Tony Gullo Motors I, L.P. and Brien Garcia v. Nury Chapa

IN THE SUPREME COURT OF TEXAS

IN THE SUPREME COURT OF TEXAS

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No. 04-0961

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Tony Gullo Motors I, L.P. and

Brien Garcia , Petitioners,

v.

Nury Chapa,

Respondent

════════════════════════════════════════════════════

On Petition for Review from the

Court of Appeals for the Ninth District of

Texas

════════════════════════════════════════════════════

Argued October 19,

2005

Justice Brister delivered the opinion

of the Court, in which Chief Justice

Jefferson , Justice Hecht ,

Justice Wainwright , Justice Green , and Justice Willett joined.

Justice Johnson filed a concurring

opinion.

Justice O’Neill filed a dissenting

opinion.

Justice Medina did not participate in

the decision.

Nury Chapa

bought a Toyota Highlander from Tony Gullo Motors for $30,207.38; they disagree

what model of the car was involved. After a two-day trial, the six jurors

answered 15 questions concerning breach of contract, fraud, and the DTPA [1] in Chapa’s favor. They also found a

difference in value of the two models of $7,213, mental anguish damages of

$21,639, exemplary damages of $250,000, and attorney’s fees of $20,000.

The trial

court disregarded the mental anguish and exemplary awards on the ground that

Chapa’s only claim was for breach of contract, and the fee award because Chapa

had not segregated fees attributable to that claim alone. In a per curiam

memorandum opinion, the Ninth Court of Appeals disagreed with both

conclusions, reinstating all the awards but reducing exemplary damages to

$125,000.

We agree that

Chapa could assert her claim in several forms, but disagree that she could

recover in all of them. Further, the court of appeals’ judgment included

exemplary damages exceeding the bounds of constitutional law and attorney’s fees

exceeding the bounds of Texas law. Accordingly, we reverse and remand for

further proceedings.

I. Election of Remedies

In entering

judgment for Chapa on all her contract, fraud, and DTPA claims, the court of

appeals violated the one-satisfaction rule. “There can be but one recovery for

one injury, and the fact that . . . there may be more than one theory of

liability[] does not modify this rule.” [2]

Chapa alleged

only one injury — delivery of a base-model Highlander rather than a Highlander

Limited. While she could certainly plead more than one theory of liability, she

could not recover on more than one. [3]

For breach of

contract, Chapa could recover economic damages and attorney’s fees, but not

mental anguish or exemplary damages. [4] For fraud, she could recover economic

damages, mental anguish, and exemplary damages, but not attorney’s fees. [5] For a DTPA violation, she could

recover economic damages, mental anguish, and attorney’s fees, but not

additional damages beyond $21,639 (three times her economic damages). [6] The court of appeals erred by simply

awarding them all.

But as Chapa

was the prevailing party, she is still entitled to judgment on the most

favorable theory supported by the pleadings, evidence, and verdict. [7] Gullo Motors does not challenge the

jury’s breach of contract or economic damages findings in this Court.

Accordingly, the only question before us is whether Chapa is entitled to

anything more.

II. Mere Breach of Contract

Gullo Motors

argues that Chapa’s only claim is in contract, as the parties’ only dispute is

whether she contracted for a base-model Highlander or Highlander Limited. “An

allegation of a mere breach of contract, without more, does not constitute a

‘false, misleading or deceptive act’ in violation of the DTPA.” [8] Similarly, “the usual view is that

mere breach of contract is not fraud and that it may not be evidence of

fraud.” [9]

But Chapa

alleged more than a mere breach of contract; her complaint was not just that

Gullo Motors failed to deliver a Highlander Limited, but that it never intended

to do so. A contractual promise made with no intention of performing may give

rise to an action for fraudulent inducement. [10] The duty not to fraudulently procure

a contract arises from the general obligations of law rather than the contract

itself, and may be asserted in tort even if the only damages are economic. [11]

Gullo Motors

argues that Chapa cannot bring a fraudulent inducement claim because she was not

promised a car she did not want, but one that she did. But a party may bring a

fraudulent inducement claim even if the terms of the promise are later subsumed

into a contract. [12] In all such cases, the liability of

the defendant on the contract does not absolve it from liability in tort damages

too. [13]

Similarly,

while the failure to deliver a Highlander Limited would not alone violate the

DTPA, [14] Chapa’s claim was that Gullo Motors

represented she would get one model when in fact she was going to get another.

While failure to comply would violate only the contract, the initial

misrepresentation violates the DTPA. [15]

Of course,

Chapa was required not just to plead but to prove her claims. Proving that a

party had no intention of performing at the time a contract was made is not

easy, as intent to defraud is not usually susceptible to direct proof. [16] Breach alone is no evidence that

breach was intended when the contract was originally made. [17] Similarly, denying that an alleged

promise was ever made is not legally sufficient evidence of fraudulent

inducement. [18] Usually, successful claims of

fraudulent inducement have involved confessions by the defendant or its agents

of the requisite intent. [19]

But while

breach alone is no evidence of fraudulent intent, breach combined with “slight

circumstantial evidence” of fraud is enough to support a verdict for fraudulent

inducement. [20] We believe Chapa met that standard

here.

At trial,

Chapa testified that she signed a contract listing a Highlander Limited, but

that Gullo Motors personnel “snatched” the contract from her after she signed

it, and must have destroyed it later. She also testified that the signatures on

at least four documents were forged, and that some were forgeries of her

deceased husband’s signature rather than her own. In light of the favorable

verdict, we must assume the jury credited this testimony. [21]

Spoliation of

evidence normally supports an inference only that the evidence was

unfavorable, [22] not that it was created ab initio

with fraudulent intent. But as the evidence here was part of the original

contracting process, it provides some circumstantial evidence of fraud in that

process.

