11th Court of Appeals
Eastland, Texas
Memorandum Opinion
John G. Kelley
Appellant
Vs. No. 11-03-00278-CV -- Appeal from Howard County
A. E. Kelley
Appellee
This appeal arises from an action to rescind a series of conveyances made by an elderly man to his son. The items conveyed consisted of a commercial building, the inventory located within the building, two automobiles, and various liens and notes. Appellee, A. E. Kelley, alleged several theories for invalidating the conveyances, including lack of assent, breach of trust, breach of fiduciary duty, and fraud. At the conclusion of a bench trial, the trial court nullified the conveyances based upon its determination that appellant, John G. Kelley, procured the conveyances by fraud. The trial court also entered judgment awarding appellee attorney=s fees of $4,500.00 and exemplary damages of $50,000.00. Appellant attacks the trial court=s judgment in three issues.[1] We affirm.
The challenged conveyances occurred in May and June of 2002. Appellee was in his nineties at the time of the conveyances and in poor physical health. He suffered serious vision problems which made him unable to read documents. In spite of his advanced age and health problems, appellee actively acquired and conveyed residential rental properties as a means of support during this period. As a result of his vision problems, appellee depended on others to read documents to him which were prepared for his execution.
The conveyances which are at issue in this appeal arise from business dealings between appellee and Tim Ortega. The first transaction between appellee and Ortega involved the sale of a farm to Ortega in the late 1990s. Later transactions involved Ortega doing repair work on appellee=s rental properties and appellee loaning various sums to Ortega. Appellee subsequently loaned Ortega funds to acquire a business known as AThe Carpet Center.@ Appellee purchased a building for the business which he rented to Ortega. Appellee also purchased inventory and equipment for Ortega which Ortega agreed to pay for with revenues generated by the business.
A disagreement developed between appellee and Ortega regarding Ortega=s repayment of the money advanced by appellee for the purchase of the business. The parties disputed the extent of this disagreement at trial. Appellee testified that the disagreement he had with Ortega was minor. The trial court determined that appellee=s disagreement with Ortega was significant based on a tape recording offered into evidence by appellant.
Appellant eventually intervened in the disagreement between his father and Ortega. Prior to March of 2002, appellant resided in Oregon and California. Appellee and appellant=s mother were divorced in 1957. Appellee testified that he had seen appellant approximately five times over a 45-year span. Appellee and appellant began having more contact in the 1990s. Appellee gave appellant $50,000.00 in 2002. Appellee also gave his other son $50,000.00 at the same time. Appellant testified that he came to Big Spring in March of 2002 in order to invest the $50,000.00 in the town where appellee lived.
Appellant presented appellee with several documents in May and June of 2002 for execution which conveyed appellee=s interests in various items of property to appellant. Appellee testified that appellant told him that the purpose of the documents was to permit appellant to look through appellee=s records and Astraighten out@ appellee=s dealings with Ortega. The documents consisted of a warranty deed for the building which housed the Carpet Center, a bill of sale for the inventory and equipment of the Carpet Center as well as all of Ortega=s indebtedness to appellee, a bill of sale transferring a lien on an automobile, and two documents transferring title to two vehicles. Appellant prepared the deed and bills of sale on his computer. He also transported appellee to notaries who acknowledged appellee=s execution of the documents. Appellee testified that the value of the property conveyed to appellant amounted to $90,000.00. The documents recited that the consideration consisted of ATen and No/100 Dollars ($10.00) and other good and valuable consideration.@ In addition to attempting to tender $10.00 to appellee for each of the documents, appellant testified that the remaining consideration consisted of the benefit his father would derive from being separated from Ortega.
Appellant took the position at trial that he owned the property conveyed in the challenged documents free and clear of any claim asserted by appellee. Appellant specifically denied that he held the property in trust for his father. Despite his assertion of complete ownership at trial, appellant executed a document shortly after the conveyances occurred wherein he agreed to reconvey the property back to his father as follows:
The undersigned [appellant] agrees to sell the property known commonly as AThe Carpet Center,@ back to [appellee and appellee=s wife] at some time in the future when all of my claims against [Ortega] regarding both personal and real property are, in all respects, settled and the Carpet Center is secured from the possession and claims of Ortega, his assigns and heirs.
