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ELLIS COUNTY STATE BANK v. GLENN KEEVER (06/22/94)

delivered: June 22, 1994.

ELLIS COUNTY STATE BANK, TRACY FLETCHER, JOHN A. HASTINGS, JR., AND DON HARRIS, PETITIONERS
v.
GLENN KEEVER, RESPONDENT



ON APPLICATION FOR WRIT OF ERROR TO THE COURT OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS. This Opinion Substituted by the Court for Withdrawn Opinion of May 11,.

COUNSEL

For PETITIONERS: Cooper, Mr. R. Brent, ATT 004783250, Cooper Huddleston & Aldous, Dallas, TX.

For RESPONDENT: Wood, Mr. Robert E., ATT 021915000, Williford & Wood, Dallas, TX.

Gonzalez, Hightower, Doggett, Gammage, Spector, Phillips, Hecht, Cornyn, Enoch

Author: Gonzalez

JUSTICE GONZALEZ delivered the opinion of the court in which all members of the Court join in sections I and II. JUSTICE HIGHTOWER, JUSTICE DOGGETT, JUSTICE GAMMAGE, AND JUSTICE SPECTOR join in sections III and IV. CHIEF JUSTICE PHILLIPS, JUSTICE HECHT, JUSTICE CORNYN, AND JUSTICE ENOCH join in sections V and VI.

The motions for rehearing are overruled. The opinions of the Court previously issued in this case are withdrawn and the following are substituted in their place.

In this action for malicious prosecution, we determine that the ordinary burden of proof by a preponderance of the evidence remains appropriate rather than the more extraordinary burden of clear and convincing evidence; we hold that the plaintiff is not entitled to prejudgment interest on punitive damages, and we remand this cause to the court of appeals with instructions that they reconsider the Bank's punitive damage points in light of the standards we articulated in Transportation Ins. Co. v. Moriel, 814 S.W.2d 144, (Tex. 1994). We further decline to obligate the courts of appeals to detail supportive evidence when affirming the sufficiency of the evidence underlying a trial court judgment.

This suit arises out of the indictment and arrest of Glenn Keever. In February 1987, Keever executed a 90-day note for $6,000 with First State Bank of Milford, secured by an interest in his office equipment. Shortly before the due date, Keever filed for Chapter 13 bankruptcy protection. In June 1987, Don Harris purchased all of the assets of First State Bank, including Keever's note, and renamed the bank the Ellis County State Bank.

The parties hotly dispute the ensuing events. Keever testified that when Tracy Fletcher, a bank vice president, first called to discuss the repayment of the note, Keever informed her of the bankruptcy proceeding and provided his attorney's name and the case number. Fletcher nevertheless continued to telephone Keever about the note and sent him a registered letter asserting a default and making formal demand for payment in full or return of the collateral. Keever testified that he telephoned Fletcher to inform her of a creditors' meeting scheduled for October 23, 1987. At that meeting, the bankruptcy court instructed Keever to turn over the collateral to the Bank. According to Keever, in November 1987 Fletcher failed to keep an appointment to pick up the collateral. In the summer of 1988, John A. Hastings, Jr., an attorney for the Bank, made arrangements through Keever's bankruptcy attorney to collect the collateral; again, the Bank failed to keep the appointment.

The Bank has a significantly different version of the events in which, after failing to respond to a number of past due notices and telephone messages, Keever finally agreed to make a payment and sign a new note, but later refused. Fletcher then made a formal written demand for the collateral in August, 1987, and was not advised by Keever until October of the earlier bankruptcy filing in May. Following several unsuccessful attempts to retrieve the collateral, Hastings sought an appointment with the grand jury to seek an indictment against Keever for hindering a secured creditor. After making this appointment, Hastings continued to attempt to negotiate with Keever's bankruptcy attorney regarding the collateral. Meanwhile, Keever relocated the collateral in violation of the security agreement and without notifying the Bank. While bringing the matter to the attention of the Ellis County grand jury in December 1987, the Bank waited until November 1988 to pursue an indictment against Keever for hindering a secured creditor.*fn1 Based upon the testimony of Fletcher and Hastings, Keever was indicted on November 29, 1988.*fn2 Keever turned himself into the police on December 2. Arrested and incarcerated until he made bail,*fn3 Keever pled not guilty, and eventually had his indictment quashed by the district court. Declining to seek reindictment, the district attorney indicated that she had not learned of the bankruptcy until the arraignment, contradicting claims of Fletcher and Hastings that they had informed the grand jury of this filing.

