ACCEPTED
12-15-00115-CV
TWELFTH COURT OF APPEALS
TYLER, TEXAS
5/1/2015 3:10:30 PM
CATHY LUSK
CLERK
NO. ___________________
__________________________________________________________________
FILED IN
12th COURT OF APPEALS
IN THE COURT OF APPEALS FOR THE TWELFTH DISTRICT, TYLER, TYLER, TEXAS
TEXAS 5/1/2015 3:10:30 PM
__________________________________________________________________
CATHY S. LUSK
Clerk
IN RE CHRISTY AND KORY HILL, Relators
__________________________________________________________________
From the 188th District Court for Gregg County, Texas Cause No. 2014-2357-A
Honorable David Brabham, Presiding Judge
__________________________________________________________________
PETITION FOR WRIT OF MANDAMUS
__________________________________________________________________
Jonathan Wharton
SNOW E. BUSH, JR., P.C.
Texas State Bar No. 24075764 420 N. Center Street
Longview, TX 75601
Tel. (903) 753-7006
Fax (903) 753-7278
jonathanwharton1@sbcglobal.net ATTORNEY FOR RELATORS
CHRISTY AND KORY HILL
May 1, 2015
IDENTITY OF PARTIES AND COUNSEL Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure, Appellant lists the following parties affected by this appeal, and their respective appellate and trial counsel: Relators: Christy and Kory Hill
Jonathan Wharton Snow E. Bush, Jr., P.C. 420 N. Center Street Longview, TX 75601 Tel. 903.753.7006 Fax 903.753.7278 jonathanwharton1@sbcglobal.net Trial and Appellate Counsel for Christy and Kory Hill
Respondent: Hon. David Brabham
188th District Court of Gregg County, Texas 101 E. Methvin, Suite 408 Longview, TX 75601 Trial Court
Real Parties in Interest: Andrew Shaw and Daniel Shaw
T. Heath Chamness White Shaver 205 W. Locust Tyler, TX 75702 Tel. 903.533.9447 Fax 903.595.3766 hchamness@whiteshaverlaw.com Trial Counsel for Andrew Shaw and Daniel Shaw
2
TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 INDEX OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 STATEMENT OF THE CASE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 STATEMENT OF JURISDICTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 NO REQUEST FOR ORAL ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 ISSUES PRESENTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 STATEMENT OF FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SUMMARY OF THE ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 PRAYER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 CERTIFICATE OF SERVICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 APPENDIX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3
INDEX OF AUTHORITIES
STATUTES
Tex. Gov’t Code § 22.221(a) and Rule 52.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Tex. Bus. Prac. & Comm. Code §§ 17.46(b)(5), (6), (7), (13), and (22). . . . . . . . . . .7 Tex. Bus. Prac. & Comm. Code § 17.50(b). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Tex. Civ. Prac. & Rem. Code § 41.011(a)(6). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Tex. Civ. Prac. & Rem. Code § 33.004(l). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 RULES
Tex. R. Civ. Prac. & Rem. Code § 33.004(g). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 CASES
Lunsford v. Morris, 746 S.W.2d 471, 473 (Tex. 1988). . . . . . . . . . . . . . . . . . 10, 12 Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 304 (Tex. 2006) (fraud). .11
Winkle Chevy-Olds-Pontiac v. Condon, 830 S.W.2d 740, 744 (Tex.App.—Corpus Christi 1992, writ dism’d). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Walker v. Packer, 827 S.W.2d 833, 843 (Tex. 1992) . . . . . . . . . . . . . . . . . . . . . . .11
In re City of Houston, No. 14-12-00861-CV at *11-12 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (mem. op.) (orig. proceeding). . . . . . . . . . . . . . . . . . . . . . . . 11
Soon Phat, L.P. v. Alvarado, 396 S.W.3d 78, 109 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
4
Suntide Sandpit, Inc. v. H&H Sand and Gravel, Inc., No. 13-11-00323-CV at *11 (Tex. App.—Corpus Christi, pet. denied) (mem. op.). . . . . . . . . . . . . . . . . . . . . . .12
In re Colonial Pipeline Co., 968 S.W.2d 938, 943 (Tex. 1998). . . . . . . . . . . . . . . 13
In re Unitec Elevator Serv. Co., 178 S.W.3d 53, 62 (Tex. App.—Houston [1st Dist] 2005, no pet.) (orig. proceeding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Broomfield v. Parker, No. 12-06-00208-CV (Tex. App.—Tyler 2007, no pet.) (mem. op.) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5
STATEMENT OF THE CASE
Relators filed this lawsuit against the Real Parties-in-Interest (operating as Engines Unlimited) arising out of a dispute over car repairs. Tab 1. Relators pleaded causes of action for fraud and conversion, among others (including DTPA violations). Tab 1. They then sought net-worth discovery from the defendants. Tab 3. The defendants objected with the following: “Defendant objects to providing any information regarding net worth because § 17.50 of the DTPA does not allow for the recovery of punitive damages.” Tabs 4 & 5. The defendants also moved to join the used car dealer as a responsible third party. Tab 6. Relators objected to that designation and set a hearing for both the net-worth discovery issue and the objection to the designation of a responsible third party. Tab 7. The trial court refused to allow Relators discovery on net worth. Tab 10. It also overruled Relators’ objections to the designation of a responsible third party. Tab 10 at 20.
