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holding that where the plaintiff "failed to prove her entitlement to summary judgment on the fraud claim, she failed to prove her entitlement to exemplary damages as well"
Summary of this case from In re Juliet Homes, LPOpinion
No. 02-09-417-CV
Delivered: September 30, 2010.
Appealed from the 96th District Court of Tarrant County.
PANEL: GARDNER and MCCOY, JJ.; and DIXON W. HOLMAN (Senior Justice, Retired, Sitting by Assignment).
MEMORANDUM OPINION
See Tex. R. App. P. 47.4.
I. INTRODUCTION
Appellant Phillip Thompson appeals the trial court's grant of summary judgment in favor of Appellee Judith Rodriguez on her claims of breach of contract and fraud. We hold that Rodriguez was entitled to summary judgment on her breach of contract claim but that the trial court's judgment did not reflect the proper amount of damages. Therefore, we affirm summary judgment on her breach of contract claim and modify the judgment to award damages in the amount of $3,000 rather than $8,330. But because we also hold that Rodriguez did not conclusively prove all essential elements of her fraud claim, we reverse the trial court's award of exemplary damages based on fraud and remand her fraud claim and her request for exemplary damages to the trial court.
II. FACTUAL AND PROCEDURAL BACKGROUND
In 2005, Thompson sold a home to Rodriguez. The next year, Rodriguez sued Thompson for alleged defects in the home's foundation. The parties mediated their dispute and signed a settlement agreement in which Thompson agreed to obtain at least three bids "from reputable, licensed contractors for the foundation repairs to the property" and then select a contractor from among those three bids "to complete the required foundation repairs." Thompson also promised to select a contractor to complete repairs to the interior of the house that were "the direct result of the foundation damage and/or defects to the paint, plaster, caulking, etc. since the property was sold." The parties agreed to split the cost of these interior repairs evenly.
According to Thompson, he obtained the three bids from different contractors as promised: a written bid for $0 (the zero bid) that stated no additional foundation work is needed, an oral bid that he described as "in the range of $3,000.00," and a written bid for $8,330. Thompson had the zero bid forwarded, along with a separate bid for the interior repairs and a cashier's check for half the amount of the interior repairs, to Rodriguez. Rodriguez sued Thompson for breach of contract and common law fraud, claiming that Thompson had breached the settlement agreement by failing to select a contractor to make the foundation repairs and that Thompson had not intended to honor the settlement agreement at the time he had signed it. Rodriguez moved for summary judgment, which the trial court granted, awarding her $8,330 in damages, $2,800 in exemplary damages, and attorney's fees and interest. Thompson now appeals.
III. LAW AND APPLICATION TO FACTS
A. Standard of Review
We review a summary judgment de novo. Mann Frankfort Stein Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009). We consider the evidence presented in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding evidence contrary to the nonmovant unless reasonable jurors could not. Id. We indulge every reasonable inference and resolve any doubts in the nonmovant's favor. 20801, Inc. v. Parker, 249 S.W.3d 392, 399 (Tex. 2008). A plaintiff is entitled to summary judgment on a cause of action if it conclusively proves all essential elements of the claim. See Tex. R. Civ. P. 166a(a), (c); MMP, Ltd. v. Jones, 710 S.W.2d 59, 60 (Tex. 1986).
B. Breach of Contract
1. Interpretation of the settlement agreement
A settlement agreement is a contract, and it is governed by the same rules of construction applicable to all contracts. See Doe v. Tex. Ass'n of Sch. Bds., Inc., 283 S.W.3d 451, 458 (Tex. App.-Fort Worth 2009, pet. denied). When construing contracts and other written instruments, our primary concern is to ascertain the true intent of the parties as expressed in the instrument. NP Anderson Cotton Exch., L.P. v. Potter, 230 S.W.3d 457, 463 (Tex. App.-Fort Worth 2007, no pet.). Lack of clarity does not create an ambiguity, and a contract is not ambiguous simply because the parties advance conflicting interpretations. Universal Health Servs., Inc. v. Renaissance Women's Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003); Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). Rather, the issue of whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered. Universal Health, 121 S.W.3d at 746. An ambiguity arises only after the application of established rules of construction leaves an agreement susceptible to more than one meaning. See DeWitt County Elec. Coop., Inc. v. Parks, 1 S.W.3d 96, 100 (Tex. 1999). But if the contract can be given a certain or definite legal meaning, it is not ambiguous and should be construed as a matter of law. Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 458 (Tex. 1997).
