A.M. Barbar Corporation D/B/A A+ Transmission Specialists and Stephen D. Peoples v. Walter Hellriegel ( 2006 )

In The Court of Appeals

Ninth District of Texas at Beaumont

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NO. 09-05-077 CV ____________________

A.M. BARBAR CORPORATION D/B/A

A+ TRANSMISSION SPECIALISTS AND STEPHEN D. PEOPLES, Appellants

V.

WALTER HELLRIEGEL, Appellee

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On Appeal from the 221st District Court Montgomery County, Texas Trial Cause No. 03-10-07612 CV

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MEMORANDUM OPINION

On Motion for Rehearing, our opinion of June 29, 2006, is withdrawn, and the following is substituted in its place.

Walter Hellriegel took his vehicle to A.M. Barbar Corporation, doing business as A+ Transmission Specialists, to have his transmission inspected and to obtain an estimate on repairs. Stephen D. Peoples, president of Barbar, claims Hellriegel authorized the repairs, and the repairs were made. Hellriegel did not pay the bill. ⁽¹⁾ Barbar and Peoples refused to release the car. Maintaining he never authorized any repairs, Hellriegel sued Barbar Corporation and Peoples individually for DTPA violations and fraud, along with other causes of action. Hellriegel produced evidence of prior instances demonstrating a fraudulent scheme involving other customers as well. A jury awarded $5,000 for actual damages on the DTPA and fraud causes of action, and $300,000 in punitive damages against each defendant. The trial court signed a judgment in December 2004. Peoples filed a motion for new trial which was overruled by the trial court. In 2005, defendants filed a notice of appeal, and the parties subsequently filed their briefs with this Court. In 2006, the trial court signed a "Final Judgment Nunc Pro Tunc." The parties filed additional briefs.

Appellants raise five issues. In their initial brief, prior to the "final judgment nunc pro tunc," Barbar and Peoples contended the 2004 judgment was void because it was not sufficiently definite and certain. Generally, if the court entering a judgment has jurisdiction of the parties and the subject matter and does not act outside its capacity as a court, a judgment is not void. Reiss v. Reiss, 118 S.W.3d 439, 443 (Tex. 2003) (citing Mapco, Inc. v. Forrest, 795 S.W.2d 700, 703 (Tex. 1990)). Errors other than lack of jurisdiction merely render the judgment voidable so that it may be corrected by ordinary appellate process or other proper proceedings. Reiss, 118 S.W.3d at 443. Here, the trial court had jurisdiction over the parties and the subject matter and was acting within its authority as a court.

We agree with appellants that the 2004 judgment was not definite or certain, and, as pointed out by appellee, there was also a conflict between the damage amounts mentioned in the judgment. A judgment rendered after a conventional trial on the merits is presumed final. North East Indep. Sch. Dist. v. Aldridge, 400 S.W.2d 893, 897-98 (Tex. 1966). However, a judgment must be sufficient to define and protect the parties' rights, or it should provide a definite means of ascertaining those rights so that the judgment can be executed without ascertainment of facts not stated in the judgment. Stewart v. USA Custom Paint & Body Shop, Inc., 870 S.W.2d 18, 19-20 (Tex. 1994) (Uncertain, indefinite "order" of dismissal was not judgment); see Olympia Marble & Granite v. Mayes, 17 S.W.3d 437, 440 (Tex. App.--Houston [1st Dist.] 2000, no pet.).   

The original judgment states in part as follows:

Based upon the jury's verdict, it is ADJUDGED that:

1. On the claims of FRAUD and TEXAS DECEPTIVE TRADE PRACTICES ACT violations, the jury finds in favor of Plaintiff, WALTER HELLRIEGEL, and against Defendant, A.M. BARBAR CORPORATION . . . , in the amount of $375,000.00 (Three Hundred Twenty Five Thousand and No/100 Dollars).

