AFFIRM in Part, and REVERSE and RENDER in Part; Opinion Filed April 8, 2014. 

# S

In The 

## Court of Appeals Fifth District of Texas at Dallas
No. 05
- 12
- 00750
- CV WEAVER AND TIDWELL, L.L.P. , Appellant
V.
THE GUARANTEE COMPAN Y OF NORTH AMERICA U SA , Appellee On Appeal from the 191st Judicial District Court Dallas County, Texas Trial Court Cause No. 09
- 11140 

### OPINION Before Justices O'Neill, Lang

- Miers, and Evans Opinion by Justice Lang

- Miers Appellant Weaver and Tidwell, L.L.P. appeal s the trial court’s judgment awarding appellee , The Guarantee Company of North America USA , approximately $2.6 million for losses
that the trial court found Guarantee sustained as a result of Weaver’s negligent

m isrepresentations i n audited financial statements. Weaver also appeals the trial court’s dismissal of Weaver’s counterclaim on summary judgment. We reverse and render in part and affirm in part.
B ACKGROUND J& V Communication Services , Inc. is a now defunct construction company that worked on projects for the Texas Department of Transportation (TxDOT)

. TxDOT required J&V to– 2

– acquire pe rformance bonds in order to bid on its projects. The appellee , Guarantee, is a bonding company that issued per formance bonds for J&V

. Guarantee required J&V to provide it with audited financial statements i n connection with its issuanc e of performance bonds

. The appellant, Weaver , is an accounting firm that prepared audited financial statements on behalf of
J&V for 2005 and 2006. J&V submitted financial statements prepared by Weaver to Guarantee , Guarantee issued performance bonds for J&V , and J&V obtained contracts with TxDOT

. When
J&V later defaulted on its contracts with TxDOT , Guarantee had to take over and complete some of the TxDOT jobs under its various performance bonds and suffered losses on performance bonds that it issued on behalf of J&V

. In September 2008, J&V sued Weaver, alleging breach of fiduciary duty, fraud, and accounting negligence. Weaver moved to compel arbitration based upon arbitration clauses in engagement letters betwe en Weaver and J&V. T he tria l court granted Weaver’s motion and

o rdered the parties to arbitration

. Nearly a year later, i n August 2009, Guarantee also sued Wea ver for accounting negligence. Weaver moved to compel arbitration based on the arbitration clauses in the engagement letters between Weaver and J&V or, alternatively, to abate the Guarantee lawsuit pending the outcome of the arbitration involving Weaver a nd J&V . The trial court denied Weaver’s motion, and Weaver filed an interlocutory appeal in this Court. We affirmed the trial
court , concluding that Guarantee did not allege a contractual subrogation claim against Weaver pursuant to the engagement letter s and that Guarantee was not a third party beneficiary of the engagement letters. See Weaver & Tidwell, L.L.P. v. Guar. Co. of N. Am. USA , No. 05

- 10

- 00557

- CV, 2011 WL 635261, at * 1

– 3 (Tex. App.

— Dallas Feb. 23, 2011, no pet.) (mem. op.)

. In the arbitratio n, J&V was awarded noth ing and Weaver was awarded its a ttorney’ s fees and other fees and costs against J&V

. A trial court confirmed the arbitration award for Weaver– 3

– totaling $773,843.82

. Weaver then filed its fourth amended counterclaim in this case , in which Weaver sought a declaratory judgment that Guarantee was liable for Weaver’s arbitration award against J&V

. The trial court granted the motion for summary judgment filed by Guarantee and dismissed Weaver’s counterclaim. After a non - jury trial, th e trial court awarded Guarantee approximately $2. 6 million against Weaver

. In its findings of fact and conclusions of law , the trial court conclud ed that Weaver’s 2005 audit of J&V was “false and/or misleading” and that Guarantee justifiably relied on the 2005 audit in deciding to issue bonds on behalf of J&V

. The trial court also concluded that Weaver’s “false and/or misleading ” representations proximately caused Guarantee’s losses

. T he trial court made the following finding s of fact regarding Weaver’s a ffirmative defense that the two

- year statute of limitations barred the claim and Guarantee’s plea that the discovery rule deferred the accrual of the cause of action : 30. The Surety, however, ultimately did not discover that the 2005 Audit was false and/ or misleading until long after the fact. In particular, Jameson [an underwriter for Guarantee] offered credible, relevant, and persuasive testimony that he did not learn that the 2005 Audit was false and/or misleading until his deposition occurred on June 29, 2010, in a separate lawsuit. Mike Bowen (“Bowen”), bond claims manager for the Surety, offered credible, relevant, and persuasive testimony that he did not consider a possible suit against Weaver until March 26, 2008. In any event, the Surety’s laws uit was filed against Weaver on August 27, 2009, and Weaver offered n o credible, relevant, and persuasive evidence rebutting the discovery by the Surety or establishing that the Surety by exercising reasonable diligence could have discovered that the 2005 Audit was false and/or misleading in [sic] any earlier point in time.

. . . . 50. Weaver failed to bring forward credible, relevant, and persuasive evidence in support of its affirmative defense of statute of limitations. Weaver failed to bring forward credible, relevant, and persuasive evidence rebutting the date of discovery by the Surety that the 2005 Audit was false and/or misleading. Weaver failed to bring forward credible, relevant, and persuasive evidence establishing that the Surety by exercising reasonable diligence could have discovered that the 2005 Audit was false and/or misleading at any earlier point in time.– 4

– Based on these findings, the trial court conclu ded that Weaver had not met its burden of proof to establish its affirmative defense of statute of limitations and that Guarantee had “ met its burden
in establishing th e applicability of the discovery rule to its claim of negligent misrepresentation. ” Weaver presents six issues on appeal

. We address only two of those issues beca use we conclude that the remaining issues do not affect the final disposition of this appeal. T EX
. R. A PP
. P. 47.1 (stating court of appeals must address every issue necessary to final disposition of appeal). In W eaver’s second issue, it contends that th e statute of limitations bars Guarantee’s negligent misrepresentation claim

. We sustain this issue. In Weaver’s fifth issue, it argues that the trial court erred by granting summary judgment dismissing Weaver’s counterclaim that
Guar antee was liable for the judgment from the arbitration between J&V and Weaver. We overrule this issue. As a result, w e reverse and render in part and affirm i n part. G UARANTEE ’ S R ECOVERY A GAINST W EAVER In issue two, Weaver argues that the judgment should be reversed because Guarantee’s claim is barred by the two

- year statute of limitations. Standard of Review
Fin dings of fact made after a non

- jury trial have the same force and effect as jury findings. Holliday v. Weaver , 410 S.W.3d 439, 442 (Tex. App.

