Opinion
No. 01-08-00539-CV
Opinion issued October 15, 2009.
On Appeal from the 412th Judicial District Court, Brazoria County, Texas, Trial Court Cause No. 33146.
Panel consists of Justices KEYES, ALCALA, and HANKS.
OPINION
Appellant, Janell S. Marin appeals from a judgment in favor of appellee, IESI TX Corporation ("IESI"). The judgment was rendered in accordance with the jury's findings that Marin committed forgery, misapplication of fiduciary property, fraud, and conversion. In nine issues, Marin challenges the trial court's admission of evidence, the legal and factual sufficiency of the evidence, and the award of exemplary damages. We conclude that the trial court did not err in the admission of the evidence, that the evidence is legally and factually sufficient, and that the trial court properly awarded exemplary damages. We affirm. Background IESI was a waste management company based in Fort Worth, Texas. IESI purchased Envirotex, Inc. ("Envirotex") in December 1998. Marin was the president and a co-owner of Envirotex. After the purchase, Envirotex became IESI's Alvin Division and Marin was hired as the Alvin Division manager. IESI also gave Marin accounting and financial responsibilities for the Alvin Division because she was a certified public accountant in Texas.
As part of an audit conducted during the first quarter of 2004, IESI's accounting firm, Ernst Young, sent out balance confirmation notices to three customers in the Alvin Division. These customers were the City of Alvin, the City of League City, and the City of Friendswood. The notices sought to confirm that the amount the customer owed to IESI matched the amount owed in IESI's records. All three customers responded that their numbers did not match IESI's. Marin was asked to investigate in order to reconcile the discrepancies in the amounts. Several days later, at IESI's office where the audit was being done, Ernst Young received three letters purportedly from Alvin, League City, and Friendswood confirming that the original amount listed in the balance confirmation request was actually correct.
Ernst Young and IESI immediately suspected at least one of the letters was a forgery. The signature of Lonna Stein on the followup letter received from League City differed significantly from her signature on the response to the original balance confirmation request. IESI called Lonna Stein, who denied the letter or signature had come from her.
IESI began an investigation of the Alvin Division. Marin denied any involvement with the letters when IESI inquired whether she knew anything about them. The investigation found that (1) all three letters were forgeries; (2) the fax header indicated the letters were sent from Marin's office; (3) Melissa Lawler, a clerk in the Alvin Division, had been asked by Marin to obtain sample letterheads from Alvin, League City, and Friendswood; (4) money owed to IESI by its customers had been overstated by $1.585 million; and (5) customer checks payable to IESI were deposited into an Envirotex account in the amount of $112,209.33. After the completion of the investigation, IESI determined that inaccuracies on accounts receivable and payable resulted in an overstatement of the Alvin Division's profits by $2.4 million. IESI terminated Marin's employment shortly after the investigation.
IESI filed suit against Marin seeking (1) some of the expenses associated with the Alvin Division investigation; (2) the IESI money deposited by Marin in the Envirotex account; (3) bonuses paid to Marin based on the financial performance of the Alvin Division that would not have been paid had the Division's earnings been accurately stated; and (4) exemplary damages based on Marin's intentional conduct.
During discovery, Marin sent a request for disclosure under Texas Rule of Civil Procedure 194 to IESI. In its response, IESI designated Steve Moody and Alyssa Martin as fact witnesses, allowing for the possibility that their testimony may include expert opinion. Specifically, in response to the request for disclosure of "persons having knowledge of relevant facts," IESI disclosed the following information regarding Moody and Martin:
See Tex. R. Civ. P. 194.1, 194.2 (providing basic discovery of specific categories of information without objection).
Mr. Moody has knowledge of IESI's accounting systems, corporate policies, and corporate procedures. He has knowledge of the facts and circumstances surrounding the activities at the IESI Alvin office that form the basis of this lawsuit.
. . . .
Ms. Martin is an accountant who was hired by IESI to conduct an investigation into the activities at the Alvin office.
In response to the request for disclosure seeking information concerning testifying experts, IESI disclosed, in pertinent part, the following:
Mr. Moody is a fact witness and an employee of IESI. He has knowledge of IESI's accounting systems, corporate policies, and corporate procedures. He has knowledge of the facts and circumstances surrounding the activities at the IESI Alvin office that form the basis of this lawsuit. As an accounting professional, some of his testimony may take the form of expert testimony regarding accounting matters.
. . . .
Ms. Martin is an accountant who was hired by IESI to conduct an investigation into the activities at the Alvin office for IESI business purposes and not specifically for the purpose of providing expert testimony. She is a fact witness, but as an accounting professional, some of her testimony may take the form of expert opinion testimony regarding accounting matters.
At trial, Moody and Martin testified about their employment at IESI. During their testimony, IESI documents were admitted into evidence. The trial court overruled Marin's objection that the documents were inadmissible due to IESI's failure to produce the documents prior to trial, as required for evidence reviewed by experts. The trial court admitted the documents, determining that Moody and Martin were fact witnesses and not experts.
