BROSSEAU v. RANZAU (2001)

OPINION

Acapulco attracted the attention of appellee Dennis R. Ranzau (“Ranzau”) and appellant William D. Brosseau (“Brosseau”).   Of particular interest to them was a house (“Casa T”) being offered for sale by John Ballis (“Ballis”).   Brosseau and Ranzau met with Ballis and found that the house was the sole asset of a Canadian Corporation, 80451 Holdings, Ltd. (“80451”), of which Ballis was the sole shareholder.¹

Ranzau and Brosseau each agreed to pay Ballis $60,000 down and co-sign a promissory note for $800,000.   Ballis was in a hurry for money, so with Ranzau's permission the funding of the transaction went through one of Brosseau's companies, Argos Properties, Inc. (“Argos”).   The ownership of 80451 was placed in Argos.   The reason for the Ballis rush became obvious when First State Bank of Liberty (“First State”) later informed the parties that it had a security interest in 80451 and would like to be paid on the debt Ballis owed First State.   The parties negotiated a deal that resulted in the $800,000 promissory note becoming pledged to First State.

Ranzau and Brosseau both had wives named Teresa, so the parties named the Acapulco house Casa T.   Ranzau soon became concerned that Brosseau was not accounting for the expenses and income of the house, which rented for $1, 500 a day.   In spite of numerous requests from Ranzau, Brosseau allegedly failed to provide receipts for the substantial expenses he claimed were being expended on the house.   On one occasion, Ranzau's wife was embarrassed and angered when she and some of her friends were locked out of the house by an agent of Brosseau.   Ranzau filed this lawsuit claiming fraud and a breach of a partner's fiduciary duty to another.   Because Brosseau had never quite found the time to have his lawyers prepare the partnership papers and transfer the paper ownership of 80451 from Argos to the partnership, Ranzau relied on the oral partnership agreements and letters confirming the 50-50 partnership.

The trial court appointed a receiver to take charge of the partnership property during the dispute.   While the lawsuit was pending, the FDIC took over as receiver for First State and the case was removed to federal court.   The case was eventually remanded back to state court after the parties each put up $300,000 to satisfy the FDIC and obtained a quitclaim of the property from the FDIC to the state court receiver.   Claiming that she owned the Brosseau/Argos interest in the property, Teresa Brosseau filed an intervention in the state court lawsuit.

In May 1991, the case was heard in a bench trial.   The trial court below entered an interlocutory judgment for Ranzau ordering Brosseau to pay $107,196.76 in actual damages and $200,000 in exemplary damages, plus attorney's fees.   On August 7, 1992, after finding that Brosseau had diverted rental income and intentionally violated court orders, the trial court ordered the receiver to sell the property.

Brosseau had filed for Chapter 11 bankruptcy on October 8, 1991.   The bankruptcy was converted to a Chapter 7 bankruptcy, and the Bankruptcy Court appointed a trustee to liquidate the assets of the estate.   On February 1, 1994, the trustee sold ownership of the estate's interest in 80451 and Casa T to Ranzau.   Teresa Brosseau filed for divorce, and the bankruptcy stay was lifted to allow her to pursue a claim of community property interest in Casa T;  so Ranzau obtained a quitclaim of any interest she and her children's trust had in 80451 and Casa T. He also obtained a quitclaim from the state court receiver pursuant to an order of the trial court dated April 11, 1994.   It appeared that Ranzau had acquired all existing rights to 80451 and Casa T. Meanwhile a divorce court in Dallas County entered a divorce decree declaring the stock in 80451 to be the property of the Brosseaus' children's trust, the trust that had given its ownership interest to Ranzau.

However, there remained another issue to be litigated.   In September 1991, Brosseau had filed a motion to recuse the state trial judge because the judge was a friend of Ranzau's attorney.   In addition, that attorney had represented the judge in a divorce proceeding.   The motion was not verified as required by Rule 18a(a) of the Rules of Civil Procedure, and the trial court correctly refused to refer it to the presiding judge.   See Tex.R. Civ. P. 18a(a).   Brosseau filed a second, properly verified motion to recuse on September 9, 1992.   The trial judge took no action on this motion either, this time in violation of Tex.R. Civ. P. 18a(c).

On November 21, 1994, Ranzau requested injunctive relief, an accounting, and a turnover order.   He sought to prevent Brosseau from interfering with his ownership of the Casa T and 80451.   The trial court granted Ranzau all the requested relief, but this court ruled these orders were void because no hearing had been held on the recusal motion.   See Brosseau v. Ranzau, 911 S.W.2d 890, 893 (Tex.App.-Beaumont 1995, no writ).

