Tranum v. Broadway

• Decision Date: 02 July 2008
• Docket Number: No. 10-06-00308-CV.,10-06-00308-CV.
• Citation: 283 S.W.3d 403
• Parties: Jim TRANUM, Appellant v. David BROADWAY, Appellee.
• Court: Texas Court of Appeals

283 S.W.3d 403

Jim TRANUM, Appellant v. David BROADWAY, Appellee.

No. 10-06-00308-CV.

Court of Appeals of Texas, Waco.

July 2, 2008.

Pat Beard, Waco, TX, for Appellant.

Jim Dunnam, Dunnam & Dunnam, Greg White, Naman Howell Smith & Lee PC, Waco, TX, for Appellee.

Before Chief Justice GRAY, Justice VANCE, and Justice REYNA.

OPINION

FELIPE REYNA, Justice.

A jury found Jim Tranum liable for malicious prosecution and slander against David Broadway and awarded mental anguish, reputation, and exemplary damages to Broadway. Tranum appeals, arguing that: (1) the evidence is legally and factually insufficient to support malicious prosecution, slander, mental anguish damages, reputation damages, and exemplary damages; (2) the jury's award of exemplary damages is unconstitutional; (3) exemplary damages were not tied to a cause of action; (4) Broadway received a double-recovery of mental anguish damages; (5) in the alternative, the exemplary damages award should be remitted if not stricken; (6) in the alternative, the award of mental anguish damages should be remitted if not stricken; and (7) the trial court abused its discretion by striking expert testimony. We modify the judgment and affirm the judgment as modified.

FACTUAL BACKGROUND

Tranum employed Broadway as the new car sales manager at Tranum Buick Pontiac GMC in Temple. Broadway later became the general manager for Tranum Ford-Mercury in his hometown of Gatesville. He received monthly compensation, a year-end bonus of twenty percent net profit, ten percent of all credit life insurance, and twenty percent of the proceeds from a car wash owned by Tranum. He used his annual bonuses to purchase stock in the dealership. Broadway and B.J. Shaw, the dealership's bookkeeper, prepared the dealership's monthly financial statements. Tranum reviewed these statements and at the end of each year, he and the board of directors reviewed the dealership's financial records and awarded bonuses. Tranum and his three daughters also received bonuses.

At some point, the dealership began experiencing cash flow problems. Tranum wanted to buy another dealership, but Ford Motor Company had expressed concern about Tranum Ford's "cash position." Broadway and Tranum had discussed the dealership's financial position. According to Broadway, Ford expected the dealership to be "in the black," and Tranum instructed Broadway to "fix it." Broadway knew how Tranum Buick had handled the problem and decided to use this same practice. He would take the "next two or three days' or four days' deposits, post them in the previous month so that it shows that you're in the positive in the bank, send your financial statement off electronically, [and] move the cash back where it belongs." Tranum did not expressly instruct Broadway to use this practice and Broadway did not tell Tranum how he "fix[ed]" the problem. Eventually, a check to Ford Motor Credit bounced due to insufficient funds. Tranum contacted Broadway who informed Tranum that the dealership needed money and had for a "long time." Tranum instructed Broadway to "grow up." Unable to "take the stress anymore," Broadway left the dealership that day, but later returned to clean out his office and deliver his resignation letter to Tranum's daughter. Tranum subsequently invested about $350,000 to "keep the doors open."

A few days later, Shaw issued a written statement wherein she claimed that Broadway instructed her to reverse transactions reflecting a loss, not show overdraft charges on the financial statements, and alter the statements to show a profit by increasing costs, offsetting expenses, and performing transactions to "bring his bottom line up." Broadway had assured Shaw that Tranum was aware of these practices and that Tranum Buick also used these practices. Shaw wrote that she once attempted to quit when she discovered that someone had gone through her office, misplacing and disposing of records, but Broadway threatened to "blame everything" on Shaw. Broadway told Shaw to follow his instructions or she would lose her job and that Tranum would "stand behind him." Shaw stated that Broadway did not care if she was unable to balance the books.