After the jury trial, the trial court awarded (1) $97,239.15 in actual damages to IESI for accounting expenses related to the investigation, bonuses paid based on inaccurate financial information, and conversion; (2) $17,678.87 to IESI in prejudgment interest; and (3) $310,105 in exemplary damages to IESI for intentional fraud, forgery, and misapplication of fiduciary property. The trial court denied Marin's Motion for Remittitur and Motion for New Trial. Admissibility of Evidence
In her first issue, Marin contends "the trial court abused its discretion in admitting evidence that was subject to a mandatory exclusion for not being produced in discovery." Specifically, Marin contends that IESI designated Moody and Martin as expert witnesses but did not disclose any documents reviewed by them, which required exclusion of the non-produced documents under the Texas Rules of Civil Procedure. See Tex. R. Civ. P. 193.6(a), 194.2 (f)(4)(A). The exhibits about which Marin complains are Exhibits 6, 7, 10, 11, 12, 13, 14, 15, 33, 35, 36, 37, 38, and 39. In her ninth issue, Marin contends that the admission of the documents deprived her of the jury's reasonable consideration of her counterclaim.
Marin's brief mistakenly refers to Exhibit 8. Based on the description of the exhibit and the record, it is clear she is referring to Exhibit 7. Moreover, in her original brief, Marin included eight other exhibits, but she concedes in her reply brief that she did not properly object to those exhibits at trial. The challenge to those exhibits, therefore, is waived. See Mieth v. Ranchquest, Inc., 177 S.W.3d 296, 307 (Tex. App. [1st Dist.] 2005, no pet.) (holding failure to object to evidence at trial waives complaint on appeal) (citing Tex. R. App. P. 33.1).
A. Applicable Law
"The admission and exclusion of evidence is committed to the trial court's sound discretion." Benavides v. Cushman, Inc., 189 S.W.3d 875, 878-79 (Tex. App. [1st Dist.] 2006, no pet.) (citing City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex. 1995)). A trial court abuses its discretion when it rules without regard for any guiding rules or principles. See Alvarado, 897 S.W.2d at 754. We uphold the district court's evidentiary ruling if there is any legitimate basis for the ruling. Owens-Corning Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex. 1998).
A fact witness may give opinion testimony if his opinions are "(a) rationally based on the perception of the witness and (b) helpful to a clear understanding of the witness' testimony or the determination of a fact in issue." Tex. R. Evid. 701. An expert is a witness qualified by "knowledge, skill, experience, training, or education" in an area of "scientific, technical, or other specialized knowledge." Tex. R. Evid. 702. An expert may testify in the form of opinions or otherwise if it "will assist the trier of fact to understand the evidence or to determine a fact in issue." Id.
Rule 194 of the Texas Rules of Civil Procedure provides that if an expert is retained by a party, the other party may request disclosure of "all documents, tangible things, reports, models, or data compilations that have been provided to, reviewed by, or prepared by or for the expert in anticipation of the expert's testimony." Tex. R. Civ. P. 194.2(f)(4)(A). Texas Rule of Civil Procedure 193.6(a) provides that a party who fails to make, amend, or supplement a discovery response in a timely manner may not introduce in evidence the material or information that was not timely disclosed, unless the court finds that there was good cause for the failure to make, amend, or supplement the discovery response timely, or that the other parties will not be unfairly surprised or prejudiced by the failure to make, amend or supplement. Tex. R. Civ. P. 193.6(a). The party seeking to introduce the evidence carries the burden of establishing good cause, lack of unfair surprise, or lack of unfair prejudice. Tex. R. Civ. P. 193.6(b). A finding of good cause, lack of unfair surprise, or lack of unfair prejudice must be supported by the record. Id. The expert disclosure rules do not apply to fact witnesses. Rather, the Texas Rules of Civil Procedure provide for requests for production to obtain documents within the possession, custody, or control of parties. See Tex. R. Civ. P. 196.1-.6. Moody, an employee of IESI, and Martin, an auditor that contracted for IESI, were both subject to the control of IESI, a party to these proceedings.
Hearsay is "a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." Tex. R. Evid. 801(d). The rules of evidence classify some evidence as non-hearsay and some evidence as hearsay that is admissible under an exception to the hearsay rule. See Tex. R. Evid. 802 ("Hearsay is not admissible except as provided by statute or these rules. . . ."); Tex. R. Evid. 803 ("The following are not excluded by the hearsay rule. . . ."). For example, one exception to the hearsay rule is records of "regularly conducted activity." Tex. R. Evid. 803(6).
