Shipley Brothers, Ltd v. Republic National Bank
(Tex.App.- Houston [1st Dist.] Jun. 11, 2009)(Jennings) (conversion, theft, and fraud, Texas Theft Liability
Act, election of remedies doctrine, remittitur of the exemplary damages, punitive exemplary damages)
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS:
Before Judge Wilson, Justices Jennings and Bland. Opinion by Justice Terry Jennings
01-07-00911-CV Shipley Brothers, Ltd., Shipley Brothers, Inc., Lone Star Investments, Kenneth Shipley
and Calvin Junek, Jr. v. Republic National Bank and Robert F. Larson
Appeal from County Civil Court at Law No 4 of Harris County
Trial Court Judge: Hon. Roberta A. Lloyd
Concurring and Dissenting Opinion by Justice Bland (subrogation, double recovery, election of remedies)
NOTE: This opinion was subsequently withdrawn on August 13, 2009 following a settlement
agreement reached by the parties. See Shipley Brothers, Ltd v. Republic National Bank II
(Tex.App.-Houston [1st Dist.] Aug. 13, 2009)(substituted opinion by Justice Jennings)
--------------------------------------------------------------------------------
O P I N I O N
Appellants, Shipley Brothers, Ltd. ("Shipley Brothers"), Lone Star Investments ("Lone Star"), Kenneth
Shipley, and Calvin Junek, Jr. (collectively referred to as the "Shipley defendants"), challenge the trial
court's final judgment entered, after a jury trial, in favor of appellees, Robert F. Larson and Republic
National Bank ("Republic"). The trial court awarded Larson actual damages of $19,000 and exemplary
damages of $218,000 on his claims against the Shipley defendants for conversion, theft, and fraud. The
trial court awarded Republic actual damages of $39,000, additional damages of $1,000, and attorney's
fees of $115,596 on Republic's claims against the Shipley defendants for violations of the Texas Theft
Liability Act. (1)
In their first issue, the Shipley defendants contend that they were divested of ownership of a manufactured
home, which was ultimately delivered to Larson "without notice or the opportunity to be heard" under
Chapter 1201 of the Texas Occupations Code, (2) in violation of "the Due Course of Law Clause of the
Texas Constitution and the Due Process Clause of the United States Constitution." (3) In their second
issue, the Shipley defendants contend that Republic was not entitled to recover damages under the Texas
Theft Liability Act as it did not own the home in question and it was not entitled to damages for theft or
conversion "merely because it [had] a security interest" in the home. In their third issue, the Shipley
defendants contend that the evidence is legally insufficient to support the jury's fraud findings in favor of
Larson. In their fourth issue, the Shipley defendants contend that the evidence is legally insufficient to
support the award of $218,000 in exemplary damages and that the exemplary damages award is excessive
and "violates state and federal due process standards." In their fifth issue, the Shipley defendants contend
that Republic may not recover damages against them for conversion as Republic did not own the home in
question and Larson may not recover damages against them under the Texas Deceptive Trade Practices
Act (4)
as his complaints against them "do not arise from a consumer transaction." In their sixth issue, the Shipley
defendants contend that Republic and Larson "should not be allowed to elect separate remedies as a
means of recovering both exemplary damages and attorney's fees when they pled, proved, and submitted
the case as if they were a joint victim of a single wrongful act" and "there is no evidence or jury finding to
support an award of separate attorney's fees to Republic only." In their seventh issue, the Shipley
defendants contend that the trial court erred in denying their motion to transfer venue.
We suggest a remittitur of the exemplary damages awards in favor of Larson and against Lone Star and
Shipley. If Larson files in this Court, within fifteen days from the date of this opinion, a remittitur to $57,000
with respect to each of the exemplary damage awards against Lone Star and Shipley, we will reform the
trial court's judgment and affirm it as reformed. Otherwise, we will reverse the judgment of the trial court,
and remand for a new trial.
Factual and Procedural Background
The Shipley defendants, who were engaged in the business of selling and financing manufactured homes,
purchased a home from Southern Energy, a manufacturer, and delivered the home to Sweet Mobile
Homes, a retailer of manufactured homes, pursuant to an informal consignment agreement that authorized
Sweet to sell the home to a third-party consumer. Larson purchased the home from Sweet to use as a
"recreational property" on a piece of rural land located in Lasalle County. Larson financed the purchase of
his home through his bank Republic, which, pursuant to a financing agreement, wired to Sweet the full
purchase price of $49,500, which included $10,500 as a down payment from Larson and $39,000 payment
from Republic for the remaining balance. After receiving payment in full, Sweet delivered the home and
installed it on Larson's property.
The Shipley defendants subsequently learned that Sweet had sold the home to a third-party customer, but
Sweet did not pay the Shipley defendants for the home in accord with the consignment agreement. After
the Shipley defendants learned that Larson had bought the home, they took the home from Larson's
property without Larson's knowledge or permission.
Upon learning that the Shipley defendants had taken Larson's home, Republic and Larson brought this
suit, asserting claims for fraud, conversion, and violations of the Theft Liability Act. Before trial, Republic
and Larson filed a summary judgment motion, seeking "summary judgment as to liability" on their
conversion and Theft Liability Act claims. The trial court granted Republic and Larson's summary judgment
motion "as to liability" on these claims. (5) The case then proceeded to a jury trial on the remaining claims.
At trial, Larson testified that Sweet delivered the home to his property on or about August 21, 2005, and
Sweet installed the home, which took about three days. Larson and his wife furnished the home with
kitchen, bathroom, and bedroom equipment, decorations, food, and other personal family items. Larson
and his wife, granddaughter, and father then stayed in the home for three nights over the Labor Day
weekend. After returning to their permanent home, Larson made a list of "some issues" that he had with
the home, and he faxed it to David Barrosso, the representative from Sweet who had sold Larson the
home. Larson also called Brad McGirt, service manager for Southern Energy. Larson explained that he
had contacted both McGirt and Sweet to determine who had the obligation to address the issues set forth
on his list, Southern Energy as the manufacturer or Sweet as the retailer. Larson was advised that McGirt
would get back in touch with him.
That same day, a man, who identified himself as "Mike," contacted Larson by telephone and stated, "I
understand you're having some problems with a Southern Energy home that you purchased." Larson, who
was not aware of the Shipley defendants or of their claims to the home, responded, "That is an awfully fast
response from the factory." "Mike" then explained, "Well, I'm going to be in that area tomorrow and I'll be
looking at some other issues with some other homes. . . . I'd like to go by your place and take a look at it, if
you don't mind." Larson agreed, believing that he was receiving "same day service" from Southern Energy.
Larson gave "Mike" directions to his property and the combination to the gate to access his property.
Larson further offered "Mike" the key to his home, but Mike told him, "No, I've got a key to every home we
sell."
Two days later, Larson telephoned "Mike," who answered the phone this time as "Cal [Junek]." Larson,
who was confused by "Mike's" name change, explained that he was calling because he had some "more
issues" on the home. To his complete surprise, Junek told Larson, "That won't make any difference . . . I
took your home this morning." Junek then told Larson to "[c]all the State of Texas, they have a recovery
fund." Larson had no idea to what Junek was referring or even who Junek was. Junek then told Larson that
Kenneth Shipley, who owns Lone Star, "owns the home," and Shipley had the Manufacturer's Certificate of
Origin ("MCO"). Junek also told Larson that Sweet had not paid Shipley for the home and that Shipley had
instructed Junek to "get [Larson's] home."
Larson explained that, in their first conversation, Junek, who represented himself as "Mike," had acted as if
he was a Southern Energy representative who was going to Larson's property to look at "warranty work."
Larson stated that he had only given Junek permission to enter his property to perform this warranty work
and he had not given Junek permission to enter his property to take the home.
Larson returned to his property the following Friday to find that his home had in fact been removed.
Larson learned that his home and personal belongings were being stored in Lytle, Texas, a significant
distance from LaSalle County, and he traveled there to retrieve his personal belongings, some of which
had been damaged. Larson explained that he was seeking, as part of his actual damages, his $10,500
down payment, and that Republic was seeking, as damages, $39,000 as the balance of the home price.
Larson also sought exemplary damages, explaining that the Shipley defendants went on to his "private
piece of property," he felt "violated," the incident had "crushed [his] seventy-nine year old dad," and his
"granddaughter cried for two days."