The price of the Carpet Center will be the original sales price plus all costs and expenses incurred in obtaining and maintaining full and clear possession, all taxes and costs paid during my possession and compensation in the amount of $60.00 per hour for time and effort spent in obtaining and maintaining possession and for maintenance, repair and improvement of the premises as I deem appropriate.
s/ [Appellant]
The trial court entered 17 findings of fact. Among other things, the trial court found that appellant caused appellee to execute the challenged conveyance documents. The trial court also found that appellant made false representations of fact in connection with the execution of the documents. The trial court further determined that appellant=s false representations were made for the purpose of inducing appellee to execute the documents and that appellee relied on these representations in executing the documents.
Appellant globally attacks the sufficiency of the evidence supporting all of the trial court=s findings in his first issue. We assume that appellant is challenging both the legal and factual sufficiency of the evidence supporting the trial court=s findings. The standards that apply to a review of jury findings also apply to findings made by the trial court after a bench trial. Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994). To review the legal sufficiency of the evidence, the appellate court must consider all the evidence in the light most favorable to the prevailing party and must indulge every reasonable inference in favor of the prevailing party. Associated Indemnity Corpo-ration v. CAT Contracting, Inc., 964 S.W.2d 276, 285-86 (Tex.1998); Merrell Dow Pharma-ceuticals, Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997), cert. den=d, 523 U.S. 1119 (1998); Harbin v. Seale, 461 S.W.2d 591, 592 (Tex.1970). Any evidence supporting the finding that is of probative value and that is more than a scintilla is legally sufficient to uphold the finding. Leitch v. Hornsby, 935 S.W.2d 114, 118 (Tex.1996); see Merrell Dow Pharmaceuticals, Inc. v. Havner, supra. In order to determine if the evidence is factually sufficient, we must review all of the evidence and determine whether the challenged finding is so against the great weight and preponderance of the evidence as to be manifestly unjust. Pool v. Ford Motor Company, 715 S.W.2d 629 (Tex.1986); In re King=s Estate, 244 S.W.2d 660 (Tex.1951).
Appellant bases his evidentiary challenges on the grounds that appellee=s trial testimony was not credible. Appellant has gone to great lengths in his brief to identify inconsistencies which he perceived in appellee=s testimony. He contends that the trial court should have rejected all of appellee=s testimony based upon these alleged inconsistencies. A witness= credibility is not an appropriate matter for an appellate court to determine. The fact finder, whether jury or trial court in a bench trial, is the sole judge of the credibility of the witnesses and the weight to be given their testimony. Leyva v. Pacheco, 358 S.W.2d 547, 549 (Tex.1962). The fact finder may believe one witness and disbelieve another. McGalliard v. Kuhlmann, 722 S.W.2d 694, 697 (Tex.1986). The fact finder resolves inconsistencies in testimony. McGalliard v. Kuhlmann, supra at 697.
Appellee testified that appellant made the representation that the documents would merely assist appellee in dealing with Ortega as opposed to documents which would convey appellee=s property to appellant. This evidence constituted both legally and factually sufficient evidence supporting the trial court=s judgment. Where enough evidence is before the fact finder that reasonable minds could differ on the meaning of the evidence or the inferences and conclusions to be drawn from the evidence, we may not substitute our judgment for that of the fact finder. Herbert v. Herbert, 754 S.W.2d 141, 144 (Tex.1988). Appellant=s first issue is overruled.
In his second issue, appellant asserts that the trial court did not enter sufficient findings to support an award of exemplary damages. Specifically, appellant asserts that the award of exemplary damages is precluded by TEX. CIV. PRAC. & REM. CODE ANN. ' 41.004(a) (Vernon Supp. 2004 - 2005) because appellee did not recover actual damages against him. Appellant also contends that the award of exemplary damages is precluded by the trial court=s failure to enter a finding of malice.
