James J. Flanagan Shipping Corporation v. Del Monte Fresh Produce N.A., Inc. , 2013 Tex. App. LEXIS 2412 ( 2013 )

Opinion issued March 12, 2013.
In The
Court of Appeals
For The
First District of Texas
————————————
NO. 01-11-00525-CV
———————————
JAMES J. FLANAGAN SHIPPING CORPORATION, Appellant
V.
DEL MONTE FRESH PRODUCE N.A., INC., Appellee
On Appeal from the County Court at Law No. 3
Galveston County, Texas
Trial Court Case No. CV0060347
OPINION ON REHEARING
Appellant Del Monte Fresh Produce N.A., Inc. has filed a motion for
rehearing of our December 6, 2012 opinion. We grant the motion, withdraw our
opinion and judgment of December 6, 2012, and issue this opinion in its stead.
James J. Flanagan Shipping Corporation appeals the trial court’s rendition of
a take nothing judgment on its claims against Del Monte. Flanagan sued Del
Monte and other defendants for breach of fiduciary duty, knowing participation in
a breach of fiduciary duty, conspiracy, conversion, unjust enrichment, unfair
competition, and accessing proprietary and confidential business information.
After settling with the other defendants, Flanagan tried its claims against Del
Monte to the bench. The trial court concluded Flanagan’s claims were “well
founded” and its findings were favorable to Flanagan. But, after concluding that
the economic loss rule and a settlement credit applied to bar Flanagan’s recovery,
the trial court rendered a take nothing judgment on all of Flanagan’s claims against
Del Monte. On appeal, Flanagan contends the trial court erred by applying the
economic loss rule and by finding that its award of exemplary damages should be
reduced based on a settlement credit. We reverse and render judgment for
Flanagan.
Background
Flanagan operates a stevedoring facility in Galveston, Texas. Del Monte
imports fresh produce, with ships arriving in Galveston throughout the year. In
1997, Flanagan began providing stevedoring services for Del Monte in Galveston.
Between 1997 and 2007, Del Monte sent out requests for proposals, seeking bids
from companies to provide stevedoring services. Flanagan was chosen each time.
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In 2006, Del Monte hired a new manager for its Galveston operations, Joe
Wiley. Wiley, the self-described “new sheriff in town,” conducted a review of the
Galveston operations and concluded that Flanagan was not performing adequately.
He recommended against renewing Flanagan’s contract when the current contract
expired at the end of September 2007. In the spring of 2007, Del Monte sent out
requests for proposals for taking over the stevedore operations in Galveston.
Flanagan submitted a proposal, and Tom Flanagan, Flanagan’s president and CEO,
sent Del Monte’s Vice President of Port Operations, Tim Albano, a letter
committing to improve Flanagan’s services if the contract was awarded to
Flanagan. Specifically, he promised Flanagan would have all new equipment by
the time Del Monte completed the planned refurbishing and improvements of its
Galveston facilities.
After receiving proposals from Flanagan and other companies, Wiley
recommended awarding the new Del Monte contract to his former employer,
Logistec. Albano concurred, but neither Wiley nor Albano had the authority to
make that decision. Only Del Monte’s Vice President of Shipping Operations,
Helmut Lutty, did. Lutty decided to award the contract to Flanagan. He testified
that one reason he did so was because both he and Wiley were new in their
positions, so he did not want to make a change in the Galveston operations. He
also testified that, in deciding to award contracts, he considered cost to be the
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driving factor, and Flanagan’s bid was better than Logistec’s. Flanagan and Del
Monte thus agreed to a contract for a term of one year, to automatically renew for
two additional years if neither party timely provided notice to terminate.
Wiley testified that by the end of November 2007, the first portion of Del
Monte’s facility upgrade was complete. Room 4, a refurbished and improved
refrigerated warehouse, was put into use around Thanksgiving. Wiley testified that
Flanagan did not have the promised new forklifts to take advantage of the
improvements in Room 4. Wiley complained that no new forklifts were available
and asked Louis Rippol, Flanagan’s clerk in charge, when the new forklifts would
arrive. Rippol told Wiley that Flanagan had never ordered the forklifts. Wiley felt
that Mr. Flanagan had lied to him and became “furious.” He told Rippol that
Flanagan was done with Del Monte. According to Wiley, this conversation took
place around early December.