— Dallas 2013, pet. filed); Jamison v. Allen , 377 S.W.3d 819, 823 (Tex. App.

— Dallas 2012, no pet.)

. We review the
court’s findings of fact using the same standard of review we apply to the review of jury findings. Holliday , 410 S.W.3d at 442; Jamison , 377 S.W.3d at 823. When an appellant attacks the legal sufficiency of an adverse finding on an issue for which it did not have the burden of proof, the appellant must demonstrate there is no evidence to support the adverse fi nding. Pulley v. Milberger , 198 S.W.3d 418, 426 (Tex. App.

— Dallas 2006, pet. denied )

. A legal sufficiency review of a no

- evidence point must credit fav orable– 5

– evidence if a reasonable fact

- finder could and disregard contrary evidence unless a reasonable
f

act

- finder could not. City of Keller v. Wilson , 168 S.W.3d 802, 827 (Tex. 2005) ; Jamison , 377 S.W.3d at 823; Pulley , 198 S.W.3d at 426

. We will sustain a no

- evidence point 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 vi tal fact, (3) the evidence offered to prove a vital fact is no mo re than a mere scintilla, or (4) the evidence establishes conclusively the opposite of the vital fact. Marathon Corp. v Pitzner , 106 S.W.3d 724, 727 (Tex. 2003) (per curiam) ; Pulley , 198 S.W.3d at 426. When an appellant challenges the factual sufficiency of the evidence to support an adverse finding on which it did not have t he burden of proof, the appellant must demonstrate there is insufficient evidence to support the adverse finding. Pulley , 198 S.W.3d at 426. In reviewing a finding for factual sufficiency, we consider and weigh all of the evidence in support of and contr ary to the trial court’s finding and will set aside the finding only if it is so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. See Cain v.
Bain , 709 S.W.2d 175, 176 (Tex. 1986) (per curiam) ; Jamison , 377 S.W .3d at 823. In a non

- jury trial, the trial court is the sole judge of a witness’s demeanor and credibility and the weight of the evidence. Wright Group Architects

- Planners, P.L.L.C. v. Pierce , 343 S.W.3d 196, 199 (Tex. App.

— Dallas 2011, no pet.). We rev iew a trial court’s co nclusions of law de novo to determine whether the trial court drew the correct legal conclusions from the facts. BMC Software Belgium, N.V. v. Marchand , 83 S.W.3d 789, 794 (Tex. 2002); Wright , 343 S.W.3d at 199. Statute of Limitation s and Discovery Rule

— Applicable Law The statute of limitations for a negligent misrepresentation cause of action is two years. HECI Exploration Co. v. Neel , 982 S.W.2d 881, 885 (Tex. 1998); Collective Asset Partners, LLC v. McDade , 400 S.W.3d 213, 217 (Tex. App.

— Dallas 2013, no pet.)

. “As a general rule, a cause– 6

– of action accrues and the statute of limitations begins to run when facts come into existence that authorize a party to seek a judicial remedy.” Provident Life & Accident Ins. Co. v. Knott , 12 8 S.W.3d 211, 221 (Tex 2003). The discovery rule is “a very limited exception to statutes of limitations” that “ defers accrual of a cause of action until the plaintiff k new or, exercising reasonable diligence, should have known of the facts giving rise to the cause of action

. ” Computer Assocs. Int’l , Inc. v. Altai, Inc. , 918 S.W.2d 453, 455 (Tex. 1996 )

. The discovery rule only applies “when the nature of the plaintiff’s injury is both inherently undiscoverable and objectively verifiable.” Wagner & Brown , Ltd. v. Horwood , 58 S.W.3d 732, 734 (Tex. 2001) ; see also Matthiessen v. Schaefer , 27 S.W.3d 25, 31 (Tex. App.

— San Antonio 2000, pet. denied) (discovery rule applies to negligent misrepresentation claim if injury is inherently undiscoverable and evidence of injury is objectively verifiable )

. Weaver bore the initial burden of pleading, proving, and securing findings to establish its affirmative defense of statute of limitations

. 1 See Woods v. William M. Mercer, Inc. , 769 S.W.2d 515, 517 (Tex. 1988); Prestige Ford, 336 S.W.3d at 836 ; see also T EX
. R. C IV
. P. 94 ( statute of limitations is an affirmative defense). G uarantee

— as the party seeking to benefit from the discovery rule

— bore “the burden of proving and securing favorable findings thereon ” or wai ved the complaint on appeal. Woods , 769 S.W.2d at 5 18 ; see Barker v. Eckman , 213 S.W.3d 306, 312 (Tex. 2006) ( stating that party seeking application of discovery rule “ has the burden of obtaining findings to support its application” and concluding that , where evidence was not conclusive as to when party should have known facts giving rise to claim, the trial court was

1 Unless the evidence conclusively established the date of accrual , Weaver’s burden included establishing when the cause of action accrued. See Holland v. Lovelace , 352 S. W.3d 777, 788 (Tex. App.

— Dallas 2011, pet. denied) (party seeking application of statute of li mitations defense must obtain findings regarding accrual date of claims unless conclusively established) ; Prestige Ford Garland Ltd. P’ship v. Morales , 336 S.W.3d 833, 836 (Tex. App.