Further, the

only contract introduced at trial listed the car sold as a “2002 Toyota”;

although Gullo Motors prepared the contract, it offered no explanation why the

box for indicating the model was left blank. Although the contract listed a

vehicle identification number that matched the base-model Chapa ultimately

received, there was evidence that Gullo Motors did not contract for that car

until several days after Chapa signed the contract, and thus must have added it

later. [23] And when Chapa’s first attorney

offered to return the car for a refund, Gullo Motors refused on the ground that

it had already been titled, although evidence at trial suggested that did not

occur until several days later.

We recognize

the need to keep tort law from overwhelming contract law, so that private

agreements are not subject to readjustment by judges and juries. [24] But we long ago abandoned the

position that procuring a contract by fraud was simply another contract

dispute. [25] Because Chapa proved more than mere

breach of contract here, we hold she was entitled to assert fraud and DTPA

claims as well.

III. Exemplary Damages

The jury

found Gullo Motors had committed deceptive acts knowingly and found clear and

convincing evidence that it had committed fraud. Beyond arguing that Chapa can

only sue in contract, Gullo Motors does not challenge either finding. As we have

rejected that argument, Chapa is entitled under the verdict to exemplary damages

for either fraud or violation of the DTPA. [26]

But both

parties challenge the court of appeals’ judgment reinstating exemplary damages

but reducing them to $125,000 — Gullo Motors because the reinstatement went too

far, and Chapa because it did not go far enough. Although the jury assessed

exemplary damages for both fraud and deceptive acts at $250,000, the DTPA caps

those damages at $21,639 (three times Chapa’s economic loss of $7,213), [27] while the fraud award is capped at

$200,000. [28] Accordingly, the court of appeals’

opinion and the parties’ briefs address only whether the exemplary damages were

properly awarded based on fraud.

A

As an initial

matter, Chapa asserts that three grounds preclude our constitutional review of

the exemplary damages award. First, she argues this Court lacks jurisdiction to

consider whether exemplary damages are constitutionally excessive. While the

excessiveness of damages as a factual matter is final in the Texas courts of

appeals, [29] the constitutionality of exemplary

damages is a legal question for the court. [30] We have conducted such analyses

before. [31] Moreover, the Supreme Court of the

United States has found unconstitutional a state constitutional provision

limiting appellate scrutiny of exemplary damages to no-evidence review. [32] Only by adhering to our practice of

reviewing exemplary damages for constitutional (rather than factual)

excessiveness can we avoid a similar constitutional conflict.

Second, Chapa

claims that by authorizing up to $200,000 in exemplary damages, the Legislature

necessarily rendered that amount constitutionally permissible. But while “state

law governs the amount properly awarded as punitive damages,” that amount is

still “subject to an ultimate federal constitutional check for exorbitancy.” [33]

Third, Chapa

argues that she is entitled to the jury’s entire exemplary damage award because

the trial court complied with the procedural protections required by the Due

Process Clause. But the constitutional limitations on such awards are

substantive as well as procedural. [34] Even if the procedural processes were

perfect, “[t]o the extent an award is grossly excessive, it furthers no

legitimate purpose and constitutes an arbitrary deprivation of property.” [35]

B

We review not

whether the exemplary damage award is exorbitant (as the dissent says), but

whether it is constitutional. In reviewing the amount of an exemplary damage

award for constitutionality, we have been directed to consider three

“guideposts”: (1) the nature of the defendant’s conduct, (2) the ratio between

exemplary and compensatory damages, and (3) the size of civil penalties in

comparable cases. [36]

The

reprehensibility of Gullo Motors’ conduct (the most important of the

guideposts) [37] depends in turn on five more factors,

all but one of which weigh against exemplary damages here. [38] Gullo Motors’ actions did not cause

physical rather than economic harm, did not threaten the health or safety of

others, and did not involve repeated acts rather than an isolated incident.

Chapa claims she was financially vulnerable, but the only harm she alleged (that

her SUV did not have Michelin tires and lumbar-support seats) did not threaten

financial ruin. [39] Only the last factor, that the

conduct at issue was deceitful rather than accidental, points in Chapa’s favor.

The existence of a single factor “may not be sufficient to sustain a punitive

damages award.” [40]

Touching the

second guidepost, the Supreme Court has declined to adopt a bright-line ratio

between actual and exemplary damages, but has stated that “few awards exceeding

a single‑digit ratio . . . will satisfy due process.” [41] Further, the Court has pointed to

early statutes authorizing awards of double, treble, or quadruple damages as

support for the conclusion that “four times the amount of compensatory damages

might be close to the line of constitutional impropriety.” [42] Here, the court of appeals’ award

exceeds four times Chapa’s total compensatory award, and is more than 17 times

her economic damages. Further, the jury’s award of precisely $21,639 for mental

anguish — exactly three times her economic damages of $7,213 — supports the

Supreme Court’s observation that emotional damages themselves often include a

punitive element. [43] The court of appeals’ judgment at

least pushes against, if not exceeds, the constitutional limits.

