No. 06-15-00013-CV

IN THE

COURT OF APPEALS

SIXTH DISTRICT OF TEXAS

TEXARKANA

__________________________________________________________________

JOHN ALEXANDER SMITH,

Cross-Appellant

v.

CITY NATIONAL BANK OF SULPHUR SPRINGS,

Cross- Appellee

__________________________________________________________________

On appeal from the District Court of Hopkins County, Texas

62 Judicial District nd

The Honorable Will Biard Presiding

__________________________________________________________________

BRIEF OF CROSS-APPELLANT

__________________________________________________________________

J. Mark Sudderth

Texas Bar No. 19461500

NOTEBOOM – THE LAW FIRM

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

ACCEPTED

06-15-00013-CV

SIXTH COURT OF APPEALS

TEXARKANA, TEXAS

9/16/2015 4:49:55 PM

DEBBIE AUTREY

CLERK

 FILED IN 6th COURT OF APPEALS TEXARKANA, TEXAS 9/17/2015 8:22:00 AM DEBBIE AUTREY Clerk
IDENTITY OF PARTIES AND COUNSEL

Pursuant to Rule 38.1(a) of the Texas Rules of Appellate Procedure, the

following is a list of all parties to the trial court’s judgment, and the names and

addresses of all trial and appellate counsel.

Parties to the Trial Court’s Judgment:

John Alexander Smith Plaintiff/Cross-Appellant

City National Bank of Sulphur Springs Defendant/Cross-Appellee

Trial and Appellate Counsel:

Charles M. Noteboom, J. Mark Sudderth, Attorneys for Plaintiff/Crossand Brian W. Butcher Appellant John Alexander Smith

Noteboom – The Law Firm

669 Airport Freeway, Suite 100

Hurst, Texas 76053

and

R. Wes Tidwell

Ellis & Tidwell, LLP

101 W. Houston

Paris, Texas 75460

Coy Johnson and Clay Johnson Attorneys for Defendant/

Johnson Law Firm, P.C. Cross-Appellee City National

609 Gilmer Street Bank of Sulphur Springs

Sulphur Springs, Texas 75482

and

Kevin L. Ferrier

222 E. Amherst, Suite 100

Tyler, Texas 75701

and

John R. Mercy

Mercy, Carter, Tidwell, L.L.P.

1724 Galleria Oaks Drive

Texarkana, Texas 75503

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

Cross-Appellant John Alexander Smith respectfully requests the opportunity

to present oral argument. TEX. R. APP. P. 39.7.

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

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

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

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

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

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

ISSUE PRESENTED

Whether the Trial Court Erred by Improperly Determining the Amount of

Pre-judgment Interest to Be Awarded to Plaintiff. . . . . . . . . . . . . . . . . . . . . . 1

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

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

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

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

II. The Trial Court Erred by Improperly Determining the Amount of

Prejudgment Interest to Be Awarded to Plaintiff.. . . . . . . . . . . . . . . . . . . . . . 6

A. Plaintiff’s Application for Investigative Depositions constituted

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

Finance Code.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

B. Pursuant to section 304.104 of the Texas Finance Code, the proper

amount of prejudgment interest to be awarded to Plaintiff is

$84,542.00, rather than $54,243.00. .. . . . . . . . . . . . . . . . . . . . . . . . . 12

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

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

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

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

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

Cases:

Bevers v. Soule,

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

Brookshire Grocery Co. v. Smith,

99 S.W.3d 819 (Tex. App.–Beaumont 2003). . . . . . . . . . . . . . . . . . . . . 6, 7, 8

Freedom Com., Inc. v. Coronado,

372 S.W.3d 621 (Tex. 2012). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Helena Chemical Co. v. Watkins,

18 S.W.3d 744 (Tex.App.–San Antonio 2000). . . . . . . . . . . . . . . . . . . . . . . . 4

Hopkins v. Spring Indep. Sch. Dist.,

736 S.W.2d 617 (Tex.1987). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc.,

962 S.W.2d 507 (Tex. 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 7, 8

K Mart Corp. v. Rhyne,

932 S.W.2d 140 (Tex. App.–Texarkana 1996). . . . . . . . . . . . . . . . . . . . . . 8, 9

MCN Energy Enters., Inc. v. Omagro de Colombia, L.D.C.,

98 S.W.3d 766 (Tex. App.–Fort Worth 2003). . . . . . . . . . . . . . . . . . . . . . . 5

Pringle v. Moon,

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

Quick v. City of Austin,

7 S.W.3d 109 (Tex.1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Robinson v. Brice,

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

Tex. Dep't of Transp. v. Needham,

82 S.W.3d 314 (Tex.2002). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Cross-Appellant’s Brief - Page vi
Toshiba Machine Co. v. SPM Flow Control, Inc.,

180 S.W.3d 761 (Tex. App.–Fort Worth 2005). . . . . . . . . . . . . . . . . . . . . . . 5

Statutes and Rule:

TEX. R. EVID. 201.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

TEX. CIV. PRAC. & REM. CODE § 101.101. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

TEX. FIN. CODE § 304.104. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

TEX. GOV. CODE § 311.011. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

ABBREVIATIONS AND RECORD REFERENCES

Abbreviations

Plaintiff/Cross-Appellant,

John Alexander Smith. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “Smith” or “Plaintiff”

Defendant/Cross-Appellee

City National Bank of Sulphur Springs. . . . . . . “CNB,” “Defendant” or “the Bank”

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

Record References

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

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

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

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

Smith brought a personal injury suit against the Bank for malicious

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

1 2 3

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

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

4

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

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

5 6

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

CR:403 (Plaintiff’s Fifth Amended Original Petition)

1

CR:535; Appx. C (Jury Charge and Verdict)

2

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

3

CR:582; Appx. A (Court’s Judgment)

4

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

5

CR:615; Appx. H (Plaintiff’s Response to Defendant’s Motion to Modify

6

Judgment)

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

7

CR:649 (Plaintiff’s Notice of Cross-Appeal)

8

Cross-Appellant’s Brief - Page viii
ISSUE PRESENTED

Whether the Trial Court Erred by Improperly Determining the Amount of

Prejudgment Interest to Be Awarded to Plaintiff.

STATEMENT OF FACTS

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

For Investigative Depositions” under TEX.R.CIV.P. 202 which clearly and

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

9

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

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

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

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

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

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

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

imprisonment, false arrest, and malicious prosecution.”

10

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

11

CR:585; Appx. E (Petitioner’s Application for Investigative Depositions –

9

enclosed with Plaintiff’s letter to trial court submitting proposed judgment).

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

10

CR:27 (Plaintiff’s Second Amended Original Petition)

11

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

in Smith’s favor.

12

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

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

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

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

13

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

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

14

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

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

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

15

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

16

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

prejudgment interest to $54,243.

17

CR:535; Appx. C (Jury Charge and Verdict)

12

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

13

CR:582; Appx. A (Court’s Judgment)

14

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

15

CR:615; Appx. H (Plaintiff’s Response to Defendant’s Motion to Modify

16

Judgment)

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

17

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

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

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

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

18

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.

The order does not set forth this calculation, but expressly grants Defendant’s

18

motion, which did. See CR:607; Appx. G (Defendant’s Motion to Modify Judgment,

p.3).

Cross-Appellant’s Brief - Page 3
ARGUMENT

I. The Standard of Review Is De Novo

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

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

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

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

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

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

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

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

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

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

On the other hand, when – as at bar – a trial court’s decision regarding prejudgment interest turns on legal rather than factual grounds, the de novo standard

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

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

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

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

(Tex.2002)”).

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

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

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

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

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

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

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

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

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

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

interest issue in this case is de novo.”)

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

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

(Tex.1998).

Cross-Appellant’s Brief - Page 5
II. The Trial Court Erred by Improperly Determining the Amount of

Prejudgment Interest to Be Awarded to Plaintiff.

A. Plaintiff’s Application for Investigative Depositions constituted

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

Finance Code.

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

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

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

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

19

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

20

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

21

While the Finance Code contains no statutory definition, case law

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

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

22

Tex. Fin. Code 304.104 (Appx. D)

19

CR:607; Appx. G (Defendant’s Motion to Modify Judgment, p. 3)

20

CR:616; Appx. H (Plaintiff’s Response to Defendant’s Motion to Modify

21

Judgment, p. 2)

See, e.g., Johnson & Higgins of Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d

22

507, 531 (Tex. 1998)(“A ‘claim’ is ‘a demand for compensation or an assertion of a

right to be paid.”)(emphasis added); Brookshire Grocery Co. v. Smith, 99 S.W.3d 819,

824 (Tex. App.–Beaumont 2003, pet. denied)(In Tex.Fin.Code § 304.104, “[t]he term

‘claim’ describes a demand for compensation or an assertion of a right to be

paid.”)(emphasis added). See also, Robinson v. Brice, 894 S.W.2d 525, 528 (Tex. App. –

Austin 1995, writ denied).

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

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

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

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

agreement merely stated:

Kenneco asserts that, to the extent underwriters are found not to be liable ...,

J & H is liable to Kenneco for the amounts which Kenneco has claimed

under the Policy.

23

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

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

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

right will suffice:

We hold that the agreement constitutes “written notice of a claim.” A

“claim” is “a demand for compensation or an assertion of a right to be paid.”

See Robinson v. Brice, 894 S.W.2d 525, 528 (Tex.App.—Austin 1995, writ

denied). ... Through the standstill agreement, J & H received written notice

that Kenneco was claiming a right to compensation.

24

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

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

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

Johnson, 962 S.W.2d at 531 (analyzing the common-law requirement of

23

“written notice of a claim” to trigger prejudgment interest)

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

24

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

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

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

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

App. – Austin 1995, writ denied).

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

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

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

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

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

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

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

25

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

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

25

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

26

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

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

27

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

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

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

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

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

should not be misunderstood as construing Robinson to always require a

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

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

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

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

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

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

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

Bevers, 909 S.W.2d at 603.

26

Id. (noting that, “Nothing in [the prejudgment interest statute] requires the

27

claimant to demand an exact amount or list every element of damage claimed in order to

trigger the notice of claim provision.”)

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

The statute does not define the term “claim,” and therefore, we must

construe it according to its ordinary meaning. Tex.Gov't Code Ann. §

312.002(a) (West 1988) [now see § 311.011]; Hopkins v. Spring Indep. Sch.

Dist., 736 S.W.2d 617, 619 (Tex.1987). The word “claim” ordinarily means

a demand for compensation or an assertion of a right to be paid.

...

The accident report fails as written notice of a claim ... because it is not

notice of a demand for compensation or an assertion of a right to be paid.

28

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

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

29

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

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

28

CR:585; Appx. E (Petitioner’s Application for Investigative Depositions –

29

enclosed with Plaintiff’s letter to trial court submitting proposed judgment).

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

30

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

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

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

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

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

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

attempting to investigate or negotiate before determining whether a lawsuit will

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

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

of action – is all that is required.

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

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

the incident giving rise to it. TEX. CIV. PRAC. & REM. CODE § 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.

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

30

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

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

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

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

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

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

assertions on October 24, 2008.

B. Pursuant to section 304.104 of the Texas Finance Code, the proper

amount of prejudgment interest to be awarded to Plaintiff is $84,542.00,

rather than $54,243.00.

The trial court’s original judgment properly calculated prejudgment interest

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

included here in order to ensure full briefing.

Section 304.104 of the Texas Finance Code provides that prejudgment

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

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

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

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

Cross-Appellant’s Brief - Page 12
2009.

31

The trial court’s judgment in this case was signed on December 15, 2014.

32

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

five percent, yearly interest on $300,000.00 is $15,000.00. Dividing that

33 34

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

Cross-Appellant respectfully requests this Court to take judicial notice of the

31

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.”); TEX. R. EVID. 201.

CR:582; Appx. A (Court’s Judgment)

32

The judgment awarded $300,000.00 in compensatory damages, not

33

including interest. Id.

.05 x 300,000 = 15,000.

34

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

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

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

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

nature of this case may require.

Respectfully submitted,

/s/ J. Mark Sudderth

J. Mark Sudderth

Texas Bar No. 19461500

NOTEBOOM – THE LAW FIRM

669 Airport Freeway, Suite 100

Hurst, Texas 76053

(817) 282-9700

(817) 282-8073 (facsimile)

Sudderth@Noteboom.com

Attorneys for Cross-Appellant,

John Alexander Smith

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

I certify that a true and correct copy of the attached document been served

upon all counsel record on the 16 day of September, 2015, via e-service, to the

th

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 TEX. R. APP. 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 TEX. R.

