Texas Real Estate Commission (TREC) v. Shahin Asgari and Ahmad Borghei

Fourth Court of Appeals
San Antonio, Texas
OPINION
No. 04-12-00368-CV
TEXAS REAL ESTATE COMMISSION,
Appellant
v.
Shahin ASGARI and Ahmad Borghei,
Appellees
From the County Court at Law No. 3, Bexar County, Texas
Trial Court No. 343425
Honorable David J. Rodriguez, Judge Presiding
Opinion by: Catherine Stone, Chief Justice
Sitting: Catherine Stone, Chief Justice
Sandee Bryan Marion, Justice
Rebeca C. Martinez, Justice
Delivered and Filed: April 10, 2013
AFFIRMED
The Texas Real Estate Commission (the Commission) appeals the trial court’s order
directing payment of a judgment from the Real Estate Recovery Trust Account (the Trust
Account) to Shahin Asgari and Ahmad Borghei. Specifically, the Commission alleges there is
no evidence to support the trial court’s findings of misrepresentation, dishonesty, or fraud by real
estate broker Saied Nekoueian, which is required to sustain the order of payment from the Trust
Account. We affirm the trial court’s order.
04-12-00368-CV
BACKGROUND
Since 2004, Nekoueian has held a license from the Commission. In February of 2006,
Nekoueian purchased a piece of commercial property at a foreclosure sale (the “Nacogdoches
lot”). In November of 2006, Nekoueian, Asgari, and Borghei jointly purchased and refurbished a
residential property (the “Leyland property”). In August of 2007, the Leyland property was sold
for a profit, and Nekoueian, Asgari, and Borghei agreed to split the monthly payments from the
note.
In January of 2008, Nekoueian traded his interest in the Nacogdoches lot for Asgari and
Borghei’s interests in the note on the Leyland property plus an additional $9,000 cash paid by
Borghei to Nekoueian. Knowing that Asgari desired to use the Nacogdoches lot as a used car
sales lot, Nekoueian informed Asgari and Borghei that the property would have to be rezoned.
In 2006, Nekoueian had a survey done on the Nacogdoches lot and the section for plat
information was left blank on the survey. This survey, however, was not turned over to Asgari
and Borghei until four months after the transfer. Shortly after the transfer, Asgari and Borghei
submitted an application for rezoning to the City of San Antonio, and they were informed that
the property could not be rezoned because it was not platted and was situated in a floodplain. In
order for the property to be platted and removed from flood plain status to qualify for rezoning,
Asgari and Borghei would be required to invest an additional $60,000 in the lot.
Subsequently, Asgari and Borghei filed suit against Nekoueian alleging various causes of
action, including violations of the Texas Deceptive Trade Practices Act (DTPA), based on
Nekoueian’s false, misleading, or deceptive conduct. After evidence and testimony were
presented, the trial court rendered judgment in favor of Asgari and Borghei. The trial court’s
judgment did not specify the basis on which liability was found. Because Asgari and Borghei
were unable to recover from Nekoueian, they filed a request for payment from the Trust Account
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with the Commission. The Commission denied payment, claiming the trial court did not base the
judgment on a finding of misrepresentation, dishonesty, or fraud. A hearing was held, during
which the Commission explained the Trust Account would be responsible for paying Asgari and
Borghei only if the trial court’s judgment was based on a finding of fraud, misrepresentation, or
dishonesty. Both parties then asked the trial court to clarify the basis of the judgment.
Following the hearing, the trial court issued findings of fact and conclusions of law, specifically
finding that Nekoueian engaged in misrepresentations, fraud, or dishonesty, and the trial court
signed an order mandating payment from the Trust Account up to the statutory cap.
