CDM Constructors, Inc. and CDM Smith, Inc. v. City of Weslaco, Texas ( 2021 )

NUMBER 13-19-00447-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI – EDINBURG
CDM CONSTRUCTORS, INC.
AND CDM SMITH, INC., Appellants,
v.
CITY OF WESLACO, TEXAS, Appellee.
On appeal from the 139th District Court
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Justices Benavides, Longoria, and Tijerina
Memorandum Opinion by Justice Longoria
Appellants CDM Constructors, Inc. and CDM Smith, Inc. bring this interlocutory
appeal to challenge the denial of their motions to dismiss pursuant to the Texas Citizen’s
Participation Act (TCPA). See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(12). By
three issues, appellants contend that the trial court erred in failing to dismiss appellee the
City of Weslaco’s (the City) claims against them. We affirm.
I. BACKGROUND
The Texas Commission on Environmental Quality (TCEQ) notified the City that its
water treatment facilities were non-compliant and needed improvements. The City
contracted with CDM Constructors in 2008 to repair and improve the City’s south
wastewater treatment plant (Project 1). In 2012, the City contracted with CDM
Constructors to build a new treatment plant and distribution system (Project 2).
In October 2018, the City filed suit against CDM Constructors for declaratory relief
regarding CDM Constructors’ allegation that the City still owed $2,400,000 under the
contract for Project 2. The City amended its petition, adding additional claims against
CDM Constructors. The City then filed another amended petition, maintaining the same
claims and adding CDM Smith, among others, as a defendant. In its live pleading, the
City asserts claims against appellants for fraud and conspiracy, for which it seeks
monetary damages, and in the alternative, equitable relief based on the theories of unjust
enrichment and constructive trust. It also asserts claims specifically against CDM
Constructors for “money-had-and-received and declaratory judgment,” seeking rescission
as an equitable remedy.
The City’s live pleading alleges that appellants committed fraud by “making false
representations to the City to pay [appellants] millions of dollars.” Further, the City alleges
that appellants committed acts of bribery and civil conspiracy in order to defraud the city.
The City’s allegations are based on the City’s contention that appellants, along with
several other individuals and companies, conspired to have the contracts for Project 1
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and Project 2 awarded to appellants as part of a larger scheme to inflate invoices and
defraud the City of large amounts of money.
After the City filed its third amended petition, CDM Constructors filed a TCPA
motion to dismiss the City’s claims that were added in the second amended pleading but
did not challenge the initial claim brought by the City. Subsequently, CDM Smith filed a
TCPA motion to dismiss the claims specifically asserted against it by the City’s third
amended petition. The motions were consolidated and set for a single hearing.
The City filed a response, the appellants filed a joint reply in support of their
motions, and the City filed a sur-reply in opposition. The trial court denied appellants’
motions and this appeal followed.
II. TCPA
By three issues, appellants argue that the trial court erred in denying the TCPA
motions to dismiss. Specifically, appellants contend that (1) the TCPA applies to the City’s
challenged claims, (2) the commercial speech exemption cannot apply to the challenged
claims, and (3) there is no clear and specific evidence of all essential elements of the
City’s challenged claims.
A. Standard of Review & Applicable Law
We review de novo a trial court’s ruling on a TCPA motion to dismiss. Dall. Morning
News, Inc. v. Hall, 579 S.W.3d 370, 377 (Tex. 2019). In conducting our review, we
consider the pleadings and evidence in a light favorable to the nonmovant. Dyer v. Medoc
Health Servs., LLC, 573 S.W.3d 418, 424 (Tex. App.—Dallas 2019, pet. denied).
The TCPA is an anti-SLAPP law; “SLAPP” is an acronym for “Strategic Lawsuits
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Against Public Participation.” Fawcett v. Grosu, 498 S.W.3d 650, 654 (Tex. App.—
Houston [14th Dist.] 2016, pet. denied) (op. on reh’g). The TCPA is intended “to
encourage and safeguard the constitutional rights of persons to petition, speak freely,
associate freely, and otherwise participate in government to the maximum extent
permitted by law and, at the same time, protect the rights of a person to file meritorious
lawsuits for demonstrable injury.” TEX. CIV. PRAC. & REM. CODE ANN. § 27.002; Cox Media
Grp., LLC v. Joselevitz, 524 S.W.3d 850, 859 (Tex. App.—Houston [14th Dist.] 2017, no
pet.). The TCPA “protects citizens from retaliatory lawsuits that seek to intimidate or
silence them” from exercising their First Amendment freedoms and provides a procedure
for the “expedited dismissal of such suits.” In re Lipsky, 460 S.W.3d 579, 586 (Tex. 2015).
