Bijan Merrikh v. Joseph Costa and Johna Costa ( 2024 )

Reversed in Part, Affirmed in Part, and Remanded, and Memorandum
Opinion filed July 25, 2024.
In The
Fourteenth Court of Appeals
NO. 14-22-00312-CV
BIJAN MERRIKH, Appellant
V.
JOSEPH COSTA AND JOHNA COSTA, Appellees
On Appeal from the 125th District Court
Harris County, Texas
Trial Court Cause No. 2018-28389
MEMORANDUM OPINION
Raising six issues on appeal, appellant Bijan Merrikh challenges the final
judgment rendered by the trial court in favor of appellees Joseph Costa and Johna
Costa on their breach of contract, Deceptive Trade Practices–Consumer Protection
Act (DTPA),1 and common-law fraud claims. Merrikh argues that the trial court
erred because there is legally insufficient evidence to support the trial court’s
1
See Tex. Bus. & Com. Code Ann. §§ 17.41–.63.
judgment with respect to (1) the Costas’s breach-of-contract claim; (2) the Costas’s
fraud claim; (3) the Costas’s DTPA claim; and (4) the Costas’s
negligent-misrepresentation claim. Merrikh also argues that the trial court erred by
(5) not requiring the Costas to make an election of remedies; and (6) awarding
attorney’s fees that were not properly segregated by claim or cause.
We conclude there is no evidence supporting the trial court’s judgment on
the Costas’s breach-of-contract claim. We also conclude that the trial court erred
by not requiring the Costas to segregate their attorney’s fees. Therefore, we
remand the cause to the trial court and order the trial court (1) to render judgment
denying the Costas’s breach-of-contract claim, and (2) to conduct further
proceedings limited to the determination of reasonable and necessary attorney’s
fees to be awarded to the Costas as a result of their DTPA claim and in light of our
conclusion that the Costas did not attempt to segregate their attorney’s fees or meet
their burden to establish that segregation was not required.
I. BACKGROUND
Joseph and Johna Costa are the owners of a 2012 Land Rover Range Rover
Sport HSE (the Range Rover). In 2017, the engine in the Range Rover failed and
the Costas sought to replace the engine with a used engine. Although they lived in
Louisiana at the time, the Costas found an online advertisement for a replacement
engine at Quality Auto Dismantle, LLC (QAD) in Houston. Bijan Merrikh was
working at QAD at the time, a business owned by Merrikh’s son.
The Costas paid $8,800 for the replacement engine. Even though QAD was
not a repair shop and generally offered no mechanical services, Merrikh agreed to
install the replacement engine in the Range Rover. After the first replacement,
Johna drove the Range Rover to Louisiana and then heard a knocking noise in the
engine. The Range Rover was towed back to Merrikh’s shop and Merrikh installed
2
a second engine in the Range Rover. QAD kept no records of the services
performed. Ultimately, four or five used engines were installed in the Range Rover
although the Costas only paid for one engine. Johna testified that five used engines
were installed in the Range Rover. In contrast, Merrikh testified he thought only
four engines were installed, but he was not certain.
After the final engine was installed in the vehicle, Johna drove the Range
Rover to Denver, Colorado. After reaching Denver, the vehicle overheated and
Johna had to have the vehicle towed to a repair shop. The Denver repair shop
inspected the vehicle and concluded that the engine was improperly installed, with
various critical parts missing. The owner of the Denver shop, who testified at trial
as an expert, also testified that several temperature sensors were unplugged or
bypassed so that the “check engine” lights would not notify the driver of an issue.
In 2018, the Costas filed suit against Merrikh, his son, and QAD. At that
time, QAD had forfeited its corporate existence and privileges. A default judgment
was taken against QAD on the Costas’s claims against it. The judgment against
QAD was then severed from the Costas’s claims against Merrikh and his son. At
trial, the Costas’s claims against Merrikh’s son were dismissed because there was
no evidence Merrikh’s son ever communicated with the Costas about the Range
Rover or was involved in the repairs.
