Case Information

*0 FILED IN 6th COURT OF APPEALS TEXARKANA, TEXAS 9/17/2015 8:22:00 AM DEBBIE AUTREY Clerk

*1 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 COURT OF APPEALS SIXTH DISTRICT OF TEXAS TEXARKANA __________________________________________________________________ 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 nd 62 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

*2

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

*3 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

*4 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 *5 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

*6 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 *7 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

*8 Smith brought a personal injury suit against the Bank for malicious 1 2 3 prosecution. Following a jury verdict, and at the request of Plaintiff, the trial court entered a judgment in Smith’s favor which included $84,542.00 in

4 prejudgment interest. The Bank filed a motion to modify the judgment, asserting that the trial court had used an incorrect starting date for calculating pre-judgment 5 6 interest. Smith opposed such motion. 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

ISSUE PRESENTED

*9 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

11 Smith ultimately sued the Bank for malicious prosecution. Smith’s *10 malicious prosecution case against the Bank went to trial, resulting in a jury verdict 12 in Smith’s favor. 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 14 $84,542 in prejudgment interest, in accordance with Smith’s letter. 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

15 months after receiving Smith’s petition to investigate claims. Smith filed a 16 response opposing such motion. After conducting a hearing, the Court granted the Bank’s motion and entered an order modifying the judgment so as to reduce 17 prejudgment interest to $54,243.

*11 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

18 claim. 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.

ARGUMENT

*12 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

*13 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 *14 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 19 receives written “notice of a “claim.” The Bank’s motion asserted that a “claim”

20 requires a “demand for payment.” Smith disagreed, pointing out that “an 21 assertion of a right to be paid” will also suffice. 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

*15 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, *16 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

25 start prejudgment interest. 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 *17 26 properly consider my injury claim.” The defendant argued the letter was not a “claim” because it “did not state the nature of the complaint or the amount of

27 damages sought,” but the court confirmed such is not required. 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 *18 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,” 29

served on the Bank on October 24, 2008, 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 *19 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.

*20 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 *21 31 2009.

32 The trial court’s judgment in this case was signed on December 15, 2014. From April 22, 2009, to December 14, 2014, is 2,062 days. At the annual rate of 33 34 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 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 *22 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

*23 I certify that a true and correct copy of the attached document been served th upon all counsel record on the 16 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

*24 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) *25 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. T EX . R. E VID . 201 W. T EX . C IV . P RAC . & R EM . C ODE § 101.101 X. T EX . G OV . C ODE § 311.011

*26 A *27 • • .. [ 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 *28 •

•

" • $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( ..... )..f,r 'Tt>~\ c\.,...~., % :?:><t'-1, )ll;).., SULPHUR SPRINGS, in the sum of ~<-j 1 S'{;).

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 *29 B *30 NO. CV40681 . JOIIf\. ALLXANlJER SM ITII IN THE DISTRICT ff9U~T I

I

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

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 J udgmc.:nt Altc.:r cons1th.:ring the •notion und argumc.:nt of counsel. the Court is of the opimon that tht: mot ion 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 *31 C *32 ' CAUSE NO. CV 40681 JOHN ALEXANDER SMITH, § IN THE DISTRICT COURT PLAINTIFF §

§ vs. ,...., § = § .r- z CITY NATIONAL BANK OF § ""il i 0 < SULPHUR SPRINGS, § """""-

N

ll'-'"'· DEFENDANT §

C)

~ rn

-·o

::!::

GENERAL INSTRUCTIONS

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

*33 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 *34 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:

*35 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 I eli 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

*36 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

*37 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

*38 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) .DDD

i

Page7 541

SPECIAL INSTRUCTIONS

*39 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-- to preside during your deliberations, I. 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, to certify to your verdict in the space provided for the presiding juror's signature or to 6. 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.

Page 8 542

CERTJFICATENO. I

*40 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

*41 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.) Page 10 544

CERTIFICATE NO. 3

*42 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

*43 D *44 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.

*45 E *46 .. • • "' '"' = = ... 'l''? 0 0 - j ,_ 0 I

vs. ~"'~ z {: i " :::.: C.J w ..

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 *47 .. • • 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 *48 • • 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

r 1' C: ' } ' ' } warnmi.!; Wt;fC putceu m ttie stateWH.IC nrnilicatiGn sy:>tCili a1ertmg ccrta.m 1aw enfvrccment pcisons I .J ' ^[1] ' I 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 *49 •

•

. ' 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 ··------ ------ ·-· .-". ordered the Petitioner to h~ rei cased. 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 *50 • • 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; f. or an Order granting the Motion which orders the taking of depositions of the b.

corporation previously identified at a location urtlercd by the Court if not agreed upon by the parties.;

l'ae-e) 589 *51 • • • 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 *52 F *53 • • NOTEBCIDM Brian \\'. Butcher* Thomas A. Herald

-THE LAW FIRM-

November 25. 2014 Charle~ .\1. ,\'oteboom* J. ~lark Suddenh

Hon. Will Biard, Judge Fl~~o~ :

62"' Judicial District Court

PO Box 391

z <!: ~. f"T1 Sulphur Springs, TX 75483 (/)--.;' (""") r

g~;-

c:....: U1

rn Re: Proposed Judgment: Cause No. CV40681: Smith v. City National Bank =s·~· _ _.. -u :<;..,~ 3: 0 --~~~ Dear Judge Biard: fT'-:oo >< :P J:_-

N

U> 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~-- ----- J. : (k Sudderth Ati~~y 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 *54 G *55 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 *56 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 *57 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 *58 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

*59 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 Mod if.• Judgment- Page 5

609 *60 NOTEB®M Brbn W. Butcher"'" Ttv>.na.~ A. Hc:r.tld

:·lfE tt..W Fl.i?M November 25, 2014 C"harlc; M. No!~hOO:Xll~' J. M;1rk Sudllenh

Hon. Will Biard. Judge 62"' Judicial District Court EXHIBIT PO Box 391 Sulphur Springs, TX 75483 Proposed Judgment: Cause No. CV40681; Smith v. City National Bank Re: 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

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*61 *62 I • • i CAUSE NO. CV-40681 JOHN ALEXANDER SMITH § IN THE DISTRICT COURT OF Plaintiff §

§ ::;: ^[0] § -u c.n \', , HOPKINS COUNTY~'(E-XAih § (,/] -t ;o c;:J CITY NATIONAL BANK OF § ^[1] c~:::J_.. c~r 0"\

SULPHUR SPRINGS §

S....,-:1

m Defendant § 62"d JUDICIAL DISTRfE=T > :..:~~ :% 0 :;;st:g C)

PLAINTIFF'S RESPONSE TO DEFENDANT'S

w -.J MOTION TO MODIFY JUDGMENT 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 *63 • • 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 of a 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 *64 • • 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 *65 • • 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 *66 • • 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

*67 619 • • 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

·-~A--

Facsimile 903-794-1268 Plaillliff's Re;po11se to Defe11da11t 's Motio11 to Mmlifr Judgmelll Page 6 *68 620 • • Exhibit A *69 621 •

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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 7 5482 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.

*70 622 • • 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.

*71 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

*72 624 • • 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

*73 625 • • 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.

1 o. 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:.~.;

*74 626 • • 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

*75 l'<lC.C 6 627

CAUSE NO.

CV3 8 727

THE STATE OF TEXAS:

ATTORNEY FOR PLAINTIFF OR DEFENDANT: '" :5 PATRICIA DORNER - DISTRICT CLERK CHARLES H CLI&i< POST OPFICE BOX 391 604 WOLDERT ]

-, ; ; P. 0. BOX 98 o::-""· n ~ SULPHUR SPRINGS, TEXAS 75483 0 TYLER TX 'W:'i:ilO --< n::O{=; N ao- .&:- ~-

s E ~~ I.,C Efll C I T A T I 0 N P E R S 0 N A L

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TO: CITY NATIONAL BANK OF SULPHUR

~~s; '>.' . SPRINGS REC ACT: LEE TEETS 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

, 2_-J. · came to hand .. ~/ ··,:::'\----o'clock .N., ,on the :;-,??'-day of /.'.::.·/;.:_~.,,..

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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· ···> -·---~·-~-- 1 ~,/·.,,J /_r:? -------- -·-...

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~... 628 I *77 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 *78 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 *79 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 *80 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 *81 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 *82 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 *83 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 *84 J *85 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 *86 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 Same or Similar Evidence Otherwise [5] Appeal and Error 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 workers' 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 A trial court's prejudgment interest award is challenged during cross examination concerning 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 Form and Sufficiency of Demand [6] Appeal and Error Evidence in General Appeal and Error Prejudicial Effect © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks. 2 *87 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 County against Brookshire Grocery Company and Brookshire trigger accrual of prejudgment interest on 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 *88 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 Brookshire, Inc. See Tex.R. Civ. P. 86(1). Under the

W hen two or more parties are joined as applicable statute, if the court had venue of a claim defendants in the same action or two or more as to one defendant, the court had venue over the claims or causes of action are properly joined claims against all defendants. See Tex. Civ. Prac. & in one action and the court has venue of an Rem.Code Ann. § 15.061; Polaris Inv. Management action or claim against any one defendant, the Corp. v. Abascal, 892 S.W .2d 860 (Tex.1995). As court also has venue of all claims or actions the Supreme Court stated in Polaris, “Venue is a against all defendants unless one or more of creature of legislative grace, and ... the power to the claims or causes of action is governed by make venue changes is purely statutory.” Id. at 862. one of the provisions of Subchapter B The Supreme Court stated in Polaris that the plain [mandatory venue provisions] requiring wording of section 15.061 appears to permit the transfer of the claim or cause of action, on joinder of additional claims, and the Court declined proper objection, to the mandatory county. ^[1] to reinterpret section 15.061 in such a way as to prohibit what Polaris characterized as the “tag-along” venue of the plaintiffs: “It is not within