Thompson and Rodriguez entered into a contract, titled "Compromise Settlement Agreement and Release of All Claims," to resolve Rodriguez's lawsuit against Thompson over alleged foundation defects in the home that she had bought from Thompson. The settlement agreement's introductory recitals stated that Thompson and Rodriguez had concluded "that further pursuit of this matter through litigation would be expensive and protracted, and that it would be desirable that the dispute between [Rodriguez] and [Thompson] be resolved in the manner and upon the terms and conditions set forth herein." Accordingly, the parties agreed to the following:
1. Defendant, PHILLIP THOMPSON, shall secure at least three (3) foundation bids from reputable, licensed contractors for the foundation repairs to the property at 3121 Dorchester Drive, Arlington, Texas ("the subject property"). Thereafter, Defendant shall select one of the contractors of his choice from the three (3) bids obtained by Defendant to complete the required foundation repairs in accordance with generally accepted foundation/construction principles; Defendant shall be responsible for the costs of the foundation repairs to the property at 3121 Dorchester Drive, Arlington, Texas; and, such foundation repairs shall be completed by December 1, 2008, unless said date is extended by agreement between the parties and memorialized in writing.
2. The parties agree that the repair costs cannot exceed one-half (() of the market value of the property located at 3121 Dorchester Dr., Arlington, Texas[,] as of May 19, 2008.
3. Defendant, Phillip Thompson, shall select a contractor to complete the repairs to the interior of the property at 3121 Dorchester, Arlington, Texas[,] which are the direct result of the foundation damage and/or defects to the paint, plaster, caulking, etc. since the property was sold by Defendant to Plaintiff. The cost of such repairs to the interior of the subject property due to the foundation damage and/or defects shall be split between Defendant, PHILLIP THOMPSON, and Plaintiff, JUDITH RODRIGUEZ, on a 50/50 basis.
The parties disagree about the meaning of "required foundation repairs" in paragraph 1. Thompson maintains that "required foundation repairs" were not specific repairs that the parties had already agreed were necessary; rather, they were repairs found to be required by the "reputable, licensed contractors." He contends that the contract therefore relegated the final determination of both the existence and the extent of any foundation damages to the contractors. Rodriguez disagrees. Under her interpretation, the agreement contemplated that repairs would be made to the property, and Thompson merely had the responsibility to select and pay for the contractor to complete those repairs.
Thompson is correct in his assertion that "required foundation repairs" was not defined in the settlement agreement. But the contract also did not provide that Thompson's duty to select and pay for a contractor to complete the repairs was contingent upon a contractor's determination of the existence of defects in or damage to the foundation. Further, nothing in the agreement made Thompson's duty to select and pay for a contractor to complete the repairs contingent on a contractor's determination that repairs were needed. Instead, the plain terms of the agreement established that Thompson was obligated to select a contractor to "complete" the "required foundation repairs"; that he was responsible for the cost of the repairs; that the cost would not exceed one-half of the home's value; and that the deadline for completing the repairs was December 1, 2008, unless the parties agreed to extend it. Accordingly, from the plain language of the parties' agreement, we conclude that Thompson agreed as part of the settlement of the parties' dispute to arrange for a contractor to complete repairs to the foundation.
Thompson complains that the settlement agreement did not require any minimum level of repairs because it did not define any existing damages or particular repairs to be performed. He points to the provisions of the agreement containing his refusals to admit liability as proof that he did not agree that some minimum amount of repairs to the foundation was required or expected. But nowhere in the agreement did Thompson specifically deny the existence of damages to the foundation; he merely denied that he bore any liability for any damages and refused to admit that Rodriguez's claims had any merit. And while the agreement did not spell out details of the repairs, leaving that instead to the three bidding contractors, the plain language did contemplate that repairs were to be made. We agree with Rodgriguez that Thompson is attempting to create a contingency where none exists.
The only reference to damages in the provisions disavowing Thompson's liability was that Thompson "had denied and still den[ies] that any acts or omissions on the part of Defendant, were a proximate cause of any damages to Plaintiff." We agree that this language was a refusal to admit any wrongdoing, but it was not specifically a refusal to admit the existence of damages. Rather, this language simply provided that, to the extent that Rodriguez had suffered "any" damages, Thompson denied responsibility.
