NORM WRETLIND,FROM A DISTRICT COURT APPELLANT, v. LINDA JOHNSON, APPELLEE

COURT OF APPEALS
FIFTH DISTRICT OF TEXAS
AT DALLAS
NO. 05-89-00050-CV
NORM WRETLIND,FROM A DISTRICT COURT
 
APPELLANT,
 
v.
 
LINDA JOHNSON,
 
        APPELLEE.OF DALLAS COUNTY, TEXAS
 
 
 
BEFORE JUSTICES WHITHAM, LAGARDE AND KINKEADE
OPINION BY JUSTICE LAGARDE
AUGUST 31, 1989
        Norm Wretlind appeals a judgment rendered jointly and severally against him and Thomas Gibson FN:1 in favor of Linda Johnson. In two points of error, Wretlind contends that the trial court erred in finding him negligent and in awarding damages and attorney's fees to Johnson. In three cross-points, FN:2 Johnson maintains that she should have been awarded damages under the Texas Deceptive Trade Practices Act (DTPA). TEX. BUS. & COM. CODE ANN. § 17.01-.826 (Vernon 1987 and Vernon Supp. 1989). We overrule Wretlind's two points of error, overrule Johnson's fourth and fifth cross-points, and grant Johnson's third cross-point for reasons that follow.
        After a trial before the court, the judge made the following pertinent findings of fact. Prior to March 23, 1983, Johnson began doing business with Wretlind, a securities broker and financial advisor. Johnson is a widow with small children, is unschooled in finances and business, has a high school education, and is a hairdresser by trade. Johnson reasonably relied upon Wretlind's advice, and as a result, Wretlind induced Johnson to sell Texas Instrument, Inc. (T.I.) stock from her husband's estate in order to invest $40,000 with Gibson. Gibson executed a "note" which provided for interest at the rate of 32% per annum and paid Wretlind a "finder's fee" of $4,000 (10% of $40,000). Wretlind did not disclose either the fact of, or the amount of, the finder's fee to Johnson. Wretlind knew at the time of the investment that Gibson was reputedly using the funds for speculation in the stock market. Wretlind highly recommended Gibson to Johnson. Gibson, with Wretlind's assistance, sold other and further shares of securities to other parties.
        The trial court determined that Wretlind's recommending the investment to Johnson was at least negligence on the part of Wretlind because the "investment" with Gibson was at least highly risky and was inappropriate for Johnson. The trial court also determined that, at all relevant times, Wretlind continued to act as financial advisor for Johnson and never advised her to seek to withdraw her funds from Gibson. The trial court concluded that Wretlind's failure to advise Johnson to seek to withdraw her funds was negligent, that the "note" was, in substance, a security, and that the transaction was, in substance, a "Ponzi Scheme."
        Johnson continued to renew her "investment" until March 23, 1986, at which time she renewed her "investment" for the last time in a "note" due March 23, 1987. The "note" due on March 23, 1987, was not paid, and Johnson lost at least $40,000. The trial court concluded that the "investments" were transactions involving shares of stock under section 27.01 of the Texas Business and Commerce Code; that representations made by Wretlind in inducing Johnson to sell her T.I. stock were false representations of past or existing material facts and made for the purpose of inducing Johnson to enter into a contract with Gibson; that representations made by Gibson to Johnson were material false promises to do an act, made to Johnson without intention of fulfilling them, and with the intent to induce her to enter into a contract; that in reliance, Johnson entered into the contract; and that Gibson and Wretlind were engaged in an unconscionable course of action against Johnson.
        In its conclusions of law, the trial court determined that Wretlind was not liable under article 581 but that Gibson was liable for actual damages of $40,000 under article 581. TEX. REV. CIV. STAT. ANN. art. 581 (Vernon 1964 and Vernon Supp. 1989). The trial court concluded that both Wretlind and Gibson were liable under section 27.01 for actual damages of $40,000. TEX. BUS. & COM. CODE ANN. § 27.01 (Vernon 1987). The trial court also held that Wretlind was liable for actual damages in the amount of $40,000 as a result of negligence, and that Gibson was liable for punitive damages in the amount of $250,000 under section 27.01(c). TEX. BUS. & COM. CODE ANN. § 27.01(c) (Vernon 1987). The trial court further concluded that Wretlind and Gibson were liable for attorney's fees under section 27.01(c), and for prejudgment interest and costs of court.
Section 27.01
        In his first point of error, Wretlind argues that the trial court erred in finding liability and awarding attorney's fees under section 27.01 of the Texas Business and Commerce Code because the transaction involved neither the sale of real estate nor the sale of stock. In his "Request for Additional and Amended Findings of Fact and Conclusions of Law," Wretlind requested that finding number thirty-four be stricken or changed to show that the only evidence regarding sale of stock was the sale of the T.I. stock and that an additional finding be made that the sale of the T.I. stock was not central to the transaction to the extent required to invoke section 27.01 of the Texas Business and Commerce Code, and finally, that the trial court's conclusions four and six be stricken or changed to show that Wretlind was not liable for damages or attorney's fees.
