Scott Fetzer Co. v. Read

• Decision Date: 01 May 1997
• Docket Number: No. 03-95-00544-CV,03-95-00544-CV
• Citation: 945 S.W.2d 854
• Parties: The SCOTT FETZER COMPANY d/b/a The Kirby Company, Appellant, v. Dena Kristi READ, Appellee.
• Court: Texas Court of Appeals

Page 854

945 S.W.2d 854

The SCOTT FETZER COMPANY d/b/a The Kirby Company, Appellant, v. Dena Kristi READ, Appellee.

No. 03-95-00544-CV.

Court of Appeals of Texas Austin.

May 1, 1997.

Rehearing Overruled June 19, 1997.

David A. Kutik, Jones, Day, Reavis & Pogue, Cleveland, OH, for Appellant.

James Lawrence Wright, Mithoff & Jacks, L.L.P., Austin, for Appellee.

Before CARROLL, C.J., and ABOUSSIE and JONES, JJ.

JONES, Justice.

The Scott Fetzer Company, doing business as The Kirby Company ("Kirby"), appellant, appeals from a judgment awarding actual and exemplary damages to appellee, Dena Kristi Read, after she was sexually assaulted in her home by a Kirby dealer. In eight points of error, Kirby argues that the evidence is legally and factually insufficient to support jury findings (1) that Kirby breached any duty to Read; (2) that Kirby proximately caused Read's injuries; (3) that Kirby acted with gross negligence; and (4) awarding Read exemplary damages. We will affirm in part and reverse in part.

FACTUAL AND PROCEDURAL BACKGROUND

Kirby manufactures vacuum cleaners and sells them through a marketing system of in-home demonstrations performed by door-to-door salespersons. Kirby vacuums are multi-task appliances that retail for approximately $1,200-$1,300. Kirby has found that the most effective way to sell its products is through in-home demonstrations. As a result, Kirby eschews direct sales to the public and sells its products only to independent "distributors." The relationship between Kirby and each of its distributors is governed by a uniform Distributor Agreement, which proclaims that the distributors act as independent contractors in performing their duties under the contract. As part of their obligations to Kirby under the Distributor Agreement, the distributors are required to sell Kirby products exclusively through in-home demonstrations. Kirby would consider a violation of this provision a material breach of the Distributor Agreement. To promote this facet of the agreement, each distributor is required to build an in-home sales force by recruiting prospective door-to-door salespeople called "dealers." ¹ Though it requires in- In 1992, Leonard Sena, a long-time Kirby distributor, hired Mickey Carter to be a dealer. On his application, Carter listed three prior places of employment and three personal references. Sena did not call Carter's references or prior employers. In fact, Sena did nothing to check Carter's background or any of the information on his application. If Sena had contacted Carter's prior employers, he would have discovered that women who had worked with Carter at those jobs had complained that he engaged in inappropriate sexual conversations and made unwanted obscene telephone calls. In addition, at the time he applied to sell Kirby vacuums door-to-door, Carter had been arrested and had received deferred adjudication for an incident in which he exposed himself to two young girls. One of the previous employers listed on Carter's application had fired him because of that indecent-exposure incident. Carter's employment records with that company contained a copy of the confession Carter gave to the police when he was arrested. The confession stated:

home sales, Kirby does not require its distributors to conduct background checks on prospective dealers.

First I want you to know I have a problem. I need help. I was in [a] psychiatric ward when I was in the Army. I have this thing in my mind that controls me at times. I can't help what I do. Like I go outside naked. I expose myself. I do things that I do not have control of.... I know I need help. I want someone to help me. I need the help before the devil controls me. Please, have them get me help.

The employment records also contained witness statements, Carter's guilty plea, and the indictment charging him with the offense. They also document another incident in which Carter was discovered masturbating in front of a woman at his apartment complex.

One of the personal references listed on Carter's application was David Bruchs, who worked with Carter's wife at a Seguin bank. Bruchs knew that Carter had exposed himself to two young girls at his apartment complex and was on probation. Bruchs also had information that Carter and his wife had been evicted from various apartments because of Carter's sexually inappropriate conduct. He also knew of a specific incident when Carter "flashed" another female bank employee. Sena never discovered this information, however, because he did not call Bruchs. Thus, in spite of Carter's sordid history, he was hired to sell Kirby vacuums to unsuspecting homemakers in the privacy of their homes.

