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Correll v. Hartman

Court of Appeals of Texas, First District

September 7, 2017


         On Appeal from the 151st Judicial District Court Harris County, Texas Trial Court Case No. 2012-38756

          Panel consists of Chief Justice Radack and Justices Jennings and Bland.


          Terry Jennings Justice

         Appellant, Wayne Correll, challenges the trial court's judgment, entered after a jury trial, in favor of appellee, Michelle Hartman, in her suit against him for breach of contract, defamation, fraud, and, alternatively, violations of the Texas Deceptive Trade Practices Act ("DTPA").[1] In three issues, Wayne contends that the evidence is legally insufficient to support the jury's findings against him on Hartman's fraud and DTPA claims[2] and the trial court erred in awarding Hartman her attorney's fees.

         In a separate appeal, under this same appellate cause number, Hartman, as appellant, challenges the trial court's judgment notwithstanding the verdict ("JNOV") in favor of appellee, Peggy Correll, in Hartman's suit against her for fraud and violations of the DTPA.[3] In four issues, Hartman contends that the trial court erred in granting Peggy a JNOV on the ground that there is no evidence supporting the jury's findings against her on Hartman's fraud and DTPA claims.[4]

         We affirm in part and reverse and render in part.


         In her Second Amended Petition, Hartman alleged that in May 2011, Wayne and his wife, Peggy, fraudulently induced her to purchase their retail jewelry business, Correll's Jewelry, and to lease their store. At the time, Wayne was an experienced business owner with over 30 years of experience in the retail jewelry industry, and she was a court reporter with "little or no business experience" and no experience in retail jewelry. Wayne induced Hartman to purchase the business by falsely overstating its past sales revenues in an advertisement and refusing to furnish her with copies of his and Peggy's sales tax records and federal tax returns. Hartman asserted that she, in entering the parties' "bill of sale, " or purchase contract, and a lease of the store, "relied to her detriment upon the truth of [Wayne's] representations." She also alleged that Wayne and Peggy sold her the business assets at arbitrarily inflated values. Some of the assets were permanently affixed to the leasehold and, after the business failed, could not be removed without substantial damage to the real property.

         Hartman further alleged that after she had purchased Wayne and Peggy's business and moved into the store, Wayne began interfering with her business by operating a competing jewelry business and coming into Hartman's store and interfering with her customers. Moreover, Wayne breached the bill of sale and the lease, constructively evicting Hartman, by leasing the parking area dedicated to the jewelry store to a used-car sales business, and actually evicting her, by locking her out of the store for eight days.

         Hartman sought actual damages, including recovery of her $95, 000 investment and her lost profits, past and future; consequential damages; certain exemplary damages; and attorney's fees.

         At trial, Hartman testified that after her divorce, she looked for a business opportunity for her adult son. In May 2011, she saw an advertisement on Craigslist offering Correll's Jewelry for sale, along with the building and real property on which it was situated. In the advertisement was a link to a website for more information. The website, a printout of which the trial court admitted into evidence, stated, in pertinent part, as follows:

A perfect career opportunity to get in the retail wholesale jewelry business with a well established store with an excellent reputation. In operation for over 32 years and located in N.W. Houston fronting on a major 6 lane road, great signage, easy parking with a gated driveway for after hours security.
Owner will train buyers, and will sell the real estate or lease jewelry store space, perfect chance to get into the small box/big box type retail jewelry store, which seems to the be trend nowadays. For more real estate information go to link at . . . .
[photographs of building]
Owner will sell store with or without inventory, priced without inventory at $90, 000 including safes, signage, alarms, shop equipment, showcases and lighting, etc.
Sales are in the range of $300, 000 to $500, 000 with a small ad budget, increases are certain with more promotion and longer hours. . . .

(Emphasis added.)

         The website contained a "Company Overview, " which stated, in pertinent part, as follows:

Correll's Jewelry is a fine jewelry store retail business located in northwest Houston . . . [and] for sale by owner . . . . The company was established in 1979 by the present owner. The retail business specializes in all facets of retail and wholesale jewelry. The on premises shop has all the capabilities to reproduce, design and manufacture most items of jewelry as well as complete repair facilities. . . .
The business has enjoyed a[n] outstanding reputation for good prices, honesty, fast service and dependability. We have also expanded into the internet business world with our web site . . . . Visit our site for more information about our company or e-mail us at: . . . The owner . . . is willing to provide training and guidance during the transitional period after the sale in order to make not only you but the stores customers feel comfortable.
The building may be leased for $3, 200 per month or purchased outright with business for $890, 000. This includes other rental income from secondary buildings. Business alone, less inventory, $90, 000.

