AFFIRMED in part; REVERSE and RENDER in part; REMAND and Opinion Filed May 13, 2021
S In The Court of Appeals Fifth District of Texas at Dallas No. 05-19-01490-CV
PAUL MUNDHEIM, MARLA MUNDHEIM, AND THE MUNDHEIM FIRM, PLLC, Appellants V. SCOTT LEPP AND AMY TORRES LEPP, Appellees
On Appeal from the County Court at Law No. 4 Dallas County, Texas Trial Court Cause No. CC-18-01169-D
MEMORANDUM OPINION Before Justices Molberg, Goldstein, and Smith Opinion by Justice Smith Paul Mundheim, Marla Mundheim, and the Mundheim Firm, PLLC, appeal
the trial court’s judgment in favor of Scott Lepp and Amy Torres Lepp. The
Mundheims challenge the legal and factual sufficiency of the evidence to support
the jury’s findings regarding (1) Scott’s recovery of damages for the Mundheims’
fraud, (2) Scott’s recovery of exemplary damages, (3) Amy’s recovery on her breach
of contract claim, (4) Amy’s recovery of damages for the Mundheims’ fraud, and
(5) Amy’s recovery of exemplary damages. The Mundheims also complain the trial
court erred in not requiring Amy to elect her remedies and awarding Amy attorney’s fees. We affirm the trial court’s judgment in part, reverse and render in part, and
reverse and remand in part.
The record shows Amy was employed by Fidelity Title Company beginning
in 1997, and she first met Paul in approximately 2005. Paul was a fee attorney at
Fidelity. In 2013, Paul and Amy discussed their frustrations at work, and Paul said
he wanted to go back out on his own but did not have any money. Amy assured Paul
that she “could take care of it.” Amy and Paul decided they were going to go into
business together and open a title company. Paul did not mention his belief that non-
lawyers such as Amy and Scott, Amy’s husband at the time of trial, could not
actually be owners of a title company. A few weeks later, Amy and Scott met with
Paul, and it was discussed that Scott was going to put up the $50,000, and Amy was
going to work at the company full time. In return, Scott was going to be a twenty
percent owner, and Amy was going to be a forty percent owner. The terms of the
partnership and the parties’ interests in the company were never put in writing. Scott
gave Amy $50,000 in cash, and Amy gave Paul the money. Over the next few
months, Paul deposited the cash in the bank in a series of deposits under $10,000
each.
For four years, the title company was very successful, earning between
$450,000 and $500,000 per month. During that time, Scott and Amy were treated
as owners of the company and received distributions in keeping with what they
believed were their percentage ownership interests and were also given access to the
–2– company’s profit and loss statements. In the summer of 2017, Paul indicated to Amy
that he hated the business and wanted out. Paul said he was not sure the company
was “going to have the income that we’ve always had moving forward,” and he
thought the market was “going to crash.”
Instead of getting out of the business, Paul became an employee of Alamo and
Fidelity and received a $400,000 “bonus,” document preparation fees of
approximately $250,000 per year, and commissions of approximately $3000 per
month. The company in which Amy and Scott invested their time and money thus
effectively ceased to exist, and Amy and Scott received nothing.
On October 20, 2017, Amy entered into a “settlement agreement and mutual
release” with the Mundheim Firm and Paul and Marla. Among other things, the
agreement divested Amy of any interest in the company and provided: (1) the parties
waived all claims for fraud; (2) Amy would receive payments totaling $301,000; (3)
the parties would bear their own “costs, expenses, and attorney’s fees incurred in
connection with any future Litigation”; and (4) the parties would keep the terms and
contents of the agreement confidential. Scott was not a party to the agreement.
Amy received an initial $100,000 payment and a second $50,000 payment.
However, Amy received no further payments. On March 2, 2018, Scott sued Paul,
Marla, and the Mundheim Firm asserting they failed to pay Scott his share from the
company. Among other things, Scott asserted causes of action for breach of contract,
breach of fiduciary duty, and fraud. In April 2018, Amy intervened in the suit
–3– asserting causes of action for breach of contract. Amy later added claims of fraud
and fraudulent inducement. The case was tried before a jury, which returned a
unanimous verdict in favor of Scott and Amy awarding Amy damages for the
Mundheims’ breach of the agreement and awarding Scott and Amy damages for the
Mundheims’ fraud, exemplary damages, and attorney’s fees. This appeal followed.