        Maintaining that no real estate or stock in a joint stock company was mentioned during the entire trial, Wretlind states that the only reference to stock in a corporation was that he suggested that Johnson sell her T.I. stock to fund the purchase of the insurance policy, the mutual fund interest, and the note from Gibson. Wretlind asserts that the sale of the T.I. stock under these circumstances did not bring the transaction under 27.01 and, therefore, he is not liable for damages or attorney's fees.
        In determining Wretlind's first point of error, we note that the trial court's findings of fact are reviewable for legal and factual sufficiency by the same standards as are applied in reviewing the legal or factual sufficiency of evidence supporting a jury's answer to jury questions. Baker v. Baker, 719 S.W.2d 672, 674-75 (Tex. App.--Fort Worth 1986, no writ); Okon v. Levy, 612 S.W.2d 938, 941 (Tex. Civ. App.--Dallas 1981, writ ref'd n.r.e.). Moreover, we note that we are not bound by the trial court's conclusions of law, Lachance v. Hollenbeck, 695 S.W.2d 618, 622 (Tex. App.--Austin 1985, writ ref'd n.r.e.); hence, their presence or absence does not affect this Court's standard of review.
        Wretlind's first point of error fails to enlighten this Court as to whether he is complaining of the legal or the factual insufficiency of the evidence. West End API, Ltd. v. Rothpletz, 732 S.W.2d 371, 373 (Tex. App.--Dallas 1987, writ ref'd n.r.e.). However, because Wretlind has only prayed for a rendition of the judgment, we need only address the question of legal insufficiency Id. at 373-74.
        In reviewing Wretlind's "no evidence" point, this Court will consider only the evidence tending to support the findings, disregarding all contrary or conflicting evidence, viewing the evidence in the light most favorable to the finding, and giving effect to all reasonable inferences that may properly be drawn from the evidence. Alm v. Aluminum Co., 717 S.W.2d 588, 593 (Tex. 1986). The trial court's findings will only be set aside if the record discloses that the evidence offered to prove a vital fact is no more than a scintilla. Fortner v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 687 S.W.2d 8, 12 (Tex. App.--Dallas 1984, writ ref'd n.r.e.).
        In deciding Wretlind's first point of error, we must first determine what a "security" is. The test of whether a contract, plan, or scheme is an "investment contract" which is regulated by the Texas Securities Act is whether the scheme involves an investment of money in a common enterprise with profits to come solely from the efforts of others. FN:3 See Koscot Interplanetary, Inc. v. King, 452 S.W.2d 531, 537 (Tex. Civ. App.--Austin 1970, writ ref'd n.r.e.); see also Cross v. DFW South Entry Partnership, 629 S.W.2d 860, 863-65 (Tex. App.--Dallas 1982, no writ); Wilson v. Lee, 601 S.W.2d 483, 485 (Tex. Civ. App.--Dallas 1980, no writ); McConathy v. Dal Mac Commercial Real Estate, Inc., 545 S.W.2d 871, 875 (Tex. Civ. App.--Texarkana 1976, no writ). A common enterprise is one in which the fortunes of the investor are interwoven with and dependent upon the efforts and success of those seeking the investment or of third parties. First Municipal Leasing Corp. v. Blankenship, Potts, Aikman, Hagin and Stewart, 648 S.W.2d 410, 416 (Tex. App.--Dallas 1983, writ ref'd n.r.e.). An "expectation of profits" is defined as either capital appreciation resulting from the development or a participation in earnings resulting from the use of investors' funds. Id. In determining whether a transaction is an investment contract, the courts will disregard the form and will look to the substance of the transaction, giving effect to the economic realities of the scheme. McConathy, 545 S.W.2d at 875; see also Bruner v. State, 463 S.W.2d 205, 214 (Tex. Crim. App. 1970).
        Applying the foregoing principles, we conclude that the "note" in this instance was a security as defined by the Texas Securities Act. A lender typically does not "purchase" a note from a borrower; rather, a note is a credit transaction. According to Wretlind, Gibson needed "capital" for his business to grow. Wretlind assisted Gibson in selling other shares of securities to other parties.
        Thus, the record establishes that Gibson and Wretlind obtained financing from numerous investors, presumably in order to supply capital for Gibson's business to grow. Moreover, from the record, we find no evidence to even suggest that Johnson would realize profits through her own efforts. In fact, the record conclusively establishes that profits could be expected solely through the money invested in the "note." Therefore, we conclude that the "note" was in fact a security because the "note" was a part of a scheme whereby Johnson invested her money in a common enterprise and was led to expect profits solely or, at least substantially, from the efforts of others. We find no merit in Wretlind's argument that the only sale of stock was the sale of the T.I. stock. Accordingly, we overrule Wretlind's first point of error.
 
