Robert H. Watkins & Wife, Sharon K. Watkins v. Fred B. Easter, Jr. & Wife, Deborah J. Easter

Easter IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS, AT AUSTIN NO. 3-91-054-CV ROBERT H. WATKINS, AND WIFE, SHARON K. WATKINS, APPELLANTS vs. FRED B. EASTER, AND WIFE, DEBORAH J. EASTER, APPELLEES FROM THE DISTRICT COURT OF WILLIAMSON COUNTY, 368TH JUDICIAL DISTRICT NO. 89-393-C368, HONORABLE BURT CARNES, JUDGE PRESIDING This contract dispute involves the sale of a residence in 1987. The Easters defaulted in 1989 and vacated the property in 1990, causing the Watkinses to bring an action for breach of contract and two actions for common law fraud, alleging false promises and false representation or concealment of material facts. The Easters then counterclaimed, alleging bad faith and unfair dealing, unjust enrichment and deceptive trade practices. After a trial to the jury, the court rendered a take-nothing judgment against both sides. The Watkinses now appeal. We will affirm the trial court's judgment. BACKGROUND Robert and Sharon Watkins [Appellants] owned a residence in Round Rock, which Fred and Deborah Easter [Appellees] contracted to buy in 1987. Much of this dispute can be traced to the unconventional terms found in the parties' contract of sale. The Easters were to make monthly payments to the Watkinses; those payments were to be applied first to one-twelfth of the annual cost of taxes and insurance on the property, next to a portion of the interest, and finally to principal. Interest on some of the principal was to be paid at ten percent, interest on some of the principal was "waived," and interest on the remaining principal balance was to accumulate at six percent and be added to principal at the end of the first year, when the entire principal balance was due and payable. The Easters were not to receive a deed until they paid the full consideration. In November 1988 the parties orally amended the contract to extend the due date for payment of the "balloon note." In exchange for this extension, the Easters agreed to increase their monthly payments from $800 to $1125 while they allegedly pursued permanent financing that would enable them to assume the Watkinses' indebtedness on the residence. In July 1989 the Easters stopped making payments; they vacated the property in February 1990. The Watkinses brought an action for breach of contract to recover the benefit of their bargain, which they asserted to be the difference in the contract price of the house in 1987 ($107,500) and its fair market value when they regained possession in 1990. They also brought a tort action alleging that the Easters made false representations and concealed material facts regarding their creditworthiness. In addition, the Watkinses sought attorney's fees for defending groundless counterclaims. The jury found that the Easters breached the contract of sale but failed to find that the Watkinses suffered damages from the breach. It also found that the Easters made false representations and concealed material facts, causing Mr. Watkins to suffer $500 damages for mental anguish. The jury also found that the Watkinses were entitled to exemplary damages, which may only be recovered if actual damages flowed from the Easters' tortious behavior. Both parties asked the court to disregard certain jury findings and to render judgment on the verdict; and in the alternative, defendants asked for judgment notwithstanding the verdict. The trial court: (1) ruled that the Easters' counterclaims were not groundless, depriving the Watkinses of any entitlement to attorney's fees; (2) entered a take-nothing judgment against both sides; and (3) ordered the Easters to pay $250 to the Watkinses as sanctions for discovery abuses. The Watkinses challenge the judgment in ten points of error. CONTRACT DAMAGES In their first four points of error, the Watkinses complain of the court's refusal to disregard the jury's failure to find that they suffered damages from the Easters' breach of the contract of sale. The first three points address the property's diminished value in 1990, when the Watkinses regained possession; the Watkinses maintain that they have proved diminished value as a matter of law, or in the alternative, that a failure to find any damages is against the great weight and preponderance of the evidence. In point of error four, the Watkinses argue that damages should be measured alternatively by the difference between the payments required under the contract and the payments actually received. The Watkinses maintain that they proved these damages as a matter of law, or, in the alternative, that the jury's failure to assess damages