Charles Gayden v. The Cadle Company and Cramer Financial Group, Inc.--Appeal from 150th Judicial District Court of Bexar County

MEMORANDUM OPINION
No. 04-06-00746-CV
Charles GAYDEN,
Appellant
v.
THE CADLE COMPANY,
Appellee
From the 150th Judicial District Court, Bexar County, Texas
Trial Court No. 2004-CI-07960
Honorable Janet P. Littlejohn, Judge Presiding

Opinion by: Catherine Stone, Justice

 

Sitting: Catherine Stone, Justice

Karen Angelini, Justice

Rebecca Simmons, Justice

 

Delivered and Filed: November 7, 2007

 

AFFIRMED

Charles Gayden filed suit against The Cadle Company seeking a declaratory judgment to determine whether Cadle owned a 1988 Texas judgment against Gayden. Gayden also sought damages for fraud and negligent misrepresentation regarding Cadle's collection of that judgment. The jury rendered a verdict for Gayden on his negligent misrepresentation and fraud claims, awarding Gayden $172,000 in actual damages and $200,000 in exemplary damages.

Following the jury's verdict, the trial court declared Cadle the owner of the Texas judgment. Although the jury found Cadle has owned the judgment, it found in favor of Gayden as to the fraud and negligent misrepresentation issues. The court, however, rendered judgment notwithstanding the verdict in favor of Cadle as to the fraud and negligent misrepresentation issues, ordering that Gayden take nothing from Cadle. Gayden appeals, claiming the trial court erred in disregarding the jury's findings and granting Cadle's motion for judgment notwithstanding the verdict ("JNOV"). By cross-point, Cadle raises several grounds that it believes would have vitiated the verdict or prevented an affirmance of the judgment had one been entered on the verdict. We affirm.

Background

Gayden and others become judgment debtors in 1988

On September 30, 1988, the 224th Judicial District Court of Bexar County, Texas entered summary judgment in favor of La Hacienda Savings Association against CDM Financial Services, Inc., Michael Janssen, Don Dively, and Gayden. The trial court entered judgment, (hereinafter the "La Hacienda judgment"), in favor of La Hacienda for the amount of $69,428.62, plus interest at the "highest applicable legal rate."

Janssen arranged a settlement with La Hacienda after the entry of the judgment to satisfy his liability to La Hacienda (hereinafter the "Janssen note"). La Hacienda offered to conditionally release Janssen in exchange for the sum of $16,000 to be paid over a 10-year period, in monthly installments of $200 each, commencing on September 30, 1989 and continuing monthly thereafter. The settlement was conditioned upon full and timely payment by Janssen of all amounts due. None of the other judgment debtors entered into any type of settlement agreement with La Hacienda.

 

The La Hacienda judgment and the Janssen note are conveyed

After the trial court rendered judgment and La Hacienda had arranged to settle with Janssen, the Resolution Trust Corporation ("RTC") acquired the La Hacienda judgment and the Janssen note from La Hacienda. On May 12, 1992, the RTC entered into a Bill of Sale and Assignment of Loans with Cadle (hereinafter the "RTC-Cadle Bill of Sale") whereby the RTC transferred to Cadle all of its rights, title, and interest in the assets it referenced in the schedule of loans attached to the bill of sale. The loan schedule attached to the RTC-Cadle Bill of Sale reflects that the RTC transferred to Cadle Loan Pool No. 17, which included the La Hacienda judgment under "Account No. 0258200052 -- original balance $69,428.62." On that same day, the RTC also executed a bill of sale with Cramer Financial Group, Inc. (hereinafter the "RTC-Cramer Financial Bill of Sale"). The loan schedule attached to the RTC-Cramer Financial Bill of Sale reflects that the RTC conveyed to Cramer Financial Loan Pool No. 19, which included Janssen's note under Account No. 0258300381. (1)

Upon acquiring the Janssen note, Cramer Financial reached a settlement with Janssen in July 1992 under which Janssen agreed to pay Cramer Financial $9,000 as a full and final satisfaction of his obligation under his note with La Hacienda. By contrast, Cadle filed a writ of execution against CDM Realty, Dively, and Gayden on February 25, 1998 to prevent the La Hacienda judgment from becoming dormant. Cadle was unable to collect the La Hacienda judgment from CDM Realty, Dively, or Gayden in the years that followed.

