the Cadle Company v. James Morgan

Opinion issued April 14, 2005 In The Court of Appeals For The First District of Texas NO. 01-03-01020-CV THE CADLE COMPANY, Appellant V. JAMES L. MORGAN, Appellee On Appeal from the 333rd District Court Harris County, Texas Trial Court Cause No. 2003-07378 MEMORANDUM OPINION The issue in this case is whether the Cadle Company [“Cadle”] is bound by a settlement negotiated by its outside counsel, Brett Lanier, with a judgment debtor, James Morgan. In five related issues on appeal, Cadle contends the trial court erred in finding that Lanier possessed the authority, either actual or apparent, to negotiate the settlement with Morgan. In a sixth issue, Cadle challenges the damages awarded to Morgan. BACKGROUND In November 1987, Park 45 National Banks obtained a default judgment against Morgan in the amount of $31,355.10, plus $5,265 in attorneys fees. In 1990, Cadle purchased the right to the default judgment from the FDIC. In 1992, 1995, and 1996, Cadle employees sent Morgan a series of letters offering to settle the default judgment for a percentage of the $34,907.10 that the letters claimed was now owed on the judgment. In 1999, after Cadle’s attempts to settle the claim with Morgan failed, a Cadle employee called Morgan and told him to expect to hear from Cadle’s attorney regarding the default judgment claim. In March 2001, Laura Harkless, a Cadle employee who was responsible for retaining and supervising outside counsel to assist in Cadle’s debt collecting efforts, hired Brett Lanier to collect Morgan’s debt. Harkless obtained Lanier’s name from a book entitled Bankers Collection Lawyers. Harkless had never met Lanier, Cadle had never done business with Lanier, and Harkless did not check any of Lanier’s references before hiring him. After hiring Lanier, Harkless sent him certain confidential information relating to the collection of the Morgan debt. Thereafter, Harkless did not have any contact with Lanier, even though Cadle’s own rules for supervising outside counsel require that outside counsel provide written status reports on their case every 60 days. Harkless testified that she tried to call Lanier several times, but was unable to reach him because his telephone had been disconnected. Harkless was aware that Lanier’s telephone had been disconnected and that she had no way to contact him, but she never relayed this information to Morgan or his attorney even though she knew Morgan’s telephone number and had spoken with him previously. In February and March of 2002, Lanier contacted Morgan regarding the collection of the default judgment. Morgan told Lanier to contact his attorney, Michael Landrum. On March 18, 2002, Lanier sent a letter to Landrum, in which Lanier stated, “My client is now calling me every day. I have some settlement authority, but only if Mr. Morgan acts quickly.” Lanier communicated an offer to settle the judgment for $20,000. When Morgan countered at $15,000, Lanier confirmed to Landrum that the judgment would be settled when Morgan made a $15,000 wire transfer to Lanier’s account for Cadle, which Morgan did. A few months after Morgan paid Lanier, Morgan received a telephone call from Harkless regarding the money he owed Cadle. Morgan told Harkless that he did not owe Cadle, and then Harkless asked Morgan if he knew how she could get in touch with Lanier, her own attorney. After learning of the settlement from Morgan, Harkless sent two letters to Lanier demanding that he turn over the settlement funds immediately. In neither letter did Harkless claim that the settlement was unauthorized; she simply demanded that Lanier give the money to Cadle. In February 2003, Harkless, on Cadle’s behalf, filed an application with the Texas State Bar Client Security Fund claiming that it had lost $70,038.41, the entire amount of the default judgment, because of Lanier’s conduct. Harkless admitted that the only way Cadle could have lost the entire value of the default judgment was if Lanier had settled that claim. Morgan filed suit against Cadle seeking declaratory and injunctive relief, as well as damages, contending that Cadle was bound by the settlement entered into by Morgan and Lanier, Cadle’s outside counsel. After a bench trial, the trial court found in favor of Morgan and entered a judgment that (1) declared that Cadle’s judgment against Morgan was “fully and finally released”; (2) permanently enjoined Cadle from making any efforts to collect on the judgment; (3) ordered Cadle to release any and all liens attached to Morgan’s property; and (4) awarded damages to Morgan. AGENCY In its first issue, Cadle contends that “Lanier lacked actual authority to bind the Cadle Company to a settlement.” In its second issue, Cadle contends that Lanier did not have the apparent authority to bind Cadle to a settlement. Although Cadle does not specify a standard of review in either of these issues, we will construe its first two issue as challenges to the legal and factual sufficiency of the evidence to support the trial court’s finding that “Lanier had authority (actual and apparent) to bind Cadle to the Settlement Agreement.” More specifically, the question is this, “Was Lanier acting as Cadle’s agent when he negotiated the settlement agreement with Morgan?” A principal is liable for the acts of its agent when the agent has actual or apparent authority to do those acts or when the principal ratifies those acts. Spring Garden 76U, Inc. v. Stewert Title Co., 874 S.W.2d 945, 948 (Tex. App.