Elizabeth Ann Davis Crews v. Gary M. Gordon D/B/A Gordon Taylor Custom Homes ( 2011 )

COURT OF APPEALS
SECOND DISTRICT OF TEXAS
FORT WORTH
NO. 02-09-00413-CV
NO. 02-09-00414-CV
ELIZABETH ANN DAVIS CREWS APPELLANT
V.
GARY M. GORDON D/B/A APPELLEE
GORDON TAYLOR CUSTOM
HOMES
----------
FROM THE 141ST DISTRICT COURT OF TARRANT COUNTY
----------
MEMORANDUM OPINION1
----------
I. INTRODUCTION
Appellant Elizabeth Ann Davis Crews challenges the legal and factual
sufficiency of the evidence to support the jury’s findings in favor of Appellee Gary
M. Gordon d/b/a Gordon Taylor Custom Homes. We will affirm.
1
See Tex. R. App. P. 47.4.
II. FACTUAL AND PROCEDURAL BACKGROUND
Gordon has been a custom and speculative homebuilder for thirty years.2
In June 1999, he contracted with Crews to build her a house. Crews moved into
the house sometime in early 2000, but there was a ―punch list‖ of ―small items on
the house, touch ups, fix ups and so forth‖ that needed to be completed. Gordon
claimed that he performed the repairs, sometimes two or three times, spending
about $55,000 in ―extras‖ for which he was never reimbursed, but Crews was
never satisfied with his efforts.3 Crews eventually sued Gordon in September
2000 for, among other things, breach of contract, fraud, and violations of the
DTPA in relation to the construction of her house, and Gordon asserted a
counterclaim against Crews for monies owed to him.4
Crews and Gordon mediated the lawsuit on July 28, 2003. That same day,
they entered into a ―Compromise and Settlement‖ agreement (CSA) that
contained the following terms:
1. [Gordon] shall pay [Crews] the sum of $33,000.00 at closing.
....
2
Gordon described his business as ―[e]xtremely‖ financially risky. He
generally builds homes costing at least $1 million, and when he builds a
speculative home, he is responsible for paying its mortgage and expenses until it
sells.
3
Gordon opined that ―[y]ou couldn’t please [Crews], regardless of what you
did.‖
4
This cause was assigned number 141-184797-00.
2
3. [Gordon] shall deliver to [Crews’s] attorney a sworn, true and
correct personal financial statement that shows he is judgment
proof on or before 4:00 PM August 4, 2003. [Crews] has been
induced to enter into this agreement to settle a disputed claim
for a lesser amount than she thinks is appropriate based upon
and in reliance upon [Gordon’s] sworn, true and correct,
financial statements.
4. [Gordon] and [Crews] shall enter into a real estate sales
contract that provides that [Gordon] shall purchase [Crews’s]
home in question (home) for 91% of its appraised value . . . .
The closing of the home sale (home closing) [shall] be within
60 days of written notice by [Crews] . . . . The written notice
from [Crews] to [Gordon] shall be on or before July 28,
2008 . . . .
....
[6]. Each party hereby releases the other party from all claims,
known or unknown, for and in consideration of this Compromise and
Settlement, except as provided herein. The release includes . . .
legal representatives. . . .
[Gordon’s attorney] shall prepare the . . . forms . . . and such
other documents needed to accomplish this agreement . . . .
....
Closing shall occur on or before 5:00 o’clock p.m. on August
28, 2003 . . . . Closing is the event at which executed documents
and funds are actually exchanged to complete this Agreement. The
delivery of all documents, fully executed by the parties, and the
funds to be delivered are to be done on or before the closing
date. . . .
THIS AGREEMENT IS NOT SUBJECT TO REVOCATION
[Emphasis added.]
In accordance with the CSA, Gordon submitted his first financial statement
to Crews on August 1, 2003, several days before the August 4, 2003 deadline.
The statement identified Gordon’s net worth as negative $340,050, and he
3
signed the statement under the following verification: ―I hereby affirm that the
above information is true and correct to the best of my knowledge, information
and belief.‖ But Crews ―was not happy with‖ the statement and asked that
Gordon submit a new financial statement, which he agreed to do.5
Gordon submitted a second financial statement on August 4, 2003, that
identified his net worth as approximately negative $474,000 and included the
same declaration found in the first financial statement above his signature.