After a bench trial, the trial court rendered judgment in favor of the Costas
against Merrikh, personally, as follows: (1) economic damages for breach of
contract in the amount of $69,881.70; (2) additional damages under the DTPA of
$139,763.40; 2 (3) actual damages for fraud in the amount of $69,881.70; and
(4) reasonable and necessary attorney’s fees in the amount of $32,210.06.
2
The final judgment does not award and the Costas do not recover any economic
damages under the DTPA. This issue has not been challenged on appeal by either party.
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II. ANALYSIS
A. Standard of review
Most of Merrikh’s appellate issues involve legal-sufficiency challenges, so
we first consider the scope of our review. When a party challenges the legal
sufficiency of the evidence supporting an adverse finding on which the party did
not have the burden of proof at trial, the party must demonstrate no evidence exists
to support the adverse finding. See City of Keller v. Wilson, 168 S.W.3d 802, 827
(Tex. 2005); Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983). Under a legal-
sufficiency review, we consider all of the evidence in the light most favorable to
the prevailing party, make every reasonable inference in that party’s favor, and
disregard contrary evidence unless a reasonable fact-finder could not. City of
Keller, 168 S.W.3d at 807, 822, 827. We cannot substitute our judgment for that of
the fact-finder if the evidence falls within this zone of reasonable disagreement. Id.
at 822.
B. Breach-of-contract claim
In issue 1, appellant argues the trial court erred in rendering judgment on the
Costas’s breach-of-contract claim because the only contract was with QAD, for
which Merrikh was acting as a salesperson or agent. Restated, Merrikh argues
there is no evidence to support a finding there was a contract between the Costas
and Merrikh.
In their original petition, the Costas alleged that there was a valid enforceable
contract between the Costas and Merrikh “to procure the replacement of an engine
in proper working condition in exchange for a certain sum of money.” The trial
court’s findings of fact state the following:
The execution of the invoice represents a valid, enforceable contract.
See Plaintiffs’ Exhibit 2. Plaintiffs contracted with Defendant to
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procure the replacement of an engine in proper working condition in
exchange for a sum of money. Trial testimony indicates that
Defendant Bijan Merrikh was to install an engine into the Plaintiffs’
vehicle and provide a working vehicle. Pursuant to the contract,
Plaintiffs tendered payment for the engine installation and repairs to
the vehicle. See Plaintiffs’ Exhibit 2. However, Defendant failed to
provide a properly working vehicle as requested for and bargained for
by Plaintiffs.
The elements of a breach-of-contract claim are: (1) a valid contract; (2) the
party suing to enforce the contract performed or tendered performance; (3) the
other party breached the contract; and (4) the suing party was damaged as a result
of the breach. USAA Tex. Lloyds Co. v. Menchaca, 545 S.W.3d 479, 501 n.21
(Tex. 2018). Here, Merrikh disputes that he was a party to the contract.
The invoice relied on by the Costas is only in the name of QAD. The invoice
does not include Merrikh’s name or signature anywhere. Although it contains
space for the name of a sales representative to be listed, that section is blank.
Merrikh did fill out the form and negotiate the transaction; however, there is no
evidence that Merrikh did so in any capacity other than as employee or agent. The
trial court’s findings of fact and conclusions of law offer no legal explanation or
support for the conclusion that Merrikh can be held personally liable for a contract
of QAD.
The Costas argued that the Tax Code allowed them to pursue Merrikh
personally. The Tax Code does provide that if a corporation forfeits its privileges
(and existence) because it has failed to file a report or pay a penalty, the directors
and officers of the corporation are liable for the debts of the entity incurred during
the time the privileges of the corporation are forfeited. Tex. Tax Code Ann.
§ 171.255(a), .2515 (applying section 171.255 to all taxable entities including
limited liability companies); Bruce v. Freeman Decorating Servs., Inc., No.
14-10-00611-CV, 2011 WL 3585619, at *2 (Tex. App.—Houston [14th Dist.]
