Anthony " Tony" Balay Jr. and Balay Builders, Inc. v. Robert B. Gamble and Ann A. Gamble

Opinion issued June 16, 2011 In The Court of Appeals For The First District of Texas ———————————— NO. 01-10-00017-CV ——————————— Anthony “Tony” Balay Jr. and Balay Builders, Inc., Appellant V. Robert B. Gamble and Ann A. Gamble, Appellee On Appeal from the 295th District Court Harris County, Texas Trial Court Case No. 2006-51860 MEMORANDUM OPINION A jury found that a homebuilder, Balay Builders, Inc., and its owner, Anthony Balay, violated the Texas Deceptive Trade Practice Act through misrepresentations, nondisclosures, and unconscionable conduct, causing the home owners, Robert and Ann Gamble, damages of $81,000. The jury also found that such conduct was committed willfully and therefore awarded additional damages against Balay Builders and Balay of $25,000 each. Balay Builders and Balay (collectively, “Balay”) raise three issues on appeal. First, Balay contends that the evidence of damages is legally insufficient because an improper measure of damages was submitted to the jury. It also claims that the jury’s DTPA liability findings are not supported by legally and factually sufficient evidence. Finally, Balay contends that the trial court erred in allowing Mr. Balay to be impeached with a document arising from his earlier bankruptcy proceeding. We affirm. Background The Gambles were residents of Sugar Land, Texas. In 2005, they decided to build a retirement home in Magnolia, Montgomery County, Texas, in the High Meadow Ranch subdivision. After an initial search for potential builders, they decided to select a builder from the High Meadow Ranch Preferred Builder Program, to avoid certain costs associated with the subdivision’s building and architectural approval process. The Gambles narrowed their choices to three potential builders and received a bid from each. During this process, the Gambles met with Anthony Balay, the owner of Balay Builders, to discuss the construction of their home. The Gambles testified that they chose Balay Builders based on Balay’s oral representations and written representations through brochures, a website, and a magazine article. According to the Gambles, these representations included Balay’s statements that he was an experienced custom homebuilder who was building 20 custom homes per year, that he would personally supervise the construction of the home and provide excellent supervision of all the subcontractors, that the homeowner was an integral part of his team during every phase of the construction process, and that a camera would be continually on the site so the homeowner could always observe the construction progress. Balay submitted a lump sum bid to build the Gambles’ home for $384,272.00. Under a lump sum contract, the builder agrees to build a home as specified for that amount. Any changes or upgrades requested by the homeowners could result in an increase (or decrease) in costs; the change is to be confirmed in a written change order. The Gambles signed the contract with Balay Builders on March 14, 2006. Balay contends that the Gambles primarily chose Balay Builders as their builder based on its status as a High Meadow Ranch Preferred Builder and its submission of the lowest bid, and not based upon any representations. Shortly after the contract was signed, the parties began experiencing problems. Balay and the Gambles testified to sharply contrasting versions of the events during the building process. The Gambles testified to a wide variety of problems during construction. According to the Gambles, the first problem occurred when Balay was doing site preparation work, bringing in an inadequate amount of fill dirt to prepare a pad for pouring the foundation. Balay did not supervise the construction site on a regular basis and often did not know the tasks the subcontractors were performing until the Gambles informed him. Balay testified that he or a supervisor would check on the construction daily but he kept no records of his attendance at the job site. Balay’s approach was to allow the subcontractors to work independently and later return and fix the work if necessary. The Gambles testified that the subcontractors made changes to the construction plans, without their knowledge. As an example, the Gambles identified the guest bathroom, which they specifically designed wider than standard, with wider doors, to accommodate a family member in a wheelchair. The framing subcontractors, however, framed the bathroom and bathroom door as standard width. Balay told the Gambles there was an error in the plans and the framers had to correct it. The Gambles also testified that Balay was a “solo act”; there was no teamwork. As mentioned above, the Gambles stated that Balay was rarely at the construction site and that his