Similar language was used in regard to Peoples. The purported "judgment" merely "adjudges" that the jury made certain findings; there is no order that Hellriegel "have and recover" anything against the defendants, and different amounts ⁽²⁾ are stated for the same jury award. The "judgment" signed in 2004 was uncertain, indefinite, and not final.

In their 2006 brief, appellants argue the trial court lacked jurisdiction to enter the 2006 "judgment nunc pro tunc" because the modifications made to the judgment were substantive. ⁽³⁾ If we had questioned, before the trial court acted, whether the 2004 post-trial judgment was final, we may have abated the appeal to permit the trial court to enter a clearly final judgment. The 2006 judgment serves that purpose. The 2006 judgment modifies the 2004 interlocutory judgment and, merging with that judgment, disposes of the causes of action and parties in the suit and constitutes the final judgment. ⁽⁴⁾ We overrule issue one.

In issue two, appellants argue the jury compensated Hellriegel twice by assessing damages for the same injury against Barbar and Peoples; appellants assert the one-satisfaction rule was violated. See Waite Hill Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d 182, 184 (Tex. 1998) (A party is not entitled to more than one recovery for the same injury.). Appellants argue this suit is about a single injury, and the plaintiff must elect between the causes of action and the damages awarded. Appellants did not assert the complaint below and cannot raise these issues for the first time on appeal. See Tex. R. App. P. 33.1(a); Andrews v. Sullivan, 76 S.W.3d 702, 708 (Tex. App.--Corpus Christi 2002, no pet.) (Appellants waived complaints regarding award of attorney's fees, punitive damages, and violation of the one-satisfaction rule, because no objection was made and ruled on by the trial court as required to preserve error.); Johns v. Ram-Forwarding, Inc., 29 S.W.3d 635, 638 (Tex. App.--Houston [1st Dist.] 2000, no pet.). Issue two is overruled.

In issue three, Barbar and Peoples argue the evidence is legally insufficient to support

the jury's findings on actual damages. To preserve a legal sufficiency challenge, a party must do one of the following: (1) present a motion for instructed verdict or judgment notwithstanding the verdict; (2) object to the submission of a jury question; (3) present a motion to disregard the jury's answer to a vital fact issue; or (4) file a motion for new trial. Cecil v. Smith, 804 S.W.2d 509, 510-11 (Tex. 1991). Appellants did not challenge the legal sufficiency of the evidence supporting the actual damages award in a motion for new trial or elsewhere before the trial court. The issue is not preserved. Issue three is overruled.

In issue four, appellants Barbar and Peoples contend the evidence is insufficient to support the jury's answer to question two. Predicated on an alter ego instruction, question two asks whether Peoples, individually, is responsible for Barbar Corporation's conduct. The jury answered yes. Texas law allows a person to incorporate a business and normally shield himself from personal liability for the corporation's contractual obligations. Willis v. Donnelly, 49 Tex. Sup. Ct. J. 661, 2006 Tex. LEXIS 505, at *19 (Tex. June 2, 2006). "Under current law, by statute, a shareholder 'may not be held liable to the corporation or its obligees with respect to . . . any contractual obligation of the corporation . . . on the basis that the holder . . . is or was the alter ego of the corporation or on the basis of actual or constructive fraud, a sham to perpetrate a fraud, or other similar theory . . . .'" Id. at *21 (quoting Tex. Bus. Orgs. Code Ann. § 21.223(a) (Vernon Supp. 2006)). "There is a statutory exception to this rule where the shareholder 'caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the' shareholder." Willis, 2006 Tex. LEXIS 505, at *21 (quoting Tex. Bus. Orgs. Code Ann. § 21.223(b) (Vernon Supp. 2006).

The jury question and instruction do not precisely track the "contractual obligation" alter ego statute, though they do employ the wording of a Texas Pattern Jury Charge on alter ego. See Comm. on Pattern Jury Charges, State Bar of Tex., Pattern Jury Charges-Business, Consumer, Insurance, Employment PJC 108.1, 108.2 (2003). Appellants did not object to the jury question two and only challenge the sufficiency of the evidence to support the jury's alter ego finding. "[I]t is the court's charge, not some other unidentified law, that measures the sufficiency of the evidence when the opposing party fails to object to the charge." Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000).