— Dallas 2011, no pet.); see Cooper v. Cochran , 288 S.W.3d 522, 531 (Tex. App.

— Dallas 2009, no pet.) (concluding that a “party asserting an affirmative defense [including limitations] in a trial before the court must request findings in support of the defense to avoid waiver ” and, if the court’s findings d o not include any of the elements of the defense, “the party must specifically request additional findings relevant to the defense”) . In its request for additional and amended findings of fact and conclusions of law, Weaver requested a finding that Guarantee’s cause of action accrued when it issued its first bond i n reliance on the 2005 a udit in May 2006, so that the statute of limitations expired in May 2008. See Cooper , 288 S.W.3d at 531 ; Alma Invs., Inc. v. Bahia Mar Co

- Owners Ass’n , 999 S.W.2d 820, 822 (Tex. App.

— Corpus Christi 1999, pet. denied). The trial court did not amend the findings of fact and conclusions of law as Weaver requested.– 7

– precluded from appl ying discovery rule absent jury findings of when the party should have known of those facts); Holland , 352 S.W.3d at 791 ; Owens

- Illinois, Inc. v. Chatham , 899 S.W.2d 722, 737 (Tex. App.

— Houston [14th Dist.] 1995, writ dism’d) ( concluding parties asserting discovery rule had the burden “to plead and prove when they knew or should have known that they had” disease s that were the basis of their claims )

. Arguments of the Parties Weaver’s Arguments
Weaver argues that Guarantee’s cause of action for negligent misrepresentation based on the 2005 audit accrued on May 4, 2006 because that is the date when Guarantee issued its first bond after it receiv ed the 2005 audit

. B ecause Guarantee did not file this lawsuit until August 29, 2009 , Weaver contends that the two

- year statute of limitations bars Guarantee’s negligent misrepresentation claim. Wea v er also argues that Guarantee did not satisfy its burden to prove that the discovery rule deferred accrual of the cause of action because “Guarantee offered no evidence of when it knew or should have known of the alleged wrongful act or resulting injury.” And Weaver contends that, “[a]ssuming the discovery rule could apply, Guarantee failed to present sufficient evidence that it would apply.” 2
Weaver also argues that the trial court’s one finding regarding the discovery rule only states when Guarantee first considered filing suit, not when Guarantee knew or should have known of the wrongful act or resulting injury

. And Weaver argues that the evidence that the trial court referred to in its finding of fact is irrelevant and does not establish that the discovery rule applied. Weaver contends that the claim accrued “as soon as the defendant’s misrepresentation

2 Weaver also contends that (1) the discov ery rule does not apply to third

- party claim s against auditors , (2) the discovery rule does not apply because Guarantee’s injury was not inherently undiscoverable and objectively verifiable , (3) the “undisputed evidence” establishes that Guarantee knew or should have known of the problems with J&V’s underbillings (which are estimates of future receivables) and that it could suff er injury by relying on the underbillings figures more than two years before Guarantee filed suit, and (4) when the trial court ref used to award Guarantee damages for bonds issued after May 2007 , the trial court acknowledged that Guarantee knew of the underbillings problem s more than two years before filing suit. Be cause of our disposi tion of this issue , we do not address these argum ents

.– 8

– induce[d] the plaintiff to act[,]” even if all resulting injuries had not occurred. See S.V. v. R.V. , 933 S.W.2d 1 , 4 (T ex. 1996). Guarantee’s Arguments Guaran tee argues that it satisfied its burden of establishing the discovery rule and that the trial court properly applied it. It argues that the statute of limitations did not begi n to run when Guarantee issued its first bond after receiving the 2005 audit bec ause that would require it “to know of a misrepresentation at the same time it was acting on this misrepresentation

. ” Guarantee contends that the “only evidence” presented to the court was that Guarantee ’s underwriters “never had any reason to question We aver’s statements in the 2005 au dit at the time it was received[.] ” Guarantee contends that the earliest date that Guarantee “knew or should have known” of a problem with Weaver’s audits was March 26, 2008 , citing (1) a letter dated March 26, 2008 that Bo wen, Guarantee’s bond claims manager, received from an other auditor whom Bowen had r etained that discussed possible problems with the 2005 and 2006 audits , (2) Guarantee’s chief underwriter’s testimony that his first notice that J&V was in financial difficulty was in March 2008 and that there were no performance defaults on J &V contracts prior to March 2008 , (3) testimony by Jameson, an underwriter with Guarantee, that he received news that J&V could not make payroll in early 2008, and (4) a Collatera l and Disbursement Agreement executed in March 2008 in which J&V and its owners admitted that J&V was financially unable to perform some contracts

. Guarantee contends t hat, until March 2008, it had not suffered any legal injury from the audits and that it timely filed this lawsuit on August 27, 2009 within the two

- year statute of limitations. 3

3 Guarantee also argues that (1) even if Weaver correctly contends that the trial court made “implied findings” that an internal e

- mail of Guarantee established that Guarantee discovered its legal injury on August 30, 2007, Guarantee still filed suit within the two

- year statute of limitations , (2) routine underwriting discussions do not equate to discovery of a legal injury , and (3) the evidence Weaver cites as providing “an earlier ‘knew or should have known’ date” does not provide this C ourt with ev idence that mandates reversing and remanding on factual sufficiency grounds.– 9

– Analysis
It was Weaver’s burden to establish when Guarantee’s caus e of action accrued

. See Woods , 769 S.W.2d at 517 ; Holland , 352 S.W.3d at 788

. If “reasonable minds could not differ about the conclusion to be drawn from the facts in the record,” an accrual date is conclusively established. NETCO, Inc. v. Montemayor , 352 S.W.3d 733, 738 (Tex. App.