Around this same time, Richard Bradford, who was Flanagan’s manager in
Galveston, began talking to Del Monte about Del Monte replacing Flanagan with
Bradford’s former employer, Pacific Stevedoring. Wiley and Bradford testified
that a few days after Wiley had decided Flanagan was done with Del Monte,
Bradford asked if Wiley would consider a bid from Pacific. While Wiley testified
that this happened around December 27, phone records show that Bradford called
Pacific on December 3, and a December 14 email shows Bradford detailed for
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Pacific what would be required for Pacific to provide stevedoring services for Del
Monte in Galveston. Phone records also show that Bradford called Pacific again
on December 26 and, shortly after that call, placed a ten-minute call to Albano’s
direct line in Florida. Albano denied having any conversation with Bradford about
Pacific taking over Flanagan’s contract.
Bradford began providing Pacific with Flanagan’s proprietary information,
including information about Flanagan’s business model and price structure, to
enable Pacific to submit the winning bid for the Del Monte contract. Many of the
emails from Bradford to Pacific were from his personal email account, not his
Flanagan account. In one email to Pacific, Bradford wrote, “You should know that
getting all the numbers you need is very difficult without creating suspicion.” At
trial, Bradford unequivocally testified that Wiley knew Bradford was sending
information to Pacific and, in fact, it was Wiley who had told Bradford not to
create any suspicion.
Wiley and Albano told Bradford that opportunities with Pacific would be
available to Bradford if Pacific replaced Flanagan as Del Monte’s stevedoring
company. Pacific formed a new company, Gulf Stevedoring Services, LLC. In
February 2008, Gulf submitted a bid offering the exact pricing and services as
Flanagan’s bid and indicated that Bradford would be Gulf’s operations manager.
Wiley testified that he was “very surprised and shocked” that the rates were
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identical and no changes had been made to the bid. Wiley therefore worked with
Bradford to make minor changes to the Gulf bid.
In May 2008, Wiley and Albano recommended to Lutty that Del Monte
accept Gulf’s bid and terminate Flanagan’s contract. Lutty agreed and signed a
contract with Pacific to begin on October 1, 2008. Despite Lutty having made a
final decision, Albano sent Mr. Flanagan an email falsely stating that Flanagan’s
contract “was under review.” Wiley was instructed not to tell Flanagan the
contract would not continue beyond the initial one-year term. In August,
approximately six weeks before the end of the contract’s term, Del Monte gave
notice of termination of the contract to Flanagan and replaced Flanagan with Gulf.
Flanagan sued Del Monte and other defendants, including Bradford, Pacific,
and Gulf. All defendants other than Del Monte settled with Flanagan for
$1,500,000, and Flanagan tried its claims against Del Monte to the bench. After
the trial, the trial court set forth in its judgment a lengthy narrative describing the
events leading up to the lawsuit. The trial court identified conflicting evidence and
explained that the conflicting evidence presented by Del Monte was not credible.
The trial court concluded Bradford had committed a breach of fiduciary duty and
that Del Monte was a joint tortfeasor because it encouraged Bradford knowing that
Bradford was breaching his fiduciary duties to Flanagan. The trial court also
concluded that Del Monte engaged in unfair competition and that Del Monte had
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conspired with the other defendants to harm Flanagan. The trial court found that
Flanagan suffered lost profits in the amount of $1,348,910 and that exemplary
damages in the amount of $635,928 were justified.
Although the trial court described Flanagan’s causes of action as “well
founded,” two legal conclusions led it to enter a take nothing judgment. First, it
concluded that the $1,500,000 settlement credit should be applied against both
actual and exemplary damages, reducing Flanagan’s potential recovery from
$1,984,838 to $484,838. Second, it concluded the economic loss rule applied to
bar any recovery whatsoever. Flanagan appealed and contends the trial court erred
in applying the economic loss rule and settlement credit to bar Flanagan’s
recovery.