STATEMENT OF JURISDICTION This Court has jurisdiction in this original proceeding pursuant to Tex. Gov’t Code § 22.221(a) and Rule 52.1 of the Texas Rules of Appellate Procedure.
NO REQUEST FOR ORAL ARGUMENT Because the case is guided by simple and well-established rules, oral argument would not benefit the court’s decision-making.
6
ISSUES PRESENTED
1. Did the trial court abuse its discretion by refusing to allow the plaintiff to conduct discovery on the defendants’ net worth?
2. Did the trial court abuse its discretion by allowing the defendants to designate a responsible third party without stating a claim for relief against that third party?
STATEMENT OF FACTS
The Plaintiffs’ filed this case alleging causes of action for fraud and conversion, among others, against the Defendants. Tab 1. The following facts were alleged:
In March of 2014, Mr. And Mrs. Hill purchased a 2006 Dodge Ram for approximately $13,000 from a used car dealer. Within a couple weeks, it had broken down due to a problem with the engine.
The dealership recommended they take it to Andrew Shaw and Daniel Shaw, operating as Engines Unlimited, who gave them a $5,500 estimate for the repair. The Hills agreed and gave them the car to fix.
Over the course of five months, the Defendants collected over $12,000 from the Hills, but instead of fixing the car, they damaged it, let it sit, and ultimately refused to return the car on request. The Hills were charged for problems with the car that did not exist at the time the truck was brought to the Defendants. Unnecessary parts were ordered and charged to the Hills in order to inflate the bill.
Eventually, when the Hills tried to pick up the truck to take to another repair shop, the Defendants told the Hills that even though they had paid the entire bill, and the repairs had not been completed, the Hills could not take the truck unless they signed a release of liability for the Shaws and their company.
Tab 1. The petition went on to state the specific claims made: “Defendants ANDREW
7
SHAW D/B/A ENGINES UNLIMITED and DANIEL SHAW are liable for conversion, trespass to chattel, DTPA violations under Tex. Bus. Prac. & Comm. Code §§ 17.46(b)(5), (6), (7), (13), and (22), negligence, gross negligence, fraud, and breach of contract.” Tab 1. The following categories of damages were requested: “The Plaintiff is entitled to recovery of actual damages, both past and future, including loss of use, the market value of the car, reasonable attorney’s fees, costs of court, expenses, punitive damages, and treble damages under the DTPA by Tex. Bus. Prac. & Comm. Code § 17.50(b).” Tab 1.
The Plaintiffs sent discovery requests on net worth to the Defendants. Tab 3.
The Defendants objected to every request, stating “Defendant objects to providing any information regarding net worth because § 17.50 of the DTPA does not allow for the recovery of punitive damages.” Tabs 4 & 5. The Defendants also moved to designate JCT Auto Sales, the used car lot, as a responsible third party for failing to disclose the condition of the truck to the Plaintiffs even though it was sold “as is.” Tab 6.
