Henry S. Miller Co. v. Bynum

797 S.W.2d 51, 1990 WL 21398

• Court: Court of Appeals of Texas
• Decided: March 8, 1990
• Docket: 01-88-00926-CV
• Status: Published

Opinions

OPINION

EVANS, Chief Justice.

This is an appeal from a judgment for the plaintiff in a Deceptive Trade Practices action.

Douglas Bynum, Jr. and Starfire Engineering, Inc., d/b/a Tiffany’s Hair Styles (“Bynum”), sued defendants, Richard E. Dover (“Dover”) and Henry S. Miller Company (“Miller”), alleging various violations of the Deceptive Trade Practices Act. Tex. Bus. & Com.Code Ann. sec. 17.41 et seq. (Vernon Supp.1988). Bynum alleged that Miller, a commercial leasing agent representing a Mr. Riddle and Dover, offered him space in the Wood Winds Shopping Center as a prospective site for his beauty shop. According to Bynum, Miller represented the Wood Winds Center: (1) was a Riddle development; (2) was “almost fully occupied”; (3) would have only “first class” establishments; and (4) was a “Riddle” center with standardized tenant regulations, high quality construction, and good maintenance. Bynum asserted that, on the basis of these representations, he leased space in April 1984 for the operation of his beauty shop. During the two years that followed, he discovered that Miller’s representations were false. He said the center’s restrictions and rules were unevenly and inconsistently applied and did not affect all occupants uniformly. Moreover, the center’s occupancy rate did not conform to what he had been told, and the center was not operated as a “first class” center. During his occupancy, numerous problems occurred: the center was poorly maintained; there was “soft and runny” tar in the parking lot; there were frequent water interruptions, flooding, and breaks in the main water lines due to poor construction; and stacks of debris and construction materials were left on site for long periods of time. He also discovered that Riddle was not the owner and developer of the center, and that Riddle did not even own the parking lot. As a consequence of these problems, Bynum had to sell his beauty shop business in January 1986. He alleged nonrefundable leasehold expenses of $33,511, lost capital investment after depreciation of $60,426, and $212,448 in lost profits.

Miller filed a cross-claim against the other defendants seeking indemnity and contribution. The cause was submitted to the court without a jury, which rendered judgment in favor of Bynum against all defendants except Dover, who had been dismissed before trial. The court’s judgment awarded Bynum $60,426 as actual damages and additional damages of $120,852. Because the judgment did not dispose of Miller’s cross-action against Dover, it was interlocutory in nature. The court later entered a final judgment disposing of all parties and issues in the case. That judgment is the subject of this appeal.

In separate findings of fact and conclusions of law, the trial court found that Miller made misrepresentations to Bynum. Miller, among other things, stated:

(a) that the Wood Winds Shopping Center would be a John C. Riddle Development;

(b) that the center would be a “first class” shopping center;

(c) that the center was almost “wholly leased out”;

(d) that the regulations of the center would be applied to all tenants, including Bynum, in a uniform manner;

(e) that construction debris would be cleaned from the center at least daily;

(f) that the center would be advertised to induce more prospective customers of Bynum’s to use the center;

(g) that the amount of rent was justified in light of the quality and quantity of services the center would provide; and

(h) that the center, including the parking lot, was wholly owned by John C. Riddle and John Riddle Interests.

The trial court found that Bynum relied upon these and other representations, which were either made verbally by Miller or in sales brochures and a tenant’s package given to Bynum by one of Miller’s sales agents. The court found that Bynum would not have entered into the lease but for these representations, which were false, misleading, or deceptive, and knowingly made in reckless disregard for the truth. The court further found that John C. Riddle and John Riddle Interests, through their exclusive sales agent, Henry S. Miller Company, made these same representations to Bynum, upon which he relied; that but for such representations, he would not have entered into the lease; and that such representations were false, misleading, or deceptive, and knowingly made in reckless disregard for the truth. The court found that Bynum had suffered damages in the amount of $60,426.