Kenneth Shipley testified that Lone Star, which had purchased the home from Southern Energy, consigns
homes to retailers, like Sweet, for sale. Shipley stated that Shipley Brothers consigned the home, which
was titled in Shipley Brothers' name, with Sweet to sell. (6) Shipley explained that, prior to the removal of
the home from Larson's property, Junek, pursuant to Shipley's instructions, had visited Sweet's lot and saw
that the home was no longer on the lot. Barrosso, of Sweet, told Junek that the home had been sold, but
Sweet did not pay Shipley the amounts due. On further questioning, Shipley agreed that Barrosso had
also told Junek that a customer, who Barrosso would not identify, had paid for the home, but that Sweet did
not have the money to pay Shipley.
Shipley further testified that a few days after Junek's visit to Sweet, Southern Energy telephoned Shipley to
inform him that it had received a telephone call from Larson, who was complaining about a set-up that had
not been completed on a home that Larson had purchased from Sweet. Shipley explained that Southern
Energy had called Shipley because his name was on the MCO. Shipley, who knew that Larson had called
Southern Energy about warranty and set-up issues, then instructed Junek to call Larson, explaining that
Southern Energy had "directed" that they contact Larson. Shipley further instructed Junek to go onto
Larson's property, and, if the home look unoccupied, Shipley instructed Junek to take the home. Shipley
agreed that the Shipley defendants took the home without Larson's permission. Shipley also agreed that
he, Junek, Lone Star, and Shipley Brothers "made the decision" to take the home from Larson's property.
Shipley conceded that one of the reasons that he had Junek go onto Larson's property was to determine if
Larson's home was in fact the missing home for which they had not received payment from Sweet.
Nevertheless, Shipley also maintained that Junek was sent to Larson's property to look at the set-up and
warranty issues about which Larson had originally notified Southern Energy. Shipley agreed that because
Southern Energy had informed him that Larson's home had been purchased from Sweet, he, at the time
that he sent Junek to Larson's property, already knew that "there was a good chance" that it was the
missing home.
Shipley further conceded that Larson did not have any reason to know of the existence of the Shipley
defendants or of any competing claims to the home's title. Shipley also agreed that a retailer, like Sweet,
who holds a home on consignment, has to be able to offer consumers, like Larson, clear and marketable
title. Shipley noted that Sweet had done everything right in the business arrangement except that it did not
pay the Shipley defendants after the sale to Larson was completed.
Junek testified that he worked for Kenneth Shipley and that he is employed by Lone Star. When Junek
visited Sweet, Sweet informed him that the home had been sold and that the customer had paid Sweet for
the home. Sweet would not identify the customer, but Junek subsequently received a telephone call from
Shipley during which Shipley informed Junek about the telephone call from Southern Energy. Junek then,
pursuant to Shipley's instructions, telephoned Larson and told Larson that he was calling about warranty
work on the home. Despite his representations to Larson, Junek conceded that he does not do warranty
work for Southern Energy. Junek knew that Larson had previously called Southern Energy about warranty
work, and he acquired Larson's gate combination "under the theory that he was going out to check on
warranty issues." When Junek went to Larson's property, he confirmed that the home was the missing
home and telephoned Shipley, who told Junek to take the home. Junek returned to Larson's property the
next day with a work crew and, without Larson's permission, took the home.
Junek agreed that Larson had given him permission only to do warranty work, Larson had not given him
permission to go onto Larson's property to take the home, and, despite his representations, Junek did not
perform any warranty work. Junek also agreed that he "had a feeling" that the Southern Energy telephone
call identifying Larson related to the missing home that had been consigned to Sweet. Junek conceded
that when he went to Larson's home, he had not even seen a copy of Larson's list of warranty issues.
Junek also conceded that if Larson had been involved in a scam with Sweet, it would not have made sense
for Larson to have telephoned Southern Energy to report the warranty problems. Although Junek
contended that he would not have taken the home had he known that Larson had paid for it, Junek never
asked Larson if he had paid for it. Moreover, Junek admitted that Sweet had told him that it had sold the
home to a customer and that the customer had in fact paid for it.
The trial court, in its final judgment, ordered that Larson recover from the Shipley defendants, jointly and
severally, actual damages on his conversion, theft, and fraud claims in the amount of $19,000. The trial
court further ordered that Larson recover exemplary damages in the total amount of $218,000,
apportioned with $100,000 against Shipley, $100,000 against Lone Star, $8,000 against Junek, and
$10,000 against Shipley Brothers. The trial court further ordered that Republic recover from the Shipley
defendants $39,000 in actual damages and $1,000 in additional damages under the Theft Liability Act and
$115,596 in attorney's fees.
Constitutional Challenge
In their first issue, the Shipley defendants argue that because they were divested of ownership of the
home that was ultimately delivered to Larson by Sweet "without notice or the opportunity to be heard,"
Chapter 1201 of the Texas Occupations Code, as applied, "violate[d] the Due Course of Law Clause of the
Texas Constitution and the Due Process Clause of the United States Constitution." See U.S. Const.
amend. XIV, § 1; Tex. Const. art. I, § 19.
The Texas Constitution provides: "No citizen of this State shall be deprived of life, liberty, property,
privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land."
Tex. Const. art. I, § 19. Likewise, the United States Constitution provides: "No State shall make or enforce
any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State
deprive any person of life, liberty, or property, without due process of law; . . . " U.S. Const. amend. XIV, §
1. Texas's Due Course of Law Clause and the federal Due Process Clause are textually different, but we
generally construe the Due Course of Law Clause in the same way as its federal counterpart. Tex.
Workers' Comp. Com'n v. Patient Advocates of Tex., 136 S.W.3d 643, 658 (Tex. 2004) (citing Univ. of Tex.
Med. Sch. v. Than, 901 S.W.2d 926, 929 (Tex. 1995)). Accordingly, we rely on federal and Texas case law
that addresses due process issues in analyzing the Shipley defendants' constitutional challenge. See id.
A deprivation of personal property without due process violates both the United States and Texas
Constitutions. Id. (citing County of Sacramento v. Lewis, 523 U.S. 833, 846, 118 S. Ct. 1708 (1998)). Due
process at a minimum requires notice and an opportunity to be heard at a meaningful time and in a
meaningful manner. Id.
The Shipley defendants challenge the constitutionality of the version of section 1201.204 of the Texas
Occupations Code that was in effect at the time Larson purchased the home. This version of section
1201.204 provided,
§ 1201.204. Manufacturer's Certificate
(a) A manufacturer's certificate must show:
(1) on a form prescribed by the director or on another document, the original transfer of a manufactured
home from the manufacturer to the retailer; and
(2) on a form prescribed by the director, each subsequent transfer of a manufactured home between
retailers and from retailer to owner, if the transfer from retailer to owner involves a completed application
for the issuance of a statement of ownership and location.
(b) At the first retail sale of a manufactured home, a manufacturer's certificate automatically converts to a
document that does not evidence any ownership interest in the manufactured home described in the
document. A security interest in inventory evidenced by the manufacturer's certificate automatically
converts to a security interest in proceeds and cash proceeds.
(c) After the first retail sale of a manufactured home, the retailer may submit the manufacturer's certificate
for that home to the department.
Act of May 26, 2003, 78th Leg., R.S., ch. 338, 2003 Tex. Gen. Laws 1471, 1477 (amended 2007) (current
version at Tex. Occ. Code Ann. § 1201.204 (Vernon Supp. 2008)) (emphasis added) (referred to
hereinafter as "former section 1201.204").
The Shipley defendants focus their constitutional challenge on the language of former section 1201.204(b)
that provides that "[a]t the first retail sale of a manufactured home, a manufacturer's certificate
automatically converts to a document that does not evidence any ownership interest in the manufactured
home described in the document." See id. The Shipley defendants explain their constitutional challenge as
follows:
When a party holding an MCO on a manufactured home sells to a consumer through a retailer on a
consignment basis, as long as the consignee is ethically responsible and financially capable of forwarding
the money to the rightful owner, there is no problem. And when the purchase of a manufactured home
under those circumstances is financed by an institution familiar with customary practices in the
manufactured home industry that require the surrender of the MCO before funding, there is no problem.
But if the consignee does not honor its commitment, and the lender is inexperienced in the manufactured
home industry and fails to follow customary practices, then [former section 1201.204] creates the problems
that arose in this case.