Then, on August 21, 1996, a Mexican court held that the stock in 80451 was owned by the Brosseau [Children's] Trust and Desarrollo Turistico Alexa, S.A. de C.V. (Alexa Tourism Development), a Mexican corporation which was a new party to the litigation and whose ownership is unknown.   This judgment was affirmed by the Superior Court of Justice of the Tabares Judicial District on December 12, 1996.

On December 5, 1997, Brosseau's second motion for recusal was finally heard and denied, and Ranzau filed a motion for summary judgment in November of 1998.   The motion was granted, Ranzau was declared the owner of 80451 and Casa T, the interlocutory money judgment was made final, and Teresa Brosseau was ordered to take nothing by way of her intervention.   Claiming he did not receive sufficient notice of the recusal hearing held in response to our order, Brosseau appealed to this court.  Brosseau v. Ranzau, 28 S.W.3d 235, 238 (Tex.App.-Beaumont 2000, no pet.).   Finding that notice had been inadequate, this court abated this appeal for a second hearing.  Id. at 240.   Another hearing on the motion to recuse was held and the motion was again denied.   We have reviewed the record of this second hearing and find no evidence for recusal.   The motion to recuse, which resulted in considerable delay and two appellate opinions, is without merit.

After a decade of litigation, the court below considered competing motions for summary judgment and issued a final judgment holding that plaintiff Dennis Ranzau is the sole owner of all interests in the single share of stock which constitutes 80451 Holdings, Ltd. The final judgment ordered the court-appointed receiver of 80451 and its holdings to transfer all the holdings, and any claims against third parties, to Ranzau.   The court ordered that intervenor Teresa Brosseau, ex-wife of defendant William Brosseau, take nothing.   The 1991 interlocutory judgment, which awarded Ranzau actual damages of $107,196.76 and exemplary damages of $200,000 plus attorney's fees, was incorporated in the final judgment.

Brosseau now asks us to consider eighteen issues.   We do, and we overrule them all.   We explain the basis for our conclusion on each issue raised.

The Mexican Judgment

Brosseau's first issue relates to the 1996 Mexican judgment holding that the Brosseau [Children's] Trust and Desarrollo Turistico Alexa (Alexa Tourism Development, hereafter “DTA”) are the legitimate stockholders of 80451 Holdings.   Brosseau claims that the Mexican judgment conclusively established the ownership of the property, and that Ranzau's summary judgment motion was collaterally estopped (issue preclusion) by the Mexican judgment.   However, Brosseau was not a party to the Mexican litigation (at least he does not claim to be), the judgment does not pretend to vest any ownership interest in him, and he demonstrates no standing to assert the interest of the parties alleged to own the property as a result of the judgment.   He lost his interest in the property when he filed for bankruptcy.   Brosseau's interest in the property became the sole property of the bankruptcy estate when he filed for bankruptcy in 1991.   The bankruptcy estate transferred his interest to Ranzau in 1994.

Here we are dealing with conflicting judgments and orders;  the judgment from the court in Mexico conflicts with prior judgments and orders from courts in this country.   In addition, there are numerous unexplained discrepancies in the 1996 lawsuit in Mexico.   The only record of the proceedings Brosseau offers is the judgment and the opinion of the Superior [appellate] Court of Justice of the Tabares Judicial District affirming the judgment, along with English translations.   The appellate opinion styles 80451 as the plaintiff and lists Ranzau, the receiver appointed by the Liberty County court, and several Mexican banks, government officials, and notaries public as defendants.   However, by the time the suit was filed in 1995, Ranzau was the sole shareholder in 80451.   Teresa Brosseau, the bankruptcy estate, and the Brosseau [Children's] Trust had all conveyed any ownership interest in the corporation to Ranzau in 1994. Ranzau, therefore, was sued by unknown persons claiming to represent a corporation of which he was and is the only shareholder.   In addition, we are given no information about DTA, its owners or directors, or what evidence they offered to substantiate an interest in 80451.²

Ignoring both the federal and state proceedings through which ownership of the corporation was transferred to Ranzau, the judgment treats the transfers of ownership in 80451 as nullities.   The judgment rests on the proposition that courts in the United States cannot adjudicate title to Mexican real estate.   However, this court, and the other courts that have dealt with this dispute, claim no jurisdiction over the real estate.   The issue here is who owns 80451.   This dispute is within the jurisdiction of courts in Texas because Casa T is owned by 80451, all of 80451's stock was and is owned by Texas residents, and those Texas residents sought to resolve their respective rights in Texas.   In addition, Brosseau's interest in 80451 came under the jurisdiction of the United States Bankruptcy Court in Texas in 1991, when he filed for bankruptcy and placed his assets under the protection of United States bankruptcy laws.