APP. P. § 9.4(i)(1) contain 2,905 words, thus bringing the brief into compliance

with the word-count limitations of that Rule.

/s/ J. Mark Sudderth

J. Mark Sudderth

Cross-Appellant’s Brief - Page 15
APPENDIX

A. Final Judgment (CR:582)

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

C. Jury Charge and Verdict (CR:535)

D. Tex. Fin. Code 304.104

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

V. TEX. R. EVID. 201

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

X. TEX. GOV. CODE § 311.011
A
582

[ .. • 

JOHN ALEXANDER SMITH, 

PLAINTIFF 

V. 

CITY NATIONAL BANK OF 

SULPHUR SPRINGS, 

DEFENDANT 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

FINAL JUDGMENT 

• 

HOPKINS COUNTY, TEXAS 

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 
583

• " • • 

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

well as pre-judgment interest on $300,000- from Defendant CITY NATIONAL BANK OF 

d> J( ..... 

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

IT IS FURTHER ORDERED, ADJUDGED, and DECREED by the court that Plaintiff 

JOHN ALEXANDER SMITH have and recover exemplary damages from Defendant CITY 

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

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

adjudged against Defendant CITY NATIONAL BANK OF SULPHUR SPRINGS. 

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

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

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

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

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

of court may issue as necessary. 

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

Final Judgment- Page 2 
B
JOIIf\. ALLXANlJER SM ITII 

V. 

CITY NATIONAL BANK OF 

SULPI IUR SPRINGS 

NO. CV40681 

IN THE DISTRICT ff9U~T I I . OF HOPKINS COUNTY. 'I I:AAS 

62"1J J UDIClAL DISTRICT 

OIWEI{ 0~ MOTION TO MODIFY .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, TllEREf-ORl. ORDERED thnt Dcl"cndant City National Hank of' Sulphtu Spnng•·.' 

Motion to Modify is GRANTED. 

IT IS HJRTHI R ORD ER.ED thut the Court's Judgment entered on Dct;embcr ~. 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-J IARD . . luJge Presiding 

.· 
C
535

' 

JOHN ALEXANDER SMITH, 

PLAINTIFF 

vs. 

CITY NATIONAL BANK OF 

SULPHUR SPRINGS, 

DEFENDANT 

CAUSE NO. CV 40681 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

IN THE DISTRICT COURT 

GENERAL INSTRUCTIONS 

LADIES AND GENTLEMEN OP THE JURY: 

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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. 

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

Page I 
536

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 
537

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 

\ 
538

QUESTION 1: 

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

"Malicious prosecution" occurs when one person initiates or procures, with malice, and without 

probable cause at the time the prosecution is commenced, the prosecution of an innocent person. 

"Malice" means ill will, bad or evil motive, or such gross indifference to the rights of others as to 

amount to a willli.ll or wanton act. 

"Probable cause" means the existence of such facts and circumstances as would excite belief in a 

person of reasonable mind, acting on the facts or circumstances within his knowledge at the time 

the prosecution was commenced, that the other person was guilty of a criminal offense. The 

probable cause determination asks whether a reasonable person would believe that a crime had 

been committed given the facts as the complainant honestly and reasonably believed them to be 

before the criminal proceedings were instituted. 

A person procures a criminal prosecution if his actions were enough to cause the prosecution, and 

but for his actions the prosecution would not have occurred. A person does not procure a criminal 

prosecution when the decision whether to prosecute is 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 
539

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 
540

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 11N0. 11 

ANSWER: "'tS 

Page 6 
541

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, area. 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 
542

SPECIAL INSTRUCTIONS 

After you retire to the jury room, you will select your own presiding juror. The first thing 

the presiding juror will do is to have this complete charge read aloud and then you will deliberate 

upon your answers to the questions asked. 

It is the duly of the presiding juror--

I. to preside during your deliberations, 

2. to see that your deliberations are conducted in an orderly manner and in accordance with 

the instructions in this charge, 

3. to write and hand to the bailiff any communications concerning the case that you desire to 

have delivered to the Judge, 

4. to vote on the questions, 

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

6. to certify to your verdict in the space provided for the presiding juror's signature or to 

obtain the signatures of all the jurors who agree with the verdict if your verdict is less than 

unammous. 

You should not discuss the case with anyone, not even with other members of the jury, 

unless all of you are present and assembled in the jury room. Should anyone attempt to talk to 

you about the case before the verdict is returned, whether at the courthouse, at your home, or 

elsewhere, please inform the judge of this fact. 

When you have answered all the questions you are required to answer under the 

instructions of the judge and your presiding juror has placed your answers in the space provided 

and signed the verdict as presiding juror or obtained the signatures, you will inform the bailiff at 

the door of the jury room that you have reached a verdict, and then you will return into the 

courtroom with your verdict. 

Page 8 
543

CERTJFICATENO. I 

We, the jury, have answered questions number 1 and number 2 as herein indicated, and 

herewith return same into court as our verdict. 

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

PRESIDING 

s~q_~ JUROR 

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

Page9 
544

CERTIFICATE NO. 2 

We, the jury, have answered question number 3 as herein indicated, and 

herewith return same into court as our verdict. 