Finally, we

must compare the exemplary damages awarded here to civil penalties authorized in

comparable cases. The Texas Occupations Code provides for a maximum civil

penalty of $10,000 for statutory or regulatory violations by motor vehicle

dealers. [44] Similarly, the attorney general could

collect not more than $20,000 as a civil penalty under the DTPA in a case like

this. [45] These are precisely the kinds of

penalties for comparable misconduct the Supreme Court has used — and says we

must use — in our constitutional analysis. [46]

Chapa argues

we should consider the possibility that Gullo Motors might be found criminally

liable or lose its license for what happened here. But she provides no proof

that such a sanction has ever been awarded in a case like this. “[T]he remote

possibility of a criminal sanction does not automatically sustain a punitive

damages award.” [47]

The dissent

reaches a different conclusion only by changing the constitutional standards.

The Supreme Court says “repeated conduct” refers to recidivism; [48] the dissent says it means reiterating

a single misrepresentation to a single consumer. [49] The Supreme Court says $1,000,000 in

emotional anguish does not mean there are “physical injuries”; [50] the dissent says $21,000 in emotional

anguish is enough to conclude otherwise. [51] The Supreme Court says multiplying

damages by a factor of 4 is “close to the line of constitutional impropriety”; [52] the dissent says using a factor of

4.33 is unworthy of our review. [53] The Supreme Court says we must look

to the civil penalties “imposed in comparable cases”; [54] the dissent says we should look to

the general $200,000 cap applicable to all exemplary cases regardless of

their nature. [55] The Supreme Court says exemplary

damages “pose an acute danger of arbitrary deprivation of property”; [56] the dissent perceives no danger in

pushing against the constitutional limits in all fraud cases, as the only factor

present here (deceitful conduct) is present in every one.

While finding

the jury verdict of $250,000 constitutionally excessive, the court of appeals

gave no explanation for its award of half that amount. Exemplary damages are not

susceptible to precise calculation, but this is still five to ten times more

than comparable civil penalties, or what Chapa could recover under the

consumer-friendly DTPA. [57] Pushing exemplary damages to the

absolute constitutional limit in a case like this leaves no room for greater

punishment in cases involving death, grievous physical injury, financial ruin,

or actions that endanger a large segment of the public. [58] On this record, Gullo Motors’ conduct

merited exemplary damages, but the amount assessed by the court of appeals

exceeds constitutional limits.

C

The Texas

Rules of Appellate Procedure provide for remittitur orders by the courts of

appeals, [59] but make no similar provision for

this Court. While this Court may review the constitutionality of an exemplary

damages award, the amount of a suggested remittitur is in the first instance a

matter for the courts of appeals.

Thus, for

example, when our constitutional review in Bentley v. Bunton found

evidentiary support for some amount of mental anguish damages but not for the $7

million awarded, we remanded to the court of appeals to determine an appropriate

remittitur. [60] When the case returned to us after

remittitur but without any reassessment of exemplary damages, we returned it

again to the court of appeals to conduct a constitutional analysis of those

damages in the first instance. [61]

Accordingly,

having found that the amount awarded by the court of appeals exceeds the

constitutional limitations on exemplary damages, we remand to that court for

determining a constitutionally permissible remittitur.

IV. Attorney’s Fees

The jury

found a reasonable and necessary attorney’s fee “in this case” was $20,000. [62] During and after trial, Gullo Motors

objected that fees were not recoverable for Chapa’s fraud claim, and thus had to

be excluded. We agree, and thus reverse and remand the fee issue for a new

trial.

For more than

a century, Texas law has not allowed recovery of attorney’s fees unless

authorized by statute or contract. [63] This rule is so venerable and

ubiquitous in American courts it is known as “the American Rule.” [64] Absent a contract or statute, trial

courts do not have inherent authority to require a losing party to pay the

prevailing party’s fees. [65] As a result, fee claimants have

always been required to segregate fees between claims for which they are

recoverable and claims for which they are not. [66]

We recognized

an exception to this historical practice in 1991 that has since threatened to

swallow the rule. In Stewart Title Guaranty Co. v. Sterling , we affirmed

the general rule: “the plaintiff is required to show that [attorney’s] fees were

incurred while suing the defendant sought to be charged with the fees on a claim

which allows recovery of such fees.” [67] But we then added:

A

recognized exception to this duty to segregate arises when the attorney’s fees

rendered are in connection with claims arising out of the same transaction and

are so interrelated that their “prosecution or defense entails proof or denial

of essentially the same facts.” Flint & Assoc. v. Intercontinental Pipe

& Steel, Inc. , 739 S.W.2d 622 , 624‑25 (Tex. App.–Dallas 1987, writ

denied). Therefore, when the causes of action involved in the suit are dependent

upon the same set of facts or circumstances and thus are “interwined to the

point of being inseparable,” the party suing for attorney’s fees may recover the

entire amount covering all claims. Gill Sav. Ass’n v. Chair King, Inc. ,

783 S.W.2d 674, 680 (Tex. App.‑Houston [14th Dist.] 1989), modified , 797

S.W.2d 31 (Tex. 1990) (remanded to the trial court for reexamination of

attorney’s fee award). [68]

As the only

two authorities cited in this passage suggest, this exception had not been

recognized by this Court before, but only by a few courts of appeals beginning

about ten years earlier. [69] In fact, we did not even apply the

exception in Sterling (as the fees there could be segregated), [70] and appear to have applied it only

once since. [71]

But the

courts of appeals have been flooded with claims that recoverable and

unrecoverable fees are inextricably intertwined. [72] As the exception can make all fees

recoverable (even if Texas law has long said they are not), it is no surprise

that more and more claimants have sought to invoke it. Moreover, as the details

of an attorney’s work are shrouded in the attorney-client privilege, it may be

hard for anyone else to tell whether the work on several claims truly was

inextricably intertwined.

