                         In The
                   Court of Appeals
     Sixth Appellate District of Texas at Texarkana
             ______________________________

                   No. 06-11-00015-CV
             ______________________________


                LARRY SANDERS, Appellant

                               V.

DAVID WOOD, D/B/A WOOD ENGINEERING COMPANY, Appellee




          On Appeal from the County Court at Law II
                    Gregg County, Texas
              Trial Court No. 2007-2212CCL2




          Before Morriss, C.J., Carter and Moseley, JJ.
                  Opinion by Justice Carter
                                            OPINION

I.      Facts and Procedural Background

        David Wood, a professional engineer, prepared plans for land development at the request

of Larry Sanders. Sanders paid Wood $123,714.00, but refused to pay the balance of $11,473.50.

Wood sued Sanders and alleged he was entitled to the additional sum based on breach of contract,

quantum meruit, and promissory estoppel. Sanders counterclaimed, seeking not only to avoid

paying the last invoice, but also seeking to recover $53,038.56—the cost of hiring a different firm

to redo the engineering job.      Sanders alleged that the plans prepared by Wood were not

economically feasible for use and Wood’s design for the project would cost $350,000.00 more

than the design of the other engineer. Wood filed a motion to dismiss Sanders’ counterclaim

alleging that Sanders failed to file a certificate of merit affidavit as required by Section 150.002 of

the Texas Civil Practice and Remedies Code. The trial court granted in part and denied in part the

motion to dismiss, ruling that Sanders’ counterclaim would be limited as an offset to any award to

Wood.

        Both parties have filed an interlocutory appeal of the trial court’s ruling. Sanders argues

the trial court erred in limiting the counterclaim to an offset of Wood’s claim. Wood’s appeal

argues the trial court erred in failing to dismiss the counterclaim in its entirety because Sanders




                                                  2
filed no certificate of merit as required by statute. TEX. CIV. PRAC. & REM. CODE ANN. § 150.002

(West 2011).1

II.      Standard of Review

         The ruling is immediately appealable as an interlocutory order. TEX. CIV. PRAC. & REM.

CODE ANN. § 150.002(f). However, in conducting such a review, we may only address the

subject of that order, and may not stray into any review of the merits of the case. 2 In reviewing

the trial court’s ruling, courts have concluded that we apply the traditional abuse of discretion

standard, based on the fact that the predecessor to this recodification was subject to such a type of

review. Natex Corp. v. Paris Indep. Sch. Dist., 326 S.W.3d 728, 732 (Tex. App.—Texarkana

2010, no pet.); Palladian Bldg. Co. v. Nortex Found. Designs, Inc., 165 S.W.3d 430, 433 (Tex.

App.—Fort Worth 2005, no pet.). The trial court abuses its discretion when it acts arbitrarily or

unreasonably, or without reference to any guiding rules or principles. Downer v. Aquamarine

Operators, Inc., 701 S.W.2d 238, 241–42 (Tex. 1985). A trial court decision that incorrectly

determines what the law is or misapplies the law to facts will also constitute an abuse of discretion.

Natex Corp., 326 S.W.3d at 731–32.


1
 We note that a number of other matters are also posed which may not be reached by this Court in this appeal from the
ruling on jurisdiction. Sanders filed an amendment to his answer and counterclaim adding a claim for slander of title
based on a mechanic’s and materialmen’s lien filed on the title by Wood. Both parties agree that the slander of title
claim is not subject to the certificate of merit requirement.
2
 City of Dallas v. First Trade Union Sav. Bank, 133 S.W.3d 680, 686 (Tex. App.—Dallas 2003, pet. denied) (holding
that, in interlocutory appeal regarding city’s plea to the jurisdiction, court could not address city’s argument that
bank’s claims against city failed as a matter of law because court may not reach the merits of the claims in determining
plea to the jurisdiction).