We construe the TCPA liberally to effectuate its purpose and intent fully. See Adams v.
Starside Custom Builders, LLC, 547 S.W.3d 890, 894 (Tex. 2018); ExxonMobil Pipeline
Co. v. Coleman, 512 S.W.3d 895, 899 (Tex. 2017); see also TEX. CIV. PRAC. & REM. CODE
ANN. § 27.011(a).
A defendant invoking the act’s protections must show first, by a preponderance of
the evidence, that the plaintiff’s legal action is “based on, relates to, or is in response to”
the defendant’s exercise of one or more of the enumerated rights. In re Lipsky, 460
S.W.3d at 586. If the defendant makes the initial showing, the burden shifts to the plaintiff
to establish by clear and specific evidence a prima facie case for each essential element
of the claim in question. See id. at 587. “Prima facie case” refers to the quantum of
evidence required to satisfy the nonmovant’s minimum factual burden and generally
refers to the amount of evidence that is sufficient as a matter of law to support a rational
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inference that an allegation of fact is true. See id. at 590.
The evidence offered to support a prima facie case must be “clear and specific.”
Bedford v. Spassoff, 520 S.W.3d 901, 904 (Tex. 2017) (per curiam). Clear and specific
evidence means that the nonmovant must provide enough detail to show the factual basis
for its claim. Id. at 904. If the movant’s constitutional rights are implicated and the
nonmovant has not met the required showing of a prima facie case, the trial court must
dismiss the nonmovant’s claim. TEX. CIV. PRAC. & REM. CODE ANN. § 27.005. The trial
court considers “the pleadings and supporting and opposing affidavits stating the facts on
which the liability or defense is based.” Id. § 27.006(a).
B. Applicability
Appellants contend that the TCPA applies to the challenged claims because those
claims “arise from Appellants’ specific exercise of their respective rights of free speech
on matters of public concern, rights to petition, and rights of association.”
1. Free Speech
The TCPA defines the “exercise of the right of free speech” as a “communication
made in connection with a matter of public concern.” TEX. CIV. PRAC. & REM. CODE
ANN. § 27.001(3). A “matter of public concern” includes an issue related to health or
safety; environmental, economic, or community well-being; or a good, product or service
in the marketplace. Id. § 27.001(7)(A)–(B), (E). 1 Communications do not become a
1 Appellants’ TCPA motion to dismiss was denied by written order on August 26, 2019, prior to
September 1, 2019, the date upon which the recent amendments to the TCPA went into effect. The prior,
pre-amendment version of the TCPA therefore applies to appellants’ claims and this appeal. See 2019 Tex.
Sess. Law Serv. Ch. 378 (H.B. 2730) (“Chapter 27, Civil Practice and Remedies Code, as amended by this
Act, applies only to an action filed on or after the effective date of this Act. An action filed before the effective
date of this Act is governed by the law in effect immediately before that date, and that law is continued in
effect for that purpose. . .. This Act takes effect September 1, 2019.”). Accordingly, our citations and
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matter of public concern simply based on the nature of the parties’ business—there must
be some relevance to issues beyond the interests of the parties. See Caliber Oil & Gas,
LLC v. Midland Visions 2000, 591 S.W.3d 226, 239–40 (Tex. App.—Eastland 2019, no
pet.) (holding that, for a communication to relate to economic well-being, it must “have an
impact on more than the party’s personal financial well-being” and to relate to community
well-being, a communication must affect “the well-being of the community at large or at
least a subset of its residents”); see also Staff Care, Inc. v. Eskridge Enters., LLC, No.
05-18-00732-CV, 2019 WL 2121116, at *4 (Tex. App.—Dallas May 15, 2019, no pet.)