Evidentiary challenges to jury findings
Appellants challenge both the legal and factual sufficiency of the evidence to
support the adverse jury findings. “When an appellant challenges the legal
sufficiency of an adverse finding on which he did not have the burden of proof at
trial, he must demonstrate there is no evidence to support the adverse finding.”
Fulgham v. Fischer, 349 S.W.3d 153, 157 (Tex. App.—Dallas 2011, no pet.). We
view the evidence in the light most favorable to the fact finding, indulging every
reasonable inference that would support it and disregarding contrary evidence unless
a reasonable factfinder could not. Bos v. Smith, 556 S.W.3d 293, 300 (Tex. 2018).
“When reviewing the record, we determine whether any evidence supports the
challenged finding.” Fulgham, 349 S.W.3d at 157. “If more than a scintilla of
evidence exists to support the finding, the legal sufficiency challenge fails.” Id.; see
Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d
41, 48 (Tex. 1998); see also King Ranch, Inc. v. Chapman, 118 S.W.3d 742, 751
(Tex. 2003) (more than a scintilla of evidence exists when evidence “rises to a level
that would enable reasonable and fair-minded people to differ in their conclusions”).
–4– In a challenge to the factual sufficiency of the evidence on an issue, we
consider all the evidence supporting and contradicting the finding in a neutral light.
Fulgham, 349 S.W.3d at 157 (citing Plas–Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d
442, 445 (Tex. 1989)). “We set aside the finding for factual insufficiency only if the
finding is so contrary to the evidence as to be clearly wrong and manifestly unjust.”
Id. (citing Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam)). The fact
finder is the sole judge of the credibility of the witnesses and the weight to be given
their testimony. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex.
2003). We defer to the jury’s implicit determinations of credibility and the weight
to be given to the evidence. Wise v. SR Dallas, LLC, 436 S.W.3d 402, 408 (Tex.
App.—Dallas 2014, no pet.). As long as the evidence falls within the “zone of
reasonable disagreement,” we will not substitute our judgment for that of the fact-
finder. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005). In conducting a
factual sufficiency review, we should detail the evidence relevant to the issue in
consideration and clearly state why the finding is factually insufficient or is so
against the great weight and preponderance as to be manifestly unjust, shock the
conscience, or clearly demonstrate bias. Windrum v. Kareh, 581 S.W.3d 761, 781
(Tex. 2019).
In their first set of issues (issues 1.a though 1.k), the Mundheims argue the
evidence is insufficient to support the jury’s findings regarding Scott’s fraud claim
against the Mundheims and his resulting damages. The Mundheims also argue Scott
–5– failed to secure findings necessary to support an exemplary damages award. Under
this set of issues, the Mundheims’ arguments focus on the jury’s findings that (1)
Paul, Marla, and the Mundheim Firm committed fraud against Scott; (2) clear and
convincing evidence showed the harm to Scott resulted from the fraud committed
by Paul, Marla, and the Mundheim Firm; (3) Paul, Marla, and the Mundheim Firm
had actual awareness of the falsity of the representation or promise the jury found to
be fraud; (4) $80,000 would fairly compensate Scott for damages resulting from the
fraud; and (5) $64,000 each from Paul, Marla, and the Mundheim Firm should be
assessed as exemplary damages.
In their next issue, the Mundheims argue the evidence is insufficient to
support the jury’s findings regarding Amy’s breach of contract and fraud claims
against the Mundheims and her resulting damages. The Mundheims also argue Amy
failed to secure findings necessary to support an exemplary damages award. Under
this issue, the Mundheims’ arguments focus on the jury’s findings that (1) Paul,
Marla, and the Mundheim Firm breached their contract with Amy; (2) $151,000
would fairly compensate Amy for damages resulting from the breach of contract; (3)
Paul, Marla, and the Mundheim Firm committed fraud against Amy; (4) clear and
convincing evidence showed the harm to Amy resulted from the fraud committed by
Paul, Marla, and the Mundheim Firm; (5) Paul, Marla, and the Mundheim Firm had
actual awareness of the falsity of the representation or promise the jury found to be
fraud; (6) $160,000 would fairly compensate Amy for damages resulting from the
–6– fraud; and (7) $96,000 each from Paul, Marla, and the Mundheim Firm should be
Fraud
The Mundheims argue the evidence is insufficient to support any fraud finding
by the jury including common law fraud, fraudulent inducement, and fraud by
nondisclosure. A common-law fraud claim requires a material misrepresentation,
which was false, and which was either known to be false when made or was asserted
without knowledge of its truth, which was intended to be acted upon, which was
relied upon, and which caused injury. Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d
143, 153 (Tex. 2015).