—Houston [1st Dist.] 1994, no writ); see Currey v. Lone Star Steel Co., 676 S.W.2d 205, 209 (Tex. App.—Fort Worth 1984, no writ) (actual and apparent authority); Little v. Clark, 592 S.W.2d 61, 64 (Tex. Civ. App.—Fort Worth 1979, writ ref’d n.r.e.) (ratification). Actual Authority “Actual” authority, which includes both express and implied authority, usually denotes authority that a principal (1) intentionally confers upon an agent, (2) intentionally allows the agent to believe that he possesses, or (3) allows the agent to believe that he possesses by want of due care. Spring Garden, 874 S.W.2d at 948; Currey, 676 S.W.2d at 209-10; Behring Int’ Inc. v. Greater Houston Bank, 662 S.W.2d 642, 649 (Tex. App.—Houston [1st Dist.] 1983, writ dism’d). Express authority exists when the principal has made it clear to the agent that he wants the act under scrutiny to be done. City of San Antonio v. Aguilar, 670 S.W.2d 681, 684 (Tex. App.—San Antonio 1984, writ dism’d). Implied authority exists when there is no proof of express authority, but appearances justify a finding that, in some manner, the agent was authorized to do what he did; in other words, there is circumstantial proof of actual authority. Id. “Implied” actual authority exists only as an adjunct to express actual authority, Behring, 662 S.W.2d at 649, because implied authority is that which is proper, usual, and necessary to the exercise of the authority that the principal expressly delegates. Employers Cas. Co. v. Winslow, 356 S.W.2d 160, 168 (Tex. Civ. App.—El Paso 1962, writ ref’d n.r.e.). Legal Sufficiency We begin by determining whether legally sufficient evidence supports the trial court’s finding that Lanier had the actual authority—either express or implied—to bind Cadle to the settlement agreement. As a general proposition, the law does not presume agency. Buchoz v. Klein, 143 Tex. 284, 184 S.W.2d 271, 271 (1944). The individual alleging agency has the burden to prove its existence. Id. Therefore, it was Morgan’s burden to prove the existence of an agency relationship between Cadle and Lanier. When, as here, an appellant challenges the legal sufficiency of the evidence to support a finding on which it did not have the burden of proof at trial, the appellant must demonstrate on appeal that no evidence supports the adverse finding. Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983). In conducting a no-evidence review, an appellate court must ‘view the evidence in a light that tends to support the finding of the disputed fact and disregard all evidence and inferences to the contrary.” Bradford v. Vento, 48 S.W.3d 749, 754 (Tex. 2001). A no-evidence point may be sustained only when the record discloses one of the following: (1) there is a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence conclusively establishes the opposite of the vital fact. Uniroyal Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334 (Tex. 1998). If there is more than a scintilla of evidence to support the finding, the claim is sufficient as a matter of law. Browning-Ferris, Inc. v. Reyna, 865 S.W.2d 925, 928 (Tex. 1993). But, if the evidence offered to prove a vital fact is so weak that it does nothing more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983). More than a scintilla of evidence exists when the evidence supporting the finding, as a whole, rises to a level that would enable reasonable and fair-minded people to differ in their conclusions. Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995) (quoting Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex. 1994)). Cadle, citing Southwestern Bell Tel. Co. v. Vidrine, argues that “the mere employment of counsel does not clothe the counsel with authority to settle the case without specific consent of the client.” 610 S.W.2d 803, 805 (Tex. App.—Houston [1st Dist.] 1980, writ ref’d n.r.e.). We agree. However, in this case there is more than the “mere employment” of Lanier as evidence of actual authority. First, there is the evidence that even before Lanier was hired, Cadle was willing to settle the case with Morgan for less than the full value of the judgment. The trial court could have reasonably concluded that Cadle hired Lanier for the purpose of pursuing further attempts at settlement after its own initial attempts had proved unsuccessful. Second, the terms of representation between Cadle and Lanier do not place any limits on Lanier’s authority to settle the judgment with Morgan. Third, Lanier made several representations that indicated his belief in his authority to settle the claim. See Austin Area Teachers Fed. Credit Union v. First City Bank-Northwest Hills, N.A., 825 S.W.2d 795, 799 (Tex. App.