Furthermore, Thompson's interpretation of the settlement agreement is unreasonable in light of the circumstances under which it was executed. This agreement embodied Thompson's and Rodriguez's compromise of a disputed claim. A settlement agreement is a contract that resolves a dispute by an agreement to make mutual concessions in order to avoid resolving the controversy through litigation. See Priem v. Shires, 697 S.W.2d 860, 863 (Tex. App.-Austin 1985, no writ). Under Thompson's interpretation of the agreement, Rodriguez agreed to dismiss her case against Thompson with prejudice and relinquish her right to have her case decided in a court of law in exchange for the opportunity to have the existence of her foundation damage determined by a single foundation repairman who had been chosen solely by her opponent. Under Thompson's interpretation, he was willing to pay for repairs to the foundation only "in the event that it was the opinion of all three independent contract[or]s that such repairs were necessary." He contends that the parties intended to leave the determination of the existence of any damages to a neutral third party who happened to be the contractor who gave the zero bid. We cannot conclude that this is a reasonable interpretation of the parties' concessions or an expression of the parties' intent in crafting a settlement of a disputed claim as set forth in the plain language of their agreement.
Consequently, we disagree with Thompson's assertion that the settlement agreement allowed him to refuse to complete the required foundation repairs by choosing the zero bid. We hold that the agreement is not ambiguous but is subject to only one meaning: Thompson was required to choose a contractor to complete repairs to the foundation. See DeWitt County, 1 S.W.3d at 100; Grain Dealers, 943 S.W.2d at 458. The evidence is undisputed that Thompson did not perform this duty under the agreement. We therefore hold that Rodriguez conclusively proved Thompson's breach of the settlement agreement, and we overrule Thompson's first issue.
We also disagree with Thompson's contention, based on the existence of a maximum amount of his liability for foundation repairs (one-half of the market value of the house) and the absence of a specified minimum amount of liability, that an interpretation of the settlement agreement that prohibits Thompson from selecting the zero bid somehow "constitutes a material change to the agreement which [Rodriguez] did not bargain for and [Thompson] did not agree to."
2. Damages for breach of the settlement agreement
In his third issue, Thompson asserts that even if he breached the agreement, the trial court erred by awarding Rodriguez damages of $8,330, the higher amount of the two bids that he obtained. We agree but hold that the trial court should have awarded Rodriguez damages of $3,000.
The normal measure of damages in a breach of contract case is the benefit of the bargain, the purpose of which is to restore the injured party to the economic position that party would have been in had the contract been performed. See City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699, 739 (Tex. App.-Fort Worth 2008, pet. dism'd); see also Qaddura v. Indo-European Foods, Inc., 141 S.W.3d 882, 888-89 (Tex. App.-Dallas 2004, pet. denied) (stating benefit of the bargain damages seek "to restore the non-breaching party to the same economic position in which it would have been had the contract not been breached") (citing CDB Software, Inc. v. Kroll, 992 S.W.2d 31, 37 (Tex. App.-Houston [1st Dist.] 1998, pet. denied).
The summary judgment record reflects that Thompson obtained two bids for the required foundation repairs: an oral bid for $3,000 and a written bid for $8,330. There was no evidence of any other calculation of repair cost. Further, Rodriguez could only compel Thompson to select the $3,000 bid because Thompson had the contractual right to select the lowest of the three qualifying bids. Accordingly, for summary judgment purposes, because Rodriguez would have received $3,000 from Thompson but for Thompson's breach of contract, $3,000 reflects the benefit of the bargain to both Rodriguez and Thompson and is the amount of damages the trial court should have awarded when granting Rodriguez's motion for summary judgment. See Qaddura, 141 S.W.3d at 888-89 (stating benefit of the bargain damages restore non-breaching party to same economic position as if contract had not been breached). We therefore hold that the record establishes as a matter of law that $3,000 is the proper amount of damages to restore Rodriguez to the economic position she would have been in had Thompson performed under the contract. We agree that the trial court erred by concluding otherwise, and we sustain Thompson's third issue in part.
Because we have concluded that the terms of the settlement agreement did not allow Thompson to choose the zero bid, the zero bid is no evidence of the cost of the repairs required by the settlement agreement.
C. Fraud
1. Rodriguez's failure to prove fraud claim as a matter of law
In his second issue, Thompson argues that Rodriguez failed to show her entitlement to summary judgment on the basis of fraud. To establish fraud, a plaintiff must prove that (1) the defendant made a material representation; (2) the representation was false; (3) when the defendant made the representation, the defendant knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) the defendant made the representation with the intention that it be acted upon by the other party; (5) the party acted in reliance upon the representation; and (6) the party suffered injury. Johnson Higgins of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 524 (Tex. 1998).
