Southwest Guar. Trust Co. v. Hardy Road 13.4 Joint Venture

• Decision Date: 03 December 1998
• Docket Number: No. 01-96-01558-CV,01-96-01558-CV
• Citation: 981 S.W.2d 951
• Parties: SOUTHWEST GUARANTY TRUST COMPANY and Robert R. Combs, Appellants, v. HARDY ROAD 13.4 JOINT VENTURE, Appellee. (1st Dist.)
• Court: Texas Court of Appeals

Page 951

981 S.W.2d 951

SOUTHWEST GUARANTY TRUST COMPANY and Robert R. Combs, Appellants, v. HARDY ROAD 13.4 JOINT VENTURE, Appellee.

No. 01-96-01558-CV.

Court of Appeals of Texas,

Houston (1st Dist.).

Dec. 3, 1998.

Mark F. Elvig, Ryan & Sudan, LLP, Houston, for Appellants.

Gary W. Dugger, John Wesley Wauson, Houston, for Appellees.

Before Justices COHEN, HEDGES, and TAFT.

OPINION ON REHEARING

MURRY B. COHEN, Justice.

Appellee, Hardy Road 13.4 Joint Venture (the joint venture), has moved for rehearing. We overrule the joint venture's motion, but we withdraw our opinion dated October 22, 1998 and substitute this opinion in its place. Our judgment of October 22, 1998 remains unchanged.

Appellants, Southwest Guaranty and Trust Company (SGTC) and Robert R. Combs (together, appellants), appeal a judgment based on a jury verdict of $299,500 against them. The joint venture asserts cross-points for attorney's fees. We affirm in part and reverse and render in part.

Background

A group of investors formed the joint venture to buy 13.425 acres of land in Houston (the property). The property was held in the name of Thomas H. Nation d/b/a Win Property Investments, not a party to this appeal, as the joint venture's trustee. Nation had no ownership interest in the property.

Nation, who was convicted of theft and mail fraud in federal court, was the genesis of this dispute. SGTC's predecessor, Med Center Bank, had handled Nation's personal and joint venture matters since 1982. Many of Nation's dealings were through Combs, who became the bank's president in 1982. Combs knew that Nation was a real estate developer who had held property as trustee for himself and for others and that much of what Nation had done through 1985 was tied up in joint venture and property holding investments.

In 1986, Nation borrowed $160,000 for what the bank knew were personal business obligations. The joint venture neither authorized Nation to use the property as collateral nor consented to encumber it. Nevertheless, while concealing the transaction from the venture participants, Nation proposed securing the loan with a lien on the property, which he misrepresented he owned. Despite knowing a title search showed Nation as "trustee," Combs took Nation's assurance that the property was solely his without investigating further, even though the bank's files contained evidence indicating Nation did not own the property. Combs admitted it was good, standard banking practice to evaluate assets and liabilities each time the bank received a borrower's financial statement or issued a loan and that, if the bank had evaluated Nation's financial information, it could have seen the loan was "fishy."

Nation executed a security agreement, and the bank recorded its lien. The bank renewed Nation's loan periodically and increased it to $267,688 to pay off other unsecured personal loans to Nation.

When Nation defaulted on this loan, the bank, having learned of the joint venture and claiming that Nation had acted on the joint venture's behalf, requested the joint venture bring payments current. The joint venture demanded release of the deed of trust and lien. When the bank threatened foreclosure, the joint venture sued for a declaration that the lien was invalid and for negligence and gross negligence, intentional wrongdoing, fraud, breach of and conspiracy to breach fiduciary duties, statutory fraud involving real estate, tortious interference with contract, conversion and conspiracy to convert, and quieting of title.

The judge charged the jury on negligence, fraud, and certain special issues. ¹ The jury returned a verdict for the joint venture, finding (1) the property was held in trust for the joint venture, (2) the bank had constructive (but not actual) knowledge of the trust, (3) there was no fraud, and (4) the bank and Combs were negligent. It awarded the joint venture $299,500 in damages and $293,000 in attorney's fees for trial, with $75,000 in conditional fees for appeal. The trial judge rendered judgment removing cloud of title, declaring the bank's lien unenforceable and invalid, awarding the full amount of damages plus $191,596.79 prejudgment interest, and denying attorney's fees.

Causation of Damages

In issues two and three, appellants contend there was legally and factually insufficient evidence that their negligence caused the joint venture's damages. In issues four through seven, appellants claim (1) loss-in-value was an improper damage measure, (2) taxes were an improper damage measure, and (3) there was legally and factually insufficient evidence of any damage. We consider these issues together.

