      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-03-00277-CV



                                      Glen Smith, Appellant

                                                  v.

                                Maximum Racing, Inc., Appellee




     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
          NO. GN100698, HONORABLE JOSEPH H. HART, JUDGE PRESIDING



                                           OPINION


               This dispute arises out of the termination of an agreement between appellant Glen

Smith and appellee Maximum Racing, Inc. Maximum Racing agreed to provide Smith’s son, Casey,

with race cars and other equipment. When the agreement ended, Smith refused to return one racing

car, alleging that Maximum Racing owed him money for “compensable work.” Maximum Racing

prevailed in its countersuit for conversion after a jury found that Smith had not performed work

entitling him to a lien on the automobile. At issue is whether a theory of recovery composed of

multiple elements, only one of which is submitted to the jury and the remainder of which are omitted

without objection, is waived if it is neither included in the jury charge nor conclusively established

by the evidence presented at trial. We also consider whether the good-faith exercise of statutory
rights constitutes a defense to the tort of conversion. For the reasons that follow, we affirm the trial

court’s judgment.


                                          BACKGROUND

                Glen and Kathy Smith entered into an unwritten agreement with Maximum Racing

to further their son Casey’s racing career. Maximum Racing was to provide the race cars and

equipment necessary for Casey to compete in the 2000 racing season. Smith, in exchange,

performed the maintenance and repair required to keep the cars in race-ready form. Upon proper

documentation of the cost of parts purchased, Maximum Racing would reimburse Smith for these

costs. At no time during the agreement was Smith reimbursed for his labor.

                For various reasons, the Smiths and Maximum Racing decided to end their

arrangement. In doing so, Maximum Racing requested that Smith return the two race cars in his

possession. Smith returned one car but refused to return the other, claiming that he was owed money

for parts and labor invested in both cars; he filed suit against Maximum Racing seeking to establish

and foreclose personal property liens against the cars pursuant to section 70.001 of the property code.

See Tex. Prop. Code Ann. § 70.001(a) (West Supp. 2004). Maximum Racing counterclaimed for

conversion of the property.

                The jury found that Smith had not performed compensable work for Maximum

Racing and that the fair market value of the disputed property was $63,000. The court entered a

judgment awarding Maximum Racing damages of $75,601.26, including pre- and post-judgment

interest, and entering a take-nothing judgment on Smith’s claim against Maximum Racing. This

appeal followed.

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               Smith brings four issues: (1) Maximum Racing’s conversion counterclaim was

waived because no element of the action was submitted to the jury, and the action was not

conclusively established as a matter of law; (2) the court erred by finding conversion when Smith’s

expenses for car parts constituted “compensable work”; (3) even without “compensable work,” the

elements of conversion were not conclusively established and did not warrant a judgment of

conversion; and (4) good-faith exercise of his rights under section 70.001 of the property code

constitutes a defense to the charge of conversion.


                                          DISCUSSION

Waiver of Conversion

               In his first and third issues, Smith asserts that Maximum Racing waived its theory of

conversion as a ground for recovery because the theory was neither included in the jury charge nor

conclusively established by the evidence presented at trial. See Tex. R. Civ. P. 279 (“Upon appeal

all independent grounds of recovery or of defense not conclusively established under the evidence

and no element of which is submitted or requested are waived.”). Maximum Racing rejoins that the

evidence, in conjunction with a jury finding of no “compensable work,” conclusively established its

right to recovery for conversion.

               Smith insists that Maximum Racing’s conversion claim was waived because none of

the elements were submitted to the jury. Rule 279, however, also provides that if one element of a

multi-element ground for recovery is found by a jury, and other elements are omitted from the charge




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without request or objection, they may be found by the trial court. See id.1 If the trial court does not

make written findings on the issue, omitted elements necessary to support the judgment shall be

deemed found by the court. Id.

                This principle is also firmly established in Texas case law. When a party’s theory of

recovery or defense consists of multiple issues necessary to support that theory and the charge omits

an issue without objection, the omission does not waive the entire claim. See Turner, Collie &

Braden, Inc. v. Brookhollow, Inc., 642 S.W.2d 160, 165 (Tex. 1982). Rather, the parties are deemed




       1
           Texas Rule of Civil Procedure 279 states:

           Upon appeal all independent grounds of recovery or of defense not conclusively
           established under the evidence and no element of which is submitted or requested
           are waived. When a ground of recovery or defense consists of more than one
           element, if one or more of such elements necessary to sustain such ground of
           recovery or defense, and necessarily referable thereto, are submitted to and found
           by the jury, and one or more of such elements are omitted from the charge,
           without request or objection, and there is factually sufficient evidence to support
           a finding thereon, the trial court, at the request of either party, may after notice
           and hearing and at any time before the judgment is rendered, make and file
           written findings on such omitted element or elements in support of the judgment.
           If no such written findings are made, such omitted element or elements shall be
           deemed found by the court in such manner as to support the judgment. A claim
           that the evidence was legally or factually insufficient to warrant the submission
           of any question may be made for the first time after verdict, regardless of whether
           the submission of such question was requested by the complainant.

