Michael B. Wansey, Individually and D/B/A Rio Grande Defensive Driving School v. Cheryl D. Hole , 379 S.W.3d 334 ( 2011 )

NUMBER 13-09-00637-CV
COURT OF APPEALS
THIRTEENTH DISTRICT OF TEXAS
CORPUS CHRISTI - EDINBURG
MICHAEL B. WANSEY, INDIVIDUALLY AND D/B/A
RIO GRANDE DEFENSIVE DRIVING SCHOOL, Appellant,
v.
CHERYL D. HOLE, Appellee.
On appeal from the County Court at Law No. 2
of Hidalgo County, Texas.
MEMORANDUM OPINION
Before Chief Justice Valdez and Justices Rodriguez and Benavides
Memorandum Opinion by Justice Rodriguez
In this breach of contract and negligent hiring, training, and retention case,
appellant Michael B. Wansey, individually and d/b/a Rio Grande Defensive Driving
School, challenges the jury's verdict in favor of appellee Cheryl D. Hole. By eight
issues,1 Wansey argues that: the evidence at trial was legally and factually insufficient
to support the jury's finding that (1) Wansey negligently hired, trained, and retained a
certain driving instructor, (2) any act or omission by Wansey or the driving instructor
proximately caused Hole's injury, (3) Hole suffered any damages as a result of the
negligent hiring, training, and retention, (4) Wansey breached the contract to provide
driver instruction training to Hole's daughter, (5) Hole suffered damages as a result of that
breach of contract, and (6) Wansey acted with malice or gross negligence such that Hole
was entitled to exemplary damages; (7) because there was no breach of contract, Hole
was not entitled to attorneys' fees; and (8) the exemplary damages award violates the
Due Process Clause of the United States Constitution because it was sixty-six times the
actual damages award. We affirm, in part, and reverse and render, in part.
I. BACKGROUND
Hole's daughter was a student at the driving school owned by Wansey. One
night, when Hole's husband arrived to pick up their daughter from class, he found her in
the back of the school with her driving instructor in what Hole's husband alleged was a
suspicious and compromising situation. The Holes withdrew their daughter from the
driving school, demanded a full refund of the fee they paid for the driving class, and asked
for an explanation of the driving instructor's conduct. Wansey sent the Holes a partial
refund based on the number of hours of instruction that their daughter had already
received at the school. Wansey also sent the Holes a letter attempting to explain the
circumstances in which they found their daughter with the driving instructor.
1
For purposes of our analysis, we have re-organized and re-numbered Wansey's appellate issues.
2
Hole filed suit against Wansey alleging claims of breach of contract, negligence in
the hiring, supervision, training, or retention of his employees, and gross negligence. 2
Hole prayed for contract damages and actual and exemplary damages for her negligence
claim. The case was tried to a jury, which returned a favorable verdict to Hole on both
the breach of contract claim and the negligence claim. The jury awarded Hole $225.00
in contract damages and $5,000.00 in attorneys' fees related to that claim. For her
negligence claim, the jury awarded Hole $225.00 in actual damages, found by clear and
convincing evidence that the harm to Hole was the result of malice or gross negligence,
and awarded Hole $15,000.00 in exemplary damages. Wansey filed a motion for new
trial, which was overruled by operation of law. See TEX. R. CIV. P. 329b(c). This appeal
followed.
II. SUFFICIENCY OF THE EVIDENCE
By five issues, Wansey challenges the legal and factual sufficiency of the evidence
supporting the jury's findings as to negligence, breach of contract, and actual and
exemplary damages.
A. Standard 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. King Ranch, Inc. v. Chapman, 118
2
Hole also sued Southern Cross Investments, Inc., Wansey's holding company, but it is not a party
to this appeal.
3
S.W.3d 742, 751 (Tex. 2003). 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 fact finder could and disregard evidence contrary to the finding unless a
reasonable fact finder could not. City of Keller v. Wilson, 168 S.W.3d 802, 807, 827
(Tex. 2005).