supervisors were both inexperienced and rarely present. The Gambles claimed that, despite Balay’s representations to the contrary, they were not included as part of the team. They also claimed that he was non-responsive. When construction choices were available, the Gambles tried to make those decisions early and communicate them to Balay. If they had any questions or concerns about the construction, they emailed Balay. But Balay rarely responded to emails. On the contrary, he often hit “reply,” with no text in the reply email, just to show the Gambles he had received the email. The Gambles further testified that camera mentioned in Balay’s promotional materials, although eventually installed, never worked. As a result, the Gambles had to make long trips to Magnolia from their home in Sugar Land or from Mr. Gamble’s work in downtown Houston just to observe the construction work. The Gambles testified that the camera feature was one of the reasons they chose Balay over the other homebuilders. Shortly before the parties terminated their working relationship, Balay began submitting change orders that required the Gambles to pay in advance for materials or additional work. The contract, in contrast, provides that the Gambles would be required to pay after approval of a change order and completion of the work. The Gambles also testified that many of these later change orders charged amounts that were many times the materials’ actual costs. As an example, the plans called for either Delta or Moen fixtures in the bathrooms, but Moen were installed without the Gambles’ knowledge. When they insisted on Delta fixtures, Balay sent a change order showing a cost of almost six times the actual costs of the fixtures. Also, when the Gambles made a change that resulted in a $6,000 cost reduction, Balay refused to credit them with the savings. In contrast, Balay testified that the Gambles immediately began interfering with the construction. The Gambles made changes to the details of the work without submitting or requesting change orders to modify the contract. The Gambles ordered upgraded materials, charging them to Balay, and had materials delivered to the work site without Balay’s consent, causing delays and cost overruns. As an example, Balay stated that the extra dirt was required because the Gambles instructed him to remove virtually every tree on the lot. Concerning the plumbing fixtures, Balay testified that the Gambles changed the fixtures and ordered the plumbers on site to change all the valves in the house without his approval. Balay and the Gambles had a meeting on June 23, 2006 concerning the construction progress. Again, the parties tell vastly different versions of what occurred at this meeting. According to Balay, his assistant, who often took notes of these types of meetings, took notes of the meeting concerning the construction progress and other specific issues. Balay then asked her to leave the room. He told the Gambles that they had to stop doing three things for the construction to progress smoothly: ordering upgrades without his approval; ordering delivery of materials to the work site; and interfering with the subcontractors, such as instructing them to stop working or to deviate from the plans. The Gambles testified that the private second portion of the meeting never occurred. After this meeting, the relationship continued to deteriorate. A few weeks later, on July 13, Balay sent a letter to the Gambles stating he was terminating the contract because the Gambles failed to pay change orders timely; they interfered with the subcontractors, causing delays in the construction; they asked subcontractors to make changes without Balay’s knowledge; and design flaws were causing delays. The parties’ relationship did not improve after this letter, and the Gambles filed this suit shortly thereafter. The Measure of Damages In its second issue, Balay contends that the trial court erred by denying a motion for directed verdict because the damages submitted to the jury “only support a breach of contract claim” and cannot be the basis for a DTPA claim. A challenge to the denial of a directed verdict is, in essence, a challenge to the legal sufficiency of the evidence. Cleveland Reg’l Med. Ctr., L.P. v. Celtic Properties, L.C., 323 S.W.3d 322, 346 (Tex. App.—Beaumont 2010, pet. filed); Haynes, & Boone, L.L.P. v. Chason, 81 S.W.3d 307, 309 (Tex. App.—Tyler 2001, pet. denied). In reviewing a trial court’s denial of a motion for directed verdict, we are limited to the specific grounds stated in the motion. Batra v. Clark, 110 S.W.3d 126, 128 (Tex. App.—Houston [1st Dist.] 2003, no pet.); Cooper v. Lyon Fin. Servs., Inc., 65 S.W.3d 197, 207 (Tex. App.