The exception

has also been hard to apply consistently. The courts of appeals have disagreed

about what makes two claims inextricably intertwined — some focusing on the

underlying facts, [73] others on the elements that must be

proved, [74] and others on some combination of the

two. [75] Some do not require testimony that

claims are intertwined, [76] while others do. [77] When faced with fraud and breach of

contract claims like those here, some have held the claims inextricably

intertwined, [78] and others just the opposite. [79]

As

Sterling suggests the need to segregate fees is a question of law, [80] the courts of appeals have generally

(though not always) applied a de novo standard of review. [81] That standard, of course, gives no

deference to the factual determinations of the trial judge or the jury. But the

fees necessary to prove particular claims often turn on such facts — how hard

something was to discover and prove, how strongly it supported particular

inferences or conclusions, how much difference it might make to the verdict, and

a host of other details that include judgment and credibility questions about

who had to do what and what it was worth. Given all these details, it may often

be impossible to state as a matter of law the extent to which certain claims can

or cannot be segregated; the issue is more a mixed question of law and fact for

the jury.

This case

illustrates several of these difficulties. The court of appeals held that Chapa

was not required to segregate fees (and thus could recover 100 percent of them)

because she “was required to prove essentially the same facts in pursuing each

of her three causes of action.” But when Chapa’s attorneys were drafting her

pleadings or the jury charge relating to fraud, there is no question those fees

were not recoverable. Nor does Texas law permit them to be compensated for

preparing and presenting evidence regarding the defendant’s net worth.

Further, the

effort to recover 100 percent of their fees has required Chapa’s attorneys to

take a position inconsistent with her underlying claims. As noted above, Chapa

has insisted (and we have agreed) that her claims were more than a mere breach

of contract — they could be asserted in fraud. But when it came time to

segregate fees, her attorneys testified that their work on the fraud claim could

not possibly be distinguished from that on the contract and DTPA claims. Having

prevailed in her argument that the claims are distinct, it is hard to see how

she can also claim they are inextricably intertwined.

It is

certainly true that Chapa’s fraud, contract, and DTPA claims were all “dependent

upon the same set of facts or circumstances,” [82] but that does not mean they all

required the same research, discovery, proof, or legal expertise. Nor are

unrecoverable fees rendered recoverable merely because they are nominal; there

is no such exception in any contract, statute, or “the American Rule.” To the

extent Sterling suggested that a common set of underlying facts

necessarily made all claims arising therefrom “inseparable” and all legal fees

recoverable, it went too far.

But

Sterling was certainly correct that many if not most legal fees in such

cases cannot and need not be precisely allocated to one claim or the other. Many

of the services involved in preparing a contract or DTPA claim for trial must

still be incurred if tort claims are appended to it; adding the latter claims

does not render the former services unrecoverable. Requests for standard

disclosures, proof of background facts, depositions of the primary actors,

discovery motions and hearings, voir dire of the jury, and a host of

other services may be necessary whether a claim is filed alone or with others.

To the extent such services would have been incurred on a recoverable claim

alone, they are not disallowed simply because they do double service.

Accordingly,

we reaffirm the rule that if any attorney’s fees relate solely to a claim for

which such fees are unrecoverable, a claimant must segregate recoverable from

unrecoverable fees. Intertwined facts do not make tort fees recoverable; it is

only when discrete legal services advance both a recoverable and unrecoverable

claim that they are so intertwined that they need not be segregated. We modify

Sterling to that extent.

This standard

does not require more precise proof for attorney’s fees than for any other

claims or expenses. Here, Chapa’s attorneys did not have to keep separate time

records when they drafted the fraud, contract, or DTPA paragraphs of her

petition; an opinion would have sufficed stating that, for example, 95 percent

of their drafting time would have been necessary even if there had been no fraud

claim. [83] The court of appeals could then have

applied standard factual and legal sufficiency review to the jury’s verdict

based on that evidence.

There may, of

course, be some disputes about fees that a trial or appellate court should

decide as a matter of law. For example, to prevail on a contract claim a party

must overcome any and all affirmative defenses (such as limitations, res

judicata , or prior material breach), and the opposing party who raises them

should not be allowed to suggest to the jury that overcoming those defenses was

unnecessary. But when, as here, it cannot be denied that at least some of the

attorney’s fees are attributable only to claims for which fees are not

recoverable, segregation of fees ought to be required and the jury ought to

decide the rest.

Chapa’s

failure to segregate her attorney’s fees does not mean she cannot recover any.

Unsegregated attorney’s fees for the entire case are some evidence of what the

segregated amount should be. [84] We have applied this same rule for

lost profits, medical expenses, and attorney’s fees — an unsegregated damages

award requires a remand. [85] Accordingly, remand is required.

V. Conclusion

Because the

jury found in Chapa’s favor on all her claims, she is entitled to recover on the

most favorable theory the verdict would support. But she is not required to make

that election until she knows her choices. [86]

Under either

fraud or the DTPA, Chapa is entitled to $7,213 in economic damages and $21,639,

in mental anguish. The court of appeals must reassess her exemplary damages, and

a jury must reassess her attorney’s fees. There is no rule establishing which

should go first, but for practical reasons we remand first to the court of

appeals. At the trial level, the most Chapa could recover under the DTPA would

be additional damages of $21,639 (three times her economic damages) plus

attorney’s fees of something less than $20,000 (depending on the new verdict).

If the court of appeals’ reassessment of exemplary damages for fraud exceeds

this amount, Chapa would obviously be better off electing that recovery; if not,

then the court of appeals should thereafter remand to the trial court for a new

trial on attorney’s fees. Accordingly, we remand to the court of appeals for

further proceedings consistent with this opinion.