The Shipley defendants assert that when, as in this case, former section 1201.204 allows a party, like
them, "who has paid for a manufactured home and retains the MCO [to] nevertheless lose title to the home
without notice or an opportunity to be heard," then they are deprived of their property without due process.
Here, Shipley testified that the Shipley defendants released possession of the home to Sweet pursuant to
an informal, one page, handwritten consignment agreement that was subsequently, verbally modified by
adding the home in question to the agreement "on the side." (7) However, regardless of the exact terms
under which the Shipley defendants released the home to Sweet, Shipley agreed that the Shipley
defendants themselves intended for Sweet to sell the home to a third-party consumer in a retail sale and
that the consumer would never be aware of Shipley's existence. (8) Shipley further testified that the
Shipley defendants entered into the agreement with Sweet knowing that consumers would be approaching
Sweet to purchase the home and obtain clear title from Sweet and that consumers would have no reason
to know of competing claims to the title from the Shipley defendants. Most importantly, Shipley knew, and
expected, that Sweet would be offering consumers, like Larson, clear title to the home. Shipley testified,
[Larson's counsel]: . . . [Y]ou know that Sweet has to make that same representation to anybody it sells
one of the homes on consignment, or otherwise. He has to make that representation that he is going to
provide clear and marketable title.
[Shipley]: That is right. Its his obligation.
[Larson's counsel]: It is his obligation to, correct?
[Shipley]: That's right.
[Larson's counsel]: And when you provide people like Sweet with a home to sell, you know that he has to
make that representation of warranty to the public. You know that?
[Shipley]: That is right.
[Larson's counsel]: So you know that any time that he is communicating to a consumer, he has to state
that he is going to provide clear and marketable title?
[Shipley]: Yes.
[Larson's counsel]: And in this case Sweet did everything he was supposed to do except pay you?
[Shipley]: That's right.
(Emphasis added).
Shipley's testimony establishes that the Shipley defendants gave Sweet possession of the home in
exchange for Sweet's promise to sell the home, with clear title, to a consumer. Shipley's testimony further
establishes that the Shipley defendants authorized Sweet to offer and convey to the consumer clear title to
the home upon purchase. It is undisputed that Larson paid Sweet for the home. Thus, based on Shipley's
own testimony, pursuant to the Shipley defendants' agreement with Sweet, when Larson purchased the
home from Sweet, Sweet transferred to Larson clear title to the home, unencumbered by any ownership
interest previously evidenced by the Shipley defendants' MCO. (9)
We conclude that the Shipley defendants were not deprived of due process as a result of the titling
procedures set forth in chapter 1201 of the Texas Occupations Code. Rather, the Shipley defendants
voluntarily released possession of the home to Sweet pursuant to an agreement that allowed Sweet to
offer, and transfer, clear title to the consumer who purchased the home. As Shipley himself testified, Sweet
did everything in accord with the parties' agreement, necessarily including Sweet's offering Larson clear
title, except to pay the Shipley defendants for the sale. Because Sweet offered clear title to Larson in
accord with the parties' agreement, and because ownership was transferred to Larson pursuant to this
agreement, Chapter 1201 did not deprive the Shipley defendants' of ownership of the home without notice
or the opportunity to be heard. Accordingly, we hold that Chapter 1201, as applied, did not violate the Due
Course of Law Clause of the Texas Constitution or the Due Process Clause of the United States
Constitution.
We overrule the Shipley defendants' first issue.
Republic's Recovery Under Theft Liability Act
In their second issue, the Shipley defendants argue that Republic was not entitled to recover damages
under the Theft Liability Act because Republic did not own the home in question and Republic was not
entitled to damages for theft or conversion "merely because it [had] a security interest" in the home.
Republic argues that it, as an owner of a security interest in the home, had standing to sue under the
Theft Liability Act because it qualified as a "person who has sustained damages resulting from theft." See
Tex. Civ. Prac. & Rem. Code Ann. § 134.005 (Vernon 2005). Alternatively, Republic argues that it qualified
as an "owner" under the Penal Code because its right to possession of the home was superior to that of
the Shipley defendants.
Section 134.003 of the Texas Civil Practice and Remedies Code provides that "[a] person who commits
theft is liable for the damages resulting from the theft." Id. § 134.003(a) (Vernon 2005). Section
134.005(a)(1) provides,
(a) In a suit under this chapter, a person who has sustained damages resulting from theft may recover:
(1) under Section 134.003(a), from a person who commits theft, the amount of actual damages found by
the trier of fact and, in addition to actual damages, damages awarded by the trier of fact in a sum not to
exceed $1,000; Id. § 134.005(a)(1) (emphasis added). "Theft," as used in the Theft Liability Act, is defined
to mean "unlawfully appropriating property or unlawfully obtaining services as described by" a number of
Penal Code sections, including section 31.03. Id. § 134.002(2) (Vernon 2005). Section 31.03(a) of the
Penal Code provides that "[a] person commits an offense if he unlawfully appropriates property with intent
to deprive the owner of property." Tex. Penal Code Ann. § 31.03(a) (Vernon Supp. 2008). Owner is
defined in the Penal Code as a person who "has title to the property, possession of the property, whether
lawful or not, or a greater right to possession of the property than the actor." Id. § 1.07(35)(A) (Vernon
Supp. 2008).
The Shipley defendants do not challenge the trial court's summary judgment ruling, "as to liability," that
they committed theft by removing the home from Larson's property. Their only challenge is to Republic's
standing to sue for damages under the Theft Liability Act. However, the Act, by its plain terms, provides a
remedy not simply for "owners," as that term is defined in the Penal Code, but for "person[s] who [have]
sustained damages resulting from theft." Tex. Civ. Prac. & Rem. Code Ann. § 134.005(a)(1). Here,
Republic presented evidence that it wired Sweet $49,500 for the home, with Larson funding $10,500 of
that amount as a down payment and Republic funding the remaining balance of $39,000. Republic also
presented evidence that shortly after it had wired the money to Sweet, Larson obtained ownership and
possession of the home and the Shipley defendants' committed theft by taking the home from Larson's
property. Republic also presented evidence that the Shipley defendants never returned the home to
Larson, even though the State of Texas subsequently declared Larson to be the rightful owner of the
home. Because Republic had loaned to Larson $39,000, which was secured only by the home, Republic
was necessarily damaged as a result of the theft of the home. Accordingly, we hold that because Republic
sustained damages in the amount of $39,000 as a result of the Shipley defendants' theft, Republic was
entitled to recover these damages under the Theft Liability Act. (10)
We overrule the Shipley defendants' second issue.
Fraud
In their third issue, the Shipley defendants argue that the evidence is legally insufficient to support the
jury's fraud findings in favor of Larson because "[t]here [is] no evidence that any of [the Shipley
defendants] made fraudulent misrepresentations in connection with the removal of the manufactured home
from Larson's property." The Shipley defendants further assert that "[e]ven if there had been some
evidence of fraud by Junek, the other [Shipley] defendants would not have derivative liability."
We will sustain a legal sufficiency or "no-evidence" challenge if the record shows one of the following: (1) a
complete absence of evidence of a vital fact, (2) rules of law or evidence bar the court from giving weight
to the only evidence offered to prove a vital fact, (3) the evidence offered to prove a vital fact is no more
than a scintilla, or (4) the evidence conclusively establishes the opposite of the vital fact. City of Keller v.
Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In conducting a legal sufficiency review, a court must consider
the evidence in the light most favorable to the verdict and indulge every reasonable inference that would
support it. Id. at 822. If the evidence allows only one inference, neither jurors nor the reviewing court may
disregard it. Id. However, if the evidence at trial would enable reasonable and fair-minded people to differ
in their conclusions, then jurors must be allowed to do so. Id. A reviewing court cannot substitute its
judgment for that of the trier-of-fact, so long as the evidence falls within this zone of reasonable
disagreement. Id.
To prove a fraud claim, a plaintiff must show that (1) a material representation was made; (11) (2) the
representation was false; (3) when the representation was made, the speaker knew it was false or made it
recklessly without any knowledge of the truth and as a positive assertion; (4) the speaker made the
representation with the intent that the other party should act upon it; (5) the party acted in reliance on the
representation; and (6) the party thereby suffered injury. In re FirstMerit Bank, N.A., 52 S.W.3d 749, 758
(Tex. 2001); Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998).