In its conclusions of law, the court found that Henry S. Miller Company had violated the Deceptive Trade Practices Act, in that it had: (a) caused confusion or misunderstanding as to the source, sponsorship, approval, or certification of its services; (b) caused confusion or misunderstanding as to its affiliation, connection, or association with John C. Riddle and John Riddle Interests; (c) represented that goods and services of the shopping center had sponsorship, approval, characteristics, uses, benefits, or qualities that they did not have; (d) represented that goods and services of the shopping center were of particular standard, quality, or grade when they were of a lesser standard, quality, or grade; and (e) represented that the lease agreement conferred rights, remedies, and obligations it did not have.

The court further concluded that it was unnecessary for the plaintiff to send prior written notice to the defendants, if such was not done, because of the possibility of the statute of limitations barring the plaintiff's claim. The court found that John G. Riddle and John Riddle Interests violated the Deceptive Trade Practices Act for each of the same reasons as specified for Miller, and that they also breached express warranties in their lease and sales brochures, as well as implied warranties to provide the highest quality management at the Wood Winds Shopping Center.

On this appeal, Miller does not challenge any of the trial court’s findings of misrepresentations, which constitute violations of the Deceptive Trade Practices Act. Thus, we must consider those facts as having been established as a matter of law, and as establishing a basis of liability under the Deceptive Trade Practices Act. Miller contends only that there is no evidence or insufficient evidence to prove it had knowledge of the falsity of such representations.

In its first four points of error, Miller contends that the evidence is legally and factually insufficient to support the trial court’s award of damages in the amount of $60,426. Miller’s contention, in essence, is that the trial court’s damage award cannot be sustained because Bynum failed to offer any evidence showing that his claimed expenditures were reasonable and necessary.

Under the Deceptive Trade Practices Act, an aggrieved consumer is entitled to an award of “actual damages.” Tex. Bus. & Com.Code Ann. sec. 17.50(b)(1) (Vernon 1987). The term “actual damages” has been defined as those damages recoverable at common law. W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex.1988). In a Deceptive Trade Practices action, damages are awarded to compensate the consumer for the “actual loss” sustained as a result of the defendant’s conduct. Kish v. Van Note, 692 S.W.2d 463, 466 (Tex.1985). Damages in such a case will usually be measured either by the “benefit of the bargain” theory, i.e., the difference between the value represented and any value actually received, or the “out-of-pocket” theory, i.e., the difference between the value lost and any value received. Bankston, 754 S.W.2d at 128. But, as the concurring opinion in Bankston explains, these remedies are not exclusive, and a court may adopt a measure that is the most appropriate for the particular case. Id.; Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 367 (Tex.1987); see also Tex.R.Civ.P. 301.

Under the express terms of his lease, Bynum was required to pay rentals of $17,-280 per year, or a total of $34,560 for the first two years of his five-year lease. He testified that in order to meet the requirements of his lease and to open his beauty salon, he was required to make expenditures totaling $64,676, of which amount he was reimbursed $8,622 by Miller. Bynum offered a chart showing his gross receipts during the first 21 months of his operation. He said the beauty shop made a profit for a couple of months, but that these profits ceased because of business disruptions. He finally sold his business for $23,000. Bynum testified, without objection, that after he subtracted the $23,000 sales price from the amount of his total capital investment, his net capital loss, after depreciation, was $60,426. Bynum explained that his net capital loss represented the amount he had been required to put into the lease venture, less the amount he had received from the venture. Miller did not controvert this testimony.