STANDARD OF REVIEW
When the sufficiency of the evidence is challenged, we review a trial court’s findings of
fact under the same standard that is applied when reviewing a jury’s findings. Anderson v. City
of Seven Points, 806 S.W.2d 791, 794 (Tex. 1991); Rosas v. Comm’n for Lawyer Discipline, 335
S.W.3d 311, 316 (Tex. App.—San Antonio 2010, no pet.). The trial court is the sole judge of the
credibility of and the weight to be given to the witnesses’ testimony. City of Keller v. Wilson,
168 S.W.3d 802, 819 (Tex. 2005); Rosas, 335 S.W.3d at 316. We review the evidence in the
light most favorable to the verdict and assume the fact finder “credited testimony favorable to the
verdict and disbelieved testimony contrary to it.” City of Keller, 168 S.W.3d at 819. In contrast,
we review a trial court’s legal conclusions de novo. Ski Masters of Tex., LLC v. Heinemeyer,
269 S.W.3d 662, 667–68 (Tex. App.—San Antonio 2008, no pet.) (citing BMC Software
Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002)).
In order to prevail in a no-evidence challenge, the record must reveal: (a) an absence of
evidence of an essential fact; (b) that rules of law or of evidence prohibit the court from crediting
the only evidence supporting a vital fact; (c) there is no more than a mere scintilla of evidence to
prove a crucial fact; or (d) the evidence conclusively establishes the opposite of a critical fact.
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City of Keller, 168 S.W.3d at 810; Regal Fin. Co. v. Tex Star Motors, Inc., 355 S.W.3d 595, 603
(Tex. 2010). Reviewing courts must credit favorable evidence if a reasonable fact finder could,
and disregard contrary evidence unless a reasonable fact finder could not. City of Keller, 168
S.W.3d at 827; Rosas, 335 S.W.3d at 316.
THE REAL ESTATE RECOVERY TRUST ACCOUNT
The statute allowing recovery under the Real Estate Recovery Trust Account is found in
Chapter 1101 of the Occupations Code. See generally TEX. OCC. CODE ANN. ch. 1101, subch. M
& N (West 2012). In construing these statutory provisions, we must seek to ascertain the
legislature’s intent by looking at the statute “as a whole, and not its isolated provisions, keeping
in mind at all times ‘the old law, the evil, and the remedy.’” Cameron v. Terrell & Garrett, Inc.,
618 S.W.2d 535, 540 (Tex. 1981) (quoting Woods v. Littleton, 554 S.W.2d 662, 665 (Tex.
1977)). The statute states that the Trust Account is maintained “to reimburse aggrieved persons
who suffer actual damages” at the hands of a license holder. TEX. OCC. CODE ANN. 1101.601(a)
(West 2012). Indeed, Texas appellate courts agree “[t]he purpose of the Account is to ‘guarantee
the fidelity and honesty of the real estate salesman in his dealings with the public and to insure
and indemnify any member of the public against damages or injury caused by a violation of the
Act.’” Wilson v. Bloys, 169 S.W.3d 364, 366 (Tex. App.—Austin 2005, pet. denied) (quoting
State v. Pace, 640 S.W.2d 432, 433 (Tex. App.—Beaumont 1982), aff’d, 650 S.W.2d 64 (Tex.
1983)).
Neither party disputes that Nekoueian is a license holder and subject to the statute’s
provisions. When a license holder is selling property in his own name instead of as an agent for
someone else, a claimant may not recover from the Trust Account unless the license holder
engages in the wrongful conduct described in Section 1101.652(a)(3) or (b), or Section
1101.653(1), (2), (3) or (4) of the Occupations Code. TEX. OCC. CODE ANN. § 1101.602 (West
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2012). The parties agree Asgari and Borghei’s only means of recovery is under Section
1101.652(a)(3), which states that a license holder is prohibited from “engag[ing] in
misrepresentation, dishonesty, or fraud when selling, buying, trading, or leasing real property in
the name of . . . the license holder.” Id. § 1101.652(a)(3) (West 2012).
The statute requires the claimant to show “that the judgment is based on facts allowing
recovery under this subchapter.” Id. § 1101.607(1) (West 2012). Further, at the hearing for
reimbursement by the Trust Account, “the [C]ommission may relitigate . . . any material and
relevant issue that was determined in the action that resulted in the judgment in favor of the
aggrieved person.” Id. § 1101.608(c) (West 2012). This means the claimant must provide
evidence sufficient to establish the essential elements of any issue relitigated by the Commission
during the hearing. Id.; see also Texas Real Estate Comm’n v. Nagle, 767 S.W.2d 691, 693 (Tex.