Brosseau and Ranzau are not contesting the title to Casa T;  they are contesting the ownership of the single share of stock constituting 80451.   In Texas, stock has always been considered personal property, even when the underlying corporation itself owns real property.  Evans v. Prufrock Restaurants, Inc., 757 S.W.2d 804, 805-06 (Tex.App.-Dallas 1988, writ denied) (“[T]he transaction was the sale of a personalty rather than realty․ It is a well established fact that the sale of stock is personalty not real estate.”);  Griffith v. Jones, 518 S.W.2d 435, 437 (Tex.Civ.App.-Tyler 1974, writ ref'd n.r.e.) (“Shares of corporate stock are personal property in the nature of choses in action.”).   United States federal courts have recognized and applied this rule of Texas law.   See Engel v. Teleprompter Corp., 703 F.2d 127, 131 (5th Cir.1983) (“Under Texas law, shares of corporate stock are personal property.”)   Our jurisdiction to adjudicate this case is not based on any claim to jurisdiction over Mexican real estate;  it is based on our jurisdiction over Ranzau and Brosseau, two Texas residents, and their conflicting, exclusive claims to ownership of stock in 80451.

In addition to divesting Ranzau of ownership of 80451, the Mexican court ordered him to pay damages of $7,234,500 pesos.   Our response to the judgment is informed by the Uniform Foreign Country Money Judgment Recognition Act (“UFCMJRA”).   See Tex. Civ. Prac. & Rem.Code Ann. § 36.003 (Vernon 1997).   The UFCMJRA provides that, under some circumstances, a foreign country judgment is conclusive between the parties to the extent that it awards or denies a sum of money.   See Reading & Bates Const. Co. v. Baker Energy Resources Corp., 976 S.W.2d 702, 706 (Tex.App.-Houston [1st Dist.] 1998, pet. denied).   Unless successfully contested under the terms of the Act, such a judgment is enforceable in the same manner as a judgment of a sister state in this country and is entitled to full faith and credit.  Id. at 706;  Tex. Civ. Prac. & Rem.Code Ann. § 36.004 (Vernon 1997).   Brosseau is not asking us to enforce the Mexican court's money judgment, but the Act is useful here if only as persuasive authority because it reflects public policy on the preclusive effect to be given foreign litigation.

Section 36.005 of the UFCMJRA states several grounds on which courts may not recognize a judgment from another country, and several of those grounds argue against recognition here.   See Tex. Civ. Prac. & Rem.Code Ann. § 36.005(b)(4) (Vernon 1997).   For example, the UFCMJRA states that courts need not recognize a judgment from another country which “conflicts with another final and conclusive judgment” from this country.   See § 36.005(b)(4). Here, the Mexican judgment conflicts with and attempts to nullify the 1992 and 1994 United States bankruptcy orders and the 1994 divorce decree in Dallas County, all of which were “final and conclusive” and all of which preceded the Mexican judgment chronologically.

Courts also may refuse to recognize a foreign judgment if the proceeding in the foreign court was “contrary to an agreement between the parties under which the dispute in question was to be settled otherwise than by proceedings in that court[.]”  See § 36.005(b)(5).   The February 1994 settlement agreement between Ranzau and the Brosseau Trust was an agreement to resolve the issue of ownership “other than by proceedings” in the Mexican courts, as was the sale on the same day, of Brosseau's former interest in 80451 to Ranzau by Brosseau's federal bankruptcy estate.   As noted above, Ranzau was purportedly sued by 80451 in the lawsuit in Mexico, although he had already purchased all existing interest in the corporation via the above settlements;  this militates strongly against recognition of the 1996 judgment.

Even if we accepted the judgment as precedential, Brosseau offered none of the pleadings in that lawsuit into the record.   The doctrine of issue preclusion cannot be applied without this evidence. Scurlock Oil Co. v. Smithwick, 787 S.W.2d 560, 562 (Tex.App.-Corpus Christi 1990, no writ).   We hold that the 1996 judgment does not bar this litigation.   Issue one is overruled.

Necessary Parties and Conflict of Laws

In issues two, three, and four appellant asserts that 80451 and DTA are necessary parties to this lawsuit as a result of the 1996 judgment, that this court has no jurisdiction over Mexican real estate, and that this court has no jurisdiction over a foreign corporation.   We hold that DTA is not a necessary party here as it has no claim or interest in 80451 other than that conferred by the 1996 judgment, which we have held does not control the issues here.   We reiterate that Texas courts have both subject matter and personal jurisdiction over Ranzau, Brosseau, and their exclusive claims to the corporation.   Issues two, three, and four are overruled.

Summary Judgment

Arguing that summary judgment was inappropriate because there was a fact issue on the question of collateral estoppel (issue preclusion), appellant asks in issue five that we reverse the summary judgment that Ranzau owns 80451.   The issue of the estoppel effect to be given a judgment is a question of law for the court, not a question of fact for a jury.   See McRae Exploration and Prod., Inc. v. Reserve Petroleum Co., 962 S.W.2d 676, 680 (Tex.App.-Waco 1998, pet. denied).   We have already reviewed that question of law de novo and resolved it by declining to give preclusive effect to the Mexican judgment.