Larson presented evidence that would enable a reasonable juror to conclude that Junek represented
himself as agent or representative of Southern Energy, the home's manufacturer, during Junek's and
Larson's first telephone conversation. Larson testified that he telephoned Southern Energy regarding a list
of warranty issues, and Southern Energy informed him that it would get back with him. Southern Energy
then notified Shipley that Larson had called it about Larson's warranty issues concerning the home that he
had purchased from Sweet. Shipley maintained that he felt "directed" by Southern Energy to call Larson,
but the record contains evidence that, after receiving this telephone call, the Shipley defendants already
believed that Larson had the missing home. Shipley then instructed Junek to telephone Larson. (12)
Shipley and Junek equivocated on the purpose of Junek's first call to Larson. However, a reasonable juror,
based on Shipley's, Junek's, and Larson's testimony, could have found that Junek called Larson not for
the purpose of evaluating Larson's warranty issues, but solely for the purpose of determining the location
of the home in order to take it from Larson's possession without his knowledge or permission. During his
telephone conversation with Larson, Junek represented himself as "Mike" and lead Larson to believe that
he was speaking with the "factory," i.e., Southern Energy, about warranty issues. At this point, Larson had
no idea that the Shipley defendants even existed, let alone that the Shipley defendants claimed ownership
of Larson's home.
There is also evidence that, at the time of Junek's first telephone call to Larson, the Shipley defendants
knew that Sweet had sold the home to Larson and that Larson had paid for the home. Also, the Shipley
defendants had placed the home with Sweet, intended for Sweet to offer consumers like Larson clear title,
and knew that, under the existing law, the MCO did not need to be tendered for ownership to be
transferred to Larson. Finally, there is evidence that the Shipley defendants knew that Larson had no
knowledge of their existence or their competing claim to ownership.
The jury could have reasonably found that Junek intentionally deceived Larson about the purpose of his
telephone call and that Junek made misrepresentations to Larson during the call to gain access to
Larson's property and to take the home. As Larson testified, Junek, at the beginning of the telephone call,
stated, "I understand you're having some problems with a Southern Energy home that you purchased."
When Larson expressed his surprise at the fast response "from the factory," Junek continued his act,
stating that he would already be in Larson's area looking at "some other issues with some other homes"
and offering to "go by Larson's place and take a look" at Larson's warranty issues. Based upon Junek's
misrepresentations, Larson gave Junek directions to his property and the combination to the lock on his
gate. At no time during this conversation did Junek indicate that he was contacting Larson on behalf of the
Shipley defendants about their competing claim to ownership of Larson's home. At no time did Junek
indicate that he was seeking access to Larson's property to locate and take the home. Although Junek and
Shipley testified that Junek went out to Larson's property to take a look at Larson's warranty and set-up
issues, their testimony on this point was inconsistent, and the jury could have been suspect of the
truthfulness of this testimony. A reasonable juror could have discounted Junek and Shipley's alleged
motivations and instead found that their purpose in contacting Larson was ultimately to take the home
away from Larson. Larson relied on these representations by providing Junek with directions and the
combination to the lock on the gate to his property. Larson was damaged when the Shipley defendants
returned to his property a second time, without his permission or knowledge, and took the home from his
property.
In regard to the Shipley defendants assertion that Shipley, Lone Star, and Shipley Brothers cannot be held
liable for Junek's misrepresentations, even assuming that the Shipley defendants agree that Junek was
acting as a Lone Star employee at the time that he made the misrepresentations, Larson still presented
evidence that Junek was instructed by Shipley to call Larson, inquire about the home, and go out to
Larson's property to take the home from Larson. Kenneth Shipley's testimony established that he and
Junek were working on behalf of both Lone Star and Shipley Brothers in making misrepresentations and
taking the home from Larson. For example, Shipley agreed that he, Junek, Lone Star, and Shipley
Brothers collectively "made the decision" to take the home from Larson. Shipley conceded that one of the
reasons that he had sent Junek out to Larson's property was to determine if Larson's home was the
missing home. Moreover, the jury heard evidence supporting a finding that, at the time Shipley instructed
Junek to call Larson, the Shipley defendants already knew that there was at least a "good chance" that
Larson had the missing home.
Junek's testimony also supports a finding of liability against all of the Shipley defendants for Junek's
misrepresentations to Larson. Junek testified that he works for Kenneth Shipley and that he is employed
by Lone Star. Although Shipley had instructed Junek to return Larson's telephone call about the warranty
issues and go to Larson's property, Shipley had not provided Junek with a list of those issues and Junek
had never seen a list of the issues.
Accordingly, after reviewing all the evidence in the light most favorable to the jury's verdict, we hold that
the evidence is legally sufficient to support the jury's fraud findings against all of the Shipley defendants.
We overrule the Shipley defendants' third issue. (13)
Venue
In their seventh issue, the Shipley defendants argue that the trial court erred in denying their motion to
transfer venue of the case from Harris County, Texas to Hockley County, Texas because no substantial
part of the events giving rise to the claims occurred in Harris County.
An appellate court reviews a trial court's denial of a motion to transfer venue de novo. Killeen v.
Lighthouse Elec. Contractors, L.P., 248 S.W.3d 343, 347 (Tex. App.--San Antonio 2007, pet. denied)
(citing Wilson v. Texas Parks & Wildlife Dept., 886 S.W.2d 259, 260-62 (Tex. 1994)). In reviewing a venue
decision, the appellate court must conduct an independent review of the entire record, including, where
applicable, the trial on the merits, to determine whether any probative evidence supports the trial court's
venue decision. Tex. Civ. Prac. & Rem. Code Ann. § 15.064 (Vernon 2002); Killeen, 248 S.W.3d at 347;
Chiriboga v. State Farm Mut. Auto. Ins. Co., 96 S.W.3d 673, 677 (Tex. App.--Austin 2003, no pet.) (citing
Ruiz v. Conoco, Inc., 868 S.W.2d 752, 758 (Tex. 1993)). "Courts review the evidentiary record in the light
most favorable to the venue ruling; however, no deference is given to the trial court's application of the
law." Chiriboga, 96 S.W.3d at 677-78. "If there is any probative evidence supporting venue in the county
where judgment was rendered, the judgment must be affirmed." Id. at 678. Moreover, "[a] court shall
determine the venue of a suit based on the facts existing at the time the cause of action that is the basis of
the suit accrued." See Tex. Civ. Prac. & Rem. Code Ann. § 15.006 (Vernon 2002).
The parties agree that the general permissive venue statute applies. See id. § 15.002 (Vernon 2002).
Section 15.002(a)(1) provides that venue is permissive in the county where "all or a substantial part of the
events or omissions giving rise to the claim occurred." Id. § 15.002(a)(1). Moreover, section 15.005 of the
Texas Civil Practice and Remedies Code provides that "[i]n a suit in which the plaintiff has established
proper venue against a defendant, the court also has venue of all the defendants in all claims or actions
arising out of the same transaction, occurrence, or series of transactions or occurrences." Id. § 15.005
(Vernon 2002).
Republic and Larson initially sued the Shipley defendants and Sweet for, among other things, fraud. In
regard to their claims against Sweet, Republic and Larson alleged that Sweet had made, in Harris County,
representations to them that it would deliver to them clear and marketable title to the manufactured home
upon purchase and that they had relied upon representations, in Harris County, made by Sweet. Republic
and Larson also sued the Shipley defendants for, among other things, conversion, asserting that after
Larson had obtained title to the home, the Shipley defendants took his home without his permission.
Although the conversion claims against the Shipley defendants were not expressly pleaded in the
alternative to the fraud claims against Sweet, the pleadings of Larson and Republic reveal that their fraud
claims against Sweet were dependent upon a possible finding, as the Shipley Brothers contended, that
Larson never actually obtained ownership or clear title of the home when he purchased it from Sweet. On
the other hand, the conversion claims against the Shipley defendants were based upon a finding that
Larson had in fact obtained ownership of the manufactured home from Sweet and, thus, the Shipley
defendants committed conversion by taking the home. (14)
The Shipley defendants filed a motion to transfer venue, arguing that the case should have been
transferred to Hockley County, Texas, the location of the principal office of the Shipley defendants. At that
time, all of the above claims, including those against Sweet, were live claims being pursued by Larson and
Republic. Republic and Larson filed a response and, citing Larson's affidavit, which is quoted below, they
asserted that the financial transaction entered into by Larson and Republic with Sweet occurred in Harris
County and was relevant for determining permissive venue because the transaction was the "genesis for
all subsequent damages flowing from the conduct of both [the Shipley defendants] and Sweet." Republic
and Larson attached to their response evidence showing that Sweet had purportedly provided the
marketable title to Republic in Houston and, based upon Sweet's representations to them in Houston,
Republic and Larson had purchased the manufactured home in Harris County. As Republic and Larson
summarized in their response to the motion to transfer venue, "Nothing could be more substantial to this
transaction than the funding . . . for the purchase of the [manufactured] home." Republic and Larson even
noted that the Shipley defendants consistently had defended the claims against them by contending that
any purported transfer of ownership by Sweet was invalid and that any title documents received by Larson
and Republic in Harris County were fraudulent.
