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Teclogistics, Inc. v. Dresser-Rand Group, Inc.

Court of Appeals of Texas, Fourteenth District

July 27, 2017

DRESSER-RAND GROUP, INC., Appellee/Cross-Appellant

         On Appeal from the 270th District Court Harris County, Texas Trial Court Cause No. 2012-62247

          Panel consists of Justices Christopher, Busby, and Jewell.


          Tracy Christopher, Justice

         In this appeal from a jury trial on claims of breach of contract and common-law fraud, both sides appeal the judgment. TecLogistics, Inc. contends that no evidence supports the breach-of-contract and fraud damages assessed against it. Successful claimant Dresser-Rand Group, Inc. argues that the trial court abused its discretion in failing to submit to the jury a question on TecLogistics' president Josephine Treurniet's individual liability for fraud.

         We agree with TecLogistics that the evidence is legally insufficient to support the jury's finding of breach-of-contract damages. The evidence is sufficient, however, to support the fraud damages assessed against it. Regarding Dresser-Rand's cross-appeal, we hold that the trial court did not abuse its discretion in refusing Dresser-Rand's proposed charge questions regarding Treurniet's individual liability for fraud.

         We accordingly modify the judgment to eliminate the award of damages for breach of contract, and as modified, we affirm the trial court's judgment.

         I. Background

         Dresser-Rand Group, Inc.[1] manufactures and services compressors and turbines for the oil and gas industry worldwide. For a number of years, Dresser-Rand used freight forwarder TecLogistics, Inc. to arrange for the transportation of parts and supplies between Dresser-Rand and its customers. In October 2010, Dresser-Rand sent a letter to its employees requiring them to use one of two other companies for any international shipments paid for by Dresser-Rand. In that letter and in another letter sent directly to TecLogistics, Dresser-Rand stated that TecLogistics was an "unapproved" freight forwarder, and that unapproved freight forwarders would be paid only for services authorized in advance by specific Dresser-Rand employees.

         TecLogistics and its owner and president Josephine Treurniet sued Dresser-Rand, and Dresser-Rand counterclaimed, but by the time of trial, only Dresser-Rand's counterclaims for breach of contract and common-law fraud remained.

         Viewed in the light most favorable to the verdict, the trial evidence showed that TecLogistics commonly subcontracted its work to Pentagon Freight Services, Inc. and included Pentagon's charges on its own invoices to Dresser-Rand. Dresser-Rand required TecLogistics to "back up" the charges by submitting Pentagon's invoices along with its own. Dresser-Rand paid the passed-through charges, which were supported by invoices bearing Pentagon's name, address, and invoice number.

         During the litigation, however, Dresser-Rand obtained the invoices directly from Pentagon and found they did not match the "Pentagon" invoices presented by TecLogistics. Through four invoices, TecLogistics charged Dresser-Rand a total of $8, 181.73 for Pentagon's services, and the figure matched the "Pentagon" invoices TecLogistics provided. Pentagon's real invoices showed that it had charged TecLogistics a total of only $2, 300.77 for those services. Treurniet admitted at trial that she had decided upon the amount to charge Dresser-Rand for Pentagon's services and that she had created the false Pentagon invoices to back up those amounts. In addition to these overcharges, Dresser-Rand produced evidence that it twice paid the same TecLogistics invoice for $7, 306.24.

         At the close of evidence, Dresser-Rand moved for directed verdict against TecLogistics, but the trial court granted the motion only as to TecLogistics' liability for breach of contract, leaving damages for the jury to assess. The trial court additionally submitted to the jury Dresser-Rand's fraud claim against TecLogistics, but refused Dresser-Rand's proposed jury question that would have included Treurniet in the same fraud-liability question with TecLogistics.

         The jury found $7, 306.00 would fairly and reasonably compensate Dresser-Rand for TecLogistics' breach of contract. The jury also found TecLogistics liable for fraud and assessed damages of $5, 881.00 for that claim.[2] In accordance with the verdict and its charge rulings, the trial court rendered judgment against TecLogistics for $13, 187.00 and ordered that Dresser-Rand take nothing on its claims against Treurniet. After the trial court denied TecLogistics' motion for judgment notwithstanding the verdict, both sides appealed.