When a consumer makes a purchase in reliance upon misrepresentations actionable under the Deceptive Trade Practices Act, the actual damages recoverable under the Act are to be determined by the “total loss” sustained by the consumer as a result of the deceptive trade practice. Gibbs v. Main Bank of Houston, 666 S.W.2d 554, 560 (Tex.App.— Houston [1st Dist.] 1984, no writ). The consumer’s “total loss” may be established by showing the total amount of the consumer’s payments, less any profits or other benefits remaining in the consumer’s hands. Id.; see also Woo v. Great Southern Acceptance Corp., 565 S.W.2d 290 (Tex.Civ.App.—Waco 1978, writ ref’d n.r.e.). The consumer’s net economic loss is a proper measure of compensation under the Deceptive Trade Practices Act. See Sam Montgomery Oldsmobile Co. v. Johnson, 624 S.W.2d 237 (Tex.App.—Houston [1st Dist.] 1981, no writ).

Here, the trial court obviously decided that a fair method of compensating Bynum was to return to him the amount of his net capital loss. This, in essence, was the total amount of his loss, less the amount, if any, of any value received and retained. Miller does not specifically complain of the trial court’s use of this measure of compensation, and complains only that the evidence is insufficient to support the trial court’s award. We find that the trial court acted within its discretion in deciding to use this measure of recovery, and we find the evidence legally and factually sufficient to support its award.

We overrule Miller’s first four points of error.

In the fifth point of error, Miller contends the trial court erred in overruling its “motion to modify, correct or reform judgment” because the evidence was factually insufficient to show that it had any knowledge that the representations complained of by Bynum, which were contained in any brochure or publication regarding the Wood Winds Shopping Center, were false. In a related sixth point of error, Miller contends the court erred in overruling its motion for entry of judgment because there was no evidence that it had knowledge of the falsity of such representations. In these points of error, and also in the trial court motions referred to therein, Miller simply contends the evidence is legally and factually insufficient to support the trial court’s award of $60,426.00 as actual damages.¹

Under its points of error five and six, Miller argues that “one cannot be held liable under the DTPA for failure to disclose facts about which he does not know.” Bynum, in response, points out that Miller was found to have made affirmative misrepresentations of fact, which do not involve the element of scienter. Thus, By-num argues, he was not required to prove Miller’s knowledge of the falsity of such misrepresentations in order to establish Miller’s liability for actual damages under the Deceptive Trade Practices Act.

We agree with Bynum’s argument and overrule Miller’s contentions. When a seller makes representations to a buyer, it is under a duty to know if the representations are true. Robinson v. Preston Chrysler-Plymouth, Inc., 633 S.W.2d 500, 502 (Tex.1982). Similarly, the seller’s agent is liable for affirmative misrepresentations, notwithstanding the agent’s lack of knowledge or notice of the falsity thereof. Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 540-41 (Tex.1981); see also Canada v. Kearns, 624 S.W.2d 755, 756 (Tex.App.—Beaumont 1981, no writ).

In Cameron, the plaintiffs had purchased a house listed through the defendant, Terrell & Garrett, the seller’s real estate agent. In listing the home for sale, Terrell & Garrett published a summary of information stating that the house had 2400 square feet of heated and air conditioned space. A jury found Terrell & Garrett misrepresented the square footage of the house, violating the provisions of the Deceptive Trade Practices Act, but the trial court entered a take-nothing judgment n.o.v. in favor of the defendant. Affirming that judgment, the Fort Worth Court of Appeals concluded that Terrell & Garrett were not liable, as a matter of law, because there was no evidence putting them on notice that the information supplied by the seller was false or that they undertook to verify the accuracy of the seller’s representations. Cameron v. Terrell & Garrett, Inc., 599 S.W.2d 680, 682-83 (Tex.Civ.App.—Fort Worth 1980), rev’d, 618 S.W.2d 535 (Tex.1981). Reversing the judgments of both lower courts, the Texas Supreme Court concluded that Terrell & Garrett were liable for their affirmative misstatements of fact under the Deceptive Trade Practices Act, notwithstanding that no privity existed between the sales agent and the consumer. Cameron, 618 S.W.2d at 535, 540-41.