Negligence
        In his second point of error, Wretlind claims that the trial court erred in finding him liable for negligence because the negligence claim against him was barred by the statute of limitations. Wretlind, in his "Request for Additional and Amended Findings of Fact and Conclusions of Law," requested that the trial court's findings twenty-one and twenty-eight (finding Wretlind liable for negligence) and conclusion three (establishing Wretlind's liability for actual damages) be stricken or changed. Wretlind maintains that he "recommended the investment" to Johnson on March 23, 1983. He asserts that, thereafter, solely on her own and without giving Wretlind an opportunity to advise her "to withdraw her funds from Gibson," without advice from or notice to Wretlind, and without Wretlind even knowing of such transactions, Johnson collected the 32% interest on the 1983 note and purchased a new note from Gibson in March of 1984, 1985, and 1986. Wretlind states that the 1986 note matured on March 23, 1987, but was not paid, and Johnson sued on March 15, 1988, one week short of five years after he "recommended the investment," her last dealing with Wretlind.
        Wretlind argues that if he was negligent, it had to have been in March 1983, since that was his last contact with Johnson. Thus, Wretlind maintains that Johnson's cause of action for negligence against Wretlind accrued in March 1983, more than four years before Johnson filed her suit; thus, it is barred by limitations. We note that Wretlind does not attack the factual sufficiency of the finding of the trial court that states that Wretlind "continued to act as financial advisor for Plaintiff [Johnson]" at all relevant times. Nor does Wretlind challenge the factual sufficiency of the trial court's finding that Johnson reasonably relied on Wretlind's advice.         
        Wretlind's brief reveals no citation to the record, nor any argument or authority, other than article 5529, FN:4 for his proposition that Johnson's suit is barred by limitations. In the absence of argument and authorities in support of a point of error, nothing is presented for this Court to review. Gibbs v. Greenwood, 651 S.W.2d 377, 381 (Tex. Civ. App.--Austin 1983, no writ). Assuming, however, for the sake of argument, that the point is preserved, we consider the limitations issue.
        Without admitting that Wretlind is correct that the four-year statute of limitations applies, Johnson urges us to apply the discovery rule, see Willis v. Maverick, 760 S.W.2d 642, 644 (Tex. 1988), in resolving the limitations question. Johnson argues that her last face-to-face contact with Wretlind occurred in September 1985 and that telephone contact with him occurred even subsequent thereto. She further argues that inasmuch as actual damage occurred on March 23, 1987, and suit was filed on March 15, 1988, the action is not barred even by a two-year limitations period.
        The primary purpose of statutes of limitations is to compel the exercise of a right of action within a reasonable time so that the opposing party has a fair opportunity to defend while witnesses are available and the evidence is fresh in their minds. Willis, 760 S.W.2d at 644. We disagree with Wretlind that the four-year limitations period applies. A suit for personal injuries resulting from negligence comes within the two-year limitations provision set out in section 16.003 of the Texas Civil Practice and Remedies Code. See Garcia v. Texas Instruments, Inc., 610 S.W.2d 456, 459 (Tex. 1980). We conclude that a negligence-based cause of action for an economic loss also falls within section 16.003. For a suit to be timely under the two-year statute, it must be brought within two years following the date the cause of action accrues. Willis, 760 S.W.2d at 644, citing TEX. CIV. PRAC. & REM. CODE ANN. § 16.003(a) (Vernon 1986). The phrase "accrues" embodies a substantive law concept, and the courts are called upon to determine when the statute of limitations commences. Willis, 760 S.W.2d at 644. The question of when a cause of action accrues is a judicial one. Id.
        A plea of limitations is an affirmative defense. TEX. R. CIV. P. 94. Generally, the burden is on the defendant to prove when a cause of action accrued. Liles v. Phillips, 677 S.W.2d 802, 808 (Tex. Civ. App.--Fort Worth 1984, writ ref'd n.r.e.); Naylor v. Gutteridge, 430 S.W.2d 726 734 (Tex. Civ. App.--Austin 1968, writ ref'd n.r.e.). In the recent decision of Woods v. Mercer, 32 TEX S. CT. J. 99 (1988), the Supreme Court again emphasized that the defendant "bears the initial burden to plead, prove and secure findings to sustain its plea of limitation."
        It is only when "legal injury" results that a cause of action accrues. FN:5 Zidell v. Bird, 692 S.W.2d 550, 555 (Tex. App.--Austin 1985, no writ). Under the "legal injury" rule, a cause of action sounding in tort generally accrues when the tort is completed, that is, the act committed and damage suffered. McClung v. Johnson, 620 S.W.2d 644, 646 (Tex. Civ. App.--Dallas 1981, writ ref'd n.r.e.), citing Atkins v. Crosland, 417 S.W.2d 150, 152 (Tex. 1967). As stated by the court in Zidell, "the plaintiff's cause of action accrues when the defendant's conduct first becomes 'unlawful' as to the plaintiff under the law applicable to the circumstances of the case." 692 S.W.2d at 554.
        Here, Wretlind pleaded the affirmative defense of limitations, but did not prove and secure findings to sustain his plea. Wretlind does not attack the factual sufficiency of the trial court's findings 10, 29 and 30 wherein the court found, respectively, that:
        Plaintiff reasonably relied upon advice she received from WRETLIND;
 