We follow the usual standard of review for legal and factual sufficiency. ²

The jury was instructed to measure damages by (1) the loss in value of the joint venture's interest in the property and (2) additional expenses, including taxes. The only evidence of loss in the property's value came from the joint venture's expert, Mr. Schultz, who testified to the market value in 1986 ($415,000) and in 1994 ($180,000); the jury apparently subtracted the latter from the former to reach $235,000 as loss of property value. The jury also awarded $65,000 as "additional expenses, including taxes," which was the approximate amount of taxes paid on the property during that period.

Appellants contend that there was no evidence their lien caused the property's value to drop, because (1) it was undisputed the property's value fell not because of the lien but because the overall real estate market declined ³ and (2) there was no evidence their lien prevented the property's sale during the decline. The joint venture's causation theory was that (1) the bank's lien prevented the joint venture from selling the property before the value declined and (2) the joint venture would not have been liable for taxes had the bank's lien not prevented the property's sale. That is, the bank's lien caused the venture's damages by preventing any sale of the property.

The joint venture's evidence was as follows. Nation should have listed the property for sale starting in 1986, but did not. Billy Bowman, Nation's successor, upon discovering that Nation had not listed the property, did so in 1990. Bowman claimed that the joint venture had not been able to sell the property since its 1990 listing. He did not say what its value was at any time after 1990, and he did not say how much he asked for the property. He identified only one purchase offer, from an unnamed person he never spoke to, for an undescribed fraction of the property and under unspecified price and terms, which was withdrawn when the prospective buyer learned of this litigation. Bowman testified the joint venture could not list the property for sale since that withdrawal, but did not say why.

1. 1986 to 1990

We find there is no evidence the lien prevented the property's sale between 1986 and 1990. The joint venture argues we should infer that Nation did not sell the property then because his illegal lien would have been discovered, which fact, in turn, demonstrates that the property could not be sold with a lien. We disagree. Nation's inaction, i.e., his not selling the property in order to conceal his wrongdoing, says nothing about whether the lien would have prevented its sale. Cf. Wal-Mart Stores, Inc. v. Gonzalez, 968 S.W.2d 934, 936 (Tex.1998) (holding evidence legally insufficient to support finding when it is "mere circumstantial evidence" from which equally plausible but opposite inferences arise). Proof showing only impairment of vendibility does not establish a right to damages. A.H. Belo Corp. v. Sanders, 632 S.W.2d 145, 145-46 (Tex.1982). Property is commonly sold with liens, and there is no finding in this case that the bank acted fraudulently or intentionally with Nation to do wrong. Its negligence in 1986 cannot be considered a cause for the fact that Nation made no attempt in four years to sell the property.

2. 1990 until Trial

Although the joint venture asserted a negligence claim, its actual complaint was that the bank's invalid lien clouded the property's title, preventing any sale. We have found no case determining the proper measure of damages (or causation of these damages) when a negligence claim is asserted under similar facts. Traditionally, a cause of action for damages for failure to release a purported, but not actual, property interest is one for slander of title, not one for negligence. See Ellis v. Waldrop, 656 S.W.2d 902, 905 (Tex.1983); Pampell Interests, Inc. v. Wolle, 797 S.W.2d 392, 395 (Tex.App.--Austin 1990, no writ) ("Generally, Texas recognizes two causes of action to remedy a cloud on title. First, ... a suit to remove the cloud.... Second, ... slander of title."); Modern Exploration, Inc. v. Maddison, 708 S.W.2d 872, 877 (Tex.App.--Corpus Christi 1986, no writ) (refusing to recognize cause of action for damages, arising from contractual or common-law duty to release acreage under terminated mineral lease, absent proof of loss of specific sale). Therefore, we conclude that we must look to and borrow from slander of title and similar cases to determine the legal standard for causation of and also for measure of damages. ⁴

To recover damages for slander of title to real property, the plaintiff must first allege and prove loss of a specific sale. E.g., Ellis, 656 S.W.2d at 905. This is because the land's market or intrinsic value is normally not affected by the slander. See id. at 906 (Spears, J., concurring). Barring such proof, the plaintiff may not recover any damages, whether litigation expenses, interest, taxes, or otherwise. Texas Am. Corp. v. Woodbridge Joint Venture, 809 S.W.2d 299, 304 (Tex.App.--Fort Worth 1991, writ denied). ⁵

Bowman's testimony about the lost sale was as follows:

Appellee's counsel: All right. In 1990 when you took over, since 1990, have you been able to sell the property?

Bowman: No....

Appellee's counsel: Why not? ... Why have you not...