—Houston [14th Dist.] 2001, no pet.). Balay argued in the motion for directed verdict and argues here that the Gambles’ sole ground for recovery is a breach of contract claim, not a DTPA action. The DTPA prohibits “[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or commerce.” Tex. Bus. & Comm. Code Ann. § 17.46(a) (West 2011). Section 17.46(b) contains a laundry list of specifically prohibited acts. Included in that laundry list are (1) “representing that goods or services have characteristics which they do not have,” (2) “representing that goods or services are of a particular . . . quality, . . . if they are of another, ” (3) “representing that an agreement confers or involves rights, remedies, or obligations which it does not have or involve,” (4) “representing that a guarantee or warranty confers or involves rights or remedies which it does not have or involve,” and (5) “failing to disclose information concerning goods or services which was known at the time of the transaction if such failure to disclose such information was intended to induce the consumer into a transaction into which the consumer would not have entered had the information been disclosed.” Id. § 17.46(b)(5), (7), (12), (20) and (24). Actionable representations may be oral or written. Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 502 (Tex. 2001). Intent to make a misrepresentation is not required to recover under section 17.46(b)(5), (7), and (12). See id. Under section 17.50(a), a DTPA plaintiff may recover “economic damages” for which the defendant’s misconduct was a producing cause. Tex. Bus. & Com. Code Ann. § 17.50(a) (West 2011). Economic damages include both benefit-of-the-bargain damages similar to those recoverable for breach of contract and out-of-pocket damages. See W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex. 1988) (explaining that out-of-pocket and benefit-of-the-bargain are two measures of damages under the DTPA, and noting that a plaintiff may recover the greater of the two measures). Additionally, “recovery under the DTPA is not exclusively limited to only these two types of damages.” Manon v. Tejas Toyota, Inc., 162 S.W.3d 743, 754 (Tex. App.—Houston [14th Dist.] 2005, no pet.). Rather, the consumer may recover its “total loss sustained . . . as a result of the deceptive trade practice,” including “related and reasonably necessary expenses.” Id.; see D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973 S.W.2d at 662, 663–64 (Tex. 1998) (explaining that a plaintiff can recover, in addition to out-of-pocket-expenses, any loss otherwise suffered as a consequence of misrepresentations); Henry S. Miller Co. v. Bynum, 836 S.W.2d 160, 162 (Tex. 1992) (holding that DTPA damages include recovery for “lost capital investment”). In other words, the consumer is “permitted [to recover] other damages to ensure that the plaintiff is made whole.” Bynum, 836 S.W.2d at 162. In this case, the jury was asked to answer two elements of damages. First, the jury was asked the “difference between the Balay Builders, Inc. contract price and the cost for Robert and Ann Gamble to complete the construction of the home.” Next, the jury was asked the “reasonable and necessary expenses incurred as a result of Balay Builders’ delay, if any, in releasing the job.” The Gambles presented evidence that their damages totaled $163,685.00 and fell into four general categories: additional costs to complete the construction over and above the original contract price, costs to repair or replace Balay’s faulty work, additional interest paid on their construction loan, and miscellaneous costs (e.g., costs of inspection and replacing an air conditioning unit stolen before Balay released the property). Thus, the Gambles sought damages that covered both benefit-of-the-bargain and out-of-pocket measure of damages. These are proper in a DTPA claim. See W.O. Bankston Nissan, Inc., 754 S.W.2d at 128. Balay correctly argues that when a plaintiff’s claim arises solely from the failure of one of the parties to perform on a contract, a DTPA action is inappropriate. Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 14 (Tex. 1996) (per curiam); see also Wayne Duddlesten, Inc. v. Highland Ins. Co., 110 S.W.3d 85, 92 (Tex. App.—Houston [1st Dist.] 2003, pet. denied) (holding that proof of a failure to comply with contractual promises “cannot be used to support an action under the DTPA”). In Crawford, the plaintiff sought to escape this rule based on the defendant’s misrepresentations that it would perform under the contract. The court held, however, that a misrepresentation that is based on nothing more than a failure to perform a contractual promise cannot be the basis for a DTPA claim; otherwise, every breach of contract claim would be converted into a DTPA claim. Id. The Gambles, however, presented evidence of more than a misrepresentation of a promise made in the parties’ contract. The evidence included testimony that Balay represented that he would personally oversee the work, that he had extensive experience, that he was building over 20 homes a year, and that the Gambles would be a integral part of the team and would have input during each phase of the building process. Cf. A.I.G. Const. Co., Inc. v. Thomson, No. 14-03-00021-CV, 2004 WL 2002556 (Tex. App.