Troy Hunt and Troy Hunt Homes, Inc. v. Billy Stephens and Wife, Kendra Stephens

11th Court of Appeals Eastland, Texas Opinion Troy Hunt and Troy Hunt Homes, Inc. Appellants Vs. No. 11-00-00222-CV B Appeal from Scurry County Billy Stephens and wife, Kendra Stephens Appellees The trial court, in a nonjury case, found that appellants, Troy Hunt and Troy Hunt Homes, Inc., constructed a defective residential dwelling for appellees, Billy Stephens and wife, Kendra Stephens. The court found that appellees sustained economic damages of $93,975 and mental anguish damages of $5,000. In its findings of facts and conclusions of law, the court found that appellants knowingly and intentionally breached an express warranty to provide appellees a 1 year builder=s warranty. The court trebled the economic damages; concluded that Troy Hunt Homes, Inc. was the alter ego of Troy Hunt, individually; and entered judgment against appellants, jointly and severally, for $286,975. Appellants appeal. We reverse the award of treble damages, affirm the award of mental anguish damages, and suggest a remittitur because we find that the evidence is factually insufficient to support the trial court=s finding that appellees sustained economic damages of $93,975. Appellees and Troy Hunt Homes, Inc. entered into a written contract which provided that Troy Hunt Homes, Inc. would build a residential dwelling on a lot owned by appellees. The agreed cost for building the house was $146,702. Troy Hunt signed the contract as president of Troy Hunt Homes, Inc. Within 6 months afer appellees moved into the house, they began to notice cracks around the doors and cracks through the sheet rock. The tile floor and tile around the fireplace began to crack. Bricks were cracking in the back patio. None of the doors would fit properly. Appellees observed a 2-inch gap where the baseboards met the floor. One day, appellees discovered that a snake had gotten into the kitchen. All of the parties agree that the substantial damages to the house were caused by the settling of the concrete slab foundation. Appellees contend that the settling was caused by appellants= defective construction. Appellants contend that the slab foundation failed because of subsurface conditions in the soil on the lot owned by appellees. Appellees= Expert Witness Jerry Lee Hargrave testified that he had been in the construction business, either full time or part time, for 35 years. He was presently in the foundation repair business and had personally participated in over 3,000 foundation repair jobs in the last 15 years. Hargrave stated that, in 35 years, he had seen may different causes for foundation problems. Hargrave inspected appellees= house and found extreme foundation settlement. Hargrave testified that approximately 75 percent of the foundation was affected. Appellants argue on appeal that the trial court abused its discretion in allowing Hargrave to give his opinion as to what caused the foundation to fail. Appellants timely urged a Daubert[1] challenge and objected to any testimony from Hargrave on the issue of causation because Hargrave did not have the technical training and background to give such an opinion. The Texas Supreme Court in Gammill v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726-27 (Tex.1998), stated: We agree with the Fifth, Sixth, Ninth, and Eleventh Circuits that [TEX.R.EVID.] 702's fundamental requirements of reliability and relevance are applicable to all expert testimony offered under that rule. Nothing in the language of the rule suggests that opinions based on scientific knowledge should be treated any differently than opinions based on technical or other specialized knowledge. It would be an odd rule of evidence that insisted that some expert opinions be reliable but not others. All expert testimony should be shown to be reliable before it is admitted. That said, it is equally clear that the considerations listed in Daubert and in Robinson for assessing the reliability of scientific evidence cannot always be used with other kinds of expert testimony. To borrow the [Berry v. City of Detroit, 25 F.3d 1342 (6th Cir. 1994)] court=s analogy, a beekeeper need not have published his findings that bees take off into the wind in a journal for peer review, or made an elaborate test of his hypotheses. Observations of enough bees in various circumstances to show a pattern would be enough to support his opinion. But there must be some basis for the opinion offered to show its reliability. Experience alone may provide a sufficient basis for an expert=s testimony in some cases, but it cannot do so in every case. A more experienced expert may offer unreliable opinions, and a lesser experienced expert=s opinions may have solid footing. The court in discharging its duty as gatekeeper must determine how the reliability of particular testimony is to be assessed. The court added: Although it appears that the United States Supreme Court will address the issue in