_____________________________

Scott

Brister

Justice

OPINION

DELIVERED: December 22, 2006

[1] See Texas Deceptive Trade Practices‑Consumer

Protection Act, Tex. Bus. & Com.

Code §§ 17.41-.63 ( A DTPA”).

[2] Stewart Title Guar. Co. v. Sterling , 822 S.W.2d

1, 8 (Tex. 1991).

[3] See Boyce Iron Works, Inc. v. Sw. Bell Tel. Co. ,

747 S.W.2d 785, 787 (Tex. 1988) ( A When a party tries a case on alternative theories of

recovery and a jury returns favorable findings on two or more theories, the

party has a right to a judgment on the theory entitling him to the greatest or

most favorable relief.”); see also Tex. Bus. & Com. Code § 17.43

(providing that A no recovery shall be permitted under both this

subchapter and another law of both damages and penalties for the same act or

practice”); Gunn Infiniti, Inc. v. O’Byrne , 996 S.W.2d 854, 862 (Tex.

1999) (holding plaintiff must elect recovery under either DTPA or fraud after

remand).

[4] See Stewart Title Guar. Co. v. Aiello , 941

S.W.2d 68, 72 (Tex. 1997) (holding mental anguish and exemplary damages

unavailable for breach of contract).

[5] See New Amsterdam Cas. Co. v. Texas Indus. , 414

S.W.2d 914, 915 (Tex. 1967) (stating that A attorney’s fees are not recoverable either in an action

in tort or a suit upon a contract unless provided by statute or by contract

between the parties”); see also Neeley v. Bankers Trust Co. of Texas , 757

F.2d 621, 633 (5th Cir. 1985).

[6] See Tex.

Bus. & Com. Code § 17.50(b)(1). For acts committed intentionally, a

consumer may recover additional damages up to three times the amount of economic

and mental anguish damages combined, see id. ; with regard to the DTPA,

Chapa only requested and obtained a jury finding that Gullo Motor’s violations

were committed knowingly.

[7] See Gulf States Utils. Co. v. Low , 79 S.W.3d

561, 566 (Tex. 2002); Boyce Iron Works , 747 S.W.2d at 787 (Tex.

1988).

[8] Ashford Dev., Inc. v. USLife Real Estate Serv.

Corp ., 661 S.W.2d 933, 935 (Tex. 1983) (citations omitted).

[9] Thigpen v. Locke , 363 S.W.2d 247, 252 (Tex.

1962).

[10] See Formosa Plastics Corp. USA v. Presidio Eng’rs

and Contractors, Inc ., 960 S.W.2d 41, 46 (Tex. 1998) (quoting Crim Truck

& Tractor Co. v. Navistar Int’l Transp. Corp ., 823 S.W.2d 591, 597 (Tex.

1992)).

[11] See id. at 46-47.

[12] See id. at 47 (citing Graham v. Roder , 5

Tex. 141, 149 (1849)).

[13] See id. ; Spoljaric v. Percival Tours,

Inc ., 708 S.W.2d 432, 436 (Tex. 1986).

[14] See Crawford v. Ace Sign, Inc ., 917 S.W.2d 12,

14 (Tex. 1996).

[15] See Tex.

Bus. & Com. Code §§ 17.46(b)(7) (defining deceptive acts to include

A representing that . . . goods are of a particular style

or model, if they are of another”), 17.46(b)(24) (defining deceptive acts to

include A failing to disclose information concerning goods or

services which was known at the time of the transaction if such failure to

disclose such information was intended to induce the consumer into a transaction

into which the consumer would not have entered had the information been

disclosed”).

[16] See Spoljaric , 708 S.W.2d at 435 .

[17] See id. ( A Failure to perform, standing alone, is no evidence of

the promisor’s intent not to perform when the promise was made.”); Formosa

Plastics , 960 S.W.2d at 48 ; Schindler v. Austwell Farmers Co‑op ., 841

S.W.2d 853, 854 (Tex. 1992) (per curiam) (finding failure to pay amount due was

not fraud); Crim Truck , 823 S.W.2d at 597 .

[18] See Miga v. Jensen , 96 S.W.3d 207, 210-11 (Tex.

2002); T.O. Stanley Boot Co., Inc. v. Bank of El Paso , 847 S.W.2d 218,

222 (Tex. 1992) (stating that denial of making promise was A a factor” but A does not constitute evidence that the Bank never

intended to perform its promise”); Spoljaric , 708 S.W.2d at 435

( A Failure to perform . . . is a circumstance to be

considered with other facts to establish intent.”). But see Thigpen v.

Locke, 363 S.W.2d 247, 252 (Tex. 1962) ( A [S]ubsequent breach is not evidence that may be

considered in determining whether or not there was fraud in the original

transaction.”).

[19] See, e.g., Formosa Plastics , 960 S.W.2d at 48

(noting that defendant’s civil department director admitted that defendant had

acted deceptively and had no intention of performing a key contractual promise

at the time it was made); Spoljaric , 708 S.W.2d at 434-35 (noting that

defendant denied he ever approved a bonus contract, but corporate secretary

testified that he did).

[20] Spoljaric , 708 S.W.2d at 435 .

[21] See City of Keller v. Wilson , 168 S.W.3d 802,

819-20 (Tex. 2005).

[22] See Trevino v. Ortega , 969 S.W.2d 950, 953 (Tex.

1998) (holding spoliation best addressed not by independent cause of action but

by inference that evidence was unfavorable).