Findings of Fact Recited in the Judgment
Before turning to the trial court’s application of the economic loss rule and
settlement credit, we address a threshold issue in dispute: whether the trial court’s
findings of fact should be accorded probative value, given that they are recited in
the judgment. Del Monte contends we should affirm the judgment because the
trial court’s placement of its findings of fact in the judgment—as opposed to a
separate document—violates Texas Rule of Civil Procedure 299a and renders the
findings null. Therefore, Del Monte argues, we must ignore the trial court’s
findings and apply the well-settled rule that, in the absence of findings, all findings
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in favor of the take-nothing judgment are implied. Flanagan responds that the
findings are valid because they do not conflict with any other findings in the
record.
Texas Rule of Civil Procedure 299a provides:
Findings of fact shall not be recited in a judgment. If there is a
conflict between findings of fact recited in a judgment in violation of
this rule and findings of fact made pursuant to Rules 297 and 298, the
latter findings will control for appellate purposes. Findings of fact
shall be filed with the clerk of the court as a document or documents
separate and apart from the judgment.
TEX. R. CIV. P. 299a. The trial court erred by reciting its findings of fact in the
judgment. However, the record contains no other findings of fact. Therefore, there
is nothing with which the trial court’s findings could conflict. Accordingly, the
trial court’s findings are accorded probative value. See Gonzalez v. Razi, 338
S.W.3d 167, 175 (Tex. App.—Houston [1st Dist.] 2011, pet. denied) (quoting In re
Sigmar, 270 S.W.3d 289, 295 n.2 (Tex. App.—Waco 2008, orig. proceeding)
(“[F]indings of fact recited in an order or judgment will be accorded probative
value so long as they are not in conflict with findings recited in a separate
document.”)); In re C.A.B., 289 S.W.3d 874, 881 (Tex. App.—Houston [14th
Dist.] 2009, no pet.) (“[t]he mere inclusion of findings in a judgment does not
mean the findings have no effect” and “findings improperly included in a judgment
still have probative value and are valid as findings”); Hill v. Hill, 971 S.W.2d 153,
157 (Tex. App.—Amarillo 1998, no pet.) (recognizing that “findings contained in a
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judgment (contrary to Rule 299a) are not shorn of all authority” but “only to the
extent they conflict” with findings made in a separate document (emphasis in
original)).
Relying on Frommer v. Frommer, 981 S.W.2d 811 (Tex. App.—Houston
[1st Dist.] 1998, pet. dism’d), Del Monte argues we should ignore the findings
altogether. In Frommer, a divorce case, a jury determined that the husband had not
committed a fraud on the community estate. 981 S.W.2d at 812. However, the
final judgment awarded the wife a sum of money and stated the reason for the
award was the husband’s fraud. Id. at 812–13. Neither party requested findings of
fact. On appeal, the husband contended that the trial court’s “finding” in the
judgment supporting the additional award to the wife conflicted with the jury
finding that he had not committed fraud. Id. at 812–13. This court concluded that
the findings contained in the judgment could not be used to support a claim on
appeal. Id. at 813–14.
We find Frommer distinguishable. The basis of the appeal in Frommer
was that the trial court’s finding arguably conflicted with a prior jury finding.
Frommer, 981 S.W.2d at 812–13. Here, there are no findings other than the ones
the trial court set forth in the judgment. There is no possible conflict, and Del
Monte does not contend otherwise.
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Economic Loss Rule
In its first issue, Flanagan contends that the trial court erred by concluding
the economic loss rule applied to bar recovery. Citing Jim Walter Homes, Inc. v.
Reed, 711 S.W.2d 617 (Tex. 1986), Del Monte argues the economic loss rule does
apply because the damages Flanagan sought were exactly what it would have
earned under the contract had it not been terminated. We review this issue of law
de novo. Miranda v. Byles, No. 01-10-01022-CV, 2012 WL 5285666, at *7 (Tex.
App.—Houston [1st Dist.] Oct. 25, 2012, pet. filed) (citing BMC Software Belg.,
N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002)).
