



Great American v. North Austin MUD                                  



TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN





NO. 03-96-00294-CV





Great American Insurance Company, Appellant


v.


North Austin Municipal Utility District No. 1, Appellee





FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT

NO. 477,113, HONORABLE JOHN K. DIETZ, JUDGE PRESIDING





	Appellant Great American Insurance Company ("Great American") appeals a judgment
in favor of North Austin Municipal Utility District No. 1  ("MUD"), appellee, awarding MUD equitable
prejudgment interest at the rate of ten percent per annum.  Great American contends in its first four points
of error that the rate of prejudgment interest should have been six percent rather than ten percent.  Points
of error five, six, and seven assert error with respect to the award, calculation, and method of compounding
of equitable prejudgment interest.  We will affirm.


FACTUAL AND PROCEDURAL BACKGROUND

	This was originally a suit in which MUD sued Great American for violations of the DTPA
and Insurance Code and for breach of contract.  The dispute grew out of construction work done by others
on the Rattan Creek Lift Station, which was owned by MUD.  Great American provided the performance
bond on the construction contract between MUD and the general contractor.  The case was tried to a jury,
which found against Great American.  The trial court rendered judgment in favor of MUD in the amount
of $2,338,207.20, including attorney's fees and prejudgment interest.  Great American appealed to this
Court, which affirmed the trial court's decision.  Great Am. Ins. Co. v. North Austin Mun. Util. Dist. No.
1, 850 S.W.2d 285 (Tex. App.Austin 1993), aff'd in part & rev'd in part, 908 S.W.2d 415 (Tex.
1995).  The Texas Supreme Court, affirming in part and reversing in part, ruled that Great American was
liable to MUD only for breach of contract in the amount of $397,503.20, plus attorney's fees and
prejudgment interest.  The court remanded the cause to the trial court for a determination of the precise
amount of prejudgment interest to which MUD was entitled.  Great Am. Ins. Co. v. North Austin Mun.
Util. Dist. No. 1, 908 S.W.2d 415 (Tex. 1995).
	On remand, Great American asserted the applicability of article 5069-1.03 of the Revised
Civil Statutes, which mandates a six percent rate in certain circumstances.  See Tex. Rev. Civ. Stat. Ann.
art. 5069-1.03 (West 1987).  Concluding that Great American's performance bond did not state the
conditions on which liability depended and the measure of damages from which the sum payable could be
ascertained, the trial court determined that the contract did not satisfy the prerequisites for applying article
5069-1.03.  The court ruled, therefore, that no statute expressly authorized prejudgment interest. 
Accordingly, the court awarded MUD equitable prejudgment interest at the rate of ten percent pursuant
to article 5069-1.05 of the Revised Civil Statutes.  See Tex. Rev. Civ. Stat. Ann. art. 5069-1.05 (West
Supp. 1996) (setting interest rate to be calculated within a range of ten and twenty percent).  On appeal,
Great American contends that (1) article 5069-1.03 applies, so the rate should have been six percent, and
(2) the trial court erred in its calculation of equitable prejudgment interest.

 DISCUSSION

	Great American first contends that the performance bond and construction contract in
question, considered together, meet the requirements for article 5069-1.03 to govern the rate of
prejudgment interest in this case.  Article 5069-1.03 states:


When no specified rate of interest is agreed upon by the parties, interest at the rate of six
percent per annum shall be allowed on all accounts and contracts ascertaining the sum
payable, commencing on the thirtieth (30th) day from and after the time when the sum is
due and payable.