In response to the motion to transfer venue, Larson testified in his affidavit as follows:
On or about August 10, 2005 [Sweet] sent to me in Houston, Harris County, Texas, a contract for the
purchase of the manufactured home. I made application for a loan with Republic in Houston, Harris County,
Texas. Republic notified Sweet that upon receipt of documentation to transfer title to the manufactured
home delivered to Republic in Houston, Harris County, Texas that Republic would wire transfer the
proceeds of its loan and the balance of the purchase price from Houston, Harris County, Texas to Sweet. A
condition of the loan was Republic obtaining a security interest in the manufactured home and Sweet was
to deliver to Republic in Houston, Texas the title transfer and lienholder designation to the manufactured
home. Sweet delivered to Republic in Houston, Harris County, Texas what purported to be the title transfer
documents to the manufactured home. All the documents concerning financing and security of the
purchase of the manufactured home were performable in Houston, Harris County, Texas. Sweet
represented to Larson and Republic in Houston, Harris County, Texas that Sweet would deliver clear and
marketable title to the manufactured home upon receipt of the purchase price to the Plaintiffs in Houston,
Harris County, Texas.
There is also evidence in the record showing that Larson did business with Republic's office in Houston,
Harris County, Texas. The financing agreement, signed by Republic in Houston, established Republic's
interest in the home under which it brought suit. Republic also wired money for the purchase price of the
home from its Houston office to Sweet, and the record contains a letter from Republic to Sweet stating that
Republic agreed to finance Larson's home and wire the money upon receiving proof that title was
transferred to Larson. Based upon this evidence, the trial court denied the motion to transfer venue.
It is undisputed that at the time the Shipley defendants filed their motion to transfer venue and Larson and
Republic filed their responses, and at the time of the trial court's ruling denying the motion to transfer
venue, Republic and Larson's claims against Sweet in which they had alleged that Sweet had committed
fraud in Harris County remained pending. However, all parties agree that, approximately one week before
trial, the trial court granted summary judgment in favor of Larson and against the Shipley defendants on
Larson's conversion and theft claims. As the Shipley defendants concede in their briefing, based upon this
ruling, the court necessarily "determined that Larson owned the home at the time [the Shipley defendants]
recovered it." Moreover, as Larson and Republic note in their briefing, based upon this ruling, the trial
court necessarily "ruled that Sweet [had] in fact transferred title to Larson and so [Sweet] did not commit
fraud that induced the payment by Larson and Republic."
On appeal, Republic and Larson assert that the trial court's venue ruling should be sustained based upon
the record evidence that Republic relied upon documents and representations it received from Sweet in
Harris County. (15) Republic and Larson agree that the trial court, on the "eve before trial" in its summary
judgment ruling, concluded that Larson owned the home. Republic and Larson further agree that they
effectively dropped their fraud claims against Sweet, at least in part, for this reason. (16) However,
Republic and Larson assert that, even in light of this procedural development, the trial court's prior venue
ruling had already established proper venue in Harris County. In sum, Republic and Larson argue that
because venue should be "tested" at the time of suit, "the trial court's [venue] ruling [should] not be
undone because [they] did not [ultimately] take a judgment against Sweet for fraud."
We recognize that we must conduct an independent review of the entire record, including, in this instance,
the trial on the merits. See Tex. Civ. Prac. & Rem. Code Ann. § 15.064(b). However, the trial court's
subsequent summary judgment ruling in favor of Republic and Larson, which, in part, led Republic and
Larson to drop their claims against Sweet, did not void the trial court's prior venue ruling or destroy the
venue evidence relied upon by the trial court in making its venue ruling. As noted above, we review the
evidentiary record in the light most favorable to the venue ruling, looking for any probative evidence
supporting venue in the county where judgment was rendered. See Chiriboga, 96 S.W.3d at 677-78.
Here, in response to the Shipley defendants' motion to transfer venue, Larson provided affidavit testimony
that Sweet had made, in Harris County, representations to Larson and Republic that it would deliver clear
title to the manufactured home and that Larson and Republic relied upon these representations to their
detriment. The claims of Larson and Republic against Sweet and the Shipley defendants, although not
pleaded expressly in the alternative, arose from two possible fact scenarios. First, if the Shipley
defendants succeeded in defending some of the claims against them and establishing that they had
maintained ownership of the home, even after they had transferred possession of the home to Sweet
under the consignment agreement, and even after Sweet had sold the home to Larson, then Larson and
Republic would maintain their claims against Sweet for fraudulently representing in Harris County that it
could convey clear title. Second, if Larson and Republic succeeded in establishing that the Shipley
defendants had converted the home after the sale because title had been transferred to Larson
(regardless of the fact that Sweet never paid the Shipley defendants pursuant to their consignment
agreement), then the focus of the claims of Larson and Republic would necessarily shift to the Shipley
defendants and away from Sweet.
We conclude that venue in Harris County was proper based upon Larson's evidence that Sweet had made
representations to him and Republic in Harris County because Sweet's representations constituted a
substantial part of events giving rise to the claims of Republic and Larson. See Tex. Civ. Prac. & Rem.
Code Ann. § 15.002(a)(1). Because venue was proper as to Sweet, it was also proper as to the Shipley
defendants because all of the claims arose out of the same series of transactions or occurrences. See id.
§ 15.005.
The Shipley defendants, without citation to any convincing authority, argue that venue in Harris County,
even if proper at one time during the suit, was destroyed because of the above events, which indisputably
occurred after the trial court's venue ruling. Although Republic and Larson subsequently elected not to
pursue their fraud claims against Sweet, their claims against Sweet were based upon their good-faith
understanding of the circumstances at the time. In fact, the Shipley defendants defended against the
claims of Republic and Larson by asserting that Larson did not obtain clear title from Sweet. The fact that
the Shipley defendants have always cast blame onto Sweet for the underlying events supported Republic
and Larson's bringing the fraud claim against Sweet. In sum, because the trial court had venue over the
claims made by Republic and Larson against Sweet, it also had venue over the claims made by Republic
and Larson against the Shipley defendants. Accordingly, we hold that the trial court did not err in denying
the Shipley defendants' motion to transfer venue. (17)
We overrule the Shipley defendants' seventh issue.
Exemplary Damages
In their fourth issue, the Shipley defendants contend that the evidence is legally insufficient to support the
award of $218,000 in exemplary damages and that the exemplary damages award is excessive and
"violates state and federal due process standards." The Shipley defendants note that "[a]lthough the trial
court's judgment awards Larson only $19,000 in actual damages, it awards him a total of $218,000 in
exemplary damages," with $100,000 apportioned against Shipley, $100,000 against Lone Star, $8,000
against Junek, and $10,000 against Shipley Brothers. The Shipley defendants ask us to "reverse or
substantially remit" the award of exemplary damages.
In support of their legal sufficiency challenge, the Shipley defendants assert that (1) there is no evidence
that each of the Shipley defendants committed fraud, (2) they "had a good-faith belief that [they] had title
to the home and [were] entitled to recover it," and (3) even if there is evidence that Junek committed fraud,
there is no evidence to support an exemplary damages award against the other Shipley defendants. We
have already concluded that the evidence is legally sufficient to support the fraud findings against each of
the Shipley defendants, thus disposing of the Shipley defendants' first and third points. We also dispose of
the second point because, as previously noted, the jury was presented with ample evidence to find that the
Shipley defendants acted in bad-faith in removing Larson's home.