Carmichael, at this point the clear weight of federal case law supports applying the relevance and reliability requirements of Rule 702 to all expert evidence offered under that rule, even though the criteria for assessing relevance and reliability must vary, depending on the nature of the evidence. Because we are persuaded that this construction of federal Rule 702 is correct, because our rule is identical but for one comma, and because there is much to be said for maintaining as much uniformity in state and federal evidence rules as possible, we hold that the relevance and reliability requirements of Texas Rule 702 apply to all evidence offered under that rule, and that the trial court must determine that these requirements have been met before admitting the evidence. See Kumho Tire Company, Ltd. v. Carmichael, 526 U.S. 137 (1999). The trial court, as the gatekeeper, heard the evidence as to Hargrave=s special knowledge about concrete slabs and foundations. Hargrave inspected the house and reviewed photographs taken of the building site before the slab was poured. From the location and extent of the damage, Hargrave concluded that the soil that was placed inside the form boards as fill material was not adequately compacted. We hold that the trial court did not abuse its discretion in permitting Hargrave=s testimony on the causation issue. Appellants challenge the sufficiency of the evidence to support the trial court=s findings that the damages sustained by appellees were proximately caused by appellants= construction defects. A trial court=s findings are reviewable for legal and factual sufficiency of the evidence by the same standards that are applied in reviewing evidence supporting a jury=s answer. Catalina v. Blasdel, 881 S.W.2d 295 (Tex.1994). In reviewing a no-evidence point of error, a reviewing court may consider only the evidence and inferences supporting the findings and will disregard all evidence and inferences to the contrary; and, if there is any evidence of probative force to support the finding, the reviewing court will overrule the no-evidence point. Davis v. City of San Antonio, 752 S.W.2d 518 (Tex.1988). In reviewing a factual sufficiency challenge of the evidence, the court must examine and weigh all of the evidence and reverse the judgment only if the court finds that the evidence is factually insufficient or is so against the great weight and preponderance of the evidence as to be manifestly unjust. Pool v. Ford Motor Company, 715 S.W.2d 629 (Tex.1986). The trial court accepted the evidence presented by appellees, and rejected the testimony of appellants= expert witness that the foundation failed because of subsurface conditions in the soil. The evidence is both legally and factually sufficient to support the trial court=s findings that the foundation failed because of defective construction by appellants. Appellees called Hargrave as a rebuttal witness. Hargrave testified that, after appellants= expert testified, Hargrave went to appellees= house, drilled some holes in the foundation, and measured the depth of some footers and fill dirt. Appellants objected to this type of testimony, arguing that it was a new test by an expert with new results that appellants had not had a chance to inspect. The trial court instructed the parties that the court would hear the evidence and then decide if appellants would be given additional time to examine the rebuttal evidence. Hargrave=s testimony clearly rebutted some of the evidence presented by appellants= expert. After Hargrave was cross-examined, the court accepted appellants= suggestion that the trial be recessed and appellants be given seven days in which to notify the court if appellants wished to do additional testing. Within the seven-day period, appellants informed the court by letter that, because of the expense involved in additional testing, appellants would not conduct any additional testing. Appellants requested the court to close the evidence. In the letter, appellants re-urged their position that Hargrave=s testimony should not be considered by the court. We do not think that the trial court abused its discretion in allowing Hargrave=s rebuttal testimony. The trial court carefully explained to the parties that the evidence would only be considered as rebuttal. The trial court stated: I received and understood this testimony to accomplish two things from the Plaintiffs= perspective. One, to suggest that the testimony about depth of the footer was not correct and, two, to rebut the testimony that there was no fill dirt under the footers was not correct. That=s what I received it, that this shows that the footer was only about nine to ten inches in depth. The slab was roughly four. When the testimony was, as I understood it, as shown by the paper there, as much as sixteen inches deep with another stem of twelve inches on top of that with a slab on top of that, some twenty-six to thirty inches from top of slab to native soil like that. And this