At the hearing, no testimony or evidence was submitted to the trial court. Tab 10. The Defendants’ attorney reassured the trial court that he has been practicing for over ten years and knows when the punitive damages issue is applicable and when it is not. Tab 10 at 5-6. He argued that “The issue in this case is that there are various
8
causes of action that have been filed by the Plaintiff that there's not a recovery for punitive damages.” Tab 10 at 6. “The other issue is a reasonableness standard, Your Honor. My client has a million dollar insurance policy. Even if this case -- they could recover the full cost of the vehicle, which they didn't buy from us, plus all of the cost of repairs, they would have to get a verdict 40 times the amount of damages before they would even get into beyond past the policy of insurance that's covered.” Tab 10 at 6-7. “Basically, what it comes down to is, I am not in any way representing to this Court that there will never come a time where the net worth information would be relevant and would be discoverable. But at this point in time, based on the fact that there are various causes of action which you can't even recover punitive damages on, if this case went to court tomorrow I'm virtually certain I could defeat a conversion claim.” Tab 10 at 7. He filed the motion to designate just so that he could conduct discovery. Tab 10 at 7.
The trial court denied the Plaintiffs request for net-worth discovery. Tab 10 at 10. It also granted the Defendants’ motion for leave to designate JCT Auto Sales as a responsible third party. Tab 10 at 20; Tab 11.
SUMMARY OF THE ARGUMENT
Net-worth discovery is a matter of well-established law. If a plaintiff pleads a cause of action that allows for the recovery of punitive damages, the plaintiff may
9
conduct discovery on the defendant’s net worth. There is no evidentiary hurdle: so long as a cause of action is pled, the discovery may be conducted. The only exceptions would be for excessively burdensome or harassing requests, but no evidence has been presented on those issues.
An order denying discovery that goes to the heart of a party’s case has no adequate remedy at law. Because the net worth of the Defendants’ goes to the heart of the Plaintiff’s punitive damages case, there is no adequate remedy at law for the trial court’s denial of discovery on the issue.
Additionally, in the interest of judicial economy, if a mandamus is granted, an appellate court should correct other errors in the case that would normally have an adequate remedy at law. The designation of JCT Auto Sales as a responsible third party is clearly improper, since the Defendants’ designation does not plead sufficient facts to allege responsibility of JCT Auto Sales. Even if JCT Auto Sales had sold the truck in a broken condition, it was sold “as is.” Without any allegation of fraudulent inducement of the “as is” clause, the car lot is not liable. Also, the fact that the Plaintiffs bought a damaged car is the reason repairs were needed, but it has nothing to do with the Defendants overcharging for work, failing to do any work, damaging the car further, and then refusing to return the truck. There is no reason why the seller of the car would be responsible for the damage the Defendants did to the car.
10
ARGUMENT
I. Discovery of Defendants’ Net Worth A. Introduction The Plaintiffs filed this case for a variety of causes of action, including fraud and conversion. The underlying facts were pled in the “FACTS” section, and those causes of action were specifically listed in the “LIABILITY” section. Tab 1. Since that placed net worth at issue, the Plaintiffs served discovery requests seeking net worth information from the Defendants. Tab 3. The Defendants objected, arguing that the DTPA (one of several causes of action asserted in the petition) does not allow for the recovery of punitive damages. Tabs 4 & 5. After the Plaintiffs filed a motion to compel responses, the trial court ruled that the Plaintiffs are not entitled to discover net worth information. Tab 10 at 10. The trial court would not allow net worth discovery unless the Relators met an evidentiary threshhold: “I'm going to deny the Motion to Compel at this time. It may be later as the trial develops that it would be more appropriate to order the net worth to be discovered, but I'm going to deny it at this time.” Tab 10 at 10.
B. Law “[I]n cases in which punitive or exemplary damages may be awarded, parties may discover and offer evidence of a defendant's net worth.” Lunsford v. Morris, 746
11
S.W.2d 471, 473 (Tex. 1988) (orig. proceeding). There is no evidentiary threshhold hurdle to cross. Id. Plaintiffs do not have to prove that they will recover punitive damages, they just have to plead it. Id. Fraud and conversion both allow for the recovery of punitive damages. Tony Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 304 (Tex. 2006) (fraud); Winkle Chevy-Olds-Pontiac v. Condon, 830 S.W.2d 740, 744 (Tex. App.—Corpus Christi 1992, writ dism’d) (conversion). Those claims have been pled, as well as punitive damages. Failing to order responses to net-worth discovery in this situation is a clear abuse of discretion.
