RDG Limited Partnership and RDG Partners, Inc. v. GEXA Corp

Affirmed and Memorandum Opinion filed April 26, 2005

Affirmed and Memorandum Opinion filed April 26, 2005.

In The

Fourteenth Court of Appeals

____________

NO. 14-04-00679-CV

____________

RDG LIMITED PARTNERSHIP AND RDG PARTNERS, INC., Appellants

V.

GEXA CORP., Appellee

On Appeal from the County Civil Court at Law No. 1

Harris County, Texas

Trial Court Cause No. 791,194

M E M O R A N D U M   O P I N I O N

Appellants, RDG Limited Partnership and RDG Partners, Inc. (collectively, ARDG@), appeal the judgment in favor of appellee, Gexa Corp., on its claim for unjust enrichment.  We affirm.

                                              Factual Summary

Gexa is a Retail Electric Provider (AREP@) that supplies electricity to individuals and businesses. RDG owns an apartment complex located at 3633 Shaver in the City of Pasadena where Jesus Fornadeo was apparently a resident.  In June 2002, Fornadeo moved to a new apartment complex in the City of Houston. In preparing to move, Fornadeo executed a Residential Electricity Authorization, under which he requested that Gexa supply electric service to his new apartment in the City of Houston.  On the authorization form, under APresent Contact Information,@ Fornadeo listed his old address as the RDG apartment at 3633 Shaver in Pasadena.

When Gexa received the authorization, it contacted the Electric Reliability Council of Texas (ERCOT), which oversees the switching of electric services providers, to obtain the identifying number (AESI@ number) for the meter located at the RDG complex, instead of the ESI for the individual meter at Fornadeo=s new apartment in Houston.  Accordingly, rather than switching Fornadeo=s new residence to Gexa, the error caused RDG=s entire apartment complex at 3633 Shaver to be inadvertently switched to Gexa. 

ERCOT sent postcard notifications of the REP switch to Fornadeo at his old address. Gexa, likewise, sent six invoices to Jesus Fornadeo at his old address, for the period from June 18, 2002 through October 18, 2002.  None of the invoices were returned to Gexa or otherwise paid.  Gexa contacted RDG about the unpaid invoices, but RDG never paid those invoices. 

Gexa eventually brought this action against RDG to collect the value of the electricity ($47,425.21) provided to the apartment complex under theories of quantum meruit, unjust enrichment, restitution, and equitable right of reimbursement.  RDG pleaded the affirmative defenses of Aunclean hands,@ failure of condition precedent, illegality, and assumption of the risk.  RDG also sought a declaratory judgment that Gexa changed RDG=s REP for the property in violation of Chapter 25 of the Substantive Rules Applicable to Electric Service Providers (the ARules@), which are promulgated by the Public Utility Commission of Texas pursuant to Section 39.101 of the Texas Utilities Code.^[1] 

RDG=s counsel wrote to Gexa to provide Aformal notice@ that the invoices were unauthorized charges obtained without consent and verification of authorization in compliance with Chapter 25 of the Rules.  RDG demanded that Gexa (1) cease charging RDG for the unauthorized charges, (2) remove the unauthorized charges from RDG=s bill, and (3) provide RDG with all billing records reflecting the removal of the unauthorized charges.  RDG also put Gexa Aon notice to refrain from@ (1) filing an unfavorable credit report against RDG on the basis of RDG=s nonpayment of the unauthorized charges, and (2) re-billing RDG for the unauthorized charges.  Finally, RDG demanded that Gexa dismiss its lawsuit with prejudice. 

RDG moved for summary judgment.  The trial court denied the summary judgment and tried the case without a jury.  The parties stipulated the only evidence to be considered by the trial court was (1) evidence submitted in support of RDG=s motion for summary judgment, (2) evidence submitted in support of Gexa=s response to the motion for summary judgment, and (3) the parties= stipulation that Gexa=s cost for electricity supplied to RDG=s property was $29,771.62. 