1989).
SUFFICIENCY OF THE EVIDENCE
The Commission contends there is no evidence of misrepresentation, dishonesty, or
fraud 1 to support the trial court’s order, specifically contesting the following findings of fact:
(18) Saied Nekoueian engaged in misrepresentation, dishonesty and fraud in
selling to Shahin Asgari and Ahmad Borghei the Nacogdoches Lot, property
which was held in Saied Nekoueian’s name.
(20) Saied Nekoueian’s misrepresentations regarding the worth of and suitability
for use of the Nacogdoches Lot were a producing cause of Shahin Asgari’s and
Ahmad Borghei’s actual damages.
(22) The Judgment was founded upon Saied Nekoueian’s deceptive conduct in
connection with his conveyance of the Nacogdoches Lot, namely that he
represented in violation of Section 17.46 of the Texas Business & Commerce
Code that the Nacogdoches Lot had characteristics, uses, benefits, and qualities
1
We note that contrary to statements in the Commission’s brief, the trial court did not have to find
misrepresentation, dishonesty, and fraud, but instead, it was required to find only one of the three. See TEX. OCC.
CODE ANN. 1101.652(a)(3) (West 2012).
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that it did not have and was of a particular standard and quality when in fact it
was of another.
Asgari and Borghei essentially assert that Nekoueian made a material misrepresentation
that they needed only to rezone the property for it to be suitable as a used car lot, which was false
because the property was not platted and was in a floodplain. The Commission argues recovery
from the Trust Account is inappropriate because Nekoueian did not misrepresent that the
property needed to be rezoned, nor did he make any specific representations regarding the
platting or floodplain status of the property. Further, the Commission contends Asgari and
Borghei’s true complaint is that Nekoueian did not sufficiently investigate the marketability of
the property prior to the transaction and that this is not grounds for relief under the Trust
Account.
The evidence and inferences viewed in the light most favorable to Asgari and Borghei
show the following: (1) Nekoueian represented to Asgari and Borghei that the only obstacle
preventing them from using the property as a used car lot was the zoning. (2) Nekoueian knew
Asgari was looking for property for his used car business. (3) Nekoueian approached Asgari and
Borghei about the exchange and enticed them by telling them the Nacogdoches lot would make a
good used car sales lot if rezoned. (4) Asgari testified they relied on Nekoueian’s knowledge as
a broker and owner of the property for almost two years, and they placed trust in Nekoueian as
their former business partner. (5) In order for the lot to be used as a used car lot, the lot would
need to be rezoned, platted, and removed from flood plain status, which would cost an additional
$60,000.
While it may be true that Nekoueian did not specifically make misrepresentations about
whether the property was platted or in a floodplain and that a party cannot be liable for failure to
disclose information absent a legal duty to do so, see Bradford v. Vento, 48 S.W.3d 749, 755
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(Tex. 2001), the trial court’s findings were not primarily premised on nondisclosures. Instead,
the trial court found that Nekoueian “affirmatively represented to Shahin Asgari that the
Nacogdoches Lot needed only to be rezoned to be suitable for [use as a used car sales lot].”
Further, the trial court stated: “The [j]udgment was founded upon Saied Nekoueian’s deceptive
conduct in connection with his conveyance of the Nacogdoches Lot, namely that he represented
in violation of [the DTPA] that the Nacogdoches Lot had characteristics, uses, benefits, and
qualities that it did not have and was of a particular standard and quality when in fact it was of
another.”