Cadle files suit in California to domesticate and collect the La Hacienda judgment

In an effort to domesticate and collect the La Hacienda judgment, in April 2003 Cadle filed an application for entry of judgment on a sister-state judgment in San Diego County, California, the county of Gayden's residence. Cadle's motion reflected that it was seeking a judgment of $244,650.96 against Gayden based on the unpaid Texas judgment ($69,428.62) plus the accrued interest on such judgment ($174.994.84), and the filing fees for the application for judgment ($227.50). Gayden responded to Cadle's application by filing a motion to vacate the Texas judgment, asserting, among other things, that: (1) "the amount of the judgment set forth in the application is erroneous" in light of Janssen's partial satisfaction of the judgment; and (2) the Texas judgment had expired because Cadle had failed to renew the judgment.

The Superior Court of California considered the parties' contentions at a hearing conducted on October 31, 2003. Following the hearing, the court denied Gayden's motion to vacate and domesticated the Texas (La Hacienda) judgment. Although the court denied Gayden's motion to vacate, the court granted Gayden's request to stay enforcement of the judgment. The trial court, however, conditioned the stay upon Gayden's posting of a $250,000 bond, which Gayden did not post. Gayden did not seek review of the trial court's rulings.

Gayden sues Cadle in Bexar County, Texas for fraud and negligent misrepresentation

On April 14, 2004, Gayden discovered that both Cadle and Cramer Financial had recorded Assignments of Judgment in Bexar County, Texas reflecting each had received an interest in the entire La Hacienda judgment from the RTC. Gayden's review of the assignments of judgment indicated to him that Cramer Financial was the true owner of the La Hacienda judgment because Cramer recorded its assignment of judgment first in time. Following Gayden's discovery, Gayden filed suit against Cadle in the 150th Judicial District Court of Bexar County, Texas on May 24, 2004.

Gayden's suit sought both declaratory relief as well as damages from Cadle. Gayden sought a declaration that Cramer Financial is the true owner of the La Hacienda judgment, not Cadle. Gayden further sought a declaration that because Cramer Financial failed to renew the La Hacienda judgment in accordance with Texas law, such judgment is dormant. Gayden also sought damages from Cadle under theories of negligent misrepresentation and fraud, claiming Cadle: (1) made false representations to him regarding its ownership of the La Hacienda judgment; (2) wrongly attempted to collect on such judgment "even though [it] had full knowledge that [it] did not own the judgment"; and (3) improperly represented that Gayden owed "18% interest on the total $69,428.62 judgment when [it was] aware that one of the parties, . . . Michael Janssen, had negotiated a partial release for 1/3 of the judgment." (2)

Gayden files suit in California to stop Cadle from executing on the La Hacienda judgment

After Gayden received notice that his property had been attached and set for a Sheriff's sale to satisfy the La Hacienda judgment, Gayden filed suit in San Diego County, California on November 18, 2004. This proceeding essentially sought the same types of declaratory relief that Gayden sought in the action he filed in the 150th Judicial District Court of Bexar County, Texas. It also sought damages under the Fair Debt Collection Practices Act and sought to exempt certain property from the Sheriff's sale. As he asserted in the Bexar County litigation, Gayden claimed the assignments of judgment recorded by Cadle and Cramer Financial demonstrate that Cramer Financial is the true owner of the La Hacienda judgment since it recorded its assignment of judgment first in time.

Cadle prevails in the California litigation

The California Court denied Gayden's claim for an exemption on February 4, 2005. Cadle subsequently moved for a judgment on the pleadings, alleging Gayden's pleadings did not state facts sufficient to constitute a cause of action against it. The trial court granted Cadle's motion, and entered judgment in favor of Cadle on June 21, 2005. Following the court's entry of judgment, Gayden paid Cadle the entire amount he owed on the La Hacienda judgment. Gayden did not appeal the California court's judgment.

