San Antonio Credit Union v. O'Connor

• Decision Date: 02 July 2003
• Docket Number: No. 04-00-00714-CV.,04-00-00714-CV.
• Citation: 115 S.W.3d 82
• Parties: SAN ANTONIO CREDIT UNION d/b/a SACU and Dennis E. Jennings and Kimberly Jennings, Appellants, v. Timothy D. O'CONNOR and Laco Development, Inc. d/b/a Laco Construction Co., Appellees.
• Court: Texas Court of Appeals

115 S.W.3d 82

SAN ANTONIO CREDIT UNION d/b/a SACU and Dennis E. Jennings and Kimberly Jennings, Appellants, v. Timothy D. O'CONNOR and Laco Development, Inc. d/b/a Laco Construction Co., Appellees.

No. 04-00-00714-CV.

Court of Appeals of Texas, San Antonio.

July 2, 2003.

Rehearing Overruled August 25, 2003.

R. Dwayne Danner, Irving, for Appellant.

Frank Oliver, Frank Oliver, P.C., Austin, for Appellant.

Gordon O. Stafford, Jr., Burns, O'Gorman, Black & Weyland, L.L.C., San Antonio, for Appellant.

Sharon E. Callaway, Michael J. Murray, and Jacqueline M. Stroh, Crofts & Callaway, P.C., San Antonio, for Appellant.

David B. West and William F. Hulse, IV, Cox & Smith Inc., San Antonio, for Appellant.

Gerald T. Drought and Denise Nixon Bunk, Martin, Drought & Torres, Inc., San Antonio, for Appellee.

Sitting: CATHERINE STONE, Justice, SARAH B. DUNCAN, Justice, KAREN ANGELINI, Justice.

Opinion by KAREN ANGELINI, Justice.

On December 12, 2002, Timothy D. O'Connor and Laco Development, Inc. d/b/a Laco Construction Company filed a motion for rehearing of our opinion that issued on November 27, 2002. See San Antonio Credit Union v. O'Connor, No. 04-00-00714-CV, 2002 WL 31662054 (Tex. App.-San Antonio Nov. 27, 2002). On December 27, 2002, Dennis E. Jennings and Kimberly Jennings also filed a motion for rehearing. On January 30, 2003, we ordered all parties to file responses to both motions for rehearing. After consideration of the responses of the parties, we deny both motions for rehearing. We do, however, withdraw our prior opinion in this matter and substitute this opinion in its place. The judgment remains unchanged.

This is an appeal from a judgment rendered in favor of Timothy D. O'Connor and Laco Development, Inc. d/b/a Laco Construction Company. San Antonio Credit Union challenges the sufficiency of the evidence supporting the jury's conspiracy finding, which rendered it jointly and severally liable with the Jennings for defamation and intentional infliction of emotional distress. It also challenges the jury's breach of contract findings. Dennis E. and Kimberly Jennings likewise challenge the jury's breach of contract, defamation, intentional infliction of emotional distress, and malicious prosecution findings, arguing the findings are unsupported by legally and factually sufficient evidence. Both SACU and the Jennings challenge the jury's award of attorney's fees and the trial court's submission of the damages questions to the jury. For the reasons set forth below, the trial court's judgment is affirmed in part, reversed and remanded in part, and reversed and rendered in part.

FACTUAL & PROCEDURAL HISTORY

On July 7, 1992, Dennis and Kimberly Jennings entered into a Builder's and Mechanic's Lien contract with Laco Construction Company ("Laco") to construct a residence for $158,212.00. A month later, the Jennings, Laco, and San Antonio Credit Union ("SACU") entered into a Construction Loan Agreement ("CLA"). Under the terms of the CLA, SACU loaned the Jennings $155,200.00 for construction of the residence. The difference between the bid price and the loan amount was to be paid by the Jennings.

Pursuant to the CLA, once a certain phase of construction was completed, O'Connor, on Laco's behalf, would complete an SACU Construction Draw Sheet and present it to the Jennings, who would then sign it and return it to SACU. SACU would then send an inspector out to review the completed work and, based upon the inspector's approval, SACU would issue a check to Laco for the amount of the draw. The CLA provided that SACU would keep 10% of the draw as retainage. According to O'Connor, he and Dennis Jennings agreed that SACU would waive the retainage requirement. SACU did not withhold the 10% retainage from O'Connor's first three draws, but it did withhold varying percentages from each of the remaining draws.

Once construction on the house had begun, the Jennings and Laco agreed to add "extras" to the house at the Jennings' expense. Laco periodically requested draws from SACU. At some point during construction Laco fell behind on payments owed to subcontractors because, according to O'Connor, the Jennings had not paid for the "extras" as promised, because SACU retained 10% of each draw in spite of the agreement between O'Connor and Jennings that it would not, and because of a lumber theft from the job site.