(mem. op.) (noting that, to determine whether the TCPA applies, a court “must look to the
content of the communications themselves and not focus solely on the occupation of the
speaker or the related industry”); Blue Gold Energy Barstow, LLC v. Precision Frac, LLC,
No. 11-19-00238-CV, 2020 WL 1809193, at *7 (Tex. App.—Eastland Apr. 9, 2020, no
pet.) (mem. op.).
Appellants contend that the communications at issue here fall into the category
protected by the TCPA as they involved matters of public concern, specifically the City’s
water treatment plant. The City, however, likens this case to Creative Oil & Gas, LLC v.
Lona Hills Ranch, LLC, 591 S.W.3d 127 (Tex. 2019), which the City contends served to
restrict the scope of the TCPA. The City argues that the TCPA does not apply here
because this case involved communications relating to a private contract dispute which
relates to appellants’ “own financial interests, not matters of public concern.” We agree
analyses are to the TCPA as it existed prior to September 1, 2019, unless otherwise noted. Nothing in this
opinion should be read to express an opinion regarding the proper construction or application of any
amended provision of the TCPA.
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with appellants.
Here, contrary to the cases cited by the City that follow the holding in Creative Oil,
the contract was not between private entities, but rather between private companies and
the City, and concerned the public water supply in the City.
We have previously held that private communications are sometimes
covered by the TCPA. E.g., ExxonMobil Pipeline Co., 512 S.W.3d 895;
Lippincott v. Whisenhunt, 462 S.W.3d 507 (Tex. 2015) (per curiam). These
prior cases involved environmental, health, or safety concerns that had
public relevance beyond the pecuniary interests of the private parties
involved. See ExxonMobil Pipeline Co., 512 S.W.3d at 898, 901 (concluding
that private statements by movants concerning plaintiff's alleged failure to
gauge a storage tank related to a matter of public concern due to “serious
safety and environmental risks”); Lippincott, 462 S.W.3d at 509–10
(concluding that alleged improper provision of medical services by a health
care professional are matters of public concern).
Id., 591 S.W.3d at 136. As discussed in detail by Morris v. Daniel,
In Creative Oil, a ranch sued to terminate an oil and gas lease. 591 S.W.3d
at 130. The operator and lessee counterclaimed alleging the ranch had
misrepresented the status of the lease to third-party purchasers of
production and urged these third-party purchasers to stop making
payments. Id. The ranch responded by filing a motion to dismiss under the
[TCPA], arguing that its statements to third parties were an exercise of the
right to free speech because these communications addressed a matter of
public concern. Id. The ranch maintained that its speech addressed a matter
of public concern because, among other things, its speech related to goods,
products, or services offered in the marketplace. Id. at 134 (relying on prior
version of [the TCPA] that explicitly included marketplace goods, products,
and services in definition of “matter of public concern”).
The Court rejected the ranch’s position. Id. at 134–36. It observed
that almost all contracts involve a marketplace good, product, or service but
that this is not enough to make every communication about these contracts
a matter of public concern. Id. at 134. The Court reasoned that for the
ranch’s statements to be on a matter of public concern, the statements had
to be relevant to the wider marketplace—the public audience of potential
buyers and sellers—rather than just the parties to the contract and the third-
party purchasers to whom the ranch made the statements. Id. at 134–36.
The Court held that a private contract dispute affecting only the fortunes of
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the litigants necessarily is not a “matter of public concern” under any
definition of these words. Id. at 137.
615 S.W.3d 571, 577–78 (Tex. App.—Houston [1st Dist.] 2020, no pet.). Appellants
contend that the City’s public water supply is a matter of public concern because it
implicates the wider marketplace. See id. Moreover, unlike Creative Oil, the City’s
allegations are based on conversations regarding the agreement, or procurement of the
agreement, between the City, a governmental entity, and appellants. See id.Communications relating to the manner in which the government operates relate to
matters of public concern. In re Lipsky, 411 S.W.3d at 543. In addition, “the award of
public contracts is almost always a public matter and an issue of public concern.” Farias
v. Garza, 426 S.W.3d 808, 819 (Tex. App.—San Antonio 2014, pet. denied), disapproved
on other grounds, In re Lipsky, 460 S.W.3d at 591.