In regard to the Shipley defendants' complaint that the exemplary damages are excessive and their
request for remittitur, we review the factual sufficiency of the evidence to support the award. See Khorshid,
Inc. v. Christian, 257 S.W.3d 748, 767 (Tex. App.--Dallas 2008, no pet.). We may vacate the award of
exemplary damages or suggest a remittitur only if the evidence for the award is "so factually insufficient or
so against the great weight and preponderance of the evidence as to be manifestly unjust." Signal Peak
Enters. of Tex., Inc. v. Bettina Invs., Inc., 138 S.W.3d 915, 928 (Tex. App.--Dallas 2004, pet. struck) (citing
Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 30 (Tex. 1994)).
In determining if exemplary damages awards are reasonable, we consider the factors set forth in Alamo
Nat'l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex. 1981). The Kraus factors include the nature of the wrong,
the character of the conduct involved, the degree of culpability of the wrongdoer, the situation and
sensibilities of the parties concerned, and the extent to which such conduct offends a public sense of
justice and propriety. Id. If, after conducing this review, we conclude that an award of exemplary damages
is excessive, we may suggest a remittitur. Tex. R. App. P. 46.3. If the remittitur is timely filed, we must
reform and affirm the trial court's judgment in accordance with the remittitur, but if the remittitur is not timely
filed, we must reverse the trial court's judgment. Id.
Here, the nature of the wrong and the character of the conduct involved the Shipley defendants' making
misrepresentations to gain access to Larson's property and taking Larson's home and personal
belongings without his permission. The Shipley defendants' conduct was particularly egregious because it
involved the taking of Larson's home and personal property and constituted a significant invasion of
Larson's privacy. The Shipley defendants entered Larson's home, took the home from Larson's property,
boxed up Larson's personal belongings, stored Larson's home and personal belongings, and transported
the home and personal belongings to a different town at a significant distance from Larson's property, all
without notice to or permission from Larson. Although the harm to Larson--the taking of his recreational
weekend home and the taking of his personal belongings--might be characterized as economic rather than
physical, Larson suffered a significant invasion of his privacy rights and his rights to be secure in his
property.
As to the degree of culpability of the Shipley defendants, there is ample evidence that would have allowed
the jury to categorically reject the Shipley defendants' claims that they acted in good faith. Although it is
undisputed that the Shipley defendants were the owners of the home prior to Sweet's sale of the home to
Larson and that the Shipley defendants did not receive payment from Sweet, the Shipley defendants had
consigned the home to Sweet with the intention that Sweet would convey clear and marketable title to a
third party purchaser. Inexplicably, when Sweet failed to pay the Shipley defendants the amounts owed
pursuant to their agreement, the Shipley defendants unilaterally contacted Larson under false pretenses,
made misrepresentations to him to gain access to Larson's home and property, entered Larson's home,
and took Larson's home and personal belongings. In regard to the situation and sensibilities of the parties
concerned, we note that Larson was a consumer and the Shipley defendants conceded that Larson would
have had no way of knowing of their claims to ownership of the home when Larson agreed to purchase the
home. The Shipley defendants agreed that Larson was a purchaser in good faith.
Finally, in regard to the extent to which the conduct offends a public sense of justice and propriety,
although the home was not Larson's full-time residence, Larson stored personal belongings in the home,
which the Shipley defendants seized, boxed up, and shipped to an offsite location. The magnitude of the
offensiveness of the Shipley defendants' conduct is extreme.
We also consider the Shipley defendants' challenge to the exemplary damages award on due process
grounds. "While state law governs the amount properly awarded as exemplary damages, that amount is
also subject to an ultimate federal constitutional check for exorbitancy." Khorshid, Inc., 257 S.W.3d at 767
(citing Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 307 (Tex. 2006)). An assessment of a grossly
excessive exemplary damages award violates a party's substantive due process rights. BMW of N. Am.,
Inc. v. Gore, 517 U.S. 559, 568, 116 S. Ct. 1589, 1595 (1996); SAS & Assocs., Inc. v. Home Mktg.
Servicing, Inc., 168 S.W.3d 296, 306 (Tex. App.--Dallas 2005, pet. denied); Owens-Corning Fiberglas
Corp. v. Malone, 972 S.W.2d 35, 45 (Tex. 1998); see also U.S. Const. amend. XIV, § 1 ("[N]or shall any
State deprive any person of life, liberty, or property, without due process of law"). In reviewing whether the
exemplary damages award is unconstitutionally excessive and, thus, violates the Shipley defendants' due
process rights, we consider three guideposts adopted by the United States Supreme Court: (1) the degree
of reprehensibility of the defendant's misconduct; (2) the disparity between actual and exemplary
damages; and (3) a comparison of the exemplary damages awarded and other civil or criminal penalties
that could be imposed for similar misconduct. BMW of N. Am., Inc. v. Gore, 517 U.S. at 574-75, 116 S. Ct.
at 1599; Tony Gullo, 212 S.W.3d at 308.
The first guidepost, the degree of reprehensibility of the defendant's misconduct, is the most important.
Gore, 517 U.S. at 575, 116 S. Ct. at 1599. In determining the degree of reprehensibility, we should
consider whether the harm was physical as opposed to economic; whether the conduct constituted an
indifference to or a reckless disregard of the health or safety of others; whether the target of the conduct
was financially vulnerable; whether the conduct involved repeated actions or was an isolated incident; and
whether the harm was the result of intentional malice, trickery, deceit, or mere accident. State Farm Mut.
Auto. Ins. Co. v. Campbell, 538 U.S. 408, 419, 123 S. Ct. 1513, 1521 (2003); Gore, 517 U.S. at 576, 116
S. Ct. at 1599. The presence of any one of these factors may still not be enough to support an award of
exemplary damages, and the absence of all of these factors renders the award suspect. Campbell, 538
U.S. at 419, 123 S. Ct. at 1521 (citing Gore, 517 U.S. at 576-77, 116 S. Ct. at 1599)).
As noted above, although the harm to Larson was ultimately economic in nature, the Shipley defendants
entered Larson's home without his permission-- conduct that involves a significant danger and risk.
Additionally, this fact provides some evidence that the Shipley defendants's conduct evidenced a reckless
disregard for the health and safety of others. However, there is no evidence that Larson, as the target of
the Shipley defendants' conduct, was financially vulnerable. In regard to whether the harm involved
repeated actions or was an isolated incident, Shipley offered undisputed testimony that the Shipley
defendants had never engaged in the type of conduct at issue in the instant case, and Shipley testified
that the Shipley defendants would not repeat the conduct. Finally, although the Shipley defendants
claimed a good-faith belief that they owned the home, Larson presented evidence that the harm was the
result of the Shipley defendants' deceit and misrepresentations. In sum, although there is evidence of a
high degree of reprehensibility in the Shipley defendants' conduct, the absence of any evidence to support
some of the other factors suggests that the amount of the exemplary damages awarded is excessive.
In regard to the second guidepost, "we must consider the disparity between actual and exemplary
damages." Khorshid, Inc., 257 S.W.3d 768. Here, the jury found that Larson sustained actual damages of
$19,000, and then awarded Larson a total of $218,000 in exemplary damages, with $100,000 imposed
against Shipley, $100,000 against Lone Star, $8,000 against Junek, and $10,000 against Shipley
Brothers. "The ratio of actual to exemplary damages alone is not determinative of excessiveness." Id.
Moreover, the United States Supreme Court has "consistently rejected the notion that the constitutional
line is marked by a simple mathematical formula, even one that compares actual and potential damages to
the punitive award." Gore, 517 U.S. at 582, 116 S. Ct. at 1602. However, the Supreme Court has indicated
that "few awards exceeding a single-digit ratio between punitive and compensatory damages, to a
significant degree, will satisfy due process." Campbell, 538 U.S. at 425, 123 S. Ct. at 1524. Even more
specifically, the Supreme Court has stated, on several occasions, that "an award of more than four times
the amount of compensatory damages might be close to the line of constitutional impropriety." Id.
The Shipley defendants, citing, among other cases, Cass v. Stephens, 156 S.W.3d 38, 75 (Tex. App.--El
Paso 2004, pet. denied), assert that "[i]n cases involving multiple defendants, most courts have calculated
the ratio based on combined exemplary awards against the defendants compared to the plaintiff's actual
damages." However, our Court has recently held that "[b]ecause exemplary damages are awarded on an
individual basis and require separate jury findings as to each defendant, the proper method for reviewing
the constitutionality of exemplary damages is to compare the exemplary damages awarded against each
individual with the compensatory damages awarded against that individual." Huynh v. Phung, No.