—Houston [14th Dist.] Sept. 9, 2004, pet. denied) (finding misrepresentation of a contractor’s expertise and ability to perform the work supported DTPA claim, and therefore Crawford was inapplicable); Howell Crude Oil Co. v. Donna Refinery Partners, Ltd., 928 S.W.2d 100, 108–09 (Tex. App.—Houston [14th Dist.] 1996, writ denied) (distinguishing Crawford when defendant made affirmative misrepresentation that its crude oil had sponsorship, approval, characteristics, uses, benefits or quantities that it did not have and that the parties’ agreement conferred rights or remedies that it did not and these representations were independent of the contract). The jury found that Balay engaged in deceptive acts by making affirmative misrepresentations, failing to disclose information that should have been disclosed, and acting unconscionably. This evidence and these findings make Crawford inapplicable. In one sentence of the brief, Balay argues that the damages found by the jury only support a breach of contract claim, and therefore the Gambles could not recover under the DTPA. Balay does not cite any case in support of this contention and does not discuss the damages permitted under contract law or the damages submitted to the jury. This argument, therefore, is waived. See Abdelnour v. Mid Nat’l Holdings, Inc., 190 S.W.3d 237, 241 (Tex. App.—Houston [1st Dist.] 2006, no pet.) (“Issues on appeal are waived if an appellant fails to support his contention by citations to appropriate authority . . . .”). We overrule Balay’s second issue. Sufficiency of the Evidence to Support Finding Balay Violated the DTPA In its third issue, Balay argues that the evidence is legally and factually insufficient to support an award of damages based on the jury’s findings that Balay violated the DTPA. The jury found both that Balay violated a number of the “laundry list” provisions of section 17.46(b) and that Balay committed an unconscionable action or course of action. 1. Laundry list violations Jury question four is a broad-form jury question that includes five subparts of the laundry list of actionable conduct under the DTPA. Four of those items track misrepresentations that are prohibited by the DTPA; the fifth inquires whether Balay failed to disclose information that should have been disclosed. The question also asks if Balay engaged in any of the acts listed in the subparts “that [the Gambles] relied on to their detriment.” Balay contends that the Gambles may not recover under the DTPA because they affirmatively disclaimed reliance on any representations other than those contained in the contract. The construction contract provides, “No other statement, representation or promise has been made to induce either party to enter into the contract.” A legal sufficiency point may be preserved by a motion for directed verdict; an objection to submitting a question to the jury; a motion for judgment notwithstanding the verdict; a motion to disregard the jury’s answer to a vital fact issue; or a motion for new trial. See El-Khoury v. Kheir, 241 S.W.3d 82, 86 (Tex. App.—Houston [1 Dist.] 2007, pet. denied) (citing Cecil v. Smith, 804 S.W.2d 509, 510–11 (Tex. 1991)). Balay did not move for judgment notwithstanding the verdict, to disregard a jury’s answer, or for a new trial. Balay did move for a directed verdict; however, Balay did not identify the element of reliance or request a directed verdict on the basis that reliance was not proved or was negated as a matter of law by the parties’ contract.[1] Additionally, Balay’s objections to the jury charge did not include an objection that the Gambles produced no evidence of reliance. Balay also failed to preserve his factual sufficiency challenge to the reliance finding. A motion for new trial is a prerequisite to raising a complaint of factual sufficiency on appeal. Tex. R. Civ. P. 324(b)(2); Cecil, 804 S.W.2d at 510. As noted above, Balay did not file a motion for new trial. Accordingly, we conclude that Balay has not preserved a challenge to the legal or factual sufficiency of the evidence of reliance. See Cecil, 804 S.W.2d at 509–10; El-Khoury, 241 S.W.3d at 86. 