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

PRESIDING 

~~~ JUROR 

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

Page 10 
545

CERTIFICATE NO. 3 

We, the jury, have unanimously answered question number 4 as herein indicated, and 

herewith return same into court as our verdict. 

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

So,~~ PRESIDING JUROR 

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

§ 304.104. Accrual of Prejudgment Interest

Except as provided by Section 304.105 or 304.108, prejudgment interest accrues on the amount

of a judgment during the period beginning on the earlier of the 180th day after the date the

defendant receives written notice of a claim or the date the suit is filed and ending on the day

preceding the date judgment is rendered. Prejudgment interest is computed as simple interest and

does not compound.

Credits

Amended by Acts 1999, 76th Leg., ch. 62, § 7.18(a), eff. Sept. 1, 1999.
E
585

.. • 

vs. 

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: 

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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. 

... 'l''? 

,_ 

I 

~"'~ z {: i 

C.J 
586

.. • • 

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 
587

• • 

9.. When U1e CJiminal complaint against Petitioner was filed, a warrant for his arrest was issued. 

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

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

that there was an outstanding wan·ant against Petitioner. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

needed to prepare the case. 

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

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

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

was not guilty and that he was ready tor a jury trial. The District Attorney again claim en that no 
588

. ' • • 

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 
589

• • 

who are most knowledgeable about the following subjects: 

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

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

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

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

of charges against Petitioner; and 

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

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

embroidery machine. 

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

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

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

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

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

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

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

III. 

18. Petitioner requests the Court to: 

a. Set a hearing to tletennine this Motion; 

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

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

upon by the parties.; 

l'ae-e) 
590

• • • 

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 
F
584

-THE 

NOTEBCIDM 

LAW FIRM- • November 25. 2014 • Brian \\'. Butcher* 

Thomas A. Herald 

Charle~ .\1. ,\'oteboom* 

J. ~lark Suddenh 

Hon. Will Biard, Judge 

62"' Judicial District Court 

PO Box 391 Fl~~o~ : 

z <!: ~. f"T1 Sulphur Springs, TX 75483 

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

Dear Judge Biard: 

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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 postjudgment interest on the entire judgment at 5%. 

"i!P1~------- J. : (k Sudderth 

Ati~~y for Plaintiff 

State Bar No. 19461500 

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 

0 
G
605

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). 
606

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 
607

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 
608

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 
609

CERTIFICATE OF SERVICE 

A true and correct copy of the foregoing Cily Nalianal Bank a/Sulphur Springs· Malian Ia 

/vladijj' JudgmenT has been forwarded to: 

Mr. J. Mark Sudderth 

NOTEBOOM LAW FIR,\·1 

669 Airport Freeway 

Hurst TX 76053 

Attorney for Plaintiff, this day of January, 2015. 

City National Bank of Sulphur Springs: Motion to Mod if.• Judgment- Page 5 
610

NOTEB®M 

:·lfE tt..W Fl.i?M 

Hon. Will Biard. Judge 

62"' Judicial District Court 

PO Box 391 

Sulphur Springs, TX 75483 

November 25, 2014 

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

Dear Judge Biard: 

Brbn W. Butcher"'" 

Ttv>.na.~ A. Hc:r.tld 

C"harlc; M. No!~hOO:Xll~' 

J. M;1rk Sudllenh 

EXHIBIT 

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 postjudgment 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 
H
615

i 

I', 

I 

• • 

CAUSE NO. CV-40681 

JOHN ALEXANDER SMITH 

Plaintiff 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

§ 

IN THE DISTRICT COURT OF 

\', 

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-u c.n 

HOPKINS COUNTY~'(E-XAih (,/] -t ;o c;:J 

c~:::J_.. 1 

c~r 0"\ S....,-:1 

CITY NATIONAL BANK OF 

SULPHUR SPRINGS 

Defendant 62"d JUDICIAL DISTRfE=T > 

:..:~~ :% 

PLAINTIFF'S RESPONSE TO DEFENDANT'S 

MOTION TO MODIFY JUDGMENT 

:;;st:g C) 

w 

-.J 

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

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

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

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

notice of Plaintiffs claim. 

Plaintiff Provided Written Notice of His Claim 

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

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

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

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

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

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

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

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

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

1

A copy is attached as Exhibit A. 

P/aillfijj's Response to Defendant's Motion to Modify Judgment Page I 

,-

m 

0 
616

• • 

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 Policy2 

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 
617

• • 

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 compensation3 

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 
618

• • 

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 
619

• • 

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 
620

• • 

PRAYER 

WHEREFORE, PREMISES CONSIDERED, Plaintiff respectfully pray that Defendant's 

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

entitled. 

Respectfully submitted, 

S~e Bar No. 19461500 

NOTEBOOM- THE LA \1' FIRM 

669 Airport Freeway, Suite I 00 

Hurst, Texas 76053 

Telephone: (817) 282-9700 

Facsimile: (817) 282-8073 

A TTOR.t'\JEYS FOR PLAINTIFFS 

CERTIFICATE OF SERVICE 

I hereby certifY that on this 4'h day of February, 2015, in accordance with the Texas Rules 

of Civil Procedure, a true and correct copy of the above and foregoing instrument was served upon 

the following: 

Coy Johnson 

Clay Johnson 

Johnson Law Firm, P.C. 

609 Gilmer Street 

Sulphur Springs, TX 75482 

Facsimile 866-584-1313 

John R. Mercy 

Mercy, Carter, Tidwell, L.L.P. 

1724 Galleria Oaks Drive 

Texarkana, TX 75503 

Facsimile 903-794-1268 ·-~A--

Plaillliff's Re;po11se to Defe11da11t 's Motio11 to Mmlifr Judgmelll Page 6 
621

• • 

Exhibit A 
622

• 

vs. 

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: 

"' = "" = 

0 

_, 

0 

0 

-u 

:r 

w 

.. 

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. 

"'t1 

·-I 

¥11 

0 
623

• • 

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

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

Respondents. 

ll. 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Texas under cnuse number 06-18569. 

Pi:IJtC 2 
624

• • 

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 
625

• • 

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 
626

• • 

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:.~.; 
627

• • 

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

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

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

J<e.~pectfully submitted, 

CLARK, LEA & PORTER 

604 Woldert Street 

P. 0. Box 98 

State Bar No. 04274000 

Gregory S. Porter 

State Bar No. 24002785 

ATTORNEYS FOR PETri10NER 

l'<lC.C 6 
628

CAUSE NO. CV3 8 727 

THE STATE OF TEXAS: ATTORNEY FOR PLAINTIFF OR DEFENDANT: 

PATRICIA DORNER - DISTRICT CLERK 

POST OPFICE BOX 391 

CHARLES H CLI&i< '" :5 

SULPHUR SPRINGS, TEXAS 75483 

604 WOLDERT ] 0 -, ;; 

P. 0. BOX 98 o::-""· n ~ TYLER TX 'W:'i:ilO --< 

C I T A T I 0 N F 0 R 

TO: CITY NATIONAL BANK OF SULPHUR 

SPRINGS REC ACT: LEE TEETS 

1108 S. BROADv1AY 

SULPHUR SPRINGS,TX 75482 

DEFENDANT: 

P E R S 0 N A L 

n::O{=; N 

ao- .&:- ~-

s E ~~ I.,C Efll :<~;:.! :1:: 

.... "'- o· ~~s; '>.' . > 

V> 

, ¥ou are hereby CO~\manded to appear before the Honorable Judicial 

D1.stn.ct Court of Hopk1.ns County Texas, to be held at the courthouse 

of s~ig County,in the City of suiphur $P~ings• Hopktns,County, Texas, by f1.l1.ng a wr1.tten answer to the oet1.t1on or pla1nt1.ff at or 

10 o'clock A.N. of the Monday next after the expiration or-zo days a~ter,the gate of service hereof, a copy of which accompanies th1s 

c1.tat1.on, 1n Cause No. CV38727. 

SNITH,JOHN ALEXANDER 

AND 

Piled in said Court 2008 

COURT OF 

came to hand .. ~/ ··,:::'\----o'clock .N., ,on the :;-,??'-day of /.'.::.·/;.:_~.,,.. , 2_-J. · Ej~<J.:?e~address) /':1;;~'(_~_!?.=:~~-··' /~·-- ~::~n :J:-~;&c;/ -~~unty at f.,t1}7¥t o • clock/-· . M. on the~ '?-~'""" .day_. of ~ J::;l;£t.,{.'./ : y2 c-~;J.....- by 

delivering to the with· n named .._·,'/:ly~~y:-,;;iJ!iC/ ,;;;,,"'/'~ -i_ee-Jee/) , in 

person, a true copy of 

of the petition, havin 

copy .of citatio~ and e 

TOTAL SERVICE FEE $ 

114-4.~,-ff?.ztti a~~g~r together ~~=~~--accompanying copy of 

first attachea-:nreh--Boipy>:t:>p ·~~(fh petition to such 

dorsed on such copy o£C'tt:-at-±o!F-the .ctate of deli very. 

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

909 S.W.2d 599

Court of Appeals of Texas,

Fort Worth.

Lauren BEVERS, Appellant,

v.

Ronald B. SOULE, Appellee.

No. 2–94–160–CV. | Oct. 19, 1995.

Motorist who was involved in collision in which his

automobile was struck from behind brought action against

following driver, and the 96th District Court, Tarrant County,

Jeff Walker, J., entered judgment on jury verdict for motorist.

Following driver appealed, and the Court of Appeals,

Richards, J., held that: (1) finding that collision was

proximate cause of motorist's herniated disk was supported by

evidence; (2) letter sent by motorist to following driver's

insurer was sufficient to constitute notice of claim and

allowed accrual of prejudgment interest beginning 180 days

after receipt of letter; but (3) judgment would be reformed to

reflect simple compounding of prejudgment interest and

annual compounding of postjudgment interest.

Affirmed as reformed.

West Headnotes (12)

[1] Appeal and Error

Interrogatories and special verdicts

Appeal and Error

Sufficiency of Evidence in Support

In determining no evidence point, reviewing court

is to consider only evidence and inferences that

tend to support finding and disregard all evidence

and inferences to contrary; if there is more than

scintilla of evidence to support finding, claim is

sufficient as matter of law, and any challenges go

merely to weight to be accorded evidence.

1 Cases that cite this headnote

[2] Appeal and Error

Total failure of proof

No evidence point of error may only be sustained

when record discloses that there is complete

absence of evidence of vital fact, that court is

barred by rules of law or evidence from giving

weight to only evidence offered to prove vital

fact, that evidence offered to prove vital fact is no

more than scintilla of evidence, or that evidence

establishes conclusively opposite of vital fact.

Cases that cite this headnote

[3] Appeal and Error

Sufficiency of Evidence in Support

Appeal and Error

Total failure of proof

There is some evidence to support finding, and no

evidence point of error must be denied, when

proof supplies reasonable basis on which

reasonable minds may reach different conclusions

about existence of vital fact.

Cases that cite this headnote

[4] Appeal and Error

Sufficiency of Evidence in Support

Appeal and Error

Great or overwhelming weight or

preponderance

Assertion that evidence is insufficient to support

fact finding can mean that evidence supporting

finding is so weak or that evidence to contrary is

so overwhelming that finding should be set aside

and new trial ordered.

Cases that cite this headnote

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

[5] Appeal and Error

Extent of Review

Appeal and Error

Form and requisites

Reviewing court is required to consider all

evidence in case in making determination of

whether evidence is insufficient to support factual

finding, and if reversing to detail that evidence in

opinion.

Cases that cite this headnote

[6] Damages

Personal Injuries and Physical Suffering

Finding that collision in which motorist's

automobile was struck from behind by following

vehicle was proximate cause of motorist's

herniated disk was supported by testimony of

following driver that her speed was in range of 25

to 30 miles per hour and that collision was “fairly

hard,” by testimony of motorist that prior to

accident he had only suffered very minor back

problems which had gone away, and by evidence

that U-bolt on motorist's automobile was damaged

as result of collision and that employment

examination of motorist one year prior to accident

had revealed no back problems.

Cases that cite this headnote

[7] Antitrust and Trade Regulation

Notice and demand requirements;

opportunity to cure

Notice provisions of Texas Deceptive Trade

Practices Act require potential plaintiff to first

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

[8] Interest

Form and sufficiency of demand

Nothing in statute governing accrual of

prejudgment interest in personal injury cases

requires claimant to demand exact amount or list

every element of damage claimed in order to

trigger notice of claim provision. Vernon's

Ann.Texas Civ.St. art. 5069–1.05, § 6(a).

4 Cases that cite this headnote

[9] Interest

Form and sufficiency of demand

Letter sent by motorist who was injured in

automobile accident to insurance carrier of

second driver involved was sufficient to constitute

notice of claim, and prejudgment interest began

accruing 180 days after receipt of letter, where

letter contained information to allow insurer to

begin considering motorist's injury claim and

included signed copy of medical authorization

form, even though letter did not state nature of

complaint and amount of damages sought.

Vernon's Ann.Texas Civ.St. art. 5069–1.05, §

6(a).

5 Cases that cite this headnote

[10] Interest

Mode of computation in general

Legislature has specifically mandated that

prejudgment interest in wrongful death, personal

injury, property damage, and condemnation cases

