Faraj Said Ghassan Said Ibrahm Said Noor Said Enterprises, Inc. (Aka Noor Enterprises, Inc.) Budget Collision, Inc.and National Auto Collision, Inc. v. AllState Insurance Company AllState Fire & Casualty Insurance Company AllState County Mutual Insurance Company AllState Indemnity Company And AllState Property & Casualty Insurance Company

Opinion issued August 27, 2013

In The

Court of Appeals
For The

First District of Texas
————————————
NO. 01-12-00435-CV
———————————
FARAJ SAID, GHASSAN SAID, IBRAHIM SAID, NOOR SAID
ENTERPRISES, BUDGET COLLISION, INC., AND NATIONAL AUTO
COLLISION, INC., Appellants
V.
ALLSTATE INSURANCE COMPANY, ALLSTATE FIRE & CASUALTY
INSURANCE COMPANY, ALLSTATE COUNTY MUTUAL INSURANCE
COMPANY, ALLSTATE INDEMNITY COMPANY, AND ALLSTATE
PROPERTY & CASUALTY INSURANCE COMPANY, Appellees

On Appeal from the 165th District Court
Harris County, Texas
Trial Court Case No. 2009-79722
 MEMORANDUM OPINION

This is an appeal from a judgment on claims for fraud and unjust enrichment

relating to insurance claims for vehicle tows. After determining that the appellants

engaged in discovery abuse, the trial court struck their pleadings and entered a

default judgment on the issue of liability. The court then held a trial on damages,

and it awarded actual and exemplary damages to the appellees. On appeal, the

appellants argue that the trial court erred by awarding damages based on a legally

incorrect understanding of what constitutes a “nonconsent” tow under a City of

Houston ordinance. We reverse and remand for a new damages hearing.

Background

Appellants Faraj Said, Ghassan Said, Ibrahim Said, Noor Said Enterprises,

Budget Collision, Inc., and National Auto Collision, Inc. are all engaged in the

business of towing, vehicle storage, and vehicle body repair. They were paid by

various appellee Allstate insurance companies (collectively, Allstate) for providing

services to Allstate insureds. This litigation arises from Allstate’s claims of fraud

and unjust enrichment against the appellants.

The City of Houston limits the amount that a towing company may charge

for towing a vehicle without the consent of the vehicle’s owner. See HOUS., TEX.,

CODE OF ORDINANCES ch. 8, art. III, § 8-123 (2005 & Supp. 2011). Allstate

alleged that the appellants charged towing fees in excess of these limits by

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mischaracterizing “nonconsent” tows as “consent” tows, which do not have a

regulatory limit on the amounts that may be charged for them. Allstate also

alleged that the appellants falsely represented on many occasions that the towing,

storage, or “tear down” of a vehicle was necessary or authorized by a vehicle

owner when it was not.

The trial court struck the appellants’ pleadings for discovery abuse and thus

found that the issue of liability was conclusively established in favor of Allstate.

At a hearing to establish the amount of damages, Allstate presented a witness who

had reviewed 350 claims submitted to Allstate by the appellants from 2001 to

2007. Based on whether Allstate received a police report associated with the

claim, the investigator determined that Allstate had been overcharged on 90 claims.

The investigator testified that for each of those 90 claims, the police report

indicated that the police initiated the tow or that the tow occurred at the direction

of the police. The investigator prepared a summary of the 90 claims and

determined the total amount of putative overcharges by subtracting the maximum

amount allowed to be charged under the municipal regulations from the amount

Allstate actually paid for each claim. Allstate offered into evidence the summary

listing the total amount of damages it claimed against each defendant, but it did not

offer the underlying copies of the claims files.

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 The appellants’ attorney cross-examined the investigator about his

classification of “nonconsent” and “consent” tows based on the definitions of those

terms found in the city ordinance. For example, he inquired about whether the

vehicles had to be taken to a vehicle storage facility, rather than the tow merely

being initiated at the direction of the police, for a tow to be a “nonconsent” tow in

2001 and 2002. Counsel also attempted to ask whether the investigator considered

a claim to be a “nonconsent” tow if there was a tow ticket signed by the vehicle

owner. Allstate objected to these lines of questions, arguing that inquiry about the

definition of a “nonconsent” tow went to liability, not to how the investigator had

determined damages. The trial court sustained these objections.

After the hearing, the trial court rendered final judgment in favor of Allstate.

It found the appellants jointly and severally liable for damages in the cumulative

amount of $70,087.71. In addition, the trial court awarded exemplary damages in

identical amounts as awarded for actual damages. After unsuccessfully moving for

a new trial, the appellants filed this timely appeal.

Analysis

When a no-answer default judgment is rendered, the defendant’s liability for

all pleaded causes of action is conclusively established and all allegations of fact in

the petition, except the amount of unliquidated damages, are deemed admitted.

Morgan v. Compugraphic Corp., 675 S.W.2d 729, 731–32 (Tex. 1984). The court

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rendering a default judgment must hear evidence of unliquidated damages. TEX. R.