Among its findings of fact, the trial court found that Gexa switched the REP at the apartment complex without RDG=s authorization, but that the switch was the result of a mistake; that RDG received and made full use of the benefits of the electricity supplied by Gexa; and while the reasonable value of the electricity was $47,425.21, Gexa=s cost to supply the electricity was $29,771.62. 

In its conclusions of law, the trial court determined that Gexa did not Aslam@ RDG; RDG passively received the benefit of electricity provided by Gexa, and it would be unconscionable to allow RDG to retain the full benefits of the electricity at Gexa=s expense; RDG would be unjustly enriched if it were allowed to retain the full benefits of the electricity provided by Gexa; and because Gexa=s mistake caused the switching of electric service, equity does not warrant Gexa recovering amounts that it would have otherwise charged or amounts that RDG would have otherwise been required to pay another provider. 

The trial court determined, under equitable principals, that Gexa was entitled to recoup the cost of providing electricity to the apartment complex, i.e., $29,771.62, and RDG was not entitled to recover on its counterclaim, including attorney fees, and accordingly, awarded Gexa $29,771.62, plus pre and post-judgment interest.

                                                     PUC Rules

In its first issue, RDG claims the trial court erred in granting judgment for Gexa because Section 25.481 of the Rules prohibits an REP from collecting either unauthorized charges or charges for unauthorized services.  Section 25.481(b)(2) provides that prior to including any charges on a customer=s electric bill, a REP shall, among other requirements, obtain the customer=s consent to the product or service offered and verify such consent.  ' 25.481(b)(2).  With respect to unauthorized charges, section 25.481(c) of the Rules provide:

(1)     If a customer=s electric bill is charged for any product or service without proper customer consent and verification of authorization in compliance with this section, the REP that billed the customer, when it learns or is notified that any charge that has not been authorized, shall promptly, but not later than 45 days thereafter:

(A)     cease charging the customer for the unauthorized product or service;

(B)     remove the unauthorized charge from the customer=s bill;

(C)     refund or credit to the customer all money that has been paid by the customer for any unauthorized charge . . . ; and

(D)     on the customer=s request, provide the customer with all bill records under its control related to any unauthorized charges within 15 business days after the date of the removal from the customer=s electric bill.

RDG, Apursuant to ' 25.481(c),@ demanded that Gexa cease charging RDG for the unauthorized charges, remove the unauthorized charges from RDG=s bill, and provide RDG  with all billing records reflecting the removal of the unauthorized charges. However, while Section 25.481(c) provides for the removal of an Aunauthorized charge,@ it is clear from reading the entire section that it applies to an REP=s already existing customer, not a new customer who is the subject of an unauthorized switch.  For example, ' 25.481(a)  provides:

After a customer has enrolled or switched to a retail electric provider (REP), pursuant to ' 25.474 of this title (relating to Selection or Change of Retail Electric Provider), any subsequent services offered by the REP that will be billed on the customer=s electric bill shall be authorized by the customer consistent with this section.  A REP may obtain authorization for an additional product or service to appear on the bill for existing customers by using any of the methods set forth in ' 25.474 of this title. 

(Emphasis added).

We find that Section 25.481 is not applicable to this case because RDG was not an existing customer of Gexa.  RDG=s first issue, therefore, is overruled. 

In its second issue, RDG contends the trial court erred in finding that Gexa could avoid the statutory penalty set forth in section 25.481(c) under principles of equity.  As discussed above, section 25.481 does not apply to unauthorized changes by a REP, but to unauthorized charges to an REP=s existing customer.  RDG=s second issue is also overruled.

                                            Unjust Enrichment

In its third issue, RDG argues that even if the trial court could properly apply equity to avoid the statutory penalty, the evidence is legally insufficient to support unjust enrichment.  In its fourth issue, RDG contends the trial court erred in finding that Gexa can recover for unjust enrichment on a finding that RDG passively received the benefit of the electricity provided by Gexa and it would be unconscionable for RDG to retain that benefit.