In reviewing an appellant's factual sufficiency challenge to an adverse jury finding
on which the other party had the burden of proof, as is the case here, we will consider,
weigh, and examine all of the evidence in the record, both in support of and contrary to the
finding. See Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). We will set
aside the district court's finding only if it is so contrary to the overwhelming weight of the
evidence as to be clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175,
176 (Tex. 1986).
In the context of a jury trial, the sufficiency of the evidence is reviewed in light of the
charge submitted if no objection is made to the charge. Romero v. KPH Consolidation,
Inc., 166 S.W.3d 212, 221 (Tex. 2005); Wal-Mart Stores, Inc. v. Sturges, 52 S.W.3d 711,
715 (Tex. 2001). Here, although Wansey expressed some concerns with the jury
charge, it appears from the record that they were resolved in his favor in the charge given
to the jury, and the trial court therefore never ruled on his objections, if any. Thus, we
review the evidence under the law as set out in the jury charge. See Romero, 166
S.W.3d at 221.
B. Negligence
By his first, second, and third issues, Wansey challenges the sufficiency of the
evidence supporting the jury's findings on Hole's cause of action for negligent hiring,
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training, supervision, and retention.
1. Jury Questions
The jury was questioned as follows regarding Wansey's liability for negligence:
"Did the negligence if any of [Wansey] proximately cause the occurrence in question?"
The charge also included the following definitions:
"NEGLIGENCE" when used with respect to the conduct of [Wansey],
means failure to use ordinary care, that is, failing to do what a driving school
of ordinary prudence would have done under the same or similar
circumstances or doing that which a driving school of ordinary prudence
would not have done under the same or similar circumstances.
"ORDINARY CARE" when used with respect to the conduct of [Wansey],
means that degree of care that a driving school of ordinary prudence would
use under the same or similar circumstances.
"PROXIMATE CAUSE," when used with respect to the conduct of
[Wansey] means that cause which, in a natural and continuous sequence,
produces an event, and without which cause such event would not have
occurred. In order to be a proximate cause, the act or omission
complained of must be such that a driving school using ordinary care would
have foreseen that the event, or some similar event, might reasonably result
therefrom. There may be more than one proximate cause of an event.
The jury was questioned as follows regarding negligence damages: "What sum of
money, if any, if paid now in cash, would fairly and reasonably compensate Cheryl Hole
for her damages, if any, that resulted from [the] occurrence in question."
2. The Evidence
At trial, Hole's husband testified in detail about the occurrence. He testified that
when he arrived to pick up his daughter and she did not exit the driving school with the
other students, he became suspicious. He went into the school, and a person inside the
classroom pointed to a back exit door and indicated that he should look out there for his
daughter. Hole's husband testified that when he tried to open the exit door, someone
5
was holding it shut, and when he managed to get outside, he found his daughter in a dark
area in back of the driving school with her instructor. His daughter's books were on the
ground, and she stepped quickly away from the instructor when Hole's husband came
through the door. Hole's husband testified that they decided to withdraw their daughter
from the class because they did not trust the safety of the situation at Wansey's driving
school. He also testified that they enrolled their daughter in another, more expensive
driving course and that she had to start the course from the beginning even though she
was only four hours short of completing the course at Wansey's school.
Hole admitted into evidence two letters written to Wansey by her husband
informing Wansey that they would be withdrawing their daughter, requesting an
explanation of the incident, and demanding a full refund of the fee for the driving course;
both letters stated that the Holes would possibly take legal action if Wansey did not
comply. Hole also admitted into evidence two letters from Wansey to the Holes. The
first letter, sent in response to the Holes' first letter, contained a one sentence reply:
"Your letter of January 18 has been received and the contents noted." In his second
letter to the Holes, in response to their second letter, Wansey informed the Holes that he
would not be refunding their fee in full, would send a "pro-rata" refund for the portion of the
course not taken, and would be cancelling their daughter's learner permit because she
was withdrawn before making up her missed classes. Wansey then described the
incident in question based on "information[] from persons who were there at the time":
[O]ur instructor, having concluded his work, went outside for a
welcome smoke.
He held the door open because it has a strong hydraulic closer and if
let go, will close itself, locking the individual out.
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[Hole's daughter], at this point wandered out and started to ask the
instructor about the Junior R.O.T.C., a subject in which [the instructor] has
considerable knowledge.