Miller does not challenge the trial court’s findings that it made false, misleading, or deceptive representations, which constitute violations of the Deceptive Trade Practices Act. These unchallenged findings show affirmative misrepresentations of fact, not merely a failure to disclose facts. Thus, Bynum was not required to prove Miller’s knowledge of the falsity of such misrepresentations in order to establish Miller’s liability for actual damages under the Deceptive Trade Practices Act. Robinson, 633 S.W.2d at 503; Cameron, 618 S.W.2d at 540.

We overrule the fifth and sixth points of error.

In Miller’s seventh and eighth points of error, it contends that the evidence is legally and factually insufficient to establish that its conduct was a producing cause of Bynum’s loss.

Under these points, Miller argues that there was no evidence that its misrepresentations regarding standardized architectural signage and paint was a producing cause of Bynum’s ultimate loss when he was forced to sell his business. We overrule these points. Miller’s argument overlooks the trial court’s unchallenged findings of a variety of misrepresentations, which establish a broad basis for the court’s judgment. The trial court was entitled to look at the entire transaction in determining whether Miller’s misrepresentations constituted a producing cause of Bynum’s loss. See Flenniken v. Longview Bank & Trust Co., 661 S.W.2d 706, 707 (Tex.1983); Royal Globe Ins. Co. v. Bar Consultants, Inc., 577 S.W.2d 688, 694 (Tex.1979); Jim Stephenson Motor Co., Inc. v. Amundson, 711 S.W.2d 665, 671 (Tex.App.—Dallas 1986, writ ref’d n.r.e). We conclude that there is sufficient evidence to support the trial court’s finding that Miller’s misrepresentations were a producing cause of Bynum’s loss.

Miller’s seventh and eighth points of error are overruled.

In Miller’s points of error nine through 13, it contends that the trial court erred in awarding additional damages and in overruling its plea in abatement because there is no evidence that appellant sent the demand letter required by the Texas Deceptive Trade Practices Act, Tex.Bus. & Com. Code Ann. sec. 17.505 (Vernon 1987). That section provides, in pertinent part:

If the giving of 30 day’s written notice is rendered impracticable by reason of the necessity of filing suit in order to prevent the expiration of the statute of limitations or if the consumer’s claim is asserted by way of counterclaim, the notice provided for in (a) of this section is not required, but the tender provided for by subsection (c) of this section and by subsection (d), Section 17.506 of this sub-chapter may be made within 30 days after the filing of the suit or counterclaim.

The purpose of the notice specified in section 17.505 of the Deceptive Trade Practices Act is to facilitate the early settlement of the dispute and to give the alleged wrongdoer an opportunity to avoid exposure to additional damages and attorney’s fees. Pool Co. v. Salt Grass Exploration, Inc., 681 S.W.2d 216, 219 (Tex.App.—Houston [1st Dist.] 1984, no writ). The statute is in furtherance of the strong policy of Texas law favoring settlement of disputes. See Hernandez v. Telles, 663 S.W.2d 91 (Tex.App.—El Paso 1983, no writ); see also Tex.Civ.Prac. & Rem.Code Ann. sec. 154.-001 (Vernon 1987). The defense set forth in section 17.505 is an affirmative defense, and the burden of pleading and proving the defense is on the party asserting it. American Petrofina, Inc. v. P.P.G. Indus., 679 S.W.2d 740, 748 (Tex.App.—Fort Worth 1984, writ dism’d); Chrysler-Plymouth City, Inc. v. Guerrero, 620 S.W.2d 700, 706 (Tex.Civ.App.—San Antonio 1981, no writ). When the pleading and proof show that the consumer failed to give the required notice, the proper relief is abatement of the action, rather than dismissal of the suit. Moving Co. v. Whitten, 717 S.W.2d 117, 124 (Tex.App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.); Sunshine Datsun, Inc. v. Ramsey, 680 S.W.2d 652, 655 (Tex.App.—Amarillo 1984, no writ); Hollingsworth Roofing Co. v. Morrison, 668 S.W.2d 872, 875 (Tex.App.—Fort Worth 1984, no writ).