In his subsequent malicious prosecution action against Harris, Fletcher, Hastings, and the Bank, Keever testified that as a result of the indictment and arrest he suffered from post-traumatic stress disorder and depression. Based on a jury verdict, the trial court rendered judgment for Keever against all defendants, and awarded Keever actual and punitive damages, as well as prejudgment interest.*fn4 The court of appeals reversed the judgment as to prejudgment interest on the punitive damages, but otherwise affirmed. 870 S.W.2d 63.

I. Malicious Prosecution--Burden of Proof

The defendants contend that the trial court erred in instructing the jury that the plaintiff must prove the elements of malicious prosecution by a preponderance of the evidence, rather than by clear and convincing evidence. This contention conflicts with our writing that "no doctrine is more firmly established than that issues of fact are resolved from a preponderance of the evidence." Sanders v. Harder, 148 Tex. 593, 227 S.W.2d 206, 209 (Tex. 1950) (trespass to try title). Over a century ago this Court rejected the view that

facts [must] be established by evidence with that absolute certainty . . . that excludes all reasonable doubt of their existence, as if it were a case of murder or treason, [this] is not a rule applicable to this or any other civil cause.

Sparks v. Dawson, 47 Tex. 138, 145 (1877) (fraudulent conveyance). Seeking to avoid a blurring of the distinction between civil and criminal cases, we have regularly found reversible error when a trial court instructed a jury that a greater burden must be met. See Bluntzer v. Dewees, 79 Tex. 272, 15 S.W. 29, 30 (Tex. 1891) (reversible error in charge requiring "a preponderance of the evidence . . . with such certainty as will satisfy your minds"); Wylie v. Posey, 71 Tex. 34, 9 S.W. 87, 88-90 (Tex. 1888) (reversible error in charge requiring "a sufficient preponderance of the evidence, to the extent of a reasonable certainty"). Only in extraordinary circumstances, such as when we have been mandated to impose a more onerous burden, has this Court abandoned the well established preponderance of the evidence standard.*fn5

Malicious prosecution is no different. Though reference has been made to the importance of "positive, clear and satisfactory" proof*fn6, all "issues of fact are resolved from a preponderance of the evidence." Andrews v. Dewberry, 242 S.W.2d 685, 687 (Tex. Civ. App.--Fort Worth 1951, writ ref'd n.r.e.) (approving a jury instruction regarding a preponderance of the evidence standard in a malicious prosecution action). Texas is certainly not alone in this regard; we have not been made aware of any other jurisdiction that has required an enhanced burden of proof in a malicious prosecution action.

This Court has explained the occasional suggestion that facts must be established by "clear and convincing evidence" as "but an admonition to the judge to exercise great caution in weighing the evidence." Sanders, 227 S.W.2d at 209. As noted in Carl v. Settegast, 237 S.W. 238, 239-40 (Tex. 1922), admonitions of this type originate from their early usage with reference to courts of chancery:

in so far as these rules merely address themselves to the conscience of the chancellor in exercising his province to pass upon the facts or weight of the evidence, they have no place in our jurisprudence, under which . . . a jury trial is given as a matter of right, and the province of the jury where the evidence is sufficient to have the issues submitted to them is absolute in determining the facts, subject only to review by the trial court and Court of Civil Appeals.

Only recently we again explained the meaning of such admonitions by relying upon Sanders to explain that a requirement of "clear and satisfactory" proof represents only an admonition to exercise great caution in weighing the evidence and does not supplant the usual standard of proof by a preponderance of the evidence.

Rhodes v. Cahill, 802 S.W.2d 643, 645 n.2 (Tex. 1990) (adverse possession).

What we said with regard to the standard of review for malicious prosecution cases in Meadows v. Green, 524 S.W.2d 509, 510 (Tex. 1975) (per curiam), is also applicable in the trial court:

The requirement of clear and convincing evidence is merely another method of stating that a cause of action must be supported by factually sufficient evidence.

Here, the trial judge correctly charged the jury to apply the traditional burden of proof by preponderance of the evidence. That burden does not change merely because trial judges are admonished to set the verdict aside and order a new trial if the judge is persuaded that the evidence is not "positive, clear and satisfactory."

