Scoggins Construction Company, Inc. v. Dealers Electrical Supply Co. ( 2009 )

NUMBER 13-06-00368-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
SCOGGINS CONSTRUCTION
COMPANY, INC., ET AL., Appellants,
v.
DEALERS ELECTRICAL SUPPLY CO., Appellee.
On appeal from the 398th District Court of Hidalgo County, Texas.
MEMORANDUM OPINION ON REMAND
Before Justices Rodriguez, Garza, and Benavides
Memorandum Opinion on Remand by Justice Garza
This case is before us on remand from the Texas Supreme Court. See Dealers
Elec. Supply Co. v. Scoggins Constr. Co., Inc., No. 08-0272, 2009 Tex. LEXIS 475, at *1
(Tex. July 3, 2009). In this case, the trial court entered the complained-of judgment in
favor of appellee, Dealers Electrical Supply Company (“Dealers”), who was left unpaid after
an electrical subcontractor on a bonded public-works project walked off the job. By four
issues, which we categorize as three, appellants, Scoggins Construction Company (“SCC”)
and Bill Scoggins, SCC’s president, argue: (1) the McGregor Act was Dealers’ mandatory
and exclusive remedy and that Dealers was precluded from asserting either a breach of
contract action pertaining to a joint-check agreement, or a cause of action under the Texas
Construction Trust Fund Act, see TEX . GOV’T CODE ANN . § 2253.021, .041, .073 (Vernon
2008) (the “McGregor Act”); see also TEX . PROP. CODE ANN . § 162.001-.033 (Vernon 2007
& Supp. 2009) (the “Trust Fund Act”); (2) there was insufficient evidence to support the trial
court’s judgment that SCC violated the joint-check agreement; and (3) there was
insufficient evidence that Bill, in his individual capacity, and SCC violated the Trust Fund
Act.1
On original submission, this Court concluded that the McGregor Act was Dealers’
mandatory and exclusive remedy and that Dealers was precluded from suing SCC and Bill
for violating the Trust Fund Act and, under the common law, for breach of the joint-check
agreement. Scoggins Constr. Co., Inc. v. Dealers Elec. Supply Co., No. 13-06-368-CV,
2007 Tex. App. LEXIS 9874, at **23-28 (Tex. App.–Corpus Christi Dec. 20, 2007), rev’d
by Dealers Elec. Supply Co., 2009 Tex. LEXIS 475, at *27. The supreme court denied
Dealers’ initial petition for review but later granted Dealers’ motion for rehearing and
concluded that the McGregor Act was not Dealers’ mandatory and exclusive remedy and
that the joint-check agreement was not a debt guarantee. See id. at **20, 26-27; see also
Dealers Elec. Supply Co. v. Scoggins Constr. Co., Inc., No. 08-0272, 2008 Tex. LEXIS
604, at **1, 26 (Tex. June 20, 2008). Accordingly, the court reversed and remanded the
1
Given the Texas Suprem e Court’s disposition in Dealers Electric Supply Co. v. Scoggins
Construction Company, Inc., we need not discuss in this opinion SCC and Bill’s first appellate issue pertaining
to the McGregor Act. See T EX . R. A PP . P. 47.1; see also No. 08-0272, 2009 Tex. LEXIS 475, at *1 (Tex. July
3, 2009).
2
case, directing us to consider SCC and Bill’s arguments pertaining to the sufficiency of the
evidence supporting Dealers’ causes of action for breach of the joint-check agreement and
violation of the Trust Fund Act. We affirm.
I. BACKGROUND 2
SCC entered into a public-work contract with the Mercedes Independent School
District (“M.I.S.D.”) in February 2001 for the construction of an elementary school in
Mercedes, Texas. Under the contract, SCC was to be paid $5,751,000. SCC
subcontracted with Arturo Bujanos d/b/a Diamond Industries (“Diamond”) and Dealers to
provide electrical labor and materials to the project. SCC, Diamond, and Dealers entered
into a joint-check agreement whereby Dealers extended credit to Diamond, and SCC
agreed to pay Dealers and Diamond by joint-check for materials and services “furnished
. . . into the construction of the improvements located at Mile 2 East (“Project”) . . . .”