In this case, we hold appellants’ communications regarding their contract with the
City were based on or related to a matter of public concern. See Hicks v. Group & Pension
Administrators, Inc., 473 S.W.3d 518, 530 (Tex. App.—Corpus Christi–Edinburg 2015, no
pet.) (concluding emails regarding concerns about a company’s ability to perform services
to be provided by the company pursuant to a potential contract between the company
and a school district related to matter of public concern); see also Mission Wrecker Serv.,
S.A., Inc. v. Assured Towing, Inc., No. 04-17-00006-CV, 2017 WL 3270358, at *4 (Tex.
App.—San Antonio Aug. 2, 2017, pet. denied) (mem. op.). Appellants’ first issue is
sustained.
C. Commercial Speech Exemption
By their second issue, appellants argue that the “commercial speech exemption”
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does not prevent dismissal of the City’s challenged claims. Intertwined with and overlying
the TCPA’s multi-step dismissal process is the TCPA provision exempting certain actions
from the TCPA’s application. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.010; Morrison
v. Profanchik, 578 S.W.3d 676, 680 (Tex. App.—Austin 2019, no pet.). The commercial
speech exemption provides that the TCPA, and its dismissal provisions, do not apply to
a legal action brought against a person primarily engaged in the business of selling or
leasing goods or services, if the statement or conduct arises out of the sale or lease of
goods, services, or an insurance product, insurance services, or a commercial transaction
in which the intended audience is an actual or potential buyer or customer. TEX. CIV. PRAC.
& REM. CODE ANN. § 27.010(a)(2). When invoked, the trial court must consider an
exemption’s applicability after and in the context of the movant having met its initial burden
under the first step of the dismissal process. See Castleman v. Internet Money Ltd., 546
S.W.3d 684, 688 (Tex. 2018); Morrison, 578 S.W.3d at 680. The party asserting the
commercial speech exemption bears the burden of proving its applicability by a
preponderance of the evidence. Hieber v. Percheron Holdings, LLC, 591 S.W.3d 208,
211 (Tex. App.—Houston [14th Dist.] 2019, pet. denied); Grant v. Pivot Tech. Sols., Ltd.,
556 S.W.3d 865, 887 (Tex. App.—Austin 2018, pet. denied). In deciding whether the
nonmovant has satisfied that burden, the scope of our review includes the pleadings and
any supporting affidavits, both of which are taken as evidence in the TCPA context. See
TEX. CIV. PRAC. & REM. CODE ANN. § 27.006; Hersh v. Tatum, 526 S.W.3d 462, 467 (Tex.
2017); Hieber, 591 S.W. 3d at 211. We also review this evidence in the light most
favorable to the nonmovant. Hieber, 591 S.W.3d at 211. If an action falls under a TCPA
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exemption, the TCPA does not apply and may not be used to dismiss the action. See
TEX. CIV. PRAC. & REM. CODE ANN. § 27.010; Best v. Harper, 562 S.W.3d 1, 11–12 (Tex.
2018). Accordingly, application of an exemption relieves the nonmovant from making a
prima facie case. See Round Table Physicians Group, PLLC v. Kilgore, 607 S.W.3d 878,
883 (Tex. App.—Houston [14th Dist.] 2020, pet. filed); see also Atlas Survival Shelters,
LLC v. Scott, No. 12-20-00054-CV, 2020 WL 6788714, at *6 (Tex. App.—Tyler Nov. 18,
2020, no pet.) (mem. op.).
Focusing on the text and context of the TCPA’s commercial-speech
exemption, we construe the exemption to apply when (1) the defendant was
primarily engaged in the business of selling or leasing goods, (2) the
defendant made the statement or engaged in the conduct on which the
claim is based in the defendant’s capacity as a seller or lessor of those
goods or services, (3) the statement or conduct at issue arose out of a
commercial transaction involving the kind of goods or services the
defendant provides, and (4) the intended audience of the statement or
conduct were actual or potential customers of the defendant for the kind of
goods or services the defendant provides.
The exemption expressly provides that the TCPA “does not apply to
a legal action brought against a person primarily engaged in the business
of selling or leasing goods or services,” but only “if the statement or conduct
arises out of the sale or lease of goods, services, or an insurance product,
insurance services, or a commercial transaction.” TEX. CIV. PRAC. & REM.
