Reverse and Render; Affirmed and Opinion Filed June 30, 2014




                                          S    In The
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                       No. 05-11-01697-CV

                                  CURTIS B. WISE, Appellant

                                                V.

                             SR DALLAS, LLC, Appellee/Cross Appellant

                                                V.

                               JERRY SPENCER, LP, Cross Appellee


                       On Appeal from the 191st Judicial District Court
                                    Dallas County, Texas
                           Trial Court Cause No. DC-07-03956-J

                                              OPINION
                         Before Justices FitzGerald, Fillmore, and Evans
                                 Opinion by Justice FitzGerald
       This dispute arises out of the purchase of an adult entertainment club. Curtis Wise

(“Wise”), appellant, complains of a jury verdict in favor of SR Dallas, LLC (“SR”) finding him

liable for breach of contract and fraud. In a cross-appeal, SR complains of the judgment

awarding conversion damages to intervener/cross-appellee Jerry Spencer, LP (“Spencer”). We

reverse and render judgment that Spencer take nothing on his conversion claim, but in all other

respects affirm the trial court’s judgment.
                                            BACKGROUND

Factual Background

        Brad Keiller is an individual who invests in adult entertainment clubs all over the world.

He resides in Dallas and was interested in acquiring a club in the Dallas market. His criteria for a

club included the ability to operate, a long-term lease, a sexually oriented business (“SOB”)

license, and a liquor license. Keiller was informed that a Dallas club operating under the name

“Texas Show Girls” (“TG”) might be available for purchase, so he met with the owner Curtis

Wise, principal and sole member of WiseTime Entertainment, LLC (“WiseTime”), to discuss a

potential sale.

        Keiller met with Wise in early 2005. Keiller wanted to structure the transaction as a stock

purchase rather than an asset purchase because a stock purchase would allow him to immediately

begin operating under the previous owner’s licenses. Wise told Keiller that there was a valid

lease on the premises that allowed him to operate until 2013, and that he was confident he would

be able to obtain extensions to operate until 2023. Wise told Keiller that WiseTime held a

sublease on the premises through Roma Corp., another subleasee. Wise also said that there was a

valid liquor license, and there was only one small issue with the Texas Alcoholic Beverage

Commission (“TABC”) that might require the payment of a small fine to resolve.

        Wise further represented that there was a current, valid SOB license, but there were a

couple of problems with the license. The first problem involved a nuisance suit that required the

club to be shut down for a period of forty-five days. But this was deemed a non-issue because the

probation period for closure would be completed by October 8, and the sale transaction was not

set to close until mid-October. The second issue involved litigation with the City of Dallas in

connection with the violation of an ordinance concerning the proximity of one SOB to another.

The violation resulted when Wise added a fifteen foot addition to the club that placed it within
the prohibited distance from another SOB. Wise informed Keiller that WiseTime and the City of

Dallas were involved in settlement negotiations, and as a worst case scenario, seven feet would

need to be removed from the west end of the building.

          To facilitate the purchase, Keiller set up two companies. The first company, Dallas

Composite Club Venture, was organized to be the company that took over the running of the

business and operated as TG. The second company, SR, was organized to hold the leases and

licenses.

          On October 15, 2005, Wise, WiseTime, and SR executed a purchase and sale agreement

(the “Agreement”). The Agreement was structured as a stock purchase agreement, and provided

for the sale of WiseTime and TG, together with all rights to the leased premises and related

assets for a purchase price of $2.3 million. The Agreement identified the amount of debt owed by

WiseTime as of the date of the Agreement. Among the identified debts, there is a representation

that WiseTime owed a $440,000 debt to Jerry Spencer, LP (“Spencer”) and that such debt was

“secured by a security agreement and a UCC-1.”1

          The Agreement included representations and warranties made by Wise. These

representations and warranties included a representation that the lease was in good standing and

that WiseTime was in good title and possession of a valid non-contested lease, and that the lease

provided options for extension through May 18, 2013. WiseTime further represented and

warranted that it had all “proper and current permitting, licensing, and grants by all applicable

and required governmental agencies without exception.”