Nor need we reject our state's well established jurisprudence in order to assure reasonable protection to citizens who report criminal activity to prosecuting authorities. This goal can be satisfied by demanding the full satisfaction of all of the elements of the malicious prosecution tort such as that the defendant lacked probable cause to initiate the prosecution and acted with malice. See, e.g., Compton v. Calabria, 811 S.W.2d 945, 949 (Tex. App.--Dallas 1991, no writ) see also Diamond Shamrock, 753 S.W.2d at 241. One accused of malicious prosecution is rightly aided by "an initial presumption that a defendant acted reasonably and in good faith and therefore had probable cause." Akin v. Dahl, 661 S.W.2d 917, 920 (Tex. 1983), cert. denied, 466 U.S. 938, 80 L. Ed. 2d 460, 104 S. Ct. 1911 (1984). Protection is also afforded to one who makes a full and fair disclosure to the prosecuting attorney. See Browning-Ferris Indus., Inc. v. Zavaleta, 827 S.W.2d 336, 345 (Tex. App.--Corpus Christi 1992, writ denied); Thomas v. Cisneros, 596 S.W.2d 313, 317 (Tex. Civ. App.--Austin 1980, writ ref'd n.r.e.); Ada Oil Co. v. Dillaberry, 440 S.W.2d 902, 912 (Tex. Civ. App.--Houston [14th Dist.] 1969, writ dism'd). In view of these alternative safeguards for those who honestly and in good faith report criminal activity, we believe the trial court acted properly in following the law concerning the applicable standard of proof rather than changing it.

II. Court of Appeals Detailing of Supportive

Evidence -- Actual Damages

To discourage a "court of appeals [from] merely substituting its judgment for that of the jury," we require that every opinion involving a reversal of a trial court judgment on factual insufficiency grounds must detail the evidence relevant to the issue in consideration and clearly state why the jury's finding is factually insufficient or is so against the great weight and preponderance as to be manifestly unjust; why it shocks the conscience; or clearly demonstrates bias. Further, those courts, in their opinions, should state in what regard the contrary evidence greatly outweighs the evidence in support of the verdict.

Pool v. Ford Motor Co., 715 S.W.2d 629, 635 (Tex. 1986). The defendants here urge that we extend this requirement to cases in which the court of appeals upholds the trial court judgment. While an appellate court may sometimes find such an outlining of supportive evidence to be useful, we decline to mandate this. Requiring the detailing of all evidence supporting a judgment is not consistent with Pool. We perceive no other justification for imposing this additional burden on the court of appeals.

III. No Evidence

Rather than clearly presenting and briefing a no evidence point concerning their liability, the defendants have lumped a generalized sufficiency of the evidence contention together with their argument for the extension of Pool 's detailing of the evidence requirement. With liberal construction,*fn7 we believe this argument can be construed as urging no evidence that Harris, individually, either gave or participated in any decision to give false testimony or make an incomplete disclosure to the grand jury. In reviewing a "no evidence" point, this court "must consider only the evidence and inferences tending to support the jury's finding, viewed most favorably in support of the finding, and disregard all contrary evidence and inferences." Havner v. E-Z Mart Stores, Inc., 825 S.W.2d 456, 458 (Tex. 1992); State v. $11,014.00, 820 S.W.2d 783 (Tex. 1991) (per curiam); Garza v. Alviar, 395 S.W.2d 821, 823 (Tex. 1965). Applying this stringent standard here, we agree that there is no evidence to support the finding against Harris individually.

The more indefinite complaint urged jointly by the remaining defendants, Fletcher, Hastings, and the Bank, relates to a claim that Keever failed to establish one element of malicious prosecution--a lack of probable cause to initiate proceedings.*fn8 This element may be demonstrated by proof that the defendant made material misrepresentations to the prosecuting officer. See Compton, 811 S.W.2d at 950; Fisher v. Beach, 671 S.W.2d 63, 67 (Tex.App.--Dallas 1984, no writ); Terk v. Deaton, 555 S.W.2d 154, 155 (Tex.Civ.App.--El Paso 1977, no writ); Andrews, 242 S.W.2d at 688. The jury heard testimony concerning written misrepresentations that Hastings made to the district attorney*fn9 as well as to Keever and his attorney.*fn10 Similarly, Fletcher did not tell the grand jury about appointments that Keever and his bankruptcy attorney made for the Bank to pick up the collateral.*fn11

A jury could reasonably conclude that misrepresentations by Hastings and Fletcher constituted evidence of a lack of probable cause. Accordingly, the court of appeals properly concluded that there was some evidence, both direct and circumstantial, that Fletcher and Hastings falsely testified before the grand jury and made material misrepresentations to the Ellis County District Attorney.

