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CLC Roofing, Inc. v. Helzer

Court of Appeals of Texas, Second District, Fort Worth

July 11, 2019

CLC Roofing, Inc., Appellant/Cross-Appellee
v.
E.G. Helzer, Appellee/Cross-Appellant & Mark Thompson, Appellee

          On Appeal from the 342nd District Court Tarrant County, Texas Trial Court No. 342-268794-13

          Before Sudderth, C.J.; Gabriel and Pittman, JJ.

          OPINION

          MARK T. PITTMAN JUSTICE

         The jury found that Appellee Mark Thompson and Appellee and Cross-Appellant E.G. Helzer (E.G.) committed fraud against Appellant CLC Roofing, Inc. (CLC). The trial court granted Thompson's motion for judgment notwithstanding the verdict (JNOV) and granted E.G.'s motion in part, reducing the jury's award on the claims against him. In its appeal, CLC complains of both the JNOV for Thompson and the reduction in damages in the final judgment. In his appeal, E.G. challenges the evidence supporting the jury's fraud findings against him. Because we hold that the evidence does not support a fraud finding against either Thompson or E.G., we affirm the trial court's JNOV for Thompson and reverse the trial court's final judgment against E.G.

         Background

         I. CLC has a Business Relationship with JEH Company to Purchase Roofing Shingles.

         This dispute arose from CLC's business relationship with JEH Company (JEH), which sold roofing and building supplies. JEH was owned by E.G.'s brother Jim Helzer. E.G. was JEH's chief operating officer, and Thompson was a JEH salesperson.

         Chad Cross, CLC's owner, had a business and occasionally social relationship with Thompson that predated Cross's founding of CLC. In late 2011, Cross and Thompson discussed CLC starting a bulk buy program with JEH. Cross ultimately negotiated an oral bulk buy agreement with JEH through E.G. Under the program, CLC used a line of credit to buy bulk quantities of roofing shingles from JEH. JEH agreed to hold the purchased shingles until needed by CLC. The parties never reduced their agreement to writing.

         CLC's lender required JEH to sign a "Landlord's Release" (the Release) under which JEH acknowledged the lender's security interest in the roofing shingles CLC bought from JEH. It agreed to hold the lender's collateral-specific invoiced, receipted shingles-"with reasonable care for separation and security" in the yard at JEH's Mansfield location. E.G. signed the Release for JEH. Thompson was aware of the Release but was not a party to it and did not sign it.

         CLC made multiple bulk buys with JEH. In its last and largest bulk buy, made on June 28, 2012 (the June 2012 bulk buy), CLC ordered 12, 000 shingle bundles for $339, 428.70.

         JEH periodically provided CLC with inventory reports showing how many shingles remained from the bulk buys. These reports were put together by JEH employee Michelle Collins. When CLC wanted an update, Thompson forwarded the request to Collins, who then sent an inventory report to CLC. Collins added shingles to the inventory report when E.G. gave her the details of another CLC bulk buy and subtracted from it when CLC ordered shingles from its bulk buy supply. She did not independently verify that the number of shingles the report showed as remaining from CLC's bulk buys were physically present at JEH's Mansfield location. Cross relied on the inventory reports to decide how many jobs he could or needed to sell and how to price them.

         JEH did not fill the bulk buys by taking CLC's money and using it to order shingles from its vendors. Instead, it filled the bulk buys with shingles it already had in its inventory, including shingles for which it had not yet paid its vendors.

         In December 2012, in order to pay down debt, JEH returned over $700, 000 worth of shingles to one of its vendors, including some shingles that JEH had allocated for CLC's bulk buy and for which CLC had paid JEH. JEH did not replenish the inventory it was supposed to have set aside for CLC to ensure it had shingles segregated to fill CLC's June 2012 bulk buy. Instead, as CLC ordered shingles from what Cross believed was CLC's stored bulk buy shingles, JEH would fill the orders by pulling inventory from its Mansfield location and its other locations. The inventory report provided to CLC in January 2013 did not reflect that JEH had returned some of CLC's shingles or that JEH did not have the remainder of the June 2012 bulk buy shingles set aside for CLC. At some point, Thompson learned about the return to JEH's vendor and that it included some of CLC's shingles, but he did not tell Cross. Despite meeting with Cross in March 2013, E.G. did not tell Cross about the shingles.