5
Aug. 16, 2011, pet. denied) (mem. op.). However, the contract for the replacement
engine was dated in 2017 when QAD still maintained its legal privileges. And even
if there had been any contractual activity after QAD forfeited its privileges, there
was no evidence at trial reflecting that Merrikh was a director or officer of QAD
necessary to invoke the liability provisions of the statute. At trial, Merrikh testified
that he was working for QAD, which was formed and owned by his son. Therefore,
there was no evidence supporting any personal liability on the part of Merrikh.
On the record created below, we conclude there was no evidence to support
the judgment against Merrikh, personally, for breach of contract based on the
invoice for the engine installation.
We sustain issue 1.
C. Fraud
The trial court rendered judgment in the Costas’s favor on both theories of
fraud they asserted: fraud by misrepresentation and fraud by nondisclosure. In
issue 3, appellant argues there was no evidence to support the trial court’s
judgment against him for common-law fraud.
Merrikh only challenges the trial court’s judgment based on findings of fact
on common-law fraud or fraud by misrepresentation. He does not challenge any of
the trial court’s findings of fact establishing fraud by nondisclosure (omission).
Therefore, Merrikh has not challenged all the trial court’s findings of fact and
conclusions of law supporting its judgment against Merrikh for fraud.
We overrule issue 3.
D. DTPA claim
In issue 4, Merrikh argues that the trial court’s findings with respect to the
Costas’s DTPA claim are erroneous because the Costas offered no evidence to
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support the elements of their claim.
1. Applicable law
The DTPA serves “to protect consumers against false, misleading, and
deceptive business practices, unconscionable actions, and breaches of warranty and
to provide efficient and economical procedures to secure such protection.” Tex.
Bus. & Com. Code Ann. § 17.44(a). The supreme court has held that the DTPA
should be liberally construed to protect consumers from deceptive business
practices. Miller v. Keyser, 90 S.W.3d 712, 715 (Tex. 2002).
The elements of a DTPA cause of action are: (1) the plaintiff is a consumer;
(2) the defendant violated a specific DTPA provision; and (3) the violation was a
producing cause of the plaintiff’s damages. Tex. Bus. & Com. Code Ann.
§ 17.50(a); Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1996).
“Producing cause” means “a substantial factor which brings about the injury and
without which the injury would not have occurred.” Doe v. Boys Clubs of Greater
Dallas, Inc., 907 S.W.2d 472, 481 (Tex. 1995). Thus, there must be evidence that
the consumer was adversely affected by the defendant’s improper conduct. See id.(citing Home Sav. Ass’n v. Guerra, 733 S.W.2d 134, 136 (Tex. 1987)). A
consumer is not required to prove intent to make a misrepresentation to recover
under the DTPA. Keyser, 90 S.W.3d at 716. Misrepresentations that may not be
actionable under common-law fraud may be actionable under the DTPA. Id. Thus,
Merrikh may be held liable under the DTPA even if he did not intend to deceive
anyone. See e.g., Eagle Props., Ltd. v. Scharbauer, 807 S.W.2d 714, 724 (Tex.
1990).
2. Liability as salesperson
Before we address his substantive challenges to the trial court’s DTPA
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findings, we address Merrikh’s arguments that the trial court’s judgment cannot be
sustained against him because he was merely working as a salesperson for QAD.
However, the DTPA does not so narrowly limit relief for consumers. The DTPA
provides that:
a consumer may maintain an action where any of the following
constitute a producing cause of economic damages or damages for
mental anguish: (1) the use or employment by any person of a false,
misleading, or deceptive act or practice that is: (A) specifically
enumerated in a subdivision of Subsection (b) of Section 17.46 of this
subchapter; and (B) relied on by a consumer to the consumer’s
detriment[.]
Tex. Bus. & Com. Code Ann. § 17.50(a) (emphasis added). “Person” is
specifically defined to include “an individual, partnership, corporation, association,
or other group.” Tex. Bus. & Com. Code Ann. § 17.45(3). Merrikh was the only
person with whom the Costas had any meaningful interaction regarding the engine
replacement and the status of repairs. Under the DTPA, Merrikh is responsible for
his own conduct and interactions with the Costas. Keyser, 90 S.W.3d at 716.