Relying on this agreement, Dealers and Diamond provided materials and services to the
project between January 1, 2002, and May 2, 2002. However, in early May 2002, Diamond
walked off the job and allegedly absconded with materials that Dealers had supplied to the
project and for which SCC had not paid. On May 10, 2002, Bill, on behalf of SCC, sent
Dealers a letter requesting that Dealers no longer allow Diamond to incur any additional
charges associated with the project.3
2
The factual and procedural background in this case has been explained in this Court’s m em orandum
opinion on original subm ission and in the suprem e court’s opinion; therefore, we will only recount those facts
which are pertinent to the rem aining issues on appeal. See T E X . R. A PP . P. 47.1; see also Dealers Elec.
Supply Co., 2009 Tex. LEXIS 475, at **1-5; Scoggins Constr. Co., Inc. v. Dealers Elec. Supply Co., No. 13-06-
368-CV, 2007 Tex. App. LEXIS 9874, at **3-8 (Tex. App.–Corpus Christi Dec. 20, 2007), rev’d by Dealers
Elec. Supply Co., 2009 Tex. LEXIS 475, at *27.
3
Ernesto Garcia, an inside salesm an with Dealers, testified that he was aware of Bill’s letter directing
Dealers to stop providing m aterials to Diam ond. Garcia stated that Dealers did not provide m aterials to
Diam ond after Dealers received Bill’s letter and that subsequent invoices generated pertained to back orders
that were placed several weeks before Diam ond walked off the job.
3
Because Diamond had walked off the job, SCC contracted with Borchers Electric
Company (“Borchers”) and Ace Fire and Sound (“Ace”) to finish the project. SCC
contended that it paid: (1) Borchers $107,440.27 to complete the electrical work on the
project; (2) Ace $34,640.00 to finish an alarm system; and (3) the Law Offices of William
F. Kimball $8,503.43 in legal fees to file a breach of contract lawsuit against Diamond to
recover damages and missing materials. Dealers sent letters to SCC on May 15, 2002,
May 23, 2002, June 24, 2002, March 14, 2003, and March 20, 2003, demanding payment
for materials provided to Diamond for the project. SCC refused to make the requested
payments to Dealers.
Dealers later sued SCC and Bill for, inter alia, breaching the joint-check agreement
and violating the Trust Fund Act. See TEX . PROP. CODE ANN . §§ 162.001-.033. After a
bench trial, the trial court concluded that: (1) SCC and Bill violated the Trust Fund Act by
receiving payment from the M.I.S.D. for electrical materials supplied to the project and
failing to pay Dealers for them; and (2) SCC breached the joint-check agreement for
refusing to pay Dealers for the materials provided to the project. SCC, Bill, and Diamond
were held jointly and severally liable for $78,123.59, in addition to prejudgment interest,
attorney’s fees, and costs of court. The trial court issued numerous findings of fact and
conclusions of law, including the following: (1) the materials for which Dealers was not paid
were furnished to the project; (2) the M.I.S.D. paid SCC for the materials that Dealers
provided; and (3) by failing to pay Dealers for the materials provided, SCC and Bill violated
the Trust Fund Act.
4
II. STANDARD OF REVIEW
A. Review of the Trial Court’s Findings of Fact
In an appeal from a bench trial, the trial court’s findings of fact “have the same force
and dignity as the jury’s verdict upon questions.” Anderson v. City of Seven Points, 806
S.W.2d 791, 794 (Tex. 1991); see Ashcraft v. Lookadoo, 952 S.W.2d 907, 910 (Tex.
