Safety Anchor Products, Inc., and Ed Reid, Individually v. Pauree, Carolyn--Appeal from 109th District Court of Andrews County

COURT OF APPEALS

COURT OF APPEALS

EIGHTH DISTRICT OF TEXAS

EL PASO, TEXAS

SAFETY ANCHOR PRODUCTS, INC. AND ED REID, INDIVIDUALLY,

Appellants,

v.

CAROLYN PAUREE,

Appellee.

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No. 08-01-00341-CV

Appeal from the

109th Judicial District

of Andrews County, Texas

(TC# 14,888)

M E M O R A N D U M O P I N I O N

This is an appeal from a judgment in favor of Appellee, Carolyn Pauree, for breach of contract and fraud against Appellants, Safety Anchor Products, Inc. and Ed Reid, Individually. For the reasons stated, we affirm the judgment of the trial court.

I. SUMMARY OF THE EVIDENCE

 

In November, 1995, Appellee, Carolyn Pauree (APauree@), and Appellants, Ed Reid (AReid@) and Safety Anchor Products, Inc. (AAnchor@), entered into a written commission agreement (AAgreement@). The Agreement required Appellants to pay Pauree a commission consisting of ten percent (10%) of Anchor=s total sales to former customers of TUBECO Steel and Manufacturing, Inc. (ATUBECO@)[1] for a period of twenty-four (24) months beginning with sales for the month of October, 1995. Pauree agreed not to compete against Anchor and agreed to contact all former TUBECO customers informing them of the acquisition by Anchor.

TUBECO later filed for bankruptcy. Under TUBECO=s bankruptcy, a settlement was reached between the bankruptcy trustee and Anchor with regard to certain promissory notes. Pauree did not receive notice concerning the agreement by the trustee and Anchor. Pauree subsequently filed for Chapter 11 bankruptcy, but she did not enter into any settlement agreements, nor did the Bankruptcy Court sell the Agreement to any individual. Because she successfully completed her bankruptcy plan, she believed the Agreement, and commission payments due, were her property.

 

Appellants thereafter failed and refused to timely forward the monthly accounting statements to Pauree. Appellants also failed to forward the commission payments due for the period of March 1, 1997, through September 5, 1997. After a formal demand was made, Appellants forwarded a commission report on June 12, 1998, that showed commission due to Pauree in the amount of $9,129.25. Pauree subsequently brought suit against Anchor and Reid for breach of contract, fraud, and attorney=s fees, claiming underpayment of commissions pursuant to the Agreement. The trial court ordered the disclosure of Anchor=s invoices from March through September of 1997, and it found that Appellants owed Pauree $68,010.87 in commissions. Appellants thereafter paid Pauree $36,567.13. After a bench trial, the court awarded $31,443.74 for breach of contract, $24,000 for fraud, $14, 574 for attorney=s fees, and $8,304.40 in prejudgment interest. This appeal follows.

II. DISCUSSION

Appellants bring one issue challenging the trial court=s conclusion of law that they committed fraud. We review a trial court=s conclusions of law de novo. Austin Hardwoods, Inc. v. Vanden Berghe, 917 S.W.2d 320, 322 (Tex. App.--El Paso 1995, writ denied).

Appellants contend that the record fails to reflect that Pauree was induced into entering into the Agreement. Appellants argue that, because the alleged fraud against Pauree consisted of misrepresented commission statements made after the Agreement was executed, no tort could occur as a matter of law. We disagree.

Tort damages are recoverable in fraudulent inducement claims irrespective of whether the fraudulent representations are subsequently subsumed in a contract or whether the plaintiff only suffers an economic loss related to the subject matter of the contract. Formosa Plastics Corp. v. Presidio Eng=rs & Contractors, Inc. 960 S.W.2d 41, 47 (Tex. 1998). To allow the recovery of fraud damages sounding in tort only when a plaintiff suffers an injury that is distinct from the economic losses recoverable under a breach of contract claim is inconsistent with this well-established law and also ignores the fact that an independent legal duty, separate from the existence of the contract itself, precludes the use of fraud to induce a binding agreement. Id. If a plaintiff presents legally sufficient evidence on each of the elements of a claim for fraudulent inducement, any damages suffered as a result of the fraud sound in tort. Id.