IV. Heightened Appellate Scrutiny

Agreeing with the Court that we should impose neither a higher burden of proof at trial nor a detailing requirement on appeal, Justice Hecht nevertheless suggests that future actions might be resolved through application of a "higher standard of evidentiary review in malicious prosecution cases." S.W.2d at (Hecht, J., concurring and dissenting). This approach has apparently never been discussed by any court or commentator in the history of Texas jurisprudence, nor was it urged or even implied as a basis for reversal by the Bank. Until today's writing, appellate review has addressed either the factual or the legal sufficiency of the evidence presented at trial.

The role of this Court is, of course, constitutionally limited. TEX. CONST. art. V, § 6. As we wrote recently in Browning-Ferris, 865 S.W.2d at 925, 927-28:

We review only to ensure the proper application of legal standards by other courts and to determine whether there is some evidence which provides a legal basis for a finding. . . . If more than a scintilla of such evidence exists, the claim is sufficient as a matter of law, and any challenges go merely to the weight to be accorded the evidence. Indeed, evidence that we might well have discounted, had we been serving as jurors ourselves, cannot now be judicially erased from the record. We are not empowered to convert some evidence into no evidence.

See also Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401, 410-11 (Tex. 1960) ("The sufficiency of the evidence, in so far as measuring its weight and preponderance, is a question of fact; and this court has no jurisdiction over fact questions."); Turner, 556 S.W.2d at 565; Meadows, 524 S.W.2d at 510.

Justice Hecht intimates an interest in a wholly new, unexplored standard of review. Other than a questionable inference drawn from one decision,*fn12 S.W.2d at (Hecht, J., concurring and dissenting), the sole writing advanced for this previously unknown approach consists of certain dicta from Sullivan v. O'Brien, 85 S.W.2d 1106 (Tex. Civ. App.--San Antonio 1935, writ ref'd):

[Plaintiffs'] evidence raises no more than mere surmise or suspicion of the fact sought to be established by them. Actions for damages for malicious prosecution are not favored in the law, and require more satisfactory proof than is required in ordinary lawsuits; and certainly recovery in such cases cannot be had upon mere surmise and suspicion.

Id. at 1112. This general admonition is hardly a justification for this Court engaging in a heightened review of the evidence, and until today no one has suggested otherwise.

The practical significance of alerting trial judges to the important policy interests at stake in malicious prosecution cases is just that -- an admonishment to be cautious in weighing the evidence while continuing to afford the trial court discretion in determining admissibility in accord with the Rules of Evidence. Though it is claimed that under a heightened level of review this Court need not weigh the evidence, Justice Hecht proceeds to suggest precisely that, thus blurring the line between factual and legal sufficiency review. S.W.2d at (Hecht, J., concurring and dissenting). Today we preserve our traditional appellate standard of review in accordance with the Texas Constitution rather than pursuing this unpreserved and unwise proposed course.

V. Prejudgment Interest

The district court awarded prejudgment interest on the punitive damages awarded to Keever. The court of appeals reversed this award. 870 S.W.2d at 74. Keever complains that the court of appeals erred.

In Cavnar v. Quality Control Parking, Inc., 696 S.W.2d 549, 555-56 (Tex. 1985), we held that prejudgment interest should not be charged on punitive damages, reasoning as follows:

Commentators are virtually unanimous in advocating that prejudgment interest not be awarded on future damages and punitive damages.

Punitive damages are intended to punish the defendant and to set an example to others. They are assessed over and above the amount of damages necessary to indemnify the plaintiff. The plaintiff can thus be made whole even if prejudgment interest is not awarded on punitive damages. The plaintiff is likewise unharmed by the defendant's retention of future damages prior to trial since these damages are, by their very nature, unaccrued.

Id. (citations omitted).

Keever argues, however, that the Legislature has modified Cavnar and authorized prejudgment interest on punitive damages in certain cases by enacting TEX. REV. CIV. STAT. art. 5069-1.05, § 6(a), which states:

Judgments in wrongful death, personal injury, and property damage cases must include prejudgment interest. Except as provided by Subsections (b), (c), and (d) of this section, prejudgment interest accrues on the amount of the judgment during the period beginning on the 180th day after the date the defendant receives written notice of a claim or on the day the suit is filed, whichever occurs first, and ending on the day preceding the date judgment is rendered.

Keever argues that since section 6(a) awards prejudgment interest "on the amount of the judgment," and punitive damages are included in that amount, prejudgment ...


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