Relators have no adequate remedy at law. An order denying discovery that goes to the heart of the case does not have an adequate remedy at law. Walker v. Packer, 827 S.W.2d 833, 843 (Tex. 1992). At least one court of appeals has held that evidence which must be considered in calculating damages “goes to the heart of the claim for damages.” In re City of Houston, No. 14-12-00861-CV at *11-12 (Tex. App.—Houston [14th Dist.] 2013, no pet.) (mem. op.) (orig. proceeding). That logic is straightforward: since the evidence in question is required by law to be introduced, deprivation of discovery on that issue guarantees a new trial on appeal.
In the City of Houston case, the plaintiff’s damage model in an inverse condemnation case was based on lost profits. Id. at *11. The calculation of lost profits is done by taking expected profits and subtracting actual profits. Id. at *12.
12
Obviously, finding the “actual profits” requires the accounting of actual income and actual expenses on the properties. See id. The plaintiff sold one of the lots and was building a home on another, which would tend to prove actual income and actual expenses on the properties. Id.
Similarly, net worth evidence goes to the heart of the issue of punitive damages. “That which could be an enormous penalty to one may be but a mere annoyance to another.” Lunsford v. Morris, 746 S.W.2d 471, 472 (Tex.1988). It is “as relevant to the defendant to prove low net worth as it is to the plaintiff to prove the defendant's high net worth.” Soon Phat, L.P. v. Alvarado, 396 S.W.3d 78, 109 (Tex. App.—Houston [14th Dist.] 2013, pet. denied). It is explicitly listed as a factor the trier “shall” consider by staute. Tex. Civ. Prac. & Rem. Code § 41.011(a)(6). Failing to provide evidence on those statutory factors precludes the recovery of punitive damages. Suntide Sandpit, Inc. v. H&H Sand and Gravel, Inc., No. 13-11-00323-CV at *11 (Tex. App.—Corpus Christi, pet. denied) (mem. op.). II. Designation of Responsible Third Party A. Introduction The Defendants moved for leave to designate the car lot that sold the truck to the Plaintiffs as a responsible third party even though the truck was sold “as is.” Tab 3. In the motion, the Defendants alleged that the car lot is liable despite the “as is”
13
clause because it was negligent in failing to disclose the pre-existing condition of the truck. Tab 3. The Defendants alleged that the defects in the car existed before the sale, but they did not allege that the car lot even knew about them: “Defendants contend that the truck was sold to Plaintiffs in a defective condition and said defects were not disclosed to Plaintiffs at the time of the sale.” Tab 3. The Plaintiffs timely objected, arguing two points. Tab 7. First, the Defendants had not pled sufficient facts to negate the “as is” clause. Tab 7. Second, the fact that the truck was broken when purchased has nothing to do with the Defendants’ liability: the truck would not have needed repairs if it were not broken, but the Defendants are being sued for failing to fix it properly, not for the fact that it was broken when purchased. Tab 7. The trial court overruled the objections and granted the Defendants leave to designate the third party. Tab 11.
B. Law Ordinarily, the decision to designate a responsible third party would not be correctable by mandamus, as there are more than adequate remedies at law, such as a motion to strike. Tex. Civ. Prac. & Rem. Code § 33.004(l). Nevertheless, in the interest of judicial economy, if mandamus issues to correct one error, other errors in the case should be corrected as well. In re Colonial Pipeline Co., 968 S.W.2d 938, 943 (Tex. 1998).
14
In order to designate a responsible third party, a defendant must plead sufficient facts concerning the alleged responsibility of the person to satisfy the pleading requirements of the Texas Rules of Civil Procedure. In other words, the facts as pled in the motion for leave to designate are reviewed for legal sufficiency. In re Unitec Elevator Serv. Co., 178 S.W.3d 53, 62 (Tex. App.—Houston [1st Dist] 2005, no pet.) (orig. proceeding) (“[I]n determining whether to grant relators' motion for leave to designate Southwestern Bell as a responsible third party, the trial court was restricted to evaluating the sufficiency of the facts pleaded by relators and was not permitted to engage in an analysis of the truth of the allegations or consider evidence on Southwestern Bell's ultimate liability.”). The Defendants’ designation fails because it does not state any right to recovery against the alleged responsible third party. The Defendants designated the car lot that sold the Plaintiffs the truck as a responsible third party, but they do not explain why that car lot would be responsible for any damages the Plaintiffs may recover against the Defendants.
