Ward v. Dallas Texas National Title Co.

735 S.W.2d 919, 1987 Tex. App. LEXIS 8332

• Court: Court of Appeals of Texas
• Decided: July 28, 1987
• Docket: 05-86-00044-CV
• Status: Published

Opinions

HECHT, Justice.

This is another in the host of lawsuits spawned by the notoriously ill-fortuned condominium development along Interstate 30 in the Lake Ray Hubbard area. The trial court rendered summary judgment in favor of several of the defendants, and plaintiffs appealed.³ The subsistence of material fact issues requires that the summary judgment be reversed and the case remanded for further proceedings.

J.A.D.A., a partnership owned 60% by James E. Ward and Aaron L. Ward, and 40% by Danny Ray Todd and Alan Wilson, contracted to buy a 4.896-acre tract for just over $245,000. Appellants⁴ allege that as the contractual closing date for purchasing the property neared, Todd falsely represented that no buyers or lenders could be found, and that it would be more prudent to forfeit the earnest money they had already paid than to deposit additional earnest money to extend the closing and run the risk of forfeiting it too. The Wards say they followed Todd’s advice.

The Wards allege that unbeknownst to them Todd and Wilson, purporting to act for J.A.D.A., closed the purchase of the property and resold it at a profit. Appellants also allege that as part of a scheme to defraud Empire Savings and Loan Association and the public, Todd and Wilson conspired with appellees and others to “flip” the property through a series of conveyances to sell it ultimately for “a fictitious and exaggerated value of more than $1.7 million.” In fact, immediately after closing on the purchase of the property J.A.D.A. sold it to Mike Faldmo for about $535,000, who sold it to Clifford Ray Sinclair, who sold it half to ADWN, Inc., and half to JMSW, Inc., for a total price of $1,706,000, all in a single day. Thus, the same property that J.A.D.A. purchased for $245,000 and sold for $535,000 sold later the same day for more than $1.7 million. Sinclair received two promissory notes secured by deeds of trust to Empire Savings. The gist of appellants’ numerous claims⁵ is simply that appellees⁶ and others⁷ conspired to deprive them of their share of the property’s value. An actionable civil conspiracy is a combination by two or more persons to accomplish an unlawful purpose by unlawful means. The essential elements are: 1) two or more persons; 2) an object to be accomplished; 3) a meeting of minds on the object or course of action; 4) one or more unlawful overt acts; and 5) damages as the proximate result. Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex.1983). To obtain summary judgment on a conspiracy claim a defendant must disprove at least one element of the claim as a matter of law. Futerfas v. Park Towers, 707 S.W.2d 149, 156 (Tex.App. — Dallas 1986, writ ref’d n.r. e.).

Appellees have not met their burden. The summary judgment record raises a question of fact as to whether a conspiracy existed and whether each appellee was a member. Appellees’ self-serving denials are not readily controvertible and thus not proper summary judgment evidence. See American Petrofina v. Crump Business Forms, 597 S.W.2d 467, 471 (Tex.App.— Dallas 1980, writ ref. n.r.e.). Furthermore, Faldmo and Sinclair have asserted their constitutional privilege against self-incrimination and refused to answer questions in depositions or interrogatories. Their silence also raises a material question of fact as to the existence and constituency of the alleged conspiracy. See Baxter v. Palmigiano, 425 U.S. 308, 96 S.Ct. 1551, 47 L.Ed.2d 810 (1976); see also TEX.R.EVID. 513.

As for the fifth element of a conspiracy, appellants claim as damages “the difference between the price paid to LINJAC and the sale price to developers of the property on 22 April 1983” and “the difference between the price to LINJAC and the price obtained from FALDMO, Trustee.” Both these claims are for part of the profits of the allegedly fraudulent scheme. A person is not entitled to recover from his partner any share of the profits of the partner’s fraudulent scheme when to do so would in effect allow the person to benefit from the fraud. See generally A. Bromberg, CRANE & BROMBERG ON PARTNERSHIP § 21, at 98-103 (1968). Appellants are therefore not entitled to recover any part of the profits of what they themselves claim was a fraudulent scheme.⁸

However, appellants also claim damages for loss of the value of the property and the opportunity to develop and use it.⁹ By this claim appellants do not seek to benefit from the alleged fraud but only to be compensated for their loss.¹⁰ Although appellants can have no moiety in any fraud-forged fund, they may have the right to recover damages for any real loss of value of the property. The summary judgment record raises a fact question on this issue of damages.

