                                                                                   ACCEPTED
                                                                               06-15-00013-CV
                                                                    SIXTH COURT OF APPEALS
                                                                          TEXARKANA, TEXAS
                                                                          9/16/2015 4:49:55 PM
                                                                              DEBBIE AUTREY
                                                                                        CLERK

                         No. 06-15-00013-CV

                              IN THE                      FILED IN
                                                   6th COURT OF APPEALS
                        COURT OF APPEALS             TEXARKANA, TEXAS
                    SIXTH DISTRICT OF TEXAS        9/17/2015 8:22:00 AM
                           TEXARKANA                   DEBBIE AUTREY
                                                           Clerk
__________________________________________________________________

                       J OHN A LEXANDER S MITH,
                           Cross-Appellant

                                  v.

               C ITY N ATIONAL B ANK OF S ULPHUR S PRINGS,
                             Cross- Appellee
__________________________________________________________________

        On appeal from the District Court of Hopkins County, Texas
                           62nd Judicial District
                    The Honorable Will Biard Presiding
__________________________________________________________________

                   BRIEF OF CROSS-APPELLANT
__________________________________________________________________

                                           J. Mark Sudderth
                                           Texas Bar No. 19461500
                                           N OTEBOOM – T HE L AW F IRM
                                           669 Airport Freeway, Suite 100
                                           Hurst, Texas 76053
                                           (817) 282-9700
                                           (817) 282-8073 (facsimile)
                                           Sudderth@Noteboom.com

                                           Attorney for Cross-Appellant,
                                           John Alexander Smith

                  ORAL ARGUMENT REQUESTED
                      IDENTITY OF PARTIES AND COUNSEL

      Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure, the
following is a list of all parties to the trial court’s judgment, and the names and
addresses of all trial and appellate counsel.

Parties to the Trial Court’s Judgment:

John Alexander Smith                              Plaintiff/Cross-Appellant

City National Bank of Sulphur Springs             Defendant/Cross-Appellee

Trial and Appellate Counsel:

Charles M. Noteboom, J. Mark Sudderth,            Attorneys for Plaintiff/Cross-
and Brian W. Butcher                              Appellant John Alexander Smith
Noteboom – The Law Firm
669 Airport Freeway, Suite 100
Hurst, Texas 76053
and
R. Wes Tidwell
Ellis & Tidwell, LLP
101 W. Houston
Paris, Texas 75460

Coy Johnson and Clay Johnson                      Attorneys for Defendant/
Johnson Law Firm, P.C.                            Cross-Appellee City National
609 Gilmer Street                                 Bank of Sulphur Springs
Sulphur Springs, Texas 75482
and
Kevin L. Ferrier
222 E. Amherst, Suite 100
Tyler, Texas 75701
and
John R. Mercy
Mercy, Carter, Tidwell, L.L.P.
1724 Galleria Oaks Drive
Texarkana, Texas 75503

Cross-Appellant’s Brief - Page ii
                          REQUEST FOR ORAL ARGUMENT

       Cross-Appellant John Alexander Smith respectfully requests the opportunity

to present oral argument. T EX. R. A PP. P. 39.7.




Cross-Appellant’s Brief - Page iii
                                        TABLE OF CONTENTS


IDENTITY OF PARTIES AND COUNSEL. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii

REQUEST FOR ORAL ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii

INDEX OF AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi

ABBREVIATIONS AND RECORD REFERENCES. . . . . . . . . . . . . . . . . . . . . . vii

STATEMENT OF THE CASE .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viii

ISSUE PRESENTED

         Whether the Trial Court Erred by Improperly Determining the Amount of
         Pre-judgment Interest to Be Awarded to Plaintiff. . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF FACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

SUMMARY OF ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARGUMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I.       The Standard of Review Is De Novo.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

II.      The Trial Court Erred by Improperly Determining the Amount of
         Prejudgment Interest to Be Awarded to Plaintiff.. . . . . . . . . . . . . . . . . . . . . . 6

         A.       Plaintiff’s Application for Investigative Depositions constituted
                  “written notice of a claim” under section 304.104 of the Texas
                  Finance Code.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

         B.       Pursuant to section 304.104 of the Texas Finance Code, the proper
                  amount of prejudgment interest to be awarded to Plaintiff is
                  $84,542.00, rather than $54,243.00. .. . . . . . . . . . . . . . . . . . . . . . . . . 12



Cross-Appellant’s Brief - Page iv
PRAYER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

CERTIFICATE OF SERVICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CERTIFICATE OF COMPLIANCE ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

APPENDIX . .. . . . . . . . . . . . . . . . . (Separate Index Located in Front of Materials)




Cross-Appellant’s Brief - Page v
                                   INDEX OF AUTHORITIES
Cases:

Bevers v. Soule,
      909 S.W.2d 599 (Tex. App.–Fort Worth 1995). . . . . . . . . . . . . . . . . . . . . 8, 9

Brookshire Grocery Co. v. Smith,
     99 S.W.3d 819 (Tex. App.–Beaumont 2003). . . . . . . . . . . . . . . . . . . . . 6, 7, 8

Freedom Com., Inc. v. Coronado,
     372 S.W.3d 621 (Tex. 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Helena Chemical Co. v. Watkins,
     18 S.W.3d 744 (Tex.App.–San Antonio 2000). . . . . . . . . . . . . . . . . . . . . . . . 4

Hopkins v. Spring Indep. Sch. Dist.,
     736 S.W.2d 617 (Tex.1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc.,
      962 S.W.2d 507 (Tex. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7, 8

K Mart Corp. v. Rhyne,
     932 S.W.2d 140 (Tex. App.–Texarkana 1996). . . . . . . . . . . . . . . . . . . . . . 8, 9

MCN Energy Enters., Inc. v. Omagro de Colombia, L.D.C.,
    98 S.W.3d 766 (Tex. App.–Fort Worth 2003). . . . . . . . . . . . . . . . . . . . . . . 5

Pringle v. Moon,
      158 S.W.3d 607 (Tex. App.–Fort Worth 2005). . . . . . . . . . . . . . . . . . . . . . . 4

Quick v. City of Austin,
      7 S.W.3d 109 (Tex.1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Robinson v. Brice,
      894 S.W.2d 525 (Tex. App.–Austin 1995). . . . . . . . . . . . . . . . . . 6, 7, 8, 9, 10

Tex. Dep't of Transp. v. Needham,
      82 S.W.3d 314 (Tex.2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Cross-Appellant’s Brief - Page vi
Toshiba Machine Co. v. SPM Flow Control, Inc.,
      180 S.W.3d 761 (Tex. App.–Fort Worth 2005). . . . . . . . . . . . . . . . . . . . . . . 5

Statutes and Rule:

T EX. R. E VID. 201.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

T EX. C IV. P RAC. & R EM. C ODE § 101.101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

T EX. F IN. C ODE § 304.104. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

T EX. G OV. C ODE § 311.011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10


                    ABBREVIATIONS AND RECORD REFERENCES

Abbreviations

Plaintiff/Cross-Appellant,
John Alexander Smith. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “Smith” or “Plaintiff”

Defendant/Cross-Appellee
City National Bank of Sulphur Springs. . . . . . . “CNB,” “Defendant” or “the Bank”

Appendix to this Brief. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “Appx.”

Record References

References to Clerk’s Record. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “CR: [page #]”

References to Supplemental Clerk’s Record. . . . . . . . . . . . . . . . . . . “SCR: [page #]”

References to Reporter’s Record . . . . . . . . . . . . . . . . . . . . . . . . . . . . “RR: [page #]”




Cross-Appellant’s Brief - Page vii
                               STATEMENT OF THE CASE

       Smith brought a personal injury suit against the Bank for malicious

prosecution.1 Following a jury verdict,2 and at the request of Plaintiff,3 the trial

court entered a judgment in Smith’s favor which included $84,542.00 in

prejudgment interest.4 The Bank filed a motion to modify the judgment, asserting

that the trial court had used an incorrect starting date for calculating pre-judgment

interest.5 Smith opposed such motion.6 After a hearing, the trial court granted the

Bank’s motion and entered an order modifying the judgment to include only

$54,243.00 in prejudgment interest.7

       The Bank has appealed the final judgment. In this cross-appeal, Smith

complains only that the trial court improperly reduced the amount of prejudgment

interest, which should be restored to the original and proper amount.8


       1
           CR:403 (Plaintiff’s Fifth Amended Original Petition)
       2
           CR:535; Appx. C (Jury Charge and Verdict)
       3
           CR:584; Appx. F (Plaintiff’s letter to trial court submitting proposed judgment)
       4
           CR:582; Appx. A (Court’s Judgment)
       5
           CR:605; Appx. G (Defendant’s Motion to Modify Judgment)
       6
      CR:615; Appx. H (Plaintiff’s Response to Defendant’s Motion to Modify
Judgment)
       7
           SCR:5; Appx. B (Order on Motion to Modify Judgment)
       8
           CR:649 (Plaintiff’s Notice of Cross-Appeal)

Cross-Appellant’s Brief - Page viii
                                   ISSUE PRESENTED

       Whether the Trial Court Erred by Improperly Determining the Amount of

Prejudgment Interest to Be Awarded to Plaintiff.

                                   STATEMENT OF FACTS

       On October 24, 2008, Smith served the Bank with Plaintiff’s “Application

For Investigative Depositions” under T EX.R.C IV.P. 202 which clearly and

explicitly notified Defendant of Plaintiff’s claim for malicious prosecution.9

       In particular, paragraphs 6 through 14 of the application set out the factual

bases of the claim in some detail – describing how the bank “caused a criminal

complaint to be filed against John Alexander Smith,” leading to Smith’s arrest and

indictment and proximately causing substantial damages, all while the bank “knew

he was not guilty of the criminal offense” – and paragraph 14 specifically notified

the bank of Smith’s claim for malicious prosecution, stating, “Petitioner alleges

that he believes that he has grounds for a lawsuit under the doctrines of false

imprisonment, false arrest, and malicious prosecution.”10

       Smith ultimately sued the Bank for malicious prosecution.11 Smith’s


       9
       CR:585; Appx. E (Petitioner’s Application for Investigative Depositions –
enclosed with Plaintiff’s letter to trial court submitting proposed judgment).
       10
            CR:586-588; Appx. E (Application pp. 2-4, paragraphs 6-14)
       11
            CR:27 (Plaintiff’s Second Amended Original Petition)

Cross-Appellant’s Brief - Page 1
malicious prosecution case against the Bank went to trial, resulting in a jury verdict

in Smith’s favor.12

       Following the verdict, Smith submitted a proposed form of judgment along

with a copy of the Application For Investigative Depositions which had been

served on the Bank on October 24, 2008, and a letter explaining how prejudgment

interest should be calculated using a starting date six months after such notice.13

       On December 15, 2014, the trial court entered a judgment which included

$84,542 in prejudgment interest, in accordance with Smith’s letter.14 The Bank

then filed a motion to modify the judgment, asserting that prejudgment interest

should have been calculated from the date the Bank was sued, rather than six

months after receiving Smith’s petition to investigate claims.15 Smith filed a

response opposing such motion.16 After conducting a hearing, the Court granted

the Bank’s motion and entered an order modifying the judgment so as to reduce

prejudgment interest to $54,243.17

       12
            CR:535; Appx. C (Jury Charge and Verdict)
       13
            CR:584; Appx. F (Plaintiff’s letter to trial court submitting proposed judgment)
       14
            CR:582; Appx. A (Court’s Judgment)
       15
            CR:605; Appx. G (Defendant’s Motion to Modify Judgment)
       16
       CR:615; Appx. H (Plaintiff’s Response to Defendant’s Motion to Modify
Judgment)
       17
            SCR:5; Appx. B (Order on Motion to Modify Judgment)

Cross-Appellant’s Brief - Page 2
       The court calculated such prejudgment interest commencing on May 2,

2011, the date suit was filed against the Bank, rather than April 22, 2009, the date

one-hundred-and-eighty days after the Bank received written notice of Smith’s

claim.18 Smith now appeals, complaining only that the trial court erred in

modifying the judgment and awarding the incorrect amount of prejudgment

interest.

                              SUMMARY OF ARGUMENT

       Prejudgment interest should have been calculated beginning on April 22,

2009, which is 180 days after October 24, 2008, the date the Bank received written

notice of Smith’s claim.

       The application for investigative depositions served on the Bank constituted

“written notice of a claim” under section 304.104 of the Texas Finance Code

because it included an assertion of a right to be paid. No “demand” for payment

was required, nor was the actual filing of a lawsuit. By specifically alleging that he

had grounds for a lawsuit based on malicious prosecution, Smith provided notice

of his claim under the prejudgment interest statute.




       18
        The order does not set forth this calculation, but expressly grants Defendant’s
motion, which did. See CR:607; Appx. G (Defendant’s Motion to Modify Judgment,
p.3).

Cross-Appellant’s Brief - Page 3
                                    ARGUMENT

I.     The Standard of Review Is De Novo

       As a general rule, a trial court’s factual decisions regarding prejudgment

interest – including determinations of whether there has been a delay, whether an

award is supported by equity, whether the parties have agreed to a particular rate of

interest, and other determinations that turn on disputed issues of fact – are

reviewed under an abuse of discretion standard. See, e.g., Helena Chemical Co. v.

Watkins, 18 S.W.3d 744, 760 (Tex. App. – San Antonio 2000), aff’d., o.g., 47

S.W.3d 486 (Tex. 2001) (“The trial court’s decision in refusing to offset from its

interest calculations periods of delay caused by a litigant are reviewed under the

abuse of discretion standard. ... Because the offset is discretionary rather than

mandatory, we do not substitute our opinion for that of the trial court.”)

       On the other hand, when – as at bar – a trial court’s decision regarding pre-

judgment interest turns on legal rather than factual grounds, the de novo standard

of review applies. See, e.g., Pringle v. Moon, 158 S.W.3d 607, 609 (Tex. App. –

Fort Worth 2005, no pet.) (“The prejudgment interest rate is controlled by statute.

... Because statutory construction is a question of law, we review the trial court's

decision de novo. Tex. Dep't of Transp. v. Needham, 82 S.W.3d 314, 318

(Tex.2002)”).



Cross-Appellant’s Brief - Page 4
       Regarding the specific issue in the case at bar, “the date from which

statutory prejudgment interest should begin is a question of law that an appellate

court must review de novo.” MCN Energy Enters., Inc. v. Omagro de Colombia,

L.D.C., 98 S.W.3d 766, 773 (Tex. App. – Fort Worth 2003, pet. denied). See also,

Toshiba Machine Co. v. SPM Flow Control, Inc., 180 S.W.3d 761, 785 (Tex.

App.–Fort Worth 2005, pet. granted, cause remanded) (“The abuse of discretion

standard applies to the trial court's factual findings as they relate to prejudgment

interest; but the de novo standard applies to the trial court's application of the law

to the facts. ... The question is whether the letter constituted notice of SPM's claims

as a matter of law. Therefore, as a practical matter, our review of the prejudgment

interest issue in this case is de novo.”)

       Under the de novo standard of review, this court exercises its own judgment

and redetermines each legal issue. Quick v. City of Austin, 7 S.W.3d 109, 116

(Tex.1998).




Cross-Appellant’s Brief - Page 5
II.    The Trial Court Erred by Improperly Determining the Amount of
       Prejudgment Interest to Be Awarded to Plaintiff.

       A.        Plaintiff’s Application for Investigative Depositions constituted
                 “written notice of a claim” under section 304.104 of the Texas
                 Finance Code.

       The issue in this cross-appeal concerns the definition of “notice of claim”

under the Texas Finance Code, which provides that prejudgment interest begins to

accrue on the earlier of the date suit is filed, or the180th day after a defendant

receives written “notice of a “claim.”19 The Bank’s motion asserted that a “claim”

requires a “demand for payment.”20 Smith disagreed, pointing out that “an

assertion of a right to be paid” will also suffice.21

       While the Finance Code contains no statutory definition, case law

establishes that, in the prejudgment interest context, no demand is required as

“claim” also includes “an assertion of a right to be paid.” 22

       19
            Tex. Fin. Code 304.104 (Appx. D)
       20
            CR:607; Appx. G (Defendant’s Motion to Modify Judgment, p. 3)
       21
       CR:616; Appx. H (Plaintiff’s Response to Defendant’s Motion to Modify
Judgment, p. 2)
       22
         See, e.g., Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d
507, 531 (Tex. 1998)(“A ‘claim’ is ‘a demand for compensation or an assertion of a
right to be paid.”)(emphasis added); Brookshire Grocery Co. v. Smith, 99 S.W.3d 819,
824 (Tex. App.–Beaumont 2003, pet. denied)(In Tex.Fin.Code § 304.104, “[t]he term
‘claim’ describes a demand for compensation or an assertion of a right to be
paid.”)(emphasis added). See also, Robinson v. Brice, 894 S.W.2d 525, 528 (Tex. App. –
Austin 1995, writ denied ).

Cross-Appellant’s Brief - Page 6
       The Texas Supreme Court addressed this meaning of “claim” in Johnson &

Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (Tex. 1998), in

which it held that a statute of limitations tolling agreement constituted a “written

notice of claim” sufficient to trigger the accrual of prejudgment interest. The

agreement merely stated:

       Kenneco asserts that, to the extent underwriters are found not to be liable ...,
       J & H is liable to Kenneco for the amounts which Kenneco has claimed
       under the Policy.23

Although absolutely no “demand” for payment or compensation was made, the

Court held this language constituted a “claim” because it asserted a right to

compensation. The Court stated the rule that either a demand or an assertion of a

right will suffice:

       We hold that the agreement constitutes “written notice of a claim.” A
       “claim” is “a demand for compensation or an assertion of a right to be paid.”
       See Robinson v. Brice, 894 S.W.2d 525, 528 (Tex.App.—Austin 1995, writ
       denied). ... Through the standstill agreement, J & H received written notice
       that Kenneco was claiming a right to compensation.24

       In its motion to the trial court, the Bank cited Brookshire Grocery Co. v.

Smith, 99 S.W.3d 819 (Tex. App.–Beaumont 2003, pet. denied) in support of its

assertion that “there must be a demand for payment or compensation;” however,

       23
        Johnson, 962 S.W.2d at 531 (analyzing the common-law requirement of
“written notice of a claim” to trigger prejudgment interest)
       24
            Johnson, 962 S.W.2d at 531.

Cross-Appellant’s Brief - Page 7
Brookshire actually confirms that either a demand or an assertion of a right to be

paid will suffice, stating, “The term ‘claim’ describes a demand for compensation

or an assertion of a right to be paid.” Brookshire, 99 S.W.3d at 824, citing

Johnson, 962 S.W.2d at 531 and Robinson v. Brice, 894 S.W.2d 525, 528 (Tex.

App. – Austin 1995, writ denied).

        This Court’s opinion in K Mart Corp. v. Rhyne, 932 S.W.2d 140 (Tex.

App.–Texarkana 1996, no pet.) also demonstrates that no demand for payment is

required in order for a writing to constitute a “claim” for purposes of pre-judgment

interest. In K Mart, this Court held that providing a medical release form which

simply stated, “this information is to be used for the purposes of evaluating and

handling my claim for injuries” constituted sufficient written notice of a claim to

start prejudgment interest.25 No “demand” for compensation or payment was

made.

        In reaching its decision in K Mart, this Court cited Bevers v. Soule, 909

S.W.2d 599 (Tex. App.–Fort Worth 1995, no pet.) In Bevers, as in K Mart, no

demand for payment was made. Instead, the plaintiff simply sent a medical

authorization along with some medical receipts and a letter stating the

authorization was enclosed “so that you could obtain the necessary information to


        25
             K Mart, 932 S.W.2d at 146.

Cross-Appellant’s Brief - Page 8
properly consider my injury claim.”26 The defendant argued the letter was not a

“claim” because it “did not state the nature of the complaint or the amount of

damages sought,” but the court confirmed such is not required.27

       The K Mart opinion references the Austin Court of Appeals’ holding in

Robinson v. Brice that mere “notice of an accident and injuries” is not sufficient to

constitute notice of a claim, commenting that “Robinson requires written notice of

a claim, i.e., a legal demand for payment or compensation.” K Mart, 932 S.W.2d at

145. This distinction between “notice of an accident” and a “demand for payment”

should not be misunderstood as construing Robinson to always require a

“demand.” The only issue in Robinson was whether an accident report constituted

a notice of claim. The Robinson opinion states, “Although the accident report

notified Highlands that an accident had occurred, and that Brice had been injured,

it was not notice of a demand for payment or compensation by Brice or on Brice's

behalf, and thus was not notice of a claim;” however, this language must not be

mis-construed as holding that a “demand” is always required, as the opinion goes

on to expressly explain that either a demand or an assertion of a right to be paid



       26
            Bevers, 909 S.W.2d at 603.
       27
         Id. (noting that, “Nothing in [the prejudgment interest statute] requires the
claimant to demand an exact amount or list every element of damage claimed in order to
trigger the notice of claim provision.”)

Cross-Appellant’s Brief - Page 9
will suffice:

       The statute does not define the term “claim,” and therefore, we must
       construe it according to its ordinary meaning. Tex.Gov't Code Ann. §
       312.002(a) (West 1988) [now see § 311.011]; Hopkins v. Spring Indep. Sch.
       Dist., 736 S.W.2d 617, 619 (Tex.1987). The word “claim” ordinarily means
       a demand for compensation or an assertion of a right to be paid.
       ...
       The accident report fails as written notice of a claim ... because it is not
       notice of a demand for compensation or an assertion of a right to be paid.28

       In the case at bar, Smith’s “Application For Investigative Depositions,”

served on the Bank on October 24, 2008,29 constituted a “claim,” as defined in all

these authorities. It plainly and explicitly notified the Bank of Plaintiff’s claim for

malicious prosecution. Indeed, it set out the factual bases of the claim in some

detail – describing how the bank “caused a criminal complaint to be filed against

John Alexander Smith,” leading to Smith’s arrest and indictment and proximately

causing substantial damages, all while the Bank “knew he was not guilty of the

criminal offense of hindering a secured creditor” – and specifically notified the

Bank of Smith’s claim for malicious prosecution, asserting, “Petitioner alleges that

he believes that he has grounds for a lawsuit under the doctrines of false




       28
            Robinson, 894 S.W.2d at 528 (emphasis added).
       29
        CR:585; Appx. E (Petitioner’s Application for Investigative Depositions –
enclosed with Plaintiff’s letter to trial court submitting proposed judgment).

Cross-Appellant’s Brief - Page 10
imprisonment, false arrest, and malicious prosecution.”30

       Any argument that Smith’s notification that he had grounds for a malicious

prosecution lawsuit was not a “claim” because it was merely a “potential claim,”

has no merit. The Finance Code, by providing that interest begins to accrue on the

earlier of 180 days after notice of a claim or the date suit is filed, specifically

recognizes that “notice of a claim” does not require actually filing a claim. Before

a lawsuit is filed, any claim may be referred to as “potential” – as where a party is

attempting to investigate or negotiate before determining whether a lawsuit will

actually be filed – but it is still a “claim.” Written notice to the potential defendant

asserting that a claim exists – as opposed to the actual filing and pursuit of a cause

of action – is all that is required.

       By way of close analogy, the Texas Tort Claims Act provides that a

governmental unit is required to receive “notice of a claim” within six months of

the incident giving rise to it. T EX. C IV. P RAC. & R EM. C ODE § 101.101(a). The

statute provides that the notice must reasonably describe the injury or damage

claimed, the time and place of the incident, and the incident, but contains no

requirement that any sort of demand for payment be included, or that any lawsuit

to pursue the claim be filed. Id.


       30
            CR:586-588; Appx. E (Application pp. 2-4, paragraphs 6-14)

Cross-Appellant’s Brief - Page 11
       Just as “notice of a claim” under the Tort Claims Act does not require any

demand, lawsuit, or other affirmative action to pursue or collect a claim, “notice of

a claim” under the Texas Finance Code likewise requires only “notice” of a claim,

not a “demand” or “pursuit” of a claim. The Bank clearly received written notice

that Smith was asserting he held a malicious prosecution claim, as well as the basis

for such claim, when it received Smith’s written application containing such

assertions on October 24, 2008.

B.     Pursuant to section 304.104 of the Texas Finance Code, the proper
       amount of prejudgment interest to be awarded to Plaintiff is $84,542.00,
       rather than $54,243.00.

       The trial court’s original judgment properly calculated prejudgment interest

at $84,542.00, and the court’s math has never been in dispute. The calculations are

included here in order to ensure full briefing.

       Section 304.104 of the Texas Finance Code provides that prejudgment

interest accrues beginning on the 180th day after the date a defendant receives

written notice of a claim and ending the day before the judgment is signed.

       As addressed above, the Bank received written notice of Plaintiff’s claim on

October 24, 2008. One-hundred-and-eighty days after this date was April 22,




Cross-Appellant’s Brief - Page 12
2009.31

       The trial court’s judgment in this case was signed on December 15, 2014.32

From April 22, 2009, to December 14, 2014, is 2,062 days. At the annual rate of

five percent, yearly interest on $300,000.0033 is $15,000.00.34 Dividing that

amount by 365 days, the daily interest amount is $41.00 (rounded down).

Multiplying $41.00 by 2,062 days yields total prejudgment interest of $84,542.00.

This was the amount originally ordered by the court, prior to granting the Bank’s

motion to amend, and is the proper amount of prejudgment interest.

                                         PRAYER

       For the foregoing reasons, Cross-Appellant respectfully requests:

1.     that this Court modify the trial court’s judgment so as to include $84,542.00

in prejudgment interest and affirm it as so-modified; and/or




       31
         Cross-Appellant respectfully requests this Court to take judicial notice of the
dates and mathematical calculations set forth in this section. See Freedom Com., Inc. v.
Coronado, 372 S.W.3d 621, 623 (Tex. 2012) (“An appellate court may take judicial
notice of a relevant fact that is ... capable of accurate and ready determination by resort to
sources whose accuracy cannot reasonably be questioned.”); T EX. R. E VID. 201.
       32
            CR:582; Appx. A (Court’s Judgment)
       33
        The judgment awarded $300,000.00 in compensatory damages, not
including interest. Id.
       34
            .05 x 300,000 = 15,000.

Cross-Appellant’s Brief - Page 13
2.     that this Court reverse and render judgment, in part, so as to include

$84,542.00 in prejudgment interest, affirming the remainder of the judgment; and

3.     that Cross-Appellant recover the appellate costs incurred by him herein; and

4.     that Cross-Appellant have all other and/or further relief that the law and the

nature of this case may require.

                                               Respectfully submitted,

                                               /s/ J. Mark Sudderth
                                               J. Mark Sudderth
                                               Texas Bar No. 19461500
                                               N OTEBOOM – T HE L AW F IRM
                                               669 Airport Freeway, Suite 100
                                               Hurst, Texas 76053
                                               (817) 282-9700
                                               (817) 282-8073 (facsimile)
                                               Sudderth@Noteboom.com

                                               Attorneys for Cross-Appellant,
                                               John Alexander Smith




Cross-Appellant’s Brief - Page 14
                              CERTIFICATE OF SERVICE

       I certify that a true and correct copy of the attached document been served
upon all counsel record on the 16th day of September, 2015, via e-service, to the
attorneys of record for Cross-Appellee City National Bank of Sulphur Springs as
follows:

       John R. Mercy
       Mercy, Carter, Tidwell, L.L.P.
       1724 Galleria Oaks Drive
       Texarkana, Texas 75503
       E-mail: jmercy@texarkanalawyers.com

       Coy Johnson
       E-mail: coy@clayjohnsonlaw.com
       Clay Johnson
       E-mail: clay@clayjohnsonlaw.coim
       Johnson Law Firm, P.C.
       609 Gilmer Street
       Sulphur Springs, Texas 75482
                                              /s/ J. Mark Sudderth
                                              J. Mark Sudderth

                          CERTIFICATE OF COMPLIANCE

       This document complies with the typeface requirements of T EX. R. A PP. P.
§ 9.4(e) because it has been prepared in a conventional typeface no smaller than
14-point for text and 12-point for footnotes.

       I certify that this brief was prepared with Corel WordPerfect X5, and that,
according to that program’s word-count function, the sections covered by T EX. R.
A PP. P. § 9.4(i)(1) contain 2,905 words, thus bringing the brief into compliance
with the word-count limitations of that Rule.

                                              /s/ J. Mark Sudderth
                                              J. Mark Sudderth




Cross-Appellant’s Brief - Page 15
                                  APPENDIX

A.   Final Judgment (CR:582)

B.   Order on Motion to Modify Judgment (SCR:5)

C.   Jury Charge and Verdict (CR:535)

D.   Tex. Fin. Code 304.104

E.   Petitioner’s Application for Investigative Depositions (CR:585)

F.   Plaintiff’s letter to trial court submitting proposed judgment (CR:584)

G.   Defendant’s Motion to Modify Judgment (CR:605)

H.   Plaintiff’s Response to Defendant’s Motion to Modify Judgment (CR:615)

I.   Bevers v. Soule (Tex. App.–Fort Worth 1995)

J.   Brookshire Grocery Co. v. Smith (Tex. App.–Beaumont 2003)

K.   Freedom Com., Inc. v. Coronado (Tex. 2012)

L.   Helena Chemical Co. v. Watkins (Tex. App.–San Antonio 2000)

M.   Hopkins v. Spring Indep. Sch. Dist. (Tex.1987)

N.   Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc. (Tex. 1998)

O.   K Mart Corp. v. Rhyne (Tex. App.–Texarkana 1996)

P.   MCN Energy v. Omagro de Colombia (Tex. App.–Fort Worth 2003)

Q.   Pringle v. Moon (Tex. App.–Fort Worth 2005)

R.   Quick v. City of Austin (Tex.1998)

S.   Robinson v. Brice (Tex. App.–Austin 1995)
T.   Tex. Dep't of Transp. v. Needham (Tex.2002)

U.   Toshiba Mach. Co. v. SPM Flow Control, Inc. (Tex. App.–Fort Worth 2005)

V.   TEX. R. EVID. 201

W.   TEX. CIV. PRAC. & REM. CODE § 101.101

X.   TEX. GOV. CODE § 311.011
A
[   ..
                                    •                                          •
         JOHN ALEXANDER SMITH,                          §
              PLAINTIFF                                 §
                                                        §
         V.                                             §
                                                        §
         CITY NATIONAL BANK OF                          §
         SULPHUR SPRINGS,                               §
              DEFENDANT                                 §               HOPKINS COUNTY, TEXAS

                                                FINAL JUDGMENT

                  On the I7"' day of November, 2014, this cause came on to be heard. Plaintiff JOHN

         ALEXANDER SMITH appeared in person and by his attorney of record and announced ready for

         trial, and Defendant CITY NATIONAL BANK OF SULPHUR SPRINGS appeared by its

         attorney of record and announced ready for trial. A jury having previously been demanded, a

         jury consisting of twelve (12) qualified jurors was duly empaneled and the case proceeded to

         trial.

                  At the conclusion of the evidence, the court submitted the questions of fact in the case

         to the jury. The charge of the court and the verdict of the jury are incorporated herein for all

         purposes by reference. Because it appears to the court that the verdict of the jury was for the

         Plaintiff against the Defendant, judgment should be rendered on the verdict in favor of the

         Plaintiff JOHN ALEXANDER SMITH and against Defendant CITY NATIONAL BANK OF

         SULPHUR SPRINGS.

                  It further appears to the Court that the amount of damages to be recovered by the Plaintiff

         should be reduced by $100,000 in accordance with TEX. CIV. PRAC. & REM. CODE§ 33.012(b).

                  IT IS THEREFORE ORDERED, ADJUDGED, and DECREED by the court that

         Plaintiff JOHN ALEXANDER SMITH have and recover compensatory damages - including



         Final Judgment- Page 1


                                                                                                        582
•"
                               •                                             •
     $400,000 in such damages found by the jury, reduced by $100,000 as referenced above. as

     well as pre-judgment interest on $300,000- from Defendant CITY NATIONAL BANK OF
                                             d>                                                   J(        .....
     SULPHUR SPRINGS, in the sum of               ~<-j S'{;).
                                                      1            )..f,r 'Tt>~\ c\.,...~.,    %:?:><t'-1, )ll;)..,
            IT IS FURTHER ORDERED, ADJUDGED, and DECREED by the court that Plaintiff

     JOHN ALEXANDER SMITH have and recover exemplary damages from Defendant CITY

     NATIONAL BANK OF SULPHUR SPRINGS in the sum of $500,000.00.

            IT IS FURTHER ORDERED that all costs of court spent or incurred in this cause are

     adjudged against Defendant CITY NATIONAL BANK OF SULPHUR SPRINGS.

            IT IS FURTHER ORDERED that the total amount of the judgment here rendered will

     bear interest at the rate of 5.00 percent from       'MJ rr   d-o (G(       until paid.

            All relief requested in this case and not expressly granted is denied. This judgment

     finally disposes of all parties and all claims and is appealable.

            All writs and processes for the enforcement and collection of this judgment or the costs

     of court may issue as necessary.



     SIGNED on     p         IS', 9...t"'(




     Final Judgment- Page 2
                                                                                                            583
B
                                             NO. CV40681

JOIIf\. ALLXANlJER SM ITII                                        IN THE DISTRICT ff9U~T     .      I   I



V.                                                                OF HOPK INS COUNTY. 'I I:AAS                     .·
CITY NATIONAL BA NK OF
SULPI IUR SPR INGS                                                62"1J J UDIClAL DISTRICT


                          OIW EI{ 0~ MOTION TO MOD IF Y .JUDGMENT

        On February 5. 2015. the Court considered Defendant City National Bank of Sulphur

Spring~·   Motion to Modify Judgmc.:nt Altc.:r cons1th.:ring the •notion und argumc.:nt of counsel. the

Court is of the opimon that tht: motion should be gra nt~;t.l.

        rr IS, Tll EREf-ORl. ORDERED thnt Dcl"cndant City National Hank of' Sulphtu Spnng•·.'
Motion to Mod ify is GRANTED.

        IT IS HJRTHI~ R ORD ER.ED thut the Court' s Judgment entered on Dct;embcr l ~. 20 14 i..,

modified to show that the proper amount of' prc.:judgment intt:rest awarded to Plaullll'f' 111thi~ ca.;~.:   1!-


Filly-four Thousand Two llundrcd l·nrty-thrcc Dollar., ($54.243.00).




                                                  WILl 1-JIARD . .luJge Presiding
C
'



                                          CAUSE NO. CV 40681

    JOHN ALEXANDER SMITH,                         §       IN THE DISTRICT COURT
    PLAINTIFF                                     §
                                                  §
    vs.                                           §                                                ,....,
                                                  §                                                =
                                                                                                   .r-
    CITY NATIONAL BANK OF                         §                                               z         ""ili
                                                                                                  0
    SULPHUR SPRINGS,                              §                                               <
                                                                                                  N         """""-
                                                                                                            ll'-'"'·
    DEFENDANT                                     §                                               C)        ~


                                      GENERAL INSTRUCTIONS
                                                                                                  -·o
                                                                                                  ::!::
                                                                                                            rn
                                                                                                  w
                                                                                                  .;::-
    LADIES AND GENTLEMEN OP THE JURY:                                                             U:J


           This case is submitted to you by asking questions about the facts, which you must decide

    from the evidence you have heard in this trial. You arc the sole judges of the credibility of the

    witnesses and the weight to be given their testimony, but in matters oflaw you must be governed

    by the instructions in this Charge.    In discharging your responsibility on this jury, you will

    observe all the instructions which have previously been given you.           I shall now give you

    additional instructions which you should carefully and strictly follow during your deliberations.

    I.     Do not let bias, prejudice or sympathy play any part in your deliberations.

    2.     In arriving at your answers, consider only the evidence introduced here under oath and

    such exhibits, if any, as have been introduced tor your consideration under the rulings of the Court;

    that is, what you have seen and heard in this courtroom, together with the law as given you by the

    Court. In your deliberations, you will not consider or discuss anything that is not represented by

    the evidence in this case.

    3.     Since every answer that is required by the Charge is important, no juror should state or




                                                                                                 Page I




                                                                                                  535
8.     The presiding juror or any other who observes a violation of the Court's instructions shall

immediately warn the juror who is violating the same and caution the juror not to do so again.

When words arc used in this charge in a sense that varies ti·om the meaning commonly understood,

you are given a proper legal definition, which you are bound to accept in place of any other

meaning.

9.     Answer "Yes" or "No" to all questions unless otherwise instructed. Unless otherwise

stated, a "Yes" answer must be based on a preponderance of the evidence. If you do not find that

a preponderance of the evidence supports a "Yes" answer, then answer "No".              The term

"preponderance of the evidence" means the greater weight and degree of credible testimony or

evidence introduced before you and admitted in this case. Whenever a question requires other

than a "Yes" or "No" answer, your answer must be based on a preponderance of the evidence.

10.    A fact may be established by direct evidence or by circumstantial evidence or both. A fact

is established by direct evidence when proved by documentary evidence or by witnesses who saw

the act done or heard the words spoken. A fact is established by circumstantial evidence when it

may be tairly and reasonably inferred trom other lacts proved.




                                                                                          Page3




                                                                                           536
consider that any required answer is not important.

4.      You must not decide who you think should win, and then try to answer the questions

accordingly. Simply answer the questions, and do not discuss nor concern yourselves with the

effect of your answers.
                                                                                                        \
5.      You will not decide the answer to a question by lot or by drawing straws, or by any other

method of chance.     Do not return a quotient verdict. A quotient verdict means that the jurors

agree to abide by the result to be reached by adding together each juror's figures and dividing by

the number of jurors to get an average. Do not do any trading on your answers; that is, one juror

should not agree to answer a certain question one way if others will agree to answer another

question another way.

6.     You may render your verdict upon the vote often or more members of the jury. The same

len or more of you must agree upon all of the answers made and to the entire verdict.       You will

not, therefore, enter into an agn:ement to be bound by a majority of any other vote of less than ten

jurors. If the verdict and all of the answers therein are reached by unanimous agreement, the

presiding juror shall sign fi.Jr the entire jury. If any juror disagrees as to any answer made by the

verdict, those jurors who agree to all findings shall each sign the verdict.

7.     These instructions are given you because your conduct is subject to review the same as that

of the witnesses, pmiies, attorneys and judge. I fit should be found that you have disregarded any

of these instructions, it will be jury misconduct and it may require another trial by another jury;

then all of our time will have been wasted.




                                                                                             Page 2




                                                                                              537
                                          QUESTION 1:

Did City National Bank of Sulphur Springs maliciously prosecute John Alexander Smith?

"Malicious prosecution" occurs when one person initiates or procures, with malice, and without
probable cause at the time the prosecution is commenced, the prosecution of an innocent person.

"Malice" means ill will, bad or evil motive, or such gross indifference to the rights of others as to
amount to a willli.ll or wanton act.

"Probable cause" means the existence of such facts and circumstances as would excite belief in a
person of reasonable mind, acting on the facts or circumstances within his knowledge at the time
the prosecution was commenced, that the other person was guilty of a criminal offense. The
probable cause determination asks whether a reasonable person would believe that a crime had
been committed given the facts as the complainant honestly and reasonably believed them to be
before the criminal proceedings were instituted.

A person procures a criminal prosecution if his actions were enough to cause the prosecution, and
but for his actions the prosecution would not have occurred. A person does not procure a criminal
prosecution when the decision whether to prosecute is Ieli to the discretion of another, including a
law enforcement oflicial or the grand jury, unless the person fails to fully and fairly disclose all
material information known to him or knowingly provides false information. A criminal
prosecution may be procured by more than one person.

You are instructed that the criminal olTensc of Hindering a Secured Creditor occurs when a debtor,
with intent to hinder enforcement of a lienholder's interest, destroys, removes, conceals,
encumbers, transfers out of the State of Texas, or otherwise harms or reduces the value of
collateral.

ln addition, the offense of Hindering a Secured Creditor occurs when a debtor who docs not have a
right to sell or dispose of the secured property, or who is required to account to the secured party
for the proceeds of a permitted sale or disposition, sells or otherwise disposes of the secured
property, or does not account to the secured party lor the proceeds of a sale or other disposition as
required, with intent to appropriate the proceeds or value of the secured property

The law does not outlaw retusal by the debtor to reveal the location of collateral, nor does it outlaw
the mere rctusal to deliver property upon demand. Nor does it make the debtor's concealment of
himscl fan offense.

       Answer "Yes" or "No."


       ANSWER: _ _         "1--'--"e....=S"------



                                                                                              rage 4
                                                                                              538
If you have answered "Yes" to Question I, answer Question 2.         Otherwise, do not answer
Question 2.

QUESTION 2:        What some of money, if paid now in cash, would fairly and reasonably
compensate John Alexander Smith for his injuries, if any, that resulted ti-om the occurrence in
question?

Consider the elements of damages listed below and none other. Consider each element separately.
Do not award any sum of money on any element if you have otherwise, under some other element,
awarded a sum of money for the same loss. That is, do not compensate twice for the same loss, if
any. Do not include interest on any amount of damages you tlnd.

Answer separately, in dollars and cents, for damages, if any.

a.     Physical pain and mental anguish.

       ANSWER:       $   \f{).OO()
                               '

b.     Injury to reputation.

       ANSWER:       $   8-5() ,('ffi




                                                                                        Page 5
                                                                                         539
Answer the following question only if you unanimously answered "Yes" to Question 1.
Otherwise, do not answer the following question.

To answer "Yes" to the following question, your answer must he unanimous. You may
answer "No" to the following question only upon a vote of ten or more jurors. Otherwise,
you must not answer the following question.

QUESTION 3:

Do you find by clear and convincing evidence that the harm to John Alexander Smith resulted
from malice?

"Clear and convincing evidence" means the measure or degree of proof that produces a firm belief
or conviction of the truth of the allegations sought to be established.

"Malice" means ill will, bad or evil motive, or such gross indifference to the rights of others as to
amount to a willful or wanton act.


Answer 11 Yes 11 or 11 N0. 11

         ANSWER:          "'tS




                                                                                             Page 6
                                                                                              540
Answer the following question only if you unanimously answered "Yes" to Question 3.
Otherwise, do not answer the following question.

QUESTION 4:

You are instructed that you must unanimously agree on the amount of any award of exemplary
damages.

What sum of money, if any, should be assessed against City National Bank of Sulphur Springs and
awarded to John Alexander Smith as exemplary damages for the conduct found in response to
Question 3?

"Exemplary damages" means any damages awarded as a penalty or by way of punishment but not
for compensatory purposes, Exemplary damages includes punitive damages.

       Factors to consider in awarding exemplary damages, if any, are-

       a.      The nature of the wrong.
       b.      The character of the conduct involved.
       c.      The degree of culpability of the wrongdoer.
       d.      The situation and sensibilities of the parties concerned.
       e.      The extent to which such conduct offends a public sense of justice and propriety.
       f.      The net worth of City National Bank of Sulphur Springs.

Answer in dollars and cents, if any.

ANSWER:      ~6;1) i.DDD




                                                                                          Page7
                                                                                           541
                                   SPECIAL INSTRUCTIONS

        After you retire to the jury room, you will select your own presiding juror. The first thing
the presiding juror will do is to have this complete charge read aloud and then you will deliberate
upon your answers to the questions asked.

       It is the duly of the presiding juror--

I.     to preside during your deliberations,

2.      to see that your deliberations are conducted in an orderly manner and in accordance with
the instructions in this charge,

3.     to write and hand to the bailiff any communications concerning the case that you desire to
have delivered to the Judge,

4.     to vote on the questions,

5.     to write your answers to the questions in the spaces provided,

6.     to certify to your verdict in the space provided for the presiding juror's signature or to
obtain the signatures of all the jurors who agree with the verdict if your verdict is less than
unammous.

        You should not discuss the case with anyone, not even with other members of the jury,
unless all of you are present and assembled in the jury room. Should anyone attempt to talk to
you about the case before the verdict is returned, whether at the courthouse, at your home, or
elsewhere, please inform the judge of this fact.

        When you have answered all the questions you are required to answer under the
instructions of the judge and your presiding juror has placed your answers in the space provided
and signed the verdict as presiding juror or obtained the signatures, you will inform the bailiff at
the door of the jury room that you have reached a verdict, and then you will return into the
courtroom with your verdict.




                                                                                             542
                                                                                            Page 8
                                     CERTJFICATENO. I

       We, the jury, have answered questions number 1 and number 2 as herein indicated, and
 herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)


                                               s~q_~
                                             PRESIDING JUROR


(To be signed by those rendering the verdict if not unanimous.)




                                                                                      Page9
                                                                                       543
                                     CERTIFICATE NO. 2

       We, the jury, have answered question number 3 as herein indicated, and
 herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)


                                             ~~~
                                             PRESIDING JUROR


(To be signed by those rendering the verdict if not unanimous.)




                                                                                 544
                                                                                Page 10
                                     CERTIFICATE NO. 3

      We, the jury, have unanimously answered question number 4 as herein indicated, and
herewith return same into court as our verdict.

(To be signed by the presiding juror if unanimous.)


                                           So,~~
                                             PRESIDING JUROR




                                                                                     Page II
                                                                                      545
D
                              V.T.C.A., Finance Code § 304.104

                         § 304.104. Accrual of Prejudgment Interest

Except as provided by Section 304.105 or 304.108, prejudgment interest accrues on the amount
of a judgment during the period beginning on the earlier of the 180th day after the date the
defendant receives written notice of a claim or the date the suit is filed and ending on the day
preceding the date judgment is rendered. Prejudgment interest is computed as simple interest and
does not compound.

Credits
Amended by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 1999.
E
..
                                  •                                            •
                                                                                                     "'
                                                                                                     '"'
                                                                                                     =
                                                                                                     =
                                                                                                     0
                                                                                                     0        ... 'l''?
                                                                                                     -j
                                                                                                              ,_
                                                                                                    0         I
     vs.                                                                                                      ~"'~
                                                                                                              z {: i
                                                                                                    ":::.:
                                                                                                    w         C.J
     CITY NATIONAL BANK OF                                                                          ..
     SULPHUR SPRINGS, TEXAS
     and .JERRY DEAN CONE

                              Defendants                     HOPKINS COUNTY, TEXAS


                PETITIONER'S APPLICATION FOR INVESTIGATIVF.DEPOSITIONS

     TO THE HONORABLE JUDGE OF SAID COURT:

            NOW COMES JOHN ALEXANDER SMITH, hereinafter called "Petitioner" complaining

     of" CITY NATIONAL BANK OF SULPHUR SPRINGS, TEXAS and JERRY DEAN CONE,

     hereinafter cal ltd "Respon<knL~" or "B'ank" or "Cone", and would respectfully show the Court as

     follows:

                                                        l.

     I.     Petitioner is a resident of Pflugerville, Trnvis County, Texas

     2.     Re,'Jlondent City National Bank of Sulphur Springs, Texas is a National Bank which has its

     principal place ofbusine.~s at 11 OB S. Broadway, Sulphur Springs, Tex.as 75482 and may be served

     by and through its President, Lee Teets at 1108 S. Broadway, Sulphur Springs, Texas 75482.

     3.         Re.,pcmdent Jerry Dean Cone re.,ides at 80! Kclli Cirde, Sulphur Springs, Texas 754R2

     where he may be served.

     4.         Venue is properly placed in Hopkins County, Texas because the intentional a<.:ts which form

     the basis for this application occuned in Hopkins County, Texas.


                                                                                                             585
..
                                   •                                                           •
     5.      Petitioner files this application under the tenns and provisions ofTexas Rules of Civil

     Procedure § 202.2(d)(2). Petitioner seeks io invt;siigate                   fl   potentia1 dain1 by Petitioner against

     Respondents.

                                                             ll.

     6.      The basis for U1is application is as fi1l!ows: On May 15, ?.005, City National Flank caused a

     criminal complaint to be filed against John Alexander Smith with the Hopkins County Disbicl

     Attorney's of1icc. The complaint alleged thai Petitioner hindered the bank, a secured creditor ir.

     violation of the Texas Penal Code § 32.:D, a felony.· The Bank claimed that Petitioner sold and

     disposed of a Toyota     ~60-12     needle embroidery machine that he had pledged to the bank to secure

     a promissory note. The Bank claimed that Petitioner disposed of the collalt:ral with an intent to

     misappropriate the proceeds and not tum over the proceeds to the Bank as required hy the tLT111S and

     provisions of documents he had signed in connection with                    hi~   loan with the Bank.

     7.      Subsequently, tb" Hopkins County District Attomey and th" Bank presented the complaint

     and their evidence to a Hopkin" County Grand Jury with n recommendation that it return an

     indictment against    P~tilioncr.    Petitioner was indicted for the felony offense of hindering a secured

     <.:rcditor, u violation of the Texns Penal Code. The bank, District Attomey, and the Grand JUly

     n:commendcd bail be sd in the amount of $10,000.00.

     8.      Petitioner was not advised of either the complaint filed against him hy lhe Bank, or the later

     indictment relumed by the Grand Jury. Petitioner                   he~ame    a criminal Defendant in a case styled:

     StCIIe ofTexas v.   John Alexander Smith pending in the R'" Judicial District Court ofHopkins County,

     Texas under cause number 06-1 HSG9.




                                                          Pi:IIIC   2                                                   586
                                    •                                             •
9..      When U1e CJiminal complaint against Petitioner was filed, a warrant for his arrest was issued.

Likewise, when he was indicted a warrant for Petitioner's arrest was issued. TI1e outstanding

                     I   .J '   1       '   I      1'   C:   '       }   '        '   }    r
warnmi.!; Wt;fC putceu m ttie stateWH.IC nrnilicatiGn sy:>tCili a1ertmg ccrta.m 1aw enfvrccment pcisons

that there was an outstanding wan·ant against Petitioner.

I 0.     On or about March 14, 2006, while on a fishing trip in Henderson County, Texas, Petitioner

was stopped by lhe Texas Dcpa11ment ofPuhlic Safety Highway Patrol at a routine driver's license

checkpoint. Though Petitioner's driver's license was verified on the State computer, the outstanding

warrant was displayed. Petitioner           wa~   immediately taken into custody with no explanation. He

spent ten days in jail in Athens, Henderson County, Texas, the county of his arrest. Later, he was

transferred to the Hopkins County Jail in Sulphur Springs, Texas, the venue of the criminal case.

Petitioner's bail on the alleged violation was set in the amount of SI 0,000. Petitioner was able to

post hail but was required to timely report to the District Cow1 each time the case was set for trial

or pre-trial   a~   a condition of his hail. Petitioner retained an attorney to represent him in the case.

The case was called for trial fourteen times. The Petitioner and his attorney tlppeared each time the

U!SC   was set for trial or pre-trial before the Court. Petitioner made approximately fifteen Com1

appearances. At each appearance, Petitioner pleaded not guilty, that he was ready for trial, and

demanded a trial. The State never announced ready for trial. Instead, the Slate advised the Judge

that the witnesses for the bank were not present and were not available, or that additional tim• was

needed to prepare the case.

11.      Finally, On January 3, 7.008, the Dislliet .I udge arlvised the District Attorney that the rase

against the Pelitioncrmust be disposed oftlwl day. This Disllict Attorney offered the Petitioner the

opportunity to plead guilty, which Petitioner refused to do. The Petitioner again announced that he

was not guilty and that he was ready            tor a jury trial. The District Attorney again claim en that no


                                                                                                            587
.   '

                                      •                                              •
        witnesses from the Batik could be produced, or that the Bank wished to discontinue the prosecution .
                       .-----· ···-
                                  ---~------....




        The same   qq~:J
                    ·-·
                         anuary 3, 200~,.tJe presiding Judge entered an order dismissing the prosecution and
                             ------ rei cased.
                       ··------
        ordered the Petitioner to  h~
                                        .-".




        12.     As a proximate result of the charges filed against him, Petitioner lost his security clearance

        and was ordered off of a construction site at Cupe Canaveral, Florida. Petitioner works as a project

        supervisor. Mosl of his work has to dl> with govenuncnt projects such us, missile installations,

        military housing, FEMA and the like. Being unaware of U1e charges, Petitioner was not able to

        contest or explain the charges until his later arrest and incarceration. Even after he learned of the

        charges, he was out of jail on bail and could not -leave the State until thtl Court finally dismissed the

        chnrgcs. All of the lime that Petitioner was under the effects of the criminul case, thtl Respondents

        kntlw he was not guilty of the criminal offense ofhindering a s~cured creditor.

        13.     W~ll   before Li)e complaining indictment was ftled, Ptltitioncr believes that the Bank and its

        officers, and employees knew that the      ~mhroidery   machine had been sold to a third-parly by one of

        the Bank officers. Petitioner believes that the officer who sold the machine concealed the sale from

        Petitioner, Petitioner's allomcy, and the District Attomey.

        14.     l'etilioncr alleges that the Respondents instigated criminal charges against him when they had

        no reasonable basis for doing so. As a result, he was charged with a setious criminal offense which

        resulted in his indictment and his incarceration. He lhen was required to face a Court and defend

        himself against all ch:•rp,es until the charges were tinnily dim1isscri in his favor. Petitioner alleges

        that he believes that he has grounds for a lawsuit under the doctrines     or false imprisuruncnt, false
        arrest, and malicious prosecution.

        15.     Petitioner desires to take the oral deposition of corporate representative.> of Respondents

        under TRCI' J99.2(b)( I). TI1e Court is asked to reljllire Respondents to produce a person or persons



                                                                                                               588
                           •                                             •
who are most knowledgeable about the following subjects:

        a.     The instance involving the alleged sale of the embroidery machine;

       b.      The iocaiion of the embroidery machine jusi immediaiuiy prior to its saie;

        c.     Any repossession of the embroidery machine by the Respondents;

       d.      The names of all employees of Respondents who had anything to do with the filing

               of charges against Petitioner; and

       c.      TI1e names of all persons, either employed by Respondents or to be acting on

               Respondents behalf who bud Hnything to do wiUJ the rL-possession and sale of the

               embroidery machine.

11\.   One of the persons whom Petitioner desires to depose is Jerry Dean Cone, a Respondent.

17.    Petitioner believes he has thoroughly investigated the incident which is the hasis for this

application as he.'t he can. However, he has not been able lo locale the person who allegedly

purchased the machine, nor records pertaining to the machines sale/purchase. It is Petitioner's belief

that Respondents are well aware that the persons employed by the Bank who have knowledge that

the embroidery machine was in fact repossessed by the Bank and sold by the.; Banlc Such facts arc

vital to Petitioners determining whether or not he will file a lawsuit against the Respondents.

                                                 III.

18.    Petitioner requests the Court to:

       a.      Set a hearing to tletennine this Motion;

       b.      f. or an Order granting the Motion which orders the taking of depositions of the

               corporation previously identified at a location urtlercd by the Court if not agreed

               upon by the parties.;




                                                l'ae-e)
                                                                                                   589
•

                    •                                            •
    c.   That a Subpoena be issued to Respondents requiring Respondents to produce all

         records which in any way pertain to the subject matter of U1is applicution; and

    d.   Such other rciicito which Petitioner may be entiiied.

                                       Respectfully suhmitted,

                                       CLARK, LEA & PORTER
                                       604 Woldert Street
                                       P. 0. Box 98




                                       State Bar No. 04274000

                                       Gregory S. Porter
                                       State Bar No. 24002785

                                       ATTORNEYS FOR PETI'l10NER




                                         Pac.c 6                                           590
F
NOTEBCIDM
-THE LAW FIRM-



     Hon. Will Biard, Judge
                                        •                November 25. 2014                    •                        Brian \\'. Butcher*
                                                                                                                       Thomas A. Herald
                                                                                                                       Charle~ .\1. ,\'oteboom*
                                                                                                                       J. ~lark Suddenh




                                                                                                    Fl~~o~
     62"' Judicial District Court
     PO Box 391
     Sulphur Springs, TX 75483                                                                          z
                                                                                                           :        <!: ~.
                                                                                                                 (/)--.;'
                                                                                                                               f"T1
                                                                                                                               (""")
                                                                                                                 g~;-
                                                                                                                 c:....:       U1        r
     Re:     Proposed Judgment: Cause No. CV40681: Smith v. City National Bank                                   =s·~· _
                                                                                                                       _..
                                                                                                                 :<;..,~
                                                                                                                               -u
                                                                                                                               3:
                                                                                                                                         rn
     Dear Judge Biard:                                                                                           --~~~
                                                                                                                 fT'-:oo
                                                                                                                                         0
                                                                                                                 ><
                                                                                                                 :P             J:_-
                                                                                                                 U>             N
     As requested by the Court. Plaintiff hereby submits the enclosed proposed judgment. The dollar amounts
     are calculated as follows:

     Actual damages found by the jury total $400,000.00. This amount is reduced by a credit of S I 00,000.00,
     which is the gross amount of PlaintifTs prior settlement with Defendant Charles Clark. Prejudgment
     interest is calculated on the remaining $300.000.00.

     Section 304.104 of the Texas Finance Code provides that prejudgment interest accrues beginning on the
      180'h day after the date a defendant receives written notice of a claim and ending the day before the
     judgment is signed. In this case, City National Bank was served with PlaintifTs "Application For
      Investigative Depositions·· which clearly and explicitly notified Defendant ofPiaintifTs claim. A copy is
     enclosed. In particular. paragraphs 6 through 14 of the application set out the factual bases of the claim,
     and paragraph 14 specifically alleges a claim for "malicious prosecution." A copy of the officer's return is
     also enclosed. showing the bank was served and thus received notice of such claim on October 24. 2008.

     One-hundred-and-eighty days after this date was April 22, 2009. From April 22, 2009, to Sunday,
     November 30, 2014. is 2048 days. At the annual rate of five percent. yearly interest on $300,000.00 is
     S 15.000.00. Dividing that amount by 365 days, the daily interest amount is $41.00 (rounded down).
     Multiplying $41.00 by 2048 days yields total prejudgment interest of $83,968.00 through November 30,
     2014. This is the amount included in the attached draft. which is prepared to be signed on ivlonday,
     December I. If the judgment is signed earlier or later. the amount should be adjusted up or down
     accordingly. at the rate of$41.00 per day. (I also enclose an extra copy of the proposed judgment with
     blanks for the compensatory damages total and the date post-judgment interest commences, in case it is
     signed on a different date.)

      In accordance with the verdict. the proposed judgment also includes punitive damages in the amount of
     $500.000.00. It also includes an award of all taxable court costs to Plaintiff and provides for post-
     judgment interest on the entire judgment at 5%.



     "i!P1~-------
     Ati~~y
     J. : (k Sudderth
              for Plaintiff
     State Bar No. 19461500

                                                                                                                                                  0
     JiviS/ms
     Enclosures

     cc: Coy Johnson (with enclosure)
              669Airpon Freeway. Suite tOO • HuN. Te.\as 76053-3698 • (817) .282-9700 • FAX (817) 282-8073 • www.noteboom.com
                              *Board Ceniiied in Personal injury Trial Law by the Te.\.a~ Board of Legal Specialization
                                                                                                                                584
G
                                          NO. CV40681

JOHN ALEXANDER Sl'v!ITH                           )
                                                  )
V.                                                )
                                                  )
CITY NATIONAL BANK OF                             )
SULPHUR SPRINGS                                   )          62N° JUDICIAL DISTRICT


                        CITY NATIONAL BANK OF SULPHUR SPRINGS'
                               MOTION TO MODIFY JUDGMENT

TO THE HONORABLE JUDGE OF SAID COURT:

       Comes now CITY NATIONAL BANK OF SULPHUR SPRINGS, Defendant. and asks this

Coun to modify the judgment entered on December 15,2014, and would show unto the Coun the

following:

                                                 I.

       Plaintiff, John Alexander Smith, sued Defendant, City National Bank of Sulphur Springs,

for malicious prosecution.

                                                 II.

       The case was tried to a jury beginning on November 17, 2014.

                                                Ill.

        The Coun signed a judgment on December 15,2014.

                                                IV.

       The Coun should modify the judgment because it is incorrect. The Coun has the power to

modi f)' the judgment as long as it retains plenary jurisdiction over the judgment. The Coun retains

plenary jurisdiction over the judgment in this case until January 14, 2015. (Upon the filing of

Defendant's Motion for New Trial that jurisdiction will be extended until March 16. 20 15).




                                                                                              605
                                                      v.
        The judgment is incorrect because it does not award the correct amount of prejudgment

interest.

                                                     VI.

        The Court's judgment awards prejudgment interest in the amount of $84,542.00. This

calculation was made upon Plaintiffs representation to the Court that interest should begin to accrue

on April 27, 2009. (See attached Exhibit "A"). Plaintiff claims that on October 24, 2008 Plaintiff

served an Application for Investigative Depositions upon the Defendant which constituted a claim

under Texas Finance Code§ 304.104. Section 304.104 provides that prejudgment interest accrues

on the amount of the judgment during the period beginning on the 180'h day after the date the

defendant receives written notice of a claim or on the date the suit is filed, whichever occurs first.

                                                     VII.

        The Court's miscalculation of prejudgment interest stems from the Plaintiffs belief that their

Application for Investigative Depositions constituted a "claim." The belief is not supported by the

case law. Typically the term "claim" describes a demand for compensation or an assertion of a right

to be paid. See Johnson & Higgins of Texas. Inc. v. Kenaco Energv. Inc., 962 S. W.2d 507. 531

(Tex. 1998); see also Robinson v. Brvce, 894 S. W.2d 525, 528 (Tex. App. -Austin 1995, writ

denied). The prejudgment interest statute does not have a definition of claim. Therefore, this Court

must be led by the object and purpose of the prejudgment interest statute. DeLeon v. Harlingen

Consol. lndep. School DisL 552 S. W.2d 922, 925 (Tex. Civ. App.- Corpus Christi 1977, no writ)

. The purpose of the prejudgment interest statute in addition to ensuring that plaintiffs are fully

compensated is to (I) encourage settlements, and (2) expedite senlements and trials by removing

incentives for defendants    to   delay. Johnson v. Higgins, 962 S.W.2d at 529. The purposes of the



City National Bank of Sulphur Springs: Afotion to Alodify Judgment- Page 2
                                                                                                606
statute are not served by determining that prejudgment accrues before the date the defendant receives

notice of the claim. Christus Health Gulf Coast v. CarswelL 433 3d 585,611 (Tex. 2013).

        To constitute a claim for purposes of the prejudgment statute there must be a demand for

payment or compensation. Brookshire Grocerv Co. v. Smith. 99 S.W.3d 819 (Tex. Civ. App.-

Beaumont 2003, pet. denied), citing Robinson, 894 S. W.2d at 528.                Here the Application for

Investigative Depositions contained no such demand for payment. Thereafter any claim was barred

by the statute of! imitations and no claim was made. The first time any demand for payment was

made upon Defendant was in PlaintifTs Second Amended Original Petition. In that amended

petition for the first time City National was made aware that a demand for payment was being made.

That amended petition was filed on May 2, 20 II. Prejudgment interest should have been calculated

from that date.

                                                          VIII.

        Properly calculated the prejudgment interest should run from the date that suit was filed

against Defendant. That date was !vlay 2, 20 II. Using that correct date under § 304.104 of the

Texas Finance Code as the starting date would allow the Court to award $54,243.00 as prejudgment

interest.

                                                           IX.

        For the above stated reasons, CITY NA T!ONAL BANK OF SULPHUR SPRINGS asks the

Court to grant this motion, and sign a corrected judgment that includes the correct amount of

prejudgment interest. and for such other and further relief to which it may show itself to be entitled.




City National Bank of Sulphur Springs: A1otion   10   AJodify Judgmenr- Page 3
                                                                                                   607
                                                      Respectfully submitted,




                                                                                 TIDWELL, L.L.P.
                                                                eria Oaks Drive
                                                      Texarkana, TX 75503
                                                      Telephone: (903) 794-9419
                                                      Facsimile: (903) 794-1268
                                                      E-mail: jmercv@tcxarkanalawvers.com


                                                      Coy Johnson
                                                      Texas State Bar No. 10698000
                                                      Clay Johnson
                                                      Texas State Bar No. 24007450
                                                      JOHNSON LAW FIRM, P.C.
                                                      609 Gilmer Street
                                                      Sulphur Springs, TX 75482-4121
                                                      Telephone: (903) 885-8866
                                                      Facsimile: (903) 584-1313

                                                      ATTORNEYS FOR DEFENDANT




City National Bank of Sulphur Springs: Alar ion to Alodifi.' Judgment- Page -1
                                                                                                   608
                                      CERTIFICATE OF SERVICE

          A true and correct copy of the foregoing Cily Nalianal Bank a/Sulphur Springs· Malian Ia
/vladijj' JudgmenT has been forwarded to:

        Mr. J. Mark Sudderth
        NOTEBOOM LAW FIR,\·1
        669 Airport Freeway
        Hurst TX 76053

Attorney for Plaintiff, this            day of January, 2015.




City National Bank of Sulphur Springs: Motion to Modif.• Judgment- Page 5
                                                                                            609
NOTEB®M
    Fl.i?M
 :·lfE tt..W
                                                                                                                                 Brbn W. Butcher"'"
                                                                                                                                 Ttv>.na.~   A. Hc:r.tld
                                                                November 25, 2014                                                C"harlc; M. No!~hOO:Xll~'
                                                                                                                                 J. M;1rk Sudllenh

       Hon. Will Biard. Judge
       62"' Judicial District Court
       PO Box 391                                                                                                                                 EXHIBIT
       Sulphur Springs, TX 75483

       Re:     Proposed Judgment: Cause No. CV40681; Smith v. City National Bank

       Dear Judge Biard:

       As requested by the Court, Plaintiff hereby submits the enclosed proposed judgment. The dollar amounts
       are calculated as follows:

       Actual damages found by the jury total $400,000.00. This amount is reduced by a credit of$100.000.00,
       which is the gross amount of Plaintiff's prior seUiement with Defendant Charles Clark. Prejudgment
       interest is calculated on the remaining $300,000.00.

       Section 304.104 of the Texas Finance Code provides that prejudgment interest accrues beginning on the
        180'h day after the date a defendant receives wrillen notice of a claim and ending the day before the
       judgment is signed. In this case, City National Bank was served with Plaintiff's "Application For
       Investigative Depositions'' which clearly and explicitly notified Defendant of Plaintiff's claim. A copy is
       enclosed. In particular, paragraphs 6through 14 of the application set out the factual bases of the claim,
       and paragraph 14 specifically alleges a claim for "malicious prosecution." A copy of the officer's return is
       also enclosed, showing the bank was served and thus received notice of such claim on October 24, 2008.

       One-hundred-and-eighty days after this date was April 22, 2009. From April22, 2009, to Sunday,
       November 30, 2014, is 2048 days. At the annual rate of five percent, yearly interest on $300,000.00 is
       $15,000.00. Dividing that amount by 365 days, the daily interest amount is $41.00 (rounded down).
       Multiplying $41.00 by 2048 days yields total prejudgment interest of$83,968.00 through November 30,
       2014. This is the amount included in the attached draft, which is prepared to be signed on Monday,
       December I. If the judgment is signed earlier or later, the amount should be adjusted up or down
       accordingly. at the rate of $41.00 per day. (I also enclose an extra copy of the proposed judgment with
       blanks for the compensatory damages total and the date post-judgment imerest commences, in case it is
       signed on a different date.)

       In accordance with the verdict, the proposed judgment also includes punitive damages in the amount of
       $500,000.00. It also includes an award of all taxable court costs to Plaintiff and provides for post-
       judgment interest on the entire judgment at 5%.




       At orney for Plaintiff
       State Bar No. 19461500

       JMS/ms
       Enclosures

       cc: Coy Johnson (with enclosure)
                &6~ Alrpo~   Frel"'Way. Sui;:c lt:O • Hur~t. Tcu~ 760.5.3-369& • (817) 282-9701 • FAX (317) 282-~073 • www.no(eCc.Jm.C!)m
                                     "'3oord Cerrified in Perwnal lnj'Jf~: Trial Law by ;:he Texa~ BoanJ oi Legal Specialization
                                                                                                                                                 610
H
                                                     I

      i


                                      •            CAUSE NO. CV-40681
                                                                                 •
          JOHN ALEXANDER SMITH                              §              IN THE DISTRICT COURT OF
          Plaintiff                                         §
                                                            §                                     ::;:
                                                                                                  0
          \',                                               §                                     -u          c.n
                                                                           HOPKINS COUNTY~'(E-XAih
          CITY NATIONAL BANK OF
          SULPHUR SPRINGS
          Defendant
                                                            §
                                                            §
                                                            §
                                                            §
                                                                                           (,/] -t ;o

                                                                                                 c~r
                                                                                                      c;:J
                                                                                                  c~:::J_..


                                                                                                 S....,-:1
                                                                           62"d JUDICIAL DISTRfE=T >
                                                                                                               1
                                                                                                              0"\      ,-m
                                                                                                 :..:~~       :%
                                                                                                 :;;st:g      C)       0
                                        PLAINTIFF'S RESPONSE TO DEFENDANT'S                                   w
                                             MOTION TO MODIFY JUDGMENT                                        -.J



                  Plaintiff, John Alexander Smith, files this objection and response to Defendant City National

          Bank of Sulphur Springs' Motion to Modify Judgment, and would respectfully show as follows:

                  This Court's Judgment properly awards pre-judgment interest beginning on April22, 2009,

          which is one-hundred-and-eighty days after October 24, 2008, the date Defendant received \\Titten

          notice of Plaintiffs claim.

                                     Plaintiff Provided Written Notice of His Claim

                  On October 24, 2008, City National Bank was served with Plaintiffs "Application For

          Investigative Depositions" 1 which clearly and explicitly notified Defendant of Plaintiffs claim for

          malicious prosecution. In particular, paragraphs 6 through 14 of the application set out the factual

          bases of the claim in detail - describing how the bank "caused a criminal complaint to be filed

          against John Alexander Smith," leading to Smith's arrest and indictment and proximately causing

          substantial damages, all while the bank "knew he was not guilty of the criminal offense of hindering

          a secured creditor"- and paragraph I 4 specifically notified the bank of Smith's claim for malicious

          prosecution, stating, "Petitioner alleges that he believes that he has grounds for a lawsuit. under the

          doctrines of false imprisonment. false arrest. and malicious prosecution."


                  1
                   A copy is attached as Exhibit A.


          P/aillfijj's Response to Defendant's Motion to Modify Judgment                                      Page I
                                                                                                              615
I',
                            •                                           •
         By detailing the facts, asserting that the bank's conduct had proximately caused damages,

and specifically stating that Smith had grounds to file a lawsuit against the bank for malicious

prosecution, this document clearly was sufficient to notify the bank of Smith's claim in such regard.

Having been apprised of such claim, the bank could have attempted to settle with Mr. Smith, had

it chosen to do so. Instead, the bank apparently chose to delay the investigation, hoping no suit

would be filed within the one-year statute of limitations.

                              No "Demand for Payment" Is Required

         Although the bank undeniably had notice of Smith's potential claim, Defendant's motion to

modi~·   the judgment asserts that, "to constitute a claim for purposes of the prejudgment interest

statute there must be a demand for payment or compensation." This is assertion is incorrect, and

contrary to the very authorities Defendant cites. Instead, as the case law explicitly states and holds,

either a demand for compensation or an assertion ofa right to be paid will suffice. No "demand"

is required (although a demand will certainly suffice), and no specific dollar figure or element of

damages need be mentioned.

         The Texas Supreme Court addressed this rule in Johnson & Higgins of Texas. Inc. v.

Kenneco Energy. Inc., 962 S. W.2d 507 (Tex. 1997), in which it held that a statute of limitations

tolling agreement constituted a written notice of claim sufficient to trigger pre-judgment interest.

The agreement merely stated:

         Kenneco asserts that. to the extent underwriters are found not to be liable ... , J & His liable
         to Kenneco for the amounts which Kenneco has claimed under the Policy 2

Although absolutely no "demand" for payment or compensation was made, the Court held this




         'Johnson, 962 S. W.2d at 531.




Plai1!1iff's Response to Defendam's Motion to Modif.r Judgment                                     Page 2
                                                                                                  616
                              •                                        •
language constituted a "claim" because it asserted a right to compensation. The Court stated the rule

that either a demand or an assertion of a right will suffice:

         We hold that the agreement constitutes "written notice of a claim." A "claim" is "a demand
         for compensation or an assertion of a right to be paid." See Robinson v. Brice, 894 S. W.2d
         525, 528 (Tex.App.-Austin 1995, writ denied) .... Through the standstill agreement J &
         H received written notice that Kenneco was claiming a right to compensation 3

         Defendant's motion cites Brookshire Groce!)' Co. v. Smith. 99 S. W.3d 819 (Tex.

App.-Beaumont2003, pet denied) in support of Defendant's assertion that "there must be a demand

for payment or compensation," but Brookshire actually confinns that either a demand or an assertion

of a right to be paid will suffice, stating, 'The term 'claim' describes a demand for compensation

or an assertion of a right to be paid." Brookshire. 99 S. W.3d at 824, citing Johnson, 962 S. W.2d

at 531 and Robinson v. Brice. 894 S. W.2d 525, 528 (Tex. App.- Austin 1995, writ denied).

        Defendant's motion also mis-cites Robinson v. Brice for the incorrect assertion that a

"demand" is required when in fact as recognized and cited by the Texas Supreme Court in Johnson.

Robinson actually held that simply asserting a right to compensation also constitutes a notice of

claim. The Robinson court explained:

        The statute does not define the term "claim," and therefore, we must construe it according
        to its ordinary meaning. Tex.Gov't Code Ann. § 312.002(a) (West 1988); Hopkins v. Spring
        Indep. Sch. Dist., 736 S. W.2d 617, 619 (Tex.l987). The word "claim" ordinarily means a
        demand for compensation or an assertion of a right to be paid.

         The accident report fails as written notice of a claim ... because it is not notice of a demand
        for compensation or an assertion of a right to be paid.'




        3
         Johnson, 962 S.W.2d at 531.

        'Robinson. 894 S.W.2d at 528 (emphasis added).




Plaillliff's Respouse to /Jefeudalll 's Motiou to Modif.r Judgmeut                                Pagel
                                                                                                  617
                             •                                       •
        In addition to these authorities, numerous other cases confirm that no demand for payment

is required in order for a writing to constitute a "claim" for purposes of pre-judgment interest. For

example, inK Man Corp. v. Rhyne, 932 S.W.2d 140 (Tex. App.-Texarkana 1996, no pet.), the

Texarkana Court of Appeals held that providing a medical release on a form which stated "this

information is to be used for the purposes of evaluating and handling my claim for injuries"

constituted sufficient \\Titten notice of a claim to start prejudgment interest, despite the fact that

absolutely no "demand" for compensation or payment was made 5

        In reaching this decision in K MarL the Texarkana Court of Appeals cited Bevers v. Soule.

909 S.W.2d 599 (Tex. App.-Fort Worth I995, no pet.) In Bevers. as inK Man and Johnson. no

demand for payment was made. Instead, the plaintiff simply sent a medical authorization along with

some medical receipts and a letter stating the authorization was enclosed "so that you could obtain

the necessary information to properly consider my injury claim." 6 The defendant argued the letter

was not a "claim" because it "did not state the nature of the complaint or the amount of damages

sought." but the court confirmed such is not required.'

        In contrast to these and numerous other authorities which confirm that either a demand for

payment or the assertion of a right to compensation will trigger pre-judgment interest, no authority

has been located- and Defendant's motion cites none- actually holding that a demand is required.

As discussed by the Texas Supreme Court in Johnson, the rule allowing for recovery of prejudgment



        'K Man. 932 S.W.2d at 146.
        6
            Bevers, 909 S.W.2d at 603.
        7
        /d. (noting that, "Nothing in [the prejudgment interest statute] requires the claimant to
demand an exact amount or list every element of damage claimed in order to trigger the notice of
claim provision.'')




Plaintiff's Response to Defendant's 1Hotion to 1Hodify Judgment                                Page4
                                                                                               618
                             •                                         •
interest in personal injury cases "was driven primarily by the rationale that awarding prejudgment

interest was necessary to fully compensate injured plaintiffs."' In addition, the prejudgment interest

rule seeks to encourage settlements and expedite both settlements and trials by removing incentives

for defendants to delay without creating such incentives for plaintiffs 9 "The purposes of awarding

prejudgment interest- full compensation to the plaintitT and expediting settlement and trial- are

not 'served by determining that prejudgment interest accrues before the date the defendant receives

notice, of the claim." 10 In this case, upon receipt of Plaintiffs application for depositions, the bank

not only had detailed notice of Plaintiffs claims, they actually retained counsel and engaged in

discussion and deposition scheduling with Plaintiffs counsel with regard to such claims. The bank

certainly had sufficient notice to takes steps to address and attempt to settle Plaintiffs claims to

avoid litigation, but never attempted to do so.

        Throughout the entire pendency of this litigation, the bank has repeatedly sought delay after

delay, while Plaintiffhas gone without any compensation. Prejudgment interest is necessary to fully

compensate Plaintiff, and this Court properly calculated it from a date six months after the bank

received \\Titten notice of Plaintiffs claim, as the statute expressly requires. The judgment is

proper, and Defendant's motion to modify it should be denied.




        'Johnson, 962 S. W.2d at 529.



        1
        °Christus Health Gulf Coast v. Carswell, 433 S. W.3d 585, 611 (Tex. App.-Houston [I"
Dist.]2014, pet. filed)




P/aillliff's Response to Defendant's Motion to Modijj• Judgme/11                                 Page5
                                                                                                  619
                               •                      PRAYER
                                                                               •
         WHEREFORE, PREMISES CONSIDERED, Plaintiff respectfully pray that Defendant's

motion be in all respects denied. Plaintiff prays for all other and further relief to which he may be

entitled.

                                                                 Respectfully submitted,




                                                                 S~e Bar No.   19461500

                                                                NOTEBOOM- THE LA \1' FIRM
                                                                669 Airport Freeway, Suite I 00
                                                                Hurst, Texas 76053
                                                                Telephone: (817) 282-9700
                                                                Facsimile: (817) 282-8073

                                                                A TTOR.t'\JEYS FOR PLAINTIFFS

                                       CERTIFICATE OF SERVICE

        I hereby certifY that on this 4'h day of February, 2015, in accordance with the Texas Rules
of Civil Procedure, a true and correct copy of the above and foregoing instrument was served upon
the following:

         Coy Johnson
         Clay Johnson
         Johnson Law Firm, P.C.
         609 Gilmer Street
         Sulphur Springs, TX 75482
         Facsimile 866-584-1313

         John R. Mercy
         Mercy, Carter, Tidwell, L.L.P.
         1724 Galleria Oaks Drive
         Texarkana, TX 75503
         Facsimile 903-794-1268                                        ·-~A--




Plaillliff's Re;po11se to Defe11da11t 's Motio11 to Mmlifr Judgmelll                              Page 6
                                                                                                  620
 •     •



Exhibit A




            621
                           •                                            •
                                                                                            "'
                                                                                            ""
                                                                                            =
                                                                                            =
                                                                                            0
                                                                                            _,
                                                                                            0       "'t1

vs.
                                                                                           0

                                                                                           -u
                                                                                           :r
                                                                                                    ·-¥11
                                                                                                    I



                                                                                           w        0
CITY NATIONAL BANK OF
SULPHUR SPRINGS, TEXAS
                                                                                           ..
and .JERRY DEAN CONE

                         Defendants                   HOPKINS COUNTY, TEXAS


           PETITIONER'S APPLICATION FOR JNVJ•:STIGATIVF..DEPOSITIONS

TO TilE HONORABLE JUDGE OF SAID COURT:

       NOW COMES JOHN ALEXANDERSMlTH, hereinaftcrealled "Pctitione,•• complaining

of CITY NATIONAL BANK OF SULPHUR SPRINGS, TEXAS and JERRY DEAN CONE.

hereinafter callt:d "RespomknL~" or "B'ank" or "Cone", and would respectfully show the Court as

follows:



l.     Petitioner is a resident of Pflugerville, Travis County, Texas

2.     Respondent City National Bank ofSulplmr Springs, Texas is a National Bank which has its

principal place of business at II OKS. Broadway, Sulphur Springs, Tex.as 75482 ant! may be served

by and through its !'resident, Lee Teets at l 108 S. Broadway, Sulphur Springs, Texas 75482.

3.         Respondent Jerry Dean Cone n'sides at 801 Kclli Circle, Sulphur Springs, Tex.as 75482

where he may be served.

4.     Venue is pmperly placed in Hopkins County, Texas because the intentional acts which form

the basis for this application occuned in Hopkins County, Texas.



                                                                                                   622
                         •                                             •
5.      Petitioner files this application under the tenns and provisions ofTexas Rules of Civil

Procedure § 202.2(d)(2). Petitioner sed<s io invtstig&te a potentia1 daiin by Petitioner against

Respondents.

                                                    ll.

6.      The basis for this application is as follows: On May 15, 7.005, City National Bank caused a

criminal complaint to be filed against John Alexander Smith with the Hopkins County Disbicl

Attorney's office. The complaint alleged that Petitioner hindered the bank, a secured creditor in

violation of the Texas Penal Code§ 32.33, a felony.· The Bank claimed that Petitioner sold and

disposed of a Toyota   ~60- 12   needle embroidery machine thai he had pledged to the bank to secure

a promissory note. The Bank claimed that Petitioner disposed of the collateral with an intent to

misappropriate the proceeds and not tum over the proceeds to the Bank as required hy the ILTI11s and

provisions of documents he had signed in connection with his Joan with the Bank.

7.      Subsequently, the Hopkins County District Attomey and the Uank presented the complaint

nnd their evidence to a Hopkins County Grand Jury with n recommendation that it return an

indictment against Petitioner. Petitioner was indicted for the felony offense ofhindm·ing a secured

creditor, u violation of the Texas Penal Code. The bank, District Attorney, and the Grand Juty

recommended bail be set in the amount of $10,000.00.

8.     Pctitiom:r was not advised of either the complaint filed against him hy the Bank, or the later

indictment returned by the Grand Jury. Petitioner be.camc a criminal Defendant in u      cas~   styled:

Swte ofTexas v. John Alexander Smith pending in the R'' Judicial District Court ofHopkinx County,

Texas under cnuse number 06-18569.




                                                 Pi:IJtC 2                                          623
                              •                                             •
9..      When U1e criminal complaint against Petitioner was filed, a warrant for his arrest was issued.