Unlike the first financial statement, the second financial statement included
information about his ownership in several entities and the assets that those
entities held in banks, a breakdown of his credit card debt, a house (704
Montreux) that he sold the same day of the mediation, two lots that he owned in
Austin, and several additional liabilities. Although Crews acknowledged that the
second financial statement contained more detail than the first financial
statement, she was not satisfied with the statement; she considered it
insufficient; she asked for more information; and on August 25, 2003, she
requested that Gordon submit a financial statement using a particular form.
Gordon agreed, again.
5
The first financial statement listed the figures associated with several of
Gordon’s assets and liabilities, including ―Cash in Bank,‖ ―Homestead,‖
―Automobiles,‖ and, among other things, ―Loans Payable to Bank,‖ but Crews
opined that the statement was incomplete and untrue because none of the
information contained therein was independently verifiable. For example, Crews
was unable to tell from the statement what bank held Gordon’s cash, what the
physical address of Gordon’s homestead was, what the details were regarding
the loans payable to the bank, and so on.
4
Gordon submitted a third financial statement to Crews on August 29, 2003,
using the form provided by Crews. The statement contained even more
information about Gordon’s financial condition, identified his net worth as
approximately negative $547,000, and included a verification that the financial
information contained therein was ―a true, complete[,] and correct statement of
[his] financial condition.‖ But Crews took issue with the statement again and
requested that it be modified to include additional information, including details
regarding Gordon’s community property, assets held in his children’s names, and
tax returns, among other things. Although Gordon thought that Crews’s latest
request was ―changing the rules‖ because ―[n]one of [it] was discussed in the
settlement agreement,‖ he agreed to submit additional information to Crews
regarding tax returns and credit card statements.
As with the three previous financial statements, Crews was yet again
dissatisfied with the additional financial information that Gordon submitted, and
she requested that he provide ―the completed financial statement, including all
community property.‖ But this time, Gordon refused to provide any additional
information. Crews consequently filed a ―Motion to Enforce Mediation
Settlement,‖ which the trial court granted, ordering Gordon to turn over
information about his ownership interests in separate and community property.6
6
The trial court ordered that the information be considered part of the third
financial statement.
5
On February 24, 2004, Gordon submitted supplemental financial
information to Crews in accordance with the trial court’s order. The documents
showed that Gordon had a net worth of approximately negative $597,000. Crews
did not request any additional financial information thereafter, and the parties
worked to finalize formal settlement documents. Gordon’s insurance company
sent a settlement check payable to Crews in September 2003 for $33,000 and a
replacement check for the same amount in June 2004. After Gordon objected to
several parts of Crews’s version of the proposed final settlement agreement,
Crews withdrew her consent to the CSA.
In August 2005, Gordon filed his original counterclaim against Crews for
breach of the CSA, alleging that he had fully performed under the enforceable
CSA but that Crews had refused to execute formal settlement documents and to
release him from liability. The trial court severed all claims related to the CSA
from Crews’s suit against Gordon (cause 141-184797-00) and abated Crews’s
suit.7
A jury trial commenced in June 2009 on the CSA-related claims. The jury
found that the CSA was a legally enforceable agreement between Crews and
Gordon, that Gordon did not fail to comply with the CSA, that Crews did fail to
comply with the CSA, and that Crews was not fraudulently induced by Gordon to
enter into the CSA. The trial court signed an amended final judgment ordering
7
The trial court assigned the severed cause 141-231935-08. Crews
pleaded the affirmative defense of fraudulent inducement.
6
that Gordon ―is entitled to a judgment on his breach of settlement agreement
claim seeking enforcement of July 28, 2003 [CSA].‖ In light of the judgment in
the CSA-related suit, the trial court granted Gordon’s subsequent motion for
summary judgment on Crews’s abated claims in cause 141-184797-00,
regarding the construction of her house, ordering that ―all claims and causes of
action between the parties are dismissed with prejudice and that [Crews] take
nothing by way of her causes of action herein.‖ Crews appeals.
III. STANDARDS OF REVIEW
We may sustain a legal sufficiency challenge only 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),
cert. denied, 526 U.S. 1040 (1999); Robert W. Calvert, "No Evidence" and
"Insufficient Evidence" Points of Error, 38 Tex. L. Rev. 361, 362–63 (1960). In
determining whether there is legally sufficient evidence to support the finding
under review, we must consider evidence favorable to the finding if a reasonable
factfinder could and disregard evidence contrary to the finding unless a
reasonable factfinder could not. Cent. Ready Mix Concrete Co. v. Islas, 228
S.W.3d 649, 651 (Tex. 2007); City of Keller v. Wilson, 168 S.W.3d 802, 807, 827
(Tex. 2005). Anything more than a scintilla of evidence is legally sufficient to
7
support the finding. Cont’l Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 450
(Tex. 1996); Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex. 1996). More than a
scintilla of evidence exists if the evidence furnishes some reasonable basis for
differing conclusions by reasonable minds about the existence of a vital fact.
