Opinion
No. 05-04-00794-CV
Opinion issued August 16, 2005.
On Appeal from the County Court at Law Number 3, Dallas County, Texas, Trial Court Cause No. cc-02-6727-c.
Affirmed as modified.
Before Justices BRIDGES, O'NEILL, and MAZZANT.
MEMORANDUM OPINION
Oscar Heydari appeals a judgment from a bench trial awarding Aida J. El-Sarabi damages for unpaid commissions, exemplary damages, and attorney's fees for fraudulent inducement and breach of contract. In seven issues, Heydari asserts the trial court erred in finding that a contract existed between the parties, that he fraudulently induced El-Sarabi into the contract, and the trial court erred in awarding "benefit of the bargain" damages, exemplary damages, and attorney's fees. We modify the judgment to vacate the award of attorney's fees against Heydari, and we affirm the trial court's judgment as modified.
FACTUAL BACKGROUND
In February 2001, El-Sarabi and her husband, Essam Mattar, contacted Oscar Heydari, President of I Need A Business, Inc. (INB) regarding the purchase of an oil change business. INB is a brokerage company for buyers and sellers of businesses. Although El-Sarabi and her husband decided not to purchase the oil change business themselves, their meeting resulted in an agreement that INB would pay El-Sarabi a referral fee in the amount of fifty percent of any commission received by INB from a transaction involving individuals referred to it by El-Sarabi. Shortly, thereafter El-Sarabi referred a friend, Wajieh Hussein, to INB. On February 26, 2001, Hussein entered into an agreement to purchase the Oil Depot business. Later, on March 5, 2001, Hussein entered into an agreement to sell his Fast Tune Lube business.
On March 27, 2001, El-Sarabi was paid a $2,500 referral fee for the Oil Depot sale involving Hussein. The full commission for the Oil Depot transaction was $10,000. However, the "seller settlement statement" reported the commission as $5,000. El-Sarabi was paid $2,500 for her part of the commission as reflected on the settlement statement. The full commission for the Fast Tune Lube was $24,000, and El-Sarabi was not paid any amount for her part of this commission. Contending she was owed fifty percent of the commission received by INB, El-Sarabi sought payment of the additional $2,500 commission from the Oil Depot transaction and $12,000 from the Fast Tune Lube transaction. After Heydari refused to pay her, she filed suit against INB and Heydari, individually, for breach of contract and fraudulent inducement.
After a bench trial, the court found INB had breached the contract with El-Sarabi and that INB and Heydari had fraudulently induced El-Sarabi into the contract. The trial court awarded $14,500 in damages, $5,000 for exemplary damages, and $7,500 in attorney's fees in the trial of the case, with a potential $5,000 in attorney's fees in the event of unsuccessful appeals to the court of appeals and supreme court, respectively.
The trial court filed findings of fact and conclusions of law. The court found that Heydari had promised that INB would pay El-Sarabi fifty percent of commissions from sales involving parties she had referred to INB, that Heydari made the promise with the intent not to perform it and with the intent that El-Sarabi would rely upon it, and that El-Sarabi had in fact relied upon the promise. Additionally, the court found that El-Sarabi had referred Wajieh Hussein to INB and would not have done so had she known Heydari's representation was false. Finally, the court found that Heydari had not met Hussein prior to the referral by El-Sarabi and that she was entitled to fifty percent of the commissions from both the Oil Depot and Fast Tune Lube sales.
Heydari filed this appeal asserting the following seven issues: (1) the evidence was insufficient to support the finding of a contract or agreement between the parties; (2) the alleged agreement was subject to the Statute of Frauds and was therefore required to be in writing; (3) the trial court erred in finding him liable for alleged torts or breach of contract while acting on behalf of INB; (4) the trial court erred in finding fraudulent inducement; (5) the trial court erred in finding liability for "benefit of the bargain" damages in the absence of a breach of agreement; (6) the trial court erred in awarding exemplary damages; and (7) the trial court erred by awarding attorney's fees.
Insufficient Evidence to Support Finding of Contract or Agreement
In his first issue, Heydari challenges the sufficiency of the evidence supporting the trial court's finding that a contract existed between INB and El-Sarabi providing that INB would pay El-Sarabi "fifty percent of the commission received by INB" upon the closing of each sale involving buyers and/or sellers she had referred to it. Heydari contends there was not a meeting of the minds regarding the fifty percent of commission referral fee.
