Donwerth v. Preston II Chrysler-Dodge, Inc.

775 S.W.2d 634, 32 Tex. Sup. Ct. J. 517, 1989 Tex. LEXIS 77, 1989 WL 73127

• Court: Texas Supreme Court
• Decided: July 5, 1989
• Docket: C-6821
• Status: Published

Opinions

OPINION

SPEARS, Justice.

This appeal presents the following issues: whether the record demonstrates some evidence of misrepresentation, whether the court or the finder of fact determines if an action is groundless and brought in bad faith under the Deceptive Trade Practices — Consumer Protection Act, Tex.Bus. & Com.Code § 17.41-17.63 (DTPA), and whether an appellee may seek affirmative relief in the court of appeals by cross-points without perfecting a separate appeal.

The court of appeals reversed the trial court’s judgment in favor of the consumers and rendered judgment that the consumers take nothing, holding that there was no evidence to support the jury’s verdict. The court also awarded attorneys’ fees against the consumers and, in doing so, held that the issue of bad faith is for the finder of fact while groundlessness is for the court. Finally, the court dismissed the consumers' cross-points because no separate appeal was brought. 744 S.W.2d 142 (1987).

We hold that there is some evidence to support the jury verdict, that the determination of whether to assess attorneys’ fees against a DTPA claimant is entirely for the court, and that the consumers’ cross-points were properly preserved. Therefore, we reverse the judgment of the court of appeals and remand the cause to that court for consideration of factual sufficiency points and other points upon which it did not initially rule.

Facts

In March 1983 Harvey and Dorothy Don-werth purchased a used 1981 Chrysler automobile from Preston II Chrysler Dodge, Inc. Before the sale, Mr. Don-werth “mashed” on the brake pedal, finding it to be “spongy” rather than “a full pedal.” Donwerth mentioned his concerns to Bob White of Preston II. After White told the Donwerths that he had driven the automobile as his personal car, that it was a good car, and that there was nothing wrong with the brakes, the Donwerths made the purchase.

The Donwerths began having serious problems with the car, especially the brakes, just months after purchasing it. Suspecting that the odometer reading did not accurately reflect the car’s milage, Mr. Donwerth had the car’s ownership history checked. As a result of this title run Don-werth discovered that the automobile had been repossessed from its last individual owner by Chrysler Credit Corporation, which then sold it to a wholesale dealer. That dealer in turn sold it to another wholesale dealer, Villa & Son Auto Sales, which sold it to Preston II. A prior owner’s records showed the car with over 57,000 miles on it. At the time of sale, however, Preston II had given the Donwerths a written odometer mileage statement that the odometer reading of approximately 37,000 miles was correct to the best of its knowledge and belief. After the sale, when Mr. Donwerth first questioned the mileage statement, White told him: “That is the actual mileage. We bought that car from Larry Lange Cadillac.” When the Don-werths confronted Preston II with the facts, however, White produced an odometer certificate from Fred Villa of Villa & Son stating under oath the unaltered odometer mileage to be 37,199.¹

After unsuccessful settlement negotiations, the Donwerths drove for three consecutive Saturdays around the Preston II dealership with signs on their automobile stating: “BOUGHT THIS CAR FROM PRESTON II. THE MILES WERE ROLLED BACK.” Preston II then brought this suit for defamation against the Donwerths, alleging that the sign falsely implied that an agent or employee of Preston II had rolled back the odometer mileage when the Donwerths knew that a prior dealer was responsible for the alteration. The Donwerths counterclaimed, alleging various violations of the DTPA.

The case proceeded to trial before a jury. The jury failed to find that the Donwerths had defamed Preston II, and the trial court rendered judgment for the Donwerths on that portion of the verdict. As to the counterclaim, the jury found that Preston II represented the automobile to be of a particular standard, quality or grade when it was of another. The jury failed to find, however, that Preston II acted knowingly in making the misrepresentation or that it violated the DTPA in any other respect. Finally, the jury found that the Donwerths’ DTPA claims were groundless and brought in bad faith, and that Preston II’s reasonable and necessary attorneys’ fees were $7,000. The trial court, disregarding the groundless and bad faith findings, rendered judgment on the remainder of the verdict for the Donwerths for $15,300, representing statutory damages, attorneys’ fees and prejudgment interest.

Preston II appealed, and the Donwerths by cross-points sought appellate attorneys’ fees. The court of appeals reversed the judgment of the trial court, holding that there was no evidence to support the jury’s finding that Preston II had violated the DTPA. Based on this holding, the court went on to hold the suit groundless as a matter of law. The court of appeals held the jury’s finding that the suit was groundless and brought in bad faith constituted an unattacked finding of bad faith and rendered judgment against the Donwerths for Preston II’s attorneys’ fees of $7,000.00. The court of appeals also dismissed the Donwerths’ cross-points, holding that the Donwerths were required to perfect a separate appeal in order to seek affirmative relief.

DTPA Claim: Circumstantial Evidence Representation Untrue

The Donwerths first complain that the court of appeals erred in holding that there was no evidence to support the jury finding that Preston II represented the automobile was of a particular standard, quality or grade when it was of another. We agree.