                                                           3
III.    Is a Certificate of Merit Required?

        The issue is whether the ―certificate of merit‖ statute applies in this suit, and if its absence

requires the suit to be dismissed in its entirety.

        A.      The Statute

        The governing statute is the version of Section 150.002(f) of the Texas Civil Practice and

Remedies Code that was in effect when this suit was brought in 2007. It has since been

substantively amended in a manner that directly impacts the issues here raised. The statute, in

relevant part, reads as follows:

        (a) In any action or arbitration proceeding for damages arising out of the
        provision of professional services by a design professional, the plaintiff shall be
        required to file with the complaint an affidavit of a third-party licensed architect
        or licensed professional engineer competent to testify, holding the same
        professional license as, and practicing in the same area of practice as the defendant,
        which affidavit shall set forth specifically at least one negligent act, error, or
        omission claimed to exist and the factual basis for each such claim. The
        third-party professional engineer or licensed architect shall be licensed in this state
        and actively engaged in the practice of architecture or engineering.

                ....

        (d) The plaintiff’s failure to file the affidavit in accordance with Subsection (a)
        or (b) shall result in dismissal of the complaint against the defendant. This
        dismissal may be with prejudice.

        (e) An order granting or denying a motion for dismissal is immediately appealable
        as an interlocutory order.

                ....

        (g) This statute does not apply to any suit or action for the payment of fees arising


                                                     4
          out of the provision of professional services.

Act of May 18, 2005, 79th Leg., R.S., ch. 208, § 2, 2005 Tex. Gen. Laws 369, 370 (amended 2009)

(current version at TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(a), (b) (West 2011) (emphasis

added).

          Wood filed suit on October 2, 2007. Sanders filed a counterclaim alleging that Wood had

breached his contract (failure of consideration) by developing plans that were ―economically

unfeasible‖ and ―were not the quality of services to which he was entitled and for which he paid.‖

Sanders argues he was not required to file a certificate of merit because he has brought

non-negligence claims arising out of engineering fees.

          Wood argues that we should follow the first part of the first paragraph of the statute, while

disregarding other portions of the statute. Section (a) of the statute requires a certificate of merit

for any action, for damages, arising out of the provision of professional services by a licensed or

registered professional.       He then alternatively argues that we should disregard the final

paragraph—which contains the ―dispute over fees‖ language, and find that the trial court abused its

discretion by failing to dismiss the entire Sanders counterclaim.

          B.     Authorities

          This Court and the majority of Texas Courts of Appeals that have addressed whether

Section 150.002 requires a certificate of merit only in relation to negligence claims have held that

(in the version applicable between September 1, 2005 and August 31, 2009) the statute required



                                                    5
the affidavit only in cases involving ―negligence or claims based on negligent acts.‖ Natex Corp.,

326 S.W.3d at 733; see also Curtis & Windham Architects, Inc. v. Williams, 315 S.W.3d 102, 108

(Tex. App.—Houston [1st Dist.] 2010, no pet.); Parker County Veterinary Clinic v. Batenhorst,

Inc., No. 02-08-380-CV, 2009 WL 3938051, at *3 (Tex. App.—Fort Worth Nov. 19, 2009, no

pet.) (mem. op.); Landreth v. Las Brisas Council of Co-Owners, Inc., 285 S.W.3d 492, 500 (Tex.

App.—Corpus Christi 2009, no pet.); Kniestedt v. Sw. Sound & Elecs., Inc., 281 S.W.3d 452, 455

(Tex. App.—San Antonio 2007, no pet.).

       The Austin court has recently reversed its own prior opinion and held otherwise. S & P

Consulting Eng’rs v. Baker, 334 S.W.3d 390, 404 (Tex. App.—Austin 2011, no pet.). Relying on

the 2009 legislative history to read into the intent of the 2005 and 2009 amendments, the Austin

Court in S & P Consulting Engineers overruled its own previous opinion by holding that a

certificate of merit is required ―in any action for damages arising out of the provision of

professional services by a design professional—not just in actions alleging negligence.‖ 334

S.W.3d at 404. In doing so, it decided that the application of the rules of grammar to the

―negligent act, error or omission‖ language in (a) was inappropriate when that application did not

appear to be consistent with the result desired by the first sentence of (a) (proceeding out of the

provision of professional services).