In a no-evidence or legal sufficiency review, ⁽⁵⁾ we credit evidence that supports the verdict if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). The no-evidence challenge fails if more than a scintilla of evidence supports the challenged finding. Id. at 810. However, evidence that is "so weak as to do no more than create a mere surmise or suspicion[,]" is not more than a scintilla. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004) (quoting Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)). The trier of fact may draw reasonable and logical inferences from the evidence. Hammerly Oakes, Inc. v. Edwards, 958 S.W.2d 387, 392 (Tex.1997). It is within the province of the jury to draw one reasonable inference from the evidence although another inference could have been made. See City of Keller, 168 S.W.3d at 821. "Jurors are the sole judges of the credibility of the witnesses and the weight to give their testimony." Id. at 819.

Appellants argue there was "no evidence [Peoples] used A+ Transmission for the purpose of perpetrating a fraud [nor] that he did actually perpetrate a fraud on Hellr[ie]gel for [Peoples'] direct personal benefit." The record includes evidence that Peoples committed fraud against Hellriegel, the jury found both Peoples and Barbar Corporation committed fraud, and Peoples and Barbar have not challenged those findings on appeal. The challenge appears to be to the alter ego finding, and specifically to whether Peoples used the corporation for the purpose of committing the fraudulent scheme, and to whether he committed the fraud for his own direct personal benefit.

In testifying about the corporation's status, Peoples stated Barbar was not closed down, and the corporate headquarters was a post office box. He acknowledged he is the corporation. Peoples appears to argue he could not personally benefit from any alleged fraud, because Hellriegel never paid for the repairs. At trial, however, Peoples testified he was keeping Hellriegel's vehicle at Peoples' house for safekeeping; Peoples indicated he was allowing the corporation to store it there. From Peoples' testimony and the evidence of similar conduct directed at other customers, the jury reasonably could have inferred Peoples used the corporate form to perpetrate the fraud and that Peoples was going to personally benefit from the fraud by either getting the money or keeping the car. The evidence is legally sufficient to support the jury's answer to question two. We overrule issue four.

In issue five, appellants contend the exemplary damages exceed statutory limits and are constitutionally excessive. ⁽⁶⁾ Compensatory damages redress the loss the plaintiff has suffered by the defendant's wrongful conduct, while exemplary damages serve the broader purposes of deterrence and retribution. State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408, 416, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003)(citing Cooper Indus., Inc. v. Leatherman Tool Group, Inc., 532 U.S. 424, 432, 121 S. Ct. 1678, 149 L. Ed. 2d 674 (2001)). The jury awarded $5,000 in actual or compensatory damages, and assessed $300,000 in exemplary damages against each defendant. Under Tex. Civ. Prac. & Rem. Code Ann. § 41.008(b) (Vernon Supp. 2006), the statutory cap on exemplary damages in this case is $200,000. ⁽⁷⁾ The exemplary damage awards exceed this cap.

Furthermore, an exemplary damage award may violate a litigant's substantive due process right to protection from grossly excessive damages. BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 575, 116 S. Ct. 1589, 134 L. Ed. 2d 809 (1996); see Baribeau v. Gustafson, 107 S.W.3d 52, 63 (Tex. App.--San Antonio 2003, pet. denied). When reviewing an exemplary damage award under the due process clause of the Fourteenth Amendment, a court considers three factors: (1) the degree of reprehensibility of the defendant's misconduct; (2) the disparity between the actual or potential harm suffered by the plaintiff and the punitive damages awarded; and (3) the difference between the punitive damages awarded and the civil penalties authorized or imposed in comparable cases. Campbell, 538 U.S. at 418 (citing Gore, 517 U.S. at 575).

In evaluating the reprehensibility of the defendants' conduct, the reviewing court considers the following factors:

(a) Was the harm physical or economic?