— Houston [1st Dist.] 2011, no pet.); see Holland , 3 52 S.W.3d at 791. As a rule, “a cause of action accrues when a wrongful act causes some legal injury, even if the fact of injury is not discovered until later, and even if all resulting damages have not yet occurred.” S.V. , 933 S.W.2d at 4; see Moreno v. Sterling Drug, Inc. , 787 S.W.2d 348, 351 (Tex. 1990) (stating “a cause of action can generally be said to accrue when the wrongful act effects an injury, regardless of when the plaintiff learned of such injury”); Sabine Towing & Transp. Co. v. Holliday Ins . Agency, Inc. , 54 S.W.3d 57, 60 (Tex. App.

— Texarkana 2001, pet. denied) (applying legal injury standard to negligent misrepresentation claim). Weaver contends that Guarantee’s claim for negligent misrepresentation accrued as soon as Weaver’s alleged misr epresentation induced Guarantee to act, which was “as soon as Guarantee issued its first bond in alleged reliance on the 2005 audit.” But Guarantee argues that its claim accrued later because it did not suffer a legal injury until J&V defaulted on its con tracts and Guarantee suffered resulting losses on the performance bonds that it issued for J&V. We agree with
Weaver. “A person suffers legal injury from faulty professional advice when the advice is taken.” Murphy v. Campbell , 964 S.W.2d 265, 270 (Tex. 199 7) (involving accounting malpractice claim). The first bond that Guarantee issued in alleged reliance on Weaver’s representations in the 2005 audit was i ssued on May 4, 2006. As a result, the cause of action accrued on that date– 10

– and the two

- year statu te of limitations for Guarantee’s negligent misrepresentation claim based on Weaver’s representations in the 2005 audit ran on May 4, 2008. Although Guarantee argued that the discovery rule applied , it did not obtain f indings on when Guarantee knew or shou ld have known of the facts that gave rise to its cause of action. See Barker , 213 S.W.3d at 311

– 12; Woods , 769 S.W.2d at 518; Patel v. Williams , No. 14

- 96

- 01482

- CV, 1998 WL 93746, at *2 (Tex. App.

— Houston [1 4th Dist.] Mar. 5, 1998, no pet.) (not designated for publication)

. Instead, t he trial court made a finding that Guarantee “ultimately did not discover that the 2005 Audit was false and/or misleading until long after the fact” based on
Jameson’s testimony that he did not learn that the 2 005 audit was false and/or misleading until he gave his deposition in a separate lawsuit and Bowen’s testimony that he did not consider filing suit against Weaver until March 26, 2008 . But Jameson ’s deposition took place on June 29, 2010, ten months after Guarantee had already filed this lawsuit on August 27, 2009 , and a finding of when Bowen first considered filing suit is not a finding of when Guarantee knew or should have known . Nevertheless, Guarantee contends that there is evidence in the record that establishes that Guarantee discovered its legal injury in March 2008. But Guarantee had the burden to obtain findings by the trier

- of

- fact concerning when Guarantee discovered or should have discovered the misrepresentations. S ee Barker , 213 S.W.3d at 311

– 12; Woods , 769 S.W.2 d at 51 7

– 1 8; Patel , 1998 WL 93746, at * 1

– 2 ( involving bench trial ). And the trial court never made a finding about when Guarantee knew or should have known of the facts giving rise to Guarantee’s claim. Because Gua rantee did n ot obtain those finding s from the trial court , Guarantee cannot rely on the discovery rule to toll the statute of limitations. See Barker , 213 S.W.3d at 312; Woods , 769 S.W.2 d at 518 ; Patel , 1998 WL 93746, at *2

. And b ecause Guarantee did not file suit until August 27, 2009 and did not satisfy its burden to establish that– 11

– the discovery rule applied , we conclude that G uarantee’s negligent misrepr esentation claim is barred by the two

- year statute of limitations.
We sustain Weaver’s second issue

. As a result, w e reverse and render judgment that
Guar antee take nothing on its claim

. S UMMARY J UDGMENT D ISMISSING W EAVER ’ S C OUNTERCLAIM In its fifth issue, Weaver argues that the trial court erred by granting summary judgment dismissing its count erclaim seeking a declaration that Guarantee wa s liable for the judgment for attorney’s fe e s and other fees and costs awarded to Weaver in the arbitration

. Weaver contends that (1) undisputed evidence established that Guarantee was the assignee , s ubrogee , and alter ego of J&V and stood in J&V’s shoes as the financial beneficiary of any arbitration award and (2)
Guarantee was liable under the doctrine of offensive collateral estoppel

. Standard of Review

— Summary Judgment
T he trial court granted both the no - evidence and traditional summary judgment motions, dismissing the parts of Weaver’s counterclaim based on assignment, subro gation, and collateral estoppel , and granted the no

- evidence summary judgment motion, dismissing Weaver’s alter ego counterclaim . We review a trial court’ s decision to grant or deny a motion for summary judgment de novo. Mid

- Century Ins. Co. of Tex. v . Ademaj , 243 S.W.3d 618, 621 (Tex. 2007); Beesley v. Hydrocarbon Separation, Inc. , 358 S.W.3d 415, 418 (Tex. App.

— Dallas 2012, no pet.)

. When the trial court’s order granting summary judgment does not specify the basis for the ruling, as here, we will affirm the summary judgment if any of the theories presented to the trial
court and preserved for appellate review are meritorious. Provi dent Life & Accident Ins. Co. v.
Knott , 128 S.W.3d 211, 216 (Tex. 2003). When a party files both a no

- evidence and a traditional motion for summary judgment, we consider the no

- evidence motion first. Ford Motor Co. v. Ridgway , 135 S.W.3d 598, 600– 12

– (Tex. 2 004). When we review a no

- evidence summary judgment motion, we examine the record in the light most favorable to the nonmovant. Forbes Inc. v. Granada Biosciences, Inc. , 124 S.W.3d 167, 172 (Tex. 2003). The no - evidence motion must specifically state the elements for which there is no evidence. T EX
. R. C IV
. P. 166a(i) ; Bever Props., L.L.C. v. Jerry Huffman Custom Builder, L.L.C. , 355 S.W.3d 878, 888 (Tex. App.

— Dallas 2011, no pet.)