says that testimony is incorrect. That=s the way I heard. If I heard it wrong, I sure would appreciate being corrected. Furthermore, if we are in error and the trial court abused its discretion in permitting the rebuttal testimony, we hold that Hargrave=s testimony probably did not cause the rendition of an improper judgment. TEX.R.APP.P. 44.1. Hargrave was vigorously cross-examined regarding his testimony and his failure to properly test at various locations in the foundation. Also, appellants presented testimony rebutting Hargrave=s testimony. Appellants= complaints, Issues Nos. 2, 3, and 4 regarding the testimony of Hargrave and sufficiency of the evidence on causation, are overruled. Piercing the Corporate Veil Troy Hunt and his wife owned all of the stock in Troy Hunt Homes, Inc. The trial court concluded that Troy Hunt Homes, Inc. was the alter ego of Troy Hunt, individually, and that the corporation was a sham corporation for the personal and family interests of Troy Hunt, individually. In the findings of fact, the trial court found that Troy Hunt, individually, used the corporation, Troy Hunt Homes, Inc., for personal purposes; that the property of the corporation was not kept separate from the personal property of Troy Hunt; that some of Hunt=s automobiles, including those of Hunt=s children, were not maintained separately from the corporation; and that country club dues and fees for Hunt, his wife, and children were paid by the corporation. The trial court also found that several corporate formalities were not kept by the corporation. The trial court found expressly that Troy Hunt Homes, Inc. was a sham corporation. Troy Hunt testified that Troy Hunt Homes, Inc. no longer exists. Troy Hunt now builds houses under a new business entity, Troy Hunt, Ltd. Hunt testified: Q: Now, you said the corporation doesn=t exist anymore. That=s because you moved all the assets out of the corporation, didn=t you? A: No, there wasn=t any assets to move. I finished the last house in the corporation and my next new house that was sold went into the Limited Partnership. Troy Hunt testified that his new partnership, Troy Hunt, Ltd., is paying the legal fees in the instant case for Troy Hunt, Individually, and Troy Hunt Homes, Inc. Troy Hunt testified that Troy Hunt Homes, Inc. has no money, no homes, and no assets. The court in Castleberry v. Branscum, 721 S.W.2d 270, 275 (Tex.1986), stated: In determining if there is an abuse of the corporate privilege, courts must look through the form of complex transactions to the substance. The variety of shams is infinite, but many fit this case=s pattern: a closely held corporation owes unwanted obligations; it siphons off corporate revenues, sells off much of the corporate assets, or does other acts to hinder the on-going business and its ability to pay off its debts; a new business then starts up that is basically a continuation of the old business with many of the same shareholders, officers, and directors. TEX. BUS. CORP. ACT ANN. art. 2.21 (Vernon Supp. 2002) reads in part: A. A holder of shares, an owner of any beneficial interest in shares, or a subscriber for shares whose subscription has been accepted, or any affiliate thereof or of the corporation, shall be under no obligation to the corporation or to its obligees with respect to: (2) any contractual obligation of the corporation or any matter relating to or arising from the obligation on the basis that the holder, owner, subscriber, or affiliate is or was the alter ego of the corporation, or on the basis of actual fraud or constructive fraud, a sham to perpetrate a fraud, or other similar theory, unless the obligee demonstrates that the holder, owner, subscriber, or affiliate caused the corporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee primarily for the direct personal benefit of the holder, owner, subscriber, or affiliate; or (3) any obligation of the corporation on the basis of the failure of the corporation to observe any corporate formality, including without limitation: (a) the failure to comply with any requirement of this Act or of the articles of incorporation or bylaws of the corporation; or (b) the failure to observe any requirement prescribed by this Act or by the articles of incorporation or bylaws for acts to be taken by the corporation, its board or directors, or its shareholders. See also Farr v. Sun World Savings Association, 810 S.W.2d 294 (Tex.App. - El Paso 1991, no writ). The trial court found that the corporation was a Asham.@ A sham is defined in BLACK=S LAW DICTIONARY 1375 (rev. 6th ed. 1990) as A[f]alse dealings.