The current statute, amended in 1995, provides that the province of this Court to reconstrue, rewrite, or in a suit in which the plaintiff has established proper contravene a venue statute when the intent of the venue against a defendant, the court also has venue Legislature is clear.” Id.; see also Bleeker v. of all the defendants in all claims or actions arising Villarreal, 941 S.W .2d 163 (Tex.App.-Corpus out of the same transaction, occurrences, or series of Christi 1996, writ dism'd by agreement); but see transactions or occurrences. See Tex. Civ. Prac. & WTFO, Inc. v. Braithwaite, 899 S.W .2d 709 Rem.Code Ann. § 15.005 (Vernon 2002). Section (Tex.App.-Dallas 1995, no writ) (W aiver of venue 15.0641 of the 1995 venue statute also provides that

by one defendant does not prevent another defendant in a suit in which two or more defendants are joined, from challenging venue.); Pearson v. Jones Co., any action or omission by one defendant in relation Ltd., 898 S.W .2d 329 (Tex.App.-Eastland 1994, no to venue, including a waiver of venue by one writ) (Even though two of four defendants filed an defendant, does not operate to impair or diminish the answer without challenging venue, they could not right of any other defendant to *822 properly waive other defendants' objections to venue.). In challenge venue. See Tex. Civ. Prac. & Rem.Code Polaris, the Supreme Court indicated any change in Ann. § 15.0641 (Vernon 2002). The 1985 statute, section 15.061 was up to the legislature. See Polaris, which applies in this case, does not contain that

892 S.W .2d at 862. In the 1995 venue statute, the provision. legislature repealed section 15.061 and added sections 15.005 and 15.064; Section 15.061 applies here because this suit was filed before section

[2] W e note that appellant does not raise the 15.061 was repealed and before sections 15.005 and procedural issue set out in GeoChem Tech Corp. v. 15.064 were added. W e find the language of the Verseckes, 962 S.W .2d 541, 543–44 (Tex.1998). 1985 statute is clear. Depending on the state of the record at the time of the filing of a nonsuit, if an objection to venue has been filed and the plaintiff then takes a nonsuit and

[3] Brookshire Grocery further maintains Smith has not specifically denied the venue facts averred © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks. 4 *89 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 the case. The answer does not address directly the establish venue in Hardin County, Smith must 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 the alleged negligence in this case: improperly never sought a severance; appellant waived any 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 *90 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 . R h y n e , 9 3 2 S . W . 2 d 1 4 0 , 1 4 6

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 *91 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 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., 1 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).) © 2015 Thomson Reuters. No claim to original U.S. Government Works. End of Document © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks. 7 *92 K *93 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 Void judgment or order FREEDOM COMMUNICATIONS, 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

judgments; rather, they have jurisdiction only to v. determine that the order or judgment underlying Juan Antonio CORONADO, et al., Respondents. 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. Supreme Court must consider its jurisdiction to Publisher moved for summary judgment. The 357th District decide an appeal, even if that consideration is sua Court, Cameron County, Abel Limas, J., denied the motion. sponte. Publisher filed an interlocutory appeal. The Corpus Christi– 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 disqualified under the Texas Constitution, if an

[1] judicial notice would be taken of trial judge's plea order or judgment in the case will directly affect agreement in a federal racketeering case, and him to his personal or pecuniary loss or gain. Vernon's Ann.Texas Const. Art. 5, § 11.

[2] trial judge had an interest in the publisher's case, such 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

[5] Judges address the merits of publisher's interlocutory appeal. 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 *94 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

Opinion were void. Vernon's Ann.Texas Const. Art. 5, § 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 judge accepted a bribe for ruling on the summary-judgment Judges motion, constitutionally disqualifying him from this case and Pecuniary Interest 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 *95 2 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *96 3

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. *97 4

© 2015 Thomson Reuters. No claim to original U.S. Government Works. L *98 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, [2] Appeal and Error San Antonio. 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 trial court's jurisdiction to hear the cause. Kenneth WILKINS and Tom Wilkins, Individually 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 [3] Appeal and Error Limited Partnership, Appellees/Cross–Appellants. 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

[4] Statutes Court of Appeals, Hardberger, C.J., held that: (1) delay in Construction in View of Effects, submitting farmers' claim against seed seller to arbitration Consequences, or Results did not bar farmers' lawsuit; (2) witness was sufficiently Purpose of statutory construction is to ascertain qualified to testify as expert as to suitability of seed for legislative intent and where the intent is clear, it dry land farming; (3) evidence was sufficient to show that will be given effect, even if the result appears to seller's failure to comply with warranty, or a deceptive act be harsh. or unconscionable action, was producing cause of farmers' 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 Partial arbitrability West Headnotes (26) 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 *99 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works. Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000) If a party fails to submit a claim to arbitration 3 Cases that cite this headnote in a timely fashion under the Agriculture Code, 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. Rules of Evid., Rule 702.

Cases that cite this headnote 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 admissible, despite his discounting of certain

3 Cases that cite this headnote 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 *100 2 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 [17] Fraud seller's failure to comply with warranty, or Matters of Fact or of Opinion a deceptive act or unconscionable action by Decisive test to determine whether seller's seller, was producing cause of farmers' damages statements are mere inactionable puffing is for purposes of Deceptive Trade Practices Act (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 judgment on a matter of which the seller has that seed might not have been suitable for dry no special knowledge and on which the buyer land farming, contrary to actual representations 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 to find that seed seller took advantage of Sales the lack of knowledge, ability, experience, or Breach of warranty capacity of farmers to grossly unfair degree so Evidence that neighbor had no adverse effect as to support liability on unconscionability claim from rotating from cotton to grain and that seed under Deceptive Trade Practices Act (DTPA). seller recommended alleged over-planting by V.T.C.A., Bus. & C. § 17.41 et seq. farmers was sufficient to rebut possibility of 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 [19] Sales warranty claims against seed seller. V.T.C.A., Exclusion by contract or express warranty Bus. & C. § 17.41 et seq.

or refusal to warrant Cases that cite this headnote Warranty language on seed bag, purchase ticket, invoices, and unsigned purchase agreement effectively disclaimed implied warranties of

[16] Antitrust and Trade Regulation merchantability and fitness for a particular Comparisons; comparative advertising purpose, as well as express warranties, and thus Sales precluded breach of warranty claim by farmers Statements as to kind, quality, condition, or against seed seller. value 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

[20] Damages to mere inactionable puffing for purposes of Effect of provisions of contract Deceptive Trade Practices Act (DTPA) and Contractual limitation on damages is not breach of warranty claims, in light of their effective as to statutorily created rights, such as specificity and disparate positions of knowledge

a right to recover for deceptive acts. *101 3 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 [26] Interest History of loss does not preclude a judgment for Stay of proceedings future lost profits. 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 lifted abatement that had been imposed during

[22] Damages attempt at arbitration of dispute, in light of role Loss of profits 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, *747 Charles C. Murray, Lisa Powell, Atlas & Hall, L.L.P., with reasonable certainty, award of damages McAllen, Keith Parr, Kevin P. McJessy, Chicago, Ill., for to farmers for lost profits resulting from seed appellant. seller's deceptive act or unconscionable action 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.

OPINION

Cases that cite this headnote Opinion by: PHIL HARDBERGER, Chief Justice. [24] Interest Helena Chemical Company and Hyperformer Seed Company Suspension (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 following a jury trial.

5 Cases that cite this headnote 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, *102 4 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

the requirements imposed by the Texas Agriculture Code. claim to have relied upon Helena's promotional literature, The Agriculture Code provides, in part: which states that Cherokee has “excellent dryland [ (farmland 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.... (b) Any period of limitations that applies to the claim shall Helena argues that the Cherokee seed failed because the 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

(c) A claim of damages due to the failure of the seed is not immune) and grows well in dryland conditions (but not as described by Subsection (a) of this section may when the underlying soil has been depleted of its moisture in not be asserted as a counterclaim or defense in any a previous cotton crop). action brought by a seller against a purchaser until the purchaser has submitted a claim to arbitration.

The Wilkins sued Helena on February 7, 1995, alleging 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. *103 5 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

a. Standard of Review of fact, conclusions of law, and recommendations as to [1] [2] [3] The question of whether a trial court has costs.... 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. Texas Air Control Board, 852 S.W.2d 440, 446 (Tex.1993).

(2) grow to production a representative sample of the Unless the pleadings demonstrate the absence of jurisdiction, seed through the facilities of the commissioner or we assume the trial court properly had jurisdiction over *750 a designated university under the commissioner's the case. See Peek v. Equipment Serv. Co., 779 S.W.2d 802, supervision; or 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 context and construed according the rules of grammar and

In any litigation involving a complaint common usage. See TEX. GOV'T CODE ANN. § 311.011(a) that has been the subject of arbitration (Vernon 1998). A court may consider, among other things, under this chapter, any party may the object sought to be obtained and the consequences of introduce the report of arbitration any particular construction. See id. § 311.023; Cole v. Texas as evidence of the facts found in *104 6 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *105 7

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

a. Standard of Review resolution of the Wilkins' claims. We note also that Helena [9] [10] Whether the trial court properly admitted Dr. could have moved to dismiss the suit at any time after the Pleunneke's testimony is subject to an abuse of discretion trial court agreed to compel arbitration, rather than wait until standard of review. See E.I. du Pont de Nemours and Co. the board issued its findings. Such a motion, if made before v. Robinson, 923 S.W.2d 549, 558 (Tex.1995); Wal–Mart the Wilkins eventually sought arbitration, would have been Stores, Inc. v. Garcia, 974 S.W.2d 83, 86 (Tex.App.-San very compelling because the Wilkins had not fulfilled the Antonio 1998, no pet.). We examine the entire substance of necessary conditions to maintaining their legal action. the expert's testimony “to determine if the opinion is based on demonstrable facts and does not rely solely on assumptions,

In the present case, Helena waited until after the possibility, speculation, and surmise.” Merrell Dow Pharms., Board determined “that the request did not qualify for Inc. v. Havner, 953 S.W.2d 706, 712–13 (Tex.1997). The arbitration” (on October 16, 1996) before it moved to dismiss decision to admit evidence is in the discretion of the trial the Wilkins' lawsuit (on November 16, 1996). A positive court. See Robinson, 923 S.W.2d at 558 (citing Downer outcome of the delay is that the parties were continuing to v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42 attempt resolution of the claim without the consequences (Tex.1985)); Ginsberg v. Fifth Court of Appeals, 686 S.W.2d of litigation. An unfortunate result of the delay is that 105, 108 (Tex.1985). We have stated that an abuse of the arbitrators could not investigate the crops under “field discretion exists when the court fails to analyze or apply the conditions.” Helena could not, therefore, have a neutral expert law correctly. Muecke v. Hallstead, No. 04–97–00483–CV, investigate the efficacy of its seed. Helena was not, however, 2000 WL 328129, at *2 (Tex.App.-San Antonio March 29, without remedy. The trial court could have considered all of 2000, no pet. h.). the circumstances surrounding the delay in adjudicating the 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 *106 8

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *107 9 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

b. Causation and Liability (First and Third Issues) than rely on the tests. (emphasis added). He recommended The court submitted the following questions to the jury; the inquiring of the local farmers “to see what varieties have been jury answered “yes” to each: working for them on large acreages.” 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, 3. Was the failure, if any, of the defendant to comply with a his opinion as an expert is reliable. Although Helena asserts warranty a producing cause of damages to the plaintiffs? that his discounting of the trials are fatal to his reliability,

[“Failure to comply with a warranty” defined.] we understand his statement to be that there are factors to consider other than merely the trials. Because his conclusion

The jury answered “no” to the fourth question, which flows from his observation of these other factors, as well addressed fraud. Questions 5–8 concern damages and as the trials, we conclude that the trial court did not err in attorney's fees. An affirmative answer to any of the first three admitting his testimony. 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

(1) EVIDENCE SUFFICIENT TO SUPPORT

and factually insufficient to support the jury verdict as to CAUSATION? (JURY QUESTIONS 1–3)) 6 causation, liability, and damages.