. The non

movant then has the burden to produce more than a scintilla of summary judgment evidence that raises a genuine issue of material fact as to each challenged element. T EX
. R. C IV
. P. 166a(i) &
cmt

. 1997 ; Sw. Elec. Power Co . v. Grant , 73 S.W.3d 211, 215 (Tex. 2002). M ore than a scintilla of evi dence exists if the evidence would allow reasonable and fair

- minded people to differ in their conclusions

. Forbes , 124 S.W.3d at 172

. Summary judgment is improper if the nonmovant presents more than a scintilla of evidence supporting the disputed issue. Id. Less than a scintilla of evidence exists if the evidence is so weak that it does no more than create a mere surmise or suspicion of a fact. Id. Discussion

— No
- Evidence Motion for Summary Judgment In its no - evidence motion for summary judgment, Guara ntee argued that the trial court should grant summary judgment on (1) Weaver’s counterclaim that Guarantee was J&V’s assignee because there was no evidence that J&V assigned its rights and obligations with respect to Weaver to Guarantee, (2) Weaver’s counterclaim that Guarantee was liable for the arbitration award under equitable or contractual subrogation theories because there was no evidence that Guarantee asserted rights of e quitable or contractual subrogation , (3) Weaver’s counterclai m that Guarantee was liable under the doctrine of offensive collateral estoppel because there was “no evidence that facts essential to the arbitration judgment were fully and fairly litigated by ”
Guarantee or that Guarantee and Weaver were adversaries in t he arbitration, and (4) Weaver’ s– 13

– counterclaim that Guarantee was J&V’s alter ego because there was no evidence that Guarantee caused J&V to be use d to perpetrate an actual fraud. Assign ment Weaver’s Arguments
Weaver argues that it was entitled to recover the arbitration award it obtained against
J&V from Guarantee because Guarantee was the assignee of J&V’ s rights in the arbitration between J&V and Weaver

. Weaver claims that there was evidence that Guarantee would have been entitled to recover attorney’s fees if J&V had prevailed in the arbitration , and, as a result,
Guarantee was liable for attorney’s fees awarded to Weaver against J&V in the arbitration. Quoting Bloom v. Burkholder Corp. , No. 05

- 94

- 01297

- CV, 1995 WL 379272, at *2 (Tex. App.

— Dallas May 30 1995, no writ) (not designated for publication), Weaver contends that Guarantee took “the cause of action subject to the same defenses that could have been asserted against the assignor. ” Relying on Nathan A. Watson Co. v. Employers Mutual Casualty Co. , 218 S.W.3d 797, 802

– 05 (Tex. App.

— Fort Worth 2007, no pet.), as authority, Weaver argues that because Guarantee would have been entitled to recover attorney’s fees if J&V had prevailed in the arbitration, Guarantee was liable for attorney’s fees awarded to Weaver in the arbitration.
Weaver contends that three documents also support its argument: (1) a Supplement to Collateral and Disbursement Agreement between J&V, the owners of J&V, Dani el C. Hurd and Dian H. Hurd , and Guarantee that state d that Guarantee had “the absolute right to control pursuit” of
J&V’s accounting malpractice claim against Weaver, including settlement of the claim , and (2) a Collateral and Disbursement Agreement betwe en J&V, the Hurds, and Guarantee and a General Agreement of Indemnity (GAI) signed by J&V and the Hurds , which Weaver claims “both
state [d] that they assign [ed] all of J&V’s present and future causes of action to Guarantee.” Weaver also argues that Guaran tee exercised the rights of an assignee by spending over– 14

– $300,000 pursuing J&V’s claims and “providing the entirety of the funding” for prosecution of the claims after December 2008. Guarantee’s Arguments Guarantee argue s that there was no evidence that J &V assigned any of its rights or obligations concerning Weaver to Guarantee, that there was no evidence Guarantee sued Weaver based on an assigned right from J&V , and that there was no evidence of an assignment by J&V to Guarantee in any documents, includi ng the Supplement and GAI , that assigned a cause of action agains t Weaver to Guarantee or assigned J&V’s non

- bonded liabilities , such as a claim for attorney’s and expert ’s fees, to Guarantee. Guarantee contends that the only assignment stated in the GAI concerns completing p erformance of a bonded contract and that t he GAI did not mention Weaver. 4 Analysis We agree with Guarantee that Weaver did not raise a genuine issue of material fact that Guarantee was J&V’s assignee of the claims and liabilities in t he arbitration

. “An assignment is construed to have been made when the owner of a right manifests its intention to transfer the right to an assignee[.]” Comm. Structures and Interiors, Inc. v. Liberty Educ. Ministries, Inc. , 192 S.W.3d 827, 833 (Tex. App

. — Fort Worth 2006, no pet.). “ [T] he assignee of a contract is not responsible for the assignor’s obligations unless he expressly or impliedly assumes them.” NextEra Retail of Tex., LP v. Investors Warranty of Am., Inc. , 418 S.W.3d 222, 226 (Tex. App.

— Houston [1st D ist.] 2013, pet. filed)

. The cases that Weaver relies upon to argue that Guarantee was an assignee are distinguishable. For example, Bloom , 1995 WL 379272, at *2, concerned whether an assignee of

4 Guarantee a rgues that the case that Weaver cites to support its claim that Guarantee must pay Weaver’s fees

— Bloom , 1995 WL 379272, at *2

— is distinguishable because Bloom concern ed subjecting an assignee to the defense of the statute of limitations

.– 15

– an insurance claim was subject to the same statute of limitations defense as the assignor. In contrast, this case involves a lawsuit by Guarantee based on its own claims, not based on J&V’s claims . And in Watson , 218 S.W.3d at 802