App.–Dallas 1997, writ denied) (en banc). The trial court’s findings of fact are reviewable
for legal and factual sufficiency of the evidence to support them by the same standards that
are applied in reviewing evidence supporting a jury’s answer. Ortiz v. Jones, 917 S.W.2d
770, 772 (Tex. 1996); Anderson, 806 S.W.2d at 794. Fact findings, however, are not
conclusive when, as in this case, a complete reporter’s record appears in the record. City
of Corpus Christi v. Taylor, 126 S.W.3d 712, 717 (Tex. App.–Corpus Christi 2004, pet.
dism’d) (citing Tucker v. Tucker, 908 S.W.2d 530, 532 (Tex. App.–San Antonio 1995, writ
denied)); see Middleton v. Kawasaki Steel Corp., 687 S.W.2d 42, 44 (Tex. App.–Houston
[14th Dist] 1985, writ ref’d n.r.e.). Unchallenged findings of fact are binding on an appellate
court unless the contrary is established as a “matter of law” or there is “no evidence” to
support the finding. McGalliard v. Kuhlmann, 722 S.W.2d 694, 696 (Tex. 1986).
Generally, attacks on the sufficiency of the evidence supporting findings of fact “must be
directed at specific findings of fact, rather than at the judgment as a whole.” De Arrellano
v. State Farm Fire & Cas. Co., 191 S.W.3d 852, 855 (Tex. App.–Houston [14th Dist.] 2006,
no pet.) (citing Zagorski v. Zagorski, 116 S.W.3d 309, 319 (Tex. App.–Houston [14th Dist.]
2003, pet. denied)).
Evidence is legally sufficient if it “would enable reasonable and fair-minded people
to reach the verdict under review.” City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex.
5
2005). A legal sufficiency challenge may only be sustained when: (1) the record discloses
a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of
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
establishes conclusively the opposite of a vital fact. Uniroyal Goodrich Tire Co. v. Martinez,
977 S.W.2d 328, 334 (Tex. 1998). In evaluating the evidence’s legal sufficiency, “we credit
evidence that supports the verdict if reasonable jurors could, and disregard contrary
evidence unless reasonable jurors could not.” Kroger Tex. Ltd. P’ship v. Suberu, 216
S.W.3d 788, 793 (Tex. 2006) (citing City of Keller, 168 S.W.3d at 827); see Am. Interstate
Ins. Co. v. Hinson, 172 S.W.3d 108, 114 (Tex. App.–Beaumont 2005, pet. denied). The
trial court, as fact finder, determines the credibility of the witnesses and the weight to be
given their testimony. See City of Keller, 168 S.W.3d at 819; McGalliard, 722 S.W.2d at
697. Furthermore, in reviewing the sufficiency of the evidence, we may not substitute our
own judgment for that of the trier of fact, even if we would reach a different answer on the
evidence. Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998).
In conducting a factual sufficiency review, we consider and weigh all of the evidence
in the case and set aside the verdict and remand the cause for a new trial, if we conclude
that the verdict is so against the great weight and preponderance of the evidence as to be
manifestly unjust, regardless of whether the record contains some “evidence of probative
force” in support of the verdict. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757,
761-62 (Tex. 2003). The evidence supporting the verdict is to be weighed along with the
other evidence in the case, including that which is contrary to the verdict. Id.
6
B. Review of the Trial Court’s Conclusions of Law
A party may not challenge conclusions of law for factual sufficiency, but we may
review conclusions of law to determine their correctness based upon the facts. Citizens
Nat’l Bank v. City of Rhome, 201 S.W.3d 254, 256 (Tex. App.–Fort Worth 2006, no pet.).
We will uphold a conclusion of law if the judgment can be supported on any legal theory
supported by the evidence. BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794
(Tex. 2002); Tex. Dep’t of Pub. Safety v. Stockton, 53 S.W.3d 421, 423 (Tex. App.–San
Antonio 2001, pet. denied). We review conclusions of law de novo, see State v. Heal, 917
S.W.2d 6, 9 (Tex. 1996), and we will not reverse them unless they are erroneous as a
matter of law. Stockton, 53 S.W.3d at 423.
III. THE TRUST FUND ACT
In their third and fourth issues, SCC and Bill contend that there was insufficient
evidence to support the trial court’s conclusion that they violated the Trust Fund Act.