[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 *108 10 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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) *109 11

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

c. Damages (Second Issue) Helena argues that because it did not require payment for the We have found no error in the trial court's entry of judgment seed in 1994, then there is no consideration paid in order to as to arbitration (fourth issue) or in the admission of expert give rise to an unconscionability claim. Even if this is true, the testimony (fifth issue). We also have found that the evidence damages awarded could be supported by the result the jury is legally and factually sufficient to support the jury verdict reached as to the first question. 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

(1) LIMITATION TO PURCHASE PRICE OF SEED

argues that it excluded the warranties by written document [20] Helena's limitation of liability to the purchase price of (here, on the seed bag, purchase ticket, and invoices). The the seed is effective only to damages arising from the breach purchase agreement (unsigned by the Wilkins) that is in the of warranty. See Southwestern Bell Tel. Co. v. FDP Corp., record provides “conditions of sale” that exclude the implied 811 S.W.2d 572, 577 (Tex.1991). A contractual limitation on warranties of merchantability and fitness for a particular damages *758 is not effective to statutorily created rights, purpose in what is relatively conspicuous print. The Wilkins such as a right to recover for deceptive acts. See id. at 576. respond that “it would ‘be difficult’ to replace such a large Because we have concluded that the judgment should be volume of seed” at the stage when the seed is delivered. affirmed as to the first and second jury questions, we address the argument regarding sufficiency of the evidence relating

The Uniform Commercial Code adopted in Texas permits a to damages. merchant to exclude or limit warranties on goods. See TEX. 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 of net losses from 1993–96 7 (which include years when they n.r.e.). In Asgrow, this court reversed a trial court's judgment did not farm with Cherokee), they have failed to establish in favor of a purchaser of seed; the sales contract, seed a history of profits. See Texas Instruments, Inc. v. Teletron bags, and invoices all contained a non-warranty clause that Energy Management, 877 S.W.2d 276, 278–80 (Tex.1994). provided, in part, “Asgrow gives no other or further warranty, The Teletron court reiterated the rule established in Southwest express or implied.” Id. at 440 n. 1, 444; see also John Deere Co. v. Tenberg, 445 S.W.2d 40, 42–43 (Tex.Civ.App.- *110 12

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *111 13 © 2015 Thomson Reuters. No claim to original U.S. Government Works. Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000) certainty. Calculating the lost profits in consideration of all of

b. Standard of Review the relevant factors is not impossible, particularly in light of [24] [25] The award of prejudgment interest during periods the $130,855.58 deduction that the jury made to the Wilkins' of delay is generally left to the discretion of the trial court. requested damages. See Lege v. Jones, 919 S.W.2d 870, 875–76 (Tex.App.- Houston [14th Dist.] 1996, no writ). The trial court's decision

We find that the award is within the range of evidence offered in refusing to offset from its interest calculations periods of by the Wilkins. We conclude that the damages awarded are delay caused by a litigant are reviewed under the abuse of supported with reasonable certainty. discretion standard. A trial court abuses its discretion if its action “is arbitrary, unreasonable, and without reference to [any] guiding [rules and] principles.” Goode v. Shoukfeh, 943

4. Pre–Judgment Interest (Wilkins' Issue on Cross– S.W.2d 441, 446 (Tex.1997); W. Wendell Hall, Standards Appeal) 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 do not substitute our opinion for that of the trial court. See City lifted the abatement (October 23, 1996). The Wilkins claim 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 Control Parking, 696 S.W.2d 549, 554 (Tex.1985). The court different from that argued below, they have not preserved 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., Inc. v. Kenneco Energy, 962 S.W.2d 507, 530 (Tex.1998). the Wilkins notified Helena of the Wilkins' problem with 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 date a defendant receives written notice of a claim or (2) which the Texas Legislature repealed in 1997 and replaced 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 to prejudgment interest “ ‘works as a system of rewards and interest under Cavnar v. Quality Control Parking, Inc., 696 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 caused by a defendant; and (2) periods of delay caused 33.1(a)(1)(A). Assuming, without *760 deciding, that the 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 *112 14

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 misrepresentation of material fact but merely ‘puffing’ or

FAILURE TO PERFORM AS REPRESENTED

opinion”). Nor will this statement support the jury's finding

ON WARRANTY OR LABEL

that Helena and Hyperformer committed an unconscionable act or course of action. See Latham v. Castillo, 972 S.W.2d 66, The majority holds the Wilkins' claims are not barred because 68 (Tex.1998) (“To be actionable under subsection (A), the they “submitted their claim to arbitration,” and “[t]he trial resulting unfairness must be ‘glaringly noticeable, flagrant, court was empowered to take such delay into account under complete and unmitigated.’ ” (quoting Chastain v. Koonce, Section 64.004 of the Agriculture Code.” Helena Chem. Co. 700 S.W.2d 579, 584 (Tex.1985))). v. Wilkins, 18 S.W.3d 744, 751-52 (Tex.App.—San Antonio 2000, no pet. h.). However, it is undisputed the Wilkins did Because the Wilkins' claims arising out of alleged not request arbitration until approximately sixteen months misrepresentations apart from the label on the seed package after the suit was abated for that purpose and, as a result, their are not actionable, and their claims arising out of the label are claims that they were “damaged by the failure of the seed

barred by their failure to timely institute arbitration, I would to produce or perform as represented by warranty or by the reverse the trial court's judgment and render judgment in favor label required to be attached to the seed” 1 were not arbitrated;

of Helena and Hyperformer. Because the majority fails to rather, the arbitration board determined the Wilkins' “request do so and instead affirms the trial court's judgment, I must did not qualify for arbitration.” Accordingly, section 64.004 respectfully dissent. does not apply. See TEX. AGRIG. CODE ANN.. § 64.004 (Vernon 1995) (“In any litigation involving a complaint that *113 15

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. *114 16

© 2015 Thomson Reuters. No claim to original U.S. Government Works. M *115 Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987) 42 Ed. Law Rep. 448

Injuries by other students Education 736 S.W.2d 617 Other particular injuries to students Supreme Court of Texas. 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 immunity of school employees for injuries SPRING INDEPENDENT SCHOOL arising from their negligent discipline of DISTRICT et al., Respondents. students. V.T.C.A., Education Code § 21.912. No. C–5209. | Feb. 25, 1987. 42 Cases that cite this headnote | Rehearing Denied Oct. 7, 1987. 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 Education 11th District Court, Harris County, William N. Blanton, Other particular injuries to students Jr., J., granted defendants' motion for summary judgment, 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 officials were negligent in failing to provide Campbell, J., held that: (1) failure of school employees to adequate medical care, school district and bus adequately supervise children or to provide prompt medical 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 during school, as injury was not proximate result discipline, and (2) even if student's injuries were aggravated of use or operation of school bus. V.T.C.A., when she had seizures on bus, and negligent failure to 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

30 Cases that cite this headnote school bus. Affirmed.

Attorneys and Law Firms Kilgarlin, J., dissented and filed opinion in which Ray and 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 Opinion Undefined terms 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. *116 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

Tex.Educ.Code Ann. § 21.912 (Vernon Supp.1986). This send her to the school nurse. Later, an occupational therapist statute was construed in Barr v. Bernhard. This court held a noticed her condition and took her to the nurse, who told professional school employee is not personally liable for acts Celeste Adeline to stay at school. The nurse did not contact done within the scope of employment and which involve the her mother, an employee *618 of the school district, and did exercise of judgment or discretion, except when disciplining not contact her doctors, although the school knew the names a student the employee uses excessive force or negligence of the doctors. which results in bodily injury to the student. Barr, 562 S.W.2d at 849.

At the end of the school day, Celeste Adeline rode on the school bus to the day care center. She suffered severe

The Barr court held the statute is ambiguous because “it is convulsions while on the bus. The bus driver contacted a inaccurate to say that a person ‘uses negligence’; negligence supervisor, requesting a school nurse be provided at the next occurs as a result of an act or omission by an individual.” stop, but none was provided. The driver was told to take her Therefore, the court determined the legislative intent of the to the day care center, where she finally received medical statute. Id. at 848. The court concluded that when subsection treatment. (b) is read in conjunction with subsection (c), an interpretation that the last clause of subsection (b) subjects employees

Two years later Celeste Adeline's mother sued Spring I.S.D., to liability for any negligent act which results in bodily the bus supervisor, the school principal, the school nurse and injury is untenable. Subsection (c) states, “This section is the teacher. She claimed the school personnel's negligence not applicable to the operation, use, or maintenance of any and gross negligence in failing to provide adequate care motor vehicle.” The court reasoned that if subsection (b) dramatically decreased Celeste Adeline's life expectancy. were read to exclude from immunity all negligent acts of Summary judgment was rendered for the school district and school employees, not merely those incident to discipline, the employees based on the immunity granted the school there would be no need for subsection (c) to explicitly negate district under the Tort Claims Act and the employees under immunity in the operation, use, or maintenance of a motor the Education Code. vehicle. We are asked to abrogate the immunity enjoyed by school Barr was decided eight years ago, and the legislature has had district employees under section 21.912 of the Texas ample time to change the statute if that construction did not Education Code. This would require us to overrule the recent comport with legislative intent. It has not done so. Indeed, the Supreme Court case of Barr v. Bernhard, 562 S.W.2d 844 legislature has broadened the immunity provided by section (Tex.1978). 21.912(b) by enacting section 13.906 of the Texas Education Code in 1981 and section 13.503 in 1984.

