AFFIRMED; and Opinion Filed May 28, 2015.




                                       S    In The
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                    No. 05-14-00189-CV
      JACKSON FULGHAM DBA COMMERCE STREET PARTNERS, Appellant
                                V.
      ALLIED PROPERTY AND CASUALTY INSURANCE COMPANY, Appellee

                     On Appeal from the 160th Judicial District Court
                                  Dallas County, Texas
                            Trial Court Cause No. 11-08353

                            MEMORANDUM OPINION
                      Before Justices Lang-Miers, Whitehill, and Schenck
                                  Opinion by Justice Schenck

       Jackson Fulgham (Fulgham) appeals a jury’s award of damages to his insurer Allied

Property and Casualty Insurance Company (Allied). In two issues, Fulgham challenges the legal

sufficiency of the evidence supporting the jury’s verdict, on the finding of fraud and on the

finding of unjust enrichment. We affirm the judgment. Because all issues are settled in law, we

issue this memorandum opinion. Tex. R. App. P. 47.4.

                                      BACKGROUND

       In July 2009, Fulgham made a claim under a property-insurance policy he purchased

from Allied for damage to his roof he alleged was caused by a recent hailstorm. Allied’s claims

specialist inspected the exterior of Fulgham’s building and estimated the cost of removing and

replacing Fulgham’s roof.   After Allied issued a payment for the estimated cost, Fulgham

contacted the claims specialist and claimed the repairs to the roof would cost more than the

estimate. Allied’s claims specialist obtained a comparison estimate to repair the roof “as Mr.
Fulgham had wanted it done,” and in October 2009, Allied paid an additional amount to Fulgham

for costs to repair his roof.

        In December 2009, Fulgham called Allied’s claims specialist to add the claim that he had

suffered interior damage to his building. In January 2010, the claims specialist inspected the

interior of Fulgham’s building and became concerned that Fulgham had misrepresented the

building’s purpose on the declarations form as a commercial real estate office when the building

had no internal cooling or heating system.       In February 2010, Allied required Fulgham to

complete and return a Sworn Statement in Proof of Loss. Allied then paid Fulgham for his

claimed damages to the interior of his building.         In April 2010, following Fulgham’s

representations that repairs were complete, and after receiving letters, contracts, and invoices

submitted by Fulgham, Allied paid additional amounts for recoverable depreciation related to

Fulgham’s roof.

        In July 2010, Fulgham submitted an invoice for costs for organizing, cleaning, and

storing the contents of the building, despite the fact that Fulgham previously had denied on

several occasions that he would make a claim for damaged contents. Allied’s claims specialist

inspected the contents of the building and determined little if any work had been done to

organize or clean the contents since his last inspection. Fulgham now stated the claimed invoice

was an estimate, rather than an invoice. In August 2010, the claims specialist returned with a

claims manager and another representative from Allied to inspect the contents of the building.

Fulgham submitted additional invoices to support his contents claim.        Allied then issued

payments to Fulgham for the contents as well.

        At this point, Allied’s payments to Fulgham totaled $899,160.00. The jury would later

hear substantial evidence that Fulgham was fabricating his claimed losses and enlisting his

employees to manufacture evidence in support of his fraud.

                                                –2–
       Fulgham then asserted additional damages related to his original claim, including debris

removal, asbestos, business interruption, increased costs of construction, and destruction of

papers and records. In July 2011, Fulgham sued Allied, asserting contractual, statutory, and

common-law claims related to the insurance policy, arguing that Allied improperly refused to

participate in an appraisal process provided under the insurance policy in order to determine

additional amounts under Fulgham’s original claim. Allied counter-sued Fulgham for fraud and

unjust enrichment. The trial court dismissed Fulgham’s claims prior to trial. The jury awarded

Allied damages in the amount of $899,160.00, and the trial court rendered judgment on the jury’s

verdict.

