Case Name: John CATHEY, Appellant, v. Larry MEYER and John Glover, Appellees
Court: Texas Courts of Appeals
Jurisdiction: Texas
Decision Date: 2003-08-04
Citations: 115 S.W.3d 644
Docket Number: No. 10-99-326-CV
Parties: John CATHEY, Appellant, v. Larry MEYER and John Glover, Appellees.
Judges: Before Chief Justice DAVIS, Justice VANCE, and Justice GRAY.
Reporter: South Western Reporter Third Series
Volume: 115
Pages: 644–696

Head Matter:
John CATHEY, Appellant, v. Larry MEYER and John Glover, Appellees.
No. 10-99-326-CV.
Court of Appeals of Texas, Waco.
Aug. 4, 2003.
Rehearing Overruled Sept. 19, 2003.
Greg White, McGregor & White, Dale Williams, Jim Wren, Williams, Squires & Wren, Waco, Gary L. Richardson, Tulsa, for Appellant.
Corbet F. Bryant, Jeffrey S. Levinger, Monica Wiseman Latin, Stephanie M. Dooley, Carrington, Coleman, Sloman & Blu-menthal, Dallas, for Appellee.
Before Chief Justice DAVIS, Justice VANCE, and Justice GRAY.

Opinion:
OPINION
BILL VANCE, Justice.
This cause involves allegations of fraud and breach of fiduciary duty between business associates.
I. FACTUAL BACKGROUND
In the mid-1990's, Larry Meyer was in the real estate development business. His projects included the acquisition, management, development, and sale of investment properties. To fund these projects, Meyer borrowed the initial investment money from a lending source called C.I.O.S. Meyer's income derived, at least in part, from profits on the projects and from consulting fees from the numerous limited partnerships he set up to carry out the projects.
In the fall of 1992, Meyer and John Cathey formed a business relationship. It was Cathey's job to find projects in which Meyer could invest and to help plan the financing, construction, and operation of the projects. Over the years, Cathey and Meyer entered into a series of agreements, both oral and written, on various projects. Cathey was paid a base salary, but he alleged his primary benefit was to be income derived in various ways from net profits from the projects on which he worked. From September 1992 to August 1996, Cathey was involved in dozens of projects with Meyer. Pertinent to the lawsuit which is the subject of this appeal, they were involved in the following:
• 1993: The acquisition of the Silverado Apartments, for which there was a written distribution agreement that Cathey would be paid twenty percent of net profits.
• 1998: The acquisition of the Polo Club Apartments, for which there was a written distribution agreement that Cathey would be paid five percent of net profits.
• 1995: The acquisition of the Valley Ranch Apartments, for which there was a written distribution agreement that Cathey would be paid nine percent of net profits if the distribution occurred before Meyer and Cathey terminated their business relationship, and four and one-half percent after termination.
• 1995: The acquisition of the Arbors Apartments. Cathey and Meyer were the sole partners in a limited partnership which purchased these apartments from Meyer's father. Cathey's interest in the partnership was five percent.
• 1995: The refinancing of the Silverado Apartments and the Arbors Apartments.
• June 1995 through August 1996: The development of a project in Waco to construct a movie theater complex, and a project in Dallas to construct luxury condominiums.
John Glover, an attorney, was also involved in the projects, drafting the legal documents for the limited partnerships and corporations through which the projects were carried out, as well as the written agreements which defined Cathey's financial interests. Cathey was an officer, manager, or partner in many of these business entities, but he claimed he was not privy to the financial records. At trial, Meyer stated that Cathey simply never asked to review the records.
During the three years and eleven months of his dealings with Meyer, Cathey was paid about $260,000. But the two had periodic disagreements about what Cath-ey's financial interests were. First, Cath-ey claimed at trial that by January 1993, just four months into their relationship, Meyer had promised that Cathey would make twenty percent of the net profits from projects Cathey found, and ten per cent from projects he did not find but nevertheless worked on. He was also to receive a $25,000 bonus if he completed a refinancing of the loans on a property previously purchased. He claimed that this oral "global agreement" as well as other oral promises were not always fully honored. However, there was trial testimony from Meyer's witnesses that the "global agreement," if it existed, would not have pertained to larger projects or to projects involving outside partners. Cathey also complained that a number of times Meyer either (a) refused to put in writing the oral agreement they had reached on a particular project or (b) presented Cathey with a written agreement containing provisions different from what had been agreed. Also, Cathey claimed to have suffered because many of the projects, after expenses and overhead were deducted, never made any net profit. He claimed at trial that Meyer secretly paid himself large "consulting fees" thereby draining off any net profit and enriching himself in the process.
In August 1996, Meyer presented Cath-ey with four documents and demanded he sign them. One was a general release of any interests Cathey might have in any of the projects he had been involved with. A second cut Cathey's interest in one of the apartment complexes in half. The third was an acknowledgment that Cathey was Meyer's employee, which Meyer said he needed for tax pin-poses. It also contained provisions dramatically cutting Cathey's monthly salary and binding Cathey to a non-competition agreement. The fourth provided that Cathey would get five percent of net profits from the Dallas condominium project. Cathey claimed that Meyer demanded that he sign all four documents, or he would get no interest in the Dallas project. Cathey refused to sign any of the documents. Meyer had the locks changed on Cathey's office, and their relationship ended.
II. TRIAL COURT PROCEEDINGS
On May 22, 1997, Cathey sued Meyer for fraudulently inducing Cathey into: (1) entering into written agreements regarding his compensation for work done on purchasing four apartment complexes, by not disclosing that Meyer intended to pay himself large consulting fees, which had the effect of draining off the profits from the apartment projects so that there were no net profits from which Cathey's share could derive; (2) working on the refinancing of two of the four apartment complexes, when Meyer did not intend to pay Cathey to the full extent orally promised; and (3) working on the Waco and Dallas projects, when Meyer did not intend to pay Cathey to the full extent orally promised. Cathey also sued Meyer for breach of fiduciary duty on the Waco and Dallas projects, asserting that Meyer took advantage of him by not fairly compensating him as promised.
Cathey sued Glover, the attorney, for breach of fiduciary duty on the Dallas project by not protecting Cathey's interests in his dealings with Meyer, and for negligence on the Dallas project by not expressly telling Cathey that Glover was representing only Meyer's interests and that Cathey should seek other counsel. Cathey also alleged that Glover conspired with Meyer to fraudulently keep Cathey in the business relationship.
A. The Verdict
After a six-week trial in July 1999, the jury returned its verdict on twenty-seven questions. Regarding the claims against Meyer, it found:
• Meyer fraudulently induced Cathey into written agreements on the four apartment complex projects. This fraud proximately caused $37,500 in damages.
• Meyer fraudulently induced Cathey to provide services in connection with the refinancing of two of the four apartment complexes. This fraud proximately caused $35,000 in damages.
• Meyer fraudulently induced Cathey to provide services regarding the Waco movie theater and Dallas condominium projects. This fraud proximately caused $150,000 in damages for the Waco project and $750,000 in damages for the Dallas project. $2,250,000 should be assessed against Meyer in exemplary damages for this fraud.
• Cathey ratified and waived Meyer's fraud that the jury found in all the above projects.
• There was a relationship of trust and confidence between Meyer and Cathey (ie., Meyer had a fiduciary duty to Cathey) which existed prior to and apart from the Waco and Dallas projects, which relationship ended on August 13,1996.
• Meyer breached his fiduciary duty to Cathey regarding the Waco and Dallas projects. This breach proximately caused $150,000 in damages for the Waco project and $750,000 in damages for the Dallas project.
• Cathey knew or should have known on or before May 22, 1995, of the facts underlying Meyer's breach of fiduciary duty. (The lawsuit was filed on May 22,1997.)
B. Post-Verdict Motions and Orders
All the parties filed post-verdict motions. Cathey filed a "Motion to Disregard Certain Jury Findings and Motion for Judgment." Cathey asserted there was "no support in the evidence" for the jury's findings that (a) Cathey ratified and waived fraud by Meyer and (b) Cathey knew or should have known about the facts giving rise to the breach of fiduciary duty claim over two years before filing suit. Specifically, he argued the following:
1. Ratification only bars a remedy of rescission in a breach-of-contract action, not damages in a fraud action.
2. Under the definition of ratification in the charge, the person defrauded must either (a) continue to accept some benefits after learning of the fraud, or (b) conduct himself so as to recognize the agreement as binding. Because Cathey received no benefits from and there was no consummated agreement on the Waco and Dallas projects, by definition he cannot have ratified fraud related to those two projects.
3. The question on ratification was improper because the jury was not asked if Cathey had full knowledge of the fraud, which, he asserted, is required for ratification.
4. There was no evidence Cathey intentionally surrendered any right to the foil benefit of his bargains with Meyer, which the instruction on waiver required the jury to find.
5. Waiver typically is asserted by a plaintiff in a breaeh-of-contract action when the defendant pleads the affirmative defense of fraud. It is not applicable here.
6. Based on the instructions to the jury on waiver, Cathey cannot have waived a known right regarding the Waco and Dallas projects because no agreement was ever consummated which would have established the right.
7. As with ratification, waiver only applies to the remedy of rescission in a breach-of-contract action, not to damages for fraud.
8. Cathey could not have known of Meyer's breach of fiduciary duty regarding the Waco and Dallas projects on or before May 22, 1995, because those projects did not exist prior to June 1995.
Meyer filed a thirty-five-page "Motion for Judgment Notwithstanding the Verdict and to Disregard Jury Findings and, in the Alternative, Motion for Judgment on the Verdict," with 453 pages of attachments. He asserted: (a) there was legally insufficient evidence to support the fraud and breach-of-fiduciary-duty claims against Meyer; (b) even if there was legally sufficient evidence, recovery on the fraud claims is barred by the findings of ratification and waiver, and recovery on the breach-of-fiduciary-duty claim is barred by limitations; and (c) there was no evidence of proximate cause regarding the Dallas project, because any fiduciary duty Meyer had to'Cathey ended in 1996, long before the property was foreclosed in 1998 resulting in no profits. Specifically, he argued the following:
1. Regarding fraud and the written agreements pertaining to four apartment complexes, there was no evidence that when Meyer entered into the agreements, he intended to later reduce the profits through consulting fees. Therefore there was no material false misrepresentation.
2. The jury did not find that Cathey knew or should have known on or before May 22, 1993, of the facts underlying Meyer's fraudulent acts. However, that finding should be disregarded because Cathey's testimony conclusively established that the "global agreement" was formed in January 1993. And if the statute of limitations for fraud is four years, then because the lawsuit was filed on May 22, 1997, the fraud claims regarding the four apartment complexes are barred by limitations, because Cathey knew before May 22, 1993, that the "global agreement" was not being honored.