Mrs. Hopkins contends that school personnel should be liable for their negligent acts which result in serious bodily injury

Section 13.906(a) applies to student teachers: to students. The Texas Education Code, section 21.912, provides tort immunity to professional school employees

A person assigned to perform student except: teaching in a student teacher center is entitled to the same protection of law

No professional employee of any accorded to the supervising teacher school district within this state shall be and the principal of the school in personally liable for any act incident which the student teacher serves or to or within the scope of the duties acts in the course of employment. of his position of employment, and *117 2 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *118 3

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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, There can be little doubt that the court was wrong in its 600 S.W.2d 773, 780 (Tex.1980) (Spears, J., concurring). ‘[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.” Section three of the bill defined “employee” as including opinion is the rendition of the opinion in Crawford v. 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” the language “except in circumstances where professional Yet, the legislature has remained silent. Like Justice Spears 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 exercise of discretion” and to add “supervisors” to the inaction could not save Deveroex, why should it be used to 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 first one reading “[a]mend committee amendment to S.B. 74, the reasoning of Barr v. Bernhard.

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 the bill in the form of the language ultimately adopted. reached a different conclusion from what we think right. As Associate Justice Livington Lindsay, speaking for the court, said over a century ago: *119 4

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. *120 5

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. *121 6 © 2015 Thomson Reuters. No claim to original U.S. Government Works. N *122 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 *123 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 Duties and liabilities to insureds or other third of those facts; (3) with intention that it should be 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 remedy in general provision, and question was taken from pattern 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 which express limitations period is available 17.50(a)(4).

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 27 Cases that cite this headnote DTPA claim. V.A.T.S. Insurance Code, art. 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 *124 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 *125 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 Statements recklessly made; negligent 1 Cases that cite this headnote misrepresentation Statement is not fraudulent unless speaker knew it was false when made or speaker made it

[18] Judgment Operation and effect recklessly without knowledge of truth. Lack of opportunity for jury trial in federal court 34 Cases that cite this headnote did not, in and of itself, preclude application of 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 *126 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 ke r ac ts recklessly if he 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 *127 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 PH ILLIPS, Chief Justice, EN O CH , B AK ER and 78 Cases that cite this headnote HANKINSON, Justices, join. SPECTOR, Justice, joined Parts I, II, III, and IV of the Court's opinion. W e withdraw our opinion of December 11, 1997, and

[31] Interest 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 *128 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 provision, under which Kenneco's buyer held the title and the to claim the primary coverage amount directly from 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 *129 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 In June 1988, prior to the Second Circuit's decision, J & H underwriters refused Kenneco's contingency coverage because 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 and sought damages on a variety of claims. A jury found that position was that the increased value coverage insured only 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 granted J & H's motion without stating the grounds. a defendant, but did offer evidence about the events at the 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 *130 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 *131 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 estoppel issue, the language submitted is not

W as Kenneco's (Armada's) failure to take “necessarily referable” to equitable estoppel and action before December 15, 1986 [the date of therefore should not be characterized as such on the standstill agreement], caused by J & H's appeal. Tex.R. Civ. P. 279; see also Martin v. knowingly engaging in conduct solely McKee Realtors, Inc., 663 S.W .2d 446, 446 calculated to induce Kenneco (Armada) to (Tex.1984); Gold Kist, Inc. v. Carr, 886 S.W .2d refrain from or postpone filing suit? 425, 431 (Tex.App.— Eastland 1994, writ denied) (holding that jury question relating to breach of

921 S.W .2d at 263. 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

Furthermore, Kenneco's question was clearly merely a submission of the 180–day limitations submitted as part of the DTPA/Insurance Code extension available under article 21.21, section 16(d) claim— the jury was instructed not to answer it of the Insurance Code or section 17.565 of the unless it found that J & H had engaged in an “unfair DTPA. W e agree. Section 16(d) provides: 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 *132 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 request that the trial court submit an Insurance Code

Did Johnson & Higgins engage in any unfair claim as an alternative cause of action. J & H's or deceptive act or practice in its dealings with argument fails to consider the fact that, while the Kenneco (Armada) on or about November 30, DTPA does incorporate article 21.21, the converse 1982? is also true— article 21.21 incorporates certain practices delineated in the DTPA. Aetna Cas. & Sur. Co. v. Marshall, 724 S.W .2d 770, 772 (Tex.1987).

The parties dispute whether this jury question is Thus, if both DTPA and Insurance Code violations properly characterized as an Insurance Code claim are alleged, but only one cause of action is or a DTPA claim. That determination must be made submitted, that claim is not automatically a DTPA before considering the applicable statute of claim. limitations. W e agree with Kenneco that the jury question is J & H asserts that Kenneco abandoned its Insurance © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks. 11 *133 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 nd sub m its P JC 102.1 6 , entitle 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 s u b m i t s P J C 1 0 2 . 1 9 , e n t i t l e d 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 *134 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 decided in the federal action to determine whether S.W .2d 598, 601 (Tex.App.— Dallas 1987, writ 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 Brazilian underwriters, for our purposes we need conclusion.

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 testify in that case. March 1983. Kenneco and J & H signed their 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 *135 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 under the increased value provisions rather than would not allow recovery for loss of profits [on a 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 Kenneco appealed the district court's ruling to the separate agreement was made, explicitly finding that 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 Anderson did not discuss insurance against loss of purport to make such an agreement,” and that “[J & 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 that J & H lacked authority to bind the London to do so. Id. at 1066–67. Finally, the court concluded 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 30 meeting binding the London underwriters to Sun contract or the profits thereon.” Id. at 1067.

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 *136 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 by collateral estoppel. In its state court claim, payment of a premium alone does not justify the Kenneco asserts that J & H “breached its agreement rewriting of an insurance contract,” reasoning that 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, “Did Johnson & Higgins and Armada agree on created “where none clearly existed.” Id. at 852.

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 cargo in question?” The instruction further clarifies

B. Preclusion of Kenneco's Claims 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 federal action. the subsequent suit is based upon a different cause of 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 November 30 meeting. Armada Supply, 665 F.Supp. true, however, the issue decided in the first action 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 was made. At least twice in its opinion, the court S.W .2d 794, 802 (Tex.1992); Eagle Properties, 807 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 Supply, 665 F.Supp. at 1051, 1066–67. The Second S.W .2d 381, 384 (Tex.1985). The federal courts 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 the finding that “Brown did not ask for, nor did 104 F.3d 38, 41 (2d Cir.1997); Hicks v. Quaker Oats Anderson agree to, coverage on lost profits.” Co., 662 F.2d 1158, 1166 (5th Cir.1981).

Armada Supply, 858 F.2d at 847, 851. In order to succeed on its breach of contract claim in state court, Kenneco was required to establish that an agreement

Kenneco's state court claims include: (1) breach of concerning lost profits coverage was made. That contract, (2) Insurance Code violations, (3) 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 contract to secure lost profits coverage is precluded limitations. W e hold that, to the extent Kenneco's

© 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks. 15 *137 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 considered” and sufficient to sustain the judgment. of Judgments provides in part: “If a judgment of a 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 agreement to secure “contingency coverage” is not there cannot be estoppel by alternative holdings. ^[8]

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, that Johnson & Higgins would secure for Kenneco's effect because both were reviewed and affirmed by 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:

Kenneco's cause of action for breach of an If the judgment of the court of first instance agreement to secure contingency coverage is not was based on a determination of two issues, collaterally estopped because, in contrast to their either of which standing independently would consideration of whether J & H agreed to secure lost be sufficient to support the result, and the profits coverage, the federal courts never addressed appellate court upholds both of these whether an agreement was made to secure determinations as sufficient, and accordingly contingency coverage. affirms the judgment, the judgment is conclusive as to both determinations. In contrast to the case discussed in Comment i,

It is undisputed that Brown went to J & H to obtain the losing party has here obtained an appellate “back up” insurance in the event the Brazilian decision on the issue, and thus the balance underwriters failed to pay on a claim. It is also weighs in favor of preclusion. undisputed that Anderson told Brown such coverage could be triggered by the policy's already existing

Restatement (Second) of Judgments § 27, cmt. o © 2015 Thom son Reuters. No claim to original U.S. Governm ent W orks. 16 *138 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 judgment in the prior suit. Bonniwell v. Beech waive the coverage requirements. Armada Supply, 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 premium. The district court concluded that it was a court findings. See Tarter v. Metropolitan Sav. & 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 was back-to-back C.I.F. and that Kenneco did not

The federal courts never decided whether J & H 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 Sun were not essential to the district court's holding. the November 30 meeting ( e.g., the underwriters' 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 contingency coverage,” id. at 1062, was not essential regarding the state of knowledge of both parties as to 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 *139 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

W e hold that, to the extent that Kenneco's fraud the London underwriters at the November 30, claim is based on its allegation that Anderson 1982, meeting? knowingly or recklessly represented that Kenneco's lost profits on the contract were insured by the

The question did not differentiate between the increased value provision, it is barred by collateral increased value coverage and the contingency estoppel. Kenneco's state court fraud claim coverage, although the pleadings alleged that necessarily involves proof that a representation was Anderson misrepresented Kenneco's coverage under made, and that that representation was false. both provisions. The jury answered affirmatively and Although Kenneco never contended that Anderson awarded Kenneco $1.5 million in damages. or J & H mis -represented coverage in the federal courts, Kenneco did contend that Anderson made certain representations regarding lost profits coverage, and the federal courts rejected that

[15] The elements of common-law fraud are that: (1) contention. In fact, the Second Circuit specifically a material representation was made; (2) the

characterized the issue being decided as “whether representation was false; (3) when the representation the London underwriters were bound by the alleged was made, the speaker knew it was false or made it representations of J & H, a Houston broker, that the recklessly without any knowledge of the truth and as insurance would cover lost profits.” Armada Supply, a positive assertion; (4) the representation was made 858 F.2d at 851 (emphasis added). Even Kenneco's with the intention that it be acted upon by the other own brief states that “Kenneco offered evidence party; (5) the party acted in reliance upon the concerning representations made by Anderson of [J representation; and (6) the party suffered injury. T.O. & H] as to the extent of coverage” for lost profits. Stanley Boot Co. v. Bank of El Paso, 847 S.W .2d Thus, insofar as Kenneco's fraud claim is based on 218, 222 (Tex.1992); Eagle Properties, 807 S.W .2d an alleged representation by Anderson that at 723. Kenneco's lost profits were covered, the claim is

barred *525 by the federal courts' conclusion that no such representation was made.

