In a case that demonstrates that the DTPA is still alive and kicking, the Austin Court of Appeals has affirmed a trial court judgment against an individual and his sham entity for posing as a commercial construction company and taking a business’s money without performing the work.
My Place Services LLC; Hatem M. Merhi; Fauneil Smith; Big Ben MIT; and Big Bend MIT v. Newman & Company, MSO, LLC (No. 03-23-00391-CV; June 19, 2025) arose from a construction contract dispute. Newman entered into a construct with Merhi and MPS for the construction buildout of commercial space on South Congress Avenue in Austin. Thought Newman made ontime payments on the contract, MPS’s work on the project faltered. MPS also made demands for extra-contractual payments and refused to perform or complete contractually required work if Newman didn’t pay. The project was not timely completed, so Newman had to hire a new contractor to finish it and to repair and replace noncompliant work. By the time Newman terminated the contract, it had paid MPS $125,000. It paid $156,698 to the new contractor as well, and the delay in opening the new location (it was a medical spa) rendered Newman’s marketing ineffective and injured its business. Newman sued MPS, Mehri, and other defendants for breach of contract and DTPA violations. After a two-day bench trial, the trial court determined that Defendants intentionally made false and deceptive representations regarding the time and manner in which they could complete the work and that they had previously done the same thing in another project. It rendered judgment for Newman and awarded $125,000 in actual damages, treble damages, attorney’s fees, and pre- and post-judgment interest. Defendants appealed.
In an opinion by Justice Kelly, the court of appeals affirmed. First, Defendants argued that Newman’s witnesses were all interested and that their testimony should be disregarded. This obviously ridiculous argument ignored the fact that the factfinder is the judge of the credibility of the witnesses, and that the testimony of an interested witness “may establish a fact as a matter of law only if the testimony could be readily contradicted tending to discredit or impeach it.” Nothing here required Newman to prove his case as a matter of law, but only by a preponderance.
Second, and perhaps more to the point, Defendants argued that Newman didn’t provide accurate plans or complete the necessary permitting to enable MPS to perform in accordance with the contract. These tasks, they contended, were conditions precedent to the contract, and Newman’s failure to satisfy them barred its breach of contract claim. Unfortunately, however, Defendants didn’t raise this argument in their pleadings, at trial, or in any post-trial motions, nor did it request a finding in the trial court’s findings of fact and conclusions of law. Even if Defendants had preserved this argument for appeal, the court observed that the contract didn’t establish any conditions precedent, on that Newman had to obtain the permits at some point. Moreover, the evidence established that Newman had an open permit on the site. As it turned out, MPS and Mehri weren’t even registered contractors with the city, so this argument was at best disingenuous. Additionally, the contract required Newman to provide plans and specifications, which it did, but did not specify that this obligation was a condition precedent to performance. In fact, Newman’s new contractor used the same plans Newman provided to MPS in order to finish the work.
Defendants next tried to raise illegality as an affirmative defense, but they didn’t plead it, so they waived it. But even if they had preserved the issue, the court determined that it would have failed. The contract could have been performed in a legal manner if MPS and Mehri had registered with the city, but they took Newman’s money knowing that they were not. When Newman hired a new general contractor, the project proceeded under the permit. “Moreover,” the court added, “MPS and Mehri would have been required to return the money Newman paid them, which they did not do” (citation omitted). Defendants then tried to argue that the contract was enforceable for lack of material terms. But, as the court observed, MPS and Mehri drafted the contract, which Newman accepted and signed. The fact that Defendants didn’t sign it was immaterial because the contract didn’t require signatures. Further, “when one party sent a contract to a counter-party without signing it, [and] the counter-party signed the contract, performance on the contract commenced, and the parties operated in a manner consistent with the existence of a contract,” a contract has been formed (citation omitted). This was what occurred here.
As to the DTPA violations, Defendants argued that they didn’t misrepresent anything or engage in unconscionable conduct because they “continued to work in good faith on the project and remained ready, willing, and able to complete” it. But they failed to challenge any of the trial court’s findings of fact, and there was plenty of evidence in the record to support the trial court’s determination. Defendants represented that they had the skill and competence to complete the project in a good and workmanlike manner, but instead of doing it, they demanded money they were not owed, didn’t do the work they were paid to do, demanded final payment for the uncompleted product, and quit the work altogether when Newman hired a lawyer to look into things. Additionally, they intentionally represented that they could do the work when “the company was understaffed, [they] did not follow normal construction processes, and did not perform the work in compliance with the plans or the City codes.” Finally, there was the matter of another job in which Defendants were paid $500,000 for a similar fiasco. As to holding Mehri individually liable as well as MPS, the trial court found that Mehri used MPS as an alter ego and sham to perpetuate a fraud. Even if he hadn’t done that, the court observed, the trial court could still have found him liable under the DTPA for his individual violations of the statute. The court thus affirmed the trial court judgment.