 

To recover in a cause of action for fraud, it requires Aa material misrepresentation, which was false, and was either known to be false when made or was asserted without knowledge of its truth, which was intended to be acted upon, which was relied upon, and which caused injury.@ Sears Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282 (Tex. 1994); Rubalcaba v. Pacific/Atlantic Crop Exchange, Inc. 952 S.W.2d 552, 555 (Tex. App.--El Paso 1997, no pet.); see also DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990), cert. denied, 498 U.S. 1048, 111 S. Ct. 755, 112 L. Ed. 2d 775 (1991). Material is defined as an important matter to the defrauded party in making a decision. AMaterial means a reasonable person would attach importance to and would be induced to act on the information in determining his choice of actions in the transaction in question.@ American Medical Inter., Inc. v. Giurintano, 821 S.W.2d 331, 338 (Tex. App.--Houston [14th Dist.] 1991, no writ). A promise of future performance constitutes a claim of misrepresentation if the promise was made with no intention of performing at the time it was made. Schindler v. Austwell Farmers Co-op., 841 S.W.2d 853, 854 (Tex. 1992). However, the mere failure to perform a contract is not evidence of fraud. Id. In the case at bar, Pauree was required to present evidence that Appellants made representations with the intent to deceive her during their contractual negotiations, with no intention of later performing. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986); see also T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 222 (Tex. 1992). Moreover, the evidence presented by Pauree must be relevant to Appellants= intent at the time the representation was made. Spoljaric, 708 S.W.2d at 434.

The evidence shows that Appellants made a material misrepresentation by claiming that they intended to pay a 10 percent commission on sales to all former TUBECO customers for the stated twenty-four month period. Reid testified he never intended to pay Pauree commission on former TUBECO customers that he already had as customers. He testified as follows:

Q: Now, you knew that you were suppose [sic] to pay a ten percent commission on all sales to the listed customers for a period of time, did you know that?

A: Well, some of these are already my customers.

Q: That=s not my question, sir. The question is, you knew, when you signed this agreement, that you were suppose [sic] to pay a ten percent commission on all sales to the listed customers for the period in time set forth in the agreement, didn=t you?

A: All of her customers, yeah.

Q: And that=s the list that=s attached to Plaintiff=s Exhibit #1, right?

A: Well, there are some on here that I already had.

Q: Do you agree with me sir, that the document says that theBthat you=re going to pay ten percent commission on sales to former TUBECO Steel & Manufacturing customers as indicated on the attached list?

A: I don=t think this list was attached.

Q: That=s what the agreement says though, isn=t it, sir?

A: Well, she knew I wasn=t going to pay her on some because I=d already had.

 

Q: I=m sorry sir, but perhaps my question wasn=t clear. I=m asking you, does the agreement say that you=re going to pay ten percent of total sales to former TUBECO customers as indicated on the attached list? Isn=t that what the agreement says--

A: Yes, that=s what it says.

Q: And that=s what you agreed too?

A: Uh-huh.

Moreover, the evidence established that Appellants failed to forward monthly accounting statements to Pauree and failed to pay the commissions owed in contravention of the Agreement. Pauree testified that after inspection of all the invoices and commission reports, she determined that Appellants had understated the commission actually earned. Appellants= report showed that Pauree was owed $9,129.25. After comparing the full invoices to the commission reports, Pauree was actually owed over $23,000. After reviewing the evidence, we hold that the trial court did not err in finding that Appellants committed fraud and in awarding damages. Issue No. One is overruled and the judgment of the trial court is affirmed.

Having overruled Appellants= sole issue on review, we affirm the judgment of the trial court.

January 23, 2003

RICHARD BARAJAS, Chief Justice

Before Panel No. 2

Barajas, C.J., McClure, and Chew, JJ.

 

 

[1] Pauree formerly owned and was an employee of TUBECO.