(b) Did the tortious conduct demonstrate a reckless disregard of the health or safety

of others?

(c) Did the target of the conduct have financial vulnerability?

(d) Did the conduct involve repeated actions or was it an isolated incident?

(e) Was the harm the result of intentional malice, trickery, deceit, or mere accident?

See Campbell, 538 U.S. at 419. Here, the harm was economic. Repairs were made that Hellriegel did not authorize. Hellriegel was deprived of his vehicle and paid for insurance on a car to which he no longer had access. Defendants' conduct did not involve health or safety issues. The record contains evidence the defendants' conduct in making unauthorized repairs of customers' vehicles was repeated, and the conduct was not accidental or simply a breach of contract, but involved fraud. The evidence of deceit involving a fraudulent scheme warrants imposition of exemplary damages.

A lesser sum would satisfy the objective of exemplary damages without violating due process. We consider the disparity between the exemplary and actual damages awards. The ratio of $300,000 (punitives) to $5,000 (actuals) is 60-to-1. Considering also Peoples' alter ego liability for the exemplary damages assessed against the corporation, the damages are excessive. Although the Supreme Court has not set out a bright-line ratio, the Court has found that single-digit multipliers are more likely to satisfy due process concerns. Campbell, 538 U.S. at 425. The Court cited with approval two earlier opinions that employed a 4-to-1 ratio; one case concluded that an award of more than four times the amount of compensatory damages might be close to the line of constitutional impropriety. Id. (citing Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 23-24, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991), and Gore, 517 U.S. at 581)). Here, the ratio far exceeds the single-digit ratio suggested by the Supreme Court as satisfying due process. See Campbell, 538 U.S. at 425.

Courts must ensure the measure of punishment is reasonable and proportionate to the amount of harm to the plaintiff. Id. at 426. The difference between the punitive damages awarded by the jury here and civil penalties authorized or imposed for similar conduct is significant. See, e.g., Tex. Bus. & Com. Code Ann. § 17.50(b)(1) (Vernon Supp. 2005). The punitive damage awards violate due process.  

Barbar Corporation did not file a motion for new trial and did not raise the excessive damages claim below, though it raises the issue on appeal. The claim against Barbar Corporation is for the same injury and conduct as that for which the jury found Peoples individually liable. In answering question two, the jury found Peoples responsible for Barbar's conduct and punished him. Peoples has preserved the excessive punishment claim.

On Motion for Rehearing, Hellriegel argues this Court cannot reverse and remand the $300,000 award against Barbar, because Barbar did not preserve error. See U.S. Fire Ins. Co. v. Carter, 473 S.W.2d 2 (Tex. 1971). The effect of the jury's finding to question two is to impose liability on Peoples for the award against Barbar. The jury found Peoples was responsible for Barbar's conduct, and the judgment is based on the jury's verdict. The "excessiveness" complaint for the exemplary damage award was preserved by Peoples for appellate review, and the award assessed against Barbar is necessarily reviewed as part of his challenge. ⁽⁸⁾ Otherwise, we would be ignoring a possible basis for the punitive damage award in the judgment entered against Peoples despite his preservation of the issue for review. The jury in effect found he is the corporation. Given the jury's answer to question two, we could not affirm the award against the corporation without implicitly rejecting Peoples' excessiveness challenge.   

The amount of the exemplary damage award is so contrary to statutory provisions and federal constitutional standards that the verdict is clearly wrong and unjust. See generally Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406 (Tex. 1998). We sustain issue five. The judgment must be reversed and the cause remanded to the trial court for a new trial unless a remittitur will cure the reversible error. See Tex. R. App. P. 43.3(b), 46.