@ The trial court could have expressly found from the evidence that Troy Hunt permitted Troy Hunt Homes, Inc. to have no assets and cease to exist for the purpose of perpetrating an actual fraud on appellees primarily for the direct personal benefit of Troy Hunt. Any omitted elements supported by the evidence will be supplied by presumption in support of the judgment. See TEX.R.CIV.P. 299. The evidence would also support a conclusion of law that the corporation was used as a sham to perpetrate a fraud. See Farr v. Sun World Savings Association, supra. We have not considered the failure of the corporation to observe any corporate formalities because of the language in Article 2.21A(3). The evidence is both legally and factually sufficient to support the piercing of the corporate veil. See Castleberry v. Branscum, supra. Appellants= Issue No. 1 is overruled. Damages Appellees sought damages pursuant to the Residential Construction Liability Act (RCLA)[2] and the Deceptive Trade Practices-Consumer Protection Act (DTPA).[3] Appellees= DTPA claims are not preempted by the RCLA in this case because the court found, and the evidence is both legally and factually sufficient to support such finding, that appellants failed to make a reasonable offer of settlement to appellees. The court in Perry Homes v. Alwattari, 33 S.W.3d 376, 384 (Tex.App. - Fort Worth 2000, pet=n den=d), held: We, therefore, hold that, under subsection 27.004(g), the effect of a contractor=s failure to make a reasonable settlement offer is that the contractor loses the benefit of all limitations on damages and defenses to liability provided for in section 27.004, including both the limitation of subsection 27.004(h) on the types of damages recoverable by a homeowner and the limitation of subsection 27.004(i) on the amount of damages recoverable by a homeowner. The construction contract signed by appellees and Troy Hunt as president of Troy Hunt Homes, Inc. provided: 5. WARRANTIES: In connection with all improvements, fixtures and all other property located on or made a part of the Property: Seller makes the express warranties stated in Paragraph 11 or attached. Paragraph No. 11B of the contract reads: SPECIAL PROVISIONS: Builder shall provide standard 1 Year Builder=s Warranty. In its findings of fact, the trial court found in part: 15. Defendant expressly warranted that Defendant would provide a Astandard one (1) year Builder=s Warranty@ on the residential dwelling. 22. Defendants= breach of the express warranty to provide a one (1) year builder=s warranty was committed knowingly and intentionally. Section 17.50 of the DTPA provides in relevant part: (a) 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; (2) breach of an express or implied warranty; (3) any unconscionable action or course of action by any person; or (4) the use or employment by any person of an act or practice in violation of Article 21.21, Insurance Code. (b) In a suit filed under this section, each consumer who prevails may obtain: (1) the amount of economic damages found by the trier of fact. If the trier of fact finds that the conduct of the defendant was committed knowingly, the consumer may also recover damages for mental anguish, as found by the trier of fact, and the trier of fact may award not more than three times the amount of economic damages; or if the trier of fact finds the conduct was committed intentionally, the consumer may recover damages for mental anguish, as found by the trier of fact, and the trier of fact may award not more than three times the amount of damages for mental anguish and economic damages. The trial court found Aeconomic@ damages of $93,975. This amount was trebled. The trial court found Amental anguish@ damages of $5,000. This amount was not trebled because the trial court found that appellees had only pleaded for $5,000 mental anguish damages. Finding of Fact No. 22 is the only Aknowingly and intentionally@ finding made by the trial court. This is obviously the finding used by the trial court to assess treble damages. The record does not contain a Astandard one (1) year Builder=s Warranty.@ The evidence does not establish such a warranty as to foundations or slabs. Appellants did agree to provide a standard one year builder=s warranty. Appellants did not comply with that provision of the agreement. However, the failure to comply with the provision in the contract was not a Abreach of an express warranty@ as contemplated by Section 17.50. The warranties, both express and implied, actionable under the DTPA must be recognized by the common law or created by statute. Parkway v. Woodruff, 901 S.W.2d 434 (Tex.1995). Appellees had the burden to prove that the Aexpress warranty@ was made by appellants and that the express warranty was breached. See Church & Dwight Co., Inc. v. Huey, 961 S.W.2d 560 (Tex.App. - San Antonio 1997, pet=n den=d); McDade v. Texas Commerce Bank National Association, 822 S.W.2d 713 (Tex.App. - Houston [1st Dist.] 1991, writ den=d). Appellees merely proved that appellants breached the contract, not that appellants breached an Aexpress warranty.