be computed only as simple interest. Vernon's

Ann.Texas Civ.St. art. 5069–1.05, § 6(g).

Cases that cite this headnote

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 2
Bevers v. Soule, 909 S.W.2d 599 (1995)

[11] Interest

Mode of computation in general

Interest

Compound interest

Judgment in favor of successful litigant in

personal injury action should reflect two

calculations with respect to interest; calculation

for prejudgment interest on plaintiff's damages at

applicable interest rate, computed as simple

interest, and postjudgment interest on total sum at

applicable interest rate, compounded annually,

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).

Cases that cite this headnote

[12] Interest

Compound interest

Trial court erred in entering judgment in personal

injury action which included prejudgment interest

award which was based on annual compounding

of interest; judgment was reformed to reflect

calculation of prejudgment interest based on

simple compounding, with postjudgment interest

on judgment amount to be compounded annually.

Vernon's Ann.Texas Civ.St. art. 5069–1.05, §§

3(a), 6(g).

1 Cases that cite this headnote

Attorneys and Law Firms

*600 John J. Drake, Shannon, Gracey, Ratliff & Miller, LLP,

Fort Worth, for appellant.

Leland A. Reinhard, Catterton & Reinhard, Fort Worth, for

appellee.

Before DAY, DAUPHINOT and RICHARDS, JJ.

OPINION

RICHARDS, Justice.

This appeal is from a personal injury case involving an

automobile accident. Appellant Lauren Bevers (“Bevers”) was

the defendant in the trial court. Appellee Ronald Soule

(“Soule”), plaintiff in the court below, alleged he suffered

physical injuries caused by Bevers' negligence when her

vehicle struck his vehicle in a rear-end collision. Trial was to

a jury, which awarded Soule $187,500.00.

Bevers presents three points of error on appeal. In point of

error one, she complains there was no evidence, or, in the

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

first contacted her, rather than on the date suit was filed. In her

third point of error, Bevers contends the trial court erred in

ordering that prejudgment interest be compounded annually

rather than as simple interest.

We affirm in part and reform in part.

The sufficiency challenge presented in Bevers' initial point of

error requires review of the circumstances of the collision and

the testimony relating to Soule's physical injuries.

On the morning of August 21, 1990, Soule was traveling to

work in his American Motor Company Concord on Interstate

Highway 35 near downtown Fort Worth. Because of heavy

rush-hour traffic, he slowed down and ultimately came to a

complete stop due to bumper-to-bumper congestion. When he

looked into his rear-view mirror, Soule saw a Chevrolet

Camaro approaching from behind at a speed suggesting the

driver did not intend to stop. Soule initially estimated the

speed of the Camaro at forty to fifty m.p.h., but later testified

it may have been moving “something less than that.” Because

he expected the collision would throw his body forward, Soule

braced himself for the impact. The Camaro, driven by Bevers,

struck *601 Soule's car with enough force to cause his vehicle

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,

but was partially restrained by his seat belt.

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

It appeared the collision caused only moderate damage to

Soule's Concord; however, after Soule's wife told him that the

rear end of the car did not appear to be properly following its

front end, it was discovered that the impact had damaged the

U–Bolt, which had to be replaced.

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

time he arrived at his office, he began experiencing pain in his

right calf and foot. Thinking the pain might go away, Soule

continued to work; however, instead of improving, the pain in

his right leg grew progressively worse. Later in the day, Soule

felt a “kind of tightness” in his back that was not initially

painful. Soule treated the tightness with Tylenol and made an

appointment with the Northeast Medical Clinic, where his

family doctor of fifteen years, Dr. David Law, was associated.

Because Dr. Law's schedule would not have permitted Soule

to see him for a week, Soule made an appointment with

another associate, Dr. Tyson, for August 24, 1990.

Dr. Tyson ordered a series of x-rays and prescribed

anti-inflammation and pain medication. Six days later Soule

saw Dr. Law, who continued with the same medical treatment

on an approximately once-a-month basis for three months.

Thereafter, Dr. Law referred Soule to Dr. Juan Capello, an

orthopedic surgeon.

Dr. Capello prescribed medications and suggested a

four-month course of physical therapy; however, Soule

continued having pain in his lower back and right leg.

According to Soule, Dr. Capello did not believe there would

be any further improvement and suggested that he simply learn

to “live with” his injury. When the pain seemed to grow worse,

Soule saw another orthopedic surgeon, Dr. Myron Glickfeld,

who diagnosed the injury as a herniated disc which required

surgery. Soule testified that he did not initially agree to

surgery because a high school friend had become paralyzed

from the chest down as a result of nerve damage. Because of

his fear of nerve damage, Soule tried to control the pain with

medications for the next eight months. When the pain got

worse, Soule relented and was operated on by Dr. Glickfeld on

August 19, 1992. Soule testified the surgery helped, but did

not completely eliminate the pain.

Soule testified the only prior back symptoms he had ever

experienced were two muscle pulls which occurred over two

years prior to the auto accident. One was a muscle pull in the

area of his abdomen from stretching and the other was “minor”

pull in the back immediately behind the abdomen injury. He

took medication for two weeks and never had another

symptom from either injury since that time. Soule also testified

that in July of 1989, he had applied for a job with American

Airlines and had undergone a complete physical that included

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.”

[1] In determining a “no evidence” point, we are to consider

only the evidence and inferences that tend to support the

finding and disregard all evidence and inferences to the

contrary. T.O. Stanley Boot Co. v. Bank of El Paso, 847

S.W.2d 218, 221 (Tex.1992); Orozco v. Sander, 824 S.W.2d

555, 556 (Tex.1992); In re King's Estate, 150 Tex. 662, 244

S.W.2d 660, 661–62 (1951). If there is more than a scintilla of

such evidence to support the finding, the claim is sufficient as

a matter of law, and any challenges go merely to the weight to

be accorded the evidence. Browning–Ferris, Inc. v. Reyna,

865 S.W.2d 925, 928 (Tex.1993).

[2] [3] A “no evidence” point of error may only be sustained

when the record discloses one of the following: (1) a complete

absence of evidence of a vital fact; (2) the court is barred by

rules of law or evidence from giving weight to the only

evidence offered to prove a vital fact; (3) the evidence offered

to *602 prove a vital fact is no more than a mere scintilla of

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.

Calvert, “No Evidence” and “Insufficient Evidence” Points of

Error, 38 TEX. L. REV. 361 (1960). There is some evidence

when the proof supplies a reasonable basis on which

reasonable minds may reach different conclusions about the

existence of the vital fact. Orozco, 824 S.W.2d at 556.

[4] [5] An assertion that the evidence is “insufficient” to

support a fact finding can mean that the evidence supporting

the finding is so weak or the evidence to the contrary is so

overwhelming that the finding should be set aside and a new

trial ordered. Garza v. Alviar, 395 S.W.2d 821, 823

(Tex.1965). We are required to consider all of the evidence in

the case in making this determination and, if reversing, to

detail that evidence in the opinion. Jaffe Aircraft Corp. v.

Carr, 867 S.W.2d 27, 29 (Tex.1993).

[6] We find the evidence to be legally sufficient to support the

jury's determination that the automobile accident was the

proximate cause of Soule's injuries. Moreover, we are

convinced the jury's finding concerning the issue of causation,

in light of the entire record, should not be overturned for

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

factual insufficiency.

Bevers suggests three reasons why we should find the

evidence factually insufficient: (1) the only evidence of

causation was Dr. Glickfeld's opinion, which was based on the

incorrect assumption that appellant's vehicle was traveling

approximately fifty m.p.h. when she struck Soule; (2) her own

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

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.

Our review of the record shows each of Bevers' concerns

involved contested issues presumably weighed by the jurors

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

testified the piano injury occurred when a piano fell on him

while being moved and that the injury was not to his back.

Similarly, Soule explained his fall from the ladder caused only

a leg and head injury. The final incident involved a muscle in

his abdomen and a muscle in his lower back, injuries that were

fully healed two years prior to the automobile accident.

Bevers' theory that the proximate cause of the herniated disc

was not the auto accident was also rebutted by evidence that

a complete physical conducted by American Airlines shortly

before the automobile accident revealed no damage to Soule's

skeletal system.

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

twenty-five and thirty m.p.h. at the time she saw Soule's car

approximately one car length ahead. What Dr. Hatsell

surmised was a “very minor collision” Bevers recalled as

being “fairly hard.” Moreover, Dr. Hatsell's conclusion as to

the speed of Bevers' vehicle did not take into account the

broken U–Bolt on Soule's Concord. Hatsell's estimate of the

speed of Bevers' car was based on his review of photographs

provided by Bevers' attorney and initial body shop estimates

of the property damage. Dr. Hatsell never examined Soule and

never saw the damage to Soule's U–Bolt. Moreover, Soule's

expert, Dr. Glickfeld, did not testify that Soule's injuries could

have only been caused by a fifty m.p.h. collision.

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

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

overall impression left upon review of the entire record is that

both sides were represented at trial by skilled and

well-prepared *603 counsel who provided the jury with

sufficient evidence to justify special issue answers favoring

either party.

Point of error one is overruled.

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

medical authorization form and claim letter to Bevers'

insurance carrier, rather than on the date Soule filed suit.

Texas law allows for the accrual of prejudgment interest in

personal injury cases as follows:

[P]rejudgment interest accrues on the amount

of the judgment during the period beginning

on the 180th day after the date the defendant

receives notice of the claim or on the day suit

is filed, whichever occurs first, and ending on

the date preceding the date judgment is

entered.

Tex.Rev.Civ.Stat.Ann. art. 5069–1.05, § 6(a)

(Vernon Supp.1995).

Bevers asks us to interpret “notice of claim” so as to

require notice of the amount of damages sought as

well as notice of the nature of the complaint. Bevers

notes that Soule's earliest written correspondence

with her insurance carrier was an October 30, 1990

letter written by Soule to Don Young, a claim

specialist at State Farm Mutual Insurance Company.

In pertinent part, the letter stated:

Re: Claim No.: 43–7080–020

Insured: Roy D. Bevers

De[a]r Mr. Young:

I enclose for your files one (1) signed copy of the

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

“Authorization” you sent me so that you could

obtain the necessary information to properly

consider my injury claim.

I also enclose for your processing copies of some of

the medical receipts relative to my injury. As you

will note, I am now seeing an orthopedist, Juan J.

Capello, M.D. I am about to start a program of

physical therapy.

Should you require any additional information,

please let me know. My office number is [number

listed].

Sincerely,

/s/ Ronald B. Soule

[7] Under Bevers' view, because the letter did not

state the nature of the complaint or the amount of

damages sought, the earliest date prejudgment

interest could have been ordered to run was the date

Soule filed suit. Bevers correctly notes that the

notice provisions of the Texas Deceptive Trade

Practice Act require a potential plaintiff to first

identify the nature of the complaint and the amount

required to compensate him for his damages.

Tex.Bus. & Comm.Code Ann. § 17.505(a) (Vernon

Supp.1995).

[8] [9] In response, Soule notes his cause of action

was not brought under the Deceptive Trade Practices

Act, and suggests Bevers' complaint would be better

addressed to the legislature. We agree. Nothing in

article 5069–1.05 requires the claimant to demand

an exact amount or list every element of damage

claimed in order to trigger the notice of claim

provision. See Robinson v. Brice, 894 S.W.2d 525,

528 (Tex.App.—Austin 1995, writ denied).

Therefore, the trial court's determination that written

notice of the claim was triggered by Soule's letter

and the signed medical authorization form was not

improper.

In her final point of error Bevers argues the trial

court erred in ordering that prejudgment interest be

compounded annually rather than as simple interest.

Regarding prejudgment interest, Texas law provides

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

interest.” Tex.Rev.Civ.Stat.Ann. art. 5069–1.05, §

6(g) (Vernon Supp.1995) (emphasis added).

[10] In providing that judgments in wrongful deaths,

personal injury, property damage, and condemnation

cases be computed only as simple interest, the

legislature has specially mandated that prejudgment

interest in these types of cases must be computed as

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

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

as simple interest under the statute, rather than

ordered compounded annually), rev'd on other

grounds, 898 S.W.2d 269 (Tex.1995).

The trial court's written judgment in the instant case,

in part, provided that the prejudgment interest be

compounded annually:

Prejudgment interest on [Soule's] damages of

$187,500.00 at the rate of 10% per annum,

compounded annually, from April 28, 1991 to

the date this judgment is signed in the amount

of $58,955.40.

Soule urges us to uphold the trial court's judgment,

based on the following language from the Texarkana

Court of Appeals:

The current version of Article 5069–1.05, § 6(g)

provides that “[t]he rate of prejudgment interest shall

be the same as the rate of postjudgment interest at

the time of judgment and shall be computed as

simple interest.” Tex.Rev.Civ.Stat.Ann. art.

5069–1.05, § 6(g) (Vernon Supp.1991). Section 3(a)

provides that “judgments earn interest for the period

beginning on the day the judgment is rendered and