The Mundheims argue the evidence was insufficient to establish the elements
of misrepresentation, reliance, causation, and damages. The record reflects that Paul
represented that Scott would own twenty percent of the company and Amy would
own forty percent. The terms of the partnership and the ownership structure were
never put in writing because Amy and Scott trusted the Mundheims and relied on
the Mundheims’ good faith. Scott invested $50,000 in the company, and Amy
worked full-time at the company. Amy and Scott were thereafter treated as owners
of the company until Paul accepted the $400,000 “bonus” from Alamo, and the
company was absorbed into Alamo. Scott received nothing to compensate him for
his lost interest in the company. The jury could have found the Mundheims
–7– committed fraud against Scott by taking his $50,000 and misrepresenting that Scott
owned twenty percent of the company.
Amy also lost her interest in the company. Therefore, the jury could have
found that the Mundheims committed fraud against Amy for the four years she
labored under the belief that she actually owned forty percent of the company. We
conclude this evidence is legally and factually sufficient to establish the Mundheims’
common-law fraud against Amy and Scott. See Fulgham, 349 S.W.3d at 157;
Zorrilla, 469 S.W.3d at 153.
Fraudulent inducement is a distinct category of common-law fraud that shares
the same elements but involves a promise of future performance made with no
intention of performing at the time it was made. Id. Fraudulent inducement arises
only in the context of a contract. Anderson v. Durant, 550 S.W.3d 605, 614 (Tex.
2018). In a fraudulent-inducement claim, the “misrepresentation” occurs when the
defendant falsely promises to perform a future act while having no present intent to
perform it. Int’l Bus. Machines Corp. v. Lufkin Indus., LLC, 573 S.W.3d 224, 228
(Tex. 2019). The plaintiff's “reliance” on the false promise “induces” the plaintiff
to agree to a contract the plaintiff would not have agreed to if the defendant had not
made the false promise. Id.
Under this sub-issue, the Mundheims argue that, even if they did tell Scott he
would be an owner of the company, there is insufficient evidence to show the
Mundheims did not intend to perform on that promise. Further, the Mundheims
–8– argue the fact that Scott received bonuses during the years he purportedly had an
interest in the company disproves any alleged intent not to perform. On the contrary,
the evidence before the jury was entirely consistent with the Mundheims intent not
to perform on their promise that Scott would be an owner of the company. Before
opening the company, Paul represented that he did not have any money. Paul
accepted $50,000 in cash from Scott and promised Scott he would be a twenty-
percent owner in the company. From the very beginning, Paul did not believe non-
lawyers like Scott could have an actual ownership interest in the title company. The
jury could have reasoned that Paul took Scott’s $50,000 in cash, never reduced the
agreement with Scott to writing so there would be no written contract, and the
Mundheims paid Scott during the successful years the company operated to keep the
company running smoothly. The jury could have believed Paul took the deal with
Alamo and left Scott with nothing, and this established Paul never intended to make
Scott an owner of the company.
Many of the same reasons support a finding that the Mundheims fraudulently
induced Amy into an identical agreement in which Amy would own a forty-percent
interest in the company. In addition to delivering the $50,000 from Scott, Amy also
committed to full-time employment at the company in reliance on the Mundheims’
representation that she would be a forty-percent owner. As with Scott, Paul did not
believe Amy could actually have an ownership interest in the company.
Additionally, in Amy’s case, there was ultimately a written contract, the “settlement
–9– agreement and mutual release.” When asked why she decided to settle, Amy
testified as follows:
Paul and Paula Hester convinced me that Paul just wanted out of the business, and it was best to walk away, and they painted a story for me and -- and I believed them, and I fell back into a corner, thought I had no choice, and I settled.