01-04-00267-CV, 2007 WL 495023, at *13 (Tex. App.--Houston [1st Dist.] Feb. 16, 2007, no pet.) (mem.
op.). Accordingly, we compare the amount of exemplary damages awarded against each of the Shipley
defendants to the amount of actual damages awarded against the Shipley defendants jointly and severally.
See id. Here, we note that the $100,000 exemplary damage awards imposed against Shipley and Lonestar
are within a single digit ratio, but are more than 5 times the amount of actual damages awarded to Larson,
whereas the exemplary damages imposed against Junek and Shipley Brothers are less than the actual
damages awarded to Larson.
In regard to the third guidepost, we compare the exemplary damages awarded to civil or criminal penalties
for similar misconduct. Khorshid, Inc., 257 S.W.3d at 768. The Shipley defendants assert that the most
analogous civil penalty is in section 17.47(c)(1) of the Texas Business and Commerce Code under which
the attorney general is authorized to collect up to a $20,000 penalty for deceptive trade practices. See
Tex. Bus. & Com. Code Ann. § 17.47(c)(1) (Vernon Supp. 2008).
In considering all three guideposts, we hold that the exemplary damage awards of $100,000 imposed
against Shipley and Lone Star are excessive under the due process clause, but that the exemplary
damages imposed against Junek and the Shipley Brothers are not excessive under the due process
clause. In addition, after reviewing the record in this case respecting the Kraus factors, we conclude the
jury's award of $100,000 in exemplary damages against Shipley and Lone Star, while supported by some
evidence, was so against the great weight and preponderance of the evidence as to be manifestly unjust.
A rational jury could not have found that the nature of the wrong, the character of the conduct, the degree
of culpability, the situation and sensibilities of the parties, and the public's sense of justice and propriety
required Lone Star and Shipley to pay exemplary damages in amounts of $100,000 each. See SAS, 168
S.W.3d at 307-08.
However, because we conclude that there is factually sufficient evidence to support a lesser award of
exemplary damages, pursuant to rule 46.3 and the due process clause of the U.S. Constitution, we
suggest a remittitur of $57,000 for the award imposed against Lone Star and $57,000 for the award
imposed against Shipley. See id. These awards would represent an exemplary to actual damages ratio of
three to one, which, given the evidence in the record, is constitutionally permissible. See Cass, 156
S.W.3d at 77 (suggesting remittitur and finding that "ratio of punitive to compensatory damages of three to
one is constitutionally permissible").
Accordingly, if Larson files in this Court, within fifteen days from the date of this opinion, a remittitur to
$57,000 with respect to the exemplary damage award against Lone Star and a remittitur to $57,000 with
respect to the exemplary damage award against Shipley, we will reform the trial court's judgment and affirm
it as reformed. See Tex. R. App. P. 46.3, 46.5. If the suggested remittitur is not timely filed, we will remand
the case to the trial court for a new trial on all issues. See id.; Tex. R. App. P. 44.1(b) (appellate court may
not order separate trial solely on unliquidated damages if liability is contested). We sustain the Shipley
defendants' fourth issue in part and overrule it in part.
Attorney's Fees
In their sixth issue, the Shipley defendants contend that Republic and Larson "should not be allowed to
elect separate remedies as a means of recovering both exemplary damages and attorney's fees when they
pled, proved, and submitted the case as if they were a joint victim of a single wrongful act" and that "there
is no evidence or jury finding to support an award of separate attorney's fees to Republic only."
Here, the jury was asked "what sum of money do you find is a reasonable and necessary fee for the
services of ROBERT LARSON and/or REPUBLIC NATIONAL BANK'S attorney in this case." The jury
awarded Larson "and/or" Republic $115,596 for trial court attorney's fees, $45,000 for fees for an appeal
to this Court, and $35,000 for fees for an appeal to the Texas Supreme Court. After trial, Larson elected
his fraud theory in order to recover his actual damages of $19,000 and his exemplary damages of
$218,000, whereas Republic elected its theft theory in order to recover its actual damages of $39,000,
additional damages of $1,000, and attorney's fees of $115,596. The parties agree that Larson, upon
making his election, was not entitled to recover attorney's fees. The parties also agree that William Powell,
who provided the only testimony in support of the request of Larson and Republic for attorney's fees,
requested the attorney's fees jointly on behalf of Larson and Republic and did not offer any testimony
segregating fees by parties or causes of action. Finally, the parties agree that the Shipley defendants did
not object to Powell's testimony or to the question in the jury charge asking the jury to award attorney's
fees to Larson "and/or" Republic without distinguishing by party or cause of action. However, the Shipley
defendants assert that their failure to object to the jury question was excused "under the unique
circumstances of this case." The Shipley defendants further assert,
Because of the nature of Mr. Powell's testimony, it would not have been proper to submit a question with
separate blanks, because there was no evidence that would enable the jury to make that determination.
Additionally, Shipley should not have been required to make an objection or a request because this
question, on its face, is not defective. Especially given the testimony that Powell was jointly engaged and
the fees were jointly incurred, submitting the question jointly was entirely consistent with the evidence. The
question did not become improper until Republic and Larson attempted to elect separate remedies, and
Larson elected a remedy that bars him from recovering attorney's fees.
It is well settled that "a party seeking to recover attorney's fees is required to segregate fees between
claims for which he can recover attorney's fees from claims for which he cannot." Hawkins v. Walker, 233
S.W.3d 380, 398 (Tex. App.--Fort Worth 2007, no pet.) (citing Tony Gullo Motors I, L.P., 212 S.W.3d at
313-14)). However, the party opposing the recovery of attorney's fees must preserve for appellate review
a contention that the fee claimant failed to segregate the fees sought. McCalla v. Ski River Dev., Inc., 239
S.W.3d 374, 383 (Tex. App.--Waco 2007, no pet.) (citing Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 389
(Tex. 1997)); see also K-2, Inc. v. Fresh Coat, Inc., 253 S.W.3d 386, 396 (Tex. App.--Beaumont 2008, pet.
filed); Bencon Mgmt. & Gen. Contracting, Inc. v. Boyer, Inc., 178 S.W.3d 198, 208 (Tex. App.--Houston
[14th Dist.] 2005, no pet.). If "no objection is made to the failure to segregate attorneys' fees, either at the
time evidence of attorneys' fees is presented or at the time of the charge, the error is waived." Holmes v.
Concord Homes, Ltd., 115 S.W.3d 310, 313 (Tex. App.--Texarkana 2003, no pet.) (concluding that party
opposing recovery of attorney's fees had waived complaint that there was no segregation of fees among
multiple parties and different causes of action); see also Hong Kong Dev., Inc. v. Nguyen, 229 S.W.3d 415,
454 (Tex. App.--Houston [1st Dist.] 2007, no pet.) (holding that objection to jury charge preserved
segregation complaint).
Here, it is undisputed that the Shipley defendants did not object to Powell's testimony about the joint
attorney's fees or the question in the jury charge asking them to award Republic "and/or" Larson
attorney's fees jointly. The Shipley defendants assert that the jury question was not defective on its face
and that post-judgment events, specifically Larson's election, rendered the question improper. This
argument lacks merit. However, Powell testified, without objection, in support of a single amount of
attorney's fees expended in the suit. Powell did not distinguish between fees expended on behalf of the
parties or the causes of action those parties pursued. The jury was also asked, without objection, to award
a single amount of attorney's fees. The Shipley defendants did not request that the fees be segregated by
party or cause of action. Thus, contrary to the Shipley defendants' assertion, the jury question, before the
complained-of post-judgment events, permitted the award of non-segregated fees, encompassing multiple
parties and causes of action, and was objectionable on its face. The Shipley defendants were aware, from
the beginning of trial, that both Republic and Larson were seeking recovery on the basis of multiple
causes of action, some of which permitted the recovery of attorney's fees (Theft Liability Act) and some of
which did not (fraud). The Shipley defendants were not entitled to withhold this objection until
post-judgment, when the parties made their election of remedies. See Hawkins, 233 S.W.3d at 398
(holding that objections to failure to segregate in post-verdict and post-judgment motions "came too late to
preserve" segregation complaint for appellate review). (18)
We overrule the Shipley defendants' sixth issue. (19)
Conclusion
We suggest a remittitur of the exemplary damages awards in favor of Larson and against Lone Star and
Shipley. If Larson files in this Court, within fifteen days from the date of this opinion, a remittitur of $57,000
for the exemplary damage award against Lone Star and of $57,000 for the exemplary damage award
against Shipley, we will reform the trial court's judgment and affirm it as reformed. Otherwise, we reverse
the judgment of the trial court and remand for a new trial.