—Austin 1992, writ denied) (considering agent’s belief that action was authorized in finding implied authority). Finally, there was evidence that tended to show that Cadle’s actions after discovering the settlement indicated Cadle, too, believed that Lanier possessed the authority to settle the claim. For example, Cadle sent letters to Lanier demanding that any money obtained from Morgan be sent to Cadle immediately. In a finding of fact not challenged on appeal, the trial court found that “[i]f Lanier had not had authority to bind Cadle to the Settlement Agreement, these letters should have demanded that Lanier return the money to Morgan.” And, in another finding not challenged on appeal, the trial court found that “Cadle, in effect, admitted that it had settled the Default Judgment and released the claim,” by filing an application to the Texas State Bar Client Security Fund claiming that Lanier’s acts had damaged it in the entire amount that it claimed was owed under the default judgment, i.e., that Cadle no longer possessed a claim against Morgan because it had been compromised and settled. Under this record, the trial court could have reasonably concluded that there was more than a scintilla of evidence to show that Lanier possessed the actual, albeit implied, authority to settle the claim with Morgan on Cadle’s behalf. Factual Sufficiency When a party attacks the factual sufficiency of an adverse finding on an issue on which he did not have the burden of proof at trial, he must show on appeal that there is insufficient evidence to support the adverse finding. See Dyson v. Olin Corp., 692 S.W.2d 456, 457 (Tex. 1985); Raw Hide Oil & Gas, Inc. v. Maxus Exploration Co., 766 S.W.2d 264, 275-76 (Tex. App.—Amarillo 1988, writ denied). To conduct this review, we examine the entire record and consider and weigh all the evidence, both in support of, and contrary to, the challenged finding. See Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996); Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex. 1989). We must uphold the finding unless the evidence that supports it is so weak as to be clearly wrong or manifestly unjust. See In re King’s Estate, 150 Tex. 662, 244 S.W.2d 660, 661 (1951); Raw Hide, 766 S.W.2d at 275-76; Otis Elevator Co. v. Joseph, 749 S.W.2d 920, 923 (Tex. App.—Houston [1st Dist.] 1988, no writ). To counter the evidence detailed above, Cadle introduced the evidence of its employee, Laura Harkless, who testified that she never authorized Lanier to bind Cadle to the settlement agreement. Similarly, Morgan and his attorney, Michael Landrum, could point to no evidence wherein Cadle specifically represented that Lanier possessed the actual authority to settle the claim. While this evidence may weigh in Cadle’s favor, it does not render the trial court’s finding that actual authority existed against the great weight and preponderance of the evidence. Because we have found legally and factually sufficient evidence to support the trial court’s finding that Lanier possessed actual authority to bind Cadle, we overrule point of error one. Similarly, because we have found that there was legally and factually sufficient evidence of Lanier’s actual authority to bind Cadle, we need not address the issues of apparent authority, estoppel, or ratification, which are raised in issues two through five, and decline to do so. Damages In issue six, appellant contends (1) that the trial court erred by permitting Morgan and his wife to offer expert opinion on the diminished value of their real property, and (2) that there is factually insufficient evidence to support the damages awarded. In its findings of fact, the trial court made the following findings pertaining to Morgan’s damages. 19. Cadle’s Judgment Lien prevented Morgan from being able to sell the following properties: a) 1836 Country Creek Ct., Magnolia, Texas, 2706; b) Lakeview Dr., Dallas Texas; c) 16909 Butera Rd., Magnolia, Texas; and d) Suncreek Lot (Lot 2, in Block 3, of Suncreek Ranch, Section two, a subdivision in Brazoria County, Texas, according to the map or plat therof, recorded in Volume 22, page 197 and corrective plat of Suncreek Ranch, Section two, recorded in Volume 22, page 383, both of the plat records of Brazoria County, Texas). 20. Morgan paid carrying costs on the properties described in a)–d) in paragraph 19, that he would not have paid but for his inability to sell the properties because of the Judgment Lien. 21. The carrying costs of Morgan’s properties includes interest, taxes, insurance, utility bill, and home owner’s association dues. 22. Morgan’s property located at 2706 Lakeview Dr., Dallas, Texas, depreciated in value during the period of time that Morgan could not sell it because of Cadle’s Judgment Lien. 23. Morgan incurred damages in the amount of $70,132 from the carrying costs described in paragraph 20 and the depreciation in value described in paragraph 22. Morgans’ Testimony as Experts Cadle contends the trial court erred by allowing the Morgans to testify about the depreciated value of the Lakeview Property in Dallas, Texas. However, our review of the record shows that the trial court actually sustained, in