According to several witnesses, Tranum began accusing Broadway of theft, embezzlement, and misappropriation. Broadway sued Tranum for slander and slander per se. Tranum's accountant, Steve Niemeier, subsequently issued a report after examining the dealership's financial records at Tranum's request. Niemeier found that: (1) certain accounts were not reconciled to the general ledger during the applicable dates; (2) operating expenses were "inappropriately deferred as increases to inventory"; (3) "financial statement items" were "increased to a value that exceeded what was considered a reasonable balance"; (4) "the Dealership had delayed reporting sales activity in order to delay required loan payments"; (5) "parts inventory" was "significantly overstated"; (6) "collection procedures significantly reduced the claims receivable account"; (7) $13,789.09 in "[i]ndividual customer accounts" were "doubtful for future collection"; (8) $9,050 in operating expenses had been "added to inventory"; (9) "retained earnings" were "reduced to a deficit balance;" (10) Broadway charged $10,232.57 in personal expenses to the dealership; and (11) Broadway received $82,091 in bonuses as a result of the above transactions.

Tranum delivered Shaw's statement and Niemeier's report to Coryell County District Attorney Riley Simpson. Bruce Beals, a legal assistant with the district attorney's office, reviewed these documents and prepared a memorandum concluding that Broadway: (1) "committed a theft by deception"; (2) "intentionally misrepresented the amount of annual net profit of Tranum Ford-Mercury in order to obtain a yearly bonus, thereby unlawful[ly] appropriating funds"; and (3) received bonuses in excess of $20,000, but less than $100,000. Beals recommended that an indictment be prepared charging Broadway with "Theft over $20,000, but less than $100,000." Simpson presented the indictment to the grand jury, which returned a "no bill." Broadway then amended his lawsuit to allege malicious prosecution.¹

At trial, Tranum admitted that Broadway advised him of the dealership's financial problems, but testified that he did not perceive a problem in light of financial statements reflecting a positive cash flow. He denied knowing that Broadway was altering financial statements until after Broadway resigned and Shaw informed him of the situation. However, at her deposition, Shaw testified that Tranum instructed her to write the statement under threats that she would go to jail and have her children taken away. Shaw was afraid and wrote what she thought Tranum wanted to hear. Tranum denied threatening Shaw and accused Shaw of lying.

Tranum testified that he would not have approved even if he had known of Broadway's actions. He denied altering the books at his other dealerships or instructing Broadway to do so, but admitted lying to General Motors to conceal a negative cash balance and submitting documents that misrepresented the "true state of the bank accounts." He testified that documents were sometimes altered, probably at his direction, to show that the dealership had more money in the bank, but did not misstate assets, liabilities, expenses, income, or losses. He would have no complaints had Broadway used these practices. He claimed that the "bottom line," "net worth of the financial statement, the assets, [and] the liabilities" never changed.

Dorothy Haddox, former bookkeeper for Tranum Buick, testified that Tranum never instructed her to change or alter an accurate financial statement. Haddox testified that General Motors did not like to see statements showing a negative cash balance. Therefore, Tranum instructed Haddox not to show a negative cash balance on the statements and reviewed statements thoroughly to ensure that such a balance was not shown. Haddox explained that she would increase the account balance and decrease the inventory, but the bottom line never changed. She corrected the statements after submitting them to General Motors. Haddox denied changing statements to obtain a "better bottom line," transferring items between expense and asset accounts, deferring operating expenses as increases to inventory, overstating accounts receivable or parts inventory, delaying reports of sales activity, or failing to record operating expenses, payments, loans, checks, or bank charges. She did not recall using "bad accounting practices" or being asked to do so.

Jack Ralston, general sales manager for Tranum Auto Group, testified that Broadway had contacted him and admitted his failure to timely pay off vehicles. Broadway was "concerned" and "distraught," could not pay the amount owed to Ford Motor Credit, had not yet told Tranum that he could not pay Ford, and expected to lose his job. Broadway did not admit to any other improprieties. He had never asked Ralston about inappropriate accounting practices. Ralston was unaware of any such practices at Tranum Auto and testified that Tranum never failed to timely pay invoices, post expenses to proper accounts, write off uncollectible accounts, or adjust inventory accounts to their proper value. Ralston visited Tranum Ford and found some evidence that dealership funds were used to pay Broadway's personal expenses. Although he did not "dig too deep," Ralston found no evidence of any other problems.

Tranum denied knowing or approving of Broadway's use of dealership funds to pay personal expenses. Broadway testified that he used his personal credit card to make purchases for the dealership, including a car wash owned by Tranum. Broadway was not reimbursed for these expenses, but rather gave the bills to the bookkeeper. Broadway further testified that the dealership paid the dry cleaning bill for his work clothes and also paid his personal expenses during a "good year," which...