Thus, the jury could have also reasoned that Amy was induced to enter into the
October 2017 agreement by Paul’s representations that he was quitting the title
business. There was no evidence Paul disclosed his deal with Alamo or his intent to
accept a bonus, salary, and fees in an ongoing position with Alamo and no evidence
Amy signed the agreement to release her interest in the company so Paul could
continue in the title business with Alamo free and clear.
The Mundheims argue there was insufficient evidence of reliance to support
Amy’s fraud claim because the agreement “expressly contemplates that [Amy] was
giving up any claims to ownership” in the company, and she knew the company’s
worth and “what she was giving up.” The jury could have reasonably concluded that
Amy signed the agreement in reliance on Paul’s representations that he was going
to quit the title business and walk away from the company in which Amy had a forty-
percent stake, but she would not have signed the agreement if she knew Paul was
accepting a $400,000 bonus, a salary and monthly fees in return for allowing the
company to be absorbed by Alamo.
Second, the Mundheims argue the terms of the agreement expressly state that
Amy was not relying on any statements or omissions by the Mundheims in entering –10– the agreement. The agreement does provide that the parties waive and assume the
risk of any claims for damages which they do not know or suspect to exist and which,
if known, would materially affect the decision to enter the agreement. However,
courts “must always examine the contract itself and the totality of the surrounding
circumstances when determining if a waiver-of-reliance provision is binding.” Int’l
Bus. Machines, 573 S.W.3d at 229 (quoting Forest Oil Corp. v. McAllen, 268
S.W.3d 51, 60 (Tex. 2008)). A clause that clearly and unequivocally expresses the
party’s intent to disclaim reliance on the specific misrepresentations at issue can
preclude a fraudulent-inducement claim. Id. at 229. This is not the case here. As
discussed, the specific misrepresentations about which Amy complains, that Paul
said he was walking away from the title business but was actually accepting a bonus
and a well-paid position with Alamo, were not referenced in the agreement and were
not disclosed to Amy. Thus, we reject the Mundheims’ argument that the
disclaimer-of-reliance provision in the agreement was binding to preclude Amy from
asserting she relied on the Mundheims’ misrepresentations when she entered the
agreement. See id.
We conclude the evidence is legally and factually sufficient to establish the
Mundheims fraudulently induced Scott and Amy into contracts for ownership of the
company and fraudulently induced Amy to enter into the settlement agreement.
Fulgham, 349 S.W.3d at 157; Int’l Bus. Machines, 573 S.W.3d at 228.
–11– Fraud by nondisclosure is simply a subcategory of fraud because, where a
party has a duty to disclose, the non-disclosure may be as misleading as a positive
misrepresentation of facts. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171,
181 (Tex. 1997). To establish fraud by nondisclosure, a party must prove (1) the
defendant failed to disclose facts to the plaintiff, (2) the defendant had a duty to
disclose those facts, (3) the facts were material, (4) the defendant knew the plaintiff
was ignorant of the facts and the plaintiff did not have an equal opportunity to
discover the facts, (5) the defendant was deliberately silent when it had a duty to
speak, (6) by failing to disclose the facts, the defendant intended to induce the
plaintiff to take some action or refrain from acting, (7) the plaintiff relied on the
defendant’s nondisclosure, and (8) the plaintiff was injured as a result of acting
without that knowledge. Blankinship v. Brown, 399 S.W.3d 303, 308 (Tex. App.—
Dallas 2013, pet. denied).
In the context of fraud by nondisclosure, a duty to disclose may arise when
the defendant: (1) discovered new information that made its earlier representation
untrue or misleading; (2) made a partial disclosure that created a false impression;
or (3) voluntarily disclosed some information, creating a duty to disclose the whole
truth. Bombardier Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d
213, 220 (Tex. 2019).
The jury heard evidence that Paul accepted $50,000 in cash from Scott and
promised Scott he would be a twenty-percent owner in the company. The jury could
–12– have reasonably believed this representation created a false impression that imposed
on the Mundheims the duty to disclose the whole truth: Scott could not actually be
an owner of the company; his twenty-percent share would only be paid as long as it
was expedient; and when Paul discovered Alamo was interested in taking over the
company, he went ahead with the deal without telling Scott or paying him anything
for his twenty-percent interest. See Bombardier, 572 S.W.3d at 220.