B. Analysis
Marin challenges the trial court's ruling that Moody and Martin are fact witnesses rather than expert witnesses by asserting that the witness list supplied by IESI lists them as experts. Marin, however, misstates the record. In response to Marin's requests for disclosure, IESI designated Moody and Martin as fact witnesses, but also identified them as "accounting professionals," stating some of their testimony "may take the form of expert opinion regarding accounting matters." The record, therefore, shows that some of the testimony by Moody and Martin could take the form of an expert opinion concerning accounting matters. Although IESI designated Moody and Martin as experts as to some accounting matters on the witness list, the trial court ruled their testimony was admissible as testimony from fact witnesses. We conclude the mere fact that the witness list identified Moody and Martin as possibly giving expert testimony does not establish that they did actually give expert testimony.
In this appeal, Marin does not specifically refer to anywhere in the record where Moody and Martin testified as experts. Marin makes no assertion that Martin was an expert for any other reason than the fact that she was designated as possibly giving some expert opinion concerning "accounting matters." Marin's sole argument is that Moody gave his opinion based on hearsay, which Marin contends necessarily made Moody an expert. The documents admitted through Moody, however, were not admitted as hearsay evidence relied on by an expert. Rather, as detailed below, the documents were admitted as either non-hearsay evidence, under an exception to the hearsay rule, or were repetitive of unobjected to testimonial evidence.
1. Exhibits 6 and 7
Exhibits 6 and 7 are copies of the forged letters received from Friendswood and League City that misstate the cities' account balances. These exhibits were introduced through Moody. Moody testified that the letters were given to him by the auditors from Ernst Young. Moody stated these forged letters contradicted the earlier letters and were the event that triggered the need for an investigation of the Alvin Division. IESI offered the exhibits for that limited purpose and not for the truth of any matter asserted in the letters. The trial court admitted the letters on that basis and instructed the jury accordingly.
Marin's complaint on appeal is that Moody testified to hearsay, which only an expert can do. But Exhibits 6 and 7 were not offered to prove the truth of the matter asserted and, therefore, were not hearsay. See Tex. R. Evid. 801; Ash v. Hack Branch Distrib. Co., 54 S.W.3d 401, 411 (Tex. App.-Waco 2001, pet. denied) (concluding out-of-court statements not hearsay because not offered for truth of matter asserted).
We overrule Marin's first issue with respect to Exhibits 6 and 7.
2. Exhibit 10
Exhibit 10 is an accounting summary created by Moody showing the amount of accounting fees incurred during the investigation of the Alvin Division, which IESI sought as damages in this case. Marin objected that Moody would have to testify as an expert to prove the fees were reasonable and necessary. Marin asserted that Moody, as an expert, had reviewed Exhibit 10 in forming his opinion that the fees were reasonable and necessary, and, therefore, Exhibit 10 was subject to the exclusion of rule 193.6 because it had not been timely disclosed. When Marin objected to the admission of Exhibit 10 and Moody's testimony concerning the accounting fees, she complained that opposing counsel had not "given any good cause for not producing this. And they [sic] are not showing failure to prejudice." After examining the exhibit and questioning counsel, the trial court allowed Moody to testify to the amount of the fees incurred.
On appeal, Marin asserts that IESI did not carry its burden of showing good cause or lack of unfair surprise. Marin cites only a single unpublished case to support her contention that she was unfairly surprised. See Hatch v. Tex. Prop. Cas. Ins. Guar. Assoc., No. 01-06-00631-CV, 2007 WL 2011041 (Tex. App. [1st Dist.] July 12, 2007, no pet.). However, Hatch is distinguishable. In that case, this Court was reviewing the record to see if any evidence supported the trial court's finding that there was unfair surprise. See id., 2007 WL 2011041, at *6. Here, we are reviewing the record to see if any evidence supports the trial court's finding the Marin was not unfairly surprised. As noted in Hatch, "We must uphold the trial court's evidentiary ruling if there is any legitimate basis for the ruling." Id. (citing Owens-Corning Fiberglas Corp., 972 S.W.2d at 43).
The trial court stated it found no unfair surprise to Marin because the petition specifically sought damages based on the costs of investigating the Alvin Division. IESI sought damages for "[t]he costs incurred by IESI in investigating and remedying the accounting and management problems caused by [Marin's] conduct. This amount is not in excess of $200,000.00." Within the factual allegations, IESI specifically named Weaver Tidwell, but not Ernst Young. Although it did not disclose a precise amount, IESI disclosed it was seeking economic damages for "the cost of IESI's investigation into and correction of the false accounting entries" at the Alvin Division. Furthermore, during Moody's deposition, he testified and was examined concerning the amounts paid to Weaver Tidwell and to Ernst Young for the investigation. The trial court also stated there was no surprise with respect to the Ernst Young invoice because it was a single amount and was not itemized or detailed. The trial court allowed Moody to testify to the amounts of the invoices and what was paid by IESI, but not to testify concerning the reasonableness and necessity of the fees.