The trial court noted in its conclusions of law that it made the award of exemplary damages as a result of appellant=s Astatutory fraud.@ TEX. BUS. & COM. CODE ANN. ' 27.01 (Vernon 2002) establishes a statutory cause of action for fraud in transactions involving real estate. The statute provides that a false representation of a past or existing material fact constitutes fraud when it is made to a person for the purpose of inducing him or her to enter into a contract and it is relied upon by that person in entering into that contract. Section 27.01(a)(1). A person who makes a false representation which constitutes fraud under the statute is liable for the defrauded person=s actual damages. Section 27.01(b). A person making a fraudulent representation under the statute that has actual awareness of the falsity is also liable for exemplary damages. Section 27.01(c). The trial court made affirmative findings on each of these elements.
Section 41.004(a) provides that Aexemplary damages may be awarded only if damages other than nominal damages are awarded.@ While appellee did not recover monetary damages against appellant, he obtained an equitable recovery based upon appellant=s fraud by virtue of the trial court rescinding the challenged conveyances. The Austin Court of Appeals held in Scott v. Sebree, 986 S.W.2d 364, 367-369 (Tex.App. - Austin 1999, pet=n den=d), that equitable remedies are recoverable as Aactual damages@ under Section 27.01. We agree with the court=s reasoning in Scott. The trial court=s order rescinding conveyances of property worth approximately $90,000.00 constituted a recovery permitted under Section 27.01 which was more than mere nominal damages.
With respect to appellant=s complaint about the lack of a Amalice@ finding, TEX. CIV. PRAC. & REM. CODE ANN. ' 41.003(a) (Vernon Supp. 2004 - 2005) provides that a recovery of exemplary damages is permitted based upon a finding of fraud in addition to a finding of malice. Furthermore, the trial court found that appellant made the false representations with actual awareness of the falsity thereof as required by Section 27.01(c) for an award of exemplary damages. See TEX. CIV. PRAC. & REM. CODE ANN. ' 41.003(c) (Vernon Supp. 2004 - 2005). Appellant=s second issue is overruled.
In his third issue, appellant argues that the amount of exemplary damages awarded against him was excessive. We review the excessiveness of an exemplary damages award as a factual sufficiency challenge. Maritime Overseas Corporation v. Ellis, 971 S.W.2d 402, 406 (Tex.1998). We may only reverse if the exemplary damages award is so against the great weight and preponderance of the evidence as to be manifestly unjust. Transportation Insurance Company v. Moriel, 879 S.W.2d 10, 30 (Tex.1994). No set rule or ratio between actual and exemplary damages exists to determine whether an exemplary damages award is excessive. Alamo National Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.1981). Factors we consider in determining the reasonableness of an award include: (1) the nature of the wrong; (2) the character of the conduct involved; (3) the degree of culpability of the wrongdoer; (4) the situation and sensibilities of the parties concerned; (5) the extent to which conduct offends a public sense of justice and impropriety; and (6) the net worth of the defendant. TEX. CIV. PRAC. & REM. CODE ANN. ' 41.011 (Vernon 1997).
Appellant cites the lack of evidence in the record regarding his net worth in support of his argument. However, a defendant=s net worth is only one of the six factors to be considered. An examination of the circumstances surrounding the challenged conveyances under the remaining five factors indicates that the trial court=s award of exemplary damages was not excessive. The victim of the fraud was an elderly man who was unable to read because of poor vision. The perpetrator of the fraud was the victim=s son. As a result of the conveyances, the son received property worth approximately $90,000.00 for very little tangible consideration. The amount of exemplary damages awarded by the trial court is reasonable when compared to the value of the property procured by fraud. Appellant=s third issue is overruled.
The judgment of the trial court is affirmed.
W. G. ARNOT, III
CHIEF JUSTICE
October 21, 2004
Not designated for publication. See TEX.R.APP.P. 47.2(a).
Panel consists of: Arnot, C.J., and
Wright, J., and McCall, J.
[1]Appellant is pro se in this appeal. He was also pro se at trial.