         II. JEH and Jim Helzer File for Bankruptcy and CLC Sues E.G. and Thompson.

         In May 2013, JEH and Jim Helzer filed for bankruptcy. In July 2013, CLC learned that some of its shingles had been returned to JEH's vendor. Out of the 12, 000 bundles CLC paid for in the June 2012 bulk buy, there were 8, 468 bundles CLC never received, with a value of $239, 535.52. However, CLC received a payment of $51, 321.40 from JEH's bankruptcy case.

         CLC sued E.G. and Thompson for fraud, fraud by nondisclosure, and breach of fiduciary duty.[1] The case was tried to a jury. At the close of evidence, the trial court granted a directed verdict for Thompson and E.G. on the breach of fiduciary duty claims.

         The jury found that E.G. committed fraud by material misrepresentation with respect to the June 2012 bulk buy and that Thompson did not. It further found that both Thompson and E.G. committed fraud by material omission with respect to the June 2012 bulk buy. The jury awarded CLC $362, 857.87 in actual damages; exemplary damages of $725, 715.74 against E.G.; and exemplary damages of $362, 857.87 against Thompson.

         Thompson and E.G. both filed motions for judgment notwithstanding the verdict. Both asserted that no evidence supported a fraud finding. E.G. also argued that the evidence only supported a finding of $239, 523.52 in actual damages, the value of the shingles CLC did not receive. He further asserted that the parties had stipulated that E.G. was entitled to a $51, 321.40 credit for the amount CLC received in the bankruptcy. And, he contended that because actual damages must be reduced, the exemplary damages award also had to be reduced.

         The trial court granted Thompson's motion and granted E.G.'s motion in part, sustaining the fraud findings against E.G. but reducing the jury's award. Because the trial court reduced the actual damages award, it also reduced the exemplary damages award. In its final judgment, the trial court awarded CLC $188, 202.12 in actual damages and $376, 404.24 in punitive damages, plus prejudgment interest and costs.

         CLC's Appeal

         In its first issue, CLC argues that the trial court erred in granting Thompson's JNOV motion and setting aside the jury's finding that Thompson committed fraud by omission. Thompson counters that the law does not support the duty to disclose relied on by CLC and that there was no evidence that he engaged in any actionable nondisclosure. We agree.

         I. We Review the Trial Court's JNOV Under a Legal Sufficiency Standard.

         Upon a party's motion and reasonable notice, a trial court may disregard a jury verdict and render a JNOV if no evidence supports the jury findings on an issue necessary to liability or if a directed verdict would have been proper. See Tex. R. Civ. P. 301; Tiller v. McLure, 121 S.W.3d 709, 713 (Tex. 2003); Fort Bend Cty. Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991).

         To determine whether the trial court erred by rendering a JNOV, we test legal sufficiency by viewing the evidence in the light most favorable to the verdict. See Ingram v. Deere, 288 S.W.3d 886, 893 (Tex. 2009); Wal-Mart Stores, Inc. v. Miller, 102 S.W.3d 706, 709 (Tex. 2003). This means we must credit evidence favoring the jury verdict if reasonable jurors could and must disregard contrary evidence unless reasonable jurors could not. See Tanner v. Nationwide Mut. Fire Ins., 289 S.W.3d 828, 830 (Tex. 2009); Cent. Ready Mix Concrete Co. v. Islas, 228 S.W.3d 649, 651 (Tex. 2007). We will uphold the trial court's JNOV if no evidence supports the jury's finding on a vital fact or if the evidence conclusively establishes the opposite of a vital fact. City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005).

         II. The Trial Court Did Not Err in Granting Thompson's JNOV Motion.

         CLC argues that the evidence established that Thompson made representations he later learned were false or misleading but did not disclose what he had learned and that Thompson voluntarily disclosed information without disclosing the whole truth. CLC primarily complains of Thompson's failure to disclose the following information:

(1) To fill the June 2012 bulk buy, JEH used shingles it already had in its inventory rather than ordering the shingles for the bulk buy from its vendors;
(2)JEH failed to keep CLC's bulk buy shingles segregated and on hold for CLC, which CLC alleges Thompson knew before the ...

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