Rocor Int’l, Inc. v. Nat’l Union Fire Ins. Co., 77 S.W.3d 253, 262 (Tex. 2002). If a
party is attacking the legal sufficiency of an adverse finding on an issue on which
the party had the burden of proof, she must demonstrate that the evidence
establishes, as a matter of law, all vital facts in support of the issue. Dow Chem.
Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001).
When reviewing an assertion that the evidence is factually insufficient to
support a finding, we set aside the finding only if, after considering and weighing
all of the evidence in the record pertinent to that finding, we determine that the
credible evidence supporting the finding is so weak, or so contrary to the
overwhelming weight of all the evidence, that the answer should be set aside and
a new trial ordered. Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986)
(op. on reh’g); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965).
IV. GORDON’S COMPLIANCE WITH THE CSA
In her first and second issues, Crews argues that the evidence is legally
and factually insufficient to support the jury’s finding that Gordon complied with
the CSA.8 Crews contends that instead of submitting a sworn, true, and correct
8
Crews does not challenge the jury’s finding that the CSA constituted a
legally enforceable agreement between her and Gordon.
8
financial statement as required by the CSA, Gordon ―flat out lied to [her]
throughout the whole process of providing her with his sworn, true[,] and correct
financial statements‖ because the first financial statement did not contain any
information regarding 704 Montreux and the two lots that Gordon owned in
Austin, the statements failed to list additional debts and assets, and Gordon
admitted to lying in applications that he submitted to Affiliated Bank.
At the heart of Crews’s first and second issues is a dispute about what is
material and what is not material to Gordon’s compliance with the CSA. Jury
question number 2 specifically addressed materiality, stating in relevant part the
following:
[Gordon’s] failure to comply, if any, must be material. The
circumstances to consider in determining whether a failure to comply
is material include:
(a) the extent to which [Crews] will be deprived of the benefit
which she reasonabl[y] expected;
(b) the extent to which [Crews] can be adequately compensated
for the part of that benefit of which she will be deprived;
(c) the extent to which [Crews] will suffer forfeiture;
(d) the likelihood that [Gordon] will cure his failure, taking into
account the circumstances including any reasonable
assurances;
(e) the extent to which the behavior of [Gordon] comports with
standards of good faith and fair dealing. [Emphasis added.]
9
See Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 199 (Tex.
2004) (listing factors of Restatement (Second) of Contracts § 241(a) (1981) in
determining materiality of breach).
Gordon testified that one of the ―big‖ issues addressed at the mediation on
July 28, 2003, was his financial situation because Crews wanted to know what
his ―ability to pay was.‖ Crews testified similarly—that Gordon’s financial
condition was one of the ―main issues‖ discussed at the mediation. In light of the
significance of Gordon’s financial condition, Crews and Gordon included the
provision in the CSA requiring that Gordon submit a sworn, true, and correct
financial statement showing that he was judgment proof and affirming that Crews
was induced to enter into the CSA for a lesser amount than she thought
appropriate based upon Gordon’s financial statements evidencing that he was
judgment proof. Crews acknowledged at trial that for Gordon to comply with the
CSA, the financial statement that he submitted had to establish that he had a
negative net worth and not a positive net worth.9 Gordon testified that he was
9
The following exchange occurred between Crews and her attorney:
Q. If you got a financial statement from [Gordon] that
showed that he was worth $500,000, positive net worth, that would
not have complied with this agreement, would it?
A. No.
Q. The sworn, true, and correct financial statement had to
establish that he had a negative net worth, right?
A. That’s correct.
10
―judgment proof‖ so long as his liabilities exceeded his assets; or as Crews
stated, that he had a negative net worth. Considering this evidence, the jury
could have concluded—and likely did conclude—that it was material to Gordon’s
compliance with the CSA that he submit a financial statement evidencing his
negative net worth.