ending on the day the judgment is satisfied. Interest

shall be compounded annually” (emphasis added).

Sadler v. Duvall, 815 S.W.2d 285, 294

(Tex.App.—Texarkana 1991, writ denied).

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

The Sadler court went on to reform the trial court's

judgment “so that prejudgment interest is

compounded annually as provided under the statute.”

Id.

We 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 Thomson Reuters. No claim to original U.S. Government W orks. 7
J
Brookshire Grocery Co. v. Smith, 99 S.W.3d 819 (2003)

99 S.W.3d 819

Court of Appeals of Texas,

Beaumont.

BROOKSHIRE GROCERY COMPANY, Appellant,

v.

Robert Elton SMITH, Appellee.

No. 09–02–226 CV. | Submitted Jan. 8, 2003. |

Decided Feb. 20, 2003.

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.,

entered judgment on a jury verdict for employee. Former

employer appealed. The Court of Appeals held that: (1) under

prior version of venue statute, venue was proper in

subsequent employer's county; (2) employee waived improper

joinder of parties argument by failing to object to joinder or

request severance; (3) any error in exclusion of impeachment

evidence was not reversible error; and (4) prejudgment

interest was properly calculated from date that former

employer received letters of claim from employee.

Affirmed.

West Headnotes (10)

[1] Venue

Particular Actions, Application To

Under venue statute applicable at time of suit,

venue for employee's negligence suit against

former employer was appropriate in county which

had venue over subsequent employer that was

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

[2] Venue

Form and Requisites of Application in

General

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 has not specifically denied the venue facts

averred by the party seeking transfer, the venue

facts alleged in the motion to transfer may be

taken as true.

Cases that cite this headnote

[3] Venue

Particular Actions, Application To

Subsequent employer was properly joined as a

defendant in negligence action by employee

against former employer for injuries sustained

while working, and was not joined solely to fix

venue in subsequent employer's county, where

former employer pled in its answer that

employee's injuries were caused by or aggravated

by subsequently occurring incidents and

conditions, it was undisputed that employee

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

negligent and caused injury. V.T.C.A., Civil

Practice & Remedies Code § 15.061 (repealed).

Cases that cite this headnote

[4] Appeal and Error

Misjoinder of Parties

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

Former employer waived any claim as to

employee's alleged improper joinder of

subsequent employer in negligence suit involving

dispute as to venue, where former employer never

sought severance of parties or object to joinder.

Cases that cite this headnote

[5] Appeal and Error

Negligence and Torts in General

Appeal and Error

Evidence Immaterial to Issue

Trial court's failure to admit impeachment

evidence in form of evidence that employee made

false statement on his job application by failing to

disclose his previous back injury was not

reversible error, in employee's negligence action

against former employer, which was a

nonsubscriber to workers' compensation

coverage, for injuries sustained when stacked

boxes allegedly fell on employee, where

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

before injury at issue was fully presented to jury,

and employee's credibility was repeatedly

challenged during cross examination concerning

his medical history, work history, and accident

itself. Rules App.Proc., Rule 44.1(a).

Cases that cite this headnote

[6] Appeal and Error

Evidence in General

Appeal and Error

Prejudicial Effect

A successful challenge to evidentiary rulings

usually requires the complaining party to show

that the judgment turns on the particular evidence

excluded or admitted.

Cases that cite this headnote

[7] Appeal and Error

Same or Similar Evidence Otherwise

Admitted

Appeal and Error

Same or Similar Evidence Otherwise

Admitted

Court of Appeals will not reverse a judgment for

erroneous rulings on admissibility of evidence

when the evidence is cumulative and the excluded

evidence is not controlling on a material issue

dispositive of the case.

Cases that cite this headnote

[8] Appeal and Error

Costs and Allowances

A trial court's prejudgment interest award is

reviewed under an abuse of discretion standard.

1 Cases that cite this headnote

[9] Interest

Form and Sufficiency of Demand

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

The term “claim,” as used in section of

prejudgment interest statute providing that a

defendant's receipt of a notice of claim or the day

suit is filed is time when prejudgment interest

accrues, describes a demand for compensation or

an assertion of a right to be paid. V.T.C.A.,

Finance Code § 304.104.

2 Cases that cite this headnote

[10] Interest

Form and Sufficiency of Demand

Two letters that employee sent to former

employer's agent on medical coverage matters

constituted written notice of a claim so as to

trigger accrual of prejudgment interest on

employee's negligence claim against employer,

where letters requested reimbursement for

expenses relating to treatment of employee's

injury sustained while working and stated medical

procedures suggested by employee's doctor

regarding injury. V.T.C.A., Finance Code §§

304.102, 304.104.

2 Cases that cite this headnote

Attorneys and Law Firms

*820 Brian J. Brandstetter, Gwinn & Roby, Fort Worth, for

appellant.

Curtis W. Leister, John Werner, Reaud, Morgan & Quinn,

Inc., Beaumont, for appellee.

Before McKEITHEN, C.J., BURGESS and GAULTNEY, JJ.

OPINION

PER CURIAM.

Robert Elton Smith filed suit in 1994 against appellant,

Brookshire Grocery Company, his nonsubscriber employer,

for injuries he sustained on the job in 1992. Finding

Brookshire Grocery negligent, a jury returned a verdict in

Smith's favor. Brookshire Grocery brings three issues on

appeal: venue, an evidentiary ruling, and the calculation of

prejudgment interest. As we conclude none of the issues

presented requires reversal, we affirm the trial court's

judgment.

Venue

Smith initially filed suit against Brookshire Grocery Company

in Jefferson County, Texas. Brookshire Grocery filed a motion

to transfer venue. Before any hearing was held on the venue

motion, Smith nonsuited the claim. He then filed suit in Hardin

County against Brookshire Grocery Company and Brookshire

Brothers, Inc. (“Brookshire, Inc.”) Although Brookshire

Grocery filed a motion to *821 transfer venue in the Hardin

County suit, Brookshire, Inc. did not challenge venue and filed

only an answer. Shortly thereafter, Smith nonsuited

Brookshire, Inc. The trial court denied Brookshire Grocery's

venue motion.

Appellant failed to include a reporter's record of the hearing

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

July 26, 2002, the court reporter explained she no longer had

notes of the 1994 venue hearing. By statute, the court reporter

is required to preserve the notes of the hearing for “three years

from the date on which they were taken[.]” Tex. Gov't Code

Ann. § 52.046(a)(4) (Vernon 1998). The Texas Supreme

Court has stated that “[i]f a litigant has not requested the

reporter to prepare a statement of facts within three years, nor

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

(Tex.App.-Austin 2002, pet. denied).

We need not decide venue on this preservation issue, however.

Brookshire Grocery has asserted on appeal, supported by its

attorney's affidavit, that no evidence was offered or admitted

at the venue hearing. Appellant's assertion is not disputed by

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

Smith, and we take as true appellant's uncontradicted

statement of fact. See Tex.R.App. P. 38.1(f). The clerk's

record is complete. While we emphasize the importance of a

complete record of the trial court proceedings and arguments

presented at the venue hearing, we will address the merits of

the venue issue in this case on the record presented here.

[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. When suit was filed in 1994, section

15.061, quoted below, set out the following rule regarding

venue over multiple defendants:

When two or more parties are joined as

defendants in the same action or two or more

claims or causes of action are properly joined

in one action and the court has venue of an

action or claim against any one defendant, the

court also has venue of all claims or actions

against all defendants unless one or more of

the claims or causes of action is governed by

one of the provisions of Subchapter B

[mandatory venue provisions] requiring

transfer of the claim or cause of action, on

proper objection, to the mandatory county.

1

The current statute, amended in 1995, provides that

in a suit in which the plaintiff has established proper

venue against a defendant, the court also has venue

of all the defendants in all claims or actions arising

out of the same transaction, occurrences, or series of

transactions or occurrences. See Tex. Civ. Prac. &

Rem.Code Ann. § 15.005 (Vernon 2002). Section

15.0641 of the 1995 venue statute also provides that

in a suit in which two or more defendants are joined,

any action or omission by one defendant in relation

to venue, including a waiver of venue by one

defendant, does not operate to impair or diminish the

right of any other defendant to *822 properly

challenge venue. See Tex. Civ. Prac. & Rem.Code

Ann. § 15.0641 (Vernon 2002). The 1985 statute,

which applies in this case, does not contain that

provision.

[2] We note that appellant does not raise the

procedural issue set out in GeoChem Tech Corp. v.

Verseckes, 962 S.W.2d 541, 543–44 (Tex.1998).

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

has not specifically denied the venue facts averred

by the party seeking transfer, the venue facts alleged

in the motion to transfer may be taken as true.

GeoChem Tech Corp., 962 S.W.2d at 543. It is

possible the procedural posture at the time of the

nonsuit here was insufficient to establish venue in

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.

Smith made Hardin County his venue choice.

Because Brookshire, Inc. did not object to venue in

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

applicable statute, if the court had venue of a claim

as to one defendant, the court had venue over the

claims against all defendants. See Tex. Civ. Prac. &

Rem.Code Ann. § 15.061; Polaris Inv. Management

Corp. v. Abascal, 892 S.W.2d 860 (Tex.1995). As

the Supreme Court stated in Polaris, “Venue is a

creature of legislative grace, and ... the power to

make venue changes is purely statutory.” Id. at 862.

The Supreme Court stated in Polaris that the plain

wording of section 15.061 appears to permit the

joinder of additional claims, and the Court declined

to reinterpret section 15.061 in such a way as to

prohibit what Polaris characterized as the

“tag-along” venue of the plaintiffs: “It is not within

the province of this Court to reconstrue, rewrite, or

contravene a venue statute when the intent of the

Legislature is clear.” Id.; see also Bleeker v.

Villarreal, 941 S.W.2d 163 (Tex.App.-Corpus

Christi 1996, writ dism'd by agreement); but see

WTFO, Inc. v. Braithwaite, 899 S.W.2d 709

(Tex.App.-Dallas 1995, no writ) (Waiver of venue

by one defendant does not prevent another defendant

from challenging venue.); Pearson v. Jones Co.,

Ltd., 898 S.W.2d 329 (Tex.App.-Eastland 1994, no

writ) (Even though two of four defendants filed an

answer without challenging venue, they could not

waive other defendants' objections to venue.). In

Polaris, the Supreme Court indicated any change in

section 15.061 was up to the legislature. See Polaris,

892 S.W.2d at 862. In the 1995 venue statute, the

legislature repealed section 15.061 and added

sections 15.005 and 15.064; Section 15.061 applies

here because this suit was filed before section

15.061 was repealed and before sections 15.005 and

15.064 were added. We find the language of the

1985 statute is clear.

[3] Brookshire Grocery further maintains Smith

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

failed to put on a prima facie case that Brookshire,

Inc. was properly joined to justify appellant's “tag

along” venue. From the record before us, we cannot

determine that Brookshire, Inc. was joined solely to

fix venue. Prior to dismissing Brookshire, Inc. from

the suit, Smith's pleadings alleged negligence on the

part of both appellant and Brookshire, Inc. We note

Brookshire Grocery pleaded in its amended answer

that any injury sustained by Smith was caused by or,

in effect, aggravated by “subsequently occurring

incidents and conditions.” It is undisputed that Smith

worked for Brookshire, Inc. in Hardin County after

the injury at appellant's store in Smith County.

Appellant filed no special exceptions requesting

Smith to plead more particularly how *823

Brookshire, Inc. was negligent and caused injury to

Smith.

[4] Appellant further argues that, in order to

establish venue in Hardin County, Smith must

establish he acted in good faith in joining

Brookshire, Inc., the resident defendant. Appellant

did not object to the joinder of Brookshire, Inc. and

never sought a severance; appellant waived any

claim regarding improper joinder. See Rosales v.

H.E. Butt Grocery Co., 905 S.W.2d 745, 751

(Tex.App.-San Antonio 1995, writ denied). We are

unable to determine from this record there was any

bad faith on the part of Smith in filing suit against

Brookshire, Inc. and appellant in Hardin County.

We conclude the trial court did not err in

maintaining venue in Hardin County. Issue one is

overruled.

Exclusion of Evidence

[5] In point of error two, Brookshire Grocery

contends the trial court erred in excluding evidence

that Smith falsified an answer on his job application

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

testimony, Smith indicated he gave the “no” answer

because at the time he did not consider his injury to

be serious. Upon reflection, he agreed the correct

answer would have been “yes.” The evidence

arguably was admissible for the purpose of

impeachment of Smith's credibility.

[6] [7] Even though the evidence was admissible,

Brookshire Grocery must still show the exclusion of

the evidence was harmful. See Texas Dep't of

Transp. v. Able, 35 S.W.3d 608, 617 (Tex.2000).

“[A] successful challenge to evidentiary rulings

usually requires the complaining party to show that

the judgment turns on the particular evidence

excluded or admitted.” Id. In our review, we

consider the entire record. Id. Ordinarily we will not

reverse a judgment for erroneous rulings on

admissibility of evidence when the evidence is

cumulative and the excluded evidence is not

controlling on a material issue dispositive of the

case. Id.

Here, the evidence of the answer on the job

application is not controlling on any material issue in

the case. The answer does not address directly the

elements of Brookshire Grocery's negligence.

Whether Brookshire Grocery knew of his prior back

injury was not an issue given the circumstances of