The Mundheims discovered Paul had an opportunity to profitably join Alamo
and permit the dissolution of the company, and the Mundheims only partially
disclosed to Amy Paul’s dissolution of the company as “walking away.” We
conclude these circumstances imposed on the Mundheims the duty to disclose the
whole truth to Amy. See id. We conclude the evidence is sufficient to support the
jury’s finding that the Mundheims defrauded Scott and Amy by nondisclosure.
Fulgham, 349 S.W.3d at 157; Blankinship, 399 S.W.3d at 308.
The Mundheims challenge the sufficiency of the evidence to support the jury’s
findings the Mundheims and the Mundheim firm had actual awareness of the falsity
of the representation or promise the jury found to be fraud. The Mundheims rely on
St. Paul Surplus Lines Ins. Co. v. Dal-Worth Tank Co., 974 S.W.2d 51, 53–54 (Tex.
1998) for the proposition that “[a]ctual awareness” does not mean merely that a
person knows what he is doing; rather, it means that a person knows that what he is
doing is false, deceptive, or unfair. In other words, a person must think to himself at
some point, “Yes, I know this is false, deceptive, or unfair to him, but I'm going to
–13– do it anyway.” Once again, we have already determined the jury could have found
that the Mundheims knew from the very beginning that they were misrepresenting
the entire situation concerning Amy and Scott’s involvement in the company. We
conclude the evidence is legally and factually sufficient to support the jury’s finding
that the Mundheims had actual awareness of the falsity of their representations to
Amy and Scott. See Fulgham, 349 S.W.3d at 157; St. Paul Surplus Lines, 974
S.W.2d at 53–54.
Fraud Damages
The Mundeims also attack the sufficiency of the evidence to support the jury’s
award of fraud damages to Scott and Amy. The jury has discretion to award damages
within the range of evidence presented at trial. SAS & Assocs., Inc. v. Home Mktg.
Servicing, Inc., 168 S.W.3d 296, 303 (Tex. App.—Dallas 2005). We are not
permitted to disregard the jury’s damages award on the basis that the jury’s reasoning
is unclear. Id. The jury awarded Scott $80,000, or twenty percent of the “bonus”
Paul received from Alamo, and the jury awarded Amy $160,000. Both of these
awards were in keeping with the twenty percent interest Scott had in the company
and Amy’s forty percent interest. The evidence is legally and factually sufficient to
support the jury’s award of damages for fraud. See Fulgham, 349 S.W.3d at 157;
SAS & Assocs., 168 S.W.3d at 303.
Under these circumstances, we conclude the evidence is legally and factually
sufficient to support the jury’s findings regarding the Mundheims’ fraud, including
–14– the Mundheims’ misrepresentations, Scott’s reliance on the Mundheims’
misrepresentations, causation, and Scott’s damages resulting from the Mundheims’
fraud. See Fulgham, 349 S.W.3d at 157; Zorrilla, 469 S.W.3d at 153.
Exemplary Damages
Regarding the jury’s award of exemplary damages to Scott and Amy, the
Mundheims challenge the sufficiency of the evidence to prove by clear and
convincing evidence the elements set forth in section 41.011 of the Texas Civil
Practice and Remedies Code.
Exemplary damages may be awarded only 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, malice, or gross negligence. TEX. CIV.
PRAC. & REM. CODE ANN. § 41.003. “Clear and convincing” means the measure or
degree of proof that will produce in the mind of the trier of fact a firm belief or
conviction as to the truth of the allegations sought to be established. Goodyear Tire
& Rubber Co. v. Rogers, 538 S.W.3d 637, 645 (Tex. App. 2017)
The Mundheims challenge the jury’s finding by clear and convincing
evidence that the harm to Scott and Amy resulted from the Mundheims’ fraud.
Relying on their previous arguments, the Mundheims again contest the sufficiency
of the evidence to show they made misrepresentations to Scott or Amy or intended
not to perform the “alleged agreement.” Our review of the record shows clear and
convincing evidence that the harm Scott and Amy suffered resulted from the
–15– Mundheims’ fraud, including what the jury was free to conclude was a “sale” of the
company to Alamo for $400,000.