First, the Plaintiffs bought the truck “as is,” which is a complete defense against claims based on the condition of the truck, absent fraudulent inducement of the “as is” clause. Prudential Ins. Co. of Am. v. Jefferson Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995) (“The ‘as is’ agreement negates causation essential to recovery on all the theories Goldman asserts—DTPA violations, fraud (excluding, of course,
15
fraud in the inducement of the ‘as is’ agreement, which Goldman does not assert), negligence, and breach of the duty of good faith and fair dealing.”); Broomfield v. Parker, No. 12-06-00208-CV (Tex. App.—Tyler 2007, no pet.) (mem. op.) (“Because Parker purchased the vehicle ‘as is,’ she was precluded from proving that any acts by the Broomfields were a producing cause of her damages. Furthermore, the record contains no evidence that the Broomfields committed any acts that were false, misleading, or deceptive. Therefore, the evidence was legally insufficient to support the trial court's judgment [for the plaintiff].”) (citatons omitted). The Defendants did not allege fraudulent inducement of the “as is” agreement, so their designation does not plead sufficient facts to allege responsibility for the car lot.
Second, the fact that the Plaintiffs bought a damaged car is the reason repairs were needed, but it has nothing to do with the Defendants overcharging for work, failing to do any work, damaging the car further, and then refusing to return the truck. There is no reason why the seller of the car would be responsible for the damage the Defendants did to the car.
C. Conclusion Even though the Defendants did not plead sufficient facts concerning the alleged responsibility of the person to satisfy the pleading requirement of the Texas Rules of Civil Procedure, they still must be given leave to replead. See Tex. R. Civ.
16
Prac. & Rem. Code § 33.004(g). The Defendants must be given that opportunity; if they do not plead sufficient facts on their second try, their motion to designate must be denied. See id.
PRAYER
WHEREFORE, PREMISES CONSIDERED, Relator, Christy and Kory Hill, respectfully request that this court issue a Writ of Mandamus ordering the Honorable David Brabham to allow Relators to conduct discovery on the issue of net worth and to deny the Real Parties-in-Interest their motion for leave to designate JCT Auto Sales as a responsible third party unless they are able to replead sufficient facts to satisfy the pleading requirements of the Texas Rules of Civil Procedure.
Respectfully submitted,
SNOW E. BUSH, JR., P.C.
420 N. Center Street
Longview, TX 75601
Tel. (903) 753-7006
Fax. (903) 753-7278
E-mail: jonathanwharton1@sbcglobal.net /s/ Jonathan Wharton
By:___________________________ JONATHAN WHARTON
STATE BAR NO. 24075764
ATTORNEY FOR RELATORS,
CHRISTY AND KORY HILL
17
CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the above and foregoing has been delivered to Heath Chamness, counsel for the Real Parties-in-Interest, on this the 1st day of May, 2015.
/s/ Jonathan Wharton
JONATHAN WHARTON
CERTIFICATE OF COMPLIANCE
I hereby certify that the Petition for Writ of Mandamus (as measured under Tex. R. App. P. 9.4(i)(1)) contains 2,627 words as counted by Microsoft WordPerfect on this the 1st day of May, 2015.
/s/ Jonathan Wharton
JONATHAN WHARTON
18
NO. ___________________
__________________________________________________________________
IN THE COURT OF APPEALS FOR THE TWELFTH DISTRICT, TYLER, TEXAS
__________________________________________________________________
IN RE CHRISTY AND KORY HILL, Relators
__________________________________________________________________
From the 188th District Court for Gregg County, Texas Cause No. 2014-2357-A
Honorable David Brabham, Presiding Judge
__________________________________________________________________
APPENDIX IN SUPPORT OF PETITION FOR WRIT OF MANDAMUS
__________________________________________________________________
Original Petition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tab 1 Defendants’ Answer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab 2 Plaintiffs’ Motion to Compel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Tab 3 Defendants’ Response to Plaintiff’s Second Request for Production . . . . . . . . Tab 4 Defendants’ Response to Plaintiff’s Second Set of Interrogatories . . . . . . . . . Tab 5 Motion to Designate Responsible Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . Tab 6 Plaintiffs’ Objection to Designation of Responsible Third Party . . . . . . . . . . . .Tab 7 Plaintiffs’ Supplement to its Motion to Compel . . . . . . . . . . . . . . . . . . . . . . . . .Tab 8 Affidavit of Jonathan Wharton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab 9 Transcript of Hearing on March 30, 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . Tab 10
19
Order Granting Defendants’ Motion to Designate Responsible Third Party . . Tab 11