[16] J & H argues that Kenneco's fraud claim is 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 *140 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 *141 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 *142 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 *143 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 *144 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 Legislature's views, expressed in its enactment of applies only to wrongful death, personal injury, and 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, under the common law, prejudgment interest should

The Legislature's codification and modification of 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 *145 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. See Robinson, 894 S.W .2d at 529 (claimant not S.W .2d at 326 . This Court has recognized the 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 The standstill agreement in this case expressly agreement was signed, is the equivalent of the date 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 *146 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 defendant receives notice or suit is filed, we

[32] W e further hold that prejudgment interest 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 settlements and trials, and removes incentives for been much confusion among Texas courts regarding 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 those policy goals even when the date of accrual of (Tex.App.— Texarkana 1994, writ dism'd by agrmt). 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 *147 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 *148 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 *149 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 *150 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 *151 Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998) 41 Tex. Sup. Ct. J. 268 Footnotes Sue and labor expenses are the reasonable expenses incurred by an insured to mitigate its loss and thus reduce the amount to be paid 1 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. “Unfair or deceptive act or practice” means any of the following:

5 (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. Prior to the 1985 amendment, § 16(d) read: “In an action under this section, damages may not include any damages incurred beyond

6 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 *152 Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507 (1998) 41 Tex. Sup. Ct. J. 268 Effective September 1, 1997, article 5069–1.05 was codified in Chapter 304 of the Texas Finance Code. See Act of May 24,1997, 9 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. Section 2 provided that the interest rate should be computed by “taking the auction rate quoted on a discount basis for 52–week 11 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 *153 O *154 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 *155 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 Damage award of $10,500 for loss of consortium Damages 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 *156 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 *157 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 *158 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 *159 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 *160 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 error amounted to such a denial of K Mart's rights as was was *146 sufficient to constitute notice under this statute. 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 ascertain the amount of future medical damages awarded by however, that “[t]his information is to be used for purposes of 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 *161 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 Justice Charles Bleil was a member of the Court when this case was argued and submitted, and participated fully in the consideration 1 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 *162 K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996) Prejudgment interest was included in the trial court's judgment pursuant to Tex.Rev.Civ. Stat. Ann. art. 5069–1.05 (Vernon 2 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.” In a previous opinion, this Court held that prejudgment interest under this statute should be compounded annually pursuant to Section 4 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. In Bevers, the Fort Worth Court asserted that this Court wrongly decided Sadler. Bevers v. Soule, 909 S.W.2d 599 (Tex.App.—Fort

5 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. See Baylor Medical Plaza Services v. Kidd, 834 S.W.2d 69, 79 (Tex.App.—Texarkana 1992, writ denied)(on motion for rehearing); 6 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). This amount was calculated as follows:

7 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 *163 P *164 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 [3] Fraud Corporation, Appellant and Appellee, Duty to disclose facts v. When one makes a representation to another that

OMAGRO DE COLOMBIA,

later becomes misleading or false, he has a duty L.D.C., Appellee and Appellant. to correct the false information to the misled party and not continue to conceal the truth. No. 2–02–015–CV. | Feb. 6, 2003. 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 Both negligence and causation in a case of company. Prospective investor appealed, and company cross- negligent misrepresentation may be established appealed. The Court of Appeals, Dixon W. Holman, J., by either circumstantial or direct evidence. held that: (1) evidence supported finding of negligent 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 Amount awarded Affirmed. 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 misrepresentation.

[1] Appeal and Error Verdict 1 Cases that cite this headnote When no objection was made to a jury instruction, evidence to support a finding based [6] Evidence on the instruction should be assessed on appeal Tendency to mislead or confuse in light of the instruction the trial court gave the 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 official substantially outweighed probative

[2] Fraud value; investor's letter to company did not Statements recklessly made; negligent mention bribe as grounds for withdrawal, and misrepresentation investor was not aware of bribe until three years Evidence legally supported finding that after it withdrew from project. Rules of Evid., prospective investor made negligent Rule 403. misrepresentation to manufacturing company; *165 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 Manufacturing company could not maintain [7] Trial claim for promissory estoppel against potential Admission of evidence in general 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 promises it alleged.

Cases that cite this headnote 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, he may have a cause of action for promissory

Cases that cite this headnote 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 unenforceable promise.

1 Cases that cite this headnote 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 (3) detrimental reliance by the promisee.

1 Cases that cite this headnote 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.

*768 Godwin Gruber, P.C., Julia F. Pendery, Dallas, for V.T.C.A., Finance Code § 304.104. Appellant/Cross Appellee. 1 Cases that cite this headnote Shannon, Gracey, Ratliff, et al., Joseph W. Spence, Fort Worth, for Appellee/Cross Appellant. *166 2

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 In 1997, after the memorandum was signed, George Robles, we reverse the jury's verdict and trial court judgment MCN's “point man” for the transaction, and Purna Pai, an awarding Appellee Omagro De Colombia, L.D.C. (Omagro) MCN chemical engineer, visited Colombia to conduct due $2,781,041.36 for a claim of negligent misrepresentation and diligence for the urea project. When they returned after that we render judgment that Omagro take nothing. We will inspecting the plant, they gave Omagro no indication that affirm. 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

Without warning, fourteen months into the transaction, a due diligence review within the first thirty days after Robles and Sharma telephoned Vashisht in September 1998 signing the memorandum and would have no obligation to to tell him that MCN would not invest in the project consummate the deal unless satisfied with that review. The with Omagro. Vashisht then wrote a letter to MCN's new memorandum was signed July 14, 1997, and eventually it president, Williams, to protest MCN's sudden withdrawal. was amended and extended six times. The final extension *167 3 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 court signed a final judgment for Omagro for $2.2 million,

In September 1999, Omagro sued MCN alleging causes of plus $581,041.36 in prejudgment interest. action for breach of contract, promissory estoppel, breach 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 *168 4

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *169 5

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *170 6

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 claim. We disagree because Omagro does not identify or

[13] [14] [15] If a promisee has reasonably and 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 We have carefully considered and overruled MCN's five of action include a promise, the promisor foreseeing that issues for the reasons stated. We hold that on the issue of the promisee will rely on it, and detrimental reliance by negligent misrepresentation, the evidence is legally sufficient the promisee. English v. Fischer, 660 S.W.2d 521, 524 to support the jury's finding for Omagro. The issue presented (Tex.1983). by Omagro's sole cross-point is overruled. We affirm the trial court's judgment.

We have already held that the record contains legally 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. *171 7

© 2015 Thomson Reuters. No claim to original U.S. Government Works. Q *172 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, although trial court intended that final judgment

Helen PRINGLE, Independent Executrix of the would relate back to earlier judgment; earlier Estate of Brantley Pringle, Deceased, Appellant, judgment no longer existed once trial court v. expressly vacated earlier judgment in granting Toby MOON, Appellee. motion to modify judgment. V.T.C.A., Finance Code §§ 304.003, 304.102, 304.103.

No. 2–04–012–CV. | Feb. 10, 2005. 3 Cases that cite this headnote Synopsis 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, When a judgment has been rendered and later set Don Chrestman, J., rendered final judgment. Independent aside or vacated, the matter stands precisely as if executrix appealed. 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 In tree remover's personal injury action that arose at time that final judgment was signed, and from automobile accident involving motorist, who was assigned as result of settlements

[2] amount of workers' compensation credit was required to with insurers subrogation recovery interest be deducted from amount of damages found by jury before concerning workers' compensation benefits prejudgment interest could be calculated. 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 Cases Triable in Appellate Court Judgment Operation and Effect *173 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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 piece of equipment, which pushed Moon into another piece Prejudgment interest is calculated on the of equipment and caused him to sustain injuries. Because judgment amount, not the amount of damages Moon sustained his injuries in the course and scope of his awarded by the jury. V.T.C.A., Finance Code §§ employment, he sought and received workers' compensation 304.003, 304.102, 304.103. 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 Before trial, Texas Mutual asserted a right to recovery Mode of Computation in General 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 subrogation recovery interest Texas Mutual had previously

1 Cases that cite this headnote 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. The trial court rendered judgment on the verdict on July

*608 Wright & Greenhill, P.C., Brantley Ross Pringle Jr., 7, 2003. Thereafter, Brantley filed a motion to modify the Austin, for Appellant. 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. *174 2

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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.- *175 3 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 Brantley's workers' compensation credit before it calculated

[6] [7] [8] Prejudgment interest is compensation allowed 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. *176 4 © 2015 Thomson Reuters. No claim to original U.S. Government Works. R *177 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, [2] Constitutional Law v. To Judiciary CITY OF AUSTIN, Save Our Springs Legal Environmental Law Defense Fund, Inc. and Al St. Louis, Respondents. 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 In analyzing the constitutionality of a statute, ordinance became effective; and (5) ordinance was proper court should, if possible, interpret the statute in a subject of the initiative and referendum process under city manner that avoids constitutional infirmity. charter. On rehearing, the Court further held (6) repealed 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 [5] Constitutional Law West Headnotes (30) Policy Municipal Corporations [1] Constitutional Law Conformity to constitutional and statutory Nature and scope in general provisions in general *178 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

3 Cases that cite this headnote a relevant statute or constitutional provision. 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 Validity Key to determining whether statute authorizes a 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, or ineffective, even insofar as it established

[8] Administrative Law and Procedure strict runoff standards, provided only limited Trial De Novo 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, compensation must be provided.

42 Cases that cite this headnote Cases that cite this headnote [10] Municipal Corporations Presumptions and burden of proof [14] Environmental Law *179 2 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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, [18] Municipal Corporations which required public hearing, did not apply to Matters subject to initiative adoption of municipal water pollution control 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 2 Cases that cite this headnote Commission for “review and approval” did not, 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 in intervention was harmless, in suit challenging

1 Cases that cite this headnote 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 1 Cases that cite this headnote of home-rule cities, but only if the limitation appears with unmistakable clarity. Vernon's Ann.Texas Const. Art. 11, § 5.