Likewise, when he was indicted a warTant for Petitioner's arrest was issued. l11e outstanding

warnmlli were placed in the statewide notification systcrn alerting certain law enfnrcemcnt pcison:;

that there was an outstanding wanant against Petitioner.

I 0.    On or about March 14, 2001i, while on a fishing trip in Henderson County, Texas, Petitioner

was stopped by ihe Texas Dcpa1tment of Public Safety Highway Patrol ala routine driver's license

checkpoint. Though Petitioner's driver's license was verified on U1e State computer, the outstanding

warrant was displayed.        Petition~r wa~   immediately taken into custody with no explanation. He

spent ten days in jail in Athens, Henderson County, Texas, the county of his arrest. Later, he was

transferred to the Harkins County Jail in Sulphur Sprin!,'S, Texas, the venue of the criminul case.

Petitioner's buil on the alleged violation was set in the amount of $10,000. Petitioner was able to

post hail but was required to timely report to the District Court each time the case was set for trial

or pre-trial   a~   a condition of his hail. Petitioner retained an attorney to represent him in the case.

The case was called for trial fourteen tinles. The Petitioner and his attorney appeared eacb time the

<;ase was set for trial nr pre-trial before the Court. Petitioner made approximately fifteen CoUI1

appearances. At each appearance, Petitioner pleaded not guilty, that he was ready for trial, and

demanded a trial. The State never announced ready for trial. Instead, the State advised the Judge

that the witnesses fi>r the bank were not present and were not available, or that additional time was

needed to prepare the case.

11.     Finally, Oo January 3, /.OOH, the Dislliet Judge advised the District Attorney that the case

against the Petitioner must be disposed ofthal day. This Disllicl Allomey offered the Petitioner the

opportunity to plead guilty, which Petitioner refused to do. The Petitioner again announced that he

wns not guilty and that he was ready tor a jury trial. The District Attorney again claimed that no



                                                                                                       624
                            •                                           •
witnesses from the Batik could be produced, or that the Bank wished to discontinue the prosecution.
                -----·· ··--·-------...

The same   q~;:·January 3, 200~,J)e presiding Judge entered an order dismissing the prosecution and
           ,._.         .--------
                ···-------
ordered the Petitioner to ht: wica"t:d.

12.     As a proximate result of the charges filed against him, Petitioner lost his security clearance

and was ordered off of a construction site at Cupe Canaveral, Florida. Petitioner works as a project

supervisor. Most of his work ha~ to do with govenunent projects such as, missile installations,

military housing, FEMA and the like. Being unaware of U1e charges, Petitioner was not able to

contest or explain the charge.' until his later arrest and incarceration. Even after he learned of the

charges, he was oul ofjail on bail and could not leave the State until the Court !in ally dismissed the

charges. All of the lime that Petitioner was under the cfftXt~ of the criminal case, the Respondents

knew he was not guilty of the criminal offense ofhindering a s~Xurcd creditor.

13.     Well before the complaining indictment was filed, Petitiontor believe.' that the Bank and its

nfficers, and employees knew !hat the embroidery machine had been sold to a third-party by one of

the Bank officers. Petitioner believes that the officer who sold the machine concealed the sale from

Petitioner, Petitioner's altomcy, and the District Attomey.

14.     l'etilioncralleges that the Respo11dcnts instigated criminal charges against hirn when they had

no reasomible basis for doing so. As a result, he was charged with a setious criminal offense which

resulted in his indictment and his incarceration. He then was required to face a Court and defend

himself against all chHrges until the charges were linnlly dimnisscrl in his favor. Petitioner alleges

that he believes that he has grounds for a lawsuit under the docllines of false imprisomucnt, false

arrest, and malicious prosecution.

15.    Petitioner desires to take the oral deposition of corporate representatives of R~spondents

under TRCI' 199 .2(b)( I). The Court is asked to relJuirc Respondents to produce a person or persons



                                                                                                    625
                         •                                                  •
who are most knowledgeable about the following subjects:

        a.     The instance involving the alleged sale of the embroidery machine;

       b.      The iocation of the embroidery muchine just immediaieiy prior to its saie;

        c.     Any repossession of the embroidery machine by the Respondents;

       d.      The names of all employees of Respondent~ whu had anything to do with the filing

               of charges against Petitioner; and

       c.      The names of all persons, either employed by Respondents or to be acting on

               Respondents behalf who had unything to do with the rqJOssession and sale of the

               embroidery machine.

1o.    One of the pernuns whom Petitiom:r de.~ ires to depose is Jerry Dean Cone, a Respondent.

17.    Petitioner believes he has thoroughly investigated the incident which is the hasis for this

application us best he can. However, he bas nut been ahle to locate the person who allegedly

purchased the machine, nor records pertaining to the machines sale/purchase. It is Petitioner's belief

that Respondents are well aware that the persons employed by the Bank who have knowledge that

lht: embroidery machine was in fact       repo~sessetl   by lhc Bank and wid by tht: Bank. Such facts arc

vital to l'etitioncrs determining whether or not he will file a lawsuit against the Respondents.

                                                     III.

18.    Petitioner requests the Court to:

       a.      Set a hearing to detennine this Motion;

       b.      l'or an Order granting the Motion which orders the taking of depositions of the

               corporation previously identified at a location ordered by the Court if not agreed

               upon by the parti t:.~.;




                                                                                                      626
              •                                                  •
c.   That a Subpoena be issued to Respondents requiring Respondents to produce all

     records which in any way pertain to the subject matter of this application; and

d.   Such other rciici to which Petitioner may be entiiicd.

                                   J<e.~pectfully   submitted,

                                   CLARK, LEA & PORTER
                                   604 Woldert Street
                                   P. 0. Box 98




                                   State Bar No. 04274000

                                   Gregory S. Porter
                                   State Bar No. 24002785

                                    ATTORNEYS FOR PETri10NER




                                     l'<lC.C   6                                       627
                                                    CAUSE NO.                                                    CV3 8 727
 THE STATE OF TEXAS:                                                                                                  ATTORNEY FOR PLAINTIFF OR DEFENDANT:
 PATRICIA DORNER - DISTRICT CLERK                                                                                                        CHARLES H CLI&i<        '"
                                                                                                                                                                 :5
 POST OPFICE BOX 391                                                                                                                     604 WOLDERT    ] 0 -, ; ;
 SULPHUR SPRINGS, TEXAS 75483                                                                                                            P. 0. BOX 98 o::-""· n                                 ~
                                                                                                                                         TYLER   TX    'W:'i:ilO --<
                                                                                                                                                                         n::O{=;     N
                                                                                                                                                                        ao-          .&:-       ~-
                  C I T A T I 0 N                                                 F 0 R                      P E R S 0 N A L                                       s   E ~~ I.,C
                                                                                                                                                                        :<~;:.!
                                                                                                                                                                                            Efll
        TO: CITY NATIONAL BANK OF SULPHUR
            SPRINGS REC ACT: LEE TEETS                                                                                                                                   . . "'-
                                                                                                                                                                        ~~s;
                                                                                                                                                                                     :1::
                                                                                                                                                                                     '>.'       o·.
            1108 S. BROADv1AY                                                                                                                                           >
            SULPHUR SPRINGS,TX 75482                                                                                                                                    V>

       DEFENDANT:
         ,    ¥ou are hereby CO~\manded to appear before the Honorable Judicial
       D1.stn.ct Court of Hopk1.ns County Texas, to be held at the courthouse
       of s~ig County,in the City of suiphur $P~ings• Hopktns,County, Texas,
       by f1.l1.ng a wr1.tten answer to the oet1.t1on or pla1nt1.ff      at or
       10 o'clock A.N. of the Monday next after the expiration or-zo days
       a~ter,the gate of     service hereof, a copy of which accompanies th1s
       c1.tat1.on, 1n Cause No.           CV38727.
       SNITH,JOHN ALEXANDER
                                                                                                                                                                                   AND

       Piled in said Court                                                                                                                            2008




                                                                                                                                                                                   COURT OF




came to hand ..~/ ··,:::'\----o'clock                                                        .N.,        ,on the                    :;-,??'-day of             /.'.::.·/;.:_~.,,..          ,   2_-J. ·
Ej~<J.:?e~address) /':1;;~'(_~_!?.=:~~-··' /~·--                                                                                               ~::~n :J:-~;&c;/ -~~unty
at f.,t1}7¥t o • clock/-· . M. on the~ '?-~'""" .day_. of ~ J::;l;£t.,{.'./                                                                                                  : y2 c-~;J.....- by
delivering to the with· n named     .._·,'/:ly~~y:-,;;iJ!iC/ ,;;;,,"'/'~                                                                                                -i_ee-Jee/) , in
person, a true copy of 114-4.~,-ff?.ztti a~~g~r together ~~=~~--accompanying copy of
                                        1
of the petition, havin first attachea-:nreh--Boipy>:t:>p ·~~(fh petition to such
copy .of         citatio~                  and         e       dorsed on such copy o£C'tt:-at-±o!F-the .ctate of deli very.
TOTAL SERVICE FEE $                                                               l::•::j·n!!( h:·. ·; r 1 .~::: . -:-;
                                                           -            ---                      ~· -    ..... ;Jf,f..;•-----~-,------...----------
                                                           -·---~·-~--                                                                               r· ···>
L5(: (c{':   }     1   ~,/·.,,J
                   . ,.,             /-;
                                                   /_r:?
                                                   ~L','\
                                                                                                        --------
                                                                                                                          ___        _/ l
                                                                                                                                            -·-...                     sheriff;const/PPS
                                                                                                                                                                       _c9un_!.y, Texas
j';~, (!                    '
                  2-.' '.]o ;>/ ./ ·
                                               I     •/    /7                                                       BY       ·4 ./ I ti.>A:· / . .
                                                                                                                           /sner'ihtoepues•/cciils.i:!PPs
                     'I~             f ,- ...--..i>f';:.,,. 7<'    ~-~?
                                                                                                                                    .~
                                                                                                                                .. J· k-
                                                                                                                                              I~;~
                                                                                                                                             , ') ,
/L!                 ,._..       f.      ~...          ·"          ...
                                                                           ·;;,
                                                                            J
                                                                        .....                                                   -
                                                                                                                                                  ?
                                                                                                                                            /,-.l(,:-a··
                                                                                                                                                     •P'
                                                                                                                                                         .,..,.,




                                                                                                                                                                                            628
I
Bevers v. Soule, 909 S.W.2d 599 (1995)




                                                                   [2]   Appeal and Error
                     909 S.W .2d 599                                        Total failure of proof
                 Court of Appeals of Texas,
                        Fort Worth.                                      No evidence point of error may only be sustained
                                                                         when record discloses that there is complete
              Lauren BEVERS, Appellant,                                  absence of evidence of vital fact, that court is
                         v.                                              barred by rules of law or evidence from giving
             Ronald B. SOULE, Appellee.                                  weight to only evidence offered to prove vital
           No. 2–94–160–CV. | Oct. 19, 1995.                             fact, that evidence offered to prove vital fact is no
                                                                         more than scintilla of evidence, or that evidence
                                                                         establishes conclusively opposite of vital fact.


M otorist who was involved in collision in which his                     Cases that cite this headnote
automobile was struck from behind brought action against
following driver, and the 96th District Court, Tarrant County,
Jeff W alker, J., entered judgment on jury verdict for motorist.
Following driver appealed, and the Court of Appeals,               [3]   Appeal and Error
Richards, J., held that: (1) finding that collision was                     Sufficiency of Evidence in Support
proximate cause of motorist's herniated disk was supported by            Appeal and Error
evidence; (2) letter sent by motorist to following driver's                 Total failure of proof
insurer was sufficient to constitute notice of claim and
allowed accrual of prejudgment interest beginning 180 days               There is some evidence to support finding, and no
after receipt of letter; but (3) judgment would be reformed to           evidence point of error must be denied, when
reflect simple compounding of prejudgment interest and                   proof supplies reasonable basis on which
annual compounding of postjudgment interest.                             reasonable minds may reach different conclusions
                                                                         about existence of vital fact.

Affirmed as reformed.
                                                                         Cases that cite this headnote


W est Headnotes (12)
                                                                   [4]   Appeal and Error
                                                                             Sufficiency of Evidence in Support
[1]     Appeal and Error                                                 Appeal and Error
           Interrogatories and special verdicts                              Great or overwhelming weight or
        Appeal and Error                                                 preponderance
           Sufficiency of Evidence in Support
                                                                         Assertion that evidence is insufficient to support
        In determining no evidence point, reviewing court                fact finding can mean that evidence supporting
        is to consider only evidence and inferences that                 finding is so weak or that evidence to contrary is
        tend to support finding and disregard all evidence               so overwhelming that finding should be set aside
        and inferences to contrary; if there is more than                and new trial ordered.
        scintilla of evidence to support finding, claim is
        sufficient as matter of law, and any challenges go
        merely to weight to be accorded evidence.                        Cases that cite this headnote


        1 Cases that cite this headnote




                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             1
Bevers v. Soule, 909 S.W.2d 599 (1995)




[5]    Appeal and Error                                       [8]    Interest
          Extent of Review                                               Form and sufficiency of demand
       Appeal and Error
          Form and requisites                                        Nothing in statute governing accrual of
                                                                     prejudgment interest in personal injury cases
       Reviewing court is required to consider all                   requires claimant to demand exact amount or list
       evidence in case in making determination of                   every element of damage claimed in order to
       whether evidence is insufficient to support factual           trigger notice of claim provision. Vernon's
       finding, and if reversing to detail that evidence in          Ann.Texas Civ.St. art. 5069–1.05, § 6(a).
       opinion.

                                                                     4 Cases that cite this headnote
       Cases that cite this headnote


                                                              [9]    Interest
[6]    Damages                                                           Form and sufficiency of demand
          Personal Injuries and Physical Suffering
                                                                     Letter sent by motorist who was injured in
       Finding that collision in which motorist's                    automobile accident to insurance carrier of
       automobile was struck from behind by following                second driver involved was sufficient to constitute
       vehicle was proximate cause of motorist's                     notice of claim, and prejudgment interest began
       herniated disk was supported by testimony of                  accruing 180 days after receipt of letter, where
       following driver that her speed was in range of 25            letter contained information to allow insurer to
       to 30 miles per hour and that collision was “fairly           begin considering motorist's injury claim and
       hard,” by testimony of motorist that prior to                 included signed copy of medical authorization
       accident he had only suffered very minor back                 form, even though letter did not state nature of
       problems which had gone away, and by evidence                 complaint and amount of damages sought.
       that U-bolt on motorist's automobile was damaged              Vernon's Ann.Texas Civ.St. art. 5069–1.05, §
       as result of collision and that employment                    6(a).
       examination of motorist one year prior to accident
       had revealed no back problems.
                                                                     5 Cases that cite this headnote

       Cases that cite this headnote

                                                              [10]   Interest
                                                                         Mode of computation in general
[7]    Antitrust and Trade Regulation
           Notice and demand requirements;                           Legislature has specifically mandated that
       opportunity to cure                                           prejudgment interest in wrongful death, personal
                                                                     injury, property damage, and condemnation cases
       Notice provisions of Texas Deceptive Trade                    be computed only as simple interest. Vernon's
       Practices Act require potential plaintiff to first            Ann.Texas Civ.St. art. 5069–1.05, § 6(g).
       identify nature of complaint and amount required
       to compensate him for his damages. V.T.C.A.,
       Bus. & C. § 17.505(a).                                        Cases that cite this headnote


       Cases that cite this headnote




                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                         2
Bevers v. Soule, 909 S.W.2d 599 (1995)




[11]    Interest
            Mode of computation in general
        Interest
            Compound interest                                 RICHARDS, Justice.

        Judgment in favor of successful litigant in           This appeal is from a personal injury case involving an
        personal injury action should reflect two             automobile accident. Appellant Lauren Bevers (“Bevers”) was
        calculations with respect to interest; calculation    the defendant in the trial court. Appellee Ronald Soule
        for prejudgment interest on plaintiff's damages at    (“Soule”), plaintiff in the court below, alleged he suffered
        applicable interest rate, computed as simple          physical injuries caused by Bevers' negligence when her
        interest, and postjudgment interest on total sum at   vehicle struck his vehicle in a rear-end collision. Trial was to
        applicable interest rate, compounded annually,        a jury, which awarded Soule $187,500.00.
        and beginning on date judgment is signed and
        until judgment is satisfied. Vernon's Ann.Texas
        Civ.St. art. 5069–1.05, §§ 3(a), 6(g).
                                                              Bevers presents three points of error on appeal. In point of
                                                              error one, she complains there was no evidence, or, in the
        Cases that cite this headnote                         alternative, insufficient evidence to support the jury's finding
                                                              the accident was the proximate cause of Soule's injuries. In
                                                              point of error two, she contends the trial court erred in
                                                              ordering that prejudgment interest accrue on the date Soule
[12]    Interest                                              first contacted her, rather than on the date suit was filed. In her
            Compound interest                                 third point of error, Bevers contends the trial court erred in
                                                              ordering that prejudgment interest be compounded annually
        Trial court erred in entering judgment in personal    rather than as simple interest.
        injury action which included prejudgment interest
        award which was based on annual compounding
        of interest; judgment was reformed to reflect         W e affirm in part and reform in part.
        calculation of prejudgment interest based on
        simple compounding, with postjudgment interest
        on judgment amount to be compounded annually.         The sufficiency challenge presented in Bevers' initial point of
        Vernon's Ann.Texas Civ.St. art. 5069–1.05, §§         error requires review of the circumstances of the collision and
        3(a), 6(g).                                           the testimony relating to Soule's physical injuries.


        1 Cases that cite this headnote                       On the morning of August 21, 1990, Soule was traveling to
                                                              work in his American M otor Company Concord on Interstate
                                                              Highway 35 near downtown Fort W orth. Because of heavy
                                                              rush-hour traffic, he slowed down and ultimately came to a
                                                              complete stop due to bumper-to-bumper congestion. W hen he
                                                              looked into his rear-view mirror, Soule saw a Chevrolet
Attorneys and Law Firms                                       Camaro approaching from behind at a speed suggesting the
                                                              driver did not intend to stop. Soule initially estimated the
*600 John J. Drake, Shannon, Gracey, Ratliff & Miller, LLP,   speed of the Camaro at forty to fifty m.p.h., but later testified
Fort W orth, for appellant.                                   it may have been moving “something less than that.” Because
                                                              he expected the collision would throw his body forward, Soule
Leland A. Reinhard, Catterton & Reinhard, Fort W orth, for    braced himself for the impact. The Camaro, driven by Bevers,
appellee.                                                     struck *601 Soule's car with enough force to cause his vehicle
Before DAY, DAUPHINOT and RICHARDS, JJ.                       to strike the car previously stopped six feet in front of him.
                                                              The force of the rear-end collision, contrary to Soule's initial
                                                              expectation, forced his body back into the seat. He was then
                                                              thrown forward by the secondary collision with the third car,
                         OPINION                              but was partially restrained by his seat belt.



                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            3
Bevers v. Soule, 909 S.W.2d 599 (1995)




It appeared the collision caused only moderate damage to           took medication for two weeks and never had another
Soule's Concord; however, after Soule's wife told him that the     symptom from either injury since that time. Soule also testified
rear end of the car did not appear to be properly following its    that in July of 1989, he had applied for a job with American
front end, it was discovered that the impact had damaged the       Airlines and had undergone a complete physical that included
U–Bolt, which had to be replaced.                                  range of motion tests to diagnose any spine problems. No back
                                                                   problems were found and the airline's doctor found Soule's
                                                                   skeletal system to be “normal.”
Initially, Soule did not believe he had been injured. Following
the accident, he drove his wrecked vehicle through still-heavy
traffic approximately four miles to his office. At about the       [1] In determining a “no evidence” point, we are to consider
time he arrived at his office, he began experiencing pain in his   only the evidence and inferences that tend to support the
right calf and foot. Thinking the pain might go away, Soule        finding and disregard all evidence and inferences to the
continued to work; however, instead of improving, the pain in      contrary. T.O. Stanley Boot Co. v. Bank of El Paso, 847
his right leg grew progressively worse. Later in the day, Soule    S.W .2d 218, 221 (Tex.1992); Orozco v. Sander, 824 S.W .2d
felt a “kind of tightness” in his back that was not initially      555, 556 (Tex.1992); In re King's Estate, 150 Tex. 662, 244
painful. Soule treated the tightness with Tylenol and made an      S.W .2d 660, 661–62 (1951). If there is more than a scintilla of
appointment with the Northeast Medical Clinic, where his           such evidence to support the finding, the claim is sufficient as
family doctor of fifteen years, Dr. David Law, was associated.     a matter of law, and any challenges go merely to the weight to
Because Dr. Law's schedule would not have permitted Soule          be accorded the evidence. Browning–Ferris, Inc. v. Reyna,
to see him for a week, Soule made an appointment with              865 S.W .2d 925, 928 (Tex.1993).
another associate, Dr. Tyson, for August 24, 1990.

                                                                   [2] [3] A “no evidence” point of error may only be sustained
Dr. Tyson ordered a series of x-rays and prescribed                when the record discloses one of the following: (1) a complete
anti-inflammation and pain medication. Six days later Soule        absence of evidence of a vital fact; (2) the court is barred by
saw Dr. Law, who continued with the same medical treatment         rules of law or evidence from giving weight to the only
on an approximately once-a-month basis for three months.           evidence offered to prove a vital fact; (3) the evidence offered
Thereafter, Dr. Law referred Soule to Dr. Juan Capello, an         to *602 prove a vital fact is no more than a mere scintilla of
orthopedic surgeon.                                                evidence; or (4) the evidence establishes conclusively the
                                                                   opposite of a vital fact. Juliette Fowler Homes, Inc. v. Welch
                                                                   Assoc., Inc., 793 S.W .2d 660, 666 n. 9 (Tex.1990); Robert W .
Dr. Capello prescribed medications and suggested a                 Calvert, “No Evidence” and “Insufficient Evidence” Points of
four-month course of physical therapy; however, Soule              Error, 38 TEX. L. REV. 361 (1960). There is some evidence
continued having pain in his lower back and right leg.             when the proof supplies a reasonable basis on which
According to Soule, Dr. Capello did not believe there would        reasonable minds may reach different conclusions about the
be any further improvement and suggested that he simply learn      existence of the vital fact. Orozco, 824 S.W .2d at 556.
to “live with” his injury. W hen the pain seemed to grow worse,
Soule saw another orthopedic surgeon, Dr. Myron Glickfeld,
who diagnosed the injury as a herniated disc which required        [4] [5] An assertion that the evidence is “insufficient” to
surgery. Soule testified that he did not initially agree to        support a fact finding can mean that the evidence supporting
surgery because a high school friend had become paralyzed          the finding is so weak or the evidence to the contrary is so
from the chest down as a result of nerve damage. Because of        overwhelming that the finding should be set aside and a new
his fear of nerve damage, Soule tried to control the pain with     trial ordered. Garza v. Alviar, 395 S.W .2d 821, 823
medications for the next eight months. W hen the pain got          (Tex.1965). W e are required to consider all of the evidence in
worse, Soule relented and was operated on by Dr. Glickfeld on      the case in making this determination and, if reversing, to
August 19, 1992. Soule testified the surgery helped, but did       detail that evidence in the opinion. Jaffe Aircraft Corp. v.
not completely eliminate the pain.                                 Carr, 867 S.W .2d 27, 29 (Tex.1993).


Soule testified the only prior back symptoms he had ever           [6] W e find the evidence to be legally sufficient to support the
experienced were two muscle pulls which occurred over two          jury's determination that the automobile accident was the
years prior to the auto accident. One was a muscle pull in the     proximate cause of Soule's injuries. M oreover, we are
area of his abdomen from stretching and the other was “minor”      convinced the jury's finding concerning the issue of causation,
pull in the back immediately behind the abdomen injury. He         in light of the entire record, should not be overturned for


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                              4
Bevers v. Soule, 909 S.W.2d 599 (1995)




factual insufficiency.                                               disc, we cannot conclude the evidence was either legally or
                                                                     factually insufficient to support the jury's determination the
                                                                     auto accident was the proximate cause of Soule's injury. The
Bevers suggests three reasons why we should find the                 overall impression left upon review of the entire record is that
evidence factually insufficient: (1) the only evidence of            both sides were represented at trial by skilled and
causation was Dr. Glickfeld's opinion, which was based on the        well-prepared *603 counsel who provided the jury with
incorrect assumption that appellant's vehicle was traveling          sufficient evidence to justify special issue answers favoring
approximately fifty m.p.h. when she struck Soule; (2) her own        either party.
expert, Dr. Charles Hatsell, testified that Bevers was traveling
only fourteen to sixteen m.p.h. when she struck Soule, causing
a “very minor” accident that could not have caused Soule's           Point of error one is overruled.
herniated disc; and (3) several other factors could have caused
Soule's injuries: a previous fall from a ladder, an injury where
a piano fell on him, and a jump from a high location.                In her second point of error, Bevers contends the trial court
                                                                     erred in ordering that prejudgment interest begin on April 28,
                                                                     1991, the 180th day following Soule's return of a signed
Our review of the record shows each of Bevers' concerns              medical authorization form and claim letter to Bevers'
involved contested issues presumably weighed by the jurors           insurance carrier, rather than on the date Soule filed suit.
during their deliberations. For example, Soule's testimony at
trial established a rational explanation why these prior injuries
could not have contributed to his herniated disc. Soule              Texas law allows for the accrual of prejudgment interest in
testified the piano injury occurred when a piano fell on him         personal injury cases as follows:
while being moved and that the injury was not to his back.
Similarly, Soule explained his fall from the ladder caused only            [P]rejudgment interest accrues on the amount
a leg and head injury. The final incident involved a muscle in             of the judgment during the period beginning
his abdomen and a muscle in his lower back, injuries that were             on the 180th day after the date the defendant
fully healed two years prior to the automobile accident.                   receives notice of the claim or on the day suit
Bevers' theory that the proximate cause of the herniated disc              is filed, whichever occurs first, and ending on
was not the auto accident was also rebutted by evidence that               the date preceding the date judgment is
a complete physical conducted by American Airlines shortly                 entered.
before the automobile accident revealed no damage to Soule's
skeletal system.                                                     Tex.Rev.Civ.Stat.Ann. art. 5069–1.05, § 6(a)
                                                                     (Vernon Supp.1995).

Dr. Hatsell's opinion that Bevers' vehicle was traveling at a
speed of only fourteen to sixteen m.p.h. was also contested.
Bevers herself estimated her car was traveling between               Bevers asks us to interpret “notice of claim” so as to
twenty-five and thirty m.p.h. at the time she saw Soule's car        require notice of the amount of damages sought as
approximately one car length ahead. W hat Dr. Hatsell                well as notice of the nature of the complaint. Bevers
surmised was a “very minor collision” Bevers recalled as             notes that Soule's earliest written correspondence
being “fairly hard.” Moreover, Dr. Hatsell's conclusion as to        with her insurance carrier was an October 30, 1990
the speed of Bevers' vehicle did not take into account the           letter written by Soule to Don Young, a claim
broken U–Bolt on Soule's Concord. Hatsell's estimate of the          specialist at State Farm Mutual Insurance Company.
speed of Bevers' car was based on his review of photographs          In pertinent part, the letter stated:
provided by Bevers' attorney and initial body shop estimates
of the property damage. Dr. Hatsell never examined Soule and         Re: Claim No.: 43–7080–020
never saw the damage to Soule's U–Bolt. Moreover, Soule's
expert, Dr. Glickfeld, did not testify that Soule's injuries could   Insured: Roy D. Bevers
have only been caused by a fifty m.p.h. collision.

                                                                     De[a]r Mr. Young:
Based on the above testimony, the medical records, and
Soule's lay witness testimony that provided a logically
traceable connection between the accident and his herniated          I enclose for your files one (1) signed copy of the

                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                              5
Bevers v. Soule, 909 S.W.2d 599 (1995)




“Authorization” you sent me so that you could                 compounded annually rather than as simple interest.
obtain the necessary information to properly                  Regarding prejudgment interest, Texas law provides
consider my injury claim.                                     that “the rate of pre-judgment interest shall be the
                                                              same as the rate of post-judgment interest at the time
                                                              of judgment and shall be computed as simple
I also enclose for your processing copies of some of          interest.” Tex.Rev.Civ.Stat.Ann. art. 5069–1.05, §
the medical receipts relative to my injury. As you            6(g) (Vernon Supp.1995) (emphasis added).
will note, I am now seeing an orthopedist, Juan J.
Capello, M.D. I am about to start a program of
physical therapy.                                             [10] In providing that judgments in wrongful deaths,
                                                              personal injury, property damage, and condemnation
                                                              cases be computed only as simple interest, the
Should you require any additional information,                legislature has specially mandated that prejudgment
please let me know. My office number is [number               interest in these types of cases must be computed as
listed].                                                      simple interest. Enterprise–Laredo Assoc. v.
                                                              Hachars Inc., 839 S.W .2d 822, 839 (Tex.App.— San
                                                              Antonio 1992, writ denied); see also *604 Transport
Sincerely,                                                    Ins. Co. v. Faircloth, 861 S.W .2d 926, 941–42
                                                              (Tex.App.— Beaumont 1993) (prejudgment interest
                                                              in personal injury claim should have been calculated
/s/ Ronald B. Soule                                           as simple interest under the statute, rather than
                                                              ordered compounded annually), rev'd on other
                                                              grounds, 898 S.W .2d 269 (Tex.1995).

[7] Under Bevers' view, because the letter did not
state the nature of the complaint or the amount of            The trial court's written judgment in the instant case,
damages sought, the earliest date prejudgment                 in part, provided that the prejudgment interest be
interest could have been ordered to run was the date          compounded annually:
Soule filed suit. Bevers correctly notes that the
notice provisions of the Texas Deceptive Trade                      Prejudgment interest on [Soule's] damages of
Practice Act require a potential plaintiff to first                 $187,500.00 at the rate of 10% per annum,
identify the nature of the complaint and the amount                 compounded annually, from April 28, 1991 to
required to compensate him for his damages.                         the date this judgment is signed in the amount
Tex.Bus. & Comm.Code Ann. § 17.505(a) (Vernon                       of $58,955.40.
Supp.1995).

                                                              Soule urges us to uphold the trial court's judgment,
[8] [9] In response, Soule notes his cause of action          based on the following language from the Texarkana
was not brought under the Deceptive Trade Practices           Court of Appeals:
Act, and suggests Bevers' complaint would be better
addressed to the legislature. W e agree. Nothing in           The current version of Article 5069–1.05, § 6(g)
article 5069–1.05 requires the claimant to demand             provides that “[t]he rate of prejudgment interest shall
an exact amount or list every element of damage               be the same as the rate of postjudgment interest at
claimed in order to trigger the notice of claim               the time of judgment and shall be computed as
provision. See Robinson v. Brice, 894 S.W .2d 525,            simple interest.” T ex.Rev.Civ.Stat.Ann. art.
528 (Tex.App.— Austin 1995, writ denied).                     5069–1.05, § 6(g) (Vernon Supp.1991). Section 3(a)
Therefore, the trial court's determination that written       provides that “judgments earn interest for the period
notice of the claim was triggered by Soule's letter           beginning on the day the judgment is rendered and
and the signed medical authorization form was not             ending on the day the judgment is satisfied. Interest
improper.                                                     shall be compounded annually” (emphasis added).

                                                              Sadler v. Duvall, 815 S.W .2d 285,                294
In her final point of error Bevers argues the trial           (Tex.App.— Texarkana 1991, writ denied).
court erred in ordering that prejudgment interest be


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    6
Bevers v. Soule, 909 S.W.2d 599 (1995)




The Sadler court went on to reform the trial court's
judgment “so that prejudgment interest is
compounded annually as provided under the statute.”
Id.


W e believe the Sadler holding is based on a
misinterpretation of the statute. The reference to
annual compounding in section 3(a) concerns
postjudgment compounding, i.e., the annual
compounding of interest for the period beginning on
the day the judgment is rendered and ending the day
the judgment is satisfied. Prejudgment interest, on
the other hand, is governed by section 6(g) of the
same article. It provides that prejudgment interest be
computed as simple interest at the same percentage
rate as postjudgment interest.


[11] Therefore, a proper judgment in favor of a
successful litigant in a personal injury cause of
action should reflect two calculations: (1)
prejudgment interest on plaintiff's damages at the
applicable interest rate, computed as simple interest;
and (2) postjudgment interest on the total sum at the
applicable interest rate, compounded annually,
beginning the date judgment is signed until the
judgment is satisfied. Tex.Rev.Civ.Stat.Ann. art.
5069–1.05, §§ 3(a), 6(g) (Vernon Supp.1995).


[12] The judgment is reformed to reflect that
prejudgment interest is reduced from $58,955.40 to
$55,890.41. Thus, the judgment is further reformed
so postjudgment interest is calculated on the total
sum of $243,390.41 ($187,500.00 damages +
$55,890.41 prejudgment interest), from March 5,
1994, the date judgment was signed, until such day
the judgment is satisfied.


As reformed, the judgment is affirmed.




End of Document                                               © 2014 Thomson Reuters. No claim to original U.S. Government Works.




                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           7
J
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




                                                                   [2]   Venue
                      99 S.W .3d 819                                         Form and Requisites of Application in
                 Court of Appeals of Texas,                              General
                        Beaumont.
                                                                         Depending on the state of the record at the time of
  BROOKSHIRE GROCERY COMPANY, Appellant,                                 the filing of a nonsuit, if an objection to venue has
                        v.                                               been filed and the plaintiff then takes a nonsuit
          Robert Elton SMITH, Appellee.                                  and has not specifically denied the venue facts
   No. 09–02–226 CV. | Submitted Jan. 8, 2003. |                         averred by the party seeking transfer, the venue
             Decided Feb. 20, 2003.                                      facts alleged in the motion to transfer may be
                                                                         taken as true.


                                                                         Cases that cite this headnote
Employee who was allegedly injured while working brought
negligence action against former employer and subsequent
employer. After employee nonsuited subsequent employer,
the 88th District Court, Hardin County, Earl B. Stover, III, J.,   [3]   Venue
entered judgment on a jury verdict for employee. Former                     Particular Actions, Application To
employer appealed. The Court of Appeals held that: (1) under
prior version of venue statute, venue was proper in                      Subsequent employer was properly joined as a
subsequent employer's county; (2) employee waived improper               defendant in negligence action by employee
joinder of parties argument by failing to object to joinder or           against former employer for injuries sustained
request severance; (3) any error in exclusion of impeachment             while working, and was not joined solely to fix
evidence was not reversible error; and (4) prejudgment                   venue in subsequent employer's county, where
interest was properly calculated from date that former                   former employer pled in its answer that
employer received letters of claim from employee.                        employee's injuries were caused by or aggravated
                                                                         by subsequently occurring incidents and
                                                                         conditions, it was undisputed that employee
Affirmed.                                                                worked for subsequent employer after working for
                                                                         former employer, and former employer filed no
                                                                         special exceptions requesting employee to plead
                                                                         more particularly how subsequent employer was
W est Headnotes (10)                                                     negligent and caused injury. V.T.C.A., Civil
                                                                         Practice & Remedies Code § 15.061 (repealed).

[1]     Venue
           Particular Actions, Application To                            Cases that cite this headnote

        Under venue statute applicable at time of suit,
        venue for employee's negligence suit against
        former employer was appropriate in county which            [4]   Appeal and Error
        had venue over subsequent employer that was                         Misjoinder of Parties
        joined as a defendant; if court had venue of a
        claim as to one defendant, court had venue over
        claims against all defendants. V.T.C.A., Civil
        Practice & Remedies Code § 15.061 (repealed).


        Cases that cite this headnote




                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             1
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




       Former employer waived any claim as to                       A successful challenge to evidentiary rulings
       employee's alleged improper joinder of                       usually requires the complaining party to show
       subsequent employer in negligence suit involving             that the judgment turns on the particular evidence
       dispute as to venue, where former employer never             excluded or admitted.
       sought severance of parties or object to joinder.

                                                                    Cases that cite this headnote
       Cases that cite this headnote


                                                              [7]   Appeal and Error
[5]    Appeal and Error                                                Same or Similar Evidence Otherwise
          Negligence and Torts in General                           Admitted
       Appeal and Error                                             Appeal and Error
          Evidence Immaterial to Issue                                 Same or Similar Evidence Otherwise
                                                                    Admitted
       Trial court's failure to admit impeachment
       evidence in form of evidence that employee made              Court of Appeals will not reverse a judgment for
       false statement on his job application by failing to         erroneous rulings on admissibility of evidence
       disclose his previous back injury was not                    when the evidence is cumulative and the excluded
       reversible error, in employee's negligence action            evidence is not controlling on a material issue
       against former employer, which was a                         dispositive of the case.
       nonsubscriber to wo rkers' compensation
       coverage, for injuries sustained when stacked
       boxes allegedly fell on employee, where                      Cases that cite this headnote
       employer's knowledge of back injury was not an
       issue given the circumstances of negligence
       alleged by employee, employee's own negligence
       was not at issue, employee's medical condition         [8]   Appeal and Error
       before injury at issue was fully presented to jury,             Costs and Allowances
       and employee's credibility was repeatedly
       challenged during cross examination concerning               A trial court's prejudgment interest award is
       his medical history, work history, and accident              reviewed under an abuse of discretion standard.
       itself. Rules App.Proc., Rule 44.1(a).

                                                                    1 Cases that cite this headnote
       Cases that cite this headnote


                                                              [9]   Interest
[6]    Appeal and Error                                                 Form and Sufficiency of Demand
          Evidence in General
       Appeal and Error
          Prejudicial Effect




                            © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                       2
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




       The term “claim,” as used in section of               Robert Elton Smith filed suit in 1994 against appellant,
       prejudgment interest statute providing that a         Brookshire Grocery Company, his nonsubscriber employer,
       defendant's receipt of a notice of claim or the day   for injuries he sustained on the job in 1992. Finding
       suit is filed is time when prejudgment interest       Brookshire Grocery negligent, a jury returned a verdict in
       accrues, describes a demand for compensation or       Smith's favor. Brookshire Grocery brings three issues on
       an assertion of a right to be paid. V.T.C.A.,         appeal: venue, an evidentiary ruling, and the calculation of
       Finance Code § 304.104.                               prejudgment interest. As we conclude none of the issues
                                                             presented requires reversal, we affirm the trial court's
                                                             judgment.
       2 Cases that cite this headnote




[10]   Interest                                                                          Venue
           Form and Sufficiency of Demand
                                                             Smith initially filed suit against Brookshire Grocery Company
       Two letters that employee sent to former              in Jefferson County, Texas. Brookshire Grocery filed a motion
       employer's agent on medical coverage matters          to transfer venue. Before any hearing was held on the venue
       constituted written notice of a claim so as to        motion, Smith nonsuited the claim. He then filed suit in Hardin
       trigger accrual of prejudgment interest on            County against Brookshire Grocery Company and Brookshire
       employee's negligence claim against employer,         Brothers, Inc. (“Brookshire, Inc.”) Although Brookshire
       where letters requested reimbursement for             Grocery filed a motion to *821 transfer venue in the Hardin
       expenses relating to treatment of employee's          County suit, Brookshire, Inc. did not challenge venue and filed
       injury sustained while working and stated medical     only an answer. Shortly thereafter, Smith nonsuited
       procedures suggested by employee's doctor             Brookshire, Inc. The trial court denied Brookshire Grocery's
       regarding injury. V.T.C.A., Finance Code §§           venue motion.
       304.102, 304.104.

                                                             Appellant failed to include a reporter's record of the hearing
       2 Cases that cite this headnote                       on the motion to transfer venue. Smith maintains this failure
                                                             requires our rejection of appellant's venue issue. The venue
                                                             hearing was conducted in November 1994, but the trial was
                                                             not held and the judgment not signed until April 2002. On
                                                             June 5, 2002, Brookshire Grocery requested the venue hearing
                                                             be included in the reporter's record on appeal. In a letter dated
Attorneys and Law Firms                                      July 26, 2002, the court reporter explained she no longer had
                                                             notes of the 1994 venue hearing. By statute, the court reporter
*820 Brian J. Brandstetter, Gwinn & Roby, Fort W orth, for   is required to preserve the notes of the hearing for “three years
appellant.                                                   from the date on which they were taken[.]” Tex. Gov't Code
                                                             Ann. § 52.046(a)(4) (Vernon 1998). The Texas Supreme
Curtis W . Leister, John W erner, Reaud, Morgan & Quinn,     Court has stated that “[i]f a litigant has not requested the
Inc., Beaumont, for appellee.                                reporter to prepare a statement of facts within three years, nor
Before McKEITHEN, C.J., BURGESS and GAULTNEY, JJ.            specifically requested that the notes of a proceeding be
                                                             preserved beyond three years, then the litigant is not free from
                                                             fault if the notes are destroyed as the statute authorizes.”
                                                             Piotrowski v. Minns, 873 S.W .2d 368, 371 (Tex.1993); see
                                                             Ganesan v. Vallabhaneni, 96 S.W .3d 345, 348–50
                        OPINION                              (Tex.App.-Austin 2002, pet. denied).


                                                             W e need not decide venue on this preservation issue, however.
                                                             Brookshire Grocery has asserted on appeal, supported by its
PER CURIAM.                                                  attorney's affidavit, that no evidence was offered or admitted
                                                             at the venue hearing. Appellant's assertion is not disputed by


                           © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          3
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




Smith, and we take as true appellant's uncontradicted           by the party seeking transfer, the venue facts alleged
statement of fact. See Tex.R.App. P. 38.1(f). The clerk's       in the motion to transfer may be taken as true.
record is complete. W hile we emphasize the importance of a     GeoChem Tech Corp., 962 S.W .2d at 543. It is
complete record of the trial court proceedings and arguments    possible the procedural posture at the time of the
presented at the venue hearing, we will address the merits of   nonsuit here was insufficient to establish venue in
the venue issue in this case on the record presented here.      the county to which appellant then sought transfer;
                                                                but we do not address the GeoChem issue as it has
                                                                not been asserted in this case.
[1] The 1985 venue statute applies in this case. See Act of
May 17, 1985, 69th Leg., R.S., ch. 959, § 1, 1985 Tex. Gen.
Laws 3246–3251. W hen suit was filed in 1994, section           Smith made Hardin County his venue choice.
15.061, quoted below, set out the following rule regarding      Because Brookshire, Inc. did not object to venue in
venue over multiple defendants:                                 Hardin County by filing a transfer motion, the
                                                                Hardin County trial court had venue over
      W hen two or more parties are joined as                   Brookshire, Inc. See Tex.R. Civ. P. 86(1). Under the
      defendants in the same action or two or more              applicable statute, if the court had venue of a claim
      claims or causes of action are properly joined            as to one defendant, the court had venue over the
      in one action and the court has venue of an               claims against all defendants. See Tex. Civ. Prac. &
      action or claim against any one defendant, the            Rem.Code Ann. § 15.061; Polaris Inv. Management
      court also has venue of all claims or actions             Corp. v. Abascal, 892 S.W .2d 860 (Tex.1995). As
      against all defendants unless one or more of              the Supreme Court stated in Polaris, “Venue is a
      the claims or causes of action is governed by             creature of legislative grace, and ... the power to
      one of the provisions of Subchapter B                     make venue changes is purely statutory.” Id. at 862.
      [mandatory venue provisions] requiring                    The Supreme Court stated in Polaris that the plain
      transfer of the claim or cause of action, on              wording of section 15.061 appears to permit the
      proper objection, to the mandatory county. 1              joinder of additional claims, and the Court declined
                                                                to reinterpret section 15.061 in such a way as to
                                                                prohibit what Polaris characterized as the
The current statute, amended in 1995, provides that             “tag-along” venue of the plaintiffs: “It is not within
in a suit in which the plaintiff has established proper         the province of this Court to reconstrue, rewrite, or
venue against a defendant, the court also has venue             contravene a venue statute when the intent of the
of all the defendants in all claims or actions arising          Legislature is clear.” Id.; see also Bleeker v.
out of the same transaction, occurrences, or series of          Villarreal, 941 S.W .2d 163 (Tex.App.-Corpus
transactions or occurrences. See Tex. Civ. Prac. &              Christi 1996, writ dism'd by agreement); but see
Rem.Code Ann. § 15.005 (Vernon 2002). Section                   WTFO, Inc. v. Braithwaite, 899 S.W .2d 709
15.0641 of the 1995 venue statute also provides that            (Tex.App.-Dallas 1995, no writ) (W aiver of venue
in a suit in which two or more defendants are joined,           by one defendant does not prevent another defendant
any action or omission by one defendant in relation             from challenging venue.); Pearson v. Jones Co.,
to venue, including a waiver of venue by one                    Ltd., 898 S.W .2d 329 (Tex.App.-Eastland 1994, no
defendant, does not operate to impair or diminish the           writ) (Even though two of four defendants filed an
right of any other defendant to *822 properly                   answer without challenging venue, they could not
challenge venue. See Tex. Civ. Prac. & Rem.Code                 waive other defendants' objections to venue.). In
Ann. § 15.0641 (Vernon 2002). The 1985 statute,                 Polaris, the Supreme Court indicated any change in
which applies in this case, does not contain that               section 15.061 was up to the legislature. See Polaris,
provision.                                                      892 S.W .2d at 862. In the 1995 venue statute, the
                                                                legislature repealed section 15.061 and added
                                                                sections 15.005 and 15.064; Section 15.061 applies
[2] W e note that appellant does not raise the                  here because this suit was filed before section
procedural issue set out in GeoChem Tech Corp. v.               15.061 was repealed and before sections 15.005 and
Verseckes, 962 S.W .2d 541, 543–44 (Tex.1998).                  15.064 were added. W e find the language of the
Depending on the state of the record at the time of             1985 statute is clear.
the filing of a nonsuit, if an objection to venue has
been filed and the plaintiff then takes a nonsuit and
has not specifically denied the venue facts averred             [3] Brookshire Grocery further maintains Smith


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     4
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




failed to put on a prima facie case that Brookshire,
Inc. was properly joined to justify appellant's “tag
along” venue. From the record before us, we cannot           [6] [7] Even though the evidence was admissible,
determine that Brookshire, Inc. was joined solely to         Brookshire Grocery must still show the exclusion of
fix venue. Prior to dismissing Brookshire, Inc. from         the evidence was harmful. See Texas Dep't of
the suit, Smith's pleadings alleged negligence on the        Transp. v. Able, 35 S.W .3d 608, 617 (Tex.2000).
part of both appellant and Brookshire, Inc. W e note         “[A] successful challenge to evidentiary rulings
Brookshire Grocery pleaded in its amended answer             usually requires the complaining party to show that
that any injury sustained by Smith was caused by or,         the judgment turns on the particular evidence
in effect, aggravated by “subsequently occurring             excluded or admitted.” Id. In our review, we
incidents and conditions.” It is undisputed that Smith       consider the entire record. Id. Ordinarily we will not
worked for Brookshire, Inc. in Hardin County after           reverse a judgment for erroneous rulings on
the injury at appellant's store in Smith County.             admissibility of evidence when the evidence is
Appellant filed no special exceptions requesting             cumulative and the excluded evidence is not
Smith to plead more particularly how *823                    controlling on a material issue dispositive of the
Brookshire, Inc. was negligent and caused injury to          case. Id.
Smith.

                                                             Here, the evidence of the answer on the job
[4] Appellant further argues that, in order to               application is not controlling on any material issue in
establish venue in Hardin County, Smith must                 the case. The answer does not address directly the
establish he acted in good faith in joining                  elements of Brookshire Grocery's negligence.
Brookshire, Inc., the resident defendant. Appellant          W hether Brookshire Grocery knew of his prior back
did not object to the joinder of Brookshire, Inc. and        injury was not an issue given the circumstances of
never sought a severance; appellant waived any               the alleged negligence in this case: improperly
claim regarding improper joinder. See Rosales v.             stacked products fell on Smith and caused his back
H.E. Butt Grocery Co., 905 S.W .2d 745, 751                  injury. Smith's own negligence was not an issue in
(Tex.App.-San Antonio 1995, writ denied). W e are            this case against a nonsubscriber. See Tex. Lab.Code
unable to determine from this record there was any           Ann. § 406.033 (Vernon Supp.2003). His medical
bad faith on the part of Smith in filing suit against        condition before the injury at issue was fully
Brookshire, Inc. and appellant in Hardin County.             presented to the jury, including testimony and
                                                             records from doctors who treated him before and
                                                             after the injury. Smith's credibility was repeatedly
W e conclude the trial court did not err in                  challenged during cross-examination concerning
maintaining venue in Hardin County. Issue one is             Smith's medical history, work history, and the
overruled.                                                   accident itself. Based on the record before us, we
                                                             conclude that the job application answer was not
                                                             controlling on a material issue, and that Brookshire
                                                             Grocery has failed to show that the excluded
              Exclusion of Evidence                          evidence probably caused the rendition of an
                                                             improper judgment. W e hold that under these
[5] In point of error two, Brookshire Grocery                circumstances the trial court's evidentiary ruling does
contends the trial court erred in excluding evidence         not require reversal of this case and a new trial. See
that Smith falsified an answer on his job application        Tex.R.App. P. 44.1(a). Issue two is overruled.
by failing to disclose his previous back surgery. A
question on the employment application asked
whether Smith had ever been seriously injured on the
job. Smith answered “no.” In the bill of exception                          Prejudgment interest
testimony, Smith indicated he gave the “no” answer
because at the time he did not consider his injury to        [8] Brookshire Grocery also challenges the
be serious. Upon reflection, he agreed the correct           prejudgment interest award set out in the judgment.
answer would have been “yes.” The evidence                   A trial court's prejudgment interest award is
arguably was admissible for the purpose of                   reviewed under an abuse of discretion standard. See
impeachment of Smith's credibility.                          J.C. Penney *824 Life Ins. Co. v. Heinrich, 32


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    5
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




S.W .3d 280, 289 (Tex.App.-San Antonio 2000, pet.            claim. In Robinson, 894 S.W .2d at 528, the Austin
denied). Appellant argues the trial court erred by           court stated that written notice of an accident and
using an incorrect date from which to begin its              injuries is not sufficient to constitute notice of a
calculations, and further erred by awarding                  claim under the prejudgment interest statute; there
prejudgment interest on future damages.                      must be written notice of a lawful demand for
                                                             payment or compensation. The Robinson court
                                                             found that a letter— in which Robinson requested
[9] [10] The Texas Finance Code provides that                that the insurance carrier pay certain medical bills
judgments in cases involving wrongful death,                 and inquired as to when the next lost wages check
personal injury, and property damages are to include         was due— constituted written notice of a claim. Id. at
prejudgment interest. See Tex. Fin.Code Ann. §               529. The Fort W orth court has noted that nothing in
304.102 (Vernon 1998 & Supp.2003). Prejudgment               the prejudgment interest statute requires the claimant
interest accrues on the amount of the judgment               to demand an exact amount or list every element of
during the period beginning on the 180th day after           damage claimed in order to trigger the notice of
the date the defendant receives written notice of a          claim provision; a signed medical authorization
claim or on the day the suit is filed, whichever             form, coupled with a letter asking the company to
occurs first.See Tex. Fin.Code Ann. § 304.104                “properly consider [plaintiff's] injury claim,”
(Vernon 1998 & Supp.2003). The term “claim”                  constituted notice under the statute. Bevers v. Soule,
describes a demand for compensation or an assertion          909 S.W .2d 599, 603–04 (Tex.App.-Fort W orth
of a right to be paid. See Johnson & Higgins of              1995, no writ). The Texarkana court has concluded
Texas, Inc. v. Kenneco Energy, Inc., 962 S.W .2d             that a person's medical release prepared by her
507, 531 (Tex.1998); see also Robinson v. Brice,             employer— stating that the information was to be
894 S.W .2d 525, 528 (Tex.App.-Austin 1995, writ             used for purposes of evaluating and handling her
denied).                                                     claim for injury as a result of an accident— was
                                                             sufficient notice under the statute. See K Mart Corp.
                                                             v. Rhyne, 932             S.W .2d        140, 146
Brookshire Grocery argues prejudgment interest               (Tex.App.-Texarkana 1996, no writ). In Johnson &
should be calculated from May 20, 1993, the date of          Higgins, a standstill agreement (normally an
a letter sent from Smith's lawyer to appellant. The          agreement to maintain the status quo and temporarily
letter notified Brookshire Grocery that the attorney         suspend or stop a suit) stated the following: “
had been retained to represent Smith in connection           ‘Kenneco asserts that, to the extent underwriters are
with claims regarding injuries Smith sustained on or         found not to be *825 liable [in the federal action]....,
about August 4, 1992.                                        J & H is liable to Kenneco for the amounts which
                                                             Kenneco has claimed under the Policy.’ ” Johnson &
                                                             Higgins, 962 S.W .2d at 531. The Supreme Court
Smith argues the trial court's determination of a            held the agreement constituted written notice of a
November 1992 starting date is correct. In evidence          claim and triggered accrual of prejudgment interest.
are two letters Smith sent to Eddie Crawford,                Id. W e conclude that, taken together, the letters
appellant's agent on the medical coverage matters.           written by Smith to Crawford constitute written
An October 1992 letter requested reimbursement for           notice of a claim: they ask for reimbursement of
expenses relating to car mileage and to treatment for        expenses relating to treatment and they state
Smith's injury. A November 1992 letter was, in               procedures suggested by the doctor. W e find the trial
effect, Smith's progress report to Crawford                  court did not abuse its discretion in calculating
concerning medical procedures contemplated by                prejudgment interest from the November 1992 date.
Smith's doctor and concerning Smith's willingness to
see another doctor. Both the October and November
1992 letters were before the trial judge when he             Brookshire Grocery also contends article 5069–1.05
made the determination to use the November 1992              § 6 and its successor statute are unconstitutional, and
date as the starting point for calculating prejudgment       that the trial court erred in awarding prejudgment
interest.                                                    interest on future damages. These constitutional
                                                             arguments were rejected by the Supreme Court in C
                                                             & H Nationwide, Inc. v. Thompson, 903 S.W .2d
Courts have considered various writings in                   315, 324 (Tex.1994). The Supreme Court held the
determining what constitutes written notice of a             statute by its terms provides for prejudgment interest


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     6
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)




on future damages. Id. at 324–327. At the hearing on
the motion to enter judgment, appellant's attorney
acknowledged the issue was settled. He argues for a
change in the law. But an intermediate appellate
court must follow Supreme Court precedent. Issue
three is overruled.


The judgment of the trial court is affirmed.


AFFIRMED.




Footnotes

1       See Act of May 17, 1985, 69th Leg., R.S., ch. 959, § 1, 1985 Tex. Gen. Laws 3242, 3249, repealed by Act of May 8, 1995, 74th Leg.,
        R.S., ch.138, § 10, 1995 Tex. Gen. Laws 981 (current version at Tex. Civ. Prac. & Rem.Code Ann. §§ 15.005, 15.0641 (Vernon
        2002).)

End of Document                                                         © 2015 Thomson Reuters. No claim to original U.S. Government Works.




                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                    7
K
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)
55 Tex. Sup. Ct. J. 975


                                                                          8 Cases that cite this headnote
                     372 S.W.3d 621
                 Supreme Court of Texas.
                                                                    [2]   Appeal and Error
          FREEDOM COMMUNICATIONS,                                            Void judgment or order
         INC., d/b/a The Brownsville Herald                               Appellate courts do not have jurisdiction to
         and Valley Morning Star, Petitioner,                             address the merits of appeals from void orders or
                         v.                                               judgments; rather, they have jurisdiction only to
    Juan Antonio CORONADO, et al., Respondents.                           determine that the order or judgment underlying
                                                                          the appeal is void and make appropriate orders
             No. 09–0745.       |    June 22, 2012.                       based on that determination.

Synopsis                                                                  8 Cases that cite this headnote
Background: Plaintiffs sued candidate for district attorney,
publisher of newspapers, and former district attorney for
                                                                    [3]   Appeal and Error
defamation and invasion of privacy after plaintiffs were
                                                                               Determination of questions of jurisdiction
identified in candidate's newspaper advertisements as persons
                                                                          in general
who had been arrested but not prosecuted for child abuse.
Publisher moved for summary judgment. The 357th District                  Supreme Court must consider its jurisdiction to
Court, Cameron County, Abel Limas, J., denied the motion.                 decide an appeal, even if that consideration is sua
Publisher filed an interlocutory appeal. The Corpus Christi–              sponte.
Edinburg Court of Appeals, 296 S.W.3d 790, affirmed.
                                                                          4 Cases that cite this headnote
Publisher petitioned for review.

                                                                    [4]   Judges
                                                                              Pecuniary Interest
Holdings: The Supreme Court held that:
                                                                          A judge is interested in a case, and thus
[1] judicial notice would be taken of trial judge's plea                  disqualified under the Texas Constitution, if an
agreement in a federal racketeering case, and                             order or judgment in the case will directly affect
                                                                          him to his personal or pecuniary loss or gain.
[2] trial judge had an interest in the publisher's case, such             Vernon's Ann.Texas Const. Art. 5, § 11.
that trial judge was constitutionally disqualified, trial judge's
                                                                          1 Cases that cite this headnote
discretionary ruling on publisher's motion was therefore void,
and the appellate courts accordingly lacked jurisdiction to
address the merits of publisher's interlocutory appeal.             [5]   Judges
                                                                              Effect on acts and proceedings of judge
                                                                          A disqualified judge has no power to act in the
Vacated and remanded.
                                                                          case. Vernon's Ann.Texas Const. Art. 5, § 11.

                                                                          Cases that cite this headnote

 West Headnotes (9)
                                                                    [6]   Judges
                                                                              Effect on acts and proceedings of judge
 [1]     Evidence
                                                                          Discretionary judicial acts by a disqualified
             Proceedings in other courts
                                                                          judge are void. Vernon's Ann.Texas Const. Art.
         A court will take judicial notice of another court's
                                                                          5, § 11.
         records if a party provides proof of the records.
         Rules of Evid., Rule 201(b, d).                                  Cases that cite this headnote



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             1
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)
55 Tex. Sup. Ct. J. 975

                                                                       interlocutory appeal from the denial; trial judge,
 [7]    Judges                                                         who pleaded guilty to federal racketeering
            Waiver of Disqualification or Objections                   charges and admitted that he accepted $8000
        Disqualification of a judge is a jurisdictional                for, in part, making rulings favorable to the
        issue that cannot be waived. Vernon's Ann.Texas                plaintiffs in publisher's case, including denying
        Const. Art. 5, § 11.                                           the summary-judgment motion, obtained a
                                                                       pecuniary gain as a direct result of his rulings.
        Cases that cite this headnote                                  Vernon's Ann.Texas Const. Art. 5, § 11.

                                                                       2 Cases that cite this headnote
 [8]    Evidence
            Proceedings in other courts
        Supreme Court, on review of a decision of
        the Court of Appeals on newspaper publisher's
                                                              Attorneys and Law Firms
        interlocutory appeal from a denial of its motion
        for summary judgment in an action against             *622 Jeffery T. Nobles, Beirne Maynard & Parsons L.L.P.,
        it for defamation and invasion of privacy,            Houston, John A. Bussian III, The Bussian Law Firm, PLLC,
        would take judicial notice of the facts in trial      Raleigh, NC, Christina Fontenot Crozier, Haynes and Boone,
        judge's plea agreement in a federal racketeering      LLP, Houston, TX, Brian G. Janis, Brian G. Janis, PC,
        case; publisher provided a copy of the plea           Brownsville, TX, for Freedom Communications, Inc., d/b/a
        agreement in its briefing to the Supreme Court        The Brownsville Herald and Valley Morning Star.
        and maintained that the facts were appropriate
        for judicial notice, trial judge would have been      Marc G. Rosenthal, Charles L. Levy, Juanita Lynn Watson,
        constitutionally disqualified from entering the       Rosenthal & Watson, PC, Austin, TX, Paul Lanaux Fourt,
        summary-judgment order if he had an interest in       Law Office of Paul L. Fourt, Jr., Robert Julius Lerma,
        the publisher's case, such a discretionary ruling     Brownsville, TX, Oscar De La Fuente Jr., Attorney at
        by trial judge would be void, and appellate           Law, Harlingen, David J. Healey, Fish & Richardson, P.C.,
        jurisdiction would lack jurisdiction to address the   Houston, TX, for Juan Antonio Coronado.
        merits of the interlocutory appeal if the order
        were void. Vernon's Ann.Texas Const. Art. 5, §        Opinion
        11; V.T.C.A., Civil Practice & Remedies Code
                                                              PER CURIAM.
        § 51.014(a)(6); V.T.C.A., Government Code §
        22.225(c, d); Rules of Evid., Rule 201(b, d).         This interlocutory appeal is from the denial of a media
                                                              defendant's motion for summary judgment regarding claims
        13 Cases that cite this headnote
                                                              that it defamed the plaintiffs and invaded their privacy by
                                                              publishing a political advertisement. We conclude that neither
 [9]    Appeal and Error                                      the court of appeals nor this Court has jurisdiction to consider
           Void judgment or order                             the merits of the parties' arguments because the trial court
        Judges                                                judge accepted a bribe for ruling on the summary-judgment
            Pecuniary Interest                                motion, constitutionally disqualifying him from this case and
                                                              thus making his order void. We vacate the judgment of the
        Trial judge had an interest in a case in which
                                                              court of appeals and remand the case to the trial court for
        he denied a newspaper publisher's motion for
                                                              further proceedings.
        summary judgment on claims against it for
        defamation and invasion of privacy, such that
                                                              In 2008 Peter Zavaletta sought election to the position of
        trial judge was constitutionally disqualified,
                                                              Cameron County District Attorney. During the course of his
        trial judge's discretionary ruling on the motion
                                                              election campaign he advertised in the Brownsville Herald
        was therefore void, and the Court of Appeals
                                                              and Valley Morning Star, two Freedom Communications,
        and the Supreme Court accordingly lacked
                                                              Inc. (Freedom) newspapers, that the incumbent District
        jurisdiction to address the merits of publisher's
                                                              Attorney failed to prosecute child abuse cases. The


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                          2
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)
55 Tex. Sup. Ct. J. 975

advertisement included the names of individuals who were          Office of Pub. Util. Counsel v. Pub. Util. Comm'n of Tex., 878
arrested, but not prosecuted, for alleged child abuse. Juan       S.W.2d 598, 600 (Tex.1994) (per curiam). Judicial notice of
Antonio Coronado, Francisco Solis Ramirez, Roberto Rivera         such a fact is mandatory if a party requests it and supplies “the
III, and Ruben Contreras (collectively, Coronado) were            necessary information.” TEX.R. EVID. 201(d). Under this
among the persons identified in the advertisement. They           standard, a court will take judicial notice of another court's
sued Zavaletta, Freedom, and former District Attorney *623        records if a party provides proof of the records. See, e.g., MCI
Yolanda DeLeon, contending that the advertisement defamed         Sales & Serv., Inc. v. Hinton, 329 S.W.3d 475, 497 n. 21
them and invaded their privacy. Freedom moved for summary         (Tex.2010); WorldPeace v. Comm'n for Lawyer Discipline,
judgment on the grounds that the advertisement was accurate,      183 S.W.3d 451, 459 (Tex.App.-Houston [14th Dist.] 2005,
true, and non-actionable under the United States and Texas        pet. denied). Here, Freedom has provided a copy of Limas's
Constitutions and Texas statutory and common law. The trial       plea agreement in federal district court and urges us to take
court judge, Abel Limas, denied the motion and Freedom            judicial notice of the facts in the agreement.
filed an interlocutory appeal. See TEX. CIV. PRAC. &
REM.CODE § 51.014(a)(6) (allowing for an appeal from               [2]   [3] Freedom's request leads us to question whether
an interlocutory order that denies a motion for summary           we have jurisdiction to decide this appeal. That is because
judgment based upon a claim against a member of the               appellate courts do not have jurisdiction to address the
electronic or print media arising under the free speech clause    merits of appeals from void orders or judgments; rather,
of the First Amendment to the United States Constitution or       they have jurisdiction only to determine that the order or
Article I, Section 8, of the Texas Constitution). The court       judgment underlying the appeal is void and make appropriate
of appeals affirmed, with one justice dissenting. 296 S.W.3d      orders based on that determination. See State ex rel. Latty
790.                                                              v. Owens, 907 S.W.2d 484, 486 (Tex.1995); see also
                                                                  Univ. of Tex. Sw. Med. Ctr. of Dallas v. Margulis, 11
Freedom filed a petition for review in this Court and as          S.W.3d 186, 187 (Tex.2000) (per curiam) (“[E]ven when
part of its briefing provided a copy of a plea agreement          an appeal is interlocutory, we have jurisdiction to determine
filed in the United States District Court for the Southern        whether the court of *624 appeals [had] jurisdiction of the
District of Texas. The agreement shows that after the court       appeal.”). And we must consider our jurisdiction, even if that
of appeals issued its decision, Limas pleaded guilty to federal   consideration is sua sponte. See Tex. Workers' Comp. Comm'n
racketeering charges. He admitted in the plea that on May 8,      v. Garcia, 893 S.W.2d 504, 517 n. 15 (Tex.1995).
2008, he accepted $8,000 in cash for, in part, making rulings
favorable to the plaintiffs in this case, including “denying       [4]    [5]     [6]     [7] The Texas Constitution provides that
[Freedom's] Summary Judgment [motion] on November                 “[n]o judge shall sit in any case wherein the judge may
26th.” The plea agreement is not in the appellate record and      be interested.” TEX. CONST. art. V, § 11. A judge is
Coronado urges us not to consider it, arguing that Freedom's      “interested” in a case—and thus disqualified under Article V,
reference to the plea amounts to an impermissible attempt         Section 11—if an order or judgment in the case will directly
to obtain sanctions against them in this Court. Freedom           “affect him to his personal or pecuniary loss or gain.” Elliott v.
maintains that the facts contained in the plea agreement are      Scott, 119 Tex. 94, 25 S.W.2d 150, 152 (1930) (quoting City
appropriate for judicial notice and it is not seeking sanctions   of Oak Cliff v. State, 97 Tex. 391, 79 S.W. 1068, 1069 (1904)).
or any other relief based on Limas's motives in ruling on the     A disqualified judge has no power to act in the case. Postal
summary-judgment motion. Instead, Freedom argues that we          Mut. Indem. Co. v. Ellis, 140 Tex. 570, 169 S.W.2d 482, 484
should decide the merits of this appeal, but do so using “close   (1943). Discretionary judicial acts by a disqualified judge are
appellate scrutiny” because Limas's guilty plea suggests his      void. Tesco Am., Inc. v. Strong Indus., Inc., 221 S.W.3d 550,
ruling on the summary-judgment motion was not the product         555 (Tex.2006); Buckholts Indep. Sch. Dist. v. Glaser, 632
of good faith.                                                    S.W.2d 146, 148 (Tex.1982). Thus, the disqualification of a
                                                                  judge is a jurisdictional issue that cannot be waived. Postal
 [1] An appellate court may take judicial notice of a relevant    Mut. Indem. Co., 169 S.W.2d at 484; see Tex. Ass'n of Bus. v.
fact that is “either (1) generally known within the territorial   Tex. Air Control Bd., 852 S.W.2d 440, 445 (Tex.1993).
jurisdiction of the trial court or (2) capable of accurate and
ready determination by resort to sources whose accuracy           [8] Limas's order denying Freedom's summary-judgment
cannot reasonably be questioned.” TEX.R. EVID. 201(b); see        motion is the sole basis for appellate jurisdiction over this



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              3
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)
55 Tex. Sup. Ct. J. 975

                                                                          disqualified and his discretionary ruling on the summary-
interlocutory appeal. See TEX. CIV. PRAC. & REM.CODE
                                                                          judgment motion was void. See TEX. CONST. art. V, § 11;
§ 51.014(a)(6); TEX. GOV'T CODE § 22.225(c), (d). If
                                                                          Tesco Am., Inc., 221 S.W.3d at 555. Because the order on
Limas's order is void, then the court of appeals did not have
                                                                          which Freedom bases its appeal is void, we cannot address
authority to consider the merits of Freedom's appeal from
                                                                          the merits of the appeal and the court of appeals did not
the order denying summary judgment, and neither do we. In
                                                                          have authority to do so either—even though it had no way
these circumstances the facts in Limas's plea agreement are
                                                                          of knowing so. See Univ. of Tex. Sw. Med. Ctr. of Dallas, 11
relevant, it is appropriate for us to take judicial notice of them,
                                                                          S.W.3d at 187; Postal Mut. Indem. Co., 169 S.W.2d at 484.
and we do so. See TEX.R. EVID. 201(b), (d), (f); TEX. CIV.
PRAC. & REM.CODE § 51.014(a)(6); TEX. GOV'T CODE
                                                                          Accordingly, without hearing oral argument, we vacate the
22.225(c), (d); see also SEI Bus. Sys., Inc. v. Bank One Tex.,
                                                                          court of appeals' judgment and opinion. TEX.R.APP. P. 59.1;
N.A., 803 S.W.2d 838, 841 (Tex.App.-Dallas 1991, no writ)
                                                                          see, e.g., Valley Baptist Med. Ctr. v. Gonzalez, 33 S.W.3d
(“As a general rule, appellate courts take judicial notice of
                                                                          821, 822 (Tex.2000) (per curiam) (vacating the judgment and
facts outside the record only to determine jurisdiction over an
                                                                          opinion of the court of appeals as advisory when the case had
appeal or to resolve matters ancillary to decisions which are
                                                                          become moot before the opinion issued). We remand the case
mandated by law....”).
                                                                          to the trial court for further proceedings. TEX.R.APP. P. 60.6.
 [9] The facts in the plea agreement show that Limas had
an interest—an illegal interest, no less—in this case because
                                                                          All Citations
he obtained a pecuniary gain as a direct result of his rulings,
including his order denying Freedom's summary-judgment                    372 S.W.3d 621, 55 Tex. Sup. Ct. J. 975
motion. See Elliott, 25 S.W.2d at 152. Therefore, he was

End of Document                                                       © 2015 Thomson Reuters. No claim to original U.S. Government Works.




                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                    4
L
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)




                                                                        Cases that cite this headnote
                     18 S.W.3d 744
                Court of Appeals of Texas,
                      San Antonio.                                [2]   Appeal and Error
                                                                           Striking out or dismissal
     HELENA CHEMICAL CO. and Hyperformer                                Reviewing court construes a petition in favor of
       Seed Co., Appellants/Cross–Appellees,                            the plaintiff and, if necessary, reviews the entire
                         v.                                             record to determine if any evidence supports the
  Kenneth WILKINS and Tom Wilkins, Individually                         trial court's jurisdiction to hear the cause.
    and d/b/a Chapotal Farms and Porciones 99
                                                                        Cases that cite this headnote
     Properties; Geen Wilkins and Mark Wilkins,
 Individually and d/b/a Tabasco and Wilkins Family
  Limited Partnership, Appellees/Cross–Appellants.                [3]   Appeal and Error
                                                                           Jurisdiction
       No. 04–99–00107–CV.          |     March 8, 2000.                Unless the pleadings demonstrate the absence of
                                                                        jurisdiction, a reviewing court assumes the trial
Farmers filed action against seed seller, alleging violation of
                                                                        court properly had jurisdiction over the case.
Deceptive Trade Practices Act (DTPA), breach of warranties,
and fraud. The 229th Judicial District Court, Starr County,             Cases that cite this headnote
John A. Pope, III, J., entered judgment on jury verdict
awarding damages to farmers. Both sides appealed. The
Court of Appeals, Hardberger, C.J., held that: (1) delay in       [4]   Statutes
submitting farmers' claim against seed seller to arbitration                 Construction in View of Effects,
did not bar farmers' lawsuit; (2) witness was sufficiently              Consequences, or Results
qualified to testify as expert as to suitability of seed for            Purpose of statutory construction is to ascertain
dry land farming; (3) evidence was sufficient to show that              legislative intent and where the intent is clear, it
seller's failure to comply with warranty, or a deceptive act            will be given effect, even if the result appears to
or unconscionable action, was producing cause of farmers'               be harsh.
damages; (4) language on seed bag, purchase ticket, invoices,
                                                                        Cases that cite this headnote
and unsigned purchase agreement effectively disclaimed
warranties; and (5) evidence was sufficient for jury to
calculate, with reasonable certainty, award of damages for        [5]   Alternative Dispute Resolution
lost profits.                                                                Arbitration favored; public policy
                                                                        Public policy favors agreements to resolve legal
Affirmed.                                                               disputes through agreements to arbitrate.

Duncan, J., filed a dissenting opinion.                                 Cases that cite this headnote


                                                                  [6]   Alternative Dispute Resolution
 West Headnotes (26)                                                         Partial arbitrability
                                                                        Parties must arbitrate any claims that fall within
                                                                        the scope of the arbitration agreements, even
 [1]    Appeal and Error
                                                                        though piecemeal litigation might result.
           Cases Triable in Appellate Court
        Question of whether a trial court has subject                   1 Cases that cite this headnote
        matter jurisdiction is a question of law subject to
        de novo review.
                                                                  [7]   Alternative Dispute Resolution
                                                                             Failure to Arbitrate



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             1
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


        If a party fails to submit a claim to arbitration
        in a timely fashion under the Agriculture Code,             3 Cases that cite this headnote
        the code provides that the trial court may take
        remedial action in light of the circumstances of     [11]   Evidence
        the delay or the conduct of the parties, but if                 Knowledge, experience, and skill in general
        a party fails to submit a claim to arbitration
                                                                    In determining whether a particular witness is
        altogether, then the party may not maintain legal
                                                                    qualified to testify as an expert, focus is on
        action. V.T.C.A., Agriculture Code §§ 64.002,
                                                                    whether the expert's expertise goes to the very
        64.004.
                                                                    matter on which he or she is to give an opinion.
        Cases that cite this headnote                               Rules of Evid., Rule 702.

                                                                    2 Cases that cite this headnote
 [8]    Alternative Dispute Resolution
             Failure to Arbitrate
                                                             [12]   Evidence
        Delay in submitting farmers' claims against seed                Physical facts
        seller to arbitration as required by Agriculture
                                                                    Witness was sufficiently qualified to testify
        Code until trial court granted motion to compel
                                                                    as expert as to suitability of seed for dry
        arbitration did not bar farmers' lawsuit, even
                                                                    land farming and its susceptibility to charcoal
        though delay prompted arbitration board to
                                                                    rot disease, even though he was not plant
        refuse to arbitrate matter due to inability to
                                                                    pathologist, where witness was plant scientist
        investigate crops in field conditions, in light
                                                                    and agronomist and used his experience to
        of Code's specific authorization for trial court
                                                                    formulate conclusion on basis of research, study
        to take such delay into account and court's
                                                                    of independent tests, and observations regarding
        ability to fashion remedy if necessary. V.T.C.A.,
                                                                    seed's suitability for dry land farming. Rules of
        Agriculture Code § 64.004.
                                                                    Evid., Rule 702.
        Cases that cite this headnote
                                                                    2 Cases that cite this headnote

 [9]    Appeal and Error
                                                             [13]   Evidence
            Rulings on admissibility of evidence in
                                                                        Sources of Data
        general
                                                                    Evidence
        Appeal and Error
                                                                        References to authorities on subject
           Competency of witness
                                                                    Evidence
        Whether the trial court properly admitted expert's
                                                                        Experiments and results thereof
        testimony is subject to an abuse of discretion
                                                                    Expert's testimony on suitability of seed for
        standard of review.
                                                                    dry land farming was sufficiently reliable to be
        3 Cases that cite this headnote                             admissible, despite his discounting of certain
                                                                    testing of seed, where his conclusion flowed
                                                                    from his observation of those tests and other
 [10]   Evidence
                                                                    factors such as weather and weed control
            Speculation, guess, or conjecture
                                                                    reports, disease publications, other testing, and
        In reviewing admissibility of expert testimony,             comparisons with crops on adjacent farms.
        court examines the entire substance of the
        expert's testimony to determine if the opinion is           Cases that cite this headnote
        based on demonstrable facts and does not rely
        solely on assumptions, possibility, speculation,
                                                             [14]   Antitrust and Trade Regulation
        and surmise.
                                                                        Weight and sufficiency



              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                       2
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


        Evidence                                                     enjoyed by farmers and seller. V.T.C.A., Bus. &
            Nature, condition, and relation of objects               C. § 17.41 et seq.
        Sales
                                                                     Cases that cite this headnote
             Breach of warranty
        Evidence was sufficient to show that seed
        seller's failure to comply with warranty, or          [17]   Fraud
        a deceptive act or unconscionable action by                      Matters of Fact or of Opinion
        seller, was producing cause of farmers' damages              Decisive test to determine whether seller's
        for purposes of Deceptive Trade Practices Act                statements are mere inactionable puffing is
        (DTPA) and breach of warranty claims; expert                 whether the seller asserts a fact of which the
        testimony and evidence of field trials indicated             buyer is ignorant or merely states an opinion or
        that seed might not have been suitable for dry               judgment on a matter of which the seller has
        land farming, contrary to actual representations             no special knowledge and on which the buyer
        in seller's promotional literature and made by               may be expected also to have an opinion and to
        sales representative. V.T.C.A., Bus. & C. § 17.41            exercise his judgment.
        et seq.
                                                                     2 Cases that cite this headnote
        Cases that cite this headnote
                                                              [18]   Antitrust and Trade Regulation
 [15]   Antitrust and Trade Regulation                                   Weight and sufficiency
            Weight and sufficiency                                   Farmers' testimony was some evidence sufficient
        Sales                                                        to find that seed seller took advantage of
             Breach of warranty                                      the lack of knowledge, ability, experience, or
        Evidence that neighbor had no adverse effect                 capacity of farmers to grossly unfair degree so
        from rotating from cotton to grain and that seed             as to support liability on unconscionability claim
        seller recommended alleged over-planting by                  under Deceptive Trade Practices Act (DTPA).
        farmers was sufficient to rebut possibility of               V.T.C.A., Bus. & C. § 17.41 et seq.
        causes of farmers' low yields other than seller's
                                                                     Cases that cite this headnote
        seed, which thus supported farmers' Deceptive
        Trade Practices Act (DTPA) and breach of
        warranty claims against seed seller. V.T.C.A.,        [19]   Sales
        Bus. & C. § 17.41 et seq.                                          Exclusion by contract or express warranty
                                                                     or refusal to warrant
        Cases that cite this headnote
                                                                     Warranty language on seed bag, purchase ticket,
                                                                     invoices, and unsigned purchase agreement
 [16]   Antitrust and Trade Regulation                               effectively disclaimed implied warranties of
            Comparisons; comparative advertising                     merchantability and fitness for a particular
        Sales                                                        purpose, as well as express warranties, and thus
             Statements as to kind, quality, condition, or           precluded breach of warranty claim by farmers
        value                                                        against seed seller.

        Repeated oral and written statements by seed                 Cases that cite this headnote
        seller that particular seed was better for dry land
        farming than other seed brands did not amount
        to mere inactionable puffing for purposes of          [20]   Damages
        Deceptive Trade Practices Act (DTPA) and                        Effect of provisions of contract
        breach of warranty claims, in light of their                 Contractual limitation on damages is not
        specificity and disparate positions of knowledge             effective as to statutorily created rights, such as
                                                                     a right to recover for deceptive acts.


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                         3
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


                                                                          court does not substitute its opinion on the matter
        Cases that cite this headnote                                     for that of the trial court.

                                                                          3 Cases that cite this headnote
 [21]   Damages
           Loss of Profits
        History of loss does not preclude a judgment for          [26]    Interest
        future lost profits.                                                   Stay of proceedings
                                                                          Trial court reasonably commenced award of
        Cases that cite this headnote                                     prejudgment interest in favor of farmers in
                                                                          action against seed sellers as of date when court
 [22]   Damages                                                           lifted abatement that had been imposed during
           Loss of profits                                                attempt at arbitration of dispute, in light of role
                                                                          that each party played in pretrial delay, which
        Precise calculation of anticipated profits has
                                                                          could support conclusion that farmers had most
        never been essential to recovery by any business;
                                                                          discretion in determining when to submit claim
        it is sufficient if there is data from which the loss
                                                                          for arbitration.
        may be ascertained with reasonable certainty.
                                                                          5 Cases that cite this headnote
        Cases that cite this headnote


 [23]   Damages
           Loss of profits                                       Attorneys and Law Firms
        Evidence was sufficient for jury to calculate,
        with reasonable certainty, award of damages               *747 Charles C. Murray, Lisa Powell, Atlas & Hall, L.L.P.,
        to farmers for lost profits resulting from seed          McAllen, Keith Parr, Kevin P. McJessy, Chicago, Ill., for
        seller's deceptive act or unconscionable action          appellant.
        concerning suitability of seed sold to farmers;
                                                                 John Skaggs, Skaggs & Garza, L.L.P., McAllen, for appellee.
        farmer's testimony allowed jury to consider
        yield attributable to other seed, recalculate lease      Sitting: PHIL HARDBERGER, Chief Justice, CATHERINE
        payments, and regard elevator costs as either            STONE, Justice, SARAH B. DUNCAN, Justice.
        reflected in yield or refundable so as to be not
        part of net cost calculation.

        Cases that cite this headnote                                                      OPINION

                                                                 Opinion by: PHIL HARDBERGER, Chief Justice.
 [24]   Interest
             Suspension                                          Helena Chemical Company and Hyperformer Seed Company
                                                                 (collectively “Helena”) appeal the trial court's entry of
        Award of prejudgment interest during periods of
                                                                 judgment, in which Kenneth, Tom, Geen, and Mark Wilkins,
        delay is generally left to the discretion of the trial
                                                                 as well as their respective business entities, (collectively
        court.
                                                                 “the Wilkins”) were awarded $360,000 plus attorney's fees
        5 Cases that cite this headnote                          following a jury trial.

                                                                 Helena raises five issues on appeal. In its fourth issue,
 [25]   Appeal and Error                                         Helena asserts that the Wilkins are barred from asserting
           Costs and Allowances                                  their claims because of their alleged failure to fulfill the
        Because the issue of an offset from interest             arbitration requirements of the Texas Agriculture Code. In its
        calculations for delay caused by a litigant is           fifth issue, Helena claims the trial court abused its discretion
        discretionary rather than mandatory, a reviewing         in admitting testimony by the Wilkins' expert. In its first,



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              4
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


third, and second issues, Helena asserts that the evidence is      The trial court entered judgment against Helena, awarding
legally and factually insufficient to support the jury's verdict   prejudgment interest from October 23, 1996 (the day the Seed
as to causation, liability, and damages. On cross-appeal, the      and Plant Board stated that the Wilkins' claims did not qualify
Wilkins claim the trial court erred in its manner of assessing     for arbitration). Helena appeals; the Wilkins appeal as to the
pre-judgment interest.                                             date from which prejudgment interest is computed.