Tex. R. Civ. P. 279.


                                                    4
to have waived only a jury determination of the omitted elements. First State Bank, Morton v.

Chesshir, 634 S.W.2d 742, 747 (Tex. App.—Amarillo 1982, writ ref’d n.r.e.).

                Maximum Racing cites Seureau v. Mudd, 515 S.W.2d 746 (Tex. Civ. App.—Houston

[14th Dist.] 1974, writ ref’d n.r.e.), for the proposition that the failure to request special issues does

not amount to a waiver of a claim. Seureau concerned the availability of possession and conversion

damages as relief for the plaintiff who sought to obtain possession of his automobile from a

mechanic. On the issue of the owner’s right to possession of the car, the court found that all facts

necessary to determine possession—other than the amount due the mechanic—were undisputed. See

id. at 749. The fact-finder’s determination in that regard provided the last element necessary for the

court to grant possession of the car to the plaintiff. See id. Smith attempts to distinguish Seureau

by arguing that it does not concern the elements of conversion because the court refers only to

possession in its ruling. However, Smith ignores the broader implication that, under Texas case law

and in accordance with the second sentence of Rule 279, the fact-finder’s factual determination may

provide the final element necessary for the court to make a ruling as a matter of law.

                The same principles are relevant here, where all but one of the elements of conversion

have allegedly been established and all that is necessary is to determine whether Smith had a valid

legal right to the property. “An issue is conclusively established when the evidence is such that there

is no room for ordinary minds to differ as to the conclusion to be drawn from it.” Triton Oil & Gas

Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982). Upon a finding by

the jury that Smith did not have a legal right to the property, the court could properly find that

conversion had been established as a matter of law. Thus, we conclude that Maximum Racing has


                                                    5
waived not the entire claim for conversion but merely the right to have a jury determine the issues

omitted from the charge. See First State Bank, 634 S.W.2d at 747. The parties are considered to

have submitted the issues to the court for resolution and, absent written findings, the court “shall be

deemed to have decided the omitted factual issue in such manner as to support the judgment

rendered.” Id. We therefore turn to the elements of conversion and the evidence presented at trial.

                Conversion is the unauthorized and wrongful assumption and exercise of dominion

and control over the personal property of another to the exclusion of, or inconsistent with, the

owner’s rights. Waisath v. Lack’s Stores, Inc., 474 S.W.2d 444, 447 (Tex. 1971). To establish a

claim for conversion of personal property, a plaintiff must prove that: (1) the plaintiff owned or had

legal possession of the property or entitlement to possession; (2) the defendant unlawfully and

without authorization assumed and exercised dominion and control over the property to the

exclusion of, or inconsistent with, the plaintiff’s rights as an owner; (3) the plaintiff demanded return

of the property; and (4) the defendant refused to return the property. Apple Imports, Inc. v. Koole,

945 S.W.2d 895, 899 (Tex. App.—Austin 1997, writ denied); Whitaker v. Bank of El Paso, 850

S.W.2d 757, 760 (Tex. App.—El Paso 1993, no writ).

                It is undisputed that the car and other racing equipment were owned by Maximum

Racing. Ownership carries with it the right of possession. See Waisath, 474 S.W.2d at 447.

Evidence at trial established that Maximum Racing demanded return of the race cars and that Smith

refused the demand. By retaining the property after Maximum Racing requested its return, Smith

exercised dominion and control over the property to the exclusion of, or inconsistent with, Maximum




                                                   6
Racing’s rights as owner. The only element about which there was any issue was whether Smith’s

assumption and exercise of control were unlawful and unauthorized.

                Smith asserts that his continued possession of the car was not unlawful because he

was entitled to a worker’s lien by virtue of his repair work. See Tex. Prop. Code Ann. § 70.001(a).

However, the question of whether Smith had a right to a worker’s lien was submitted to the jury in

the form of a question asking whether Smith had performed compensable work for Maximum

Racing.2 The jury found against Smith on this issue. Therefore, the jury’s failure to find

compensable work established the final element of conversion and allowed the trial court to enter

judgment for Maximum Racing. See Waisath, 474 S.W.2d at 447 (noting that conversion defendant

had no possessory rights in furniture for which it did not have valid lien). Also, the submission of

whether Smith performed compensable work that would make his possession of the car lawful was

“necessarily referable” to Maximum Racing’s claim for conversion because, as the only contested

issue, its submission put Smith on notice of the possibility of a deemed or express finding on the

theory of conversion. See Tex. R. Civ. P. 279; Johnson & Higgins of Tex. v. Kenneco Energy, Inc.,

962 S.W.2d 507, 516 (Tex. 1998); Gold Kist, Inc. v. Carr, 886 S.W.2d 425, 431 (Tex.

App.—Eastland 1994, writ denied).