[22] Statutes *180 3 © 2015 Thomson Reuters. No claim to original U.S. Government Works. Quick v. City of Austin, 7 S.W.3d 109 (1998) Repealing Statutes by clear expression or necessary implication. V.T.C.A., Government Code § 311.031(a, b). Generally, when a statute is repealed without 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 clause of Code Construction Act, though repeal When a right or remedy is dependent on a statute, included specific savings clause, where repeal the unqualified repeal of that statute operates to did not expressly make general savings clause deprive the party of all such rights that have not inapplicable, and specific savings clause was become vested or reduced to final judgment. 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 Statute locking in development regulations in Construction Act to the repeal. V.T.C.A., existence at time of original permit application Government Code § 311.031(a, b). 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 *181 4 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 Frustrated by their perception that the Austin City Council Construction Act, repealed statute locking in was failing to safeguard Barton Springs adequately, a group development regulations in existence at time of of Austin citizens interested in protecting the environment original permit application precluded application initiated the Save Our Springs Ordinance and placed it of current water pollution control ordinance, on the Austin municipal ballot for a local referendum restricting new development in watershed area, election. In August 1992, the Austin citizens participating to permit applications first filed or approved in the referendum election overwhelmingly approved the before repeal, but not those first filed after repeal. Ordinance. Two days after the voters approved the Ordinance, V.T.C.A., Government Code § 311.031(a, b). 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, Barton Springs, and the Barton Springs Edwards Aquifer. 1

Attorneys and Law Firms 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 in the regulated areas to between 15% and 25% of the net

William G. Bunch, Thomas H. Watkins, Andrew F. Martin, site area. The Ordinance also requires that new developments Elizabeth G. Bloch, James K. McClendon, Frank C. Cooksey, be set back from streams and not contribute to an increase Pamela Stanton Baron, Austin, Michael A. Hatchell, Tyler, in the amount of pollution constituents commonly found in Dick DeGuerin, Houston, Teresa L. Todd, Marfa, for urban rainfall runoff water. Construction in the “critical water Respondents. quality zone” of the Barton Creek watershed is prohibited by the Ordinance. The Ordinance provides for no waivers or Opinion 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 *182 5 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. Any person affected by any ... The appellate court first determined that the trial court did

ordinance ... relating to water pollution not abuse its discretion in striking the Alliance's plea in control and abatement outside the intervention. 930 S.W.2d at 683. The court of appeals then corporate limits of such city adopted concluded that the trial court erred in rendering judgment pursuant to this section or any other that the Ordinance *114 was unreasonable, arbitrary, and

statutory authorization may appeal inefficient pursuant to section 26.177(d) of the Texas Water such action to the [Texas Natural Code because section 26.177(d) was unconstitutional under Resource Conservation Commission] article II, section 1 of the Texas Constitution, the separation or district court.... The issue on appeal of powers provision. Id. at 685. The court of appeals further

is whether the action or program held that the Ordinance was not illegally enacted because (1) *183 6 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 review of a legislative act. The Petitioners maintain that the

A

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.

Petitioners observe that section 26.177(d) employs terms such branch of government. Article II, section 1 of the Texas as “unreasonable” and “arbitrary,” which are consistent with Constitution divides the functions of government as follows: 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 *184 7 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *185 8

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 brand bottled drinking water. 4 Petitioners allege that the control water quality. Ordinance's practical effect is therefore a preclusion of all development in the watershed areas.

We further do not believe that the provision in section 26.177(d) allowing the reviewing court to “modify” the city's

Petitioners also attack the lack of variances in the Ordinance. action connotes an impermissible de novo review. Courts For instance, even if a landowner could establish that no ordinarily cannot strike down an entire ordinance as invalid increase in pollution would result from constructing a greater based on the invalidity of only a part of the ordinance, percentage of impervious cover than allowed under the unless all the provisions of the ordinance are so dependent Ordinance, no variance is permitted. or connected that it cannot be presumed that one provision would have been passed without the others. Rose v. Doctors *186 9

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *187 10

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

TEX. LOC. GOV'T CODE § 212.002. Local Government Further, *120 it is indisputable that limiting pollutants in Code section 212.003 provides in pertinent part: runoff water will aid in preserving water quality. We therefore 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 (2) the bulk, height, or number of buildings constructed too far, compensation must be provided. See Barshop, 925 on a particular tract of land; S.W.2d at 628. To the extent that the City's limitations on 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 apply because these sections are zoning statutes and the [14] The Petitioners next attack the court of appeals' Ordinance is a water pollution control measure. We agree conclusion that the Ordinance is not void under sections

with the City. 212.002 and 212.003 of the Local Government Code. Local 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 *188 11

© 2015 Thomson Reuters. No claim to original U.S. Government Works. Quick v. City of Austin, 7 S.W.3d 109 (1998) section 212.003 was not intended “to affect the ability of

The water pollution and abatement a municipality to apply water control requirements” in its program ... must be submitted extraterritorial jurisdiction. CONFERENCE COMMITTEE to the [Texas Natural Resource REPORT, Tex. H.B. No. 3187, 71st Leg., R.S. (1989). We Conservation] commission for review therefore conclude that sections 212.002 and 212.003 apply and approval. The commission may only to zoning statutes, not water control measures such as adopt rules providing the criteria for the Ordinance. the establishment of those programs and the review and approval of those

[15] Petitioners nevertheless assert that the Ordinance is, programs. in effect, a zoning ordinance, not a water control ordinance. 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 ANALYSIS, Tex. H.B. 1546, 71st Leg., R.S. (1989).

[16] Petitioners also complain that the court of appeals erred Petitioners assert that the Commission cannot “provide in holding that the Ordinance is effective without the City oversight” of the pollution abatement plans if the plans can first obtaining approval from the Texas Natural Resource become effective before approval is obtained. Because the Conservation Commission. Section 26.177(a) of the Water Ordinance undisputedly has not yet been approved by the Code allows municipalities with populations in excess of five Commission, Petitioners urge that it is not effective. thousand to establish water pollution control and abatement programs. Section 26 .177(c) provides in pertinent part: *189 12

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. *190 13

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

Petitioners finally contend that the court of appeals erred a planning commission which “shall” review and make by holding that only projects where the original permit recommendations on proposals to “adopt or amend land applications were filed after September 1, 1987 were required development regulations,” including “zoning, subdivision, to be considered on the basis of the City's regulations building and construction, environmental and other police and ordinances in effect at that time. Circle C made power regulations controlling, regulating, or affecting the use applications for preliminary subdivision approval for five or development of land.” Austin City Charter art. X, § 4. different sections of the Circle C development, four of which Finally, the charter provides that the city council may adopt were filed in 1985 and the fifth of which was filed in 1992. amendments to the comprehensive plan only after at least one In furtherance of its ongoing development from these permit public hearing. Id. § 5. Petitioners claim that these provisions applications, Circle C applied for site development permits of the charter remove water pollution regulations, such as the after the enactment of the Ordinance. Ordinance, from the domain of citizen initiators. The City responds that such a withdrawal of the power of initiative

The trial court concluded that, under former section 481.143 must be clearly stated, and no such clear statement exists in of the Government Code, the ordinances in effect when Circle this case. C filed its original permit applications in 1985 and 1992 governed the City's consideration of Circle C's subsequent

*124 [19] [20] Charter provisions are to be liberally permit applications for the same development. The court of construed in favor of the power of initiative and referendum. appeals, however, modified the trial court's judgment, holding Glass v. Smith, 150 Tex. 632, 244 S.W.2d 645, 649 (1951); that because section 481.143 became effective September 1, Taxpayers' Ass'n of Harris County v. City of Houston, 129 1987, only initial permits filed between September 1, 1987 Tex. 627, 105 S.W.2d 655, 657 (1937). While the initiative and the effective date of the Ordinance (August 10, 1992) power may be either expressly or impliedly limited by the were not subject to the strictures of the Ordinance. Circle C city charter, such a limitation will not be implied unless the contends that the court of appeals erred in modifying the trial provisions of the charter are clear and compelling. Glass, 244 court's judgment. S.W.2d at 649. Generally, the right to develop property is subject to Petitioners make no contention that the Austin city charter intervening regulations or regulatory changes. Connor v. City expressly provides that a water control regulation, such of University Park, 142 S.W.2d 706, 709 (Tex.Civ.App.— as the Save Our Springs Ordinance, may not be adopted *191 14 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *192 15 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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' judgment holding that the Ordinance is a valid legislative

[21] As a final matter, we must consider Save Our Springs act that need not be approved by the Texas Natural Alliance's argument that the trial court erred in striking Resource Conservation Commission to become effective and its plea in intervention and the court of appeals erred in enforceable. We dismiss Circle C's point of error regarding affirming the trial court's striking of its intervention. The the court of appeals' modification of the trial court's judgment Alliance, comprised of the citizen initiators of the Save with regard to section 481.143 of the Government Code Our Springs Ordinance, maintains that the City could not because Circle C did not obtain final relief prior to the repeal adequately defend the Ordinance in court because the City of section 481.143. had consistently opposed the Ordinance and had vigorously 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

Justice ENOCH, concurring. 340 (Tex.App.—Austin 1992, no writ)(citizens sued City to I join in the Court's opinion and in the judgment. I write force election on the Ordinance). Under these circumstances, separately only to mention one facet of this case that troubles the Alliance urges that its intervention was essential to protect me: *127 by conferring on Austin the authority to control its interests. See Guaranty Fed. Savings Bank v. Horseshoe land use outside its boundaries, the Legislature has partially Operating Co., 793 S.W.2d 652, 657 (Tex.1990)(trial court disenfranchised a class of citizens. This disenfranchisement abuses its discretion in striking intervention when (1) the is at its most obvious in this case, in which the citizens of one intervenor, in its own name, could have either brought, or community by their vote have placed land use restrictions on defended and defeated the same action; (2) the intervention citizens of neighboring communities who had no vote. It is will not complicate the case by an excessive multiplication also a disenfranchisement that may very well violate the “one of the issues; and (3) the intervention is almost essential man, one vote” principle inherent in the right to participate in to effectively protect the intervenor's interest). The Alliance the political process and guaranteed by the Equal Protection contends that the court of appeals erred in concluding Clause of the Fourteenth Amendment to the United States that the City could adequately protect its interests. The Constitution. See Holt Civic Club v. City of Tuscaloosa, 439 Alliance further asserts that citizen initiative sponsors have an U.S. 60, 68, 99 S.Ct. 383, 58 L.Ed.2d 292 (1978). absolute right to intervene in litigation involving the initiated legislation.