In his motion for rehearing, Hellriegel conditionally ⁽⁹⁾ tendered "a voluntary remittitur of $285,000 of the exemplary damage award against Peoples and/or $285,000 of the exemplary damage award against Barbar." We determine this voluntary remittitur cures the only reversible error preserved for appellate review. The voluntary remittitur ⁽¹⁰⁾ of $570,000 in the award of exemplary damages is accepted. See Tex. R. App. 46.5. We reform the trial court's judgment to award $15,000 in exemplary damages against Peoples and $15,000 against A.M. Barbar Corporation. We affirm the judgment as reformed.

AFFIRMED AS REFORMED.

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DAVID GAULTNEY

Justice

Submitted on March 23, 2006

Opinion Delivered August 31, 2006

Before McKeithen, C.J., Gaultney and Horton, JJ.

1.

The bill was $2,641.18 of which Hellriegel offered to pay $1,500. Hellriegel said Peoples refused the $1,500 amount.

2.

The judgment first states "$375,000" and then "Three Hundred Twenty Five Thousand[.]"

3.

Were this a judgment nunc pro tunc modifying a final judgment, Tex. R. Civ. P. 306a(6), 316, and 329b(h), along with Tex. R. App. 4.3(b), would apply.

4. Appellants filed a notice of appeal after the 2004 interlocutory judgment, but before the judgment was made final in 2006. Pursuant to Tex. R. Civ. P. 27.1(a), appellants' March 1, 2005, notice of appeal constitutes a premature notice that is deemed timely filed. The parties submitted briefs to this Court before and after the 2006 final judgment. We have considered all briefs filed.

5. We interpret issue four as a no-evidence point, because appellants argued in terms of "no evidence" and specifically requested a rendition under issue four.

6. In general terms, Peoples raised the excessiveness of the punitive awards in his motion for new trial. Barbar did not file a motion for new trial. See Tex. R. Civ. P. 324(b)(4). In the first appellate brief, Peoples raised excessiveness of the punitive damages award on statutory grounds and added the constitutional grounds in a subsequent brief. We consider both statutory and constitutional grounds.

7.

Section 41.008(b) provides as follows:

(b) Exemplary damages awarded against a defendant may not exceed an amount equal to the greater of:

(1) (A) two times the amount of economic damages; plus

(B) an amount equal to any noneconomic damages found by the jury, not to exceed $750,000; or

(2) $200,000.

8. Hellriegel relies on Menetti v. Chavers, 974 S.W.2d 168 (Tex. App.--San Antonio 1998, no pet.), and argues that a shareholder individually lacks standing to challenge the claims against a corporation in an alter ego context. In Menetti, however, alter ego was never established. Id. at 173. By footnote, the court stated as follows: "If the corporate veil is pierced, the shareholders are considered the equivalent of the corporation, not separate parties with individual defenses. The corporation's liability becomes the shareholder's liability absolutely." Id. at 171 n.5.

9. Hellriegel voluntarily tenders a remittitur should this Court reverse and remand the judgment "against Peoples and/or Barbar."

10. Appellants argue this Court cannot suggest a remittitur of damages and remand is the only appropriate disposition. They cite Pope v. Moore, 711 S.W.2d 622 (Tex. 1986), where the Supreme Court held that if the court of appeals finds the evidence supporting actual damages is factually sufficient, the court cannot then suggest remittitur of actual damages. Here, the excessiveness claim relates to exemplary damages, which appellants have challenged on due process and statutory grounds. Rule 46.5 of the Texas Rules of Appellate Procedure provides in part as follows:

If a court of appeals reverses the trial court's judgment because of a legal error that affects only part of the damages awarded by the judgment, the affected party may . . . voluntarily remit the amount that the affected party believes will cure the reversible error. . . .If the remittitur is timely filed and the court of appeals determines that the voluntary remittitur cures the reversible error, then the court must accept the remittitur and reform and affirm the trial court judgment in accordance with the remittitur.

We have found the exemplary damages award is excessive and erroneous under the statute and the constitution. We determine the voluntary remittitur is sufficient to cure the reversible error. Under Rule 46.5 we "must accept the remittitur and reform and affirm the trial court's judgment in accordance with the remittitur."