She stood alone, a few feet away from him, and as he smoked, he
answered her questions.
That's called exercising her 1st Amendment rights. Our instructor
was politely answering her questions.
That's the scene you saw when you nearly knocked our instructor off
his feet as he was holding the door open.
Wansey's second letter concluded, "Your threats are rejected . . . . Until you march up to
our door with a writ in your hand, you don't give us orders." Wansey's "pro-rata" refund
check to the Holes for $18.00 was admitted into evidence.
Hole presented evidence at trial that Wansey had employed two instructors in the
past whose teaching licenses were revoked for inappropriate sexual conduct with
students. Hole also introduced a memo written by Wansey's wife to the driving school's
employees noting that two students had complained that an in-car instructor had made
inappropriate sexual advances toward them. In the memo, Wansey's wife stated, "We
are going on record with this memo to tell you not [to] say or do anything that might be
deemed inappropriate in the slightest way. In other words, think before you open your
mouth." Wansey admitted in the litigation, however, that his driving school has no
written policies regarding student-teacher relations and that he does not perform
background checks on his employees. Finally, Hole produced evidence that Wansey
had repeatedly refused to take responsibility for the behavior of his instructors and
students, stating, in particular, that "[we] are NOT responsible for what students do after
classes, in particular if they take action under their own volition."
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3. Liability
By his first issue, Wansey argues the evidence was legally and factually
insufficient to support the jury's finding that Wansey negligently hired, trained, and
retained the driving instructor involved in the incident with the Holes' daughter. We
disagree. Hole presented evidence that the driving instructor engaged in inappropriate
behavior with Hole's daughter and that Wansey had no policies or procedures in place to
prohibit or govern such a situation. Hole also presented evidence that Wansey does not
perform background checks on his employees. Although there was evidence that
Wansey had informally warned employees against engaging students in an inappropriate
way, Hole's evidence that Wansey had no official policies and procedures in place was
sufficient to support the jury's verdict under the facts of this case. In other words, there
was sufficient evidence that Wansey failed to act in a way that a driving school owner of
ordinary prudence should act when operating a school for young students. Thus,
viewing the evidence in the light most favorable to the verdict, we conclude there was
more than a scintilla of evidence that Wansey failed to exercise ordinary care in the hiring,
training, and retention of his driving instructors. See Chapman, 118 S.W.3d at 751.
Further, considering evidence both favorable and contrary to the verdict, we cannot
conclude that the jury's finding was so contrary to the overwhelming weight of the
evidence as to be clearly wrong and manifestly unjust. See Francis, 46 S.W.3d at 242;
Cain, 709 S.W.2d at 176. Wansey's first issue is overruled.
By his second issue, Wansey argues that the evidence was legally and factually
insufficient to prove that his negligence was the proximate cause of any injury to Hole.
Again, we disagree. The evidence at trial showed that Wansey's failure to create a safe
8
learning environment through the proper screening and control of his employees caused
the Holes to withdraw their daughter from Wansey's driving school. The Holes were
subsequently required to enroll their daughter in another school at additional cost to them
and at which their daughter was required to restart her driver's education from the
beginning. This result should have been foreseeable to Wansey because he had
employed instructors in the past whose inappropriate behavior prompted student
complaints and had even resulted in the revocation of instructors' licenses. The Holes'
withdrawal of their daughter from Wansey's school was a natural and continuous
consequence of Wansey's lax screening procedures and absent employment policies,
which resulted in the employment of an instructor who engaged in inappropriate behavior
with the Holes' daughter. Therefore, again viewing the evidence in the light most
favorable to the verdict, we conclude there was more than a scintilla of evidence that
Wansey's negligence was the proximate cause of the Hole's injury, i.e., the withdrawal of
the Holes' daughter from Wansey's school and subsequent costs incurred by enrolling her
in a different program. See Chapman, 118 S.W.3d at 751. And, again, we cannot
conclude that the jury's finding on proximate cause was so contrary to the overwhelming
weight of the evidence as to be clearly wrong and manifestly unjust. See Francis, 46
S.W.3d at 242; Cain, 709 S.W.2d at 176. Wansey's second issue is overruled.