        Plaintiff continued to renew her "investment" until March 23, 1986, when she renewed it for the last time in a "note" due March 23, 1987;
 
        The "note" due March 23, 1987 was not paid and Plaintiff lost at least $40,000.00.
It is undisputed that Johnson's loss occurred on March 23, 1987 when the "note" then due was not paid. Inasmuch as suit was filed on March 15, 1988, within two years of that date, we conclude that suit was timely filed. Thus, we overrule Wretlind's second point.
CROSS-POINTS
Delay Damages
        In Johnson's third cross-point, she contends that she "should be awarded damages for appellant's [Wretlind's] appeal." See TEX. R. APP. P. 84. In support, Johnson states that Wretlind filed a totally meritless affidavit of inability to pay a cost bond, failed to timely file a cost bond for appeal, and abandoned his second point of error by not briefing it. FN:6
        Rule 84 of the Texas Rules of Appellate Procedure authorizes this Court to award an amount not to exceed ten percent of the amount of damages awarded to appellee as damages against an appellant when the court determines the appeal was taken for delay and without sufficient cause. Daniel v. Esmaili, 761 S.W.2d 827, 829-30 (Tex. App.--Dallas 1988, no writ). In determining whether delay damages are appropriate, this Court must review the record from the advocate's point of view at the time the appeal was taken in order to determine if reasonable grounds existed to believe that the case should be reversed. Daniel, 761 S.W.2d at 830, citing Mid-Continent Casualty Co. v. Whatley, 742 S.W.2d 475, 479 (Tex. App.--Dallas 1987, no writ).
        In viewing the case from the advocate's perspective, this Court should impose damages only if the likelihood of a favorable result was so improbable as to make this an appeal taken for delay and without sufficient cause. Daniel, 761 S.W.2d at 830; see Mid-Continent, 742 S.W.2d at 479. With these criteria in mind, we now review the record in this case for specific factors that indicate the appeal was taken for delay and without sufficient cause.
        In showing sufficient cause for appeal, courts have examined whether the attorney prosecuted the appeal in good faith. This Court has previously taken into account whether appellant's brief was well researched and raised arguable points of error. Daniel, 761 S.W.2d at 830, citing GTE Directories Corp. v. McKinnon, 734 S.W.2d 429, 432 (Tex. App.--Fort Worth 1987, no writ). In this instance, we are of the opinion that Wretlind's brief was not well researched, and in his first point of error, he failed to sufficiently raise arguable points. Daniel, 761 S.W.2d at 830, citing Triland Investment Group v. Tiseo Paving Co., 748 S.W.2d 282, 285 (Tex. App.--Dallas 1988, no writ). Although Wretlind cited one statute as authority for his second point of error, he failed to cite any cases supporting his position.
        In addition, when determining whether an appeal was taken for delay and without sufficient cause, this Court has taken into consideration the appellant's failure to appear for oral argument, coupled with his failure to file a statement of facts. See Daniel, 761 S.W.2d at 830, citing Radio Station WQCK v. TM Communications, Inc., 744 S.W.2d 676, 677 (Tex. App.--Dallas 1988, no writ). In this case, Wretlind did not request oral argument; however, a statement of facts and transcript were filed by Wretlind.
        This Court has also taken into consideration two other criteria: (1) whether appellant has filed a statement of facts or provided an explanation for his failure to do so; and (2) whether appellant has filed a supersedeas bond. See Daniel, 761 S.W.2d at 830. Here, Wretlind filed a statement of facts, and although Wretlind did not file a supersedeas bond, we infer nothing from that fact. Id.
        In determining whether Johnson should be awarded damages for delay, we note that:
        [W]e do not award delay damages merely for "poor lawyering." Ineptitude in the presentation of an appeal is not an adequate ground for assessment of a frivolous appeal penalty. A.T. Lowry Toyota, Inc. v. Peters, 727 S.W.2d 307, 309 (Tex. App.--Houston [1st Dist.] 1987, no writ)(Dunn, J., dissenting). A court should not punish the client simply for the inadequacies of his attorney. However, upon a finding that appeal was brought for purposes of delay and without sufficient cause, the judiciary cannot allow appellees to be injured, without compensation, by unscrupulous appellants who appeal merely to delay the satisfaction of judgment.