When the findings of fact by the trial court are challenged for legal and factual sufficiency, this Court applies the same standard used to review evidence supporting findings by a jury. Lisanti v. Dixon, 147 S.W.3d 638, 642 (Tex.App.-Dallas 2004, no pet.). When reviewing legal sufficiency, we credit evidence favorable to the verdict if reasonable jurors could do so and disregard contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 48 Tex. Sup. Ct. J. 848, 863 (June 10, 2005). If there is more than a scintilla of evidence to support the findings, the legal challenge cannot be sustained. Lisanti, 147 S.W.3d at 642. In reviewing a claim of factual insufficiency, we must consider and weigh all the evidence and set aside the verdict only if it is so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust. Id. We do not substitute our judgment for that of the fact finder. Id. Additionally, the trial court, as fact finder, is the sole judge of the credibility of the witnesses, and it may accept or reject all or any part of a witness's testimony. Id.
The requirements of a valid contract include acceptance of the terms and a meeting of the minds. Hubbard v. Shankle, 138 S.W.3d 474, 481 (Tex.App.-Fort Worth 2004, pet. denied). "Meeting of the minds" describes the mutual understanding and assent to the agreement regarding the subject matter and essential terms of the contract. Weynand v. Weynand, 990 S.W.2d 843, 846 (Tex.App.-Dallas 1999, pet. denied). Every contract requires a meeting of the minds, but the meeting can be implied from and by the parties' conduct and course of dealing. Harrison v. Williams Dental Group, P.C., 140 S.W.3d 912, 916 (Tex.App.-Dallas 2004, no pet.). A meeting of the minds must be based on actions and words of the parties and not "uncommunicated subjective intentions." Id. (quoting Fuqua v. Fuqua, 750 S.W.2d 238, 245 (Tex.App.-Dallas 1988, writ denied)). Thus, we examine the actions of the parties when there is a challenge to the existence of a meeting of the minds.
In this case, more than a scintilla of evidence exists to suggest a meeting of the minds between the parties and that the evidence is not so weak that such a finding would be clearly wrong or unjust. El-Sarabi and Mattar both testified that Heydari originally offered twenty-five percent to El-Sarabi. After she refused, Heydari then increased the offer to fifty percent. When El-Sarabi was paid for the Oil Depot sale, the amount was equivalent to fifty percent of the officially documented commission from the sale. On March 27, 2001, the $2,500 check was made payable to her. El-Sarabi testified that before she introduced Hussein to Heydari, she confirmed with Heydari that she would also be paid a referral fee of fifty percent of commission for sales involving Hussein. Thereafter, Hussein sold his Fast Tune Lube business on April 2, 2001, and the documentation showed the commission INB received was $24,000. However, INB did not pay El-Sarabi a part of this commission.
A check for half of the officially documented commission regarding the Oil Depot sale, the testimony of El-Sarabi and Mattar regarding negotiation for referral fees, and El-Sarabi's testimony that she would receive a referral fee of fifty percent of the commissions from transactions involving Hussein provide more than a scintilla of evidence as to a meeting of the minds of the terms of the contract. Additionally, we conclude the evidence is not so weak that the trial court's finding of an agreement between INB and El-Sarabi would be clearly wrong or unjust. Accordingly, we resolve Heydari's first issue against him.
Statute of Frauds
In his second issue, Heydari attacks the validity of the agreement by asserting that it was subject to the Statute of Frauds and, therefore, required to be in writing. Heydari argues that the alleged contract "is akin to a promise of lifetime employment" and falls within the Statute of Frauds. However, Heydari does not cite to evidence in the record regarding the duration of the contract and does not support his speculative assertion that El-Sarabi "expected payment for years and years" with references to the record. The Statute of Frauds requires that contracts which cannot be completed within one year be in writing. Tex. Bus. Com. Code Ann. § 26.01(b)(6) (Vernon 2002). Where the parties do not fix the time of performance and the agreement itself does not indicate that it cannot be performed within one year, the contract does not violate the Statute of Frauds. Niday v. Niday, 643 S.W.2d 919, 920 (Tex. 1982) (per curiam). The two transactions in this suit occurred within two months of the date El-Sarabi testified she met Heydari. The settlement date for the Oil Depot transaction is March 15, 2001, and the settlement date for the Fast Tune Lube transaction is April 2, 2001. El-Sarabi's referrals were all performed within a year. We resolve Heydari's second issue against him.