We review an exemplary damage award under a factual sufficiency standard
of review. Hernandez v. Sovereign Cherokee Nation Tejas, 343 S.W.3d 162, 168
(Tex. App.—Dallas 2011, pet. denied). We are not free to reweigh the evidence and
set aside a jury verdict merely because we feel that a different result is more
reasonable. Id. Because the award of exemplary damages rests in the jury’s
discretion, we will not set aside the damages unless after reviewing the entire record,
we determine the award is so contrary to the overwhelming weight and
preponderance of the evidence as to be clearly wrong and manifestly unjust. Id.
When determining whether the exemplary damage award is excessive, we
consider the following statutory factors: (1) the nature of the wrong; (2) the character
of the conduct involved; (3) the degree of the Mundheims’ culpability; (4) the
situation and sensibilities of the parties concerned; (5) the extent to which such
conduct offends a public sense of justice and propriety; and (6) the Mundheims’ net
worth. See TEX.CIV. PRAC. & REM. CODE ANN. § 41.011(a); McCullough v.
Scarbrough, Medlin & Assocs., Inc., 435 S.W.3d 871, 913 (Tex. App.—Dallas 2014,
pet. denied). The jury charge listed the 41.011 factors and instructed the jury to
consider these factors in determining the amount of exemplary damages to assess
for both Scott and Amy.
–16– Here, the record supports the jury’s findings that the Mundheims perpetrated
a fraud on Scott and Amy as discussed above, and the Mundheims were actually
aware of the fraud. Paul accepted $50,000 in cash from Scott to start up a business
with Scott and Amy. After four years, Paul accepted a $400,000 “bonus” and went
to work for Alamo earning $250,000 in fees and approximately $3000 per month in
commissions. Not only did Scott and Amy receive nothing from Paul’s deal with
Alamo, Scott lost his twenty-percent income stream when the company ceased to
exist as an entity in which he claimed an interest. Amy lost her forty-percent interest
when the company ceased to exist. On this record, we conclude the clear and
convincing evidence was legally and factually sufficient to support the jury’s award
of exemplary damages to Scott and Amy.
As to the jury’s award of exemplary damages, the Mundheims further argue
(1) the questions regarding fraud defined fraud as both actual and constructive fraud
and therefore cannot support an award of exemplary damages and (2) the questions
regarding the Mundheims actual awareness of the falsity of their representations
omitted the requirement of “clear and convincing evidence.” However, the
Mundheims did not object to these alleged defects at trial. In fact, the Mundheims
submitted a proposed jury charge that was identical with respect to the questions
about which the Mundheims now complain. The Mundheims do not complain that
the relevant issues were not submitted at all; they argue the issues were submitted
defectively. A defendant must preserve error by objecting when an independent
–17– theory of recovery is submitted defectively. See TEX. R. CIV. P. 279; United
Scaffolding, Inc. v. Levine, 537 S.W.3d 463, 481 (Tex. 2017). This includes when
an element of that theory of recovery is omitted. Levine, 537 S.W.3d at 481. Thus,
the Mundehims’ arguments about the defective nature of questions 6 and 8 present
nothing for our review. See id. Having found the evidence sufficient to support the
complained-of jury findings, we conclude the trial court did not err in denying the
Mundheims’ motion for judgment notwithstanding the verdict and motion for new
trial. We overrule the Mundheims’ issues complaining of the jury’s fraud findings.
Breach of Contract
In their next issue, the Mundheims argue Amy’s breach of contract recovery
should be set aside. Specifically, the Mundheims challenge the legal and factual
sufficiency of the evidence to support the jury’s findings that (1) they failed to
comply with the agreement by failing to pay Amy all the monies due under the
agreement and (2) the Mundheims owed Amy $151,000 under the agreement. The
Mundheims argue the evidence established they were excused from performing
under the agreement due to Amy’s prior breach in violating the confidentiality
provision by telling Scott about the agreement.
Amy responds that (1) Paul admitted not paying all monies owed pursuant to
the agreement; (2) Paul stopped paying the money he owed under the agreement
because it was his “belief” that Amy had disclosed to Scott information about the
agreement in violation of the confidentiality provision; (3) Paul admitted he had only
–18– his “belief” to rely on and did not have “any facts or evidence or anything like that”
to show Amy violated the confidentiality provision; and (4) the Mundheims’ “claims
of first-breach by Amy were never pled and therefore could not properly form the
basis for any judgment.”