3. Trial court’s findings
The trial court found that the Costas were consumers, which Merrikh does
not dispute. However, on appeal, Merrikh maintains there was no evidence
supporting the trial court’s findings that he violated the DTPA in the following
ways:
Defendant engaged in false, misleading, or deceptive acts or practices
that Plaintiffs relied on to Plaintiffs’ detriment. Specifically,
Defendant:
i. Represented that good or services had sponsorship, approval,
characteristics, ingredients, uses, benefits, or quantities which
they did not have;
ii. Represented that goods or services were of a particular
standard, quality, or grade;
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iii. Knowingly made false or misleading statements of fact
concerning the need and quality of parts, replacement, or repair
service;
iv. Represented that work or services had been performed on, or
parts replaced in, [] when the work or services were not
performed, or the parts replaced; and
v. Failed to disclose information concerning goods or services
which were known at the time of the transaction when failure to
disclose such information was intended to induce the consumer
into a transaction which the consumer would not have entered
had the information been disclosed. Tex. Bus. & Com. Code
Ann. § 17.46(b).
4. Failure to disclose
To prevail on their claim for failure to disclose under the DTPA, the Costas
had the burden to prove (1) Merrikh knew information regarding the capability for
repairs services at QAD, (2) the information was not disclosed, (3) there was an
intent to induce the consumer to enter into the transaction through the failure to
disclose, and (4) the consumer would not have entered into the transaction had the
information been disclosed. Tex. Bus. & Com. Code Ann. § 17.46(b)(24); see
Jasek v. Tex. Farm Bureau Underwriters, No. 14-19-00759-CV, 2022 WL 364050,
at *3 (Tex. App.—Houston [14th Dist.] Feb. 8, 2022, no pet.) (mem. op.);
Patterson v. McMickle, 191 S.W.3d 819, 827 (Tex. App.—Fort Worth 2006, no
pet.). Mere nondisclosure of material information is not enough to establish an
actionable DTPA claim; there must be an intent to induce. See Tex. Bus. & Com.
Code Ann. § 17.46(b)(24).
Any false, misleading, or deceptive act must also be relied upon by the
consumer. Tex. Bus. & Com. Code Ann. § 17.50(a)(1)(B). However, in contrast to
a fraud cause of action, the DTPA does not require proof of justifiable reliance;
rather, the DTPA simply requires the consumer’s detrimental reliance. See id.9
There is undisputed evidence that Merrikh failed to disclose material
information about QAD’s capability for “repair services.” Merrikh knew, but
testified he did not tell the Costas, that he was not a mechanic and that QAD did
not have any employees who were mechanics. He did not disclose that, at best, he
and potentially some other employees of QAD had mechanical knowledge. He did
not disclose that neither he nor QAD had ever performed engine replacements and
QAD did not possess the tools and equipment needed to properly evaluate the
functioning of the Range Rover. Given that the Costas paid to have the Range
Rover towed to Houston for an engine replacement, there is undisputed evidence
that the Costas believed QAD had the capability of performing the engine
replacement. Johna testified that if QAD had not been able to perform the engine
replacement, she would have purchased the used engine and had it shipped to a
repair shop in her area.
There was legally-sufficient evidence supporting the trial court’s findings
that Merrikh failed to disclose information concerning engine-replacement
services, which he knew at the time of the transaction and did not disclose, because
he intended to induce the Costas into a transaction they might not have otherwise
contemplated. Tex. Bus. & Com. Code Ann. § 17.46(b)(24). Having concluded
that the trial court did not err in finding that Merrikh violated the DTPA by
committing at least one of the acts enumerated in the DTPA “laundry list,” we
need not address the other DTPA findings. Main Place Custom Homes, Inc. v.