          The Agreement also provided that SR could rely on Wise’s representations and

warranties without conducting its own due diligence. To this end, the Agreement stated:

     1
        The Agreement identified $300,000 owed by WiseTime under three assignment agreements, which were referenced as exhibits to the
Agreement. Then, the Agreement included a representation that, at the time of closing, WiseTime owed a maximum additional amount of
$600,000. $440,000 of this $600,000 was identified as a debt owed to Spencer and up to an additional $160,000 in debts were to be identified on
or before closing.
                      The Seller shall make no claim against the Buyer regarding Buyer’s
                      review or non-review of the Exhibits or lack of Buyer’s investigation of
                      the Seller’s exhibits, warranties, representations and guarantees and the
                      Seller agrees that Buyer may rely solely on the warranties, representations,
                      and guarantees made herein by the Seller without exception as being true,
                      correct, and complete.

           The Agreement was amended ten days after its execution.2 The representations and

warranties from the original Agreement, however, remained unchanged.

           Following the execution of the amended Agreement, Wise settled the litigation with the

City of Dallas and WiseTime entered into an agreed final judgment. Pursuant to the terms of the

judgment, WiseTime was required to comply with the ordinance by May 31, 2006 in order to

keep the SOB license for the premises. This compliance entailed removal of fourteen feet of the

fifteen foot addition to the building. Wise did not consult with the landlord about removal of the

addition, and signed the agreed judgment.

           Keiller later learned that the landlord did not consent to the removal of the addition on the

property. In fact, the landlord had never consented to construction of the addition in the first

place. As a result, a SOB could not be operated on the premises.

           Keiller also discovered that Wise failed to disclose the full extent of the enforcement

action with the TABC. Rather than the “single” administrative action Wise had described, there

were several violations on different dates that had simply been combined in one action. The

TABC would not allow SR to apply for or operate under a new liquor license on the premises

unless SR agreed to the immediate termination of the existing WiseTime liquor license.

           SR also learned that the lease on the premises had been terminated prior to the signing of

the Agreement. Consequently, the lease was not in good standing, and SR did not have the right

to extend the lease through 2013.

     2
         The amendment pertains primarily to modification of payment terms not relevant here. It also gives the parties time to attempt to resolve
the litigation with the City concerning the nuisance and the west wall.
       SR made payments to Wise under the Agreement until April 2007. From January 2006

through March 2007, SR also made fifteen payments to Spencer on the $440,000 debt described

in the Agreement. These payments totaled approximately $181,765.95. But when SR could not

verify that Spencer had actually loaned money to WiseTime or that a debt existed, SR ceased

making payments to Spencer.

Procedural Background

       SR initiated the underlying lawsuit against Wise and asserted claims for breach of

contract, fraud and negligent misrepresentation. Wise answered and counterclaimed for breach of

contract. Spencer filed a plea in intervention and asserted claims against SR for breach of

contract and conversion. Spencer’s breach of contract claim was predicated on the theory that he

was an intended third-party beneficiary of the Agreement. Spencer claimed that pursuant to the

Agreement, SR assumed a $440,000 debt owed to him and breached the contract by failing to

make payments on the allegedly assumed debt. Spencer further claimed that the debt was secured

by the furniture, fixtures, and inventory (“FFE”) of the business, and SR converted his property

when Keiller removed all of the FFE from the business premises.

       The case was tried to a jury. SR moved for a directed verdict on Spencer’s claims against

it. The trial court granted the directed verdict as to Spencer’s third-party beneficiary breach of

contract claims against SR, but submitted Spencer’s conversion claim to the jury. The jury found

that Wise breached his contract with SR and committed fraud and negligent misrepresentation.

The jury awarded SR contract damages in the amount of $806,706.41, fraud damages in the

amount of $704,480.45, attorney’s fees in the amount of $295,311.41, and found that SR was

excused from its failure to comply with the Agreement. The jury also found that SR converted

property owned by Spencer and awarded Spencer damages to be recovered from SR in the

amount of $258,234.05. SR moved for the entry of judgment on its claims and for judgment
notwithstanding the verdict on Spencer’s claims against it. Wise also moved for judgment

notwithstanding the verdict.