On December 7, 1992, Jim Potter, a SACU officer, received a phone call from Guido Lumber, a Laco subcontractor, notifying him that Laco owed Guido Lumber $9,000.00 for lumber used for construction of the Jennings' house. Potter noted on the loan disbursement sheet "hold on draw" and "no more draws until this is resolved." On that same day, Guido Lumber sent the Jennings a letter informing them of the nonpayment and notifying them that if the account remained unpaid, a lien may be placed on the property. On December 8, 1992, Jennings, upon receipt of Guido Lumber's letter, instructed SACU to place a hold on the draws. According to both Potter and Jennings, they mutually decided to freeze the account. According to O'Connor, he went to SACU to pick up a draw he had submitted on December 8th and was told that Jennings had instructed SACU to freeze the draws.¹ Around the same time, Jennings began placing calls to subcontractors inquiring into the status of their accounts with Laco. None of the subcontractors had complained to Jennings about any delinquency until after he made the calls.

On December 18, 1992, the Jennings' attorney sent to O'Connor a letter notifying him that he had failed to satisfy his obligations under the construction contract, requesting that he extinguish all debts owed to subcontractors and man the construction site to finish construction of the residence. The letter further requested that O'Connor provide the attorney with a list of "all outstanding bills from subcontractors who have worked on the single-family residence and who have not been paid...." O'Connor responded with a letter detailing the agreed-upon extras. On December 28th, O'Connor resubmitted a draw request, which was not paid because the account was still frozen.

On January 14, 1993, the Jennings' attorney sent a letter to O'Connor/Laco terminating the Builder's and Mechanic's Lien contract because Laco had failed to pay outstanding balances due to subcontractors. In closing, the letter stated:

For your information, your misapplication of the funds received from the lender (SACU) is a very serious criminal offense. According to § 162.031 of the Texas Property Code you have committed a felony of the third degree. Our client intends to pursue this matter with the Bexar County District Attorney.

On January 22, 1993, upon the Jennings' attorney's request, SACU sent to the Jennings' attorney a memo summarizing a history of activity on the Jennings' loan. SACU sent the memo understanding that it would be shared with O'Connor's attorney. On January 25th, SACU received a letter from the Jennings' attorney informing it that the Jennings had terminated their contract with Laco and were in the process of completing the residence themselves. Attached to the letter was an estimate of expenses associated with completing the residence. SACU and the Jennings entered into a separate contract to complete the residence.

In August of 1993, Jennings filed a criminal complaint, alleging O'Connor misappropriated or embezzled funds. At trial, Jennings testified that SACU might have provided him with draw sheets and copies of checks issued to O'Connor. Jennings attached at least some of these documents as exhibits to his criminal complaint. In May of 1995, almost two years after the complaint had been filed, O'Connor was indicted for misapplication of funds. On June 6th, O'Connor was arrested at his home, incarcerated, and then released on bail. In October of 1995, O'Connor filed a motion to set aside the indictment, and the district attorney dropped the charges against him, but on the dismissal sheet noted "case to be reindicted." O'Connor was never reindicted.

O'Connor and Laco sued SACU and the Jennings under multiple theories of recovery. The jury found the following: that SACU and the Jennings each breached the CLA; that Dennis Jennings maliciously prosecuted and defamed O'Connor and intentionally inflicted emotional distress on him; and that SACU and Kimberley Jennings had conspired with Dennis Jennings to defame and intentionally inflict emotional distress on O'Connor. The jury awarded O'Connor actual and exemplary damages. The trial judge further imposed a constitutional lien on the Jennings' property in O'Connor's favor. SACU and the Jennings appeal.

SUFFICIENCY OF THE EVIDENCE

A. Standard of Review:

In multiple issues, SACU and the Jennings challenge the sufficiency of the evidence supporting the jury's findings. In assessing whether the evidence supporting a jury finding is legally sufficient, this court considers only the evidence favorable to the jury's decision and disregards all evidence and inferences to the contrary. Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988); Thrift v. Hubbard, 974 S.W.2d 70, 77 (Tex.App.-San Antonio 1998, pet. denied). If there is more than a scintilla of evidence to support the finding, then the no evidence challenge fails. Thrift, 974 S.W.2d at 77. In considering a challenge to the evidence's factual sufficiency, this court reviews all of the evidence and reverses for a new trial only if the challenged finding shocks the conscience, clearly demonstrates bias, or is so against the great weight and preponderance of the evidence that it is manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986); Thrift, 974 S.W.2d at 77.

B. SACU

According to O'Connor, the Jennings and SACU "conspired by concerted action to effectuate the slander and intentional and reckless infliction of emotional distress that resulted in Plaintiff O'Connor's injuries and damages...." Specifically, O'Connor...