the alleged negligence in this case: improperly

stacked products fell on Smith and caused his back

injury. Smith's own negligence was not an issue in

this case against a nonsubscriber. See Tex. Lab.Code

Ann. § 406.033 (Vernon Supp.2003). His medical

condition before the injury at issue was fully

presented to the jury, including testimony and

records from doctors who treated him before and

after the injury. Smith's credibility was repeatedly

challenged during cross-examination concerning

Smith's medical history, work history, and the

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

evidence probably caused the rendition of an

improper judgment. We hold that under these

circumstancesthe trial court's evidentiary ruling does

not require reversal of this case and a new trial. See

Tex.R.App. P. 44.1(a). Issue two is overruled.

Prejudgment interest

[8] Brookshire Grocery also challenges the

prejudgment interest award set out in the judgment.

A trial court's prejudgment interest award is

reviewed under an abuse of discretion standard. See

J.C. Penney *824 Life Ins. Co. v. Heinrich, 32

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

S.W.3d 280, 289 (Tex.App.-San Antonio 2000, pet.

denied). Appellant argues the trial court erred by

using an incorrect date from which to begin its

calculations, and further erred by awarding

prejudgment interest on future damages.

[9] [10] The Texas Finance Code provides that

judgments in cases involving wrongful death,

personal injury, and property damages are to include

prejudgment interest. See Tex. Fin.Code Ann. §

304.102 (Vernon 1998 & Supp.2003). Prejudgment

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.See Tex. Fin.Code Ann. § 304.104

(Vernon 1998 & Supp.2003). The term “claim”

describes a demand for compensation or an assertion

of a right to be paid. See Johnson & Higgins of

Texas, Inc. v. Kenneco Energy, Inc., 962 S.W.2d

507, 531 (Tex.1998); see also Robinson v. Brice,

894 S.W.2d 525, 528 (Tex.App.-Austin 1995, writ

denied).

Brookshire Grocery argues prejudgment interest

should be calculated from May 20, 1993, the date of

a letter sent from Smith's lawyer to appellant. The

letter notified Brookshire Grocery that the attorney

had been retained to represent Smith in connection

with claims regarding injuries Smith sustained on or

about August 4, 1992.

Smith argues the trial court's determination of a

November 1992 starting date is correct. In evidence

are two letters Smith sent to Eddie Crawford,

appellant's agent on the medical coverage matters.

An October 1992 letter requested reimbursement for

expenses relating to car mileage and to treatment for

Smith's injury. A November 1992 letter was, in

effect, Smith's progress report to Crawford

concerning medical procedures contemplated by

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

made the determination to use the November 1992

date as the starting point for calculating prejudgment

interest.

Courts have considered various writings in

determining what constitutes written notice of a

claim. In Robinson, 894 S.W.2d at 528, the Austin

court stated that written notice of an accident and

injuries is not sufficient to constitute notice of a

claim under the prejudgment interest statute; there

must be written notice of a lawful demand for

payment or compensation. The Robinson court

found that a letter—in which Robinson requested

that the insurance carrier pay certain medical bills

and inquired as to when the next lost wages check

was due—constituted written notice of a claim. Id. at

529. The Fort Worth court has noted that nothing in

the prejudgment intereststatute requires the claimant

to demand an exact amount or list every element of

damage claimed in order to trigger the notice of

claim provision; a signed medical authorization

form, coupled with a letter asking the company to

“properly consider [plaintiff's] injury claim,”

constituted notice under the statute. Bevers v. Soule,

909 S.W.2d 599, 603–04 (Tex.App.-Fort Worth

1995, no writ). The Texarkana court has concluded

that a person's medical release prepared by her

employer—stating that the information was to be

used for purposes of evaluating and handling her

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

(Tex.App.-Texarkana 1996, no writ). In Johnson &

Higgins, a standstill agreement (normally an

agreement to maintain the status quo and temporarily

suspend or stop a suit) stated the following: “

‘Kenneco asserts that, to the extent underwriters are

found not to be *825 liable [in the federal action]....,

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

held the agreement constituted written notice of a

claim and triggered accrual of prejudgment interest.

Id. We conclude that, taken together, the letters

written by Smith to Crawford constitute written

notice of a claim: they ask for reimbursement of

expenses relating to treatment and they state

procedures suggested by the doctor. We find the trial

court did not abuse its discretion in calculating

prejudgment interest from the November 1992 date.

Brookshire Grocery also contends article 5069–1.05

§ 6 and its successor statute are unconstitutional, and

that the trial court erred in awarding prejudgment

interest on future damages. These constitutional

arguments were rejected by the Supreme Court in C

& H Nationwide, Inc. v. Thompson, 903 S.W.2d

315, 324 (Tex.1994). The Supreme Court held the

statute by its terms provides for prejudgment interest

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

on future damages. Id. at 324–327. At the hearing on

the motion to enter judgment, appellant's attorney

acknowledged the issue was settled. He argues for a

change in the law. But an intermediate appellate

court must follow Supreme Court precedent. Issue

three is overruled.

The judgment of the trial court is affirmed.

AFFIRMED.

Footnotes

1 See Act of May 17, 1985, 69th Leg., R.S., ch. 959, § 1, 1985 Tex. Gen. Laws 3242, 3249, repealed by Act of May 8, 1995, 74th Leg.,

R.S., ch.138, § 10, 1995 Tex. Gen. Laws 981 (current version at Tex. Civ. Prac. & Rem.Code Ann. §§ 15.005, 15.0641 (Vernon

2002).)

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

© 2015 Thomson Reuters. No claim to original U.S. Government W orks. 7
K
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)

55 Tex. Sup. Ct. J. 975

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

372 S.W.3d 621

Supreme Court of Texas.

FREEDOM COMMUNICATIONS,

INC., d/b/a The Brownsville Herald

and Valley Morning Star, Petitioner,

v.

Juan Antonio CORONADO, et al., Respondents.

No. 09–0745. | June 22, 2012.

Synopsis

Background: Plaintiffs sued candidate for district attorney,

publisher of newspapers, and former district attorney for

defamation and invasion of privacy after plaintiffs were

identified in candidate's newspaper advertisements as persons

who had been arrested but not prosecuted for child abuse.

Publisher moved for summary judgment. The 357th District

Court, Cameron County, Abel Limas, J., denied the motion.

Publisher filed an interlocutory appeal. The Corpus Christi–

Edinburg Court of Appeals, 296 S.W.3d 790, affirmed.

Publisher petitioned for review.

Holdings: The Supreme Court held that:

[1] judicial notice would be taken of trial judge's plea

agreement in a federal racketeering case, and

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

that trial judge was constitutionally disqualified, trial judge's

discretionary ruling on publisher's motion was therefore void,

and the appellate courts accordingly lacked jurisdiction to

address the merits of publisher's interlocutory appeal.

Vacated and remanded.

West Headnotes (9)

[1] Evidence

Proceedings in other courts

A court will take judicial notice of another court's

records if a party provides proof of the records.

Rules of Evid., Rule 201(b, d).

8 Cases that cite this headnote

[2] Appeal and Error

Void judgment or order

Appellate courts do not have jurisdiction to

address the merits of appeals from void orders or

judgments; rather, they have jurisdiction only to

determine that the order or judgment underlying

the appeal is void and make appropriate orders

based on that determination.

8 Cases that cite this headnote

[3] Appeal and Error

Determination of questions of jurisdiction

in general

Supreme Court must consider its jurisdiction to

decide an appeal, even if that consideration is sua

sponte.

4 Cases that cite this headnote

[4] Judges

Pecuniary Interest

A judge is interested in a case, and thus

disqualified under the Texas Constitution, if an

order or judgment in the case will directly affect

him to his personal or pecuniary loss or gain.

Vernon's Ann.Texas Const. Art. 5, § 11.

1 Cases that cite this headnote

[5] Judges

Effect on acts and proceedings of judge

A disqualified judge has no power to act in the

case. Vernon's Ann.Texas Const. Art. 5, § 11.

Cases that cite this headnote

[6] Judges

Effect on acts and proceedings of judge

Discretionary judicial acts by a disqualified

judge are void. Vernon's Ann.Texas Const. Art.

5, § 11.

Cases that cite this headnote
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)

55 Tex. Sup. Ct. J. 975

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

[7] Judges

Waiver of Disqualification or Objections

Disqualification of a judge is a jurisdictional

issue that cannot be waived. Vernon's Ann.Texas

Const. Art. 5, § 11.

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

interlocutory appeal from a denial of its motion

for summary judgment in an action against

it for defamation and invasion of privacy,

would take judicial notice of the facts in trial

judge's plea agreement in a federal racketeering

case; publisher provided a copy of the plea

agreement in its briefing to the Supreme Court

and maintained that the facts were appropriate

for judicial notice, trial judge would have been

constitutionally disqualified from entering the

summary-judgment order if he had an interest in

the publisher's case, such a discretionary ruling

by trial judge would be void, and appellate

jurisdiction would lack jurisdiction to address the

merits of the interlocutory appeal if the order

were void. Vernon's Ann.Texas Const. Art. 5, §

11; V.T.C.A., Civil Practice & Remedies Code

§ 51.014(a)(6); V.T.C.A., Government Code §

22.225(c, d); Rules of Evid., Rule 201(b, d).

13 Cases that cite this headnote

[9] Appeal and Error

Void judgment or order

Judges

Pecuniary Interest

Trial judge had an interest in a case in which

he denied a newspaper publisher's motion for

summary judgment on claims against it for

defamation and invasion of privacy, such that

trial judge was constitutionally disqualified,

trial judge's discretionary ruling on the motion

was therefore void, and the Court of Appeals

and the Supreme Court accordingly lacked

jurisdiction to address the merits of publisher's

interlocutory appeal from the denial; trial judge,

who pleaded guilty to federal racketeering

charges and admitted that he accepted $8000

for, in part, making rulings favorable to the

plaintiffs in publisher's case, including denying

the summary-judgment motion, obtained a

pecuniary gain as a direct result of his rulings.

Vernon's Ann.Texas Const. Art. 5, § 11.

2 Cases that cite this headnote

Attorneys and Law Firms

*622 Jeffery T. Nobles, Beirne Maynard & Parsons L.L.P.,

Houston, John A. Bussian III, The Bussian Law Firm, PLLC,

Raleigh, NC, Christina Fontenot Crozier, Haynes and Boone,

LLP, Houston, TX, Brian G. Janis, Brian G. Janis, PC,

Brownsville, TX, for Freedom Communications, Inc., d/b/a

The Brownsville Herald and Valley Morning Star.

Marc G. Rosenthal, Charles L. Levy, Juanita Lynn Watson,

Rosenthal & Watson, PC, Austin, TX, Paul Lanaux Fourt,

Law Office of Paul L. Fourt, Jr., Robert Julius Lerma,

Brownsville, TX, Oscar De La Fuente Jr., Attorney at

Law, Harlingen, David J. Healey, Fish & Richardson, P.C.,

Houston, TX, for Juan Antonio Coronado.

Opinion

PER CURIAM.

This interlocutory appeal is from the denial of a media

defendant's motion for summary judgment regarding claims

that it defamed the plaintiffs and invaded their privacy by

publishing a political advertisement. We conclude that neither

the court of appeals nor this Court has jurisdiction to consider

the merits of the parties' arguments because the trial court

judge accepted a bribe for ruling on the summary-judgment

motion, constitutionally disqualifying him from this case and

thus making his order void. We vacate the judgment of the

court of appeals and remand the case to the trial court for

further proceedings.

In 2008 Peter Zavaletta sought election to the position of

Cameron County District Attorney. During the course of his

election campaign he advertised in the Brownsville Herald

and Valley Morning Star, two Freedom Communications,

Inc. (Freedom) newspapers, that the incumbent District

Attorney failed to prosecute child abuse cases. The
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)

55 Tex. Sup. Ct. J. 975

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

advertisement included the names of individuals who were

arrested, but not prosecuted, for alleged child abuse. Juan

Antonio Coronado, Francisco Solis Ramirez, Roberto Rivera

III, and Ruben Contreras (collectively, Coronado) were

among the persons identified in the advertisement. They

sued Zavaletta, Freedom, and former District Attorney *623

Yolanda DeLeon, contending that the advertisement defamed

them and invaded their privacy. Freedom moved for summary

judgment on the grounds that the advertisement was accurate,

true, and non-actionable under the United States and Texas

Constitutions and Texas statutory and common law. The trial

court judge, Abel Limas, denied the motion and Freedom

filed an interlocutory appeal. See TEX. CIV. PRAC. &

REM.CODE § 51.014(a)(6) (allowing for an appeal from

an interlocutory order that denies a motion for summary

judgment based upon a claim against a member of the

electronic or print media arising under the free speech clause

of the First Amendment to the United States Constitution or

Article I, Section 8, of the Texas Constitution). The court

of appeals affirmed, with one justice dissenting. 296 S.W.3d

790.

Freedom filed a petition for review in this Court and as

part of its briefing provided a copy of a plea agreement

filed in the United States District Court for the Southern

District of Texas. The agreement shows that after the court

of appeals issued its decision, Limas pleaded guilty to federal

racketeering charges. He admitted in the plea that on May 8,

2008, he accepted $8,000 in cash for, in part, making rulings

favorable to the plaintiffs in this case, including “denying

[Freedom's] Summary Judgment [motion] on November

26th.” The plea agreement is not in the appellate record and

Coronado urges us not to consider it, arguing that Freedom's

reference to the plea amounts to an impermissible attempt

to obtain sanctions against them in this Court. Freedom

maintains that the facts contained in the plea agreement are

appropriate for judicial notice and it is not seeking sanctions

or any other relief based on Limas's motives in ruling on the

summary-judgment motion. Instead, Freedom argues that we