– 05 , the court held that the insurance companies that

sue d as subrogees and were seeking recovery in the lawsuit were also liable for the prevailing party’s attorney’s fees. However, Guarantee did not sue as a subrogee. The GAI provided Guarantee with various rights in consideration for Guarantee’s execution o f bonds, but did not assign J& V’s liabilities to Guarantee. Additionally, t he terms of the GAI, the Collateral and Disburse ment Agreement, and the Supplement did not include an y assignment of J&V ’s liabilities in connection with its claims against Weaver. T he GAI allowed Guarantee to “settle or compromise any claim, liability, demand, suit or judgment upon any BOND or BONDS executed or procured by it ” and provide d that J&V and the Hurds w ould indemnify Guarantee for any claims and losses that Guarantee su ffered as a result of executing the bonds, including “by prosecuting or defending any actio n in connection with any BOND or BONDS[.]” Although J&V and the Hurds assigned Guarantee their rights and property in collateral , including inventory, receivables , and equipment , to enable Guarantee to use the collateral in the event of J& V’s default , it specified that it did so to allow Guarantee to complete performance of and pay obligations incurred in perfor ming a bonded contract. The GAI also authorized Guarant ee , upon default by J&V or the Hurds, “to assert and prosecute any right or claim hereby assigned . . . and to compromise and settle any such right or claim on such terms as it considers reasonable under the circumstances in its sole and absolute discretio n[.]” But n o provisions of the GAI impose d liability upon Guarantee for expenses incurred in a malpractice suit by J&V against Weaver

. And i n the Supplement to Collateral and Disbursement Agreement, Guarantee agreed to fund J&V’s malpractice claim against Weaver up to $70,000 for attorney’s fees , and reserved the– 16

– right to stop funding if Guarantee determined that the claim should no longer be pursued. The Hurds, individually and on behalf of J&V, granted Guarantee “the absolute right to control pursuit of the Malpractice Claim , ” including the “unconditional right[,]” in Guarantee’s sole discretion, to settle the claim. 5 The Supplement supplemented the collateral that was available to satisfy J& V’s and the Hurds’ obligations to Guarantee to include the lawsuit. But t he Supplement did not assign the claim or any liabilities to Guarantee

. In summary, w e conclude that Weaver did not raise a genuine issue of material fact in response to Guarantee’s motion for summary judgment on the assignment counterclaim. See
Lone Star Gas. Co. v. Mexia Oil & Gas, Inc

. , 833 S.W.2d 199, 201 , 203 (Tex. App.

— Dallas 1992, no writ) (declining to hold that “if an assignee receives any benefit, no matter how tangential, from the contract, then the assignee impliedly assumes all of the contract’s burdens, no matter how tangential”). We conclude that the trial court did not err in granting no

- evidence summary judgment on Weaver’s counterclaim that Guarantee was J&V’s assig nee . Subrog ation Weaver’s Arguments
Weaver argues that Guarantee was “the equitable subrogee of J&V’s arbitration” because “Guarantee paid on the projects that J&V was liable for.” Weaver also argues that the terms of the GAI, Collateral and Disbursement Agreeme nt, and Supplement established “Guarantee’s right to pursue reimbursement from a third party in exchange for Guarantee’s payment of J&V’s project defaults

. ” Weaver contends that , because Guarantee’ s only damages resulted from bond losses it suffer ed from J&V’s defaults on TxDOT projects , “Guarantee had contractual subrogation rights to the arbitration.” Weaver argues that Guarantee acknowledged its

5 The Supplement’s language controls because it contained more specific terms concerning the funding of the mal practice action than the GAI or Collateral and Disbursement Agreement. S ee Presley v. N.B. Masure e l Veredeling , 370 S.W.3d 425, 433 (Tex. App.

— Houston [1st Dist.] 2012, no pet.); see also Forbau v. Aetna Life Ins. Co. , 876 S.W.2d 132, 133

– 34 (Tex. 1994) (stating that specific provisions control over more general provisions).– 17

– subrogation rights in a provision of the Collate ral and Disbursement Agreement that stated that the agreement did not prejudice “the legal and equitable rights of subrogation of the Surety.” In addition, Weaver contends that the “Guarantee/J&V Arbitration was based on a co ntractual relationship between J &V and Weaver,” that Guarantee “assumed ‘the abs ol ute right to control pursuit’ of the arbitration ” through the Supplement , including the “unconditional right” to settle the malpractice claim , and that the Supplement also provided that any recovery from the arbitration between J&V and Weaver “would go dir ectly to Guarantee to reimburse it for the bond payments it made on behalf of J&V.” Weaver argues that Guarantee’s involvement in the arbitration proceeding was “ [l]ike a ty pical subrog ation lawsuit” because G uarantee “assumed control of its principal’s c laim against a third party,” agreed to fund the principal’s claim, and would be reimbursed from any recovery from the principal’s claim for losses Guarantee paid on behalf of the principal. Weaver argues that this case is “almost identical” to Watson , 218 S.W.3d at 802

– 05. In
Watson , insurance companies that sued in subrogation argued that they were subrogated to the rights of their insured but not to its liabilities, including liabilities for attorney’s fees. Id. at 803. The court held that when a n insurer sues in subrogation under a contract, it is both entitled to all of its insured ’s rights an d exposed to all of its insured ’s liabilities. Id. Weaver argues that, “[l]ike the insurance companies” in Watson , Guarantee would have sought its attorn ey’s fees and costs if the arbitration was successful for J&V but denied its responsibility for attorney’s fees and costs when J&V was unsuccessful, and that the Watson court “expressly rejected” this argument. 6

6 Weaver argues that, contrary to Guarantee’s argument, this Court did not hold in Weaver & Tidwell , 2011 WL 635261, at *2, that Guarantee was not the subrogee of J&V’s rights in the previous suit between J&V and Weaver but only that Guarantee did not br ing a contractual subrogation claim in this suit. Weaver also argues that, because this Court did not have knowledge of the Supplement

— which Weaver contends “would have been outcome determinative”

— “the Court’s previous opinion was based on fraud and should h ave no bearing in determining Guarantee’s rights in the arbitration.” Because of our resolution of this issue on other grounds, we do not address these ar guments.– 18