Concerning the Weaver Tidwell fees, we hold the record supports the trial court's finding that Marin was not unfairly surprised. Both the petition and discovery responses gave her notice that IESI sought as damages its costs for investigating the Alvin Division. See Williams v. County of Dallas, 194 S.W.3d 29, 33 (Tex. App.-Dallas 2006, pet. denied) (upholding trial court's determination of lack of unfair surprise concerning back taxes accrued after filing of suit where petition gave notice lawsuit covered all claims for delinquent taxes, including taxes becoming delinquent after filing of suit until judgment). We also note that the amount of damages reflected in Exhibit 10 and awarded by the jury was $47,840.31, significantly below the amount of $200,000 pleaded.
With respect to the Ernst Young fees, we hold that the error, if any, in admitting the evidence was harmless. The jury awarded "$0" in damages for the Ernst Young fees.
We overrule Marin's first issue with respect to Exhibit 10.
3. Exhibits 11, 12, 13, 14, and 15
Exhibits 11, 12, 13, and 14 are IESI's profit and loss statements for the calendar years 2000, 2001, 2002, and 2003. Exhibit 15 is a summary of Marin's earnings and bonuses paid from IESI. Marin contends these documents, "which go to the amount and theory of damages," should have been produced in response to her requests for disclosure because they "had all been reviewed by, if not prepared by, Steve Moody."
Moody was the controller for IESI. As such, Moody was the employee in charge of the books and records of IESI. Moody was also personally involved in investigating the Alvin Division. Moody's testimony was based on his perception as the primary person at IESI in charge of making, maintaining, and reviewing the corporate books and accounts. We conclude the trial court properly characterized Moody's testimony concerning the these exhibits as that of a fact witness and not an expert witness. See Hartis v. Century Furniture Indus., Inc., 230 S.W.3d 733, 736 (Tex. App. [14th Dist.] 2007, no pet.) (furniture store's controller opinion testimony concerning fair market price admissible as fact witness testimony because it was based on controller's perception and experience in selling furniture). The provisions of rule 194.2(f) do not apply to fact witnesses. Therefore, Exhibits 11, 12, 13, 14, and 15 were not required to be produced in response to Marin's request for disclosure and are not subject to the exclusion provisions of rule 193.6.
We overrule Marin's first issue with respect to Exhibits 11, 12, 13, 14, and 15.
4. Exhibit 33
Exhibit 33 is a list of accounts for the Alvin Division. Marin objected that it was a document prepared or reviewed by Martin and not disclosed. IESI responded that Martin, as an accountant that performed the audit of IESI, would be testifying to the facts found in the audit and not offering an opinion based on Exhibit 33. On appeal, Marin asserts Exhibit 33 "goes directly to theamount and method of calculating damages."
Martin testified to the content of Exhibit 33, including that she found a number of customers of the Alvin Division that had been charged but not made any payments. She also stated the records of the accounts looked suspicious to her as an auditor. Marin did not object to any of this testimony, but only to the admission of Exhibit 33.
Because she failed to object to Martin's testimony, Marin waived any objection to the admission of Exhibit 33. See Bay Area Healthcare Group, Ltd. v. McShane, 239 S.W.3d 231, 235 (Tex. 2007) (complaining party waives error in admission of evidence if evidence introduced elsewhere without objection).
We overrule Marin's first issue with respect to Exhibit 33.
5. Exhibit 35
Exhibit 35 is an accounting "analytic" run by IESI. Marin's objection to the admission of this document was initially sustained. However, IESI re-offered Exhibit 35 during redirect examination, asserting Marin "spent a half hour cross-examining [Moody] on that document." The trial court allowed the document to be admitted on that basis and Marin did not object when it was re-offered. Error in the improper admission of evidence is usually deemed harmless if the objecting party "opens the door" by introducing the same evidence or evidence of a similar character. Sw. Elec. Power Co. v. Burlington N. R.R. Co., 966 S.W.2d 467, 473 (Tex. 1998). Furthermore, by failing to object to its admission when it was re-offered under a different theory, any error is not preserved. See Bay Area Healthcare Group, Ltd., 239 S.W.3d 231 at 235.
We overrule Marin's first issue with respect to Exhibit 35.
6. Exhibit 36, 37, 38, and 39
Exhibits 36 through 39 are invoices from landfill companies charging IESI for their services. Marin's objection to the admission of these invoices was initially sustained. However, when IESI offered these a second time, Marin did not object. Therefore, Marin waived any error in the admission of these documents. See id.
We overrule Marin's first issue with respect to Exhibits 36, 37, 38 and 39.
Forgery, Fraud, and Misapplication of Fiduciary Property In her fourth, fifth, and sixth issues, Marin challenges the legal and factual sufficiency of the evidence to support the finding that she committed forgery, fraud, and misapplied fiduciary property.