         II. Issues Presented

         In two issues, TecLogistics argues that Dresser-Rand's voluntary overpayment of $7, 306.00 is not recoverable as breach-of-contract damages and cannot be recovered as unjust enrichment, which was not pleaded. In two additional issues, TecLogistics argues that there is no evidence of damages from fraud because any evidence of Dresser-Rand's future loss of business was speculative, and because Dresser-Rand mitigated its damages by passing TecLogistics' overcharges through to Dresser-Rand's customers.[3]

         In its cross-appeal, Dresser-Rand contends that the trial court abused its discretion in failing to submit its fraud claim against Treurniet to the jury.

         III. TecLogistics' Appeal

         Because TecLogistics did not object to the jury charge, we analyze its legal-sufficiency challenges by determining whether the evidence at trial would have enabled reasonable and fair-minded jurors following the charge's instructions to make the challenged findings. See Seger v. Yorkshire Ins. Co., 503 S.W.3d 388, 406-07 (Tex. 2016). To make this determination, we review the evidence in the light most favorable to the verdict and draw all reasonable inferences in support of the findings. See Ford Motor Co. v. Castillo, 444 S.W.3d 616, 620-21 (Tex. 2014) (op. on reh'g) (per curiam) (citing City of Keller v. Wilson, 168 S.W.3d 802, 821- 22 (Tex. 2005)). Because the opposing party bore the burden of proof on each of the challenged findings, we will conclude that the evidence is legally insufficient only if no more than a scintilla of evidence supports it. See Burbage v. Burbage, 447 S.W.3d 249, 259 (Tex. 2014).

         A. Breach-of-Contract Damages

         TecLogistics does not challenge the directed verdict against it regarding its liability to Dresser-Rand for breach of contract, but does contend that no evidence supports the contract damages of $7, 306.00 assessed by the jury and awarded by the trial court. Dresser-Rand's director of supply-chain management Caldwell Hart testified that, based on a "Supplier Payment History Report, " TecLogistics owed Dresser-Rand that amount. These are not, however, damages caused by TecLogistics' breach of contract.

         The Supplier Payment History Report indicates that Dresser-Rand initially paid a single TecLogistics invoice in the amount of $7, 306.24. This amount is supported by TecLogistics' invoice labeled "TEC3168." The Report also shows that Dresser-Rand later wired nearly $69, 000 to TecLogistics as payment for several invoices.[4] Hart testified that this large payment included a second payment of $7, 306.24 for invoice TEC3168. According to Hart, "we double paid this invoice." Hart stated that double payments occasionally happen in companies of Dresser-Rand's size, and that when this occurs, "[w]e'll typically notify the supplier and ask to have that money remitted back to us." Hart admitted, however, that Dresser-Rand did not do so in this instance, and that, to his knowledge, the overpayment had not been returned. Based on this evidence, Dresser-Rand's counsel argued to the jury, "You heard Caldwell Hart talk about that, $7, 306.24 for the breach of contract that occurred. You heard him talk about that. We paid twice, you didn't pay it back, you owe it to us."

         But, the jury was not asked to measure breach-of-contract damages by the amount by which Dresser-Rand paid an amount greater than that agreed; the jury was asked to find Dresser-Rand's "damages, if any, that resulted from TecLogistics' charging an amount greater than that agreed."[5] Although there is evidence that Dresser-Rand paid a single invoice for $7, 306.24 twice, there is no evidence that TecLogistics charged this amount twice.

         We sustain this issue and modify the judgment to delete the award of $7, 306.00 as breach-of-contract damages. We therefore do not address TecLogistics' remaining argument about these damages.[6]

         B. Fraud Damages

         Predicated on its finding that TecLogistics committed fraud against Dresser-Rand, the jury was asked to assess damages measured by "[t]he difference, if any, between the value of the services provided by Pentagon Freight Services, Inc. to TecLogistics, and the value of the services fraudulently claimed by TecLogistics to have been performed by Pentagon Freight Services, Inc." Based on this instruction, the jury assessed fraud damages of $5, 881.00.

