Tony Gullo Motors I, L.P. v. Chapa

Decision Date22 December 2006
Docket NumberNo. 04-0961.,04-0961.
PartiesTONY GULLO MOTORS I, L.P. and Brien Garcia, Petitioners, v. Nury CHAPA, Respondent.
CourtTexas Supreme Court

Craig T. Enoch, Melissa Anne Prentice, Alejandro Sin Valdes, Joe Michels Jr., Roxanne T.L. Wilson, Winstead Sechrest & Minick, P.C., Austin, and William T. Green III, Houston, for Petitioner.

Kristin Bays, J. Randal Bays, Bays and Bays, Conroe, for Respondent.

Justice BRISTER delivered the opinion of the Court, in which Chief Justice JEFFERSON, Justice HECHT, Justice WAINWRIGHT, Justice GREEN, and Justice WILLETT joined.

Nury Chapa bought a Toyota Highlander from Tony Gullo Motors for $30,207.38; they disagree what model of the car was involved. After a two-day trial, the six jurors answered 15 questions concerning breach of contract, fraud, and the DTPA1 in Chapa's favor. They also found a difference in value of the two models of $7,213, mental anguish damages of $21,639, exemplary damages of $250,000, and attorney's fees of $20,000.

The trial court disregarded the mental anguish and exemplary awards on the ground that Chapa's only claim was for breach of contract, and the fee award because Chapa had not segregated fees attributable to that claim alone. In a per curiam memorandum opinion, the Ninth Court of Appeals disagreed with both conclusions, reinstating all the awards but reducing exemplary damages to $125,000.

We agree that Chapa could assert her claim in several forms, but disagree that she could recover in all of them. Further, the court of appeals' judgment included exemplary damages exceeding the bounds of constitutional law and attorney's fees exceeding the bounds of Texas law. Accordingly, we reverse and remand for further proceedings.

I. Election of Remedies

In entering judgment for Chapa on all her contract, fraud, and DTPA claims, the court of appeals violated the one-satisfaction rule. "There can be but one recovery for one injury, and the fact that . . . there may be more than one theory of liability[] does not modify this rule."2

Chapa alleged only one injury— delivery of a base-model Highlander rather than a Highlander Limited. While she could certainly plead more than one theory of liability, she could not recover on more than one.3

For breach of contract, Chapa could recover economic damages and attorney's fees, but not mental anguish or exemplary damages.4 For fraud, she could recover economic damages, mental anguish, and exemplary damages, but not attorney's fees.5 For a DTPA violation, she could recover economic damages, mental anguish, and attorney's fees, but not additional damages beyond $21,639 (three times her economic damages).6 The court of appeals erred by simply awarding them all.

But as Chapa was the prevailing party, she is still entitled to judgment on the most favorable theory supported by the pleadings, evidence, and verdict.7 Gullo Motors does not challenge the jury's breach of contract or economic damages findings in this Court. Accordingly, the only question before us is whether Chapa is entitled to anything more.

II. Mere Breach of Contract

Gullo Motors argues that Chapa's only claim is in contract, as the parties' only dispute is whether she contracted for a base-model Highlander or Highlander Limited. "An allegation of a mere breach of contract, without more, does not constitute a `false, misleading or deceptive act' in violation of the DTPA."8 Similarly, "the usual view is that mere breach of contract is not fraud and that it may not be evidence of fraud."9

But Chapa alleged more than a mere breach of contract; her complaint was not just that Gullo Motors failed to deliver a Highlander Limited, but that it never intended to do so. A contractual promise made with no intention of performing may give rise to an action for fraudulent inducement.10 The duty not to fraudulently procure a contract arises from the general obligations of law rather than the contract itself, and may be asserted in tort even if the only damages are economic.11

Gullo Motors argues that Chapa cannot bring a fraudulent inducement claim because she was not promised a car she did not want, but one that she did. But a party may bring a fraudulent inducement claim even if the terms of the promise are later subsumed into a contract.12 In all such cases, the liability of the defendant on the contract does not absolve it from liability in tort damages too.13

Similarly, while the failure to deliver a Highlander Limited would not alone violate the DTPA,14 Chapa's claim was that Gullo Motors represented she would get one model when in fact she was going to get another. While failure to comply would violate only the contract, the initial misrepresentation violates the DTPA.15