should decide the merits of this appeal, but do so using “close

appellate scrutiny” because Limas's guilty plea suggests his

ruling on the summary-judgment motion was not the product

of good faith.

[1] An appellate court may take judicial notice of a relevant

fact that is “either (1) generally known within the territorial

jurisdiction of the trial court or (2) capable of accurate and

ready determination by resort to sources whose accuracy

cannot reasonably be questioned.” TEX.R. EVID. 201(b); see

Office of Pub. Util. Counsel v. Pub. Util. Comm'n of Tex., 878

S.W.2d 598, 600 (Tex.1994) (per curiam). Judicial notice of

such a fact is mandatory if a party requests it and supplies “the

necessary information.” TEX.R. EVID. 201(d). Under this

standard, a court will take judicial notice of another court's

records if a party provides proof of the records. See, e.g., MCI

Sales & Serv., Inc. v. Hinton, 329 S.W.3d 475, 497 n. 21

(Tex.2010); WorldPeace v. Comm'n for Lawyer Discipline,

183 S.W.3d 451, 459 (Tex.App.-Houston [14th Dist.] 2005,

pet. denied). Here, Freedom has provided a copy of Limas's

plea agreement in federal district court and urges us to take

judicial notice of the facts in the agreement.

[2] [3] Freedom's request leads us to question whether

we have jurisdiction to decide this appeal. That is because

appellate courts do not have jurisdiction to address the

merits of appeals from void orders or judgments; rather,

they have jurisdiction only to determine that the order or

judgment underlying the appeal is void and make appropriate

orders based on that determination. See State ex rel. Latty

v. Owens, 907 S.W.2d 484, 486 (Tex.1995); see also

Univ. of Tex. Sw. Med. Ctr. of Dallas v. Margulis, 11

S.W.3d 186, 187 (Tex.2000) (per curiam) (“[E]ven when

an appeal is interlocutory, we have jurisdiction to determine

whether the court of *624 appeals [had] jurisdiction of the

appeal.”). And we must consider our jurisdiction, even if that

consideration is sua sponte. See Tex. Workers' Comp. Comm'n

v. Garcia, 893 S.W.2d 504, 517 n. 15 (Tex.1995).

[4] [5] [6] [7] The Texas Constitution provides that

“[n]o judge shall sit in any case wherein the judge may

be interested.” TEX. CONST. art. V, § 11. A judge is

“interested” in a case—and thus disqualified under Article V,

Section 11—if an order or judgment in the case will directly

“affect him to his personal or pecuniary loss or gain.” Elliott v.

Scott, 119 Tex. 94, 25 S.W.2d 150, 152 (1930) (quoting City

of Oak Cliff v. State, 97 Tex. 391, 79 S.W. 1068, 1069 (1904)).

A disqualified judge has no power to act in the case. Postal

Mut. Indem. Co. v. Ellis, 140 Tex. 570, 169 S.W.2d 482, 484

(1943). Discretionary judicial acts by a disqualified judge are

void. Tesco Am., Inc. v. Strong Indus., Inc., 221 S.W.3d 550,

555 (Tex.2006); Buckholts Indep. Sch. Dist. v. Glaser, 632

S.W.2d 146, 148 (Tex.1982). Thus, the disqualification of a

judge is a jurisdictional issue that cannot be waived. Postal

Mut. Indem. Co., 169 S.W.2d at 484; see Tex. Ass'n of Bus. v.

Tex. Air Control Bd., 852 S.W.2d 440, 445 (Tex.1993).

[8] Limas's order denying Freedom's summary-judgment

motion is the sole basis for appellate jurisdiction over this
Freedom Communications, Inc. v. Coronado, 372 S.W.3d 621 (2012)

55 Tex. Sup. Ct. J. 975

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

interlocutory appeal. See TEX. CIV. PRAC. & REM.CODE

§ 51.014(a)(6); TEX. GOV'T CODE § 22.225(c), (d). If

Limas's order is void, then the court of appeals did not have

authority to consider the merits of Freedom's appeal from

the order denying summary judgment, and neither do we. In

these circumstances the facts in Limas's plea agreement are

relevant, it is appropriate for us to take judicial notice of them,

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

22.225(c), (d); see also SEI Bus. Sys., Inc. v. Bank One Tex.,

N.A., 803 S.W.2d 838, 841 (Tex.App.-Dallas 1991, no writ)

(“As a general rule, appellate courts take judicial notice of

facts outside the record only to determine jurisdiction over an

appeal or to resolve matters ancillary to decisions which are

mandated by law....”).

[9] The facts in the plea agreement show that Limas had

an interest—an illegal interest, no less—in this case because

he obtained a pecuniary gain as a direct result of his rulings,

including his order denying Freedom's summary-judgment

motion. See Elliott, 25 S.W.2d at 152. Therefore, he was

disqualified and his discretionary ruling on the summaryjudgment motion was void. See TEX. CONST. art. V, § 11;

Tesco Am., Inc., 221 S.W.3d at 555. Because the order on

which Freedom bases its appeal is void, we cannot address

the merits of the appeal and the court of appeals did not

have authority to do so either—even though it had no way

of knowing so. See Univ. of Tex. Sw. Med. Ctr. of Dallas, 11

S.W.3d at 187; Postal Mut. Indem. Co., 169 S.W.2d at 484.

Accordingly, without hearing oral argument, we vacate the

court of appeals' judgment and opinion. TEX.R.APP. P. 59.1;

see, e.g., Valley Baptist Med. Ctr. v. Gonzalez, 33 S.W.3d

821, 822 (Tex.2000) (per curiam) (vacating the judgment and

opinion of the court of appeals as advisory when the case had

become moot before the opinion issued). We remand the case

to the trial court for further proceedings. TEX.R.APP. P. 60.6.

All Citations

372 S.W.3d 621, 55 Tex. Sup. Ct. J. 975

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

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

18 S.W.3d 744

Court of Appeals of Texas,

San Antonio.

HELENA CHEMICAL CO. and Hyperformer

Seed Co., Appellants/Cross–Appellees,

v.

Kenneth WILKINS and Tom Wilkins, Individually

and d/b/a Chapotal Farms and Porciones 99

Properties; Geen Wilkins and Mark Wilkins,

Individually and d/b/a Tabasco and Wilkins Family

Limited Partnership, Appellees/Cross–Appellants.

No. 04–99–00107–CV. | March 8, 2000.

Farmers filed action against seed seller, alleging violation of

Deceptive Trade Practices Act (DTPA), breach of warranties,

and fraud. The 229th Judicial District Court, Starr County,

John A. Pope, III, J., entered judgment on jury verdict

awarding damages to farmers. Both sides appealed. The

Court of Appeals, Hardberger, C.J., held that: (1) delay in

submitting farmers' claim against seed seller to arbitration

did not bar farmers' lawsuit; (2) witness was sufficiently

qualified to testify as expert as to suitability of seed for

dry land farming; (3) evidence was sufficient to show that

seller's failure to comply with warranty, or a deceptive act

or unconscionable action, was producing cause of farmers'

damages; (4) language on seed bag, purchase ticket, invoices,

and unsigned purchase agreement effectively disclaimed

warranties; and (5) evidence was sufficient for jury to

calculate, with reasonable certainty, award of damages for

lost profits.

Affirmed.

Duncan, J., filed a dissenting opinion.

West Headnotes (26)

[1] Appeal and Error

Cases Triable in Appellate Court

Question of whether a trial court has subject

matter jurisdiction is a question of law subject to

de novo review.

Cases that cite this headnote

[2] Appeal and Error

Striking out or dismissal

Reviewing court construes a petition in favor of

the plaintiff and, if necessary, reviews the entire

record to determine if any evidence supports the

trial court's jurisdiction to hear the cause.

Cases that cite this headnote

[3] Appeal and Error

Jurisdiction

Unless the pleadings demonstrate the absence of

jurisdiction, a reviewing court assumes the trial

court properly had jurisdiction over the case.

Cases that cite this headnote

[4] Statutes

Construction in View of Effects,

Consequences, or Results

Purpose of statutory construction is to ascertain

legislative intent and where the intent is clear, it

will be given effect, even if the result appears to

be harsh.

Cases that cite this headnote

[5] Alternative Dispute Resolution

Arbitration favored; public policy

Public policy favors agreements to resolve legal

disputes through agreements to arbitrate.

Cases that cite this headnote

[6] Alternative Dispute Resolution

Partial arbitrability

Parties must arbitrate any claims that fall within

the scope of the arbitration agreements, even

though piecemeal litigation might result.

1 Cases that cite this headnote

[7] Alternative Dispute Resolution

Failure to Arbitrate
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

If a party fails to submit a claim to arbitration

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

the delay or the conduct of the parties, but if

a party fails to submit a claim to arbitration

altogether, then the party may not maintain legal

action. V.T.C.A., Agriculture Code §§ 64.002,

64.004.

Cases that cite this headnote

[8] Alternative Dispute Resolution

Failure to Arbitrate

Delay in submitting farmers' claims against seed

seller to arbitration as required by Agriculture

Code until trial court granted motion to compel

arbitration did not bar farmers' lawsuit, even

though delay prompted arbitration board to

refuse to arbitrate matter due to inability to

investigate crops in field conditions, in light

of Code's specific authorization for trial court

to take such delay into account and court's

ability to fashion remedy if necessary. V.T.C.A.,

Agriculture Code § 64.004.

Cases that cite this headnote

[9] Appeal and Error

Rulings on admissibility of evidence in

general

Appeal and Error

Competency of witness

Whether the trial court properly admitted expert's

testimony is subject to an abuse of discretion

standard of review.

3 Cases that cite this headnote

[10] Evidence

Speculation, guess, or conjecture

In reviewing admissibility of expert testimony,

court examines the entire substance of the

expert's testimony to determine if the opinion is

based on demonstrable facts and does not rely

solely on assumptions, possibility, speculation,

and surmise.

3 Cases that cite this headnote

[11] Evidence

Knowledge, experience, and skill in general

In determining whether a particular witness is

qualified to testify as an expert, focus is on

whether the expert's expertise goes to the very

matter on which he or she is to give an opinion.

Rules of Evid., Rule 702.

2 Cases that cite this headnote

[12] Evidence

Physical facts

Witness was sufficiently qualified to testify

as expert as to suitability of seed for dry

land farming and its susceptibility to charcoal

rot disease, even though he was not plant

pathologist, where witness was plant scientist

and agronomist and used his experience to

formulate conclusion on basis of research, study

of independent tests, and observations regarding

seed's suitability for dry land farming. Rules of

Evid., Rule 702.

2 Cases that cite this headnote

[13] Evidence

Sources of Data

Evidence

References to authorities on subject

Evidence

Experiments and results thereof

Expert's testimony on suitability of seed for

dry land farming was sufficiently reliable to be

admissible, despite his discounting of certain

testing of seed, where his conclusion flowed

from his observation of those tests and other

factors such as weather and weed control

reports, disease publications, other testing, and

comparisons with crops on adjacent farms.

Cases that cite this headnote

[14] Antitrust and Trade Regulation

Weight and sufficiency
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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

Evidence

Nature, condition, and relation of objects

Sales

Breach of warranty

Evidence was sufficient to show that seed

seller's failure to comply with warranty, or

a deceptive act or unconscionable action by

seller, was producing cause of farmers' damages

for purposes of Deceptive Trade Practices Act

(DTPA) and breach of warranty claims; expert

testimony and evidence of field trials indicated

that seed might not have been suitable for dry

land farming, contrary to actual representations

in seller's promotional literature and made by

sales representative. V.T.C.A., Bus. & C. § 17.41

et seq.

Cases that cite this headnote

[15] Antitrust and Trade Regulation

Weight and sufficiency

Sales

Breach of warranty

Evidence that neighbor had no adverse effect

from rotating from cotton to grain and that seed

seller recommended alleged over-planting by

farmers was sufficient to rebut possibility of

causes of farmers' low yields other than seller's

seed, which thus supported farmers' Deceptive

Trade Practices Act (DTPA) and breach of

warranty claims against seed seller. V.T.C.A.,

Bus. & C. § 17.41 et seq.

Cases that cite this headnote

[16] Antitrust and Trade Regulation

Comparisons; comparative advertising

Sales

Statements as to kind, quality, condition, or

value

Repeated oral and written statements by seed

seller that particular seed was better for dry land

farming than other seed brands did not amount

to mere inactionable puffing for purposes of

Deceptive Trade Practices Act (DTPA) and

breach of warranty claims, in light of their

specificity and disparate positions of knowledge

enjoyed by farmers and seller. V.T.C.A., Bus. &

C. § 17.41 et seq.

Cases that cite this headnote

[17] Fraud

Matters of Fact or of Opinion

Decisive test to determine whether seller's

statements are mere inactionable puffing is

whether the seller asserts a fact of which the

buyer is ignorant or merely states an opinion or

judgment on a matter of which the seller has

no special knowledge and on which the buyer

may be expected also to have an opinion and to

exercise his judgment.

2 Cases that cite this headnote

[18] Antitrust and Trade Regulation

Weight and sufficiency

Farmers' testimony was some evidence sufficient

to find that seed seller took advantage of

the lack of knowledge, ability, experience, or

capacity of farmers to grossly unfair degree so

as to support liability on unconscionability claim

under Deceptive Trade Practices Act (DTPA).

V.T.C.A., Bus. & C. § 17.41 et seq.

Cases that cite this headnote

[19] Sales

Exclusion by contract or express warranty

or refusal to warrant

Warranty language on seed bag, purchase ticket,

invoices, and unsigned purchase agreement

effectively disclaimed implied warranties of

merchantability and fitness for a particular

purpose, as well as express warranties, and thus

precluded breach of warranty claim by farmers

against seed seller.

Cases that cite this headnote

[20] Damages

Effect of provisions of contract

Contractual limitation on damages is not

effective as to statutorily created rights, such as

a right to recover for deceptive acts.
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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

Cases that cite this headnote

[21] Damages

Loss of Profits

History of loss does not preclude a judgment for

future lost profits.

Cases that cite this headnote

[22] Damages

Loss of profits

Precise calculation of anticipated profits has

never been essential to recovery by any business;

it is sufficient if there is data from which the loss

may be ascertained with reasonable certainty.

Cases that cite this headnote

[23] Damages

Loss of profits

Evidence was sufficient for jury to calculate,

with reasonable certainty, award of damages

to farmers for lost profits resulting from seed