@ Appellees failed to prove a breach of an Aexpress warranty@ under Section 17.50 of the DTPA. There are neither findings of fact nor evidence to support the treble damages ordered by the trial court. The trial court did find in its findings of fact that appellants impliedly warranted that the house would be built in a good and workmanlike manner and that appellants failed to construct the residential dwelling in a good and workmanlike manner. However, the trial court expressly found that appellants= breach of the implied warranty to construct the house in a good and workmanlike manner was Anot committed knowingly and intentionally.@ These findings, which are supported by both legally and factually sufficient evidence, will support the trial court=s finding that appellees sustained Aeconomic damages.@ See Evans v. J. Stiles, Inc., 689 S.W.2d 399 (Tex.1985); Melody Home Manufacturing Company v. Barnes, 741 S.W.2d 349 (Tex.1987); Humber v. Morton, 426 S.W.2d 554 (Tex.1968). We further find that the evidence is both legally and factually sufficient to support the $5,000 awarded by the court for mental anguish. Kendra Stephens testified as follows: Q: As a result of the damages to your home have you C how has it affected you personally, if it has at all? A: Oh, it=s been very trying. Q: In what respect? A: I mean this whole deal has tried our faith, our marriage, our C I mean our three year old, that=s all he=s known. You know, we moved into the house in October and started having problems six months later and, you know, when your three year old asks, ADaddy, why won=t that man fix your house,@ what do you tell him? Q: How did you feel about that? A: Well, it doesn=t make me feel very good at all. Q: Have you C are there manifestations or do you have specific symptoms that you relate to this experience? A: I mean the emotional, I guess C I mean I=m going to say it hasn=t been easy because it hasn=t been. Q: When you say this experience has challenged your marriage, what do you mean by that? A: When you go home from work, all you see is, you know, cracks through your ceiling, your fireplace is falling apart, your C I mean it=s not like it=s something that we can get away from. You know, it=s our home and, you know, it=s C it has consumed me, I would admit that. It has affected my work. Q: You mentioned earlier that there was at one point a snake in your kitchen. How did you feel when that happened? A: It scared me to death. I was just thankful it was me and not one of the kids. I walked in there one morning and I saw something out of the corner of my eye over on my kitchen floor and I thought, you know, one of the kids had left a belt or whatever. When I got closer, it was a snake. Suggestion of Remittitur as to Economic Damages Appellees are entitled under the evidence and findings of fact to economic damages and to $5,000 in mental anguish damages. Appellees paid appellants $146,702 to build the house. Appellees= expert appraiser testified that, after inspection of the house and the defective foundation, the house had a fair market value of $81,000. The contract price minus the market value of the defective house equals $65,702. The trial court found that appellees suffered economic damages of $93,975 because of the reduction in the fair market value. This figure is found in a report made by the appraiser. It is apparent from the report that the appraiser=s finding of $93,975 ADepreciation@ was not related to the contract cost to build the house. For instance, the contract included a three-car garage which had a cost of $4,000. The report prepared by the appraiser showed a AGarage/Carport@ cost of $18,850. The evidence is factually insufficient to support any amount of economic damages above $65,702. See Pope v. Moore, 711 S.W.2d 622 (Tex.1986). Therefore, we suggest a remittitur of $28,273. If appellees file such remittitur within 20 days from September 12, 2002, the date of this opinion, we will modify the judgment of the trial court to provide that appellees be awarded economic damages of $65,702 and mental anguish damages of $5,000 against appellants, jointly and severally, and affirm the judgment as modified. If the suggested remittitur is not timely filed, we will reverse the entire trial court=s judgment and remand the cause to the trial court for a new trial. TEX.R.APP.P. 46.3; Rose v. Doctors Hospital, 801 S.W.2d 841 (Tex.1990); Larson v. Cactus Utility Company, 730 S.W.2d 640 (Tex.1987); Pope v. Moore, supra. The judgment of the trial court is affirmed as to the award of $5,000 for mental anguish and is reversed and rendered as to the award of treble damages. A suggestion of remittitur is made concerning the economic damages. AUSTIN McCLOUD SENIOR JUSTICE September 12, 2002 Do not publish. See TEX.R.APP.P. 47.3(b). Panel consists of: Wright, J., and McCall, J., and McCloud, S.J.[4] [1]Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See also E.I. du Pont de Nemours and Company, Inc. v. Robinson, 923 S.W.2d 549 (Tex.1995). [2]TEX. PROP. CODE ANN. ' 27.001 et seq. (Vernon 2000). [3]TEX. BUS. & COM. CODE ANN. ' 17.41 et seq. (Vernon 2002). [4]Austin McCloud, Retired Chief Justice, Court of Appeals, 11th District of Texas at Eastland sitting by assignment.