We review the trial court=s findings of fact for legal and factual sufficiency of the evidence by the same standards applied in reviewing the evidence supporting a jury=s finding.  Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).  When reviewing the legal sufficiency of the evidence, we consider only the evidence and inferences tending to support the trial court=s finding, disregarding all contrary evidence and inferences.  Bradford v. Vento, 48 S.W.3d 749, 754 (Tex. 2001).  A Ano evidence@ point will be sustained if there is no more than a scintilla of evidence to support the finding.  Minyard Food Stores, Inc. v. Goodman, 80 S.W.3d 573, 577 (Tex. 2002).

Unjust enrichment is not a distinct independent cause of action, but a theory of recovery.  Mowbray v. Avery, 76 S.W.3d 663, 679 (Tex. App.CCorpus Christi 2002, pet. denied).  Unjust enrichment is based on the equitable principle that one who receives benefits unjustly should make restitution for those benefits.  Villarreal v. Grant Geophysical, Inc., 136 S.W.3d 265, 270 (Tex. App.CSan Antonio 2004, pet denied); Mowbray, 76 S.W.3d at 679; Bransom v. Standard Hardware, Inc., 874 S.W.2d 919, 927 (Tex. App.CFort Worth 1994, writ denied).  A party may recover under the theory of unjust enrichment when another has obtained a benefit by fraud, duress, or the taking of an undue advantage. Heldenfels Bros., Inc. v. City of Corpus Christi, 832 S.W.2d 39, 41 (Tex. 1992).  To be entitled to restitution under a theory of unjust enrichment, the plaintiff must show the party sought to be charged had wrongfully secured a benefit or had passively received one which would be unconscionable for that party to retain.  Villarreal, 136 S.W.3d at 270; Matagorda County v. Texas Ass=n of Counties County Gov=t Risk Mgmt. Pool, 975 S.W.2d 782, 785 (Tex. App.CCorpus Christi 1998), aff=d, 52 S.W.3d 128 (Tex. 2000). 

RDG contends that Gexa failed to present evidence of fraud, duress, or the taking of undue advantage that would render its retention of the benefit unconscionable. We disagree.  We find the evidence shows that RDG obtained the benefit of the electricity by the taking of undue advantage of Gexa=s mistake when it refused to pay for the electricity.  Gexa mailed six invoices to the address at 3633 Shaver (although addressed to Jesus Fornadeo) for the period from June 18, 2002, through October 18, 2002, which were never returned Gexa.  When Gexa had not received payment for any of the invoices, Gexa=s collections manager contacted RDG about the unpaid invoices.  An RDG employee admitted to Gexa that RDG had not been billed for electricity by its usual providerCReliant Energy.  While initially agreeing to pay Gexa for the electricity, RDG ultimately refused to pay any of the invoices for the electricity it had received and made use of, thus obtaining a benefit by the taking of an undue advantage.

The trial court concluded that RDG passively received the benefit of the electricity provided by Gexa, and it would be unconscionable to allow RDG to retain the full benefits of the electricity at Gexa=s expense. RDG contends this concept, i.e., that a recovery for unjust enrichment may be supported by evidence that a defendant Apassively received a benefit@ which it is unconscionable to retain, was not adopted by the Texas Supreme Court in Heldenfels Brothers.^[2]  Instead, according to RDG, the Heldenfels Brothers Court adopted the following standard:  AUnjust enrichment is not a proper remedy merely because it >might appear expedient or generally fair that some recompense be afforded for an unfortunate loss= to the claimant or because the benefits to the person sought to be charged amounts to a windfall@  832 S.W.2d at 42 (quoting Austin v. Duval, 735 S.W.2d 647, 649 (Tex. App.CAustin 1987, writ denied)).  RDG concludes from this holding that the supreme court disapproved sub silentio of former jurisprudence stating that unjust enrichment can be shown by mere passive receipt of a benefit that would be unconscionable to retain.