Appellant also claims Ranzau is an interested witness and in one sentence questions generally, without identifying any particular evidence, the authentication of the documents used to support the summary judgment.   We have reviewed the summary judgment proof carefully and find it to be sufficiently authenticated and legally sufficient.   There is no basis for the general statement of lack of authenticity.   Issue five is overruled.

Breach of Contract

In issue six, Brosseau asserts that Ranzau presented no evidence of breach of contract in the 1991 bench trial.   In reviewing a “no evidence” challenge, courts are to review only the evidence that tends to support the finding, disregarding all evidence to the contrary.  Davis v. City of San Antonio, 752 S.W.2d 518, 522 (Tex.1988).   If there is any evidence of probative value to support the trial court's finding, we will find the evidence legally sufficient.  Anderson v. City of Seven Points, 806 S.W.2d 791, 795 (Tex.1991).

First, we examine whether there is legally sufficient evidence that a contract existed between Ranzau and Brosseau.   John Ballis, who sold 80451 to Ranzau and Brosseau, testified that the two were purchasing 80451 as partners.   Ballis testified that Brosseau told him on several occasions that Brosseau and Ranzau were to own 80451 as partners.   This corroborates Ranzau's uncontroverted testimony that he and Brosseau agreed to purchase the corporation as partners, sharing both expenses and income equally.   We hold that there is legally sufficient evidence that the partnership agreement existed.

Next, we examine the record for evidence that the partnership contract was breached.   The record contains extensive testimony from Ranzau to the effect that Brosseau refused to provide documentation for large sums allegedly spent on expenses, and that Ranzau sent Brosseau checks for his half of the mortgage only to find that mortgage payments were not being made.   Further, Ranzau testified that he was denied the use of the house, that Brosseau refused to produce accountings of income from the house, and that Brosseau had not forwarded any income from the rental of the house.   We hold that this uncontroverted testimony was legally sufficient evidence that the partnership contract was breached.

Finally, damages from the breach were supported by Ranzau's testimony of his damages and by checks totaling over $95,000 made out either to Brosseau, Brosseau's law firm, or Argos Properties (of which Brosseau was the sole owner).   These payments did not result in the promised transfer of a half interest in 80451 into Ranzau's name.   We hold that there is legally sufficient evidence of actual damages resulting from Brosseau's breach of contract.   Issue six is overruled.

Breach of Fiduciary Duty

In issue seven, Brosseau contends that there is no evidence to support the trial court's finding at the conclusion of the bench trial that he breached a fiduciary duty to Ranzau.   We have held that there was legally sufficient evidence for the trial court to find that the partnership existed between Ranzau and Brosseau.   Under both the Texas Uniform Partnership Act and the common law, partners have a duty to one another to make full disclosure of all matters affecting the partnership and to account for all partnership profits and property.  Bohatch v. Butler & Binion, 905 S.W.2d 597, 602 (Tex.App.-Houston [14th Dist.] 1995), aff'd, 977 S.W.2d 543 (Tex.1998);  Tex.Rev.Civ. Stat. Ann. art. 6132b § 20 (Vernon 1970).   Texas law recognizes that partners owe one another a fiduciary duty.  Hawthorne v. Guenther, 917 S.W.2d 924, 934 (Tex.App.-Beaumont 1996, writ denied).   A fiduciary owes a strict duty of good faith and candor.  Id. Ranzau allowed Brosseau, through Argos Properties, to take full paper title to 80451 and relied on Brosseau's promise that a half interest would be transferred to Ranzau later.   In addition, Ranzau allowed Brosseau to manage the maintenance and rental of Casa T. This evidence supports the conclusion that Brosseau was the managing partner of 80451.   A managing partner owes his partners the highest fiduciary duty recognized in the law.  Huffington v. Upchurch, 532 S.W.2d 576, 579 (Tex.1976).   Sufficient evidence was presented to support the judgment that Brosseau breached this duty.   Ranzau offered uncontroverted testimony that, in spite of their agreement that both expenses and income would be equally divided, Brosseau did not forward a penny of rental income to Ranzau and did not offer an accounting for this income.   Issue seven is overruled.

Fraud

In issue eight, Brosseau contends that the money judgment from the bench trial should be reversed because there was no evidence to support a finding of fraud.   To substantiate a claim of fraud, a plaintiff must prove a material false representation was made, the misrepresentation was either known to be false when made or was asserted recklessly without any knowledge of its truth, the misrepresentation was intended to be acted upon, and the plaintiff relied on the representation and thereby suffered injury.   See Sears, Roebuck & Co. v. Meadows, 877 S.W.2d 281, 282 (Tex.1994).   A promise of future performance constitutes an actionable misrepresentation if the promise was made with no intention of performance at the time it was made.   See Formosa Plastics Corp. USA v. Presidio Eng'rs and Contractors, Inc., 960 S.W.2d 41, 48 (Tex.1998).   However, the mere failure to perform a contract is not evidence of fraud;  the plaintiff must present evidence that the defendant made representations with the intent to deceive and had no intention of performing at the time they were made.  Id.