                       BACKGROUND                                                          DISCUSSION

The Wilkins manage farms in Hidalgo and Starr Counties.            1. Arbitration
Helena sells seed. The Wilkins purchased Cherokee grain            In its fourth issue, Helena asserts that the Wilkins are barred
sorghum 1 from Helena in 1992, 1993, and 1994. The Wilkins         from asserting their claims because they failed to comply with
claim to have relied upon Helena's promotional literature,         the requirements imposed by the Texas Agriculture Code.
which states that Cherokee has “excellent dryland [ (farmland      The Agriculture Code provides, in part:

with little or no irrigation) ] yield potential.” 2                  (a) When a purchaser of seed designed for planting claims
                                                                        to have been damaged by the failure of the seed to
 *748 Although the Wilkins' 1992 Cherokee crop produced                 produce or perform as represented by warranty or by
a high yield, their 1993 and 1994 Cherokee crops suffered               the label required to be attached to the seed under
from reduced yields. The parties disagree as to the cause of            this subtitle or as a result of negligence, the purchaser
the reduced yield. The Wilkins claim that the 1993–94 crops             must submit the claim to arbitration as provided by
“failed to produce or perform as expected, or as represented            this chapter as a prerequisite to the exercise of the
by [Helena].” They argue that the Cherokee failed because it            purchaser's right to maintain a legal action against the
is not drought resistant or tolerant to charcoal rot.                   labeler....

Helena argues that the Cherokee seed failed because the              (b) Any period of limitations that applies to the claim shall
Wilkins had planted cotton (which reduces soil moisture)                be tolled until the 11th day after the date of filing with the
a year earlier on a portion of the field, which reduced                 commissioner of the report of arbitration by the board of
the Cherokee yield significantly on that part of the field.             arbitration.
According to Helena, Cherokee is tolerant to charcoal rot (but
is not immune) and grows well in dryland conditions (but not         (c) A claim of damages due to the failure of the seed
when the underlying soil has been depleted of its moisture in           as described by Subsection (a) of this section may
a previous cotton crop).                                                not be asserted as a counterclaim or defense in any
                                                                        action brought by a seller against a purchaser until the
The Wilkins sued Helena on February 7, 1995, alleging                   purchaser has submitted a claim to arbitration.
that Helena had violated the Deceptive Trade Practices Act
                                                                     (d) When the court in which an action has been filed
(“DTPA”), breached implied and express warranties, and
                                                                        by a seller of seed described by Subsection (c) of this
committed fraud. On February 21, 1995, Helena filed a plea
                                                                        section receives from the purchaser *749 a copy of the
in abatement and motion to compel arbitration of the Wilkins'
                                                                        purchaser's complaint filed in arbitration, accompanied
claims. On April 5, 1995, the trial court abated the proceeding
                                                                        by a written notice of intention to use the claim as a
and granted Helena's motion to compel. On August 30, 1996,
                                                                        counterclaim or defense in the action, the seller's action
the Wilkins submitted the matter to arbitration. On October
                                                                        shall be stayed. Any period of limitations that applies to
16, 1996, the Texas Plant and Seed Board declined to arbitrate
                                                                        the claim is suspended until the 11th day after the date of
the matter because the crops were not in “field conditions.”
                                                                        filing with the commissioner of the report of arbitration
The trial court subsequently lifted the abatement.
                                                                        by the board of arbitration.

A jury found for the Wilkins on the different theories             TEX. AGRIC. CODE ANN. § 64.002 (Vernon 1995)
of recovery, except on the question of fraud and whether           (emphasis added). The code requires seed bags to provide a
Helena had committed these acts knowingly. The jury                notice alerting the farmer to the requirement of submitting
awarded damages to the Wilkins in the amount of $360,000.


                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               5
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


claims to arbitration. See id. § 64.003. The seed bag tendered                   the report, and the court may give
as an exhibit to this court contains such a notice.                              such weight to the arbitration board's
                                                                                 findings of fact, conclusions of law,
The Agriculture Code sets forth the arbitration procedure, in                    and recommendations as to damages
part, as follows:                                                                and costs as the court determines
                                                                                 advisable. The court may also take into
  (a) A purchaser may begin arbitration by filing ... a sworn                    account any findings of the board of
     complaint and a filing fee, as provided by department                       arbitration with respect to the failure
     rule. The purchaser shall send a copy of the complaint                      of any party to cooperate in the
     to the seller by certified mail. Except in the case of seed                 arbitration proceedings, including any
     that has not been planted, the complaint must be filed                      finding as to the effect of delay in filing
     within the time necessary to permit effective inspection                    the arbitration claim or the arbitration
     of the plants under field conditions.                                       board's ability to determine the facts of
                                                                                 the case.
  ....
                                                                    Id. § 64.004 (Vernon 1995). We did not locate any Texas case
  (c) The commissioner shall refer the complaint and
                                                                    law reviewing these sections of the Agriculture Code as they
     the answer to the arbitration board for investigation,
                                                                    relate to this case. If the Wilkins' claims are barred, then the
     findings, and recommendations.
                                                                    trial court did not have subject matter jurisdiction to hear the
  ....                                                              case.

  (e) The report of the arbitration board shall include findings
     of fact, conclusions of law, and recommendations as to         a. Standard of Review
     costs....                                                       [1]    [2]    [3] The question of whether a trial court has
                                                                    subject matter jurisdiction is a question of law subject to
  (f) In the course of its investigation, the ... board or any of   de novo review. See Mayhew v. Town of Sunnyvale, 964
     its members may:                                               S.W.2d 922, 928 (Tex.1998). We construe the petition in
                                                                    favor of the Wilkins and, if necessary, review the entire record
      (1) examine the purchaser and the seller on all matters
                                                                    to determine if any evidence supports the district court's
         that the arbitration board considers relevant;
                                                                    jurisdiction to hear the cause. See Texas Ass'n of Bus. v.
      (2) grow to production a representative sample of the         Texas Air Control Board, 852 S.W.2d 440, 446 (Tex.1993).
         seed through the facilities of the commissioner or         Unless the pleadings demonstrate the absence of jurisdiction,
         a designated university under the commissioner's           we assume the trial court properly had jurisdiction over *750
         supervision; or                                            the case. See Peek v. Equipment Serv. Co., 779 S.W.2d 802,
                                                                    804 (Tex.1989).
      (3) hold informal hearings....

  ....                                                              b. Construction of Texas Agriculture Code
                                                                     [4] The purpose of statutory construction is to ascertain
  (h) The arbitration board shall consider any field inspection     legislative intent. See Woods v. Littleton, 554 S.W.2d 662,
     or other data submitted by either party in its report and      665 (Tex.1977). Where the intent is clear, it will be given
     recommendation....                                             effect, even if the result appears to be harsh. See Boudreaux
                                                                    v. Texas and N.O.R. Co., 78 S.W.2d 641, 644 (Tex.Civ.App.-
Id. § 64.006 (Vernon Supp.2000). The effect of arbitration is
                                                                    Beaumont 1935, writ ref'd). In ascertaining this intent, the
that:
                                                                    Legislature has provided that words and phrases shall be read
             In any litigation involving a complaint                in context and construed according the rules of grammar and
             that has been the subject of arbitration               common usage. See TEX. GOV'T CODE ANN. § 311.011(a)
             under this chapter, any party may                      (Vernon 1998). A court may consider, among other things,
             introduce the report of arbitration                    the object sought to be obtained and the consequences of
             as evidence of the facts found in                      any particular construction. See id. § 311.023; Cole v. Texas



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              6
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


Employment Comm'n, 563 S.W.2d 363, 367 (Tex.Civ.App.-
Fort Worth 1978, writ dism'd).                                    In furtherance of the non-binding seed arbitration process,
                                                                  the statute requires only that the arbitration board produce a
                                                                  report containing “findings of fact, conclusions of law, and
(1) FRAMING THE ISSUE PROPERLY                                    recommendations as to costs.” TEX. AGRIC. CODE ANN. §
 [5]      [6]    Public policy favors agreements to resolve 64.006 (Vernon 1995). Neither party is required to introduce
legal disputes through agreements to arbitrate. See EZ            the report of arbitration into evidence. Id. § 64.004. The
Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex.1996);              court has discretion to “give such weight to the arbitration
Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 268            board's [report] as [it] determines advisable.” Id. Even if the
(Tex.1992). “Questions of arbitability must be addressed with     language in the *751 first sentence of Section 64.004 (“has
a healthy regard for the federal policy favoring arbitration....” been the subject of arbitration”) is read to require actual
Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc.,         arbitration of the claim (as opposed to submission of the
473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).         claim to arbitration), the second sentence explains what the
The parties must arbitrate any claims that fall within the        court may do, regardless of whether the claim was submitted
scope of the arbitration agreements, even though piecemeal        to arbitration. See id. The court is empowered to consider
litigation might result. See Dean Witter Reynolds, Inc. v.        the parties' failure to cooperate, “including any finding as
Byrd, 470 U.S. 213, 220–21, 105 S.Ct. 1238, 84 L.Ed.2d 158        to the effect of delay in filing the arbitration claim or the
(1985). If the Wilkins had not submitted a claim to arbitration   arbitration board's ability to determine the facts of the case.”
at all, their claim would be barred. The legislature has stated   Id. (emphasis added). The arbitration contemplated by our
very clearly that “the purchaser must submit the claim to         legislature is not intended to replace the parties' right to have
arbitration as provided by this chapter as a prerequisite to the  their day in court. In fact, the legislature expressly accounted
exercise of the purchaser's right to maintain a legal action.”    for the possibility that a party might be delayed (or purposely
TEX. AGRIC. CODE ANN. § 64.002 (Vernon 1995).                     delay) filing a claim for arbitration.

The code states that “the complaint must be filed within the
time necessary to permit effective inspection of the plants        (3) THE STATUTE PROVIDES A REMEDY FOR
under field conditions.” See id. § 64.006 (Vernon Supp.2000).      FAILING TO FILE A CLAIM IN A TIMELY
Here, the Wilkins did not submit the claim to arbitration          FASHION
until well after the time that they began to notice Cherokee's      [7] A strict reading of the Texas Agriculture Code might
poor performance. As a result, the issue before us is whether      lead one to believe that a farmer's failure to submit a claim
this delay in submitting the claim to arbitration acts as a        to arbitration while the crop is in “field conditions” has the
catastrophic bar to the Wilkins' legal claim.                      extreme effect of barring the claim altogether. Yet, the plain
                                                                   language of the statute reveals that there is a fundamental
                                                                   difference between failing to submit the claim in a timely
(2) SEED ARBITRATION IS NON–BINDING                                fashion in comparison to failing to submit a claim at all.
The arbitration scheme for seed claims recognizes that             If a party fails to submit a claim to arbitration in a timely
“farmers and seedmen agree that litigation is not the most         fashion, the trial court may take remedial action in light of
desirable way to settle a complaint about seed.” Op. Tex.          the circumstances of the delay or the conduct of the parties.
Att'y Gen. No. DM–3 (1991). The arbitration process for            If a party fails to submit a claim to arbitration altogether, the
seed, although a potential avenue for settlement without trial,    party may not maintain legal action.
also “provides for an unbiased third party investigation.”
Id. (emphasis added) (citation omitted). Recognizing the
benefits of mandatory non-binding arbitration, the American        (4) THE PARTIES' ACTIONS
Seed Trade Association has worked with state legislators            [8] In the present case, conflicting testimony exists as to
to enact statutes to aid in the investigation and resolution       who was responsible for prolonging the investigation and
of seed claims. See, e.g., AMERICAN SEED TRADE                     negotiation before the suit was commenced. The parties do
ASS'N, Legislative Affairs (visited February 1, 2000) <http://     not dispute that the claim was not submitted to arbitration
www.amseed.com/annrept/ar98/ar98p7.html>; AMERICAN                 until approximately sixteen months after the trial court
SEED TRADE ASS'N, Legislative Affairs (visited February            granted Helena's motion to compel arbitration. The parties
1, 2000) <http:// www.amseed.com/annrept/legis.html>.              instead differ as to who bears the responsibility for causing


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              7
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


for the delay. In the end, the State Seed and Plant Board          not complain that his testimony amounts to an unreliable
refused to arbitrate the matter because they were unable to        scientific opinion.
examine the crops in “field conditions.” We note that the
parties were apparently attempting to effectuate a non-trial
resolution of the Wilkins' claims. We note also that Helena        a. Standard of Review
could have moved to dismiss the suit at any time after the          [9]    [10] Whether the trial court properly admitted Dr.
trial court agreed to compel arbitration, rather than wait until   Pleunneke's testimony is subject to an abuse of discretion
the board issued its findings. Such a motion, if made before       standard of review. See E.I. du Pont de Nemours and Co.
the Wilkins eventually sought arbitration, would have been         v. Robinson, 923 S.W.2d 549, 558 (Tex.1995); Wal–Mart
very compelling because the Wilkins had not fulfilled the          Stores, Inc. v. Garcia, 974 S.W.2d 83, 86 (Tex.App.-San
necessary conditions to maintaining their legal action.            Antonio 1998, no pet.). We examine the entire substance of
                                                                   the expert's testimony “to determine if the opinion is based on
In the present case, Helena waited until after the                 demonstrable facts and does not rely solely on assumptions,
Board determined “that the request did not qualify for             possibility, speculation, and surmise.” Merrell Dow Pharms.,
arbitration” (on October 16, 1996) before it moved to dismiss      Inc. v. Havner, 953 S.W.2d 706, 712–13 (Tex.1997). The
the Wilkins' lawsuit (on November 16, 1996). A positive            decision to admit evidence is in the discretion of the trial
outcome of the delay is that the parties were continuing to        court. See Robinson, 923 S.W.2d at 558 (citing Downer
attempt resolution of the claim without the consequences           v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42
of litigation. An unfortunate result of the delay is that          (Tex.1985)); Ginsberg v. Fifth Court of Appeals, 686 S.W.2d
the arbitrators could not investigate the crops under “field       105, 108 (Tex.1985). We have stated that an abuse of
conditions.” Helena could not, therefore, have a neutral expert    discretion exists when the court fails to analyze or apply the
investigate the efficacy of its seed. Helena was not, however,     law correctly. Muecke v. Hallstead, No. 04–97–00483–CV,
without remedy. The trial court could have considered all of       2000 WL 328129, at *2 (Tex.App.-San Antonio March 29,
the circumstances surrounding the delay in adjudicating the        2000, no pet. h.).
case.

                                                                   b. Admissibility
We find that an arbitration board's inability to investigate
                                                                    [11] Texas Rule of Evidence 702 permits a witness who
crops in “field conditions” does not bar the plaintiff's claim
                                                                   is “qualified as an expert by knowledge, skill, experience,
in a case that falls under Chapter 64 of the Texas Agriculture
                                                                   training, or education” to testify “in the form of an opinion
Code. The defendant has adequate remedies that could have
                                                                   or otherwise” if “scientific, technical, or other specialized
been pursued after the trial court ordered arbitration. In
                                                                   knowledge will assist the trier of fact to understand the
addition, the trial court has the necessary tools to fashion a
                                                                   evidence or to determine a fact in issue.” TEX.R. EVID.
remedy itself during trial if necessary. We choose to exercise
                                                                   702. Such testimony must not be substantially outweighed
restraint here. We do not wish to make law where our
                                                                   by the danger of unfair prejudice, confusion of the issues,
legislature has already spoken. The trial court was empowered
                                                                   or other factors. TEX.R. EVID. 403. There exists no bright-
to take such delay into account under *752 Section 64.004
                                                                   line test to guide us as to whether a particular witness is
of the Agriculture Code. Because the Wilkins submitted their
                                                                   qualified to testify as an expert. See James v. Hudgins, 876
claim to arbitration, we conclude that their claim is not
                                                                   S.W.2d 418, 421 (Tex.App.-El Paso 1994, writ denied) *753
barred. 3 The trial court had jurisdiction to hear the case.       (noting that the absence of “definite guidelines for making the
                                                                   determination of whether a witness's education, experience,
                                                                   skill, or training qualify the witness as an expert”). We focus
2. Expert Testimony
                                                                   instead on whether the expert's expertise “goes to the very
In its fifth issue, Helena argues that the trial court abused
                                                                   matter on which he or she is to give an opinion.” Broders v.
its discretion in admitting the testimony of Wilkins' expert,
                                                                   Heise, 924 S.W.2d 148, 153 (Tex.1996).
Dr. Pleunneke (“Pleunneke”). His opinion was that Cherokee
seed is not an appropriate grain sorghum for dry land crops
where the Wilkins' farm is located (Starr County). 4 Helena        c. Did the Trial Court Err in Admitting Dr. Pleunneke's
argues that Pleunneke is unqualified to testify as an expert       Expert Testimony?
and that his testimony as an expert is unreliable. Helena does



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                           8
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


                                                                     Although Pleunneke is not a plant pathologist, the trial
(1) QUALIFICATIONS                                                   court's decision to allow him to testify is not an abuse of
 [12] Helena argues that Pleunneke is unqualified to render          discretion. The trial judge could have reasonably concluded
an opinion regarding Cherokee's ability to tolerate charcoal         that Pleunneke's background qualifies him to testify as to
rot. Helena also claims that because Pleunneke is not a plant        the viability of Cherokee seed in the harsh Starr County
pathologist, he is unqualified to render an opinion on diseases      environment. Although susceptibility to charcoal rot, a plant
affecting plants.                                                    disease, is the claimed Achilles' Heel of Cherokee, Pleunneke
                                                                     need not necessarily be a pathologist to testify to that effect.
At trial, the Wilkins had the “burden to show that [Pleunneke]       He used his experience to formulate a conclusion on the
possess[es] special knowledge as to the very matter on which         basis of research, study of independent tests, and observations
he” testified. Broders, 924 S.W.2d at 152–53; Negrini v.             regarding Cherokee's suitability for dry land farming. How
State, 853 S.W.2d 128, 130–31 (Tex.App.-Corpus Christi               disease affects plants is undoubtedly an important part of
1993). The central issue regarding Pleunneke's qualifications        plant science and the ability to manage crop production
is not whether he is qualified to render an opinion with             effectively. We have permitted, for example, an orthopedic
respect to Cherokee's inherent susceptibility to charcoal rot.       surgeon to give expert testimony regarding a radiologist's
Instead, the issue regarding his qualifications is whether he is     interpretation of x-rays and the radiologist's subsequent
qualified to render an opinion regarding Cherokee's suitability      actions. See *754 Silvas v. Ghiatas, 954 S.W.2d 50,
for dry land farming. In determining Pleunneke's qualification       53–54 (Tex.App.-San Antonio 1997, pet. denied) (stating
to provide such an opinion an important factor to consider           that “[t]heir professions are interrelated and their specialties
is his ability to conduct research, gather information, and          intertwined”).
assimilate the data in a meaningful manner relating to a plant's
performance. Is he able to marshal the necessary observations        The trial court had the opportunity to consider whether
in support of his conclusion?                                        Pleunneke was qualified to render expert testimony. We find
                                                                     that Helena's voir dire and cross-examination of Pleunneke
Helena argues that Pleunneke's ability to testify as an expert       could all have been factors that the jury considered as to
is limited to those areas within his experience and training.        the weight of his testimony. We conclude that because his
See TEX.R. EVID. 702. Pleunneke is a plant scientist and             qualifications match the area in which he offered testimony,
an agronomist. He does not have to be a pathologist (one             the trial court did not abuse its discretion in allowing
who studies plant disease). His occupational status does not         Pleunneke to testify as an expert.
undermine his ability to testify as an expert in this case. See
Nunley v. Kloehn, 888 F.Supp. 1483, 1488 (E.D.Wis.1995)
(stating that “[t]he focus ... is on the ‘fit’ between the subject   (2) RELIABILITY
matter at issue and the expert's familiarity therewith, and           [13] Helena also argues that Pleunneke's testimony is
not on ... the expert's title”); Broders, 924 S.W.2d at 153          unreliable. Helena does not argue that Pleunneke's testimony
(cautioning that “[o]ur holding does not mean that only a            is scientifically unreliable, which would subject it to an
neurosurgeon can testify about the cause in fact of death            analysis of the elements articulated in E.I. du Pont de
from an injury to the brain”) (emphasis added); Blan v. Ali,         Nemours and Co., Inc. v. Robinson, 923 S.W.2d 549
7 S.W.3d 741, 745 (Tex.App.-Houston [14th Dist.] 1999, no            (Tex.1995). Yet, the testimony must still comport with the
pet.) (indicating that a physician who serves as an expert           principle of reliability articulated in Robinson. See Gammill
witness need not be a specialist in a particular branch of           v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726
the profession on which the physician offers testimony).             (Tex.1998). Even though the subject matter of Pleunneke's
Pleunneke has had experience, “on occasion” with charcoal            testimony is scientific in nature, a Robinson inquiry is not
rot in grain sorghum.                                                necessarily appropriate. See id. at 727. Following the lead of
                                                                     Gammill, the inquiry becomes whether an “analytical gap”
Agronomy is the “science of soil management and crop                 exists; do Pleunneke's observations support his conclusions?
production.” THE CONCISE OXFORD DICTIONARY 19                        See id. at 727.
(7th ed.1988). The Wilkins offered evidence that Pleunneke
has experience addressing issues regarding plant physiology,         Pleunneke explained that Cherokee seed performs (that is, has
nutrition, and environmental factors that affect plant growth.       good characteristics of growth and a favorable yield) very
                                                                     well when there is adequate rainfall. In non-irrigated trials


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               9
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


where precipitation was infrequent, Cherokee did not perform       court should assess all the evidence and reverse for a new
(consistently) as well as other seed manufactured by Helena.       trial only if the challenged finding is so against the great
This observation, by itself, would suggest that Cherokee is        weight and preponderance of the evidence as to be manifestly
not suited to dry land farming because there is no expectation     unjust. See Pool v. Ford Motor Co., 715 S.W.2d 629, 635
of consistent precipitation in a dry land farming environment.     (Tex.1986); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).
                                                                   “Under this analysis, we are not fact finders, we do not
Yet, Pleunneke agreed with the statement that certain “tests       pass upon the credibility of witnesses, nor do we substitute
aren't really something that tells us very much about what         our judgment for that of the trier of fact, even if there
might happen in Starr County.” He testified, “They're              is conflicting evidence upon which a different conclusion
generated statistics and should be taken with a grain of           could be supported.” Thrift v. Hubbard, 974 S.W.2d 70, 76
salt.” He acknowledged that a range of performance exists          (Tex.App.-San Antonio 1998, pet. denied).
for Cherokee, and that “[w]ith that kind of variability ...
comparing them all ...,” Pleunneke would have done more
than rely on the tests. (emphasis added). He recommended           b. Causation and Liability (First and Third Issues)
inquiring of the local farmers “to see what varieties have been    The court submitted the following questions to the jury; the
working for them on large acreages.”                               jury answered “yes” to each:

                                                                     1. Did the defendant engage in any false, misleading, or
Because our inquiry is whether Pleunneke's observations
                                                                        deceptive act or practice that was a producing cause
support his conclusions, we find the testimony to be reliable.
                                                                        of damages to the plaintiffs? [“False, misleading, or
His observations include not only the trials in question, but
                                                                        deceptive act or practice” defined.]
encompass research into other sources (weather and weed
control reports, disease publications, and testing). Pleunneke       2. Did the defendant engage in any unconscionable action
also based his testimony on comparisons with crops adjacent             or course of action that was a producing cause of any
to the Wilkins' farm.                                                   damages to the plaintiffs? [“Unconscionable action or
                                                                        course of action” explained.]
Based on Pleunneke's testimony and his supporting evidence,
his opinion as an expert is reliable. Although Helena asserts        3. Was the failure, if any, of the defendant to comply with a
that his discounting of the trials are fatal to his reliability,        warranty a producing cause of damages to the plaintiffs?
we understand his statement to be that there are factors to             [“Failure to comply with a warranty” defined.]
consider other than merely the trials. Because his conclusion
flows from his observation of these other factors, as well         The jury answered “no” to the fourth question, which
as the trials, we conclude that the trial court did not err in     addressed fraud. Questions 5–8 concern damages and
admitting his testimony.                                           attorney's fees. An affirmative answer to any of the first three
                                                                   questions would have been sufficient to allow the jury to
                                                                   award damages. 5
3. Sufficiency of Evidence (First, Second, & Third Issues)
Helena complains that the Wilkins' evidence is legally
and factually insufficient to support the jury verdict as to       (1) EVIDENCE SUFFICIENT TO SUPPORT
causation, liability, and damages.                                 CAUSATION? (JURY QUESTIONS 1–3)) 6
                                                                    [14] The issue is whether legally and factually sufficient
                                                                   evidence exists to support the proposition that Helena's failure
a. Standard of Review
                                                                   to comply with a warranty, or Helena's deceptive act or
In considering a “no evidence” or legal sufficiency point, we
                                                                   unconscionable action, was a producing cause of the Wilkins'
consider only the evidence favorable to the decision of the
                                                                   damages. Because the trial court did not err in admitting Dr.
trier of fact and disregard all evidence and inferences to the
                                                                   Pleunneke's expert testimony (discussed earlier), sufficient
contrary. See Davis v. City of San Antonio, 752 S.W.2d 518,
                                                                   evidence exists in support of the jury's verdict as to causation.
522 (Tex.1988). If more than a scintilla of evidence is offered
on a fact, the court should overrule the issue. See Kindred
                                                                   In addition to Pleunneke's testimony, the various field
v. *755 Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983). In
                                                                   trials that were performed across Texas also support
reviewing a “great weight” or factual insufficiency point, the


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            10
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


the possibility that Helena knew that its seed may                 More importantly, Helena made written representations in
not be suited for dryland farming. Although some of                its seed catalogue that indicated Cherokee's suitability for
these trials were discussed during the testimony of                dryland farming was better than the other seed brands it
Pleunneke, others were referenced during the testimony of          sold. Not every seed brand was purported to have “excellent”
Helena's corporate representative. Ample evidence exists           dryland yield potential. Helena's statements regarding the
regarding the actual representations that Helena made              tolerance level of Cherokee to charcoal rot do not amount
regarding the seed (promotional literature and statements          to imprecise or vague opinions. Instead, they are used
by sales representatives, for example). When evidence of           for comparison purposes with other Helena brands, and
Cherokee's lackluster dryland performance is included, these       were made on multiple occasions both orally as well as in
representations amount to mis-representations.                     writing. Cf. Autohaus, Inc. v. Aguilar, 794 S.W.2d 459, 463
                                                                   (Tex.App.-Dallas 1990), writ denied per curiam, 800 S.W.2d
                                                                   853 (Tex.1991).
(A) FAILURE TO EXPLAIN OTHER CAUSES
 [15] Helena asserts that the Wilkins' prior cotton crop is the     [17] The knowledge enjoyed by the buyer and seller is
cause of the poor yield. Helena also argues that one of the        important in determining whether statements amount to
possible reasons for the Wilkins' poor yield is related to over    puffing. The “decisive test ... is whether the seller asserts a
planting in 1993. The Texas Supreme Court has stated that          fact of which the buyer is ignorant or merely states an opinion
“if there are other plausible causes of the injury or condition    or judgment on a matter of which the seller has no special
that could be negated, the plaintiff must offer evidence           knowledge and on which the buyer may be expected also to
excluding those causes with reasonable certainty.” Merrell         have an opinion and to exercise his judgment.” Id. (citing
Dow Pharm. v. Havner, 953 S.W.2d 706, 720 (Tex.1997)               Royal Bus. Machs., Inc. v. Lorraine Corp., 633 F.2d 34, 42
(emphasis added); see E.I. du Pont de Nemours & Co. v.             (7th Cir.1980)). Although the Wilkins should be expected to
Robinson, 923 S.W.2d 549, 559 (Tex.1995) *756 (regarding           exercise their judgment as to which seed to plant, Helena had
as speculation an expert who failed to rule out other causes       “special knowledge” in light of their seed's performance in
of the damage); Parker v. Employers Mut. Liab. Ins. Co., 440       previous trials.
S.W.2d 43, 47 (Tex.1969) (requiring other reasonable causal
explanations to be excluded in order for a possible cause to be    We conclude that the statements do not amount to mere
elevated to the status of “probable”). The Wilkins explained       puffing because of their specificity and the disparate positions
that the cotton-grain rotation is required by the local crop-      of knowledge enjoyed by the buyer and seller.
management office; his neighbor rotated cotton and grain
on certain portions of his acreage without adverse effects;
and the alleged “over planting” occurred because the Wilkins       (C) ACCURACY OF STATEMENTS
followed the recommendations of Helena in planting their           Helena argues that the weight of the evidence supports
1993 crop.                                                         the accuracy of the statements relied upon by the Wilkins;
                                                                   the brochure language is qualified by the statement that
Here, the jury could have considered the explanations that         the characteristics of the different seed are “averages”
the Wilkins offered to rebut the possibility of other causes. In   and “can vary depending upon location, date of planting,
light of these explanations, we do not believe that the verdict    environmental conditions, [and] soil type.” Although Wilkins
is against the great weight and preponderance of the evidence      does not respond to this point, Helena does not point to
so as to be manifestly unjust.                                     other statements allegedly relied upon the Wilkins (such as
                                                                   oral representations and recommendations made by Helena's
                                                                   representatives). Even if the brochure does not amount to
(B) NON–ACTIONABLE PUFFING                                         a misrepresentation, other evidence of misrepresentations
 [16] Helena also contends that its actions are non-actionable     exists in the record (testimony by Wilkins and Helena sales
puffing. If the statements in question lack “the specificity       representative) that is factually sufficient to support the jury
of an affirmation of fact upon which a warranty could              verdict.
be predicated,” then they may amount to puffing, and
would not be actionable. Id. In the present case, Helena
made multiple oral representations to Wilkins regarding            (2) INSUFFICIENT EVIDENCE OF
Cherokee's suitability for dry land farming on his acreage.        UNCONSCIONABILITY (JURY QUESTION 2)


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            11
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


 [18] Helena asserts, without extensive briefing, that no            Beaumont 1969, no writ) (stating that the appellee “cannot
evidence exists to support the jury's verdict regarding              rely upon breach of implied warranties because implied
unconscionability. Because we have concluded that *757               warranties were excluded in the written instrument” that the
Helena's actions did not amount to mere puffing, at least a          appellee signed and accepted).
scintilla of evidence exists (in the form of Wilkins' testimony)
that would support the verdict that Helena took “advantage           We find that the warranty language effectively disclaimed
of the lack of knowledge, ability, experience, or capacity of        the implied warranties of merchantability and fitness for
a person to a grossly unfair degree.” Because Helena does            a particular purpose, as well as express warranties. We
not complain that the evidence is factually insufficient as to       conclude that a warranty upon which liability can be based
unconscionability, we need not consider whether more than            does not appear to exist in support of jury question number
a scintilla of evidence exists on this point. Even if it did not,    3. Recovery under the first and second jury questions is still
the verdict would still be upheld as to the first question in the    possible.
jury charge.

Helena argues that because it did not require payment for the        c. Damages (Second Issue)
seed in 1994, then there is no consideration paid in order to        We have found no error in the trial court's entry of judgment
give rise to an unconscionability claim. Even if this is true, the   as to arbitration (fourth issue) or in the admission of expert
damages awarded could be supported by the result the jury            testimony (fifth issue). We also have found that the evidence
reached as to the first question.                                    is legally and factually sufficient to support the jury verdict
                                                                     as to causation (Helena's first issue, relating to jury questions
                                                                     one and two). We now turn to the matter of damages. In its
(3) RELEVANT WARRANTIES WERE EXCLUDED                                second issue, Helena argues that the Wilkins failed to prove
(JURY QUESTION 3)                                                    the amount of their damages with reasonable certainty and
 [19] Helena argues that liability cannot be based on a breach       the Wilkins' prior losses do not support lost profit damages.
of warranty because “relevant warranties were excluded.”             Helena also contends that damages should have been limited
Although a seed company may exclude implied warranties               to the purchase price of the seed.
by course of dealing and trade usage, we did not locate
any evidence to this effect in the record. Helena also
argues that it excluded the warranties by written document           (1) LIMITATION TO PURCHASE PRICE OF SEED
(here, on the seed bag, purchase ticket, and invoices). The           [20] Helena's limitation of liability to the purchase price of
purchase agreement (unsigned by the Wilkins) that is in the          the seed is effective only to damages arising from the breach
record provides “conditions of sale” that exclude the implied        of warranty. See Southwestern Bell Tel. Co. v. FDP Corp.,
warranties of merchantability and fitness for a particular           811 S.W.2d 572, 577 (Tex.1991). A contractual limitation on
purpose in what is relatively conspicuous print. The Wilkins         damages *758 is not effective to statutorily created rights,
respond that “it would ‘be difficult’ to replace such a large        such as a right to recover for deceptive acts. See id. at 576.
volume of seed” at the stage when the seed is delivered.             Because we have concluded that the judgment should be
                                                                     affirmed as to the first and second jury questions, we address
The Uniform Commercial Code adopted in Texas permits a               the argument regarding sufficiency of the evidence relating
merchant to exclude or limit warranties on goods. See TEX.           to damages.
BUS. & COM.CODE ANN. § 2.316 (Vernon 1994).

                                                                     (2) REASONABLE CERTAINTY REGARDING
We have previously applied a non-warranty clause in favor
                                                                     DAMAGES
of a seed company. See Asgrow Seed Co. v. J.R. Gulick,
                                                                      [21] Helena argues that because the Wilkins have a history
420 S.W.2d 438 (Tex.Civ.App.-San Antonio 1967, writ ref'd
n.r.e.). In Asgrow, this court reversed a trial court's judgment     of net losses from 1993–96 7 (which include years when they
in favor of a purchaser of seed; the sales contract, seed            did not farm with Cherokee), they have failed to establish
bags, and invoices all contained a non-warranty clause that          a history of profits. See Texas Instruments, Inc. v. Teletron
provided, in part, “Asgrow gives no other or further warranty,       Energy Management, 877 S.W.2d 276, 278–80 (Tex.1994).
express or implied.” Id. at 440 n. 1, 444; see also John             The Teletron court reiterated the rule established in Southwest
Deere Co. v. Tenberg, 445 S.W.2d 40, 42–43 (Tex.Civ.App.-


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              12
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097,                  51 (Tex.1998). “In the calculation of net profits, allowance
1098–1099 (1938):                                                      should be made for expenditures which the plaintiff would
                                                                       have been compelled to make....” Id.

   In order that a recovery may be had on account of loss of           Wilkins testified as to the method he used to arrive
   profits, the amount of the loss must be shown by competent          at the damage calculation. For example, he relied upon
   evidence with reasonable certainty. Where the business              measurements by a government agency in order to determine
   is shown to have been already established and making a
   profit at the time when the contract was breached or the tort                   acreages to come up with deficits....
   committed, such pre-existing profit, together with other                        I took the yield per farm from
   facts and circumstances, may indicate with reasonable                           the [government *759 agency] and
   certainty the amount of profits lost.                                           multiplied it times the number of acres
   Id. at 279 (citation omitted) (emphasis added). Yet, at least                   of grain that was planted per farm to
   one court of appeals has held that “the absence of a history                    come up with the number I have under
   of profits does not, by itself, preclude a new business                         yield.... I took the actual yield based on
   from recovering lost future profits.” Orchid Software, Inc.                     the sales records of what we produced
   v. Prentice–Hall, Inc., 804 S.W.2d 208, 211 (Tex.App.-                          and subtracted that from what yield
   Austin 1991, writ denied). The Fifth Circuit has recognized                     should have been ... [t]o come up with
   this trend in Texas law. See Hiller v. Manufacturers Prod.                      a deficit, and then I multiplied the
   Research Group of N. Am., Inc., 59 F.3d 1514, 1519, 1521                        deficit times the number of acres, and
   (5th Cir.1995) (declining to regard “the absence of a profit                    then I multiplied that times the price.
   history ... as dispositive of the recoverability of lost profits”
   with respect to a new business). Because history of loss            Wilkins admitted that he did not include expenses in
   does not preclude a judgment for future lost profits, the           computing his estimated losses, such as additional lease
   issue becomes whether the Wilkins proved their damages              payments, grain elevator costs, and transportation charges.
   properly and with certainty.                                        These expenses would have been higher if the Wilkins
 [22]      [23] “[P]recise calculation of anticipated profits          enjoyed a greater yield during the years in question. Yet,
has never been essential to recovery by any business. It               the record reflects (both in the form of testimony as well as
is sufficient if there is data from which the loss may be              exhibits) what the lease payments would have been. Wilkins
ascertained with reasonable certainty.” Id. (emphasis added)           testified also that “check-off that the grain elevator deducts”
(citations omitted). In the present case, evidence exists from         could have been refunded, which explains why he did not
which the jury could have determined damages. Helena                   add that potential cost to the damages sought. He testified
responds that the factors given to the jury, such as the possible      that he believed the costs for drying the grain “were reflected
yield of the crops, were speculative in nature, thus making an         as a shrinking in yield” rather than as an actual charge. A
objective determination of the damages impossible.                     copy of the statement in which Helena canceled the Wilkins'
                                                                       debt for seed in 1994 was admitted as an exhibit as well.
Helena also argues that the Wilkins failed to account for              Finally, Wilkins testified to the amount of acreage devoted
net profits. “The general rule for assessing damages for crop          to seed other than Cherokee. With this evidence, the jury
losses, as expressed in a number of Texas precedents, is ‘the          could have reduced the yield attributable to non-Cherokee
market value of the lost portion of his crop, as measured              seed in arriving at their damage award, recalculated the lease
at maturity of the crop, less the cost he would have had in            payments, and regarded the various elevator costs as either
harvesting and marketing the lost portion.’ ” See International        reflected in the yield or refundable (and not part of the net
Harvester Co. v. Kesey, 507 S.W.2d 195, 197 (Tex.1974).                cost calculation).
Another court has stated, “The correct measure of damages
for loss of profits is net profits, which is defined as ‘what          The Wilkins' estimated damages (which they submitted to
remains in the conduct of a business after deducting from its          the jury) was $490,855.58. The jury's award of $360,000
total receipts all of the expenses incurred in carrying on the         is $130,855.58 lower than what the Wilkins sought. The
business.’ ” See St. Paul Surplus Lines Ins. Co. v. Dal–Worth          Wilkins did not fail to provide the necessary factual data
Tank Co., 917 S.W.2d 29, 60 (Tex.App.-Amarillo 1995),                  to support their claim of lost net profits with reasonable
aff'd in part, reversed in part on other grounds, 974 S.W.2d


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               13
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


certainty. Calculating the lost profits in consideration of all of
the relevant factors is not impossible, particularly in light of     b. Standard of Review
the $130,855.58 deduction that the jury made to the Wilkins'          [24] [25] The award of prejudgment interest during periods
requested damages.                                                   of delay is generally left to the discretion of the trial court.
                                                                     See Lege v. Jones, 919 S.W.2d 870, 875–76 (Tex.App.-
We find that the award is within the range of evidence offered       Houston [14th Dist.] 1996, no writ). The trial court's decision
by the Wilkins. We conclude that the damages awarded are             in refusing to offset from its interest calculations periods of
supported with reasonable certainty.                                 delay caused by a litigant are reviewed under the abuse of
                                                                     discretion standard. A trial court abuses its discretion if its
                                                                     action “is arbitrary, unreasonable, and without reference to
4. Pre–Judgment Interest (Wilkins' Issue on Cross–                   [any] guiding [rules and] principles.” Goode v. Shoukfeh, 943
Appeal)                                                              S.W.2d 441, 446 (Tex.1997); W. Wendell Hall, Standards
On cross-appeal, the Wilkins argue that the trial court erred        of Review in Texas, 29 ST. MARY'S L.J. 351, 362 (1998).
when it computed prejudgment interest from the date the court        Because the offset is discretionary rather than mandatory, we
lifted the abatement (October 23, 1996). The Wilkins claim           do not substitute our opinion for that of the trial court. See City
that the trial court's judgment should order pre-judgment            of Alamo v. Casas, 960 S.W.2d 240, 260 (Tex.App.-Corpus
interest to accrue from November 17, 1994 (which reflects six        Christi 1997, pet. denied).
months after the date of the alleged “occurrence,” May 20,
1994).
                                                                     c. Discussion
                                                                     In Cavnar, the Texas Supreme Court held that, “as a matter of
a. Preservation of Error                                             law, a prevailing plaintiff may recover prejudgment interest
Helena maintains that because the Wilkins argue a theory             compounded daily (based on a 365–day year) on damages that
of recovery regarding prejudgment interest on appeal that is         have accrued by the time of judgment.” Cavnar v. Quality
different from that argued below, they have not preserved            Control Parking, 696 S.W.2d 549, 554 (Tex.1985). The court
error regarding this issue. In their proposed judgment,              later abrogated the Cavnar holding and explained that the
attached to their Motion for Entry of Judgment, “[p]re-              “[w]hen the Court decided Cavnar, there was no statute
judgment interest is calculated to commence 180 days [after          governing prejudgment interest.” Johnson & Higgins of Tex.,
the Wilkins notified Helena of the Wilkins' problem with             Inc. v. Kenneco Energy, 962 S.W.2d 507, 530 (Tex.1998).
the seed].” In their Motion to Modify, Correct or Reform             In Johnson, the court adopted the statutory predecessor to
Judgment, the Wilkins ask for an award of pre-judgment               the Texas Finance Code and held that “prejudgment interest
interest “pursuant to the terms of Article 5069–1.05(6),”            begins to accrue on the earlier of (1) 180 days after the
which the Texas Legislature repealed in 1997 and replaced            date a defendant receives written notice of a claim or (2)
with Section 304.108 of the Finance Code. See TEX.                   the date suit is filed.” Id. at 531; see TEX. FIN.CODE
FIN.CODE ANN. § 304.108 (Vernon 1998 & Supp.2000).                   ANN. § 304.104 (Vernon Supp.2000) (providing similar
On appeal, the Wilkins argue for an award of pre-judgment            provisions). The court recognized that the statutory approach
interest under Cavnar v. Quality Control Parking, Inc., 696          to prejudgment interest “ ‘works as a system of rewards and
S.W.2d 549 (Tex.1985). In their brief, the Wilkins appear to         penalties' intended to encourage settlements.” Johnson, 962
concede that their reliance on the predecessor to Chapter 34 of      S.W.2d at 530–31 (citation omitted).
the Finance Code, Article 5069–1.05(6), “was inappropriate.”
                                                                     Accrual of prejudgment interest is not automatic. For
The Wilkins may have waived their right to complain on               example, “a court may order that prejudgment interest does
appeal regarding prejudgment interest because they state a           not accrue during periods of delay in the trial.” Id. §
different ground for the relief sought. See TEX.R.APP. P.            304.108(a). “A court shall consider: (1) periods of delay
33.1(a)(1)(A). Assuming, without *760 deciding, that the             caused by a defendant; and (2) periods of delay caused
issue is preserved for our review, we conclude that the trial        by a claimant.” TEX. FIN.CODE ANN. § 304.108(b)
court's decision to award prejudgment interest beginning on          (Vernon Supp.2000). Johnson recognizes that this provision,
October 23, 1996 is not an abuse of discretion.                      among others, helps encourage settlements. See Johnson, 962
                                                                     S.W.2d at 529 (discussing the predecessor to § 304.108).
                                                                     Yet, “[t]he statute does not mandate such offsetting, which is


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              14
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)


entirely within the discretion of the trial court.” Casas, 960       has been the subject of arbitration under this chapter, ...
S.W.2d at 260.                                                       [t]he court may also take into account ... any finding as
                                                                     to the effect of delay in filing the arbitration claim ....”)
 [26] The record reflects the Wilkins' understanding of              (emphasis added). Therefore, even if we view “must” in
Texas law regarding the necessity of arbitrating seed claims.        section 64.002 of the Texas Agriculture Code as directory
The Wilkins waited sixteen months after the trial court              rather than mandatory, and even if the Wilkins' failure
abated the matter before submitting their claim to arbitration.      to timely institute arbitration was not jurisdictional, their
Conversely, the Wilkins argue that they did not cause any            failure to timely submit their claim to arbitration during the
delay. They argue that any delay stems from Helena's desire          abatement ordered for that purpose should have resulted in the
to continue negotiations.                                            dismissal of their claims arising out of the label on the seed
                                                                     package. Cf. Hines v. Hash, 843 S.W.2d 464, 469 (Tex.1992)
Given the parties' actions, the trial court could have               (A trial court should dismiss a plaintiff's DTPA suit if it fails
reasonably commenced prejudgment interest after it lifted the        to give the notice required by the DTPA “while the action is
abatement. It could have considered the role that each party         abated for that purpose…. See Miller v. Kossey, 802 S.W.2d
played in giving rise to the pretrial delay and concluded that       873, 876–77 (Tex.App.—Amarillo 1991, writ denied) (no
the Wilkins had the most discretion in determining when to           notice for more than six months after abatement granted until
submit the claim for arbitration.                                    date set for trial).”).



                       CONCLUSION                                              DTPA—MISREPRESENTATION
                                                                            APART FROM LABEL OR WARRANTY
We affirm the trial court's judgment.
                                                                     Apart from the information printed on the labels on the
                                                                     seed packages, the Wilkins allege only one misrepresentation.
                                                                     According to the Wilkins, Helena representative Elmore told
Dissenting opinion by: SARAH B. DUNCAN, Justice.
                                                                     them that Cherokee was a “good” seed. However, this alleged
                                                                     misrepresentation amounts to no more than non-actionable
 *761 SARAH B. DUNCAN, Justice, dissenting.                          puffing. Prudential Ins. Co. of America v. Jefferson Assocs.,
I respectfully dissent.                                              Ltd., 896 S.W.2d 156, 163 (Tex.1995) (holding statements
                                                                     that a “building was ‘superb’, ‘super fine’, and ‘one of the
                                                                     finest little properties in the City of Austin’ ” “were not
    FAILURE TO PERFORM AS REPRESENTED                                misrepresentation of material fact but merely ‘puffing’ or
          ON WARRANTY OR LABEL                                       opinion”). Nor will this statement support the jury's finding
                                                                     that Helena and Hyperformer committed an unconscionable
The majority holds the Wilkins' claims are not barred because        act or course of action. See Latham v. Castillo, 972 S.W.2d 66,
they “submitted their claim to arbitration,” and “[t]he trial        68 (Tex.1998) (“To be actionable under subsection (A), the
court was empowered to take such delay into account under            resulting unfairness must be ‘glaringly noticeable, flagrant,
Section 64.004 of the Agriculture Code.” Helena Chem. Co.            complete and unmitigated.’ ” (quoting Chastain v. Koonce,
v. Wilkins, 18 S.W.3d 744, 751-52 (Tex.App.—San Antonio              700 S.W.2d 579, 584 (Tex.1985))).
2000, no pet. h.). However, it is undisputed the Wilkins did
not request arbitration until approximately sixteen months           Because the Wilkins' claims arising out of alleged
after the suit was abated for that purpose and, as a result, their   misrepresentations apart from the label on the seed package
claims that they were “damaged by the failure of the seed            are not actionable, and their claims arising out of the label are
to produce or perform as represented by warranty or by the           barred by their failure to timely institute arbitration, I would
label required to be attached to the seed” 1 were not arbitrated;    reverse the trial court's judgment and render judgment in favor
rather, the arbitration board determined the Wilkins' “request       of Helena and Hyperformer. Because the majority fails to
did not qualify for arbitration.” Accordingly, section 64.004        do so and instead affirms the trial court's judgment, I must
does not apply. See TEX. AGRIG. CODE ANN.. § 64.004                  respectfully dissent.
(Vernon 1995) (“In any litigation involving a complaint that


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              15
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)



All Citations

18 S.W.3d 744


Footnotes
1      Sorghum: “any of an economically important genus (Sorghum ) of Old World tropical grasses similar to Indian corn in
       habit ... with ... spikelets in pairs on a hairy rachis [ (axial structure) ]; esp: a cultivated plant (as a grain sorghum or
       sorgo). ....” WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 1126 (1991).
2      The Cherokee seed is also purported to have “good field tolerance” to charcoal rot. When grain sorghum develops
       charcoal rot, the stem becomes weak. It “lodges,” or literally “falls down,” which reduces yield. The best height for
       harvesting sorghum with a combine is chest-high, because the harvesting equipment cannot pick it as effectively if it is
       shorter. Also, if the sorghum is shorter, the combine will pull in other undesirable parts of the plant (called “trash”), as
       well as dirt and rocks.
3      Our resolution of Helena's issue regarding the Wilkins' failure to arbitrate in a timely fashion is consistent with a Texas
       case discussed during oral argument. In Hines v. Hash, the Supreme Court of Texas affirmed the judgment of the trial
       court in a DTPA case Hines failed to give Hash the statutory notice of an impending DTPA claim prior to commencing suit.
       See Hines v. Hash, 843 S.W.2d 464, 469 (Tex.1992) (concluding “that if a plaintiff files an action for damages under the
       DTPA without first giving the required notice, and a defendant timely requests an abatement, the trial court must abate the
       proceedings”). The court explained that the court of appeals erred in reversing and remanding the case because Hash
       “waived notice under the DTPA by failing to request abatement.” Id. Our result today is not at odds with Hines because
       we recognize that filing a claim for arbitration is necessary in order to maintain a legal action. When an untimely claim for
       arbitration is filed, the Agriculture Code provides the trial court with ample room to fashion a remedy.
4      “Dry land” refers to non-irrigated land that relies upon natural precipitation for moisture. The viability of a dry land parcel
       is relative to the amount of rainfall it receives. Whether a seed is suitable for dry land farming depends upon various
       factors; for example, its ability to tolerate diseases such as charcoal rot determines whether a seed is suitable for dry land
       farming. A drought-stressed crop is more likely to develop charcoal rot. So, if a dry land crop does not tolerate charcoal
       rot well, and if below-average rainfall occurs (assuming no irrigation), such a crop is at an increased risk of developing
       charcoal rot. As discussed earlier, a crop of grain that has a greater chance of developing charcoal rot could result in
       decreased yields.
5      The court defined “producing cause” as an “efficient, exciting, or contributing cause that, in a natural sequence, produced
       the damages, if any.”
6      Because Helena's complaint regarding liability and causation stem from the same jury questions, we combine our
       discussion on these issues.
7      The Wilkins had a profit of approximately $111,000 in 1992.
1      TEX. AGRIC. CODE ANN.. § 64.002(a) (Vernon 1995).


End of Document                                                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.




                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              16
M
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)
42 Ed. Law Rep. 448

                                                                              Injuries by other students
                     736 S.W.2d 617                                      Education
                 Supreme Court of Texas.                                     Other particular injuries to students
                                                                         Failure of school employees to supervise
            Celeste Eugenia HOPKINS, a/n/f of                            children or to obtain prompt medical care for
            Celeste Adeline Hopkins, Petitioner,                         student injured at school was not “negligent
                             v.                                          discipline” for purposes of statute eliminating
            SPRING INDEPENDENT SCHOOL                                    immunity of school employees for injuries
              DISTRICT et al., Respondents.                              arising from their negligent discipline of
                                                                         students. V.T.C.A., Education Code § 21.912.
             No. C–5209. | Feb. 25, 1987.
            | Rehearing Denied Oct. 7, 1987.                             42 Cases that cite this headnote

Mother, as next friend of injured student, brought action
                                                                  [3]    Education
against school district, bus driver, principal, nurse, and
                                                                             Duties and liabilities in general
teacher for personal injuries suffered by student. The
11th District Court, Harris County, William N. Blanton,                  Education
Jr., J., granted defendants' motion for summary judgment,                    Other particular injuries to students
and mother appealed. The Court of Appeals, 706 S.W.2d                    Even if student's injuries were aggravated when
325, affirmed, and mother appealed. The Supreme Court,                   she had seizures on school bus, and school
Campbell, J., held that: (1) failure of school employees to              officials were negligent in failing to provide
adequately supervise children or to provide prompt medical               adequate medical care, school district and bus
care for injured student was not “negligent discipline”                  supervisor were immune from liability for
for purposes of statute eliminating immunity for negligent               injuries sustained when student struck her head
discipline, and (2) even if student's injuries were aggravated           during school, as injury was not proximate result
when she had seizures on bus, and negligent failure to                   of use or operation of school bus. V.T.C.A.,
provide medical care continued while student was on bus, bus             Education Code § 21.912; V.T.C.A., Civil
supervisor and school district were immune from liability,               Practice and Remedies Code § 101.051.
as injuries were not proximate result of use or operation of
school bus.                                                              30 Cases that cite this headnote


Affirmed.

Kilgarlin, J., dissented and filed opinion in which Ray and      Attorneys and Law Firms
Mauzy, JJ., joined.
                                                                 *617 Victor R. Rodriguez, Hocker, Rodriguez & Morrow,
                                                                 George W. Wilhite, Wilhite, Gilbreath, Squier, Hamm &
                                                                 Caridi, Inc., Houston, for petitioner.
 West Headnotes (3)
                                                                 Daryl G. Dursum, Coats, Yale, Holm & Lee, James A.
                                                                 McDaniel, Houston, for respondents.
 [1]    Statutes
             Undefined terms                                     Opinion
        In construing statute, ordinary meaning of terms
                                                                 CAMPBELL, Justice.
        will be applied if legislature does not define
        terms.                                                   This is an appeal from a summary judgment rendered
                                                                 for Spring Independent School District and several of its
        36 Cases that cite this headnote
                                                                 employees. The court of appeals affirmed the trial court's
                                                                 judgment. 706 S.W.2d 325. We affirm the judgment of the
 [2]    Education                                                court of appeals.


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                          1
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)
42 Ed. Law Rep. 448

                                                                              which act involves the exercise of
Celeste Adeline Hopkins, a student at an elementary school in                 judgment or discretion on the part of
the Spring Independent School District, suffers from cerebral                 the employee, except in circumstances
palsy. Her mother, Celeste Eugenia Hopkins, alleges that                      where professional employees use
while the students were left unsupervised Celeste Adeline was                 excessive force in the discipline of
pushed into a stack of chairs and sustained a head injury.                    students or negligence resulting in
She had mild convulsions, developed cold sweats and became                    bodily injury to students.
dazed and incoherent. The teacher did not call for help or
send her to the school nurse. Later, an occupational therapist   Tex.Educ.Code Ann. § 21.912 (Vernon Supp.1986). This
noticed her condition and took her to the nurse, who told        statute was construed in Barr v. Bernhard. This court held a
Celeste Adeline to stay at school. The nurse did not contact     professional school employee is not personally liable for acts
her mother, an employee *618 of the school district, and did     done within the scope of employment and which involve the
not contact her doctors, although the school knew the names      exercise of judgment or discretion, except when disciplining
of the doctors.                                                  a student the employee uses excessive force or negligence
                                                                 which results in bodily injury to the student. Barr, 562 S.W.2d
At the end of the school day, Celeste Adeline rode on            at 849.
the school bus to the day care center. She suffered severe
convulsions while on the bus. The bus driver contacted a         The Barr court held the statute is ambiguous because “it is
supervisor, requesting a school nurse be provided at the next    inaccurate to say that a person ‘uses negligence’; negligence
stop, but none was provided. The driver was told to take her     occurs as a result of an act or omission by an individual.”
to the day care center, where she finally received medical       Therefore, the court determined the legislative intent of the
treatment.                                                       statute. Id. at 848. The court concluded that when subsection
                                                                 (b) is read in conjunction with subsection (c), an interpretation
Two years later Celeste Adeline's mother sued Spring I.S.D.,     that the last clause of subsection (b) subjects employees
the bus supervisor, the school principal, the school nurse and   to liability for any negligent act which results in bodily
the teacher. She claimed the school personnel's negligence       injury is untenable. Subsection (c) states, “This section is
and gross negligence in failing to provide adequate care         not applicable to the operation, use, or maintenance of any
dramatically decreased Celeste Adeline's life expectancy.        motor vehicle.” The court reasoned that if subsection (b)
Summary judgment was rendered for the school district and        were read to exclude from immunity all negligent acts of
the employees based on the immunity granted the school           school employees, not merely those incident to discipline,
district under the Tort Claims Act and the employees under       there would be no need for subsection (c) to explicitly negate
the Education Code.                                              immunity in the operation, use, or maintenance of a motor
                                                                 vehicle.
We are asked to abrogate the immunity enjoyed by school
district employees under section 21.912 of the Texas             Barr was decided eight years ago, and the legislature has had
Education Code. This would require us to overrule the recent     ample time to change the statute if that construction did not
Supreme Court case of Barr v. Bernhard, 562 S.W.2d 844           comport with legislative intent. It has not done so. Indeed, the
(Tex.1978).                                                      legislature has broadened the immunity provided by section
                                                                 21.912(b) by enacting section 13.906 of the Texas Education
Mrs. Hopkins contends that school personnel should be liable     Code in 1981 and section 13.503 in 1984.
for their negligent acts which result in serious bodily injury
to students. The Texas Education Code, section 21.912,           Section 13.906(a) applies to student teachers:
provides tort immunity to professional school employees
                                                                              A person assigned to perform student
except:
                                                                              teaching in a student teacher center is
            No professional employee of any                                   entitled to the same protection of law
            school district within this state shall be                        accorded to the supervising teacher
            personally liable for any act incident                            and the principal of the school in
            to or within the scope of the duties                              which the student teacher serves or
            of his position of employment, and                                acts in the course of employment.


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             2
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)
42 Ed. Law Rep. 448

            This protection includes the limitation                 [3] Hopkins argues the school district and the bus supervisor
            of liability accorded all professional                 cannot claim this immunity because 1) the child's injuries
            employees as specified in Section                      were aggravated when she had seizures on the bus and
            21.912 of this Code. While serving as a                2) the defendants were negligent in failing to provide
            student teacher, a person shall comply                 adequate medical care. Therefore, she claims, the injuries
            with the rules of the school and of the                arose from the “use or operation of a motor vehicle.”
            board of trustees of the district *619                 Several Texas courts have held that when injuries are not
            serving as the student teacher center.                 the proximate result of the use or operation of the school
                                                                   bus, but the bus provides the setting for the injury, the
Tex. Educ.Code Ann. §§ 13.503, 13.906(a) (Vernon                   actions do not fall within the section 101.051 exception to
Supp.1986). Subsection (c) of section 13.503 states: “A non-       immunity. See Jackson v. City of Corpus Christi, 484 S.W.2d
certified teacher is immune from personal liability for acts       806 (Tex.Civ.App.—Corpus Christi 1972, writ ref'd n.r.e.);
or omissions in the scope of employment to the same extent         Brantley v. City of Dallas, 545 S.W.2d 284 (Tex.Civ.App.—
that a certified teacher is immune....” The Barr decision had      Amarillo 1976, writ ref'd n.r.e.); Estate of Garza v. McAllen
been law for three years when the earliest of these statutes       Independent School District, 613 S.W.2d 526 (Tex.Civ.App.
was passed. The legislature had time to consider Barr' s effect    —Beaumont 1981, writ ref'd n.r.e.); Pierson et al. v. Houston
and chose to add to, not abrogate, the immunity granted by         Independent School District et al., 698 S.W.2d 377 (Tex.App.
section 21.912. This court stated in Barr, “We will adhere         —Houston [14th Dist.] 1985, writ ref'd n.r.e.). Applying the
to our decisions in the past that the waiver of governmental       common and ordinary meaning of the words “operation” and
immunity is a matter to be addressed by the legislature.” Lowe     “use”, Celeste Adeline's injury could not have arisen from the
v. Texas Tech University, 540 S.W.2d 297 (Tex.1976).               use of a motor vehicle as contemplated by the statute.

Hopkins also contends the school employees could be                We remain committed to our original interpretation of section
liable under section 21.912 because their actions constituted      21.912 of the Education Code. The judgment of the court of
“negligent discipline.” She claims the child was disciplined       appeals is affirmed.
by submitting to the authority and control of her teacher, the
school nurse and other employees. We do not accept such a
broad interpretation of the term “discipline.”
                                                                   KILGARLIN, J., dissenting, joined by RAY and MAUZY, JJ.
 [1] [2] In construing a statute, if the legislature does not
define a term, its ordinary meaning will be applied. Satterfield   KILGARLIN, Justice, dissenting.
v. Satterfield, 448 S.W.2d 456 (Tex.1969). “Discipline” in the     I respectfully dissent. Even if the court were correct in its
school context ordinarily describes some form of punishment.       adherence to Barr v. Bernhard, 562 S.W.2d 844 (Tex.1978),
The opinion in Diggs v. Bales describes “negligent discipline”     this cause would have to be reversed and remanded as
as “punishment [which] involves no force, but rather requires      to the defendant Charles Bammel, Spring's Director of
some action on the part of the student as a result of which        Transportation.
the student suffers bodily injury,” as in ordering a student to
run laps. 667 S.W.2d 916, 918 (Tex.App.—Dallas 1974, writ          By its clear language, Tex.Educ.Code Ann. § 21.912(b)
ref'd n.r.e.) We hold “negligent discipline” is not involved.      is applicable to professional school district employees.
                                                                   Bammel's summary judgment proof does not *620 place
Hopkins also asserts the court of appeals erred in holding the     him in this category. While his affidavit states his job involves
school district and the bus supervisor immune from liability       the exercise of judgment or discretion, it fails to state his
under the Texas Tort Claims Act. That Act grants immunity          employment requires certification, as mandated by section
to school districts and their employees from liability for         21.912(d).
damages caused by negligence except in circumstances
relating to the use, maintenance or operation of motor             But, I would go further. I would overrule Barr v. Bernhard.
vehicles. Tex.Civ.Prac. & Rem. Code Ann. § 101.051                 The court's holding in that case was a product of faulty
(Vernon 1986) (formerly article 6252–19 § 19A).                    reasoning and conflicts with a majority of other jurisdictions
                                                                   which have followed the prevailing authority that the



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               3
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)
42 Ed. Law Rep. 448

tort immunity of the school does not preclude liability
                                                                      Certainly, in all doubtful cases, precedent and former
of professional school employees for their negligence. 1
                                                                      adjudication of what the law may be should have great
Commentators have also recognized that teachers may be
                                                                      weight with all courts. But all courts would but subserve the
liable to pupils for their negligence. 2 It is noteworthy that        interest of society and fulfill the obligations of conscience,
the court in this cause does not attempt to justify such faulty       by the observance of that remarkable institute of Justinian,
reasoning. Rather, the court says that because Bernhard has           so replete with wisdom and so pre-eminently just, in which
not been overruled by the legislature, it must be correct.            it is ordered: ‘Let no judge or arbiter believe himself bound
This obeisance to a misguided notion of what constitutes              to follow official opinions which he holds not to be correct;
legislative intent is disheartening. When one considers all of        nor even the judgment of the prefect or other magnates;
the rules operative in the respective houses of the legislature       nor those of the supreme court of prefecture and of other
that prevent proposed legislation from even coming to a vote,         supreme courts; but we commend all our judges to follow
it cannot be contended that legislative inaction amounts to           truth, justice and law. It does not seem good to us, that if
legislative intent. Nevertheless, such argument is repetitive of      one judge decide wrong, his error should be extended to
the contention made by the dissent in Sanchez v. Schindler,           others. The decision of the judge should be founded on law,
651 S.W.2d 249, 256 (Tex.1983). However, this court                   and not on precedents.’
disposed of that thesis by saying “[i]naction of the legislature
cannot be interpreted as prohibiting judicial reappraisal of the    Myers v. State, 33 Tex. 525, 542 (1870).
judicially created pecuniary loss rule. Bedgood v. Madalin,
600 S.W.2d 773, 780 (Tex.1980) (Spears, J., concurring).            There can be little doubt that the court was wrong in its
‘[A] legislature legislates by legislating, not by doing nothing,   conclusions as to legislative intent in Barr v. Bernhard.
not by keeping silent.’ Wycko v. Gnodtke, 361 Mich. 331, 105        Section 21.912 of the Texas Education Code became law
N.W.2d 118, 121–22 (Mich.1960).”                                    in 1971. Its origin was S.B. 74 introduced by Senator
                                                                    Snelson of Midland. Section two of that bill provided that
Moreover, the court is extremely inconsistent in its                “no employee of any school district ... shall be personally
application of its misguided concept of legislative intent.         liable for any act ... which act involves the exercise of
Almost contemporaneous with the handing down of this                judgment or discretion on the part of the employee.”
opinion is the rendition of the opinion in Crawford v.              Section three of the bill defined “employee” as including
Coleman, 726 S.W.2d 9 (Tex.1987), wherein this court                “superintendents, principals, classroom teachers, counselors
overruled Deveroex v. Nelson, 529 S.W.2d 510 (Tex.1975).            and other employees of a school district whose employment
Like this case, both of those cases involved interpretation of      requires an exercise of discretion.”
statutory language. This court was not deterred in Crawford
from giving a new interpretation to Tex.Ins.Code Ann. art.          The bill was amended in the Senate Education Committee
21.23, although the legislature had over eleven years in which      to change “employee” to “professional employee” and add
to amend the statute if it were dissatisfied with Deveroex.         after “judgment or discretion on the part of the employee”
Yet, the legislature has remained silent. Like Justice Spears       the language “except in circumstances where professional
in Sanchez, I do not consider legislative inactivity to be          employees use excessive force in the discipline of students.”
legislative intent. All that I ask of my colleagues who do, is      The definition of “professional employee” was changed
that they apply that concept uniformly. If legislative *621         to read “whose employment requires certification and an
inaction could not save Deveroex, why should it be used to          exercise of discretion” and to add “supervisors” to the
preserve Bernhard? While I dissented in Crawford, I at least        laundry list. After the bill, as amended by the Education
did so by giving support to the logic expressed in Deveroex,        Committee, was favorably reported to the Senate, Senator
which is more than can be said for this court's silence as to       Snelson successfully tacked on two floor amendments, the
the reasoning of Barr v. Bernhard.                                  first one reading “[a]mend committee amendment to S.B. 74,
                                                                    sec. 2, by striking the period at the end of the paragraph
If the court was wrong in Bernhard, we should admit so,             following the word ‘students' and adding the following: ‘or
rather than reaffirming it simply because seven other jurists       negligence resulting in bodily injury to students'.” That left
reached a different conclusion from what we think right. As         the bill in the form of the language ultimately adopted.
Associate Justice Livington Lindsay, speaking for the court,
said over a century ago:


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              4
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)
42 Ed. Law Rep. 448

                                                                       liability of professional employees to students. Paragraph (c)
The general rule in respect to statutory interpretation is that
                                                                       is an imposition of liability for all school district employees,
“[c]ourts should carefully search out a statute's intent, giving
                                                                       professional or otherwise, not just as to students, but to
full effect to all of its terms. ‘But they must find its intent in
                                                                       the world at large, for their acts of negligence when motor
its language and not elsewhere. They are not the lawmaking
                                                                       vehicles are involved. As was observed in a Comment,
body. They are not responsible for omissions in legislation’.”
                                                                       Liability of Public Officials For Their Tortious Acts, 16
Seay v. Hall, 677 S.W.2d 19, 25 (Tex.1984). However, a
                                                                       Hous.L.Rev. 100, 115 (1978):
different rule attains when the statute is ambiguous. Section
21.912(b) of the Education Code is clearly ambiguous, as                            This latter provision would be
was recognized by the court in Bernhard, 562 S.W.2d at 848.                         rendered meaningless only if the
Whether it was inartful drafting, or what, it is erroneous to say                   earlier provision encompassed all
that one “uses” negligence. If a statute is ambiguous, a court,                     negligent activities involving motor
in interpreting that statute, is justified in looking to legislative                vehicles that the latter language
intent. Huntsville Independent School District v. McAdams,                          covered. That the earlier section does
148 Tex. 120, 221 S.W.2d 546 (1949).                                                not purport to do, however. By its
                                                                                    terms, it empowers only students
Fortunately, we have a clear expression of legislative intent                       suffering from negligently inflicted
in regards to section 21.912(b) in the form of a bill analysis                      ‘bodily injury ’ to recover from official
prepared by the House Committee on Judiciary when it                                malefactors; by its terms, it declines to
considered S.B. 74 after the measure, incorporating the                             regulate personal or property injuries
Snelson floor *622 amendments, passed the Senate. That                              to non-students. In contrast, the latter
bill analysis states that the exception to non-liability of an                      subsection permits student and non-
employee is “where the employee uses excessive force or is                          student alike to recover from officials
negligent ” (emphasis added). The amended Senate version                            unreasonably operating, using, or
passed the House intact and became law. Yet, the court in                           maintaining motor vehicles, whether
Bernhard totally overlooked this important item of legislative                      they sue for personal or property
history. Instead, it rewrote the statute to in effect read that                     damages.
a professional school employee was not personally liable
for acts done except in circumstances where disciplining a             Thus, it can be readily seen that the motor vehicle exemption
student, the employee uses excessive force or his negligence           is not rendered meaningless by an interpretation that
results in bodily injury to the student.                               professional school employees are liable for their negligent
                                                                       acts towards students.
To reach its conclusion, the Bernhard court put great
emphasis on the conflict that would exist if liability were            Justice Sam Johnson articulated in his dissent in Bernhard
imposed upon professional employees for their negligence               many of the arguments that I have presented here, and with the
and the fact that the second Snelson floor amendment made              exception of Justice Pope, met with the same lack of success
the statute inapplicable to the operation, use, or maintenance         as I have in the convincing of colleagues. Nevertheless, I
of a motor vehicle. The court said “[i]f the interpretation            believe that the court has erred, and therefore I dissent.
of subdivision (b) urged by Bernhard were followed, then
subdivision (c) would be meaningless since liability for the
negligent operation of a motor vehicle would necessarily be
                                                                       RAY and MAUZY, JJ., join in this dissenting opinion.
covered by the broader provisions of subdivision (b).” 562
S.W.2d at 849. This judicial legerdemain, if unexamined,               All Citations
has initial appeal. However, it is plagued with one major
inconsistency. Paragraph (b) of section 21.912 deals with              736 S.W.2d 617, 42 Ed. Law Rep. 448


Footnotes
1       See Forgone v. Salvador Union School Dist., 41 Cal.App.2d 423, 106 P.2d 932 (1940): Buzzard v. East Lake School
        Dist., 34 Cal.App.2d 316, 93 P.2d 233 (1939); Adams v. Kline 239 A.2d 230 (Del.Super.1968); Miller v. Griesel, 261
        Ind. 604, 308 N.E.2d 701 (1974); Anderson v. Calamus Com. School Dist., 174 N.W.2d 643 (Iowa 1970); Rose v. Bd.


                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                5
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)
42 Ed. Law Rep. 448

      of Education, 184 Kan. 486, 337 P.2d 652 (1959); Cox v. Barnes, 469 S.W.2d 61 (Ky.Civ.App.1971); Prier v. Horace
      Mann Ins. Co., 351 So.2d 265 (La.App. 3d Cir.1977, writ ref'd); Brooks v. Jacobs, 139 Me. 371, 31 A.2d 414 (1943);
      Duncan v. Koustenis, 260 Md. 98, 271 A.2d 547 (1970); Lovitt v. Concord School Dist., 58 Mich.App. 593, 228 N.W.2d
      479 (1975), rev'd on other grounds, Galli v. Kirkeby, 398 Mich. 527, 248 N.W.2d 149 (1976); Wire v. Williams, 270 Minn.
      390, 133 N.W.2d 840 (1965); Clark v. Furch, 567 S.W.2d 457 (Mo.App.1978); Doktor v. Greenberg, 58 N.J.Super. 155,
      155 A.2d 793 (1959); Ostrowski v. Board of Education of Coxsackie-Athens School Dist., 294 N.Y.S.2d 871, 31 A.D.2d
      571 (1968); Drum v. Miller, 135 N.C. 204, 47 S.E. 421 (1904); Wentz v. Deseth, 221 N.W.2d 101 (N.D.1974); Baird v.
      Hosmer, 46 Ohio St.2d 273, 347 N.E.2d 533 (1976); Hutchison v. Toews, 4 Or.App. 19, 470 P.2d 811 (1970); Guerrieri v.
      Tyson, 147 Pa.Super.Ct. 239, 24 A.2d 468 (1942); DeGooyer v. Harkness, 70 S.D. 26, 13 N.W.3d 815 (1944); Eastman
      v. Williams, 124 Vt. 445, 207 A.2d 146 (1965); Crabbe v. County School Bd. of Northumberland Co., 209 Va. 356, 164
      S.E.2d 639 (1968).
2     Comment, Broad Tort Immunity Provided Texas Public Schools and Public School Personnel: A Reappraisal, 16 Tex.Tech
      L.Rev. 515 (1985); Comment, Professional School Employees—The Privileged Class?, 19 S.Tex.L.J. 664 (1978); Seitz,
      Legal Responsibility Under Tort Law of School Personnel and School Districts as Regards Negligent Conduct Toward
      Pupils, 15 Hastings L.J. 495 (1964); Teacher's Liability for Pupils Injuries—Duty of Supervision, 19 Main L.Rev. 111
      (1967); Proehh, Tort Liability of Teachers, 12 Vand.L.Rev. 723 (1959); Ripps, Tort Liability of the Classroom Teacher, 9
      Akron L.Rev. 19 (1975); Vacca, Teacher Malpractice, 8 U.Rich.L.Rev. 447 (1974); Schools and Teachers—Tort Liability
      in Our Changing Society, 8 U.Kan.L.Rev. 124 (1959).


End of Document                                             © 2015 Thomson Reuters. No claim to original U.S. Government Works.




             © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             6
N
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



                                                                         Cause of action generally accrues, and statute of
                      962 S.W .2d 507                                    limitations begins to run, when facts come into
                  Supreme Court of Texas.                                existence that authorize claimant to seek judicial
                                                                         remedy.
JOHNSON & HIGGINS OF TEXAS, INC., Petitioner,
                          v.
KENNECO ENERGY, INC., f/k/a Armada Supply Inc.,                          93 Cases that cite this headnote
                     Respondent.
 No. 96–0244. | Argued Oct. 22, 1996. | Decided Jan.
     16, 1998. | Dissenting Opinion Dec. 7, 1997.
                                                                   [2]   Limitation of Actions
                                                                             Negligence

                                                                         Insured sustained injury when coverage for loss of
After defending against similar suit in federal court, insurance         profits on its oil shipment was denied, and,
broker filed declaratory judgment action in state court to               therefore, limitations period on insured's cause of
determine its liability for insured's marine cargo. The 133rd            action against broker for negligent breach of duty
District Court, Harris County, Lamar M cCorkle, J., entered              to obtain insurance commenced on that date; all
judgment in favor of broker, notwithstanding jury verdict in             facts required for cause of action existed at that
favor of insured, and insured appealed. The Court of Appeals,            time.
Lee Duggan, Jr., J. (Retired), 921 S.W .2d 254, reversed. On
application for writ of error, the Supreme Court, Abbott, J.,
held that: (1) insured sustained injury when coverage for loss           15 Cases that cite this headnote
of profits was denied and, therefore, limitations period on
insured's negligence cause of action against insurer
commenced on that date; (2) to the extent insured's fraud and
breach of contract claims were based on lost profits coverage,     [3]   Limitation of Actions
they were barred by collateral estoppel; (3) insured's claim                 Estoppel to rely on limitation
based on insurance broker's breach of alleged agreement to
secure contingency coverage was not barred by collateral                 Equitable estoppel did not bar insurance broker's
estoppel; (4) broker's misrepresentation as to insured's                 assertion of its limitations defense to insured's
coverage did not amount to fraud; (5) under common law,                  negligence action, even though jury answered
prejudgment interest begins to accrue on earlier of 180 days             “yes” to question of whether insured's failure to
after date defendant receives written notice of claim or date            take action earlier was caused by insurance broker
suit is filed; and (6) prejudgment interest must be calculated           knowingly engaging in conduct solely calculated
as simple interest.                                                      to induce insured to refrain from or postpone
                                                                         filing suit, where jury question was submitted as
                                                                         part of deceptive practices act claim and was not
Judgment of Court of Appeals modified and remanded with                  submitted as independent, common-law issue.
directions.

                                                                         3 Cases that cite this headnote
Hecht, J., filed dissenting opinion, in which Gonzalez and
Owen, JJ., joined, and in part II of which Spector, J., joined.

                                                                   [4]   Estoppel
                                                                             Essential elements
W est Headnotes (32)


[1]     Limitation of Actions
            Causes of action in general



                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           1
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



       Doctrine of equitable estoppel requires: (1) false      [7]    Antitrust and Trade Regulation
       representation or concealment of material facts;                   Time to Sue; Limitations
       (2) made with knowledge, actual or constructive,               Insurance
       of those facts; (3) with intention that it should be               Duties and liabilities to insureds or other third
       acted on; (4) to party without knowledge or                    persons
       means of obtaining knowledge of facts; (5) who
       detrimentally relies on representations.                       Two-year statute of limitations provision of
                                                                      Deceptive Trade Practices-Consumer Protection
                                                                      Act (DTPA) applied to insured's cause of action
       98 Cases that cite this headnote                               against broker under pre-1985 version of
                                                                      Insurance Code provision concerning unfair or
                                                                      deceptive practices, since close relationship exists
                                                                      between Insurance Code provision at issue and
[5]    Insurance                                                      certain sections of DTPA. V.A.T.S. Insurance
           Duties and liabilities to insureds or other third          Code, art. 21.21, § 16(d); V.T.C.A., Bus. & C. §
       persons                                                        17.50(a)(4).

       On issue of applicable statute of limitations, jury
       question whether insurance broker engaged in                   11 Cases that cite this headnote
       unfair or deceptive act or practice in dealings with
       insured was grounded in Insurance Code, rather
       than Deceptive Trade Practices-Consumer
       Protection Act (DTPA), where question's                 [8]    Limitation of Actions
       language mirrored language of Insurance Code                       Limitation as affected by nature or form of
       provision, and question was taken from pattern                 remedy in general
       jury charge that referred to insurance code
       provision, rather than DTPA. V.A.T.S. Insurance                W hen statute lacks express limitations period,
       Code, art. 21.21; V.T.C.A., Bus. & C. §                        courts look to analogous causes of action for
       17.50(a)(4).                                                   which express limitations period is available
                                                                      either by statute or by case law.

       4 Cases that cite this headnote
                                                                      4 Cases that cite this headnote


[6]    Antitrust and Trade Regulation
           Insurance                                           [9]    Judgment
       Insurance                                                          Persons not parties or privies
           Of Insurers
                                                                      “Defensive collateral estoppel” is utilized by
       If violations of Insurance Code and Deceptive                  defendants to prevent relitigation by plaintiff of
       Trade Practices-Consumer Protection Act                        issues previously lost against another defendant.
       (DTPA) are alleged, but only one cause of action
       is submitted, that claim is not automatically
       DTPA claim. V.A.T.S. Insurance Code, art.                      27 Cases that cite this headnote
       21.21; V.T.C.A., Bus. & C. § 17.50(a)(4).


       3 Cases that cite this headnote                         [10]   Judgment
                                                                          Matters actually litigated and determined




                            © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           2
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



       Collateral estoppel may preclude relitigation of              Exception exists to general rule of no issue
       issues previously litigated even though                       preclusion based on alternative holdings if they
       subsequent suit is based upon different cause of              are appealed and affirmed. Restatement (Second)
       action.                                                       of Judgments § 27 comment.


       16 Cases that cite this headnote                              8 Cases that cite this headnote




[11]   Judgment                                               [14]   Judgment
           Identity of Issues, in General                                Operation and effect
       Judgment
           Matters actually litigated and determined                 Insured's claim based on insurance broker's
       Judgment                                                      breach of alleged agreement to secure
           Essentials of Adjudication                                contingency coverage was not barred by collateral
                                                                     estoppel, even though parties had brought
       If cause of action in second lawsuit involves                 previous suit in federal district court, where
       element already decided in first lawsuit, that cause          federal courts never addressed whether agreement
       of action is barred under doctrine of collateral              was made to secure contingency coverage.
       estoppel; for this to be true, however, issue
       decided in first action must be actually litigated,
       essential to that lawsuit's judgment, and identical           Cases that cite this headnote
       to issue in pending action.


       3 Cases that cite this headnote                        [15]   Fraud
                                                                         Elements of Actual Fraud

                                                                     Elements of common-law fraud are that: (1)
[12]   Judgment                                                      material representation was m ade; (2)
           Operation and effect                                      representation was false; (3) when representation
                                                                     was made, speaker knew it was false or made it
       To extent insured's fraud and breach of contract              recklessly without any knowledge of truth and as
       claims against broker were based on failure to                positive assertion; (4) representation was made
       secure lost profits coverage, they were barred by             with intention that it be acted upon by other party;
       collateral estoppel in state court lawsuit against            (5) party acted in reliance upon representation;
       insurance broker, even though federal district                and (6) party suffered injury.
       court's findings of no coverage were based on
       alternative findings of no agreement and no
       authority; appellate court reviewed and affirmed              128 Cases that cite this headnote
       those findings, and they were thus essential to
       judgment. Restatement (Second) of Judgments §
       27 comment.
                                                              [16]   Judgment
                                                                         Operation and effect
       Cases that cite this headnote




[13]   Judgment
           Essentials of Adjudication



                            © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          3
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



       To extent that insured's state court fraud claim              W hen prevailing party does not elect measure of
       was based on its allegation that insurance broker             damages from among alternative measures, courts
       knowingly or recklessly represented that insured's            should render judgment based on finding
       lost profits on oil purchase contract were insured,           affording greatest recovery.
       it was barred by collateral estoppel in that federal
       court had already concluded in earlier lawsuit that
       no such representation was made; however,                     2 Cases that cite this headnote
       insured's allegation that broker knowingly or
       recklessly represented that insured was fully
       insured for any loss to which underwriters did not
       respond under contingency clause was not barred        [20]   Insurance
       because that issue was not decided in federal suit.               Duties and liabilities to insureds or other third
                                                                     persons

       Cases that cite this headnote                                 Insurance broker's misrepresentation as to
                                                                     insured's contingency coverage with respect to
                                                                     shipment of oil and transfer of title did not
                                                                     amount to fraud where there was no evidence that
[17]   Judgment                                                      broker recklessly misrepresented the coverage;
           Operation and effect                                      although broker should have known that his
                                                                     representations may have been incorrect, such
       Insurance broker's involvement in prior federal               evidence was akin to negligent misrepresentation,
       action as witness on behalf of insured did not                not fraud.
       extinguish collateral estoppel effect of federal
       court's findings, with respect to insured's state
       court action against broker, despite insured's                2 Cases that cite this headnote
       argument that it had no incentive to fully litigate
       against broker in federal action; proper inquiry
       was whether insured had incentive to litigate issue
       of broker's representations.                           [21]   Fraud
                                                                         Knowledge of defendant
                                                                     Fraud
       1 Cases that cite this headnote                                   Statements recklessly made; negligent
                                                                     misrepresentation

                                                                     Statement is not fraudulent unless speaker knew
[18]   Judgment                                                      it was false when made or speaker made it
           Operation and effect                                      recklessly without knowledge of truth.