4. Damages
By his third issue, Wansey argues that the evidence was legally and factually
insufficient to show that Hole suffered any damages as a result of the incident. As
previously discussed, Hole presented evidence that she and her husband decided to
withdraw their daughter from Wansey's school because of the incident in question. As a
9
result, they had to pay for an additional driver's education course. The evidence
therefore supported the jury's negligence award of $225.00. It represented the amount
of the fee paid by the Holes to Wansey's school—in other words, the sum of money the
Holes would not have lost but for Wansey's negligence. Viewing the evidence in the light
most favorable to the verdict, we conclude there was more than a scintilla of evidence
supporting the jury's negligence damage award. See Chapman, 118 S.W.3d at 751.
And, after reviewing all of the evidence both in support of and contrary to the verdict, we
cannot conclude that the jury's award was so contrary to the overwhelming weight of the
evidence as to be clearly wrong and manifestly unjust. See Francis, 46 S.W.3d at 242;
Cain, 709 S.W.2d at 176. Wansey's third issue is overruled.
C. Breach of Contract
By his fourth issue, Wansey argues that the evidence was legally and factually
insufficient to support the jury's breach of contract finding. We agree.
The jury was questioned as follows: "Did [Wansey] breach the Student
Enrollment Contract entered into between Rio Grande Defensive Driving School and
Cheryl Hole?"3 The contract provided that the Holes' daughter would receive thirty-two
hours of classroom instruction and twenty-one "behind-the-wheel" lessons. The contract
price was $186 for the course fees and $39 in administrative expenses, for a total of $225,
which the Holes paid in full. The contract included an attendance policy, a grading and
progress policy, and rules of conduct for students. The contract also included a notice
from the Texas Education Agency, enumerating for parents the minimum requirements
for teen driver education courses under the law. Finally, the contract contained a refund
3
The jury charge contained no further instructions on the breach of contract issue.
10
policy, which provided, in relevant part, as follows:
1. Refund computations will be based on actual instruction received
through the last date of attendance.
2. The effective date of the termination for refund purposes will be the
earliest of the following: (a) the last day of attendance, if the student
is terminated by the school; or (b) the date of receipt of written notice
from the student.
....
5. A full refund of all tuition and fees is due and refundable in each of
the following cases: (a) when an enrollee is not accepted by the
school; (b) if the course of instruction is discontinued by the school at
this location; or (c) if the student's enrollment was procured as a
result of any misrepresentation in advertising, promotional materials
of the school, or misrepresentation by the owner or representation of
the school.
6. Refunds shall be completed within 30 days after the effective date of
termination.
Hole's theory at trial was that, because the Holes were forced to withdraw their
daughter from Wansey's school "for cause," Wansey breached the contract by not
providing the entire course of instruction. In her petition, Hole alleged that Wansey
breached the contract by "fail[ing] to properly supervise [his] employees and fail[ing] to
provide a safe and proper environment for their students . . . ." Hole also prayed to be
"reimbursed in full" for the contract price. But the contract here contained no provisions
governing particular reasons for a student's withdrawal or covenanting or promising
anything related to the driving school's employees. Further, Hole alleged no facts and
produced no evidence at trial that would have qualified her for a full refund under the
contract. Rather, the evidence at trial established that Wansey complied with the
contract by sending the Holes a partial refund based on the instruction already received
11
by the Holes' daughter. This is all evidence no reasonable juror could have ignored.
See City of Keller, 168 S.W.3d at 807, 827. We conclude the trial record is devoid of any
evidence of a breach by Wansey of the student enrollment contract, and in light of this
complete absence of evidence of a vital fact, the jury's verdict was not supported by
legally sufficient evidence. See Chapman, 118 S.W.3d at 751. Wansey's fourth issue
is sustained.4
By his fifth and seventh issues, respectively, Wansey argues that: the evidence
was insufficient to show that Hole suffered damages as a result of the breach of contract;
and if we were to determine that the evidence was insufficient to support the breach of
contract finding, we must also reverse the attorneys' fees awarded to Hole on the basis of
breach of contract. Having already determined that the evidence was legally insufficient
to support the jury's breach of contract liability finding, we further conclude that Hole was
not entitled to contract damages or attorneys' fees based on a breach of contract.