Dealers counters by arguing that SCC and Bill misapplied trust funds by refusing to pay
Dealers for the materials provided to the project even after Dealers had notified SCC and
Bill of the amounts owed. Dealers further argues that: (1) the evidence demonstrates that
Bill exercised control over the dispersion of the trust funds, making him individually liable
as a trustee for misapplying trust funds; and (2) SCC and Bill did not conclusively establish
their affirmative defenses with competent evidence.
1. Applicable Law
Under section 162.001 of the Trust Fund Act, payments made to a contractor or a
subcontractor pursuant to a construction contract for the improvement of real property are
considered to be trust funds. TEX . PROP. CODE ANN . § 162.001(a) (Vernon 2007); see
7
Holladay v. CW&A, 60 S.W.3d 243, 246 (Tex. App.–Corpus Christi 2001, pet. denied).
Moreover, section 162.003 of the Act provides that a subcontractor who labors or who
furnishes labor or material for the construction or repair of an improvement on real property
is a beneficiary of any trust funds paid by or received in connection with the improvement.
TEX . PROP . CODE ANN . § 162.003. The contractor, or an officer of a contractor who
receives trust funds or who had control or discretion of the trust funds, is a trustee of the
trust funds. Id. § 162.002.
A trustee misapplies trust funds if it “intentionally or knowingly or with intent to
defraud, directly or indirectly retains, uses, disburses, or otherwise diverts trust funds
without first fully paying all current or past due obligations incurred by the trustee to the
beneficiaries of the trust fund.” Id. § 162.031(a). “A party who misapplies trust funds under
the Trust Fund Act is subject to civil liability to trust-fund beneficiaries whom the Act was
designed to protect.” Dealers Elec. Supply Co., 2009 Tex. LEXIS 475, at *16 (citing C &
G, Inc. v. Jones, 165 S.W.3d 450, 453 (Tex. App.–Dallas 2005, pet. denied)); see Lively
v. Carpet Servs., Inc., 904 S.W.2d 868, 873 (Tex. App.–Houston [1st Dist.] 1995, writ
denied). The supreme court has noted that the Act “was enacted for the protection of
laborers and materialmen, and is a remedial statute that should be given a broad
construction.” Dealers Elec. Supply Co., 2009 Tex. LEXIS 475, at *20 (citing RepublicBank
Dallas, N.A. v. Interkal, Inc., 691 S.W.2d 605, 607 (Tex. 1985); C & G, Inc., 165 S.W.3d
at 454). “‘The purpose of [the Trust Fund Act] is best served when the statute is read in
accordance with its common sense meaning.’” C & G, Inc., 165 S.W.3d at 454 (quoting
Vulcan Materials Co. v. Jack Raus, Inc. (In re HLW Enters. of Tex., Inc.), 157 B.R. 592,
597 (Bankr. W.D. Tex. 1993)).
8
2. Discussion
It is undisputed that SCC was a trustee of the trust funds and that Dealers was a
beneficiary of the trust funds. See TEX . PROP. CODE ANN . §§ 162.001(a), 162.003. The
parties’ dispute centers on (1) whether Bill exerted control over the trust funds so as to be
a trustee and (2) whether SCC and/or Bill misapplied trust funds by refusing to pay Dealers
for materials provided to Diamond for use in the project.
Among SCC and Bill’s arguments on appeal are that they did not violate the Trust
Fund Act because: (1) “Dealers failed to prove that the bulk of the material sold to
Diamond were [sic] actually incorporated into the school project”; (2) Dealers failed to
establish a violation of the Trust Fund Act; and (3) if Dealers did prove a Trust Fund Act
violation, SCC and Bill conclusively established at trial an affirmative defense to
prosecution under the Trust Fund Act. See TEX . PROP. CODE ANN . § 162.031(b).