Ranzau's initial pleadings concerning the fraud claim are rather vague;  they assert that the material fact fraudulently misrepresented was “the creation of a partnership” between the two. Ranzau alleged that Brosseau promised the creation of a written partnership agreement which he never allowed to come into existence.   However, Ranzau's claims for breach of contract and breach of fiduciary duty rest on an implicit finding by the trial court that there was, in fact, a partnership between the two, a finding we have affirmed.   And while the trial record contains sufficient evidence of breach of contract and fiduciary duty, it does not contain legally sufficient evidence to support the intent element of a fraud claim.

However, neither the 1991 interlocutory judgment nor the final judgment state that Brosseau perpetrated fraud, and such a holding is not necessary to support the relief granted Ranzau by the trial court.   Appellant's request in issue eight that the money judgment be reversed is therefore overruled.

Actual Damages

In issue nine, Brosseau contends that there is no evidence, or insufficient evidence, to support the trial court's award of actual damages.   As discussed in issue six, we find that there is legally sufficient evidence to support the actual damages awarded.   Brosseau argues, correctly, that Ranzau did not present sufficient evidence to justify mental anguish damages;  however, since the court awarded none, we need not address the issue of mental anguish.   Issue nine is overruled.

Exemplary Damages

In issue ten, Brosseau argues that the punitive damage award should be reversed because exemplary damages are unavailable in contract, and there is insufficient evidence of malice or actual damages.   Brosseau is correct that exemplary damages are not available for breach of contract.   However, we have held that Ranzau presented legally sufficient evidence to substantiate both actual damages and breach of fiduciary duty.   Therefore, we will examine the law dealing with exemplary damages for breach of fiduciary duty.

A defendant's intentional breach of fiduciary duty is a tort for which a plaintiff may recover punitive damages.  Hawthorne, 917 S.W.2d at 936;  see also Lesikar v. Rappeport, 33 S.W.3d 282, 310 (Tex.App.-Texarkana 2000, pet. denied, mot. for extension of time to file mot. for reh'g granted).   The “intent” issue concerning exemplary damages for breach of fiduciary duty is whether the one with a fiduciary duty intended to gain an additional unwarranted benefit for himself.   See Cheek v. Humphreys, 800 S.W.2d 596, 599 (Tex.App.-Houston [14th Dist.] 1990, writ denied).

When a court of appeals conducts a factual sufficiency review of a punitive damage award, the court must detail relevant evidence in the opinion and explain why the evidence does or does not support the award in light of the established Kraus factors.  Transportation Ins. Co. v. Moriel, 879 S.W.2d 10, 31 (Tex.1994). The Kraus factors include “(1) the nature of the wrong, (2) the character of the conduct involved, (3) the degree of the culpability of the wrongdoer, (4) the situation and sensibilities of the parties concerned, and (5) the extent to which such conduct offends a public sense of justice and propriety.”  Alamo Nat'l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.1981).   In the process, the court of appeals must detail all the relevant evidence, whether or not the evidence supports the award.  Ellis County State Bank v. Keever, 915 S.W.2d 478, 479 (Tex.1995).   A court of appeals may vacate a damage award or suggest a remittitur only if the evidence for the award is “so factually insufficient or so against the great weight and preponderance of the evidence as to be manifestly unjust.”  Moriel, 879 S.W.2d at 30 (quoting Pope v. Moore, 711 S.W.2d 622, 624 (Tex.1986)).

The record contains legally and factually sufficient evidence that Brosseau breached his fiduciary duty to Ranzau.   The primary violations were his failure to transfer a half interest in 80451 from Argos into Ranzau's name as promised, his refusal to account to Ranzau for the uses made of rental income, and his failure to apply payments from Ranzau toward the promissory note which initially financed the house.   Brosseau attempted to maintain all ownership of 80451 while demanding that Ranzau pay half of the maintenance costs and note payments.   The only parties with an ownership interest in 80451 were Ranzau and Brosseau, so the court as finder of fact could reasonably draw the inference that the income withheld from Ranzau benefitted Brosseau.   Brosseau offered no evidence controverting Ranzau's proof.

We address the evidence in light of the Kraus factors.

(1) The nature of the wrong:  The wrong was an intentional violation of the fiduciary duty owed by a managing partner to a partner-the “highest fiduciary duty recognized by law.”  Hawthorne, 917 S.W.2d at 934.