was contrary to the great weight and preponderance of the evidence. To establish as a matter of law that they suffered damages from the breach, the Watkinses must first demonstrate on appeal that the evidence conclusively established all vital facts in support of the issue. See Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989). We apply a two-step process to overcome, as a matter of law, adverse jury findings on which appellant had the burden of proof: (1) examine the record for evidence that supports the verdict, ignoring all evidence to the contrary; if there is no evidence to support the fact finder's answer, then (2) examine the entire record to see if the contrary position is established as a matter of law. Holley v. Watts, 629 S.W.2d 694, 696 (Tex. 1982). At trial, the Watkinses argued that their damages after regaining possession should be measured by the property's substantial decline in value between 1987 and 1990. Their expert witness testified that as of February 1990 the property's value had declined to $74,000. The Easters' countervailing argument, that the house had substantially the same value in 1990 as it had in 1987, was apparently more persuasive. On appeal, the Watkinses appear to argue that because they presented the only expert testimony of the property's value in February 1990, the trial court erred by failing to disregard the jury's contrary finding. The jury could reject the testimony of the Watkinses' appraiser, even if it was not contradicted. Kansas City Fire & Marine Ins. Co. v. Duncan, 330 S.W.2d 469, 471 (Tex. Civ. App. 1959, no writ). Appellants complain that because the Easters introduced no direct evidence of the property's value in February 1990, expert or otherwise, there is no evidence to support the jury's failure to find that the house had substantially diminished in value at the time the Watkinses regained possession. We disagree. There is evidence in the record to support the jury's failure to find that the Watkinses suffered damage from the property's diminished value. The parties stipulated that the rental value of the house remained $850 per month from August 1987 to February 1990 (Stipulation No. 3). Rental value directly impacts the income approach to estimating a property's fair market value. The parties' stipulation that the rental value of this property remained constant is some evidence that the property did not lose its value. The stipulation regarding the property's rental value is sufficient evidence to support the jury's failure to find that the Watkinses suffered damages from the breach of this contract. Because the record contains some evidence in support of the jury's verdict, appellant cannot establish damages as a matter of law. Furthermore, we cannot say that the jury's failure to find any damage is against the great weight and preponderance of the evidence. We turn to the Watkinses' alternative measure of damages, payments due under the contract less payments received, a measure that they also maintain was proved as a matter of law. Whether such figures were proved as a matter of law is immaterial because this is not a proper measure of damages in real estate transactions. The universal rule for measuring damages for breach of contract is just compensation for loss or damage actually sustained. Stewart v. Basey, 245 S.W.2d 484, 486 (Tex. 1952). Points of error one through four are overruled. TORT DAMAGES In their fifth and sixth points of error, the Watkinses argue that the trial court erred in entering a take-nothing judgment because the jury found they were entitled to mental anguish damages and exemplary damages on their common law fraud claims. In order to award exemplary damages, there first must be a finding of actual damages. Nabours v. Longview Sav. & Loan Ass'n, 700 S.W.2d 901, 903 (Tex. 1985). We are left with two issues: (1) have the Watkinses prevailed on their common law fraud action; and if so, (2) were mental anguish damages properly awarded and are they actual damages in support of exemplary damages? We need not decide whether mental anguish damages can support an award of exemplary damages because we find that they were improperly awarded. The Watkinses failed to satisfy all the elements of common law fraud. A cause of action for common law fraud has the following elements: (1) that a material representation was made; (2) that it was false; (3) that when the speaker made it he knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by the party; (5) that the party acted in reliance upon it; and (6) that he thereby suffered injury. Stone v. Lawyers Title Ins. Corp., 554 S.W.2d 183, 185 (Tex. 1977). The Watkinses failed