Although the Texas Supreme Court described the term as “something of a
misnomer,” one general formulation of the economic loss rule, as applicable to this
case, is that a party may not recover in tort for purely economic losses suffered to
the subject matter of a contract. Sharyland Water Supply Corp. v. City of Alton,
354 S.W.3d 407, 415, 418 (Tex. 2011). In determining whether the economic loss
rule applies, courts must consider “both the source of the defendant’s duty to act
(whether it arose solely out of the contract or from some common-law duty) and
the nature of the remedy sought by the plaintiff.” Formosa Plastics Corp. USA v.
Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 45 (Tex. 1998) (quoting
Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 12 (Tex. 1996)).
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Del Monte asserts that the Supreme Court’s opinion in Jim Walter Homes
bars Flanagan’s recovery in this case. The claim in Jim Walter Homes was that the
builder of a home had “breached the warranty of good workmanship and . . . was
grossly negligent in the supervision of the construction of the house.” 711 S.W.2d
at 617. The Supreme Court noted that the plaintiffs’ sole injury “was that the
house they were promised and paid for was not the house they received” and that
that claim could “only be characterized as a breach of contract.” Id. at 618.
More recently, the Texas Supreme Court explained that the economic loss
rule has been applied more narrowly than Del Monte argues. In Sharyland Water
Supply Corporation, the Supreme Court said “[W]e have applied the economic loss
rule only in cases involving defective products or failure to perform a contract.”
354 S.W.3d at 418. The Supreme Court also explained that the fact that a party
seeks economic damages does not necessarily bar a tort cause of action. Id. at
418–19 (noting that economic losses may be recovered in tort for “negligent
misrepresentation, legal or accounting malpractice, breach of fiduciary duty, fraud,
fraudulent inducement, tortious interference with contract, nuisance, wrongful
death claims related to loss of support from the decedent, business disparagement,
and some statutory causes of action” (emphasis added) (footnotes omitted)).
Here, Flanagan does not assert that Del Monte caused Flanagan’s damages
by performing its duties under the contract in a negligent or grossly negligent
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manner. Cf. Jim Walter Homes, Inc., 711 S.W.2d at 617 (holding economic loss
rule applied where plaintiff attempted to cast breach of contract claim as tort
claim). Del Monte’s duty under the contract was, essentially, to pay Flanagan for
stevedoring services. Flanagan does not complain about any failure on the part of
Del Monte to perform this contractual obligation. Rather Flanagan’s claim is
based on Del Monte’s involvement in Bradford’s breach of fiduciary duty. In
other words, Flanagan seeks to recover the lost profits it would have earned under
the contract if Del Monte had not encouraged and participated in Bradford’s
disclosure of Flanagan’s business model and pricing structure to a competing
company, causing Del Monte to terminate the contract with Flanagan after the
initial one-year term. The duty breached in this case—the fiduciary duty owed by
an agent, Bradford, to his principal, Flanagan—did not arise from the contract.
Rather, as Flanagan notes in its brief, the duty breached existed independent of
Flanagan’s contract with Del Monte. Accordingly, the economic loss rule does not
apply. See Formosa Plastics, 960 S.W.2d at 47 (holding that “tort damages are
recoverable for a fraudulent inducement claim irrespective of . . . whether the
plaintiff only suffers an economic loss related to the subject matter of the
contract”); see also Sharyland Water Supply Corp., 354 S.W.3d at 418 (noting
economic losses are recoverable for breach of fiduciary duty). We therefore
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conclude that Jim Walter Homes and the economic loss rule do not apply to this
case.
Settlement Credit
In its second issue, Flanagan contends the trial court erred by applying a
settlement credit against the exemplary damages award. Del Monte does not
disagree.
Chapter 33 of the Texas Civil Practice and Remedies Code provides for a
credit in the case of a settling defendant. TEX. CIV. PRAC. & REM. CODE ANN.