(2) The character of the conduct involved:  The trial court heard evidence that Brosseau's behavior toward Ranzau was duplicitous.   For example, when Ranzau and Brosseau were negotiating the purchase of 80451 in September 1988, Brosseau suggested that, to expedite the deal, ownership initially be transferred to Argos Properties, which he wholly owned.   He promised Ranzau that the legal paperwork recognizing Ranzau's half-ownership would be drawn up “later.”   This promised event still had not taken place at the time of the bench trial almost three years later.

(3) The degree of the culpability of the wrongdoer:  The court heard testimony about conduct on Brosseau's part which went beyond self-dealing.   For example, in March 1989, Ranzau and his wife visited Acapulco and were locked out of the house on Brosseau's orders.   The house was not rented to paying guests at the time;  the only occupant was Javier Klaus, a friend of Brosseau's, who acted as Brosseau's agent in refusing Ranzau admittance.   Ranzau testified that there was no evidence that Klaus was ever charged rent for the use of the house.   Ranzau found himself locked out of his own largely unoccupied ³ house, on the orders of his own partner, with his exclusion carried out by a tenant whom Brosseau exempted from rent.

(4) The situation and sensibilities of the parties concerned:  Remorse is a factor to be considered in assessing the situation and sensibilities of the parties.   See Mobil Oil Corp. v. Ellender, 934 S.W.2d 439, 460 (Tex.App.-Beaumont 1996), rev'd in part on other grounds, 968 S.W.2d 917 (Tex.1998).   The record is silent as to any remorse on the part of Brosseau, or as to any mitigating explanation for his behavior.   Brosseau's wrongful conduct did not end when the court put 80451 into receivership.   In August 1992, the trial court found that Brosseau had diverted rental income from Casa T and engaged in “admitted intentional violations of the prior Orders of this Court.”   While this occurred after the May 1991 bench trial, the court heard evidence of this situation prior to rendering punitive damages.

Regarding the “situation and sensibilities” of Ranzau, we do note that Ranzau is a professional real estate investor who, without a written partnership agreement, bought a million-dollar house with an acquaintance.

(5) The extent to which Brosseau's conduct offends a public sense of justice and propriety:  As we held earlier, the record does not contain sufficient evidence of fraud.   Having said that, the evidence above shows evidence sufficient to support a finding of an injustice.   Much of Brosseau's behavior subsequent to the purchase of 80451 reasonably could be viewed as outright intentional harm to Ranzau.

We hold that there is legally and factually sufficient evidence to justify the award of punitive damages under the Kraus factors. The amount awarded ($200,000) is within the statutory limits.   See Tex. Civ. Prac. & Rem.Code Ann. § 41.008 (Vernon 1997). We affirm the award of punitive damages.

Attorney's Fees

In issues eleven and twelve, Brosseau contests the award of attorney's fees.  “Attorney's fees are not recoverable unless provided for by statute or by contract between the parties.”  Twelve Oaks Tower I, Ltd. v. Premier Allergy, Inc., 938 S.W.2d 102, 118 (Tex.App.-Houston [14th Dist.] 1996, no writ).   However, attorney's fees are recoverable for breach of contract under section 38.001(8) of the Civil Practice and Remedies Code, and we have found legally sufficient evidence of such a breach.  Tex. Civ. Prac. & Rem.Code Ann. § 38.001(8) (Vernon 1997) (“A person may recover reasonable attorney's fees ․ if the claim is for ․ an oral or written contract.”).   Where allowed by statute, the allowance of attorney's fees is within the discretion of the trial court and will only be reversed for abuse of discretion.   Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 881 (Tex.1990).   Reversal for abuse of discretion is justified only when the trial court's decision was arbitrary and unreasonable.  Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226 (Tex.1991).

The trial court heard extensive testimony about the legal costs which Ranzau incurred to litigate this case through the 1991 bench trial.   Granted, this testimony came from Richard Fuqua, Ranzau's lead attorney, obviously an interested witness.   However, the Supreme Court, in addressing such situations, has said:

In order for the court to award an amount of attorneys' fees as a matter of law, the evidence from an interested witness must not be contradicted by any other witness or attendant circumstances and the same must be clear, direct and positive, and free from contradiction, inaccuracies and circumstances tending to case [sic] suspicion thereon.   The court, as a trier of fact, may award attorneys' fees as a matter of law in such circumstances, especially when the opposing party has the means and opportunity of disproving the testimony or evidence and fails to do so.

Ragsdale, 801 S.W.2d at 882.

An examination of the record shows that Fuqua's testimony was “clear, direct and positive,” and that Brosseau had the “means and opportunity” to contest it and failed to do so.   We note that the summary judgment awards no more in attorney's fees than that awarded in the 1991 interlocutory judgment, despite the fact that ten years have passed in litigation since the 1991 bench trial.   We hold that the trial court did not abuse its discretion in the amount of attorney's fees awarded to Ranzau.   Issues eleven and twelve are overruled.