Tex. Rev. Civ. Stat. Ann. art. 5069-1.03 (West 1987) (emphasis added).  Article 5069-1.03 has been
construed to require a six percent per annum rate if the parties' contract (1) provides the conditions upon
which liability depends, and (2) fixes a measure by which the sum payable can be ascertained with
reasonable certainty.  See Federal Life Ins. Co. v. Kriton, 249 S.W. 193, 195 (Tex. 1923).
	In point of error one, Great American argues that the trial court erred in concluding that
Great American's contract does not sufficiently state the conditions upon which its liability to MUD
depends.  In point of error two, Great American argues that the court erred in concluding that the contract
does not sufficiently state the measure by which the sum payable to MUD can be ascertained with
reasonable certainty.  Points of error three and four complain in general terms of the trial court's conclusion
that article 5069-1.03 does not apply.
	Three relatively recent cases decided by the Texas Supreme Court have significantly
narrowed the category of cases to which article 5069-1.03 applies and have approved awards of equitable
prejudgment interest in a variety of circumstances.  In Cavnar v. Quality Control Parking, Inc., 696
S.W.2d 549 (Tex. 1985), the court allowed an award of equitable prejudgment interest in a tort case, to
which article 5069-1.03 clearly did not apply.  Id. at 554.  In a subsequent case, Perry Roofing Co. v.
Olcott, 744 S.W.2d 929 (Tex. 1988), the supreme court affirmed an award of equitable prejudgment
interest in a contract case, holding that article 5069-1.03 did not apply where the contract contained "no
measure by which the sum payable could be ascertained" for a breach of contract.  Id. at 930.  Three
justices dissented, arguing that article 5069-1.03 "applies to all contract cases in which the contract is silent
on prejudgment interest."  Id. at 931 (Wallace, J., dissenting).  Finally, only a few months after Perry
Roofing, the court in Rio Grande Land & Cattle Co. v. Light, 758 S.W.2d 747 (Tex. 1988), viewed
the statute even more narrowly and determined that, in light of Cavnar and Perry Roofing, article 5069-1.03 did not govern prejudgment interest in a breach-of-contract case where the amount of damages "could
not be ascertained by reference to the face of the contract."  Light, 758 S.W.2d at 748.  Light was a
unanimous per curiam opinion.
	Most appellate courts have construed these three cases, culminating in Light, to mean that
if any extrinsic evidence is needed to determine the amount of contract damages, article 5069-1.03 does
not apply.  See Graco Robotics, Inc. v. Oaklawn Bank, 914 S.W.2d 633, 646 (Tex. App.Texarkana
1995, no writ); Houston Cable TV v. Inwood W. Civic Ass'n, 839 S.W.2d 497, 504-05 (Tex.
App.Houston [14th Dist.] 1992), writ granted w.r.m., 860 S.W.2d 72 (Tex. 1993); International
Piping Sys., Ltd. v. M.M. White & Assocs., Inc., 831 S.W.2d 444, 453 (Tex. App.Houston [14th
Dist.] 1992, writ denied); Sage Street Assocs. v. Northdale Constr. Co., 809 S.W.2d 775, 778 (Tex.
App.Houston [14th Dist.] 1991), aff'd in part & rev'd in part, 863 S.W.2d 438 (Tex. 1993) (award
of prejudgment interest at rate of ten percent per annum affirmed); Phillips v. Phillips, 792 S.W.2d 269,
272-73 (Tex. App.Tyler 1990), aff'd, 820 S.W.2d 785 (Tex. 1991); Winograd v. Willis, 789 S.W.2d
307, 312 (Tex. App.Houston [14th Dist.] 1990, writ denied); General Life and Acc. Ins. Co. v. Handy,
766 S.W.2d 370, 374 (Tex. App.El Paso 1989, no writ); cf. Atchison, Topeka & Santa Fe R.R. v.
Sherwin-Williams Co., 963 F.2d 746, 751-52 (5th Cir. 1992).  As one court recently commented, "since
the Cavnar decision, courts appear to be leaning away from the liberal test, toward a more restrictive test
requiring the exact `amount of damages to be ascertainable from the face of the contract' before an award
of prejudgment interest under the statute would be proper."  Allied Chemical Co. v. DeHaven, 824
S.W.2d 257, 266-67 (Tex. App.Eastland 1992, no writ).
	Great American relies on Thompson v. Trinity Universal Insurance Co., 708 S.W.2d
45 (Tex. AppTyler 1986, writ ref'd n.r.e.), and Dolenz v. American General Fire & Casualty Co., 798
S.W.2d 862 (Tex. App.Dallas 1990, writ denied), in which article 5069-1.03 was held to apply because
a measure of damages (i.e., a method or way of determining damages) could be gleaned from the contract,
even though extrinsic evidence was needed to calculate the precise amount.  We decline to follow the
holdings of these two cases, for the following reasons.  First, Thompson was decided before the supreme
court's decisions in Perry Roofing and Light.  Second, Dolenz did not cite Light, even though it had been
issued two years earlier.  Finally and most straightforwardly, we think the holdings of those cases are
inconsistent with Perry Roofing and Light.
	In the present case, the contract between the parties is the performance bond, which
expressly incorporates the underlying construction contract between MUD and the contractor.  Under the
terms of those documents, extrinsic evidence was needed to ascertain the actual amount of damages. (1) 
Accordingly, we conclude that the damages were not ascertainable from the face of the contract, and article
5069-1.03 does not apply.  We overrule points of error two through four.  In light of this holding, we need
not address point of error one.
	In points of error five, six, and seven, Great American asserts that the trial court erred in
(1) awarding equitable prejudgment interest at all under these circumstances; (2) calculating equitable
prejudgment interest pursuant to article 5069-1.05; and (3) concluding that the equitable prejudgment
interest awarded to MUD should be compounded daily.  However, Great American's brief fails to provide
supporting authority or discussion for any of those points of error.  Accordingly, they are waived and we
need not address them.  See Rayburn v. Giles, 182 S.W.2d 9, 13-14 (Tex. Civ. App.San Antonio
1944, writ ref'd) (appellant's points of error waived because they were not argued); Dear v. City of
Irving, 902 S.W.2d 731, 735 n.3 (Tex. App.Austin 1995, writ denied) (court overruled appellant's
points of error because they had no supporting authority).  We overrule points of error five, six, and seven.