       This disagreement stems from the 2005 amendments made to the statute. The amendment

removed language from Section 150.002(a) explicitly limiting the certificate of merit requirement



                                                6
to actions alleging professional negligence and requiring a certificate in ―any action or arbitration

proceeding for damages arising out of the provision of professional services.‖ Act of May 18,

2005, 79th Leg., R.S., ch. 208, § 2, 2005 Tex. Gen. Laws 369, 370 (amended 2009); S & P

Consulting Eng’rs, 334 S.W.3d at 399. However, the legislature left unchanged the language of

Section 150.002(a) requiring the certificate to allege ―at least one negligent act, error, or

omission.‖ Act of May 18, 2005, 79th Leg., R.S., ch. 208, § 2, 2005 Tex. Gen. Laws 369, 370

(amended 2009); S & P Consulting Eng’rs, 334 S.W.3d at 399. The Parker County court made a

compelling argument for applying the law only to negligence claims by pointing out that requiring

a certificate setting forth ―at least one negligent act, error, or omission‖ where there is no

negligence claim would ―require an affidavit that had no relevance to the suit and would render the

statute meaningless.‖ 2009 WL 3938051, at *3. The S & P Consulting Engineers court chose to

rectify this apparent contradiction by disregarding a grammatical rule of construction and deciding

that the adjective ―negligent‖ only modified ―act,‖ rather than ―act, error, or omission‖ in Section

150.002(a). 334 S.W.3d at 403 (allowing a certificate to delineate either a negligent ―act‖ or in a

non-negligence case the ―error or omission‖). This allowed the court to reconcile the conflict

between the apparent meaning of the plain language and what that court believed the Legislature

intended. Id.

       We find the Austin court’s reasons for the reversal of its position unpersuasive. We will

not utilize the legislative history for a later statutory amendment to determine why an earlier,



                                                 7
different Legislature had taken a particular act. We also note that the rules of grammar, in a

profession based upon the use of words, are neither unimportant nor to be ignored. We therefore

continue to hold that under the September 1, 2005, version of the statute, the certificate of merit

requirement applies only to negligence claims. Natex Corp., 326 S.W.3d at 733.

       C.      Does the Counterclaim Involve Tort or Contract?

       This Court, following precedent from other Texas appellate courts, has held that this statute

―applies only to negligence claims and not to claims based on contract.‖ Id.     If this statute does

not apply, Sanders was not required to file a certificate of merit and his counterclaim should be

allowed to proceed in its entirety. The question before us is whether the allegations in Sanders’

counterclaim are based on the negligence of Wood or only on contractual obligations.

       We do not address this issue in a vacuum. The Texas Supreme Court has repeatedly

analyzed the distinction between torts and contracts.

               Over the last fifty years, this Court has analyzed the distinction between
       torts and contracts from two different perspectives. At first, we merely analyzed
       the source of the duty in determining whether an action sounded in tort or contract.
       For instance, in International Printing Pressmen & Assistants’ Union v. Smith, 145
       Tex. 399, 198 S.W.2d 729, 735 (Tex. 1946), this Court held that ―an action in
       contract is for the breach of a duty arising out of a contract either express or
       implied, while an action in tort is for a breach of duty imposed by law.‖ Id. (quoting
       1 C.J.S. Actions § 44).

               Later, we overlaid an analysis of the nature of the remedy sought by the
       plaintiff. In Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617 (Tex. 1986), we
       recognized that, while the contractual relationship of the parties could create duties
       under both contract law and tort law, the ―nature of the injury most often
       determines which duty or duties are breached. When the injury is only the


                                                 8
       economic loss to the subject of a contract itself, the action sounds in contract
       alone.‖ Id. at 618. Because a mere breach of contract cannot support recovery of
       exemplary damages, and because the plaintiffs did not ―prove a distinct tortious
       injury with actual damages,‖ we rendered judgment that the plaintiffs take nothing
       on their exemplary damages claim. Id.