With respect to SCC and Bill’s first contention, the trial court found that the delivery
tickets admitted into evidence all showed that Dealers’ materials were delivered to the
project. In addition, in its findings of fact, the trial court referenced the testimony of Antonio
Tello and Ernesto Garcia, both employees of Dealers. Both Tello and Garcia testified to
seeing materials provided by Dealers incorporated in the project. In particular, Tello
believed that most of the materials incorporated in the project were provided by Dealers
because the project required many special orders that were unique to the project and the
incorporation of such materials in the project was visible to Tello on a “walk-through”
inspection.
SCC and Bill direct us to Garcia’s and Tello’s testimony where they admitted on
cross-examination that they did not account for each and every item provided by Dealers
9
to ensure that they all were incorporated in the project. Tello did state, however, that when
he saw Dealers’ specially-made projects incorporated into the project during his “walk-
through” inspection, the project was 95% complete. SCC and Bill also refer to Garcia’s
seemingly inconsistent testimony, whereby he admits that Dealers delivered materials to
be used in the project to Diamond’s place of business and that Dealers allowed Diamond
to pick up materials at Dealers’ place of business. Garcia testified that of the disputed
materials, approximately $56,000 worth of materials were delivered directly to Diamond
with the remaining materials delivered directly to the project site. However, Garcia later
explained that Plaintiff’s exhibit 69 illustrated that of the disputed materials allegedly
furnished to the project, $42,088.53 of materials were delivered from Dealers’ factory
directly to the project site, $29,432.36 of materials were delivered directly to the project site
by Dealers’ truck, and $6,314.92 of materials were “will call materials” that were picked up
at the counter of Dealers’ supply store.
SCC and Bill’s first contention essentially centers on the trial court’s reconciling of
Tello and Garcia’s testimony regarding the materials furnished to and incorporated into the
project by Dealers. Because the trial court was the sole judge of the credibility of
witnesses, it was empowered with the discretion to believe one witness over another; we
may not impose our own opinion to the contrary, and thus, we must defer to the trial court’s
resolution of the testimony. See City of Keller, 168 S.W.3d at 819. Furthermore, other
than referring to the allegedly inconsistent testimony of Garcia and Tello, SCC and Bill
have not directed us to any evidence in the record demonstrating that all or some of the
materials provided by Dealers were not furnished to or incorporated in the project.
Moreover, SCC and Bill have not directed us to, nor are we aware of, authority requiring
10
that the materials provided to a project by materialmen actually be incorporated in the
project. In fact, the governing statute does not impose such a requirement. See TEX .
PROP. CODE ANN . § 162.003(a). Based on our review of the record, we cannot say that the
disputed findings of fact were supported by legally insufficient evidence. See City of Keller,
168 S.W.3d at 827; see also Uniroyal Goodrich Tire Co., 977 S.W.2d at 334; Associated
Indem. Corp. v. CAT Contracting, Inc., 964 S.W.2d 276, 285-86 (Tex. 1998) (holding that
in a legal sufficiency challenge, we must view all of the evidence in the light most favorable
to the prevailing party and indulge every reasonable inference in favor of the trial court’s
judgment). In reviewing SCC and Bill’s factual sufficiency challenge, we cannot say that
the trial court’s findings are against the great weight and preponderance of the evidence
as to be manifestly unjust or clearly wrong. Golden Eagle Archery, Inc., 116 S.W.3d at
761-62.
By their second and third contentions, SCC and Bill assert that Dealers failed to
establish a violation of the Trust Fund Act and that even if Dealers did prove a violation of
the Trust Fund Act, SCC and Bill established an affirmative defense, as provided by
section 162.031(b) of the property code. See TEX . PROP. CODE ANN . § 162.031(b).4
Dealers argues that several pay applications that SCC submitted to the M.I.S.D. for
reimbursement of expenses prove that SCC and Bill misapplied trust funds and, therefore,
violated the Trust Fund Act. In particular, Dealers directs us to pay applications dated May
4
Section 162.031(b) provides that it is an affirm ative defense to an action brought under the Trust
Fund Act if:
the trust funds not paid to the beneficiaries of the trust were used by the trustee to pay the
trustee’s actual expenses directly related to the construction or repair of the im provem ent or
have been retained by the trustee, after notice to the beneficiary who has m ade a request for
paym ent, as a result of the trustee’s reasonable belief that the beneficiary is not entitled to
such funds or have been retained as authorized or required by Chapter 53.