JNOV is granted in favor of Cadle in the Bexar County litigation

Gayden's Bexar County suit proceeded to trial on April 10, 2006. Question 1 of the court's charge to the jury asked whether "[Cadle] has never been the owner of the La Hacienda judgment?" Questions 3 and 4 of the court's charge asked the jury to determine whether Cadle made "a negligent misrepresentation on which [Gayden] justifiably relied" and whether Cadle "committed fraud against [Gayden]." Finally, Questions 5, 6, and 7 of the charge asked the jury to consider whether Gayden suffered damages as a result of Cadle's conduct. The jury answered "no" to Question 1, thereby finding that Cadle has owned the La Hacienda judgment. As for Questions 3 (negligent misrepresentation) and 4 (fraud), the jury found in favor of Gayden. Based on its affirmative responses to the negligent misrepresentation and fraud questions, the jury awarded Gayden $172,000 in actual damages and $200,000 in exemplary damages.

Cadle filed a motion for judgment notwithstanding the verdict following the jury's verdict. Cadle's motion provided numerous grounds for the court to enter JNOV in its favor, including: (1) there is no evidence to support the jury's findings; (2) the jury's findings are contrary to the undisputed evidence presented at trial; (3) the jury's findings are barred as a matter of law under the concepts of res judicata and collateral estoppel due to the prior adjudication of the issues by the California courts; and (4) the jury's fraud and negligent misrepresentation findings are rendered immaterial by the jury's finding that Cadle has owned the La Hacienda judgment. After considering Cadle's JNOV motion, the trial court granted the motion. (3) The trial court vacated the jury's findings "as to Question Nos. 3, 4, 5, 6, and 7" of the charge, declared Cadle owns the La Hacienda judgment, and entered a take-nothing judgment in favor of Cadle.

Following the trial court's entry of judgment in favor of Cadle, Gayden brought this appeal. Gayden argues on appeal that the trial court erred in disregarding the jury's findings and granting JNOV in favor of Cadle. Cadle, by cross-issue, raises several grounds on appeal that it believes would have vitiated the verdict or prevented an affirmance of the judgment had one been entered on the verdict.

Discussion

Gayden claims the trial court erred in disregarding the jury's findings and granting JNOV in favor of Cadle. Gayden's appellate complaints challenge the merits of the two grounds the trial court apparently relied upon in support of its ruling: (1) the principles of res judicata/collateral estoppel (based on the matters adjudicated in the California proceedings) preclude rendition of judgment in accordance with the jury's verdict; and (2) Gayden failed to present sufficient evidence on the issue of damages. According to Gayden, the trial court improperly determined that the principles of res judicata/collateral estoppel preclude rendition of judgment in accordance with the jury's verdict because California lacked jurisdiction to determine the issues before it. In the alternative, Gayden argues that even if California had jurisdiction, there is no identity of issues between the California proceedings and those in the underlying suit. Moreover, Gayden claims there is no proof that the California court even resolved the issues presented on the merits. Finally, Gayden claims his damage expert provided some evidence upon which the jury could base its damage award.

Standard of Review

A JNOV is proper only when a directed verdict would have been proper. Tex. R. Civ. P. 301; Fort Bend County Drainage Dist. v. Sbrusch, 818 S.W.2d 392, 394 (Tex. 1991). We review a JNOV under a legal sufficiency standard, see Tabrizi v. Daz-Rez Corp., 153 S.W.3d 63, 66 (Tex. App.--San Antonio 2004, no pet.), viewing the evidence and inferences in the light most favorable to the jury's finding, crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 807, 823 (Tex. 2005). We will sustain the granting of a JNOV based on "no evidence" when the record discloses one of the following: (1) a complete absence of evidence of a vital fact; (2) rules of law or evidence bar the trial court from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact. Id. at 810.