White, the Preston II salesman, represented that there was nothing wrong with the brakes. The Donwerths, however, produced evidence that despite proper braking procedure the brakes began “groaning” within a few months after the purchase. After five months, when the Donwerths had driven the car approximately 3,250 miles, Preston II’s own service report showed that the front brake linings were gone, were “metal to metal,” and that the back linings were “super thin,” making the car “dangerous due to brakes." Finally, as previously noted, the odometer had been rolled back approximately 20,000 miles at the time of purchase. Together, this constituted some evidence that the brakes were excessively worn and defective at the time of the sale, thus supporting the jury finding that Preston II represented the car was of a particular standard, quality or grade when it was of another. See Morgan v. Compugraphic Corp., 675 S.W.2d 729, 733 (Tex.1984).

Defendant’s Attorneys’ Fees

The Donwerths next complain that the court of appeals erred in concluding that Preston II was entitled to recover attorneys’ fees against them under section 17.-50(c), which provides as follows:

On a finding by the court that an action under this section was groundless aind brought in bad faith, or brought for the purpose of harassment, the court shall award to the defendant reasonable and necessary attorney’s fees and court costs.

We hold that the court of appeals erred in holding that the Donwerths’ action was groundless and brought in bad faith.

The jury found, in response to a single issue, that the Donwerths’ claim was both groundless and brought in bad faith. The court of appeals correctly held that a determination of groundlessness is for the court. However it erred in concluding that the action brought by the Donwerths was groundless. The court stated: “Because the Donwerths could come forward with no evidence to support a DTPA complaint against Preston II, their suit was without arguable basis in fact and, therefore, groundless as a matter of law.” 744 S.W.2d at 145. Even if the court's approach were correct, our holding that there was some evidence to support the jury’s answer to the DTPA inquiry would require a reversal on the determination of ground-lessness. However we find the whole approach of the court of appeals flawed. To equate groundlessness with no evidence would preclude the award of attorneys’ fees in obviously fraudulent or malicious actions when some evidence was presented, yet discourage legitimately wronged consumers from seeking the protections afforded by the Act for fear of failure in court. “Groundless” under the DTPA has the same meaning as “groundless” under Rule 13 of the Texas Rules of Civil Procedure: “[N]o basis in law or fact and not warranted by good faith argument for the extension, modification, or reversal of existing law.” Tex.R.Civ.P. 13. Even evidence that is legally inadmissible or subject to other defects may be considered by a court in determining whether an arguable basis existed for the suit, provided there is some good faith basis for belief that the tendered evidence might be admissible or that it could reasonably lead to the discovery of admissible evidence.² Cf. Tex.R. App.P. 84 (appeal “without sufficient cause”); Fed.R.Civ.P. 11 (reasonable basis for pleading or motion). As a matter of law, the Donwerths’ claim was not groundless.

The court of appeals next held that the existence of bad faith is an issue for the finder of fact, and that there was some evidence of bad faith to support the jury’s finding. This was also erroneous. Under the Act, defendants may recover their attorneys’ fees when the court finds the DTPA action was groundless and brought in bad faith, or was brought for the purpose of harassment. Tex.Bus. & Com. Code § 17.50(c) (emphasis added). See Leissner v. Schott, 668 S.W.2d 686 (Tex. 1984). Despite the plain words of the statute, a number of courts of appeals have interpreted this section as providing that the finder of fact determines bad faith and harassment while the court determines whether the action is groundless. See Mader v. Aetna Casualty and Surety Co., 683 S.W.2d 731, 734 (Tex.App.—Corpus Christi 1984, no writ); Parks v. McDougall, 659 S.W.2d 875, 876-77 (Tex.App.—San Antonio 1983, no writ); LaChance v. McKown, 649 S.W.2d 658, 661 (Tex.App.—Texarkana 1983, writ ref’d n.r.e.); Computer Business Services, Inc. v. West, 627 S.W.2d 759, 761 (Tex.App.—Tyler 1981, writ ref’d n.r.e.); O’Shea v. International Business Machines Corp., 578 S.W.2d 844, 848 (Tex.Civ.App.—Houston [1st Dist.] 1979, writ ref’d n.r.e.). But see Blizzard v. Nationwide Mut. Fire Ins. Co., 756 S.W.2d 801, 802-10 (Tex.App.—Dallas 1988, no writ). While this approach is admittedly appealing, it is contrary to the plain words of the statute. The court, not the factfinder, must determine the existence of groundlessness, bad faith and harassment under section 17.50(c).³

Under the statute, attorneys’ fees may be awarded against the consumer if the court determines that the action was brought for the purpose of harassment. See Leissner v. Schott, 668 S.W.2d at 686. Because Preston II did not complain of the trial court’s failure to find that the suit was brought for the purpose of harassment, Preston II has not preserved any claim to attorneys’ fees on that ground.