The record is clear that the Mundheims failed to pay Amy the final payment
of $151,000 due under the agreement. Paul testified it was his “belief” that Amy
had disclosed to Scott information about the agreement. Paul relied only on his
“belief” and had no evidence Amy violated the confidentiality agreement. Marla
testified, “I believe that [Amy] told Scott about [the agreement] right away.” Marla
identified no evidence to support her belief. Scott testified he did not know about
the agreement until it was “put . . . into the case at some point.” Amy testified, “Scott
did not see the agreement.” On this record, we conclude the evidence was legally
and factually sufficient to support the jury’s findings that the Mundheims failed to
pay Amy $151,000 due under the agreement, and the Mundheims were not excused
from performing under the agreement due to any violation of the confidentiality
provision. See Fulgham, 349 S.W.3d at 157.
In an alternative argument, the Mundheims complain that the jury’s award of
$151,000 as Amy’s damages from the Mundheims’ breach of the agreement was
excessive. The entirety of their argument is that the evidence established they “paid
$223,112.00 of the Settlement Agreement’s $301,000.00 owed, in payments of
$100,000, $50,000, and payroll extending through the end of December 2017 of
–19– $73,112 per the terms of the agreement.” The agreement does provide for “regular
payroll” payments from October through December 2017 totaling $73,112.
However, a separate paragraph of the agreement entitled “Payment” provided for
“lump sum or installment payments” amounting to “a grand total of ($301,000.00).”
Thus, the express terms of the agreement show the $73,112 in regular payroll
payments were separate from the $301,000. Because the jury’s award of $151,000,
coupled with the $150,000 the Mundheims paid Amy in lump sum payments merely
resulted in the payment of the $301,000 contemplated by the settlement agreement,
we conclude the award was not excessive. We overrule the Mundheims’ issue
regarding breach of contract.
Election of Remedies for Amy
In their next issue, the Mundheims argue the trial court erred in failing to
require Amy to elect her remedy. A party is entitled to sue and seek damages on
alternative theories but is not entitled to recover on both theories; to do so is
considered equivalent to a “double recovery.” Waite Hill Servs., Inc. v. World Class
Metal Works, Inc., 959 S.W.2d 182, 184 (Tex. 1998).
In this context, a double recovery exists when a plaintiff obtains more than
one recovery for the same injury. Waite Hill, 959 S.W.2d at 184; Stewart Title Guar.
Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991). The prohibition against double
recovery is a corollary of the rule that a party is entitled to but one satisfaction for
the injuries sustained by him. See Stewart Title, 822 S.W.2d at 7–8 (noting that
–20– courts have applied the one satisfaction rule when defendants commit the same act
as well as when defendants commit technically differing acts that result in a single
injury). An election will normally be required between contract damages and fraud
damages to prevent a double recovery. Foley v. Parlier, 68 S.W.3d 870, 883 (Tex.
App.—Fort Worth 2002, no pet.).
Although the causes of action Amy asserted, breach of contract and fraud,
were separate, the damages for both causes of action were the same: Amy’s
ownership interest in the company. In this situation, the Mundheims argue, Amy
should be required to elect her remedy to recover either for breach of contract or
fraud. We agree. Amy was entitled to sue and seek damages for both breach of
contract and fraud, but she is not entitled to recover on both theories. Waite Hill,
959 S.W.2d at 184.
Further, to the extent Amy seeks recovery for fraudulent inducement
associated with the agreement and also seeks recovery for breach of the agreement,
these remedies are inconsistent. A plaintiff who has two inconsistent remedies must
elect between them and pursue only one of them. Foley, 68 S.W.3d at 882.
Remedies are inconsistent when one of the remedies results from affirming the
transaction and the other results from disaffirming the transaction. Id. For example,
in a fraud case, the plaintiff can either claim rescission for fraud and get his property
back or he can sue for damages and affirm the transaction. Id. In Dallas Farm
–21– Machinery Co. v. Reaves, specifically regarding remedies for fraudulent inducement
and breach of contract damages, the supreme court stated:
[I]t is well settled that one who is induced by fraud to enter into a contract has his choice of remedies. He may stand to the bargain and recover damages for the fraud, or he may rescind the contract, and return the thing bought and receive back what he paid.