Appellants also seek a declaration that J.A.D.A.’s deed to Faldmo is void. The summary judgment record raises a material fact question as to whether Wilson defrauded appellants, and whether Faldmo participated in the fraud.

Given the nature of the appellants’ claims, appellees’ reliance upon testimony of interested witnesses not readily controvertible, and two alleged conspirators’ assertion of their Fifth Amendment rights, we conclude that material fact issues exist precluding summary judgment. We therefore reverse the summary judgment and remand¹¹ the case for further proceedings not inconsistent with this opinion.¹²

WHITHAM, J., dissents.

3 . The trial court also rendered default judgment against several other defendants, who are not parties to this appeal.

4 . Appellants, plaintiffs in the trial court, are the Wards and J.A.D.A.

5 . In 39 legal pages and 110 numbered paragraphs, the Wards' seventh amended petition alleges fraud, breach of fiduciary duty and conspiracy, and seeks money damages, declaratory relief, and an accounting and dissolution of the partnership.

6 . Appellees are Dallas Texas National Title Company, Clifford Ray Sinclair, Mike Faldmo, Dallas Title Company — Rowlett, Jane Nix, Lola Greene and Robert C. Lea.

7 . Non-appellee defendants at this stage include Danny Ray Todd, Alan D. Wilson, ADWN, Inc., JMSW, Inc., Elizabeth Susan "Betty" Salamone and Mike Crosby.

8 . Sophistically, the dissent states: "Surely, we have not reached the point where a person may recover damages for being denied the right to defraud." Needless to say, we agree with the dissent that we have not reached that point. Equally surely, however, we have not reached the point where valid claims are denied simply because invalid claims are joined in the same pleadings.

9 . The dissent concludes as a matter of law that the Wards have not suffered legally recoverable damages because they “must rely upon their own participation in an illegal transaction in order to establish their case.” Were the dissent’s premise correct, we would agree with the conclusion. However, the Wards need not show that they were denied participation in an illegal scheme in order to recover damages. They may recover damages, as pleaded, by proving that Todd and Wilson sold or conspired to sell the property without giving the Wards’ their share of any legal profit.

10 . The dissent concludes "that the Wards complain of nothing other than that a conspiracy by the Interstate 30 parties denied the Wards of an opportunity to participate in a scheme to defraud Empire Savings and Loan of the amount of $1,706,158 by inflating the value of the Wards’ land.” Although as we have noted the Wards do make this invalid claim, it is not their only claim. The dissent appears to view "the Wards’ short-hand rendition” of their complaints in their brief as superseding the pleadings. The dissent’s disregard of appellants’ pleadings and strait reading of one-sentence summaries in their brief belies its acknowledgment that we must indulge all reasonable inferences in favor of the non-movant Wards.

11 . Despite appellants’ insistence that the trial court’s judgment be reversed, the dissent assumes that because the Wards pray in their brief for a remand "with instructions” but not for a remand for new trial, "by the time the appellant [sic] got to the end of the appellant’s brief, the appellant was convinced that the trial court correctly disposed of the case and agreed that we should affirm....” The dissent cites no authority for this rather remarkable assumption which is contrary to the spirit if not the letter of our rules. Tex.R.App.P. 83; see Inpetco, Inc. v. Texas American Bank, 729 S.W.2d 300 (Tex.1987). Appellants' general prayer is sufficient for a remand for further proceedings. See Sherrod v. Bailey, 580 S.W.2d 24, 29 (Tex.Civ.App. — Houston [1st Dist.] 1979, writ refd n.r.e.).

12 .We sustain appellants’ second, fourth, fifth and sixth points of error. In their third point of error appellants complain that the trial court should not have considered affidavits offered by appellees in support of their motions. In their first point of error appellants’ complain that the trial court erroneously refused to hear certain discovery matters prior to hearing the motions for summary judgment. The conduct of discovery is within the sound discretion of the trial court. Because of our holding we need not reach appellants’ first and third points of error.