A. Legal and Factual Sufficiency Standard of Review
In reviewing the trial court's verdict for legal sufficiency, we credit evidence that supports the verdict if reasonable jurors could, and disregard contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005). A challenge to the legal sufficiency of evidence will be sustained when, among other things, the evidence offered to establish a vital fact does not exceed a scintilla. Id. at 810. Evidence does not exceed a scintilla if it does no more than create a mere surmise or suspicion that the fact exists. Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 601 (Tex. 2004). In conducting a legal-sufficiency review in a case in which the burden of proof is "clear and convincing evidence," we must consider all of the evidence, not only that which favors the verdict. See City of Keller, 168 S.W.3d at 817.
In determining the factual sufficiency of the evidence to support a jury's finding, courts of appeals are to weigh all the evidence, both for and against the finding. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 242 (Tex. 2001). In reviewing a factual sufficiency challenge to a finding where the burden of proof is not on the complaining party, we set aside the verdict only if the evidence in support of the finding is so weak as to render the verdict clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986). In conducting our review, we may not substitute our judgment for that of the jury, which is the sole judge of the credibility of witnesses and the weight to be given to their testimony. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003). In determining factual sufficiency under the clear and convincing burden, we must consider whether the evidence is sufficient to produce in the mind of the factfinder a firm belief or conviction as to the truth of the allegation sought to be established. In re C.H., 89 S.W.3d 17, 26 (Tex. 2002). We consider whether disputed evidence is such that a reasonable factfinder could not have resolved that disputed evidence in favor of its finding. In re J.F.C., 96 S.W.3d 256, 266 (Tex. 2002). "If, in light of the entire record, the disputed evidence that a reasonable factfinder could not have credited in favor of the finding is so significant that a factfinder could not reasonably have formed a firm belief or conviction, then the evidence is factually insufficient." Id.
B. Forgery
In her fourth issue, Marin challenges the legal and factual sufficiency of the evidence under the clear and convincing standard to support the finding that she committed forgery.
Under section 41.008(c)(8) of the Texas Civil Practice and Remedies Code, the statutory cap on exemplary damages may be exceeded for an intentional or knowing violation of section 32.21 of the Penal Code. See Tex. Civ. Prac. Rem. Code Ann. § 41.008(c)(8) (Vernon Supp. 2009). Under section 32.21, a person commits an offense if he forges a writing with intent to defraud or harm another. Tex. Penal Code Ann. § 32.21(b) (Vernon Supp. 2008). "Forge" means to alter, make, complete, execute, or authenticate any writing so that it purports: (1) to be the act of another who did not authorize that act; (2) to have been executed at a time or place or in a numbered sequence other than was in fact the case; or (3) to be a copy of an original when no such original existed. Id. § 32.21(a)(1)(A). The intent to defraud or harm may be established by circumstantial evidence. Williams v. State, 688 S.W.2d 486, 488 (Tex. Crim. App. 1985).
Within her fourth issue, Marin contends the "key element ofintent to defraud or harm was omitted from the jury charge." Marin asserts that without a jury instruction on that element, the award of exemplary damages cannot stand. Texas Rule of Civil Procedure 278 provides, in pertinent part, "Failure to submit a definition or instruction shall not be deemed a ground for reversal of the judgment unless a substantially correct definition or instruction has been requested in writing and tendered by the party complaining of the judgment." Tex. R. Civ. P. 278; see McCarthy v. Wani Venture, A.S., 251 S.W.3d 573, 585-86 (Tex. App. [1st Dist.] 2007, pet. denied) (holding complaint concerning definition in jury charge waived despite party's objection because rule 278 requires tender of substantially correct instruction).
Question 9, the forgery question, asked the jury, "Do you find by clear and convincing evidence that JANELL S. MARIN knowingly or intentionally committed forgery?" The trial court instructed the jury on the burden of proof for "clear and convincing evidence," as well as the definitions of "knowingly" and "intentionally." Finally, the trial court instructed the jury as follows:
"Forgery" means:
(A) to alter, make, complete, execute, or authenticate any writing so that it purports:
(i) to be the act of another who did not otherwise act;
(ii) to have executed at a time or place in a numbered sequence other than was in fact the case; or
(iii) to be a copy of the original when no such original existed.
During the charge conference, Marin made the following objection to Question 9:
Question 9 is again, another, quote "cap busting" question. And again, there are no pleadings that would justify submitting Question No. 9 under the penal code. It's making allegations with regards to forgery that are not within the original petition that — the current active petition. And there is insufficient evidence or no evidence that would support this. Any documents that might be used to justify any — this allegation should have been produced in response to legitimate discovery requests under our requests for disclosure and were not. No good cause has been shown and we would object to the submission of Question No. 9.
Marin did not object that the instruction accompanying Question 9 was not correct, nor did she request a "substantially correct definition or instruction." Because Marin never objected on the ground that the jury was not instructed on the "key element of intent to defraud or harm," any error on this ground is not preserved for appeal. See Tex. R. Civ. P. 278; McCarthy, 251 S.W.3d at 585-86. We must also address the sufficiency of the evidence in light of the charge given to the jury. See St. Joseph Hosp. v. Wolff, 94 S.W.3d 513, 530 (Tex. 2002) (noting that when charge is submitted without objection, sufficiency of evidence is measured against charge given).