– Guarantee’s Arguments Guarantee argues that the trial court correctly granted its no - evidence summary judgment motion dismissing Weaver’s subrogat ion counter claim because Guarantee “never proceeded as a subrogor [sic] of J&V” on either equitable or contractual grounds. It argues that there was no evidence that Guarantee “invoked a right of equitable subrogation” in a lawsuit or the arbitration , t he evidence shows that it was not a party to the arbitration, it “did not assert a right against Weaver based on a debt [Guarantee] paid on behalf of J&V[, ]” and it did not sue Weaver in subrogation

. Guarantee argues that Weaver “cannot point to any” contrary evidence that would support its claim that Guarantee was an equitable subrog ee in the arbitration

. Guarantee likewise argues that the trial court properly granted the no - evidence motion for summary judgment on subrog ation because there was no evidence Guarantee sued Weaver “in subrogation under a contractual right granted by J&V in the present suit or in the A rbitration ” and there was no evidence Guarantee was a party to the arbitration. Analysis Contractual subrogation “is created by an agreement or contract that grants the right to pursue reimbursement from a third party in exchange for payment of a loss, while” equitable subrogation “does not depend on contract but arises in every instance in which one person, not acting voluntarily, has paid a debt for which another was primarily liable and which in equity should have been paid by the latter.” Mid

- Continent Ins. Co. v. Liberty Mut. Ins. Co. , 236 S.W.3d 765, 774 (Tex. 2007). In both contractual and equitable subrogation, the subrogee “stands in the shoes of ” the subrogor, “obtaining only those rights held by” the subrogor against a third party, and subject to any defenses the third party held against the subrogor

. See i d. Here, Weaver did not raise an issue of fact on whether Guarantee pleaded or otherwise asserted a subrogation interest in a judicial proceeding against Weaver

. See Casstevens v. Smith ,– 19

– 269 S.W.3d 222, 228 (Tex. App.

— Texarkana 2008, pet. denied) (stating that a right of subrogation “is not a substantive, tangible thing” that “can be seized and held independently of a judicial proceeding; it is a right of action only

— that is, it mus t be established by a judicial proceeding”); Monk v. Dallas Brake & Clutch Serv. Co. , 697 S.W.2d 780, 782 n.2 (Tex. App.

— Dallas 1985, writ ref’d n.r.e.) (“[T]o be available, subrogation must be pleaded by the person claiming it.”). T he Supplement provided that Guarantee

— in consideration for funding attorney’s fees in J&V’s malpractice claim against Weaver

— had “ the absolute right to control pursuit of ” J&V’s malpractice claim, including the unconditional right to settle the malpractice claim , and had the ri ght to be r eimbursed for costs it incurred and losses it suffered on the bonds ( subject to other parties’ priority rights of reimbursement )

. But Weaver has not provided and we have not located any authority , holding on these facts , that Guarantee asserted a right of subrogation in a judicial proceeding

. 7 We agree with Guarantee that Weaver did not raise a genuine issue of material fact that Guarantee acted as c ontractual or equitable subrogee of J&V with respect to the arbitration and conclude that t he tr ial court correctly granted no

- evidence summary judgment on Weaver’s subrogation counterclaim

. As a result , we do not address the parties’ other subrogation arguments. Offensive Collateral Estoppel Applicable L aw Weaver also contends the t rial court erre d in granting Guarantee’s no - evidenc e summary judgment motion on Weaver’s counterclaim based on offensive collateral estoppel. A party may use the doctrine of offensive collateral estoppel “to estop a defendant from relitigating an issue that the defendan t litigated and lost in prior litigation with another party.” Goldstein v. Comm’n

7 The case Weaver relies upon, Watson , 218 S.W.3d at 802

– 05, is distinguishable. In Watson , property insurers sued under the terms of a contract as subrogees of a home builder and acknowledged “that they step[ped] into the shoes” of their subrogor. Id. at 803. Here, Guarantee did not bring an action in subrogation against Weaver.– 20

– for Lawyer Discipline , 109 S.W.3d 810, 812 (Tex. App.

— Dallas 2003, pet. denied). To invoke the doctrine of collateral estoppel, a party must establish that (1) the facts sought to be litigated in the second action were fully and fairly litigated in the first action , (2) those facts were
essent ial to the judgment in the first action, and (3) the parties were cast as adversaries in the first action. Sysco Foo d Servs., Inc. v. Trapnell , 890 S.W.2d 796, 801 ( Tex. 1994). A trial court has broad discr etion to determine whether to allow a plaintiff to employ collateral estoppel offensively. Parklane Hosiery C o. v. Shore , 439 U.S. 322, 331 (1979) ; Goldstein , 109 S .W.3d at
81 2

– 1 3. Weaver’s A rguments Weaver argues that it established all three elements of collateral estoppel because (1) the basis and amount of Weaver’s attorney’s fees were fully and fairly litigated in the arbitration, (2) the issue of attorney’ s fe es was “essential because the contract stated the prevailing party was entitled to recover its attorneys’ fees and costs[,]” and (3) “it cannot be disputed that Guarantee was in privity with J&V, or that Guarantee and Weaver were ad versaries in the arbitra tion.” In its response to Guarantee’s summary judgment motion, Weaver argued that the evidence, including the terms of the Supplement, Collateral and Disbursement Agreement, and GAI, testimonial evidence, and J&V’s finances , established privity by demonst rating Guarantee’s control of J&V, that its interests were fully re presented in the arbitration, and that it was J&V’s successor in interest. Guarantee’s A rguments Guarantee contends that the trial court correctly granted the no

- evidence summary judgment motion b ecause (1) no facts were “fully and fairly ” litigated in the arbitration concerning Guarantee’s obligation to pay Weaver’s fees “because there were simply no facts that gave rise to such a claim in the Arbitration ” and (2) Guarantee and Weaver were not adversaries– 21

– in the arbitration

. Guarantee argued in its motion for summary judgment that, because there was no evidence that Guarantee and Weaver were cast as adversaries in the arbitration or that the “facts essential to the judgment” in the arbitra tion were fully and fairly litigated by Guarantee, Weaver’s collateral estoppel counter claim should be dismissed. Analysis We agree with Guarantee that Weaver did not raise a genuine issue of material fact concerning whether the issue of Guarantee’s liabi lity to Weaver for the arbit ration judgment was fully and fai rly litigated