CODE [ANN.] § 27.010(b). While these clauses do not expressly state that
the statement or conduct must arise out of “the defendant’s” sale or lease
of goods or services, or that the defendant be acting in its capacity as a
seller or lessor of those goods or services, we believe that is the only
reasonable and logical construction of the exemption when considered
within its statutory context.
Castleman, 546 S.W.3d at 688. We begin by addressing the fourth element, the intended
audience, as it is dispositive of appellants’ second issue.
The City was required to show that the intended audience of appellants’
statements and conduct was an actual or potential customer for the kind of services that
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appellants provide. The City contends that as the actual customer of appellants’ services
for the construction contract, the City was the intended audience of the statements made
to procure the contract. Specifically, the City argues that the communications were
directed to the City from others on behalf of appellants. Appellants, in contrast, argue that
the alleged statements complained of by the City were made to separate individuals and
other businesses, not the City itself, and therefore were not made to an intended
customer. We agree with appellants. To establish the applicability of the commercial
speech exemption, the City needed to show that the intended audience of the alleged
statements were actual or potential customers of appellants. Castleman, 546 S.W.3d at
688. However, by its own pleadings and in its appellate briefing, the City’s lawsuit is based
on allegations that appellants schemed and conspired with certain individuals and
businesses without the City’s knowledge, meaning, the City was clearly not the audience
of the alleged statements. We conclude the City failed to establish the commercial speech
exemption. See TEX. CIV. PRAC. & REM. CODE ANN. § 27.010(a)(2); Castleman, 546
S.W.3d at 688. Appellants’ second issue is sustained.
Accordingly, because we hold that the TCPA is applicable to the challenged claims
and the commercial speech exemption has not been established, we turn now to whether
the City established by clear and specific evidence a prima facie case for each essential
element of the claim in question. See In re Lipsky, 460 S.W.3d at 587.
D. Prima Facie Case
Appellants argue in their third issue that the City did not meet its burden to establish
clear and specific elements for each of the challenged claims. See TEX. CIV. PRAC. & REM.
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CODE ANN. § 27.005(c) (providing that trial court may not dismiss legal action if nonmovant
shows by “clear and specific evidence prima facie case for each essential element of
claim in question”). “‘[P]rima facie case’ has a traditional legal meaning. It refers to
evidence sufficient as a matter of law to establish a given fact if it is not rebutted or
contradicted. It is the minimum quantum of evidence necessary to support a rational
inference that the allegation of fact is true.” In re Lipsky, 460 S.W.3d at 590 (internal
citations and quotations omitted). Because the TCPA does not define “clear and specific
evidence,” we give those terms their ordinary meanings. Id. “The words ‘clear’ and
‘specific’ in the context of this statute have been interpreted respectively to mean, for the
former, ‘unambiguous,’ ‘sure,’ or ‘free from doubt’ and, for the latter, ‘explicit’ or ‘relating
to a particular named thing.’” Id. (quoting KTRK Television, Inc. v. Robinson, 409 S.W.3d
682, 689 (Tex. App.—Houston [1st Dist.] 2013, pet. denied). Collectively, these elements
require that a party “provide enough detail to show the factual basis for its claim.” In re
Lipsky, 460 S.W.3d at 591.
1. Fraud
A plaintiff seeking to prevail on a fraud claim must prove that (1) the
defendant made a material misrepresentation; (2) the defendant knew the
representation was false or made the representation recklessly without any
knowledge of its truth; (3) the defendant made the representation with the
intent that the other party would act on that representation or intended to
induce the party’s reliance on the representation; and (4) the plaintiff
suffered an injury by actively and justifiably relying on that representation.
Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 217 (Tex. 2011). Appellants
specifically challenge the City’s evidence on “the reliance [and] intent elements.”