Of course, Chapa was required not just to plead but to prove her claims. Proving that a party had no intention of performing at the time a contract was made is not easy, as intent to defraud is not usually susceptible to direct proof.16 Breach alone is no evidence that breach was intended when the contract was originally made.17 Similarly, denying that an alleged promise was ever made is not legally sufficient evidence of fraudulent inducement.18 Usually, successful claims of fraudulent inducement have involved confessions by the defendant or its agents of the requisite intent.19

But while breach alone is no evidence of fraudulent intent, breach combined with "slight circumstantial evidence" of fraud is enough to support a verdict for fraudulent inducement.20 We believe Chapa met that standard here.

At trial, Chapa testified that she signed a contract listing a Highlander Limited, but that Gullo Motors personnel "snatched" the contract from her after she signed it, and must have destroyed it later. She also testified that the signatures on at least four documents were forged, and that some were forgeries of her deceased husband's signature rather than her own. In light of the favorable verdict, we must assume the jury credited this testimony.21

Spoliation of evidence normally supports an inference only that the evidence was unfavorable,22 not that it was created ab initio with fraudulent intent. But as the evidence here was part of the original contracting process, it provides some circumstantial evidence of fraud in that process.

Further, the only contract introduced at trial listed the car sold as a "2002 Toyota"; although Gullo Motors prepared the contract, it offered no explanation why the box for indicating the model was left blank. Although the contract listed a vehicle identification number that matched the base-model Chapa ultimately received, there was evidence that Gullo Motors did not contract for that car until several days after Chapa signed the contract, and thus must have added it later.23 And when Chapa's first attorney offered to return the car for a refund, Gullo Motors refused on the ground that it had already been titled, although evidence at trial suggested that did not occur until several days later.

We recognize the need to keep tort law from overwhelming contract law, so that private agreements are not subject to readjustment by judges and juries.24 But we long ago abandoned the position that procuring a contract by fraud was simply another contract dispute.25 Because Chapa proved more than mere breach of contract here, we hold she was entitled to assert fraud and DTPA claims as well.

III. Exemplary Damages

The jury found Gullo Motors had committed deceptive acts knowingly and found clear and convincing evidence that it had committed fraud. Beyond arguing that Chapa can only sue in contract, Gullo Motors does not challenge either finding. As we have rejected that argument, Chapa is entitled under the verdict to exemplary damages for either fraud or violation of the DTPA.26

But both parties challenge the court of appeals' judgment reinstating exemplary damages but reducing them to $125,000 —Gullo Motors because the reinstatement went too far, and Chapa because it did not go far enough. Although the jury assessed exemplary damages for both fraud and deceptive acts at $250,000, the DTPA caps those damages at $21,639 (three times Chapa's economic loss of $7,213),27 while the fraud award is capped at $200,000.28 Accordingly, the court of appeals' opinion and the parties' briefs address only whether the exemplary damages were properly awarded based on fraud.

A

As an initial matter, Chapa asserts that three grounds preclude our constitutional review of the exemplary damages award. First, she argues this Court lacks jurisdiction to consider whether exemplary damages are constitutionally excessive. While the excessiveness of damages as a factual matter is final in the Texas courts of appeals,29 the constitutionality of exemplary damages is a legal question for the court.30 We have conducted such analyses before.31 Moreover, the Supreme Court of the United States has found unconstitutional a state constitutional provision limiting appellate scrutiny of exemplary damages to no-evidence review.32 Only by adhering to our practice of reviewing exemplary damages for constitutional (rather than factual) excessiveness can we avoid a similar constitutional conflict.

Second, Chapa claims that by authorizing up to $200,000 in exemplary damages, the Legislature necessarily rendered that amount constitutionally permissible. But while "state law governs the amount properly awarded as punitive damages," that amount is still "subject to an ultimate federal constitutional check for exorbitancy."33

Third, Chapa argues that she is entitled to the jury's entire exemplary damage award because the trial court complied with the procedural protections required by the Due Process Clause. But the constitutional limitations on such awards are substantive as well as procedural.34 Even if the procedural processes were perfect, "[t]o the extent an award is grossly excessive, it furthers no...

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