CIV. P. 243; Holt Atherton Ind., Inc. v. Heine, 835 S.W.2d 80, 83 (Tex. 1992). At

the trial on damages, the plaintiff must prove by competent evidence the amount of

unliquidated damages consistent with the cause of action pleaded. Morgan, 675

S.W.2d at 732; Whitaker v. Rose, 218 S.W.3d 216, 220 (Tex. App.—Houston [14th

Dist.] 2007, no pet.). The damages must be ascertainable by reference to some

fairly definite standard, established experience, or direct inference from known

facts. Paradigm Oil, Inc. v. Retamco Operating, Inc., 242 S.W.3d 67, 72 (Tex.

App.—San Antonio 2007, pet. denied); A.B.F. Freight Sys., Inc. v. Austrian Imp.

Serv., Inc., 798 S.W.2d 606, 615 (Tex. App.—Dallas 1990, writ denied).

The legal and factual sufficiency of the evidence supporting an award of

unliquidated damages after a default judgment may be challenged on appeal.

Paradigm Oil, 242 S.W.3d at 72; Whitaker, 218 S.W.3d at 221; see Holt Atherton,

835 S.W.2d at 83–84. In conducting a legal-sufficiency review, we credit

favorable evidence if a reasonable factfinder could and disregard contrary evidence

unless a reasonable factfinder could not. City of Keller v. Wilson, 168 S.W.3d 802,

827 (Tex. 2005). We will sustain a legal sufficiency challenge if the record shows:

(1) a complete absence of a vital fact; (2) rules of law or evidence bar the court

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 scintilla; or (4) the evidence

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conclusively establishes the opposite of a vital fact. Id. at 810. We consider the

evidence in the light most favorable to the finding and indulge every reasonable

inference that would support it. Id. at 822.

In a no-answer default judgment, all facts properly pleaded are deemed

admitted. Morgan, 675 S.W.2d at 732; Whitaker, 218 S.W.3d at 220. In its

pleadings, Allstate alleged that the appellants committed fraud and unjustly

enriched themselves because they characterized tows as “consent” tows when in

fact they were “nonconsent” tows under the municipal ordinances.1 Allstate did

not allege in its pleadings that any particular tow was falsely classified as a

“consent” tow. Instead, Allstate alleged generally that the appellants “in many

cases” represented that a claim was related to a “consent” tow when in fact it was a

1
In its appellate brief, Allstate argues that the applicable definition of
“nonconsent” tow is that found in Texas Transportation Code in force at the
time of the charges, rather than the definition found in the city ordinance.
See Act of June 16, 2001, 77th Leg., R.S., ch. 1303, § 1, 2001 Tex. Gen.
Laws 3192 (effective Sep. 1, 2001) (current version at TEX. OCC. CODE
ANN. § 2308.201 (West 2012)) (“In this section: “Consent tow” . . . does not
include a tow of a motor vehicle initiated by a peace officer investigating a
traffic accident or a traffic incident that involves the vehicle.”). Allstate did
not plead that the appellants had violated the Texas Transportation Code, but
instead pleaded that the appellants had violated the municipal regulations on
“nonconsent” tows. See Morgan v. Compugraphic Corp., 675 S.W.2d 729,
732 (Tex. 1984) (noting that in an unliquidated damages hearing after a no-
answer default, that the plaintiff is entitled to recover damages arising only
from its cause of action). The provision of the Texas Transportation Code
that Allstate references does not regulate the fees that may be charged for a
“nonconsent” tow. See Act of June 16, 2001, 77th Leg., R.S., ch. 1303, § 1,
2001 Tex. Gen. Laws 3192.

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“nonconsent” tow. Accordingly, it remained for Allstate at the damages trial to

establish which tows fit into the category of “nonconsent” tows; otherwise, Allstate

could have used the default liability finding to cover every claim the appellants

made for a “consent” tow, regardless of whether it was merited or not. See Holt

Atherton, 835 S.W.2d at 85 (claimant must show damages were caused by event

sued upon).

Allstate presented the testimony of its investigator and his damages

summary to establish the amount of its claimed damages. The investigator testified

that each tow that he included in his damages calculations had “indications the

police initiated the tow or the tow was done at the direction of the police.” He also

testified that all of the 90 claims for which Allstate sought damages were City of

Houston tows. Appellants argue that the city’s definition of “nonconsent” tows is

incompatible with the investigator’s definition, so that the investigator may have

incorrectly included certain charges in his damages calculation.

The interpretation of ordinances, which are interpreted by the same rules of

construction that apply to statutes, is a question of law. Howeth Invs., Inc. v. City

of Hedwig Village, 259 S.W.3d 877, 904 (Tex. App.—Houston [1st Dist.] 2008,

pet. denied). We review the trial court’s construction of a statute de novo.

Galbraith Eng’g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex. 2009).