                                    STANDARD OF REVIEW

       When an appellant challenges the legal sufficiency of the evidence on a matter for which

he or she did not have the burden of proof, the appellant must demonstrate on appeal that there is

no evidence to support the adverse findings. McCullough v. Scarbrough, Medlin & Assocs., Inc.,

435 S.W.3d 871, 892 (Tex. App.—Dallas 2014, pet. denied). Under a no-evidence point, we

consider the evidence in the light most favorable to the verdict, indulging every reasonable

inference in support of it. Id. We are mindful in our review that jurors are the sole judges of the

credibility of the witnesses and the weight to be given their testimony. Id. A legal-sufficiency

challenge fails if there is more than a scintilla of evidence to support the judgment. Id. “The

final test for legal sufficiency must always be whether the evidence at trial would enable

reasonable and fair-minded people to reach the verdict under review.” Id. Evidence that does no

more than create a surmise or suspicion is insufficient to rise to the level of a scintilla and, in

legal effect, is no evidence. Id.




                                               –3–
                                          DISCUSSION

       Fulgham’s first issue challenges the legal sufficiency of the evidence supporting the

jury’s finding of fraud.

       In general, actionable fraud consists of a material false representation that (1) the speaker

either knew to be false or was asserted without knowledge of its truth, (2) he intended to be

relied upon, (4) was reasonably relied on, and (5) caused injury. Italian Cowboy Partners, Ltd.

v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 337 (Tex. 2011). Fulgham argues that the record

lacks sufficient evidence of Allied’s reliance on Fulgham’s misrepresentations in the application

process. Fulgham further urges that Allied is legally precluded from claiming it relied on

Fulgham’s misrepresentations in the claims process because it conducted its own investigation.

Finally, Fulgham raises issues with Allied’s failure to comply with provisions of the Texas

Insurance Code.

       Fulgham urges that there is no evidence that Allied relied on any of the various false

statements he made in the application process and that the jury’s finding of Allied’s reliance on

Fulgham’s statements in the claims process is contrary to the great weight of the evidence. The

question posed to the jury on fraud did not distinguish between fraud in the application process

or fraud in the claims process. Fulgham waived error, if any, in comingling these two bases for

liability in a single fraud question by failing to raise a timely and specific objection at the trial

court below. Burbage v. Burbage, 447 S.W.3d 249, 256 (Tex. 2014). Accordingly, evidence of

reliance in the claims process is sufficient to support the jury’s finding of fraud. Indeed, the jury

heard ample evidence of Allied’s reliance in the claims process. Allied’s claims specialist

testified he relied on Fulgham’s representations that (1) his roof was damaged by a hailstorm

during the policy period when it was not, (2) extra work was necessary in paying Fulgham more

than the initial estimated cost to repair his roof when it was not, (3) the hailstorm led to damages


                                                –4–
to the interior of the building when it did not, and (4) statements, invoices, and a contract to

repair the roof were all issued by contractors when they were fabricated by Fulgham.

       Independent of his factual challenges, Fulgham fashions a non-reliance argument to the

effect that, as a matter of law, Allied could not rely on his misrepresentations in the claims

process because it conducted its own investigation of his claim. This notion does not account for

the prospect of fraud directed at the investigation itself. In that context, the Texas Supreme

Court rejected this argument more than a century ago, leaving the fraud subject to a remedy

despite the plaintiff’s investigation where the defendant takes affirmative steps to frustrate it.

Ranger & Co. v. Hearne, 41 Tex. 258, 260–61 (1874) (holding that a contract’s recital that the

purchaser of an engine satisfactorily examined the engine will not preclude the purchaser from

showing the engine had defects the sellers of the engine hid with new paint and polish). Indeed,

this rule has been in effect and in continuous operation since the founding of the Republic. TEX.

CONST. OF 1836, art. IV, § 13 (directing Congress to adopt the common law of England as rule of

decision); see also Schneider v. Heath (1813) 170 Eng. Rep. 1462 (Ct. Com. Pls.) 1462–63, 3

Camp. 506, 506–08 (cited with approval in Hearne, 41 Tex. at 261).

       To be sure, it would initially appear that this Court rejected this ancient common-law

norm in a 1950 opinion when we said “[w]here a party who claims to have been defrauded had

the means to have discovered the fraud, if any existed, and undertakes to investigate for himself,

. . . it must be held as a matter of law that he has knowledge of everything that a proper

investigation would disclose, and hence would not be justified in acting on fraudulent

representations . . . .” Mann v. Rugel, 228 S.W.2d 585, 587 (Tex. Civ. App.—Dallas 1950, no

writ). However, on closer reading, the Court actually confirmed and embraced the rule laid

down in Hearne. In particular, reliance can be defeated by a party’s investigation only when he

is “not hindered or prevented from doing so by any act of the other party.” Id.; see also M. L.