to prove that the Easters made an intentional misrepresentation. The Easters asked the court to disregard the jury's finding of "actual awareness" in Question #15, arguing that if the jury did not find the mental state of "knowingly," as it was defined in Question #16, then there could be no "actual awareness" in response to Question #15. The Easters argued that without a showing that they acted knowingly or intentionally, the Watkinses were not entitled to recover for misrepresentation, and thus were not entitled to exemplary damages. We agree. When jury findings appear to conflict, the trial court may disregard such conflict because a specific finding should be held to dominate a finding which is so general as to constitute a legal conclusion. Williams v. Williams, 559 S.W.2d 888, 894 (Tex. Civ. App. 1977, writ ref'd n.r.e). The term "actual awareness" was not defined for the jury, whereas, "knowingly," "intentionally," and "recklessly" were. We hold that the jury's answer to Question #16, that the Easters did not act intentionally or knowingly, dominates the finding in Question #15, that the Easters had "actual awareness" of false actions or concealments. Without knowledge or intent to defraud, an action for common law fraud will not lie. Because the Watkinses failed to prove their claim of common law fraud, mental anguish damages are inappropriate, as are exemplary damages. Points of error five and six are overruled. COUNTERCLAIMS NOT GROUNDLESS In points of error seven, eight and nine, the Watkinses allege that the trial court erred in denying their motion for judgment because the Easters' counterclaims for breach of contract and violations of the Deceptive Trade Practices-Consumer Protection Act (DTPA) (Tex. Bus. & Com. Code Ann. §§ 17.41-17.826 (1987 & Supp. 1992)) were groundless. The trial court issued findings of fact and conclusions of law stating that the Easters' claims had a basis in law and fact. We agree. The Easters brought their counterclaims for breach of contract and DTPA violations premised upon their reading of the Contract for Sale. The provision in question reads, "When this contract of sale has been cancelled for non-payment if need be by the Seller, the only question to be determined is that of possession." Mr. Easter testified that he read this provision as an exclusive remedy in the event of default: he would lose the house and all payments made prior to default. The Watkinses instead brought suit for damages and specific performance; the Easters counterclaimed, alleging the Watkinses' actions constituted "representations that the agreement involved rights, remedies, and obligations which it did not have or involve," violating DTPA § 17.46(b). We find that Mr. Easter's reading of the contract was not only plausible, but a legally correct interpretation of what can only be deemed a contract for deed. The Easters could well have prevailed on their counterclaims. As the Easters correctly point out, "groundless" under the DTPA has the same meaning as "groundless" under Rule 13 of the Texas Rules of Civil Procedure: "[N]o basis in law or fact and not warranted by good faith argument for the extension, modification or reversal or existing law." Donwerth v. Preston II Chrysler-Dodge Inc., 775 S.W.2d 634, 637 (Tex. 1989); Tex. R. Civ. P. Ann. 13 (Supp. 1992). Every litigant who fails to persuade the fact finder is not necessarily subject to sanctions for bringing a groundless law suit. We hold that the Easters' claims were not groundless, and therefore overrule points of error seven through nine. SPECIFIC PERFORMANCE NOT APPROPRIATE The Watkinses' final point of error alleges that the trial court abused its discretion in denying specific performance of the contract. Specific performance is warranted where the remedies at law are inadequate. Guzman v. Acuna, 653 S.W.2d 315, 318 (Tex. App. 1983, writ dism'd). However, specific performance is an equitable remedy and the equities of both parties must be protected. Johnson v. Downing & Wooten Constr. Co., 480 S.W.2d 254, 258 (Tex. Civ. App. 1972, no writ). Further, specific performance is a matter resting in the court's discretion. Magram v. Lewis, 618 S.W.2d 420, 422 (Tex. Civ. App. 1981, no writ). Keeping in mind that previous events had shown the financial inability of the Easters to maintain payments on the contract, we cannot say the trial court abused its discretion in not requiring them to complete the contract. We overrule the tenth point of error. We affirm the judgment of the trial court. Bea Ann Smith, Justice [Before Chief Justice Carroll, Justices Aboussie and B. A. Smith] Affirmed Filed: April 22, 1992 [Do Not Publish]