3. The evidence was legally insufficient to prove that Cathey's damages (underpayments) under the four written agreements were proximately caused by any fraudulent inducement by Meyer at the time the agreements were entered into.
4. The evidence proved as a matter of law that Cathey was fully compensated for the Silverado Apartments, Polo Club Apartments, and Valley Ranch Apartments projects.
5. There was no evidence of damages for the Arbors Apartments project, because Cathey was to be compensated as a limited partner, not under a distribution-of-profits agreement.
6. As to the refinancing of the Silvera-do Apartments and Arbors Apartments: (a) the evidence proved as a matter of law that Cathey was not entitled to a bonus for his services; (b) there was no evidence that when the agreement for Cathey's services was entered into, Meyer intended not to pay Cathey according to the agreement; (c) there is no evidence Cathey relied on a promise of a bonus when he performed services for refinancing; and (d) the evidence proved as a matter of law that there was no money left after closing from which a bonus could have been paid, and therefore Cathey failed to prove damages.
7. There was no evidence Cathey was entitled to compensation for work on the Waco and Dallas projects in addition to his salary, and therefore there was no evidence of damages for these projects.
8. There was no evidence that at the time of the formation of the agreements on the Waco and Dallas projects, Meyer intended not to pay Cathey.
9. Cathey's fraud claims derive from the "global agreement" in 1993. Because the fraud claims are premised on a contract (the "global agreement") that could not be performed in one year, the statute of frauds applies. Therefore, because there was no written agreement on the Waco and Dallas projects, the fraud claims pertaining to them fail.
10.The damages question for fraud pertaining to the Waco and Dallas projects asked about benefit-of-the-bargain damages. However, the liability question for fraud asked whether Meyer fraudulently induced Cathey to provide services for which he was not fully compensated. Therefore, the damages question should have asked about the value of those services, not benefit-of-the-bargain damages. Because it did not, the proper measure of damages was not used, and damages are not recoverable.
11. Cathey's damages for fraud on the Dallas project were derived from a twenty-percent interest in any profits distributed by the limited partnership which developed that project. Because the Dallas project was foreclosed on, the partnership never made any profit, and therefore as a matter of law Cathey has not proved his entitlement to any damages.
12. The evidence is legally insufficient that Meyer had an informal fiduciary duty to Cathey.
13. Cathey's damages for breach of fiduciary duty on the Dallas project were derived from a twenty-percent interest in any profits distributed by the limited partnership which developed that project. Because the Dallas project was foreclosed on, the partnership never made any profit. In addition, the jury found that the fiduciary relationship ended on August 13, 1996, long before the property was foreclosed on. Therefore as a matter of law Cathey has not proved his entitlement to any damages.
14. There is no clear and convincing evidence that Meyer defrauded Cathey on the Waco and Dallas projects, and therefore exemplary damages are not recoverable. Also, exemplary damages are capped under the Civil Practice and Remedies Code.
15. The jury's findings of ratification and waiver on all the fraud claims entitled Meyer to a take-nothing judgment on the verdict against Cathey.
16. The jury's finding on limitations, i.e., that Cathey knew or should have known of the facts underlying the breach of fiduciary duty two years or more before the date the lawsuit was filed, entitles Meyer to a take-nothing judgment on the verdict against Cathey.
The trial court granted Meyer's motion and denied Cathey's motion. The trial court signed a take-nothing judgment in favor of Meyer without specifying on what grounds it was based. We sustain the judgment of a trial court if it is correct on any theory of law applicable to the case and supported by the record, regardless of whether the trial court gives the correct legal reason for the judgment, or whether it gives any reason at all. See Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, 84 (1939).
C. Post-Judgment Motions
Cathey filed a motion for new trial claiming, inter alia, factually insufficient evidence to support the jury's findings of ratification and waiver. The motion also reiterated his objections to the charge on ratification and waiver, i.e., that the defenses do not apply when damages are sought in a claim for fraud and that the definitions in the jury instructions were erroneous. Cathey also filed a motion to modify, correct, or reform the judgment. This motion addressed the proper limitations period for breach of fiduciary duty and urged the court to render judgment on that claim for Cathey. These motions were overruled by operation of law.
Meyer did not file a motion for new trial.
Several weeks after judgment, Meyer filed a motion for sanctions claiming that Cathey lied in a deposition and in responses to requests for admissions to inquiries about his background and credentials, and Meyer had to expend thousands of dollars discovering the true facts so he could present them at trial. The trial court granted the motion and awarded close to $26,000 as sanctions.
III. ISSUES ON APPEAL
Cathey appeals on five issues as to Meyer:
1. The trial court erred in rendering a take-nothing judgment in favor of Meyer because: (a) there was more than a scintilla of evidence to support the jury's findings regarding Cathey's fraud and breach of fiduciary duty claims against Meyer; (b) the jury's finding that Cathey did not know of the fraud more than four years before the lawsuit was filed should not have been disregarded; (c) the statute of frauds does not bar recovery for the fraud claims pertaining to the four projects which were not in writing, because Cathey did not seek recovery for breach of contract; and (d) the foreclosure on the Dallas project does not preclude the recovery of damages.
2. The trial court erred in finding that "ratification" barred recovery on all the fraud claims against Meyer because: (a) there was no evidence that Cathey ratified Meyer's fraudulent acts; (b) the definition of ratification in the charge "essentially de fines [the Waco and Dallas projects] out of the ratification defense," because an agreement on Cathey's benefits was never consummated between him and Meyer; and (c) ratification is inapplicable in this case, because normally it applies only when the remedy of rescission of a contract is sought, and it does not apply when, as here, a party merely continues to honor the terms of a contract after he learns he was fraudulently induced to enter into it.
3. Under the facts of this case, there is no difference in the affirmative defenses of "ratification" and "waiver." Therefore, for the same reasons that apply to "ratification," the trial court erred in finding that "waiver" barred recovery on all the fraud claims against Meyer.
4. The trial court erred in finding that limitations bars the recovery against Meyer for breach of fiduciary duty, because a four-year rather than a two-year limitations period applies. Even if the period was two years, the evidence is undisputed that the Waco and Dallas projects did not commence until after the two-year period began.
5. The trial court abused its discretion in awarding sanctions for discovery abuse.
Meyer asserts as cross-issues: (1) the evidence is legally and factually insufficient to support the jury's findings in Cathey's favor, and (2) the trial court erred in its instructions to the jury regarding the breach-of-fiduciary-duty question.
IV. FRAUD CLAIMS
Cathey presents three issues, two with multiple sub-parts, concerning his fraud claims against Meyer. Each advances a reason why the trial court erred in granting Meyer's post-trial motions. Because Cathey's issues on ratification and waiver, if overruled, would bar recovery as to all or part of the fraud claims, we will discuss those issues first. Next, his issue concerning the statute of frauds, which relates to only the Waco and Dallas projects, will be discussed. Then, his issues concerning the legal sufficiency of the evidence, i.e., that the court erred if it granted the take-nothing judgment on the basis that there was no evidence to support the jury's findings in Cathey's favor, will be discussed. Finally, we will discuss his argument about exemplary damages.
Meyer's cross-issues that the evidence supporting the jury's findings favorable to Cathey is legally and factually insufficient occupy one sentence in his fifty-nine-page brief. There are no citations to the reporter's record. Because the trial court had to find that no evidence supports the jury's findings in Cathey's favor before it could disregard those findings (if that was the basis for the judgment), Meyer's cross-issues on legal sufficiency are, of necessity, resolved by our discussion of Cath-ey's issues on legal sufficiency. However, Meyer has failed to brief his cross-issues on factual insufficiency. The rules of appellate procedure require that "[t]he brief must contain a clear and concise argument for the contentions made, with appropriate citations to authority and to the record." Tex.R.App. P. 38.1(h), 38.2(a)(1). This is especially important in a case such as this with a reporter's record consisting of many thousands of pages covering a six-week trial. By his failure, Meyer has waived the cross-issues on factual sufficiency. E.g. Franklin v. Enserch, Inc., 961 S.W.2d 704, 711 (Tex.App.-Amarillo 1998, no pet.); Sisters of Charity of the Incarnate Word v. Gobert, 992 S.W.2d 25, 31 (Tex.App.-Houston [1st Dist.] 1997, no pet.); Leyva v. summer of 1996, when his relationship with Meyer abruptly ended.
Again, ratification and waiver require some voluntary action after discovery of the fraud which either relinquishes a right or validates the fraud. The evidence conclusively shows that Cathey performed services on these four projects before he realized Meyer did not intend to fully honor his promises about compensation, ie., before Cathey learned of the fraud. Juliette Fowler, 793 S.W.2d at 666 n. 9. After he learned of it, the evidence does not show specific acts of relinquishment or validation. Although there is evidence that, during the course of his numerous business dealings with Meyer over the years, Cathey knew he had not gotten the full benefit of some of his bargains with Meyer in the past, this does not establish that, during the course of the projects, Cathey became aware of Meyer's fraud and then performed acts of ratification or waiver.
The evidence shows that, regarding these four different projects, Cathey was made promises of financial rewards in exchange for services, he performed services, and the full measure of the rewards promised was not given. In each instance, the jury found that fraud had occurred. We find no more than a scintilla of evidence that Cathey intentionally relinquished his rights under these four agreements or intentionally validated the fraud. Id. Therefore, there is legally insufficient evidence to support the jury's findings of ratification and waiver regarding these four projects.
6. Conclusion
There is legally insufficient evidence of ratification and waiver regarding any of the eight fraud claims. The trial court erred if it rendered a take-nothing judgment based on these affirmative defenses.
B. Statute of Frauds
Meyer argued in his post-trial motion that because Cathey's fraud claims derive from the "global agreement" in 1993, a contract that could not be performed in one year, the statute of frauds applies. He says because there was no written agreement on the Waco and Dallas projects which were begun in 1995, the fraud claims pertaining to them must fail. Meyer attempts to characterize the agreements Cathey claimed he had with Meyer on the Waco and Dallas projects as dating back to 1993 when the "global agreement" was formed. He asserts that because the "global agreement" was not intended to be performed in one year, Cathey's fraud claims fail under the statute of frauds. Tex. Bus. & Com.Code Ann. § 26.01(b)(6) (Vernon 2002); Haase v. Glazner, 62 S.W.3d 795, 799 (Tex.2001) (Benefit-of-the-bargain damages under a claim of fraudulent inducement into a contract are not recoverable if a claim of breach of the contract would fail under the statute of frauds.).