Id. at 831. Based upon Wretlind's poorly written brief raising no arguable points and Wretlind's failure to request oral argument, we conclude that the likelihood of a favorable result on appeal was so improbable as to make this an appeal taken for delay and without sufficient cause. We sustain Johnson's third cross-point and award delay damages. In line with the reasoning of the Court that delay damages should be both modest in amount and compensatory in purpose, id., we award delay damages to Johnson in the amount of $1,000.
DTPA
        In her fourth cross-point, Johnson maintains that the trial court erred in not awarding damages under the DTPA for unconscionable conduct. Johnson argues that because the trial court specifically found that Wretlind "engaged in an unconscionable course of action against Plaintiff [Johnson]" and that Johnson gave proper notice of a claim, Johnson should have been awarded damages under the DTPA. Johnson cites section 17.44 of DTPA which provides:
        This subchapter shall be liberally construed and applied to promote its underlying purposes, which are to protect consumers against false, misleading, and deceptive business practices, unconscionable actions, and breaches of warranty and to provide efficient and economical procedures to secure such protection.
TEX. BUS. & COM. CODE ANN. § 17.44 (Vernon 1987).
        Before any recovery under the DTPA can be had, it is necessary to plead and prove that the complaining party was a "consumer." Woods v. Littleton, 554 S.W.2d 662, 666 (Tex. 1977). A "consumer" is defined as "an individual . . . who seeks or acquires by purchase or lease, any goods or services. . . ." TEX. BUS. & COM. CODE ANN. § 17.45(4) (Vernon 1987) (emphasis added). "Goods" are defined as "tangible chattels or real property purchased or leased for use." TEX. BUS. & COM. CODE ANN. § 17.45(1) (Vernon 1987) (emphasis added). Thus, an "intangible" is not a "good," and a buyer of an intangible is not a "consumer" under the DTPA. Examples of an "intangible" include the right to receive payment under an assignment, see First Municipal Leasing, 648 S.W.2d at 417, and accounts receivable. See Snyders Smart Shop, Inc. v. Santi, Inc., 590 S.W.2d 167, 170 (Tex. Civ. App.--Corpus Christi 1979, no writ).
        As previously stated, Johnson's claim arises out of her purchase of a "note," and the "note" was, in substance, a security. Now we must determine whether Johnson's purchase was of a "tangible good," thereby allowing her to recover under the DTPA. The sale of a security has previously been addressed by the Corpus Christi Court of Appeals in Portland Savings & Loan Association v. Belvil, Bresler & Schulman Government Securities, Inc., 619 S.W.2d 241 (Tex. App.--Corpus Christi 1981, no writ). That court said:
        As stated by Chief Justice Greenhill in Riverside Nat. Bank v. Lewis, 603 S.W.2d 169, 174 (Tex. 1980), the definition of "goods" under the DTPA does not include "money" or any "currency of exchange that enables the holder to acquire goods." The Supreme Court looked to the Texas Business & Commerce Code as a whole to determine if "money" was a good within the meaning of [the] DTPA. Specifically the court looked at Section 2.105, which provides, "`goods' means all things ... which are movable at the time of identification to the contract for sale other than the money in which the price is to be paid, investment securities (Chapter 8) and thing in action." [emphasis added]. Section 9.105(a)(8) provides that "`goods' includes all things which are movable at the time the security interest attaches or which are fixtures ... but does not include money, documents, instruments ..." [emphasis added]. This definition of "goods" excludes the sale of securities as a sale of "goods" under the DTPA. See also, First State Bank, Morton v. Chessir, 613 S.W.2d 61 (Tex. Civ. App.--Amarillo 1981, no writ).
Portland Savings, 619 S.W.2d at 245. We conclude that the security sold to Johnson was not a "good" as contemplated under the DTPA; therefore, we hold that the trial court properly denied Johnson recovery under the theory of a DTPA violation. Johnson's fourth cross-point is overruled.
Remand
        In her fifth cross-point, Johnson maintains that should this Court reverse the trial court's decision, a remand to the trial court is in the interest of justice. We need not address Johnson's fifth cross-point because we affirm the judgment of the trial court and award Johnson delay damages against Wretlind for a frivolous appeal.
 
