Court of Appeals of Texas, Fifth District, Dallas
RESIDENCES AT RIVERDALE, LP AND RESIDENCES AT RIVERDALE GP LLC, Appellants
DIXIE CARPET INSTALLATIONS, INC., Appellee
Appeal from the 199th Judicial District Court Collin County,
Texas Trial Court Cause No. 199-04903-2012
Justices Bridges, Lang-Miers, and Whitehill
L. BRIDGES JUSTICE
appeal arises from underlying contracts involving the
installation of carpet at an apartment complex. The jury
returned a verdict in favor of appellee Dixie Carpet
Installations, Inc. (Dixie) on all of its claims against
appellants Residences at Riverdale, LP and Residences at
Riverdale GP, LLC (Riverdale) and awarded Dixie $142, 898 in
tort damages and $285, 796 in exemplary damages. The jury
also awarded Dixie $142, 898 in breach of contract damages
and $234, 816.90 in attorneys' fees against Nations
Construction Management, Inc. (Nations); however, Nations has
not challenged the judgment on appeal.
raises seven issues in which it challenges aspects of the
judgment, the sufficiency of the evidence to support the
jury's fraud findings and punitive damages award, and the
application of the economic loss rule to its contract and
conversion claims. We reverse the trial court's judgment
based on the jury's fraud findings against Riverdale,
including its award of exemplary damages and joint and
several liability with Nations, and render a take-nothing
judgment against Dixie on its fraud claims. We remand the
case to the trial court for Dixie to make a new election of
remedies. In all other respects, the judgment of the trial
court is affirmed.
21, 2008, Riverdale hired Nations, as general contractor, to
build the Residences at Riverdale Apartments (the project).
Nations and Dixie entered into a purchase order agreement on
January 19, 2010 for $142, 128, in which Dixie agreed to
provide carpet, vinyl plank, and rubber flooring to Nations
for the project. Linda Kutac, Dixie's president, signed
the purchase agreement on behalf of Dixie and John Czapski,
Nations' president and owner, signed on behalf of
Nations. According to the agreement, Nations was responsible
for paying Dixie.
supervised Connie Strawbridge, the Nations employees
responsible for writing checks and paying subcontractors.
Nations received draw payments from Riverdale, which Nations
used to pay subcontractors. Strawbridge generated the checks
and Czapski signed them. Nations received draw payments from
Riverdale for draw requests 1 through 9.
March 2010 and after draw request 9, the payment structure
changed. Riverdale learned payments from Nations were not
flowing through to its subcontractors on the project. David
Stapleton, a limited partner/managing member of Riverdale,
explained Riverdale took over the check writing
responsibility around March 19, 2010 and initiated a joint
checking system to pay subcontractors. When the funds came
in, Riverdale asked Czapski or Strawbridge who to pay and how
much. Based on their information, Riverdale cut the joint
checks for the subcontractors. Howard Akin, a Riverdale
limited partner and managing member, also testified Nations
decided which subcontractors received payment because
"it was their vendors and they instructed them and they
knew whether or not they deserved to be paid." When
there was not enough in a draw to pay certain vendors, Akin
worked with Strawbridge on the pay applications. According to
Riverdale, the ultimate payment decision was Nations.
to Czapski, however, Riverdale took over the responsibility
in March 2010 of determining which subcontractors received
payment and then dispersing funds. Czapski claimed the reason
for the switch in payment scheme was because Riverdale wanted
to have "full control of what was going on."
According to Czapski, from March 2010 forward, Nations
neither received money from Riverdale to pay subcontractors,
nor was responsible for such payments.
sent its first invoice to Nations on April 12, 2010 for $142,
Dixie did not receive payment. Stapleton instructed Czapski
to offer Dixie a discount on the original invoice.
November 2010, Czapski called Kutac. During the conversation,
Czapski told her there was not enough money to pay all the
vendors in full. Czapski told Kutac that Dixie would get paid
"if we agreed to take a 20-percent discount on our
invoices" and signed a lien release. Czapski told her
Dixie would receive its money from an escrow account with
Chicago Title Insurance Company (Chicago Title) within two
weeks of Chicago Title's receipt of the lien release.
later called Strawbridge and accepted Czapski's
discounted offer. Strawbridge said she would tell Czapski and
Riverdale that Dixie accepted the offer. Strawbridge
indicated Riverdale would provide payment.