Honaker, 192 S.W.3d 604, 625 (Tex. App.—Fort Worth 2006, pet. denied)
(because evidence was sufficient to support violation of at least one laundry list
prohibition, there was no need to address contentions as to remaining DTPA
violations); see also Tex. R. App. P. 47.1 (opinion must address every issue
necessary to final disposition of appeal).
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We overrule issue 4.
E. Negligent misrepresentation
In issue 5, appellant argues that the trial court erred in rendering judgment
against him individually for negligently misrepresenting a material fact. Although
the Costas pleaded negligent misrepresentation, the final judgment does not
contain a liability finding on negligent misrepresentation, nor do the trial court’s
findings of fact and conclusions of law address the Costas’s
negligent-misrepresentation claim.
We overrule issue 5.
F. Election of remedies
In issue 6, Merrikh argues the trial court erred by not requiring the Costas to
make an election of remedies for recovery.
To the extent that Merrikh seeks to preclude the Costas from obtaining more
than one recovery for their injury, any error on this issue was not preserved for
appellate review.3 See Boyce Iron Works, Inc. v. Sw. Bell Tel. Co., 747 S.W.2d
785, 787 (Tex. 1988) (error must have been brought to trial court’s attention); Tex.
R. App. P. 33.1(a). The record does not reflect that Merrikh brought this issue to
the trial court’s attention after the judgment was rendered. 4
3
For fraud, the Costas could recover economic damages, but not attorney’s fees. For a
DTPA violation, the Costas could recover economic damages and attorney’s fees. See Tony
Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 304 (Tex. 2006). The Costas are not entitled to
recover their economic damages twice; however, they had the right to judgment on the theory
entitling them to the greatest or most favorable relief. Boyce Iron Works, Inc. v. Sw. Bell Tel.
Co., 747 S.W.2d 785, 787 (Tex. 1988). But, given that the trial court did not award economic
damages to the Costas under the DTPA, it does not appear that they recovered their economic
damages twice.
4
Further, Merrikh only challenges on appeal that the Costas must elect between fraud
damages and breach-of-contract damages. We have already held that the Costas cannot recover
on their breach-of-contract claim against Merrikh personally and that claim should be denied.
11
Because Merrikh did not preserve error on this issue, we overrule issue 6.
G. Attorney’s fees
In issue 2, Merrikh asserts he is entitled to a reversal and “reformation” of
the judgment on the award of attorney’s fees because the evidence is conclusive
that the Costas did not segregate their fees. Merrikh argued to the trial court that
the Costas had not properly segregated their attorney’s fees and cross-examined the
Costas’s attorney’s fees expert on that issue.
Parties have always been required to segregate fees between claims for
which they are recoverable and claims for which they are not. Chapa, 212 S.W.3d
at 311. However, the supreme court has recognized that an exception exists “when
the attorney’s fees rendered are in connection with claims arising out of the same
transaction and are so interrelated that their “prosecution or defense entails proof
or denial of essentially the same facts.” Stewart Title Guar. Co. v. Sterling, 822
S.W.2d 1, 11 (Tex. 1991). Therefore, if any attorney’s fees relate solely to a claim
for which such fees are unrecoverable, a claimant must segregate recoverable from
unrecoverable fees. Chapa, 212 S.W.3d at 313. However, “intertwined facts do not
make tort fees recoverable; it is only when discrete legal services advance both a
recoverable and unrecoverable claim that they are so intertwined that they need not
be segregated.” Id.
The trial court found that the Costas were entitled to recover $32,210.06 in
reasonable and necessary attorney’s fees for their breach-of-contract and DTPA
claims. The Costas’s attorney’s fees expert, John Davis, testified that the total
attorney’s fees incurred from inception of the case through trial was $45,505.07.
He also testified that the requested attorney’s fees were not segregated by claim or
by cause number, even though a judgment had been rendered against QAD in favor
of the Costas awarding attorney’s fees long before the trial against Merrikh. Davis
12
stated that the claims against the various defendants were intertwined and could
not be segregated because: “It’s the same people. It’s the same parties. It’s the
same stuff.”