§ 33.012(b) (West 2008) (“If the claimant has settled with one or more persons, the
court shall further reduce the amount of damages to be recovered by the claimant
with respect to a cause of action by the sum of the dollar amounts of all
settlements.”). However, Chapter 33 expressly states that it “does not apply to . . .
a claim for exemplary damages included in an action to which this chapter
otherwise applies . . . .” TEX. CIV. PRAC. & REM. CODE ANN. § 33.002(c)(2) (West
2008). We therefore conclude that the trial court erred by applying a settlement
credit to the exemplary damages assessed against Del Monte. See Crown Life Ins.
Co. v. Casteel, 22 S.W.3d 378, 391 (Tex. 2000) (non-settling defendant may only
claim credit based on damages for which all joint tortfeasors jointly liable);
Gilcrease v. Garlock, Inc., 211 S.W.3d 448, 457 (Tex. App.—El Paso 2006, no
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pet.) (exemplary damages assessed against non-settling defendant may not be
offset by amount of common damages paid by settling defendants).
Causation
Del Monte contends the judgment should be affirmed because there is no
evidence of causation. Specifically, Del Monte contends the evidence shows Del
Monte had decided to replace Flanagan in December 2007 and, because all of
Bradford’s alleged wrongdoing occurred after that decision had been made, the
wrongdoing did not cause Flanagan’s loss.
Evidence is legally insufficient when (1) the record discloses a complete
absence of evidence of a vital fact; (2) the court is barred by rules of law or rules of
evidence from giving weight to the only evidence offered to prove a vital fact;
(3) the evidence offered to prove a vital fact is no more than a mere scintilla; or
(4) the evidence establishes conclusively the opposite of a vital fact. City of Keller
v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). In determining whether there is
legally sufficient evidence, we must consider evidence favorable to the finding if a
reasonable fact-finder could and disregard evidence contrary to the finding unless a
reasonable fact-finder could not. Id. at 807, 827. “If the evidence at trial would
enable reasonable and fair-minded people to differ in their conclusions, then [the
fact-finder] must be allowed to do so.” Id. at 822; see also King Ranch, Inc. v.
Chapman, 118 S.W.3d 742, 751 (Tex. 2003). “A reviewing court cannot substitute
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its judgment for that of the trier-of-fact, so long as the evidence falls within this
zone of reasonable disagreement.” City of Keller, 168 S.W.3d at 822. When, as
here, a party who does not have the burden of proof at trial challenges the legal
sufficiency of the evidence, we consider the evidence in the light most favorable to
the prevailing party, indulging every reasonable inference in that party’s favor.
City of Houston v. Hildebrandt, 265 S.W.3d 22, 27 (Tex. App.—Houston [1st
Dist.] 2008, pet. denied) (citing Assoc. Indem. Corp. v. CAT Contracting, Inc., 964
S.W.2d 276, 285–86 (Tex. 1998)). Additionally, we may “not invade the fact-
finding role of the trial court, who alone determines the credibility of the witnesses,
the weight to give their testimony, and whether to accept or reject all or any part of
that testimony.” Volume Millwork, Inc. v. W. Hous. Airport Corp., 218 S.W.3d
722, 730 (Tex. App.—Houston [1st Dist.] 2006, pet. denied).
Del Monte contends that “uncontradicted” evidence shows that Del Monte
decided not to continue its contractual relationship with Flanagan in December
2007, before Bradford began feeding Flanagan’s information to Pacific. Wiley
testified that he made the decision to replace Flanagan in December 2007. He also
testified that Albano agreed with him. Albano’s testimony was consistent with
this, and Albano added that Lutty also agreed in December 2007 to terminate the
relationship with Flanagan.
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But there is also evidence from which a rational fact-finder could conclude
that Lutty, the only person with the authority to make the decision on behalf of Del
Monte, did not decide to terminate Flanagan’s contract until May 2008, well after
Bradford and Del Monte conspired to help Gulf win the contract. Both Wiley and
Albano testified that neither of them had the authority to decide who would receive
the contract, only Lutty did. Lutty himself never testified about when he made the
decision, and Wiley testified that he did not know what Lutty’s decision was until
May of 2008. A reasonable fact-finder could conclude that, although Wiley and
Albano testified they had made a decision to terminate Flanagan as of December
2007, Lutty’s decision was not made until May 2008, after—and because—
Bradford’s and Del Monte’s misconduct allowed Gulf to match Flanagan’s bid.