           The trial court denied all motions for judgment notwithstanding the verdict, granted SR’s

motion for judgment, and signed a final judgment on September 27, 2011. The judgment recites

that SR shall recover from Wise $704,480.45 in damages for fraud, together with pre- and post-

judgment interest, and that Spencer shall recover from SR $258,234.05 in damages for

conversion, together with pre- and post-judgment interest. The judgment further recites that Wise

take nothing on his claims against SR. There is no award of contract damages or attorney’s fees

against Wise on SR’s breach of contract claim.3 On October 19, 2011, Wise moved for a new

trial and challenged the court’s denial of his motion for a directed verdict, and the jury findings

against him on breach of contract, negligent misrepresentation, fraud, and SR’s excused

nonperformance. The trial court entered an order denying Wise’s motion for new trial on

December 7, 2011.

                                                              ANALYSIS

           In three issues, Wise asserts the trial court erred in denying his motion for new trial

because: (a) the evidence is legally and factually insufficient to support the jury’s findings that

he breached the contract and that SR’s performance was excused; (b) there is no evidence or

insufficient evidence to support the jury’s finding that he committed fraud, and (c) there is no

evidence or insufficient evidence to support the damage award of $704,480.45. In two cross-

appeal issues, SR challenges the legal and factual sufficiency of the evidence to support the

jury’s findings that SR converted Spencer’s property and that the fair market value of the

converted property is $258,234.05.

     3
        None of the parties complain that the judgment erroneously omitted the contract damages and attorney’s fees. In a motion for new trial,
Wise asserts that “SR waived its contract action in open court.” SR did not address this contention in its response to the motion. Comparing the
verdict to the judgment, it appears that SR elected to recover its fraud damages rather than its breach of contract damages. There is, however,
nothing in the record to confirm or explain such an election.
        As we previously noted, the final judgment does not include the jury’s breach of contract

findings with regard to SR’s breach of contract claim against Wise. Generally, Texas appellate

courts have jurisdiction over final judgments, and such interlocutory orders as the legislature

deems appealable by statute. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.012 (West Supp.

2012); Bison Bldg. Materials, Ltd. v. Aldridge, 422 S.W.3d 582, 585 (Tex. 2012). Because the

breach of contract claim was not included in the final judgment, Wise’s complaint about the

breach of contract finding is immaterial, and we restrict our inquiry to Wise’s complaints about

fraud and SR’s excused performance, and to SR’s complaints about Spencer’s award for

conversion.

Fraud

        In his second issue, Wise contends the evidence was legally and factually insufficient to

support the jury finding that he engaged in fraud. When a party challenges the legal sufficiency

of the evidence to support an adverse finding on which he did not have the burden of proof at

trial, the party must demonstrate that there is no evidence to support the adverse finding.

Thornton v. Dobbs, 355 S.W.3d 312, 315 (Tex. App.—Dallas 2011, no pet.). In our review, we

must credit favorable evidence if reasonable jurors could and disregard contrary evidence unless

reasonable jurors could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005);

Metroplex Mailing Services, LLC v. RR Donnelley & Sons, Co., 410 S.W.3d 889, 895 (Tex.

App.—Dallas 2013, no pet.). If more than a scintilla of evidence supports the finding, the legal

sufficiency challenge fails. Cont’l Coffee Prods., Co. v. Cazarez, 937 S.W.2d 444, 450 (Tex.

1996); Sharifi v. Steen Auto., LLC, 370 S.W.3d 126, 147 (Tex. App.—Dallas 2012, no pet.).