We fail to see any contradiction between the two doctrines, but, instead, find they are fully compatible, and any determination on unjust enrichment will necessarily depend upon the evidence presented in the case.  In any event, several courts of appeals have relied on the Apassively received@ language even after the Texas Supreme Court decided Heldenfels Brothers.^[3]  Moreover, the supreme court in Heldenfels Brothers did not address the Apassively retained@ language or otherwise disapprove or overrule any case law applying that language in unjust enrichment analysis.  Therefore, we conclude the Apassively retained@ language is still viable.  RDG=s third issue is overruled.

RDG also complains that there is no evidence that Gexa had clean hands because Gexa=s conduct violated the Rules and the public policy behind the Rules prohibiting the collection of unauthorized charges.  The party seeking equity must come into court with clean hands. Truly v. Austin, 744 S.W.2d 934, 938 (Tex. 1988).  A court will generally deny equitable relief to a party whose conduct with the issue in dispute is unconscionable, unjust, or marked by want of good faith.  Jackson Law Office, P.C. v. Chappell, 37 S.W.3d 15, 27 (Tex. App.CTyler 2000, pet. denied); Crown Constr. Co. v. Huddleston, 961 S.W.2d 552, 559 (Tex. App.CSan Antonio 1997, no pet.).  However, the doctrine Adoes not operate to repeal all sinners from a court of equity.@  1st Coppell Bank v. Smith, 742 S.W.2d 454, 464 (Tex. App.CDallas 1987, no writ).  The clean hands doctrine should not be applied unless the party asserting the doctrine has been seriously harmed and the wrong complained of cannot be corrected without the application of the doctrine.  City of Fredericksburg v. Bopp, 126 S.W.3d 218, 221 (Tex. App.CSan Antonio 2003, no pet.); Flores v. Flores, 116 S.W.3d 870, 876 (Tex. App.CCorpus Christ 2003, no pet.).  It is within the trial court=s discretion to determine whether a party has come to court with unclean hands.  Willis v. Donnelly, 118 S.W.3d 10, 38 (Tex. App.CHouston [14th Dist.] 2003, pet. filed); Wynne v. Fischer, 809 S.W.2d 264, 267 (Tex. App.CDallas 1991, writ denied). 

RDG has not shown that it has been harmed by the unauthorized REP switch.  Specifically, it has not established that it would have paid Reliant Energy, or any other service provider, a different amount for the same service provided by Gexa.  Therefore, the trial court did not abuse its discretion in not finding that Gexa had unclean hands.  RDG=s fourth issue is overruled.

   Request for Additional Findings of Fact & Conclusions of Law

In its fifth issue, RDG complains the trial court erred in not adopting its requested additional findings of fact, namely:

a.       Plaintiff Gexa Corp. (APlaintiff@) is an Retail Electric Provider (AREP@), as that term is defined  by Chapter 25, Subchapter A, ' 25.5(115) of the Substantive Rules Applicable to Electric Service Providers promulgated by the Public Utility Commission of Texas (the ARules@).

b.       On or about June 8, 2002, Plainitff received a Residential Electricity AuthorizationBApartment Units [form] from a person named Jesus Fornadeo (the AFornadeo Authorization@) authorizing Plaintiff to switch the REP of Mr. Fornadeo=s apartment at the Edgebrook Apartments located at 101 East Edgebrook, Houston, Texas 77034.

c.       The Fornadeo Authorization identified Linda Talbert at 713-944-7740 as the manager or agent contact at the Edgebrook Apartments.

d.       The Edgebrook Apartments have never been owned or operated by Defendants.

e.       Linda Talbert has never been a manager or agent of Defendants.

f.        Defendants have never maintained the telephone number of 713-944-7740.

g.       Jesus Fornadeo has never been an employee, agent, or representative of Defendants.

h.       Jesus Fornadeo has never had authority, either actual or apparent, to authorize a switch of Defendants= REP at the Westpoint Village Apartments.

i.        On or about June 8, 2002, Plaintiff switched the REP of one of the meters owned by Defendants from Reliant Energy to Plaintiff without the knowledge or consent of Defendants.