As the parties seeking attorney’s fees, the Costas bore the burden of
demonstrating that segregation was not required. Sustainable Tex. Oyster Res.
Mgmt., L.L.C. v. Hannah Reef, Inc., 623 S.W.3d 851, 872 (Tex. App.—Houston
[1st Dist.] 2020, pet. denied); Clearview Props., L.P. v. Prop. Tex. SC One Corp.,
287 S.W.3d 132, 144 (Tex. App.—Houston [14th Dist.] 2009, pet. denied). Here,
Davis offered no expert testimony supporting the Costas’s contention that all
attorney’s fees supporting any claims against any of the defendants (including the
severed corporate defendant, QAD) were recoverable against Merrikh personally.
His conclusory response that it was all the same people and “stuff” is not evidence
that will satisfy the Costas’s burden that segregation was not required. 5 On
cross-examination, Merrikh highlighted the fact that the Costas’s requested
attorney’s fees included time entries for collecting on the judgment against QAD,
after the judgment against QAD was severed. Davis repeatedly confirmed that his
firm had not attempted to segregate fees by claim—even though the Costas had
made claims for which attorney’s fees were not recoverable—or by cause number.6
We conclude that the Costas did not meet their burden.
At least some of the work performed by the Costas’s attorneys related
(1) solely to claims which attorney’s fees are unrecoverable and (2) after 2019 to
collection from a defendant no longer part of the lawsuit. See Sustainable Tex.
5
Initially, Davis testified that total reasonable and necessary expenses incurred through
trial was $45,505.07. He then testified that after subtracting the amount of attorney’s fees
awarded against QAD in 2019 the total amount of attorney’s fees incurred was $30,536.06.
6
Davis’s testimony appeared to be informed by a belief that Merrikh should be liable for
the debts of QAD, even though the Costas did not plead or introduce any evidence to support the
disregard of corporate formalities.
13
Oyster Res. Mgmt., 623 S.W.3d at 874 (concluding that party seeking attorney’s
fees must segregate fees for drafting portions of petitions relating solely to three
tort claims for which fees are not recoverable); see also Chapa, 212 S.W.3d at 314
(“[W]hen, as here, it cannot be denied that at least some of the attorney’s fees are
attributable only to claims for which fees are not recoverable, segregation of fees
ought to be required”); CA Partners v. Spears, 274 S.W.3d 51, 84 (Tex. App.—
Houston [14th Dist.] 2008, pet. denied) (noting that each counterclaim, including
claims for which attorney’s fees were unrecoverable, required drafting separate
portions of pleading, separate legal research, and possibly separate discovery
requests, and party was therefore required to segregate fees).
We hold that the trial court erred by failing to require the Costas to segregate
their attorney’s fees. Because the total amount of unsegregated fees incurred by the
Costas is some evidence of the proper amount of attorney’s fees to award, we
remand the cause for further proceedings limited to allowing the Costas to properly
prove their recoverable attorney’s fees. See Chapa, 212 S.W.3d at 314 (stating that
party’s failure to segregate attorney’s fees “does not mean she cannot recover any”
because unsegregated attorney’s fees for entire cause are “some evidence of what
the segregated amount should be”).
We sustain issue 2.
III. CONCLUSION
Having sustained issue 1, we reverse the final judgment of the trial court as
to the Costas’s breach-of-contract claim. Having sustained issue 2, we reverse the
final judgment of the trial court as to the award of attorney’s fees to the Costas. We
remand the cause to the trial court and order the trial court (1) to render judgment
denying the Costas’s breach-of-contract claim, and (2) for further proceedings
limited to the determination and award of reasonable and necessary attorney’s fees
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to be awarded to the Costas on their DTPA claim and in light of our conclusion
that the Costas did not attempt to segregate their attorney’s fees or meet their
burden to establish that segregation was not required. The remainder of the
judgment as challenged on appeal is affirmed.
/s/ Charles A. Spain
Justice
Panel consists of Justices Wise, Spain, and Hassan.
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