Wansey's fifth and seventh issues are likewise sustained.
III. MALICE OR GROSS NEGLIGENCE
By his sixth issue, Wansey argues that the evidence was legally and factually
insufficient to prove that Wansey acted with malice or gross negligence. However,
because there was no objection, we are guided in our analysis of Wansey's evidentiary
issue by the standard and applicable law set out in the jury charge:
Do you find by clear and convincing evidence that the harm to Cheryl
Hole resulted from malice or gross negligence?
4
Having concluded that the evidence was legally insufficient, we need not reach Wansey's
argument that it is factually insufficient. See TEX. R. APP. P. 47.1.
12
"Clear and convincing evidence" means the measure or degree of
proof that produces a firm belief or conviction of the truth of the allegations
sought to be established.
"Malice" means specific intent by [Wansey] to cause substantial
injury or harm to Cheryl Hole.
"Gross negligence" means more than momentary thoughtlessness,
inadvertence, or error of judgment. It means such an entire want of care as
to establish that the act or omission in question was the result of actual
conscious indifference to the rights, welfare, or safety of the persons
affected by it.
We will therefore determine whether Hole produced clear and convincing evidence that
Wansey's conduct rose to the level of malice or gross negligence. See Romero, 166
S.W.3d at 221.
As noted above, Hole produced evidence that, even though Wansey had
employed instructors in the past who were known to have inappropriate sexual conduct
with young female students, he had no formal policy regarding instructor-student relations
and did not perform background checks on his employees. Further, Hole produced
evidence that Wansey did not believe it was his responsibility to prohibit or prevent the
sort of incident that occurred between the Holes' daughter and her driving instructor. In
fact, the evidence showed that Wansey repeatedly and adamantly refused to take such
responsibility or admit that his employment practices were problematic. In particular,
Wansey's letter to the Holes was hostile in tone and indicated an almost stubborn
ignorance to the circumstances at his school. In short, there was ample evidence from
which the jury could have found that Wansey's conduct was "more than momentary
thoughtlessness, inadvertence, or error of judgment" and, instead, exhibited "an entire
want of care" and "actual conscious indifference to the rights, welfare, or safety of the
13
persons affected" by Wansey's conduct. We thus conclude that there was sufficient
evidence to produce in the minds of the jurors a firm belief that Wansey's conduct
amounted to gross negligence. Wansey's sixth issue is overruled.
IV. EXEMPLARY DAMAGES AND DUE PROCESS
By his eighth issue, Wansey argues that the jury's $15,000.00 exemplary damages
award was unconstitutionally excessive and violated the Due Process Clause of the
United States Constitution because it was sixty-six times the actual damages award.
See U.S. CONST. amend. XIV. We disagree.
"The Due Process Clause 'prohibits a [s]tate from imposing a grossly excessive
punishment on a tortfeasor.'" Owens-Corning Fiberglass Corp. v. Malone, 972 S.W.2d
35, 45 (Tex. 1998) (quoting BMW of N. Am. v. Gore, 517 U.S. 559, 562 (1996)). In
reviewing exemplary damages, we are instructed to consider three guideposts: "(1) the
degree of reprehensibility of the defendant's misconduct; (2) the disparity between the
actual or potential harm suffered by the plaintiff and the punitive damages award; and (3)
the difference between the punitive damages awarded by the jury and the civil penalties
authorized or imposed in comparable cases." State Farm Mut. Auto. Ins. Co. v.
Campbell, 538 U.S. 408, 418 (2003); see Tony Gullo Motors I, Inc. v. Chapa, 212 S.W.3d
299, 308-09 (Tex. 2006). The reprehensibility of the defendant's conduct is the "most
important indicium of the reasonableness of a punitive damages award . . . ." Campbell,
538 U.S. at 419. In assessing reprehensibility, we determine whether: the plaintiff's
health or safety was endangered, as opposed to his economic well-being; the tortious
conduct evidenced a reckless disregard for or indifference to the health or safety of
others; the plaintiff was financially vulnerable; the conduct was repeated; and the injury
14
was the result of malice, trickery, or deceit. Id. Further, "a reprehensibility analysis
can . . . consider, to some extent, surrounding circumstances beyond the underlying tort."