When, as here, the trial court renders a JNOV, and the losing party appeals, the prevailing party may also appeal and present points or issues on any ground that would either vitiate the verdict or preclude affirming the judgment and reinstating the jury's verdict. Swink v. Alesi, 999 S.W.2d 107, 111-12 (Tex. App.--Houston [14th Dist.] 1999, no pet.); see also Tex. R. App. P. 38.2(b) (providing that when a trial court renders a JNOV "the appellee must bring forward by cross-point any issue or point that would have vitiated the verdict or that would have prevented an affirmance of the judgment if the trial court had rendered judgment on the verdict."); Tex. R. Civ. P. 324(c) (stating that when a JNOV is rendered the appellee "may bring forward by cross-point contained in his brief filed in the Court of Appeals any ground which would have vitiated the verdict or would have prevented an affirmance of the judgment had one been rendered by the trial court in harmony with the verdict, including although not limited to the ground that one or more of the jury's findings have insufficient support in the evidence or are against the overwhelming preponderance of the evidence as a matter of fact. . . .").

Propriety of the Court's Judgment

We will assume, without deciding, that the trial court improperly relied upon the doctrines of res judicata/collateral estoppel and the lack of evidence regarding Gayden's damages to conclude the JNOV was warranted. Having assumed Gayden's complaints have merit, we must now determine whether Cadle's cross-issues present any grounds that would have vitiated the jury's verdict or precluded an affirmance of the judgment had one been entered on the verdict. According to Cadle's cross-issues, the jury's findings of negligent misrepresentation and fraud are unsubstantiated by the evidence. We agree.

Gayden's claims of fraud and negligent misrepresentation are based on his contention that Cramer Financial owned the La Hacienda judgment -- not Cadle -- because Cramer Financial recorded its assignment of judgment indicating an interest in the entire La Hacienda judgment before Cadle. Gayden alleges Cadle made negligent misrepresentations to him and committed fraud when it represented to him that it owned the La Hacienda judgment and then "attempt[ed] to collect on the judgment [when it] had full knowledge that [it] did not own the judgment." Gayden's claims, however, are unsustainable in light of the undisputed evidence before the jury, which conclusively shows Cadle owns the La Hacienda judgment.

The record reveals the Federal Deposit Insurance Corporation ("FDIC") (the successor in interest of the RTC), Cramer Financial, and Cadle all agree that the RTC sold and assigned the La Hacienda judgment to Cadle under the RTC-Cadle Bill of Sale, while the RTC sold and assigned only the Janssen note to Cramer Financial under the RTC-Cramer Financial Bill of Sale. David Groveman, the custodian of records for the FDIC indicated during trial that he reviewed the documents in the FDIC's possession pertaining to Loan Pool Nos. 17 and 19. According to Groveman, all of the documents he reviewed consistently indicated the La Hacienda judgment was an asset the RTC sold to Cadle under Loan Pool No. 17. He further confirmed that Cramer Financial, as part of its purchase of Loan Pool No. 19, acquired only the Janssen note. Groveman stated that once the RTC entered into a bill of sale with Cadle concerning the La Hacienda judgment, the judgment became Cadle's; thus, the RTC could not resell or reassign the La Hacienda judgment to Cramer Financial under the RTC-Cramer Financial Bill of Sale. Grovemen also explained that although the RTC provided Cramer Financial with an Assignment of Judgment reflecting an assignment of the entire La Hacienda judgment, this was nothing more than a coincidence and in no way assigned the judgment to Cramer Financial. Michael Cramer, president of Cramer Financial, likewise testified that the RTC-Cramer Financial Bill of Sale conveyed only the Janssen note to Cramer Financial, not the La Hacienda judgment. Cramer further indicated that, aside from his company's efforts to collect from Janssen, Cramer Financial has never attempted to collect anything from CDM Realty, Gayden, or Dively to satisfy the La Hacienda judgment.