But the Waco and Dallas projects were not begun until 1995. There was evidence that the two agreements were "new" agreements, although some of their terms regarding Cathey's compensation may have derived from the "global agreement." In addition, the evidence does not establish that either project could not be performed in one year, and there was no jury finding on the issue. Therefore, there is legally insufficient evidence to support application of the statute of frauds, and the trial court erred if it rendered a take-nothing judgment based on this affirmative defense.
C. Legal Sufficiency of the Evidence for the Fraud Claims; Jury Charge Issue
Cathey asserts on appeal that there was some evidence to support the jury's findings of fraud regarding each of the eight projects, and therefore the trial court erred in granting Meyer's motion for judgment notwithstanding the verdict or to disregard jury findings, if that was the basis for the judgment.
1. Standard of Review
We review the granting of a motion for judgment notwithstanding the verdict or a motion to disregard a jury finding in the light most favorable to the finding, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor. Navarette v. Temple Independent Sch. Dist. 706 S.W.2d 308, 309 (Tex.1986); Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex.1990); Exxon Corp. v. Quinn, 726 S.W.2d 17, 19 (Tex.1987). We review for whether there is more than a mere scintilla of evidence to support the jury's finding. Basin Operating Co. v. Valley Steel Products, 620 S.W.2d 773, 776 (Tex.Civ.App.-Dallas 1981, writ ref'd n.r.e.); see Farias v. Laredo Nat'l Bank, 985 S.W.2d 465, 470 (Tex.App.-San Antonio 1997, no writ); Quinn, 726 S.W.2d at 19. "More than a scintilla of evidence exists where the evidence supporting the finding, as a whole, 'rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.' " Burroughs Wellcome, 907 S.W.2d at 499.
2. Four Written Agreements
First, Meyer's post-trial motion argued that the evidence proved as a matter of law that Cathey knew prior to the execution of the four written agreements that Meyer was not going to honor the "global agreement." This argument misses the point, because the fraudulent misrepresentation Cathey undertook to prove is the non-disclosure by Meyer about the consulting fees which affected the net profits under the four written agreements.
Next, Meyer argued there was no evidence that when he entered into these four agreements, he intended to later divert profits through consulting fees. "Since intent to defraud is not susceptible to direct proof, it invariably must be proven by circumstantial evidence." Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986) (citations omitted). " 'Slight circumstantial evidence' of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent." Id. (citing Maulding v. Niemeyer, 241 S.W.2d 733, 738 (Tex.Civ.App.-El Paso 1951) (orig.proceeding)); see Johnson & Higgins of Texas v. Kenneco Energy, 962 S.W.2d 507, 527 (Tex.1998). There is evidence that, without telling Cathey, Meyer paid himself consulting fees which had the effect of denying Cathey income derived from profits from the apartment complexes. Construing the evidence in the light most favorable to Cathey, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor, we find that there was more than a scintilla of evidence from which the jury could have concluded that, at the time he entered into the four written agreements, Meyer intended to reduce or eliminate the profits by payment to himself of consulting fees. Navarette, 706 S.W.2d at 309.
Continuing to address proof of the elements of fraud, Meyer asserted in his post-trial motion that the evidence was
4. There was no evidence Cathey intentionally surrendered any right to the full benefit of his bargains with Meyer, which the instruction on waiver required the jury to find.
5. Waiver typically is asserted by a plaintiff in a breach-of-contract action when the defendant pleads the affirmative defense of fraud. It is not applicable here.
6. Based on the instructions to the jury on waiver, Cathey cannot have waived a known right regarding the Waco and Dallas projects because no agreement was ever consummated which would have established the right.
7. As with ratification, waiver only applies to the remedy of rescission in a breach-of-contract action, not to damages for fraud.
8. Cathey could not have known of Meyer's breach of fiduciary duty regarding the Waco and Dallas projects on or before May 22, 1995, because those projects did not exist prior to June 1995.
Meyer filed a thirty-five-page "Motion for Judgment Notwithstanding the Verdict and to Disregard Jury Findings and, in the Alternative, Motion for Judgment on the Verdict," with 458 pages of attachments. He asserted: (a) there was legally insufficient evidence to support the fraud and breach-of-fiduciary-duty claims against Meyer; (b) even if there was legally sufficient evidence, recovery on the fraud claims is barred by the findings of ratification and waiver, and recovery on the breach-of-fiduciary-duty claim is barred by limitations; and (c) there was no evidence of proximate cause regarding the Dallas project, because any fiduciary duty Meyer had to'Cathey ended in 1996, long before the property was foreclosed in 1998 resulting in no profits. Specifically, he argued the following:
1. Regarding fraud and the written agreements pertaining to four apartment complexes, there was no evidence that when Meyer entered into the agreements, he intended to later reduce the profits through consulting fees. Therefore there was no material false misrepresentation.
2. The jury did not find that Cathey knew or should have known on or before May 22, 1993, of the facts underlying Meyer's fraudulent acts. However, that finding should be disregarded because Cathey's testimony conclusively established that the "global agreement" was formed in January 1998. And if the statute of limitations for fraud is four years, then because the lawsuit was filed on May 22, 1997, the fraud claims regarding the four apartment complexes are barred by limitations, because Cathey knew before May 22, 1993, that the "global agreement" was not being honored.
3. The evidence was legally insufficient to prove that Cathey's damages (underpayments) under the four written agreements were proximately caused by any fraudulent inducement by Meyer at the time the agreements were entered into.
4. The evidence proved as a matter of law that Cathey was fully compensated for the Silverado Apartments, Polo Club Apartments, and Valley Ranch Apartments projects.
5. There was no evidence of damages for the Arbors Apartments project, because Cathey was to be compensated as a limited partner, not under a distribution-of-profits agreement.
6. As to the refinancing of the Silvera-do Apartments and Arbors Apartments: (a) the evidence proved as a matter of law that Cathey was not entitled to a bonus for his services; (b) there was no evidence that when the agreement for Cathey's services was entered into, Meyer intended not to pay Cathey according to the agreement; (c) there is no evidence Cathey relied on a promise of a bonus when he performed services for refinancing; and (d) the evidence proved as a matter of law that there was no money left after closing from which a bonus could have been paid, and therefore Cathey failed to prove damages.
7. There was no evidence Cathey was entitled to compensation for work on the Waco and Dallas projects in addition to his salary, and therefore there was no evidence of damages for these projects.
8. There was no evidence that at the time of the formation of the agreements on the Waco and Dallas projects, Meyer intended not to pay Cathey.
9. Cathey's fraud claims derive from the "global agreement" in 1993. Because the fraud claims are premised on a contract (the "global agreement") that could not be performed in one year, the statute of frauds applies. Therefore, because there was no written agreement on the Waco and Dallas projects, the fraud claims pertaining to them fail.
10.The damages question for fraud pertaining to the Waco and Dallas projects asked about benefit-of-the-bargain damages. However, the liability question for fraud asked whether Meyer fraudulently induced Cathey to provide services for which he was not fully compensated. Therefore, the damages question should have asked about the value of those services, not benefit-of-the-bargain damages. Because it did not, the proper measure of damages was not used, and damages are not recoverable.
11. Cathey's damages for fraud on the Dallas project were derived from a twenty-percent interest in any profits distributed by the limited partnership which developed that project. Because the Dallas project was foreclosed on, the partnership never made any profit, and therefore as a matter of law Cathey has not proved his entitlement to any damages.
12. The evidence is legally insufficient that Meyer had an informal fiduciary duty to Cathey.
13. Cathey's damages for breach of fiduciary duty on the Dallas project were derived from a twenty-percent interest in any profits distributed by the limited partnership which developed that project. Because the Dallas project was foreclosed on, the partnership never made any profit. In addition, the jury found that the fiduciary relationship ended on August 13, 1996, long before the property was foreclosed on. Therefore as a matter of law Cathey has not proved his entitlement to any damages.
14. There is no clear and convincing evidence that Meyer defrauded Cathey on the Waco and Dallas projects, and therefore exemplary damages are not recoverable. Also, exemplary damages are capped under the Civil Practice and Remedies Code.
15. The jury's findings of ratification and waiver on all the fraud claims entitled Meyer to a take-nothing judgment on the verdict against Cathey.
16. The jury's finding on limitations, i.e., that Cathey knew or should have known of the facts underlying the breach of fiduciary duty two years or more before the date the lawsuit was filed, entitles Meyer to a take-nothing judgment on the verdict against Cathey.
The trial court granted Meyer's motion and denied Cathey's motion. The trial court signed a take-nothing judgment in favor of Meyer without specifying on what grounds it was based. We sustain the judgment of a trial court if it is correct on any theory of law applicable to the case and supported by the record, regardless of whether the trial court gives the correct legal reason for the judgment, or whether it gives any reason at all. See Gulf Land Co. v. Atlantic Refining Co., 134 Tex. 59, 131 S.W.2d 73, 84 (1939).
C. Post-Judgment Motions
Cathey filed a motion for new trial claiming, inter alia, factually insufficient evidence to support the jury's findings of ratification and waiver. The motion also reiterated his objections to the charge on ratification and waiver, i.e., that the defenses do not apply when damages are sought in a claim for fraud and that the definitions in the jury instructions were erroneous. Cathey also filed a motion to modify, correct, or reform the judgment. This motion addressed the proper limitations period for breach of fiduciary duty and urged the court to render judgment on that claim for Cathey. These motions were overruled by operation of law.
Meyer did not file a motion for new trial.
Several weeks after judgment, Meyer filed a motion for sanctions claiming that Cathey lied in a deposition and in responses to requests for admissions to inquiries about his background and credentials, and Meyer had to expend thousands of dollars discovering the true facts so he could present them at trial. The trial court granted the motion and awarded close to $26,000 as sanctions.
III. ISSUES ON APPEAL
Cathey appeals on five issues as to Meyer:
1. The trial court erred in rendering a take-nothing judgment in favor of Meyer because: (a) there was more than a scintilla of evidence to support the jury's findings regarding Cathey's fraud and breach of fiduciary duty claims against Meyer; (b) the jury's finding that Cathey did not know of the fraud more than four years before the lawsuit was filed should not have been disregarded; (c) the statute of frauds does not bar recovery for the fraud claims pertaining to the four projects which were not in writing, because Cathey did not seek recovery for breach of contract; and (d) the foreclosure on the Dallas project does not preclude the recovery of damages.