According to Rodriguez, Thompson's misrepresentation was that he induced her into entering into a contract that he had no intention of honoring at the time he signed it. Proof of intent to deceive is almost always made by circumstantial evidence. IFC Credit Corp. v. Specialty Optical Sys., Inc., 252 S.W.3d 761, 770 (Tex. App.-Dallas 2008, pet. denied). Circumstantial evidence, when coupled with proof of failure to perform a contract, is sufficient to support a finding of fraudulent intent. Id. (citing Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986)). Thompson argues that, even if he had breached the agreement, Rodriguez offered no evidence that he had any fraudulent intent at the time the settlement agreement was executed. The mere fact that a party breached a contract is not evidence of intent not to perform at the time the contract was executed. Spoljaric, 708 S.W.2d at 435; see Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009); Formosa Plastics Corp. USA v. Presidio Eng'rs and Contractors, Inc., 960 S.W.2d 31, 48 (Tex. 1998).
The only evidence that Rodriguez supplied to the trial court in support of her fraud claim was her own affidavit. In her affidavit, she stated that she never would have signed the settlement agreement had she known that simply selecting a zero bid was an option for Thompson. She explained that on November 18, 2008, she received a letter from a lawyer named Rakesh I. Patel, who was not the lawyer who had represented Thompson at mediation. Attached to the letter was a foundation repair evaluation stating that the existing piers were installed adequately and that no foundation repair was needed, as well as a cashier's check for $2,427.50 to pay for one-half of the cost to repair the damage to the home's interior.
Rodriguez further testified in her affidavit that her attorney had immediately contacted the new lawyer, warning him that Thompson was about to breach the settlement agreement. On November 25, 2008, the new lawyer sent a reply letter stating that he was not representing Thompson and had merely forwarded the documents at Thompson's request "as a courtesy to Mr. Thompson and for tracking purposes only." Rodriguez's attorney then contacted Thompson's prior counsel of record, Edmund Anderson, and attempted to arrange another meeting with the mediator; the parties ultimately did not meet with the mediator because, according to Rodriguez, Thompson did not return his own lawyer's phone calls. When Rodriguez filed this suit to enforce the settlement agreement, Thompson hired yet another lawyer — the third attorney to become involved in this dispute on Thompson's behalf.
Rodriguez argues that Thompson's hiring a new lawyer to send the zero-bid letter and sending it directly to her rather than her attorney is circumstantial evidence of fraud because the original lawyer would have known that the parties had not intended that Thompson would accept a zero bid. Rodriguez also points to the date that each bid was submitted to Thompson as circumstantial evidence because he selected the very first bid to be the bid that he tendered in satisfaction of the settlement agreement.
A party cannot rely on circumstantial evidence that is equally consistent with the nonexistence of the fact that the party seeks to prove. See Lozano v. Lozano, 52 S.W.3d 141, 148 (Tex. 2001). That Thompson asked a different lawyer to forward the zero-bid letter and forwarded it directly to Rodriguez does not mandate a conclusion that Thompson was attempting to hide his actions from the lawyer who represented him in the settlement negotiations in the prior suit. The previous lawsuit had been dismissed, and there are other explanations for using a different lawyer to send the documents as a "courtesy" — the unavailability of the first lawyer or a desire to minimize legal fees, for example(that are equally likely. Furthermore, the fact that the zero bid was the earliest-prepared bid proves no more than that it was the first bid of the three to be submitted to Thompson. There is no evidence that Thompson knew that the contractor would prepare a zero bid when Thompson signed the settlement agreement or that he approached that particular contractor first. Accordingly, we conclude that Rodriguez did not conclusively prove Thompson intended for her to act upon any alleged misrepresentation and, thus, that the trial court erred by awarding summary judgment on her fraud claim. We sustain Thompson's second issue.
2. Exemplary damages
In his fifth issue, Thompson argues that the trial court erred by awarding exemplary damages to Rodriguez because she made no showing of fraud. Rodriguez pleaded for exemplary damages in her petition based on Thompson's alleged fraud. See Tex. Civ. Prac. Rem. Code Ann. § 41.003(a)(1) (Vernon 2008) (providing that exemplary damages may be awarded if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from fraud). Exemplary damages are not available unless a plaintiff establishes that he or she sustained actual loss or injury as the result of an underlying tort. Id. § 41.004(a); Fed. Express Corp. v. Dutschmann, 846 S.W.2d 282, 284 (Tex. 1993) ("Recovery of punitive damages requires a finding of an independent tort with accompanying actual damages."). As stated in our discussion of Thompson's second issue, because Rodriguez failed to prove her entitlement to summary judgment on her fraud claim, she failed to prove her entitlement to exemplary damages as well. We sustain Thompson's fifth issue.