CONCLUSION

	Because Great American's contract (the performance bond and relevant construction
contract) does not satisfy the prerequisites for application of article 5069-1.03, we conclude that the trial
court did not err in awarding equitable prejudgment interest at the rate of ten percent per annum pursuant
to article 5069-1.05.  We affirm the judgment of the trial court.


  					J. Woodfin Jones, Justice
Before Justices Powers, Aboussie and Jones
Affirmed
Filed:   October 23, 1996
Publish
1.        The relevant portions of the construction contract provided as follows:

	13.12. . . . If Contractor does not promptly comply with the terms of such
instructions [to correct defective work], . . . Owner may have the defective work
corrected or the rejected work removed and replaced, and all direct, indirect and
consequential costs of such removal and replacement (including but not limited to
fees and charges of engineers, architects, attorneys and other professionals) will
be paid by contractor. . . .

	13.14. . . . All direct, indirect and consequential costs of OWNER in
exercising such rights and remedies will be charged against CONTRACTOR in
an amount approved as to reasonableness by ENGINEER, and a Change Order
will be issued incorporating the necessary revisions in the Contract Documents
with respect to the Work; and OWNER shall be entitled to an appropriate
decrease in the Contract Price, and, if the parties are unable to agree as to the
amount thereof, OWNER may make a claim therefor as provided in Article 11. 
Such direct, indirect and consequential costs will include but not be limited to fees
and charges of engineers, architects, attorneys and other professionals, all court
and arbitration costs and all costs of repair and replacement of work of others
destroyed or damaged by correction, removal or replacement of
CONTRACTOR'S defective work.

e gleaned from the contract,
even though extrinsic evidence was needed to calculate the precise amount.  We decline to follow the
holdings of these two cases, for the following reasons.  First, Thompson was decided before the supreme
court's decisions in Perry Roofing and Light.  Second, Dolenz did not cite Light, even though it had been
issued two years earlier.  Finally and most straightforwardly, we think the holdings of those cases are
inconsistent with Perry Roofing and Light.
	In the present case, the contract between the parties is the performance bond, which
expressly incorporates the underlying construction contract between MUD and the contractor.  Under the
terms of those documents, extrinsic evidence was needed to ascertain the actual amount of damages. (1) 
Accordingly, we conclude that the damages were not ascertainable from the face of the contract, and article
5069-1.03 does not apply.  We overrule points of error two through four.  In light of this holding, we need
not address point of error one.
	In points of error five, six, and seven, Great American asserts that the trial court erred in
(1) awarding equitable prejudgment interest at all under these circumstances; (2) calculating equitable
prejudgment interest pursuant to article 5069-1.05; and (3) concluding that the equitable prejudgment
interest awarded to MUD should be compounded daily.  However, Great American's brief fails to provide
supporting authority or discussion for any of those points of error.  Accordingly, they are waived and we
need not address them.  See Rayburn v. Giles, 182 S.W.2d 9, 13-14 (Tex. Civ. App.San Antonio
1944, writ ref'd) (appellant's points of error waived because they were not argued); Dear v. City of
Irving, 902 S.W.2d 731, 735 n.3 (Tex. App.Austin 1995, writ denied) (court overruled appellant's
points of error because they had no supporting authority).  We overrule points of error five, six, and seven.


CONCLUSION

	Because Great American's contract (the performance bond and relevant construction
contract) does not satisfy the prerequisites for application of article 5069-1.03, we conclude that the trial
court did not err in awarding equitable prejudgment interest at the rate of ten percent per annum pursuant
to article 5069-1.05.  We affirm the judgment of the trial court.


  					J. Woodfin Jones, Justice
Before Justices Powers, Aboussie and Jones
Affirmed
Filed:   October 23, 1996
Publish
1.        The relevant portions of the construction contract provided as follows:

	13.12. . . . If Contractor does not promptly comply with the terms of such
instructions [to correct defective work], . . . Owner may have the defective work
corrected or the rejected work removed and replaced, and all direct, indirect and
consequential costs of such removal and replacement (including but not limited to
fees and charges of engineers, architects, attorneys and other professionals) will
be paid by contractor. . . .

	13.14. . . . All direct, indirect and consequential costs of