2. The trial court erred in finding that "ratification" barred recovery on all the fraud claims against Meyer because: (a) there was no evidence that Cathey ratified Meyer's fraudulent acts; (b) the definition of ratification in the charge "essentially de fines [the Waco and Dallas projects] out of the ratification defense," because an agreement on Cathey's benefits was never consummated between him and Meyer; and (c) ratification is inapplicable in this ease, because normally it applies only when the remedy of rescission of a contract is sought, and it does not apply when, as here, a party merely continues to honor the terms of a contract after he learns he was fraudulently induced to enter into it.
3. Under the facts of this case, there is no difference in the affirmative defenses of "ratification" and "waiver." Therefore, for the same reasons that apply to "ratification," the trial court erred in finding that "waiver" barred recovery on all the fraud claims against Meyer.
4. The trial court erred in finding that limitations bars the recovery against Meyer for breach of fiduciary duty, because a four-year rather than a two-year limitations period applies. Even if the period was two years, the evidence is undisputed that the Waco and Dallas projects did not commence until after the two-year period began.
5. The trial court abused its discretion in awarding sanctions for discovery abuse.
Meyer asserts as cross-issues: (1) the evidence is legally and factually insufficient to support the jury's findings in Cathey's favor, and (2) the trial court erred in its instructions to the jury regarding the breach-of-fiduciary-duty question.
IV. FRAUD CLAIMS
Cathey presents three issues, two with multiple sub-parts, concerning his fraud claims against Meyer. Each advances a reason why the trial court erred in granting Meyer's post-trial motions. Because Cathey's issues on ratification and waiver, if overruled, would bar recovery as to all or part of the fraud claims, we will discuss those issues first. Next, his issue concerning the statute of frauds, which relates to only the Waco and Dallas projects, will be discussed. Then, his issues concerning the legal sufficiency of the evidence, ie., that the court erred if it granted the take-nothing judgment on the basis that there was no evidence to support the jury's findings in Cathey's favor, will be discussed. Finally, we will discuss his argument about exemplary damages.
Meyer's cross-issues that the evidence supporting the jury's findings favorable to Cathey is legally and factually insufficient occupy one sentence in his fifty-nine-page brief. There are no citations to the reporter's record. Because the trial court had to find that no evidence supports the jury's findings in Cathey's favor before it could disregard those findings (if that was the basis for the judgment), Meyer's cross-issues on legal sufficiency are, of necessity, resolved by our discussion of Cath-ey's issues on legal sufficiency. However, Meyer has failed to brief his cross-issues on factual insufficiency. The rules of appellate procedure require that "[t]he brief must contain a clear and concise argument for the contentions made, with appropriate citations to authority and to the record." Tex.R.App. P. 38.1(h), 38.2(a)(1). This is especially important in a case such as this with a reporter's record consisting of many thousands of pages covering a six-week trial. By his failure, Meyer has waived the cross-issues on factual sufficiency. E.g. Franklin v. Enserch, Inc., 961 S.W.2d 704, 711 (Tex.App.-Amarillo 1998, no pet.); Sisters of Charity of the Incarnate Word v. Gobert, 992 S.W.2d 25, 31 (Tex.App.-Houston [1st Dist.] 1997, no pet.); Leyva v. Leyva, 960 S.W.2d 732, 734 (Tex.App.-El Paso 1997, no writ).
A. Ratification and Waiver
The jury found that Meyer defrauded Cathey on eight projects — the acquisition of the four apartment complexes, the refinancing of two apartment complexes, and the Waco and Dallas projects. However, it also found that Cathey ratified and waived the fraud. Ratification and waiver are affirmative defenses which Meyer pled. Tex.R. Crv. P. 94.
Ratification and waiver have extensive application in the law. One application is their assertion as affirmative defenses. It has been said that ratification and waiver are opposite sides of the same coin:
These two terms have been used interchangeably many times. . [Ratification and waiver invoke the same factual elements: (1) There must be full knowledge of the known right which vitiates a prior act, and (2) there must be an intentional relinquishment of the known right, or intentional recognition of the prior act, depending upon the user's choice of words. While to relinquish is the gist of "waiver" and to approve is the gist of "ratification," to relinquish a known right is to give validity to the prior act and to approve a prior act is to relinquish a known right.
Caldwell v. Callender Lake Prop. Owners Imp. Ass'n, 888 S.W.2d 903, 910 (Tex.App.-Texarkana 1994, no writ) (quoting Jordan v. City of Beaumont, 337 S.W.2d 115, 118 (Tex.Civ.App.-Beaumont 1960, writ ref'd n.r.e.)).
These are ordinarily questions of fact; however, they can involve questions of law if the facts are clearly established. Id.
1. Ratification
A party fraudulently induced into a contract can under some circumstances ratify the contract and thereby forego a claim for damages for fraud. Fortune Production Co. v. Conoco, Inc., 52 S.W.3d 671, 676 (Tex.2000). In Fortum Production, four producers of natural gas sued Conoco claiming that when contracts for purchase of their gas by Conoco were being renegotiated, Conoco told them that the part of the product called "residue gas" was no longer needed by Conoco to supply its regular customers, and so the "residue gas" would have to be sold on the "spot market" at a substantially reduced rate. The producers believed this representation and agreed to significantly lower prices than they had agreed to in previous contracts. In fact, what Conoco told the producers was not true, and Conoco knew it. Some of the producers entered into written contracts with Conoco, binding them to sell gas for a specific term of years at a set price; two producers simply continued to deliver gas to Conoco without a written agreement and accepted the price Conoco paid. There was a factual dispute over when the producers learned Conoco had fraudulently induced them into the contracts. Nevertheless, four years after the initial events, they sued. Conoco alleged that the producers had ratified any fraud because they had full knowledge of it, yet continued to do business under the pricing system Conoco offered.
A party may affirm a contract that has been induced by fraud, in such a way that damages are foreclosed. Id. at 677. "The question . is largely one of intent. Hence acts done in affirmance of the contract can amount to a waiver of the fraud only where they are done with full knowledge of the fraud and of all material facts, and with the intention, clearly manifested, of abiding by the contract and waiv ing all right to recover for the deception. Acts which, although in affirmance of the contract, do not indicate any intention to waive the fraud, cannot be held to operate as a waiver." Id. (quoting Kennedy v. Bender, 104 Tex. 149, 135 S.W. 524, 525 (Tex.1911)). For example, accepting benefits under the terms of the fraudulent representation after the fraud is known can bar damages if the nature of the conduct constituting acceptance shows an intentional relinquishment of a known right. Id. (citing Spellman v. American Universal Investment Co., 687 S.W.2d 27, 31-32 (Tex.App.-Corpus Christi 1984, writ ref'd n.r.e.)). However, there is an inherent difficulty in stating a bright-line rule about what constitutes ratification, and the determination is made case by case. Id. at 678. The Court held that as a matter of law, the acceptance of the contracted-for price after they learned of the fraud, by the producers with written contracts, did not result in their ratification of the fraud, and they could sue for damages. They had a continuing contractual obligation to sell gas to Conoco, and honoring that and receiving the contracted-for price was not a ratification. Id. at 679. However, the two remaining producers, by continuing to sell to Conoco without obligation after learning of the fraud and accepting the price offered by Conoco, ratified the fraud and were barred from recovering damages accruing after the ratification. Id. at 680. "When they delivered their gas after they knew of Conoco's fraud, with no obligation to continue deliveries, they were no longer relying on misrepresentations." Id. at 679. By their conduct "[they] entered into a new series of agreements with full knowledge of all material facts and of the prices that they were accepting." Id. at 680.
2. Waiver
"Waiver" is the intentional relinquishment of a known right. United States Fidelity & Guar. Co. v. Bimco Iron & Metal Corp., 464 S.W.2d 353, 357 (Tex.1971); Ford v. Culbertson, 158 Tex. 124, 308 S.W.2d 855, 865 (1958); Cal-Tex Lumber Co. v. Owens Handle Co., 989 S.W.2d 802, 812 (Tex.App.-Tyler 1999, no pet.). The right may be conferred by law or contract. Culbertson, 308 S.W.2d at 865. "Intention" may be either expressly made or inferred from conduct that is inconsistent with an intent to claim the right. Id.; Owens Handle, 989 S.W.2d at 812; Ferrantello v. Paymaster Feed Mills, 336 S.W.2d 644, 647 (Tex.Civ.App.-Dallas 1960, writ ref'd n.r.e.).
Cathey contends that "ratification" and "waiver" should not be analyzed separately. The jury was instructed in separate questions as follows:
Ratification occurs when a person, induced by fraud to enter into an agreement, continues to accept benefits under that agreement after he becomes aware of the fraud or breach, or if he conducts himself so as to recognize the agreement as binding.
Waiver is an intentional surrender of a known right or intentional conduct inconsistent with claiming the right.
The Supreme Court in Fortune Production declined to express "an opinion on whether a jury issue should be framed in terms of ratification, affirmance, or waiver," noting without citation that "[c]ourts and commentators have variously used the terms 'waiver,' 'ratification,' and 'affir-mance' in discussing the legal effect of a party's actions after it learns that its contract was induced by fraud." Fortune Production, 52 S.W.3d at 680. Here, because the jury considered the same facts in deciding each question, and because of the commonalities in the definitions of the terms in the charge, we will analyze the jury's affirmative answers to the ratification and waiver questions as "two sides of the same coin," i.e., either the evidence was legally sufficient to support both or it was legally insufficient to support either. Jordan, 337 S.W.2d at 118.
3. Standard of Review
Cathey's issue on appeal concerns whether the trial court was justified in finding the evidence legally sufficient to support the jury's affirmative findings on ratification and waiver, if that was the basis of the trial court's judgment. When we conduct a review of whether the evidence is legally sufficient, we consider only that evidence and the inferences therefrom which support the jury's findings, considered in the light most favorable to the findings, and disregard contrary evidence and inferences. Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex.1995); Holt Atherton Industries, Inc. v. Heine, 835 S.W.2d 80, 84 (Tex.1992). We can find the evidence legally insufficient if: (1) there is a complete absence of evidence for the findings, (2) there is evidence to support the findings, but rules of law or evidence bar the court from giving any weight to the evidence, (3) there is no more than a mere scintilla of evidence to support the findings, or (4) the evidence conclusively establishes the opposite of the findings. Juliette Fowler Homes, Inc. v. Welch Assoc., Inc., 793 S.W.2d 660, 666 n. 9 (Tex.1990); Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997) (citing Robert W. Calvert, "No Evidence" and "Insufficient Evidence" Points of Error, 38 Tex. L.Rev. 361, 362-63 (1960)). "More than a scintilla of evidence exists where the evidence supporting the findings, as a whole, 'rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.' " Burroughs Wellcome, 907 S.W.2d at 499 (quoting Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex.1994)). If the evidence is so weak as to do no more than create a mere surmise or suspicion of the finding's existence, the effect is that there is legally-insufficient evidence. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 182 (Tex.1995).