In Holt, the United States Supreme Court decided that the City of Tuscaloosa's extraterritorial jurisdiction, which

However, we do not believe it is necessary to reach the extended police jurisdiction and sanitary regulations over merits of the Alliance's argument. Even assuming the trial several unincorporated areas, did not violate the voting rights court erred in striking the Alliance's intervention and the of those areas' residents. Id. at 70, 99 S.Ct. at 389-90. The court of appeals erred by affirming the trial court's action, Court declined to invalidate the extraterritorial jurisdiction the error was harmless. Under the Texas Rules of Appellate because of “the extraordinarily wide latitude that States Procedure, no judgment may be reversed on appeal unless *193 16 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *194 17 © 2015 Thomson Reuters. No claim to original U.S. Government Works. Quick v. City of Austin, 7 S.W.3d 109 (1998) in effect at the time the original (1) the prior operation of the statute or any prior action application for the first permit in that taken under it; series is filed shall be the sole basis 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 (b) If the penalty, forfeiture, or punishment for any offense repealed without a savings clause limiting the effect of the is reduced by a reenactment, revision, or amendment of repeal, the repeal of that statute is usually given immediate a statute, the penalty, forfeiture, or punishment, if not effect. See Knight v. International Harvester Credit Corp.,

already imposed, shall be imposed according to the statute 627 S.W.2d 382, 384 (Tex.1982). When a right or remedy is as amended. dependent on a statute, the unqualified repeal of that statute 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. *195 18 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *196 19 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 A statute does not operate expressly prescribed the statute's proper reach. See Landgraf “retrospectively” merely because it is v. USI Film Prods., 511 U.S. 244, 280, 114 S.Ct. 1483, 128 applied in a case arising from conduct L.Ed.2d 229 (1994). The statute provides that if a series of antedating the statute's enactment, or permits is required for a project, the ordinances in effect at the upsets expectations based in prior time the original application for the first permit is filed shall law. Rather, the court must ask be the sole basis for consideration of all subsequent permits whether the new provision attaches required for the completion of the project. Nowhere does the new legal consequences to events statute require that the original application for the first permit completed before its enactment. The in the series be filed after September 1, 1987. But neither conclusion that a particular rule does the statute expressly state that it will apply to projects operates “retroactively” comes at in progress before that date. Thus, the plain language of the the end of a process of judgment statute does not expressly delineate its reach. concerning the nature and extent of the change in the law and the degree

Petitioners contend that the statute applies to the treatment of connection between the operation of any subsequent permit application filed after September of the new rule and a relevant 1, 1987, regardless of when the first permit was filed. This past event. Any test of retroactivity construction is consistent with the plain language of section will leave room for disagreement 481.143, which states that “the ... ordinances ... in effect at the in hard cases, and is unlikely to time the original application for the first permit in that series is classify the enormous variety of legal filed [the ordinances in effect in 1985 in this case] shall be the changes with perfect philosophical sole basis for consideration of all subsequent permits required clarity. However, retroactivity is for completion of the project [the subsequent permits filed by 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 *197 20 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 *198 21 © 2015 Thomson Reuters. No claim to original U.S. Government Works. Quick v. City of Austin, 7 S.W.3d 109 (1998) of the repeal, and nothing is saved by the general savings

United States Fidelity & Guar. Co. v. United States ex rel. clause. Thus, the City may not apply current regulations Struthers Wells Co., 209 U.S. 306, 314, 28 S.Ct. 537, 52 L.Ed. and ordinances to its evaluation of permit applications filed 804 (1908). or approved during *134 the prior operation of section 481.143, but it may do so with respect to any applications filed

Texas has its own “well-entrenched legal hostility to after its repeal, subject, of course, to the effects, if any, of the retroactive laws.” Houston Indep. Sch. Dist. v. Houston statute as reenacted in 1999. See Act of April 29, 1999, 76th Chronicle Publ'g Co., 798 S.W.2d 580, 585 (Tex.App.— Leg., R.S., ch. 73, 1999 Tex. Gen. Laws 431 to be codified at Houston [1st Dist.] 1990, writ denied). “Texas law militates TEX. LOC. GOV'T CODEE § 245.001 et. seq.). strongly against the retroactive application of laws,” id., and any doubts must be resolved against retroactive operation

In sum, we hold that the general savings clause applies of a statute. See Government Personnel Mut. Life Ins. Co. to the repeal of section 481.143. Considering Petitioners' v. Wear, 151 Tex. 454, 251 S.W.2d 525, 529 (1952). The point of error, we conclude that, under the 1987 version of Legislature has codified the presumption that statutes apply section 481.143, any subsequent permit applications filed or prospectively: “A statute is presumed to be prospective in approved between September 1, 1987 and September 1, 1997 its operation unless expressly made retroactive.” Tex. Gov't are governed by only the rules, regulations, and ordinances in Code § 311.022 (emphasis added). effect in 1985 when the original applications for preliminary subdivision approval were filed. Because we hold that this

The Court misconstrues the proper temporal reach of the is not a retroactive application of the statute, we reverse the statute before us. It seems reasonably clear to me that while court of appeals' judgment in that regard, and we modify the section 481.143 is not retroactive on its face, the Court's judgment accordingly.BAKER and Justice O'NEILL join. 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 applications were subject to any intervening ordinances

The presumption is very strong that and amendments. Section 481.143 essentially eliminated a statute was not meant to act any intervening ordinances and amendments passed by any retrospectively, and it ought never to city, including changes to fire, electrical, plumbing, and receive such a construction if it is mechanical codes designed to further public safety. For susceptible of any other. It ought not example, if someone filed an application for a building to receive such a construction unless permit in 1970, under the Court's reading of section 481.143, the words used are so clear, strong, that person would only have to meet the safety standards and imperative that no other meaning of 1970 when applying in 1987 for the next permit in can be annexed to them or unless the the series, and any ordinances passed in the intervening intention of the legislature cannot be seventeen years would have no effect. In this manner, the otherwise satisfied. Court's reading attaches new legal consequences to the 1985 permit applications and retroactively changes the law *199 22

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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:

Because [prospectivity] accords The practical danger of ignoring the Legislature's policy with widely held intuitions about choice, as expressed in the Code Construction Act, and how statutes ordinarily operate, a applying section 481.143 retroactively, is that we have no presumption against retroactivity will idea what rules, regulations, ordinances, or orders will be generally coincide with legislative affected. Section 481.143 applies not just to the city of and public expectations. Requiring Austin, or to all cities in Texas, but to every “agency, clear intent assures that Congress bureau, department, division, or commission of the state or itself has affirmatively considered any department or other agency of a political subdivision the potential unfairness of retroactive that processes and issues permits.” TEX. GOV'T CODE § application and determined that it 481.142(4). The statute applies not just to land development is an acceptable price to pay for projects, but to every “endeavor over which a regulatory the countervailing benefits. Such a agency exerts its jurisdiction and for which a permit is requirement allocates to Congress required before initiation of the endeavor.” TEX. GOV'T responsibility for fundamental policy CODE § 481.142(3). The definition of permit is equally judgments concerning the proper broad: “ ‘Permit’ means a license, certificate, approval, temporal reach of statutes, and has the registration, consent, permit, or other form of authorization additional virtue of giving legislators required by law, rule, regulation, or ordinance....” Id. § a predictable background rule against 481.142(2). In striving to reach its result in this particular which to legislate. case, the Court ignores the fact that the implications of 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, *200 23 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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

7 S.W.3d 109 would hold that because section 481.143 was not effective 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 *201 24

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. *202 25 © 2015 Thomson Reuters. No claim to original U.S. Government Works. S *203 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 *204 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 *205 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, T e m p l e – I n l a n d F o r e s t P r o d u c t s C o r p o r a t i o n Prejudgment interest statute does not require 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 attached. These documents described the accident and Brice's 6 Cases that cite this headnote 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 *206 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 *207 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 *208 Robinson v. Brice, 894 S.W.2d 525 (1995) Brice credited Robinson for Highland's previous payment of medical bills and lost wages in the amount of $23,091.94, requesting 3 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). Many “notice of claim” provisions do provide detailed requirements for what the notice must contain. See, e.g., Texas Tort Claims

5 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 *209 T *210 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

[3] Statutes TRANSPORTATION, Petitioner, Construing together; harmony v. Courts should not give an undefined statutory Eddie William NEEDHAM, Respondent. 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., In ascertaining a term's meaning, courts look entered judgment on jury verdict in favor of employee. DOT primarily to how that term is used throughout the appealed. The Austin Court of Appeals affirmed. DOT filed statute as a whole. petition for review. The Supreme Court, Baker, J., held, 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 [5] Statutes driving while intoxicated laws, and (2) evidence did not Similarity or difference support finding that employee had good faith belief that DOT 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. 6 Cases that cite this headnote

Reversed. [6] Statutes Questions of law or fact West Headnotes (11) 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 Supreme Court reviews legal questions de novo. 38 Cases that cite this headnote 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, *211 1 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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.

51 Cases that cite this headnote V.T.C.A., Government Code § 554.002(b). 39 Cases that cite this headnote

Attorneys and Law Firms [9] Officers and Public Employees 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; John Judge, Judge & Brim, Mark W. Robinett, Jefferson K. rather, the particular law the public employee Brim, III, Brim Arnette & Robinett, Austin, for respondent. reported violated is critical to the determination. V.T.C.A., Government Code § 554.002(b).