[23] Chapa also argues that Gullo Motors’ agreement after

the dispute arose to install certain features of a Highlander Limited in her

base-model is some evidence of its earlier fraudulent intent. We disagree; if

efforts to satisfy a consumer after a dispute arises are some evidence of fraud,

sellers will be loathe to make any. Cf. PPG Indus., Inc. v. JMB/Houston Ctrs.

Partners Ltd. P’ship , 146 S.W.3d 79, 95 (Tex. 2004) ( A We should encourage sellers to attempt repairs; tolling

limitations every time they do might discourage them from doing so at all.”).

[24] See, e.g. , William Powers, Jr., The

Availability of Tort Remedies for Breach of Contract: Border Wars , 72 Tex. L. Rev . 1209

(1994).

[25] See Formosa Plastics , 960 S.W.2d at

46-47 .

[26] See Tex.

Civ. Prac. & Rem. Code § 41.003(a) (providing for recovery of

exemplary damages if claimant proves by clear and convincing evidence that harm

resulted from fraud); Tex. Bus. &

Com. Code § 17.50(b)(1) (providing for recovery of up to three times

economic damages if conduct violating DTPA was committed

knowingly).

[27] Tex. Bus. &

Com. Code § 17.50(b)(1). The same statutory provision limits additional

damages to three times economic and mental anguish damages if conduct is

committed intentionally , id. , but Chapa only requested a jury

finding whether Gullo Motors’ committed deceptive acts

knowingly .

[28] Tex. Civ. Prac.

& Rem. Code § 41.008(b) (capping exemplary damages at the greater of

(1) noneconomic damages plus two times economic damages, or (2)

$200,000).

[29] See Alamo Nat’l. Bank v. Kraus , 616 S.W.2d 908,

910 (Tex. 1981).

[30] See Owens‑Corning Fiberglas Corp. v. Malone , 972

S.W.2d 35, 43, 45 (Tex. 1998); see also Cooper Indus., Inc. v. Leatherman

Tool Group, Inc ., 532 U.S. 424, 436-37 (2001) (requiring de novo appellate

review of exemplary damages because A the level of punitive damages is not really a ‘fact’

‘tried’ by the jury”) (citation omitted).

[31] See Bentley v. Bunton, 94 S.W.3d 561, 607 (Tex.

2002) (finding exemplary damages were not constitutionally excessive, but

remanding for reassessment in light of reduced mental anguish award);

Malone , 972 S.W.2d at 45-48 (finding exemplary damages were not

constitutionally excessive).

[32] Honda Motor Co., Ltd. v. Oberg , 512 U.S. 415,

418, 426-27 (1994) ( A An amendment to the Oregon Constitution prohibits

judicial review of the amount of punitive damages awarded by a jury ‘unless the

court can affirmatively say there is no evidence to support the verdict.’ The

question presented is whether that prohibition is consistent with the Due

Process Clause of the Fourteenth Amendment. We hold that it is

not.”).

[33] Gasperini v. Ctr. for Humanities, Inc ., 518 U.S.

415 , 431 n.12 (1996); Malone , 972 S.W.2d at 45 ( A [E]ven if an assessment of punitive damages is not

deemed excessive under governing state law, it may violate a party’s substantive

due process right to protection from ‘grossly excessive’ punitive damages

awards.”).

[34] State Farm Mut. Auto. Ins. Co. v. Campbell , 538

U.S. 408, 418 (2003); Cooper Indus ., 532 U.S. at 433 ; Oberg , 512

U.S. at 420 ( A Our recent cases have recognized that the Constitution

imposes a substantive limit on the size of punitive damages awards.”); TXO

Prod. Corp. v. Alliance Res. Corp ., 509 U.S. 443, 453-54 (1993).

[35] Campbell , 538 U.S. at 417 .

[36] Id . at 418 (citing BMW of N. Am. v. Gore ,

517 U.S. 559, 575 (1996)).

[37] Id. at 419 (quoting Gore , 517 U.S. at

575 ).

[38] See id.

[39] Cf. Transp. Ins. Co. v. Moriel , 879 S.W.2d 10,

24 (Tex. 1994) ( A [A]n insurance carrier’s refusal to pay a claim cannot

justify punishment unless the insurer was actually aware that its action would

probably result in extraordinary harm not ordinarily associated with breach of

contract or bad faith denial of a claim B such as death, grievous physical injury, or financial

ruin.”).

[40] Campbell , 538 U.S. at 419 .

[41] Id . at 425; Gore , 517 U.S. at

581-82 .

[42] Campbell , 538 U.S. at 425 .

[43] See id. at 426 ; see also Restatement (Second) of Torts § 908,

cmt. c, at 466 (1977) ( A In many cases in which compensatory damages include an

amount for emotional distress, such as humiliation or indignation aroused by the

defendant’s act, there is no clear line of demarcation between punishment and

compensation and a verdict for a specified amount frequently includes elements

of both.”).

[44] Tex. Occ. Code

§ 2301.801.

[45] See Tex.

Bus. & Com. Code § 17.47(c).

[46] See Campbell , 538 U.S. at 428 (comparing award

in bad-faith insurance case to civil penalty of $10,000 available under Utah

law); Cooper Indus., Inc. v. Leatherman Tool Group, Inc ., 532 U.S. 424,

442-43 (2001) (comparing award in misappropriation case to civil penalty of

$25,000 available under Oregon’s Unlawful Trade Practices Act).

[47] Campbell , 538 U.S. at 428 ( A Great care must be taken to avoid use of the civil

process to assess criminal penalties that can be imposed only after the

heightened protections of a criminal trial have been observed, including, of

course, its higher standards of proof. Punitive damages are not a substitute for

the criminal process. . .”).