In March 1993, after having been allowed into Read's home to perform a Kirby demonstration, Carter sexually assaulted Read while her children were taking an afternoon nap. Read and her husband sued Kirby, Sena, and Carter. ² The claims against Carter were non-suited prior to trial. The Reads' case was submitted to the jury under a "broad form" negligence question asking the jury to determine the comparative negligence of Kirby, Sena, and Kristi Read. Because the trial court had granted Sena's motion for a bifurcated trial on exemplary damages, questions on exemplary damages were withheld subject to a finding of gross negligence. See Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 29-30 (Tex.1994). The jury found Sena and Read each ten percent negligent and Kirby eighty percent negligent. The jury also found Kirby grossly negligent. With regard to damages, the Due to the finding of gross negligence against Kirby, the trial court began the exemplary-damages phase of the trial. During their deliberations in this second phase, the jurors indicated that they had reached an impasse. The jury sent out a note stating that some of the jurors felt exemplary damages were included in the actual damages found in the trial's first phase. Outside the jurors' presence, counsel for all parties expressed concern at the jury's deadlock. The trial court noted that the jury had not been discharged, the verdict from the first phase had not been formally accepted, and no new evidence had been presented in the second phase that could prejudice the jury. The court proposed to counsel a procedure by which it would instruct the jury that, if they were not satisfied that they had followed the instructions in the first-phase charge, they could deliberate further on both actual and exemplary damages simultaneously. Both the Reads' and Sena's counsel expressed their satisfaction with that instruction, and the trial court subsequently gave it to the jury.

jury found that Kristi Read had suffered $1,500,000 in actual damages, but that her husband had no monetary damages.

After further deliberation, the jury returned a new damages verdict: $200,000 in actual damages and $1,500,000 in exemplary damages. The Reads' counsel then objected for the first time to the court's new instruction and requested an additional period of re-argument. The court denied this request and accepted the jury's verdict. Pursuant to former section 41.007 of the Civil Practice and Remedies Code, which limited exemplary damages to four times the amount of actual damages, the trial court reduced the exemplary damages award to $800,000. ³ Judgment was ultimately rendered against Kirby for $160,000 in actual damages and $800,000 in exemplary damages, plus prejudgment and postjudgment interest and costs. On appeal, Kirby claims it owed Read no duty and that the evidence is legally and factually insufficient to show that Kirby proximately caused Read's damages and to support the award of exemplary damages. In a cross-point, Read argues the trial court erred by failing to render judgment on the jury's first determination of actual damages. We will affirm the award of actual damages and reverse the award of exemplary damages.

DISCUSSION

The Duty Owed to Kristi Read

Read's cause of action rests on negligence and gross negligence on the part of Kirby. The common-law doctrine of negligence consists of three elements: (1) a legal duty owed by one person to another; (2) a breach of that duty; and (3) damages proximately resulting from that breach. El Chico Corp. v. Poole, 732 S.W.2d 306, 311 (Tex.1987); Rosas v. Buddies Food Store, 518 S.W.2d 534, 536 (Tex.1975). The threshold inquiry in a negligence case is whether a duty exists. El Chico Corp., 732 S.W.2d at 311. In its first two points of error, Kirby asserts that, because Sena and Carter were independent contractors, it owed no legal duty to Read. We disagree.

(i) Duty Arising from Knowledge of a Peculiar Risk

Whether the defendant owes a legal duty to the plaintiff is a question of law. Mitchell v. Missouri-K.-T. R.R., 786 S.W.2d 659, 662 (Tex.1990). The general rule is that an employer or owner is not liable for the acts or omissions of its independent contractors. See Abalos v. Oil Dev. Co., 544 S.W.2d 627, 631 (Tex.1976); American Nat'l Ins. Co. v. Denke, 128 Tex. 229, 95 S.W.2d 370, 373 (Comm.App.1936). Texas courts, however, have recognized many exceptions to this general rule of non-liability. ⁴ Both the rule and The peculiar-risk exception establishes liability for an employer who hires an independent contractor to do work that the employer knows is likely to create "a peculiar risk of physical harm to others" absent special precautions. The peculiar-risk exception is premised on the putative existence of a duty to third parties that the employer, for policy reasons, may not delegate to an independent contractor. Its use is traced to the leading English case of Bower v. Peate, 1 Q.B.D. 321 (1876), in which an independent contractor undermined the plaintiff's building by negligently failing to shore up an excavation on his employer's adjacent land. The court held the independent contractor's employer liable, finding that:

its exceptions are derived from the same underlying polices. The general rule...