Terry Jennings
Justice
Panel consists of Justices Jennings, Bland, and Wilson. (20)
Justice Bland, concurring and dissenting.
1. See Tex. Civ. Prac. & Rem. Code Ann. § 134.001-005 (Vernon 2005).
2. See Act of May 26, 2003, 78th Leg., R.S., ch. 338, 2003 Tex. Gen. Laws 1471, 1477 (amended 2007)
(current version at Tex. Occ. Code Ann. § 1201.204 (Vernon Supp. 2008)).
3. U.S. Const. amend. XIV, § 1; Tex. Const. art. I, § 19.
4. Tex. Bus. & Com. Code Ann. § 17.41-.63 (Vernon 2002 & Supp. 2008).
5. The Shipley defendants have not challenged the trial court's summary judgment ruling as to liability on
these claims, but, on appeal, they assert that Republic was not a movant for summary judgment. However,
the summary judgment motion was filed on behalf of both plaintiffs and the portion of the motion regarding
the Theft Liability Act specifically references the plaintiffs that "paid for and/or financed the purchase" of
the home. The trial court signed an order granting the "plaintiffs' motion," without distinguishing between
Larson or Republic. Accordingly, we conclude that Republic did move for summary judgment and the trial
court granted both Republic and Larson summary judgment as to liability on these claims.
6. Shipley's testimony supported a finding that both Lone Star and Shipley Brothers were involved in the
consignment and subsequent seizure of the home and that Shipley and Junek acted on behalf of both
corporate Shipley defendants. Although the Shipley defendants, on appeal, argue that there is no
evidence that any of the Shipley defendants were agents of the other, the Shipley defendants, at trial,
made no significant effort to present evidence that they had separately engaged in the conduct at issue or
that they did not represent each other.
7. The written agreement, which was introduced into evidence, provides only a few terms, one of which
states "pay us before it leaves location." The agreement, which is illegible in parts, also states, "This is
consignment" and it generally refers to "title," but such references in the agreement are unclear and were
not discussed in depth at trial. And, as noted above, it is unclear if the home in question is even covered
by the written agreement or if it was released to Sweet pursuant to a verbal agreement "on the side," the
terms of which are unclear at best.
8. Shipley also stated that at the time the Shipley defendants released the home to Sweet in a retail sale,
he knew that the law in effect did not require that the MCO, which was in the Shipley defendants'
possession, be tendered to the State of Texas in order for ownership to be transferred to the consumer
and for the consumer to obtain a new ownership document referred to as a statement of ownership and
location.
9. The fact that Sweet breached its agreement with the Shipley defendants did not affect the transfer of
title as the Shipley defendants expressly intended for clear title to be offered to a consumer and for clear
title to be transferred to the consumer pursuant to their agreement with Sweet. According to the terms of
the agreement, as provided by Shipley's testimony, the Shipley defendants' remedy, upon Sweet's breach,
was against Sweet, not Larson. The Shipley defendants even obtained an agreed judgment against Sweet
for the amounts allegedly owed pursuant to their agreement. We also note that former section 1201.204
provided the Shipley defendants a security interest in the proceeds from Sweet's sale of the home to
Larson. Act of May 26, 2003, 78th Leg., R.S., ch. 338, 2003 Tex. Gen. Laws 1471, 1477 (amended 2007).
10. We note that because Larson sought actual damages only for his down payment of $10,500 and
Republic sought actual damages only for the remaining balance of $39,000, Republic's recovery under the
Theft Liability Act did not present the risk of a double recovery.
11. We note that the jury charge further provided that "[f]raud also occurs when (a) a party fails to disclose
a material fact within the knowledge of that party, (b) the party knows that the other party is ignorant of the
fact and does not have an equal opportunity to discover the truth, (c) the party intends to induce the other
party to take some action by failing to disclose the fact, and (d) the other party suffers injury as a result of
acting without knowledge of the undisclosed fact." We need not consider this failure to disclose theory
because we hold below that there is evidence to support the jury's finding that the Shipley defendants
made material misrepresentations.
12. Again, at trial, the Shipley defendants did not present any evidence that Junek was acting on behalf of
only certain Shipley defendants.
13. Having held that Republic was entitled to recover under the Theft Liability Act and that the evidence is
legally sufficient to support the fraud findings against the Shipley defendants, we need not consider the
Shipley defendants' fifth issue, in which they contend, alternatively, that Republic could not recover for
conversion and Larson could not recover under the Texas Deceptive Trade Practices Act.
14. The Shipley defendants also asserted a cross-claim against Sweet for "breach of trust" and conversion
on the basis that Sweet had failed to tender the proceeds of the sale of the manufactured home to the
Shipley defendants in accordance with their consignment agreement. On July 6, 2006, the trial court
entered an agreed judgment against Sweet in favor of the Shipley defendants, finding that Sweet had
wrongfully converted proceeds from the sale to Larson.
15. Republic and Larson also assert that the trial court's venue ruling should be affirmed based upon
evidence that Junek made misrepresentations to Larson during Junek's telephone call to Larson while he
was at work in Harris County. The Shipley defendants dispute that there is such evidence in the record.
The record reveals evidence showing that Larson worked at a company in Harris County, Larson received
Junek's telephone call on the Tuesday after the Labor Day weekend, and that Larson received the
telephone call sometime during the "day," and, possibly even Larson's normal "work day." Nevertheless, in
light of our holding affirming the trial court's venue ruling on the ground that there is some evidence
showing that Sweet made representations to Republic and Larson in Harris County and that such evidence
constituted a substantial part of the events giving rise to Republic and Larson's claims, we need not
directly address the Shipley defendants' evidentiary dispute.
16. Republic and Larson also note in their post-submission briefing that Sweet refused to appear and
defend itself at trial. They assert that this fact, and a number of circumstances, led them "to pursue their
fraud claims against [the Shipley defendants], and not to pursue fraud charges that now seem[ed] weak
against Sweet," which they describe as an "absent and insolvent defendant."
17. In support of their argument that venue was not destroyed, Larson and Republic cite McIntosh v.
Copeland, which provides that an appellate court's review of the entire record "is intended to strike a
balance between preserving the plaintiff's right to select and maintain suit in a county of proper venue and
protecting the defendant against fraud or inaccuracy at the pleading stage." 894 S.W.2d 60, 64 (Tex.
App.--Austin 1995, writ denied) (citations omitted) (emphasis added). The McIntosh court further stated
that "the complete review is designed to prevent a party from knowingly arguing invalid grounds to the trial
court." Id. at 65 (emphasis added). In conducting the complete review, an appellate court should consider
evidence in the record adduced after venue was decided, but only to determine if this evidence "destroys
the prima facie proof on which the trial court relied." Id. (citing Ruiz v. Conoco, Inc., 868 S.W.2d 752, 757
(Tex. 1993)). Here, contrary to the Shipley defendants' assertion in their post-submission briefing, there is
no evidence that Republic or Larson, in bringing their claims against Sweet, committed fraud or inaccuracy
in their pleading. Moreover, although the trial court ultimately ruled that ownership of the home was
transferred to Larson by Sweet, the evidence presented at trial did not destroy the prima facia evidence
relied upon by the trial court in making its venue ruling.
18. We note that the Shipley defendants have not asserted a challenge as to whether Republic's
attorney's fee were reasonable or necessary under Arthur Andersen & Co. v. Perry Equip. Corp., 945
S.W.2d 812, 819 (Tex. 1997).
19. In their sixth issue, the Shipley defendants alternatively argue that "Republic and Larson should not be
allowed to elect separate remedies" because allowing Larson to recover exemplary damages and allowing
Republic to recover attorney's fees "undermines the election of remedies doctrine." However, in their reply
brief, the Shipley defendants concede that under Texas law "each party can elect a remedy that awards it
the greatest recovery."
20. The Hon. Davie L. Wilson, retired Justice, Court of Appeals, First District of Texas at Houston,
participating by assignment.