Cathey does not complain on appeal about the wording of the charge, and so we will not review any objection to the charge that he made at trial. Tex.R.App. P. 38.1(e). He does, however, assert that the findings on ratification and waiver are not supported by legally-sufficient evidence and that the trial court erred to the extent it relied on these findings. Accordingly, we review the sufficiency issues under the charge as given, regardless of whether the definitions of ratification and waiver were correctly submitted. Tex.R. Civ. P. 274; Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex.2000) ("It is the court's charge, not some other unidentified law, that measures the sufficiency of the evidence."). In Green Intern., Inc. v. Solis, both the plaintiff and the defendant prevailed on claims against the other, and the jury awarded both parties attorney's fees. Green v. Solis, 951 S.W.2d 384, 389-90 (Tex.1997). Green complained that, as a matter of law, attorney's fees could not be recovered for some of Solis's claims. Id. However, the jury charge failed to segregate the claims for which attorney's fees were recoverable from those for which they were not, and Green had failed to object. Id. The Court said that without an objection, as long as the jury's finding was supported by the evidence and material, the award must stand. Id.; see also Allen v. American National Insurance Co., 380 S.W.2d 604, 609 (Tex.1964) (An unobject-ed-to defective submission of a theory of recovery or defense waives a complaint of error concerning the verdict.); Casteel-Diebolt v. Diebolt, 912 S.W.2d 302, 304 (Tex.App.-Houston [14th Dist.] 1995, no writ) (Failure to object to omissions from the charge estops a party from complaining on appeal.). By not raising his objections to the wording of the charge as issues on appeal, Cathey has waived them. We turn to his sufficiency issues.
4. Four Written Agreements
Under Fortune Production, any profits from which Cathey should have derived compensation that were unilaterally and thus fraudulently taken by Meyer before Cathey learned of the fraud cannot be ratified, because ratification requires knowledge of the fraud. Fortune Production, 52 S.W.3d at 680. The jury was charged under this theory. Furthermore, under Fortune Production, Cathey's continued dealings with Meyer under the terms of the contracts are not a ratification, because a party, such as Cathey, who is contractually bound to continue providing services and contractually entitled to continue to receive compensation does not thereby ratify fraudulent conduct. Id. at 679. However, this part of the Fortune holding was omitted from the charge without objection. Therefore, Cathey cannot rely on the latter holding in Fortune Production, and we will review the evidence under the charge as given. Osterberg, 12 S.W.3d at 55.
Cathey and Meyer had written agreements on the four apartment-complex projects. Before Cathey could be said to have ratified Meyer's alleged fraudulent misrepresentation, ie., his non-disclosure that he intended to reduce the profits from the complexes through consultant fees, Cathey would first have to learn about Meyer's fraud. The evidence at trial was that Cathey had access to the financial records kept by Meyer; but it was not shown that Cathey reviewed the records and learned of Meyer's actions. Therefore, because the charge required actual knowledge by Cathey, the evidence of ratification and waiver regarding the four apartment-complex projects is legally insufficient to support the jury's verdict.
5. Two Reñnancing Projects, and the Waco and Dallas Projects
The fraud Cathey alleged regarding the four oral agreements was that Meyer promised specific financial rewards without intending to pay them. In 1995, Cathey worked on the refinancing of the Silverado Apartments and the Arbors Apartments. Based on the oral "global agreement," Cathey claimed that Meyer misrepresented that Cathey would get a $25,000 bonus for any project he helped refinance. As for the Waco and Dallas projects, which commenced in approximately June 1995, Cath-ey claimed Meyer misrepresented that in exchange for Cathey's services, he would receive fifteen percent of the profits from the Waco project and ten percent of the profits from the interest Meyer owned in the Dallas project. Cathey participated in these two projects in some form until the summer of 1996, when his relationship with Meyer abruptly ended.
Again, ratification and waiver require some voluntary action after discovery of the fraud which either relinquishes a right or validates the fraud. The evidence conclusively shows that Cathey performed services on these four projects before he realized Meyer did not intend to fully honor his promises about compensation, i.e., before Cathey learned of the fraud. Juliette Fowler, 793 S.W.2d at 666 n. 9. After he learned of it, the evidence does not show specific acts of relinquishment or validation. Although there is evidence that, during the course of his numerous business dealings with Meyer over the years, Cathey knew he had not gotten the full benefit of some of his bargains with Meyer in the past, this does not establish that, during the course of the projects, Cathey became aware of Meyer's fraud and then performed acts of ratification or waiver.
The evidence shows that, regarding these four different projects, Cathey was made promises of financial rewards in exchange for services, he performed services, and the full measure of the rewards promised was not given. In each instance, the jury found that fraud had occurred. We find no more than a scintilla of evidence that Cathey intentionally relinquished his rights under these four agreements or intentionally validated the fraud. Id. Therefore, there is legally insufficient evidence to support the jury's findings of ratification and waiver regarding these four projects.
6. Conclusion
There is legally insufficient evidence of ratification and waiver regarding any of the eight fraud claims. The trial court erred if it rendered a take-nothing judgment based on these affirmative defenses.
B. Statute of Frauds
Meyer argued in his post-trial motion that because Cathey's fraud claims derive from the "global agreement" in 1993, a contract that could not be performed in one year, the statute of frauds applies. He says because there was no written agreement on the Waco and Dallas projects which were begun in 1995, the fraud claims pertaining to them must fail. Meyer attempts to characterize the agreements Cathey claimed he had with Meyer on the Waco and Dallas projects as dating back to 1993 when the "global agreement" was formed. He asserts that because the "global agreement" was not intended to be performed in one year, Cathey's fraud claims fail under the statute of frauds. Tex. Bus. & Com.Code Ann. § 26.01(b)(6) (Vernon 2002); Haase v. Glazner, 62 S.W.3d 795, 799 (Tex.2001) (Benefit-of-the-bargain damages under a claim of fraudulent inducement into a contract are not recoverable if a claim of breach of the contract would fail under the statute of frauds.).
But the Waco and Dallas projects were not begun until 1995. There was evidence that the two agreements were "new" agreements, although some of their terms regarding Cathey's compensation may have derived from the "global agreement." In addition, the evidence does not establish that either project could not be performed in one year, and there was no jury finding on the issue. Therefore, there is legally insufficient evidence to support application of the statute of frauds, and the trial court erred if it rendered a take-nothing judgment based on this affirmative defense.
C. Legal Sufficiency of the Evidence for the Fraud Claims; Jury Charge Issue
Cathey asserts on appeal that there was some evidence to support the jury's findings of fraud regarding each of the eight projects, and therefore the trial court erred in granting Meyer's motion for judgment notwithstanding the verdict or to disregard jury findings, if that was the basis for the judgment.
1. Standard of Review
We review the granting of a motion for judgment notwithstanding the verdict or a motion to disregard a jury finding in the light most favorable to the finding, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor. Navarette v. Temple Independent Sch. Dist., 706 S.W.2d 308, 309 (Tex.1986); Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex.1990); Exxon Corp. v. Quinn, 726 S.W.2d 17, 19 (Tex.1987). We review for whether there is more than a mere scintilla of evidence to support the jury's finding. Basin Operating Co. v. Valley Steel Products, 620 S.W.2d 773, 776 (Tex.Civ.App.-Dallas 1981, writ ref'd n.r.e.); see Farias v. Laredo Nat'l Bank, 985 S.W.2d 465, 470 (Tex.App.-San Antonio 1997, no writ); Quinn, 726 S.W.2d at 19. "More than a scintilla of evidence exists where the evidence supporting the finding, as a whole, 'rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.' " Burroughs Wellcome, 907 S.W.2d at 499.
2. Four Written Agreements
First, Meyer's post-trial motion argued that the evidence proved as a matter of law that Cathey knew prior to the execution of the four written agreements that Meyer was not going to honor the "global agreement." This argument misses the point, because the fraudulent misrepresentation Cathey undertook to prove is the non-disclosure by Meyer about the consulting fees which affected the net profits under the four written agreements.
Next, Meyer argued there was no evidence that when he entered into these four agreements, he intended to later divert profits through consulting fees. "Since intent to defraud is not susceptible to direct proof, it invariably must be proven by circumstantial evidence." Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986) (citations omitted). " 'Slight circumstantial evidence' of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent." Id. (citing Maulding v. Niemeyer, 241 S.W.2d 733, 738 (Tex.Civ.App.-El Paso 1951) (orig.proceeding)); see Johnson & Higgins of Texas v. Kenneco Energy, 962 S.W.2d 507, 527 (Tex.1998). There is evidence that, without telling Cathey, Meyer paid himself consulting fees which had the effect of denying Cathey income derived from profits from the apartment complexes. Construing the evidence in the light most favorable to Cathey, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor, we find that there was more than a scintilla of evidence from which the jury could have concluded that, at the time he entered into the four written agreements, Meyer intended to reduce or eliminate the profits by payment to himself of consulting fees. Navarette, 706 S.W.2d at 309.
Continuing to address proof of the elements of fraud, Meyer asserted in his post-trial motion that the evidence was legally insufficient to support a finding that any fraudulent misrepresentations by him proximately caused damages to Cath-ey. The jury was asked whether Meyer's fraud was the cause of Cathey's damages and was given a "proximate cause" instruction. When the damages are "special" damages, proximate cause is shown if (1) the fraud was a substantial factor in bringing about the damages, without which the damages would not have occurred, and (2) a person of ordinary intelligence would have foreseen that the damages might result from the fraud. See Libhart v. Copeland, 949 S.W.2d 783, 799 (Tex.App.-Waco 1997, no writ); Texas PJC — Business, Consumer, Insurance & Employment (2000), PJC 110.19. The evidence supports each of these components. Again, construing the evidence in the light most favorable to Cathey, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor, we find that there was more than a scintilla of evidence from which the jury could have concluded that Meyer's non-disclosure proximately caused Cathey's damages. Navarette, 706 S.W.2d at 309.