If the words of a statute are clear and unambiguous, we apply them according to

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their plain and common meaning. Id. The investigator’s criteria for identifying

“nonconsent” tows does not match the definition of a “nonconsent” tow in the city

ordinance, which is:

[T]he tow of a motor vehicle in every instance in which the vehicle
owner is unwilling or unable to designate a tow operator to remove
the vehicle, including instances in which the vehicle is: (i) abandoned
or stolen, or (ii) being operated by a person who is the subject of a
custodial arrest or who is physically or mentally unable or unwilling
to request a tow operator or destination, when a law enforcement
officer determines that no other authorized person is present and able
to remove the vehicle.

HOUS., TEX., CODE OF ORDINANCES ch. 8, art. III, § 8-101 (2005 & Supp. 2009).

Under the city ordinance, a “nonconsent” tow must involve the vehicle owner

being “unwilling or unable to designate a tow operator.” Id. This can include

when the vehicle is abandoned or the driver is incapacitated, and an officer

determines that no one else can remove the vehicle. Id. This is a different and

more limited set of circumstances than when the police merely initiate or direct

that the tow take place—the definition used by Allstate’s investigator.

Although the appellants’ attorney attempted to ask for more details about the

tows that were included in the damages summary, the trial court prevented him

from inquiring further into how the investigator had determined whether a claim

was for a “nonconsent” tow. For instance, the appellants’ attorney attempted to

ask if the damages calculation included tows when the vehicle owner signed a tow

receipt, which may have indicated that the vehicle owner was willing or able to
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designate the tow operator and, thereby, that the tow was not a “nonconsent” tow.

But the trial court sustained Allstate’s objection to these questions, preventing the

presentation of evidence on the basis for the investigator’s “nonconsent”

determinations.

In our legal sufficiency review, we cannot disregard evidence that an expert

witness’s conclusion was based on unfounded assumptions. See City of Keller,

168 S.W.3d at 813. Allstate’s investigator testified that he had determined that all

the claims that he included in the damages calculation, which were all City of

Houston claims, involved “nonconsent” tows. But he also testified that this

conclusion was based on a definition of “nonconsent” which was legally incorrect

under the city ordinance. Beyond the testimony regarding the definition the

investigator had used, Allstate prevented the introduction of evidence allowing the

appellants to dispute the conclusion that all 90 tow claims were “nonconsent” tows

under the ordinance. As a result, we have no factual basis to affirm the

investigator’s conclusion that damages were authorized for all of the claims. See

Lefton v. Griffith, 136 S.W.3d 271, 277–78 (Tex. App.—San Antonio 2004, no

pet.) (holding evidence was legally insufficient to support damages award when

there was no evidence for how plaintiff came to conclusions regarding amounts of

damages).

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 Proof of a casual nexus between the event sued upon and the plaintiff’s

injuries is necessary to ascertain the amount of damages to which the plaintiff is

entitled. Morgan, 675 S.W.2d at 732. The events Allstate sued upon were

overcharges for “nonconsent” tows under the municipal ordinances. Once Allstate

presented evidence that a given tow was a “nonconsent” tow under the city

ordinance, it was entitled to the award of damages for that tow. But Allstate was

not entitled to recover for tows in the absence of evidence that they were

“nonconsent” tows. At the damages trial, Allstate objected to the presentation of

evidence concerning whether all of the tows for which it sought damages met the

city’s definition of “nonconsent.” Thus, by using the incorrect definition of a

“nonconsent” tow and a damages summary which may have included tows that

were both “consent” and “nonconsent” tows under the ordinance, Allstate did not

show that it was entitled to recover damages for all 90 of the claims. See Holt

Atherton, 835 S.W.2d at 85 (holding legally insufficient evidence supported lost

profits award when plaintiffs failed to provide a specific lost contracts and time-

frame for measuring their lost profits); Lefton, 136 S.W.3d at 277–78 (holding

legally insufficient evidence to support damages award when plaintiff failed to

explain how she arrived at the values for economic losses she sustained).

We hold that the evidence is legally insufficient to support the award of

damages for overcharges for “nonconsent” tows under Allstate’s pleadings.

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Having sustained the appellants’ issue regarding the amount of damages awarded,

we need not consider their other issues.

Conclusion

The record does not provide any means of distinguishing between the

amounts erroneously awarded for exceeding the city’s limit on “nonconsent”

towing charges and the other claims for which Allstate sought damages, such as

unnecessary or unauthorized fees for transfer or storage of vehicles. Because

Allstate requested, and the trial court awarded, exemplary damages in the same

amount as the actual damages award, the amount of exemplary damages was also

intertwined with amount of actual damages awarded for “non-consent” tows.

Accordingly, we reverse the award of damages and remand for a new trial

on damages. See TEX. R. APP. P. 44.1(b) (allowing partial reversal only if error

affects part of, but not all, the matter in controversy and that part is fairly

separable); see also Holt Atherton, 835 S.W.2d at 86 (when evidence of

unliquidated damages not fully developed, reverse and remand appropriate as to all

of damages award after sustaining no-evidence point as to some of the damages

award).

Michael Massengale
Justice

Panel consists of Chief Justice Radack and Justices Sharp and Massengale.
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