       2
           Question No. 1 of the jury charge read:

           Did Smith perform compensable work for Maximum Racing, Inc.?

           One party performs compensable work if valuable services are rendered or
           materials furnished for another party who knowingly accepts and uses them and
           if the party accepting them should know that the performing party should expect
           to be paid for the work.

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               We find that by submitting to the jury, without objection, the question of whether

compensable work was performed by Smith, the trial judge submitted one of the elements of

conversion (whether Smith’s possession was unlawful). Therefore, the claim for conversion was not

waived. The jury’s finding that Smith had not performed compensable work and had no valid lien

rights to Maximum Racing’s property constituted the final element of conversion, and the trial judge

did not err in finding conversion as a matter of law. We overrule Smith’s first and third issues.


Compensable Work

               In his second issue, Smith argues that the court erred by finding conversion because

his payment for car parts constituted “compensable work” as a matter of law. The jury declined to

find that Smith had performed compensable work. When reviewing a party’s assertion that its claim

or defense was established as a matter of law, and where a jury has made an adverse finding of fact

on that issue, we apply a special analysis. See Holley v. Watts, 629 S.W.2d 694, 696 (Tex. 1982).

We must first examine the record for evidence that supports the court’s findings, while ignoring all

evidence to the contrary. Id. If there is no evidence to support the fact-finder’s conclusion, then the

entire record must be examined to see if the contrary proposition is established as a matter of law.

Id.

               The record reflects much evidence from which the jury could infer that Smith had not

performed compensable work. In particular, we note that in filing suit, Smith diverged widely from

the usual course of dealing between the parties. Previously, Smith had presented Maximum Racing

with reimbursement requests documented by supplier invoices on a semi-regular basis, each of which

was paid in a timely manner. These requests never included a request for reimbursement for labor.

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               As relations between the parties deteriorated in early 2001, Smith did not present

Maximum Racing with any reimbursement requests until he filed his lawsuit in March 2001, when

he presented a homemade invoice compiled from memory that included for the first time labor

charges. No documentation in the form of invoices or receipts was submitted into evidence. The

jury charge, to which neither party objected, stated that a party “performs compensable work if

valuable services are rendered or materials furnished for another party who knowingly accepts and

uses them and if the party accepting them should know that the performing party expects to be paid

for the work.” The jury may consider the circumstantial evidence, weigh witnesses’ credibility, and

make reasonable inferences from the evidence it chooses to believe. Lozano v. Lozano, 52 S.W.3d

141, 149 (Tex. 2001). The parties’ normal course of dealing would not have informed Maximum

Racing that Smith expected to be paid for his labor, and in fact Maximum Racing took pains to

convey to Smith that it did not desire any additional repairs or upgrades after their arrangement

began to deteriorate. Furthermore, there was no evidence other than Smith’s homemade invoice and

testimony to support his contention that he had purchased the parts listed on his invoice. The jury

was free to weigh and disbelieve this evidence. See id. There is sufficient evidence to support the

jury’s failure to find that Smith performed compensable work. We overrule Smith’s second issue.


Good Faith as a Defense to Conversion

               It is well established under Texas law that acting with good faith or innocence does

not constitute a defense to conversion. See Rodriguez v. Ortegon, 616 S.W.2d 946, 949 (Tex. Civ.

App.—Corpus Christi 1981, no writ) (good-faith defense not available to excuse actions in

conversion suit because requisite intent is only to assert right in property; wrongful intent is not

                                                 9
required); Adam v. Harris, 564 S.W.2d 152, 155 (Tex. Civ. App.—Houston [14th Dist.] 1978, writ

ref’d n.r.e.) (application to court for declaratory judgment may show good intentions but does not

defeat suit for conversion). One exception exists in the law: the “qualified refusal.” “Where the

refusal is not absolute, but is qualified by certain conditions which are reasonable and justifiable, and

which are imposed in good faith, and in recognition of the rights of plaintiff, it will not serve as a

sufficient basis for an action for conversion.” Earthman’s, Inc. v. Earthman, 526 S.W.2d 192, 204

(Tex. Civ. App.—Houston [1st Dist.] 1975, no writ) (quoting 89 C.J.S. Trover & Conversion § 59b,

564-65).