Appellants state that the City’s only “evidence” on the element of reliance are the
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allegations in its pleadings and the affidavit of the City’s attorney, both of which appellants
argue are baseless and conclusory. The City may rely on circumstantial evidence—
indirect evidence that creates an inference to establish a central fact—unless “the
connection between the fact and the inference is too weak to be of help in deciding the
case.” In re Lipsky, 460 S.W.3d at 589. Here, the City’s evidence consisted of allegations
that appellants concocted a bribery scheme to secure a lucrative contract with the City
regarding the City’s water treatment plant. There is no dispute that the City and appellants
entered into multimillion dollar contracts for appellants to design and construct new and
updated water treatment facilities, which necessarily infers that the City relied on
appellants’ representations to award the contract to appellants.
The movant for dismissal under the TCPA has no burden to disprove the existence
of a prima facie case. Indeed, the movant cannot do so, because “[p]rima facie proof is
not subject to rebuttal, cross-examination, impeachment[,] or even disproof.” Rodriguez
v. Gonzales, 566 S.W.3d 844, 849 (Tex. App.—Houston [14th Dist.] 2018, pet. denied)
(quoting KBMT Operating Co., LLC v. Toledo, 492 S.W.3d 710, 721 (Tex. 2016)).
Appellants also challenge the City’s evidence on the intent element. The City, in
turn, states that it presented evidence through its pleadings and supporting affidavits that
appellants “failed to disclose the truth to the City precisely because they intended for the
City to rely on their misrepresentations.”
In Texas’s fraud jurisprudence, courts considering the intent element focus
on the defendant’s knowledge and intent to induce reliance. Ernst & Young,
L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 578 (Tex. 2001). A
defendant who acts with knowledge that a result will follow is considered to
intend the result. Id. at 579. A party’s intent is determined at the time that it
makes the complained-of representation; however, intent may be inferred
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from the party’s acts made after the representation. Aquaplex, Inc. v.
Rancho La Valencia, Inc., 297 S.W.3d 768, 775 (Tex. 2009). “[I]ntent to
defraud is not usually susceptible to direct proof.” Id. at 774–75. Thus, intent
to defraud, or intent to induce reliance, most often must be proven by
circumstantial evidence. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432,
435 (Tex. 1986). “Intent is a fact question uniquely within the realm of the
trier of fact because it so depends upon the credibility of the witnesses and
the weight to be given to their testimony.” Id. at 434.
Samson Lone Star Ltd. P’ship v. Hooks, 497 S.W.3d 1, 15 (Tex. App.—Houston [1st Dist.]
2016, pet. denied). Fraud [can] not be inferred from the “vague, indefinite, and
inconclusive” testimony of interested witnesses. In re Lipsky, 460 S.W.3d at 588 (quoting
S. Cantu & Son v. Ramirez, 101 S.W.2d 820, 822 (Tex. App.—San Antonio 1936, no
writ)).
Appellants argue, however, that the affidavit is conclusory and therefore
insufficient to satisfy the TCPA’s requirement of “clear and specific evidence.”
Bare, baseless opinions do not create fact questions, and neither are they
a sufficient substitute for the clear and specific evidence required to
establish a prima facie case under the TCPA. See Elizondo v. Krist, 415
S.W.3d 259, 264 (Tex. 2013) (“Conclusory statement[s] . . . [are] insufficient
to create a question of fact to defeat summary judgment.”); City of San
Antonio v. Pollock, 284 S.W.3d 809, 816 (Tex. 2009) (holding conclusory,
baseless testimony to be no evidence).
In re Lipsky, 460 S.W.3d at 592–93. The City’s argument is largely based on inference—
specifically stating “[t]here can be no explanation for these bribe payments other than the
CDM Entities intended for the City to rely on the information being conveyed through the
chain of conspirators, including presentation of the falsified cost reports and phony
invoices from the CDM Entities.” However, the City also presented evidence that an agent
for appellants, through a series of bribe payments, secured “favorable votes and other
actions” to obtain the contracts with the City, allowing the appellants to defraud the City
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through “falsified cost reports and phony invoices.” The agent’s affidavit gives specific
facts about how appellants intended to defraud the City. Accordingly, we find that the City
established a prima facie case under the TCPA as to the challenged elements of its fraud
claim against appellants.
2. Damages
Direct evidence of damages is not required, but the evidence must be sufficient to
allow a rational inference that some damages naturally flowed from the defendant’s
conduct. See S & S Emergency Training Sols., Inc. v. Elliott, 564 S.W.3d 843, 847 (Tex.