2. Unconscionability Balay also contends that the evidence is insufficient to support a finding that Balay engaged in an unconscionable action or course of action. Section 17.50 provides that a consumer may recover under the DTPA for a laundry list violation or an unconscionable action or course of action. Tex. Bus. & Comm. Code Ann. § 17.50(a). Because we have overruled Balay’s only challenge to the laundry list violations, we may uphold the judgment based on the laundry list violations and need not address Balay’s argument concerning the sufficiency of the evidence to support the jury’s finding on unconscionability. See Parkway Co. v. Woodruff, 901 S.W.2d 434, 440 (Tex. 1995) (noting appellate court did not address unconscionability finding when trial court’s DTPA judgment was upheld on another theory); see also Gillman Imports of San Antonio, Inc. v. Castillo, No. 04-95-00670-CV, 1996 WL 383112, at *5 (Tex. App.—San Antonio July 10, 1996, no pet.) (citing Parkway and declining to address jury’s unconscionability finding because judgment could be upheld based on other DTPA violations). We overrule Balay’s third issue. Use of Bankruptcy Trustee’s Report In its first issue, Balay argues that the trial court committed reversible error by allowing the Gambles’ counsel to read verbatim from portions of an objection filed by the trustee to Mr. Balay’s chapter seven bankruptcy. Outside the presence of the jury, the Gambles offered the bankruptcy trustee’s “Complaint Objecting to Discharge,” a pleading filed by the trustee in Mr. Balay’s personal bankruptcy proceeding. Balay objected that the complaint had not been produced in response to a document request seeking “exhibits and demonstrative aids [the Gambles] may use at trial for this cause.” Citing Alvarado v. Farah Mfg. Co., Inc., 830 S.W.2d 911, 914 (Tex. 1992), Balay contends that the exclusion of the complaint was mandatory because of the lack of production. We reject Balay’s contention. First, the Gambles objected that the request sought their work product and was “beyond the scope of permissible discovery.” The request did seek counsel’s work product and was overly broad. Texas Tech Univ. Health Sciences Ctr. v. Schild, 828 S.W.2d 502, 504 (Tex. App.—El Paso 1992, orig. proceeding) (holding that request for “each and every exhibit” that opposing counsel might “introduce as evidence” at the trial of the case sought attorney’s work product and was overly broad). Second, Balay did not seek a ruling on the Gambles’ objection. “[T]he failure to obtain a pretrial ruling on discovery disputes that exist before commencement of trial constitutes a waiver of any claim for sanctions based on that conduct.” Remington Arms Co. v. Caldwell, 850 S.W.2d 167, 170 (Tex. 1993). When a party receives objections to its discovery, its failure to seek a ruling on those objections waives its right to the requested discovery. Roberts v. Whitfill, 191 S.W.3d 348, 361 (Tex. App.—Waco 2006, no pet.). A party cannot sit on an objection and then seek exclusion of the evidence at trial. See Lewis v. W. Waste Indus., 950 S.W.2d 407, 410 (Tex. App.—Houston [1st Dist.] 1997, no writ); Smith v. O’Neal, 850 S.W.2d 797, 799 (Tex. App.—Houston [14th Dist.] 1993, no writ). Finally, we note that any error was waived by Balay. The trial court initially refused to admit the document and also refused to permit counsel to display or read it to the jury. Instead, she permitted the Gambles’ counsel to provide the document to Mr. Balay for him to read to himself and refresh his recollection about matters involved in his bankruptcy. As counsel began to ask him to read portions of the document to himself and to refresh his recollection, Mr. Balay stated that he preferred for the Gambles’ counsel to read it aloud to the jury. Only at that point did the trial court allow the exhibit to be read to the jury. We overrule Balay’s first issue. Conclusion We affirm the judgment of the trial court. Harvey Brown Justice Panel consists of Justices Higley, Brown, and Halbach.[2] [1] The closest Balay came to identifying reliance as an element on which the Gambles had presented no evidence came as part of its directed verdict that the Gambles should be limited to a breach of contract cause of action and not a DTPA cause of action. Balay argued in pertinent part: We have a cite for this, Your Honor, the Crawford v. Ace Sign case, 917 S.W.2d 12, Texas Supreme Court, 1996. It says that if a plaintiff’s claims under the DTPA arise sole under the failure of one of the parties to perform on a contract, then the claim is inappropriate under the DTPA. . . . . And so the problem that the plaintiffs will have on this point is Mr. Gamble testified that he had read and understood the -- the integration or merger clauses in the various contracts, that there were no oral representations, there were no warranties outside the contract that induced him. So the only thing is the contractual language. So it’s purely breach of contract. [2] The Honorable Tad Halbach, Judge of the 333rd District Court of Harris County, participating by assignment.