Formosa Plastics Corp. v. Presidio Eng’r, 960 S.W.2d 41, 45 (Tex. 1996).

       The result provides two factors to review in determining the nature of an action. Under

Formosa, we consider (1) the source of the duty owed to plaintiff (was it based merely on the

contract and (2) the nature of the remedy sought (economic loss to the subject of the contract

means the action sounds in contract).

       In Natex, the Paris Independent School District (PISD) contracted with Natex to prepare

architectural designs for renovations and new construction of school buildings. Written contracts

were entered on each of the seven buildings and a new stadium. PISD gave Natex notice of

termination of the contracts for failure to provide documents for approval, failure to provide a

schedule, and for requests for payment for which it was not entitled. PISD filed suit alleging

Natex had breached the contracts. PISD alleged various violations of the contracts and the plans

produced were ―unusable.‖ Natex, 326 S.W.3d at 733. PISD later amended its suit—clearly

adding negligence claims—and filed a certificate of merit at that time. Natex alleged PISD

should have filed such a certificate with the original suit. In Natex, we held that the requirement

of a certificate of merit applied only to negligence claims, not claims based on contract. Id.

       In determining whether PISD had an obligation to file the certificate with the original



                                                9
petition, we undertook to decipher if the original claim was for negligence or only for contractual

violations. Natex argued that the original petition alleged negligence actions when it asserted that

the work of Natex was ―untimely‖ and ―unusable.‖ We recognized that we were not bound by the

labels of the pleadings and looked to the body of the pleadings to determine what the claim

asserted. Applying the Texas Supreme Court’s analysis, we looked to see whether the causes of

action asserted arose only from a violation of a duty imposed by law (tort) or from a duty imposed

by contract. In that case, the duty was imposed by contract. Id.

       In our analysis, we recognized that a contractual relationship between the parties may

create duties under both contract and tort law, and the party may breach either or both duties. Id.

(citing Parker County Veterinary Clinic, Inc., 2009 WL 3938051). We found that even though

PISD alleged the plans were so ―untimely‖ and ―unusable‖ and ―out of touch‖ with the available

budget that they could not be used, the basic duty flowed from the contract between the parties.

We further discussed that the parties had a written contract that governed and included specific

provisions, whereas in Ashkar Eng’g Corp. v. Gulf Chem. & Metallurgical Corp.,

No. 01-09-00855-CV, 2010 Tex. App. LEXIS 769 (Tex. App.—Houston [1st Dist. ] Feb. 4, 2010)

the parties had no written contract, and no specific provision of a contract giving rise to specific

duties to adequately design, engineer, etc. were alleged. (In Ashkar the court held that the

pleadings of contract violations included ―failing to adequately monitor the work,‖ ―failure . . . to

properly supervise,‖ ―or properly test,‖ which the court found mirrored the negligence claims).



                                                 10
The damages sought in Natex were consequential damages and attorney’s fees recoverable in a

contract action. The damages sought in Ashkar were for repairs and remediation, not economic

loss related directly to the subject of the contract, which suggested the claims did not sound in

contract. Id. at *28. So in Ashkar, the claims were for negligence and the failure to file the

certificate required dismissal. Id. at *24.

       In this case, there is no written contract. The complaint is similar to that in the Natex case

in that both allegations were that the plans as drawn were unusable and were not economically

feasible for the project. We recognize that a contractual relationship may create duties under both

contract and tort law. In many cases, the nature of the remedy is instructive. Natex, 326 S.W.3d

at 734. The allegations in the counterclaim were that the plans by Wood made the proposed

project economically unfeasible, which required Sanders to hire another firm to revise the plans.