                                               –5–
Mayfield Petroleum Corp. v. Kelly, 450 S.W.2d 104, 110 (Tex. Civ. App.—Texarkana 1970, writ

ref’d n.r.e.) (if the investigation is “free and unhampered and conditions are such that he must

obtain the information he desires, he is presumed to rely upon his own investigation rather than

on representations made to him”).

       Fulgham relies on decisions from our sister courts of appeal to support his interpretation

that when one performs his or her own investigation of the facts, one cannot, as a matter of law,

be said to have relied upon the misrepresentation of others. See Chitsey v. Nat’l Lloyd’s Ins. Co.,

698 S.W.2d 766, 769 (Tex. App.—Austin 1985), aff’d on other grounds, 738 S.W.2d 641 (Tex.

1987); Kolb v. Tex. Emp’rs Ins. Ass’n, 585 S.W.2d 870, 872 (Tex. Civ. App.—Texarkana 1979,

writ ref’d n.r.e.). However, neither decision discusses the effect of a defendant’s systematic

campaign to hinder or hamper the investigation of a plaintiff. The Chitsey court relied on Kolb

to hold that when one makes his own investigation of the facts, he cannot, as a matter of law, be

said to have relied upon the misrepresentations of others. Chitsey, 698 S.W.2d at 769. The Kolb

court did agree with the general rule that where a person makes his own investigation of the

facts, he cannot sustain a cause of action based on misrepresentations made by others, but the

court reversed summary judgment granted in favor of the defendant on the grounds that the

record was unclear as to whether the plaintiff relied solely on his own investigation. The

Texarkana Court of Appeals later made clear that the assertion “that one cannot recover for

misrepresentations when he has made his own investigation of the facts . . . is too broad a

statement of the rule.” Lutheran Bhd. v. Kidder Peabody & Co., Inc., 829 S.W.2d 300, 308 (Tex.

App.—Texarkana 1992, writ granted w.r.m.). Instead, the rule is that “one cannot recover for

fraudulent misrepresentations when he knows the representation is false, or when he has relied

solely on his own investigation rather than on the representations of the other party.” Id. We do

not read these opinions to be out of harmony with that of the Texas Supreme Court or those from

                                               –6–
this Court. A party who claims to have been defrauded and conducted his own investigation will

not be prevented from relying on representations made to him by the alleged fraudster so long as

the party was hindered or hampered in his investigation by the alleged fraudster or did not rely

solely on his investigation.

       The jury heard plenty of evidence that Fulgham’s employees, at his instruction, took

numerous affirmative actions to hinder or hamper Allied’s investigation and to misrepresent both

the existence and the extent of his claimed loss. One employee testified that the building,

including its roof, was previously damaged prior to the hail storm and that Fulgham had filed a

claim with a different insurance company for fire damage to the building. The employee also

related that Fulgham used those other insurance proceeds to remodel the building instead of

replacing the roof. In his remodeling attempts, Fulgham removed pipes and installed beams that

blocked the building’s drainage system, forcing the rainwater to penetrate the ceiling.

       Fulgham then installed a PVC pipe that caught the water coming through the roof and

carried the water outside the building. The employee also testified Fulgham hired additional

laborers to paint and repair the building in order to make it appear as if Fulgham had maintained

the building before the hail storm and to disguise the fact that the damage, including the leak in

the roof, existed prior to the hailstorm. According to the employee, Fulgham instructed him on

how to answer Allied’s claims specialist’s questions regarding the damage to the building and its

roof. Fulgham also directed the employee to represent to Allied’s claims specialist and claims

manager that steel beams stored in the building were damaged by leaks and required cleaning so

that Fulgham could make custom furniture with them, when in fact that steel beams were leftover

from a previous project and as such did not require cleaning. That same employee also testified

that his contracting company, which was listed on the invoices sent to Allied’s claims specialist,

did not perform the work listed on the invoices and that although his signature was on the

                                               –7–
invoices, he did not prepare or sign the invoices. A second employee testified that Fulgham

instructed him to wear business clothes to a meeting with one of Allied’s representatives and to

present himself as an owner of a demolition company at a meeting between Fulgham and

Allied’s representative. The second employee also testified that Fulgham directed his employees

to place documents in certain areas of the building in order to cause them to sustain water

damage.

