is made in that manner, the broker is considered a mere "middleman" and is not necessarily the "agent" of either party. Where the relationship of principal and agent is shown, the principal is entitled to the best efforts and unbiased judgment of the agent. Burleson v. Earnest, 153 S.W.2d 869, 873-74 (Tex.Civ.App.--Amarillo 1941, writ ref'd). A broker is a special agent and has the same duty toward his employer as a special agent has toward his principal. Barnsdall Oil Co. v. Willis, 152 F.2d 824, 828 (5th Cir.1946), motion for reh'g overruled, 153 F.2d 784. A broker's contract of employment calls for the utmost good faith on the part of the broker and he is bound to disclose to his employer all material facts within his knowledge affecting any transaction. The broker may become liable to his principal for any negligent or other wrongful act done by him where his principal suffers damage. Barnsdall Oil Co. at 828.

The letter agreements established the relationship of broker/customer and principal/agent. The letter from RPR dated June 1, 1990, told GSW that RPR would have to be the "exclusive agent" of GSW in this transaction and this offer was accepted by GSW. Appellant cites In re Thomson...