        In a factual sufficiency review, appellate courts must examine the evidence that both

supports and contradicts the jury’s verdict in a neutral light. See Dow Chem. Co. v. Francis, 46

S.W.3d 237, 242 (Tex. 2001) (per curiam). We still defer to the jury’s implicit determinations of
credibility and weight to be given to the evidence. See Golden Eagle Archery, Inc. v. Jackson,

116 S.W.3d 757, 761 (Tex. 2003). Therefore, when a party brings a factual sufficiency challenge

to a jury finding for which the party did not have the burden of proof, we consider and weigh all

of the evidence and set aside the verdict only if the evidence that supports the finding is so weak

as to make the verdict clearly wrong and manifestly unjust. Cain v. Bain, 709 S.W.2d 175, 176

(Tex. 1986); Pitts & Collard, L.L.P. v. Schechter, 369 S.W.3d 301, 312 (Tex. App.—Houston

[14th Dist.] 2011, no pet.).

       The jury was asked to determine whether Wise committed fraud by failing to disclose

and/or intentionally misrepresenting material facts in the Agreement. To establish that Wise

engaged in fraud by affirmative misrepresentation, SR was required to prove (1) that a material

representation was made, (2) the representation was false, (3) when the representation was made,

Wise knew it was false or made it recklessly without any knowledge of the truth and as a positive

assertion, (4) Wise made the representation with the intent that SR should act on it, (5) SR acted

in reliance on the representation, and (6) SR suffered injury. See Aquaplex, Inc. v. Rancho La

Valencia, Inc., 297 S.W.3d 768, 774 (Tex. 2009) (per curiam); Fath v. CSFB 1999–C1

Rockhaven Place Ltd. P’ship, 303 S.W.3d 1, 5 (Tex. App.—Dallas 2009, pet. denied). Fraud by

nondisclosure is a subcategory of fraud. Schlumberger Tech. Corp. v. Swanson, 959 S.W.2d 171,

181 (Tex. 1997). The elements of fraud by nondisclosure require (1) a deliberate failure to

disclose material facts, (2) by one who had a duty to disclose such facts, (3) to another who was

ignorant of the facts and did not have an equal opportunity to discover them, (4) with the intent

the listener act or refrain from acting, and (5) the listener relies on the nondisclosure resulting in

injury. 7979 Airport Garage, L.L.C. v. Dollar Rent A Car Sys., Inc., 245 S.W.3d 488, 507 n. 27

(Tex. App.—Houston [14th Dist.] 2007, pet. denied); see also Bradford v. Vento, 48 S.W.3d 749,

754-55 (Tex. 2001).
       It is undisputed that the Agreement provided that SR could rely on Wise’s representations

and warranties as true without conducting its own due diligence. The evidence at trial focused on

whether the representations and warranties Wise made in the Agreement prior to the sale were

true, and whether there were additional material facts that Wise failed to disclose.

        Among the representations Wise made in the Agreement was the representation that the

lease was in good standing and not in actual or contingent default. Wise also represented that he

had good title and possession with regard to the lease. Subsequent to the execution of the

Agreement, however, SR learned that the lease had been terminated prior to the signing of the

Agreement. Plaintiff’s Exhibit 5, a copy of the notice of termination, was admitted into evidence.

The notice, dated October 12, 2005, directed to Roma Corp., shows WiseTime as receiving a

copy. The notice states that the sublease is terminated and directs that Roma Corp. shall vacate

the property. The defaults cited pursuant to the sublease include using the property as a

“common nuisance” and allowing a judgment to be attached to the property.

        Wise testified that he signed the Agreement on October 12, 2005 and received the notice

of termination on October 13. SR did not sign the Agreement until October 15, 2005. When

asked if he informed Keiller that the lease had been terminated before Keiller signed the

Agreement on behalf of SR, Wise claimed that the reason the Agreement was amended was to

give SR some time to attempt to work out the issues with the lease. But when confronted with

the amendment to the Agreement, Wise admitted that the document makes no reference to the

lease. Wise also testified that after October 12, SR was the party dealing with the lease problem.

Nonetheless, a letter in Wise’s files dated October 24 suggests a meeting between WiseTime and

the landlord to attempt to resolve the lease issue. Although he denied that he was attempting to

resolve the issue before Keiller discovered that the lease had been terminated, our factual
sufficiency review requires deference to the jury’s determinations of credibility and the weight

afforded the evidence. See Golden Eagle, 116 S.W.3d at 761.