See Hildebrandt, 265 S.W.3d at 27.
Malice
Del Monte also contends no evidence supports a finding of malice, which is
required to support an award of exemplary damages against Del Monte.
Exemplary damages may be awarded only when there is clear and convincing
evidence of fraud, malice, or gross negligence. TEX. CIV. PRAC. & REM. CODE
ANN. § 41.003 (West Supp. 2012). In this case, Flanagan alleged malice as the
basis for an award of exemplary damages. Malice is defined as “specific intent by
the defendant to cause substantial injury or harm to the claimant.” Id. § 41.001(7)
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(West 2008). “‘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.” Id. § 41.001(2). When
reviewing the legal sufficiency of the evidence to support a finding required under
the “clear and convincing” standard, courts must consider all the evidence “in the
light most favorable to the finding to determine whether a reasonable trier of fact
could have formed a firm belief or conviction that its finding was true.” Romero v.
KPH Consol., Inc., 166 S.W.3d 212, 220 (Tex. 2005).
The evidence in this case would allow a rational fact-finder to form a firm
belief or conviction that Del Monte specifically intended to cause Flanagan
substantial injury or harm. “When a third party knowingly participates in the
breach of a fiduciary duty, the third party becomes a joint tortfeasor and is liable as
such.” JSC Neftegas-Impex v. Citibank, N.A., 365 S.W.3d 387, 411 (Tex. App.—
Houston [1st Dist.] 2011, pet. denied) (quoting Kastner v. Jenkens & Gilchrist,
P.C., 231 S.W.3d 571, 580 (Tex. App.—Dallas 2007, no pet.)). “[P]articipation in
a breach of fiduciary duty can be the basis of an award of exemplary damages
where the jury finds the defendant acted with fraud or malice.” Fid. Nat’l Title Ins.
Co. v. Heart of Tex. Title Co., No. 03-98-00473-CV, 2000 WL 13037, at *8 (Tex.
App.—Austin Jan. 6, 2000, pet. denied) (not designated for publication). Here,
Wiley, Del Monte’s Galveston port manager, knew that Bradford was providing
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information about Flanagan’s operation to Pacific to allow Pacific to match
Flanagan’s bid. Indeed, Wiley encouraged Bradford to do so. Bradford
unequivocally testified that Wiley knew what Bradford was doing and that it was
Wiley who instructed Bradford to gather the information without creating
suspicion. Bradford also testified that a Del Monte employee, probably Wiley,
provided him a copy of Flanagan’s contract and rate sheet to forward to Pacific.
This was significant because one reason that Flanagan continued to be chosen by
Del Monte is that no other stevedore could match Flanagan’s bid. Albano testified
that Del Monte should not provide a company’s rate sheet to another company
because it contains confidential information. However, Albano also testified that
he, on behalf of Del Monte, had approved and ratified everything Wiley had done
in connection with bringing Pacific into Galveston.
Wiley admitted he was complicit in the scheme. Wiley testified that when
he received Pacific’s bid in February 2008 he was “very surprised and shocked”
that the rates were identical to Flanagan’s. And Bradford testified that he and
Wiley altered the proposed rate sheet, making “cuts here, increases there.” A
reasonable inference from these facts is that Wiley made the adjustments to keep
total costs on Pacific’s bid the same as Flanagan’s, while making the scheme less
obvious. After receiving Pacific’s bid based on Flanagan’s confidential
information, Del Monte did not follow its normal procedure of soliciting
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competitive bids. Rather, Wiley informally contacted two other stevedores—his
former employer and his roommate’s employer—to solicit bids to make the
bidding process appear normal. Finally, in May 2008, Lutty—the Del Monte
employee ultimately in charge of making the decision—decided to award the
contract to Pacific, but told Albano to not tell Flanagan, and Albano falsely
informed Flanagan that the contract renewal was still under review.