November 19, 2010, Strawbridge sent an email to Dixie, with
the lien release form attached for execution, indicating
Dixie would receive information concerning when and where to
pick up its check the following week. The lien release
indicated Dixie agreed to a discounted payment of $114,
318.40. Kutac signed the lien release on behalf of Dixie on
November 22, 2010.
executed an escrow agreement, with Riverdale as borrower,
Legacy Texas Bank as lender, and Chicago Title as escrow
agent, on December 7, 2010 for $669, 278.09. A list of
subcontractors with unpaid claims, including Dixie, was
attached as an exhibit to the escrow agreement. The agreement
provided that upon receipt of the lien release, the escrow
agent "shall immediately pay, without further
instruction, the Unpaid Claims in the amounts and to the
parties" listed in the exhibit. Nations was not a party
to the escrow agreement.
Dixie did not receive payment, Kutac reached out to
Strawbridge. Strawbridge emailed back on December 6, 2010
requesting Kutac resend the original executed lien release to
Chicago Title because Chicago Title never received it. Once
Chicago Title received it, Chicago Title would send the
check. Kutac executed another (albeit identical to the first)
lien release on January 12, 2011.
Title cut a check to Dixie on January 5, 2011 for $114,
318.40 but did not release it. Czapski and Strawbridge said
Stapleton instructed Chicago Title to hold the January 5
check. Stapleton denied telling Chicago Title to hold the
check or knowing why Chicago Title was holding it. He claimed
someone from Nations requested the hold, but admitted Nations
did not have such authority under the escrow agreement. A
January 31, 2011 email from Chicago Title to Strawbridge
indicated Chicago Title still had Dixie's check in its
possession and "WAS REQUESTED I STILL HOLD."
Riverdale was not included on this communication.
February 7, 2011, Stapleton, on behalf of Riverdale, sent an
email to Chicago Title instructing it to void Dixie's
check. The circumstances surrounding the decision to void the
check were contested.
said he was part of a conference call with Czapski,
Strawbridge, and Akin on February 7 that centered on the fact
Snell-Northcutt, another subcontractor on the project, had
filed a lien and lawsuit for non-payment. At that time, there
was not enough money to pay all the vendors. Dixie's
check was the only one left big enough to void and pay
Snell-Northcutt. Stapleton said Czapski agreed Nations would
take care of Dixie and instructed Stapleton to void
Dixie's check. Riverdale would then pay Snell-Northcutt
from the escrow account.
could not recall any details of the conference call. However,
he knew Snell-Northcutt had sued Riverdale and filed a lien
against the property. He said Snell-Northcutt's lien, as
well as the threats of other subcontractors' liens
"popping up, " was discussed. He also testified, in
contradiction to his previous deposition testimony,
that it was Czapski's idea to void Dixie's check and
that Czapski said Nations would handle paying Dixie.
said it was Stapleton's idea to void Dixie's check
and then pay Snell-Northcutt. Strawbridge could not recall
who set up the conference call or what anyone said during the
conversation. However, she remembered the purpose of the call
was to discuss Dixie and Snell-Northcutt.
was no paperwork confirming the alleged agreement reached
during the conference call regarding which party was
responsible for paying Dixie. However, it is undisputed
Stapleton sent the email to Chicago Title on February 7, 2011
instructing it to void Dixie's check and issue a check to
March 8, 2011, Kutac emailed Strawbridge demanding to know
when Dixie would receive payment. Strawbridge did not respond
to the email. Kutac testified it was her understanding, based
on what Czapski and Strawbridge said, that Dixie never
received payment because its check was voided and used to pay
other vendors who had filed liens against the property. Dixie
was the only subcontractor on the project that had a check
held, later voided, and received nothing.
filed suit against Nations, Czapski, Strawbridge, Riverdale,
Stapleton, Akin, and Chicago Title. Prior to trial, Dixie
nonsuited Akin and Strawbridge, and the court granted summary
judgment in favor of Chicago Title. The court granted a
directed verdict in favor of Czapski and Stapleton. The jury
returned a verdict in favor of Dixie on its breach of
contract, quantum meruit, fraud, promissory estoppel,
conversion, and conspiracy claims against Riverdale, LP. The
jury found in favor of Dixie on its quantum meruit claim
against Riverdale, GP, LLC. The jury also found in favor of