In a fraud case, the plaintiff must prove he relied on the misrepresentation to his detriment. Johnson & Johnson Med., Inc. v. Sanchez, 924 S.W.2d 925, 929-30 (Tex.1996). Meyer asserted in his motion to disregard and for judgment that there was no evidence to support a finding of reliance by Cathey on Meyer's misrepresentation under the "global agreement." Again, Meyer misunderstands Cathey's claim. The claim is about Meyer's nondisclosure at the time he entered into the four written agreements with Cathey concerning Meyer's intent to pay himself con-suiting fees. If Cathey had known he would not receive profits from the apartment complexes because there would be less or no profits, a reasonable inference is that he would not have entered into the agreements. Construing the evidence in the light most favorable to Cathey, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor, we find legally-sufficient evidence to support a finding of reliance. Navarette, 706 S.W.2d at 309.
Finally, Meyer claimed (1) the evidence shows as a matter of law that Cath-ey was fully compensated for the Silverado Apartments, Polo Club Apartments, and Valley Ranch Apartments projects, and (2) there was no evidence of damages for the Arbors Apartments project because Cath-ey was to be compensated as a limited partner and not under a distribution-of-profits agreement. Meyer's argument amounts to no more than his version of what the evidence was. But, in reviewing a no-evidence issue, we must construe the evidence in the light most favorable to the jury's findings, and we must consider only the evidence and inferences which support the findings, and indulge every reasonable inference in favor of the findings. Id. Cathey testified about the events and the projects, introduced the four written contracts, and presented a damages expert, Larry Canter, who reviewed financial documents and calculated what Cathey should have received in compensation. The jury awarded about one-half the amount of damages that Canter calculated. We find that there was more than a scintilla of evidence from which the jury could have determined the amount of damages it awarded on each of the four projects. Id.
In conclusion, the evidence was legally sufficient to support the jury's findings of fraud and damages regarding the projects covered by the four written agreements.
3. Two Refinancing Projects
As to the refinancing of the Silverado Apartments and the Arbors Apartments, Meyer asserted in his motion: (a) the evidence proved as a matter of law that Cath-ey was not entitled to a bonus for his services; (b) there is no evidence that when the agreement for Cathey's services was entered into, Meyer intended not to pay Cathey; and (c) there is no evidence Cathey relied on a promise of a bonus when he performed services for refinancing. As for damages, Meyer also asserted the evidence proved as a matter of law that there was no money left after closing from which a bonus could have been paid, and therefore Cathey failed to prove damages.
First, the evidence was disputed about whether Cathey's agreements required him to perform the services solely for a contractual fee, so that he was not entitled to a bonus. Cathey testified that as part of the "global agreement," he was to receive a bonus in addition to other fees. The jury heard the evidence and concluded that Cathey was entitled to damages. Construing the evidence in the light most favorable to the jury's findings, considering only the evidence and inferences which support the findings, and indulging every reasonable inference in favor of the findings, we find that there was more than a scintilla of evidence from which the jury could have found an agreement to pay a bonus. Id.
Second, Meyer's contention that there was no evidence to prove his fraudulent intent at the time the two agreements were made fails for the same reason it did with the four written. Intent to defraud is usually proven by circumstantial evidence. Spoljaric v. Percival, 708 S.W.2d at 435. " 'Slight circumstantial evidence' of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent." Id. The evidence was legally sufficient to prove intent.
Third, Meyer's claim of no reliance by Cathey also fails for the same reasons as applied to the four written agreements. Cathey testified he performed the refinancing services in part because be relied on Meyer's promises to pay him a bonus. The evidence was legally sufficient to prove reliance.
Finally, the argument that the evidence may show there was no money from which a bonus could have been paid misses the point. Cathey testified he had an agreement to receive a bonus if he obtained refinancing. That Meyer claims he had no money to pay the bonus does not detract from the existence of the agreement. The jury, having heard all the evidence, concluded that Cathey had been told by Meyer that he would pay Cathey a bonus. Construing the evidence in the light most favorable to Cathey, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor, we find that the evidence was legally sufficient to support the jury's award of damages. Navarette, 706 S.W.2d at 309.
In conclusion, we find legally-sufficient evidence to support findings that Meyer fraudulently induced Cathey into providing services regarding the two refinancing agreements, resulting in damages.
4. Waco and Dallas Projects
Meyer asserted in his motion to disregard and for judgment the following about the Waco and Dallas projects:
1. There was no evidence Cathey was entitled to compensation for work on the Waco and Dallas projects in addition to his salary, and therefore there was no evidence of damages for these projects.
2. There was no evidence that at the time the Waco and Dallas projects were formed, Meyer intended not to pay Cathey.
3. Cathey's damages for fraud on the Dallas project were derived from a twenty-percent interest in any profit distributed by the limited partnership which developed that project. Because the Dallas project was foreclosed on, the partnership never made any profit, and therefore as a matter of law Cathey has not proved his entitlement to damages.
4. The damages question for fraud regarding the Waco and Dallas projects asked for benefit-of-the-bargain damages. However, the fraud question asked whether Meyer fraudulently induced Cathey to provide services for which he was not fully compensated. Therefore, the damages question should have asked about the value of those services. Because it did not, the proper measure of damages was not used, and damages are not recoverable.
First, Meyer contended there was no evidence Cathey was entitled to compensation other than his salary. However, this was a disputed fact issue. Cathey testified he was promised various percentages of profits. Also, one of the four documents Meyer presented to Cathey for signature just before their business relationship ended referred to an agreement on the Dallas project for compensation based on a percent interest. The jury found for Cathey. Viewing the evidence in the light most favorable to the findings, we find legally-sufficient evidence to support the findings. Id.
Meyer's second contention fails for the same reasons as before, i.e., intent is usually proven by circumstantial evidence, and " '[s]light circumstantial evidence' of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent." Spoljaric, 708 S.W.2d at 435. Construing the evidence in the light most favorable to the findings, the evidence was legally sufficient to prove intent. Navarette, 706 S.W.2d at 309.
The third complaint was about Cathey's compensation for the Dallas project. The jury was asked to consider "the difference between the value as represented and the value received." The "represented value" was that Cathey would receive a percentage of the profit, if any. The evidence was that due to cost overruns, the project went deeply into debt, ultimately resulting in foreclosure. Therefore, because there was no profit, Meyer contended that Cathey did not show damages. Cathey, however, argues that because the project was purchased at foreclosure two years later by another limited partnership newly-formed by Meyer, and has become profitable since, there was ultimately a profit from which he can recover. He says that his agreement with Meyer extends across time to these events. We do not agree. The original agreement specifically pertained to the development of the condominium project and any profit realized from it. There was no profit. There was no evidence that, at the time the agreement was made, Meyer and Cathey intended that it would apply to subsequent events involving different business entities. Thus we find no evidence of Cathey's damages on the Dallas project.
Meyer's final complaint raised in his motion concerns the jury charge and the wording of the damages question. The jury was instructed to consider "the following elements of damages, if any, and none other: the difference between the value as represented and the value received." The jury awarded $150,000 in damages for the Waco project and $750,000 for the Dallas project. Meyer did not object to the instruction about damages that was submitted, and therefore the trial court erred in granting Meyer's post-verdict motion based on this issue, if it did. Tex.R.App. P. 88.1.
We agree with Cathey's contention that there was legally-sufficient evidence to support the damages awarded for the Waco project. Construing the evidence in the light most favorable to the jury's finding, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in favor of the finding, we find legally sufficient evidence to support the jury's $150,000 award. Navarette, 706 S.W.2d at 309.
5. Conclusion
Except for the damages award on the Dallas project, the evidence is legally sufficient to support the jury's findings concerning fraud and the resulting damages.
D. Exemplary Damages
The charge contained two questions pertaining to exemplary damages regarding the Waco and Dallas projects. The first, derived from section 41.003 of the Civil Practice and Remedies Code, asked whether the jury found by "clear and convincing evidence that the harm to Cathey by Meyer resulted from fraud." Tex. Civ. PRAc. & Rem.Code Ann. § 41.003 (Vernon 1997); North American Van Lines, Inc. v. Emmons, 50 S.W.3d 103, 127 (Tex.App.-Beaumont 2001, no pet.). The jury was instructed that " 'clear and convincing evidence' means the measure or degree of proof that produces a firm belief or conviction of the truth of allegations sought to be established." The jury answered "yes" and in a separate question awarded $2,250,000 in exemplary damages.
Meyer complained in his post-verdict motion that the evidence of fraud was legally insufficient under a "clear and convincing" standard. Meyer also complained that the amount of exemplary damages is capped by section 41.008 of the Civil Practice and Remedies Code. Id. at § 41.008(b). On appeal, Cathey maintains that there is factually sufficient evidence to support the jury's finding of "clear and convincing" evidence, and does not address the "cap" issue. Because Meyer waived cross-issues on factual sufficiency, we will review for whether there was legally-sufficient evidence to support the finding. The "no evidence" standard is the same for findings made under the "clear and convincing" standard as for a preponderance standard. Bill Vance, The Clear and Convincing Evidence Standard in Texas: A Critique, 48 Baylor L.Rev. 391 (1996).
The jury heard six weeks of testimony about Meyer's and Cathey's business dealings. Again, applying the same legal standard as we did under a "preponderance" standard, when we construe the evidence in the light most favorable to the jury's findings, consider only the evidence and inferences which support the findings, and indulge every reasonable inference in their favor, we find more than a scintilla of evidence to support the jury's findings that the harm resulted from fraud. See id.
However, the exemplary damages question concerned both the Waco and Dallas projects combined, and there was no objection or request to segregate damages. Furthermore, we have determined that there is no evidence of actual damages for the Dallas project. Consequently, Cathey cannot recover exemplary damages for the Dallas project, because actual damages are a prerequisite to that. Tex. Civ. Prac. & Rem.Code Ann. § 41.004(a) (Vernon 1997); Juliette Fowler, 793 S.W.2d at 667 (citing Doubleday & Co., Inc. v. Rogers, 674 S.W.2d 751, 753-54 (Tex.1984)). Therefore, because we cannot know how the jury proportioned exemplary damages between the two projects, if it did, we have no basis on which to uphold exemplary damages for Cathey or render a different amount. Also, we will not remand for a new trial solely on exemplary damages, because that would deny the jury on retrial an opportunity to hear all the relevant evidence. See Ford Motor Co. v. Miles, 967 S.W.2d 377, 389-90 (Tex.1990); Health Care Centers of Texas, Inc. v. Nolen, 62 S.W.3d 813, 817 (Tex.App.-Waco 2001, no pet.); Green Tree Financial Corp. v. Garcia, 988 S.W.2d 776, 785 (Tex.App.-San Antonio 1999, no pet.). Therefore, we must remand for a new trial on the fraud claim pertaining to the Waco project.