From this evidence, a rational fact-finder could determine that Del Monte
conspired with Bradford to misappropriate Flanagan’s business information with
the specific intent to keep for itself the benefit of Flanagan’s low rate structure—
one no other company had ever matched—and the benefit of the experience of
Flanagan’s manager, Bradford, but also to oust Flanagan as Del Monte’s stevedore
in Galveston. Accordingly, we hold that the evidence is sufficient to support the
trial court’s finding that Del Monte acted with malice. See Fid. Nat’l Title Ins.
Co., 2000 WL 13037, at *6 (holding some evidence supported implied finding of
fraud to support exemplary damages where defendant conspired with plaintiff’s
employee for employee to breach her fiduciary duties by recruiting co-workers to
staff competing office defendant planned to open); see also Qwest Int’l Commc’ns,
Inc. v. AT & T Corp., 167 S.W.3d 324, 326 (Tex. 2005) (stating that corporation is
liable for exemplary damages if it authorizes or ratifies an agent’s malice); Bright
v. Addison, 171 S.W.3d 588, 598 (Tex. App.—Dallas 2005, pet. denied) (evidence
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sufficient to support finding of malice in breach of fiduciary duty case where
fiduciary (an attorney) failed to disclose business opportunity to his clients and
instead usurped it for himself).
In its motion for rehearing, Del Monte also argues that it presented
“uncontradicted” evidence that it acted without malice. Specifically, Del Monte
argues there can be no malice finding when Wiley and Albano each testified they
had no intent to injure Flanagan, and Flanagan offered no direct evidence of
malice. But it is well-established that a plaintiff required to prove the state of mind
of a defendant need not adduce direct evidence; it may instead rely upon
circumstantial evidence. See Bentley v. Bunton, 94 S.W.3d 561, 596 (Tex. 2002)
(discussing “malice” in a defamation case: “The defendant’s state of mind can—
indeed, must usually—be proved by circumstantial evidence.”); Transp. Ins. Co. v.
Moriel, 879 S.W.2d 10, 22–23 (Tex. 1994) (discussing evidence of gross
negligence as predicate for exemplary damages and stating, “We hereby reaffirm
our holding that the defendant’s subjective mental state can be proven by direct or
circumstantial evidence.”); Behee v. Mo. Pac. Ry. Co., 71 Tex. 424, 429 (1888)
(“Malice is rarely ever shown by direct evidence. It is commonly a state of mind
indicated and inferable from other facts proved,—from language used, or acts, or
both together. We infer a bad motive when an injurious act is intentionally done
without legal excuse. The motive is not a bare fact of itself, susceptible of proof
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like any other fact; it is a conclusion deduced from acts or words.”); Turner v.
Franklin, 325 S.W.3d 771, 783 (Tex. App.—Dallas 2010, pet. denied) (noting
issues of state of mind “are not susceptible to being readily controverted and are
best left to the determination of the trier of fact”); French v. French, 385 S.W.3d
61, 69 (Tex. App.—Waco 2012, pet. denied) (citing Digby v. Texas Bank, 943
S.W.2d 914, 922 (Tex. App.—El Paso 1997, writ denied) (“[Malice] is proved by
direct or (usually) circumstantial evidence.”). The trial court stated that both
Wiley and Albano lacked credibility; this determination is left to the trial court as
the fact-finder. See Volume Millwork, Inc., 218 S.W.3d at 730. Combining the
trial court’s determination that Wiley and Albano lacked credibility with the
circumstantial evidence detailed throughout this opinion, we conclude the record
contradicts Wiley’s and Albano’s self-serving denials of ill intent. Viewing the
evidence in favor of the trial court’s findings and indulging reasonable inferences
from the evidence, we conclude the record supports the trial court’s determination
that Del Monte acted with malice.
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Conclusion
We conclude the trial court erred in applying the economic loss rule. We
also conclude the trial court erred in applying the settlement credit to the award of
exemplary damages. We reverse the judgment of the trial court and render
judgment for Flanagan in the amount of $635,928.
Rebeca Huddle
Justice
Panel consists of Justices Jennings, Massengale, and Huddle.
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