part, Cadle’s objection to Mrs. Morgan’s testimony during the following exchange: Q. Mrs. Morgan, did you—in addition to these carrying costs what other damages is Mr. Morgan asking for related to the Lakeview property? A. He is asking for $50,000 for the devaluation since we do have a tenant in there. When we had it as a model home we only walked —had people walk through it; we’d go unlock it and actually had walk[ed] people through it and then we had it as an office for probably three months. A. So would you—from your experience as a broker and as an owner of this house, can you testify that this dollar amount is a reasonable amount of the depreciation value? [Cadle’s counsel]: Your Honor, the same objection I had before. The testimony of the witness is based not simply on her status as an owner, which at this point we didn’t even know she is an owner, but assuming she is is not on her status as an owner but on her experience, training, education. [Trial court]: Let’s deal with this whole exposure [sic] issue. [Morgan’s counsel]: I’ll rephrase my question, Your Honor. [Trial court]: Well, you’ll withdraw it and then ask a new question, is that right? [Morgan’s counsel]: I’ll withdraw it. [Trial court]: Okay. Q. As the owner of this house— A. Um-hum. Q.—do you believe the value declined $50,000 because of the tenant? A. Yes, I do. A. Okay. [The Court]: Well, the objection still holds, Counsel. She can give testimony on the value of the house. At best we still have this issue on— [Cadle’s counsel]: Absolutely, the causation. [Trial court]: But you can now have her say what caused that as opposed to in my opinion as an owner of day one it’s worth “X”; in my opinion as an owner on day six it’s worth “Y.” I mean, you see? [Morgan’s counsel]: Okay. [Cadle’s counsel]: Your Honor— [Trial court]: At best she can give testimony on fair market value. That’s it. [Cadle’s counsel]: At a particular point in time but not as to causation. [Trial court]: Exactly. [Morgan’s counsel]: May I withdraw my question and rephrase accordingly? [Trial court]: Yes. Yes, sir. * * * * Q. What do you believe the fair market value of the house is today? A. I would imagine we will be lucky if we can get $300,000. As is made clear from this passage, the trial court agreed that the Morgans could testify, as owners, to the fair market value of their property on any given date, but would not permit them, as experts, to testify about what caused any change in fair market value. In sum, the trial court allowed the Morgans to testify that the fair market value of the Lakeview property was at least $350,000 on the date that an earnest money contract for that value fell through, and that, as of the date of trial, the fair market value of the house was $300,000. However, the trial court would not allow the Morgans to testify, as experts, that the decreased in value was caused by the fact that the property was leased to a tenant. The trial court did not err by allowing the Morgans, as owners, to testify about the fair market value of their property. See Redman Homes, Inc. v. Ivy, 920 S.W.2d 664, 669 (Tex. 1996). Factual Sufficiency of Damages Evidence The trial court awarded $70,132 in damages, which the trial court’s findings of fact indicate were supported by (1) the Morgan’s carrying costs on the properties, and (2) the depreciation of the Lakeview property. Cadle contends that the evidence is factually insufficient to support this amount of damages. We again employ the usual standard of review for factual sufficiency. See Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). Specifically, Cadle contends that (1) its judgment was never abstracted in Brazoria County, therefore Morgan cannot recover damages for his inability to sell the Brazoria County property, and (2) Morgan never received any offers on the County Creek or Butera Road properties. Even if we were to exclude the evidence of damages to the Brazoria County, County Creek, and Butera Road properties, we nonetheless conclude that the evidence of the damage to the Lakeview property alone would supports the judgment. The Morgans testified that they had an earnest money contract on the Lakeview property in the amount of $350,000, which fell through because of Cadle’s lien. The Morgans later testified that, as of the day of trial, the value of the Lakeview property was $300,000. Therefore, the trial court could have reasonably concluded that the Lakeview property had depreciated by $50,000. The Morgans also testified that they had incurred $20,132 in carrying costs after the sale of the Lakeview property fell through. The carrying costs included interest, taxes, insurance, utility bills, and home owner’s association dues. Thus, the total of damages to the Lakeview property alone is $70, 132—the exact amount awarded in the judgment. As such, we conclude that the evidence presented at trial was factually sufficient to support the damages awarded by the trial court. We overrule point of error six. CONCLUSION We affirm the judgment. Sherry Radack Chief Justice Panel consists of Chief Justice Radack and Justices Higley and Bland.