2018); In re Lipsky, at 591, 592; Sw. Battery Corp. v. Owen, 115 S.W.2d 1097, 1099
(1938) (“A party who breaks his contract cannot escape liability because it is impossible
to state or prove a perfect measure of damages.”).
Appellants argue that the City’s pleadings “provide only general averments and
conclusory assumptions” regarding the alleged damages. Such conclusory statements
would not satisfy the requirements for “clear and specific evidence” under the TCPA. See
In re Lipsky, 460 S.W.3d at 593 (explaining that “general averments of direct losses and
lost profits,” even in specified dollar amounts, do not satisfy minimum requirements of
TCPA). The City, however, responds that it established a prima facie case under the
TCPA with respect to the damages incurred through its pleadings and supporting
affidavits. Specifically, the City points to the specific amount of $2,978,950 as an
“overpayment” by the City based on appellants fraudulent overcharges in the conspiracy
scheme. The City presented the affidavit of Juan E. Gonzalez, the City Attorney for the
City of Weslaco, wherein he averred:
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The City was damaged by the actions of [appellants] and [co-defendants].
Amendment No. 1 to [co-defendant’s] contract cost the City $2,978,950.
Given the facts as we now know, this was a high overpayment that was
shared among the defendants in this lawsuit, because the purpose of the
payment was to compensate Leonel Lopez, Jr. and others. Therefore, the
City is damaged by at least that figure.
The City also presented the affidavit of Leonel Lopez, Jr., wherein Lopez
confessed to being part of a bribery scheme involving appellants and co-defendants
related “to the construction and rehabilitation of a Wastewater Treatment Plant and Water
Treatment Plant in Weslaco, Texas.” The City provided the trial court evidence of an
alleged bribery scheme concocted in part by appellants in order to defraud the City. In
furtherance of its allegations, the City’s evidence as it related to damages adequately set
forth the particular loss the City claims and how the loss relates to the alleged acts of
appellants. Appellants argue in part that the City’s failure to account for a settlement
received from another defendant in this matter renders the provided evidence “insufficient
to show that the City’s damages are susceptible to calculation with any certainty.”
However, the City is not required to provide evidence sufficient to allow an exact
calculation of the lost profits; rather, it was only required to present evidence sufficient to
support a rational inference that appellants’ actions caused it to lose some specific,
demonstrable profits. S & S Emergency Training, 564 S.W.3d at 848 (citing In re Lipsky,
460 S.W.3d at 592–93). Accordingly, we find that the City met its burden to establish a
prima facie case under the TCPA for the element of damages.
3. Equitable Relief
Appellants argue that the record evidence is insufficient to support the City’s
equitable relief claims, specifically the City’s claims for money had and received, unjust
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enrichment, constructive trust, and recission.
A constructive trust is an equitable, court-created remedy designed to prevent
unjust enrichment. KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 87 (Tex. 2015) (citing
Meadows v. Bierschwale, 516 S.W.2d 125, 131 (Tex. 1974) (“Constructive trusts, being
remedial in character, have the very broad function of redressing wrong or unjust
enrichment in keeping with basic principles of equity and justice.”)). The party requesting
a constructive trust must establish the following: (1) breach of a special trust or fiduciary
relationship or actual or constructive fraud; (2) unjust enrichment of the wrongdoer; and
(3) an identifiable res that can be traced back to the original property. Matter of Haber Oil
Co., Inc., 12 F.3d 426, 437 (5th Cir.1994) (applying Texas law); see also Meadows, 516
S.W.2d at 128–31. Here, appellants only challenge that the City did not identify a specific
res to support the constructive trust claim. To prove an identifiable res, the proponent of
the constructive trust must show that the specific property that is subject to the
constructive trust is the same property—or the proceeds from the sale thereof or revenues
therefrom—that was somehow wrongfully taken. Wheeler v. Blacklands Prod. Credit
Ass’n, 627 S.W.2d 846, 851 (Tex. App.—Fort Worth 1982, no writ); In re Hayward, 480
S.W.3d 48, 52 (Tex. App.—Fort Worth 2015, no pet.). The City argues that the funds
identified as improperly obtained through the fraudulent contract is the res underlying its
claim against appellants. The City established a prima facie case that the monetary
payment to appellants on the allegedly fraudulent invoices was the res.