         The fraud damages found by the jury are supported by the evidence. The jury was able to compare Pentagon's real invoices with TecLogistics' false Pentagon invoices for the same services. The uncontroverted evidence showed that in each of four invoices, TecLogistics falsely stated the amount Pentagon charged, and that Dresser-Rand paid TecLogistics' invoices containing the inflated charges. Although Pentagon charged TecLogistics a total of only $2, 300.77 for its services, TecLogistics represented to Dresser-Rand that Pentagon had charged TecLogistics a total of $8, 181.73-a difference of $5, 880.96.

         Treurniet agreed at trial that the amounts TecLogistics actually paid Pentagon are shown only in the real Pentagon invoices. She also admitted that she chose the amount TecLogistics charged Dresser-Rand for Pentagon's services and that she created the false Pentagon invoices TecLogistics sent Dresser-Rand as support for those charges. Although Treurniet also testified that she acted in accordance with the instructions of a Dresser-Rand employee, we must assume that the jury did not find her testimony credible. See Wilson, 168 S.W.3d at 819. Because we cannot say that the jury's credibility determination was itself unreasonable, we must defer to it. See id. at 820; In re J.P.B., 180 S.W.3d 570, 573 (Tex. 2005) (per curiam).

         Despite Treurniet's admissions, TecLogistics challenges the jury's fraud findings on two grounds. First, TecLogistics argues that both the jury's fraud-liability finding and its fraud-damages finding must be reversed because damages are an essential element of a fraud claim, [7] and "speculation about possible future loss of business" is not evidence of actual damages caused by fraud. The "speculation about possible future loss of business" to which TecLogistics refers is Hart's trial testimony that if Dresser-Rand passed TecLogistics' false Pentagon invoices on to a customer, then Dresser-Rand could lose business. As a second ground for reversal, TecLogistics asserts that Dresser-Rand suffered no actual monetary loss from the false representations about Pentagon's charges because Dresser-Rand passed those charges on to its customers.

         Both arguments fail for the same reason: in reviewing the legal sufficiency of the evidence to support the fraud-damages finding, we are bound by the instructions given to the jury and by the presumption that the jury followed those instructions. See Seger, 503 S.W.3d at 407. The charge required the jury consider one measure of damages "and none other." The charge specified that Dresser-Rand's fraud damages were equal to the difference, if any, between (1) the value of Pentagon's services, and (2) the value of Pentagon's services as fraudulently claimed by TecLogistics. Thus, the jury could neither increase the resulting figure by adding the value of Dresser-Rand's possible future loss of business, nor decrease it by the extent to which Dresser-Rand was reimbursed for the inflated charges from a collateral source. Of course, the jury was also instructed to consider whether the claimed amounts were "damages . . . that resulted from such fraud." But this causation requirement also did not require the jury to deduct any recovery from another source, as a fraud victim may recover out-of-pocket damages based on the difference between the value paid and the value received. See Aquaplex, Inc. v. Rancho La Valencia, Inc., 297 S.W.3d 768, 775 (Tex. 2009) (per curiam).

         Because the evidence is legally sufficient to support the fraud damages assessed in accordance with the jury's instructions, we overrule TecLogistics' issues challenging the jury's fraud-liability and fraud-damages findings, and we affirm the portion of the judgment giving effect to those findings.

         IV. Dresser-Rand's Appeal

         In its sole appellate issue, Dresser-Rand argues that the trial court improperly refused Dresser-Rand's written request to submit its proposed jury question (and its accompanying instructions and definitions) regarding Treurniet's liability for common-law fraud. We review a trial court's jury-charge rulings for abuse of discretion. See Sw. Energy Production. Co. .v Berry-Helfand, 491 S.W.3d 699, 727 (Tex. 2016). Because Dresser-Rand intended to rely on its proposed question, instructions, and definitions, we will conclude that the trial court's refusal to submit them constitutes reversible error only if Dresser-Rand's question, instructions, and definitions (a) were raised by the written pleadings and the evidence; (b) were written ...

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