j.        Plaintiff did not obtain Defendants= authorization, or verification of same, for the REP switch in accordance with ' 25.474 of the Rules.

k.       On or about November 12, 2002, Plaintiff for the first time billed Defendants for electrical charges incurred after the REP switch in the amount of $47,425.21.

l.        On or about December 5, 2003, Defendants notified Plaintiff that the $47,425.21 in electrical charges billed by Plaintiff were not authorized by Defendants in compliance with ' 25.474 of the Rules and demanded that Plaintiff cease charging Defendants for the unauthorized charges, remove the unauthorized charge from Defendants= bill and not re-bill Defendants for the unauthorized charges.

m.      Plaintiff refused Defendants= demand.

RDG also contends the trial court erred in not making the following requested conclusions of law:

a.       Plaintiff violated ' 25.474 of the Rules by failing to obtain Defendants= authorization to switch Defendants= REP on June 8, 2002 and by failing to verify Defendants= authorization to switch Defendants= REP on June 8, 2002.

b.       Plaintiff violated ' 25.481 of the Rules by failing to cease charging Defendants for the unauthorized charges after receiving notice that the charges were unauthorized; by failing to remove the unauthorized charge from Defendants= bill after receiving notice that the charges were unauthorized and by failing to not re-bill Defendants for the unauthorized charges after receiving notice that the charges. [sic]

c.       Gexa may recover under the unjust enrichment theory because RDG obtained a benefit from Gexa by fraud, duress, or the taking of undue advantage.

d.       Gexa has clean hands.

Texas Rule of Procedure 298 states A[t]he court shall file any additional or amended findings and conclusions that are appropriate . . .@  Tex. R. Civ. P. 298.  Additional findings of fact and conclusions of law are required only if they relate to ultimate or controlling issues.  Rafferty v. Finstad, 903 S.W.2d 374, 376 (Tex. App.CHouston [1st Dist.] 1995, writ denied); Hunter v. NCNB Tex. Nat=l Bank, 857 S.W.2d 722, 727 (Tex. App.CHouston [14th Dist.] 1993, writ denied).  Thus, the trial court is not required to make additional findings and conclusions (1) that are unsupported in the record, relate merely to evidentiary matters, or are contrary to other previous findings;^[4] (2) if the original findings of fact and conclusions of law A>properly and succinctly relate the ultimate findings of fact and law necessary to apprise [the party] of adequate information for the preparation of his or her appeal=@;^[5] or (3) if the requested findings and conclusions will not result in a different judgment.^[6]  The trial court is not required to set out in detail every reason or theory by which it arrived at its final conclusions.  Associated Tel. Directory Publishers v. Five D=s Publ=g Co., 849 S.W.2d 894, 901 (Tex. App.CAustin 1993, no writ). 

RDG must show from the record that the trial court=s failure to file additional findings of fact and conclusions of law was reasonably calculated to cause and did cause the rendition of an improper judgment or probably prevented it from properly presenting the matter to the court of appeals. In re R.D.Y., 51 S.W.3d at 322; Tamez, 822 S.W.2d at 693. 

RDG=s requested additional findings concern the fact that Gexa was not authorized to switch the REP at the apartment complexCa fact that was not only undisputed by Gexa, but fully admitted to.  With respect to RDG=s requested additional conclusion of law that Gexa violated section 25.474 of the Rules by switching the apartment complex=s REP without RDG=s consent and by failing to verify consent, Gexa does not contest the fact that it did not have RDG=s consent.  With respect to RDG=s requested additional conclusion of law that Gexa violated section 25.481, we have already determined that section 25.481 applies to unauthorized charges to an REP=s already existing customer, not a new customer that is the result of slamming.  With respect to RDG=s requested additional conclusion of law that Gexa may recover under the theory of unjust enrichment because RDG obtained a benefit by fraud, duress or taking undue advantage, the failure to make this conclusion has not prevented RDG from adequately presenting its issues on appeal. Likewise, with respect to RDG=s requested additional conclusion that Gexa has clean hands, the failure to make this conclusion, once again, has not prevented RDG from adequately presenting its issues on appeal. 