Conflicting testimony was presented on whether Nekoueian represented that the property
needed merely to be rezoned to be utilized as a car sales lot, so we defer to the trial court’s
implicit credibility assessment in finding that Nekoueian made that representation. See City of
Keller, 168 S.W.3d at 819. It is a violation of the DTPA to represent that goods or services have
characteristics, uses, or benefits that they do not have or are of a particular standard or quality
when they are not. TEX. BUS. & COM. CODE ANN. § 17.46(b)(5) & (7) (West 2011). Because the
evidence, summarized above, supports the trial court’s findings that Nekoueian misrepresented
that the lot needed only to be rezoned to be used as a car sales lot while the lot actually also
needed to be platted and removed from flood plain status, Nekoueian represented the lot was of a
particular quality when it was not or had characteristics that it did not. Therefore, the trial
court’s judgment was based on a misrepresentation entitling Asgari and Borghei to recover from
the Trust Account.
The Commission argues that Nekoueian cannot be liable for a misrepresentation as to the
suitability of the property because he did not have knowledge of the lot’s flood plain status or
lack of platting and, therefore, did not know the representation was false. In Miller v. Keyser,
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however, the Texas Supreme Court rejected the argument that an individual cannot be held liable
under the DTPA when he does not know the falsity of his representations.
[A] DTPA claim does not require that the consumer prove the employee acted
knowingly or intentionally. The DTPA requires that the consumer show that the
misrepresentation was false and that the false misrepresentation was the
producing cause of the consumer’s damages. A consumer is not required to prove
intent to make a misrepresentation to recover under the DTPA.
Miller v. Keyser, 90 S.W.3d 712, 716 (Tex. 2002). Moreover, “misrepresentations that may not
be actionable under common law fraud may be actionable under the DTPA.” Id. In light of this
authority, the trial court did not err in determining that Asgari and Borghei could recover from
the Trust Account based on Nekoueian’s misrepresentation under the DTPA. Further, the record
evidence shows that a survey of the property, which Nekoueian had in his possession, revealed
no plat of the property. From this evidence the trial court could infer that Nekoueian knew that
more than rezoning would be required before the property could be used as a car lot.
Additionally, the Commission asserts that Asgari and Borghei were responsible for
making reasonable efforts to protect their own interests. However, the case cited by the
Commission, Taft v. Sherman, 301 S.W.3d 452, 457–58 (Tex. App.—Amarillo 2009, no pet.), is
distinguishable from the case at hand because it dealt with “unambiguous statements [in a
contract] that directly contradicted the alleged oral promises” the appellant claimed were
fraudulent misrepresentations. The court determined that the unambiguous language in the
contract was included at the appellant’s insistence, displaying the appellant’s failure to exercise
reasonable care to protect his interests. See also, e.g., Prudential Ins. Co. of Am. v. Jefferson
Assocs., Ltd., 896 S.W.2d 156, 161 (Tex. 1995) (refusing to hold a seller responsible for alleged
misrepresentations when the buyer was a sophisticated real estate purchaser who agreed to
purchase the property “as is” and assumed the risk of properly determining the property’s value);
Isaacs v. Bishop, 249 S.W.3d 100, 110 (Tex. App.—Texarkana 2008, pet. denied) (suggesting
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the appellee was negligent for failing to read a promissory note, but still upholding rescission
based on fraud by the appellant). Contrary to the Commission’s argument, the proportional
responsibility of the parties to investigate does not negate a finding of misrepresentation. See
Pleasant v. Bradford, 260 S.W.3d 546, 555 (Tex. App.—Austin 2008, pet. denied) (concluding
that “[t]he opportunity to conduct an independent investigation of a representation, without
more,” does not negate a finding of fraud); Barber v. Keeling, 204 S.W. 139, 140 (Tex. Civ.
App.—San Antonio 1918, no writ) (holding that the director of a bank, and friend of the
appellee, was liable for misrepresentations about the value of stock, despite “evidence tending to
show that appellee could, by an investigation, have ascertained the falsity of the
representations”).
CONCLUSION
On the record before us, we conclude that the evidence is legally sufficient for a
reasonable fact finder to determine that Nekoueian engaged in misrepresentations, fraud, or
dishonesty. We overrule the Commission’s sole issue and affirm the trial court’s order for
payment from the Trust Account.
Catherine Stone, Chief Justice
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