Appellants next argue that the City’s claims for unjust enrichment and money had
and received must be dismissed as a “valid, express contract covers the subject matter
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of the parties’ dispute, there can be no recovery under a quasi-contract theory.” Fortune
Prod. Co. v. Conoco, Inc., 52 S.W.3d 671, 684 (Tex. 2000). However, because the City
seeks to have the contracts voided as part of their allegations against appellants, this
argument by appellants fails. As an alternative theory of recovery, if the City prevails and
the contracts are voided, no “valid, express contract” would cover the subject matter of
the dispute. Accordingly, the City has established a prima facie case for its claims for
unjust enrichment and money had and received, as pled in the alternative.
Lastly, appellant CDM Constructors challenges the City’s rescission claim, stating
that “[t]he City does not even attempt to provide evidence that might preclude dismissal
under the TCPA of its rescission claim” against appellant CDM Constructors. CDM
Constructors specifically argues that a rescission claim cannot be based upon a
completed contract and that the contract between the City and CDM Constructors was
undisputedly completed. To the contrary, the City contends that CDM Constructors did
not fully perform on the contract, and even if it had, exceptions justify a rescission claim
in this case based on the fraudulent conduct of CDM Constructors. The City relies on
Sister Initiative, LLC v. Broughton Maintenance Association, Inc. to support its position,
which explains
[a] recognized exception to this rule is that rescission may be allowed
without complete or partial restoration of the consideration where the
particular circumstances indicate that to be the more equitable result, as
where a defrauded party’s inability to make restoration is due to the wrongful
conduct of the fraudulent party.
No. 02-19-00102-CV, 2020 WL 726785, at *24–25 (Tex. App.—Fort Worth Feb. 13, 2020,
pet. denied) (mem. op.) (citing Turner v. Hous. Agric. Credit Corp., 601 S.W.2d 61, 65
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(Tex. App.—Houston [1st Dist.] 1980, writ ref’d n.r.e.)); see also Shenandoah Assocs. v.
J & K Props., Inc., 741 S.W.2d 470, 476 (Tex. App.—Dallas 1987, writ denied) (stating
that a recognized exception to the rule requiring restoration of the parties to their original
status “is when the purchaser terminates the contract and the court has examined the
circumstances and determined that it would be more equitable to grant the rescission
without the complete or partial restoration of the consideration received by the purchaser
while in possession of the purchased item”); Boyter v. MCR Constr. Co., 673 S.W.2d 938,
941 (Tex. App.—Dallas 1984, writ ref’d n.r.e.) (stating that to be entitled to the equitable
remedy of rescission, “a party must show either (1) that he and the other party are in the
status quo . . . or (2) that there are special equitable considerations that obviate the need
for the parties to be in the status quo”). Here, where the City is attempting to void the
allegedly fraudulently induced contracts, it has provided a prima facie case under the
TCPA on its rescission claim.
Appellants generally argue that the City was required to show that it had no
adequate remedy at law in order to pursue its equitable relief claims. In response,
however, the City argues that the equitable relief claims were pled in the alternative, and
as such “it is inappropriate to dismiss one alternative claim simply because the City might
prevail on another.” Appellants have not challenged the City’s proof of a prima facie case
as to any other specific elements of its equitable relief claim. Consequently, we need not
address those elements. See TEX. R. APP. P. 38.1(i) (appellant’s brief must contain clear
and concise argument for contentions made with citation to authorities and record).
4. Summary
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Accordingly, having found that the City established a prima facie case under the
TCPA as to appellants’ challenged claims, we overrule appellants’ third issue.
III. CONCLUSION
The judgment of the trial court is affirmed. 2
NORA L. LONGORIA
Justice
Delivered and filed on the
25th day of March, 2021.
2 Appellants also raise a fourth issue that “governmental immunity does not bar the City’s liability
under the TCPA for costs, fees, and sanctions.” However, as we have affirmed the trial court’s denial of
appellants’ TCPA motion, we need not address this issue. See TEX. R. APP. P. 47.1.
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