Gordon testified that the third financial statement, twice supplemented with
additional financial information (ordered once by the trial court), was the most
accurate and detailed of the three financial statements that he submitted to
Crews; that it truly, correctly, and accurately reflected that he had a negative net
worth of $597,000; and, therefore, that he was judgment proof as of July 28,
2003.10 Gordon testified extensively about the details and figures set forth in the
third financial statement, establishing its accuracy, and the trial court admitted
numerous exhibits supporting Gordon’s uncontroverted testimony that he had a
negative net worth on July 28, 2003.11
Crews’s arguments highlighting Gordon’s failure to include certain
information in his financial statements impliedly assert that those exclusions were
10
Crews agreed that the appropriate calculation of Gordon’s net worth was
as of July 28, 2003, and not at any time thereafter. Crews does not argue that
Gordon submitted the third financial statement untimely.
11
Among other things, Gordon testified and offered exhibits about balances
that he held in bank accounts at relevant time periods, funds that he withdrew
from his retirement account to pay subcontractors, money that he owed to
different institutions, his homestead, his partial ownership in real property and the
debts associated therewith, his numerous contingent liabilities, tax returns, and
past and pending lawsuits.
11
material to his compliance with the CSA. The arguments closely track Crews’s
testimony agreeing that ―every single thing in the financial statement had to be
absolutely correct for [Gordon] to comply with the settlement, even if the error
made didn’t result in [Gordon] having a positive net worth.‖ [Emphasis added.]
However, Crews was not charged with determining the materiality of a failure to
comply with the CSA; the jury was charged with that responsibility. Accounting
for the circumstances that the jury was charged with considering in determining
whether a failure to comply was material, the jury could have determined—and
apparently did so determine—that Gordon’s failure to include information in his
first financial statement about 704 Montreux and the two lots in Austin, and his
failure to include in the financial statements more detailed data about assets and
liabilities that he had already identified, were not material to whether he complied
with the CSA because the inclusion of the omitted financial information would not
have resulted in Gordon ever having a positive net worth—an issue that was
material to Gordon’s compliance with the CSA. Instead, the complained-of
omitted financial information, which was all included in the third, supplemented
financial statement, merely increased the extent of Gordon’s negative net worth.
Crews further argues that the jury could not have found that Gordon
complied with the CSA because he lied to her by excluding information on the
financial statements and because he submitted financial statements to Affiliated
Bank that contained false information. Attacking Gordon’s credibility, Crews
contends that Gordon ―should not be able to come into court, admit that he
12
intentionally left information out of a series of financial statements[,] . . . and
enjoy the protection of the [j]ury’s verdict in this case.‖ Crews’s arguments
disregard the jury’s province in determining witness credibility, erroneously
substituting her opinion of Gordon’s credibility for that of the jury. See City of
Keller, 168 S.W.3d at 819. Gordon explained that he did not include the
information about 704 Montreux and the two lots that he owned in Austin on his
first financial statement because ―it was a terrible time‖; he was ―[t]rying to
survive, jocking around money, changing offices, office managers, reducing the
size of the office each time and people. I had a young child, you know, a lot of
things.‖ Regarding the financial statements that he submitted to the bank,
Gordon testified that he excluded debt and inflated several assets on the
financial statements because he needed loans to pay off debt that he had
incurred to banks, subcontractors, lienholders, and suppliers. Gordon admitted
that what he had done was wrong, but he explained that he had repaid his
creditors and the bank with interest and that the same bank had loaned him
money again. The jury was free to conclude that Gordon was no less credible—
and, therefore, that he had complied with the CSA by submitting a sworn, true,
and correct financial statement showing that he had a negative net worth on July
28, 2003—notwithstanding his omission of information in the financial statements
that he submitted to Crews and his admitted actions regarding the unrelated
financial statements that he submitted to the bank.
13
Crews also argues that Gordon overstated the amount of his liabilities by
$503,500 because he counted certain liabilities twice. Of the approximately
$500,000, Crews argues that Gordon overstated liabilities in the amount of
$471,000 because he counted liabilities totaling that figure in the financial
statements that he submitted to Crews and in the HUD-1 settlement statement
for the ―1803 Leeds‖ property. However, Crews raised this issue at trial, and the
jury rejected it. Gordon testified that he did not sell the 1803 Leeds property until
nine months after he and Crews had entered into the CSA, which was at a point
in time that was irrelevant to his net worth as of July 28, 2003, and that he had
paid additional debts that were attributable to the Leeds property but that were
not listed on the Leeds statement. Moreover, even if the jury agreed with
Crews’s argument, Gordon still had a negative net worth.
Viewing the evidence under the appropriate standards of review, we hold
that the evidence is both legally and factually sufficient to support the jury’s
finding that Gordon complied with the CSA. See id. at 802, 807, 827; Pool, 715
S.W.2d at 635; Garza, 395 S.W.2d at 823. Accordingly, we overrule Crews’s first
and second issues.