E. Conclusion — All Fraud Claims
The evidence was legally sufficient to support the jury's findings regarding all eight fraud claims, except as to damages from the Dallas project. Because both the Dallas and the Waco projects are the basis of the exemplary damages the jury awarded, the fraud claim about the Waco project, including the exemplary damages claim, must be remanded for a new trial.
We will affirm the take-nothing judgment on the fraud claim pertaining to the Dallas project. We will reverse the judgment on the fraud claims pertaining to the four written agreements and the two refinancing projects and render judgment that Cathey recover $72,500 in damages as found by the jury. We will reverse the judgment on the fraud claim pertaining to the Waco project, sever that claim, and remand it for a new trial.
V. BREACH OF FIDUCIARY DUTY CLAIM
The jury found Meyer breached a fiduciary duty to Cathey on the Waco and Dallas projects and awarded Cathey $150,000 on the Waco project and $750,000 on the Dallas project. But the jury's answer to a question concerning the limitations period for this claim favored Meyer. Meyer pled limitations as an affirmative defense. Tex.R. Civ. P. 94.
Previously, in our discussion of his fraud claims, we found that Cathey did not establish any damages on the Dallas project. Although the elements of damages in the jury charge were different for fraud and breach of fiduciary duty, the same reasons we relied on in the discussion of damages under fraud apply to the lack of evidence to support a damages finding under breach of fiduciary duty on the Dallas project. Thus we do not address Cathey's issue regarding any breach of fiduciary duty on that project.
We will, however, review the claim about the Waco project. And if we reverse and render judgment on this claim, we must remand it so that Cathey may make an election to recover under the fraud claim or the breach of fiduciary duty claim. Cathey cannot have a double recovery of lost income on the Waco claim due to the "one satisfaction rule." Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390-91 (Tex.2000) (When a defendant commits technically different acts that result in a single injury, a plaintiff is entitled to only one recovery for any damages suffered.); Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7-8 (Tex.1991).
As with the fraud claims, Meyer's cross-issues on legal sufficiency are, of necessity, resolved by our discussion of Cathey's issues on legal sufficiency. However, by failing to brief his cross-issues on factual insufficiency and on the charge question concerning whether Meyer had a fiduciary duty to Cathey, Meyer has also waived those complaints. Tex.R.App. P. 38.1(h), 38.2(a)(1).
A. Limitations
The jury found that Cathey knew or should have known "on or before May 22, 1995," of the facts underlying Meyer's breach of fiduciary duty. Cathey filed the lawsuit on May 22, 1997. Thus, if there is a two-year limitations period for the breach of fiduciary duty claim, Cathey's claim may be barred. Meyer cites case law holding that the limitations period is two years. Cathey cites section 16.004 of the Civil Practice and Remedies Code which says the period is four years. Tex. Civ. PRAC. & Rem.Code Ann. § 16.004(a)(5) (Vernon 2002). Section 16.004(a)(5) became effective August 30, 1999, after the trial in July. Meyer claims the statute cannot operate retroactively. Cathey responds that the statute merely clarifies a conflict in the case law rather than imposing a new law. He cites section 2 of Acts 1999, 76th Leg., ch. 950 which provides: "(a) The intent of this Act is to clarify existing law by resolving a conflict in case law concerning the applicable statute of limitations for actions for fraud and breach of fiduciary duty."
Before the statute became effective, some courts held the limitations period was two years. E.g. International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 579 (Tex.1963) (citing only Glenn v. Steele, 141 Tex. 565, 61 S.W.2d 810 (Tex.1933) (holding the limitations period for a fraud claim is two years)); Maxson v. Travis County Rent Account, 21 S.W.3d 311, 319 (Tex.App.-Austin 1999, pet. dism. agr.); Redman Industries, Inc. v. Couch, 613 S.W.2d 787, 789 (Tex.App.-Houston [14th Dist.] 1981, writ ref'd n.r.e.). However, others held it was four years. E.g. McGuire v. Kelley, 41 S.W.3d 679, 682 (Tex.App.-Texarkana 2001, no pet.) (Before section 16.004(a)(5), "the appellate courts generally held that a four-year statute of limitations was appropriate in cases where breach of fiduciary duty claims were coupled with fraud claims."); In re Estate of Herring, 970 S.W.2d 583, 587 (Tex.App.-Corpus Christi 1998, no pet.) (citing the residual four-year statute of limitations, Tex Civ. PRAC. & Rem.Code Ann. § 16.051 (Vernon 1997)); Rowe v. Rowe, 887 S.W.2d 191, 201 (Tex.App.-Fort Worth 1994, writ denied) (citing section 16.051 of the Civil Practice and Remedies Code).
Section 16.004(a)(5) resolved the conflict in the case law. As to what the limitations period was before the statute went into effect, we agree with the courts which have held, and for the reasons stated therein, that in a pre-1999 case in which allegations of fraud and breach of fiduciary duty are coupled, the limitations period is four years. See Williams v. Khalaf 802 S.W.2d 651, 654-58 (Tex.1990) (Those torts which developed from the common law of "trespass" have a two-year limitations period. Torts related to debts, e.g., "fraud," have a four-year limitations period.). Thus the "retroactivity" argument is without merit. Accordingly, the jury's answer to the limitations question does not bar Cath-ey's claim of breach of fiduciary duty, and the trial court erred in granting Meyer's motion for judgment on this basis, if it did. We sustain the issue.
B. Legal Sufficiency of the Evidence
The issues are (1) whether Meyer had a fiduciary duty to Cathey, (2) if so, did he breach the duty, and (3) was there "some evidence" of damages.
1. Standard of Review
To reiterate, we review the granting of a motion to disregard a jury finding in the light most favorable to the finding, considering only the evidence and inferences which support the finding, and indulging every reasonable inference in its favor. Navarette, 706 S.W.2d at 309. We review for whether there is more than a mere scintilla of evidence to support the jury's finding. Basin Operating Co. v. Valley Steel Products, 620 S.W.2d 773, 776 (Tex.Civ.App.-Dallas 1981, writ ref'd n.r.e.); see Farias v. Laredo Nat'l Bank, 985 S.W.2d 465, 470 (Tex.App.-San Antonio 1997, no writ); Quinn, 726 S.W.2d at 19. "More than a scintilla of evidence exists where the evidence supporting the finding, as a whole, 'rises to a level that would enable reasonable and fair-minded people to differ in their conclusions.' " Burroughs Wellcome, 907 S.W.2d at 499.
2. Fiduciary Duty
The jury found that a relationship of trust and confidence existed between Meyer and Cathey. The jury instruction read: "A relationship of trust and confidence existed if Cathey justifiably placed trust and confidence in Meyer to act in Cathey's best interest. Cathey's subjective trust and feelings alone do not justify transforming arm's-length dealings into a relationship of trust and confidence." Meyer contends he had no duty as a fiduciary to Cathey; they merely had business dealings.
Cathey argues that Meyer had an "informal" fiduciary duty to him. An "informal" fiduciary duty "may arise from a moral, social, domestic or purely personal relationship of trust and confidence, generally called a confidential relationship." Associated Indem. Corp. v. CAT Contracting, 964 S.W.2d 276, 287 (Tex.1998). The relationship "must exist prior to, and apart from, the agreement made the basis of the suit." Id. at 288. In other words, there must be a preexisting special relationship of trust and confidence which is betrayed in later dealings.
Prior to the Dallas and Waco projects, Cathey and Meyer worked together on other projects for three years. Cathey had a five percent partnership interest in one of the apartment complex projects, and he co-signed a security agreement for a loan used to finance it. The parties do not dispute that Meyer was always in charge of all aspects of the projects and made the final decisions. Meyer controlled the financing and the books, and Cathey relied on and trusted Meyer to treat him fairly and keep accurate financial records. Meyer told Cathey the two of them would "make millions" together. Cathey considered Meyer a friend; he testified they ate lunch together every day for four years. Therefore, we find more than a mere scintilla of evidence that a fiduciary relationship existed. See id. at 287. The evidence is legally sufficient to support the jury's finding that "Cathey justifiably placed trust and confidence in Meyer to act in Cathey's best interest."
3. Breach of Fiduciary Duty
Sometime in early 1995, Cathey began work on the Waco movie theater project. Discussions became more serious between potential partners in June 1995. Cathey testified Meyer initially promised him a ten to fifteen percent interest. Later, Meyer took Cathey off the project claiming Cathey had too much work to do on other projects. In June 1996, a partnership agreement was reached between Meyer and Mark and Morris Schulman, and a limited partnership was set up. Cathey was designated as the manager of the partnership. However in June 1996, Cathey received a memorandum from Meyer disavowing any financial interest of Cathey in the project, because Cathey did not find the project for Meyer (true) and Cathey was not involved in the project. Cathey contended that his work refinancing two of the apartment complexes to free up money for the Waco project constituted working on it.
Meanwhile, in June 1995, Cathey found the property in Dallas and proposed to Meyer that a condominium be built there. He testified he "could have" taken the property to someone else if he had not been working with Meyer. There was no evidence at trial of what percent "finders" of property could get from other investors. Cathey met with a builder and others about the possibilities for the project, and he provided a financial analysis to Meyer. When an agreement between investors was finally struck in 1996, Cathey testified that he thought he would receive ten percent of the interest in the project owned by the limited partnership Meyer had set up for the project. After the condominiums were built, due to cost overruns, the property was foreclosed on in January 1998. Meyer formed another limited partnership and purchased the property at foreclosure. Meyer asserts that if Cath-ey had any interest in the project, he was not entitled to damages because the project never made any money for the initial limited partnership.
As previously stated, in August 1996, Meyer presented Cathey with several documents and demanded he sign them. One was a general release of any interests Cathey might have in any of the projects he had been involved with. Another was a document showing Cathey was Meyer's employee, which Meyer said he needed for tax purposes. It contained provisions dramatically cutting Cathey's monthly salary, and binding Cathey to a non-competition agreement. A third document stated Cathey would get five percent of net profits from the Dallas project. If Cathey did not sign all the documents, he would get no interest in the Dallas project. Cathey refused to sign any of the documents. Meyer had the locks changed on Cathey's office; their relationship ended.