T EX . P R O P . C OD E A N N . § 162.031(b) (Vernon Supp. 2009).
11
1, 2002, June 4, 2002, June 27, 2002, August 1, 2002, September 3, 2002, September 27,
2002, and January 22, 2003, in which SCC and Bill represented to the M.I.S.D. that:
The undersigned contractor certifies that to the best of the Contractor’s [SCC
and Bill] knowledge, information and belief Work covered by this Application
for Payment has been completed in accordance with the Contract
Documents, that all amounts have been paid by the Contractor for Work for
which previous Certificates of Payment were issued and payments received
from the Owner, and that current payment shown herein is now due.
(Emphasis added.) As noted earlier, Dealers sent several letters to SCC and Bill
demanding payment for the materials provided to the project, letters which predated many
of the pay applications submitted to the M.I.S.D. Dealers now argues that because the
M.I.S.D. paid SCC the amounts requested in the pay applications, despite SCC and Bill’s
knowledge of the amounts owed to Dealers, SCC and Bill intentionally and knowingly made
false representations to the M.I.S.D. in order to obtain payment, and, further, these actions
amounted to a misapplication of trust funds and a violation of the Trust Fund Act. Dealers
also argues that because Bill is the president and sole shareholder of SCC and signed the
joint checks paid to Diamond and Dealers, he is individually liable for violating the Trust
Fund Act.
At trial, Stacy Scoggins, Bill’s daughter and SCC’s secretary and bookkeeper,
testified that: (1) SCC received $5,794,031.73 from the M.I.S.D. for the construction of the
elementary school; (2) the total expenses for materials and labor provided by all the
subcontractors on the project amounted to $5,489,260.23; and (3) SCC had projected a
5% profit on the elementary school project when it made its bid. Stacy further testified that
SCC paid itself approximately the 5% profit it projected from the proceeds obtained from
the M.I.S.D.; the profit was used to pay overhead and day-to-day expenses for SCC, such
as salaries, insurance, lighting bills, air conditioning bills, and water bills; and the payment
12
of such expenses was not a violation of the Trust Fund Act. Stacy also noted that she was
not aware of any construction funds received from the M.I.S.D. that were “siphoned off” by
SCC or Bill.
On appeal, SCC and Bill point to the testimony of Garcia, who testified that he was
not aware of either SCC or Bill misappropriating any of the construction funds received by
SCC from the M.I.S.D. Garcia, however, also stated that he was unsure how Bill handled
the construction funds received from the M.I.S.D. Furthermore, in an affidavit in a related
lawsuit against Diamond that was admitted as a part of Plaintiff’s exhibit 49, Bill swore that
Diamond had approximately $76,700 in electrical supplies that were provided by Dealers
and not incorporated into the project. Bill also averred that SCC had paid Diamond “all
sums due and owing to the Defendant [Diamond] for the work and materials provided by
Defendant on said subcontract” and that “[p]rior to the termination of said subcontract,
[SCC] purchased from Dealers . . . certain electrical supplies and specially fabricated items
for the electrical system of said school . . . .”
Among its findings of fact, the trial court found that Dealers provided $78,123.59 in
materials to the project; SCC did not pay for these materials; and Bill falsely swore under
oath on January 22, 2003, in the final pay application to the M.I.S.D. that all amounts owed
had been paid by SCC. Thus, the trial court concluded that SCC and Bill violated the Trust
Fund Act and were liable to Dealers for $78,123.59.