The Jury Trial Request

In issue thirteen, appellant complains of being denied a jury in the 1991 trial.   During the pretrial hearing preceding the 1991 bench trial, Brosseau preserved error by pointing out that he had filed a jury request and that he objected to the case having been set on the non-jury docket.   While opposing Brosseau's continuance motion and jury request, Ranzau asked the court to take judicial notice of a docket entry stating that Brosseau paid the required jury fee on March 8, 1991, 60 days before the date set for trial.   The court took such notice, then denied Brosseau a jury trial and ordered the parties to return for a bench trial that afternoon.

The right to a jury trial is guaranteed by the Texas Constitution, and is one of our fundamental rights.   See Tex. Const. art.  I, § 15;  Tex. Const. art.  V, § 10.   In order to secure the right to a jury trial, the Rules of Civil Procedure specify that a litigant must submit a written request for a jury and pay a $10 jury fee “not less than thirty days in advance” of the trial date.  Tex.R. Civ. P. 216.   A request in advance of the thirty day deadline is presumed to have been made a reasonable time before trial.  Wittie v. Skees, 786 S.W.2d 464, 466 (Tex.App.-Houston [14th Dist.] 1990, writ denied).

However, courts have consistently held the adverse party can rebut that presumption by showing the granting of a jury trial would operate to disrupt the court's docket or impede the ordinary handling of the court's business.   Halsell v. Dehoyos, 810 S.W.2d 371 (Tex.1991).   This evidence must appear in the record.  Weng Enter. Inc. v. Embassy World Travel, Inc., 837 S.W.2d 217, 222 (Tex.App.-Houston [1st Dist.] 1992, no writ).   Having acknowledged that Brosseau's jury request met the initial requirements of Rule 216, Ranzau must show that he successfully rebutted the resulting presumption of timeliness.   See Southern Farm Bureau Cas. Ins. Co. v. Penland, 923 S.W.2d 758, 760 (Tex.App.-Corpus Christi 1996, no writ);  see also Wittie, 786 S.W.2d at 466.

A close examination of the record convinces us that Ranzau did not meet that heavy burden.   The record contains substantial evidence that scheduling a jury trial in this matter would, in fact, have “disrupt[ed] the court's docket” and “impede[d] the ordinary handling of the court's business.”  Halsell, 810 S.W.2d at 371.   The trial court stated that there was no jury available on the day of trial.   A showing in the record that a jury was unavailable at the time set for trial may justify the denial of a jury trial under proper circumstances.  M M M v. Central State Depository of Criminal Records, 681 S.W.2d 908, 910 (Tex.App.-Fort Worth 1984, no writ).   By itself, however, this factor is normally insufficient in the face of a motion for continuance.   The record also indicates that the district court where this case was tried is responsible for adjudicating not only the county's civil cases but also its criminal and family cases as well.   The trial court stated that he had “a serious problem as far as jury time is concerned.   Very serious.”   He also stated that the county had several criminal defendants who had been jailed a year or more awaiting trial, “and I am going to have to give priority to those people.”   And although a motion for continuance was filed in this case, it was not brought to the court's attention until an ex parte phone call was made the day before the scheduled bench trial.   Brosseau's agreement to set the trial on the non-jury docket on at least two prior occasions likely led the case to be set as a bench trial case.   The case had been on file for two years before the May 8, 1991, trial date and had already been set twice for trial to the judge only.

We do not take lightly the denial of a jury request;  restrictions on the right to a jury trial are subjected to the utmost scrutiny.  Granger v. Folk, 931 S.W.2d 390, 393 (Tex.App.-Beaumont 1996, orig. proceeding).   The jury request was timely on its face, although possibly not timely in the context of the peculiar circumstances confronting this trial court.   The record indicates that a jury trial would have seriously impeded the court's operations, including the pressing requirement to dispose promptly of its criminal docket.   The evidence also suggests that Brosseau did not timely bring to the attention of the trial court his shift away from his initial agreement to a bench trial.   As an example of Brosseau's overall lack of diligence, we note he did not file an answer until after Ranzau rested his case.   Nevertheless, even under the exceptional circumstances in this case, some of which we have described, we hold that the trial court did err in refusing Brosseau a jury trial.

Having held that the trial court did err in refusing a jury trial, we must perform a harm analysis.   We note the Texas Supreme Court has held that even an erroneous refusal to grant a jury trial may be harmless “if the record shows that no material issues of fact exist and an instructed verdict would have been justified.”  Halsell, 810 S.W.2d at 372.   Given that Brosseau did not file an answer until the conclusion of Ranzau's case, that his answer was stricken as untimely, and that Brosseau offered no testimony to rebut Ranzau's claims, our review of the record establishes this is a case where judgment as a matter of law or by default would have been justified.   Under these unique circumstances, we hold that the trial court's error in denying the jury request was harmless.   Issue thirteen is overruled.