Heydari's Liability for Acting on Behalf of INB
In his third issue, Heydari asserts the trial court erred in finding him liable for breach of contract. Heydari argues that as an officer of INB, he cannot be held liable for breach of the corporate contract arising from actions performed in good faith and in the best interest of the corporation. However, the trial court found that INB had breached its agreement with El-Sarabi. It made no finding that Heydari had breached the contract. Accordingly, we resolve his third issue regarding breach of contract against him.
Liability for Fraudulent Inducement
Also as a part of his third issue Heydari attacks the legal sufficiency of the finding of fraudulent inducement by asserting that El-Sarabi failed to produce any evidence at trial that he intended to fraudulently induce her into the contract. As previously stated, in reviewing a legal sufficiency point, we consider the record as a whole, viewing the evidence and inferences that tend to support the challenged findings and disregard all evidence and inferences to the contrary. Lisanti, 147 S.W.3d at 642. Because intent to defraud is not susceptible to direct proof, it invariably must be proven by circumstantial evidence. Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 435 (Tex. 1986). "Slight circumstantial evidence" of fraud, when considered with the breach of promise to perform, is sufficient to support a finding of fraudulent intent. Id. (quoting Maulding v. Niemeyer, 241 S.W.2d 733, 738 (Tex.Civ.App.-El Paso 1951, no writ)).
Evidence of the intent to defraud El-Sarabi can be found in the Oil Depot transaction and Heydari's refusal to pay a referral fee on the Fast Tune Lube transaction. Heydari testified that the actual commission received in the Oil Depot sale was $10,000. However, the "seller settlement statement" recorded this commission as $5,000 and El-Sarabi was paid a $2,500 referral fee, an amount equal to fifty percent of the recorded amount. Heydari testified that he did promise that he would pay El-Sarabi for "anybody she brings in as far as a referral." Heydari testified that he paid El-Sarabi because she had referred Hussein to INB, and that he did not know Hussein prior to El-Sarabi's referral. Heydari testified that while Hussein was in the office on the Oil Depot transaction, Hussein decided to sell Fast Tune Lube through INB. Heydari stated that El-Sarabi did not do any work on the Fast Tune Lube transaction and that she was not entitled to a commission. However, Heydari admitted that El-Sarabi was paid the $2,500 on the Oil Depot transaction because of her referral, not because she had done "any work" on the transaction.
In view of this evidence and the inferences therefrom in support of the court's findings, the trial court did not err in finding that Heydari used the promise of a referral fee of fifty percent of the commission received by INB to induce El-Sarabi to bring her contacts to it for the purpose of buying and selling businesses and that Heydari did not intend for INB to pay the full commission.
Also in his fourth issue, Heydari attacks the finding of fraudulent inducement by asserting that El-Sarabi's claim is essentially one for breach of contract and he asserts that the fraudulent inducement claim was barred because the contract violated the Statute of Frauds. Without a binding agreement, there is no detrimental reliance, and thus no fraudulent inducement claim. Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001). However, as discussed above, the trial court did not err in finding an enforceable contract between INB and El-Sarabi.
We resolve Heydari's issues regarding the finding of fraudulent inducement against him.
Liability for "Benefit of the Bargain" Damages Absent a Valid Agreement
In his fifth issue, Heydari asserts the trial court erred in finding liability for "benefit of the bargain" damages in the absence of breach of a valid agreement. Heydari argues that because there was no agreement, or, in the alternative, that any agreement was subject to the Statute of Frauds, the trial court's awarding of "benefit of the bargain" damages for breach of contract was erroneous.
An individual has a duty not to fraudulently induce parties to enter into a contract, a duty that is separate from duties created by the contract. Formosa Plastics Corp. USA v. Presidio Eng'rs Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). A fraud claim may arise when a promise is made without the intention to perform, even when that promise is subsumed within a contract. Id. Accordingly, tort damages, including "benefit of the bargain" damages, are recoverable for a fraudulent inducement claim irrespective of whether the fraudulent representations are later subsumed into a contract or whether the plaintiff only suffers an economic loss related to the subject matter of the contract. Id. at 47, 49. In light of the trial court's finding that Heydari fraudulently induced El-Sarabi into the contract, Heydari's argument that the trial court erred in awarding "benefit of the bargain" damages cannot be sustained. Accordingly, we resolve Heydari's fifth issue against him.