Based on our disposition of Thompson's fifth issue, we need not reach his fourth issue, in which he complains that Rodriguez did not request exemplary damages in her motion for summary judgment. See Tex. R. App. P. 47.1.
D. Attorney's Fees
1. Attorney's fees for breach of contract
In addition to damages, a plaintiff who prevails on a breach of contract claim may recover reasonable attorney's fees. Tex. Civ. Prac. Rem. Code Ann. § 38.001(8) (Vernon 2008). In his sixth issue, Thompson complains that the trial court erred by awarding Rodriguez her attorney's fees because she did not prove that he had breached the settlement agreement. Because we have already determined that Rodriguez conclusively established each essential element of her breach of contract claim, she was also entitled to recover attorney's fees. See id. We overrule Thompson's sixth issue.
2. Attorney's fees on appeal
Finally, in his seventh issue, Thompson argues that the trial court erred by awarding Rodriguez attorney's fees of $7,500 in the event that Thompson unsuccessfully appealed the trial court's judgment. Thompson contends that the $7,500 amount awarded by the trial court is not supported by any evidence.
Although we agree with Thompson in this appeal that the trial court erred by granting summary judgment on Rodriguez's fraud claim, the issue of appellate attorney's fees is not moot because the attorney's fees award is based on the trial court's grant of summary judgment on Rodriguez's breach of contract claim, which we uphold (albeit for a lesser amount than originally awarded). Cf. Head v. U.S. Inspect DFW, Inc., 159 S.W.3d 731, 749 (Tex. App.-Fort Worth 2005, no pet.) ("A prevailing party has been defined as the party `who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even though not to the extent of its original contention.'" (quoting Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552, 564 (Tex. App.-Texarkana 2003, pet. denied))).
Rodriguez submitted the affidavit of her attorney, J.D. Milks, to support her request for attorney's fees in her motion for summary judgment. In the affidavit, Milks stated that he was familiar with the customary and reasonable attorney's fees charged in the county where the fees were incurred for cases of this type. He stated that, in his opinion, the rates charged by his firm for the attorneys and paralegals involved in this case constituted normal, customary, and reasonable charges in Texas and the surrounding counties. He gave his opinion(based upon the time and labor required, the customary fees in cases similar to this one, the amount in controversy, the experience, reputation, and ability of the attorneys involved, and the preclusion of other employment(that $7,500 would be a reasonable and necessary attorney's fee for an appeal of the case.
Thompson did not file any objections to this affidavit or any affidavit controverting Milks's testimony, even though he could have readily done so if he had believed that the claimed fee was unreasonable. When the testimony of an interested witness is not contradicted by any other witness or attendant circumstances, and the testimony is clear, direct, positive, and free from contradiction, inaccuracies, and circumstances tending to cast suspicion thereon, it is taken as true as a matter of law. Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990). This is especially true when the opposing party had the means and opportunity to disprove the testimony or evidence and failed to do so. Id.
Based on our review of the affidavit and the fact that no controverting affidavit or other evidence was submitted regarding the reasonableness of the legal fees, we hold that Milks's affidavit conclusively established Rodriguez's right to recover the attorney's fees awarded to her by the trial court. See, e.g., BW Supply, Inc. v. Beckman, 305 S.W.3d 10, 20 (Tex. App.-Houston [1st Dist.] 2009, pet. denied) (holding that attorney's uncontroverted testimony on the reasonableness of trial and appellate fee amounts was sufficient to support award of attorney's fees on appeal). We overrule Thompson's seventh issue.
IV. CONCLUSION
Having concluded that the trial court erred by granting Rodriguez's motion for summary judgment on her fraud claim, we reverse that portion of the trial court's judgment awarding her $2,800 in exemplary damages and remand her fraud claim and her request for exemplary damages to the trial court for further proceedings. See Tex. R. App. P. 43.2(d). Having held that Rodriguez conclusively proved the essential elements of her breach of contract claim but that the amount of damages proven was $3,000 instead of $8,330, we modify the trial court's judgment on her breach of contract claim to award damages to Rodriguez in the amount of $3,000, and we affirm the remainder of the judgment as modified. See Tex. R. App. P. 43.2(b).