The evidence before the jury conclusively demonstrates that Cadle owns the La Hacienda judgment, not Cramer Financial. We may not disregard this evidence, and must conclude Gayden's claims are unsubstantiated by the evidence. See City of Keller, 168 S.W.3d at 817 ("When evidence contrary to a verdict is conclusive, it cannot be disregarded.").

Gayden also claims Cadle committed fraud when it represented to him that he owed Cadle the full amount of the La Hacienda judgment, without any credits or offsets for the Janssen payment to Cramer Financial, and post-judgment interest at a rate of 18%. (4) To prevail on his fraud claim, Gayden was required to prove that Cadle's representations to him were false and that Cadle made the representations with knowledge of their falsity or made them recklessly without knowledge of the truth. See Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., No. 14-06-00032-CV, 2007 WL 2386358, *5 (Tex. App.--Houston [14th Dist.] Aug. 23, 2007, no pet. h.) (setting forth the elements of an action for fraud). Here, the representations Cadle made to Gayden concerning the judgment amount and applicable post-judgment interest rate were consistent with the order issued by the Superior Court of California, which entitled Cadle to collect both the full amount of the La Hacienda judgment and accrued interest at a rate of 18%. Because Cadle was acting in accordance with the California court's order, we cannot say there is sufficient evidence in the record to support Gayden's fraud claim against Cadle.

We agree with Cadle that the jury's findings of negligent misrepresentation and fraud are unsubstantiated by the evidence. Cadle has thus presented this court with cross-issues raising grounds that would either vitiate the verdict or preclude affirming the judgment had one been entered on the verdict. Consequently, we need not disturb the trial court's judgment under the circumstances presented.

Declaratory Judgment

Finally, Gayden contends the trial court erred by declaring Cadle the owner of the La Hacienda judgment. Declaratory judgments are reviewed under the same standards as other judgments or decrees. See Tex. Civ. Prac. & Rem. Code Ann. 37.010 (Vernon 1997); Citizens Nat'l Bank v. City of Rhome, 201 S.W.3d 254, 256 (Tex. App.--Fort Worth 2006, no pet.). Declaratory judgments may determine fact issues in the same manner as issues of fact are determined in other civil actions. Tex. Civ. Prac. & Rem. Code Ann. 37.007 (Vernon 1997); Citizens, 201 S.W.3d at 256.

Question 1 of the court's charge asked the jury whether "[Cadle] has never been the owner of the La Hacienda judgment?" The jury answered "no," thereby finding that Cadle has owned the La Hacienda judgment. The undisputed testimony at trial clearly supports such finding by the jury. The declaratory provision in the judgment stating Cadle is the owner of the judgment is therefore consistent with both the evidence presented at trial and the jury's answer to Question 1 of the charge. Accordingly, we hold Gayden has failed to demonstrate error in the trial court's declaration concerning Cadle's ownership of the La Hacienda judgment. Conclusion

Based on the foregoing, the judgment of the trial court is affirmed.

Catherine Stone, Justice

1. Both Cadle and Cramer Financial filed an "Assignment of Judgment" with the County Clerk of Bexar County, Texas following their transactions with the RTC. Cramer Financial recorded its assignment of judgment on July 21, 1992, while Cadle recorded its assignment of judgment on March 9, 1995. Although Cadle and Cramer Financial had purchased different assets from the RTC, both Cadle's and Cramer's assignments of judgment reflect the RTC had assigned to each of them the entirety of the La Hacienda judgment.

2. Cramer Financial was later joined as a necessary party to the suit, but Gayden stipulated that he sought no damages from Cramer Financial.

3. The court's judgment reflects the court was persuaded by Cadle's res judicata/collateral estoppel argument and Gayden's failure to present sufficient evidence on the issue of damages.

4. The record shows that during settlement discussions between Cadle and Gayden's attorney in California prior to the Sheriff's sale of Gayden's property, Cadle presented Gayden with a spreadsheet reflecting the balance owed on the La Hacienda judgment. This spreadsheet, which was consistent with the judgment issued by the California court in the domestication action, indicated Gayden owed Cadle the entire amount the judgment plus accrued interest at a rate of 18%.