Court Opinion

ID: 9654887
Source: CourtListenerOpinion
Date Created: 2023-08-23 18:54:05.297382+00
Date Added: 2024-06-11T18:13:14.379262
License: Public Domain

OPINION ON MOTION FOR REHEARING
Charles J. Schindler, II, moves this court to rehear his appeal stemming from a judgment entered after a jury found breach of contract and fraudulent misrepresentation issues against him and found actual damages of $65,722.11 arising from each issue. Appellant argues that when a party to a contract suffers only economic loss to the subject matter of the contract, the action sounds in contract alone and exemplary damages may not stand. We overrule the motion for rehearing.
The general rule is that the failure to perform the terms of a contract is a breach of contract, not a tort. See International Printing Pressmen & Assistants’ Union v. Smith, 145 Tex. 399, 198 S.W.2d 729, 735-36 (1946). When a party suffers only economic injury to the subject *290matter of the contract, the action sounds in contract, not in tort. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.1986). However, a party who promised to do a future act with no intent to perform and with intent to deceive may be liable for fraud. Crim Truck & Tractor Co. v. Navistar Int’l Transp., 823 S.W.2d 591, 597 (Tex.1992); Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986). The question becomes whether fraud under the Spoljaric theory overcomes the Jim Walter Homes requirement of a distinct actual injury.
In Spoljaric, an executive was fraudulently promised a bonus if he agreed to continue employment with the company. The jury found an oral contract to pay the bonus, breach of the contract, and fraudulent misrepresentation. The jury found $30,000 actual damages and $750,000 punitive damages. The Court of Appeals reversed and rendered on the misrepresentation issue, holding that there was no evidence to support the finding. Id. at 434. The Supreme Court reversed the decision of the Court of Appeals and remanded for consideration of factual sufficiency points, finding there was some evidence of the defendant’s lack of intent to perform under the contract. Id. at 436. The significance of Spoljaric in this context is that the only injury the plaintiff suffered was the unpaid bonus due under the oral contract, yet the right of the plaintiff to recover punitive damages was upheld, since “[a] finding of intent to harm or conscious indifference to the rights of others will support an award of exemplary damages.” Id. at 436.
Appellant cites American Nat’l Petroleum Co. v. Transcontinental Gas Pipe Line Corp., 798 S.W.2d 274 (Tex.1990) and Hebisen v. Nassau Development Co., 754 S.W.2d 345, 348 (Tex.App.—Houston [14th Dist.] 1988, writ denied) for the proposition that a distinct actual damage must be attributable to the tort and not attributable to the breach of contract for the tort to survive.
In Hebisen, a jury found that the defendant breached a rental agreement and never intended to perform some of its terms, that the plaintiff relied on the misrepresentations to his detriment, and that the defendant made the representations with intent that the plaintiff would act upon them. The evidence was held to be sufficient. Hebisen, 754 S.W.2d at 348. The Court of Appeals, however, reversed the award of punitive damages because the only actual damages were “the economic loss to the subject of the contract itself.” Id. at 348. Hebisen is the only case we have found that applies Jim Walter Homes to reverse a jury finding of fraud and a jury finding of actual damages due to fraud.
In American Nat’l Petroleum, a mineral rights owner sued a purchaser for breach of contract and tortious interference with a gas balancing agreement it held with a third party. The Texas Supreme Court was asked whether a tort finding could stand when the party failed to submit a jury issue on actual damages. The Court answered that the defendant waived error when it stipulated actual tort damages were equal to damages on the contractual breach. American Nat’l Petroleum, 798 S.W.2d at 278. No distinct injury attributable only to the tort and not to the contract was found by the jury. The Court noted that the measure of damages in a commercial relations tort may be “economic,” but that they are, nevertheless, damages for the tort. “The basic measure of actual damages for tortious interference with contract is the same as the measure of damages for the breach of the contract interfered with, to put the plaintiff in the same economic position he would have been in had the contract interfered with been actually performed.” Id. at 278.
We understand that in American Nat’l Petroleum, the breached contract was not the same contract as that which was tor-tiously interfered with by the defendant. We do note, however, the stipulation that damages due to defendant’s breach were equal to damages caused by defendant’s tortious conduct, the ruling that actual tort damages were established, and the ruling that exemplary damages may follow, and we conclude that American Nat’l Petroleum is no authority for the argument that an injury attributable to the tort alone *291must be proven for a tort to survive when a contract is breached.
Appellant also relies heavily on Justice Gonzalez’s dissent in American Nat’l Petroleum. Justice Gonzalez would have required the plaintiffs to prove a distinct tortious injury with actual damages. Id. at 283 (Gonzalez, J., dissenting). We are bound, however, only by the majority opinion. We note that the cases Justice Gonzalez cites in his American Nat’l Petroleum dissent, with the exception of Hebisen, do not include a situation in which a jury found fraud and actual damages arising from fraud. In Adolph Coors v. Rodriguez, 780 S.W.2d 477, 485 (Tex.App.—Corpus Christi 1989, writ denied), the tort was negligence, not fraud. In Lone Star Steel Co. v. Scott, 759 S.W.2d 144, 156 (Tex.App.—Texarkana 1988, writ denied), the court found no evidence of fraudulent misrepresentation. In Bellefonte Underwriters Ins. Co. v. Brown, 704 S.W.2d 742, 745 (Tex.1986), the jury found no damages arose from the tort. Finally, in International Bank, N.A. v. Morales, 736 S.W.2d 622 (Tex.1987), and Texas Nat’l Bank v. Karnes, 717 S.W.2d 901 (Tex.1986), there was no jury finding that any tort was committed.
Two arguments can be advanced to decline to extend the Jim Walter Homes rule to a case in which the tort complained of is fraudulent inducement to contract. First, the rationale for Jim Walter Homes is that contractual remedies are limited to compensatory damages in common law and by statute, regardless of the culpable mental state of the breaching party. Jim Walter Homes, Inc., 711 S.W.2d at 618. The purpose of this breacher-friendly rule is to promote economic efficiency by allowing a party to intentionally remove himself from a contract that becomes unfavorable under later market conditions. The general policy is that the aggrieved party deserves the benefit of the bargain, but the aggrieving party does not deserve punishment. See Restatement (Second) of Contracts § 355 comment a (1981). This rule should not be extended to benefit parties who fraudulently enter contracts they have no intention of performing.
Second, appellant’s argument that any tort committed in a contractual relationship must have a damage element independent of any damages suffered to the subject matter of the contract would completely eliminate fraudulent misrepresentation in procurement of a contract as a tort. Only under the rarest of circumstances will a party be able to show some personal injury or harm to property not the subject of the contract to support a tort finding. If appellant’s position is the state of the law and the policy of the courts of this state, Spol-jaric would not be constantly cited for the proposition that fraudulent entry to contract is a tort.
We are of the opinion that a party who enters a contract with no intention of performing, shows intent to harm or conscious indifference to the rights of others and is liable for exemplary damages. Spoljaric, 708 S.W.2d at 436. We decline to follow the reasoning of the Fourteenth District Court of Appeals and hold that a jury finding of fraudulent misrepresentation and a jury finding of actual damages caused by the misrepresentation, will support an award of exemplary damages. We overrule the motion for rehearing and affirm the judgment of the trial court.