                Smith argues that his actions in filing a lawsuit while retaining Maximum Racing’s

property were a good-faith exercise of his rights under the property code. See Tex. Prop. Code Ann.

§ 70.001. He relies upon Whitaker and Earthman’s as support for his contentions that a refusal to

deliver property on request may be reasonable and justified in order to investigate the rights of the

parties, and that conversion does not result if a qualified refusal is made in good faith to resolve a

doubtful matter. Whitaker, 850 S.W.2d at 760; Earthman’s, 526 S.W.2d. at 204-06.

                Ordinarily, a defense is waived if the party relying on it fails to submit an issue. See

Tex. R. Civ. P. 279; Morey v. Page, 802 S.W.2d 779, 786 (Tex. App.—Dallas 1990, no writ); Pope

v. Darcey, 667 S.W.2d 270, 274 (Tex. App.—Houston [14th Dist.] 1984, writ ref’d n.r.e.). “This

rule applies in all cases except when the defense has been conclusively established.” Pope, 667

S.W.2d at 274. Smith did not attempt to submit the defense of qualified refusal in good faith he now

asserts on appeal. Therefore, this ground of defense, if not conclusively established, was waived.




                                                   10
               Smith has not conclusively established that his refusal to return Maximum Racing’s

cars was qualified by certain reasonable and justifiable conditions. The reason for the qualified

refusal must be distinctly stated to the party demanding possession at the time of the refusal, or the

right to the property is lost. Whitaker, 850 S.W.2d at 760; Stein v. Mauricio, 580 S.W.2d 82, 83

(Tex. Civ. App.—San Antonio 1979, no writ). We find no evidence in the record supportive of the

required elements of a proper qualified refusal to surrender possession of the race car to Maximum

Racing. Smith failed to assert promptly his belief that the law entitled him to a worker’s lien on the

property, preferring instead to file suit over a month after Maximum Racing’s demand letter was

sent. Smith did offer to return the car if Maximum Racing reimbursed him for the cost of materials

and labor (effectively requiring Maximum Racing to pay for labor and parts that it had not contracted

for); this is not the type of qualification contemplated by the Whitman and Earthman’s courts. See

Morey, 802 S.W.2d at 786.

               Whether a conversion defendant acted in good faith and upon reasonable grounds

under the circumstances is a question for the jury. See Earthman’s, 526 S.W.2d at 205. However,

even if we assume that there was evidence from which the jury could have inferred a proper qualified

refusal, we cannot say that the evidence was such that the jury was bound to make such a finding.

Additionally, in this case the jury in fact made an unfavorable determination that Smith had not

performed compensable work, which cuts against Smith’s assertion that his refusal to return the race

cars to Maximum Racing was a proper qualified refusal. Thus, the evidence did not conclusively

establish Smith’s good-faith defense.




                                                 11
               We also reject Smith’s policy argument that he should not be held liable for

exercising his statutory rights.    Smith relies on Huffmeyer v. Mann, 49 S.W.3d 554 (Tex.

App.—Corpus Christi 2001, no pet.), to argue that persons who exercise control over property while

under the auspices of a judicial conflict should not be punished. Huffmeyer, however, concerns a

case where the defendant, having been notified by the court that he was appointed as receiver of an

estate, prevented the plaintiff from removing property. The plaintiff accused the receiver of

exercising “dominion and control . . . before he had lawfully assumed his duties as a receiver.” Id.

at 558. Finding that the property was in the custody of the court from the day the trial court took the

appointment of a receiver under advisement, the Huffmeyer court held that Mann was not liable for

acting on behalf of the court and retaining the property. Id. at 560. Huffmeyer presents a very

different case than the situation here, where Smith took it upon himself to assert a right to the

property and sought to use the statute as a weapon to fend off the claims of the rightful owner.

Permitting individuals to maintain possession of others’ property without repercussions merely

because they claim “good faith” is poor public policy. We overrule Smith’s final issue.


                                          CONCLUSION

               We hold that an element “necessarily referable” to the theory of conversion was

submitted to the jury, and therefore the claim was not waived, but only the right to a jury finding on

the remaining elements. Likewise, the jury did not err in failing to find Smith had performed

compensable work; there was evidence to support this finding, and his compensable work was not

established as a matter of law. This finding satisfied the only disputed element of conversion, and

Rule 279 permits us to deem findings of the other elements to support the trial court’s judgment.

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Finally, good faith is not a defense to conversion under Texas law, and Smith fails to meet the

“qualified refusal” exception to this rule. Because we hold that conversion was conclusively

established, we affirm the trial court’s judgment.




                                              __________________________________________

                                              Bea Ann Smith, Justice

Before Chief Justice Law, Justices B. A. Smith and Patterson

Justice Patterson concurs in the judgment only.

Affirmed

Filed: May 13, 2004




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