The transcript reflects that this suit was filed on May 9, 1986, and that the plaintiff’s second amended original petition was filed on December 7, 1987. In that petition, Bynum alleged:

Notice was not sent to Defendant pursuant to Section 17.50A, Texas Deceptive Trade Practices Act, prior to filing this suit because of the necessity of filing suit in order to prevent the possible expiration of the statute of limitations on all of Plaintiff’s claims. A notice letter will be promptly sent to the Defendants and, in the event an acceptable settlement to the claims set forth herein are timely received, Plaintiff will file a motion that this suit be dismissed.

The transcript does not show whether a subsequent notice was sent to the defendants, but the petition does pray for actual and treble damages and attorney’s fees. The transcript also contains Miller’s plea in abatement filed June 16,1988, just six days before the trial date, which asserts that the plaintiff failed to give written notice, as required by section 17.505, and asked the court to abate the cause for 30 days so that notice could be given. There is nothing in the record showing that the court held a hearing on Miller’s plea in abatement, and if so, what evidence was presented at that hearing. Neither does the record contain an order or docket entry showing the court’s ruling on the plea in abatement. Indeed, the only ruling contained in the record is expressed in the court’s findings of fact, which indicate that the plea had been overruled.

Miller asserts that a hearing was, in fact, held on its plea in abatement, and that the trial court overruled the plea when By-num’s attorney explained to the court that the statute of limitations was about to run on his cause of action and that he could not send the requisite demand letter before filing suit. Miller takes the position that it was Bynum’s burden to offer evidence at the hearing or at trial to overcome the averments in its plea in abatement.

The mere filing of a plea in abatement, without presentment to the trial court and without offer of evidence in its support, usually amounts to a waiver of the plea. Schaff v. Nash, 193 S.W. 469, 470 (Tex.Civ.App.—Amarillo 1917, no writ); 3 R. McDonald, Texas Civil Practice in District and County Courts sec. 10.13 at 10-12 (rev. 1983). The party asserting a plea in abatement must see that the record correctly reflects the proceedings before the trial court and the court’s ruling on the plea. Schaff, 193 S.W. at 470. Here, the plaintiff’s petition alleged circumstances that, under the statute, excused his failure to give Miller 30 days written notice before filing suit. Even assuming that the court held a hearing on Miller’s plea, the court was required to accept Bynum’s allegations as true, and to view his allegations in the light most favorable to his contentions. Brazos Elec. Power Coop., Inc. v. Weatherford Indep. School Dist., 453 S.W.2d 185, 189 (Tex.Civ.App.—Fort Worth 1970, writ ref’d n.r.e.). Here, the record does not contain any evidence supporting the allegations of Miller’s plea in abatement, and because the face of Bynum’s petition does not admit the validity of such allegations, Miller waived any error in the court’s denial of the plea. Id.

Miller’s points of error 12 and 13 are overruled.

In Miller’s points of error 14 and 15, it contends that the trial court erred in admitting Bynum’s testimony on the facts because his response to interrogatories did not list his name, address, and telephone number as a party who had knowledge of facts that were relevant to the issues in the suit.

Because of Bynum’s failure to respond to Miller’s interrogatories, the trial court refused to allow Bynum to testify as an expert regarding the beauty shop business, and it also refused to allow Bynum’s attorney to testify regarding attorney’s fees. But the court did permit Bynum, as the principal party plaintiff in the lawsuit, to testify about the facts relating to his claim. The record shows that Miller had previously taken Bynum’s deposition in a proceeding lasting over several days, and that all of Bynum’s receipts and other documents were then delivered to Miller’s possession. From the evidence before it, the court could have found that Miller was fully aware of the nature and extent of Bynum’s testimony, and that Miller had access to all relevant documents.