       Lack of opportunity for jury trial in federal court
       did not, in and of itself, preclude application of            34 Cases that cite this headnote
       defensive collateral estoppel in state court.


       Cases that cite this headnote                          [22]   Fraud
                                                                          Falsity of representations and knowledge
                                                                     thereof

[19]   Damages
          Construction and operation




                            © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                       4
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



       Proof that defendant made statement knowing of         [26]   Interest
       its falsity or without knowledge of its truth may                 Prejudgment Interest in General
       be proved by direct or circumstantial evidence.
                                                                     There are two legal sources for award of
                                                                     prejudgment interest: (1) general principles of
       14 Cases that cite this headnote                              equity and (2) an enabling statute.


                                                                     48 Cases that cite this headnote
[23]   Fraud
           Statements recklessly made; negligent
       misrepresentation
                                                              [27]   Interest
       S p e a k e r ac ts recklessly if h e m a ke s                    Torts; wrongful death
       representations without any knowledge of truth
       and as positive assertion.                                    Tort reform statute providing that judgments in
                                                                     wrongful death, personal injury, and property
                                                                     damage cases must include prejudgment interest
       43 Cases that cite this headnote                              applies only to wrongful death, personal injury,
                                                                     and property damage cases. Vernon's Ann.Texas
                                                                     Civ.St. art. 5069–1.05, § 6(a) (Repealed).

[24]   Insurance
           Actions                                                   46 Cases that cite this headnote

       Jury's finding that insurance broker breached
       contract with insured to secure contingency
       coverage for oil shipment was supported by             [28]   Interest
       evidence demonstrating that either broker sold                    Insurance matters
       insured insurance it did not need, or broker
       agreed to sell insured additional coverage, which             Although contract concerned insurance coverage
       broker ultimately did not do.                                 for damages to insured's property by third party,
                                                                     statute providing for prejudgment interest in
                                                                     property damage cases did not apply where
       Cases that cite this headnote                                 insured did not base its suit on that property
                                                                     damage, but instead brought claims for purely
                                                                     economic losses stemming from insurance
                                                                     broker's breach of contract to secure contingency
[25]   Interest                                                      coverage; thus, any recovery for prejudgment
           Prejudgment Interest in General                           interest would be governed by common law.
                                                                     Vernon's Ann.Texas Civ.St. art. 5069–1.05, §
       “Prejudgment interest” is compensation allowed                6(a) (Repealed).
       by law as additional damages for lost use of
       money due as damages during lapse of time
       between accrual of claim and date of judgment.                56 Cases that cite this headnote
       Vernon's Ann.Texas Civ.St. art. 5069–1.01(a)
       (Repealed).

                                                              [29]   Interest
       104 Cases that cite this headnote                                 Prejudgment Interest in General




                           © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                        5
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



       Under common-law, prejudgment interest begins                  Equitable prejudgment interest should be
       to accrue on earlier of (1) 180 days after date                computed as simple interest. Vernon's Ann.Texas
       defendant receives written notice of claim or (2)              Civ.St. art. 5069–1.05, § 6(g) (Repealed).
       date suit is filed. Vernon's Ann.Texas Civ.St. art.
       5069–1.05, § 6(a) (Repealed).
                                                                      32 Cases that cite this headnote

       112 Cases that cite this headnote




[30]   Interest                                               Attorneys and Law Firms
           Insurance matters
                                                              *511 Joe R. Greenhill, Bob E. Shannon, Austin, Stephen G.
       Insured's standstill agreement with broker             Tipps, Jane A. Bland, Robert Harrison Pemberton, Amy Eikel,
       delaying state court suit pending outcome of           Houston, for Petitioner.
       federal suit against insurers was “written notice of
       a claim” that triggered accrual of prejudgment         John L. Russell, David J. M ullican, Jr., Robert Eikel, George
       interest 180 days from date of agreement;              E. Pletcher, Kimberly Ann W arren Brown, Nina Cortell,
       agreement preserved all of insured's rights,           Houston, for Respondent.
       including right to prejudgment interest, and all of
       broker's liabilities.                                  Opinion

                                                              ABBOTT, Justice delivered the opinion of the Court, in which
       78 Cases that cite this headnote                       PH ILLIPS, Chief Justice, EN O CH , B AK ER and
                                                              HANKINSON, Justices, join. SPECTOR, Justice, joined Parts
                                                              I, II, III, and IV of the Court's opinion.

[31]   Interest                                               W e withdraw our opinion of December 11, 1997, and
           Stay of proceedings                                substitute the following in its place. The parties' motions for
                                                              rehearing are overruled.
       In most circumstances, standstill agreement to
       maintain status quo and temporarily suspend or
       stop all aspects of suit operates to toll accrual of
       prejudgment interest while agreement is in effect;     This insurance case involves statute of limitations and
       however, parties may contractually provide             collateral estoppel issues, and reevaluates the common-law
       otherwise.                                             method of calculating prejudgment interest under Cavnar v.
                                                              Quality Control Parking, Inc., 696 S.W .2d 549 (Tex.1985).
                                                              The court of appeals reversed the trial court's judgment in
       4 Cases that cite this headnote                        favor of Johnson & Higgins, and rendered judgment for
                                                              Kenneco Energy. W e modify the court of appeals' judgment
                                                              and remand the cause to the trial court to render judgment in
                                                              accordance with this opinion.
[32]   Interest
           Mode of computation in general

                                                                                  I. BACKGROUND

                                                              In 1982, Kenneco Energy, an oil trading company then known
                                                              as Armada Supply, purchased a tanker cargo of fuel oil from
                                                              Petrobas, a Brazilian oil company, to be shipped from Rio de
                                                              Janeiro to New York. Under their contract, the purchase price
                                                              of the oil was to be measured by the market price on the day


                            © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                        6
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



the tanker arrived in New York. The contract was on a              under the contingency coverage Kenneco already had with the
“C.I.F.” basis, meaning that Petrobas bore the cost of             London underwriters. Anderson did not, however, offer the
shipment, insurance, and freight.                                  possibility of a “guarantee of collectibility,” which would
                                                                   insure Kenneco against the risk that Banorte would not pay.
                                                                   This later proved problematic because the policy's cover sheet
Petrobas purchased insurance for the cargo from Banorte, a         stated that contingency coverage required a back-to-back
Brazilian underwriter, for the amount of the purchase price,       C.I.F. sale, meaning that both the sale from Petrobas to
plus ten percent. This amount was the “primary coverage.” In       Kenneco and the sale from Kenneco to Sun needed to be
addition to the insurance provided by Petrobas, Kenneco            C.I.F.
already had its own insurance from a group of London
underwriters, which it obtained through an insurance broker,
Johnson & Higgins of Texas, Inc. (J & H).                          Anderson testified that he believed the sale was back-to-back
                                                                   C.I.F. In a back-to-back C.I.F. sale, Kenneco would not hold
                                                                   title to the cargo during the voyage; instead, Kenneco's buyer
The oil tanker sailed November 16, 1982. W hile the tanker         would take title and accordingly bear the risk of loss of the
was en route, Kenneco contracted to sell the oil, upon delivery    cargo during transport. In a back-to-back C.I.F. sale, Kenneco
in New York Harbor, to Sun Oil Trading Company (Sun) for           would prepare a certificate of insurance under its contingency
$30.55 per barrel. This contract was on a “delivered” basis        coverage and deliver it to the purchaser of the cargo, who
(rather than a C.I.F. basis), meaning that Kenneco retained        would then replace Kenneco as the party asserting a claim.
title to the oil and assumed the risk of loss until Sun accepted
the cargo in New York. Kenneco's profit on the oil was to be
the difference between the sale price of $30.55 per barrel and     As it turned out, the sale from Kenneco to Sun was contracted
the purchase price to be determined by the market price upon       on a delivered basis, not C.I.F.; therefore, Kenneco retained
delivery.                                                          both the title and the risk. As a consequence, the contingency
                                                                   coverage procured by J & H did not protect Kenneco against
                                                                   the possibility that the Brazilian underwriters would not fulfill
After the tanker set sail, the market price of the oil began to    their insurance obligations.
decline. Because Kenneco's purchase price was determined by
the market price, as the market price decreased, Kenneco's
potential profit on the sale increased. At the same time, the      The second concern Brown expressed to J & H was that the
primary coverage amount under the Brazilian insurance              primary coverage through Banorte was insufficient to cover its
policy, which was tied to the market price Kenneco would pay       profits on the deal because Banorte insured only the purchase
to Petrobas (plus ten percent), declined. Concerned about the      price (i.e., the market price) plus ten percent. Kenneco wanted
adequacy of insurance coverage for its increasing potential        to insure against the loss of the sizable profit it would make on
profit, anticipated to be $1.5 million, Kenneco arranged a         the Sun contract. Anderson responded by preparing a
meeting with J & H to discuss coverage under the London            certificate under Kenneco's preexisting increased value
policy. On November 30, 1982, while *512 the tanker of fuel        coverage, increasing the insured value of the cargo from the
sailed to New York, Kenneco sent Carolyn Brown to meet             market price plus ten percent (the primary coverage amount)
with Jim Anderson of J & H to discuss coverage.                    to the contract amount of $30.55 per barrel (thereby including
                                                                   the profit).

According to Kenneco, Brown met with J & H to address two
primary concerns. First, Kenneco was worried that it would be      In preparing both certificates, Anderson apparently did not
unable to collect on a claim under the Banorte policy because      realize that Kenneco could not recover under both the
Kenneco had heard that the Brazilian insurers had a dubious        increased value provision, under which Kenneco retained title
reputation. To avoid that potential problem, Kenneco wanted        and bore the risk of loss, and the contingency coverage
to claim the primary coverage amount directly from the             provision, under which Kenneco's buyer held the title and the
London underwriters. In essence, Kenneco wanted assurance          risk. Nevertheless, Brown discerned from her meeting with
from the London underwriters that it would be able to recover      Anderson that Kenneco was protected by “contingency
the amount insured by Banorte.                                     coverage” in the event the Brazilian underwriters failed to pay,
                                                                   and that the profits on the Sun contract were covered by the
                                                                   increased value provision. Kenneco paid premiums for both
In response, Anderson prepared a certificate of insurance          the contingency coverage and the increased value coverage.


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                              7
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



                                                                   contingency coverage was inapplicable because the sale was
                                                                   not back-to-back C.I.F. The court also concluded that the
W hen the tanker arrived in New York Harbor, Sun rejected the      increased value provision covered physical loss and damage,
cargo and canceled the contract because the oil arrived both       but not the loss of the Sun contract. In determining the scope
short and contaminated. Before leaving Brazil, the cargo was       of the lost profits and lost contract coverage, the court
apparently deficient by 8,000 barrels. In addition, the tanker     considered J & H's conduct during and after the November 30
crew used some of the cargo as fuel during the voyage,             meeting to decide what agreements had been made regarding
pumping in seawater to replace the depleted amount.                coverage. On appeal, the Second Circuit affirmed most of the
                                                                   district court's judgment, but reversed in part on the issue of
                                                                   sue and labor expenses. 1 Armada Supply, Inc. v. Wright, 858
Sun rescinded the contract. Had it not, Kenneco's profits          F.2d 842, 851 (2d Cir.1988). The Second Circuit rendered its
would have been about $1,690,780.00. Kenneco was able to           decision on September 22, 1988.
partially renegotiate the contract with Sun; however, the
renegotiated contract was also lost when the tanker fled the
harbor to avoid being sanctioned for its conduct. Eventually,      W hile the federal action was pending in New York, Kenneco
Kenneco convinced the tanker captain to return, took control       indicated that it might file a separate suit against J & H for
of the cargo, and began to recondition the oil. As the             mishandling its insurance needs. J & H and Kenneco signed a
reconditioned oil became saleable, Kenneco sold it in several      standstill agreement on December 15, 1986, delaying any such
parcels at various prices below the $30.55 per barrel contract     action pending the outcome of the federal litigation. The
price.                                                             standstill agreement contained a provision tolling the statute
                                                                   of limitations for “the period between December 15, 1986 and
                                                                   the date when thirty days ... elapsed following the final
Kenneco asserted insurance claims under both the Brazilian         determination of the New York Action.”
and London policies, *513 claiming the full amount of its lost
profit under the canceled Sun contract. The London
underwriters refused Kenneco's contingency coverage because        In June 1988, prior to the Second Circuit's decision, J & H
the sale was not back-to-back C.I.F. as required under the         filed a declaratory judgment action in Texas state court,
insurance policy. The London underwriters did recognize            seeking a ruling that res judicata and collateral estoppel barred
coverage under the increased value provision; however, their       Kenneco from filing suit against it. Kenneco counterclaimed
position was that the increased value coverage insured only        and sought damages on a variety of claims. A jury found that
against physical loss or damage to the cargo up to the amount      Kenneco suffered damages in the amounts of: $1,500,000 for
insured, not the loss of profits due to cancellation of a          fraud; $1,500,000 for Insurance Code 2 violations; $1,560,000
contract, as Kenneco urged. The London underwriters took a         for breach of the contract to secure lost profits coverage;
formal position on the claim in March 1983, denying                $412,273.66 for breach of the contract to secure contingency
contingency coverage and rejecting Kenneco's interpretation        coverage; and $1,700,000 for negligence. The jury also found
of the increased value provision.                                  that Kenneco discovered or should have discovered the basis
                                                                   for its Insurance Code claim by March 1983.

Kenneco filed suit against Banorte and the London
underwriters in April 1983 in New York federal district court.     J & H moved for judgment based on the ground that the
Armada Supply, Inc. v. Wright, 665 F.Supp. 1047                    Insurance Code and negligence claims were barred by their
(S.D.N.Y.1987), aff'd in part, rev'd in part, 858 F.2d 842 (2d     respective statutes of limitations. J & H alternatively moved
Cir.1988). W ith the contingency coverage in dispute, Kenneco      for judgment notwithstanding the verdict on the grounds that:
could not look solely to the London underwriters for coverage,     (1) all of Kenneco's claims were barred by collateral estoppel
but had to bring suit against Banorte, which disputed              and res judicata, and (2) no evidence supported the jury's
Kenneco's primary coverage. Kenneco did not name J & H as          findings of breach of contract and fraud. The trial court
a defendant, but did offer evidence about the events at the        granted J & H's motion without stating the grounds.
November 30, 1982 meeting between Brown and Anderson,
and Kenneco's contention that Anderson's and J & H's
representations resulted in lost profits coverage.                 *514 The court of appeals reversed the trial court's judgment,
                                                                   finding that: (1) res judicata and collateral estoppel did not bar
                                                                   any of Kenneco's claims; (2) Kenneco's Insurance Code claim
After a non-jury trial, the federal district court held that the   was not barred by limitations; and (3) although Kenneco's


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                               8
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



negligence claim accrued in March 1983 and would otherwise           limitations defense.
be barred by limitations, equitable estoppel prevented J & H
from asserting a limitations defense. 921 S.W .2d 254, 261–63.
Accordingly, the court of appeals rendered judgment in favor         [1] [2] A cause of action generally accrues, and the statute of
of Kenneco, awarding $1,972,273.66 in damages (based on              limitations begins to run, when facts come into existence that
the breach of contract claims 3 ), $275,000 in attorney's fees,      authorize a claimant to seek a judicial remedy. Murray v. San
and $2,750,952.39 in prejudgment interest. To calculate the          Jacinto Agency, Inc., 800 S.W .2d 826, 828 (Tex.1990); see
prejudgment interest, the court of appeals held that the case        also Moreno v. Sterling Drug, Inc., 787 S.W .2d 348, 351
was controlled by Cavnar v. Quality Control Parking, Inc.,           (Tex.1990) (“[A] cause of action can generally be said to
696 S.W .2d 549 (Tex.1985), and not by Tex.Rev.Civ. Stat.            accrue when the wrongful act effects an injury.”). Today we
article 5069–1.05, section 6. As a result, the court of appeals      are asked to decide whether, in a suit by an insured against its
compounded the prejudgment interest on a daily basis                 agent for negligent breach of the agent's duty to obtain
beginning six months from the date Sun rejected the cargo.           insurance, the injury-producing event was the denial of
921 S.W .2d at 267.                                                  coverage by the insurance company, or the final resolution of
                                                                     the coverage dispute by the courts. W e hold that Kenneco
                                                                     sustained injury when coverage was denied and, therefore,
W e granted this application for writ of error to determine: (1)     limitations commenced on that date because all facts required
whether limitations bars the negligence and Insurance Code           for a cause of action existed at that time. See Gilbreath v.
claims; (2) the appropriate preclusive effect of the federal         White, 903 S.W .2d 851, 856 (Tex.App.— Texarkana 1995, no
court judgment on the state court action under the doctrine of       writ) (holding that legal injury occurred for purposes of
collateral estoppel; and (3) the proper method for calculating       negligence action against insurance agent when insurance
prejudgment interest on claims governed by Cavnar.                   company rejected the claim); see also Bush v. Ford Life Ins.
                                                                     Co., 682 So.2d 46, 47–48 (Ala.1996); Plaza Bottle Shop v. Al
                                                                     T o rstric k In s. A g e n c y , 7 1 2 S .W .2 d 3 4 9 , 3 5 0
                                                                     (Ky.Ct.App.1986).
                     II. LIM ITATIONS

J & H asserts that limitations bars Kenneco's negligence and         *515 In Murray v. San Jacinto Agency, Inc., 800 S.W .2d at
Insurance Code claims. W e agree.                                    828, we held that when an insurer wrongfully denies coverage,
                                                                     the denial is the injury-producing event and, therefore, a cause
                                                                     of action for breach of the duty of good faith and fair dealing
                                                                     accrues when coverage is denied and not the date upon which
                         A. Negligence                               the coverage suit is resolved. See also Celtic Life Ins. Co. v.
                                                                     Coats, 885 S.W .2d 96, 100 (Tex.1994) (holding that a cause
The court of appeals held that Kenneco's negligence claim            of action under article 21.21 of the Insurance Code accrued on
against J & H accrued in M arch 1983, when the London                the date that insurer first denied coverage); Long v. State Farm
underwriters denied coverage of Kenneco's claim. 921 S.W .2d         Fire & Cas. Co., 828 S.W .2d 125, 128 (Tex.App.— Houston
at 262. However, it found that equitable estoppel barred J &         [1st Dist.] 1992, writ denied) (holding that a cause of action
H's limitations defense based upon the jury's finding that           under the DTPA accrues on the date that coverage is denied).
Kenneco's delay in filing suit was caused by J & H's conduct.        W e believe that the reasoning of Murray is equally applicable
Id. at 265–66. In its application for writ of error, J & H asserts   to Kenneco's negligence claim.
that the court of appeals correctly held that Kenneco's
negligence claim accrued in March 1983, but erred in holding
that equitable estoppel prevents J & H from asserting its            Although Arnold v. National County Mut. Fire Ins. Co., 725
limitations defense. Kenneco responds that the court of              S.W .2d 165, 168 (Tex.1987), held that limitations on a bad
appeals correctly found and applied equitable estoppel, or, in       faith claim does not begin to run until the underlying contract
the alternative, the court of appeals erred in determining the       claims are finally resolved, that rule was expressly modified in
date of accrual because Kenneco's negligence claim did not           Murray by our holding that limitations runs when coverage is
arise until August 1988, the date when the Second Circuit            denied because, at that time, the insured “ha[s] sufficient facts
affirmed the district court's holding of no coverage and when        to seek a judicial remedy.” Murray, 800 S.W .2d at 829.
Kenneco first suffered injury. W e agree with J & H that the         Kenneco's position that its negligence cause of action did not
negligence cause of action accrued in March 1983, and that           accrue until the underlying coverage dispute was resolved “is
equitable estoppel does not bar J & H's assertion of its             not consistent with the rule that limitations commences at the


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                               9
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



time facts come into existence which authorize a claimant to               that the failure to timely commence the action
seek a judicial remedy.” Id. Regardless of whether a coverage              was caused by the defendant's engaging in
suit was ever filed against the London underwriters, sufficient            conduct solely calculated to induce the
facts existed when coverage was denied in March 1983 for                   plaintiff to refrain from or postpone the
Kenneco to seek a judicial remedy against J & H for                        commencement of the action.
negligence.
                                                                     Tex. Ins.Code art. 21.21, § 16(d) (emphasis added).
                                                                     Section 17.565 of the DTPA contains virtually
Kenneco's reliance on Atkins v. Crosland, 417 S.W .2d 150            identical language. Tex. Bus. & Com.Code § 17.565.
(Tex.1967), is misplaced. Atkins involved a suit by a taxpayer       Kenneco's question tracks the language of sections
against his accountant for negligence. W e held that the statute     16(d) and 17.565 almost verbatim and submits the
of limitations did not begin to run against the taxpayer in that     exact question suggested by Pattern Jury Charge
case until his tax deficiency was assessed by the IRS because        102.23 for the 180–day extension under both
“[p]rior to assessment the plaintiff had not been injured.” Id.      statutes.
at 153. Kenneco, in contrast, was not only harmed when the
London underwriters denied coverage on its claim, but also
knew or should have known at that time that J & H might have
been negligent. Thus, Kenneco's negligence cause of action           [4] In contrast to that statutory language, the doctrine
accrued in March 1983, and the two-year limitations period           of equitable estoppel requires: (1) a false
had run when Kenneco and J & H signed the standstill                 representation or concealment of material facts; (2)
agreement in 1986.                                                   made with knowledge, actual or constructive, of
                                                                     those facts; (3) with the intention that it should *516
                                                                     be acted on; (4) to a party without knowledge or
[3] W e also hold that equitable estoppel does not bar J & H's       means of obtaining knowledge of the facts; (5) who
assertion of its limitations defense. The court of appeals, citing   detrimentally relies on the representations.
Neeley v. Bankers Trust Co. of Texas, 757 F.2d 621, 632 & n.         Schroeder v. Texas Iron Works, Inc., 813 S.W .2d
14 (5th Cir.1985), found the jury's affirmative answer to the        483, 489 (Tex.1991). Kenneco's jury question
following question to be equivalent to a finding of equitable        clearly does not address most of the equitable
estoppel:                                                            estoppel elements. 4 Even if the question could be
                                                                     characterized as a partial submission of the equitable
      W as Kenneco's (Armada's) failure to take                      estoppel issue, the language submitted is not
      action before December 15, 1986 [the date of                   “necessarily referable” to equitable estoppel and
      the standstill agreement], caused by J & H's                   therefore should not be characterized as such on
      knowingly engaging in conduct solely                           appeal. Tex.R. Civ. P. 279; see also Martin v.
      calculated to induce Kenneco (Armada) to                       McKee Realtors, Inc., 663 S.W .2d 446, 446
      refrain from or postpone filing suit?                          (Tex.1984); Gold Kist, Inc. v. Carr, 886 S.W .2d
                                                                     425, 431 (Tex.App.— Eastland 1994, writ denied)
921 S.W .2d at 263.                                                  (holding that jury question relating to breach of
                                                                     contract and fraud did not necessarily refer to
                                                                     promissory estoppel to the extent that defendant
                                                                     would be put on notice of possibility of deemed or
                                                                     express findings on that theory).
J & H argues that this question is an insufficient
submission of equitable estoppel and that it was
merely a submission of the 180–day limitations                       Furthermore, Kenneco's question was clearly
extension available under article 21.21, section 16(d)               submitted as part of the DTPA/Insurance Code
of the Insurance Code or section 17.565 of the                       claim— the jury was instructed not to answer it
DTPA. W e agree. Section 16(d) provides:                             unless it found that J & H had engaged in an “unfair
                                                                     or deceptive act or practice” that was a producing
                                                                     cause of damages to Kenneco. The question was not
      The period of limitation provided in this
                                                                     submitted as an independent common-law issue.
      section may be extended for a period of 180
                                                                     Therefore, the wording of the question and its
      days if the person bringing the action proves
                                                                     placement after other questions concerning statutory


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            10
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



claims reveal that it was an attempt to submit the            Code claim and submitted only a DTPA claim to the
180–day extension issue, either under the Insurance           jury, and therefore the DTPA's two-year statute of
Code or the DTPA. Because Kenneco's jury question             limitations applies. J & H's position is not supported
is a correct submission of the statutory 180–day              by the record. There is no indication that Kenneco
extension under the DTPA and Insurance Code, J &              waived the Insurance Code claim and proceeded
H could not have objected to the question as                  only with its DTPA claim.
improperly submitted.

                                                              To support its position, J & H relies on the parties'
Further, holding that an affirmative answer to this           repeated references to the cause of action submitted
jury question, which tracks the language of sections          to the jury as dealing with “unfair or deceptive
16(d) and 17.565, is equivalent to a finding of               practices.” J & H argues that such language refers to
equitable estoppel renders the 180–day extension              a DTPA cause of action and, thus, indicates that
language meaningless in actions under the DTPA                Kenneco submitted the claim under the DTPA.
and the new Insurance Code; anytime the question is           However, article 21.21 also deals with unfair or
submitted, a “yes” answer would arguably establish            deceptive practices.
equitable estoppel and wholly preclude a defendant's
limitations defense instead of just allowing the
180–day extension.                                            Article 21.21 is entitled “Unfair Competition and
                                                              Unfair Practices.” *517 Tex. Ins.Code art. 21.21.
                                                              Section 3 is captioned “Unfair methods of
In sum, J & H is not estopped from asserting its              competition or unfair and deceptive acts or practices
limitations defense and Kenneco's negligence claim            prohibited.” Id. § 3. Section 16 provides a cause of
is barred by the statute of limitations.                      action for persons injured by “unfair and deceptive
                                                              acts or practices in the business of insurance.” Id. §
                                                              16. Clearly, the reference to “any unfair or deceptive
                                                              act or practice” in the jury question can refer to an
                B. Insurance Code                             Insurance Code claim as well as to a DTPA claim.


                                                              [6] J & H also argues that because violations of
           1. Insurance Code vs. DTPA                         article 21.21 are incorporated as violations of the
                                                              DTPA, Tex. Bus. & Com.Code § 17.50(a)(4), and
[5] Kenneco asserted causes of action under the               because Texas courts have held that the DTPA
DTPA and Insurance Code article 21.21. Under each             limitations provision should be applied to all causes
cause of action, Kenneco argued incorporation of the          of action submitted under the DTPA, see McAdams
other cause of action. On those issues, Kenneco               v. Capitol Prods. Corp., 810 S.W .2d 290, 292
submitted a single liability question to the jury:            (Tex.App.— Fort W orth 1991, writ denied),
                                                              limitations bars this claim since Kenneco did not
      Did Johnson & Higgins engage in any unfair              request that the trial court submit an Insurance Code
      or deceptive act or practice in its dealings with       claim as an alternative cause of action. J & H's
      Kenneco (Armada) on or about November 30,               argument fails to consider the fact that, while the
      1982?                                                   DTPA does incorporate article 21.21, the converse
                                                              is also true— article 21.21 incorporates certain
                                                              practices delineated in the DTPA. Aetna Cas. & Sur.
The parties dispute whether this jury question is             Co. v. Marshall, 724 S.W .2d 770, 772 (Tex.1987).
properly characterized as an Insurance Code claim             Thus, if both DTPA and Insurance Code violations
or a DTPA claim. That determination must be made              are alleged, but only one cause of action is
before considering the applicable statute of                  submitted, that claim is not automatically a DTPA
limitations.                                                  claim.



J & H asserts that Kenneco abandoned its Insurance            W e agree with Kenneco that the jury question is


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                   11
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



grounded in the Insurance Code because it mirrors               828 S.W .2d 125, 128 (Tex.App.— Houston [1st
the language of article 21.21. Pattern Jury Charge              Dist.] 1992, writ denied). The jury found, and
(PJC) 102.14 (1990 ed.), entitled “Question for                 Kenneco concedes, that its insurance claim accrued
Article 21.21 of the Insurance Code,” was the form              when coverage was denied in March 1983.
used for the jury question actually submitted. The              Therefore, the pre–1985 version of article 21.21,
jury question language “unfair or deceptive act or              section 16(d) applies to Kenneco's claim.
practice” tracks the language of article 21.21, section
16. Also, the definitions provided in the jury charge
for “unfair or deceptive act or practice” 5                     [8] W hen a statute lacks an express limitations
unmistakably resemble the Insurance Code.                       period, courts look to analogous causes of action for
Definition (1) tracks the language of article 21.21, §          which an express limitations period is available
4 (1 ) a n d su b m its P JC 1 02 .1 6 , en title d             either by statute or by case law. See Tectonic Realty
“Misrepresentation or False Advertising of Policy               Inv. Co. v. CNA Lloyd's of Tex. Ins. Co., 812 S.W .2d
Contracts— Insurance.” Definition (2) tracks the                647, 655 (Tex.App.— Dallas 1991, writ denied);
language of article 21.21, § 4(2) and submits PJC               Brooks Fashion Stores, Inc. v. Northpark Nat'l
1 0 2 .1 7 , e n tit l e d “ F a ls e I n fo r m a tio n o r    Bank, 689 S.W .2d 937, 942 (Tex.App.— Dallas
Advertising— Insurance.” Definition (3) tracks the              1985, no writ). Texas courts of appeals have
language of Insurance Board Order No. 41060 and                 repeatedly analogized an article 21.21 cause of
submits            PJC       102.19,           entitled         action to an action for breach of a written contract,
“M isrepresentations— Insurance.” Additionally,                 thus applying the four-year statute of limitations
Question 12 (“W hat amount of the damages you                   applicable to actions for debt. See, e.g., Long, 828
found, if any, ... occurred before December 15, 1984            S.W .2d at 128; Tectonic, 812 S.W .2d at 655; Nash
[two years before the date of the standstill                    v. Carolina Cas. Ins. Co., 741 S.W .2d 598, 601
agreement]?”) is applicable only to causes of action            (Tex.App.— Dallas 1987, writ denied); Gibbs v.
under the pre–1985 Insurance Code, which excluded               Main Bank of Houston, 666 S.W .2d 554, 558
recovery for “damages incurred beyond a point two               (Tex.App.— Houston [1st Dist.] 1984, no writ). See
years prior to the institution of the action.” Tex.             also Kalis et al., Policyholder's Guide to the Law of
Ins.Code art. 21.21, § 16(d) (Vernon 1981). This                Insurance Coverage § 26.02[B], at 26–4
question would not have been submitted if the                   (1997)(“Lawsuits seeking to enforce a coverage
underlying liability claim concerned only the DTPA.             obligation typically are governed by the general
                                                                statute of limitations applicable to actions on written
                                                                contracts.”)(citing Franco v. Allstate Ins. Co., 505
                                                                S.W .2d 789, 793 (Tex.1974)). The court of appeals
          2. Applicable Limitations Period                      in this case cited Long and Tectonic to reach the
                                                                same conclusion. 921 S.W .2d at 262.
[7] Having determined that the claim submitted is
sufficiently grounded in the Insurance Code, we
must determine what statute of limitations applies to           In deciding which limitations period applied to an
an Insurance Code cause of action that accrued prior            article 21.21 claim that arose before April 4, 1985,
to April 4, 1985. Under the current version of article          the Tectonic court explained:
21.21, a party has two years from the date on which
it discovered or should have discovered its cause of                  The key question is whether to analogize
action in which to file suit. Tex. Ins.Code art. 21.21,               article 21.21 claims to general tort actions, for
§ 16(d). However, before April 4, 1985, article                       which a two-year limitations period applied, or
21.21 contained no express statute of limitations. 6                  to actions for breach of a written contract, for
*518 Tex. Ins.Code art. 21.21, § 16(d) (Vernon                        which a four-year limitations period applied.
1981); Act of June 7, 1951, 52d Leg., R.S., ch. 491,                  Texas appellate courts interpreting article
§ 1, 1951 Tex. Gen. Laws 868, 1075, amended by                        21.21 have repeatedly analogized it to an
Act of April 4, 1985, 69th Leg., R.S., ch. 22, §§ 3, 4,               action for breach of a written contract. As a
1985 Tex. Gen. Laws 395, 395–96. The date of                          result, the cases have applied the four-year
accrual of the article 21.21 cause of action                          limitations period normally available for
determines which version of the Insurance Code                        actions to enforce a written contract.
applies. See Long v. State Farm Fire & Cas. Co.,


                                © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    12
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



Tectonic, 812 S.W .2d at 655 (citations omitted).            invocation of the plea is, in fact, “defensive.”
                                                             Defensive collateral estoppel is utilized by
                                                             defendants to prevent relitigation by a plaintiff of
                                                             issues previously lost against another defendant.
This reasoning is flawed, however, because it fails to       Parklane Hosiery Co. v. Shore, 439 U.S. 322, 329,
consider that an article 21.21 claim is more                 99 S.Ct. 645, 650–51, 58 L.Ed.2d 552 (1979);
analogous to a DTPA claim than to an action for              Black's Law Dictionary 261–62 (6th ed.1990). J &
debt on a written contract. As discussed in the              H's status as a “plaintiff” in the declaratory judgment
preceding section in this opinion, Kenneco's article         action is purely nominal; J & H asserted its plea of
21.21 claim is virtually indistinguishable from its          collateral estoppel as a defense to Kenneco's claims
DTPA claim. The language of section 17.50(a)(4) of           for affirmative relief. See Republic Ins. Co. v. Davis,
the DTPA, by its terms, incorporates article 21.21 of        856 S.W .2d 158, 164 (Tex.1993).
the Insurance Code in its entirety. Vail v. Texas
Farm Bureau Mut. Ins. Co., 754 S.W .2d 129, 132
(Tex.1988). Similarly, article 21.21, section 16             J & H asserts that all of Kenneco's claims in the state
makes actionable any violation of section 17.46 of           court action are barred by collateral estoppel. 7 The
the DTPA. Aetna Cas. & Sur. Co. v. Marshall, 724             court of appeals concluded that collateral estoppel
S.W .2d 770 (Tex.1987). “The DTPA and the                    did not bar any of Kenneco's claims. Because
Insurance Code each grant relief for unfair or               Kenneco, then known as Armada, actually was a
deceptive acts or practices in the business of               party in the first action, the critical collateral
insurance.” Vail, 754 S.W .2d at 132.                        estoppel issues concern only whether: (1) the facts
                                                             sought to be litigated in the second action were fully
                                                             and fairly litigated in the first action, and (2) those
W e conclude that the close relationship between             facts were essential to the judgment in the first
article 21.21 and section 17.50(a)(4) of the DTPA            action. Sysco Food Servs., Inc. v. Trapnell, 890
requires us to apply the two-year statute of                 S.W .2d 796, 801 (Tex.1994); Eagle Properties, Ltd.
limitations provision of the DTPA to Kenneco's               v. Scharbauer, 807 S.W .2d 714, 721 (Tex.1990).
article 21.21 claim. W e disapprove of Long v. State
Farm Fire & *519 Cas. Co., 828 S.W .2d 125, 128
(Tex.App.— Houston [1st Dist.] 1992, writ denied);
Tectonic Realty Inv. Co. v. CNA Lloyd's of Tex. Ins.                     A. Federal Court Findings
Co., 812 S.W .2d 647, 655 (Tex.App.— Dallas 1991,
writ denied); Nash v. Carolina Cas. Ins. Co., 741            W e must first ascertain exactly what issues were
S.W .2d 598, 601 (Tex.App.— Dallas 1987, writ                decided in the federal action to determine whether
denied); and Gibbs v. Main Bank of Houston, 666              those findings might preclude Kenneco's claims in its
S.W .2d 554, 558 (Tex.App.— Houston [1st Dist.]              state court action. Although Kenneco's federal action
1984, no writ); to the extent they differ from this          was brought against both the London and the
conclusion.                                                  Brazilian underwriters, for our purposes we need
                                                             address only the claims against the London
                                                             underwriters. J & H was not a party in the federal
Kenneco's article 21.21 cause of action accrued in           action; but, several of its employees were called to
March 1983. Kenneco and J & H signed their                   testify in that case.
standstill agreement more than two years later on
December 15, 1986. As a result, Kenneco's
Insurance Code claims are barred by limitations.             The federal district court concluded that the London
                                                             underwriters were not liable for contingency
                                                             coverage. Kenneco argued that the back-to-back
                                                             C.I.F. requirement was waived by the London
        III. COLLATERAL ESTOPPEL                             underwriters' retention of Kenneco's premium. The
                                                             district court rejected this argument, finding that the
[9] Kenneco's arguments indicate that it regards J &         London underwriters did not waive their reservation
H's collateral estoppel plea as “offensive” collateral       of coverage, despite the fact that they received and
estoppel. However, J & H correctly argues that its           retained the premium from Kenneco. As to J & H's


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    13
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



conduct, the court stated, “[I]t appears that Johnson        The district court also made other specific findings
& Higgins did not clearly understand the situation           about what occurred at the November 30 meeting.
and mistakenly billed Armada for a premium for               The court drew the distinction “between the concept
contingency coverage.” Armada Supply, 665 F.Supp.            of increasing the insured value based on the amount
at 1062. The court further noted that “Johnson &             of a contract and the concept of insuring against the
Higgins billed Armada for the contingency coverage           loss of a contract as such,” finding that only the
premium before the question of coverage was                  former was discussed at the November 30 meeting.
resolved.” Id. at 1067. The court did not, however,          Id. at 1059. The court also found that “Brown said
determine whether J & H was or was not liable to             nothing which apprised Anderson that [Kenneco]
Kenneco.                                                     wished to have coverage that would depart from the
                                                             normal marine insurance and would cover possible
                                                             loss of a contract. Brown did not testify in words or
The federal district court also considered whether           substance that Anderson ever agreed to such a
the London underwriters were liable for Kenneco's            thing.” Id. at 1059–60. The court continued, “There
lost profits on the Sun contract under the increased         is nothing in Anderson's testimony to indicate that he
value provision. The court reasoned that the                 was agreeing to insure against the loss of the Sun
increased value coverage included physical loss or           contract or the profits on that contract. Certainly
damage to the cargo, but not the loss of a contract or       Anderson did not agree to something other than the
its *520 profits. Id. at 1051. The court squarely            normal particular average method of adjustment in
addressed Kenneco's argument that “even if the               the case of a contamination loss.”Id. at 1061. Again,
normal interpretation of [the coverage provision]            these conclusions by the court relate to lost profits
would not allow recovery for loss of profits [on a           under the increased value provisions rather than
contract], nevertheless there was a separate                 contingency coverage.
agreement to provide such coverage for this cargo.”
Id. at 1050. The district court held that no such
separate agreement was made, explicitly finding that         Kenneco appealed the district court's ruling to the
J & H “did not make an agreement binding the                 Second Circuit. The Second Circuit generally
London underwriters ... to coverage of the lost              affirmed the district court's findings regarding
profits on the Sun contract,” that “[J & H] did not          increased value coverage that: (1) Brown and
purport to make such an agreement,” and that “[J &           Anderson did not discuss insurance against loss of
H] had neither actual nor apparent authority to do           profits for the Sun contract at the November 30
so.” Id. at 1051. It is significant to note that these       meeting; (2) Brown did not ask for, nor did
findings relate to the loss of profits coverage under        Anderson agree to, coverage on lost profits; (3)
the increased value provision and not to contingency         Anderson's testimony was consistent with the
coverage.                                                    London underwriters' position that the increased
                                                             value coverage insured against cargo loss or damage
                                                             rather than lost profits; (4) what was actually
In its conclusions of law regarding increased value          discussed was Kenneco's desire to “protect” its
coverage, the federal district court phrased the issue       profits by utilizing the increased value coverage; and
as follows: “[Kenneco] contends that Johnson &               (5) Brown and Anderson did not discuss the
Higgins agreed that the London insurance would               difference between increasing the insured value
cover lost profits on the Sun contract.” Id. at 1058.        based on the amount of the contract and insuring
The court “found as a fact that Johnson & Higgins            against the loss of a contract as such. Armada
did not purport to make any agreement to insure the          Supply, 858 F.2d at 851. The Second Circuit found
Sun contract or the profits on that contract,” and           that these findings were not clearly erroneous. Id.
found that J & H had no actual or apparent authority         The court also reviewed and affirmed the finding
to do so. Id. at 1066–67. Finally, the court concluded       that J & H lacked authority to bind the London
that, “as a matter of fact and law, no agreement was         underwriters. Id. Finally, the court explicitly upheld
made at the November 30 meeting binding the                  the district court's conclusion that “as a matter of fact
London underwriters to insurance against loss of the         and law, no agreement was made at the November
Sun contract or the profits thereon.” Id. at 1067.           30 meeting binding the London underwriters to
                                                             insurance against loss of the Sun contract or the
                                                             profits thereon.” Id.


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                      14
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



                                                              remaining claims are based on lost profits coverage,
                                                              they are barred by collateral estoppel and to the
The Second Circuit also upheld the district court's           extent they are based on contingency coverage, they
finding that the London underwriters were not liable          are not barred.
for contingency coverage. Id. at 852. The court
addressed Kenneco's claim “that the London
underwriters' acceptance and retention of a premium
for contingency coverage waived any objection they                       1. Breach of Contract Claim s
may have had to such coverage.” Id. at 851. The
court noted that the “evidence indicates that *521 J
& H mistakenly billed Armada for [contingency]
coverage before any question of coverage had been                           a. lost profits coverage
resolved and that the London underwriters denied
coverage as soon as the facts of the transaction              [12] Kenneco's claim for breach of the alleged
became fully known.” Id. The court held that “the             agreement to secure lost profits coverage is barred
payment of a premium alone does not justify the               by collateral estoppel. In its state court claim,
rewriting of an insurance contract,” reasoning that           Kenneco asserts that J & H “breached its agreement
waiver cannot change coverage. Id. at 851–52. Thus,           to provide the type of coverage it assured [Kenneco]
the court concluded that coverage could not be                it would secure.” The jury question submitted asks,
created “where none clearly existed.” Id. at 852.             “Did Johnson & Higgins and Armada agree on
                                                              November 30, 1982, that Johnson & Higgins would
                                                              secure for Kenneco's (Armada's) benefit a policy of
                                                              insurance protecting the profits on the sale of the
       B. Preclusion of Kenneco's Claims                      cargo in question?” The instruction further clarifies
                                                              that the jury was asked to “decid[e] whether the
[10] [11] Collateral estoppel may preclude                    parties reached an agreement.” That identical issue
relitigation of issues previously litigated even though       was previously decided against Kenneco in the
the subsequent suit is based upon a different cause of        federal action.
action. Wilhite v. Adams, 640 S.W .2d 875
(Tex.1982). If a cause of action in the second lawsuit
involves an element already decided in the first              In the federal suit, Kenneco argued that J & H
lawsuit, that cause of action is barred. For this to be       “specifically agreed” to lost profits coverage at the
true, however, the issue decided in the first action          November 30 meeting. Armada Supply, 665 F.Supp.
must be actually litigated, essential to that lawsuit's       at 1057. Even a cursory reading of the federal
judgment, and identical to the issue in the pending           district court's opinion demonstrates its finding that
action. Getty Oil v. Insurance Co. of N. Am., 845             no such agreement to secure lost profits coverage
S.W .2d 794, 802 (Tex.1992); Eagle Properties, 807            was made. At least twice in its opinion, the court
S.W .2d at 721–22; Tarter v. Metropolitan Sav. &              explicitly found that J & H neither made an
Loan Ass'n, 744 S.W .2d 926, 927 (Tex.1988); Van              agreement to insure the profits on the contract nor
Dyke v. Boswell, O'Toole, Davis & Pickering, 697              purported to make such an agreement. Armada
S.W .2d 381, 384 (Tex.1985). The federal courts               Supply, 665 F.Supp. at 1051, 1066–67. The Second
have applied the same test. See Interoceanica Corp.           Circuit noted the district court's rejection of
v. Sound Pilots, Inc., 107 F.3d 86, 91 (2d Cir.1997);         Kenneco's argument that the parties agreed to
Levy v. Kosher Overseers Ass'n of America, Inc.,              coverage of lost profits at the meeting, and affirmed
104 F.3d 38, 41 (2d Cir.1997); Hicks v. Quaker Oats           the finding that “Brown did not ask for, nor did
Co., 662 F.2d 1158, 1166 (5th Cir.1981).                      Anderson agree to, coverage on lost profits.”
                                                              Armada Supply, 858 F.2d at 847, 851. In order to
                                                              succeed on its breach of contract claim in state court,
Kenneco's state court claims include: (1) breach of           Kenneco was required to establish that an agreement
contract, (2) Insurance Code violations, (3)                  concerning lost profits coverage was made. That
common-law fraud, and (4) negligence. Kenneco's               issue was already decided against Kenneco in the
negligence and Insurance Code claims are barred by            prior action. Thus, Kenneco's claim for breach of a
limitations. W e hold that, to the extent Kenneco's           contract to secure lost profits coverage is precluded


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    15
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



if the claim was actually litigated and essential to the      (1982). The district court's alternative findings of no
judgment in the federal action.                               agreement to insure the Sun contract and no
                                                              authority to do so were both appealed and affirmed
                                                              by the Second Circuit. The finding that no agreement
The issue concerning whether J & H agreed to                  was made to cover the Sun contract profits was
secure lost profits coverage was actually litigated in        rigorously considered—the district court discussed
the federal action because the issue was properly             this issue extensively in its findings of fact and
raised, submitted for determination, and determined.          conclusions of law. This finding was affirmed by the
Restatement (Second) of JudgmentsSSSSSSS § 27                 Second Circuit and could, standing independently,
cmt. *522 d (1982); Van Dyke v. Boswell, O'Toole,             support the result of no coverage; it thus serves as a
Davis & Pickering, 697 S.W .2d 381, 384                       valid estoppel in this action.
(Tex.1985). The real question concerns the extent to
which the federal district court's finding that no such
agreement was made was essential to its judgment.
                                                              Because we conclude that alternative findings that
                                                              are in fact reviewed and affirmed by an appellate
Kenneco argues that, because the federal district             court may have preclusive effect, we need not
court's holding of no lost profits coverage was based         address J & H's additional argument under Eagle
on the alternative findings of no agreement and no            Properties, Ltd. v. Scharbauer, 807 S.W .2d 714,
authority, neither finding was “essential to the prior        721 (Tex.1990), that estoppel is allowed for
judgment.” Section 27 of the Restatement (Second)             alternative holdings that were “rigorously
of Judgments provides in part: “If a judgment of a            considered” and sufficient to sustain the judgment.
court of first instance is based on determinations of
two issues, either of which standing independently
would be sufficient to support the result, the
judgment is not conclusive with respect to either                          b. contingency coverage
issue standing alone.” Id. § 27, cmt. i (1982). Thus,
according to the Restatement, the general rule is that        [14] Kenneco's claim for breach of the alleged
there cannot be estoppel by alternative holdings. 8           agreement to secure “contingency coverage” is not
                                                              barred by collateral estoppel. The issue sought to be
                                                              litigated in this action, as framed by the submitted
[13] In response, J & H correctly asserts that both of        jury question, is: “Did Johnson & Higgins and
the district court's findings can have a preclusive           Kenneco (Armada) agree on November 30, 1982,
effect because both were reviewed and affirmed by             that Johnson & Higgins would secure for Kenneco's
the Second Circuit. An exception exists to the                (Armada's) benefit ‘contingency coverage’?” The
general rule of no preclusion when alternative                jury found that such an agreement was made and
holdings are appealed and affirmed. Comment o to              awarded Kenneco $412,273.66.
the Restatement provides:

      If the judgment of the court of first instance          Kenneco's cause of action for breach of an
      was based on a determination of two issues,             agreement to secure contingency coverage is not
      either of which standing independently would            collaterally estopped because, in contrast to their
      be sufficient to support the result, and the            consideration of whether J & H agreed to secure lost
      appellate court upholds both of these                   profits coverage, the federal courts never addressed
      determinations as sufficient, and accordingly           whether an agreement was made to secure
      affirms the judgment, the judgment is                   contingency coverage.
      conclusive as to both determinations. In
      contrast to the case discussed in Comment i,
      the losing party has here obtained an appellate         It is undisputed that Brown went to J & H to obtain
      decision on the issue, and thus the balance             “back up” insurance in the event the Brazilian
      weighs in favor of preclusion.                          underwriters failed to pay on a claim. It is also
                                                              undisputed that Anderson told Brown such coverage
Restatement (Second) of Judgments § 27, cmt. o                could be triggered by the policy's already existing


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    16
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



“contingency coverage.” The federal district court            waived. Not every fact finding in the district court's
found that the contingency coverage did not apply             opinion may be afforded preclusive effect. To allow
because: (1) the sale was not back-to-back *523               such broad preclusion would eviscerate the
C.I.F., and (2) the London underwriters did not               requirement that the finding be essential to the
waive the coverage requirements. Armada Supply,               judgment in the prior suit. Bonniwell v. Beech
665 F.Supp. at 1051, 1067. Thus, the district court's         Aircraft Corp., 663 S.W .2d 816, at 818–19
finding that the policy's contingency coverage did            (Tex.1984); Eagle Properties, 807 S.W .2d at
not apply to the sale does not preclude a finding by          721–22.
the jury in the state action that Anderson agreed to
secure contingency coverage.
                                                              In federal court, Kenneco argued that the C.I.F.
                                                              back-to-back requirement was not a material term of
Collateral estoppel is not proper because the issue           the cover note and that the underwriters waived the
decided in the federal action is not identical to the         requirement because they retained the contingency
issue Kenneco litigated as a basis for the                    premium. The district court made three inquiries that
contingency coverage breach of contract claim in the          were essential to its holding of no contingency
state court. See Getty Oil, 845 S.W .2d at 802.               coverage: (1) whether the back-to-back C.I.F.
Similarly, the ultimate issues in Kenneco's state             requirement of the cover note was a material term;
action “were neither expressly nor necessarily                (2) if so, whether it was satisfied; and (3) if not
adjudicated” in the federal action nor were the               satisfied, whether the London underwriters waived
federal court findings inconsistent with the state            that requirement by accepting and retaining the
court findings. See Tarter v. Metropolitan Sav. &             premium. The district court concluded that it was a
Loan Ass'n, 744 S.W .2d 926, 928 (Tex.1988).                  material term, it was not satisfied, and that it was not
                                                              waived. Although the district court stated that
                                                              “Anderson understood Brown to say” that the sale
The federal courts never decided whether J & H                was back-to-back C.I.F. and that Kenneco did not
agreed to secure contingency coverage. Kenneco's              “affirmatively state” until December 1992 that the
assertions in the federal courts regarding                    sale to Sun was delivered, what Brown said and what
contingency coverage were mainly that events after            Anderson knew or understood regarding the sale to
the November 30 meeting (e.g., the underwriters'              Sun were not essential to the district court's holding.
receiving and retaining premiums for contingency              Armada Supply, 665 F.Supp. at 1061–62.
coverage) resulted in a waiver of the back-to-back
C.I.F. requirement. Armada Supply, 665 F.Supp. at
1061–63, 1067–68, 1061 (“[Kenneco] claims that                Regarding Kenneco's “claim that the underwriters
during the course of later events the London                  waived the requirement of the cover note because
underwriters waived the requirement of the cover              they received and retained the ‘contingency’
note.”). In contrast, the jury question in the state          premium,” the district court made two alternative
action focused only on whether J & H agreed on                holdings. Id. at 1067. First, it concluded that waiver
November 30 to secure coverage. The issue of                  could not rewrite the requirements of the policy. Id.
whether J & H mistakenly billed Kenneco for                   Then, it stated, “In any event, the evidence does not
premiums after the London underwriters disputed               support the conclusion that the London underwriters
coverage is not identical to whether Anderson agreed          waived their objections to coverage through
on November 30 to secure contingency coverage.                retention of a premium.” Id. The district court's
                                                              statement that “it appears that Johnson & Higgins
                                                              did not clearly understand the situation and
Further, the federal district court's statements              mistakenly billed Armada for a premium for
regarding the state of knowledge of both parties as to        contingency coverage,”id. at 1062, was not essential
the nature of the sale from Kenneco to Sun (i.e., that        in its evaluation of whether the conduct of the
it was not back-to-back C.I.F.) should not support            underwriters resulted in waiver. The district court
collateral estoppel. These statements were not                focused on the fact *524 that the London
affirmed on appeal and were not essential to the              underwriters reserved decision on the contingency
district court's holdings that the sale was not covered       coverage, did not waive their position after J & H
and that the back-to-back C.I.F. requirement was not          billed Kenneco for premiums, and plainly denied


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     17
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



coverage when the facts were fully known. Id. at              the London policy, and the federal district court
1067–68. Thus, J & H's billing actions did not affect         found against Kenneco on that issue. To support its
the London underwriters' position. If J & H's act of          position, J & H points to the federal district court's
billing Kenneco was irrelevant to the determination           statement that “[Kenneco] contends that [J & H]
of no waiver, surely J & H's state of mind in so              agreed that the London insurance would cover lost
doing was also irrelevant.                                    profits on the Sun contract.” 665 F.Supp. at 1058. J
                                                              & H further argues that Kenneco relies on the same
                                                              arguments and facts that it relied on in federal court
Simply put, the facts relevant to the contingency             to now support its fraud claim.
claims in this case were not identical to the facts
decided in the federal case and were not essential to
the federal court's holding. Therefore, the                   Kenneco responds that its fraud claim could not be
contingency coverage breach of contract claim is not          estopped by the prior action because, in the federal
collaterally estopped.                                        action, it contended that Anderson did not
                                                              misrepresent coverage because J & H correctly
                                                              represented the coverage under the London policy,
                                                              whereas here its position is that J & H did
              2. Com m on-law Fraud                           misrepresent coverage. Further, Kenneco argues that
                                                              the federal suit was nothing more than a contract
In the state action, the court submitted the following        construction suit, and therefore the federal court's
question to the jury:                                         determination of that suit should have no bearing on
                                                              Kenneco's fraud claim.
      Did Johnson & Higgins misrepresent
      Kenneco's (Armada's) insurance coverage with
      the London underwriters at the November 30,             W e hold that, to the extent that Kenneco's fraud
      1982, meeting?                                          claim is based on its allegation that Anderson
                                                              knowingly or recklessly represented that Kenneco's
The question did not differentiate between the                lost profits on the contract were insured by the
increased value coverage and the contingency                  increased value provision, it is barred by collateral
coverage, although the pleadings alleged that                 estoppel. Kenneco's state court fraud claim
Anderson misrepresented Kenneco's coverage under              necessarily involves proof that a representation was
both provisions. The jury answered affirmatively and          made, and that that representation was false.
awarded Kenneco $1.5 million in damages.                      Although Kenneco never contended that Anderson
                                                              or J & H mis-represented coverage in the federal
                                                              courts, Kenneco did contend that Anderson made
                                                              certain representations regarding lost profits
[15] The elements of common-law fraud are that: (1)           coverage, and the federal courts rejected that
a material representation was made; (2) the                   contention. In fact, the Second Circuit specifically
representation was false; (3) when the representation         characterized the issue being decided as “whether
was made, the speaker knew it was false or made it            the London underwriters were bound by the alleged
recklessly without any knowledge of the truth and as          representations of J & H, a Houston broker, that the
a positive assertion; (4) the representation was made         insurance would cover lost profits.” Armada Supply,
with the intention that it be acted upon by the other         858 F.2d at 851 (emphasis added). Even Kenneco's
party; (5) the party acted in reliance upon the               own brief states that “Kenneco offered evidence
representation; and (6) the party suffered injury. T.O.       concerning representations made by Anderson of [J
Stanley Boot Co. v. Bank of El Paso, 847 S.W .2d              & H] as to the extent of coverage” for lost profits.
218, 222 (Tex.1992); Eagle Properties, 807 S.W .2d            Thus, insofar as Kenneco's fraud claim is based on
at 723.                                                       an alleged representation by Anderson that
                                                              Kenneco's lost profits were covered, the claim is
                                                              barred *525 by the federal courts' conclusion that no
[16] J & H argues that Kenneco's fraud claim is               such representation was made.
estopped because Kenneco contended in the federal
action that Anderson misrepresented coverage under

                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                   18
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



However, Kenneco's allegation that Anderson                   representations regarding lost profits coverage at the
knowingly or recklessly represented that Kenneco              November 30 meeting. See Sysco Food Servs., Inc.
“was fully insured for any loss to which the Brazilian        v. Trapnell, 890 S.W .2d 796, 802 (Tex.1994)
underwriters did not respond under the ‘contingency’          (“W hen the issue is properly identified, it becomes
clause” is not barred because that issue was not              clear that this issue was fully and fairly litigated in
decided in the federal suit. The federal courts made          the federal action.”). Kenneco had every incentive to
no findings that would preclude a verdict in favor of         p ro ve tha t A nd e rso n m ade the allege d
Kenneco on this claim, and the jury's findings are not        representations concerning increased value
inconsistent with the federal courts' findings.               coverage; Kenneco's recovery for lost profits in the
                                                              federal coverage suit depended upon such a finding.
                                                              W hat Anderson said regarding lost profits coverage
                                                              was fully aired in the federal courts through the
            C. Full and Fair Litigation                       testimony of Brown and Anderson and through the
                                                              conflicting positions of Kenneco and the London
[17] Kenneco argues that the federal court's findings         underwriters regarding those representations. See
should not be afforded preclusive effect because of           Armada Supply, 665 F.Supp. at 1050 (“London
the alignment of the parties in the federal action.           underwriters ... den[y] that Johnson & Higgins
Kenneco asserts that it had no real incentive in the          purported to make such an agreement.”). Thus, the
federal action to develop testimony against J & H,            issue of what Anderson said at the November 30
because J & H was participating on Kenneco's                  meeting was fully and fairly litigated in the federal
behalf. Thus, according to Kenneco, there was no              courts.
full and fair litigation of issues relating to J & H's
conduct, and the alignment of the parties created a
situation in which J & H's conduct was not                    [18] Kenneco also argues that collateral estoppel
rigorously considered.                                        should not apply because the “procedural
                                                              opportunity” of a jury trial was unavailable in the
                                                              New York action, citing Federal Rule of Civil
J & H responds that the alignment of the parties              Procedure 38(e). The mere fact that Kenneco could
should not negate the collateral estoppel effect of the       not avail itself of this opportunity does not, in and of
federal court's findings. J & H admits that it assisted       itself, preclude an application of defensive collateral
Kenneco in asserting its claim against the London             estoppel. Further, the United States Supreme Court
underwriters, and even testified on Kenneco's behalf          has previously rejected the position that collateral
in federal court as to how the claim should be                estoppel violates a party's Seventh Amendment right
adjusted. However, J & H claims it did not align              to a trial by jury. Parklane Hosiery Co. v. Shore, 439
itself with Kenneco concerning the events of the              U.S. 322, 333–37, 99 S.Ct. 645, 652–55, 58 L.Ed.2d
November 30 meeting. J & H asserts that the issue of          552 (1979). W hile the question remains open as a
what occurred at the meeting and what Anderson                matter of Texas constitutional law, see Sysco Food
said or did was “drawn” through the conflicting               Servs., 890 S.W .2d at 801 n. 7, Kenneco has not
testimony of Anderson and Brown and through the               raised any argument under the Texas Constitution in
dispute over that issue between Kenneco and the               this Court, and therefore we will not consider the
London underwriters.                                          question. See Tilton v. Marshall, 925 S.W .2d 672,
                                                              677 n. 6 (Tex.1996).

W e agree with J & H and hold that J & H's
involvement in the prior action as a witness on
behalf of Kenneco does not extinguish the collateral                       *526 IV. DISPOSITION
estoppel effect of the federal court's findings. There
would be no question as to the preclusive effect of           [19] After application of J & H's limitations and
those findings had J & H not participated in the prior        collateral estoppel defenses, Kenneco's remaining
action. Kenneco's argument that it had no incentive           jury awards include fraud ($1,500,000.00) and
to litigate against J & H fails because that is not the       breach of contract ($412,273.66), both of which
test: the proper inquiry is whether Kenneco had               relate to the contingency coverage issue. W hen a
incentive to litigate the issue of Anderson's                 prevailing party does not elect a measure of damages


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     19
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



from among alternative measures, courts should                 of Kenneco's policy and read the provision aloud at
render judgment based on the finding affording the             the meeting, including the language requiring
greatest recovery. Birchfield v. Texarkana Memorial            back-to-back C.I.F. sales. Brown testified that she
Hosp., 747 S.W .2d 361, 367 (Tex.1987). Although               clearly informed Anderson that the sale to Sun was
the fraud claim provides the greatest recovery,                on a delivered basis, and that Anderson told her that
Kenneco is not entitled to recover on the jury's fraud         the contingency coverage applied nonetheless.
award because there is no evidence to support the              Anderson admitted telling Brown that Kenneco had
jury's finding that J & H knowingly or recklessly              contingency coverage, but testified that Brown had
misrepresented Kenneco's contingency coverage.                 incorrectly informed him that Kenneco's deal was
                                                               back-to-back C.I.F., which would trigger
                                                               contingency coverage. Anderson's contemporaneous
                                                               notes of the meeting reflected that Kenneco's
                       A. Fraud                                purchase was C.I.F., but the notes were silent
                                                               regarding the sale to Sun. Anderson testified that
[20] The contingency coverage provisions in                    D ecem ber 22, 1982, whe n B ro wn se nt
Kenneco's insurance policy provided that “where the            documentation reflecting that the Sun sale was
Assured purchase goods on C.I.F. terms and sell on             delivered, was the first time he was informed that the
C.I.F. terms, but wish to give their buyer a certificate       sale to Sun was not C.I.F. Despite that knowledge,
for their Sales Price ... they may issue certificates for      Anderson did not inform Kenneco or the London
the full value hereunder.” Thus, the contingency               underwriters of the potential problem with
coverage policy language required a C.I.F. purchase            contingency coverage. Instead, he calculated the
and a C.I.F. sale. Kenneco contends that Anderson,             premium and billed Kenneco even though he
on behalf of J & H, committed fraud by representing            admittedly knew at that time that coverage was
on November 30 that the contingency coverage                   “highly improbable.” Anderson testified that J & H
applied even though Brown had informed Anderson                billed Kenneco for the premium to avoid difficulty
that the sale to Sun was on a delivered basis, not             in processing a claim for lack of payment, and that J
C.I.F. J & H responds that, even if Anderson                   & H at all times advocated to the London
misrepresented the contingency coverage, there is no           underwriters that there was contingency coverage.
evidence that he made the misrepresentation
knowingly or recklessly. According to J & H,
Anderson was, at worst, negligent.                             Construing the evidence in the light most favorable
                                                               to Kenneco and disregarding all contrary evidence
                                                               and inferences, see Havner v. E–Z Mart Stores, Inc.,
[21] [22] A statement is not fraudulent unless the             825 S.W .2d 456, 458 (Tex.1992), we conclude that
speaker knew it was false when made or the speaker             although Anderson did in fact misrepresent
made it recklessly without knowledge of the truth.             Kenneco's coverage, there is no evidence that he
Prudential Ins. Co. v. Jefferson Assocs., 896 S.W .2d          made the misrepresentation knowingly or recklessly.
156, 163 (Tex.1995). Proof that a defendant made a             Clearly Kenneco has provided no direct *527
statement knowing of its falsity or without                    evidence, such as Anderson's notes or a
knowledge of its truth may be proved by direct or              memorandum, indicating that Anderson intentionally
circumstantial evidence. See Spoljaric v. Percival             or recklessly misled Brown and Kenneco. Thus,
Tours, Inc., 708 S.W .2d 432, 435 (Tex.1986).                  Kenneco's claim must be supported, if at all, by
                                                               circumstantial evidence. But there is no
                                                               circumstantial evidence that Anderson knowingly
The evidence of the events surrounding the                     misrepresented the coverage. Brown herself
November 30 meeting is as follows: Brown visited               discounted such a theory, testifying that “[i]n
J & H's offices to discuss insurance coverage for the          retrospect I believe that [Anderson] didn't appreciate
tanker cargo, already en route from Rio de Janeiro to          the difference [between a C.I.F. sale and a delivered
New York. Kenneco's normal account representative              sale].” Further, there is no evidence to support a
was on vacation, so Brown met with Anderson, a                 motive for Anderson to intentionally misrepresent
cargo claims adjuster. Anderson testified that,                the coverage. In contrast, Anderson testified that,
because he was not familiar with the language of the           had he obtained coverage other than the existing
contingency coverage provision, he obtained a copy             contingency coverage, J & H would have received a


                               © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                   20
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



better premium. Thus, there is no evidence that                [24] J & H also challenges the legal sufficiency of
Anderson acted knowingly.                                      the jury's award for breach of contract to secure
                                                               contingency coverage. Specifically, J & H argues
                                                               that there is no evidence that it agreed to secure
[23] Further, there is no evidence that Anderson               contingency coverage. W e hold that there is some
recklessly misrepresented the coverage. A speaker              evidence to support the jury's finding, and therefore
acts recklessly if he makes representations “without           Kenneco is entitled to judgment on this claim.
any knowledge of the truth and as a positive
assertion.” T.O. Stanley Boot Co. v. Bank of El Paso,
847 S.W .2d 218, 222 (Tex.1992). In other words, a             Both Anderson and Brown testified that Brown went
representation is recklessly made if the speaker               to J & H on November 30, 1982 seeking, among
knows that he does not have sufficient information             other things, insurance against the possibility that the
or basis to support it, Trenholm v. Ratcliff, 646              Brazilian underwriters would not pay on a claim by
S.W .2d 927, 933 (Tex.1983), or if he realizes that he         Kenneco. Brown testified several times that she told
does not know whether or not the statement is true.            Anderson that the transaction for which the
Custom Leasing, Inc. v. Texas Bank & Trust Co.,                additional insurance was sought “was a C.I.F.
516 S.W .2d 138, 142 (Tex.1974) (citing                        purchase and a delivered sale.”
Restatement of Restitution § 8 (1957)). This
standard might apply if Anderson, with no
familiarity of the policy language, had told Brown             Brown further testified that:
that the coverage applied without consulting the
policy itself. It is undisputed that that is not the case.           [T]he end result was he [Anderson] agreed
Anderson realized his ignorance of the policy                        that it [the additional coverage] would cover
language, and obtained a copy of the policy and read                 exactly what we were looking for, the type of
it over with Brown in an effort to answer her                        purchase we had and type of sale we had. He
concerns. See Jauregui v. Jones, 695 S.W .2d 258,                    knew I told him that it was a delivered sale, so
263–64 (Tex.App.— San Antonio 1985, writ ref'd                       that he was well aware that it was not a C.I.F.
n.r.e.) (finding no fraud when defendant made                        back-to-back but was a purchase sale.
investigation before making assertion). Thus, the
evidence does not indicate that Anderson made the              W hen asked whether she was “telling the Court and
representation “without any knowledge of the truth.”           jury that when you left Johnson and Higgins you
At most, it establishes that Anderson should have              were convinced that you had the protection that you
known that his representations may have been                   went there specifically to get,” Brown succinctly and
incorrect; such evidence, however, is akin to                  unequivocally testified: “W ithout a doubt.” J & H
negligent misrepresentation, not fraud. See Federal            *528 charged, and Kenneco paid, a premium for this
Land Bank Ass'n v. Sloane, 825 S.W .2d 439, 442                insurance.
(Tex.1991) (standard for negligent misrepresentation
is that defendant “did not exercise reasonable care or
competence in obtaining or communicating the
information”).                                                 Anderson testified that he sold Brown contingency
                                                               coverage and told her he would make the
                                                               declarations. He further agreed that he would have
Lastly, we do not believe that Anderson's conduct              expected her to believe that she had contingency
weeks after the loss occurred constitutes evidence             coverage after the meeting, and that it was possible
that he acted fraudulently at the November 30                  for him to convince the underwriters to grant
meeting. Taking all reasonable inferences favorable            coverage for the sale even were it not back-to-back
to Kenneco, Anderson's conduct establishes, at most,           C.I.F.
that he was reluctant to admit his mistake. That is not
evidence of fraud.
                                                               Although Anderson claims that Brown indicated to
                                                               him that the transaction was C.I.F. back-to-back,
                                                               Brown explained that “on a back-to-back
               B. Breach of Contract                           transaction, Armada [Kenneco] would never have

                               © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     21
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



any risk at all,” and consequently no need for the           Cloud, Note, Cavnar v. Quality Control Parking,
contingency coverage which Anderson actually                 Inc.: Prejudgment Interest is Now Recoverable in
procured for Kenneco. Either Anderson sold                   Personal Injury, Wrongful Death and Survival
Kenneco insurance that it did not need; or, contrary         Action Cases, 38 Baylor *529 L.Rev. 385 (1986).
to his later position, he actually agreed to sell            The decision to extend prejudgment interest
Kenneco the additional coverage that Brown claims            recovery to such cases was driven primarily by the
she requested.                                               rationale that awarding prejudgment interest was
                                                             necessary to fully compensate injured plaintiffs.
                                                             Cavnar, 696 S.W .2d at 552.
This is legally sufficient evidence to support the
jury's verdict. Therefore, Kenneco is entitled to
recover on its claim for breach of contract to secure        Cavnar established that a prevailing plaintiff may
contingency coverage, in the amount of                       recover prejudgment interest, compounded daily
$412,273.66.                                                 (based on a 365–day year), on damages that accrued
                                                             by the time of judgment. Id. at 554. The starting date
                                                             for accrual of prejudgment interest on claims
                                                             governed by Cavnar was “six months after the
        V. PREJUDGM ENT INTEREST                             occurrence of the incident giving rise to the cause of
                                                             action,” 1 0 and the rate of interest was to be computed
[25] [26] W e next consider the proper method of             under Tex.Rev.Civ. Stat. article 5069–1.05, section
calculating prejudgment interest under Cavnar v.             2 1 1 on the date of judgment. Cavnar, 696 S.W .2d at
Quality Control Parking, Inc., 696 S.W .2d 549, 552          554. Cavnar involved claims for personal injury, but
(Tex.1985). Prejudgment interest is “compensation            its application has been expanded to non-personal
allowed by law as additional damages for lost use of         injury scenarios. See, e.g., Perry Roofing Co. v.
the money due as damages during the lapse of time            Olcott, 744 S.W .2d 929, 930 (Tex.1988) (breach of
between the accrual of the claim and the date of             contract action for damages unascertainable from
judgment.” Id. at 552 (citing McCormick, Damages,            contract); Rio Grande Land & Cattle Co. v. Light,
§ 50 (1935)); see also Tex.Rev.Civ. Stat. art.               758 S.W .2d 747, 748 (Tex.1988) (same); City of
5069–1.01(a). There are two legal sources for an             Houston v. Wolfe, 712 S.W .2d 228, 229
award of prejudgment interest: (1) general principles        (Tex.App.— Houston [14th Dist.] 1986, writ ref'd)
of equity and (2) an enabling statute. Cavnar, 696           (eminent domain).
S.W .2d at 552; Phillips Petroleum Co. v. Stahl
Petroleum Co., 569 S.W .2d 480, 483–85
(Tex.1978).                                                  In fashioning its prejudgment interest rule, the
                                                             Cavnar Court was primarily concerned with
                                                             advancing two ends: (1) encouraging settlements and
J & H argues that any award of prejudgment interest          (2) expediting both settlements and trials by
in this case is governed by Tex.Rev.Civ. Stat. article       removing incentives for defendants to delay without
5069–1.05, section 6, or, alternatively, that we             creating such incentives for plaintiffs. Cavnar, 696
should defer to the policy underlying section 6 even         S.W .2d at 554–55; see also Perry Roofing, 744
if it does not expressly apply. Kenneco argues that          S.W .2d at 930.
Cavnar controls this case and that general principles
of equity govern the award of prejudgment interest.
W e hold that this case is governed by the common            In 1987, two years after Cavnar was issued, the
law rather than by statute; however, we conform              Texas Legislature passed a comprehensive package
Cavnar's common-law rule with the legislative                of legislation known as “tort reform.” See generally
policy established by section 6. 9                           Sanders & Joyce, “Off to the Races”: The 1980s
                                                             Tort Crisis and the Law Reform Process, 27
                                                             Houston L.Rev. 207 (1990). Part of the tort reform
In Cavnar, this Court overruled eighty-eight years of        legislation added section 6 to article 5069–1.05.
judicial precedent and adopted a rule allowing
recovery of prejudgment interest on personal injury,
wrongful death, and survival actions. See generally          Section 6 somewhat codified and modified the


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     22
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



Cavnar rule by providing that “[j]udgments in                 Spangler, 861 S.W .2d at 398. The limited
wrongful death, personal injury, and property                 application of section 6 is evident from the statute's
damage cases must include prejudgment interest.”              plain language, especially when viewed in the
Tex.Rev.Civ. Stat. art. 5069–1.05, § 6(a). However,           context of other sections of article 5069–1.05.
under this section, the time period during which              W hereas section 2 provides that interest shall accrue
prejudgment interest accrues is shorter than under            on “all judgments,” section 6 provides only that
Cavnar. Instead of beginning six months after the             statutory prejudgment interest must be awarded for
date of the incident, section 6 provides that                 “[j]udgments in wrongful death, personal injury, and
prejudgment interest generally begins to accrue on            property damage cases.” Tex.Rev.Civ. Stat. art.
the earlier of (1) 180 days after the date the                5069–1.05 §§ 2, 6(a). Further, the Legislature later
defendant receives written notice of a claim or (2)           added section 7, which specifically allows for
the day the suit is filed. Id. Section 6(g) states that       prejudgment interest in condemnation cases. Id. § 7.
“[t]he rate of prejudgment interest shall be the same         Surely if section 6 were applicable to all judgments,
as the rate of postjudgment interest at the time of           the addition of section 7 would have been
judgment.” But, interest “shall be computed as                superfluous.
simple interest.” Id. § 6(g). Section 6 also provided
other modifications to the Cavnar rule, such as
tolling accrual of prejudgment interest as to the             [28] Given that section 6 is expressly limited to
amount of a settlement offer during its pendency,             wrongful death, personal injury, and property
allowing a trial court the discretion to order accrual        damage cases, we must next determine whether
or nonaccrual during periods of delay caused by a             Kenneco's claims fall within any of those categories.
defendant or a plaintiff, and allowing prejudgment            Clearly the only potentially applicable category
interest for future damages included in the judgment.         would be property damage. W e have concluded that
Id. §§ 6(a)-(d).                                              Kenneco is entitled to recover only on its breach of
                                                              contract claim. Although the contract concerned
                                                              insurance coverage for damages to Kenneco's
[27] J & H takes the position that section 6 's               property by a third party, Kenneco does not base its
calculation rules apply to all judgments, and                 suit on that property damage. Instead, Kenneco's
therefore apply to any judgment awarded to                    claims are for purely economic losses stemming
Kenneco. Kenneco argues that the plain language of            from J & H's breach of contract to secure
section 6 applies only to wrongful death, personal            contingency coverage. Such claims do not fall within
injury, and property damage cases. The courts of              the scope of “property damage cases,” which only
appeals have split on this question. Compare e.g.,            include claims for damage to tangible property, not
Kuehnhoefer v. Welch, 893 S.W .2d 689, 694                    economic loss or loss of economic opportunity. See
(Tex.App.— Texarkana 1995, writ denied) and                   Spangler, 861 S.W .2d at 398; Associated Telephone
Texas Commerce Bank v. Lebco Constructors, *530               Directory Publishers, Inc. v. Five D's Publishing
Inc., 865 S.W .2d 68, 84 n. 13 (Tex.App.— Corpus              Co., 849 S.W .2d 894, 900 (Tex.App.—Austin 1993,
Christi 1993, writ denied)(holding that statute has           no writ); Ralston Purina Co. v. McKendrick, 850
application beyond those actions listed) with                 S.W .2d 629, 633 (Tex.App.— San Antonio 1993,
Spangler v. Jones, 861 S.W .2d 392, 397–98                    writ denied). Thus, section 6 does not apply to this
(Tex.App.— Dallas 1993, writ denied); and H.E.                case, and any award of prejudgment interest is
Butt Grocery Co. v. Bay, Inc., 808 S.W .2d 678, 680           governed by the common law.
(Tex.App.— Corpus Christi 1991, writ denied)
(holding that statute only applies to actions
specifically enumerated). W e hold that section 6             J & H argues that, even if section 6 does not
means what it says: statutory prejudgment interest            expressly apply, this Court should adopt the
applies only to wrongful death, personal injury, and          Legislature's views, expressed in its enactment of
property damage cases.                                        section 6, concerning the appropriate balancing of
                                                              interests. Specifically, J & H argues that this Court
                                                              could follow the policy of section 6 and hold that,
The Legislature's codification and modification of            under the common law, prejudgment interest should
Cavnar did not purport to provide a statutory                 begin to accrue on the earlier of 180 days after a
framework for prejudgment interest in all cases. See          defendant receives written notice of a claim or the


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                   23
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



day suit is filed, and that it should be calculated as        nor did it provide that it would be considered the
simple interest. Kenneco responds that Cavnar                 date of suit for any purpose.
requires both daily compounding and accrual
beginning six months after the occurrence giving rise
to the cause of action. Cavnar, 696 S.W .2d at                Alternatively, Kenneco argues that prejudgment
554–55.                                                       interest began to accrue on June 13, 1987, 180 days
                                                              from the date the tolling agreement was signed. J &
                                                              H counters that interest did not begin to accrue until
[29] W hen the Court decided Cavnar, there was no             April 15, 1988, 180 days after J & H received
statute governing prejudgment interest. See Act of            Kenneco's DTPA notice letter. Thus, we must
May 8, 1967, 60th Leg., R.S., ch. 274, § 2, 1967              determine whether the standstill agreement
Tex. Gen. Laws 608, 610; Tex.Rev.Civ. Stat. art.              constitutes “written notice of a claim” that triggers
5069–1.05 (Vernon 1987). Thus, the Cavnar Court               accrual of prejudgment interest.
fashioned its rule without the guidance of legislative
policy. The enactment of section 6 involved many of
the same policy concerns underlying the decision in           The standstill agreement plainly says that “Kenneco
Cavnar. Section 6 is a “trade-off provision,”                 asserts that, to the extent underwriters are found not
effectuating some of the goals of tort reform while           to be liable [in the federal action] ..., J & H is liable
preserving the availability of prejudgment interest           to Kenneco for the amounts which Kenneco has
under Cavnar, and even expanding the scope of                 claimed under the Policy.” W e hold that the
recoverable interest to include future damages                agreement constitutes “written notice of a claim.” A
awarded as part of the judgment. C & H Nationwide,            “claim” is “a demand for compensation or an
Inc. v. Thompson, 903 S.W .2d 315, 326–27                     assertion of a right to be paid.” See Robinson v.
(Tex.1994) (citing Montford & Barber, 1987 Texas              Brice, 894 S.W .2d 525, 528 (Tex.App.— Austin
Tort Reform: The Quest for a Fairer and More                  1995, writ denied); see also Black's Law Dictionary
Predictable Texas Civil Justice System, 25 Houston            247 (6th ed.1991) (a “claim” is a “demand for
L.Rev. 59, 102 (1988)). Section 6 works as a                  money or property as of right”). Through the
“system of rewards and penalties” intended to                 standstill agreement, J & H received written notice
encourage settlements. *531 C & H Nationwide, 903             that Kenneco was claiming a right to compensation.
S.W .2d at 326. This Court has recognized the                 See Robinson, 894 S.W .2d at 529 (claimant not
importance of such a goal, and today we adopt the             required to demand exact amount or list every
Legislature's approach to effectuating that goal. See         element of damage). Moreover, J & H had sufficient
Owens–Illinois, Inc. v. Estate of Burt, 897 S.W .2d           information at that time to obtain a settlement
765, 769 (Tex.1995) (adopting a prejudgment                   without incurring any prejudgment interest at all. See
interest accrual rule for latent-injury cases                 Owens–Illinois, Inc. v. Estate of Burt, 897 S.W .2d
“consistent with the prejudgment interest statute”);          765, 769 (Tex.1995) (“[A] defendant must have
cf. Smith v. Merritt, 940 S.W .2d 602, 604–05                 notice and an opportunity to settle a claim in order to
(Tex.1997) (fashioning a common-law social host               advance Cavnar's objective of expedited
liability rule in accordance with legislative policy of       settlements.”).
Dram Shop Act). W e adopt the Legislature's
approach to prejudgment interest and hold that,
under the common law, prejudgment interest begins             [31] The purpose of a standstill agreement is
to accrue on the earlier of (1) 180 days after the date       normally to maintain the status quo and temporarily
a defendant receives written notice of a claim or (2)         suspend or stop all aspects of a suit. In most
the date suit is filed. See Tex.Rev.Civ. Stat. art.           circumstances, this would operate to toll the accrual
5069–1.05, § 6(a).                                            of prejudgment interest while the agreement is in
                                                              effect. However, parties to a standstill agreement
                                                              may contractually provide otherwise.
[30] Applying these time frames, Kenneco argues
that December 15, 1986, the date the tolling
agreement was signed, is the equivalent of the date           The standstill agreement in this case expressly
of suit, and therefore should be the date of accrual.         preserves all of Kenneco's rights and all of J & H's
W e disagree. The tolling agreement is not a lawsuit,         liabilities. The terms of the agreement provide: “The


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                      24
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



period between December 15, 1986 and the date                to delay. In contrast to section 6, where interest
when 30 days shall have elapsed following the final          begins to accrue 180 days after a defendant receives
determination of the New York Action ... shall not           notice of the claim or the claim is filed, Cavnar
be counted for purposes of the statute of limitations,       interest begins to accrue 180 days after the
laches or any other defense which may be asserted in         occurrence giving rise to the claim, regardless of
any subsequent action.” The agreement continues,             whether a defendant knows of the claim. Allowing
“Except as expressly provided [in the previous               plaintiffs to accrue prejudgment interest even before
sentence], nothing in this agreement, or the recitals        the defendant becomes aware of the claim is at odds
set forth herein, shall prejudice, influence or in any       with the principle we recognized in Owens–Illinois,
way affect any rights, liabilities, defenses,                Inc. v. Estate of Burt, 897 S.W .2d 765, 769
counterclaims or setoffs which may be asserted by            (Tex.1995), that “[o]bviously, a defendant must have
either party hereto in this or any other proceeding.”        notice and an opportunity to settle a claim in order to
Thus, the standstill's application is narrow— it             advance Cavnar's objective of expedited settlements
applies only to limitations, laches, and other               and trials.”
defenses. All of Kenneco's rights, which include
prejudgment interest, were expressly reserved. 1 2
Thus, prejudgment interest accrued *532 beginning            In Estate of Burt, the Cavnar accrual rule required
180 days from the date the standstill agreement was          an exception in cases of latent injury because the
signed.                                                      date of the occurrence of the incident giving rise to
                                                             the cause of action was often difficult to determine.
                                                             In adopting an accrual date beginning when a
[32] W e further hold that prejudgment interest              defendant receives notice or suit is filed, we
accrues at the rate for postjudgment interest and it         reasoned that such an accrual rule provides sufficient
shall be computed as simple interest. See                    compensation for plaintiffs, establishes a definite
Tex.Rev.Civ. Stat. art. 5069–1.05, § 6(g). There has         date for accrual to begin, encourages expedited
been much confusion among Texas courts regarding             settlements and trials, and removes incentives for
how prejudgment interest should be calculated in             defendants to delay without creating such incentives
cases following Cavnar. Crum & Forster, Inc. v.              for plaintiffs. Id. at 769. Section 6 — and, now, the
M o n s a n to C o ., 8 8 7 S .W .2 d 1 0 3 , 1 5 3          new common law rule— effectively serve each of
(Tex.App.— Texarkana 1994, writ dism'd by agrmt).            those policy goals even when the date of accrual of
Although the majority of appellate court cases have          the cause of action can be readily determined.
held that equitable prejudgment interest awards
should be compounded daily, even after the
enactment of section 6, see, e.g., Spangler, 861             Applying the computation rules of section 6 to the
S.W .2d at 398–99; Shell Pipeline Corp. v. Coastal           common law also serves the goal of compensating
States Trading, Inc., 788 S.W .2d 837, 848–49                plaintiffs, without overcompensating them or
(Tex.App.— Houston [1st Dist.] 1990, writ denied),           simultaneously punishing defendants. Although the
we hold that equitable prejudgment interest should           rate of prejudgment interest is the same under
be computed in accordance with the legislative               Cavnar and section 6, Cavnar's daily compounding
policy supporting section 6. The Legislature                 allows plaintiffs far greater recovery than under
expressly provided that statutory prejudgment                section 6. It is not uncommon for Cavnar
interest shall be computed as simple interest.               prejudgment interest awards to greatly exceed the
Tex.Rev.Civ. Stat. art 5069–1.05, § 6(g). W e will           amount of the actual judgment, as is true in this case
follow the Legislature's lead and hold that equitable        where the actual damages awarded were
prejudgment interest shall be computed as simple             $1,972,273.66 and the prejudgment interest award
interest.                                                    was $2,750,952.39. Further, Cavnar often allows for
                                                             a larger recovery of interest than the plaintiff could
                                                             have received by investing the money himself,
Adoption of the statutory approach to prejudgment            thereby overcompensating the plaintiff. The
interest continues to promote the policy goals               computation rules of section 6 serve to more *533
underlying the Cavnar decision. For example, the             accurately reflect the damages incurred by the
accrual rule of section 6 effectively encourages             plaintiff for the lost use of money.
settlements without creating incentives for plaintiffs


                             © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    25
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



Finally, conforming the common law to legislative             stipulated by the parties. Kenneco is also entitled to
policy serves the important goal of restoring                 recover prejudgment interest on its $412,273.66
uniformity to the law of prejudgment interest. In             breach of contract award, calculated as simple
Cavnar, we reasoned that “[t]he time has come to              interest, accruing beginning 180 days from
revise the prejudgment interest rule ... and restore          December 15, 1986, as well as postjudgment interest
equity and symmetry to this area of the law.”                 and costs as allowed by law. W e accordingly modify
Cavnar, 696 S.W .2d at 553–54. Given the                      the judgment of the court of appeals and remand the
Legislature's enactment of section 6, that time has           cause to the trial court for the calculation of the
come again. Cavnar was a wrongful death case and,             amount of prejudgment interest and for rendition of
by its express language, applied to personal injury,          judgment in accordance with this opinion.
wrongful death, and survival action cases. Id. Thus,
while Cavnar's application has expanded beyond
those specific causes of action, it is the context of
those causes of action in which the rule was
fashioned. The enactment of section 6, however,               HECHT, Justice, filed a dissenting opinion, in which
precludes the application of Cavnar to some of those          GONZALEZ and OW EN, Justices, join, and in Part
very claims, if they accrue after September 2, 1987.          II of which SPECTOR, Justice, joins.
The result is that section 6 applies one rule to
personal injury, wrongful death, and property
damage cases, while Cavnar applies a different rule,
and only in cases not involving personal injury,              HECHT, Justice, dissenting.
wrongful death, and property damage. Such a result
is as illogical as it is arbitrary, and is therefore no       I do not disagree with the Court that prejudgment
longer the law in Texas.                                      interest awards on common law contract claims
                                                              should be guided by legislated policies for
                                                              prejudgment interest on wrongful death, personal
Our common law prejudgment interest holding                   injury, and property damage claims. No good reason
applies to all cases in which judgment is rendered on         is advanced for having different prejudgment interest
or after December 11, 1997, and to all other cases            rules for different kinds of claims. In deference to
currently in the judicial process in which the issue          the Legislature's adoption of a rule for some cases, it
has been preserved.                                           is appropriate for the common law to apply the same
                                                              rule in other cases. I do disagree with the Court's
                                                              holding that prejudgment interest should accrue
                                                              during a period when the parties have agreed to take
                      *****                                   no action. Neither of the two purposes of
                                                              prejudgm e nt inte rest— e nco ura ging p rom pt
W e conclude that limitations bars Kenneco's                  s e ttle m e n ts a n d d i s c o u r a g in g d e la y b y
negligence and Insurance Code claims and that there           defendants— can be served when parties agree to
is no legally sufficient evidence to support                  allow the plaintiff to delay deciding whether to file
Kenneco's fraud claim concerning contingency                  suit. The Court's argument that the plaintiff in this
coverage. W e further hold that collateral estoppel           case reserved by agreement a right to prejudgment
bars all of Kenneco's claims concerning an alleged            interest that it would not have had otherwise— in
agreement to secure lost profits coverage and the             other words, that the defendant contracted to pay
related fraud claims. W e sustain, in part, J & H's           prejudgment interest for plaintiff's delay in filing
point of error regarding the calculation of                   suit— can hardly be taken seriously.
prejudgment interest. W e overrule J & H's other
points of error.