Recusal Hearing Notice

In issue fourteen appellant complains that he did not receive timely notice of the first recusal hearing held on December 5, 1997.   However, appellant raised this point in an earlier appeal to this court, and we resolved it in his favor and ordered a second recusal hearing.   See Brosseau v. Ranzau, 28 S.W.3d 235, 240 (Tex.App.-Beaumont 2000, no writ).   That hearing was held as ordered.   Brosseau does not allege any irregularities in the second hearing, nor does he challenge the denial of the recusal motion.

Appellant asks us to clarify whether our opinion in Brosseau v. Ranzau, 911 S.W.2d 890, 893 (Tex.App.-Beaumont 1995, no writ), voided all actions taken by the trial judge after his first recusal motion on September 27, 1991, or referred to those taken after the second recusal motion filed on September 8, 1992.

However, having abated this appeal to permit a hearing on the motion to recuse, we now have reconsidered issue fourteen in light of the record of the recusal hearing presented to this court.   The Texas Supreme Court has made clear that even “the erroneous denial of a recusal motion does not void or nullify the presiding judge's subsequent acts”;  the judgment may be reversed on appeal if erroneous.  In re Union Pacific Resources Co., 969 S.W.2d 427, 428 (Tex.1998).   Here, the recusal motion was properly denied and we affirm that denial;  none of the presiding judge's acts are void.⁴  The trial court reinstated the 1991 interlocutory monetary judgment in its final judgment;  that judgment is not void and is affirmed here.   Issue fourteen is overruled.

Disqualification of the Judge

In issue fifteen, Brosseau contends that the trial judge was disqualified.   We addressed and overruled this argument in an earlier opinion.   See Brosseau, 28 S.W.3d at 237.   Issue fifteen is overruled.

The Late-Filed Answer

In issue sixteen, appellant complains about the trial court's refusal to let him file his answer at the end of plaintiff's case;  he claims his defenses were tried by consent.   We disagree.

The lawsuit was on file for two years without an answer being filed, although Brosseau made an appearance in the case when he agreed to the appointment of a receiver.   Pleadings must be amended seven days before trial unless the trial court grants permission to amend.  Tex.R. Civ. P. 63.   This permits all parties to know what issues have been joined and will be tried before trial begins.

Brosseau apparently relies on the last sentence in Rule 63, which states that “leave [by the court to file late pleadings] shall be granted by the judge unless there is a showing that such filing will operate as a surprise to the opposite party.”   However, Brosseau's untimely answer included several affirmative defenses, and thus was prejudicial on its face.  State Bar of Texas v. Kilpatrick, 874 S.W.2d 656, 658 (Tex.1994).   In Chapin & Chapin, Inc. v. Texas Sand and Gravel Co., 844 S.W.2d 664, 665 (Tex.1992), the Supreme Court distinguished between trial amendments which were “of a formal, procedural nature” and those which are substantive, “changing the bases of the defense-which rather clearly changed the nature of the trial itself.”   An answer raising affirmative defenses filed after the plaintiff has rested his case certainly is likely to result in surprise and prejudice to the plaintiff;  Ranzau would have found it rather difficult to address any new issues raised.   The trial court did not abuse its discretion in striking Brosseau's untimely answer.   Issue sixteen is overruled.

Trial by Consent and Affirmative Defenses

Finally, Brosseau argues that Ranzau's invitation at trial for him to present evidence means that his defenses of breach and unclean hands were tried by consent, notwithstanding the striking of his answer.   However, Brosseau presented no evidence and controverted none of Ranzau's testimony.   We decline to find trial by consent of issues unsupported by evidence.   Issues seventeen and eighteen are overruled.

Appellant's issues are all overruled.   The judgment of the trial court is affirmed in its entirety.

AFFIRMED.

FOOTNOTES

1.   This history is easier to follow if the reader remembers that an ownership interest in 80451 Holdings is synonymous with an ownership interest in the house (Casa T), since the house is 80451's only asset.

2.   The timing and circumstances of the Mexican lawsuit appear curious.   We note the bankruptcy estate trustee took ownership of Brosseau's interest in 80451 and conveyed his interest to Ranzau as a matter of United States federal law before the lawsuit.   We have not been told, for example, whether Brosseau has a relationship with DTA.

3.   Exhibits indicate that the house was large enough to accommodate two parties of tourists at once;  the presence of Klaus did not mean that there was no room for the Ranzaus and their friends.

4.   This court's opinion in Brosseau, 28 S.W.3d at 236, cited In re Union Pacific Resources Co.;   any holding inconsistent with the Texas Supreme Court's decision was unintended and, to the extent necessary, is overruled by this opinion.

DAVID B. GAULTNEY, Justice.