The jury was asked if Meyer failed to comply with his fiduciary duty to Cathey, and it answered "yes." However, the charge stated that to prove Meyer complied with his duty, Meyer must show:
1. The transaction in question was fair and equitable to Cathey;
2. Meyer made reasonable use of the confidence that Cathey placed in him;
3. Meyer acted in the utmost good faith and exercised the most scrupulous honesty toward Cathey;
4. Meyer placed the interests of Cathey before his own, did not use the advantage of his position to gain any benefit for himself at the expense of Cathey, and did not place himself in any position where his self-interest might conflict with his obligations as a fiduciary; and
5. Meyer fully and fairly disclosed all important information to Cathey concerning the transaction.
As submitted, ie., in the conjunctive, if the jury found any one of these five factors not supported by a preponderance of the evidence, it could find that Meyer breached his duty. We find there was some evidence that Meyer: (1) made but failed to keep promises about the financial interests Cathey would receive in the Waco project, resulting in unfairness to Cathey; (2) took advantage of Cathey's confidence in Meyer; (3) acted in bad faith; (4) placed his own interests above Cathey's and used his superior bargaining position to benefit at Cathey's expense; and (5) was not completely forthcoming with Cathey. Thus we find that the evidence is legally sufficient to support the jury's finding of Meyer's breach of his fiduciary duty to Cathey.
4. Damages
The jury was instructed to consider "the following elements of damages, if any, and none other: the value of any property, income, or business interests lost as a natural, probable, and foreseeable consequence of Meyer's breach of fiduciary duty." Cathey's financial expert, Canter, testified that Meyer should have paid Cathey over $238,000 on the Waco project. The jury awarded $150,000 in damages. Meyer did not object to the elements of damages submitted, and therefore waived his cross-claim about them. Tex.R.App. P. 33.1. Considering the wide range of elements the jury could consider, we find some evidence to support the $150,000 award on the Waco project. See Green, 951 S.W.2d at 389-90.
C. Conclusion
The trial court erred in rendering a take-nothing judgment on the breach of fiduciary duty claim. The statute of limitations is four years; some evidence supports the jury's finding that Meyer had a fiduciary duty, that he breached it, and that the breach proximately caused $150,000 in damages. Thus, we will reverse the judgment as to that claim, render an interlocutory judgment for $150,000, but remand the claim to the trial court.
VI. DISCOVERY SANCTIONS
Cathey's sixth issue asserts that the trial court erred in awarding monetary sanctions against him for discovery abuse. When Cathey and Meyer were exploring a business relationship in 1992, Cathey gave Meyer a resume. Cathey does not now dispute that the resume contained numerous false statements about his work experience and education. At his pre-trial deposition, Cathey said the resume was accurate. Also, Cathey refused to admit to some of the inaccuracies when served with requests for admissions.
Meyer expended sums for several depositions, some out-of-state, for attorney's fees, and for other costs and expenses to find individuals who knew the truth about Cathey's work history and educational background. At trial, Cathey was confronted with his false resume and admitted it was not accurate. Almost a month after judgment, Meyer filed a motion for discovery sanctions seeking to recover the expenditures he made for the investigation of the misrepresentations in Cathey's resume. Tex.R. Civ. P. 215.3, 215.4. The trial court granted the motion and awarded $25,978.73 as sanctions.
Cathey claims that as a matter of law, discovery sanctions cannot be recovered under the facts of this case via a post-trial motion for sanctions. He cites Remington Arms Co., Inc. v. Caldwell, 850 S.W.2d 167 (Tex.1993), to support his contention. In Remington, the Supreme Court said:
Remington contends that no trial court may impose discovery sanctions posttrial for pretrial discovery abuse. We cannot agree. Such a rule would absolutely bar imposition of sanctions for discovery abuse revealed for the first time during or after the trial. We do, however, agree that the failure to obtain a pretrial ruling on discovery disputes that exist before commencement of trial constitutes a waiver of any claim for sanctions based on that conduct. Olney Savings & Loan Ass'n v. Farmers Market of Odessa, Inc., 764 S.W.2d 869, 871 (Tex.App.-El Paso 1989, writ denied); 3 Roy W. McDonald, Texas Civil Practice § 17.9. Here, of the twelve incidents of misconduct cited in the sanctions order, nine concern pretrial conduct of which Craig was aware before trial. We hold that Craig waived any objections to these matters by failing to request a pretrial hearing on the alleged discovery abuse and by requesting a preferential trial setting. See McKinney v. National Union Fire Ins. Co., 112. S.W.2d 72, 75 (Tex.1989); Rule 3.02(a)(4), Local Rules of Practice of the 23rd Judicial Districts of Texas. On the other hand, if pretrial discovery abuse is not revealed until after the trial has begun, or even after trial, a party cannot be said to have waived a claim for sanctions.
Id. at 170.
Meyer also cites Remington, but he claims it does not bar his post-trial motion because, although he had evidence pretrial that Cathey had lied in his deposition and answers to requests for admissions, "[a]t most, Meyer had elicited testimony from other individuals that contradicted some of Cathey's resume entries. Meyer was not in a position to assert a pretrial motion for sanctions alleging perjury on the basis of evidence that created nothing more than a 'swearing match' between Cathey and some third-party." (Appel-lee's BRief p. 57). In other words, he says that unless and until Cathey admitted at trial he had lied on his resume, Meyer did not have "conclusive" evidence to file a sanctions motion.
We review imposition of sanctions under Rule 215 for abuse of discretion. Koslow's v. Mackie, 796 S.W.2d 700, 704 (Tex.1990); Bodnow Corp. v. City of Hondo, 721 S.W.2d 839, 840 (Tex.1986); U.S. Fidelity and Guar. Co. v. Rossa, 830 S.W.2d 668, 672 (Tex.App.-Waco 1992, writ, denied). A trial court abuses its discretion if "it reaches a decision so arbitrary and unreasonable as to amount to a clear and prejudicial error of law." Johnson v. Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1986). A clear failure by the trial court to analyze or apply the law correctly will constitute an abuse of discretion. Walker v. Packer, 827 S.W.2d 833, 840 (Tex.1992).
We view Meyer's approach of waiting until trial to confront Cathey as trial strategy. Meyer had evidence with which to impeach Cathey's credibility, and he want ed to use it at trial to prejudice the jury. But Remington requires Meyer to make a choice: air the matter pre-trial in a motion for sanctions and lose the advantage of surprise at trial by confronting Cathey with the information, or do nothing pretrial and use the matter to his advantage at trial, but thereby waive his objection under Rule 215. Meyer had a reasonable evidentiary basis on which to base a pretrial motion for discovery sanctions. Furthermore, application of Meyer's contention that he had to wait until trial for Cathey to admit to the falsifications before he had sufficient grounds to file the motion would effectively nullify the rule in Remington, because in most cases a party could make this claim as an excuse for not filing its sanctions motion until after trial.
We find that the trial court abused its discretion in imposing sanctions. We sustain issue six.
VII. CONCLUSION
We reverse the take-nothing judgment on the fraud claims regarding the four written agreements and the two refinancing projects, ie., on the six fraud claims other than the fraud claims pertaining to the Waco and Dallas projects. We render judgment for Cathey on these six claims for $72,500, prejudgment interest on this amount at 10% per annum from May 22, 1997 to August 26,1999, and postjudgment interest at the rate of 10% per annum from August 27, 1999, the date of final judgment, until the date of payment.
We reverse the take-nothing judgment on the fraud claim pertaining to the Waco project, on which Cathey is entitled to a new trial on liability and on actual and exemplary damages.
We reverse the take-nothing judgment on the breach-of-fiduciary-duty claim pertaining to the Waco project, and render an interlocutory judgment for Cathey for $150,000, prejudgment interest on this amount at 10% per annum from May 22, 1997 to August 26, 1999, and postjudgment interest at the rate of 10% per annum from August 27, 1999, the date of final judgment, until the date of payment.
We affirm the take-nothing judgment on the fraud and breach-of-fiduciary claims pertaining to the Dallas project.
We reverse the order granting sanctions and order that Meyer take nothing by his motion for sanctions.
We sever the fraud claim pertaining to the Waco project and the interlocutory judgment pertaining to the breach-of-fiduciary duty claim for the Waco project, order these two claims into a separate cause, and remand that cause to the trial court for further proceedings consistent with this opinion.
Eighty percent (80%) of costs in the trial court and this court are assessed against Meyer, and twenty percent (20%) of costs in the trial court and this court are assessed against Cathey.
Justice TOM GRAY dissenting.
. Profits came from various sources, such as apartment leases and the income realized on sales of properties for amounts greater than invested costs.
. Cathey also filed a claim for breach of contract, which was later abandoned, and a claim for quantum meruit on which the trial court granted a directed verdict.
. Cathey's dispute with Glover was resolved while the appeal has been pending, and on Cathey's motion we dismissed as to Glover.
. Silverado Apartments — $10,000; Polo Club Apartments — $12,000; Valley Ranch Apartments — $11,500; Arbors Apartments— $4,000.
. Silverado Apartments — $25,000; Arbors Apartments — $ 10,000.
. Cathey's motion for judgment requested that the trial court award $972,500 plus interest against Meyer for compensatory damages, $1,945,000 plus interest against Meyer for exemplary damages, and $150,000 plus interest against Glover for compensatory damages.
. These complaints are not presented on appeal.
. The statute of frauds is an affirmative defense which must be pled and proved by the defendant. Tex.R. Civ. P. 94.
. These complaints are not presented on appeal.
. At trial, Cathey objected that there was "no evidence" of ratification, and that the submission of the question on ratification was "not a proper submission for fraud allegations generally." In his brief, Cathey relies on the definition of ratification as given: "The very definition of ratification given to the jury, and the evidence at trial essentially defines two Cathey/Meyer projects out of the ratification defense."
He also objected at trial that "there is no evidence to support the submission of the waiver issue," the submission of waiver "is not a proper submission for a defense to fraud," and "the issue and instruction as worded is an improper submission" which he followed with a proffer of his requested definition.
. The statute of frauds is an affirmative defense which must be pled and proved by the defendant. Tex.R. Civ. P. 94.
. Again, we me asure sufficiency of the evidence against the charge as given. Osterberg, 12 S.W.3d at 55.
. Because of the way the question was worded, i.e., "on or before," the jury may have found that Cathey knew or should have known on May 22, in which case he filed the lawsuit on the last day of the limitations period.
. The limitations period for a fraud claim is now four years. Tex. Civ. Prac. & Rem.Code Ann. § 16.004(4) (Vernon Supp.2002).
. In a cross-issue, Meyer reurged his trial objection that the charge question on whether there was a fiduciary relationship was defective. In his cross-issue he does not assert in what manner nor how it resulted in an improper judgment. Tex.R.App. P. 38.1(h), 38.2(a)(1). Accordingly, his cross-issue is overruled.
. Evidently the property is currently profitable.
. This submission essentially shifted the burden to Meyer to prove he did not breach his duty. Meyer did not object to this at trial.
. We found no evidence of damages for the Dallas project.