                                                              But I would not reach the prejudgment interest issue
Therefore, we conclude that Kenneco is entitled to            because I conclude that Kenneco Energy, Inc.
recover $412,273.66 from J & H on its claim for               (formerly Armada Supply Inc.) is not entitled to
breach of contract to secure contingency coverage,            judgment against Johnson & Higgins of Texas, Inc.
plus attorney's fees in the amount of $300,000 as             on any *534 claim Kenneco asserts. I agree with the


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                        26
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



Court that Kenneco's negligence claim is barred by             sought assurance that its marine insurance policies
limitations,* that there is no evidence to support             issued by London underwriters would provide both
Kenneco's fraud claim, and that Kenneco's claims for           increased value coverage and contingency coverage.
breach of contract based on Johnson & Higgins'
failure to obtain lost profits coverage are precluded
by findings in Armada Supply Inc. v. Wright, 665               W hen the ship arrived in New York, the cargo was
F.Supp. 1047 (S.D.N.Y.1987), aff'd in part and                 found to be contaminated, and some of it had been
rev'd in part, 858 F.2d 842 (2d Cir.1988). Contrary            lost. Sun canceled the contract, and eventually
to the Court, however, I would hold that Kenneco's             Kenneco sold some of the oil at a reduced price. The
contract claims for Johnson & Higgins' failure to              London and Brazilian underwriters disputed
obtain contingency coverage are also precluded by              Kenneco's claims, so Kenneco sued them— but not
the federal court's findings. Thus, I would render             Johnson & Higgins— in the United States District
judgment for Johnson & Higgins.                                Court for the Southern District of New York. In
                                                               essence, the London underwriters contended that the
                                                               increased value coverage applied only to damages
Accordingly, I respectfully dissent.                           from the destruction of the oil and not to damages
                                                               from Sun's cancellation of the contract, and that the
                                                               contingency coverage applied only if Kenneco's
                                                               purchase and resale were both on C.I.F. terms, and
                           I                                   its sale to Sun was not. Kenneco argued that Johnson
                                                               & Higgins had agreed to provide Kenneco with the
Kenneco bought fuel oil from Petrobras in Rio de               coverage it claimed, and that because Johnson &
Janeiro for resale to Sun Oil Trading Corp. in New             Higgins was the London underwriters' agent, the
York. Kenneco's purchase price was the market                  underwriters were bound by that agreement.
value of the oil upon arrival in New York harbor.
The resale to Sun was at a fixed contract price,
which Kenneco hoped would be higher than the                   The federal district court's finding that Johnson &
prevailing market price at the time of delivery.               Higgins was not the London underwriters' agent was
Kenneco's purchase was on a C.I.F. basis, meaning              sufficient reason to deny Kenneco's claims, but the
that although Kenneco took title to the oil in the             court went further. It also found, in the words of the
Brazilian port, Petrobras was obliged to insure the            Second Circuit on appeal, that Kenneco “did not ask
oil during its voyage to New York. Kenneco's resale            for, nor did [Johnson & Higgins] agree to, coverage
of the oil was not on a C.I.F. basis, so that it had no        on lost profits” as Kenneco contended. Armada, 858
obligation to Sun Oil to insure the cargo during               F.2d at 851. This Court holds, and I agree, that
shipment. But while the oil was en route, a steep and          because the federal district court's findings of no
steady decline in the fuel oil market moved Kenneco            agency and no agreement regarding increased value
to obtain additional insurance to protect what                 coverage were both affirmed *535 on appeal,
appeared would very likely be a very substantial               relitigation of either is barred by collateral estoppel.
profit from the resale to Sun.                                 Restatement (Second) of Judgments § 27 cmt. o
                                                               (1982). But contrary to the Court, I believe a fair
                                                               reading of the federal district court's opinion shows
Kenneco's concerns were two. Petrobras had                     that it also found that Johnson & Higgins did not
provided insurance from Brazilian underwriters for             agree to provide the contingency coverage Kenneco
110% of the purchase price, but because the                    requested, and that finding, too, was affirmed on
purchase price was tied to the market, as the market           appeal.
fell, so did the amount of insurance, leaving a large
part of the potential value of the oil at resale— and
almost all of Kenneco's profits— uninsured. Kenneco            The federal district court found that Johnson &
sought to insure the oil at Sun's higher contract price.       Higgins' representative, Anderson, did not know
Kenneco was also concerned that the Brazilian                  because Kenneco's representative, Brown, did not
underwriters might fail to pay a claim and so sought           tell him that Kenneco's sale to Sun was not on C.I.F.
insurance against that contingency. Through its                terms. Specifically, the federal district court found:
insurance broker, Johnson & Higgins, Kenneco


                               © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     27
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



  • “She [Brown] did not state what she told                  agent did not know the automobile would be
  Anderson about whether the Sun contract was or              operated in Mexico, that fact precludes an agreement
  was not C.I.F.” Armada, 665 F.Supp. at 1059.                to provide such coverage.

  • “As to the question of coverage under the
  contingency clause, Anderson understood Brown               The federal district court expressly found that
  to say that both the Petrobras–Armada sale and              Kenneco did not tell Johnson & Higgins that it
  the Armada–Sun sale were C.I.F. sales. As already           wanted contingency coverage for a transaction that
  stated, this was contrary to the fact.” Id. at 1061.        did not involve back-to-back sales on C.I.F. terms,
                                                              Johnson & Higgins understood from Kenneco that
                                                              the transaction did involve back-to-back sales on
                                                              C.I.F. terms, and Johnson & Higgins provided an
  • “It is important to note that [it was not until after     insurance certificate that clearly conditioned
  the meeting between Brown and Anderson and                  coverage on back-to-back sales on C.I.F. terms.
  after the dispute arose], according to evidence in          These facts having been determined, Johnson &
  this case, that Armada had affirmatively stated             Higgins cannot be said to have agreed to provide the
  that the sale to Sun was on a delivered, rather than        contingency coverage Kenneco claims it wanted, or
  a C.I.F. basis.” Id. at 1062.                               to have represented that it would provide such
                                                              coverage. Had the federal district court concluded
                                                              otherwise, it would not have been necessary to
                                                              address, as it did, Kenneco's argument that the
Anderson could not have agreed to provide                     back-to-back C.I.F. requirement was waived.
contingency coverage despite the fact that the sale to
Sun was not on C.I.F. terms when, as the federal
court found, Anderson understood from what Brown              Kenneco had full opportunity to litigate in its federal
told him that the sale to Sun was on C.I.F. terms. In         suit whether Johnson & Higgins agreed to provide
other words, Anderson could not have agreed to                contingency coverage applicable in Kenneco's
provide coverage he did not even know was being               circumstances. It could not prevail on its claim
requested. Thus, the federal district court found that        against the London underwriters without proving
“Johnson & Higgins did not clearly understand the             either a representation by Johnson & Higgins that it
situation and mistakenly billed Armada for a                  would obtain the coverage, or a waiver of the
premium for contingency coverage.” Id. at 1062.               back-to-back C.I.F. sales requirement. Having lost
The Second Circuit approved this finding. Armada,             on both grounds, it should not be allowed to
858 F.2d at 851 (“The evidence indicates that                 relitigate the issue in Texas.
[Johnson & Higgins] mistakenly billed Armada for
this coverage....”). If Johnson & Higgins did not
understand that Kenneco was requesting coverage
even though the sale to Sun was not on C.I.F. terms,                                    II
it could hardly have agreed to provide such
coverage.                                                     “The purpose of a standstill agreement,” the Court
                                                              explains, “is normally to maintain *536 the status
                                                              quo and temporarily suspend or stop all aspects of a
                                                              suit. In most circumstances, this would operate to
A simpler example makes the point clearer. Suppose            toll the accrual of prejudgment interest while the
a person wants an automobile policy that applies              agreement is in effect.” Ante at 531. Prejudgment
throughout Mexico, but he does not tell the agent,            interest encourages early settlem ents and
and the agent understands from what the person says           discourages delay by defendants. Obviously, a
that the car will not be operated in Mexico. The              plaintiff who wishes to maintain the status quo can
agent procures a policy that clearly limits coverage          hardly complain of a defendant's delay or failure to
to operations in the United States. W hen the insured         settle. A plaintiff should not be entitled to
is involved in an accident in M exico City, how can           prejudgment interest for a delay he has requested
he successfully claim that the agent agreed to                and agreed to.
provide coverage? Once it is established that the


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                    28
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



The Court nevertheless holds that Kenneco should              preservation of the full scope of its rights under a
recover prejudgment interest while the standstill             standstill stipulation means that it preserved all but
agreement was in effect because Johnson & Higgins             one, the right not to pay prejudgment interest during
contracted to pay interest during such period. One            the period. The absurdity of this Orwellian
would naturally think that if anyone should pay for           doublespeak and consequent result is lost on the
a delay in the running of limitations requested by the        Court.
plaintiff, it should be the plaintiff. W hile it is
certainly possible that a defendant might agree not
only to delay the running of limitations but also to
pay a plaintiff interest for that delay, no reason for
such an agreement suggests itself, and the Court
supplies none. The Court's position is simply that by         Parallel Citations
the language of their agreement, Johnson & Higgins
agreed to pay Kenneco prejudgment interest for the            41 Tex. Sup. Ct. J. 268
delay Kenneco requested, strange as that may seem.
The only language to which the Court points is this:

      Except as expressly provided, nothing in this
      agreement, or the recitals set forth herein, shall
      prejudice, influence or in any way affect any
      rights, liabilities, defenses, counterclaims or
      setoffs which may be asserted by either party
      hereto in this or any other proceeding.

By this language both parties attempted to preserve
their rights. Since as a general rule, according to the
Court, a defendant would not owe prejudgment
interest while a standstill agreement was in effect,
Johnson & Higgins should have preserved its right
not to pay interest for that period, and Kenneco had
no right to interest to be preserved. The Court simply
changes the phrase, “which may be asserted by
either party ”, to “which may be asserted by
Kenneco”. Misconstrued, the language does not
preserve each party's rights but gives Kenneco more
rights than it would otherwise have had and takes
away a right of Johnson & Higgins'.




Had the quoted sentence been omitted, the Court
would hold that Kenneco had no right to
prejudgment interest during the period of the
standstill agreement:

      That “right” [not to pay prejudgment interest
      during a standstill period], which may exist
      under a general stipulation, was eliminated
      because the stipulation protected the full scope
      of Kenneco's rights and J & H's liabilities.

Ante at 531 n. 12. That is, Johnson & Higgins'


                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                   29
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268



Footnotes

1      Sue and labor expenses are the reasonable expenses incurred by an insured to mitigate its loss and thus reduce the amount to be paid
       by the underwriter. Armada Supply, 858 F.2d at 853.

2      The parties disagree as to whether the claim submitted to the jury is properly characterized as an Insurance Code claim or a DTPA
       claim. Because we conclude that the claim submitted can be characterized as an Insurance Code claim, infra at 517, we will refer
       to it as such.

3      When a prevailing party does not elect a measure of damages from among alternative measures, the court should render judgment
       based on the finding affording the greatest recovery. Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 367 (Tex.1987).

4      Neeley v. Bankers Trust Co. of Texas, 757 F.2d 621 (5th Cir.1985), relied on by the court of appeals, is distinguishable because the
       question submitted in that case at least included the necessary elements of false representation, materiality, and reliance, and did not
       appear to be submitted as part of some other theory of recovery, whereas Kenneco's question was submitted as part of its Insurance
       Code/DTPA claim.

5      “Unfair or deceptive act or practice” means any of the following:
       (1) Making or causing to be made any statement misrepresenting the terms, benefits, or advantages of an insurance policy.
       (2) Making, or directly or indirectly causing to be made, any assertion, representation, or statement with respect to insurance that was
       untrue, deceptive, or misleading.

       (3) Making any misrepresentation relating to insurance. ‘Misrepresentation’ means any of the following:

       (a) any untrue statement of a material fact; or

       (b) any failure to state a material fact that is necessary to prevent the statements from being misleading, when these statements are
       considered in light of the circumstances under which they are made; or

       (c) the making of any statement in such manner or order as to mislead a reasonably prudent person to a false conclusion of a material
       fact.


6      Prior to the 1985 amendment, § 16(d) read: “In an action under this section, damages may not include any damages incurred beyond
       a point two years prior to the institution of the action.” Tex. Ins.Code art. 21.21, § 16(d) (Vernon 1981). This provision has been
       characterized as an exclusion on damages incurred more than two years before filing of the suit, rather than as a statute of limitations.
       Tectonic Realty Inv. Co. v. CNA Lloyd's of Texas Ins. Co., 812 S.W.2d 647, 655 n. 4 (Tex.App.—Dallas 1991, writ denied). But see
       Johnston v. Barnes, 717 S.W.2d 164, 165 (Tex.App.—Houston [14th Dist.] 1986, no writ)(applying pre–1985 § 16(d) as a two-year
       limitations period). J & H admits that “[prior] to 1985, the Texas Insurance Code had no limitations provision, although it did have
       a provision that limited recoverable damages to those incurred within two years of the date the lawsuit is filed.”

7      In Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex.1990), we declined to decide whether state or federal collateral
       estoppel law governed the preclusive effect of a prior federal court judgment on a subsequent state court action because the same
       result would have been reached under either state or federal law.See also Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 805
       (Tex.1994). The same is true in this case. Accordingly, we do not decide the issue today.

8      The Second Restatement states a rule different from that of the First Restatement, which provided that each independently sufficient
       alternative basis for the prior judgment was a valid estoppel. Restatement (First) of Judgments § 68 cmt. n (1942).




                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                       30
Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998)

41 Tex. Sup. Ct. J. 268




9      Effective September 1, 1997, article 5069–1.05 was codified in Chapter 304 of the Texas Finance Code. See Act of May 24,1997,
       75 th Leg., R.S., ch. 1008, § 1, 1997 Tex. Sess. Law Serv. 3435. No substantive change in law was intended by the codification. Tex.
       Fin. Code § 1.001(a); Act of May 24, 1997, 75 th Leg., R.S., ch. 1008, § 7 & preamble, 1997 Tex. Sess. Law Serv. 3091, 3603. It
       appears that the prejudgment language in the Texas Finance Code was then superseded by the subsequent enactment of similar
       prejudgment interest language in the Texas Credit Title, Act of June 2, 1997, 75 th Leg., R.S., ch. 1396, § 1, 1997 Tex. Sess. Law
       Serv. 5212–13. See Tex. Gov't Code § 311.031(c) (“The repeal of a statute by a code does not affect an amendment, revision, or
       reenactment of the statute by the same legislature that enacted the code. The amendment, revision, or reenactment is preserved and
       given effect as part of the code provision that revised the statute so amended, revised, or reenacted.”) & § 311.031(d) (“If any
       provision of a code conflicts with a statute enacted by the same legislature that enacted the code, the statute controls.”). See also
       Miller v. State, 708 S.W.2d 436, 446 (Tex.Crim.App.1984) (holding that amendment to statute controlled when same Legislature
       amended statute and also enacted a new code that omitted the amendment).
       The codification and subsequent reenactment of what has been Tex.Rev.Civ. Stat. article 5069–1.05, section 6 does not modify the
       legislative policy established by section 6. We believe the legislative underpinnings of section 6 extend to that section's codification
       in the Texas Finance Code and its subsequent reenactment in the Texas Credit Title.
       In any event, at the time the trial court's judgment was rendered in this case, section 6 was the operative provision. As a result, the
       opinion will refer to section 6 rather than to the Texas Finance Code or the Texas Credit Title.


10     For survival actions, interest accrual was to begin on either the date of death or six months after the injury-causing accident occurred,
       whichever yielded the larger interest award. Cavnar, 696 S.W.2d at 555.

11     Section 2 provided that the interest rate should be computed by “taking the auction rate quoted on a discount basis for 52–week
       treasury bills issued by the United States government as published by the Federal Reserve Board on the most recent date preceding
       the date of computation,” except that “if the rate so computed is less than 10 percent, the judgment interest rate shall be 10 percent,
       and if it be more than 20 percent, the judgment interest rate shall be 20 percent.” Tex.Rev.Civ. Stat. art. 5069–1.05, § 2 (Vernon
       1987). The most recent version of section 2 is virtually identical. Id. (Supp.1997).

12     The standstill agreement was silent with regard to prejudgment interest. The parties easily could have included a provision that
       prejudgment interest would abate during the specified standstill time period. Absent such provision, this court cannot imply one.
       Tenneco Inc. v. Enterprise Products Co., 925 S.W.2d 640, 646 (Tex.1996).
       The dissent distorts our conclusion by stating that we are holding that J & H “contracted to pay interest during such period [the
       period of the standstill]” and that J & H “agreed to pay Kenneco prejudgment interest for the delay Kenneco requested.” 962 S.W.2d
       at 534 (emphasis added). The stipulation does not reference interest, prejudgment or otherwise. The agreement does, however,
       expressly preserve the “rights and liabilities” of the parties. Kenneco has the legal right to prejudgment interest and J & H has the
       legal liability to pay prejudgment interest—unless otherwise stipulated. Contrary to the dissent, J & H does not have an inherent
       “right not to pay interest” during the stipulation period. That “right,” which may exist under a general stipulation, was eliminated
       because the stipulation protected the full scope of Kenneco's rights and J & H's liabilities.

*      The Court holds that Kenneco's negligence action accrued when the insurer denied coverage, not when the lack of coverage was
       finally adjudicated years later. Johnson & Higgins does not argue for a different accrual date. I do not read the Court's opinion to
       foreclose the position, had it been argued, that Kenneco's negligence claim accrued even earlier, when Johnson & Higgins failed to
       provide the coverage Kenneco claims it requested, but that limitations was tolled until coverage was denied.

End of Document                                                           © 2015 Thomson Reuters. No claim to original U.S. Government Works.




                              © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                       31
O
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




                                                                    [2]   Negligence
                      932 S.W.2d 140                                          Buildings and Other Structures
                  Court of Appeals of Texas,
                         Texarkana.                                       Determination that store had actual or
                                                                          constructive knowledge of condition created by
            K MART CORPORATION, Appellant,                                metal plate protruding from floor, in patron's
                           v.                                             negligence action against store that arose from
      Allie Louise RHYNE and Curtis Olin Rhyne, Sr.,                      patron's trip on plate and fall to floor, was
                       Appellees.                                         supported by evidence that there was observable
           No. 06–95–00042–CV. | June 4, 1996.                            physical evidence of pipe, broken from metal
                                                                          plate, that extended three inches from floor, and
                                                                          testimony that employee had been working in that
                                                                          area with fork truck, and that it was probable that
                                                                          employee knocked pipe down with fork truck.
Store patron brought negligence action against store in which
she fell to floor after tripping over protruding metal plate, and
patron's husband sought damages for loss of consortium. The               1 Cases that cite this headnote
124th Judicial District Court, Gregg County, Alvin G.
Khoury, J., entered judgment for patron and her husband,
awarding $190,000 to patron, and $10,500 to husband. Store
appealed. The Court of Appeals, Grant, J., held that: (1)           [3]   Appeal and Error
sufficient evidence supported determination that store should                Clear or Palpable W eight or Preponderance
have known of condition caused by protruding plate; (2)
sufficient evidence supported damage award; (3) execution of              In reviewing factual sufficiency challenge, Court
release to store for medical records provided notice to begin             of Appeals must examine all of evidence
accrual of prejudgment interest; and (4) improper admission               presented at trial and may set aside finding only
of testimony of chiropractor, who was not qualified to testify            when it is so contrary to overwhelming weight of
as to costs of future surgeries, did not warrant reversal.                evidence as to be clearly wrong and unjust.


Affirmed.                                                                 Cases that cite this headnote



W est Headnotes (15)                                                [4]   Damages
                                                                             Discretion as to Amount of Damages

[1]       Appeal and Error                                                Jury has broad discretion in assessing amount of
             Interrogatories and Special Verdicts                         damages in personal injury case.
          Appeal and Error
             Total Failure of Proof
                                                                          1 Cases that cite this headnote
          In reviewing no evidence point, Court of Appeals
          considers only evidence and inferences that tend
          to support finding, disregarding all evidence and
          inferences to the contrary; if there is any               [5]   Damages
          probative evidence to support finding, Court of                    Expenses
          Appeals must uphold verdict.


          Cases that cite this headnote




                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            1
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




       Recovery for future medical expenses is primarily           Jury has great discretion in awarding damages in
       matter for jury to determine in its discretion.             a personal injury case for pain and mental
                                                                   anguish.

       1 Cases that cite this headnote
                                                                   Cases that cite this headnote


[6]    Damages
          Expenses                                          [9]    Damages
                                                                      Loss of Earnings, Services, or Consortium
       Recovery for future medical expenses requires
       showing that there is reasonable probability that           Jury has discretion in awarding loss of consortium
       such medical expenses will be incurred in future;           damages.
       expert testimony, however, is not required.

                                                                   Cases that cite this headnote
       2 Cases that cite this headnote


                                                            [10]   Damages
[7]    Damages                                                        Husband and W ife
          Injuries to the Person
       Damages                                                     Damage award of $10,500 for loss of consortium
          Medical Treatment and Custodial Care                     to husband of store patron who brought
       Damages                                                     negligence action against store for injuries she
          Particular Cases                                         incurred in fall to store floor after trip over metal
       Damages                                                     plate that protruded from floor, was supported by
          Construction and Operation                               testimony that husband had been under stress
                                                                   from seeing patron in pain, that husband had not
       Damage award of $190,000 to patron in                       been able to sleep with patron since her injury,
       negligence action against store in which patron             that husband was required to perform household
       tripped over protruding metal plate and fell to             duties such as cooking and gardening that had
       floor, was supported by evidence of both past and           previously been performed by patron, and that
       future physical pain and mental anguish, physical           husband and patron were no longer able to pursue
       impairment, and medical care, and so jury could             their plans to travel.
       have awarded entire amount on basis of past and
       future pain and suffering, so as to preclude
       requirement of recovery for future medical                  1 Cases that cite this headnote
       expenses, of reasonable probability that such
       medical expenses would be incurred in future.

                                                            [11]   Appeal and Error
       3 Cases that cite this headnote                                Amount of Recovery
                                                                   Appeal and Error
                                                                      Remission of Part of Recovery

[8]    Damages
           Physical Suffering and Inconvenience in
       General
       Damages
           Mental Suffering and Emotional Distress




                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          2
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




       In reviewing request for remittitur, proper                     Chiropractor was not qualified to testify as to cost
       standard is factual sufficiency; appellate court will           of surgeries, and so chiropractor's testimony was
       examine all of evidence in record to determine                  improperly admitted in store patron's negligence
       whether sufficient evidence supports damage                     action against store, to recover damages for
       award, remitting only if some portion is so                     injuries patron suffered when she fell to floor
       factually insufficient as to be manifestly unjust.              after tripping over protruding metal plate. Rules
                                                                       of Civ.Evid., Rule 702.

       1 Cases that cite this headnote
                                                                       4 Cases that cite this headnote


[12]   Interest
           Form and Sufficiency of Demand                      [15]    Appeal and Error
                                                                          Opinions and Conclusions
       Patron's execution of release to store for her
       medical records, that indicated that information                Improper admission of testimony of chiropractor
       was to be used for purposes of evaluating and                   in slip and fall negligence action by patron against
       handling patron's claim for injury, was sufficient              store, as to cost of future surgeries that patron
       to give notice to store of patron's claim for                   might need in future, did not warrant reversal of
       compensation for her injuries, and so date of                   judgment and award of $200,000 for patron, even
       execution of release was date of accrual of                     though jury could have included future medical
       prejudgment interest in patron's negligence action              expenses as part of damage award, since jury
       against store. Vernon's Ann.Texas Civ.St. art.                  could have awarded entire amount to cover pain
       5069–1.05, § 6(a).                                              and suffering, mental anguish, and physical
                                                                       impairment, for which patron had sought
                                                                       $215,000. Rules App.Proc., Rule 81(b)(1); Rules
       2 Cases that cite this headnote                                 of Civ.Evid., Rule 702.


                                                                       2 Cases that cite this headnote
[13]   Interest
           Mode of Computation in General

       Prejudgment interest awarded in patron's
       negligence action against store should have been
       computed as simple interest. Vernon's Ann.Texas         Attorneys and Law Firms
       Civ.St. art. 5069–1.05, § 6(g).
                                                               *141 J. Gene Bailey, Longview, for appellant.

       Cases that cite this headnote                           John Graves, Sloan & Price, Longview, for appellees.
                                                               Before CORNELIUS, C.J., and GRANT, J. 1


[14]   Evidence
           Damages                                                                      OPINION




                                                               GRANT, Justice.

                                                               This is a premises liability case in which the appellee, Allie
                                                               Louise Rhyne, slipped and fell in the appellant's store (K Mart

                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            3
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




Corporation) in Longview, Texas, on March 7, 1991. Allie            it must demonstrate on appeal that there was no evidence to
Rhyne and her husband, Curtis Olin Rhyne, brought a                 support this finding. Croucher v. Croucher, 660 S.W .2d 55,
negligence suit against K Mart, and the jury awarded damages        58 (Tex.1983). In reviewing a no evidence point, we consider
in the amount of $200,000. Because the jury found K Mart            only the evidence and inferences that tend to support the
ninety-five percent negligent and Allie Rhyne five percent          finding, disregarding all evidence and inferences to the
negligent, her damages were reduced to $190,000. The jury           contrary. Weirich v. Weirich, 833 S.W .2d 942, 945
also awarded $10,500 in damages to her husband. Both were           (Tex.1992); Havner v. E–Z Mart Stores, Inc., 825 S.W .2d
also awarded prejudgment interest. 2                                456, 458 (Tex.1992); E–Z Mart Stores, Inc. v. Hale, 883
                                                                    S.W .2d 695, 699 (Tex.App.— Texarkana 1994, writ denied).
                                                                    If there is any probative evidence to support the finding, we
                                                                    must uphold the verdict. Southern States Transportation, Inc.
                                                                    v. State, 774 S.W .2d 639, 640 (Tex.1989); Stafford v.
*142 On March 7, 1991, Rhyne was shopping in the garden             Stafford, 726 S.W .2d 14, 16 (Tex.1987) (stating that if there
section of the Longview K Mart when she tripped and fell on         is “more than a scintilla of evidence” to support the finding, a
a three-inch metal plate protruding from the concrete floor.        no evidence point fails); In re King's Estate, 150 Tex. 662,
The metal plate on which Rhyne fell was embedded in the             664, 244 S.W .2d 660, 661 (1951).
middle of the concrete walkway and was used to hold a pipe
that ran between the concrete and the fence to stabilize the
fence. She blacked out after she fell. W hen she awoke, she         The Texas Supreme Court listed the elements in a premises
could not move, and her foot was caught underneath the metal        liability negligence case as follows:
plate upon which she had stumbled. After she freed her foot,
she crawled several feet and collapsed. Rhyne sustained               (1) Actual or constructive knowledge of some condition on
injuries to her face, neck, and back.                                 the premises by the owner/operator;

                                                                      (2) That the condition posed an unreasonable risk of harm;
Sharon Moore, the assistant manager on duty at the time of
Rhyne's fall, was summoned by another employee. M oore
filled out an accident report with Rhyne, listing the cause of        (3) That the owner/operator did not exercise reasonable
Rhyne's fall as “inadequate guard of fence.” Moore admitted           care to reduce or eliminate the risk; and
that the metal plate was a dangerous and hazardous condition
and that it was K M art's responsibility to repair the condition.
                                                                      (4) That the owner/operator's failure to use such care
                                                                      proximately caused the plaintiff's injuries.
Rhyne's husband testified that he has been under stress seeing
his wife in pain every day and that the two of them have not
slept together since Rhyne's accident. He also testified that he    Keetch v. Kroger Co., 845 S.W .2d 262, 264 (Tex.1992);
must now perform what were previously his wife's household          Corbin v. Safeway Stores, Inc., 648 S.W .2d 292, 296
duties, such as cooking and gardening. Finally, he testified that   (Tex.1983).
the two are not able to travel in his retirement years, as they
had planned before his wife's injuries.


                                                                    [2] K Mart argues that there was legally insufficient evidence
Dr. Roy Randall Northcutt, a chiropractor, testified that Rhyne     for the jury to infer K Mart's actual or constructive knowledge
has a very limited range of motion in her neck and that her         of the condition which injured Rhyne. Moore, the assistant
condition is permanent. Dr. Frank R. Jackson, Rhyne's family        manager on duty the day of Rhyne's accident, testified that no
doctor, testified via videotape that Rhyne will continue to have    one had previously been hurt on the metal plate and that K
medical problems in the foreseeable future.                         Mart had no previous notice of the condition. Moore also
                                                                    testified, however, that the most probable explanation for the
                                                                    condition was that a K Mart employee in a fork truck broke
[1] By its first point of error, K Mart contends that the trial
                                                                    the pipe while setting tables *143 in the garden area. 3 Moore
court erred in rendering judgment on the verdict because the
                                                                    further testified that to dislodge the pipe, the employee would
evidence was legally insufficient to support the jury's answer
                                                                    had to have hit it with great force and, therefore, should have
to question one, which addressed K Mart's negligence.
                                                                    assessed the situation after the impact.
Because K Mart did not have the burden of proof on this issue,


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             4
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




K Mart argues that the evidence is legally insufficient because      jury had to draw was based on direct evidence admitted at
a jury had to have stacked inferences to come to this                trial. See Farley, 529 S.W .2d at 757. There was observable
conclusion, citing McClure v. Allied Stores of Texas, 608            physical evidence of the pipe, broken from the metal plate,
S.W .2d 901, 904 (Tex.1980). The Texas Supreme Court has             which extended three inches from the floor. W hen the pipe
also held, however, that a number of inferences may be drawn         was extended from the metal plate to the fence, it provided an
from a single fact situation. McClure, 608 S.W .2d at 904; see       obvious barrier that called attention to the obstacle. After the
also Farley v. M M Cattle Co., 529 S.W .2d 751, 757                  pipe was separated, it no longer extended into the air above
(Tex.1975).                                                          the plate to the fence and left only the metal plate protruding
                                                                     from the floor, which was not an obvious obstacle. From the
                                                                     physical evidence, an inference could be made that the pipe
W hether inferences are stacked is often a matter of semantics,      had been broken off from the metal plate by something or
and thus depends upon the wording of the inference. The              someone requiring considerable force, which would have been
ultimate test on any inference should be its reasonable              obvious to anyone involved in the breaking.
probability.

                                                                     The other contended inference came from the opinion
In the first place, these conclusions were not based solely on       evidence of the K Mart employee. It is drawn from the totality
inferences made by the jury, but were founded upon direct            of the circumstances and the personal knowledge of the
opinion evidence by the K Mart assistant manager. The                assistant manager. She gave direct testimony that a K Mart
present case is analogous to the case of Coffee v. F.W.              employee had been working in that area with a fork truck, and
Woolworth Co., 536 S.W .2d 539 (Tex.1976). In the Coffee             she concluded that it was probable that this K Mart employee
case, the Supreme Court concluded that there was sufficient          knocked the pipe down with the fork truck. Furthermore, even
evidence to support the jury finding that the defendant store        if these were improper inferences, a jury could have concluded
owner created the condition based upon the testimony of a            because of the physical condition of the plate extended up
supervisor in the defendant store. The supervisor testified that     from the floor three inches in the middle of an aisle that the K
the only two possible causes of the condition both involved          *144 Mart employees either knew or should have known of
store personnel. (In the present case, the assistant manager on      the dangerous condition.
duty at the time of the accident testified that the probable
cause of the condition was that a K Mart employee broke the
pipe with a fork truck.) In the Coffee case, the court concluded     K Mart also contends that there was legally insufficient
that the evidence created a reasonable inference for the jury        evidence for the jury to find the third element, i.e., that the
that the defendants had caused the condition and therefore had       owner/operator did not exercise reasonable care to reduce or
actual notice. (In the present case, there was evidence from         eliminate the risk. It was undisputed, however, that the
which the jury could have concluded that the defendant caused        condition was hazardous when Rhyne fell and that K Mart did
the condition and therefore had actual notice of the condition.)     not repair the condition until after Rhyne fell. Therefore, the
                                                                     jury could have concluded that K Mart did not exercise
                                                                     reasonable care to reduce or eliminate the risk of harm to its
The jury did not have to make an inference that an employee          customers after notice of the condition. This point of error is
was actually aware of the pipe being broken, but only that the       therefore overruled.
K Mart employee working in that area should have known of
the condition. The jury found that Allie Rhyne was five
percent negligent based upon the pleadings and evidence              By its second and third points of error, K Mart contends that
presented by K Mart concerning her failure to keep a proper          the trial court erred in rendering judgment on the verdict
lookout. If the jury determined that there was some negligence       because the evidence was factually insufficient to support the
on the part of Allie Rhyne, a customer coming down the aisle,        jury's answer to question three (amount of damages to Ms.
then the jury also certainly had a basis to believe that K Mart      Rhyne), and question four (amount of damages to Mr. Rhyne).
employees, working in that area of the store, should have            K Mart contends that the jury's award of $200,000 in damages
known of the condition, because the workers, by spending             was factually insufficient because the damage award included
more time in the store, would have more opportunities to             future damages, which K Mart argues were not proven by a
observe the situation and to recognize the change that had           reasonable probability.
been created by the broken pipe.

                                                                     [3] In reviewing a factual sufficiency challenge, we must
In the present case, as in the Farley case, the inference that the   examine all of the evidence presented at trial and may set aside


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                              5
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




the finding only when it is so contrary to the overwhelming       mental anguish. Kidd, 834 S.W .2d at 78; Exxon Corp. v.
weight of the evidence as to be clearly wrong and unjust. Cain    Roberts, 724 S.W .2d 863, 868 (Tex.App.— Texarkana 1986,
v. Bain, 709 S.W .2d 175, 176 (Tex.1986); In re King's Estate,    writ ref'd n.r.e.); George C. Vaughan & Sons v. Dyess, 323
244 S.W .2d at 661; Wal–Mart Stores, Inc. v. Berry, 833           S.W .2d 261, 264–65 (Tex.Civ.App.— Texarkana 1959, writ
S.W .2d 587, 590 (Tex.App.— Texarkana 1992, writ denied).         dism'd). Thus, the jury could have awarded the entire amount
                                                                  on the basis of past and future pain and suffering. See Kidd,
                                                                  834 S.W .2d at 79 (on motion for rehearing). There was
[4] Because personal injury damages are unliquidated and are      evidence to support the jury's damage award to Rhyne. The
not capable of certain measurement, the jury has broad            jury's verdict is therefore not so contrary to the overwhelming
discretion in assessing the amount of damages in a personal       weight of *145 the evidence as to be clearly wrong and unjust.
injury case. Transit Management Co. of Laredo v. Sanchez,         This point of error is overruled.
886 S.W .2d 823, 826 (Tex.App.—San Antonio 1994, no writ);
Baylor Medical Plaza Services v. Kidd, 834 S.W .2d 69, 78
(Tex.App.— Texarkana 1992, writ denied); Pipgras v. Hart,
832 S.W .2d 360, 366 (Tex.App.— Fort W orth 1992, writ            [9] By its third point of error, K Mart contends that the
denied); Kansas City Southern Railway Co. v. Catanese, 778        evidence was factually insufficient to support the jury's award
S.W .2d 114, 119 (Tex.App.— Texarkana 1989, writ denied).         of $10,500 in loss of consortium damages to the husband. The
                                                                  jury has discretion in awarding loss of consortium damages.
                                                                  See Whittlesey v. M iller, 572 S.W .2d 665, 667 (Tex.1978)
[5] [6] Likewise, recovery for future medical expenses is         (stating that the duty to compensate for loss of consortium
primarily a matter for the jury to determine in its discretion.   must be resolved by the “impartial conscience and judgment
Strahan v. Davis, 872 S.W .2d 828, 832 (Tex.App.— W aco           of jurors who may be expected to act reasonably, intelligently
1994, writ denied); Berry Property Management v. Bliskey,         and in harmony with the evidence”).
850 S.W .2d 644, 664 (Tex.App.— Corpus Christi 1993, writ
dism'd by agr.); Hughett v. Dwyre, 624 S.W .2d 401, 405
(Tex.App.— Amarillo 1981, writ ref'd n.r.e.). Recovery for        [10] K Mart does not, however, argue this point in its brief.
future medical expenses requires a showing that there is a        The only reference regarding Rhyne's husband in this portion
reasonable probability that such medical expenses will be         of K Mart's brief details his testimony as it related to his wife's
incurred in the future. Fisher v. Coastal Transport Co., 149      injuries. Based on Tex.R.App. P. 74, an appellant waives any
Tex. 224, 230 S.W .2d 522, 523 (1950); Fibreboard Corp. v.        issue not supported by argument and authority in his or her
Pool, 813 S.W .2d 658, 681 (Tex.App.— Texarkana 1991, writ        brief. Trenholm v. Ratcliff, 646 S.W .2d 927, 934 (Tex.1983);
denied), cert. denied, 509 U.S. 923, 113 S.Ct. 3037, 125          Gulf Coast State Bank v. Emenhiser, 562 S.W .2d 449, 452–53
L.Ed.2d 724 (1993). Expert testimony, however, is not             (Tex.1978). Furthermore, there was sufficient evidence in the
required. Strahan, 872 S.W .2d at 832; Hughett, 624 S.W .2d       record to support this award. Rhyne's husband testified that he
at 405; see also Bliskey, 850 S.W .2d at 664 (stating that the    has been under stress seeing his wife in pain everyday and has
jury may estimate both the necessity of future medical            not been able to sleep with his wife since her injury. He also
treatment and the cost of such treatment).                        testified that he must now perform what were previously his
                                                                  wife's household duties, such as cooking and gardening.
                                                                  Finally, he testified that the two are not able to travel in his
[7] [8] In the present case, the jury was given a broad-form      retirement years as they had planned before his wife's injuries.
damage submission consisting of both past and future medical      Therefore, the jury's award of $10,500 in damages to the
damages for the following:                                        husband is not so contrary to the overwhelming weight of the
                                                                  evidence as to be clearly wrong and unjust.
· physical pain and mental anguish;

· physical impairment; and                                        [11] K Mart alternatively contends that the trial court erred in
                                                                  refusing to order a remittitur. In reviewing a request for a
                                                                  remittitur, the proper standard is factual sufficiency. Kansas
· medical care.                                                   City Southern Railway Co. v. Carter, 778 S.W .2d 911, 915
                                                                  (Tex.App.— Texarkana 1989, writ denied). The appellate
                                                                  court will examine all of the evidence in the record to
The jury was not asked to specify the amount of damages for       determine whether sufficient evidence supports the damage
each damage element. The jury has great discretion in             award, remitting only if some portion is so factually
awarding damages in a personal injury case for pain and           insufficient as to be manifestly unjust. Pope v. Moore, 711


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                               6
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




S.W .2d 622, 623–24 (Tex.1986); Carter, 778 S.W .2d at 915.          compensation for her injuries.


The jury's determination was not so factually insufficient as to     [13] Secondly, K Mart argues that the trial court erred in
be manifestly unjust. Therefore, the trial court did not err in      compounding the prejudgment interest because the statute
refusing to order a remittitur. This point of error is overruled.    authorizing prejudgment interest specifically requires simple
                                                                     interest. 4 Article 5069–1.05 provides that “[t]he rate of
                                                                     prejudgment interest shall be the same as the rate of
[12] By its fourth point of error, K Mart contends that the trial    postjudgment interest at the time of judgment and shall be
court erred in failing to modify, correct, or reform the             computed as simple interest.” Tex.Rev.Civ. Stat. Ann. art.
judgment as it relates to prejudgment interest. First, K Mart        5069–1.05, § 6(g) (Vernon Supp.1996) (emphasis added); see
argues that the trial court used the incorrect date of accrual of    also Bevers, 909 S.W .2d at 603–04. 5
prejudgment interest.

                                                                     Rhyne argues that this section was modified by section 2 of the
The Texas statute dealing with prejudgment interest in a             same statute which states that all judgments earn interest
personal injury case states that interest shall begin 180 days       “compounded annually.” Tex.Rev.Civ. Stat. Ann. art.
after the defendant receives written notice of the plaintiff's       5069–1.05, § 2 (Vernon Supp.1996). Section 2, however,
claim. Tex.Rev.Civ. Stat. Ann. art. 5069–1.05 § 6(a) (Vernon         deals with postjudgment interest, not prejudgment interest. Id.
Supp.1996). The court ordered that the prejudgment interest          Because the plain language of Section 6(g) requires
would begin 180 days after Rhyne executed a release to K             prejudgment interest to be computed as simple interest, this
Mart for her medical records on March 27, 1991. K Mart               point of error is sustained.
contends that this is not sufficient to constitute notice of a
claim as required by the statute. K Mart argues that the
appropriate date for prejudgment interest to begin is 180 days       [14] By its final point of error, K Mart argues the trial court
after Rhyne provided written notice to a K Mart claims agent         erred in admitting evidence from Dr. Roy Randall Northcutt,
on April 22, 1992.                                                   which he was incompetent to render. K Mart complains that
                                                                     Dr. Northcutt, a chiropractor, estimated the cost of future
                                                                     surgeries Rhyne might need. K Mart asserts that a chiropractor
A recent Austin appellate court opinion states that written          is not competent to testify as to the costs of surgeries.
notice of an accident and injuries is not sufficient to constitute
notice of a claim under the prejudgment interest statute.
Robinson v. Brice, 894 S.W .2d 525, 528 (Tex.App.— Austin            In support of this contention, K Mart cites a recent Texas
1995, writ denied). Robinson requires written notice of a            Supreme Court case holding that courts should more closely
claim, i.e., a legal demand for payment or compensation.             scrutinize expert witness testimony before allowing it into
Robinson, 894 S.W .2d at 528. The court in Robinson,                 evidence. E.I. du Pont de Nemours and Co. v. Robinson, 923
however, recognized that it was deciding an issue of first           S.W .2d 549, 38 Tex. S.Ct. J. 852 (June 15, 1995) (stating that
impression. Robinson, 894 S.W .2d at 528.                            an expert's opinion must be based upon a reliable foundation).
                                                                     K Mart argues that because there was no showing that a
                                                                     chiropractor was qualified to opine about cost of surgical
The Fort W orth appellate court also recently addressed this         treatment, this evidence was improperly admitted. See Tex.R.
issue in Bevers v. Soule, 909 S.W .2d 599, 603–604                   Civ. Evid. 702. W e agree.
(Tex.App.— Fort W orth 1995, n.w.h.), where it concluded that
a signed medical authorization form, coupled with a letter
asking the company to “properly consider [plaintiff's] claim,”       [15] W e can only reverse based on this error, however, if this
was *146 sufficient to constitute notice under this statute.         error amounted to such a denial of K Mart's rights as was
Bevers, 909 S.W .2d at 603. K Mart distinguishes this case on        reasonably calculated to cause and probably did cause the
the basis that Rhyne made no similar request with her medical        rendition of an improper judgment. See Tex.R.App. P.
release form. Rhyne's release, prepared by K Mart, indicates,        81(b)(1). As stated in point of error two, this Court cannot
however, that “[t]his information is to be used for purposes of      ascertain the amount of future medical damages awarded by
evaluating and handling my claim for injury as a result of an        the jury in this case because the damages were submitted by a
accident occurring on or about 3–7–91.” (Emphasis added.)            broad-form question and also included pain and suffering,
This notice is comparable to that given in Bevers and was            physical impairment, and past medical care. The other
sufficient to give notice to K Mart of Rhyne's claim for             damages could have amounted to this total without the cost of


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             7
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




surgical treatment.


On rehearing, K–Mart contends that the record reflects that the
chiropractor's testimony as to future medical expenses
probably had an effect on the jury's verdict. K–Mart states that
the opposing counsel had emphasized the cost of future
surgeries in the final argument and that he had asked for
$395,000 in damages of which the cost of the future medical
expenses amounted to more than forty percent. It must be
pointed out, however, that the jury did not award the $395,000
argued for by counsel, but instead *147 awarded $200,000. It
should further be pointed out that in addition to the argument
for the cost of future medical expenses, counsel for Rhyne
placed a great deal of emphasis and spent considerable time in
discussing pain and suffering, mental anguish, and physical
impairment that had resulted from the injury. In argument,
counsel asked the jury to award $215,000 for pain and
suffering, mental anguish, and physical impairment. Therefore,
the $200,000 awarded by the jury may have been to cover pain
and suffering, mental anguish, and physical impairment and
not the cost of future medical expenses. The finding of harm
is not to be based upon speculation, but on whether the error
probably did cause the rendition of an improper judgment. W e
can only say that it was possible. W e do not find that it was
probable that the jury included the future medical expenses as
a part of the damages. Because the jury could have awarded
the entire amount on the basis of elements other than the cost
of future medical expenses, 6 no harmful error has been
presented to this Court.


W hile there is much virtue in the simplicity of the broad-form
submission, the courts are deprived in many situations of
determining with exactitude what the jury found. This is
especially true in lumping of all damages together because it
renders the trial court and the reviewing court helpless in
knowing which damages were actually awarded. This point of
error is overruled.


Based on our disposition of K Mart's fourth point of error, the
prejudgment interest awards are reformed to $70,211 7 for Allie
Rhyne and $3,905 8 for Curtis Rhyne. The judgment of the trial
court is otherwise affirmed.




Footnotes

1       Justice Charles Bleil was a member of the Court when this case was argued and submitted, and participated fully in the consideration
        of this case, but resigned from the Court before the opinion was issued.




                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                     8
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)




2      Prejudgment interest was included in the trial court's judgment pursuant to Tex.Rev.Civ. Stat. Ann. art. 5069–1.05 (Vernon
       Supp.1996). Rhyne's prejudgment interest amounted to $65,812.33. Her husband's prejudgment interest amounted to $3,872.80.

3      Moore testified that “[t]he only—it probably got broken setting the tables with the fork truck.”


4      In a previous opinion, this Court held that prejudgment interest under this statute should be compounded annually pursuant to Section
       3 of this Article 5069–1.05. See Sadler v. Duvall, 815 S.W.2d 285, 294 (Tex.App.—Texarkana 1991, writ denied). This opinion,
       however, dealt with a case occurring before the Legislature amended Section 6(g) to require simple interest. See Sadler, 815 S.W.2d
       at 294.

5      In Bevers, the Fort Worth Court asserted that this Court wrongly decided Sadler. Bevers v. Soule, 909 S.W.2d 599 (Tex.App.—Fort
       Worth 1995, n.w.h.). The Fort Worth Court failed to recognize, however, that Sadler dealt with a case that occurred before the
       Legislature amended Section 6(g) of Article 5069–1.05 to require simple interest. See Sadler, 815 S.W.2d at 294.

6      See Baylor Medical Plaza Services v. Kidd, 834 S.W.2d 69, 79 (Tex.App.—Texarkana 1992, writ denied)(on motion for rehearing);
       see also Transit Management Co. of Laredo v. Sanchez, 886 S.W.2d 823, 826 (Tex.App.—San Antonio 1994, no writ) (stating that
       the valuation of mental anguish damages are generally left to the trier of fact); Pipgras v. Hart, 832 S.W.2d 360, 366 (Tex.App.—Fort
       Worth 1992, writ denied) (noting that future physical pain and mental anguish damages are left to the jury's discretion).

7      This amount was calculated as follows:
                First three years (3/27/91—3/27/94), 10% of $190,000 per year x 3 = $57,000.


                  For partial year (3/27/94—2/24/95), 10% of $190,000 for 334 days = $17,386.


                  Total interest is $57,000 + $17,386 = $74,386.




       The parties agreed to reduce this amount based upon settlement offers K Mart made to Rhyne. Accordingly, $4,175 was
       subtracted from the above amount of $74,386 to reach a final figure of $70,211.


8      This amount was calculated in the same manner as above, except on a principal amount of $9,975, resulting in the amount of $3,905
       in interest to be paid. Because K Mart made no settlement offers to Curtis Rhyne, no deductions apply.

End of Document                                                         © 2014 Thomson Reuters. No claim to original U.S. Government Works.




                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                      9
P
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)


                                                                     evidence showed that representatives of investor
                                                                     repeatedly urged company to expend more
                     98 S.W.3d 766
                                                                     money by making it believe that investor would
                Court of Appeals of Texas,
                                                                     be joining company in operation of plant.
                       Fort Worth.
                                                                     Cases that cite this headnote
         MCN ENERGY ENTERPRISES, INC.,
          formerly named MCN Investment
         Corporation, Appellant and Appellee,                  [3]   Fraud
                          v.                                             Duty to disclose facts
             OMAGRO DE COLOMBIA,                                     When one makes a representation to another that
           L.D.C., Appellee and Appellant.                           later becomes misleading or false, he has a duty
                                                                     to correct the false information to the misled
            No. 2–02–015–CV.        |   Feb. 6, 2003.                party and not continue to conceal the truth.

Manufacturing company brought action against prospective             1 Cases that cite this headnote
investor for breach of contract, promissory estoppel, breach
of good faith and fair dealing, fraud, and negligent
                                                               [4]   Fraud
misrepresentation. The 67th District Court, Tarrant County,
                                                                         Weight and Sufficiency
Don J. Cosby, J., entered judgment on jury verdict for
company. Prospective investor appealed, and company cross-           Both negligence and causation in a case of
appealed. The Court of Appeals, Dixon W. Holman, J.,                 negligent misrepresentation may be established
held that: (1) evidence supported finding of negligent               by either circumstantial or direct evidence.
misrepresentation; (2) damages of $2.2 million were not
                                                                     1 Cases that cite this headnote
excessive; and (3) company could not maintain claim for
promissory estoppel.
                                                               [5]   Fraud
Affirmed.                                                                Amount awarded
                                                                     Damages of $2.2 million were not excessive for
                                                                     potential investor's negligent misrepresentation
                                                                     that it would join manufacturing company
 West Headnotes (15)
                                                                     in operating plant; company spent $3.6
                                                                     million of development costs in reliance on
 [1]    Appeal and Error                                             misrepresentation.
           Verdict
                                                                     1 Cases that cite this headnote
        When no objection was made to a jury
        instruction, evidence to support a finding based
        on the instruction should be assessed on appeal        [6]   Evidence
        in light of the instruction the trial court gave the             Tendency to mislead or confuse
        jury.                                                        Prejudicial effect of evidence that potential
                                                                     investor withdrew from involvement with
        Cases that cite this headnote
                                                                     manufacturing company because company paid
                                                                     a bribe to the wife of a foreign government
 [2]    Fraud                                                        official substantially outweighed probative
             Statements recklessly made; negligent                   value; investor's letter to company did not
        misrepresentation                                            mention bribe as grounds for withdrawal, and
        Evidence legally supported finding that                      investor was not aware of bribe until three years
        prospective     investor  made      negligent                after it withdrew from project. Rules of Evid.,
        misrepresentation to manufacturing company;                  Rule 403.




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                       1
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)




        Cases that cite this headnote                          [12]   Estoppel
                                                                          Pleading as element of cause of action

 [7]    Trial                                                         Manufacturing company could not maintain
             Admission of evidence in general                         claim for promissory estoppel against potential
                                                                      investor, based on investor's withdrawal from
        A trial court has the sound discretion to admit
                                                                      proposed project; company did not identify or
        and exclude evidence.
                                                                      make clear the specific nature of the promise or
        Cases that cite this headnote                                 promises it alleged.

                                                                      1 Cases that cite this headnote
 [8]    Appeal and Error
           Rulings as to Evidence in General
                                                               [13]   Estoppel
        A party desiring to reverse a judgment on                         Future events; promissory estoppel
        evidentiary error must show that the error
                                                                      If a promisee has reasonably and detrimentally
        probably resulted in an improper judgment.
                                                                      relied on an otherwise unenforceable promise,
        Cases that cite this headnote                                 he may have a cause of action for promissory
                                                                      estoppel.

 [9]    Interest                                                      4 Cases that cite this headnote
             Demand for Payment of Principal
        Prejudgment interest on claim of negligent             [14]   Estoppel
        misrepresentation by potential investor in                        Future events; promissory estoppel
        manufacturing company was to be calculated
                                                                      Although normally a defensive theory,
        beginning the day company sent letter to
                                                                      promissory estoppel may become available as a
        potential investor, demanding to be paid.
                                                                      cause of action to a promisee who has acted to his
        V.T.C.A., Finance Code § 304.104.
                                                                      detriment in reasonable reliance on an otherwise
        1 Cases that cite this headnote                               unenforceable promise.

                                                                      6 Cases that cite this headnote
 [10]   Appeal and Error
           Cases Triable in Appellate Court
                                                               [15]   Estoppel
        The date from which statutory prejudgment                         Future events; promissory estoppel
        interest should begin is a question of law that an
                                                                      The elements of a cause of action for promissory
        appellate court must review de novo. V.T.C.A.,
                                                                      estoppel include: (1) a promise, (2) the promisor
        Finance Code § 304.104.
                                                                      foreseeing that the promisee will rely on it, and
        1 Cases that cite this headnote                               (3) detrimental reliance by the promisee.

                                                                      7 Cases that cite this headnote
 [11]   Interest
             Demand for Payment of Principal
        A “claim,” for purposes of calculating
        prejudgment interest, is a demand for                 Attorneys and Law Firms
        compensation or an assertion of a right to be paid.
        V.T.C.A., Finance Code § 304.104.                     *768 Godwin Gruber, P.C., Julia F. Pendery, Dallas, for
                                                              Appellant/Cross Appellee.
        1 Cases that cite this headnote
                                                              Shannon, Gracey, Ratliff, et al., Joseph W. Spence, Fort
                                                              Worth, for Appellee/Cross Appellant.


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                         2
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)


                                                                 of the memorandum was dated March 16, 1998, extending
Panel B: HOLMAN, GARDNER, and WALKER, JJ.                        the date for signing the definitive documents until April 15,
                                                                 1998. In the summer of 1998, MCN's president, Bhargava,
                                                                 was replaced by Joe Williams.
                         OPINION

DIXON W. HOLMAN, Justice.
                                                                                   Due Diligence Efforts
Appellant MCN Energy Enterprises, Inc. (MCN) asks that
we reverse the jury's verdict and trial court judgment           In 1997, after the memorandum was signed, George Robles,
awarding Appellee Omagro De Colombia, L.D.C. (Omagro)            MCN's “point man” for the transaction, and Purna Pai, an
$2,781,041.36 for a claim of negligent misrepresentation and     MCN chemical engineer, visited Colombia to conduct due
that we render judgment that Omagro take nothing. We will        diligence for the urea project. When they returned after
affirm.                                                          inspecting the plant, they gave Omagro no indication that
                                                                 MCN would not be interested in it. To the contrary, when they
                                                                 came home from Colombia, Robles, Pai, and Shanti Sharma
                                                                 (the man in charge of MCN's international investments) told
                      The Agreement                              Omagro the plant looked fine to them. In August 1997, MCN
                                                                 asked for a thirty-day extension within which to sign the
Omagro is a company controlled by petroleum engineer
                                                                 definitive documents. The request was granted by a sixty-day
Naresh Vashisht. Omagro produces urea, a nitrogen fertilizer
                                                                 extension letter the two companies signed, that also extended
used for plants and crops. In 1996, Vashisht decided to
                                                                 the thirty-day period for MCN to conduct its due diligence.
operate a urea plant that he bought in Peru. He soon moved the
plant to Colombia. Unable to find adequate bank financing, he
                                                                 Omagro continued to pursue the project, obtaining a
approached MCN's president, Rai Bhargava, and asked him
                                                                 “mandate agreement” signed by International Finance
to buy an interest in Omagro as an international investment.
                                                                 Corporation, MCN, and Omagro to proceed with the
Eventually, MCN and Omagro signed a memorandum of
                                                                 financing of the project. Omagro then spent money to conduct
understanding in which the two companies agreed they would
                                                                 soil studies, design electrical systems, do engineering work,
associate for the purpose of owning and operating the urea
                                                                 and to continue repairing and cleaning the plant's equipment.
plant.
                                                                 Because MCN and Omagro decided to transform the plant
                                                                 into a “granular” operation, costs again increased, and
Each party agreed to deal with the other in good faith.
                                                                 Omagro bought more equipment in the United States, storing
The memorandum stated the companies' agreement that
                                                                 it in Houston. That equipment was inspected by MCN's
as long as MCN was negotiating in good faith, Omagro
                                                                 Robles and Pai, who once again indicated that MCN was
would share with MCN information to use in making
                                                                 committed to the project. Meanwhile, Omagro sent a memo
joint decisions about the project and would not solicit or
                                                                 to MCN containing Omagro's analysis of the bids received
encourage proposals from others. The parties further agreed
                                                                 for constructing and operating the plant and identifying the
that within thirty days the companies would sign “definitive
                                                                 party Omagro wished to hire for that purpose. Robles reacted
documents,” consisting of a stock purchase agreement and
                                                                 by calling Omagro to agree with the hiring recommendation.
documents concerning financing, plant construction and
                                                                 Also, Omagro sent MCN a copy of a proposed gas contract
operation, and the distribution of the plant's profits. *769
                                                                 with Ecopetrol, to which MCN made no objection.
The memorandum also stated that within thirty days after
the definitive documents were signed, MCN would reimburse
Omagro for a percentage of the verifiable development
costs Omagro incurred before those documents were signed.                             MCN Withdraws
Finally, the memorandum provided that MCN would conduct
a due diligence review within the first thirty days after        Without warning, fourteen months into the transaction,
signing the memorandum and would have no obligation to           Robles and Sharma telephoned Vashisht in September 1998
consummate the deal unless satisfied with that review. The       to tell him that MCN would not invest in the project
memorandum was signed July 14, 1997, and eventually it           with Omagro. Vashisht then wrote a letter to MCN's new
was amended and extended six times. The final extension          president, Williams, to protest MCN's sudden withdrawal.



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                         3
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)


MCN responded to Omagro with a letter dated November                  plant, he concluded the equipment was substandard, but he
10, 1998, stating that MCN would not invest in the                    did not report that to Omagro. Pai conceded that he knew
operation of Omagro's urea plant because MCN believed                 Omagro was continuing to spend a lot of money on the
the memorandum of understanding had “expired.” The                    project. Pai also admitted that the MCN people with whom
September telephone call and November letter were the                 Omagro was talking should have been informed that Pai had
first times MCN expressed any concerns or reservations to             made two negative reports to MCN about the project. In
Omagro about the Colombia urea plant.                                 answer to question 4, the jury found that for the damages
                                                                      proximately caused by MCN's negligent misrepresentations,
                                                                      Omagro is entitled to recover $2.2 million, as fair and
                                                                      reasonable compensation to reimburse it for expenses it
                     Omagro Sues MCN
                                                                      incurred in connection with the urea plant project. The trial
In September 1999, Omagro sued MCN alleging causes of                 court signed a final judgment for Omagro for $2.2 million,
action for breach of contract, promissory estoppel, breach            plus $581,041.36 in prejudgment interest.
of good *770 faith and fair dealing, fraud, and negligent
misrepresentation. At trial, the jury heard evidence that
from April 1997 until September 1998, MCN personnel                                          MCN's Appeal
negligently misrepresented to Omagro, through words and
conduct, that MCN was committed to making an investment               MCN presents five issues on appeal. The first complains that
in the construction and operation of the urea plant, and              Omagro relied on the same evidence to prove its three theories
that Omagro relied to its detriment on the negligent                  of liability against MCN: breach of contract; fraud; and
misrepresentations of MCN's words and conduct.                        negligent misrepresentation. MCN asserts that because the
                                                                      jury found MCN neither breached the contract, nor committed
From the evidence, the jury answered “yes” to question                fraud related to it, the jury had no reasonable basis for finding
3 of the charge, which asked whether MCN made a                       that Omagro independently proved a compensable injury for
negligent misrepresentation on which Omagro justifiably               negligent misrepresentation in the transaction. MCN's second
relied. Question 3 defined “misrepresentation” as “any                issue contends Omagro presented both legally and factually
manifestation by words or other conduct by one person to              insufficient evidence of the essential elements of negligent
another that, under the circumstances, amounts to an assertion        misrepresentation. Omagro counters the second issue by
not in accordance with the facts.” The question instructed            arguing that MCN has failed to preserve a factual sufficiency
jurors that a “negligent misrepresentation” occurs when a             complaint because MCN failed to file a motion for new trial
party, acting either in the course of his business, or in a           after the jury verdict. Because MCN concedes in its reply brief
transaction in which he has a pecuniary interest, makes a             that its claim of factual insufficiency is waived, that portion
representation that supplies false information to guide others        of the second issue is moot. We will address the first and the
in their business, and without exercising reasonable care or          remainder of the second issues together.
competence in obtaining or communicating the represented
information.                                                           *771 [1]       With regard to MCN's legal sufficiency
                                                                      challenge, we are required to consider all of the evidence
On direct examination, Robles conceded that, despite his              in the light most favorable to Omagro, the party for
favorable comments to Omagro, he had determined in                    whom the verdict has been rendered, and to indulge every
1998 that the urea project would not get done. On cross-              reasonable inference from that evidence in Omagro's favor.
examination, Robles agreed that “from the very beginning,”            See Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706,
he did not believe it would fit MCN. Moreover, Robles                 711 (Tex.1997). Our review must be based on the actual
conceded that he felt he could not be honest with Omagro              wording of the question and instructions submitted to the
because it might hurt his own employment at MCN. Pai                  jury. Wal–Mart Stores, Inc. v. Sturges, 52 S.W.3d 711,
testified that soon after his first visit to the plant in Colombia,   715 n. 5 (Tex.2001). MCN complains about jury question
he concluded that the project was not technically feasible.           3, arguing MCN cannot be considered liable for negligent
Pai did not tell that to Omagro. Pai also admitted that when          misrepresentation without evidence of an “affirmative”
he went to Houston in January 1998 to inspect equipment               misrepresentation it made to Omagro. However, MCN's
Omagro had bought to transform the plant to a “granular”              complaint is contrary to the wording of the jury charge. The



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 4
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)


jury's instruction in question 3 does not mention the word        he had been told the truth as soon as it became apparent
“affirmative.” Instead, it defines only a “misrepresentation”     to MCN's personnel, Omagro could and would have found
as “any manifestation by words or other conduct by one            another investor partner. Pai testified that he knew Omagro
person to another that, under the circumstances, amounts to       was spending more money on the project and, for that reason,
an assertion not in accordance with the facts.” MCN's appeal       *772 conceded MCN should have told Omagro the truth
does not complain of the word “misrepresentation,” and the        early in the transaction. We overrule MCN's first and second
jury charge does not limit the definition to only “affirmative”   issues.
misrepresentations. When, as here, no objection was made to
a jury instruction, evidence to support a finding based on the  MCN's third issue asserts that because the jury awarded
instruction should be assessed in light of the instruction the  Omagro damages that equal the benefit of the bargain,
trial court gave the jury. City of Fort Worth v. Zimlich, 29    Omagro erroneously is placed in the same position it would
S.W.3d 62, 71 (Tex.2000).                                       have enjoyed if MCN had signed the definitive documents.
                                                                MCN insists that in this case, Omagro is controlled by
 [2] [3] [4] Legally sufficient evidence exists to show that a contract/tort principle that prevents any plaintiff from
the words and conduct of MCN's point man, Robles, and its       recovering breach of contract damages for liability under a
petroleum engineer, Pai, were misrepresentations of the type    tort theory. See D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973
defined in jury question 3. Their words and conduct, along      S.W.2d 662 (Tex.1998).
with that of Sharma, repeatedly spurred Omagro to expend
more money by making Omagro believe MCN would be                To apply the contract/tort principle here, the parties first
joining Omagro in the operation of the urea plant. The specific must have an agreement, the breach of which will create
words and conduct of the negligent misrepresentations have      identifiable “benefit of the bargain” damages. Id. at 663.
been stated above and will not be repeated. Suffice it to say   Nevertheless, MCN also relies on the jury's answer to
that evidence of the negligent misrepresentations made by       question 1, that there never was a binding and enforceable
Robles, Pai, and Sharma establishes conclusively that they      agreement obligating it to execute definitive documents,
were made on behalf of MCN in the course of its business        or otherwise continue with the project, or to reimburse
and in connection with the transaction in which MCN had a       forty percent of Omagro's development costs. Yet, when
pecuniary interest—but were not in accord with the true facts   jury question 1 asked whether MCN failed to comply with
and were false when made to Omagro. MCN never attempted         the terms of the memorandum of understanding, the jury
to correct the false or misleading statements. When one makes   answered “no.” And by answering “no” to question 1, the
a representation to another that later becomes misleading       jury accepted MCN's theory, that no agreement legally
or false, he has a duty to correct the false information        obligated MCN to execute definitive documents or reimburse
to the misled party and not continue to conceal the truth.      forty percent of Omagro's development costs. Thus, the jury
Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200,             found that the so-called “benefit of the bargain,” an alleged
212–13 (Tex.App.-Houston [14th Dist.] 2001, pet. denied).       obligation to pay Omagro forty percent of its costs, was not
Both negligence and causation may be established by either      available to Omagro in its action for breach of contract.
circumstantial or direct evidence. Birmingham v. Gulf Oil
Corp., 516 S.W.2d 914, 917 (Tex.1974) (op. on reh'g).           For a long time, the Texas Supreme Court has held that
                                                                obligations and duties separately imposed by contract and
The evidence of the words and conduct of MCN's personnel,       by tort may co-exist. See Formosa Plastics Corp. USA v.
done over a period of fourteen months while Omagro was          Presidio Eng'rs. & Contractors, Inc., 960 S.W.2d 41, 44
expending millions of dollars for the joint benefit of MCN and  (Tex.1998); Jim Walter Homes, Inc. v. Reed, 711 S.W.2d
Omagro, is legally sufficient to have proven to a reasonable    617, 618 (Tex.1986); Int'l Printing Pressmen & Assistants'
jury that MCN did not exercise reasonable care or competence    Union v. Smith, 145 Tex. 399, 198 S.W.2d 729, 735–36
and, indeed, that MCN worked to hide the truth from Omagro,     (1946). And these cases are not altered by D.S.A., Inc.,
until after September 1998. A reasonable jury was able          973 S.W.2d at 663 (stating that the court was not deciding
to conclude that no reasonably prudent person would have        whether a party breached a legal duty independent of its
acted as MCN acted. The evidence also is legally sufficient     contractual duty). We hold here MCN had a tort duty not
to demonstrate to a reasonable jury that Omagro relied on       to make negligent misrepresentations, and we decline to
MCN's negligent representations. Vashisht testified that if     apply contract/tort principles in this case. Even without the



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            5
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)


memorandum of understanding, MCN had a duty not to                 Omagro objected to allowing the jury to hear the bribery
negligently misrepresent that it was committed to a business       evidence by filing a motion in limine.
deal when it was not. Shell Oil Prods. Co. v. Main St.
Ventures, L.L.C., 90 S.W.3d 375, 382 (Tex.App.-Dallas 2002,         [7]    [8] A trial court has the sound discretion to admit
pet. denied).                                                      and exclude evidence. Pack v. Crossroads, Inc., 53 S.W.3d
                                                                   492, 499 (Tex.App.-Fort Worth 2001, pet. denied). A
 [5] The damages of $2.2 million found by the jury's               party desiring to reverse a judgment on evidentiary error
answer to question 4 are not limited to reimbursing forty          must show that the error probably resulted in an improper
percent of Omagro's development costs. Instead, question           judgment. Id. The trial court granted the motion because the
4 allowed the jury to award any damages proximately                alleged relevance and/or probative value of the evidence was
caused by MCN's negligent misrepresentation, including             significantly outweighed by its prejudicial effect. TEX.R.
reimbursement of Omagro's expenses incurred in connection          EVID. 403. The record reveals no abuse of discretion in the
with the project. That includes the sixty percent of Omagro's      court's ruling. We overrule the fourth issue.
costs MCN had no obligation, except from breaching its tort
duty, to reimburse. MCN failed to object to the wording of          [9]    [10]    [11] In the fifth issue, MCN asserts that the
the instruction about the measure of damages or submit its         trial court used an incorrect date for accrual of prejudgment
own instruction specifically limiting the jury to consideration    interest. The date from which statutory prejudgment interest
of only MCN's contractual share of development costs. The          should begin is a question of law that an appellate court must
evidence in the record clearly supports the conclusion that the    review de novo. See generally Johnson v. City of Fort Worth,
jury's award of damages from MCN's misrepresentations is           774 S.W.2d 653, 655–56 (Tex.1989). Prejudgment interest
for an independent tort injury. Here, the undisputed evidence      accrues on the amount of a judgment during a period that
shows that Omagro spent $3.6 million of development costs          begins on the earlier of the 180th day after the date a defendant
in reliance on MCN's negligent misrepresentations. A jury          like MCN receives written notice of a claim against it, or
may award damages anywhere within the trial court's range          the date the suit is filed. TEX. FIN.CODE ANN. § 304.104
of the presented evidence. *773 Clary Corp. v. Smith, 949          (Vernon Supp.2003); Johnson & Higgins, Inc. v. Kenneco
S.W.2d 452, 467 (Tex.App.-Fort Worth 1997, pet. denied).           Energy, Inc., 962 S.W.2d 507, 531 (Tex.1998). A “claim” is a
The jury therefore had before it sufficient evidence to support    demand for compensation or an assertion of a right to be paid.
its $2.2 million verdict. We overrule the third issue.             Johnson, 962 S.W.2d at 531.

 [6] The fourth issue contends that the trial court denied         On October 29, 1998, Vashisht sent a letter to MCN,
MCN the right to provide the jury with evidence of one             demanding Omagro's right to be paid by MCN. The letter was
of its “most important reasons” for withdrawing from the           Omagro's claim. Id. The trial court used this date to calculate
transaction. MCN suspected from evidence it gained outside         prejudgment interest. We overrule MCN's fifth issue.
the jury's presence that Omagro had paid a bribe to the
wife of a Colombian government official, not disclosing
it in violation of the Foreign Corrupt Practices Act. 15
                                                                                     Omagro's Cross–Point
U.S.C.A. §§ 78dd–1—78dd–2 (West 1998). In connection
with its fourth issue, MCN argues that if the jury had              [12] Once the evidence in the trial closed, the trial court
only known about the alleged bribe, Omagro's negligent             granted a directed verdict against Omagro on its cause of
misrepresentation claim would have been defeated. Initially,       action for promissory estoppel. In a sole cross-point, Omagro
we note that the evidence shows that MCN's November 10,            complains that it is entitled to a new trial of its claim for
1998 letter to Omagro does not mention the alleged “bribe”         promissory estoppel.
as a reason for cancelling its participation in the transaction.
Next, Daniel Schiffer, former MCN senior vice president and        In reviewing a directed verdict, we must consider all of
general counsel, testified to the trial court outside the jury's   the evidence in the light most favorable to Omagro, the
presence that MCN was not aware of any such bribe until            party against whom the verdict was granted, disregarding all
three years after it withdrew from the urea plant project.         evidence and inferences to the contrary. See Smith v. Elliott,
Finally, Vashisht denied to the court that he had paid a bribe.    68 S.W.3d 844, 846 (Tex.App.-El Paso 2002, pet. denied). If
                                                                   conflicting evidence of *774 probative value on any theory



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             6
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)


                                                             negligent misrepresentations via words and conduct of MCN
of recovery exists, an instructed verdict is improper, and we
                                                             representatives (Robles, Sharma, and Pai), equals more than a
must remand the case for jury determination of the issue. Id.
                                                             scintilla of evidence to support Omagro's promissory estoppel
 [13]    [14]      [15]   If a promisee has reasonably and claim. We disagree because Omagro does not identify or
                                                             make clear the specific nature of the promise or promises
detrimentally relied on an otherwise unenforceable promise,
                                                             it alleges the MCN representatives made. We overrule
he may have a cause of action for promissory estoppel.
                                                             Omagro's sole cross-point.
Wheeler v. White, 398 S.W.2d 93, 96–97 (Tex.1965).
Although normally a defensive theory, it may become
available as a cause of action to a promisee who has acted
to his detriment in reasonable reliance on an otherwise                                 Conclusion
unenforceable promise. Id. at 97. The elements of that cause
of action include a promise, the promisor foreseeing that    We have carefully considered and overruled MCN's five
the promisee will rely on it, and detrimental reliance by    issues for the reasons stated. We hold that on the issue of
the promisee. English v. Fischer, 660 S.W.2d 521, 524        negligent misrepresentation, the evidence is legally sufficient
(Tex.1983).                                                  to support the jury's finding for Omagro. The issue presented
                                                             by Omagro's sole cross-point is overruled. We affirm the trial
We have already held that the record contains legally        court's judgment.
sufficient evidence for a reasonable jury, as charged in
this case, to find that negligent misrepresentations were
                                                                    All Citations
made by MCN representatives. We will not revisit that
evidence here. In connection with its sole cross-point,             98 S.W.3d 766
Omagro now argues generally that the evidence showing

End of Document                                                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               7
Q
Pringle v. Moon, 158 S.W.3d 607 (2005)


                                                                        Trial court's final judgment in personal injury
                                                                        action arising from automobile accident did
                     158 S.W.3d 607
                                                                        not relate back to earlier judgment, and thus
                 Court of Appeals of Texas,
                                                                        applicable rate of prejudgment interest was rate
                        Fort Worth.
                                                                        in effect at time that final judgment was signed,
       Helen PRINGLE, Independent Executrix of the                      although trial court intended that final judgment
       Estate of Brantley Pringle, Deceased, Appellant,                 would relate back to earlier judgment; earlier
                              v.                                        judgment no longer existed once trial court
                                                                        expressly vacated earlier judgment in granting
                   Toby MOON, Appellee.
                                                                        motion to modify judgment. V.T.C.A., Finance
           No. 2–04–012–CV.        |   Feb. 10, 2005.                   Code §§ 304.003, 304.102, 304.103.

Synopsis                                                                3 Cases that cite this headnote
Background: Motorist brought action against tree remover,
and tree remover counterclaimed to recover for personal           [2]   Judgment
injuries that allegedly were sustained when motorist's car                  Operation and Effect
struck piece of equipment, which pushed tree remover into
                                                                        Judgment that has been vacated has no legal
another piece of equipment. Due to settlements involving
                                                                        effect.
tree remover's workers' compensation carrier and motorist's
liability insurer, motorist was assigned subrogation recovery           3 Cases that cite this headnote
interest concerning workers' compensation benefits paid to
tree remover. Independent executrix of motorist's estate
                                                                  [3]   Judgment
was substituted as a party following motorist's death.
                                                                            Operation and Effect
Following a jury trial, the 43rd District Court, Parker County,
Don Chrestman, J., rendered final judgment. Independent                 When a judgment has been rendered and later set
executrix appealed.                                                     aside or vacated, the matter stands precisely as if
                                                                        there had been no judgment.