Exemplary Damages
In his sixth issue, Heydari challenges the awarding of exemplary damages. Heydari argues that damages cannot be awarded for an "unenforceable breach of an unenforceable contract." Further, he argues that even if a contract existed and was breached, such breach cannot be the basis for the awarding of exemplary damages.
The judgment states Heydari and INB are jointly and severally liable for the exemplary damages. Heydari does not argue that this award violates section 41.006 of the civil remedies and practice code, which requires that an award of exemplary damages be specific as to each defendant. See Tex. Civ. Prac. Rem. Code Ann. § 41.006 (Vernon 1997). Accordingly, Heydan has waived any error on this issue.
In this case, the award of exemplary damages is supported by the trial court's finding on the tort of fraudulent inducement and is not based on breach of contract. See Tex. Civ. Prac. Rem. Code Ann. § 41.003(a)(1) (Vernon Supp. 2004-05). Tort damages are recoverable for a fraudulent inducement claim irrespective of whether the fraudulent representations are later subsumed in a contract or whether the plaintiff only suffers economic loss relating to the subject matter of the contract. Hubicki v. Festina, 156 S.W.3d 897, 903 (Tex.App.-Dallas 2005, pet. filed). In this case, the trial court found that Heydari had fraudulently induced El-Sarabi into the referral contract. A finding of fraudulent inducement will support an award of exemplary damages. See Spoljaric, 708 S.W.2d at 436 (citing Trenholm v. Ratcliff, 646 S.W.2d 927, 933 (Tex. 1983)). Accordingly, we resolve Heydari's sixth issue against him.
Attorney's Fees
In his final issue, Heydari challenges the award of attorney's fees. Heydari argues there is no legal basis to support the award of attorney's fees. We agree. A party cannot recover attorney's fees unless permitted by statute or contract. El-Sarabi pleaded she was entitled to attorney's fees under civil practice and remedies code section 38.001. The trial court's findings of facts and conclusions of law did not set out the basis for awarding attorney's fees against Heydari.
In this case, El-Sarabi's contract was with INB, not Heydari. The only cause of action on which El-Sarabi prevailed against Heydari was her fraud cause of action. Attorney's fees are generally not recoverable for fraud. Wilson Wilson Tax Servs., Inc. v. Mohammed, 131 S.W.3d 231, 236 n. 7 (Tex.App.-Houston [14th Dist.] 2004, no pet.); Burleson State Bank v. Plunkett, 27 S.W.3d 605, 618 (Tex.App.-Waco 2000, pet. denied); Cantu v. Butron, 921 S.W.2d 344, 354 (Tex.App.-Corpus Christi 1996, writ denied).
El-Sarabi asserts she is entitled to recover attorney's fees under section 38.001(8) because she pleaded all conditions precedent to recovery of attorney's fees had been met and Heydari did not specifically deny this allegation. See Tex. R. Civ. P. 54. Although this pleading might have satisfied the requirements of proving the conditions precedent in civil practice and remedies code section 38.002-representation by an attorney, presentation of the claim, and failure to pay the claim-it does not eliminate the need to prove the elements of a claim for attorney's fees. Tex. Civ. Prac. Rem. Code Ann. § 38.002 (Vernon 1997).
The supreme court explained the necessary elements to recovery of attorney's fees under section 38.001: "To recover attorney's fees under Section 38.001, a party must (1) prevail on a cause of action for which attorney's fees are recoverable, and (2) recover damages." Green Int'l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997). In this case, El-Sarabi, in her suit against Heydari, did not prevail on any breach of contract cause of action against him, nor did she recover damages for breach of contract against Heydari. Because no statute or contract supports an award of attorney's fees against Heydari, we conclude the trial court erred in awarding attorney's fees against Heydari. We sustain Heydari's seventh issue.
We modify the trial court's judgment to vacate the award of attorney's fees against Heydari, and we affirm the trial court's judgment as modified.