Indeed, the record contains several demand letters sent by Dealers to SCC notifying
SCC that it owed money for materials provided to the project. However, despite this notice,
SCC and Bill continued to submit pay applications to the M.I.S.D. claiming that all work and
materials had been paid for by SCC. Each of these pay applications was personally signed
13
by Bill. The record also contains numerous joint checks signed by Bill and made payable
to Diamond and Dealers for materials and labor provided to the project, thus demonstrating
that Bill exerted control over the finances for SCC. See C & G, Inc., 165 S.W.3d at 454
(“However, there must be some evidence that the officer or director had control or direction
over the trust funds, such as possessing and exercising the power to divert the trust funds
by sending the funds wherever they choose and actually controlling the disposition of the
funds.”) (citing Nuclear Corp. of Am. v. Hale, 355 F. Supp. 193, 197-98 (N.D. Tex.), aff’d,
479 F.2d 1045 (5th Cir. 1973) (per curiam)). Based on our review of the record, we cannot
say that the trial court erred in concluding that SCC and Bill intentionally or knowingly
misrepresented to the M.I.S.D. that they had paid for all work and materials provided to the
project. As a result of SCC and Bill’s misrepresentations to the M.I.S.D., the evidence
demonstrates that SCC retained $327,846.18 in profits for itself, or, in other words, more
than the contracted 5% profit.5 See BMC Software, 83 S.W.3d at 794 (holding that we will
uphold a conclusion of law if the judgment can be supported on any legal theory supported
by the evidence).
“‘Misapplication’ [of trust funds] occurs when a trustee intentionally [or knowingly]
or with intent to defraud[6], directly or indirectly retains, uses or diverts trust funds without
first fully paying all obligations to the beneficiaries.” Lively, 904 S.W.2d at 874 (citing TEX .
5
Based on Stacy’s testim ony, SCC retained $304,771.45 in profits from the project. This figure was
calculated by subtracting all of the cash disbursem ents SCC m ade to its vendors (including Borchers and
Ace)— $5,489,260.28— from the am ount it received from the M.I.S.D.— $5,794,031.73. However, SCC’s
records reflect that it only disbursed $5,466,185.55 to its vendors, leaving SCC with an actual profit of
$327,846.18, which is m ore than the 5% that SCC projected. See id. § 161.001(c) (Vernon 2007). In fact,
based on Stacy’s testim ony that SCC received $5,794,031.73 and SCC’s 5% profit projection, SCC would
have netted only $289,701.59, not $327,846.18 in profits. W hen asked about the difference in the am ounts
paid to SCC’s vendors, Stacy testified that she was unsure as to why the am ounts differed and that she was
not responsible for reconciling the difference.
6
W e note that there is no evidence supporting an “intent to defraud.” See id. § 162.031(a).
14
PROP. CODE ANN . § 162.031(a)). Here, SCC retained more than the contracted 5% profit
for itself even though it had been notified by a trust fund beneficiary and materials provider,
Dealers, that it had not been paid for materials provided to the project. Therefore, in
keeping with the Trust Fund Act’s purpose to protect laborers and materialmen, we
conclude that the record supports the trial court’s finding that SCC and Bill violated the
Trust Fund Act. See TEX . PROP CODE ANN . § 162.031(a); see also Dealers Elec. Supply
Co., 2009 Tex. LEXIS 475, at *21; RepublicBank Dallas, N.A., 691 S.W.2d at 607; C & G,
Inc., 165 S.W.3d at 454. Accordingly, we hold that the evidence supporting the trial court’s
finding that SCC and Bill violated the Trust Fund Act is legally sufficient.7 See BMC
Software, 83 S.W.3d at 794; Stockton, 53 S.W.3d at 423.
Nevertheless, SCC and Bill assert as affirmative defenses that the money retained
was used to pay actual expenses and offsets related to the project and that they were
entitled to take a reasonable profit even though Dealers had not been paid for materials
provided. See TEX . PROP. CODE ANN . § 162.031(b). SCC and Bill, however, failed to
request findings from the trial court on their affirmative defenses.
“A party asserting an independent ground of recovery or an affirmative defense in
a trial before the court must request findings in support thereof in order to avoid waiver.”