V. CREWS’S COMPLIANCE WITH THE CSA
In her third and fourth issues, Crews argues that the evidence is legally
and factually insufficient to support the jury’s finding that she failed to comply with
the CSA. Crews argues that her obligation under the CSA to release Gordon
from all claims was subject to him submitting to her a sworn, true, and correct
14
financial statement, which Gordon failed to do, and that she was not obligated to
sign another release for Gordon because the CSA itself operated to release
Gordon and his insurance company.
We have already held above that the evidence is legally and factually
sufficient to support the jury’s finding that Gordon complied with the CSA. Thus,
in line with Crews’s argument, she had an obligation under the CSA to release
Gordon ―from all claims, known or unknown,‖ but she admittedly did not do that.
Crews testified that in April 2004, she decided that she did not want to go through
with the CSA and that she authorized her attorney ―to withdraw [her] consent‖ to
the CSA. Indeed, Crews subsequently filed an amended petition in the suit
involving the claims related to the construction of her house instead of dismissing
that suit, and she did not execute the formal settlement documents, even though
the CSA expressly contemplated that she do so. Crews’s argument that she was
not obligated to sign another release is without any merit because she
unequivocally repudiated the CSA, which also required her and Gordon to
exchange fully executed documents in order to ―complete‖ the CSA.
Viewing the evidence under the appropriate standards of review, we hold
that the evidence is both legally and factually sufficient to support the jury’s
finding that Crews failed to comply with the CSA. See City of Keller, 168 S.W.3d
at 802, 807, 827; Pool, 715 S.W.2d at 635; Garza, 395 S.W.2d at 823.
Accordingly, we overrule Crews’s third and fourth issues.
15
VI. FRAUDULENT INDUCEMENT
In her fifth and sixth issues, Crews argues that the evidence is legally and
factually insufficient to support the jury’s finding that she was not fraudulently
induced by Gordon to enter into the CSA. Crews contends that the jury ―should
have found an intent on the part of [Gordon] to fraudulently induce [Crews] into
entering into‖ the CSA because (1) Gordon never performed his obligation to
provide her with a true and correct financial statement but instead filed four
financial statements, each containing more information than the previously
submitted statement, and (2) Gordon submitted a false financial document to
obtain a loan from Affiliated Bank.
Crews bore the burden of proving her fraudulent inducement affirmative
defense. See Garner v. Fidelity Bank, N.A., 244 S.W.3d 855, 861 (Tex. App.—
Dallas 2008, no pet.) (stating that party asserting affirmative defense bears the
burden of proving its elements). We have already held that the evidence is
legally and factually sufficient to support the jury’s finding that Gordon complied
with the CSA by submitting a sworn, true, and correct personal financial
statement to Crews showing he was judgment proof on July 28, 2003, and the
jury chose to accept Gordon’s testimony as credible even though he admitted to
filing a false financial statement with Affiliated Bank. Crews has not established,
as a matter of law, all vital facts in support of her fraudulent inducement
affirmative defense, nor is the jury’s failure to find that Gordon fraudulently
induced her to enter into the CSA so weak, or so contrary to the overwhelming
16
weight of all the evidence, that the answer should be set aside and a new trial
ordered. See Dow Chem. Co., 46 S.W.3d at 242; Pool, 715 S.W.2d at 635;
Garza, 395 S.W.2d at 823. Accordingly, we hold that the evidence is legally and
factually sufficient to support the jury’s finding that Crews was not fraudulently
induced by Gordon to enter into the CSA. We overrule Crews’s fifth and sixth
issues.
VII. APPEAL OF SUMMARY JUDGMENT IN CAUSE 02-09-00413-CV
The trial court granted Gordon’s motion for summary judgment on Crews’s
claims regarding the construction of her house in cause 141-184797-00 (appeal
cause 02-09-00413-CV). Crews concedes that ―[i]f Appeal No. 02-09-00414-CV
[cause 141-231935-08] is rejected by the Court of Appeals, Appeal No. 02-09-
00413[-CV] is frivolous.‖ She asserts no other arguments. Because we have
overruled each of Crews’s issues in cause 02-09-00414-CV, we overrule any
challenge that Crews makes to the summary judgment granted in cause 141-
184797-00.
VIII. CONCLUSION
Having overruled each of Crews’s issues, we affirm the trial court’s
judgment and its order.
BILL MEIER
JUSTICE
PANEL: DAUPHINOT, MEIER, and GABRIEL, JJ.
DELIVERED: June 9, 2011
17