Opinion 65 Cases that cite this headnote Justice BAKER delivered the opinion of the Court. In this Texas Whistleblower Act suit we determine whether [10] Officers and Public Employees the Texas Department of Transportation is an appropriate Grounds for removal or discipline law enforcement authority to which a public employee In the context of provision of Whistleblower may report an alleged driving while intoxicated incident. Act requiring public employee to have a good If TxDOT is not, we must determine whether the public faith belief that report of misconduct is made employee had a good faith belief that it was an appropriate to an appropriate law enforcement agency, law enforcement authority. The trial court rendered judgment “good faith” means: (1) the employee believed based on the jury's verdict for Eddie Needham, TxDOT's the governmental entity was authorized to (a) former employee who TxDOT allegedly retaliated against regulate under or enforce the law alleged to because he reported a co-worker's alleged unlawful conduct be violated in the report, or (b) investigate or to TxDOT supervisors. The court of appeals affirmed the trial prosecute a violation of criminal law; and (2) the court's judgment. 76 S.W.3d 15. employee's belief was reasonable in light of the employee's training and experience. V.T.C.A.,

We conclude, under the circumstances in this case, that Government Code § 554.002(b). 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

I. BACKGROUND

another entity to prosecute a drunk driving allegation against a coworker did not support *212 2

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 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, *213 3

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

TEX. GOV'T CODE § 554.002(b). or insufficient evidence to show that TxDOT violated the 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 [1] [2] In construing a statute, “our objective is to held, TxDOT qualified as an appropriate law enforcement determine and give effect to the Legislature's intent.” Nat'l authority. 76 S.W.3d at 21. The court of appeals also held

Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 that there was sufficient evidence for a jury to find that (Tex.2000); see Albertson's, Inc. v. Sinclair, 984 S.W.2d 958, “Needham's report of [the co-worker's] conduct constituted a 960 (Tex.1999). Ordinarily, we first look at the statute's plain good faith report of a violation of law to an appropriate law and common meaning. Allen, 15 S.W.3d at 527; Fitzgerald v. enforcement authority.” 76 S.W.3d at 21. Finally, the court

Advanced Spine Fixation Systems, Inc., 996 S.W.2d 864, 865 of appeals held that the evidence was sufficient to support a (Tex.1999). But if a statute defines a term, a court is bound finding that TxDOT retaliated against Needham because of to construe that term by its statutory definition only. TEX. his report. 76 S.W.3d at 21. We granted TxDOT's petition for GOV'T CODE § 311.011(b); Transp. Ins. Co. v. Faircloth, review to determine if the court of appeals correctly applied

898 S.W.2d 269, 274 (Tex.1995); Tijerina v. City of Tyler, the Whistleblower Act to conclude that Needham reported a 846 S.W.2d 825, 827 (Tex.1992). violation of law to a government entity that he in good faith 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 [8] In this case, we interpret for the first time the term local governmental entity or the federal government that “appropriate law enforcement authority” under the post– the employee *318 in good faith believes is authorized 1995 Whistleblower Act. TxDOT argues that the statutory to: 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 *214 4 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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. ” *215 5

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

917 S.W.2d 779, 784 (Tex.1996). whether TxDOT has the authority to regulate under, enforce, investigate, or prosecute a violation of Texas's driving while

The test's first element—the “honesty in fact” element— intoxicated laws. See TEX. GOV'T CODE § 554.002(b). ensures that an employee seeking a Whistleblower Act remedy believed he was reporting an actual violation of

Here, after analyzing the reported violation of law— law. Hart, 917 S.W.2d at 784–85. The test's second element driving while intoxicated—under the statutory definition, ensures that, even if the reporting employee honestly believed we conclude that TxDOT was not an appropriate law that the reported act was a violation of law, the reporting enforcement authority. TxDOT has no authority to regulate employee only receives Whistleblower Act protection if a under or enforce the Texas's driving while intoxicated laws. reasonably prudent employee in similar circumstances would See TEX. GOV'T CODE § 554.002(b)(1). Nor does it have have believed that the facts as reported were a violation of authority to investigate or prosecute these criminal laws. See law. Hart, 917 S.W.2d at 785. Thus, the Hart test includes TEX. GOV'T CODE § 554.002(b)(2). At most, TxDOT has both a subjective and objective element. authority to regulate and investigate its employees' conduct only to carry out its internal disciplinary process procedures.

[10] We conclude the same test applies to determine But construing the statutory terms to include a public if a public employee in good *321 faith believed the employer's internal disciplinary power would mean all public governmental entity to which he reported a violation of employers with a disciplinary policy for handling employees' law was an appropriate law enforcement authority. Applying alleged illegal conduct are “appropriate law enforcement this test upholds the statutory construction principle that, authorities” for purposes of reporting any alleged violation. when feasible, we should consistently interpret terms used We reject such an interpretation. See TEX. GOV'T CODE § throughout a statute. See Barr, 562 S.W.2d at 849; Finlan, 311.023(5). Accordingly, we hold that, as a matter of law, 27 S.W.3d at 228. And it allays the same concerns expressed TxDOT is not an appropriate law enforcement authority under in Hart that public employees receive Whistleblower Act section 554.002(b) for a public employee to report another protection when they attempt to report illegal activity while, employee's violation of Texas's driving while intoxicated at the same time, public employers retain the right to laws. discipline employees who, in reporting the alleged violation, act unreasonably or only with ill motive. See Hart, 917

However, our conclusion that TxDOT is not a governmental S.W.2d at 784–85. Thus, in the context of section 554.002(b), entity authorized to regulate under, enforce, investigate, or “good faith” means: prosecute Texas's driving while intoxicated laws does not end 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 *216 6 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 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 law enforcement authority under section 554.002(b) to which

But the court of appeals' analysis, and Needham's contention a public employee may report an alleged *322 drunk driving that the evidence supports his good faith belief under the incident. We further hold that there is no evidence to support a Hart test, are both based on the erroneous assumption that finding that Needham had a good faith belief that he reported section 554.002(b)'s “appropriate law enforcement authority” the alleged drunk driving to an appropriate law enforcement definition includes an employer's power to discipline an authority. Because these conclusions dispose of this appeal, employee for allegedly violating a law. 76 S.W.3d 24. As we we need not reach TxDOT's second argument that Needham's have already held, the statutory definition's limiting language causation evidence is legally sufficient. Accordingly, we —regulate under, enforce, investigate, and prosecute—does reverse the court of appeals' judgment and render judgment not include an employer's power to internally discipline that Needham take nothing. its own employees for an alleged violation. Here, the 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. *217 7 © 2015 Thomson Reuters. No claim to original U.S. Government Works. U *218 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 *219 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 *220 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 acceptance, and effect thereof documents referred to on its face constituted 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 “Conformity” does not mean substantial manufacturer, in manufacturer's breach of contract 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 performance. V.T.C.A., Bus. & C. § 2.601. times and a test run-off of a fluid end for one of 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 *221 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 *222 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 gether with other 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 of contract action brought by heavy-duty oilfield [20] Evidence Damages pump manufacturer against maker of machine tools, by admitting manufacturer's vice president's expert testimony on lost profits, though it was Vice president of finance for oilfield pump 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 hearsay; expert could rely on inadmissible facts or the maker of machine tools purchased by 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 Loss of profits [21] Evidence Knowledge, experience, and skill in general © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks. 5 *223 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 permissible double recove 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 expected, 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 *224 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 *225 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 heavy-duty oilfield pump manufacturer's breach the fee is fixed or contingent on results obtained 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 million through date of judgment, plus $200,000 Rules, V.T.C.A., Government Code Title 2, 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 $667,114, that his firm took risk of losing case

[35] Costs 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 *226 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 prejudgment interest, but the de novo standard jury as to whether heavy-duty oilfield pump 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 Letter fro m he a vy-d uty o ilfield pum p [40] Interest 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 constitute a written notice of a “claim,” and thus accrual of prejudgment interest 180 days after the 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 *227 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 *228 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 *229 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 revoked its acceptance of the BMC–1000 and failed to find contouring, they could be used for rough machining. Using the 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, and there is conclusive evidence that SPM accepted the per fluid end before the Toshibas went online, but far longer 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 determining a “no evidence” issue, we are to consider only the end in thirty-four hours.

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); Cont'l Coffee Prods. Co. v. Cazarez, 937 S.W .2d 444, 450 misrepresentation, breach of contract and breach of warranty. ^[1] (Tex.1996); In re King's Estate, 150 Tex. 662, 244 S.W .2d Toshiba counterclaimed for the unpaid balance of the 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 (Tex.1996). More than a scintilla of evidence exists if the

The case was tried to a jury. SPM claimed three broad 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 fact. Rocor Int'l, Inc. v. Nat'l Union Fire Ins. Co., 77 S.W .3d for items such as pouring foundations for the Toshiba 253, 262 (Tex.2002). A “no evidence” issue may only be machines and time spent designing tools for the Toshiba 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 to prove a vital fact, (3) the evidence offered to prove a vital

The jury returned a verdict in favor of SPM on every cause of 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 (Tex.1998), cert. denied, 526 U.S. 1040, 119 S.Ct. 1336, 143 attorney's fees was submitted to the trial court by agreement of 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 (2) M atter of law court's judgment. The trial court also found that SPM was 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 must overcome two hurdles. Victoria Bank & Trust Co. v.

III. Discussion © 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks. 12 *230 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 *231 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 *232 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 additional to or different from those offered or agreed upon, use of the BMC–1000 was reasonable was a fact question for 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 (b) The additional terms are to be construed as proposals for revoked its acceptance of the BMC–1000.

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 *233 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 *234 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 discretion. Gammill v. Jack Williams Chevrolet, Inc., 972 per hour was the industry standard shop rate; he also produced 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 *235 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 *236 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 *237 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 involved and the results obtained; (5) the time Toshiba machines by the shop rate; thus every hour 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 experience, reputation, and ability of the lawyer or 100 hours— the time it actually took a make a fluid 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 have been rendered. Miller, 142 S.W .3d at 336–37. multiplied the difference by SPM's $150 per hour 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 *238 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 counterclaim to the jury and failing to direct the Prac. & Rem.Code Ann. § 38.001.

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 Nor did the trial court err by refusing to submit statutes in question. Id. at 567, 112 S.Ct. at 2648.

© 2014 Thom son Reuters. No claim to original U.S. Governm ent W orks. 21 *239 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 which statutory prejudgment interest should begin is W e overrule Toshiba's ninth and tenth issues. 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 *240 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 W e hold that SPM's November 4, 1998 letter did not necessary. However, SPM prefers to resolve constitute notice of a claim as a matter of law. The the issues if the machines can perform to trial court properly *787 computed prejudgment specification and contract requirements. If this interest from the date SPM filed suit. W e overrule is not attainable, SPM prefers to return the SPM's sole issue. machines to Toshiba, with Toshiba to absorb SPM's costs-to-date.

SPM contends that this letter was sufficient notice of IV. Conclusion its claims to trigger accrual of prejudgment interest W e overrule Toshiba's issues two, four, and six 180 days later. Toshiba responds that the letter did through eleven. W e do not reach Toshiba's issues not give notice of a claim because it did not make a one, three, and five. W e overrule SPM's sole issue. demand for payment or assert a right to be paid. 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 *241 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. Section 1.103 of the Texas Business and Commerce Code states that the Code should be liberally construed “to make uniform the 2 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 *242 V *243 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.

*244 W *245 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.

*246 X *247 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.

NOTES

[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

[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

[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

[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

[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

[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

[25] K Mart, 932 S.W.2d at 146. Cross-Appellant’s Brief - Page 8

[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

[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

[30] CR:586-588; Appx. E (Application pp. 2-4, paragraphs 6-14) Cross-Appellant’s Brief - Page 11

[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 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 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