Sanders does not allege the plans were prepared negligently or without due care, but that the plans

were so economically impractical as to be unusable for the project. Woods performed the job

based solely on the agreement of the parties. These pleadings, even though there is no written

contract, appear to be of a contractual nature.

       The second issue is the nature of the remedy sought (economic loss to the subject of the

contract means the action sounds in contract). In Natex, we noted that the damages sought were

consequential damages for the increased costs of construction due to the breach. Id. at 730.

Here, we review the court’s ruling based on the pleadings and evidence before it at the time of the



                                                  11
hearing, on January 13, 2011. See City of Houston v. O’Fiel, No. 01-08-00242-CV, 2009 Tex.

App. LEXIS 630 (Tex. App.—Houston [1st Dist.] Jan. 29, 2009, pet. denied) (mem. op.). In the

first amended counterclaim, Sanders alleged that he and Wood had an agreement that he would

prepare engineering and surveying for the project and that after it was completed, the projected

cost as prepared was so high as to make the project economically unfeasible. Sanders hired

another firm, which revised the plans (which were approved by the City), resulting in a

$356,498.00 decrease in the cost of the project. A fair reading of the counterclaim reflects that

Sanders alleged the services provided under the agreement were

       not the quality of services to which he was entitled and for which he paid.
       Counter-Plaintiff had every reason to expect that Counter-Defendant’s plans could
       be used for the proposed project and that when used, the project would be
       economically feasible.

       Counter-Plaintiff has been damaged by having to pay Dunn Engineering for
       services which he should not have had to pay. His damages exceed $53,038.56 for
       which he sues Counter-Defendant.

       We find the relief requested is based on an alleged breach of contract. Although inartfully

worded, the pleadings quoted above seek recovery that could be based on a type of breach of

warranty (which is in this context clearly based upon the contractual agreement), a failure of

consideration, and a failure to provide the agreed-upon type of plans. The damages sought are

consequential damages of being required to employ an additional engineer to prepare plans that




                                               12
allow the project to be economically feasible.3

         Thus, both the source of duty and the type of relief sought are based in application of

contract law rather than tort law, and this action was therefore not properly dismissible for failure

to file a certificate of merit.

         We emphasize that we do neither by this opinion express any view as to the ultimate terms

of this apparent oral agreement as they may be proven to exist, nor do we express any view as to

which party (if either) may be able to recover on their respective claims.

         D.       Is This a Suit for Payment of Fees?

         Section 150.002(g) has an explicit exception stating that a certificate of merit is not

required for lawsuits involving payment of fees arising out of the provision of professional

services.4 Wood and Sanders both appeal from the trial court’s ruling regarding the ―payment of

fees‖ exception. The trial court found that Sanders’ counterclaim was limited to an offset against

Wood’s recovery. Sanders argues that the entire matter is a suit for the collection of fees for

professional services and therefore no certificate of merit is required. Wood argues that the court

erred in allowing Sanders to assert any claim or offset.

         If the suit is one for the payment of fees, a certificate of merit is not required. We have


3
 ―When the injury is only the economic loss to the subject of a contract itself, the action sounds in contract alone.‖
Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986).
4
 Wood’s lawsuit against Sanders is couched solely as an attempt to obtain fees due but unpaid, and is based on their
contract. Although some types of potential relief under equitable theories of relief are set out, they all revolve around
the attempt to recover his fees under some theory of law.

                                                          13
already concluded that the statute does not require filing a certificate because the counterclaim

involves contractual claims, not negligence. Therefore, Sanders was not required to file a

certificate of merit regardless of whether this case is classified as a suit over the payment of

professional fees or not. Consequently, we do not address that issue.

       We reverse the trial court’s order limiting Sanders’ counterclaim as an offset only and

remand for further proceedings consistent with this opinion.




                                                    Jack Carter
                                                    Justice

Date Submitted:       July 27, 2011
Date Decided:         August 12, 2011




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