The record shows that while Ernst Young was conducting a routine audit of IESI, it sent balance confirmation letters to a number of IESI's clients, including the cities of Alvin, Friendswood, and League City. All three cities responded, stating they owed less than the amount reflected in IESI's books. Marin was asked to contact the cities concerning the discrepancies. Within days, the auditors working at IESI received letters from the three cities stating their earlier letters were incorrect and they owed the amounts stated in IESI's books. The letters were all faxed from the Alvin Division. The auditors immediately noticed the signature of Lonna Stein, the controller for League City, was not the same on the second confirmation letter as on the first letter. At trial, Stein and the city employees from Alvin and Friendswood all testified that the later confirmation letters were not written by them and that their signatures were forged.
Tom Brown, one of IESI's vice-presidents, testified that when he confronted Marin with the forged letters, she reacted strangely and this caused him to believe she had something to do with the forged letters. Brown also testified that an Alvin Division employee told him that Marin instructed the employee to get samples of the letterheads from the cities of Alvin, Friendswood, and League City. Melissa Lawler, another former Alvin Division employee, testified that, shortly before the time the forged letters were sent to the auditors, Marin asked her to get samples of the letterhead from Alvin, Friendswood, and League City. The time and date stamp on all three forged letters matches the stamp from Marin's fax machine.
A reasonable juror could form a firm belief or conviction Marin made the letters so that they purported "to be the act of another who did not otherwise act." See Chapa v. Tony Gullo Motors I, L.P., No. 09-03-00568-CV, 2004 WL 1902533, at *8 (Tex. App.-Beaumont, Aug. 26, 2004), rev'd on other grounds, 212 S.W.3d 299 (Tex. 2006) (holding evidence legally sufficient to support forgery finding under clear and convincing standard where plaintiff testified her signature and signature of her deceased husband were forged and presented proof of her usual signature for jury to review). Likewise, the disputed evidence is such that a reasonable factfinder could have resolved that disputed evidence in favor of the finding of forgery. See id. (holding evidence factually sufficient to support forgery finding under clear and convincing standard). Therefore, we hold the evidence is legally and factually sufficient to support the jury's finding concerning forgery.
We overrule Marin's fourth issue.
C. Fraud
In her fifth issue, Marin challenges the legal and factual sufficiency of the evidence under the clear and convincing standard to support the finding that she committed fraud.
The jury was instructed,
Fraud occurs when —
a. [A] party makes a material representation[,]
b. The misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion,
c. The misrepresentation is made with the intention that it should be acted on by the other party, and
d. The other party relies on the misrepresentation and thereby suffers injury.
"Misrepresentation" means a false statement of fact.
See Ernst Young, L.L.P. v. Pac. Mut. Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001) (stating elements of common-law fraud: (1) material representation that was false when made; (2) when representation was made, speaker knew it was false or made it recklessly as positive assertion without any knowledge of its truth; (3) speaker made representation with intent that other party should act upon it; (4) other party actually and justifiably relied on representation; and (5) thereby suffered injury).
The record shows the books of the Alvin Division contained customers or other accounts receivable that did not exist. In addition, the books overstated the balances owed by Friendswood, League City, and Alvin. The incorrect account information resulted in the Alvin Division appearing to be more profitable than it in fact was. Marin was paid bonuses based on the profitability of the Alvin Division, as incorrectly stated in the books. Moody testified that Marin, as the manager for the Alvin Division, was in charge of the books and the tracking the accounts for the division. Moody also testified that Marin's user identification was linked with some of the falsified accounts and transactions.
Furthermore, the jury was presented with evidence that the letters from Alvin, League City, and Friendswood were forgeries. A former Alvin Division employee testified that Marin had asked her to obtain sample letterheads from Alvin, League City, and Friendswood. The fax header indicated the forged letters were sent from Marin's office. The three forged letters contained misstatements of fact concerning the balance owed by the three cities.
A reasonable juror could form a firm belief or conviction Marin knowingly misrepresented the accounts with the intention that IESI would act upon the information in paying Marin's bonuses. Foley v. Parlier, 68 S.W.3d 870, 880-81 (Tex. App.-Fort Worth 2002, no pet.) (holding evidence legally sufficient to support jury's finding of fraud under clear and convincing standard where plaintiff testified defendant misrepresented value of business plaintiff wished to purchase, but defendant testified she did not). Also, the disputed evidence is such that a reasonable factfinder could have resolved that disputed evidence in favor of the finding of fraud. See id. (holding evidence factually sufficient to support fraud finding under clear and convincing standard). Therefore, we hold the evidence is legally and factually sufficient to support the jury's finding concerning fraud.
We overrule Marin's fifth issue.