       Keiller testified that he reviewed the lease after the Agreement was signed, and he

disagreed with Wise’s interpretation that WiseTime had an absolute right to renew the lease.

Consequently, in late October or early November 2005, Keiller contacted Roma Corp., the

sublessor, for clarification. Roma informed Keiller that it would not extend the terms of the

lease, and that the lease had been terminated by the landlord.

       Wise also represented that WiseTime had a “single TABC administrative action against

it.” After the execution of the Agreement, SR learned that the “single” action actually consisted

of twelve violations that had been consolidated in a single action that was going to result in

termination of the WiseTime liquor license. Keiller testified that the violations consisted of

charges for underage drinking, prostitution, lewd conduct, and drug use which occurred on

different dates. According to Keiller, Wise did not disclose any of these violations before the

Agreement was signed. Keiller described how he learned that the club had a long history of

violations, and explained that with the TABC, every violation builds on another. This results in

the fines becoming increasingly larger and ultimately results in cancellation of the liquor license.

The TABC made clear to Keiller that the pending administrative matter could not be resolved

merely by paying a fine; the liquor license was going to be cancelled. Keiller testified that the

TG liquor license was cancelled, and SR never did obtain a liquor license for the premises.

       Wise also represented that WiseTime had a valid SOB license. But in order to retain the

license, Wise was required to remove the fifteen foot addition from the building. Keiller testified

that he learned Wise had not obtained approval from the landlord to construct the addition and

removal of the addition was not allowed. If the fifteen feet could not be removed from the

building, there would be no SOB license, and the club would be out of business. From this
evidence, the jury may have reasonably inferred that Wise made affirmative misrepresentations

or failed to disclose material facts to SR.

       Keiller testified that SR relied on the representations Wise made in determining whether

to purchase the business. The purchase price of the business was $2.3 million dollars, and Keiller

paid over $1 million dollars toward this purchase. Keiller valued the business he actually

received at $230,000.

       Viewing the evidence in the light favorable to the jury’s finding, crediting favorable

evidence if a reasonable fact–finder could and disregarding contrary evidence unless a

reasonable fact–finder could not, we conclude that there is some evidence supporting each

element of the jury’s finding of fraud. Thus, we conclude that SR presented legally sufficient

evidence that Wise made misrepresentations and failed to disclose material facts in connection

with the Agreement, with the intent that SR rely on these misrepresentations and omissions, and

that SR relied on these misrepresentations and omissions to its detriment. Furthermore, after

considering and weighing all of the evidence in a neutral light, we conclude that the finding is

not so contrary to the overwhelming weight of the evidence as to be clearly wrong and unjust.

We overrule Wise’s challenge to the legal and factual sufficiency of the evidence supporting the

finding of fraud.

Damages

       Having concluded the evidence was sufficient to support the jury’s finding of fraud, we

next examine whether the evidence was legally and factually insufficient to support the jury

finding that SR suffered $704,480.45 in damages as a result of Wise’s fraud. Wise does not

explain the basis for his argument concerning the sufficiency of the evidence. Instead, he simply

argues that the “actual damage testimony as it relates to the agreement . . . shows there is

insufficient evidence to support [the damage award].” Then, Wise supplies three excerpts from
testimony, one of which pertains to Keiller’s job duties as an associate attorney many years ago,

one of which shows the date the Agreement was signed, and the last demonstrating that the $2.3

million dollar purchase price was to be paid in installments. The lack of discussion of this issue

is insufficient to raise an issue for our review. See TEX. R. APP. P. 38.1(i) (requiring a brief to

contain a “clear and concise argument for the contentions made”); Fredonia State Bank v. Gen.

Am. Life Ins. Co., 881 S.W.2d 279, 284 (Tex. 1994) (noting appellate courts have discretion to

deem issues waived due to inadequate briefing).

