Opinion
NO. 02-13-00191-CV
03-24-2016
KENT DAVIS AND D. KENT DAVIS, P.C. APPELLANTS AND APPELLEES v. LEDFORD WHITE AND M & M JOINT VENTURE APPELLEES AND APPELLANTS
FROM THE 96TH DISTRICT COURT OF TARRANT COUNTY
TRIAL COURT NO. 096-257264-11 MEMORANDUM OPINIONON REMAND
See Tex. R. App. P. 47.4.
This appeal involves the validity and amount of an exemplary damages award in a suit by one former law partner against another, arising from the failure to properly distribute a firm receivable. In our original memorandum opinion issued on December 29, 2014, we reversed the part of the trial court's judgment that reduced the exemplary damages award in accordance with the statutory cap in civil practice and remedies code section 41.008(b), and we rendered judgment on the jury's full $2.8 million exemplary damages award. Davis v. White, No. 02-13-00191-CV, 2014 WL 7387045, at *13 (Tex. App.—Fort Worth Dec. 29, 2014) (mem. op.), vacated and remanded, 475 S.W.3d 783 (Tex. 2015); see Tex. Civ. Prac. & Rem. Code Ann. § 41.008(b) (West 2015). After we issued our memorandum opinion, the supreme court vacated our judgment, but not our prior opinion, so that we could reconsider our review of the exemplary damages award in light of its opinion in Zorrilla v. Aypco Constr. II, LLC, 469 S.W.3d 143 (Tex. 2015), which was handed down after our memorandum opinion issued. Davis, 475 S.W.3d at 783. Upon reconsideration of that issue, we affirm the entire trial court judgment.
The factual background of the parties' dispute is detailed in our prior opinion. Davis, 2014 WL 7387045, at *1-4. After appellants Kent Davis and D. Kent Davis, P.C. sued appellees—Davis's former law partner Ledford White and an entity affiliated with White, M & M Joint Venture—for breach of fiduciary duty and fraud, a jury awarded appellants actual damages of $374,672.56 and exemplary damages of $2.8 million. Id. at *4. Appellants moved for judgment on the jury's verdict. Id. In their motion, appellants contended that the exemplary damages award should not be subject to the cap in section 41.008(b) because appellees had waived application of the cap by failing to plead it as an affirmative defense. Id. Appellees responded by arguing that the cap is not an affirmative defense that must be pleaded; however, they also filed a post-trial motion seeking an amendment of their answer to add the statutory cap. Id. The trial court allowed appellees to amend their answer. Id.
The trial court signed a judgment awarding appellants actual damages of $282,084.82, after the application of a stipulated offset. Id. The trial court also applied the statutory cap to the exemplary damages award, limiting it to $564,169.64. Id. Finally, the trial court imposed a constructive trust on an undivided fifty percent of M & M and its assets. Id.
Issues on Remand
In three issues, appellants contend that the trial court should not have applied the section 41.008(b) exemplary damages cap as a matter of law and should not have allowed appellees to amend their answer to plead section 41.008(b) as an affirmative defense.
In our prior memorandum opinion, we rejected appellees' argument that appellants failed to preserve their complaint regarding the application of the exemplary damages cap in the trial court. Davis, 2014 WL 7387045, at *9.
Appellees argued at trial, and they argue on appeal, that the cap in section 41.008(b) need not be pled at all and that the trial court must automatically apply the cap to any such award. This is precisely the holding of Zorrilla. 469 S.W.3d at 157-58. In that case, the supreme court held that a defendant "bears no burden of establishing the cap's applicability"; instead, the plaintiff bears the burden of pleading and proving one of the capbusters listed in section 41.008(c) before the cap will not apply. Id. at 157; see Tex. Civ. Prac. & Rem. Code Ann. § 41.008(c). Accordingly, we overrule appellants' first issue. Likewise, because the application of the cap applies as a matter of law, the trial court did not abuse its discretion by allowing appellees to file a post-trial amendment to their answer pleading the application of the cap. See Zorrilla, 469 S.W.3d at 158 (holding that Zorrilla timely raised the application of the cap in her motion for new trial). We therefore overrule appellants' second issue.
In their third issue, appellants contend that section 41.008 does not apply to the suit as a matter of law because they pleaded and proved that White's actions fell within the "misapplication of fiduciary property" exception listed in section 41.008(c)(10). We addressed this issue in our prior opinion in the context of the discussion regarding whether the cap must be pled as an affirmative defense and concluded that appellants did not plead facts in support of a capbuster in relation to their exemplary damages claim. See Davis, 2014 WL 7387045, at *11-12. Accordingly, we implicitly overruled this issue.
In our conclusion of the discussion of appellants' issues, we mistakenly indicated that we sustained their "sole" issue. Id. However, appellants raised three issues in their appeal. Id. at *4. Because their third issue was an alternative argument to their first two issues, and because we concluded in our prior opinion that they had not pled facts supporting a capbuster in connection with their exemplary damages claim, we should have expressly overruled their third issue.
At the hearing regarding the applicability of the cap, appellants' counsel argued that although he did not plead facts supporting the application of a capbuster listed in section 41.008(c), he would have pleaded and introduced proof of the applicability of penal code section 32.45 had he known that appellees intended to rely on the cap. Tex. Penal Code Ann. § 32.45 (West Supp. 2015). Instead, he acknowledged that he had asked only for exemplary damages within jurisdictional limits. And in their reply brief, appellants conceded that "the cap was not pleaded, and therefore not part of the case."
We conclude and hold that—in light of appellants' concession that they did not plead and prove a capbuster and in light of a fair reading of their pleadings—the trial court did not err by applying the cap in section 41.008(b) to reduce the jury's exemplary damages award. We overrule appellants' third issue.
Conclusion
Having overruled appellants' three issues, and having overruled appellees' issues in their cross-appeal in our prior opinion, we affirm the trial court's judgment.
Although appellants pled for a constructive trust on M & M as an alternative to their request for the entire exemplary damages amount—and the trial court imposed a constructive trust on an undivided fifty percent of M & M's assets for Davis's benefit in light of the trial court's finding that Davis was entitled to ownership of a fifty percent interest in M & M—appellees have not asked this court for any relief regarding the constructive trust. --------
/s/ Terrie Livingston
TERRIE LIVINGSTON
CHIEF JUSTICE PANEL: LIVINGSTON, C.J.; MEIER and SUDDERTH, JJ. DELIVERED: March 24, 2016