Weaver and Tidwell, L.L.P. v. the Guarantee Company of North America, USA
2014 Tex. App. LEXIS 3805
Tex. App.2014Background
- J&V Communication Services performed TxDOT contracts and was required to obtain performance bonds from The Guarantee Company of North America USA (Guarantee).
- Weaver & Tidwell, L.L.P. (Weaver) audited J&V’s 2005 and 2006 financials; Guarantee received the 2005 audit and issued bonds; J&V later defaulted and Guarantee incurred bond losses.
- J&V sued Weaver and the dispute proceeded to arbitration; Weaver prevailed in arbitration and obtained an award of attorneys’ fees against J&V.
- Guarantee separately sued Weaver for negligent misrepresentation based on Weaver’s audited financial statements; Weaver sought to compel arbitration and to dismiss on statute-of-limitations grounds.
- After a bench trial, the trial court found Weaver’s 2005 audit false, that Guarantee relied on it, and awarded Guarantee ~ $2.6 million; the trial court also granted summary judgment dismissing Weaver’s counterclaim seeking to make Guarantee liable for Weaver’s arbitration award.
- On appeal the court held Guarantee’s negligent-misrepresentation claim was barred by the two-year statute of limitations (discovery rule not properly established) and affirmed dismissal of Weaver’s counterclaim on assignment/subrogation/alter-ego/collateral-estoppel theories.
Issues
| Issue | Plaintiff's Argument (Guarantee) | Defendant's Argument (Weaver) | Held |
|---|---|---|---|
| Accrual / statute of limitations for negligent misrepresentation | Claim did not accrue when first bond issued; accrual deferred by discovery rule until Guarantee knew or should have known (argues March 2008) | Cause accrued when Guarantee first relied on the audit (first bond issued May 4, 2006); suit filed in 2009 is time-barred; Guarantee failed to obtain required findings for discovery rule | Held for Weaver: cause accrued May 4, 2006; two-year limitations ran May 4, 2008; discovery rule not available because Guarantee failed to secure findings on when it knew/should have known; claim barred |
| Burden to prove discovery rule | Discovery rule applicable when injury is inherently undiscoverable and objectively verifiable; Guarantee says it met burden | Weaver says Guarantee failed to prove when it knew or should have known; trial court’s findings were insufficient | Held: Guarantee bore burden of obtaining findings; it did not, so discovery rule could not toll limitations |
| Counterclaim: assignment / subrogation / entitlement to arbitration award | Weaver argued Guarantee was assignee/subrogee/alter ego of J&V and thus liable for arbitration fee award; relied on GAI, collateral agreements, and funding/control evidence | Guarantee argued no assignment or subrogation was evidenced; no judicial assertion of subrogation; funding or contractual rights did not transfer J&V liabilities to Guarantee | Held for Guarantee: no genuine fact issue of assignment or subrogation; summary judgment dismissing those counterclaims affirmed |
| Counterclaim: offensive collateral estoppel and alter ego | Weaver argued arbitration fully litigated fees, Guarantee was in privity and controlled arbitration, so estoppel/alter-ego should bind Guarantee | Guarantee argued it was not an adversary in arbitration, issues were not fully and fairly litigated by Guarantee, and evidence did not show actual fraud or dishonest intent | Held for Guarantee: Weaver failed to raise fact issues on elements of collateral estoppel and alter ego; summary judgment affirmed |
Key Cases Cited
- HECI Exploration Co. v. Neel, 982 S.W.2d 881 (Tex. 1998) (two-year limitations for negligent misrepresentation)
- Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211 (Tex. 2003) (general accrual rule for causes of action)
- Computer Assocs. Int’l, Inc. v. Altai, Inc., 918 S.W.2d 453 (Tex. 1996) (discovery rule defers accrual until plaintiff knew or should have known)
- Wagner & Brown, Ltd. v. Horwood, 58 S.W.3d 732 (Tex. 2001) (discovery rule requires injury to be inherently undiscoverable and objectively verifiable)
- Murphy v. Campbell, 964 S.W.2d 265 (Tex. 1997) (legal injury occurs when faulty professional advice is taken; accrual when advice is relied upon)