          Moreover, even if we considered Wise’s briefing adequate to merit review, the evidence

is sufficient to support the jury’s determination on damages. In considering damages for fraud

and negligent misrepresentation, the jury was instructed to consider “the difference, if any,

between the value of the business as it was received and the value SR paid for it.”4 The evidence

shows that SR made payments under the Agreement in the following amounts: $509,014.66 to

Wise, $294,500 to certain assignees, $181,765.95 to Spencer, and $75,208 to vendors. Keiller

also testified that SR was forced to pay Roma Corp. $102,225.96 to obtain a release from the

sublease. These payments combined totaled over $1,162,000. Keller testified that the value of the

business received was $230,000. The jury has the discretion to award damages within the range

of evidence presented at trial, so long as a rational basis exists for the jury’s calculation. Duggan

v. Marshall, 7 S.W.3d 888, 893 (Tex. App.—Houston [1st Dist.] 1999, no pet.); Mayberry v.

Tex. Dep’t of Agric., 948 S.W.2d 312, 317 (Tex. App.—Austin 1997, writ denied). From the

evidence presented, we conclude there is more than a scintilla of evidence to support the finding

that Wise’s fraud proximately caused SR to suffer damages in the amount of $704,480.45.




     4
       The jury was asked separate questions concerning fraud (Question 2) and negligent misrepresentation (Question 3), and made affirmative
findings as to each. Then, the jury was asked to determine what amount of money, if any, would compensate SR for the damages proximately
caused by the conduct in response to Question 2 or Question 3.
Moreover, the award is not clearly wrong or manifestly unjust. The first part of Wise’s third

issue is overruled.

Excused Performance

       The jury found that SR failed to comply with the Agreement, but found the failure was

excused because of Wise’s prior failure to comply with a material obligation of the Agreement.

The judgment recites that Wise take nothing on his claims against SR. In the second part of his

third issue, Wise complains that the evidence is legally and factually insufficient to support the

jury’s finding of excused performance. We disagree.

       A party is released from further obligation under a contract if the other party has

materially breached the contract. See Mustang Pipeline Co., Inc. v. Driver Pipeline Co., Inc., 134

S.W.3d 195, 198 (Tex. 2004). The evidence showed that SR made payments to Wise under the

Agreement until April 2007. From January 2006 through March 2007, SR also made payments

on the $440,000 debt described in the Agreement. As previously discussed, Wise was obligated

to provide valid liquor and SOB licenses and a valid, renewable lease on the premises, and failed

to do so. This evidence is sufficient to support the jury’s conclusion that Wise breached the

contract and by reason of such breach, SR’s further performance was excused. The second part

of Wise’s third issue is overruled.

Conversion

       In two cross-points, SR argues the evidence is legally and factually insufficient to support

the jury’s findings that SR converted Spencer’s property and that the fair market value of the

property converted was $258,234.05.

       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); Tex. Integrated
Conveyor Sys., Inc. v. Innovative Conveyor Concepts, Inc., 300 S.W.3d 348, 376 (Tex. App.—

Dallas 2009, pet. denied) (op. on reh’g). To establish conversion of personal property, a plaintiff

must prove (1) the plaintiff owned, had legal possession of, or was entitled to possession of the

property; (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; (3) the plaintiff made a demand for the property; and (4) the defendant refused to return

the property. Wells Fargo Bank Northwest, N.A. v. RPK Capital XVI, L.L.C., 360 S.W.3d 691,

699 (Tex. App.—Dallas 2012, no pet.).

       Spencer testified that $258,234.05 was the amount due and owing on the $440,000 loan.

The jury awarded Spencer this amount as damages for conversion. On original submission,

Spencer argued the evidence establishes that $258,234.05 is the fair market value of the

converted property because it represented the balance due on the note, and Spencer and Wise

both testified that the original loan was to pay for remodeling of the property. In supplemental

briefing, Spencer argues that the actual value of the FFE is the appropriate measure of damages,

and the $258,234.05 awarded by the jury reflects the actual value of the FFE. We are not

persuaded by either argument.