 
 
                                                                                                                            SUE LAGARDE
                                                          JUSTICE
DO NOT PUBLISH
TEX. R. APP. P. 90
89-00050.F
 
FN:1 Gibson defaulted and is not a party to this appeal.
FN:2 Johnson refers to all five of her points as "counterpoints"; however, only two are actually counterpoints. Johnson's counterpoints three, four, and five are actually cross-points; therefore, throughout this opinion Johnson's counterpoints three, four, and five will be referred to as "cross-points" three, four, and five.
FN:3 Texas courts look to federal court decisions to interpret the Texas Securities Act because of obvious similarities in the Federal Securities Act of 1933. Star Supply Co. v. Jones, 665 S.W.2d 194, 196 (Tex. App.--San Antonio 1984, no writ), citing Searsy v. Commercial Trading Corp., 560 S.W.2d 637, 640-41 (Tex. 1977).
FN:4 TEX. REV. CIV. STAT. ANN. art. 5529 (repealed by Acts 1985, 69th Leg., ch. 959, § 9(1), eff. Sept. 1, 1985) (now codified at TEX. CIV. PRAC. & REM. CODE § 16.051 (Vernon 1986)) providing for a four-year limitations period.
FN:5 As a general rule, the discovery rule does not apply in a negligence-based cause of action. See Atkins v. Crosland, 417 S.W.2d 150, 153 (Tex. 1967). Although Johnson urges us to apply the discovery rule, we note that Johnson did not plead and prove discovery facts at trial. Thus, we apply the "legal injury" rule. See Black v. Wills, 758 S.W.2d 809, 816 (Tex. App. --Dallas 1988, no writ).
FN:6 Wretlind did cite one statute in support of his proposition in his second point of error.
File Date[08-30-89]
File Name[890050F]