RDG has not shown the trial court=s failure to file its requested additional findings of fact and conclusions of law was reasonably calculated to cause, and did cause, the rendition of an improper judgment or probably prevented it from properly presenting the matter to the court of appeals.  RDG=s fifth issue is overruled. 

Accordingly, the judgment of the trial court is affirmed. 

/s/      J. Harvey Hudson

Justice

Judgment rendered and Memorandum Opinion filed April 26, 2005.

Panel consists of Chief Justice Hedges and Justices Hudson and Seymore.

---

^[1]  The purpose of Section 39.101 of the Texas Utilities Code is to provide protections for customers of utility providers, including the right to choose an REP, to have that choice honored, and to not have the REP changed without the customer=s consent.  Tex. Util. Code Ann. ' 39.101(b)(2) (Vernon Supp. 2004B05).  Customers are also entitled to protection from unfair, misleading, or deceptive practices, including protection from being billed for unauthorized services.  Id. at ' 39.101(b)(6). In order to achieve these goals, A[t]he commission has the authority to adopt and enforce such rules as may be necessary or appropriate to carry out Subsections (a)-(d), . . .@  Id. at ' 39.101(e). 

^[2]  Prior to the Texas Supreme Court=s decision in Heldenfels Brothers, several court of appeals, had stated that to be entitled to restitution, a plaintiff must not only show unjust enrichment, but that the defendant had wrongfully secured a benefit or had passively received one which it would be unconscionable to retain.  See, e.g., Oxford Fin. Cos. v. Velez, 807 S.W.2d 460, 465 (Tex. App.CAustin 1991, writ denied); Community Mut. Ins. Co. v. Owen, 804 S.W.2d 602, 606 (Tex. App.CHouston [1st Dist.] 1991, writ denied); City of Corpus Christi v. S.S. Smith & Sons Masonry, Inc., 736 S.W.2d 247, 250 (Tex. App.CCorpus Christi 1987, writ denied); Barrett v. Ferrell, 550 S.W.2d 138, 143 (Tex. Civ. App.CTyler 1977, writ ref=d n.r.e.).

^[3]  Johnson v. Maund Auto. Group, L.P., No. 03-03-00730-CV, 2004 WL 1792400, at *3 (Tex. App.CSan Antonio Aug. 12, 2004, pet. denied) (mem. op.); Villarreal, 136 S.W.3d at 270; Gotham Ins. Co. v. Petroleum Dev. Corp., No. 04-01-00375-CV, 2003 WL 21696625, at *7 (Tex. App.CSan Antonio July 23, 2003, pet. denied) (mem. op.); Matagorda County, 975 S.W.2d at 785; Nationscredit Corp. v. CSSI, The Support Group, Inc., No. 05-99-01612-CV, 2001 WL 200147, at *6 (Tex. App.CDallas Mar. 1, 2001, no pet.) (not designated for publication); Helm v. Landry Serv. Co., No. 01-94-00348-CV, 1995 WL 319014, at *5 (Tex. App.CHouston [1st Dist.] May 25, 1995, writ denied) (not designated for publication).

^[4]  Rafferty, 903 S.W.2d at 376 (citing Simmons v. Compania Financeria Libano, S.A., 830 S.W.2d 789, 791B92 (Tex. App.CHouston [1st Dist.] 1992, writ denied)). 

^[5]  In re R.D.Y., 51 S.W.3d 314, 322 (Tex. App.CHouston [1st Dist.] 2001, pet. denied) (quoting In re Marriage of Morris, 12 S.W.3d 877, 886 (Tex. App.CTexarkana 2000, no pet.)).

^[6]  Tamez v. Tamez, 822 S.W.2d 688, 693 (Tex. App.CCorpus Christi 1991, writ denied) (citing Shelby Int=l, Inc. v. Wiener, 563 S.W.2d 324, 328 (Tex. Civ. App.CHouston [1st Dist.] 1978, no writ)).