When Bynum started to testify, Miller’s counsel objected that Bynum had failed to list himself as a witness in response to written interrogatories. Bynum’s counsel then explained to the court that he had not responded to the interrogatories because after receiving them, Bynum’s deposition was taken. He explained that Bynum, in his deposition, had answered all of Miller’s questions, and that he had given Miller copies of “every exhibit that we have in this case ... which is essentially all that they were asking for, anyway.” Bynum’s counsel said he assumed, because he never heard anything more from Miller’s counsel about the interrogatories, that Miller was satisfied with the information obtained during the two-day deposition. After hearing the parties’ contentions, the court ruled that it would permit Bynum to testify only as a fact witness, and that it later would rule on any objections made to testimony as an expert witness. When Bynum later sought to offer his own expert testimony as an expert witness, the court refused to permit him to do so.

Under the particular circumstances shown, the trial court did not abuse its discretion in ruling that Bynum could testify as a fact witness, but not as an expert witness. Although the trial court did not make an express finding of “good cause,” its finding on that issue is implicit in its ruling that Bynum would be permitted to testify about his factual knowledge.² The court evidently decided that there were reasonable grounds for Bynum’s not having listed himself as a fact witness, while there was no justification for Bynum’s failure to designate himself as an expert witness.

In deciding whether good cause existed for Bynum’s testimony as a fact witness, the trial court was entitled to consider:

(1) that Bynum, the party plaintiff in the lawsuit, would obviously be a principal witness at the trial of the case;

(2) that Miller had already taken By-num’s deposition and was fully cognizant of Bynum’s claims and his intended testimony at trial.

In ruling that Bynum could testify as a fact witness, but not as an expert witness, the trial court could reasonably have concluded that Miller was fully aware of By-num’s status as a potential fact witness and that Bynum had knowledge of facts relevant to the suit.

We do not suggest that the “good cause exception” to the sanctions of automatic exclusion will always be satisfied by the taking of a witness’ deposition before trial, or by showing the absence of surprise or unfairness to the other party when a witness is not identified pursuant to Tex.R. Civ.P. 166b. See Sharp, at 671. (holding such circumstances did not warrant a finding of good cause as to counsel’s offer of his own testimony as an expert witness on the subject of attorney’s fees).

Here, we are presented with a set of circumstances different from those in Sharp and other cases where good cause has not been established. In this case, it was quite obvious to all concerned that Bynum was a “potential” party witness who had “knowledge of relevant facts.” He was the principal party plaintiff and an extensive deposition had been taken of him concerning the claims he asserted against Miller in the suit. The trial court admitted his testimony as a fact witness, not as an expert witness. We accordingly hold that the trial court did not abuse its discretion in permitting Bynum to testify as a fact witness about the transactions forming the basis of his suit against Miller.

Because the issues raised by Miller’s points of error 16 and 17 are rendered immaterial by our disposition of Miller’s other points of error, we need not further discuss those issues.

The trial court’s judgment is affirmed.

O’CONNOR, J., dissenting.

1 . Miller does not argue, under these points of error, that Bynum was not entitled to the amount awarded by the court as additional damages. Therefore, that matter is not before us for consideration. San Jacinto River Authority v. Duke, 783 S.W.2d 209 (Tex.1990).

2 . We agree with the statement of the Fourteenth Court of Appeals in Tri-State Motors Trans. Co. v. Nicar, 765 S.W.2d 486, 491 (Tex.App.—Houston [14th Dist.] 1989, no writ), that the language in Walsh v. Mullane, 725 S.W.2d 263, 264 (Tex.App.—Houston [1st Dist.] 1986, writ refd n.r.e.), regarding an "express finding” of good cause, should "not be read as a broad requirement that a finding of good cause must affirmatively appear in the record to support a trial court’s discretionary admission of testimony." Tri-State Motors Trans. Co., 765 S.W.2d at 491; see also Sharp v. Broadway Nat'l Bank & Amy Sue Cavender, 784 S.W.2d 669 (1990) (per curiam).