Because the trial court expressly refused to find the action was groundless, and because as a matter of law the action was not groundless, it appears Preston II could not have prevailed on a claim the suit was brought for the purposes of harassment in any event. Section 17.44 of the DTPA provides that the Act “shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.” This legislative direction for a liberal construction to protect consumers means, at the very least, that the requirement that the suit be brought “for purposes of harassment” must mean it was brought for the sole purpose of harassment. See Curry, The 1979 Amendments to the Deceptive Trade Practices — Consumer Protection Act, 32 Baylor L.Rev. 51, 67 (1980). Because any purpose for recovering money damages, however small, as a motivating factor would defeat such a finding, it is difficult to conceive of a case which was not groundless but was brought for purposes of harassment. In Leissner v. Schott, this court, in refusing the application for writ of error, no reversible error, held that a judgment for attorney’s fees could be based on a finding that a suit was brought for the purpose of harassment even in the absence of a finding of groundlessness. 668 S.W.2d at 686. However, neither party in Leissner urged that the failure to find groundlessness necessarily precluded a finding of purposes of harassment.

Cross-Points

We turn now to the court of appeals’ dismissal of the Donwerths’ cross-points. The Donwerths asserted by cross-points in their appellees’ brief before the court of appeals that the trial court erred in not awarding them appellate attorneys’ fees as a matter of law. They did not, however, perfect a separate appeal by filing their own cost bond under Texas Rule of Appellate Procedure 40(a)(1). The court of appeals held that a separate appeal was required. We disagree.

Texas Rule of Appellate Procedure 40(a)(4) is dispositive on this issue. It states:

Notice of Limitation of Appeal. No attempt to limit the scope of an appeal shall be effective as to a party adverse to the appellant unless the severable portion of the judgment from which the appeal is taken is designated in a notice served on the adverse party within fifteen days after judgment is signed, or if a motion for new trial is filed by any party, within seventy-five days after the judgment is signed.⁴

By its plain language, this rule provides the sole means by which an appellee’s complaints on appeal can be restricted. We confronted this same issue in Hernandez v. City of Fort Worth, 617 S.W.2d 923 (Tex.1981). In Hernandez, as in this case, the court of appeals refused to consider appel-lees’ cross-points which sought more relief than appellees had received from the trial court, because appellees had not perfected an independent appeal. In reversing the court of appeals, we held:

An appellee may use cross-points to bring forward complaints of some ruling or action of the trial court that the appel-lee alleges constituted error as to him. [Citations omitted.] It is not necessary to perfect two separate and distinct appeals, unless the judgment of the trial court is definitely severable, and appellant strictly limits the scope of his appeal to a severable portion. [Citations omitted.]

Hernandez, 617 S.W.2d at 924.

We reaffirm that holding today. Unless an appellant limits his appeal pursuant to Texas Rule of Appellate Procedure 40(a)(4), an appellee may complain by cross-point in his brief in the court of appeals, without perfecting an independent appeal, of any error in the trial court as between appellant and appellee.⁵ In this case, the court of appeals was required to consider the Donwerths’ cross-points.

We reverse the judgment of the court of appeals and remand the cause to that court for further proceedings consistent with this opinion.

PHILLIPS, C.J., files a concurring opinion in which GONZALEZ and COOK, JJ., join. RAY, J., files a concurring opinion in which MAUZY and HECHT, JJ., join.

1 . At the trial of this case Villa invoked his Fifth Amendment privilege against self-incrimination tó avoid testifying about the odometer reading.

2 . We note that the Donwerths tendered in evidence a written statement by a former employee of a company related to Preston II that the head of Preston II's used car department was selling used cars with rolled-back odometers and knew it. The statement was token by an investigator from the Attorney General’s Consumer Protection Division as part of an investigation of the complaint filed by the Donwerths against Preston with the Attorney General. Even though the trial court excluded the statement as hearsay, it provides a good faith basis for the consumers’ claim.

3 . The Legislature refused to amend the statute in 1979 to authorize the jury, as well as the court, to make these findings. See Bragg, Maxwell & Longley, Texas Consumer Litigation, § 9.07 at 246-47 (2d ed. 1983). Appellate review of such trial court determinations is a question of law under an abuse of discretion standard. Cf. Barnes v. Whittington, 751 S.W.2d 493, 494-95 (Tex.1988).

4 . This rule is taken verbatim from former Texas Rule of Civil Procedure 353. What now appears as Rule 40(a)(4), Tex.R.App.P., was promulgated by this court as an amendment to former Rule 353, Tex.R.Civ.P. (1962), for the express purpose of overturning the result in Connell Constr. Co. v. Phil Dor Plaza Corp., 158 Tex. 262, 310 S.W.2d 311 (1958). Tex.R.Civ.P.Ann. 353 (General Commentary — 1966) (Vernon 1985). Connell Construction and other cases prior to the rule amendment are no longer applicable.

5 . This rule for appeals to the court of appeals differs from the rule for appeals to this court. To obtain a different and more favorable judgment in this court than the one rendered by the court of appeals, a party must file a timely motion for rehearing and his own application for writ of error in the court of appeals, Archuleta v. International Ins. Co., 667 S.W.2d 120, 123 (Tex.1984). Whether appeals to the court of appeals should be governed by a different rule than appeals to this court is an issue for continued study in revising the rules of appellate procedure.