       Generally, the measure of damages for conversion is the fair market value of the property

at the time and place of the conversion. United Mobile Networks, L.P. v. Deaton, 939 S.W.2d

146, 146–48 (Tex. 1997). Fair market value has been defined as the price that the property would

bring when it is offered for sale by one who desires, but is not obligated to sell, and is bought by

one who is under no necessity of buying it. Burns v. Rochon, 190 S.W.3d 263, 270 (Tex. App.—

Houston [1st Dist.] 2006, no pet.). However, when converted property has no readily

ascertainable fair market value, the measure of damages is the actual value of the property to the

owner at the time of its loss. Id. In such circumstances, the purchase price is probative of actual
value. See id. To establish conversion damages, the original cost in the market, and the manner,

time, and place of use, the condition of the property and the relative usefulness before and after

the alleged injury may be offered into evidence. Henson v. Reddin, 358 S.W.3d 428,436 (Tex.

App.—Fort Worth 2012, no pet.). But testimony regarding purchase price, standing alone, will

not support a fair-market value damages award. See Lee v. Dykes, 312 S.W.3d 191, 199 (Tex.

App.—Houston [14th Dist.] 2010, no pet.). Such evidence is but a starting point for actual

damages. See Wutke v. Yolton, 71 S.W.2d 549, 552 (Tex. Civ. App.—Beaumont 1934, writ ref’d

n.r.e.). From that starting point, adjustments are made for wear and tear, depreciation, and other

pertinent factors. See id.

        Here, there is no evidence to support the fair market value of the property at the time of

the conversion. Indeed, there is no testimony specifically identifying when the FFE was

allegedly converted. Keiller testified that he received furniture, fixtures, and equipment from

Wise, and that this FFE consisted of lighting, glassware, tables, chairs and “that sort of thing.”

Although Keiller valued the FFE that he received at around $30,000, the testimony is vague and

describes only the value of “what he received” when he took possession of the property on

December 1, 2005. Keiller did not testify as to the value at the time he stopped making payments

to Spencer under the Agreement in March 2007, which is presumably when the conversion is

alleged to have occurred. Keiller further testified that he removed some of the FFE from the

premises to use in another club. There is nothing to indicate the specific items that were removed

or remained, or the value of these items at any point in time.

        There is also no evidence of the purchase price of the FFE. Wise testified that he

borrowed money from Spencer for remodeling in 2002. A promissory note from Wise in favor of

Spencer, dated February 13, 2003, was admitted into evidence. The note provided for funding of

“up to $225,000” with monthly interest payments beginning March 15, 2003. The outstanding
principal balance as of July 15, 2003 was to be amortized for a period of sixty months, with

payments of principal and interest commencing on August 15, 2003 and continuing through July

15, 2008. The note states that a security interest is granted in “all furniture, fixtures, and

equipment” located on the premises. Although Spencer asserts that a UCC financing statement

was filed in connection with the alleged security interest, the financing statement offered at trial

was not admitted into evidence.

        But Wise did not identify any specific items of furniture, fixtures, and equipment that

may have been purchased during the remodeling. See Hughes Blanton, Inc. v. Shannon, 581

S.W.2d 538, 540 (Tex. Civ. App.—Dallas 1979, no writ) (concluding evidence not competent to

establish fair market value of converted tools where no evidence of particular tools or which

tools were converted). If such purchases were made, there was no testimony concerning the

purchase price of any specific items. Instead, Wise’s testimony was only that the $440,000

amount represented debt for “furniture and fixtures,” and he and Keiller discussed this amount in

conjunction with the identification of the outstanding WiseTime debts. Spencer then testified that

of the $440,000 debt, $258,234.05 remained due and owing.

       Spencer asserts that the evidence supports the judgment because the value of the FFE was

negotiated in an arms-length transaction. We disagree. The amount of the debt may have been

negotiated, but the amount of the debt is not evidence of the fair market value of the property

that allegedly secures the debt. Even if we were to assume that the purchase price of the FFE was

the $440,000 debt under the Agreement, there is no evidence concerning the depreciation, wear

and tear of the items, the condition of the property, and the manner, time place and use of the

property.