                                                                        4 Cases that cite this headnote
Holdings: The Court of Appeals, John Cayce, C.J., held that:

                                                                  [4]   Interest
[1] final judgment did not relate back to earlier judgment, and
                                                                             Mode of Computation in General
thus applicable rate of prejudgment interest was rate in effect
at time that final judgment was signed, and                             In tree remover's personal injury action that arose
                                                                        from automobile accident involving motorist,
[2] amount of workers' compensation credit was required to              who was assigned as result of settlements
be deducted from amount of damages found by jury before                 with insurers subrogation recovery interest
prejudgment interest could be calculated.                               concerning workers' compensation benefits
                                                                        paid to tree remover, amount of workers'
                                                                        compensation credit had to be deducted from
Reversed and remanded.                                                  amount of damages found by jury before
                                                                        prejudgment interest could be calculated.
                                                                        V.T.C.A., Finance Code §§ 304.003, 304.102,
                                                                        304.103.
 West Headnotes (8)
                                                                        Cases that cite this headnote
 [1]       Interest
                Effect on Judgments                               [5]   Appeal and Error
           Judgment                                                        Cases Triable in Appellate Court
               Operation and Effect


                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                          1
Pringle v. Moon, 158 S.W.3d 607 (2005)


        Calculation of prejudgment interest is a question
        of law and thus is reviewed de novo. V.T.C.A.,
        Finance Code §§ 304.003, 304.102, 304.103.                                   OPINION

        1 Cases that cite this headnote                     JOHN CAYCE, Chief Justice.

                                                            In this personal injury case, Helen Pringle, as independent
 [6]    Interest
                                                            executrix of the estate of Brantley Pringle, appeals from a
             Prejudgment Interest in General
                                                            judgment for Toby Moon. In two issues, Helen contends
        “Prejudgment interest” is compensation allowed      that the trial court erred in applying the wrong prejudgment
        by law as additional damages for lost use of        interest rate and in calculating prejudgment interest on the
        money due as damages during the lapse of time       damages found by the jury rather than on the judgment
        between the accrual of the claim and the date of    amount. We *609 will reverse the part of the judgment
        judgment. V.T.C.A., Finance Code §§ 304.003,        relating to prejudgment interest and remand to the trial court
        304.102, 304.103.                                   to recalculate prejudgment interest in accordance with this
                                                            opinion.
        1 Cases that cite this headnote

                                                            On July 18, 2000, Brantley was driving in Parker County
 [7]    Interest                                            when he came upon a construction zone where Moon was
             Mode of Computation in General                 working with tree removal equipment. Brantley's car struck a
        Prejudgment interest is calculated on the           piece of equipment, which pushed Moon into another piece
        judgment amount, not the amount of damages          of equipment and caused him to sustain injuries. Because
        awarded by the jury. V.T.C.A., Finance Code §§      Moon sustained his injuries in the course and scope of his
        304.003, 304.102, 304.103.                          employment, he sought and received workers' compensation
                                                            insurance benefits totaling $39,430.69 from Texas Mutual
        2 Cases that cite this headnote                     Insurance Company (Texas Mutual). Brantley filed suit
                                                            against Moon, and Moon counterclaimed.
 [8]    Interest
             Mode of Computation in General                 Before trial, Texas Mutual asserted a right to recovery
                                                            of benefits paid to Moon. Brantley's liability insurance
        Any credits or offsets due a defendant should be
                                                            carrier, GEICO, then entered into an agreement with Texas
        deducted from the total damages awarded before,
                                                            Mutual whereby, in exchange for GEICO's cash payment,
        not after, prejudgment interest is calculated.
                                                            Texas Mutual assigned to GEICO Texas Mutual's right to
        V.T.C.A., Finance Code §§ 304.003, 304.102,
                                                            recovery of the statutory workers' compensation lien in the
        304.103.
                                                            amount of $39,430.69. GEICO then assigned to Brantley the
        1 Cases that cite this headnote                     subrogation recovery interest Texas Mutual had previously
                                                            assigned to GEICO.

                                                            The case was tried to a jury in Parker County in June 2003.
                                                            At the conclusion of the evidence, the jury returned a verdict
Attorneys and Law Firms
                                                            finding Brantley negligent and liable to Moon for $44,243.06.
*608 Wright & Greenhill, P.C., Brantley Ross Pringle Jr.,   The trial court rendered judgment on the verdict on July
Austin, for Appellant.                                      7, 2003. Thereafter, Brantley filed a motion to modify the
                                                            judgment because it did not reflect the amount of his workers'
Dan Stroup, P.C., Dan Stroup, Longview, for Appellee.       compensation lien. On August 20, 2003, the trial court
                                                            granted Brantley's motion and vacated the July 7 judgment.
Panel A: CAYCE, C.J.; DAUPHINOT and GARDNER, JJ.
                                                            Brantley died suddenly on September 2, 2003. Helen, as
                                                            independent executrix of Brantley's estate, was substituted as
                                                            a party on October 24, 2003.


              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                      2
Pringle v. Moon, 158 S.W.3d 607 (2005)



                                                                   appeal on or after September 1, 2003. 2 Burke v. Union Pac.
The trial court rendered a final judgment on October 30, 2003,     Res. Co., 138 S.W.3d 46, 74 (Tex.App.-Texarkana 2004, no
allowing the credit for Brantley's workers' compensation lien      pet.); see also Columbia Med. Ctr. of Las Colinas v. Bush,
and calculating prejudgment interest at the rate of ten percent    122 S.W.3d 835, 865 (Tex.App.-Fort Worth 2003, no pet.)
per annum on the entire amount of damages found by the jury.       (holding that judgment is “subject to appeal” when it fully
Helen filed a motion to modify both the interest rate and the      and finally disposes of all parties and is therefore capable of
interest calculation in the judgment, which was overruled by       being appealed).
operation of law. This appeal followed.
                                                                   The final judgment in this case was signed October 30, 2003.
 [1] In her first issue, Helen contends that the trial court       Moon's argument that the October 30 judgment was nunc pro
erred in applying the wrong prejudgment interest rate to the       tunc and therefore related back to the July 7 judgment is not
damages award. Helen argues that the correct prejudgment           supported by the record. The trial court expressly vacated
interest rate was the greater of five percent or the prime         the July 7 judgment in its order granting Pringle's motion
interest rate in effect when the final judgment was signed.        to modify and at a later hearing twice acknowledged setting
Moon contends that the final judgment was signed July 7,
                                                                   aside that judgment. 3
2003, that the October 30 judgment was merely a judgment
nunc pro tunc, and that the trial court properly determined that
                                                                    [2]     [3] A judgment that has been vacated has no legal
the applicable interest rate is ten percent.
                                                                   effect. Shelby Operating Co. v. City of Waskom, 964 S.W.2d
                                                                   75, 80 (Tex.App.-Texarkana 1997, pet. denied). When a
The prejudgment interest rate is controlled by statute.
                                                                   judgment has been rendered and later set aside or vacated,
See TEX. FIN.CODE ANN. §§ 304.003, 304.103 (Vernon
                                                                   the matter stands precisely as if there had been no judgment.
Supp.2004–05). Because statutory construction is a question
                                                                   Ferguson v. Naylor, 860 S.W.2d 123, 127 (Tex.App.-
of law, we review the trial court's decision de novo. Tex.
                                                                   Amarillo 1993, writ denied); *611 Sawyer v. Donley County
Dep't of Transp. v. Needham, 82 S.W.3d 314, 318 (Tex.2002);
                                                                   Hosp. Dist., 513 S.W.2d 106, 109 (Tex.Civ.App.-Amarillo
Town of Flower Mound v. Stafford Estates, L.P., 71 S.W.3d
                                                                   1974, no writ). Therefore, despite the trial court's statement of
18, 26 (Tex.App.-Fort Worth 2002, no pet.). Under a de
                                                                   its intention that the October 30 judgment would relate back
novo standard of review, the reviewing court exercises its
                                                                   to the July 7 judgment, the October 30 judgment could not
own judgment and redetermines each legal issue. Subaru of
                                                                   relate back because the July 7 judgment no longer existed.
Am., Inc. v. David McDavid Nissan Inc., 84 S.W.3d 212,
222 (Tex.2002); Quick v. City of Austin, 7 S.W.3d 109, 116
                                                                   Because the final judgment in this case was signed and
(Tex.1998).
                                                                   became subject to appeal after September 1, 2003, the trial
                                                                   court erred in applying a prejudgment interest rate of ten
A judgment in a personal injury case earns prejudgment
                                                                   percent instead of five percent. We sustain Helen's first issue.
interest. TEX. FIN.CODE ANN. § 304.102 (Vernon
Supp.2004–05). The prejudgment interest rate is *610 equal
                                                                    [4] In her second issue, Helen contends that the trial
to the postjudgment rate applicable at the time of judgment.
                                                                   court improperly calculated prejudgment interest on the
Id. § 304.103. During the regular 2003 legislative session,
                                                                   entire amount of damages found by the jury rather than
the legislature passed House Bills 4 and 2415, both of which
                                                                   the amount awarded to Moon after the credit for Brantley's
contained nearly identical amendments to the finance code
                                                                   workers' compensation lien. Helen argues that the trial court
that effectively reduced the postjudgment interest rate from
                                                                   should have deducted the amount of Brantley's workers'
ten to five percent. 1 Both bills provided that the new interest   compensation lien from the total damages before calculating
rate would apply in a case in which a final judgment was           prejudgment interest. Moon contends that the trial court
“signed or subject to appeal on or after the effective date of     correctly calculated prejudgment interest on the full amount
this Act.” Tex. H.B. 2415, § 2(a), 78th Leg., R.S., 2003 Tex.
                                                                   of damages found by the jury. 4
Gen. Laws 2096, 2097; Tex. H.B. 4, § 6.04, 78th Leg., R.S.,
2003 Tex. Gen. Laws 847, 862. Because House Bill 4 went
                                                                    [5] Because the calculation of prejudgment interest is a
into effect on September 1, 2003, H.B. 4, § 23.02, 2003 Tex.
                                                                   question of law, Travelers Ins. Co. v. Wilson, 28 S.W.3d
Gen. Laws 847, 898, its prejudgment interest rate applies in
                                                                   42, 47 (Tex.App.-Texarkana 2000, no pet.); Morgan v. Ebby
any case in which a final judgment was signed or subject to
                                                                   Halliday Real Estate, Inc., 873 S.W.2d 385, 391 (Tex.App.-


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             3
Pringle v. Moon, 158 S.W.3d 607 (2005)


                                                                   960 (Tex.App.-Houston [14th Dist.] 1994, no writ); Berry
Fort Worth 1993, no writ); Strickland v. Coleman, 824
                                                                   Prop. Mgt., Inc. v. Bliskey, 850 S.W.2d 644, 671 (Tex.App.-
S.W.2d 188, 192–93 (Tex.App.-Houston [1 Dist.] 1991, no
                                                                   Corpus Christi 1993, writ dism'd by agr.); Sisters of Charity
writ), we will review the issue de novo, Mayhew v. Town of
                                                                   of Incarnate Word v. Dunsmoor, 832 S.W.2d 112, 118
Sunnyvale, 964 S.W.2d 922, 928 (Tex.1998), cert. denied,
                                                                   (Tex.App.-Austin 1992, writ denied).
526 U.S. 1144, 119 S.Ct. 2018, 143 L.Ed.2d 1030 (1999);
Town of Flower Mound, 71 S.W.3d at 26.
                                                           The trial court erred in failing to deduct the amount of
 [6] [7] [8] Prejudgment interest is compensation allowed Brantley's workers' compensation credit before it calculated
                                                           prejudgment interest. Prejudgment interest should have been
by law as “additional damages for lost use of money due
                                                           calculated on the sum of $4,812.37, which is the amount of
as damages during the lapse of time between the accrual of
                                                           the damages award less the offsetting credit for the workers'
the claim and the date of judgment.” Johnson & Higgins
                                                           compensation lien. We sustain Helen's second issue.
of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507,
528 (Tex.1998). Prejudgment interest is calculated on the
                                                                    *612 Having sustained both of Helen's issues, we reverse
judgment amount, not the amount of damages awarded by the
                                                                   the part of the judgment awarding prejudgment interest and
jury. C & H Nationwide, Inc. v. Thompson, 810 S.W.2d 259,
                                                                   remand to the trial court to recalculate prejudgment interest
275 (Tex.App.-Houston [1st Dist.] 1991), aff'd in part and
                                                                   in accordance with this opinion.
rev'd in part on other grounds, 903 S.W.2d 315 (Tex.1994);
Owens–Corning Fiberglas Corp. v. Schmidt, 935 S.W.2d
520, 524 (Tex.App.-Beaumont 1996, writ denied). Any
                                                                   All Citations
credits or offsets due a defendant should be deducted from
the total damages awarded before—not after—prejudgment             158 S.W.3d 607
interest is calculated. Roberts v. Grande, 868 S.W.2d 956,


Footnotes
1      The legislation provided, in pertinent part:
            “The postjudgment interest rate is: (1) the prime rate as published by the Federal Reserve Bank of New York on the
            date of computation; (2) five percent a year if the prime rate as published by the Federal Reserve Bank of New York
            as described by Subdivision (1) is less that five percent; or (3) 15 percent a year if the prime rate as published by
            the Federal Reserve Bank of New York described by Subdivision (1) is more than 15 percent.” Act of June 20, 2003,
            78th Leg., R.S., ch. 676, § 1, 2003 Tex. Gen. Laws 2096, 2097; Act of June 2, 2003, 78th Leg., R.S., art. 6, § 6.01,
            2003 Tex. Gen. Laws 847, 862 (both codified at TEX. FIN.CODE ANN. § 304.003(c)).
2      We note that the five percent prejudgment interest rate actually went into effect on June 20, 2003 by virtue of House Bill
       2415. See Tex. H.B. 2415, § 2(b), 78th Leg., R.S., Tex. Gen. Laws 2096, 2097 (providing that House Bill 2415 took effect
       immediately if it received a two-thirds vote of all the members elected to each house, which it did on June 20, 2003);
       Tesfa v. Stewart, 135 S.W.3d 272, 279 (Tex.App.-Fort Worth 2004, pet. denied) (noting that amendments to finance
       code interest rate were effective on both June 20 and September 1, 2003). Because Pringle did not raise this argument
       below, however, we cannot reverse the trial court on this ground. See Banda v. Garcia, 955 S.W.2d 270, 272 (Tex.1997);
       Rogers v. Stell, 835 S.W.2d 100, 101 (Tex.1992).
3      At a hearing on October 6, 2003 the court made the following statements:
            [THE COURT]: The parties are incorrect, in that Mr. Pringle is deceased, was killed in a car wreck following the
            actual date of the jury verdict, and following the date I set aside the original final judgment. [Emphasis supplied.]
            ....
            [THE COURT]: The Court's response to that is I signed a judgment in this case before the death of Mr. Pringle even
            though I did set it aside. [Emphasis supplied.]
4      The case Moon cites to support his position, Brandon v. American Sterilizer Co., 880 S.W.2d 488 (Tex.App.-Austin 1994,
       no writ), is inapposite because it does not address the issue before us. The prejudgment issues in American Sterilizer
       involved the award of prejudgment interest for the time between the return of the verdict and the rendering of the judgment
       and the right of a workers' compensation lien assignee to receive credit for the full amount of the lien. See id. at 494–95.


End of Document                                                © 2015 Thomson Reuters. No claim to original U.S. Government Works.



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              4
R
Quick v. City of Austin, 7 S.W.3d 109 (1998)


                                                                       Legislative function cannot, under the separation
                                                                       of powers doctrine, be reviewed de novo by
                      7 S.W.3d 109
                                                                       any other branch of government. Vernon's
                 Supreme Court of Texas.
                                                                       Ann.Texas Const. Art. 2, § 1.
  Jerry J. QUICK, Kaira G. Quick, John M. Bryant,
                                                                       Cases that cite this headnote
   Ruth E. Bryant, Joe Cox, Dolores Cox, Florence
     Turck and Circle C Land Corp., Petitioners,
                         v.                                      [2]   Constitutional Law
     CITY OF AUSTIN, Save Our Springs Legal                                To Judiciary
  Defense Fund, Inc. and Al St. Louis, Respondents.                    Environmental Law
                                                                           Validity
           No. 96–1154. | Argued Nov. 3,                               Water Code provision that permitted persons
        1997. | Decided May 8, 1998. |                                 located outside city limits, but affected by
       Opinion Granting Rehearing Sept. 30, 1999.                      water pollution control ordinance, to bring suit
                                                                       challenging such ordinance as “invalid, arbitrary,
Owners of land within city's extraterritorial jurisdiction
                                                                       unreasonable, inefficient, or ineffective,” and
brought declaratory judgment action challenging water
                                                                       permitted reviewing court to “overturn or
pollution control ordinance. The 22nd Judicial District Court,
                                                                       modify” city's action, did not allow de
Hays County, John Forbis, J., entered judgment declaring
                                                                       novo review of legislative action, as would
ordinance to be null and void. City appealed. The Austin
                                                                       violate separation of powers doctrine. Vernon's
Court of Appeals reversed in part and modified in part,
                                                                       Ann.Texas Const. Art. 2, § 1; V.T.C.A., Water
930 S.W.2d 678. On writ of error, the Supreme Court,
                                                                       Code § 26.177(d).
Abbott, J., held that: (1) review did not violate separation
of powers doctrine; (2) ordinance was rationally related               4 Cases that cite this headnote
to city's interest in protecting water quality; (3) ordinance
was not subject to statutory procedures for adopting zoning
                                                                 [3]   Constitutional Law
ordinances; (4) city was not required to obtain approval
                                                                           Avoidance of constitutional questions
from the Natural Resource Conservation Commission before
ordinance became effective; and (5) ordinance was proper               In analyzing the constitutionality of a statute,
subject of the initiative and referendum process under city            court should, if possible, interpret the statute in a
charter. On rehearing, the Court further held (6) repealed             manner that avoids constitutional infirmity.
statute locking in development regulations in existence at
                                                                       10 Cases that cite this headnote
time of original permit application continued to apply to
applications filed or approved before repeal.
                                                                 [4]   Statutes
Affirmed in part, reversed and modified in part.                            Effect of Partial Invalidity; Severability
                                                                       If any provision of statute is held to be invalid,
Enoch, J., filed a concurring opinion on original submission.          the invalidity does not affect other provisions
                                                                       that can properly be given effect in the absence
Hankinson, J., filed dissenting opinion on rehearing, which            of the invalid provisions.
Enoch, Baker, and O'Neill, JJ., joined.
                                                                       5 Cases that cite this headnote


 West Headnotes (30)                                             [5]   Constitutional Law
                                                                           Policy
                                                                       Municipal Corporations
 [1]    Constitutional Law
                                                                            Conformity to constitutional and statutory
            Nature and scope in general
                                                                       provisions in general



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             1
Quick v. City of Austin, 7 S.W.3d 109 (1998)


        Judiciary has no power to allow a jury to                   Party attacking municipal ordinance bears
        redecide the policy behind legislative issues by            the extraordinary burden to establish that no
        a preponderance of the evidence; instead, in                conclusive or even controversial or issuable fact
        reviewing an ordinance, the court is to consider            or condition existed that would authorize the
        all the circumstances and determine as a matter             passage of the ordinance.
        of law whether the legislation is invalidated by
        a relevant statute or constitutional provision.             3 Cases that cite this headnote
        Vernon's Ann.Texas Const. Art. 2, § 1.
                                                             [11]   Municipal Corporations
        6 Cases that cite this headnote
                                                                       Public safety and welfare
                                                                    Court reviewing municipal ordinance considers
 [6]    Administrative Law and Procedure                            all the circumstances and determines, as a
           Scope of Review in General                               substantive matter, if reasonable minds could
        Standard of review is more than just words;                 differ as to whether the ordinance has a
        rather, it embodies principles regarding the                substantial relationship to the protection of the
        amount of deference a reviewing tribunal                    general health, safety, or welfare of the public; if
        accords the original tribunal's decision.                   the evidence reveals a fact issue in this respect,
                                                                    the ordinance must be upheld.
        4 Cases that cite this headnote
                                                                    6 Cases that cite this headnote
 [7]    Administrative Law and Procedure
           Trial De Novo                                     [12]   Environmental Law
        Key to determining whether statute authorizes a                 Validity
        de novo review is the amount of deference the               Water pollution control ordinance that restricted
        statute requires the reviewing tribunal to give to          new development in watershed area, including
        the original tribunal's decision.                           areas within city's extraterritorial jurisdiction,
                                                                    was rationally related to city's governmental
        28 Cases that cite this headnote                            interest in protecting water quality, and was
                                                                    not invalid, arbitrary, unreasonable, inefficient,
 [8]    Administrative Law and Procedure                            or ineffective, even insofar as it established
           Trial De Novo                                            strict runoff standards, provided only limited
                                                                    opportunity for variance, and severely affected
        When conducting a de novo review, the
                                                                    some property values. V.T.C.A., Water Code §
        reviewing tribunal exercises its own judgment
                                                                    26.177(d).
        and redetermines each issue of fact and law.
                                                                    3 Cases that cite this headnote
        95 Cases that cite this headnote

                                                             [13]   Eminent Domain
 [9]    Administrative Law and Procedure
                                                                        What Constitutes a Taking; Police and
           Trial De Novo
                                                                    Other Powers Distinguished
        In conducting de novo review, the reviewing
                                                                    Governmental regulation can restrict, or even
        tribunal accords the original tribunal's decision
                                                                    take, property for public benefit, but if the
        absolutely no deference.
                                                                    regulation of property rights goes too far,
        42 Cases that cite this headnote                            compensation must be provided.

                                                                    Cases that cite this headnote
 [10]   Municipal Corporations
           Presumptions and burden of proof
                                                             [14]   Environmental Law


              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                          2
Quick v. City of Austin, 7 S.W.3d 109 (1998)


             Effluent Limitations and Guidelines
                                                                   7 Cases that cite this headnote
        Statutory procedures for adopting municipal
        rules governing plats and subdivisions of land,
        which required public hearing, did not apply to     [18]   Municipal Corporations
        adoption of municipal water pollution control                 Matters subject to initiative
        ordinance. V.T.C.A., Local Government Code                 Water pollution control ordinance was proper
        §§ 212.002, 212.003.                                       subject of the initiative and referendum process
                                                                   under city charter, and was not impliedly
        2 Cases that cite this headnote
                                                                   withdrawn by charter provision requiring
                                                                   comprehensive plan to regulate development and
 [15]   Zoning and Planning                                        planning commission to review development
            Procedural Requirements                                proposals.
        Municipal water pollution control ordinance was
                                                                   2 Cases that cite this headnote
        not in effect a zoning ordinance that would
        be subject to statutory procedures for adopting
        municipal rules governing plats and subdivisions    [19]   Municipal Corporations
        of land, though ordinance included impervious                 Initiative
        cover limitations that clearly had effect on               City charter provisions are to be liberally
        land use. V.T.C.A., Local Government Code §§               construed in favor of the power of initiative and
        212.002, 212.003.                                          referendum.

        2 Cases that cite this headnote                            3 Cases that cite this headnote


 [16]   Municipal Corporations                              [20]   Municipal Corporations
           Local legislation                                          Initiative
        Home rule city was not required to                         While the initiative power may be either
        obtain approval from the Natural Resource                  expressly or impliedly limited by the city charter,
        Conservation Commission before its water                   such a limitation will not be implied unless
        control ordinance became effective; Water                  the provisions of the charter are clear and
        Code provision requiring that water pollution              compelling.
        or abatement program be submitted to the
        Commission for “review and approval” did not,              2 Cases that cite this headnote
        with unmistakable clarity, limit effectiveness
        of home rule city's program pending appeal.         [21]   Appeal and Error
        Vernon's Ann.Texas Const. Art. 11, § 5;                       Intervention
        V.T.C.A., Water Code § 26.177(a, c).
                                                                   Any error in failing to grant citizens group's plea
        1 Cases that cite this headnote                            in intervention was harmless, in suit challenging
                                                                   city's water pollution control ordinance, where
                                                                   group sought to intervene because it believed
 [17]   Municipal Corporations
                                                                   city could not adequately protect its interest, but
           Local legislation
                                                                   city prevailed on appeal in upholding ordinance
        Home-rule city is not dependent on the                     against all the challenges. Rules App.Proc., Rule
        Legislature for a grant of authority; rather, the          61.1.
        Legislature may provide limits on the power
        of home-rule cities, but only if the limitation            1 Cases that cite this headnote
        appears with unmistakable clarity. Vernon's
        Ann.Texas Const. Art. 11, § 5.                      [22]   Statutes



              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                        3
Quick v. City of Austin, 7 S.W.3d 109 (1998)


             Repealing Statutes                                      by clear expression or necessary implication.
        Generally, when a statute is repealed without                V.T.C.A., Government Code § 311.031(a, b).
        a savings clause limiting the effect of the
                                                                     29 Cases that cite this headnote
        repeal, the repeal of that statute is usually given
        immediate effect.
                                                              [27]   Zoning and Planning
        3 Cases that cite this headnote                                  Constitutional and Statutory Provisions
                                                                     Repeal of statute locking in development
 [23]   Statutes                                                     regulations in existence at time of original
             Repealing Statutes                                      permit application was subject to general savings
        When a right or remedy is dependent on a statute,            clause of Code Construction Act, though repeal
        the unqualified repeal of that statute operates to           included specific savings clause, where repeal
        deprive the party of all such rights that have not           did not expressly make general savings clause
        become vested or reduced to final judgment.                  inapplicable, and specific savings clause was
                                                                     not redundant of and did not conflict with
        7 Cases that cite this headnote                              general clause. V.T.C.A., Government Code §
                                                                     311.031(a, b); V.T.C.A., Government Code §
                                                                     481.143 (Repealed).
 [24]   Appeal and Error
           Effect of change in law                                   1 Cases that cite this headnote
        Statutes
             Pending Actions and Proceedings
                                                              [28]   Zoning and Planning
        Ordinarily all suits filed in reliance on statute                Retroactive operation
        must cease when the repeal of statute becomes
                                                                     Subsequent applications were covered by statute
        effective, and if final relief has not been granted
                                                                     locking in development regulations in existence
        before the repeal goes into effect, final relief
                                                                     at time of original permit application even if
        cannot be granted thereafter, even if the cause is
                                                                     original application was filed before effective
        pending on appeal; repeal of the statute deprives
                                                                     date of statute. V.T.C.A., Government Code §
        the court of subject matter jurisdiction.
                                                                     481.143 (Repealed).
        9 Cases that cite this headnote
                                                                     2 Cases that cite this headnote

 [25]   Statutes
                                                              [29]   Statutes
             Saving clauses
                                                                          Property
        Existence of the specific savings clause in repeal
                                                                     Zoning and Planning
        of legislation does not preclude application
                                                                         Retroactive operation
        of the general savings provision of the Code
        Construction Act to the repeal. V.T.C.A.,                    Statute locking in development regulations in
        Government Code § 311.031(a, b).                             existence at time of original permit application
                                                                     was not improperly given retroactive effect to
        1 Cases that cite this headnote                              extent it was determined to apply even when
                                                                     original application was filed before effective
                                                                     date of statute, with result that subsequent
 [26]   Statutes
                                                                     applications, filed after effective date, were
             Saving clauses
                                                                     governed by regulations in effect before effective
        General savings clause of Code Construction Act
                                                                     date. V.T.C.A., Government Code § 481.143
        is presumed to apply to repeal of legislation
                                                                     (Repealed).
        unless a contrary legislative intent is shown




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                        4
Quick v. City of Austin, 7 S.W.3d 109 (1998)


                                                                 not agree with all of the court of appeals' analysis, we affirm
        4 Cases that cite this headnote                          its judgment upholding the Ordinance's validity.


 [30]   Zoning and Planning
            Constitutional and Statutory Provisions                                             I
        By application of general savings clause of Code
        Construction Act, repealed statute locking in            Frustrated by their perception that the Austin City Council
        development regulations in existence at time of          was failing to safeguard Barton Springs adequately, a group
        original permit application precluded application        of Austin citizens interested in protecting the environment
        of current water pollution control ordinance,            initiated the Save Our Springs Ordinance and placed it
        restricting new development in watershed area,           on the Austin municipal ballot for a local referendum
        to permit applications first filed or approved           election. In August 1992, the Austin citizens participating
        before repeal, but not those first filed after repeal.   in the referendum election overwhelmingly approved the
        V.T.C.A., Government Code § 311.031(a, b).               Ordinance. Two days after the voters approved the Ordinance,
                                                                 the Austin City Council enacted the Ordinance and
        2 Cases that cite this headnote                          incorporated it into the City Code.

                                                                 The purpose of the Ordinance, according to its Declaration
                                                                 of Intent, is to insure water quality control in Barton Creek,
Attorneys and Law Firms                                          Barton Springs, and the Barton Springs Edwards Aquifer. 1
                                                                 The provisions of the *113 Ordinance apply to those
 *112 Roy Q. Minton, John L. Foster, Bob E. Shannon,
                                                                 areas within Austin and Austin's extraterritorial jurisdiction
Joseph R. Knight, Robert I. Howell, Scott K. Field, Joe R.
                                                                 that contain watersheds contributing to Barton Springs. The
Greenhill, Austin, for Petitioners.
                                                                 Ordinance limits impervious or non-porous cover on land
William G. Bunch, Thomas H. Watkins, Andrew F. Martin,           in the regulated areas to between 15% and 25% of the net
Elizabeth G. Bloch, James K. McClendon, Frank C. Cooksey,        site area. The Ordinance also requires that new developments
Pamela Stanton Baron, Austin, Michael A. Hatchell, Tyler,        be set back from streams and not contribute to an increase
Dick DeGuerin, Houston, Teresa L. Todd, Marfa, for               in the amount of pollution constituents commonly found in
Respondents.                                                     urban rainfall runoff water. Construction in the “critical water
                                                                 quality zone” of the Barton Creek watershed is prohibited
Opinion                                                          by the Ordinance. The Ordinance provides for no waivers or
                                                                 exceptions unless necessary to avoid conflict with state and
Justice ABBOTT delivered the opinion of the Court.               federal laws.

We are confronted with a challenge to the City of Austin's
                                                                 Petitioners Jerry J. Quick, Kaira G. Quick, John M. Bryant,
Save Our Springs Ordinance, a water pollution control
                                                                 Ruth E. Bryant, Joe Cox, Dolores Cox, Florence Turck, and
measure enacted in 1992. Petitioners, who own land within
                                                                 Circle C Land Corporation all own land outside the city limits
the City of Austin's extraterritorial jurisdiction, brought
                                                                 of Austin but within its extraterritorial jurisdiction. Because
this action contesting the Ordinance. Petitioners claim that
                                                                 their land is within Austin's extraterritorial jurisdiction,
the Ordinance is arbitrary, unreasonable, and inefficient.
                                                                 any development of their property must comply with the
Petitioners also assert that the Ordinance is void because
                                                                 Ordinance. The Petitioners sued the City in Hays County,
it was enacted without a public hearing, it impermissibly
                                                                 seeking a declaratory judgment that the Ordinance was void
regulates the number, use, and size of buildings in the City's
                                                                 because it was illegally enacted. Additionally, Petitioners
extraterritorial jurisdiction, and it has not been approved by
                                                                 challenged the Ordinance under section 26.177(d) of the
the Texas Natural Resource Conservation Commission. The
                                                                 Texas Water Code, which authorizes a party aggrieved by
trial court rendered judgment in favor of Petitioners, holding
                                                                 a water pollution control ordinance to appeal to district
that the Ordinance was null and void. The court of appeals
                                                                 court to review whether the ordinance is invalid, arbitrary,
reversed in part and modified in part, rendering judgment that
                                                                 unreasonable, inefficient, or ineffective.
the Ordinance was valid. 930 S.W.2d 678. Although we do



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            5
Quick v. City of Austin, 7 S.W.3d 109 (1998)


Save Our Springs Alliance, Inc., an incorporated association         it did not require approval by the Texas Natural Resource
of individuals led by the citizen initiators of the Ordinance,       Conservation Commission before it could become effective,
moved to intervene in the suit. The Alliance urged that the          (2) it was not subject to sections 212.002 and 212 .003 of
City was incapable of adequately advocating the Alliance's           the Local Government Code, and (3) it was a proper subject
interest due to previous hostilities over the Ordinance. See,        of the initiative and referendum process. Id. at 686–91. The
e.g., City Council of Austin v. Save Our Springs Coalition,          appellate court accordingly reversed the trial court's judgment
828 S.W.2d 340 (Tex.App.—Austin 1992, no writ)(citizens              in part and rendered judgment that the Ordinance was a valid
sued City to force election on the Ordinance). The trial court,      legislative act. The court of appeals also modified the trial
however, struck the plea in intervention, leaving the City to        court's judgment in part, holding that any permit required
defend the Ordinance.                                                by Circle C would be considered only under the regulations
                                                                     and ordinances in effect when the original application for
The Petitioners and the City proceeded to try the case to            preliminary subdivision approval was filed, as long as the
a jury. The jury answered “yes” to all the questions in the          permit application was filed after September 1, 1987. Id. at
charge inquiring whether the Ordinance and its impervious            693–94.
cover limitations, its prohibition against increases in pollution
constituents, and its failure to contain variances were an           Petitioners challenged the court of appeals' judgment by filing
unreasonable, arbitrary, and inefficient attempt to control          an application for writ of error with this Court. Petitioners
water quality. The jury also found that the Ordinance was            allege that the court of appeals erred by holding (1) that
not a proper subject for the initiative and referendum process       section 26.177(d) of the Water Code is unconstitutional as
and that the Ordinance regulated the number, use, and size of        a violation of separation of powers, (2) that the Ordinance
buildings in the City's extraterritorial jurisdiction (a violation   is not subject to sections 212.002 and 212.003 of the
of section 212.003 of the Texas Local Government Code).              Local Government Code, (3) that the Ordinance is effective
                                                                     without the City first obtaining the Texas Natural Resource
Based on the jury's answers, the trial court rendered judgment       Conservation Commission's approval, (4) that the Ordinance
for the Petitioners declaring the Ordinance null and void.           was a proper subject of the initiative and referendum process,
The trial court's final judgment also contained conclusions          and (5) that only Circle C's permit applications filed after
of law, including that the Ordinance was ineffective because         September 1, 1987 would be considered on the basis of the
the Texas Natural Resource Conservation Commission had               regulations and ordinances in effect at that time. The Alliance
not approved it and that the Ordinance was void because it           also filed its own application for writ of error, contending that
was enacted without a public hearing in violation of section         the court of appeals erred in upholding the trial court's striking
212.002 of the Local Government Code. The trial court                of its plea in intervention.
further decreed that any permit required by Petitioner Circle
C Land Corporation to develop its property would be subject
only to the law in effect when the original application for
                                                                                                    II
preliminary subdivision approval was filed, which, in some
cases, pre-dated the enactment of the Ordinance.                     We first consider the constitutionality of section 26.177(d)
                                                                     of the Texas Water Code. Section 26.177(d) provides in
The court of appeals reversed and rendered in part and               pertinent part:
modified in part the trial court's judgment. 930 S.W.2d 678.
The appellate court first determined that the trial court did                     Any person affected by any ...
not abuse its discretion in striking the Alliance's plea in                       ordinance ... relating to water pollution
intervention. 930 S.W.2d at 683. The court of appeals then                        control and abatement outside the
concluded that the trial court erred in rendering judgment                        corporate limits of such city adopted
that the Ordinance *114 was unreasonable, arbitrary, and                          pursuant to this section or any other
inefficient pursuant to section 26.177(d) of the Texas Water                      statutory authorization may appeal
Code because section 26.177(d) was unconstitutional under                         such action to the [Texas Natural
article II, section 1 of the Texas Constitution, the separation                   Resource Conservation Commission]
of powers provision. Id. at 685. The court of appeals further                     or district court.... The issue on appeal
held that the Ordinance was not illegally enacted because (1)                     is whether the action or program



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 6
Quick v. City of Austin, 7 S.W.3d 109 (1998)


            is invalid, arbitrary, unreasonable,                      administrative agency, a de novo review by the judiciary of
            inefficient, or ineffective in its                        the delegated function violates the Constitution. Chemical
            attempt to control water quality. The                     Bank & Trust Co. v. Falkner, 369 S.W.2d 427, 432–33
            commission or district court may                          (Tex.1963); Davis v. City of Lubbock, 160 Tex. 38, 326
            overturn or modify the action of the                      S.W.2d 699, 712–14 (1959); Southern Canal Co. v. State
            city.                                                     Bd. of Water Eng'rs, 159 Tex. 227, 318 S.W.2d 619, 621–
                                                                      22 (1958).
TEX. WATER CODE § 26.177(d).                                       [2] The Petitioners concede that, if section 26.177(d) in
                                                                  fact confers the power on the courts to review a legislative
The trial court submitted several questions to the jury           function de novo, the statute is unconstitutional as a violation
inquiring whether various provisions of the Ordinance were        of the separation of powers provision of our state constitution.
“unreasonable,” “arbitrary,” or “inefficient.” Based on the       Petitioners also concede that the Ordinance represents the
jury's affirmative answers to these questions, the court then     exercise of a legislative function the Legislature has delegated
rendered judgment that the Ordinance was invalid under            to the City. Accordingly, the only issue we must determine is
section 26.177(d).                                                whether section 26.177(d) necessitates a de novo review by
                                                                  the judiciary. If it does, it is unconstitutional; if it does not,
The court of appeals, however, concluded that section             it is constitutional.
26.177(d) violates the separation of powers doctrine of the
Texas Constitution because it requires a de novo review of         [3] [4] In analyzing the constitutionality of a statute, we
a legislative act. The court of appeals reasoned that the trial   should, if possible, interpret the statute in a manner that
court conducted a de novo review of the statute as evidenced      avoids constitutional infirmity. Barshop v. Medina County
by the court's charge asking the jury to determine, by a          Underground Water Conservation Dist., 925 S.W.2d 618,
preponderance of the evidence, whether the jury thought           629 (Tex.1996). Moreover, if any provision of the statute
the Ordinance was unreasonable, arbitrary, or inefficient.        is held to be invalid, the invalidity does not affect other
The court of appeals further ruled that section 26.177(d)         provisions that can properly be given effect in the absence
authorized such an unconstitutional de novo review by             of the invalid provisions. Rose v. Doctors Hosp., 801 S.W.2d
permitting the reviewing court to “modify” a legislative act      841, 844 (Tex.1990); see also TEX. GOV'T CODE §
and to determine whether a legislative act was “inefficient”      311.032(c).
or “ineffective.”
                                                                  The Petitioners argue that, under these standards, section
                                                                  26.177(d) does not unconstitutionally authorize de novo
                              A                                   review of a legislative act. The Petitioners maintain that the
                                                                  Legislature did not expressly mandate de novo review, but
[1]   A legislative function cannot, under the separation of      rather used neutral terms consistent with the constitutionally
powers doctrine, be reviewed *115 de novo 2 by any other          appropriate standard for judicial review of legislative acts.
branch of government. Article II, section 1 of the Texas          Petitioners observe that section 26.177(d) employs terms such
Constitution divides the functions of government as follows:      as “unreasonable” and “arbitrary,” which are consistent with
                                                                  the standard of review traditionally employed in reviewing
                                                                  city ordinances. See City of Brookside Village v. Comeau,
  [T]hree distinct departments, each of which shall be            633 S.W.2d 790, 792 (Tex.), cert. denied, 459 U.S. 1087,
  confided to a separate body of magistracy, to wit: Those        103 S.Ct. 570, 74 L.Ed.2d 932 (1982)(city ordinance is
  which are Legislative to one; those which are Executive         presumed valid unless the ordinance is unreasonable and
  to another, and those which are Judicial to another; and        arbitrary); Hunt v. City of San Antonio, 462 S.W.2d 536,
  no person, or collection of persons, being of one of these      539 (Tex.1971)(same). Petitioners also rely on this Court's
  departments, shall exercise any power properly attached to      holding in Edgewood Indep. Sch. Dist. v. Kirby, 777 S.W.2d
  either of the others.                                           391, 394 (Tex.1989), that legislative acts can be reviewed
  TEX. CONST. art. II, § 1. Consistent with this division         for “efficiency.” Petitioners alternatively urge that, even
  of power, we have recognized that, when the Legislature         assuming that certain words in the statute impermissibly
  delegates a legislative function to a municipality or an



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                              7
Quick v. City of Austin, 7 S.W.3d 109 (1998)


connote a de novo review, this Court should excise those             the basis for its conclusion that the statute unconstitutionally
words and uphold the remaining portions of the statute.              authorizes a de novo review for legislative acts. However,
                                                                     a standard of review is more than just words; rather, it
The City responds that section 26.177(d)'s effect is to              embodies principles regarding the amount of deference a
require a court to reweigh the City's legislative decisions          reviewing tribunal accords the original tribunal's decision.
regarding the reasonableness, effectiveness, and efficiency          The key to determining whether section 26.177(d) authorizes
of the Ordinance, which is an unconstitutional judicial              a de novo review is therefore the amount of deference the
review of public policy determinations. The intrusiveness            statute requires the reviewing tribunal to give to the original
of section 26.177(d) is demonstrated, according to the City,         tribunal's decision.
by the fact that the jury was asked to decide in this case,
by a *116 preponderance of the evidence, whether the                  [8] [9] When conducting a de novo review, the reviewing
Ordinance was “inefficient,” “unreasonable,” or “arbitrary.”         tribunal exercises its own judgment and redetermines each
Section 26.177(d) is not, the City continues, similar to a           issue of fact and law. Key Western Life Ins. Co. v. State
permitted review of whether a legislative act is unreasonable        Bd. of Ins., 163 Tex. 11, 350 S.W.2d 839, 846 (1961); Lone
or arbitrary. Moreover, the City argues that Edgewood, 777           Star Gas Co. v. State, 137 Tex. 279, 153 S.W.2d 681, 692
S.W.2d at 394, does not apply because our decision in that           (1941); Ysleta Ind. Sch. Dist. v. Meno, 933 S.W.2d 748,
case was premised on a unique state constitutional provision,        751 n. 5 (Tex.App.—Austin 1996, writ denied). In such a
article VII, section 1, which charged the Legislature with           review, the reviewing tribunal accords the original tribunal's
the duty to provide for “an efficient system of public free          decision absolutely no deference. See, e.g., State v. Heal,
schools.” Because there is no constitutional mandate that a          917 S.W.2d 6, 9 (Tex.1996); Ysleta, 933 S.W.2d at 751 n.
water quality ordinance be “efficient,” the City avers that          5. Accordingly, then, the controlling issue is whether section
Edgewood does not mean that courts may routinely review the          26.177(d) requires that the Ordinance be given practically no
efficiency of legislation. Finally, the City asserts that severing   deference by the reviewing court.
any offending terms in section 26.177(d) would contravene
legislative intent and would render the statute devoid of            We hold that section 26.177(d) does not mandate such a
meaning.                                                             result. In reaching this conclusion, we abide by the maxim
                                                                     that courts should, if possible, interpret statutes in a manner
 [5] The City correctly argues that the trial court erred in         that avoids constitutional infirmities. Barshop, 925 S.W.2d
submitting a question for the jury to determine, based on            at 629. We note that section 26.177(d) utilizes two words,
a preponderance of the evidence, whether the Ordinance               “unreasonable” and “arbitrary,” that this Court has repeatedly
was arbitrary, unreasonable, or inefficient. The judiciary has       stated connote the proper deferential standard of reviewing a
no power to allow a jury to redecide the policy behind               city ordinance. Comeau, 633 S.W.2d at 792 (city ordinance is
legislative issues by a preponderance of the evidence. See           presumed to be valid unless the ordinance is unreasonable and
Southern Canal, 318 S.W.2d at 623–24. Instead, in reviewing          arbitrary); Thompson v. City of Palestine, 510 S.W.2d 579,
an ordinance, the court is to consider all the circumstances         581–82 (Tex.1974)(describing extraordinary burden *117
and determine as a matter of law whether the legislation is          on party attacking ordinance to show that reasonable minds
invalidated by a relevant statute or constitutional provision.       could not differ on whether the ordinance has a substantial
Cf. Comeau, 633 S.W.2d at 793. Nevertheless, the fact that           relationship to the general welfare and that the city acted
the trial court in this case impermissibly submitted these           arbitrarily); Hunt, 462 S.W.2d at 539 (city ordinance is
questions to the jury does not mandate that the statute              presumed to be valid unless the ordinance is unreasonable and
is unconstitutional. The submitted jury questions, being             arbitrary).
questions of law, are immaterial and will not be considered.
Spencer v. Eagle Star Ins. Co., 876 S.W.2d 154, 157             In the context of the deferential standard predicated by
(Tex.1994)(court may disregard as immaterial a jury's finding   the words “unreasonable” and “arbitrary,” we cannot agree
on a question of law). We will instead rely on the provisions   with the court of appeals that the inclusion of “inefficient”
of the statute itself to determine its constitutionality.       and “ineffective” somehow requires a transformation of the
                                                                standard of review from the proper deferential standard
 [6] [7] The court of appeals focused on certain words in the to a standard in which the City's decision is afforded
statute, such as “inefficient,” “ineffective,” and “modify,” as no deference. In fact, on prior occasions, albeit under



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               8
Quick v. City of Austin, 7 S.W.3d 109 (1998)


different circumstances, this Court has interpreted the           Hosp., 801 S.W.2d 841, 844 (Tex.1990). If a reviewing
word “efficient” in a more deferential manner than would          court were to determine that one portion of a water control
have been required under a de novo review. See, e.g.,             ordinance was invalid, the court would therefore be required
Edgewood, 777 S.W.2d at 398–99 (utilizing the term                to “modify” the ordinance to delete the invalid portion if the
“efficient” in article VII, section 1 of the Texas Constitution   remainder of the ordinance was complete in itself and capable
to provide a standard to measure the constitutionality            of being executed in accordance with the apparent legislative
of the Texas system for financing public education in             intent. See id. The Legislature's use of the word “modify”
Texas, but recognizing that the Legislature, rather than the      thus does not render section 26.177(d) unconstitutional. We
courts, had “the primary responsibility to decide how best        disagree with the court of appeals' holding that section
to achieve an efficient system”); Central Educ. Agency            26.177(d) violates the separation of powers doctrine and is
of State of Texas v. Upshur County Com'rs Court, 731              unconstitutional. Rather, we will interpret and apply section
S.W.2d 559, 561 (Tex.1987)(holding that Commissioner              26.177(d) consistent with the deferential *118 standard of
of Education's responsibility to “promote efficiency and          review this Court articulated in Comeau.
improvement” did not mean that Commissioner could
conduct a de novo review of county commissioners'
detachment and annexation decisions). We accordingly
                                                                                                B
perceive no constitutional impediment to judicial review
of an ordinance to determine whether it is “inefficient” or       [12] Petitioners urge that the Ordinance's invalidity under
“ineffective” under the appropriate deferential standard of      the Comeau standard is manifest. Petitioners rely upon
review.                                                          evidence in the record that, before the passage of the
                                                                 Ordinance, the City already had the most stringent water
 [10]     [11] The principles that underlie this deferential quality standards in Texas. Moreover, a city engineer and the
standard of review for municipal legislation are summarized      head of Austin's Environmental Services admitted during trial
in our decision in Comeau, 633 S.W.2d at 792–93. The party       that no discernible trend of pollution existed in Barton Springs
attacking the ordinance bears the “extraordinary burden”         prior to the Ordinance's enactment. Accordingly, Petitioners
to establish “ ‘that no conclusive or even controversial or      maintain that the Ordinance was unnecessary and based on
issuable fact or condition existed’ ” that would authorize the   flawed data.
passage of the ordinance. Id. (quoting Thompson, 510 S.W.2d
at 581). We consider all the circumstances and determine,        Petitioners also complain that it is impossible to comply with
as a substantive matter, if reasonable minds could differ as     the Ordinance. The Ordinance requires that a development
to whether the ordinance has a substantial relationship to       not increase annual pollution loadings of thirteen identified
the protection of the general health, safety, or welfare of the  constituents. Petitioners contend that the rules implemented
public. Id. at 793. If the evidence reveals a fact issue in this by the City of Austin to execute the Ordinance require runoff
respect, the ordinance must be upheld. Id. Accordingly, we       surface water from a development to have lower average
hold that, under this deferential standard of review, the Texas  concentrations of some of these constituents than was found
Constitution is not violated by the judiciary considering,
                                                                 in certain rain samples taken in Austin. 3 In fact, Petitioners
according to the mandates of section 26.177(d) of the Water
                                                                 point out that the Ordinance requires that runoff surface water
Code, whether a water control ordinance is invalid, arbitrary,
                                                                 have less average nitrogen than contained in some name-
unreasonable, inefficient, or ineffective in its attempt to
control water quality.                                           brand bottled drinking water. 4 Petitioners allege that the
                                                                 Ordinance's practical effect is therefore a preclusion of all
We further do not believe that the provision in section          development in the watershed areas.
26.177(d) allowing the reviewing court to “modify” the city's
action connotes an impermissible de novo review. Courts           Petitioners also attack the lack of variances in the Ordinance.
ordinarily cannot strike down an entire ordinance as invalid      For instance, even if a landowner could establish that no
based on the invalidity of only a part of the ordinance,          increase in pollution would result from constructing a greater
unless all the provisions of the ordinance are so dependent       percentage of impervious cover than allowed under the
or connected that it cannot be presumed that one provision        Ordinance, no variance is permitted.
would have been passed without the others. Rose v. Doctors



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            9
Quick v. City of Austin, 7 S.W.3d 109 (1998)


Finally, Petitioners impugn the Ordinance's financial impact.      protecting the watershed from pollution in order to preserve
The City's own expert economist concluded that the                 water quality.
Ordinance would, over a fifteen-year period, decrease
property values in the watershed areas in the range of $229        In light of the conflicting evidence presented at trial regarding
million to $379 million. The Petitioners introduced evidence       the Ordinance, we cannot conclude that the Petitioners met
at trial that some land lost ninety percent of its value because   their “extraordinary burden” of establishing that reasonable
of the Ordinance.                                                  minds could not differ regarding whether the Ordinance was
                                                                   invalid, arbitrary, unreasonable, inefficient, or ineffective
The City presented evidence at trial that sharply contradicted     in its attempt to control water quality. While Petitioners
the Petitioners' arguments. In response to the Petitioners'        presented evidence tending to establish that prior water
evidence regarding the effectiveness of the water control          control ordinances were sufficient such that the Ordinance
ordinances in place before the Save Our Springs Ordinance,         was not necessary, the City's evidence regarding the excessive
the City provided testimony that the Ordinance was cheaper         grant of variances under the prior measure precludes a
and easier to administer than earlier measures. Further,           determination that reasonable minds could not differ on the
the evidence also established that eighty-six percent of all       need for the Ordinance.
development applications received a variance under the water
quality ordinance in effect immediately prior to the Save Our      The trial testimony conflicts regarding a landowner's ability to
Springs Ordinance. This excessive grant of variances under         comply with the Ordinance. The Petitioners offered scientific
the prior ordinance, according to the City, obviously undercut     testimony attempting to establish that it was virtually
its effectiveness.                                                 impossible to comply with the Ordinance, but this testimony
                                                                   was refuted by the City. Moreover, the City also presented
To rebut the Petitioners' claim that it is impossible to comply    the testimony of two developers that, not only did the
with the Ordinance because its rules require that runoff be        City approve their developments under the Ordinance, they
purer than rain, the City elicited testimony from Stephen          actually anticipate profitable returns on their investments.
Stecher, the project director of the Barton Creek watershed        The conflict in this evidence demonstrates that reasonable
study. He testified that soil and plants on the ground *119        minds could indeed differ on whether compliance with the
typically capture much of the nitrogen and some other              Ordinance is possible.
constituents in urban rainfall before the constituents reach
a creek or tributary. Accordingly, even assuming that the          While the Petitioners decry the lack of a variance procedure in
Petitioners' evidence regarding the rainfall samples was           the Ordinance, the Ordinance does actually provide a limited
reliable, see ante at n. 3, the City contends that compliance      variance to keep the Ordinance from running afoul of federal
with the technical rules is still possible because runoff          and state laws. Moreover, the Petitioners' complaint regarding
is naturally less contaminated with certain pollutants than        the lack of a variance procedure ignores the evidence that
rainfall. In further support of its argument that it is not        the excessive grant of variances under prior water control
impossible to comply with the Ordinance, the City presented        measures had undercut their effectiveness.
testimony from two developers that it is not only possible,
but actually profitable to develop land in the watershed areas     We perceive that the real crux of the Petitioners' complaint
in compliance with the Ordinance. These developers both            is that the Ordinance unreasonably reduces property values
testified that they were anticipating sizable profits from their   and requires excessive expenditures in order to comply with
developments complying with the strictures of the Ordinance.       its provisions. The Petitioners established that the Ordinance
                                                                   will result in at least a $225 million decrease in property
Finally, the City offered evidence that the impervious cover       values in regulated areas, and that the Ordinance has caused
limitations in the Ordinance reduce polluting runoff and are       some parcels of land to lose ninety percent of their value. The
a nationally-recognized method of protecting water quality.        City has not refuted this evidence.
According to the City, the provisions restricting the pollutant
constituents are only a small percentage of the 138 pollutants     However, in this case, the fact that the Ordinance severely
that the City is required to monitor under federal law. The        impacts some property values does not make it invalid,
restrictions on impervious cover and pollutant constituents,       arbitrary, unreasonable, inefficient, or ineffective in its
the City therefore urges, are clearly related to its goal of       attempt to control water quality. While the Ordinance's



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            10
Quick v. City of Austin, 7 S.W.3d 109 (1998)


impervious cover limitations undoubtedly substantially affect                    the safe, orderly, and healthful
the value of some property parcels, such limitations are a                       development of the municipality.
nationally-recognized method of preserving water quality.
Further, *120 it is indisputable that limiting pollutants in        TEX. LOC. GOV'T CODE § 212.002. Local Government
runoff water will aid in preserving water quality. We therefore     Code section 212.003 provides in pertinent part:
conclude that the Ordinance's provisions are rationally related
                                                                      (a) The governing body of a municipality by ordinance may
to its goal of protecting water quality.
                                                                      extend to the extraterritorial jurisdiction of the municipality
                                                                      the application of municipal ordinances adopted under
 [13] Because we have concluded that the Ordinance is
                                                                      Section 212.002 and other municipal ordinances relating
rationally related to the governmental interest in protecting
                                                                      to access to public roads. However, unless otherwise
water quality, the City has the right to significantly limit
                                                                      authorized by state law, in its extraterritorial jurisdiction a
development in watershed areas in furtherance of this interest.
                                                                      municipality shall not regulate:
See Day–Brite Lighting, Inc. v. Missouri, 342 U.S. 421,
424, 72 S.Ct. 405, 96 L.Ed. 469 (1952). A governmental                   (1) the use of any building or property for business,
regulation can restrict, or even take, property for such a public        industrial, residential, or other purposes;
benefit; however, if the regulation of property rights goes
too far, compensation must be provided. See Barshop, 925                 (2) the bulk, height, or number of buildings constructed
S.W.2d at 628. To the extent that the City's limitations on              on a particular tract of land;
development deny all economically viable use of property
                                                                         (3) the size of a building that can be constructed on a
or unreasonably interfere with the right to use and enjoy
                                                                         particular tract of land, including without limitation any
property, affected property owners may have a remedy in
                                                                         restriction on the ratio of building floor space to the land
takings law. See Mayhew v. Town of Sunnyvale, 964 S.W.2d
                                                                         square footage; or
922, 935 (Tex.1998)(recognizing that a compensable taking
can occur if a governmental regulation totally destroys a                (4) the number of residential units that can be built per
property's value or if the regulation has a severe enough                acre of land.
economic impact and the regulation interferes with distinct
investment-backed expectations). Such a challenge is not part       Id. § 212.003.
of this lawsuit. Our holding today that the Ordinance is not
invalid, arbitrary, unreasonable, inefficient, or ineffective in    Petitioners argue that (1) sections 212.002 and 212.003
its attempt to control water quality accordingly has no impact      govern the Ordinance, (2) the Ordinance was enacted without
on any potential claim that the Ordinance unconstitutionally        a public hearing in violation of section 212.002, and (3)
interferes with a landowner's property rights.                      the Ordinance effectively violates the prohibitions in section
                                                                    212.003 by regulating the use, bulk, height, number, or size
                                                                    of buildings. Petitioners accordingly advocate that the trial
                                                                    court correctly held that the Ordinance was void. The City
                              III
                                                                    responds that sections 212.002 *121 and 212.003 do not
 [14] The Petitioners next attack the court of appeals'             apply because these sections are zoning statutes and the
conclusion that the Ordinance is not void under sections            Ordinance is a water pollution control measure. We agree
212.002 and 212.003 of the Local Government Code. Local             with the City.
Government Code section 212.002 provides:
                                                                    By their express terms, sections 212.002 and 212.003 apply
             After a public hearing on the matter,                  to ordinances that “govern plats and subdivisions of land.”
             the governing body of a municipality                   Further, the statutes' legislative history indicates that they
             may adopt rules governing plats                        govern a city's zoning authority, not a city's authority to apply
             and subdivisions of land within the                    water quality requirements. For instance, House Bill 3187,
             municipality's jurisdiction to promote                 which amended section 212.003, “prohibits the application
             the health, safety, morals, or general                 of zoning regulations in ETJ areas.” COMMITTEE ON
             welfare of the municipality and                        URBAN AFFAIRS, BILL ANALYSIS, Tex. H.B. 3187, 71st
                                                                    Leg., R.S. (1989). In fact, the Legislature made it clear that



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             11
Quick v. City of Austin, 7 S.W.3d 109 (1998)


section 212.003 was not intended “to affect the ability of
a municipality to apply water control requirements” in its                    The water pollution and abatement
extraterritorial jurisdiction. CONFERENCE COMMITTEE                           program ... must be submitted
REPORT, Tex. H.B. No. 3187, 71st Leg., R.S. (1989). We                        to the [Texas Natural Resource
therefore conclude that sections 212.002 and 212.003 apply                    Conservation] commission for review
only to zoning statutes, not water control measures such as                   and approval. The commission may
the Ordinance.                                                                adopt rules providing the criteria for
                                                                              the establishment of those programs
 [15] Petitioners nevertheless assert that the Ordinance is,                  and the review and approval of those
in effect, a zoning ordinance, not a water control ordinance.                 programs.
Petitioners argue that the Ordinance's impervious cover
                                                                  TEX. WATER CODE § 26.177(c).
limitations effectively constitute a regulation on the use,
bulk, height, number, and size of buildings in the City's
                                                                  Petitioners argue that the Legislature clearly contemplated
extraterritorial jurisdiction in violation of section 212.003.
                                                                  by the phrase “review and approval” that the Texas Natural
Petitioners contend that we should consider the actual effect
                                                                  Resource Conservation Commission would actually approve
of the Ordinance, not its stated purpose, in determining
                                                                  a city's water pollution and abatement control program before
whether the Ordinance must comply with these statutes.
                                                                  the program could become effective. Otherwise, Petitioners
                                                                  maintain that a city ordinance would remain effective even
However, we disagree with Petitioners' assertion that the
                                                                  if the Commission later expressly disapproved the ordinance.
Ordinance effectively constitutes a zoning regulation. The
                                                                  Additionally, Petitioners *122 rely on the statute's bill
Ordinance's stated goal is to protect and preserve a “clean
                                                                  analysis, which stated that:
and safe drinking water supply” and “to prevent further
degradation of the water quality in Barton Creek, Barton                      Current law requires the preparation of
Springs, and the Barton Springs Edwards Aquifer.” While                       pollution abatement plans by cities ...
the Ordinance clearly has effects on land use through its                     but does not require submittal, review
imposition of impervious cover limitations, these cover                       and approval of the plans. There is
limitations are typical features in ordinances protecting                     currently no requirement for cities
water quality. Indeed, as discussed previously, such cover                    to notify anyone when a pollution
limitations are a nationally-recognized method of preserving                  abatement plan is established. Water
water quality, and therefore we conclude that the cover                       pollution abatement plans, when
limitations further the Ordinance's stated goal. On balance,                  properly prepared, can be beneficial
the Ordinance is not a zoning regulation seeking to shape                     in reducing water pollution. However,
urban development, but rather is a measure designed                           if a city fails to submit a plan,
to protect water quality. We accordingly hold that the                        or submits an inadequate plan, there
requirements of sections 212.002 and 212.003 are not                          is no procedure for carrying out
applicable to the Ordinance, and the Ordinance cannot be                      the intent of the law. This bill
invalidated by these statutes.                                                would provide for direct Texas Water
                                                                              Commission oversight of pollution
                                                                              abatement plans.
                             IV
                                                                  SENATE NATURAL RESOURCES COMM., BILL
 [16] Petitioners also complain that the court of appeals erred   ANALYSIS, Tex. H.B. 1546, 71st Leg., R.S. (1989).
in holding that the Ordinance is effective without the City       Petitioners assert that the Commission cannot “provide
first obtaining approval from the Texas Natural Resource          oversight” of the pollution abatement plans if the plans can
Conservation Commission. Section 26.177(a) of the Water           become effective before approval is obtained. Because the
Code allows municipalities with populations in excess of five     Ordinance undisputedly has not yet been approved by the
thousand to establish water pollution control and abatement       Commission, Petitioners urge that it is not effective.
programs. Section 26 .177(c) provides in pertinent part:




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                         12
Quick v. City of Austin, 7 S.W.3d 109 (1998)


The City responds that its own charter prescribes when              Laws 2760 (emphasis added), repealed by Act of June 17,
ordinances become effective. Any legislative limits on the          1987, 70th Leg., R .S., ch. 406, § 2, 1987 Tex. Gen. Laws
City's authority to control the effective date of its ordinances    1938. Thus, while the Legislature clearly was well-versed in
cannot be implied, but must be set forth with unmistakable          drafting statutes that explicitly provided that a local act was
clarity. Lower Colorado River Auth. v. City of San Marcos,          not *123 effective until approved by the Commission, the
523 S.W.2d 641, 643–45 (Tex.1975). According to the City,           Legislature chose not to include such an express provision
section 26.177(c) does not state with unmistakable clarity          in section 26.177(c). We presume that this omission has a
that a water pollution control ordinance is not effective until     purpose. See Cameron v. Terrell & Garrett, 618 S.W.2d
the Commission approves it. Moreover, the City maintains            535, 540 (Tex.1981). The only purpose that we can ascribe
that the statute's legislative history supports its position. The   for such an omission is that the Legislature did not intend
City also points out that the Commission itself considers           that water pollution programs such as the Ordinance require
any ordinance submitted for review to be effective prior to         Commission approval before becoming effective.
Commission approval. Indeed, the Commission has filed an
amicus curiae brief in this Court requesting that we affirm the     Section 26.177(c)'s legislative history also supports our
court of appeals' holding on this issue.                            holding. The author of the bill that added the review and
                                                                    approval provision stated that the provision was not intended
 [17] The City of Austin is a home-rule city deriving its           to take away local control, but was designed to gather
power from article XI, section 5 of the Texas Constitution.         information and to assist cities in developing their programs.
A home-rule city is not dependent on the Legislature for a          Debate on Tex. H.B. 1546 on the Floor of the House, 71st
grant of authority. Lower Colorado River Auth., 523 S.W.2d          Leg., R.S., Floor Tape 72, Side 2 (May 2, 1989)(remarks
at 643. Rather, the Legislature may provide limits on the           of Representative Terral Smith). See also Hearing on Tex.
power of home-rule cities, but only if the limitation appears       H.B. No. 1546 before the House Resources Committee, 71st
with “unmistakable clarity.” Id. at 645; City of Sweetwater v.      Leg., R.S., House Tape Excerpts, Tape 2–B (March 22,
Geron, 380 S.W.2d 550, 552 (Tex.1964).                              1989)(Executive Director of the Commission testified that
                                                                    the Commission viewed the legislation as establishing an
Under Austin's city charter, the Ordinance is effective.            information-gathering process). Nothing in the bill analysis
Accordingly, unless the Legislature limited the City's              relied upon by the Petitioners compels a contrary conclusion.
authority to set the Ordinance's effective date with
unmistakable clarity in section 26.177(c), the Ordinance does       Finally, we note that our holding is consistent with
not require Commission approval before it becomes effective.        the Commission's interpretation of the statute. While not
We conclude that the Legislature has not so limited the City's      controlling, the contemporaneous construction of a statute by
authority.                                                          the administrative agency charged with its enforcement is
                                                                    entitled to great weight. State v. Public Util. Comm'n, 883
While section 26.177(c) states that a water pollution or            S.W.2d 190, 196 (Tex.1994); Dodd v. Meno, 870 S.W.2d
abatement program must be submitted to the Commission               4, 7 (Tex.1994). According to the Commission's amicus
for “review and approval,” the statute is silent as to whether      brief, the Commission has refrained from acting on submitted
the program is effective pending approval. We find this             water pollution control and abatement programs until it
silence significant because, in other Water Code sections,          can analyze and adopt rules and standards to guide its
the Legislature has specifically stated that an act was not         consideration. Therefore, a holding that a water pollution
effective until the Commission approved it. For instance,           control and abatement program requires pre-approval by
section 11.121 of the Water Code provides that any project          the Commission would essentially render ineffective every
for “the storage, taking, or diversion of water” shall not begin    municipality's program passed since 1989. This is a result
“without first obtaining a permit from the commission. ”            that we cannot presume the Legislature intended by enacting
TEX. WATER CODE § 11.121 (emphasis added). Similarly,               section 26.177(c).
section 26.032, which has since been repealed, stated
that “[b]efore the order, resolution, or other rule becomes
effective, the county shall submit it to the commission and
                                                                                                  V
obtain the commission's written approval.” Act of May 26,
1985, 69th Leg., R.S., ch. 795, § 1.079(c), 1985 Tex. Gen.



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            13
Quick v. City of Austin, 7 S.W.3d 109 (1998)


 [18] Petitioners next urge that the Ordinance is invalid          by the people at an initiative election. Rather, Petitioners
because it is not a proper subject of the initiative and           claim that, because the charter requires a comprehensive
referendum process under Austin's city charter. Article IV,        plan to regulate development and a planning commission
section 1 of the City's charter contains the following provision   to review development proposals, the subject matter of
regarding legislation by public initiative:                        the Ordinance has been implicitly withdrawn from the
                                                                   people. However, such an implicit withdrawal must be
             The people of the city reserve                        “clear and compelling.” The provisions of article X do not
             the power of direct legislation by                    clearly compel the conclusion that the Ordinance cannot be
             initiative, and in the exercise of such               passed through the initiative and referendum process. The
             power may propose any ordinance, not                  planning commission's review and recommendation powers
             in conflict with this Charter, the state              over development can reasonably coexist with the adoption
             constitution, or the state laws except                of a water quality regulation through public initiative. Indeed,
             an ordinance appropriating money or                   article X does not grant the planning commission the power
             authorizing the levy of taxes.                        to establish a water pollution and abatement program under
                                                                   section 26.177(d) of the Water Code. Accordingly, we hold
Austin City Charter art. IV, § 1.
                                                                   that the SOS Ordinance was a proper subject of the initiative
                                                                   and referendum process.
Petitioners assert that the Ordinance conflicts with article X
of the City's charter. Article X mandates the implementation
of a comprehensive plan to guide, regulate, and manage
development to assure the most beneficial use of land,                                           VI
water, and other natural resources. Article X also establishes
a planning commission which “shall” review and make                Petitioners finally contend that the court of appeals erred
recommendations on proposals to “adopt or amend land               by holding that only projects where the original permit
development regulations,” including “zoning, subdivision,          applications were filed after September 1, 1987 were required
building and construction, environmental and other police          to be considered on the basis of the City's regulations
power regulations controlling, regulating, or affecting the use    and ordinances in effect at that time. Circle C made
or development of land.” Austin City Charter art. X, § 4.          applications for preliminary subdivision approval for five
Finally, the charter provides that the city council may adopt      different sections of the Circle C development, four of which
amendments to the comprehensive plan only after at least one       were filed in 1985 and the fifth of which was filed in 1992.
public hearing. Id. § 5. Petitioners claim that these provisions   In furtherance of its ongoing development from these permit
of the charter remove water pollution regulations, such as the     applications, Circle C applied for site development permits
Ordinance, from the domain of citizen initiators. The City         after the enactment of the Ordinance.
responds that such a withdrawal of the power of initiative
must be clearly stated, and no such clear statement exists in  The trial court concluded that, under former section 481.143
this case.                                                     of the Government Code, the ordinances in effect when Circle
                                                               C filed its original permit applications in 1985 and 1992
 *124 [19]       [20] Charter provisions are to be liberally governed the City's consideration of Circle C's subsequent
construed in favor of the power of initiative and referendum.  permit applications for the same development. The court of
Glass v. Smith, 150 Tex. 632, 244 S.W.2d 645, 649 (1951);      appeals, however, modified the trial court's judgment, holding
Taxpayers' Ass'n of Harris County v. City of Houston, 129      that because section 481.143 became effective September 1,
Tex. 627, 105 S.W.2d 655, 657 (1937). While the initiative     1987, only initial permits filed between September 1, 1987
power may be either expressly or impliedly limited by the      and the effective date of the Ordinance (August 10, 1992)
city charter, such a limitation will not be implied unless the were not subject to the strictures of the Ordinance. Circle C
provisions of the charter are clear and compelling. Glass, 244 contends that the court of appeals erred in modifying the trial
S.W.2d at 649.                                                 court's judgment.


Petitioners make no contention that the Austin city charter        Generally, the right to develop property is subject to
expressly provides that a water control regulation, such           intervening regulations or regulatory changes. Connor v. City
as the Save Our Springs Ordinance, may not be adopted              of University Park, 142 S.W.2d 706, 709 (Tex.Civ.App.—



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            14
Quick v. City of Austin, 7 S.W.3d 109 (1998)


Dallas 1940, writ ref'd). In adopting sections 481.141–.143         (1940). The repeal of the statute in such instances deprives a
of the Texas Government Code on September 1, 1987, the              court of subject matter jurisdiction over the cause. See Knight,
Texas Legislature significantly altered this rule by locking in     627 S.W.2d at 384; Dickson, 139 S.W.2d at 259.
for the life of a project the regulations in effect at the time
of the application for the project's first permit. The version of   The Legislature, in its repeal of section 481.143, did not
section 481.143 in effect at the time of the dispute provided:      include a savings clause providing that section 481.143
                                                                    remained in effect for pending litigation. Accordingly, we
             The approval, disapproval, or                          must give its repeal immediate effect, and we cannot review
             conditional approval of an application                 Circle C's argument that the court of appeals erred in
             for a permit shall be considered                       concluding that its original permit applications filed before
             by each regulatory agency solely on                    September 1, 1987 were not covered by section 481.143.
             the basis of any orders, regulations,
             ordinances, or other duly adopted                      We were confronted with a similar situation in Dickson v.
             requirements in effect at the time the                 Navarro County Levee Improvement Dist. No. 3, 135 Tex. 95,
             original application for the permit is                 139 S.W.2d 257 (1940). In Dickson, a bondholder instituted
             filed. If a series of permits is required              suit to collect delinquent taxes owed by the defendants to a
             for a project, the orders, regulations,                levee improvement district under a statute allowing holders
             ordinances, or other requirements in                   of bonds issued by such districts to commence suit if the
             effect at the time the original *125                   district failed to do so within sixty days after the taxes became
             application for the first permit in that               delinquent. The trial court rendered judgment in favor of the
             series is filed shall be the sole basis                bondholder, and defendants appealed. While the case was
             for consideration of all subsequent                    pending in the court of appeals, the Legislature repealed
             permits required for the completion of                 the statute allowing bondholders to bring such actions. Id.
             the project.                                           at 259. The court of appeals nevertheless affirmed the trial
                                                                    court's judgment for the bondholder, but this Court vacated
Act of June 16, 1987, 70th Leg., R.S., ch. 374, § 1, 1987 Tex.
                                                                    the appellate court's judgment and dismissed the cause. Id . at
Gen. Laws 1838–39, amended by Act of May 24, 1995, 74th
                                                                    260. We reasoned that the Legislature's repeal of the statute
Leg., R.S., ch. 794, § 1, 1995 Tex. Gen. Laws 4147, repealed
                                                                    precluded the bondholder from maintaining the suit because
by Act of June 1, 1997, 75th Leg., R.S., ch. 1041, § 51(b),
                                                                    the Legislature had not incorporated a savings clause in the
1997 Tex. Gen. Laws 3966.
                                                                    repealing statute. Id. at 259.

However, the Legislature repealed section 481.143 while this
                                                                    We similarly cannot review Circle C's claim that the court of
case was pending before this Court. Act of June 1, 1997, 75th
                                                                    appeals erred by holding that section 481.143 did not apply
Leg., R.S., ch. 1041, § 51(b), 1997 Tex. Gen. Laws 3966.
                                                                    to subsequent permit applications when the original permit
Because of this repeal, we conclude that we cannot address
                                                                    application was filed before September 1, 1987. Because the
Circle C's argument that the court of appeals erred in its
                                                                    Legislature did not include a savings provision in its repeal
modification of the trial court's judgment.
                                                                    of section 481.143, we must give the repeal immediate effect
                                                                    since Circle C had not obtained “final relief” prior to the
When a cause of action is based on a statute, the repeal
                                                                    repeal.
of that statute without a savings clause for pending suits
is usually given immediate effect. Knight v. International
                                                                    However, no party challenged the court of appeals' holding
Harvester Credit Corp., 627 S.W.2d 382, 384 (Tex.1982).
                                                                    that section 481.143 applied to Circle C's original permit
Ordinarily, all suits filed in reliance on the statute must cease
                                                                    applications filed after September 1, 1987. The court of
when the repeal becomes effective; if final relief has not
                                                                    appeals' holding on this issue therefore constituted “final
been granted before the repeal goes into effect, final relief
                                                                    relief” in Circle C's favor. When “final relief” has been
cannot be granted thereafter, even if the cause is pending
                                                                    granted before the repeal of a statute, the relief is not usually
on appeal. Knight, 627 S.W.2d at 384; National Carloading
                                                                    affected by the statute's *126 subsequent repeal, unless the
Corp. v. Phoenix–El Paso Express, Inc., 142 Tex. 141, 176
                                                                    Legislature has provided to the contrary. Cf. Knight, 627
S.W.2d 564, 568 (1943); Dickson v. Navarro County Levee
                                                                    S.W.2d at 384.
Improvement Dist. No. 3, 135 Tex. 95, 139 S.W.2d 257, 259


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             15
Quick v. City of Austin, 7 S.W.3d 109 (1998)


                                                                    we conclude that the error complained of probably caused
In sum, we dismiss Circle C's point of error challenging the        the rendition of an improper judgment. TEX. R. APP. P.
court of appeals' modification to the trial court's judgment.       61.1. The Alliance admits that the only remedy for the alleged
However, that portion of the court of appeals' judgment             improper striking of its intervention is a new trial. Because the
holding that any permit Circle C required be considered on the      City has prevailed in upholding the Ordinance against all the
basis of the ordinances in effect when the original application     challenges raised by Petitioners, a new trial would do nothing
for preliminary subdivision approval was filed, as long as          to further the Alliance's interests. We accordingly conclude
the original application was filed after September 1, 1987,         that any alleged error in striking the Alliance's intervention
remains intact as it was not challenged in this Court.              was harmless.

                                                                    ******

                             VII
                                                                    For the foregoing reasons, we affirm the court of appeals'
 [21] As a final matter, we must consider Save Our Springs          judgment holding that the Ordinance is a valid legislative
Alliance's argument that the trial court erred in striking          act that need not be approved by the Texas Natural
its plea in intervention and the court of appeals erred in          Resource Conservation Commission to become effective and
affirming the trial court's striking of its intervention. The       enforceable. We dismiss Circle C's point of error regarding
Alliance, comprised of the citizen initiators of the Save           the court of appeals' modification of the trial court's judgment
Our Springs Ordinance, maintains that the City could not            with regard to section 481.143 of the Government Code
adequately defend the Ordinance in court because the City           because Circle C did not obtain final relief prior to the repeal
had consistently opposed the Ordinance and had vigorously           of section 481.143.
defended the previous water control ordinances that had been
in place. Further, the Alliance points out that the City had
opposed the legality of the Ordinance in open court and             Justice ENOCH filed a concurring opinion.
attempted to preclude a vote on the Ordinance. See City
Council of Austin v. Save Our Springs Coalition, 828 S.W.2d
340 (Tex.App.—Austin 1992, no writ)(citizens sued City to           Justice ENOCH, concurring.
force election on the Ordinance). Under these circumstances,        I join in the Court's opinion and in the judgment. I write
the Alliance urges that its intervention was essential to protect   separately only to mention one facet of this case that troubles
its interests. See Guaranty Fed. Savings Bank v. Horseshoe          me: *127 by conferring on Austin the authority to control
Operating Co., 793 S.W.2d 652, 657 (Tex.1990)(trial court           land use outside its boundaries, the Legislature has partially
abuses its discretion in striking intervention when (1) the         disenfranchised a class of citizens. This disenfranchisement
intervenor, in its own name, could have either brought, or          is at its most obvious in this case, in which the citizens of one
defended and defeated the same action; (2) the intervention         community by their vote have placed land use restrictions on
will not complicate the case by an excessive multiplication         citizens of neighboring communities who had no vote. It is
of the issues; and (3) the intervention is almost essential         also a disenfranchisement that may very well violate the “one
to effectively protect the intervenor's interest). The Alliance     man, one vote” principle inherent in the right to participate in
contends that the court of appeals erred in concluding              the political process and guaranteed by the Equal Protection
that the City could adequately protect its interests. The           Clause of the Fourteenth Amendment to the United States
Alliance further asserts that citizen initiative sponsors have an   Constitution. See Holt Civic Club v. City of Tuscaloosa, 439
absolute right to intervene in litigation involving the initiated   U.S. 60, 68, 99 S.Ct. 383, 58 L.Ed.2d 292 (1978).
legislation.
                                                                    In Holt, the United States Supreme Court decided that
However, we do not believe it is necessary to reach the             the City of Tuscaloosa's extraterritorial jurisdiction, which
merits of the Alliance's argument. Even assuming the trial          extended police jurisdiction and sanitary regulations over
court erred in striking the Alliance's intervention and the         several unincorporated areas, did not violate the voting rights
court of appeals erred by affirming the trial court's action,       of those areas' residents. Id. at 70, 99 S.Ct. at 389-90. The
the error was harmless. Under the Texas Rules of Appellate          Court declined to invalidate the extraterritorial jurisdiction
Procedure, no judgment may be reversed on appeal unless             because of “the extraordinarily wide latitude that States



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             16
Quick v. City of Austin, 7 S.W.3d 109 (1998)


have in creating various types of political subdivisions and        of the Ordinance. These subsequent permit applications are
conferring authority upon them.” Id. at 71, 99 S.Ct. at 390.        at issue.
But however wide the states' latitude is, it is not without
boundaries, and two aspects of the Holt opinion indicate that       The trial court concluded that, under former section 481.143
this case might be distinguishable.                                 of the Government Code, the ordinances in effect when Circle
                                                                    C filed its original permit applications in 1985 and 1992
First, the jurisdictional extension in Holt provided substantial    governed the City's consideration of Circle C's subsequent
benefits to the residents in the form of municipal services         permit applications for the same development. The court of
such as police, fire, and health protection. See id. at 74, 99      appeals, however, modified *128 the trial court's judgment,
S.Ct. at 392. Second, the Court stated that an extraterritorial-    holding that because section 481.143 became effective
jurisdiction statute conferring broader powers than those at        September 1, 1987, only projects in which the initial permits
issue in Holt could run afoul of the “one man, one vote”            were filed between September 1, 1987 and the effective date
principle. See id. at 72 n. 8, 99 S.Ct. at 391; id. at 79, 99       of the Ordinance (August 10, 1992) were not subject to the
S.Ct. at 394-95 (Stevens, J., concurring) (noting the Court's       strictures of the Ordinance. Petitioners contend that the court
“limited” holding and stating that extraterritorial jurisdiction    of appeals erred in modifying the trial court's judgment in this
“might sometimes operate to deny the franchise to individuals       manner.
who share the interests of their voting neighbors”).
                                                                    Generally, the right to develop property is subject to
In this case, by contrast, the Petitioners appear to bear most      intervening regulations or regulatory changes. See Connor v.
of the burdens and the City appears to enjoy most of the            City of University Park, 142 S.W.2d 706, 709 (Tex.Civ.App.
benefits. Perhaps the extraterritorial jurisdiction at issue here   —Dallas 1940, writ ref'd). In adopting sections 481.141–.143
is onerous enough to violate the Petitioners' constitutional        of the Texas Government Code on September 1, 1987, the
rights. However, though they hint at it, the Petitioners do not     Texas Legislature significantly altered this rule by requiring
brief this issue, and the Court properly omits considering it.      that each permit in a series required for a development
See TEX. R. APP. P. 38.1(h). On the other hand, I think that        project be subject to only the regulations in effect at
this is a serious question that should be kept in mind.             the time of the application for the project's first permit,
                                                                    and not any intervening regulations. The stated purpose
                                                                    of the statute was to establish requirements relating to
Justice ABBOTT delivered the opinion of the Court on                the processing and issuance of permits and approvals
Motion for Rehearing as to Section VI, in which Chief Justice       by governmental regulatory agencies in order to alleviate
PHILLIPS, Justice HECHT, Justice OWEN, and Justice                  bureaucratic obstacles to economic development. See Act of
GONZALES join.                                                      May 30, 1987, 70th Leg., R.S., ch. 374, § 1, sec. 7.001(2),
                                                                    1987 Tex. Gen. Laws 1823, 1838, amended by Act of May 24,
We granted Petitioners' Motion for Rehearing. We now
                                                                    1997, 74th Leg., R.S., ch. 794, § 1, sec. 481.141(b), 1995 Tex.
withdraw Part VI of our opinion and substitute the following.
                                                                    Gen. Laws 4147, 4147, repealed by Act of June 1, 75th Leg.,
                                                                    R.S., ch. 1041, § 51(b), 1997 Tex. Gen. Laws 3943, 3966. The
                                                                    version of section 481.143 in effect at the time of the dispute
                               VI                                   provided:

Petitioners finally contend that the court of appeals erred                      The approval, disapproval, or
by holding that only projects in which the original permit                       conditional approval of an application
applications were filed after September 1, 1987 are required                     for a permit shall be considered
to be considered on the basis of the City's regulations                          by each regulatory agency solely on
and ordinances in effect at the time the original permit                         the basis of any orders, regulations,
applications were filed. Circle C made applications for                          ordinances, or other duly adopted
preliminary subdivision approval for five different sections of                  requirements in effect at the time the
the Circle C development, four of which were filed in 1985                       original application for the permit is
and the fifth of which was filed in 1992. In furtherance of its                  filed. If a series of permits is required
ongoing development from these permit applications, Circle                       for a project, the orders, regulations,
C applied for site development permits after the enactment                       ordinances, or other requirements


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             17
Quick v. City of Austin, 7 S.W.3d 109 (1998)


            in effect at the time the original
            application for the first permit in that                  (1) the prior operation of the statute or any prior action
            series is filed shall be the sole basis                   taken under it;
            for consideration of all subsequent
                                                                      (2) any validation, cure, right, privilege, obligation,
            permits required for the completion of
                                                                      or liability previously acquired, accrued, accorded, or
            the project.
                                                                      incurred under it;
Act of May 30, 1987, 70th Leg., R.S., ch. 374, § 1, sec.
                                                                      (3) any violation of the statute or any penalty, forfeiture,
7.003(a), 1987 Tex. Gen. Laws 1823, 1839, amended by Act
                                                                      or punishment incurred under the statute before its
of May 24, 1995, 74th Leg., R.S., ch. 794, § 1, sec. 481.143,
                                                                      amendment or repeal; or
1995 Tex. Gen. Laws 4147, 4147, repealed by Act of June
1, 1997, 75th Leg., R.S., ch. 1041, § 51(b), 1997 Tex. Gen.           (4) any investigation, proceeding, or remedy concerning
Laws 3943, 3966.                                                      any privilege, obligation, liability, penalty, forfeiture,
                                                                      or punishment; and the investigation, proceeding, or
 [22] [23] [24] The Legislature repealed section 481.143              remedy may be instituted, continued, or enforced, and
while this case was pending before this Court. See Act of June        the penalty, forfeiture, or punishment imposed, as if the
1, 1997, 75th Leg., R . S., ch. 1041, § 51(b), 1997 Tex. Gen.         statute had not been repealed or amended.
Laws 3943, 3966. The general rule is that when a statute is
repealed without a savings clause limiting the effect of the        (b) If the penalty, forfeiture, or punishment for any offense
repeal, the repeal of that statute is usually given immediate       is reduced by a reenactment, revision, or amendment of
effect. See Knight v. International Harvester Credit Corp.,         a statute, the penalty, forfeiture, or punishment, if not
627 S.W.2d 382, 384 (Tex.1982). When a right or remedy is           already imposed, shall be imposed according to the statute
dependent on a statute, the unqualified repeal of that statute      as amended.
operates to deprive the party of all such rights that have not
                                                                  TEX. GOV'T CODE § 311.031(a), (b).
become vested or reduced to final judgment. Ordinarily, all
suits filed in reliance on the statute must cease when the
                                                                  Petitioners assert that the general savings provision of the
repeal becomes effective; if final relief has not been granted
                                                                  Code Construction Act applies to the repeal of section
before the repeal goes into effect, final relief cannot be
                                                                  481.143. See TEX. GOV'T CODE § 311.002 (application of
granted thereafter, even if the cause is pending on appeal. See
                                                                  the Code Construction Act); Knight, 627 S.W.2d at 385. The
id.; National Carloading Corp. v. Phoenix–El Paso Express,
                                                                  City argues that the general savings clause does not apply
Inc., 142 Tex. 141, 176 S.W.2d 564, 568 (1943); Dickson v.
                                                                  because a much narrower specific savings clause is included
Navarro County Levee Improvement Dist. No. 3, 135 Tex.
                                                                  in section 52 of the repealing legislation, which provides:
95, 139 S.W.2d 257, 259 (1940). The repeal of the statute in
such instances deprives a court of subject matter jurisdiction      The rules, policies, procedures, and decisions of the
over the cause. See Knight, 627 S.W.2d at 384; Dickson, 139         Texas Department of Commerce are continued in effect
S.W.2d at 259.                                                      as rules, policies, procedures, and decisions of the Texas
                                                                    Department of Economic Development until superseded by
 [25] This common-law rule of abatement may be modified             a rule or other appropriate action of the Texas Department
by a specific savings clause in the repealing legislation or        of Economic Development.
by a general savings statute limiting the effect of repeals.
Most states, including Texas, *129 have adopted some form           The validity of a rule, form, or procedure adopted,
of general savings statute. See Ruud, The Savings Clause—           contract or acquisition made, proceeding begun, obligation
Some Problems in Construction and Drafting, 33 TEX. L.              incurred, right accrued, or other action taken by or in
REV. 285, 296–97 (1955). Texas's general savings clause is          connection with the authority of the Texas Department of
codified in section 311.031 of the Government Code, which           Commerce before it is abolished under ... this section is not
states:                                                             affected by this Act. To the extent those actions continue
                                                                    to have any effect on or after September 1, 1997, they are
  (a) Except as provided by Subsection (b), the reenactment,        considered to be the actions of the Texas Department of
  revision, amendment, or repeal of a statute does not affect:      Economic Development.