[48] See, e.g., BMW of N. Am. v. Gore , 517 U.S. 559,

577 (1996) ( A Our holdings that a recidivist may be punished more

severely than a first offender recognize that repeated misconduct is more

reprehensible than an individual instance of malfeasance.”).

[49] See ___ S.W.3d at ___.

[50] Campbell , 538 U.S. at 426 .

[51] See ___ S.W.3d at ___.

[52] Campbell , 538 U.S. at 425 .

[53] ___ S.W.3d at ___.

[54] Gore , 517 U.S. at 575 (emphasis added);

Campbell , 538 U.S. at 428 ; Cooper Indus., Inc. v. Leatherman Tool Group,

Inc ., 532 U.S. 424, 442-43 (2001).

[55] See ___ S.W.3d at ___ . The case cited by

the dissent does not support its analysis. See Gore , 517 U.S. at 583-84

(comparing award in fraud case to maximum civil penalty of $2,000 available

under Alabama’s Deceptive Trade Practices Act).

[56] Honda Motor Co., Ltd. v. Oberg , 512 U.S. 415,

432 (1994).

[57] Cf. PPG Indus., Inc. v. JMB/Houston Ctrs. Partners

Ltd. P’ship, 146 S.W.3d 79, 89 (Tex. 2004) ( A Frequently, the DTPA is pleaded not because it is the

only remedy, but because it is the most favorable remedy.”)

(italics in original).

[58] See Transp. Ins. Co. v. Moriel , 879 S.W.2d 10,

24 (Tex. 1994).

[59] Tex. R. App.

P . 46.

[60] 94 S.W.3d 561, 605-08 (Tex. 2002).

[61] See Bunton v. Bentley , 153 S.W.3d 50, 53-54

(Tex. 2004) (per curiam).

[62] The figure represented fees only through the trial

level; Chapa tendered no evidence or jury question on appellate

fees.

[63] See, e.g., Gulf States Utils. Co. v. Low , 79

S.W.3d 561, 567 (Tex. 2002); Dallas Cent. Appraisal Dist. v. Seven Inv.

Co. , 835 S.W.2d 75, 77 (Tex. 1992); New Amsterdam Cas. Co. v. Texas

Indus., Inc ., 414 S.W.2d 914, 915 (Tex. 1967); Mundy v. Knutson Constr.

Co. , 294 S.W.2d 371, 373 (Tex. 1956).

[64] See, e.g., Buckhannon Bd. and Care Home, Inc. v.

West Virginia Dept. of Health and Human Res. , 532 U.S. 598, 602 (2001)

( A In the United States, parties are ordinarily required to

bear their own attorney’s fees‑the prevailing party is not entitled to collect

from the loser. Under this ‘American Rule,’“ we follow A a general practice of not awarding fees to a prevailing

party absent explicit statutory authority.”) (internal citations

omitted).

[65] Travelers Indem. Co. of Connecticut v. Mayfield ,

923 S.W.2d 590, 594 (Tex. 1996).

[66] See Stewart Title Guar. Co. v. Aiello , 941

S.W.2d 68, 73 (Tex. 1997); Stewart Title Guar. Co. v. Sterling , 822

S.W.2d 1, 10 (Tex. 1991); Matthews v. Candlewood Builders, Inc ., 685

S.W.2d 649, 650 (Tex. 1985); Int’l Sec. Life Ins. Co. v. Finck , 496

S.W.2d 544, 547 (Tex. 1973).

[67] 822 S.W.2d at 10 .

[68] Id . at 11-12.

[69] See, e.g., Village Mobile Homes, Inc. v. Porter ,

716 S.W.2d 543, 552 (Tex. App.‑Austin 1986, writ ref’d n.r.e.); De La Fuente

v. Home Sav. Ass’n , 669 S.W.2d 137, 146 (Tex. App. B Corpus Christi 1984, no writ); First Wichita Nat’l

Bank v. Wood , 632 S.W.2d 210, 215 (Tex. App.-Fort Worth 1982, no writ);

Wilkins v. Bain , 615 S.W.2d 314, 316 (Tex. Civ. App.‑Dallas 1981, no

writ).

[70] See Sterling , 822 S.W.2d at 12 .

[71] See Aiello , 941 S.W.2d at 73 . In Am. Nat’l

Petroleum Co. v. Transcon. Gas Pipe Line Corp ., this Court held that the

court of appeals erred in requiring segregation of fees between a valid contract

and an invalid tortious interference claim, holding instead that both claims

were valid. 798 S.W.2d 274, 280 (Tex. 1990). We did not address the alternative

basis for the court of appeals’ ruling — that attorney’s fees are not

recoverable in a tort action. See 763 S.W.2d 809, 823 (Tex.

App. B Texarkana 1988).

[72] A Westlaw search shows more than one hundred published

and unpublished opinions addressing the Sterling exception since 1991.

See, e.g., Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121, 143 (Tex.

App. B Waco 2005, pet. denied); Marrs and Smith P’ship v.

D.K. Boyd Oil and Gas Co. , 2005 WL 3073794, *15 (Tex. App. B El Paso 2005, pet. denied); Shadow Dance Ranch

P’ship, Ltd. v. Weiner , 2005 WL 3295664 , *9 (Tex. App. B San Antonio 2005, no pet. h.); Royal Maccabees Life

Ins. Co. v. James , 146 S.W.3d 340, 353 (Tex. App. B Dallas 2004, pet. denied); Aetna Cas. & Sur. v.