       Based on the foregoing, we conclude that the record contains more than a scintilla of

evidence that Allied relied on Fulgham’s representations and that there is sufficient evidence

from which a reasonable jury could have found fraud as charged. See McCullough, 435 S.W.3d

at 892. There was also evidence Fulgham hindered or hampered Allied’s investigation by

covering up the physical evidence that the roof was not damaged when or as Fulgham claimed,

by directing employees to lie to Allied’s claims specialist, and by creating fraudulent invoices to

support his claimed costs of repair, all of which a reasonable jury could find prevented Allied

from discovering the fraudulent nature of his claims. See Mann, 228 S.W.2d at 587. The record

contains evidence that Allied did not rely solely on its investigations, but instead also relied on

Fulgham’s representations. See Lutheran Bhd., 829 S.W.2d at 308. Accordingly, we overrule

Fulgham’s first issue.

       In his second issue, Fulgham urges that unjust enrichment is not an available cause of

action because Allied, as an insurer, was limited to contractual claims and challenges the legal

and factual sufficiency of the evidence supporting the jury’s finding of unjust enrichment.

Because the jury’s fraud finding is sufficient to support the judgment, we need not address

Fulgham’s second issue. See TEX. R. APP. P. 47.1.

       Finally, we briefly address Fulgham’s arguments that Allied failed to comply with certain

provisions of the Texas Insurance Code. Fulgham argues that under section 705.005, Allied was

                                               –8–
required to provide notice to Fulgham that it refused to be bound by the policy. TEX. INS. CODE

ANN. § 705.005 (West 2009).          Fulgham also urges Allied was required to show his

misrepresentations caused Allied to waive or lose a valid defense to the policy in order to rely on

a policy provision concerning misrepresentation in a proof of loss. Id. § 705.003. These

provisions govern an insurer’s use of a policyholder’s misrepresentations as grounds for defense

against a policyholder’s claims or to void or rescind a policy based on a provision in the policy

prohibiting insured’s misrepresentations. See id. § 705.005 (“A defendant may use as a defense a

misrepresentation made in the application for or in obtaining an insurance policy”); § 705.003

(imposing requirements on insurer in order to allow insurer to rescind or void policy based on

provision prohibiting insured’s misrepresentations). In the instant case, the insurance policy

provided that any material misrepresentations made by Fulgham in the application or claims

process would void the insurance policy, but Allied did not seek to rescind or void the policy on

that provision and did not obtain relief on those grounds. Instead, Allied sought and obtained

relief on the grounds of its own affirmative claims of common-law fraud and unjust enrichment.

                                        CONCLUSION

       We affirm the judgment.




                                                     /David J. Schenck/
                                                     DAVID J. SCHENCK
                                                     JUSTICE


140189F.P05




                                               –9–
                                         S
                               Court of Appeals
                        Fifth District of Texas at Dallas
                                       JUDGMENT

JACKSON FULGHAM D/B/A                                 On Appeal from the 160th Judicial District
COMMERCE STREET PARTNERS,                             Court, Dallas County, Texas
Appellant                                             Trial Court Cause No. 11-08353.
                                                      Opinion delivered by Justice Schenck.
No. 05-14-00189-CV         V.                         Justices Lang-Miers and Whitehill
                                                      participating.
ALLIED PROPERTY AND CASUALTY
INSURANCE COMPANY, Appellee

     In accordance with this Court’s opinion of this date, the judgment of the trial court is
AFFIRMED.

    It is ORDERED that appellee ALLIED PROPERTY AND CASUALTY INSURANCE
COMPANY recover its costs of this appeal from appellant JACKSON FULGHAM D/B/A
COMMERCE STREET PARTNERS.


Judgment entered this 28th day of May, 2015.




                                               –10–