         The website also included an extensive list of equipment and assets, along with assigned values.

         Hartman further testified that on or near May 29, 2011, she telephoned Wayne, told him that she "had seen his ad, " inquired about purchasing the business and real property, and arranged to visit and see the store. Days later, Hartman, with "the entire printout" of the website in hand, went to the store, met with Wayne, and "spent a whole lot of time there." He explained that the Corrells owned four parcels of land and another building they could rent out. And they had a house behind the store, where they lived. Wayne told Hartman that he had built everything from the income from his jewelry business, which he had operated for over 30 years. Hartman noted that he had "a huge motor home, " "rings on every [finger] and lots of gold, " and "[i]t was just impressive." Wayne offered to sell her all four parcels of land and improvements for $850, 000. She explained to him that her house, worth $800, 000, had been paid off in her divorce and she would consider taking out a mortgage against it to make the purchase.

         After Hartman visited the property with her son, who declined to live at the location, Wayne suggested that Hartman "just buy[] the business" and, "if [she] still like[d] it after a year, " she could purchase the real estate. And he told her that if she did not like the business, he would buy it back from her. Wayne also stated that he had, on a past occasion, bought the business back from a purchaser.

         Subsequently, Hartman, along with her fiancé, Kelly Sumrall, met with Wayne, and asked to view the store's financial records. According to Hartman, Wayne abruptly refused, insisting that "jewelry stores don't do that" and "[n]o jewelry store would ever do that." Hartman explained that she accepted his answer and, after Wayne told her that other parties wanted to buy the business and she needed to make a decision, she decided to move forward with the purchase.

         Hartman and Wayne then exchanged emails, negotiating the language of the bill of sale, the list of assets to be included in the sale, and the terms of the lease. Hartman noted that Peggy had not participated in any of the discussions or negotiations, she had not met Peggy in person, and she had not had any conversations with her over a telephone. On June 12, 2011, Wayne arranged for Hartman to meet with him and Peggy to close the sale. On June 13, 2011, Hartman met with Wayne and Peggy, gave them a cashier's check for $87, 000, paid them $12, 750 from her credit cards and executed a bill of sale for the purchase of the business and a lease of the store. The trial court admitted into evidence the bill of sale and lease.

         The bill of sale provides that Wayne and Peggy, for the amount of $95, 000 cash at closing, agreed to sell to Hartman the "retail business known as Correll's Jewelry." Included in the sale was "all furniture, fixtures, equipment, trade fixtures and lighting, " and all items included on the attached equipment and asset list; use of the assumed name of "Correll's Jewelry" for up to one year; "$15, 000 worth of fine jewelry priced at wholesale . . . and to be chosen by buyer from sellers inventory with advice from seller considered"; and "no more than 30 days" assistance with the transition and training. And Wayne and Peggy "offer[ed] no guarantees of success or amount or sale potential of buyer" and "all due diligence" was to be "completed by" Hartman.

         The lease was for a term of one year and to commence on June 15, 2011, with an automatic renewal for one year, unless Hartman provided notice otherwise within 30 days before the renewal date. Rent of $3, 100 per month was due on the first day of each month and considered late after the tenth day. The lease also created "a lien upon and security interest in all property" of Hartman located at the leased premises.

         Hartman admitted that she did not read the bill of sale before she signed it. Rather, she "perused it kind of quickly" and "it looked pretty simple" to her. She explained that she believed that the business had been established for a "long time and had good customers." Hartman explained that her grandfather had had a jewelry store and she understood that Wayne, who had been in the business for a long time, would provide training. She trusted Wayne and relied "a hundred percent" on his representations about the store's sales being "$300, 000 to $500, 000" per year. And she anticipated purchasing the store and real estate on which it was situated at the end of the lease term.

         Hartman further testified that within two weeks after she had purchased the business, her relationship with Wayne began to deteriorate. She and her son did not "get along" with Wayne during the training period, and she asked Wayne to leave. Thereafter, the store did not generate the income that Hartman had anticipated. Her 2011 tax records for the business, which the trial court admitted into evidence, reflect a loss of $77, 422. Hartman noted that although she had sold a "lot" of jewelry in February 2012, around Valentine's Day, she had been forced to sell all of it on credit to "no-credit-check" customers that had failed to fully pay. She was further forced to cover operating expenses from her personal funds. And, on two occasions, the store's utilities were shut off for ...

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