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                           18
Quick v. City of Austin, 7 S.W.3d 109 (1998)


                                                                    statute ... does not apply [to the repealed statute].”). Nor is
Act of June 1, 1997, 75th Leg., R.S., ch. 1041, §§ 52(g),           application of the general savings clause negated by necessary
52(h), 1997 Tex. Gen. Laws 3943, 3967. The City argues              implication. Although in many cases it could be argued
that because the repealing legislation contains a specific          that the Legislature's inclusion of a specific savings clause
savings clause, application of the general savings provision        despite its awareness of the existence of the general savings
is preempted. See Ex parte Mangrum, 564 S.W.2d 751, 755             clause renders the specific savings clause redundant, see
(Tex.Crim.App.1978) (“The general savings clause of the             State v. Showers, 34 Kan. 269, 8 P. 474, 477 (1885), that
Code Construction Act, however, is inapplicable to the new          is not the case here. The specific savings clause in section
Penal Code because a specific savings clause was provided           52 is not redundant of the general savings provision. The
by the Legislature.”); Scott v. State, 916 S.W.2d 40, 41            purpose of Senate Bill 932, which repealed section 481.143,
(Tex.App.—Houston [1st Dist.] 1995, no pet.); Wilson v.             was to “abolish[ ] the Texas Department of Commerce and
State, 899 S.W.2d 36, 38 (Tex.App.—Amarillo 1995, pet.              transfer [ ] its powers and duties to the newly created Texas
ref'd); see also TEX. GOV'T CODE § 311.026.                         Department of Economic Development and to certain other
                                                                    economic development programs.” Act of June 1, 1997,
We conclude that section 52 contains a specific savings             75th Leg., ch. 1041, 1997 Tex. Gen. Laws 3943, 3943.
clause. But the existence of the specific savings clause does       Sections 52(g) and (h) ensured that proceedings begun, rights
not preclude application of the general savings provision of        accrued, and other actions taken by or in connection with
the Code Construction Act to the repeal of section 481.143.         the authority of the Texas Department of Commerce before
                                                                    it was abolished were not affected by the Act, and, as of
 [26] The Legislature's adoption of the general savings clause      the September 1, 1997 effective date of the Act, would be
in the Code Construction Act indicates a general legislative        continued in effect as the actions of the newly created Texas
policy that the repeal of any statute shall not affect the prior    Department of Economic Development. This result may not
operation of that statute nor extinguish any liability incurred     have been achieved by the general savings clause. Thus, both
or *130 affect any right accrued or claim arising before            the general and specific clauses were needed to effectuate
the repeal takes effect. Given this general policy and the          legislative intent.
broad applicability of the Code Construction Act, we will
presume that the general savings clause applies unless a            Additionally, in contrast to the cases that have held that a
contrary legislative intent is shown by clear expression or         specific savings clause “trumps” application of the general
necessary implication. See Great N. Ry. Co. v. United States,       savings clause, the specific savings clause in section 52
208 U.S. 452, 465, 28 S.Ct. 313, 52 L.Ed. 567 (1908) (“[T]he        does not irreconcilably conflict with the general savings
provisions of [the general savings clause] are to be treated        clause. See TEX. GOV'T CODE § 311.026(a) (providing
as incorporated in and as a part of subsequent enactments,          that a special provision prevails over a general provision
and therefore under the general principles of construction          only if the conflict between the provisions is irreconcilable).
requiring, if possible, that effect be given to all parts of a      Accordingly, we conclude that the general savings clause
law the section must be enforced unless either by express           applies to the repeal of section 481.143. Applying the clause,
declaration or necessary implication, arising from the terms        the prior operation of section 481.143 is not affected by the
of the law, as a whole, it results that the legislative mind will   repeal, and we may address Petitioners' point of error.
be set at naught by giving effect to the provisions of [the
general savings clause].”). Here, no contrary legislative intent
is expressed or implied by section 52.
                                                                                                  A
 [27] Section 52 does not expressly state that only the
                                                                     [28] The parties do not dispute whether section 481.143
enumerated items are saved, nor does it expressly negate
                                                                    applies to subsequent permit applications when the original
application of the general savings statute. See State v.
                                                                    permit application was filed after September 1, 1987, such as
Fenter, 89 Wash.2d 57, 569 P.2d 67, 70 (1977) (en banc)
                                                                    the one application for preliminary subdivision approval filed
(“Although [the specific savings clause] exempts three
                                                                    in 1992. The issue we must decide is whether the statute is
categories from repeal and thus acts as a mini-savings statute,
                                                                    applicable to Circle C's subsequent permit applications filed
it does not expressly state that these three categories are
                                                                    after September 1, 1987, when the original application *131
the only three categories exempt from repeal. Therefore, we
                                                                    in the series was filed before September 1, 1987, such as
find no express legislative intent that the general savings


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            19
Quick v. City of Austin, 7 S.W.3d 109 (1998)


the four applications for preliminary subdivision approval             administrative practices” can present bureaucratic obstacles
filed in 1985. The City argues that, in order to apply the             to both ongoing and future projects. If the statute only applies
statute to original permit applications filed before September         to projects in *132 which initial permit applications are
1, 1987, the statute must be applied retroactively, and that           filed after the statute's effective date, the benefit of the statute
the law disfavors such retroactive application. See Houston            would be denied to existing projects even though they too play
Indep. Sch. Dist. v. Houston Chronicle, 798 S.W.2d 580,                a role in the State's economic development. Accordingly, we
585 (Tex.App.—Houston [1st Dist.] 1990, writ denied); see              agree with Petitioners' construction of the statute.
also TEX. GOV'T CODE § 311.022 (“A statute is presumed
to be prospective in its operation unless expressly made                [29] Our next step is to determine whether this construction
retroactive.”). Because section 481.143 does not expressly             renders the statute retroactive, thereby invoking the
or impliedly indicate that it has a retroactive effect, the City       presumption against retroactivity. See Landgraf, 511 U.S.
asserts that the court of appeals correctly concluded that the         at 280, 114 S.Ct. 1483. As the Supreme Court observed
statute does not apply to original permit applications filed           in Landgraf v. USI Film Products, “[w]hile statutory
before September 1, 1987. 930 S.W.2d at 693. Petitioners               retroactivity has long been disfavored, deciding when a
respond that they are not requesting a retroactive application         statute operates ‘retroactively’ is not always a simple or
of section 481.143, but rather a prospective application of the        mechanical task.” Id. at 268, 114 S.Ct. 1483. The Court in
law to Circle C's subsequent permits filed after September 1,          Landgraf did not attempt to precisely define what constitutes
1987.                                                                  a retroactive law, instead preferring a “functional” approach.
                                                                       The Court instructed:
Our first task is to determine whether the Legislature has
expressly prescribed the statute's proper reach. See Landgraf                       A statute does not operate
v. USI Film Prods., 511 U.S. 244, 280, 114 S.Ct. 1483, 128                          “retrospectively” merely because it is
L.Ed.2d 229 (1994). The statute provides that if a series of                        applied in a case arising from conduct
permits is required for a project, the ordinances in effect at the                  antedating the statute's enactment, or
time the original application for the first permit is filed shall                   upsets expectations based in prior
be the sole basis for consideration of all subsequent permits                       law. Rather, the court must ask
required for the completion of the project. Nowhere does the                        whether the new provision attaches
statute require that the original application for the first permit                  new legal consequences to events
in the series be filed after September 1, 1987. But neither                         completed before its enactment. The
does the statute expressly state that it will apply to projects                     conclusion that a particular rule
in progress before that date. Thus, the plain language of the                       operates “retroactively” comes at
statute does not expressly delineate its reach.                                     the end of a process of judgment
                                                                                    concerning the nature and extent of
Petitioners contend that the statute applies to the treatment                       the change in the law and the degree
of any subsequent permit application filed after September                          of connection between the operation
1, 1987, regardless of when the first permit was filed. This                        of the new rule and a relevant
construction is consistent with the plain language of section                       past event. Any test of retroactivity
481.143, which states that “the ... ordinances ... in effect at the                 will leave room for disagreement
time the original application for the first permit in that series is                in hard cases, and is unlikely to
filed [the ordinances in effect in 1985 in this case] shall be the                  classify the enormous variety of legal
sole basis for consideration of all subsequent permits required                     changes with perfect philosophical
for completion of the project [the subsequent permits filed by                      clarity. However, retroactivity is
                                                                                    a matter on which judges tend
Circle C in 1992].” 1 Moreover, this construction complies
                                                                                    to have “sound ... instinct[s],”
with the Legislature's mandate to construe statutes liberally to
                                                                                    and familiar considerations of fair
achieve their purposes. See TEX. GOV'T CODE § 312.006.
                                                                                    notice, reasonable reliance, and settled
If we were to apply the construction urged by the City and the
                                                                                    expectations offer sound guidance.
dissent, the statute would at least partially fail of its intended
purpose to “alleviat[e] bureaucratic obstacles” that “inhibit          Id. at 269–70, 114 S.Ct. 1483 (citations and footnote omitted).
the economic development of the state.” Obviously, “current



                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                  20
Quick v. City of Austin, 7 S.W.3d 109 (1998)


Applying these principles, we conclude that our construction        State Bank of Miami, 900 S.W.2d 117, 121 (Tex.App.—
does not operate retroactively. Contrary to the court of            Amarillo 1995, writ denied) (discussing Landgraf ). Here, the
appeals' conclusion, section 481.143 does not affect any            statute merely draws upon an antecedent fact—the date of the
applications for permits filed before September 1, 1987.            first permit application—to determine what law will apply to
That would be retroactive. But applying section 481.143             subsequent permit applications.
to subsequent permit applications filed after September 1,
1987, when the original permit application was filed before         Accordingly, we hold that the court of appeals erred in
September 1, 1987, is not a retroactive application of the law.     holding that only the subsequent permit applications from
The statute operates prospectively on new permits for existing      original permit applications filed after September 1, 1987
projects. It affects only new permits to be issued in the future.   were governed by the ordinances in effect at the time of the
It does not annul or affect prior permits, or require the City to   original application.
issue a permit retroactively.

When Circle C filed its original permit applications in 1985,
                                                                                                   B
the City's ordinances in effect at that time governed the
City's evaluation of those applications. Although subsequent         [30] That does not end our inquiry, however, for we must
applications in the series required for a project would             also consider the effect of the repeal on Circle C's rights. The
normally be subject to any new ordinances and regulations           general savings clause of the Code Construction Act saves
in effect at the time of their filing, the Legislature provided     both the prior operation of the statute and “any validation,
that these subsequent applications, if filed after September        cure, right, privilege, obligation, or liability previously
1, 1987, would be governed by only the ordinances and               acquired, accrued, accorded, or incurred under it.” TEX.
regulations in effect at the time the original permit application   GOV'T CODE § 311.031(a)(2).
was filed. Thus, when Circle C filed subsequent permit
applications after September 1, 1987, the City was required         We begin by identifying Circle C's rights under section
to apply only the ordinances in effect in 1985 to those             481.143. As we have concluded, by its terms, section 481.143
applications. The statute is not retroactive merely because it      gives Circle C the right to have the City consider an
requires the City to evaluate future permits based on past law.     application for a permit “solely on the basis of any orders,
                                                                    regulations, ordinances, or other duly adopted requirements
The dissent argues that application to existing projects is         in effect at the time the original application for the permit
retroactive because it reaches back in time and attaches new        is filed,” which in this case would be the regulations and
legal consequences to past acts. But the only new legal             ordinances in effect in 1985 when the original applications for
consequences it attaches to prior acts is in determining which      preliminary subdivision approval were filed and approved.
“orders, regulations, ordinances, and other requirements”
may be applied in the future to new permits. The Legislature        The general savings clause saves this right only if it was
could have passed a law comprehensively setting out criteria        acquired, accrued, or accorded under section 481.143 before
for new permits. Instead, section 481.143 adopts by reference
                                                                    the September 1, 1997 effective date of the repeal. 2 See
to original *133 permits the appropriate orders, regulations,
                                                                    Iowa Dep't of Transp. v. Iowa Dist. Ct. for Buchanan County,
ordinances, and other requirements to apply to new permits
                                                                    587 N.W.2d 774, 776 (Iowa 1998) (“[O]ne relying on [the
—those in effect at the time the original application for the
                                                                    general savings clause] must demonstrate that the privilege
first permit in the series was filed. As the Landgraf opinion
                                                                    he seeks to save is one that he possessed, or that had vested,
states, “a statute ‘is not made retroactive merely because it
                                                                    or that had been granted prior to the date the statute providing
draws upon antecedent facts for its operation.’ ” Id. at 270 n.
                                                                    such a privilege was repealed.”). This right would not accrue
24, 114 S.Ct. 1483 (quoting Cox v. Hart, 260 U.S. 427, 435,
                                                                    until Circle C filed an application for a permit; it is only
43 S.Ct. 154, 67 L.Ed. 332 (1922)); accord Regions Hosp.
                                                                    when an application is filed that the right granted by section
v. Shalala, 522 U.S. 448, 456, 118 S.Ct. 909, 139 L.Ed.2d
                                                                    481.143 is due and attaches to the review of the application.
895 (1998); General Dynamics Corp. v. Sharp, 919 S.W.2d
                                                                    As each subsequent application for a permit is filed, Circle
861, 866 (Tex.App.—Austin 1996, writ denied); American
                                                                    C's right accrues with respect to that application. With respect
Home Assurance v. Texas Dep't of Ins., 907 S.W.2d 90, 94
                                                                    to applications filed after the repeal of section 481.143, Circle
(Tex.App.—Austin 1995, writ denied); see also Walls v. First
                                                                    C's right would not have accrued before the effective date


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             21
Quick v. City of Austin, 7 S.W.3d 109 (1998)


of the repeal, and nothing is saved by the general savings
clause. Thus, the City may not apply current regulations               United States Fidelity & Guar. Co. v. United States ex rel.
and ordinances to its evaluation of permit applications filed          Struthers Wells Co., 209 U.S. 306, 314, 28 S.Ct. 537, 52 L.Ed.
or approved during *134 the prior operation of section                 804 (1908).
481.143, but it may do so with respect to any applications filed
after its repeal, subject, of course, to the effects, if any, of the   Texas has its own “well-entrenched legal hostility to
statute as reenacted in 1999. See Act of April 29, 1999, 76th          retroactive laws.” Houston Indep. Sch. Dist. v. Houston
Leg., R.S., ch. 73, 1999 Tex. Gen. Laws 431 to be codified at          Chronicle Publ'g Co., 798 S.W.2d 580, 585 (Tex.App.—
TEX. LOC. GOV'T CODEE § 245.001 et. seq.).                             Houston [1st Dist.] 1990, writ denied). “Texas law militates
                                                                       strongly against the retroactive application of laws,” id., and
In sum, we hold that the general savings clause applies                any doubts must be resolved against retroactive operation
to the repeal of section 481.143. Considering Petitioners'             of a statute. See Government Personnel Mut. Life Ins. Co.
point of error, we conclude that, under the 1987 version of            v. Wear, 151 Tex. 454, 251 S.W.2d 525, 529 (1952). The
section 481.143, any subsequent permit applications filed or           Legislature has codified the presumption that statutes apply
approved between September 1, 1987 and September 1, 1997               prospectively: “A statute is presumed to be prospective in
are governed by only the rules, regulations, and ordinances in         its operation unless expressly made retroactive.” Tex. Gov't
effect in 1985 when the original applications for preliminary          Code § 311.022 (emphasis added).
subdivision approval were filed. Because we hold that this
is not a retroactive application of the statute, we reverse the        The Court misconstrues the proper temporal reach of the
court of appeals' judgment in that regard, and we modify the           statute before us. It seems reasonably clear to me that while
judgment accordingly.BAKER and Justice O'NEILL join.                   section 481.143 is not retroactive on its face, the Court's
                                                                       application of it creates a retroactive effect that can easily be
                                                                       avoided. The Court creates this retroactive effect by applying
                                                                       a statute not effective until September 1, 1987, to permit
Justice HANKINSON filed a dissenting opinion on rehearing              applications originally filed in 1985. Section 481.143 has
as to Section VI, in which Justice ENOCH, Justice BAKER,               retroactive effect if applied in this manner—it reaches back
and Justice O'NEILL join.                                              before its effective date and attaches new legal consequences
                                                                       to past acts by changing what the law was before section
Justice HANKINSON, dissenting.
                                                                       481.143 was enacted.
While I agree with the Court's resolution of the first issue
we address on rehearing, I dissent from what I perceive to
                                                                       Before the Legislature enacted section 481.143, under well-
be its impermissible and unnecessary retroactive application
                                                                       established law cities could pass or amend ordinances in
of Texas Government Code § 481.143. For the reasons
                                                                       the proper exercise of their police power, and citizens were
expressed by the court of appeals, 930 S.W.2d 678, 693, I
                                                                       bound by those intervening ordinances even if they were
would hold that for section 481.143 to apply to a particular
                                                                       passed while an application for a permit was pending. See
series of permits, the first permit in the series must have been
                                                                        *135 Connor v. City of Univ. Park, 142 S.W.2d 706,
filed after the effective date of section 481.143.
                                                                       709 (Tex.Civ.App.—Dallas 1940, writ ref'd). Thus, permit
             The presumption is very strong that                       applications were subject to any intervening ordinances
             a statute was not meant to act                            and amendments. Section 481.143 essentially eliminated
             retrospectively, and it ought never to                    any intervening ordinances and amendments passed by any
             receive such a construction if it is                      city, including changes to fire, electrical, plumbing, and
             susceptible of any other. It ought not                    mechanical codes designed to further public safety. For
             to receive such a construction unless                     example, if someone filed an application for a building
             the words used are so clear, strong,                      permit in 1970, under the Court's reading of section 481.143,
             and imperative that no other meaning                      that person would only have to meet the safety standards
             can be annexed to them or unless the                      of 1970 when applying in 1987 for the next permit in
             intention of the legislature cannot be                    the series, and any ordinances passed in the intervening
             otherwise satisfied.                                      seventeen years would have no effect. In this manner, the
                                                                       Court's reading attaches new legal consequences to the
                                                                       1985 permit applications and retroactively changes the law


                 © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                               22
Quick v. City of Austin, 7 S.W.3d 109 (1998)


governing those 1985 applications, which were filed before         not be applied retroactively without the Legislature itself
the Legislature enacted section 481.143 in 1987. This is not       saying so, without it's having weighed the consequences
“merely draw[ing] upon an antecedent fact,” as the Court           after considering the potential effects of retroactivity and
proposes. And I must emphasize that the Court's reading            expressed its decision that those consequences are desirable.
is what creates the retroactive effect, not the language of        Courts simply are not empowered or endowed with the
the Legislature as expressed in the statute itself; the Court      jurisdiction or the resources to make those kinds of open-
agrees that the statute “does not expressly delineate its          ended policy decisions.
reach.” Precisely because section 481.143 contains no clear
expression that it operates retroactively, and because the Code    The Court struggles to find legislative intent on retroactivity
Construction Act mandates that statutes operate prospectively      where none is apparent and uses that phantom intent to *136
in the absence of such clear expression, we are bound to read      circumvent the express language of the Code Construction
the statute in a way that does not create a retroactive effect.    Act. Nothing in the language of the statute or its history
                                                                   supports the Court's assertion that the usual prospective
Moreover, the Legislature knows precisely how to make the          reading would cause the statute to “at least partially fail
statute retroactive—it did so by amending section 481.143          of its intended purpose.” Without some expression by the
in 1995 so that the section then expressly applied to projects     Legislature that it intended section 481.143 to apply to
“in progress on or commenced after” September 1, 1987. Act         existing projects, how do we know whether it intended
of May 24, 1995, 74th Leg., R.S., ch. 794, § 1, 1995 Tex.          precisely the opposite, perhaps as part of a legislative
Gen. Laws 4147. That amendment bolsters the conclusion             compromise, or perhaps as a result of the Legislature's
that we should not apply the 1987 version, which was not           understanding that statutes operate prospectively in the
expressly retroactive, to have a retroactive effect. Thus, the     absence of clear expression to the contrary. Moreover, how
Court's reading of the 1987 statute has the effect of making the   can we liberally construe a statute on a point on which the
1995 amendments mere surplusage. The 1995 amendments               statute is admittedly silent, without any proof of legislative
also included an exemption for adopting the kind of codes          intent, and when the Code Construction Act unequivocally
affecting public safety mentioned above, highlighting that the     mandates the opposite of the Court's reading. Whether to
Legislature is the proper body to decide what the best policy      apply a statute retroactively is, for very good reasons, a
is and how best to redress particular problems.                    legislative policy choice:

The practical danger of ignoring the Legislature's policy                      Because      [prospectivity]    accords
choice, as expressed in the Code Construction Act, and                         with widely held intuitions about
applying section 481.143 retroactively, is that we have no                     how statutes ordinarily operate, a
idea what rules, regulations, ordinances, or orders will be                    presumption against retroactivity will
affected. Section 481.143 applies not just to the city of                      generally coincide with legislative
Austin, or to all cities in Texas, but to every “agency,                       and public expectations. Requiring
bureau, department, division, or commission of the state or                    clear intent assures that Congress
any department or other agency of a political subdivision                      itself has affirmatively considered
that processes and issues permits.” TEX. GOV'T CODE §                          the potential unfairness of retroactive
481.142(4). The statute applies not just to land development                   application and determined that it
projects, but to every “endeavor over which a regulatory                       is an acceptable price to pay for
agency exerts its jurisdiction and for which a permit is                       the countervailing benefits. Such a
required before initiation of the endeavor.” TEX. GOV'T                        requirement allocates to Congress
CODE § 481.142(3). The definition of permit is equally                         responsibility for fundamental policy
broad: “ ‘Permit’ means a license, certificate, approval,                      judgments concerning the proper
registration, consent, permit, or other form of authorization                  temporal reach of statutes, and has the
required by law, rule, regulation, or ordinance....” Id. §                     additional virtue of giving legislators
481.142(2). In striving to reach its result in this particular                 a predictable background rule against
case, the Court ignores the fact that the implications of                      which to legislate.
its decision are unknown. I would argue that is precisely
                                                                   Landgraf v. USI Film Prods., 511 U.S. 244, 272–73, 114
why the Legislature has codified its decision that statutes
                                                                   S.Ct. 1483 (1994). Through the Code Construction Act,


                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                           23
Quick v. City of Austin, 7 S.W.3d 109 (1998)


                                                                      until 1987, it did not apply to Circle C's 1985 applications
the Legislature has clearly expressed its policy choice
                                                                      for preliminary subdivision approval. I would further hold
that its laws will not operate retroactively without its
                                                                      that section 481.143 governs Circle C's one application
own deliberation and manifest expression of the value of
                                                                      filed after the effective date of section 481.143 and before
retroactivity in the statute at issue. Ignoring the Code
                                                                      the SOS ordinance became effective, but that any other
Construction Act, especially in the absence of any statutory
                                                                      applications in that series must have been filed before
language or legislative history to the contrary, is, in my view,
                                                                      section 481.143 was repealed for section 481.143 to govern
tantamount to legislating.
                                                                      those applications. Any other reading flouts our longstanding
                                                                      principles disfavoring retroactive lawmaking. Accordingly, I
The Court points out that “[n]owhere does [the 1987] statute
                                                                      dissent.
require that the original application for the first permit be
filed after September 1, 1987.” In the face of that legislative
silence, and in light of the statutory presumption against
retroactive application, I conclude we must apply the statute         All Citations
prospectively. Applying section 481.143 prospectively, I
would hold that because section 481.143 was not effective             7 S.W.3d 109


Footnotes
1      The Barton Springs Edwards Aquifer is that portion of an underground system of water-bearing formations in Central
       Texas that recharges Barton Springs. Barton Springs is a spring surfacing in Austin that is fed by and feeds Barton Creek.
       Barton Springs and Barton Creek provide a significant source of Austin's water supply. Barton Springs also contributes
       to a unique recreational attraction in Austin, Barton Springs Pool, a spring-fed outdoor swimming pool open throughout
       the year.
2      In a de novo review, the reviewing tribunal determines each issue of fact and law without according deference to the
       original tribunal's decision. See Post at 116.
3      As support for this contention, Petitioners rely on a water quality analysis of sixteen rainfall samples taken at three
       locations. The City, however, elicited testimony that the water quality analysis of the samples was unreliable because
       not enough rain was collected and several of the samples were contaminated.
4      Petitioners introduced into evidence a label from a bottle of Evian natural spring water showing a nitrate concentration
       exceeding the runoff requirements under the Ordinance's technical rules. Because the purpose of the Ordinance's rules is
       to ensure that no increases occur in the average annual loadings of constituents such as nitrogen, Petitioners' comparison
       to Evian merely establishes that natural runoff in the Barton Creek watershed has a lower concentration of nitrates than the
       spring waters producing Evian bottled water. Accordingly, this evidence is actually not probative of whether compliance
       with the technical requirements of the Ordinance is possible.
1      Chapter 481 was amended in 1995. See Act of May 24, 1995, 74th Leg., R.S., ch. 794, § 1, 1995 Tex. Gen. Laws
       4147, repealed by Act of June 1, 1997, 75th Leg., R.S., ch. 1041, § 51(b), 1997 Tex. Gen. Laws 3943, 3966. The 1995
       amendments provided that section 481.143 applied “to all projects in progress on or commenced after the effective date of
       this subchapter as originally enacted.” Act of May 24, 1995, 74th Leg., R.S. ch. 794, § 1, sec. 481.143(b), 1995 Tex. Gen.
       Laws 4147, 4147 (repealed). Although the 1995 amendments were expressly made retroactive to September 1, 1987,
       Circle C concedes that the amendments do not apply to its claims. See Act of May 24, 1995, 74th Leg., R.S., ch. 794, §
       3, 1995 Tex. Gen. Laws 4147, 4148 (“Nothing in this Act shall be construed to diminish or impair the rights or remedies of
       any person or entity under a final judgment rendered by, or in any pending litigation brought in, any court concerning an
       interpretation of the provisions of Subchapter I, Chapter 481, Government Code.”). Subchapter I was reenacted in 1999
       as Local Government Code, Subtitle C, Title 7, Chapter 245, but the reenacted version contains a similar provision and
       is thus also inapplicable to this litigation. See Act of April 29, 1999, 76th Leg., R.S., ch. 73, § 4, 1999 Tex. Gen. Laws
       ___, ___ (to be codified at TEX. LOC. GOV'T CODE E § ___). Moreover, given the Legislature's mandate, we do not
       consider the 1995 amendments in construing section 481.143 as enacted.
2      It is unclear whether the terms “accorded” and “acquired” relate to rights. Certainly, not all terms in the general savings
       clause relate to rights—for example, incur, which generally means “become liable or subject to” would not refer to a
       party's rights. In addition, if we apply the general definition of “accord,” which is “grant” or “allow,” then any right of action
       granted or allowed by a statute would be saved despite a repeal, regardless of whether it had accrued before repeal.
       This cannot have been the Legislature's intent in enacting the general savings clause, for repeals of statutory causes of



                © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 24
Quick v. City of Austin, 7 S.W.3d 109 (1998)


       action would have no effect. Accordingly, we will apply these terms, but in the more limited sense of affording the right
       when due, rather than when granted.


End of Document                                              © 2015 Thomson Reuters. No claim to original U.S. Government Works.




              © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                           25
S
Robinson v. Brice, 894 S.W.2d 525 (1995)




                                                                       Plaintiff was not required to perfect independent
                    894 S.W.2d 525                                     appeal in order to bring cross-appeal concerning
                Court of Appeals of Texas,                             date on which prejudgment interest accrued
                         Austin.                                       following defendant's appeal regarding award of
                                                                       prejudgment interest on judgment in favor of
         Bryan D. ROBINSON, Appellant,                                 plaintiff where defendant's appeal included that
                       v.                                              portion of judgment which awarded prejudgment
            Kevin R. BRICE, Appellee.                                  interest on future damages.
 No. 03–93–00123–CV. | March 8, 1995. | Rehearing
            Overruled April 12, 1995.
                                                                       Cases that cite this headnote



Passenger injured in accident while riding in automobile         [2]   Statutes
which belonged to driver's employer brought action against                 Purpose
driver. The 368th Judicial District Court, W illiamson County,
Burt Carnes, J., entered judgment for passenger and awarded            In interpreting statute, court must consider its
prejudgment interest accruing on date action was filed. After          object and purpose.
driver appealed portion of judgment awarding prejudgment
interest on future damages, passenger cross-appealed
regarding determination of accrual date, and the Court of              Cases that cite this headnote
Appeals, Powers, J., held that: (1) passenger was not required
to perfect independent appeal; (2) accident report submitted
by passenger to employer's insurer shortly after accident did
not constitute written notice of claim as would accrue claim     [3]   Interest
for prejudgment interest; but (3) letter sent two months after             Unreasonable or vexatious delay in payment
accident in which passenger requested that insurer pay certain
medical bills and inquired as to when next lost wages check            In addition to ensuring that plaintiffs are fully
was due did not constitute written notice of claim.                    compensated, prejudgment interest statute
                                                                       provides series of incentives designed to
                                                                       encourage expeditious settlement of claims.
Reversed and rendered.                                                 Vernon's Ann.Texas Civ.St. art. 5069–1.05, §
                                                                       6(a).


W est Headnotes (12)                                                   2 Cases that cite this headnote


[1]     Appeal and Error
           Cross-appeals or writs of error                       [4]   Interest
                                                                           Prejudgment Interest in General




                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                        1
Robinson v. Brice, 894 S.W.2d 525 (1995)




       Prejudgment interest statute plainly requires not            Accident report submitted by passenger, who was
       merely written notice of accident and resulting              injured in automobile accident which occurred
       injuries, but also written notice of claim, in order         while passenger was riding in automobile
       for award of prejudgment interest to accrue.                 belonging to driver's employer, to insurer of
       Vernon's Ann.Texas Civ.St. art. 5069–1.05, §                 driver's employer did not constitute “written
       6(a).                                                        notice of claim” as would accrue claim for
                                                                    prejudgment interest under statute in action
                                                                    against driver where report was not notice of
       Cases that cite this headnote                                demand for payment or compensation by
                                                                    passenger on passenger's behalf, even though
                                                                    report notified insurer that accident had occurred.
                                                                    Vernon's Ann.Texas Civ.St. art. 5069–1.05, §
[5]    Statutes                                                     6(a).
           Undefined terms

       W here statute does not define term, term must be            7 Cases that cite this headnote
       construed according to its ordinary meaning.
       V.T.C.A, Government Code § 312.002(a).

                                                              [8]   Costs
       Cases that cite this headnote                                    Attorney Fees

                                                                    Provision of statute governing recovery of
                                                                    attorney fees which requires claimant to present
[6]    Interest                                                     claim to opposing party is similar to prejudgment
           Prejudgment Interest in General                          interest statute in that there is no indication what
                                                                    information must be included in claim. V.T.C.A.,
       Term “claim,” as used in provision of                        Civil Practice & Remedies Code § 38.002(2);
       prejudgment interest statute which requires                  Vernon's Ann.Texas Civ.St. art. 5069–1.05, §
       plaintiff to provide written notice of claim in              6(a).
       order for claim for prejudgment interest to accrue,
       means demand for compensation or assertion of
       right to be paid. Vernon's Ann.Texas Civ.St. art.            Cases that cite this headnote
       5069–1.05, § 6(a).


       10 Cases that cite this headnote                       [9]   Costs
                                                                        Attorney Fees
                                                                    Interest
                                                                        Prejudgment Interest in General
[7]    Interest
           Prejudgment Interest in General                          Fact that presentment of claim required under
                                                                    statute to accrue claim for prejudgment interest or
                                                                    for attorney fees may be informal does not
                                                                    obviate necessity for assertion of claim. V.T.C.A.,
                                                                    Civil Practice & Remedies Code § 38.002(2);
                                                                    Vernon's Ann.Texas Civ.St. art. 5069–1.05, §
                                                                    6(a).


                                                                    2 Cases that cite this headnote




                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                         2
Robinson v. Brice, 894 S.W.2d 525 (1995)




[10]   Interest                                              Attorneys and Law Firms
           Torts; wrongful death
                                                             *526 Ranelle M. Meroney, W right & Greenhill, Austin, David
       Letter sent by passenger injured in automobile        C. Kent, Hughes & Luce, L.L.P., Dallas, for appellant.
       accident, which occurred while passenger was
       riding in automobile belonging to driver's            Danny S. Ashby, Hughes & Luce, L.L.P., Dallas, for appellee.
       employer, to insurer of driver's employer in which    Before POW ERS, JONES and KIDD, JJ.
       passenger requested that insurer pay certain
       medical bills and inquired as to when next lost
       wages check was due constituted “written notice       Opinion
       of claim” so as to satisfy requirements of
       prejudgment interest and accrue claim for             POW ERS, Justice.
       prejudgment interest in action against driver
       where letter was sufficient to notify insurer that    [1] Kevin Brice appeals the portion of a trial-court judgment
       passenger was claiming compensation for his           fixing the date from which prejudgment interest began to
       injuries, even though letter was phrased as           accrue. 1 W e will reverse that part of the judgment *527 and
       request. Vernon's Ann.Texas Civ.St. art.              render judgment consistent with this opinion.
       5069–1.05, § 6(a).


       7 Cases that cite this headnote
                                                                               THE CONTROVERSY

                                                             On February 2, 1989, Bryan Robinson and Brice were
[11]   Interest                                              involved in a one-car accident in which Robinson was the
           Prejudgment Interest in General                   driver and Brice was the passenger. Brice sustained severe
                                                             personal injuries. The car belonged to Robinson's employer,
       Prejudgment interest statute does not require         T em p le–Inland F o rest P ro d ucts C o rp o ratio n
       claimant to demand exact amount or list every         (“Temple–Inland”). Temple–Inland's insurance carrier was
       element of damage claimed in order to provide         Highlands Insurance Company (“Highlands”).
       written notice of claim as will accrue claim for
       prejudgment interest. Vernon's Ann.Texas Civ.St.
       art. 5069–1.05, § 6(a).                               On February 14, approximately two weeks after the accident,
                                                             Temple–Inland sent Highlands a “Motor Vehicle Accident
                                                             Report” with Robinson's handwritten account of the accident
       6 Cases that cite this headnote                       attached. These documents described the accident and Brice's
                                                             injuries. Subsequently, a claims adjustor at Highlands,
                                                             Marthilyn Collins, began an investigation and on February 15
                                                             obtained tape-recorded statements from Brice and Robinson.
[12]   Interest                                              The next day, Collins filled out a report, noting that liability
           Prejudgment Interest in General                   was present and that Brice had told her he only wanted
                                                             payment of lost wages and medical bills that were not covered
       Prejudgment interest statute is construed liberally   by his own health insurance policy. Highlands began to pay
       to achieve its purposes of fully compensating         these items periodically.
       plaintiff and encouraging settlements. V.T.C.A.,
       Government Code § 312.006(a); Vernon's
       Ann.Texas Civ.St. art. 5069–1.05, § 6(a).             On April 1, Brice sent a note to Highlands, attaching certain
                                                             medical bills not covered under his own insurance policy. He
                                                             requested that Highlands pay the bills and asked when he
       2 Cases that cite this headnote                       would receive his next lost wages check. Highlands continued
                                                             to pay Brice's medical bills and lost wages over the next few
                                                             months, eventually paying a total of $23,091.94. Collins
                                                             testified at the hearing on prejudgment interest that Brice
                                                             requested payment solely for lost wages and unpaid medical


                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                         3
Robinson v. Brice, 894 S.W.2d 525 (1995)




bills until shortly before the statute of limitations ran. At that   the prejudgment interest statute provides a series of incentives
point, Brice requested a substantial amount for future               designed to encourage the expeditious settlement of claims. C
damages. Shortly thereafter, on January 31, 1991, he filed suit      & H Nationwide, Inc. v. Thompson, 37 Tex.Sup.Ct.J. 1059,
against Robinson and Temple–Inland. 2                                903 S.W .2d 315, 1994 W L 278167 (June 22, 1994). Brice
                                                                     contends the evident purpose of the 180–day provision is to
                                                                     provide a time period within which the defendant may, without
At trial, the jury found Robinson's negligence had proximately       penalty, conduct an investigation and settle claims with merit.
caused the accident and fixed damages in the amount of               He argues that the accident report was sufficient to fulfill this
$676,248.97. Brice filed a motion for judgment on the jury's         purpose because it apprised Highland that he was injured, the
verdict 3 and requested prejudgment interest. See                    time, place and manner of the accident, and its probable cause.
Tex.Rev.Civ.Stat.Ann. art. 5069–1.05 § 6(a) (W est
Supp.1995) (the “Statute”). 4 According to the Statute,
prejudgment interest accrues beginning on the 180th day after        [4] [5] [6] [7] The statute, however, plainly requires not
the date the defendant receives written notice of a claim, or on     merely written notice of an accident and resulting injuries, but
the date suit is filed, whichever occurs first. Id. Brice asserted   also written notice of a claim. The statute does not define the
that prejudgment interest should be calculated beginning             term “claim,” and therefore, we must construe it according to
August 14, 1989, 180 days after Highlands received the               its ordinary meaning. Tex.Gov't Code Ann. § 312.002(a)
accident report from Temple–Inland. Robinson contended that          (W est 1988); Hopkins v. Spring Indep. Sch. Dist., 736 S.W .2d
prejudgment interest should accrue from the day Brice filed          617, 619 (Tex.1987). The word “claim” ordinarily means a
suit (January 31, 1991).                                             demand for compensation or an assertion of a right to be paid.
                                                                     Although the accident report notified Highlands that an
                                                                     accident had occurred, and that Brice had been injured, it was
After a hearing, the trial court found that Highlands had not        not notice of a demand for payment or compensation by Brice
received written notice of Brice's claim more than 180 days          or on Brice's behalf, and thus was not notice of a claim.
before the filing of suit. The court therefore calculated
prejudgment interest from the date Brice filed suit (January 31,
1991) through the day before the date judgment was rendered.         [8] [9] Brice refers us to cases construing “notice of claim”
The sole issue on appeal is whether the trial court correctly        provisions in other statutes to support his contention that
determined that Highlands had not received written notice of         Highland's receipt of the accident report was sufficient
Brice's claim before Brice filed suit.                               “written notice of a claim” under the prejudgment interest
                                                                     statute. Section 38.002 of the Civil Practice and Remedies
                                                                     Code provides that in order to recover attorney's fees “the
                                                                     claimant must present the claim to the opposing party.”
              DISCUSSION AND HOLDING                                 Tex.Civ.Prac. & Rem.Code Ann. § 38.002(2) (W est 1986).
                                                                     This provision is similar to the prejudgment interest statute in
Brice asserts the trial court erred in finding Highlands did not     that it does not indicate what information must be included in
receive written notice of a claim before Brice filed suit so as      the claim. Brice cites cases holding that presentment may be
to *528 trigger the 180–day provision in the statute. Brice          informal and in no particular form. Jones v. Kelley, 614
argues that the statute does not require written notice to come      S.W .2d 95, 100 (Tex.1981). The fact that presentment may be
from the claimant, and therefore, the accident report that           informal does not obviate the necessity for assertion of a
Highlands received on February 14 from its insured,                  claim. See, e.g., Adams v. Petrade Int'l, Inc., 754 S.W .2d 696,
Temple–Inland, constituted written notice of his claim.              719 (Tex.App.— Houston [1st Dist.] 1988, writ denied)
Robinson asserts that notice of an accident from an insured          (noting section 38.002 merely requires some type of assertion
who is a potential defendant is not notice of a third party's        of debt or claim to opposing party and request for
claim.                                                               compliance); King Optical v. Automatic Data Processing of
                                                                     Dallas, Inc., 542 S.W .2d 213, 217 (Tex.Civ.App.— W aco
                                                                     1976, writ ref'd n.r.e.) (holding claimant must merely assert
[2] [3] The prejudgment interest statute does not set forth          right to be paid and request payment in order to recover
requirements for what constitutes adequate “written notice of        attorney fees). Additionally, Brice argues that courts have
a claim.” 5 Apparently, no court has addressed the question. In      construed section 101.101 of the Texas Tort Claims Act as
interpreting the statute, we must consider its object and            requiring merely a description of the injury, and the time,
purpose. De Leon v. Harlingen Consol. Indep. Sch. Dist., 552         place and manner of the incident. Tex.Civ.Prac. & Rem.Code
S.W .2d 922, 925 (Tex.Civ.App.— Corpus Christi 1977, no              Ann. § 101.101 (W est 1986). He contends that the accident
writ). In addition to ensuring plaintiffs are fully compensated,     report in the present case includes all of the above


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                               4
Robinson v. Brice, 894 S.W.2d 525 (1995)




information. The accident report fails as written notice of a
claim not because of insufficient form or detail, but because it
is not notice of a demand for compensation or an assertion of
a right to be paid.


*529 [10] [11] [12] Alternatively, Brice contends that his
letter of April 1, stamped “Received” by Highlands on April
10, in which he requested that Highlands pay certain medical
bills and inquired as to when the next lost wages check was
due, constituted written notice of a claim so as to satisfy the
statutory requirement. 6 W e agree. Although phrased as a
request, Brice plainly asserted in the letter a right to payment
of his medical bills and lost wages. See Huff v. Fidelity Union
Life Ins. Co., 158 Tex. 433, 312 S.W .2d 493, 500 (1958)
(noting demand need not be evidenced by firm and
commanding language, but may be phrased in customarily
used polite language). The statute does not require the
claimant to demand an exact amount or list every element of
damage claimed, and we decline to read such requirements
into it. W e must construe the statute liberally to achieve its
purposes of fully compensating the plaintiff and encouraging
settlements.See Tex.Gov't Code Ann. § 312.006(a) (W est
1988). Brice's letter was sufficient to notify Highlands that he
was claiming compensation for his injuries and afforded it the
opportunity to settle the claim without incurring liability for
prejudgment interest. Therefore, Brice is entitled to
prejudgment interest calculated from 180 days after April 10,
1989, the date Highland received Brice's letter of April 1, until
the day before rendition of judgment. W e sustain Brice's
cross-point of error.


W e reverse that portion of the trial-court judgment awarding
Brice prejudgment interest calculated from the date this
lawsuit was filed. W e render judgment that prejudgment
interest accrue from 180 days after April 10, 1989, the date
Highlands received Brice's letter of April 1, through the day
preceding the date judgment was rendered.




Footnotes

1       Initially, Bryan Robinson appealed that portion of the judgment awarding Brice prejudgment interest on future damages. Brice
        cross-appealed regarding the trial court's determination of the date from which prejudgment interest accrued. Robinson moved to
        dismiss the entire appeal in light of the supreme court's decision in C & H Nationwide, Inc. v. Thompson, 37 Tex.Sup.Ct.J. 1059,
        903 S.W.2d 315, 1994 WL 278167 (June 22, 1994). In his motion to dismiss, Robinson contends Brice is not entitled to the relief
        sought by his cross-point because Brice did not perfect an independent appeal. However, it was unnecessary for Brice to do so
        because Robinson's appeal included “[t]hat portion of the judgment which awards pre-judgment interest on future damages.”

2       Although Temple–Inland was a defendant at trial, the trial court granted its motion for directed verdict before the case was submitted
        to the jury. It is not a party to this appeal.




                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                       5
Robinson v. Brice, 894 S.W.2d 525 (1995)




3      Brice credited Robinson for Highland's previous payment of medical bills and lost wages in the amount of $23,091.94, requesting
       judgment for the difference between $23,091.94 and the award of $676,248.97 in the amount of $653,157.03. The court rendered
       judgment for Brice and calculated prejudgment interest on the adjusted amount.

4      The statute provides:
       Judgments in wrongful death, personal injury, and property damage cases must include prejudgment interest.... [P]rejudgment interest
       accrues on the amount of the judgment during the period beginning on the 180th day after the date the defendant receives written
       notice of a claim or on the day the suit is filed, whichever occurs first, and ending on the day preceding the date judgment is rendered.
       Tex.Rev.Civ.Stat.Ann. art. 5069–1.05 § 6(a) (West Supp.1995).


5      Many “notice of claim” provisions do provide detailed requirements for what the notice must contain. See, e.g., Texas Tort Claims
       Act, Tex.Civ.Prac. & Rem.Code Ann. § 101.101(a)(1)–(3) (West 1986) (stating notice of claim must reasonably describe damage
       or injury claimed, the incident and its time and place); Deceptive Trade Practices—Consumer Protection Act, Tex.Bus. & Com.Code
       Ann. § 17.505(a) (West Supp.1995) (stating written notice must advise in reasonable detail of the consumer's specific complaint,
       actual damages, and expenses reasonably incurred in asserting claim).

6      The day after Highlands received the accident report, Brice informed Highlands that he wanted compensation for lost wages and
       medical bills, thus effectively giving notice of a claim, but this communication was not in writing as required by the statute. The April
       1st letter read as follows:
       Marthilyn—These are the bills that Prudential won't pay because they are applying to my deductible. Also included are other bills
       I have submitted to you previously but have no resolution on. Please process these as quickly as you can, as I have had to pay out
       of my pocket on these. Also, when is next lost wages check due? I'll call this week. Thank you, Kevin Brice.

End of Document                                                           © 2014 Thomson Reuters. No claim to original U.S. Government Works.




                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                         6
T
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

                                                                       statutory definition only. V.T.C.A., Government
                                                                       Code § 311.011(b).
                     82 S.W.3d 314
                 Supreme Court of Texas.                               30 Cases that cite this headnote
              TEXAS DEPARTMENT OF
           TRANSPORTATION, Petitioner,                           [3]   Statutes
                         v.                                                 Construing together; harmony
        Eddie William NEEDHAM, Respondent.                             Courts should not give an undefined statutory
                                                                       term a meaning out of harmony or inconsistent
          No. 01–0383. | Argued April 10,                              with other provisions, although it might be
         2002. | Delivered May 9, 2002.                                susceptible of such a construction if standing
         | Rehearing Denied Sept. 12, 2002.                            alone.

Former employee sued Department of Transportation (DOT),               35 Cases that cite this headnote
alleging DOT violated Whistleblower Act when it retaliated
against employee for reporting a co-worker's alleged unlawful
                                                                 [4]   Statutes
conduct to DOT supervisors. The District Court, Travis
                                                                            Similarity or difference
County, 353rd Judicial District, W. Jeanne Muerer, J.,
entered judgment on jury verdict in favor of employee. DOT             In ascertaining a term's meaning, courts look
appealed. The Austin Court of Appeals affirmed. DOT filed              primarily to how that term is used throughout the
petition for review. The Supreme Court, Baker, J., held,               statute as a whole.
as matter of first impression, that: (1) as a matter of law,
                                                                       7 Cases that cite this headnote
DOT was not an appropriate law enforcement authority under
Act for employee to report co-worker's alleged violation of
driving while intoxicated laws, and (2) evidence did not         [5]   Statutes
support finding that employee had good faith belief that DOT                Similarity or difference
was an appropriate law enforcement authority under Act to              Statutory terms should be interpreted
report co-worker's alleged drunk driving.                              consistently in every part of an act.

Reversed.                                                              6 Cases that cite this headnote


                                                                 [6]   Statutes
 West Headnotes (11)                                                        Questions of law or fact
                                                                       Statutory construction is a question of law for the
                                                                       court to decide.
 [1]    Statutes
             Intent                                                    9 Cases that cite this headnote
        In construing a statute, a court's objective is to
        determine and give effect to the Legislature's           [7]   Appeal and Error
        intent.                                                           Cases Triable in Appellate Court
        38 Cases that cite this headnote                               Supreme Court reviews legal questions de novo.

                                                                       53 Cases that cite this headnote
 [2]    Statutes
             Defined terms; definitional provisions
                                                                 [8]   Officers and Public Employees
        Ordinarily, a court first looks at the statute's plain              Grounds for removal or discipline
        and common meaning, but if a statute defines a
                                                                       Department of Transportation (DOT) was not an
        term, a court is bound to construe that term by its
                                                                       entity charged with regulating under, enforcing,


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                           1
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

        investigating, or prosecuting driving while                   finding that employee had a good faith belief
        intoxicated (DWI) laws and, thus, as a matter of              that DOT was an appropriate law enforcement
        law, was not an “appropriate law enforcement                  authority under the Whistleblower Act to report
        authority” to whom former employee could have                 co-worker's alleged drunk driving. V.T.C.A.,
        reported co-worker's alleged violation of DWI                 Government Code § 554.002(b).
        laws, within meaning of Whistleblower Act.
        V.T.C.A., Government Code § 554.002(b).                       51 Cases that cite this headnote

        39 Cases that cite this headnote


 [9]    Officers and Public Employees                         Attorneys and Law Firms
             Grounds for removal or discipline
                                                              *315 Julie Caruthers Parsley, Office of Solicitor Gen. of
        Under the Whistleblower Act's statutory               Texas, John Cornyn, Jeffrey S. Boyd, Philip A. Lionberger,
        definition of an “appropriate law enforcement         Katherine E. Kasten, Cavitt Wendlandt, Danica Lynn Milios,
        agency,” it is clearly not enough that a              Office of Attys Gen. of Texas, Howard G. Baldwin, First
        government entity has general authority to            Asst. Atty. Gen., Austin, for petitioner.
        regulate, enforce, investigate, or prosecute;
        rather, the particular law the public employee        John Judge, Judge & Brim, Mark W. Robinett, Jefferson K.
        reported violated is critical to the determination.   Brim, III, Brim Arnette & Robinett, Austin, for respondent.
        V.T.C.A., Government Code § 554.002(b).
                                                              Opinion
        65 Cases that cite this headnote
                                                              Justice BAKER delivered the opinion of the Court.

 [10]   Officers and Public Employees                         In this Texas Whistleblower Act suit we determine whether
             Grounds for removal or discipline                the Texas Department of Transportation is an appropriate
        In the context of provision of Whistleblower          law enforcement authority to which a public employee
        Act requiring public employee to have a good          may report an alleged driving while intoxicated incident.
        faith belief that report of misconduct is made        If TxDOT is not, we must determine whether the public
        to an appropriate law enforcement agency,             employee had a good faith belief that it was an appropriate
        “good faith” means: (1) the employee believed         law enforcement authority. The trial court rendered judgment
        the governmental entity was authorized to (a)         based on the jury's verdict for Eddie Needham, TxDOT's
        regulate under or enforce the law alleged to          former employee who TxDOT allegedly retaliated against
        be violated in the report, or (b) investigate or      because he reported a co-worker's alleged unlawful conduct
        prosecute a violation of criminal law; and (2) the    to TxDOT supervisors. The court of appeals affirmed the trial
        employee's belief was reasonable in light of the      court's judgment. 76 S.W.3d 15.
        employee's training and experience. V.T.C.A.,
        Government Code § 554.002(b).                         We conclude, under the circumstances in this case, that
                                                              TxDOT was not an appropriate law enforcement authority as
        79 Cases that cite this headnote                      the Whistleblower Act defines that term. We also conclude
                                                              that there is no evidence to support a finding that Needham
                                                              had a good faith belief that TxDOT was an appropriate law
 [11]   Officers and Public Employees
                                                              enforcement authority. Accordingly, we reverse the court of
             Grounds for removal or discipline
                                                              appeals' judgment and render judgment that Needham take
        Evidence      regarding      Department       of      nothing.
        Transportation's (DOT) disciplinary process,
        former employee's participation therein, and his
        belief that DOT could forward information to
        another entity to prosecute a drunk driving                               I. BACKGROUND
        allegation against a coworker did not support



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                      2
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

By 1996, Eddie Needham had worked for TxDOT's                    Six said that he already knew about the incident, management
information systems division *316 for twenty-three years.        was deciding what to do, and Needham had already done
Needham was a crew chief in TxDOT's Geodetic Control             everything he needed to do.
Section. He traveled around the state with other TxDOT
employees to perform global positioning surveys. On January      From March 4 through March 6, Needham was out with flu.
10, 1996, Needham and a crew member were returning               When he returned to work, he again spoke to Six about the
from Orange to Austin. The two stopped for the night at          co-worker's conduct. Then, Needham suffered a relapse from
College Station. When they arrived at the motel, Needham         the flu and stayed home until March 11.
encountered another TxDOT crew chief, Sam Garnett, and
his two crew members. The two crews decided to eat dinner        When Needham returned to work, Coffman escorted him
together. One of Garnett's crew members, who drove a             into Six's office to discuss concerns about Needham's travel
separate vehicle to the restaurant, called Needham on the        and work assignment practices. A week later, Howard
radio for directions. Needham testified at trial that the co-    and Needham met with the division head, Coffman, Six,
worker's voice was slurred and that he was weaving as he         and another TxDOT supervisor. At that time, Howard
walked into the restaurant. Needham also said that during        gave Needham a progressive disciplinary action document
dinner the co-worker's breath smelled of alcohol. Because        charging Needham with thirteen violations of TxDOT
he concluded that the co-worker was too intoxicated to           policies and procedures. The violations included a charge
drive, Needham instructed another employee to drive the          that Needham unnecessarily traveled to College Station
intoxicated employee's car back to the motel after dinner.       with no TxDOT business to conduct, secured lodging in
                                                                 College Station rather than return to Austin headquarters, and
Needham testified that he did not immediately report the         encouraged other employees to do the same. Based on *317
co-worker's conduct to TxDOT because he believed that            these allegations, Howard demoted Needham and placed him
the worker's crew chief, Garnett, should do so, and because      on probation for twelve months. Needham testified that he
Needham feared retaliation. Accordingly, Needham waited          was shocked and devastated about these charges, because he
until February 23 to report the co-worker's conduct to Lewis     had never received a reprimand during his twenty-three years
Keller, a supervisor at the same level as Needham's immediate    with TxDOT.
supervisor, Frank Howard. Needham met with Keller to
discuss whether Needham could transfer to Keller's section.      In early April 1996, Needham initiated an administrative
During the meeting, Needham also discussed the co-worker's       appeal of the adverse employment decision. Needham also
conduct in College Station and sought Keller's advice about      left work on sick leave and eventually took early retirement
what to do. Keller told Needham that TxDOT's Human               on December 31, 1996. After abandoning his administrative
Resources Manual required Needham to report the incident to      appeal, Needham sued TxDOT and alleged, among other
Needham's immediate superior. That same day, Needham met         things, a Whistleblower Act claim. See TEX. GOV'T CODE
with Howard and discussed the possible transfer to Keller's      §§ 554.001–010.
department as well as the drunk driving incident involving the
co-worker.                                                       TxDOT moved for summary judgment on the Whistleblower
                                                                 Act claim. TxDOT asserted that Needham had not reported a
On March 1, Needham talked to Leah Coffman, Howard's             violation of law to an appropriate law enforcement authority
supervisor, about various work matters. Needham did not          as the Whistleblower Act requires. However, the trial court
mention the co-worker's conduct in College Station to            denied TxDOT's motion. After a trial, the jury found in
Coffman, because he had already told Keller and Howard           Needham's favor. Needham moved for judgment on the
about the incident. In fact, Needham saw Keller on that day to   verdict, and TxDOT moved for judgment notwithstanding the
again bring up the drunk driving incident, because Needham       verdict. The trial court entered judgment on the jury's verdict,
thought nothing was being done about the situation. On this      and, in response to TxDOT's request, filed findings of fact
occasion, Keller told Needham to talk to Barry Six, a TxDOT      and conclusions of law. The trial court found and concluded
employee who dealt with human resources issues.                  that Needham reported a violation of law to an appropriate
                                                                 law enforcement authority, and that TxDOT took adverse
Needham thus met with Six later that afternoon. When             personnel action against Needham in retaliation for the report.
Needham started to tell Six about the drunk driving incident,



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            3
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

TxDOT appealed and asserted that there was no evidence
or insufficient evidence to show that TxDOT violated the            TEX. GOV'T CODE § 554.002(b).
Whistleblower Act. The court of appeals concluded that
TxDOT's disciplinary action policy gives it the power to
discipline an employee “on account of an alleged violation                    B. STATUTORY CONSTRUCTION
being reported.” 76 S.W.3d at 23. Thus, the court of appeals
held, TxDOT qualified as an appropriate law enforcement              [1]    [2] In construing a statute, “our objective is to
authority. 76 S.W.3d at 21. The court of appeals also held          determine and give effect to the Legislature's intent.” Nat'l
that there was sufficient evidence for a jury to find that          Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527
“Needham's report of [the co-worker's] conduct constituted a        (Tex.2000); see Albertson's, Inc. v. Sinclair, 984 S.W.2d 958,
good faith report of a violation of law to an appropriate law       960 (Tex.1999). Ordinarily, we first look at the statute's plain
enforcement authority.” 76 S.W.3d at 21. Finally, the court         and common meaning. Allen, 15 S.W.3d at 527; Fitzgerald v.
of appeals held that the evidence was sufficient to support a       Advanced Spine Fixation Systems, Inc., 996 S.W.2d 864, 865
finding that TxDOT retaliated against Needham because of            (Tex.1999). But if a statute defines a term, a court is bound
his report. 76 S.W.3d at 21. We granted TxDOT's petition for        to construe that term by its statutory definition only. TEX.
review to determine if the court of appeals correctly applied       GOV'T CODE § 311.011(b); Transp. Ins. Co. v. Faircloth,
the Whistleblower Act to conclude that Needham reported a           898 S.W.2d 269, 274 (Tex.1995); Tijerina v. City of Tyler,
violation of law to a government entity that he in good faith       846 S.W.2d 825, 827 (Tex.1992).
believed was an “appropriate law enforcement authority.”
                                                                     [3] [4] [5] Further, courts should not give an undefined
                                                                    statutory term a meaning out of harmony or inconsistent
                                                                    with other provisions, although it might be susceptible of
                  II. APPLICABLE LAW
                                                                    such a construction if standing alone. See Barr v. Bernhard,
                                                                    562 S.W.2d 844, 849 (Tex.1978); Dallas Indep. Sch. Dist.
           A. THE WHISTLEBLOWER ACT                                 v. Finlan, 27 S.W.3d 220, 228 (Tex. App.-Dallas 2000,
                                                                    pet. denied). In ascertaining a term's meaning, courts look
Texas's Whistleblower Act prohibits a state or local                primarily to how that term is used throughout the statute as
governmental entity from taking adverse personnel action            a whole. See Barr, 562 S.W.2d at 849; Finlan, 27 S.W.3d
against “a public employee who in good faith reports a              at 228. Statutory terms should be interpreted consistently in
violation of law by the employing governmental entity or            every part of an act. See Finlan, 27 S.W.3d at 228.
another public employee to an appropriate law enforcement
authority.” TEX. GOV'T CODE § 554.002(a). Before 1995,               [6]   [7] Statutory construction is a question of law for
the Whistleblower Act did not define the term “appropriate          the court to decide. Havlen v. McDougall, 22 S.W.3d 343,
law enforcement authority.” However, the Legislature's 1995         345 (Tex.2000); Johnson v. City of Fort Worth, 774 S.W.2d
amendments to the statute added a provision to do so. See Act       653, 656 (Tex.1989). We review legal questions de novo.
of May 25, 1995, 74th Leg., R.S. ch. 721, §§ 1–12, 1995 Tex.        See Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928
Gen. Laws 3812 (current version at TEX. GOV'T CODE §                (Tex.1998).
554.002(b)). Thus, section 554.002 of the Whistleblower Act
provides:

  (b) In this section, a report is made to an appropriate law                             III. ANALYSIS
     enforcement authority if the authority is part of a state or
     local governmental entity or the federal government that        [8] In this case, we interpret for the first time the term
     the employee *318 in good faith believes is authorized         “appropriate law enforcement authority” under the post–
     to:                                                            1995 Whistleblower Act. TxDOT argues that the statutory
                                                                    definition's plain meaning does not support the court of
     (1) regulate under or enforce the law alleged to be            appeals' conclusion that TxDOT was an appropriate law
        violated in the report; or                                  enforcement authority. TxDOT further asserts that the
                                                                    court of appeals misconstrued and interpreted the statute
     (2) investigate or prosecute a violation of criminal law.      too broadly by reading a power-to-discipline qualification



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             4
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

into the statutory definition. TxDOT contends that it is          Relying on Moreau's fourth category, the court of appeals
not an entity charged with regulating under, enforcing,           determined that TxDOT was an appropriate law enforcement
investigating, or prosecuting the state's criminal laws,          authority, because TxDOT could “otherwise discipline”
including those that penalize driving while intoxicated.          employees under its progressive disciplinary action policy.
                                                                  76 S.W.3d at 24. The court of appeals explained that
On the other hand, Needham contends that the governmental         TxDOT's policy identifies conduct warranting disciplinary
entity's function, and the authority the state grants it, do      action, including illegal activity committed while carrying
not solely determine whether it is an “appropriate law            out official duties and behavioral problems occurring during
enforcement authority.” Rather, Needham contends that the         work hours that relate to alcohol and substance abuse.
perception of the employee who makes the report also              76 S.W.3d at 24. Then, the court of appeals noted that
determines what constitutes an appropriate law enforcement        the policy requires supervisors to take certain progressive
authority. Here, Needham argues, he reported the co-worker's      disciplinary action when an employee fails to meet behavior
conduct to his superiors believing in good faith that TxDOT       or performance standards. 76 S.W.3d at 24. Because TxDOT's
had authority to investigate allegations that an employee         policy gave it the power to discipline an employee based on
drove a TxDOT vehicle while intoxicated in order to regulate      a reported violation, the court of appeals held that TxDOT
its employees by prohibiting their driving TxDOT vehicles         qualified as an appropriate law enforcement authority under
while intoxicated. Further, Needham contends that any long-       Moreau. 76 S.W.3d at 23.
time TxDOT employee would believe that TxDOT had the
authority to investigate a report that an employee violated       We disagree with the court of appeals' conclusion, because it
a criminal law not *319 only for TxDOT's own internal             relies on a pre–1995 amendment case. The court of appeals'
disciplinary process but also to forward the report to another    analysis ignores the limiting nature of the Legislature's
entity to prosecute.                                              1995 amendment to the Whistleblower Act that defines
                                                                  “appropriate law enforcement authority.” And, in doing so,
In analyzing whether TxDOT was an appropriate law                 the court of appeals' analysis expands the statutory definition
enforcement authority, the court of appeals recognized that       to include an employer's general obligation to internally
the pre–1995 Whistleblower Act did not define the term. The       discipline its own employees.
court of appeals also recognized that the post–1995 version
now defines “appropriate law enforcement authority” as a           [9] When Needham made his drunk driving “report”
governmental entity that the public employee in good faith        to TxDOT, the Legislature had already amended the
believes is authorized to: (1) regulate under or enforce the      Whistleblower Act to define the term “appropriate law
law alleged to be violated in the report; or (2) investigate or   enforcement authority.” Thus, the Whistleblower Act
prosecute a violation of criminal law. See 76 S.W.3d at 23        provided, as it does today, that an appropriate law
(citing TEX. GOV'T CODE § 554.002(b)).                            enforcement authority is a governmental entity authorized to
                                                                  “regulate under or enforce the law alleged to be violated in the
But then the court of appeals considered a pre–1995               report.” TEX. GOV'T CODE § 554.002(b)(1). Alternatively,
amendment case that discussed the undefined term                  an appropriate law enforcement authority is a governmental
“appropriate law enforcement authority.” 76 S.W.3d at 21          entity authorized to “investigate or prosecute a violation
(citing City of Dallas v. Moreau, 697 S.W.2d 472 (Tex.App.-       of a criminal law.” TEX. GOV'T CODE § 554.002(b)
Dallas 1985, no writ)). In Moreau, the court of appeals held      (2). Under the statutory definition, it is clearly not enough
that an appropriate law enforcement authority must have:          that a government entity has general authority to regulate,
(1) the power and duty under the law to decide disputes           enforce, investigate, or prosecute. Rather, to determine if
concerning the lawfulness of the matter being reported; (2)       a governmental entity qualifies as an “appropriate law
the power and duty to order a halt or a change in the matter      enforcement authority,” we are bound to construe *320
reported; (3) the power to legislate or regulate with respect     that term as the statute defines it. See TEX. GOV'T CODE
thereto; or (4) the power to arrest, prosecute, or otherwise      § 311.011(b); Faircloth, 898 S.W.2d at 274; Tijerina,
discipline on account of the alleged violation being reported.    846 S.W.2d at 827. And the statute defines that term
Moreau, 697 S.W.2d at 474.                                        as a governmental entity authorized to regulate under or
                                                                  enforce “the law alleged to be violated in the report,” or
                                                                  to investigate or prosecute “a violation of criminal law.”



               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                            5
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

See TEX. GOV'T CODE § 554.002(b). In other words,                             in light of the employee's training and
the particular law the public employee reported violated is                   experience.
critical to the determination. Thus, here, we must determine
whether TxDOT has the authority to regulate under, enforce,       917 S.W.2d 779, 784 (Tex.1996).
investigate, or prosecute a violation of Texas's driving while
intoxicated laws. See TEX. GOV'T CODE § 554.002(b).               The test's first element—the “honesty in fact” element—
                                                                  ensures that an employee seeking a Whistleblower Act
Here, after analyzing the reported violation of law—              remedy believed he was reporting an actual violation of
driving while intoxicated—under the statutory definition,         law. Hart, 917 S.W.2d at 784–85. The test's second element
we conclude that TxDOT was not an appropriate law                 ensures that, even if the reporting employee honestly believed
enforcement authority. TxDOT has no authority to regulate         that the reported act was a violation of law, the reporting
under or enforce the Texas's driving while intoxicated laws.      employee only receives Whistleblower Act protection if a
See TEX. GOV'T CODE § 554.002(b)(1). Nor does it have             reasonably prudent employee in similar circumstances would
authority to investigate or prosecute these criminal laws. See    have believed that the facts as reported were a violation of
TEX. GOV'T CODE § 554.002(b)(2). At most, TxDOT has               law. Hart, 917 S.W.2d at 785. Thus, the Hart test includes
authority to regulate and investigate its employees' conduct      both a subjective and objective element.
only to carry out its internal disciplinary process procedures.
But construing the statutory terms to include a public             [10] We conclude the same test applies to determine
employer's internal disciplinary power would mean all public      if a public employee in good *321 faith believed the
employers with a disciplinary policy for handling employees'      governmental entity to which he reported a violation of
alleged illegal conduct are “appropriate law enforcement          law was an appropriate law enforcement authority. Applying
authorities” for purposes of reporting any alleged violation.     this test upholds the statutory construction principle that,
We reject such an interpretation. See TEX. GOV'T CODE §           when feasible, we should consistently interpret terms used
311.023(5). Accordingly, we hold that, as a matter of law,        throughout a statute. See Barr, 562 S.W.2d at 849; Finlan,
TxDOT is not an appropriate law enforcement authority under       27 S.W.3d at 228. And it allays the same concerns expressed
section 554.002(b) for a public employee to report another        in Hart that public employees receive Whistleblower Act
employee's violation of Texas's driving while intoxicated         protection when they attempt to report illegal activity while,
laws.                                                             at the same time, public employers retain the right to
                                                                  discipline employees who, in reporting the alleged violation,
However, our conclusion that TxDOT is not a governmental          act unreasonably or only with ill motive. See Hart, 917
entity authorized to regulate under, enforce, investigate, or     S.W.2d at 784–85. Thus, in the context of section 554.002(b),
prosecute Texas's driving while intoxicated laws does not end     “good faith” means:
our inquiry. Needham may still obtain Whistleblower Act
                                                                    (1) the employee believed the governmental entity was
protection if he in good faith believed that TxDOT was an
                                                                       authorized to (a) regulate under or enforce the law
appropriate law enforcement authority as the statute defines
                                                                       alleged to be violated in the report, or (b) investigate or
the term. See TEX. GOV'T CODE § 554.002(b). Because we
                                                                       prosecute a violation of criminal law; and
have not defined what “good faith” means in this context, this
issue is also one of first impression.                              (2) the employee's belief was reasonable in light of the
                                                                       employee's training and experience.
Though we have not defined “good faith” under subsection
(b), we have defined the term in the context of subsection        Accordingly, we must determine if, under the test we adopt
(a)'s requirement that the reporting employee have a good         today, there is any evidence to support the conclusion that
faith belief that another employee violated the law. See TEX.     Needham had a good faith belief that he reported the alleged
GOV'T CODE § 554.002(a). Specifically, in Wichita County          drunk driving incident to the appropriate law enforcement
v. Hart, this Court held:                                         authority.

            “Good faith” means that (1) the
                                                                   [11] Here, the court of appeals applied the Hart test to
            employee believed that the conduct
                                                                  determine that Needham had a good faith belief that he was
            reported was a violation of law and (2)
                                                                  reporting the violation to an appropriate law enforcement
            the employee's belief was reasonable


               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                             6
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)
45 Tex. Sup. Ct. J. 631

                                                                      that TxDOT could forward information to another entity
authority. See 76 S.W.3d at 21. The court of appeals relied
                                                                      to prosecute a drunk driving allegation. Therefore, we hold
on the same evidence as Needham does here to argue he
                                                                      that there is no evidence to support a finding that Needham
had a good faith belief under the Hart test. First, the court
                                                                      had a good faith belief that TxDOT was an appropriate
of appeals decided that Needham's persistence in reporting
                                                                      law enforcement authority under the Whistleblower Act to
the drunk driving incident to various TxDOT supervisors
                                                                      report a co-worker's drunk driving. See Bradford v. Vento, 48
demonstrates that he subjectively believed TxDOT was the
                                                                      S.W.3d 749, 754 (Tex.2001); Faircloth, 898 S.W.2d at 275–
appropriate law enforcement authority. Second, the court of
                                                                      76.
appeals concluded that TxDOT supervisors' telling Needham
to whom he should report the co-worker's conduct “reinforces
the reasonableness of Needham's belief that the individuals
to whom he was reporting were appropriate law enforcement                                  IV. CONCLUSION
authorities.” 76 S.W.3d at 24.
                                                                      We hold that, as a matter of law, TxDOT is not an appropriate
But the court of appeals' analysis, and Needham's contention          law enforcement authority under section 554.002(b) to which
that the evidence supports his good faith belief under the            a public employee may report an alleged *322 drunk driving
Hart test, are both based on the erroneous assumption that            incident. We further hold that there is no evidence to support a
section 554.002(b)'s “appropriate law enforcement authority”          finding that Needham had a good faith belief that he reported
definition includes an employer's power to discipline an              the alleged drunk driving to an appropriate law enforcement
employee for allegedly violating a law. 76 S.W.3d 24. As we           authority. Because these conclusions dispose of this appeal,
have already held, the statutory definition's limiting language       we need not reach TxDOT's second argument that Needham's
—regulate under, enforce, investigate, and prosecute—does             causation evidence is legally sufficient. Accordingly, we
not include an employer's power to internally discipline              reverse the court of appeals' judgment and render judgment
its own employees for an alleged violation. Here, the                 that Needham take nothing.
only evidence Needham relies on to support that he could
have subjectively or objectively believed he was reporting
                                                                      All Citations
to the appropriate law enforcement authority is TxDOT's
disciplinary process, his participation therein, and his belief       82 S.W.3d 314, 45 Tex. Sup. Ct. J. 631

End of Document                                                   © 2015 Thomson Reuters. No claim to original U.S. Government Works.




               © 2015 Thomson Reuters. No claim to original U.S. Government Works.                                                 7
U
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




                                                                [7] letter from manufacturer to maker did not constitute a
                     180 S.W .3d 761                            written notice of a claim and, thus, did not trigger accrual of
                Court of Appeals of Texas,                      prejudgment interest.
                       Fort Worth.
                                                                Affirmed.
  TOSHIBA MACHINE CO., AMERICA, Appellant,
                    v.
     SPM FLOW CONTROL, INC., Appellee.
      No. 2–03–156–CV. | Nov. 10, 2005.                         W est Headnotes (43)


                                                                [1]     Sales
                                                                            Effect of Acceptance
                                                                        Sales
Synopsis                                                                    Protest, objection, notice, or conditional
Background: Manufacturer of heavy-duty oilfield pumps                   acceptance, and effect thereof
brought breach of contract action against maker of machine
tools. The 236th District Court, Tarrant County, Thomas                 A buyer's rejection or acceptance of
W ilson Lowe III, J., entered judgment on a jury verdict for            nonconforming goods determines the remedies
manufacturer and awarded manufacturer attorney fees. Both               available to him. V.T.C.A., Bus. & C. §§ 2.601,
parties appealed.                                                       2.711, 2.714.


                                                                        4 Cases that cite this headnote
Holdings: On rehearing, the Court of Appeals, Anne
Gardner, J., held that:

                                                                [2]     Sales
[1] there was some evidence to establish that manufacturer's                Use or other disposition by buyer
use of nonconforming machine tools was reasonable and did
not constitute acceptance nor preclude revocation of
acceptance;


[2] there was some evidence to establish that addendum to
purchase order was part of the parties' contract;


[3] there was some evidence to establish that maker breached
its contracts;


[4] there was some evidence to establish that manufacturer
was damaged in amount of $6,007,226;


[5] there was some evidence to establish that manufacturer
made reasonable efforts to cover and mitigate its damages;


[6] trial court did not abuse its discretion by exceeding the
lodestar amount and awarding manufacturer attorney fees in
amount of $1.5 million through the date of judgment; and



                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           1
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       There was some evidence to establish, in breach              In determining and applying the Texas version of
       of contract action, that heavy-duty oilfield pump            the Uniform Commercial Code (UCC), Texas
       manufacturer's 17,000 hours of use of                        courts may consider and apply pertinent decisions
       nonconforming machine tools over four years was              from other jurisdictions. V.T.C.A., Government
       reasonable and, thus, did not constitute                     Code § 311.028; V.T.C.A., Bus. & C. § 1.103.
       acceptance of machine tools nor preclude
       manufacturer's revocation of acceptance; there
       was evidence that maker of machine tools agreed              1 Cases that cite this headnote
       to provide a specific boring function with both
       machines, that machine tools were delivered
       without the software necessary for boring
       function, that maker repeatedly promised it would     [5]    Sales
       deliver the boring software, that maker did not                  Use or other disposition by buyer
       announce that it would not deliver the software
       until 17 months after delivery of first machine              Factors relevant to a buyer's reasonable use of
       tool, that manufacturer's use of machine tools               nonconforming goods, such that the use does not
       mitigated its damages, and that replacement                  undo a rejection or revocation of acceptance,
       machine tools having the required boring function            include the degree of economic hardship the
       had a long lead time. V.T.C.A., Bus. & C. §§                 buyer would suffer if it discontinued using the
       1.205, 2.602, 2.606, 2.608.                                  defective goods and the reasonableness of the
                                                                    buyer's use after revocation as a method of
                                                                    mitigating damages. V.T.C.A., Bus. & C. §§
       2 Cases that cite this headnote                              1.205, 2.602, 2.606, 2.608.


                                                                    5 Cases that cite this headnote
[3]    Sales
           Use or other disposition by buyer
       Sales
           Acceptance of goods                               [6]    Sales
                                                                        Use or other disposition by buyer
       W hat constitutes reasonable use, such that a
       buyer's use of nonconforming goods does not                  Use of nonconforming goods may be the most
       undo a rejection or revocation of acceptance, is a           appropriate means of achieving mitigation until
       question of fact to be decided under the                     the buyer can obtain suitable replacements.
       circumstances of each case, though generally
       using goods during the time when the seller is
       promising or trying unsuccessfully to cure the               Cases that cite this headnote
       nonconformity will not adversely affect the
       buyer's rights. V.T.C.A., Bus. & C. §§ 2.602,
       2.606, 2.607(b), 2.608.
                                                             [7]    Sales
                                                                        Acceptance of offer
       4 Cases that cite this headnote




[4]    Courts
          Decisions of Courts of Other State




                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                       2
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       There was some evidence to establish that                    Under the Uniform Commercial Code (UCC),
       addendum that heavy-duty oilfield pump                       delivery of goods is a necessary predicate to
       manufacturer attached to its purchase order for              acceptance or rejection, but delivery by itself does
       machine tool was part of contract between                    not determine the buyer's remedies. V.T.C.A.,
       manufacturer and maker of machine tool, in                   Bus. & C. §§ 2.711, 2.713, 2.714.
       manufacturer's breach of contract action;
       manufacturer's purchase order was an offer to buy
       the machine tool, terms and conditions of                    1 Cases that cite this headnote
       purchase recited on back of order stated that
       maker's shipment of the machine tool was
       acceptance of the purchase order, maker shipped
       the machine tool, terms and conditions also stated    [10]   Sales
       that acceptance of order was acceptance of all                   Effect of Acceptance
       terms on front and back of purchase order, merger            Sales
       clause on order stated that the order and all                    Protest, objection, notice, or conditional
       documents referred to on its face constituted                acceptance, and effect thereof
       parties' entire agreement, and front of order
       specifically referred to addendum. V.T.C.A., Bus.            Assuming the seller delivers something, the
       & C. § 2.207.                                                buyer's acceptance or rejection determines the
                                                                    buyer's remedies under the Uniform Commercial
                                                                    Code (UCC). V.T.C.A., Bus. & C. §§ 2.711,
       Cases that cite this headnote                                2.713, 2.714.


                                                                    2 Cases that cite this headnote
[8]    Sales
           Quality, Fitness, and Condition of Goods

       There was some evidence to establish that maker       [11]   Sales
       of machine tools breached contracts to sell                      Acts Constituting Delivery
       machine tools to heavy-duty oilfield pump
       manufacturer, in manufacturer's breach of contract           “Conformity” does not mean substantial
       action; there was evidence that maker of machine             performance, for purposes of determining whether
       tools failed to deliver boring function software,            a seller breached a contract under the Uniform
       tool lists and part programs, process cycle study            Commercial Code (UCC); it means complete
       times and a test run-off of a fluid end for one of           performance. V.T.C.A., Bus. & C. § 2.601.
       manufacturer's pumps, all of which the contracts
       required maker of machine tools to deliver.
                                                                    1 Cases that cite this headnote

       Cases that cite this headnote

                                                             [12]   Damages
                                                                       Particular cases
[9]    Sales
           Effect of delivery




                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          3
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       There was some evidence to establish with                      “Reasonable certainty” necessary to recover on a
       reasonable certainty that heavy-duty oilfield pump             claim for lost profits is not demonstrated when the
       manufacturer was damaged in the amount of                      profits claimed to be lost are largely speculative
       $6,007,226 as a result of breach of contracts by               or a mere hope for success, as from an activity
       maker of machine tools, in manufacturer's breach               dependent on uncertain or changing market
       of contract action; manufacturer's vice president              conditions, on chancy business opportunities, or
       of finance testified, to a reasonable certainty, that          on promotion of untested products or entry into
       manufacturer lost profits in the amount of                     unknown or unproven enterprises.
       $6,038,292, and there was evidence that
       manufacturer incurred incidental damages for
       things such as pouring foundations and designing               Cases that cite this headnote
       tools for the machines.