D. Misapplication of Fiduciary Property
In her sixth issue, Marin challenges "[w]hether the evidence was legally and factually sufficient to support the jury's findings that by clear and convincing evidence Janell Marin committed [sic] misapplied fiduciary property."
Question 8 asked the jury, "Do you find by clear and convincing evidence that JANELL S. MARIN knowingly or intentionally misapplied fiduciary property?" The definitions accompanying this question informed the jury of the meaning of "clear and convincing evidence," "intentionally," and ""knowingly." The jury was also told,
"Misapply" means deal with property contrary to
(A) An agreement under which the fiduciary holds the property or
(B) A law prescribing the custody or disposition of the property.
See also Tex. Penal Code Ann. § 32.45(a)(2) (Vernon Supp. 2008).
The evidence shows that Marin deposited checks tendered for payment to IESI into the Envirotex account she controlled. Moody testified that customer payments should have been deposited into an IESI account and Marin did not have the authority to deposit customer payment checks into Envirotex's account. Furthermore, IESI did not know or approve of Marin's depositing of customer payment checks into the Envirotex account. Moody also testified that he examined Envirotex's account and saw that $112,209.33 of checks payable to IESI were deposited in the account and that only $96,757,96 worth of checks had been written to IESI out of that account.
A reasonable juror could form a firm belief or conviction Marin dealt with property contrary to an agreement with IESI concerning the property. See Bailey v. State, No. 03-02-00622-CR, 2003 WL 22859984, at *6 (Tex. App.-Austin Dec. 4, 2003, pet. ref'd) (evidence legally sufficient to support finding beyond reasonable doubt defendant misapplied fiduciary property by depositing funds from joint account into defendant's personal account). Looking to all the evidence, the disputed evidence is such that a reasonable factfinder could have resolved that disputed evidence in favor of the finding of misapplication of fiduciary property. See id. (evidence factually sufficient to support finding beyond reasonable doubt defendant misapplied fiduciary property by depositing funds from joint account into defendant's personal account). Therefore, we hold the evidence is legally and factually sufficient to support the jury's finding concerning misapplication of fiduciary property.
We overrule Marin's sixth issue.
Exemplary Damages
In her third issue, Marin asserts that an award of exemplary damages in excess of the statutory cap cannot be supported "without having any pleadings or without being tried by consent." Marin contends in her second issue that "the judgment for exemplary damages was excessive and exceeded the statutory cap." Marin presents the same argument for her second issue as she does for her seventh issue, in which she asserts the evidence is legally and factually insufficient to support exemplary damages.
A. Exemplary Damages and the Statutory Cap
Exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the harm with respect to which the claimant seeks recovery of exemplary damages results from fraud, malice, or gross negligence. Tex. Civ. Prac. Rem. Code Ann. § 41.003(a) (Vernon Supp. 2009). In addition, exemplary damages awarded against a defendant may not exceed an amount equal to the greater of (1) two times the amount of economic damages; plus an amount equal to any non-economic damages found by the jury, not to exceed $750,000; or (2) $200,000. Id. § 41.008(b) (Vernon Supp. 2009). This section does not apply if the plaintiff seeks recovery of exemplary damages based on certain enumerated acts committed intentionally or knowingly, including forgery and misapplication of fiduciary property. Id. § 41.008(c)(8), (10).
B. Notice from the Pleadings
Texas follows a "fair notice" standard for pleading, which looks to whether the opposing party can ascertain from the pleading the nature and basic issues of the controversy and what testimony will be relevant. Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 896 (Tex. 2000). Rule 47 of the Texas Rule of Civil Procedure provides a pleading "shall contain . . . a short statement of the cause of action sufficient to give fair notice of the claim involved. . . ." Tex. R. Civ. P. 47. "The purpose of this rule is to give the opposing party information sufficient to enable him to prepare a defense." Roark v. Allen, 633 S.W.2d 804, 810 (Tex. 1982). The test of fair notice is whether an opposing attorney of reasonable competence, on review of the pleadings, can ascertain the nature and the basic issues of the controversy and the testimony probably relevant. Bowen v. Robinson, 227 S.W.3d 86, 91 (Tex. App. [1st Dist.] 2006, pet. denied). The "fair notice" requirement of Texas pleading relieves the pleader of the burden of pleading evidentiary matters with meticulous particularity. Id.
Here, IESI states in its petition under a section entitled "Exemplary Damages" that
Considering the wrongful nature of Ms. Marin's transactions, her fraudulent acts and omissions, her intentional acts, her breach of the fiduciary duties she owed to IESI, and the degree to which her actions offend the public's traditional sense of justice and propriety, an award of exemplary damages is justified and warranted in this case. IESI sues for exemplary damages.