158 Tex. 1, 307 S.W.2d 233, 238–39 (1957); see also Fortune Prod. Co. v. Conoco,
Inc., 52 S.W.3d 671, 677 (Tex. 2000) (recognizing quote from Reaves as correct
statement of long-standing general proposition of law).
Thus, in electing a remedy, Amy has two choices. She can elect to recover
for breach of contract and recover the amount owed under the contract, or she can
elect to recover for fraud and return the $150,000 the Mundheims paid to her
pursuant to the contract. See Foley, 68 S.W.3d at 883.
We note that the agreement expressly provided a waiver of claims that
included “any claims for any alleged fraud.” Thus, not only is Amy required to elect
her remedies to prevent a double recovery and to elect between inconsistent
remedies, if she elects to recover for breach of contract, the express terms of the
agreement bar recovery of any damages for fraud. See id. We sustain the
Mundheim’s issue regarding election of remedies.
Attorney’s Fees
In their next issue, the Mundheims argue the trial court erred in awarding Amy
attorney’s fees. First, the Mundheims point out that the settlement agreement
provides that each party will bear its own “attorney’s fees incurred in connection –22– with any future Litigation or Attorney review of this document.” The Civil Practice
and Remedies Code provides that “[a] person may recover reasonable attorney's fees
from an individual or corporation, in addition to the amount of a valid claim and
costs, if the claim is for . . .an oral or written contract.” TEX. CIV. PRAC & REM.
CODE ANN. § 38.001; Peterson Grp., Inc. v. PLTQ Lotus Grp., L.P., 417 S.W.3d 46,
60 (Tex. App.—Houston [1st Dist.] 2013, pet. denied). To obtain an award of
attorney's fees under Section 38.001, “a party must (1) prevail on a cause of action
for which attorneys fees are recoverable, and (2) recover damages.” Green Int’l,
Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). However, “[p]arties are free to
contract for a fee-recovery standard either looser or stricter than Chapter 38’s.”
Intercontinental Grp. P’ship v. KB Home Lone Star L.P., 295 S.W.3d 650, 653 (Tex.
2009). When parties include such a provision in a contract, the language of the
contract controls, rather than the language of the statute. Id. at 654–56. We agree
the settlement agreement controls and precludes Amy’s recovery of attorney’s fees
if she elects her remedy for breach of contract. See id. Second, the Mundheims
assert attorney’s fees are not recoverable for fraud. Tony Gullo Motors I, L.P. v.
Chapa, 212 S.W.3d 299, 304 (Tex. 2006). Again, we agree. See id. Thus, Amy is
not entitled to recover attorney’s fees if she elects her remedy for fraud; because
Scott’s claim is for fraud, he is also not entitled to attorney’s fees. See id. We sustain
the Mundheims’ issue regarding attorney’s fees.
–23– Accordingly, we (i) reverse the trial court’s award of attorney’s fees and
render judgment that Amy and Scott take nothing on their claims for attorney’s fees
and (ii) remand for Amy to elect her remedy in accordance with this opinion. In all
other respects, we affirm the trial court’s judgment.
/Craig Smith/ CRAIG SMITH JUSTICE
191490F.P05
–24– S Court of Appeals Fifth District of Texas at Dallas JUDGMENT
PAUL MUNDHEIM, MARLA On Appeal from the County Court at MUNDHEIM, AND THE Law No. 4, Dallas County, Texas MUNDHEIM FIRM, PLLC, Trial Court Cause No. CC-18-01169- Appellants D. Opinion delivered by Justice Smith. No. 05-19-01490-CV V. Justices Molberg and Goldstein participating. SCOTT LEPP AND AMY TORRES LEPP, Appellees
In accordance with this Court’s opinion of this date, the judgment of the trial court is AFFIRMED in part and REVERSED in part. We REVERSE that portion of the trial court's judgment awarding Scott Lepp and Amy Torres Lepp attorney's fees and RENDER judgment that Scott Lepp and Amy Torres Lepp take nothing on their claims for attorney’s fees. We REMAND this cause to the trial court for Amy Torres Lepp to elect her remedy in accordance with this Court’s opinion. In all other respects, the trial court's judgment is AFFIRMED.
It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 13th day of May 2021.
–25–