Bennett v. Reynolds, 315 S.W.3d 867, 875 (Tex. 2010).
With regard to the reprehensibility of Wansey's conduct, the evidence at trial, as
discussed above, showed a conscious disregard by Wansey for the safety of his
students. Despite having multiple past experiences with driving instructors who
engaged in inappropriate conduct with students, Wansey still did not perform background
checks on employees and had no official policy in place to govern the relationship
between instructors and students. This same evidence demonstrates that Wansey's
disregard produced repeated incidents of inappropriate contact between instructors and
students. Wansey's flippant response to the Holes' inquiries is but further evidence of
his indifference to the situation. The evidence at trial therefore showed that Wansey's
conduct evidenced a reckless disregard for his students' safety and was repeated. See
Campbell, 538 U.S. at 418; see also Bennett, 315 S.W.3d at 875 (allowing the reviewing
court to consider circumstances occurring before the commission of the particular tort
giving rise to the plaintiff's cause of action). Our analysis of the first guidepost weighs in
favor of the punitive damages awarded to Hole.
As to the second guidepost, we note that courts have held that a single-digit ratio
between the exemplary and actual damages would "more likely" comport with due
process and that the exemplary damages award in this case was roughly sixty-six times
the actual damages award. See Campbell, 538 U.S. at 425; see, e.g., Malone, 972
S.W.2d at 46-47 (affirming an exemplary damages award of "slightly more than" two
times the compensatory damages); Borden, Inc. v. Guerra, 860 S.W.2d 515, 528 (Tex.
15
App–Corpus Christi 1993, writ dism'd by agr.) (approving an exemplary award that was
five times the amount of actual damages). However, we also recognize that there is no
"bright-line ratio" between the actual damages suffered and punitive damages awarded
that will mandate the affirming or reversal of an award. See Campbell, 538 U.S. at
424-25. Importantly, where "a particularly egregious act has resulted in only a small
amount of economic damages," as is the case here, ratios greater than single digits will
be considered constitutional. Id. at 425. Exemplary damages are intended to punish
the wrongdoer and act as a deterrence to others. Bennett, 315 S.W.3d at 874. With
that precept guiding our analysis, we cannot conclude, under the facts of this case, that
the exemplary damages award was unreasonable and impermissibly disproportionate to
the amount of harm suffered by Hole. See Campbell, 538 U.S. at 425-26.
The third and final guidepost requires the Court to examine the civil penalties
authorized or imposed in comparable cases. Id. at 428. We note that, in a case like this
involving a common law tort that does not readily compare to statutory causes of action,
we are also guided by judicial decisions at the time of the misconduct. See Malone, 972
S.W.2d at 47. In particular, we look to whether the defendant had notice that substantial
punitive damages were a potential consequence of its misconduct. See id. We
conclude that Wansey had such notice. At trial, Hole admitted into evidence a letter
written by Wansey to the State Bar of Texas, after the filing of Hole's lawsuit, complaining
about Hole's husband, a local attorney. In his letter to the bar, Wansey implied that Hole
filed her lawsuit in Hidalgo County, Texas, because it is known for "[s]ympathetic juries."
From this, we conclude that Wansey was aware of the possibility of a significant damages
award were a jury to find him liable for his conduct. This final guidepost therefore weighs
16
against excessiveness.
The jury's award of exemplary damages comported with federal due process
requirements. Wansey's conduct was reprehensible; the amount of the exemplary
damages was reasonably proportionate to the actual harm suffered by Hole; and Wansey
had adequate notice of his vulnerability to such an award. See Campbell, 538 U.S. at
418. Wansey's eighth issue is overruled.
V. CONCLUSION
We affirm the judgment of the trial court regarding the jury's findings of negligence,
negligence damages, gross negligence, and exemplary damages. We reverse the
judgment of the trial court regarding the jury's findings of breach of contract, contract
damages, and attorneys' fees and render judgment dismissing Hole's breach of contract
claim with prejudice.
NELDA V. RODRIGUEZ
Justice
Delivered and filed the
7th day of April, 2011.
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