Alma Invs., Inc. v. Bahia Mar Co-Owners Ass’n, 999 S.W.2d 820, 822 (Tex. App.–Corpus
Christi 1999, pet. denied). “If the findings filed by the trial court do not include any element
of the ground of recovery or defense asserted, failure to request additional findings
relevant thereto effects a waiver of the ground or defense.” Id.; see Intec Sys. v. Lowrey,
7
Bill also argues that he cannot be held liable in his individual capacity because he was not a party
to the joint-check agreem ent and that there is insufficient evidence to support piercing the corporate veil.
However, because we have concluded that the evidence established that Bill exerted control over the finances
of SCC and, in turn, violated the Trust Fund Act, we need not analyze these sub-issues. See T EX . R. A PP . P.
47.1; see also T EX . P R O P . C OD E A N N . § 162.031(a).
15
230 S.W.3d 913, 919 (Tex. App.–Dallas 2007, no pet.). “‘[A]n express finding of fact
cannot extend by implication to cover independent grounds of defense’ and ‘cannot extend
to cover further independent issuable facts.’” Intec. Sys., 230 S.W.3d at 919 (quoting F.R.
Hernandez Constr. & Supply Co. v. Nat’l Bank of Commerce, 578 S.W.2d 675, 679 n.4
(Tex. 1979)).
In the instant case, SCC and Bill generally requested that the trial court issue
findings of fact and conclusions of law. The record does not include a request filed by SCC
or Bill moving the trial court to specifically issue findings on their affirmative defenses. See
TEX . R. CIV. P. 298 (stating that after the trial court files its original findings of fact and
conclusions of law, any party may file “a request for specified additional or amended
findings or conclusions”); see also Alvarez v. Espinoza, 844 S.W.2d 238, 241-42 (Tex.
App.–San Antonio 1992, writ dism’d w.o.j.) (“A bare request is not sufficient; proposed
findings must be submitted.”) (citing Heard v. City of Dallas, 456 S.W.2d 440, 445 (Tex.
Civ. App.–Dallas 1970, writ ref’d n.r.e.)). Therefore, because SCC and Bill did not request
that the trial court issue findings specifically addressing their affirmative defenses, we
conclude that SCC and Bill have waived their arguments pertaining to the affirmative
defenses provided by section 162.031(b). See TEX . R. CIV. P. 298; see also Alma Invs.,
Inc., 999 S.W.2d at 822; Alvarez, 844 S.W.2d at 241-42.
Based on the foregoing, we uphold the trial court’s findings that: (1) Dealers
furnished $78,123.59 in materials for the project; and (2) SCC and Bill misapplied trust
funds by refusing to pay Dealers for the materials provided. We further hold that SCC and
Bill waived their appellate arguments pertaining to their affirmative defenses by failing to
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request specific findings from the trial court. Accordingly, we overrule SCC and Bill’s third
and fourth issues on appeal.
V. CONCLUSION
The trial court, in its conclusions of law, held that SCC and Bill were jointly and
severally liable to Dealers for $78,123.59 in actual damages for breaching the joint-check
agreement or for violating the Trust Fund Act. Because we have upheld the trial court’s
conclusion that SCC and Bill are liable for the $78,123.59 damage award for violating the
Trust Fund Act, we need not analyze SCC and Bill’s arguments pertaining to the joint-
check agreement, as that issue would not alter our ultimate disposition—that Dealers is
entitled to $78,123.59 in actual damages from SCC and Bill. See TEX . R. APP. P. 47.1; see
also BMC Software, 83 S.W.3d at 794; Marsh v. Marsh, 949 S.W.2d 734, 739 (Tex.
App.–Houston [14th Dist.] 1997, no writ) (stating that the reviewing court independently
evaluates the trial court’s conclusions of law and upholds them if the trial court’s judgment
can be sustained on any theory supported by the evidence). Thus, we affirm the judgment
of the trial court.
___________________________
DORI CONTRERAS GARZA,
Justice
Memorandum Opinion on Remand delivered
and filed this the 22nd day of October, 2009.
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