Wild , 944 S.W.2d 37, 40 (Tex. App. B Amarillo 1997, writ denied); Panizo v. Young Men’s

Christian Ass’n 938 S.W.2d 163 , 170 (Tex. App. B Houston [1st Dist.] 1996, no writ); Kenneth H. Hughes

Interests, Inc. v. Westrup , 879 S.W.2d 229, 233 (Tex. App. B Houston [1st Dist.] 1994, writ denied).

[73] See, e.g., Rio Grande Valley Gas Co. v. City of

Edinburg , 59 S.W.3d 199, 224 (Tex. App.‑Corpus Christi 2000) aff’d in

part, rev’d in part sub nom . Southern Union Co. v. City of Edinburg,

129 S.W.3d 74 (Tex. 2003); Great Am. Ins. Co. v. N. Austin Mun. Util.

Dist. No. 1 , 902 S.W.2d 488, 505 (Tex. App. B Austin 1993) aff’d in part, rev’d in part , 908

S.W.2d 415 (Tex. 1995).

[74] See, e.g., Z.A.O., Inc. v. Yarbrough Drive Ctr.

Joint Venture , 50 S.W.3d 531 , 550‑51 (Tex. App. B El Paso 2001, no pet.); AU Pharm., Inc. v.

Boston , 986 S.W.2d 331, 337 (Tex. App. B Texarkana 1999, no pet.).

[75] See, e.g., Air Routing Int’l. Corp. (Canada) v.

Britannia Airways, Ltd. , 150 S.W.3d 682, 693 (Tex. App. B Houston [14th Dist.] 2004, no pet.).

[76] See id.

[77] See Royal Maccabees ,146 S.W.3d at

353.

[78] See, e.g., Nat’l Gas Clearinghouse v. Midgard Energy

Co. , 113 S.W.3d 400, 417 (Tex. App.‑Amarillo 2003, pet. denied); W. Beach

Marina, Ltd. v. Erdeljac , 94 S.W.3d 248, 268 (Tex. App.‑Austin 2002, no

pet.); Pegasus Energy Group, Inc. v. Cheyenne Petroleum Co. , 3 S.W.3d

112, 131 (Tex. App.‑Corpus Christi 1999, pet. denied).

[79] See, e.g., Young v. Neatherlin , 102 S.W.3d 415,

421 (Tex. App.-Houston [14th Dist.] 2003, no pet.); Panizo v. Young Men’s

Christian Ass’n , 938 S.W.2d 163 , 171 (Tex. App.‑Houston [1st Dist.] 1996, no

writ); S. Concrete Co. v. Metrotec Fin. , 775 S.W.2d 446 , 450‑51

(Tex.App. B Dallas 1989, no writ).

[80] See Stewart Title Guar. Co. v. Sterling , 822

S.W.2d 1, 12 (Tex. 1991) ( A Following a review of the record, we conclude that the

attorney’s fees are capable of segregation.”).

[81] See, e.g., Air Routing Int’l. Corp ., 150 S.W.3d

at 688 ; Flagship Hotel, Ltd. v. City of Galveston , 117 S.W.3d 552, 565

(Tex. App. B Texarkana 2003, pet. denied); Pacesetter Pools, Inc.

v. Pierce Homes, Inc ., 86 S.W.3d 827, 833 (Tex. App. B Austin 2002, no pet.); Aetna Cas. & Sur. v.

Wild , 944 S.W.2d 37, 41 (Tex. App. B Amarillo 1997, writ denied). But see AU Pharm., Inc.

v. Boston , 986 S.W.2d 331, 337 (Tex. App. B Texarkana 1999, no pet.) (applying abuse of discretion

review).

[82] Sterling , 822 S.W.2d at 11 .

[83] See, e.g., Stewart Title Guar. Co. v.

Aiello , 941 S.W.2d 68, 73 (Tex. 1997) (noting that claimant’s attorney

A testified that approximately twenty‑percent of his time

and fifteen‑percent of his paralegal’s time concerned issues predating the

agreed judgment”); Med. Specialist Group, P.A. v. Radiology Assocs.,

L.L.P. , 171 S.W.3d 727, 738 (Tex. App.‑Corpus Christi 2005, pet. denied)

( A In his affidavit, Radiology Associates’ counsel. . .

testified that his fees for the defense of the case totaled $460,087.00, and

approximately forty percent of these fees were directly related to Saratoga’s

antitrust claims.”); Flagship Hotel , 117 S.W.3d at 566 n.7 ( A Flagship argues that the segregation standard is

difficult to meet. We disagree and note that segregated attorney’s fees can be

established with evidence of unsegregated attorney’s fees and a rough percent of

the amount attributable to the breach of contract claim. Schenck v. Ebby

Halliday Real Estate, Inc ., 803 S.W.2d 361, 369 (Tex. App. B Fort Worth 1990, no writ); accord, Bradbury v.

Scott , 788 S.W.2d 31, 40 (Tex. App.‑Houston [1st Dist.] 1989, writ

denied).”).

[84] See Sterling , 822 S.W.2d at 12 .

[85] See Minnesota Mining and Mfg. Co. v. Nishika

Ltd. , 953 S.W.2d 733, 739 (Tex. 1997) (lost profits); Texarkana Mem’l

Hosp., Inc. v. Murdock , 946 S.W.2d 836, 840-41 (Tex. 1997) (medical

expenses); Sterling , 822 S.W.2d at 11-12 (attorney’s

fees).

[86] The dissent suggests Chapa must elect between her

fraud, contract, and DTPA claims before knowing what amount of attorney’s

fees she might recover. This would defeat the principle that she is entitled to

recover on the most favorable theory the verdict supports. See n.7,

supra .