. As a result, Weaver did not produce evidence on each of the elements of collateral estoppel that it was required to establish to invoke the doctrine. Consequently, w e conclude that the trial court properly granted Gu a rantee’s no - evidence summary judgment motion dismissing Weaver’s offensive col lateral estoppel counterclaim. Alter Ego Applicable Law Weaver contends that the trial court erred in granting Guarantee’s no

- evidence s ummary judgment motion dismissing Weaver’s alter ego counterclaim. The ability to impose alter ego liability is limited: an affiliate of a corporation cannot be held liable for a contractual obligation of the corporation unless the affiliate caused the co rporation to be used for the purpose of perpetrating and did perpetrate an actual fraud on the obligee for the direct personal benefit of the affiliate. See T EX
. B US
. O RGS
. C ODE A NN
. § 21.223 (West 2012); Latham v. Burgher , 320 S.W.3d 602, 606 n.1 (Tex. A pp.

— Dallas 2010, no pet.) (stating that a “finding of actual fraud” is “a threshold finding necessary for the ultimate finding of alter ego”). In the context of alter ego , actual fraud involves dishonesty of purpose or intent to deceive. Lantham , 320 S.W .3d at 607.– 22

– Weaver’s A rguments Weaver argues that the “evidence overwhelmingly established ” that Guarantee was J&V’s alter ego in the arbitration between J&V and Weaver

. Weaver argues this evidence includes Guarantee’s payment of over $300,000 to fin ance J&V ’s expenses in the arbitration , Guarantee’s payment of “all of J&V’ s expenses since at least Marc h 2008 [,] ” Guarantee’s assumption of control over J&V’s remaining TxDOT projects and rehiring J&V to complete the projects, and Guarantee’s control ove r J&V’s revenue from the projects

. Weaver contends that the “overwhelming evidence” establishes actual fraud, including that Guarantee financed and controlled the arbitration for Guarantee’s direct benefit, Guarantee entered into the arbitration agreement s for the “dishonest purpose” of securing J&V’s “cooperation in not one, but two lawsuits against Weaver[,]” and Guarantee intended to deceive Weaver about “the true nature of its financing and control” of the arbitration by not disclosing the Supplement. Guarantee’ s A rguments Guarantee argues that the trial court properly granted its no

- evidence summary judgment motion on Weaver’s alter ego counter claim because there was “ no evidence of fraud.” Guarantee argues that its exercise of the rights and obligations it had under the performance bonds and GAI and its funding of a lawsuit that J&V initiated but could no longer afford to prosecute were “not evidence of dishonesty of purpose or intent to deceive[.]” Guarantee

c ontends that, regardless of whether it funded the litigation or cooperated with J&V, it would have been entitled to any proceeds from the arbitration

. Guarantee also argues that Weaver does
not identify any obligation Guarantee had to disclose the agreeme nts it had with J&V to support Weaver’s argument that Guarantee committed fraud by not disclosing the agreements

.– 23

– Analysis We agree with Guarantee that Weaver did not pr oduce any summary judgment evidence that raised a genuine issue of material fact c oncerning whether Guarantee caused J&V to perpetr ate an actual fraud on Weaver for Guarantee’s benefit

. The evidence that Weaver references

— that Guarantee paid J&V’s expenses and controlled its revenues and unfinished TxDOT projects

— were rights that Guara ntee had pursuant to the GAI. And evidence of Guarantee’s agreement i n the Supplement to fund J&V’s expenses that it could not afford in its previously

- filed suit against Weaver and Guarantee’ s subsequent filing of a different cause of action in this suit against Weaver did not show dishonesty of purpose or intent to deceive required for a finding of actual fraud and raise a genuine issue of material fact

. See Metroplex Mailing Servs., LLC v. RR Donnelley & Sons Co. , 410 S.W.3d 889, 896

– 98 (Tex. App.

— Dall as 2013, no pet.). As a result, w e agree with Guarantee that the trial court properly granted
Guarantee’s no - evidence summary judgment motion, dismissing Weaver’s alter ego counterclaim. Consequently, w e overrule Weaver’s fifth issue

. C ONCLUSION Given our resolution of the two issues above, it is unnecessary for us to address Weaver’s

rem aining issues

. T EX
. R. A PP
. P. 47.1. We reverse and render judgment that Guar antee take nothing on its claim and affirm the trial court’s dismissal of Weaver’s counterclaim on summary judgment.

120750F.P05 /Elizabeth Lang

- Miers/ ELIZABETH LANG

- MIERS JUSTICE– 24

– 

# S

Court of Appeals Fifth District of Texas at Dallas JUDGMENT
WEAVER AND TIDWELL, L.L.P., Appellant
No. 05

- 12

- 00750

- CV V.
THE GUARANTEE COMPANY OF NORTH AMERICA USA, Appellee On Appeal from the 191st Judicial District Court, Dallas County, Texas Trial Court Cause No. 09

- 11140. Opinion delivered by Justice Lang

- Miers, Justices O'Neill and Evans participating.

In accordance wi th this Court’s opinion of this date, the judgment of the trial court is AFFIRMED in part and REVERSED and RENDERED in part. We REVERSE that portion of the trial court's judgment on the negligent misrepresentation claim by appellee The Guarantee Company o f North America USA and judgment is RENDERED that appellee The Guarantee Company of North America USA take nothing on its negligent misrepresentation claim against appellant Weaver and Tidwell, L.L.P. We AFFIRM the trial court’s dismissal of appellant Wea ver and Tidwell, L.L.P.’s counterclaim on summary judgment. It is ORDERED that each party bear its own costs of this appeal.
Judgment entered this 8th day of April, 2014.

/Elizabeth Lang

- Miers/ ELIZABETH LANG

- MIERS JUSTICE