       In his supplemental briefing, Spencer advances an alternative theory of valuation.

Specifically, Spencer contends the evidence is sufficient to establish actual value. In this regard,
Spencer notes that an actual value measure of damages is frequently used in lieu of the fair

market value measure to determine the value of restaurant and bar furniture and equipment, as

well as other property with no readily ascertainable value. We do not disagree with this general

proposition. See, e.g., Ogden v. Wilson, 649 S.W.2d 780, 783 (Tex. App.—Austin 1983, writ

ref’d n.r.e.). Actual value refers to the actual value to the owner of the property at the time of

loss. See id. This case, however, was submitted to the jury without objection on a fair market

value theory of valuation, not an actual value theory.5 Even if we were inclined to entertain a

damages model that was not presented to the jury, there is no evidence that the damages awarded

represent the actual value of the property. Spencer testified as to the amount due under the note;

there was no testimony concerning the value of the FFE to Spencer or Keiller at the time of the

loss. Instead, it appears that the jury took the original amount of the debt ($440,000), subtracted

the payments SR made ($181,765.95), and awarded the amount remaining on the contract

($258,234.05). This contract measure of damages, standing alone, is not an appropriate remedy

for conversion. Damages for conversion are limited to the amount necessary to compensate the

plaintiff for actual losses sustained as a natural and proximate result of the defendant’s

conversion. Alan Reuber Chevrolet, Inc. v. Grady Chevrolet, Ltd., 287 S.W.3d 877, 889 (Tex.

App. —Dallas 2009, no pet.). In the present case, the evidence is legally insufficient to support

the damages awarded by the jury for conversion.

           There is also no evidence that SR refused to return the property after a proper demand by

Spencer. See Wells Fargo Bank, 360 S.W.3d at 699. Spencer does not dispute the lack of

demand, arguing that demand would have been useless or was not required. See Autry v.

Dearman, 933 S.W.2d 182, 191–92 (Tex. App.—Houston [14th Dist.] 1996, writ denied); First


     5
        The jury was asked, “What is the fair market value of the property converted by SR Dallas at the time of the conversion? Answer in
dollars and cents, if any.”
State Bank, N.A., v. Morse, 227 S.W.3d 820, 827–28 (Tex. App.—Amarillo 2007, no pet.);

McVea v. Verkins, 587 S.W.2d 526, 531 (Tex. Civ. App.—Corpus Christi 1979, no writ).

       The elements of conversion that were submitted to the jury, however, included the

requirement that “Spencer demanded return of the property and SR refused return of the

property.” There was no pleading, argument at trial, jury issue, or proof to support Spencer’s

current assertion that demand would have been futile or was otherwise not required.

        On the record before us, we conclude the evidence is legally insufficient to support the

jury’s finding on conversion. Accordingly, we reverse and render judgment that Spencer take

nothing on his conversion claim. In all other respects the trial court’s judgment is affirmed.




       111697F.P05
                                                    /Kerry P. FitzGerald/
                                                    KERRY P. FITZGERALD
                                                    JUSTICE
                                          S
                                Court of Appeals
                         Fifth District of Texas at Dallas
                                        JUDGMENT

CURTIS B. WISE, Appellant                            On Appeal from the 191st Judicial District
                                                     Court, Dallas County, Texas
No. 05-11-01697-CV          V.                       Trial Court Cause No. DC-07-03956-J.
                                                     Opinion delivered by Justice FitzGerald.
SR DALLAS, LLC, Appellee/Cross                       Justices Fillmore and Evans participating.
Appellant
                          V.
Jerry Spencer, LP, Cross Appellee




       In accordance with this Court’s opinion of this date, the judgment of the trial court as to
conversion is REVERSED and judgment is RENDERED that Cross-Appellee Jerry Spencer
take nothing on his claim. In all other respects, the judgment of the trial court is AFFIRMED.

       It is ORDERED that appellee SR DALLAS, LLC recover its costs of this appeal from
appellant CURTIS B. WISE.


Judgment entered June 30, 2014