       Cases that cite this headnote                           [16]   Damages
                                                                         Loss of profits

                                                                      The mere assertion that contracts were lost does
[13]   Damages                                                        not demonstrate a reasonably certain objective
          Loss of profits                                             determination of lost profits.

       A party seeking to recover lost profits must prove
       the loss through competent evidence with                       Cases that cite this headnote
       reasonable certainty.


       Cases that cite this headnote                           [17]   Damages
                                                                         Questions for Jury

                                                                      W hether evidence is speculative or reasonably
[14]   Damages                                                        certain, such that a claim for lost profits is
           Loss of profits                                            established, is a factual issue within the exclusive
       Evidence                                                       province of the jury to determine.
           Damages

       W hile the requirement, that a party seeking to                Cases that cite this headnote
       recover lost profits must prove the loss through
       competent evidence with reasonable certainty, is
       a flexible one in order to accommodate the
       myriad circumstances in which claims for lost           [18]   Damages
       profits arise, at a minimum, opinions or estimates                Loss of profits
       of lost profits must be based on objective facts,
       figures, or data from which the amount of lost
       profits can be ascertained.


       Cases that cite this headnote




[15]   Damages
          Loss of profits




                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          4
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       Reasonably certain lost profits may be proved by             A witness is qualified to testify as an expert if he
       relying on such factors as: (1) the experience of            has the appropriate knowledge, skill, experience,
       the business principals, (2) the nature of the               training, or education. Rules of Evid., Rule 702.
       business, (3) the nature of the market, (4) the
       nature of the client base, (5) the sales force, (6)
       the marketing plan, and (7) the company's track              2 Cases that cite this headnote
       record of sales.


       Cases that cite this headnote                         [22]   Appeal and Error
                                                                        Competency of witness
                                                                    Evidence
                                                                        Determination of question of competency
[19]   Damages
          Loss of profits                                           The decision to admit expert testimony is within
                                                                    the trial court's discretion and will be disturbed on
       W hen a business is already established and                  appeal only if there has been an abuse of that
       making a profit at the time the contract was                 discretion. Rules of Evid., Rule 702.
       breached or the tort committed, pre-existing
       p ro fit, to g ether with o ther facts and
       circumstances, may indicate with reasonable                  1 Cases that cite this headnote
       certainty the amount of profits lost.


       Cases that cite this headnote                         [23]   Evidence
                                                                        Damages

                                                                    Trial court did not abuse its discretion, in breach
[20]   Evidence                                                     of contract action brought by heavy-duty oilfield
           Damages                                                  pump manufacturer against maker of machine
                                                                    tools, by admitting manufacturer's vice president's
       Vice president of finance for oilfield pump                  expert testimony on lost profits, though it was
       manufacturer was qualified to testify as an expert           based on contacts vice president made with
       on issue of manufacturer's lost profits, in                  manufacturer's customers, and vice president's
       manufacturer's breach of contract action against             testimony regarding customer's responses was
       the maker of machine tools purchased by                      hearsay; expert could rely on inadmissible facts or
       manufacturer, where vice president had a BBA in              data to form an opinion if the facts or data were of
       accounting, and he had more than 30 years'                   type reasonably relied upon by experts in the
       experience managing the financial and accounting             particular field, and asking customers was an
       functions of companies engaged in the                        appropriate way to determine why sales were lost.
       manufacture and distribution of various products.            Rules of Evid., Rule 703.
       Rules of Evid., Rule 702.

                                                                    Cases that cite this headnote
       1 Cases that cite this headnote


                                                             [24]   Damages
[21]   Evidence                                                        Loss of profits
           Knowledge, experience, and skill in general




                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          5
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       Testimony by vice president of finance of                     Trial court did not err by failing to submit
       heavy-duty oilfield pump manufacturer regarding               damages questions that provided separate blanks
       manufacturer's lost profits was not so speculative            for each element of damages claimed by
       as to be legally insufficient, in breach of contract          heavy-duty oilfield pump manufacturer, in its
       action against maker of machine tools, though                 breach of contract action against maker of
       vice president failed to determine what price or              machine tools, as there was legally sufficient
       delivery time would have induced customers to                 evidence to support all of the elements in
       buy pumps from manufacturer, where the lost                   manufacturer's damage model.
       sales to which vice president testified concerned
       the loss of sales of proven products to existing
       customers.                                                    Cases that cite this headnote


       Cases that cite this headnote
                                                              [27]   Appeal and Error
                                                                        Submission of Issues or Questions to Jury

[25]   Damages                                                       A trial court commits reversible error when it
          Nature and theory of compensation                          submits a broad-form damage issue that
                                                                     incorporates an element of damages on which
       Damages awarded to heavy-duty oilfield pump                   there is no evidence, as such a submission
       manufacturer, in breach of contract action against            prevents the appellate court from determining
       maker of machine tools, for lost profits due to               whether the jury based its verdict on the
       increased production costs and for lost profits due           improperly submitted element of damage.
       to lost sales did not overlap and did not result in
       a n im p ermissib le d oub le reco ve ry fo r
       manufacturer; though calculation of both elements             Cases that cite this headnote
       hinged on the slow speed of maker's machines, if
       m achines had p e rfo rm e d as exp ected,
       manufacturer would have saved time and made
       more profit on the pumps actually produced, and        [28]   Sales
       with the time saved manufacturer could have also                  Purchase of similar property elsewhere and
       made more pumps and thus additional profits.                  prevention of damages

                                                                     It is immaterial that hindsight may later prove that
       Cases that cite this headnote                                 the method of cover used was not the cheapest or
                                                                     most effective, when determining whether a buyer
                                                                     mitigated its damages and thus was not barred
                                                                     from recovering consequential damages.
[26]   Damages                                                       V.T.C.A., Bus. & C. §§ 2.712, 2.715(b)(1).
           Preparation and Form of Interrogatories or
       Findings
                                                                     2 Cases that cite this headnote




                                                              [29]   Sales
                                                                         Presumptions and burden of proof




                            © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                          6
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       The burden of establishing that damages could                There was some evidence to establish, in breach
       not have been reasonably prevented by cover is               of contract action against maker of machine tools,
       on the buyer seeking consequential damages in a              that heavy-duty oilfield pump manufacturer made
       breach of contract action. V.T.C.A., Bus. & C. §§            reasonable efforts to limit its consequential
       2.712, 2.715(b)(1).                                          damages by making a proper attempt at cover;
                                                                    there was evidence that manufacturer purchased
                                                                    two machines from another maker when it became
       1 Cases that cite this headnote                              clear that machine tools in question would not
                                                                    perform as represented, and that once new
                                                                    machines became operational manufacturer
                                                                    stopped using machines in question. V.T.C.A.,
[30]   Damages                                                      Bus. & C. §§ 2.712, 2.715(b)(1).
          Duty of Person Injured to Prevent or Reduce
       Damage
                                                                    1 Cases that cite this headnote
       Mitigation of damages is a rule requiring the
       injured party to use reasonable diligence to
       minimize his damages.
                                                             [33]   Damages
                                                                       W eight and Sufficiency
       1 Cases that cite this headnote
                                                                    There was some evidence to establish, in breach
                                                                    of contract action against maker of machine tools,
                                                                    that heavy-duty oilfield pump manufacturer
[31]   Damages                                                      mitigated its damages; though machines did not
          Mitigation of damages and reduction of loss               perform as represented, there was evidence that
                                                                    manufacturer used machine tools to the extent
       Though mitigation is similar to cover and a                  possible and reduced its damages in the amount of
       plaintiff in a breach of contract action has the             $2,250 per fluid end, which was one of the
       burden of establishing that damages could not                components of manufacturer's pumps.
       have been reasonably prevented by cover, the
       burden of disproving mitigation lies with the
       defendant.                                                   Cases that cite this headnote


       Cases that cite this headnote
                                                             [34]   Costs
                                                                        Contracts

[32]   Sales
           Purchase of similar property elsewhere and
       prevention of damages




                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                        7
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       Eight factors are weighed in determining                     Court of Appeals reviews a court-ordered award
       reasonableness and necessity of attorney fees for            of attorney fees under the abuse of discretion
       breach of contract claim: (1) time and labor                 standard.
       required, novelty and difficulty of the questions
       involved, and skill required to perform the legal
       services properly, (2) likelihood that acceptance            1 Cases that cite this headnote
       of the particular employment will preclude other
       employment by lawyer, (3) fee customarily
       charged in the locality for similar legal services,
       (4) the amount involved and results obtained, (5)     [37]   Costs
       time limitations imposed by client or by                         Contracts
       circumstances, (6) nature and length of the                  Costs
       professional relationship with client, (7)                       Attorney fees on appeal or error
       experience, reputation, and ability of the lawyer
       or lawyers performing services, and (8) whether              Trial court did not abuse its discretion, in
       the fee is fixed or contingent on results obtained           heavy-duty oilfield pump manufacturer's breach
       or uncertainty of collection before the legal                of contract action against maker of machine tools,
       services have been rendered. V.T.C.A., Civil                 by exceeding the lodestar amount and awarding
       Practice & Remedies Code § 38.001; State Bar                 manufacturer attorney fees in amount of $1.5
       Rules, V.T.C.A., Government Code Title 2,                    million through date of judgment, plus $200,000
       Subtitle G App. A, Art. 10, § 9, Rules of                    if maker was unsuccessful in appeal, plus $35,000
       Prof.Conduct, Rule 1.04(b).                                  if maker filed a petition for review with Supreme
                                                                    Court of Texas and petition was denied, or
                                                                    $65,000 if the Supreme Court granted the petition
       1 Cases that cite this headnote                              but ruled against maker on the merits, as there
                                                                    was some evidence that award of fees was
                                                                    reasonable; manufacturer's attorney testified that
                                                                    his firm's services had a lodestar value of
[35]   Costs                                                        $667,114, that his firm took risk of losing case
           Contracts                                                and receiving nothing over its $150,000 base fee,
                                                                    that $1.5 million were reasonable fees, and that
       One method of computing reasonable attorney                  such fees represented about 25% of jury verdict,
       fees that can be awarded for a valid breach of               which was less than the 30% to 50% typically
       contract claim is the “lodestar method,” or the              charged in contingent fee cases. V.T.C.A., Civil
       product of reasonable hours times a reasonable               Practice & Remedies Code § 38.001; State Bar
       rate. V.T.C.A., Civil Practice & Remedies Code               Rules, V.T.C.A., Government Code Title 2,
       § 38.001; State Bar Rules, V.T.C.A., Government              Subtitle G App. A, Art. 10, § 9, Rules of
       Code Title 2, Subtitle G App. A, Art. 10, § 9,               Prof.Conduct, Rule 1.04(b).
       Rules of Prof.Conduct, Rule 1.04(b).

                                                                    4 Cases that cite this headnote
       20 Cases that cite this headnote


                                                             [38]   Costs
[36]   Appeal and Error                                                 Effect of fee agreement with attorney
          Attorney fees




                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                        8
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




       The use of a multiplier based upon the contingent            A written notice of “claim,” which triggers
       nature of a fee is allowed when awarding attorney            accrual of prejudgment interest 180 days after the
       fees under Texas statutes allowing recovery of               claim is made, need not demand an exact amount
       attorney fees.                                               or list every element of damage. V.T.C.A.,
                                                                    Finance Code § 304.104.

       4 Cases that cite this headnote
                                                                    2 Cases that cite this headnote


[39]   Sales
           Acceptance of goods                               [42]   Appeal and Error
                                                                       Cases Triable in Appellate Court
       Evidence that machine tool never was able to                 Appeal and Error
       perform specific boring function that maker of                  Costs and Allowances
       machine tool agreed to provide and that maker
       repeatedly promised it would deliver software for            In a review of a trial court award of prejudgment
       the boring function before announcing that it                interest, the abuse of discretion standard applies
       would not deliver software raised fact issue for             to the trial court's factual findings as they relate to
       jury as to whether heavy-duty oilfield pump                  prejudgment interest, but the de novo standard
       manufacturer never accepted machine tool, and                applies to the trial court's application of the law to
       thus whether manufacturer did not owe maker                  the facts.
       contract price for machine, in manufacturer's
       breach of contract action against maker.
       V.T.C.A., Bus. & C. § 2.607(a).                              4 Cases that cite this headnote


       Cases that cite this headnote
                                                             [43]   Interest
                                                                        Form and sufficiency of demand

[40]   Interest                                                     Letter fro m he a vy-d uty o ilfield pum p
           Form and sufficiency of demand                           manufacturer to maker of machine tools,
                                                                    complaining that machines did not perform to the
       A written notice of a “claim,” which triggers                specifications represented by maker, did not
       accrual of prejudgment interest 180 days after the           constitute a written notice of a “claim,” and thus
       claim is made, is a demand for compensation or               letter did not trigger accrual of prejudgment
       an assertion of a right to be paid. V.T.C.A.,                interest on judgment for manufacturer in breach
       Finance Code § 304.104.                                      of contract action against maker, where letter
                                                                    urged maker to avoid a future claim by curing the
                                                                    defects rather than to accept an accrued, existing
       3 Cases that cite this headnote                              liability, and letter did not demand payment or
                                                                    assert a right to be paid. V.T.C.A., Finance Code
                                                                    § 304.104.

[41]   Interest
           Form and sufficiency of demand                           1 Cases that cite this headnote




                                                            Attorneys and Law Firms



                           © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             9
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




*767 Munsch, Hardt, Kopf & Harr, PC and Michael G. Foster,         reduce the time required to make a fluid end. SPM enlisted the
Dallas, Jackson W alker, LLP and Albon O. Head, and W illiam       help of Maruka, U.S.A., Inc., a machine tool distributor, to
R. Jenkins, Jr., Fort W orth, and Dorsey & W hitney, LLP and       find suitable replacements. Maruka presented SPM with
Creighton R. Magid, and Kevin B. Bedell, W ashington, D.C.,        literature and quotes for several machine tools, including
for Appellant.                                                     Toshiba's BMC 1000 Horizontal Machining Center
                                                                   (“BMC–1000”).
Kelly Hart & Hallman, PC and Marshall M. Searcy, Jr., Hugh
G. O'Connor, II and Brian S. Stagner, Fort W orth, for
Appellee.                                                          SPM initially rejected Toshiba's quote because the BMC–1000
Panel A: CAYCE, C.J.; GARDNER and McCOY, JJ.                       lacked the ability to perform internal contouring. Soon
                                                                   thereafter, however, Toshiba informed SPM that it had
                                                                   developed new software for the BMC–1000 that made internal
                                                                   contouring possible. Toshiba called the software, and the
               OPINION ON REHEARING                                process it controlled, “orbit boring.” Toshiba told SPM that
                                                                   Toshiba customers in Japan were already using the
                                                                   orbit-boring software on BMC–1000 machines.


ANNE GARDNER, Justice.                                             Toshiba represented that orbit boring on the BMC–1000 could
                                                                   make fluid ends in much less time than SPM's existing tools.
After reviewing Appellant, Toshiba Machine Co., America's          According to Toshiba, orbit boring allowed one cutting tool to
motion for rehearing, we deny the motion. W e withdraw our         do the work of many. The time saved by not having to change
June 2, 2005 opinion and judgment and substitute the               cutting tools would, said Toshiba, reduce the time needed to
following. Our ultimate conclusions remain unchanged.              a make a fluid end, even though the cutting speed of the
                                                                   BMC–1000 was slower than that of SPM's existing equipment.
                                                                   SPM employees testified that Toshiba employees said, at
                                                                   various times before and after the sale, that orbit boring would
I. Introduction                                                    allow SPM to make a fluid end in anywhere from fifteen to
This case arises from the sale of two large machine tools.         fifty hours.
Toshiba Machine Company of America (“Toshiba”) appeals
a $9.25 million judgment on a jury verdict in favor of S.P.M.
Flow Control, Inc. (“SPM”). In twelve issues, Toshiba              A key issue at trial was what the term “orbit boring” meant.
complains of legally insufficient evidence to support jury         According to SPM's president, Dan Lowrance, Toshiba
findings on various aspects of SPM's breach of contract            promoted orbit boring, also called “shake turning,” as a new
claims, mutually exclusive and inconsistent theories of            process that would bring new functionality to the BMC–1000.
recovery, overlapping damage awards, and excessive                 According to Toshiba's regional sales manager, Steve
attorney's fees. In a single issue, SPM complains that the trial   Oliphant, orbit boring on the BMC–1000 was simply a
court used the wrong date to compute prejudgment interest.         combination of older techniques called “Hale Interpolation”
W e affirm the judgment in all respects.                           and “Archimedes Interpolation.” Complicating the issue,
                                                                   Toshiba's parent company in Japan developed a new
                                                                   “concept” machine tool, the NX–76, to showcase what it
II. Factual and Procedural Background                              touted as a “revolutionary” new process— a process also called
SPM manufactures heavy-duty oilfield pumps. The pumps              “orbit boring.” The parties hotly disputed whether shake
consist of two components: *768 a “power end” and a “fluid         turning on the BMC–1000 was the same process as orbit
end.” SPM makes the fluid ends from blocks of solid steel          boring on the NX–76. SPM argued that Toshiba sold SPM
weighing 3,000–4,000 pounds. The fluid ends have a complex         orbit boring but delivered Hale and Archimedes Interpolation.
internal shape machined through a process called “internal         Toshiba argued that orbit boring and shake turning were two
contouring.”                                                       names for the same process, regardless of which machine was
                                                                   involved.

In 1996, SPM began to shop for new machine tools to make
fluid ends. The machines SPM used at the time dated from the       In December 1997, SPM issued a purchase order for a
1960s and required 115 hours to make a single fluid end.           BMC–1000 that Toshiba had available for immediate delivery.
SPM's primary goal in replacing the old machines was to            SPM's purchase order incorporated a proposal from Maruka


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           10
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




in which Maruka listed “orbit machining” as a $20,000 option,      to the field. This was sold to SPM.... W hat further complicates
and stipulated that Toshiba would provide a five-year warranty     this definition issue is that Mr. Oki [sic] told [M aruka] that
on “[o]rbit machining software, including support, updates and     Orbit and Hale were two different things and that the
revisions as they become available.” SPM also attached to the      BMC1000 was not capable of Orbit.
purchase order a list of terms captioned “Addendum ‘A’.”
Those terms included the following:

  • Toshiba would machine a fluid end on a BMC–1000 from           On May 8, 1998, SPM complained that the BM C–1000 did
  a raw forging that SPM had already shipped to Japan, and         not perform as expected and requested written confirmation
  provide to SPM the data gathered during the machining            that the machine could produce fluid ends. Toshiba replied
  process;                                                         that Ohki would return to Fort W orth later in May and again
                                                                   attempt to install the orbit boring software. Ohki returned to
  *769 • Toshiba would provide a process cycle time, i.e., the     SPM on May 18, but still the BMC–1000 could not perform
  time it should take to machine a fluid end on the                internal contouring. Around the same time, SPM offered to
  BMC–1000;                                                        return the machine to Toshiba in exchange for a refund of its
                                                                   down payment if Toshiba had any concern about the
                                                                   BMC–1000's ability to perform. Toshiba promised that a
  • Toshiba would provide the technical support and training       software solution was imminent.
  needed to make a fluid end on the BMC–1000; and

                                                                   Meanwhile, SPM ordered a second machine tool from Toshiba
  • SPM's acceptance of the BMC–1000 was conditioned on            in late July. This second tool, the BMC–800, was slightly
  the successful production of a fluid end on the machine at       smaller than the BMC–1000 but had the same purported
  SPM's factory.                                                   functionality— including orbit boring. Toshiba advised SPM
                                                                   that it would not ship the BMC–800 until SPM paid the
                                                                   $742,500 balance due on the BMC–1000. On August 10, SPM
Toshiba accepted SPM's purchase order and down payment             paid the BMC–1000 balance.
without commenting on Addendum A. Toshiba delivered the
BMC–1000 to SPM's factory in March 1998. Significantly,
Toshiba delivered the machine without the software needed to       Five days later, Toshiba sent SPM an “acceptance” of the
perform orbit boring.                                              BMC–800 purchase order. The acceptance stated that “there
                                                                   is no orbit boring software” and “there will never be any
                                                                   revisions or updates” to the software provided with the
                                                                   BMC–800. W hen SPM confronted Toshiba about these
In late April 1998, Toshiba sent a programmer, Takeshi Ohki,       statements, Toshiba dismissed them as a miscommunication.
to install orbit boring software on the BMC–1000 at SPM's          Toshiba said it planned to showcase the orbit boring software
factory. Ohki testified that this was the first time he had        along with the new NX–76 at a Chicago tool show in
attempted to combine Hale Interpolation and Archimedes             September. SPM would receive the software immediately after
Interpolation to create the orbit boring function on a             the show, promised Toshiba.
BMC–1000. He was unable to make the software perform to
SPM's requirements and returned to Japan.
                                                                   SPM sent a representative to the Chicago tool show. Toshiba
                                                                   did exhibit orbit boring on the new NX–76, but told SPM's
Soon after Ohki left SPM, Toshiba's Steve Oliphant sent a          *770 representative that the NX–76 software would not be
memorandum to Tony Tani, Toshiba's assistant general               available for the BMC–1000 until January.
manager, raising several issues related to the BMC–1000.
Oliphant wrote:
                                                                   SPM and Toshiba continued to wrangle over the BMC
SPM is a Beta site for this very unique [orbit boring] software.   performance issues, and especially the orbit boring software,
                                                                   for another year. As late as May 13, 1999, Toshiba's Oliphant
Orbit Boring vs Hale Interpolation: There seems to be some         sent a memorandum to SPM promising delivery of the orbit
confusion as to the definition and capabilities of these two       boring software within two months. SPM, Maruka, and
programs. In the beginning we were told that the Orbit Boring      Toshiba scheduled a meeting at SPM's factory for August
option was available and process descriptions were supplied        1999. At the meeting, Toshiba definitively announced that


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           11
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




SPM would not receive the orbit boring software.
                                                                   A. Toshiba's Issues

From June 1998, when the BMC–1000 became operational at            1. Did SPM accept the machines as a matter of law?
SPM, until November 2001, SPM used the Toshiba machines            A threshold question in this case, and key to several of
extensively to help make fluid ends. Although the lack of orbit    Toshiba's issues, is whether SPM accepted or rejected the
boring software made the Toshibas useless for internal             Toshiba machines. The jury found that SPM accepted but later
contouring, they could be used for rough machining. Using the      revoked its acceptance of the BMC–1000 and failed to find
Toshiba machines for 15,000 hours in conjunction with 18,600       that SPM accepted the BMC–800. In its second *771 issue,
hours on other machines, SPM produced 344 fluid ends at the        Toshiba argues that there is no evidence to support the jury's
average rate of 100 hours per fluid end— down from 115 hours       finding that SPM revoked its acceptance of the BMC–1000,
per fluid end before the Toshibas went online, but far longer      and there is conclusive evidence that SPM accepted the
than the fifteen to fifty hours predicted by Toshiba.              BMC–800. The gist of Toshiba's argument is that SPM's
                                                                   extensive use of the BMC machines— 17,000 hours of use
                                                                   over four years— constitutes acceptance and precludes
W hen Toshiba announced that SPM would not receive the             revocation of acceptance as a matter of law. W e disagree.
orbit boring software, SPM began to shop for machines to
replace the Toshibas. In May 2000, SPM purchased the first
of two machine tools from Toshiba rival Goss Trevisan. The         a. Standards of review
first Goss went online in July 2000. A second Goss went
online in May 2001. In November 2001, SPM stopped using             (1) No evidence
the Toshiba machines altogether. SPM offered testimony at          W e review the jury's finding that SPM revoked its acceptance
trial that the Goss machines could produce a complete fluid        of the BMC–1000 under the “no evidence” standard. In
end in thirty-four hours.                                          determining a “no evidence” issue, we are to consider only the
                                                                   evidence and inferences that tend to support the finding of the
                                                                   disputed fact and disregard all evidence and inferences to the
In February 2000, SPM sued Toshiba for fraud, negligent            contrary.Bradford v. Vento, 48 S.W .3d 749, 754 (Tex.2001);
misrepresentation, breach of contract and breach of warranty. 1    Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W .2d 444, 450
Toshiba counterclaimed for the unpaid balance of the               (Tex.1996); In re King's Estate, 150 Tex. 662, 244 S.W .2d
BMC–800.                                                           660, 661 (1951). Anything more than a scintilla of evidence is
                                                                   legally sufficient to support the finding. Cont'l Coffee, 937
                                                                   S.W .2d at 450; Leitch v. Hornsby, 935 S.W .2d 114, 118
The case was tried to a jury. SPM claimed three broad              (Tex.1996). More than a scintilla of evidence exists if the
categories of damages: refund of the $898,200 SPM paid for         evidence furnishes some reasonable basis for differing
the two Toshiba machines; $969,945 in incidental expenses          conclusions by reasonable minds about the existence of a vital
for items such as pouring foundations for the Toshiba              fact. Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co., 77 S.W .3d
machines and time spent designing tools for the Toshiba            253, 262 (Tex.2002). A “no evidence” issue may only be
machines; and $6,038,492 in lost profits.                          sustained when (1) the record discloses a complete absence of
                                                                   evidence of a vital fact, (2) the court is barred by rules of law
                                                                   or of evidence from giving weight to the only evidence offered
The jury returned a verdict in favor of SPM on every cause of      to prove a vital fact, (3) the evidence offered to prove a vital
action. SPM elected to recover on the basis of its breach of       fact is no more than a mere scintilla, or (4) the evidence
contract claim, for which the jury awarded SPM $3,003,613          establishes conclusively the opposite of a vital fact. Uniroyal
for each machine, for a total of $6,007,226. The issue of          Goodrich Tire Co. v. Martinez, 977 S.W .2d 328, 334
attorney's fees was submitted to the trial court by agreement of   (Tex.1998), cert. denied, 526 U.S. 1040, 119 S.Ct. 1336, 143
the parties. The trial court found that SPM was entitled to $1.5   L.Ed.2d 500 (1999).
million in attorney's fees through the date of judgment, plus
additional fees if Toshiba unsuccessfully appealed the trial
court's judgment. The trial court also found that SPM was          (2) M atter of law
entitled to prejudgment interest beginning on the day SPM          W e review the jury's failure to find that SPM accepted the
filed suit through the date of judgment. Both parties appealed.    BMC–800 under the “as a matter of law” standard. W hen an
                                                                   appellant attacks the legal sufficiency of an adverse answer to
                                                                   an issue on which he had the burden of proof, the appellant
III. Discussion                                                    must overcome two hurdles. Victoria Bank & Trust Co. v.


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            12
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




Brady, 811 S.W .2d 931, 940 (Tex.1991). First, the record          After rejection or revocation of acceptance, any exercise of
must be examined for evidence that supports the finding, while     ownership by the buyer with respect to the goods is wrongful
ignoring all evidence to the contrary. Dow Chem. Co. v.            as against the seller. Tex. Bus. & Com.Code Ann. §
Francis, 46 S.W .3d 237, 241 (Tex.2001). Second, if there is       2.602(b)(1).
no evidence to support the finding, then the entire record must
be examined to see if the contrary proposition is established as
a matter of law. Id.; Sterner v. Marathon Oil Co., 767 S.W .2d     [2] As noted above, the gist of Toshiba's argument is that
686, 690 (Tex.1989). The issue should be sustained only if the     SPM's extensive use of the BMC machines— 17,000 hours of
contrary proposition is conclusively established. Dow Chem.,       use over four years— constitutes acceptance and precludes
46 S.W .3d at 241–42.                                              revocation of acceptance as a matter of law. According to
                                                                   Toshiba, use equals irrevocable acceptance because it is an act
                                                                   inconsistent with Toshiba's ownership under § 2.606(a)(3) and
b. Analysis                                                        a wrongful exercise of ownership under § 2.602(b)(1).
[1] W here goods fail to conform to the contract, the buyer may    Toshiba cites several Texas and foreign cases to support its
reject or accept the goods. Tex. Bus. & Com.Code Ann. §            argument. Generally, these cases stand for the proposition that
2.601 (Vernon 1994). A buyer's rejection or acceptance of          a buyer who exercises dominion and control over
nonconforming goods determines the remedies available to           nonconforming goods accepts those goods. See, e.g., Bacchus
him. Id. §§ 2.711, 2.714 (Vernon 1994); Southwestern Bell          Indus., Inc. v. Frontier Mech. Contractors, 36 S.W .3d 579,
Tel. Co. v. FDP Corp., 811 S.W .2d 572, 576 (Tex.1991) (op.        585 (Tex.App.-El Paso 2000, no pet.) (holding that buyer who
on reh'g); Paul Mueller Co. v. Alcon Labs., Inc. 993 S.W .2d       made substantial repairs and modifications to air conditioning
851, 855 (Tex.App.-Fort W orth 1999, no pet.).                     units accepted them as a matter of law); Danjee, Inc. v.
                                                                   Addressograph Multigraph Corp., 44 N.C.App. 626, 262
                                                                   S.E.2d 665, 669–70 (1980) (stating in dicta that revocation not
A buyer accepts goods if he agrees to accept them despite their    available to buyer who, with full knowledge of defects, used
nonconformity, fails to make an effective rejection, or does       printing presses for a “long period of time” and never
any act inconsistent with the seller's ownership. Tex. Bus. &      attempted to reject them or revoke acceptance); Explorers
Com.Code Ann. § 2.606 (Vernon 1994). W here a buyer                Motor Home Corp. v. Aldridge, 541 S.W .2d 851, 853–54
accepts goods with knowledge of a non-conformity, *772 the         (Tex.App.-Beaumont 1976, writ ref'd n.r.e.) (holding that
buyer may not revoke acceptance unless the acceptance was          buyers who traveled 14,000 miles in motor home over two
made on the reasonable assumption that the non-conformity          years did not effectively reject the motor home); Bowen v.
would be seasonably cured. Id. §§ 2.607(b), 2.608(a)(1)            Young, 507 S.W .2d 600, 603–04 (Tex.App.-El Paso 1974, no
(Vernon 1994). W here a buyer accepts goods without                writ) (holding that buyer who moved into nonconforming
knowledge of a non-conformity, the buyer may revoke its            mobile home and converted its heater from electric to gas
acceptance if acceptance was reasonably induced either by the      accepted the home as a matter of law).
difficulty of discovery before acceptance or by the seller's
assurances. Id. § 2.608(a)(2).
                                                                   [3] [4] But the cases cited by Toshiba do not give a complete
                                                                   answer to the question of whether “use equals acceptance”
Rejection of goods must occur within a reasonable time after       under the UCC. Most courts have indicated that whether the
their delivery. Id. § 2.602(a) (Vernon 1994). Likewise,            buyer's continued use of goods undoes a purported rejection
revocation of acceptance must occur a reasonable time after        or revocation of acceptance depends upon whether the use was
the buyer discovers the grounds for revocation. Id. § 2.608(b).    reasonable. Anderson on the Uniform Commercial Code, §
W hether rejection or revocation occurred within a reasonable      2–608:281 (2004); W illiston on Contracts, §§ 40:19, 40:30
time depends on the facts of a particular case.Id. § 1.205(a)      (4th ed.). W hat constitutes reasonable use is a question of fact
(Vernon Supp.2004–05) (providing that “[w]hether a time for        to be decided under the circumstances of each case, but courts
taking an action required by this title is reasonable depends on   generally hold that *773 using goods during the time when the
the nature, purpose, and circumstances of the action.”);           seller is promising or trying unsuccessfully to cure the
Purnell v. G uar. Bank, 624 S.W .2d 357, 359                       nonconformity will not adversely affect the buyer's rights.
(Tex.App.-Dallas 1981, writ ref'd n.r.e.) (holding that whether    W illiston on Contracts, § 40:30; see Aluminum Line Prods.
thirty-month delay precluded revocation of acceptance of           Co. v. Rolls–Royce Motors, Inc., 98 Ohio App.3d 759, 649
defective pleasure boat was a fact question); Don's Marine,        N.E.2d 887, 894 (1994) (holding that buyer was not precluded
Inc. v. Haldeman, 557 S.W .2d 826, 829 (Tex.App.-Corpus            from revoking acceptance of automobile after three years and
Christi 1977, writ ref'd n.r.e.).                                  15,000 miles of use when seller made repeated attempts to
                                                                   repair the vehicle, and buyer's continued use after revocation


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            13
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




did not undo revocation); 2 North Am. Lighting, Inc. v. Hopkins      machine arrived. According to Lowrance, Toshiba assured
Mfg., Inc., 37 F.3d 1253, 1258–59 (7th Cir.1994) (holding            SPM that its programmer would travel to SPM's factory “very
seller's repeated promises to update software for headlight          quickly” and install the software. Toshiba's programmer
testing apparatus justified buyer's use of apparatus during          attempted but failed to install the software in April 1998 and
two-year delay in revoking acceptance); Wilk Paving, Inc. v.         again in May. Lowrance testified that after the programmer's
Southworth Milton, Inc., 162 Vt. 552, 649 A.2d 778, 782              first attempt, Lowrance told Toshiba's assistant general
(1994) (holding buyer's continued use of asphalt paving              manager, Tony Tani, that SPM would return the BMC–1000
machine after revocation of acceptance was reasonable where          for a refund if Toshiba had any doubt about its ability to make
the seller continued to assure buyer that seller could repair        fluid ends. Chris W all, SPM's director of manufacturing,
machine); Four Sons Bakery, Inc. v. Dulman, 542 F.2d 829,            admitted that SPM accepted the BMC–1000 when it paid the
832 (10th Cir.1976) (holding seller's repeated assurances that       $742,500 balance due, but Lowrance testified that SPM paid
it would fix commercial oven justified continued use of oven         the balance only because Toshiba assured SPM that resolution
after revocation of acceptance). As the Seventh Circuit held in      of the orbit boring problem was “right around the corner” and
North American Lighting, a “use equals acceptance” argument          refused to ship the BMC–800 otherwise.


                                                                     Toshiba delivered the BMC–800 in September 1998.
comes dangerously close to suggesting a rule that would allow        Lowrance testified that Toshiba's Steve Oliphant told him that
sellers to ‘lock in’ purchasers of goods by promising them the       SPM would receive the orbit boring software immediately
moon— only to bring them back to earth when they attempted           following the debut of the NX–76 in Chicago that same
to revoke the acceptance that they were persuaded to give            month. Chris W all testified that Oliphant told him on
because of their failure to fully understand a substantial defect.   September 18, 1998 that Toshiba was working on the orbit
North Am. Lighting, 37 F.3d at 1258–59.                              boring software and would deliver it in January of the
[5] [6] Other factors relevant to a buyer's reasonable use of        following year. On May 13, 1999, Oliphant sent a memo to
nonconforming goods include the degree of economic                   SPM 's George Reeve in which he stated that Toshiba would
hardship the buyer would suffer if it discontinued using the         deliver orbit boring software within two months. Gene Burkes,
defective goods and the reasonableness of the buyer's use after      general manager of Maruka U.S.A., testified that he called
revocation as a method of mitigating damages. Liarikos v.            Oliphant on SPM's behalf at least a dozen times between
Mello, 418 Mass. 669, 639 N.E.2d 716, 719 (1994) (holding            January and May 1999. According to Burkes, Oliphant “kept
that continued use of automobile after revocation of                 saying the software is coming.” In August 1999, Toshiba
acceptance was reasonable where buyer relied on car to run           announced that it would not deliver orbit boring software to
her business). Use of nonconforming goods may be the most            SPM.
appropriate means of achieving mitigation until the buyer can
obtain suitable replacements. Fablok Mills, Inc. v. Cocker
Mach. & Foundry Co., 125 N.J.Super. 251, 310 A.2d 491,               Ray Gilbert, SPM's vice president of finance, testified that the
494 (1973) (holding two-year delay in revocation of                  BMC machines were worthless to SPM without the orbit
acceptance and extensive use by buyer of defective knitting          boring function. Nevertheless, as detailed later in this opinion
machines was reasonable, during which seller attempted to fix        under the issues of damages and mitigation, SPM cut the time
the machines on many occasions); see Deere & Co. v.                  needed to make a fluid end from 115 hours to 100 hours by
Johnson, 271 F.3d 613, 619–20 (5th Cir.2001) (applying               making what use it could of the BMC machines, though the
Mississippi law and holding that farmer's continued use of           production time was far longer than the fifteen to fifty hours
defective tractor after revoking acceptance was reasonable           SPM expected to achieve. It is undisputed that SPM used the
because tractor was essential to farmer's work, replacement          BMC machines for 17,000 hours.
was difficult to obtain, and farmer mitigated his damages by
using the tractor).
                                                                     W e note that it is unclear from the record when and how SPM
                                                                     notified Toshiba that it was revoking its acceptance of the
                                                                     BMC–1000 and rejecting the BMC–800. But Toshiba does
In our case, Toshiba agreed to provide the orbit boring              not complain of lack of notice, so we will not dwell on this
function with both BMC machines. SPM's president, Dan                point.
Lowrance, *774 testified that Toshiba delivered the
BMC–1000 in March 1998 without the software needed to
perform orbit boring. Lowrance testified that SPM asked              W e turn to the question of SPM's revocation of acceptance of
Toshiba about the missing orbit boring software soon after the       the BMC–1000 under section 2.608. The non-conformity


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                            14
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




identified by SPM was the lack of the orbit boring function.       themselves to an agreement regarding the BMC–1000 that
Gilbert testified that the lack of orbit boring substantially      included all provisions contained in Addendum A” to SPM's
impaired the BMC–1000's value to SPM. The jury could               purchase order. Toshiba argues that there is no evidence to
reasonably conclude that SPM did not discover the                  support the jury's finding.
non-conformity until Toshiba announced in August 1999 that
it would not deliver the orbit boring software, and that SPM's
failure to discover the non-conformity was induced by              Toshiba relies on section 2.207 of the Texas Business and
Toshiba's many assurances that it would deliver the orbit          Commerce Code. Tex. Bus. & Com.Code Ann. § 2.207
boring software. Both Toshiba's assurances and SPM's use of        (Vernon 1994). Section 2.207, captioned “Additional Terms
the BMC–1000 to mitigate its damages until it could obtain         in Acceptance or Confirmation” and often referred to as the
replacements tend to support the conclusion that SPM's             “battle of the forms” section of the UCC, provides in part as
extensive use of the BMC–1000 was reasonable, before and           follows:
after SPM revoked its acceptance. Moreover, Chris W all
testified that replacement machines suitable to SPM's needs        (a) A definite and seasonable expression of acceptance or a
were not easy to obtain, and the replacement machines *775         written confirmation which is sent within a reasonable time
SPM ultimately bought had a long lead time. W hether SPM's         operates as an acceptance even though it states terms
use of the BMC–1000 was reasonable was a fact question for         additional to or different from those offered or agreed upon,
the jury to decide. The evidence supports the conclusion that      unless acceptance is expressly made conditional on assent to
SPM's use was reasonable. W e hold that there was more than        the additional or different terms.
a scintilla of evidence to support the jury's finding that SPM
revoked its acceptance of the BMC–1000.                            (b) The additional terms are to be construed as proposals for
                                                                   addition to the contract. Between merchants such terms
                                                                   become part of the contract unless:
W ith regard to the BMC–800, the same factors— Toshiba's
repeated assurances of an imminent fix, SPM's use of the
BMC–800 to mitigate its damages, and the difficulty of             (1) the offer expressly limits acceptance to the terms of the
obtaining replacement machines—tend to justify SPM's use of,       offer;
and delay in rejecting, the BMC–800. W e hold that there is
more than a scintilla of evidence to support the jury's failure
to find that SPM accepted the BMC–800.                             (2) they materially alter it; or


W e overrule the part of Toshiba's second issue that concerns      (3) notification of objection to them has already been given or
acceptance of the BMC machines (the same issue raises other        is given within a reasonable time after notice of them is
complaints, which we address in the next section of this           received.
opinion). This conclusion is the starting point for our analysis
of Toshiba's other issues.
                                                                   (c) Conduct by both parties which recognizes the existence of
                                                                   a contract is sufficient to establish a contract for sale although
2. Did Toshiba breach the contracts?                               the writings of the parties do not otherwise establish a
Also in its second issue, Toshiba contends that even if SPM        contract. In such case the terms of the particular contract
rejected the machines, there is no evidence that Toshiba           consist of those terms on which the writings of the parties
breached sales contracts. Toshiba argues that its failure to       agree, together with any supplementary terms incorporated
deliver orbit boring software cannot give rise to a breach of      *776 under any other provisions of this title.
contract claim and that there is no evidence to support the
jury's finding that Toshiba breached the contracts. As a
subissue, Toshiba argues that Addendum A to the BMC–1000
contract was not a part of the agreement between Toshiba and       Significantly, Toshiba does not argue that Maruka's December
SPM and therefore could not give rise to a breach of contract      16, 1997 proposal to SPM was an offer. Nor does Toshiba
claim.                                                             point to any other writing that it claims was an offer accepted
                                                                   by SPM's purchase order. Rather, Toshiba contends that this
                                                                   case is governed by section 2.207(c); according to Toshiba,
a. W as Addendum A part of the contract?                           the writings of the parties do not establish a contract.
[7] The jury found that Toshiba and SPM intended to “bind


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             15
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




Toshiba's argument fails because SPM's purchase order was an      [11] A seller breaches a contract if its delivery fails in any
offer to buy the BMC–1000. The “Terms and Conditions of           respect to conform to the contract. Id. § 2.601. This is
Purchase” recited on the back of the purchase order state that    sometimes referred to as the “perfect tender” rule. Tex. Imps.
Toshiba's shipment of the BMC–1000 constitutes acceptance         v. Allday, 649 S.W .2d 730, 737 (Tex.App.-Tyler 1983, writ
of the purchase order. Therefore, Toshiba accepted the            ref'd n.r.e.). Conformity does not mean substantial
purchase order when it shipped the BMC–1000 to SPM. The           performance; it means complete performance. Printing Ctr.,
“Terms and Conditions of Purchase” also state that acceptance     Inc. v. Supermind Publ'g Co., 669 S.W .2d 779, 783
of the purchase order is acceptance of all terms on the front     (Tex.App.-Houston [14th Dist.] 1984, no writ).
and back of the purchase order. And the merger clause on the
back of the purchase order recites that “[t]his purchase order,
and any documents referred to on the face hereof, constitute      *777 SPM identifies four specific contract items that Toshiba
the entire agreement between the parties.” (Emphasis added.)      failed to deliver: the orbit boring software, tool lists and part
The front of the purchase order specifically refers to            programs, process cycle time studies, and a test run-off of a
Addendum A. George Reeve, the SPM employee who                    fluid end. SPM offered evidence that Toshiba failed to deliver
generated the purchase order and Addendum A, testified that       these items. Except for the orbit boring software, Toshiba does
he discussed the specific terms of the addendum with              not dispute its failure to deliver these items. Therefore, SPM
Toshiba's Oliphant and Maruka's Davenport during a                produced at least some evidence to show that Toshiba's
three-hour phone conference on December 9, 1998 and that          delivery did not conform to the contract in all respects.
Toshiba never objected to the Addendum A terms after it
received the purchase order. W e hold that SPM adduced more
than a scintilla of evidence to support the jury's finding that   W e hold that Toshiba's delivery of the BMC machines does
Addendum A was part of the contract.                              not preclude SPM's beach of contract claims and that there is
                                                                  some evidence to support the jury's findings that Toshiba
                                                                  breached the contracts. W e overrule Toshiba's second issue.
b. Is there any evidence of breach?
[8] Next, Toshiba argues that there is no evidence to support
the jury's finding that it breached the contracts. In the same    3. Damages
subissue, Toshiba claims that its delivery of the BMC             Toshiba's first, fourth, sixth, seventh, and eleventh issues
machines to SPM precludes a breach of contract claim, even        complain about various aspects of SPM's damages.
if the machines were missing critical features. W e disagree.

                                                                  a. Is there any evidence to support SPM 's lost profits?
[9] [10] The remedies available to a buyer under the UCC          [12] In issue 7a, 3 Toshiba complains that there is no evidence
depend on whether the buyer accepts or rejects the goods in       to support SPM's claim of lost profits. In its closely-related
question. See Tex. Bus. & Com.Code Ann. §§ 2.711, 2.714.          issue 4, Toshiba complains that the trial court erred by
If a buyer rejects goods (or revokes acceptance), the buyer is    admitting the testimony of SPM's damage witness, Ray
entitled to the remedies set forth in sections 2.711 and 2.713.   Gilbert, on the question of lost profit. W e disagree.
Id. § 2.713 (Vernon 1994). If, on the other hand, a buyer
accepts goods, the buyer's remedy is determined by section
2.714. Because a buyer cannot accept what a seller does not       [13] [14] [15] [16] [17] [18] [19] A party seeking to recover
deliver, delivery of goods is a necessary predicate to            lost profits must prove the loss through competent evidence
acceptance or rejection; but delivery by itself does not          with reasonable certainty. Szczepanik v. First Southern Trust
determine the buyer's remedies. Assuming the seller delivers      Co., 883 S.W .2d 648, 649 (Tex.1994); VingCard A.S. v.
something, the buyer's acceptance or rejection determines the     Merrimac Hospitality Sys., Inc., 59 S.W .3d 847, 863
buyer's remedies.                                                 (Tex.App.-Fort W orth 2001, pet. denied). W hile this test is a
                                                                  flexible one in order to accommodate the myriad
                                                                  circumstances in which claims for lost profits arise, at a
It is undisputed that Toshiba delivered the BMC machines to       minimum, opinions or estimates of lost profits must be based
SPM. The jury found that SPM rejected the BMC–800 and             on objective facts, figures, or data from which the amount of
revoked its acceptance of the BMC–1000. The question, then,       lost profits can be ascertained.Tex. Instruments, Inc. v.
is whether SPM produced any evidence to support the jury's        Teletron Energy Mgmt., Inc., 877 S.W .2d 276, 279
finding that Toshiba breached the contracts.                      (Tex.1994); Szczepanik, 883 S.W .2d at 649; VingCard A.S.,
                                                                  59 S.W .3d at 863. In other words, “reasonable certainty” is not
                                                                  demonstrated when the profits claimed to be lost are largely


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           16
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




speculative or a mere hope for success, as from an activity         quotes to ascertain whether the cancellation or rejection was
dependent on uncertain or changing market conditions, on            due to SPM's price or delivery time. Gilbert then multiplied
chancy business opportunities, or on promotion of untested          the gross sales lost because of price or delivery time by SPM's
products or entry into unknown or unproven enterprises.             28.68% profit margin to compute SPM's net lost profits.
Teletron Energy Mgmt., Inc., 877 S.W .2d at 279–80;                 Gilbert derived the profit margin from SPM's consolidated
VingCard A.S., 59 S.W .3d at 863. The mere assertion that           financial statements for the years 1994 through 2001. W hile
contracts were lost does not demonstrate a reasonably certain       Gilbert admitted that he did not know precisely what price or
objective determination of lost profits. Holt Atherton Indus.,      delivery time SPM would have had to quote to make the sales
Inc. v. Heine, 835 S.W .2d 80, 85 (Tex.1992). W hether              in question, he opined that SPM would have made the sales if
evidence is speculative or reasonably certain is a factual issue    the Toshiba machines could make a fluid end in thirty-five
within the exclusive province of the jury to determine.             hours. He attributed a total of $2,362,821 in lost profits to lost
VingCard A.S., 59 S.W .3d at 863. Reasonably certain lost           fluid end sales.
profits may be proved by relying on such factors as (1) the
experience of the business principals, (2) the nature of the
business, (3) the nature of the market, (4) the nature of the       Gilbert's third category of lost profit arose from lost sales of
client base, (5) the sales force, (6) the marketing plan, and (7)   flow control products—valves, piping, and connections— that
the company's track record of sales. Id. at 864. For example,       SPM would have sold as part of its lost fluid end sales. Gilbert
when a business is already established and making a profit at       examined SPM 's sales history to determine which customers
the time the contract was breached or the tort committed,           typically purchased flow control products along with pumps
pre-existing profit, together with other facts and                  and fluid ends. He testified that the fluid end sales SPM lost to
circumstances, may indicate with reasonable certainty the           those customers would have generated additional sales of
amount of profits lost. Teletron Energy Mgmt., Inc., 877            $1,317,022 in flow control products. Gilbert multiplied the
S.W .2d at 279; *778 Anthony Equip. Corp. v. Irwin Steel            lost flow control sales by SPM's 28.68 percent profit margin
Erectors, Inc., 115 S.W .3d 191, 204 (Tex.App.-Dallas 2003,         for a lost net profit of $377,721.
pet. dism'd).

                                                                    Finally, Gilbert testified that SPM had the same customer base
Ray Gilbert, SPM's vice president of finance, was SPM's sole        for decades. SPM sold the same product lines “for some time,”
witness on damages. To begin our analysis, we will summarize        and those product lines had always been profitable. He
Gilbert's testimony on the question of SPM's lost profits.          testified that SPM has turned a profit since at least 1991, the
                                                                    year Gilbert joined the company.

Gilbert broke SPM's lost profits into three components. First
was the increased cost of producing the 344 fluid ends SPM          [20] [21] [22] Toshiba challenges Gilbert's testimony on three
made in part on the Toshiba machines. Gilbert testified that it     grounds. First, Toshiba argues that Gilbert did not qualify as
took SPM 34,025 hours to produce the 344 fluid ends. From           an expert. A witness is qualified to testify as an expert if he
that he subtracted 12,040 hours, the time it would have taken       has the appropriate knowledge, skill, experience, training, or
to produce 344 fluid ends if the Toshiba machines could             education. Roberts v. Williamson, 111 S.W .3d 113, 121
produce a fluid end in thirty-five hours. Gilbert then multiplied   (Tex.2003); Tex.R. Evid. 702. The decision to admit expert
the remainder, 21,985 hours, by SPM's “shop rate” of $150           testimony is within the trial court's discretion and will be
per hour, for a total of $3,297,750. Gilbert testified that $150    disturbed on appeal only if there has been an abuse of that
per hour was the industry standard shop rate; he also produced      discretion. Gammill v. Jack Williams Chevrolet, Inc., 972
calculations to show that the shop rate was reasonably accurate     S.W .2d 713, 718–19 (Tex.1998). In this case, the specific
for SPM.                                                            subject matter of Gilbert's *779 testimony is SPM's damages
                                                                    arising from its purchase of the Toshiba machines. The
                                                                    question we consider is whether Gilbert has specialized
Gilbert's second category of lost profits stemmed from the          knowledge that would assist the jury in understanding that
sales of 296 fluid ends SPM lost because it quoted prices too       issue. See Helena Chem. Co. v. Wilkins, 47 S.W .3d 486, 500
high or delivery times too long to suit its customers. Gilbert      (Tex.2001).
testified that SPM lost these sales “because the Toshibas didn't
perform as represented and we had to quote longer deliveries
and our prices were not competitive because instead of doing        Gilbert earned a BBA in accounting in 1968. From 1968 to
it in 35 hours, we were up closer to 100 hours.” He personally      1991 he worked as an accountant, controller, and vice
contacted customers who cancelled orders or rejected SPM            president of sales and finance for several companies. In 1991,


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                             17
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




Gilbert went to work for SPM, first as vice-president and          evidence that two of the three other bids on the same project
general manager with full responsibility for SPM's                 were lower than the claimant's hypothetical bid; thus, the
manufacturing, sales, marketing, and accounting, then              alleged lost profits “were based on an entirely hypothetical,
gradually narrowing his focus to sales and accounting as           speculative bargain that was never struck and would not have
SPM's vice president of finance. He testified that he had more     been consummated.” Id. There is no such evidence in our case.
than thirty years' experience managing the financial and           Moreover, the lost sales to which Gilbert testified concerned
accounting functions of companies engaged in the manufacture       the loss of sales of proven products to existing customers. W e
and distribution of various products. After reviewing Gilbert's    hold that Gilbert's testimony regarding lost sales was not so
testimony about his education, work history, experience, and       speculative as to be legally insufficient.
familiarity with SPM's business, we cannot say that the trial
court abused its discretion by allowing Gilbert to testify as an
expert about SPM's damages.                                        *780 In sum, Gilbert testified that SPM lost profits of
                                                                   $6,038,292. As noted above, SPM also claimed $970,000 in
                                                                   incidental damages. The jury awarded SPM a total of
[23] Second, Toshiba argues that the trial court erred by          $6,007,226 on its breach of contract claims. Even if we
admitting Gilbert's testimony about lost sales because it was      assume that the jury based its award solely on SPM's lost
rife with inadmissible hearsay. Gilbert testified that he          profits, we hold that Gilbert's testimony presented more than
personally contacted SPM customers to ascertain why certain        a scintilla of evidence to support the jury's verdict. Gilbert's
sales were lost or certain orders cancelled. Toshiba made          testimony established SPM's lost profits to a reasonable
timely hearsay objections to Gilbert's testimony.                  certainty. W e overrule Toshiba's issues 4 and 7a.


W e review a trial court's rulings in admitting or excluding       b. Did SPM 's damage model result in a double recovery?
evidence under an abuse of discretion standard. Nat'l Liab. &      [25] In its sixth issue, Toshiba argues that two of SPM's
Fire Ins. Co. v. Allen, 15 S.W .3d 525, 527 (Tex.2000). W e        damage elements— lost profits due to increased production
must uphold the trial court's evidentiary ruling if there is any   costs and lost profits due to lost sales— overlap, and to allow
legitimate basis in the record for the ruling. Owens–Corning       SPM to recover both results in an impermissible double
Fiberglas Corp. v. Malone, 972 S.W .2d 35, 43 (Tex.1998).          recovery. W e disagree.


An expert may rely on inadmissible facts or data to form an        Toshiba argues, and we agree, that both of Gilbert's lost profit
opinion or inference if the facts or data are of a type            calculations hinge on the speed of the Toshiba machines. As
reasonably relied upon by experts in the particular field.Tex.R.   detailed above, SPM's Gilbert testified that SPM incurred
Evid. 703; In re A.J.L., 136 S.W .3d 293, 301 (Tex.App.-Fort       more costs and lost profits on the fluid ends actually produced
W orth 2004, no pet.). W e cannot think of a more appropriate      because the Toshiba machines were slower than expected.
method to determine why sales were lost than to ask the            Likewise, SPM lost sales because it quoted higher prices and
customer. W e hold that the trial court did not abuse its          longer delivery times to its customers based on the slower than
discretion by admitting this testimony.                            expected speed of the Toshiba machines. Had the machines
                                                                   performed as expected, SPM would have realized a higher
                                                                   profit on the fluid ends actually made and sold and realized
[24] Finally, Toshiba argues that Gilbert's testimony about lost   additional sales. But we disagree with Toshiba that the fact
sales was purely speculative because Gilbert failed to             that both damage elements arise from the speed of the Toshiba
determine what price or delivery time would have induced           machines necessarily means that the elements overlap.
SPM's customers to buy fluid ends from SPM. W e find no
case law to support Toshiba's argument. Measuring lost profits
is an inherently speculative undertaking. Pena v. Ludwig, 766      To show that the elements overlap, Toshiba argues that the
S.W .2d 298, 301 (Tex.App.-W aco1989, no writ). In Formosa         extra hours needed to make the fluid ends actually produced
Plastics Corp. USA v. Presidio Engineers and Contractors,          are the same hours SPM would have used to make additional
Inc., the Supreme Court of Texas held that a hypothetical bid      fluid ends for additional sales. This may be true, but it misses
for a construction project was “entirely speculative” and          the point. Toshiba confuses the issues of time and profit. The
legally insufficient to support an award of lost profits because   hours might be the same, but the dollars are different. Under
there was no evidence that the bid would have been accepted.       Gilbert's analysis, if the Toshiba machines had performed as
960 S.W .2d 41, 50 (Tex.1997). But our case is readily             expected, SPM would have saved time and realized more
distinguishable from Formosa Plastics. In that case, there was     profit on each of the fluid ends actually produced. W ith the


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           18
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




time saved, SPM could also have made and sold more fluid            Com.Code Ann. § 2.715(b)(1) (Vernon 1994). After a breach
ends and made additional profit. The time used to make fluid        by the seller, the buyer may “cover” by making, in good faith
ends is the same, but the lost profits are separate and distinct.   and without unreasonable delay, any reasonable purchase of
                                                                    goods in substitution for those due from the seller. Id. §
                                                                    2.712(a). To determine if a buyer effected a proper attempt at
W e overrule Toshiba's issue six.                                   cover, we consider “whether at the time and place the buyer
                                                                    acted in good faith and in a reasonable manner....” Id. § 2.712,
                                                                    cmt 2. “[I]t is immaterial that hindsight may later prove that
c. Did the trial court err by submitting broad-form                 the method of cover used was not the cheapest or most
damage questions?                                                   effective.” Id. The burden of establishing that damages could
[26] In its eleventh issue, Toshiba argues that the trial court     not have been reasonably prevented by cover is on the
erred in failing to submit damage questions that provided           plaintiff. Wilson v. Hays, 544 S.W .2d 833, 836
separate blanks for each element of SPM's damage model. W e         (Tex.Civ.App.-W aco 1976, writ ref'd n.r.e.).
disagree.

                                                                    [30] [31] Mitigation of damages is a rule requiring the injured
[27] Toshiba's complaint about the damage submission turns          party to use reasonable diligence to minimize his damages.
on the proposition that a trial court commits reversible error      LTV Aerospace Corp. v. Bateman, 492 S.W .2d 703, 709
where it submits a broad-form damage issue that incorporates        (Tex.Civ.App.-Tyler 1973, writ ref'd n.r.e.). Though
an element of damages on which there is no evidence. Harris         mitigation is similar to cover, the burden of disproving
County v. Smith, 96 S.W .3d 230, 234 (Tex.2002). Such a             mitigation lies with the defendant.
submission prevents the appellate court from determining
whether the jury based its verdict on an improperly submitted
element of damage. Id. Toshiba identifies lost profits as the       The trial court submitted the issues of cover and mitigation to
element of damage lacking evidentiary support.                      the jury as limiting instructions on the breach of contract
                                                                    damage questions, as follows:

Toshiba's argument fails because we have already concluded                Do not include in your answers any loss you
that there is legally sufficient evidence to support the jury's           find SPM could have avoided by the exercise
award, even if the entire award consists of lost profits. W e             of reasonable care. Do not include in your
overrule Toshiba's eleventh issue.                                        answer any loss that occurred after the date
                                                                          that replacement machining centers could have
                                                                          been reasonably obtained and installed by
*781 d. M ay SPM recover both its purchase money and                      SPM.
consequential damages?
In its first issue, Toshiba argues that a party claiming breach
of contract may not recover both the purchase money paid            Toshiba's argument on cover amounts to a
under the contract— what Toshiba calls “rescission                  no-evidence issue; its argument on mitigation is a
damages”— and consequential damages. But SPM's purchase             conclusive evidence issue. Under either standard, we
money was not submitted to the jury as an element of SPM's          must affirm if there is more than a scintilla of
contract damages. Therefore, Toshiba's first issue is moot, and     evidence in SPM's favor.
we need not consider it. See Tex.R.App. P. 47.1.

                                                                    [32] W ith regard to cover, SPM produced evidence
4. Did SPM fail to mitigate its damages?                            at trial to show that it purchased two Goss Trevisan
In issue 7b, Toshiba argues that the trial court erred by           machines as cover when it became clear that the
awarding damages that SPM could have avoided by cover or            Toshiba machines would not perform as represented.
mitigation. Toshiba claims that SPM did nothing to mitigate         Once both Goss Trevisan machines were fully
its losses and therefore is barred from recovering any              operational, SPM stopped using the Toshiba
consequential damages.                                              machines. This is some evidence of that SPM made
                                                                    reasonable efforts to limit its consequential damages
                                                                    and is enough to support the jury's award.
[28] [29] A buyer may recover consequential damages that
could not reasonably be prevented by cover. Tex. Bus. &


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                           19
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




[33] W ith regard to mitigation, SPM produced                1997). Texas courts weigh the eight factors recited
evidence to show that it limited its damages by using        in rule 1.04 of the rules of professional conduct to
the Toshiba machines to the extent possible.                 determine the reasonableness and necessity of
Although the Toshiba machines did not perform as             attorney's fees. Tex. Disciplinary R. Prof'l Conduct
expected, they cut the time it took SPM to make a            1.04(b), reprinted in Tex. Gov't Code Ann., tit. 2,
fluid end from 115 hours to 100 hours. This fifteen          subtit. G, app. A (Vernon 2005) (Tex. State Bar R.
hour savings, when *782 multiplied by SPM's shop             art. X § 9); Miller v. Kennedy & Minshew, Prof.
rate of $150 per hour, yielded a reduction in SPM's          Corp., 142 S.W .3d 325, 336–37 (Tex.App.-Fort
damages of $2,250 per fluid end. Gilbert's damage            W orth 2003, pet. denied). Those factors are (1) the
computation properly accounted for this savings.             time and labor required, the novelty and difficulty of
                                                             the questions involved, and the skill required to
                                                             perform the legal services properly; (2) the
Toshiba argues that by using the Toshiba machines,           likelihood that the acceptance of the particular
SPM aggravated its damages, not mitigated them.              employment will preclude other employment by the
Toshiba reasons that SPM's damage model                      lawyer; (3) the fee customarily charged in the
multiplied the number of hours SPM used the                  locality for similar legal services; (4) the amount
Toshiba machines by the shop rate; thus every hour           involved and the results obtained; (5) the time
SPM used the Toshiba machines increased SPM's                limitations imposed by the client or by the
damages by $150. But SPM claimed no such thing.              circumstances; (6) the nature and length of the
SPM claimed as damages the difference between                professional relationship with the client; (7) the
100 hours— the time it actually took a make a fluid          experience, reputation, and ability of the lawyer or
end with the help of the Toshiba machines— and               lawyers performing the services; and (8) whether the
thirty-five hours— the time Toshiba said it would            fee is fixed or contingent on results obtained or
take the machines to make a fluid end— and                   uncertainty of collection before the legal services
multiplied the difference by SPM's $150 per hour             have been rendered. Miller, 142 S.W .3d at 336–37.
shop rate. If SPM had not used the Toshiba                   One method of computing a reasonable fee is the
machines, its damages would have been the                    “lodestar” method, or “the product of reasonable
difference between 115 hours and thirty-five hours,          hours times a reasonable rate.” City of Burlington v.
multiplied by the $150 per hour shop rate. Thus, by          Dague, 505 U.S. 557, 559, 112 S.Ct. 2638, 2640,
using the Toshiba machines, SPM mitigated its                120 L.Ed.2d 449 (1992). W e review a court-ordered
damages by $2,250— 15 hours times the shop                   award of attorney's fees under the abuse of discretion
rate— for every fluid end produced.                          standard. Ridge Oil Co., Inc. v. Guinn Invs., Inc.,
                                                             148 S.W .3d 143, 163 (Tex.2004).

W e hold that SPM presented some evidence on the
question of cover and that Toshiba failed to prove           [37] In this case, the issue of attorney's fees was
conclusively that SPM did not mitigate its damages.          submitted to the trial court, *783 rather than the jury,
W e overrule Toshiba's issue 7b.                             by agreement of the parties. SPM's lead counsel,
                                                             Marshall Searcy, testified about SPM's attorney's
                                                             fees. SPM 's fee agreement with Searcy's firm
5. Did the trial court err in awarding attorney's            consisted of three elements. First, SPM paid Searcy's
fees to SPM ?                                                firm a flat fee of $150,000 up front. Second, SPM
In its eighth issue, Toshiba complains that the trial        agreed to pay Searcy's firm 5% of SPM 's ultimate
court erred by awarding attorney's fees to SPM.              recovery, if any. Third, SPM agreed that Searcy's
Toshiba's complaint has two components: First, that          firm could keep any attorney's fees awarded by the
SPM is not entitled to attorney's fees because it did        trial court. SPM argues that this third provision
not prevail on its breach of contract claim; and             contemplates a fee higher than the flat $150,000 plus
second, that the trial court impermissibly enhanced          5%, contingent upon whether the trial court awarded
SPM's “lodestar” attorney's fees.                            attorney's fees.


[34] [35] [36] A party may recover reasonable                Searcy testified that the services his firm rendered to
attorney's fees for a valid breach of contract claim.        SPM had a lodestar value of $667,114. He then
Tex. Civ. Prac. & Rem.Code Ann. § 38.001 (Vernon             testified that a reasonable fee would be $1.5 million.


                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     20
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




To support a reasonable fee in excess of the lodestar          Since this case involves neither of those statutes,
value, Searcy testified at length about the rule 1.04          Dague offers little guidance and imposes no
elements. Most significantly, Searcy testified that the        restrictions here. M oreover, T exas courts
risk his firm took of losing the case and receiving            consistently allow the use of a multiplier based upon
nothing over its $150,000 base fee justified the $1.5          the contingent nature of a fee under Texas statutes
million fee. He also testified that the lodestar value         allowing recovery of attorney's fees. Dillard Dept.
would represent a reasonable fee if SPM had paid               Stores, Inc. v. Gonzales, 72 S.W .3d 398, 413
his firm on a monthly basis; but since his firm had to         (Tex.App.-El Paso 2002, pet. denied).
wait until the conclusion of the case to collect its fee,
the lodestar value was insufficient. Finally, Searcy
testified that $1.5 million represented about 25% of           Nor is Toshiba's argument supported by PPG
the jury's verdict— significantly less than the                Industries. In that DTPA case, the trial court
30%–50% typically charged by Tarrant County                    awarded a “bonus” of $300,000 on top of the
attorneys in contingent fee cases.                             plaintiff's lodestar attorney's *784 fee. PPG Indus.
                                                               41 S.W .3d at 285. The court of appeals held that the
                                                               trial court had no authority to consider the result
The trial court made findings of fact and conclusions          obtained as a basis for awarding the bonus against
of law that specifically took into account the rule            the defendant. Id. But the court went on to affirm the
1.04 factors. The trial court found that the following         bonus because there was some evidence, besides the
attorney's fees were reasonable: $1.5 million through          result obtained, to show that the attorney's fee,
the date of judgment, plus $200,000 if Toshiba is              including the bonus, was reasonable. Id. The court
unsuccessful in this appeal, plus $35,000 if Toshiba           concluded that the trial court had not abused its
files a petition for review with the Supreme Court of          discretion in awarding the bonus. Id.
Texas and the petition is denied, or $65,000 if the
Supreme Court grants the petition but rules against
Toshiba on the merits. The trial court incorporated            In our case, as in PPG Industries, there is some
these fees into its judgment.                                  evidence that the trial court's award of attorney's fees
                                                               to SPM is reasonable. W e hold that the trial court
                                                               did not abuse its discretion by awarding those fees to
Toshiba lodges two complaints about SPM's                      SPM. W e overrule Toshiba's eighth issue.
attorney's fees. First, Toshiba contends that SPM is
not entitled to any award of attorney's fees because
SPM did not prevail on its breach of contract claim.           6. Did the trial court err by failing to submit
W e have already concluded that SPM may recover                Toshiba's counterclaim to the jury?
for breach of contract; therefore, SPM may also                [39] In its ninth and tenth issues, Toshiba argues that
recover its reasonable attorney's fees. See Tex. Civ.          the trial court erred by failing to submit Toshiba's
Prac. & Rem.Code Ann. § 38.001.                                counterclaim to the jury and failing to direct the
                                                               verdict on the counterclaim. Toshiba sued SPM for
                                                               the unpaid balance of the BMC–800. The amount of
[38] Second, Toshiba argues that the trial court erred         the unpaid balance, $658,800, was not disputed.
by awarding more than the lodestar amount. To
support this argument, Toshiba cites Dague, 505
U.S. at 557, 112 S.Ct. at 2638, and PPG Industries,            A buyer must pay at the contract rate for any goods
Inc. v. JMB/Houston Centers Partners Ltd. P'ship,              accepted. Tex. Bus. & Com.Code Ann. § 2.607(a).
41 S.W .3d 270 (Tex.App.-Houston [14th Dist.]                  Toshiba argues that it was entitled to a directed
2001, no pet.), rev'd on other grounds, 146 S.W .3d            verdict on its counterclaim because SPM accepted
79 (Tex.2004). The question in Dague was whether               the BMC–800 as a matter of law. But the jury failed
the attorney's fees shifting provisions of the federal         to find that SPM accepted the BMC–800, and we
Solid W aste Disposal Act and Clean W ater Act                 have already concluded that Toshiba failed to prove
permitted “enhancement” of lodestar attorney's fees            acceptance as a matter of law. Thus, Toshiba was not
where the attorney's fees were contingent. Dague at            entitled to a directed verdict.
559, 112 S.Ct. at 2639. The Supreme Court held that
such enhancement was not permitted under the
statutes in question. Id. at 567, 112 S.Ct. at 2648.           Nor did the trial court err by refusing to submit


                               © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     21
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




Toshiba's counterclaim to the jury. Since the amount          Colom bia, L.D .C ., 98 S.W .3d 766, 773
of the counterclaim was undisputed, the only                  (Tex.App.-Fort W orth 2003, pet. denied). A claim
question for the jury to decide was whether SPM               need not demand an exact amount or list every
accepted the BMC–800. If the jury had found that              element of damage. Bevers v. Soule, 909 S.W .2d
SPM accepted the machine and did not revoke its               599, 603 (Tex.App.-Fort W orth 1995, no writ).
acceptance, Toshiba would be entitled to judgment
for the amount of its counterclaim. But because the
jury failed to find that SPM accepted the BMC–800,            1. Standard of review
SPM is not liable for the unpaid balance.                     Before we turn to the merits of SPM's issue, we must
                                                              determine what standard of review to apply. In MCN
                                                              Energy Enterprises, we wrote that “[t]he date from
W e overrule Toshiba's ninth and tenth issues.                which statutory prejudgment interest should begin is
                                                              a question of law that an appellate court must review
                                                              de novo.” 98 S.W .3d at 773. W e cited as authority
7. SPM 's non-contract claims                                 for that proposition Johnson v. City of Fort Worth,
In its third and fifth issues, Toshiba argues that the        774 S.W .2d 653, 655–56 (Tex.1989). Johnson did
trial court erred by submitting SPM 's breach of              not concern prejudgment interest; instead, it stands
warranty, fraud, and negligent misrepresentation              for the general proposition that “matters of statutory
claims to the jury. Because we affirm the judgment            construction are questions of law for the court to
on SPM's breach of contract claims, we need not               decide rather than issues of fact.” Id. at 656. Implicit
consider these two issues. See Tex.R.App. P. 47.1.            in Johnson, and necessary to bridge the gap between
                                                              Johnson and MCN Energy Enterprises, is the rule
                                                              that appellate courts review questions of law de
B. SPM 's Issue: W hen did prejudgment interest               novo. See, e.g., Graves v. Alders, 132 S.W .3d 12, 17
begin to accrue?                                              (Tex.App.-Beaumont 2004, pet. denied).
In its sole issue, SPM complains that the trial court
chose the wrong date from which to calculate
prejudgment interest. The trial court chose February          On the other hand, we held that “[a] trial court's
29, 2000, the date SPM filed suit. SPM contends that          award of prejudgment interest is reviewed under an
prejudgment interest began to accrue on May 3,                abuse of discretion standard” in Manufacturers Auto
1999, 180 days after SPM sent Toshiba what SPM                Leasing, Inc. v. Autoflex Leasing, Inc., 139 S.W .3d
claims was notice of its claims. The difference is            342, 348 (Tex.App.-Fort W orth 2004, pet. denied).
significant; using the earlier date yields an additional      Our sister courts generally hold the same. 4
$493,000 in prejudgment interest.

                                                              [42] The San Antonio Court of Appeals described
Prejudgment interest accrues on the amount of a               the standard of review this way:
judgment during a period that begins on the earlier
of the 180th day after the date a defendant receives          W e review a trial court's award of prejudgment
written notice of a claim against it, or the date the         interest under the abuse of discretion standard.
suit is filed. Tex. Fin.Code Ann. § 304.104 (Vernon           [Citation omitted.] Under this standard, we will not
Supp.2004–05). Although section 304.101 states that           disturb a trial court's findings on factual issues unless
“[t]his subchapter applies only to a wrongful death,          the court reasonably could have reached only one
personal injury, or property damage case,” the                decision and it failed to do so. Walker v. Packer, 827
Supreme Court of Texas has extended the notice                S.W .2d 833, 839–40 (Tex.1992). However, “a trial
provision of section 304.104 to all claims. Id. §             court has no discretion in determining what the law
304.101; Johnson & Higgins *785 of Tex., Inc. v.              is or applying the law to the facts.” Id. at 840.
Kenneco Energy, Inc., 962 S.W .2d 507, 531
(Tex.1998).                                                   J.C. Penney Life Ins. Co. v. Heinrich, 32 S.W .3d
                                                              280, 289 (Tex.App.-San Antonio 2000, pet. denied).
                                                              W e conclude that Heinrich correctly articulates the
[40] [41] A “claim” under section 304.104 is a                general standard for reviewing an award of
demand for compensation or an assertion of a right            prejudgment interest. The abuse of discretion
to be paid. MCN Energy Enters., Inc. v. Omagro de             standard applies to the trial court's factual findings as


                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                      22
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




they relate to prejudgment interest; but the de novo          coupled with a letter asking an insurance company to
standard applies to the trial court's application of the      “properly consider [plaintiff's] injury claim,”
law to the facts.                                             constituted notice. Bevers, 909 S.W .2d at 603. The
                                                              Texarkana court reached the same conclusion where
                                                              a personal injury plaintiff, at the defendant's request,
                                                              signed a medical records release form that stated,
In the case before us, the trial court's award of             “[t]his information is to be used for purposes of
prejudgment interest does not hinge on any factual            evaluating and handling my claim for injury.” K
finding. Instead, the issue turns on the interpretation       Mart Corp. v. Rhyne, 932 S.W .2d 140, 146
of a single letter from SPM to Toshiba. The                   (Tex.App.-Texarkana 1996, no writ). Likewise, the
existence and contents of the letter are not in dispute.      Austin court held that a request from a plaintiff to a
The question is whether the letter constituted notice         defendant's insurance company asking the company
of SPM's claims as a *786 matter of law. Therefore,           to pay certain medical bills, and inquiring when he
as a practical matter, our review of the prejudgment          would receive his next lost wages check, was a
interest issue in this case is de novo.                       “claim” for purposes of prejudgment interest.
                                                              Robinson v. Brice, 894 S.W .2d 525, 529
                                                              (Tex.App.-Austin 1995, writ denied). More recently,
2. Facts and analysis                                         the Beaumont court concluded that letters requesting
[43] On November 4, 1998, SPM sent a letter to the            reimbursement for medical treatment constituted
president of Toshiba Machine Co., Ltd. in Japan. 5            written notice of a claim. Brookshire Grocery Co.,
SPM complained that the BMC machines                          99 S.W .3d at 825.


                                                              There is a key distinction between those cases and
will not perform to the specifications in the machine         the case now before us. In each of those cases, the
literature or as represented by Toshiba.... [W ]e are         claims asserted by the writings in question were
concerned that the machines will never perform                certain and unconditional. The writings did not urge
consistently to Toshiba's specifications and SPM's            the recipients to avoid a contingent, future liability,
contract requirements.                                        but to accept an accrued, existing liability. SPM's
The letter summarized twenty-one complaints about             letter does just the opposite. SPM urges Toshiba to
the BM C machines and Toshiba's earlier responses             avoid a future claim by curing the defects in the
to those complaints. SPM stated that it had incurred          BMC machines. SPM does not demand payment or
damages of $998,250 and continued to incur                    assert a right to be paid. Instead, SPM suggests that
damages at the rate of $5,775 for each day the                it will assert a claim and demand payment in the
machines did not perform. SPM concluded its letter            future if Toshiba cannot make its machines perform
with these words:                                             to specification.

       SPM is prepared to litigate the issues if
       necessary. However, SPM prefers to resolve             W e hold that SPM's November 4, 1998 letter did not
       the issues if the machines can perform to              constitute notice of a claim as a matter of law. The
       specification and contract requirements. If this       trial court properly *787 computed prejudgment
       is not attainable, SPM prefers to return the           interest from the date SPM filed suit. W e overrule
       machines to Toshiba, with Toshiba to absorb            SPM's sole issue.
       SPM's costs-to-date.
SPM contends that this letter was sufficient notice of
its claims to trigger accrual of prejudgment interest         IV. Conclusion
180 days later. Toshiba responds that the letter did          W e overrule Toshiba's issues two, four, and six
not give notice of a claim because it did not make a          through eleven. W e do not reach Toshiba's issues
demand for payment or assert a right to be paid.              one, three, and five. W e overrule SPM's sole issue.
                                                              W e therefore affirm the trial court's judgment in all
                                                              respects. See Tex.R.App. P. 43.2(a).

W e look to similar cases for guidance. In Bevers, we
held that a signed medical authorization form,

                              © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                     23
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)




Footnotes

1      Toshiba sued SPM in Illinois for the unpaid balance due on the BMC–800 in November 1999. The Illinois trial court dismissed that
       suit for lack of jurisdiction.

2      Section 1.103 of the Texas Business and Commerce Code states that the Code should be liberally construed “to make uniform the
       law among various jurisdictions.” Tex. Bus. & Com.Code Ann. § 1.103(a)(3) (Vernon 1994). Section 311.028 of the Texas
       Government Code provides that “[a] uniform act ... shall be construed ... to make uniform the law of those states that enact it.” Tex.
       Gov't Code Ann. § 311.028 (Vernon 2005). Thus, in determining and applying the Texas version of the Uniform Commercial Code,
       we may consider and apply pertinent decisions from other jurisdictions. Rogers v. Ricane Enterprises, Inc. 930 S.W.2d 157, 171
       (Tex.App.-Amarillo1996, writ denied); Fin. Universal Corp. v. Mercantile Nat'l Bank, 683 S.W.2d 815, 817 (Tex.App.-Dallas 1984,
       writ ref'd n.r.e.).

3      Toshiba's “Issues Presented” lists two issues numbered “7.” We will refer to the first as “7a” and the second, discussed elsewhere
       in this opinion, as “7b.”

4      See, e.g., Protective Life Ins. Co. v. Russell, 119 S.W.3d 274, 288 (Tex.App.-Tyler 2003, pet. denied); Brookshire Grocery Co. v.
       Smith, 99 S.W.3d 819, 823 (Tex.App.-Beaumont 2003, pet. denied); Wilmer–Hutchins ISD v. Smiley, 97 S.W.3d 702, 706
       (Tex.App.-Dallas 2003, pet. denied); Purcell Constn., Inc. v. Welch, 17 S.W.3d 398, 402 (Tex.App.-Houston [1st Dist.] 2000, no
       pet.) (“We review a challenge to a trial court's award of pre-judgment interest using an abuse of discretion standard, giving limited
       deference to the court's application of the law to the facts.”); Marsh v. Marsh, 949 S.W.2d 734, 744 (Tex.App.-Houston [14th Dist.]
       1997, no writ).

5      Toshiba points out that the letter is not addressed to Toshiba Machine Co., America, but to its parent company, Toshiba Machine
       Co., Ltd. But Toshiba does not complain that it did not receive the letter, so the letter's addressee is not a factor in our analysis.

End of Document                                                          © 2014 Thomson Reuters. No claim to original U.S. Government Works.




                             © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks.                                     24
V
                                   TX Rules of Evidence, Rule 201

                           Rule 201. Judicial Notice of Adjudicative Facts

(a)   Scope. This rule governs judicial notice of an adjudicative fact only, not a legislative fact.

(b)   Kinds of Facts That May Be Judicially Noticed. The court may judicially notice a fact that is
      not subject to reasonable dispute because it:

      (1)    Is generally known within the trial court's territorial jurisdiction; or

      (2)    can be accurately and readily determined from sources whose accuracy cannot reasonably
             be questioned.

(c)   Taking Notice. The court:

      (1)    may take judicial notice on its own; or

      (2)    must take judicial notice if a party requests it and the court is supplied with the necessary
             information.

(d)   Timing. The court may take judicial notice at any stage of the proceeding.

(e)   Opportunity to Be Heard. On timely request, a party is entitled to be heard on the propriety of
      taking judicial notice and the nature of the fact to be noticed. If the court takes judicial notice
      before notifying a party, the party, on request, is still entitled to be heard.

(f)   Instructing the Jury. In a civil case, the court must instruct the jury to accept the noticed fact as
      conclusive. In a criminal case, the court must instruct the jury that it may or may not accept the
      noticed fact as conclusive.

Credits
Eff. March 1, 1998. Amended by orders of Supreme Court March 10, 2015 and Court of Criminal
Appeals March 12, 2015, eff. April 1, 2015.
W
                         V.T.C.A., Civil Practice & Remedies Code § 101.101

                                             § 101.101. Notice

(a)    A governmental unit is entitled to receive notice of a claim against it under this chapter not later
       than six months after the day that the incident giving rise to the claim occurred. The notice must
       reasonably describe:

       (1)     the damage or injury claimed;

       (2)     the time and place of the incident; and

       (3)     the incident.

(b)    A city's charter and ordinance provisions requiring notice within a charter period permitted by
       law are ratified and approved.

(c)    The notice requirements provided or ratified and approved by Subsections (a) and (b) do not
       apply if the governmental unit has actual notice that death has occurred, that the claimant has
       received some injury, or that the claimant's property has been damaged.

Credits
Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.
X
                             V.T.C.A., Government Code § 311.011

                      § 311.011. Common and Technical Usage of Words

(a)    Words and phrases shall be read in context and construed according to the rules of
       grammar and common usage.

(b)    Words and phrases that have acquired a technical or particular meaning, whether by
       legislative definition or otherwise, shall be construed accordingly.

Credits
Acts 1985, 69th Leg., ch. 479, § 1, eff. Sept. 1, 1985.