IESI's petition gives fair notice that IESI sought exemplary damages based on Marin's conduct, specifically alleging "fraudulent acts and omissions" and "breach of fiduciary duties owed to IESI." IESI includes factual allegations that Marin forged letters from Alvin, Friendswood, and League City and that she deposited checks payable to IESI in accounts that she controlled. Forgery and misapplication of fiduciary property are two of the statutory bases for exceeding the cap on exemplary damages. See Tex. Civ. Prac. Rem. Code Ann. § 41.008(c)(8), (10).
We conclude IESI's petition seeking exemplary damages provides fair notice of the basic issues supporting its claims for intentional forgery and intentional misapplication of fiduciary property, and, therefore, necessarily alerted Marin that the exemplary damages cap would not apply because the statute governing exemplary damages provides that the cap may be exceeded for those circumstances. See Horizon/CMS Healthcare Corp., 34 S.W.3d at 896; cf. Al Parker Buick Co. v. Touchy, 788 S.W.2d 129, 130 (Tex. App. [1st Dist.] 1990, orig. proceeding) (denying discovery of defendant's net worth because petition alleged "no facts that might establish [plaintiff's] right to a recovery of exemplary damages from [defendant]").
We overrule Marin's third issue.
C. Sufficiency of Evidence for Exemplary Damages
In her seventh issue, Marin challenges "[w]hether the evidence was legally and factually sufficient to support the jury's findings that by clear and convincing evidence Janell Marin be assessed punitive damages."
Marin challenges exemplary damages for forgery, but the jury did not award exemplary damages for forgery; the award for exemplary damages was for breach of fiduciary duty or for fraud. The jury was asked to assess exemplary damages based upon its answer to Question 1 concerning a breach of fiduciary duty or its answer to Question 2 concerning fraud.
In her brief, Marin's sole challenge to the award for exemplary damages for fraud or breach of fiduciary duty states,
It is impossible for a jury to find in favor of [IESI] on this issue by "clear and convincing evidence" in the face of all the witnesses['] statements that they had no proof that Janell Marin or anyone on her behalf was, in any way, involved in forgery or fraud.
The record is absent of any evidence [sic] that links Janell Marin to forgery, fraud, or misapplying fiduciary property.
(Emphasis in original).
We have already addressed the sufficiency of the evidence supporting the jury's findings of forgery, fraud, and misapplication of fiduciary duty and found the evidence both legally and factually sufficient. We therefore overrule Marin's second and seventh issue.
Conversion
In her eighth issue, Marin challenges the legal and factual sufficiency of the evidence that IESI proved by a preponderance of the evidence it "suffered actual damages from the deposit of the City of Oyster Creek and Jamaica Beach checks in the Envirotex, Inc. Account."
Jury Question 3 concerning conversion states,
Do you find that JANELL S. MARIN converted the check from the City of Oyster Creek in the amount of $4,559.14 and/or the check from the Village of Jamaica Beach in the amount of $9,839.70?
INSTRUCTION
"Conversion" as used in this charge means the wrongful exercise of dominion and control over IESI TX CORPORATION'S checks, in denial of or inconsistent with its rights. A conversion may occur from the unauthorized and wrongful control, wrongful acquisition or wrongful withholding of the checks which is to its exclusion or inconsistent with its property rights.
The jury answered yes for both Oyster Creek and Jamaica Beach. In response to Question 4, the damages question, the jury determined the damages in the amount of each check.
On appeal, Marin contends that the only witness at trial who examined the Envirotex account was Moody, who testified "he did not have any information that Janell Marin ended up getting any money out of the Envirotex account for her personal use that was not hers." Marin's concluding argument in this section of her brief is that "it is pure speculation as to whether IESI was owed the funds from the City of Oyster Creek and Village of Jamaica Beach."
We address the sufficiency of the evidence in light of the charge given to the jury. See St. Joseph Hosp., 94 S.W.3d at 530. The evidence is legally and factually sufficient to support the jury's finding of conversion. In pertinent part, the jury was instructed that Marin converted the checks if she exercised control over the checks inconsistent with IESI's rights. The evidence is undisputed that Marin deposited the checks into her Envirotex account when they were properly payable to IESI. This is more than a scintilla of evidence from which a rational juror could determine that Marin had exercised control over the checks in a manner inconsistent with IESI's rights to the checks. We therefore hold the evidence is legally sufficient to support the jury's finding concerning conversion. See Am. Network Leasing Corp. v. Corporate Funding Houston, Inc., No. 01-00-00789-CV, 2002 WL 31266230, at *15 (Tex. App. [1st Dist.] Oct. 10, 2002, pet. dism'd) (overruling sufficiency of evidence challenge to claim for conversion of partnership checks deposited in account of partner instead of partnership account, as required by agreement).
We also conclude the evidence is not so weak as to render the verdict clearly wrong and manifestly unjust and is, therefore, factually sufficient. See Am. Network Leasing Corp., 2002 WL 31266230, at *15.
We overrule Marin's eighth issue.
Conclusion
We affirm the judgment of the trial court.