seller's deceptive act or unconscionable action

concerning suitability of seed sold to farmers;

farmer's testimony allowed jury to consider

yield attributable to other seed, recalculate lease

payments, and regard elevator costs as either

reflected in yield or refundable so as to be not

part of net cost calculation.

Cases that cite this headnote

[24] Interest

Suspension

Award of prejudgment interest during periods of

delay is generally left to the discretion of the trial

court.

5 Cases that cite this headnote

[25] Appeal and Error

Costs and Allowances

Because the issue of an offset from interest

calculations for delay caused by a litigant is

discretionary rather than mandatory, a reviewing

court does not substitute its opinion on the matter

for that of the trial court.

3 Cases that cite this headnote

[26] Interest

Stay of proceedings

Trial court reasonably commenced award of

prejudgment interest in favor of farmers in

action against seed sellers as of date when court

lifted abatement that had been imposed during

attempt at arbitration of dispute, in light of role

that each party played in pretrial delay, which

could support conclusion that farmers had most

discretion in determining when to submit claim

for arbitration.

5 Cases that cite this headnote

Attorneys and Law Firms

*747 Charles C. Murray, Lisa Powell, Atlas & Hall, L.L.P.,

McAllen, Keith Parr, Kevin P. McJessy, Chicago, Ill., for

appellant.

John Skaggs, Skaggs & Garza, L.L.P., McAllen, for appellee.

Sitting: PHIL HARDBERGER, Chief Justice, CATHERINE

STONE, Justice, SARAH B. DUNCAN, Justice.

OPINION

Opinion by: PHIL HARDBERGER, Chief Justice.

Helena Chemical Company and Hyperformer Seed Company

(collectively “Helena”) appeal the trial court's entry of

judgment, in which Kenneth, Tom, Geen, and Mark Wilkins,

as well as their respective business entities, (collectively

“the Wilkins”) were awarded $360,000 plus attorney's fees

following a jury trial.

Helena raises five issues on appeal. In its fourth issue,

Helena asserts that the Wilkins are barred from asserting

their claims because of their alleged failure to fulfill the

arbitration requirements of the Texas Agriculture Code. In its

fifth issue, Helena claims the trial court abused its discretion

in admitting testimony by the Wilkins' expert. In its first,
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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

third, and second issues, Helena asserts that the evidence is

legally and factually insufficient to support the jury's verdict

as to causation, liability, and damages. On cross-appeal, the

Wilkins claim the trial court erred in its manner of assessing

pre-judgment interest.

BACKGROUND

The Wilkins manage farms in Hidalgo and Starr Counties.

Helena sells seed. The Wilkins purchased Cherokee grain

sorghum 1 from Helena in 1992, 1993, and 1994. The Wilkins

claim to have relied upon Helena's promotional literature,

which states that Cherokee has “excellent dryland [ (farmland

with little or no irrigation) ] yield potential.” 2

*748 Although the Wilkins' 1992 Cherokee crop produced

a high yield, their 1993 and 1994 Cherokee crops suffered

from reduced yields. The parties disagree as to the cause of

the reduced yield. The Wilkins claim that the 1993–94 crops

“failed to produce or perform as expected, or as represented

by [Helena].” They argue that the Cherokee failed because it

is not drought resistant or tolerant to charcoal rot.

Helena argues that the Cherokee seed failed because the

Wilkins had planted cotton (which reduces soil moisture)

a year earlier on a portion of the field, which reduced

the Cherokee yield significantly on that part of the field.

According to Helena, Cherokee is tolerant to charcoal rot (but

is not immune) and grows well in dryland conditions (but not

when the underlying soil has been depleted of its moisture in

a previous cotton crop).

The Wilkins sued Helena on February 7, 1995, alleging

that Helena had violated the Deceptive Trade Practices Act

(“DTPA”), breached implied and express warranties, and

committed fraud. On February 21, 1995, Helena filed a plea

in abatement and motion to compel arbitration of the Wilkins'

claims. On April 5, 1995, the trial court abated the proceeding

and granted Helena's motion to compel. On August 30, 1996,

the Wilkins submitted the matter to arbitration. On October

16, 1996, the Texas Plant and Seed Board declined to arbitrate

the matter because the crops were not in “field conditions.”

The trial court subsequently lifted the abatement.

A jury found for the Wilkins on the different theories

of recovery, except on the question of fraud and whether

Helena had committed these acts knowingly. The jury

awarded damages to the Wilkins in the amount of $360,000.

The trial court entered judgment against Helena, awarding

prejudgment interest from October 23, 1996 (the day the Seed

and Plant Board stated that the Wilkins' claims did not qualify

for arbitration). Helena appeals; the Wilkins appeal as to the

date from which prejudgment interest is computed.

DISCUSSION

1. Arbitration

In its fourth issue, Helena asserts that the Wilkins are barred

from asserting their claims because they failed to comply with

the requirements imposed by the Texas Agriculture Code.

The Agriculture Code provides, in part:

(a) When a purchaser of seed designed for planting claims

to have been damaged by the failure of the seed to

produce or perform as represented by warranty or by

the label required to be attached to the seed under

this subtitle or as a result of negligence, the purchaser

must submit the claim to arbitration as provided by

this chapter as a prerequisite to the exercise of the

purchaser's right to maintain a legal action against the

labeler....

(b) Any period of limitations that applies to the claim shall

be tolled until the 11th day after the date of filing with the

commissioner of the report of arbitration by the board of

arbitration.

(c) A claim of damages due to the failure of the seed

as described by Subsection (a) of this section may

not be asserted as a counterclaim or defense in any

action brought by a seller against a purchaser until the

purchaser has submitted a claim to arbitration.

(d) When the court in which an action has been filed

by a seller of seed described by Subsection (c) of this

section receives from the purchaser *749 a copy of the

purchaser's complaint filed in arbitration, accompanied

by a written notice of intention to use the claim as a

counterclaim or defense in the action, the seller's action

shall be stayed. Any period of limitations that applies to

the claim is suspended until the 11th day after the date of

filing with the commissioner of the report of arbitration

by the board of arbitration.

TEX. AGRIC. CODE ANN. § 64.002 (Vernon 1995)

(emphasis added). The code requires seed bags to provide a

notice alerting the farmer to the requirement of submitting
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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

claims to arbitration. See id. § 64.003. The seed bag tendered

as an exhibit to this court contains such a notice.

The Agriculture Code sets forth the arbitration procedure, in

part, as follows:

(a) A purchaser may begin arbitration by filing ... a sworn

complaint and a filing fee, as provided by department

rule. The purchaser shall send a copy of the complaint

to the seller by certified mail. Except in the case of seed

that has not been planted, the complaint must be filed

within the time necessary to permit effective inspection

of the plants under field conditions.

....

(c) The commissioner shall refer the complaint and

the answer to the arbitration board for investigation,

findings, and recommendations.

....

(e) The report of the arbitration board shall include findings

of fact, conclusions of law, and recommendations as to

costs....

(f) In the course of its investigation, the ... board or any of

its members may:

(1) examine the purchaser and the seller on all matters

that the arbitration board considers relevant;

(2) grow to production a representative sample of the

seed through the facilities of the commissioner or

a designated university under the commissioner's

supervision; or

(3) hold informal hearings....

....

(h) The arbitration board shall consider any field inspection

or other data submitted by either party in its report and

recommendation....

Id. § 64.006 (Vernon Supp.2000). The effect of arbitration is

that:

In any litigation involving a complaint

that has been the subject of arbitration

under this chapter, any party may

introduce the report of arbitration

as evidence of the facts found in

the report, and the court may give

such weight to the arbitration board's

findings of fact, conclusions of law,

and recommendations as to damages

and costs as the court determines

advisable. The court may also take into

account any findings of the board of

arbitration with respect to the failure

of any party to cooperate in the

arbitration proceedings, including any

finding as to the effect of delay in filing

the arbitration claim or the arbitration

board's ability to determine the facts of

the case.

Id. § 64.004 (Vernon 1995). We did not locate any Texas case

law reviewing these sections of the Agriculture Code as they

relate to this case. If the Wilkins' claims are barred, then the

trial court did not have subject matter jurisdiction to hear the

case.

a. Standard of Review

[1] [2] [3] The question of whether a trial court has

subject matter jurisdiction is a question of law subject to

de novo review. See Mayhew v. Town of Sunnyvale, 964

S.W.2d 922, 928 (Tex.1998). We construe the petition in

favor of the Wilkins and, if necessary, review the entire record

to determine if any evidence supports the district court's

jurisdiction to hear the cause. See Texas Ass'n of Bus. v.

Texas Air Control Board, 852 S.W.2d 440, 446 (Tex.1993).

Unless the pleadings demonstrate the absence of jurisdiction,

we assume the trial court properly had jurisdiction over *750

the case. See Peek v. Equipment Serv. Co., 779 S.W.2d 802,

804 (Tex.1989).

b. Construction of Texas Agriculture Code

[4] The purpose of statutory construction is to ascertain

legislative intent. See Woods v. Littleton, 554 S.W.2d 662,

665 (Tex.1977). Where the intent is clear, it will be given

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.-

Beaumont 1935, writ ref'd). In ascertaining this intent, the

Legislature has provided that words and phrases shall be read

in context and construed according the rules of grammar and

common usage. See TEX. GOV'T CODE ANN. § 311.011(a)

(Vernon 1998). A court may consider, among other things,

the object sought to be obtained and the consequences of

any particular construction. See id. § 311.023; Cole v. Texas
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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Employment Comm'n, 563 S.W.2d 363, 367 (Tex.Civ.App.-

Fort Worth 1978, writ dism'd).

(1) FRAMING THE ISSUE PROPERLY

[5] [6] Public policy favors agreements to resolve

legal disputes through agreements to arbitrate. See EZ

Pawn Corp. v. Mancias, 934 S.W.2d 87, 90 (Tex.1996);

Jack B. Anglin Co., Inc. v. Tipps, 842 S.W.2d 266, 268

(Tex.1992). “Questions of arbitability must be addressed with

a healthy regard for the federal policy favoring arbitration....”

Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc.,

473 U.S. 614, 626, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985).

The parties must arbitrate any claims that fall within the

scope of the arbitration agreements, even though piecemeal

litigation might result. See Dean Witter Reynolds, Inc. v.

Byrd, 470 U.S. 213, 220–21, 105 S.Ct. 1238, 84 L.Ed.2d 158

(1985). If the Wilkins had not submitted a claim to arbitration

at all, their claim would be barred. The legislature has stated

very clearly that “the purchaser must submit the claim to

arbitration as provided by this chapter as a prerequisite to the

exercise of the purchaser's right to maintain a legal action.”

TEX. AGRIC. CODE ANN. § 64.002 (Vernon 1995).

The code states that “the complaint must be filed within the

time necessary to permit effective inspection of the plants

under field conditions.” See id. § 64.006 (Vernon Supp.2000).

Here, the Wilkins did not submit the claim to arbitration

until well after the time that they began to notice Cherokee's

poor performance. As a result, the issue before us is whether

this delay in submitting the claim to arbitration acts as a

catastrophic bar to the Wilkins' legal claim.

(2) SEED ARBITRATION IS NON–BINDING

The arbitration scheme for seed claims recognizes that

“farmers and seedmen agree that litigation is not the most

desirable way to settle a complaint about seed.” Op. Tex.

Att'y Gen. No. DM–3 (1991). The arbitration process for

seed, although a potential avenue for settlement without trial,

also “provides for an unbiased third party investigation.”

Id. (emphasis added) (citation omitted). Recognizing the

benefits of mandatory non-binding arbitration, the American

Seed Trade Association has worked with state legislators

to enact statutes to aid in the investigation and resolution

of seed claims. See, e.g., AMERICAN SEED TRADE

ASS'N, Legislative Affairs (visited February 1, 2000) <http://

www.amseed.com/annrept/ar98/ar98p7.html>; AMERICAN

SEED TRADE ASS'N, Legislative Affairs (visited February

1, 2000) <http:// www.amseed.com/annrept/legis.html>.

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

recommendations as to costs.” TEX. AGRIC. CODE ANN. §

64.006 (Vernon 1995). Neither party is required to introduce

the report of arbitration into evidence. Id. § 64.004. The

court has discretion to “give such weight to the arbitration

board's [report] as [it] determines advisable.” Id. Even if the

language in the *751 first sentence of Section 64.004 (“has

been the subject of arbitration”) is read to require actual

arbitration of the claim (as opposed to submission of the

claim to arbitration), the second sentence explains what the

court may do, regardless of whether the claim was submitted

to arbitration. See id. The court is empowered to consider

the parties' failure to cooperate, “including any finding as

to the effect of delay in filing the arbitration claim or the

arbitration board's ability to determine the facts of the case.”

Id. (emphasis added). The arbitration contemplated by our

legislature is not intended to replace the parties' right to have

their day in court. In fact, the legislature expressly accounted

for the possibility that a party might be delayed (or purposely

delay) filing a claim for arbitration.

(3) THE STATUTE PROVIDES A REMEDY FOR

FAILING TO FILE A CLAIM IN A TIMELY

FASHION

[7] A strict reading of the Texas Agriculture Code might

lead one to believe that a farmer's failure to submit a claim

to arbitration while the crop is in “field conditions” has the

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

fashion in comparison to failing to submit a claim at all.

If a party fails to submit a claim to arbitration in a timely

fashion, the trial court may take remedial action in light of

the circumstances of the delay or the conduct of the parties.

If a party fails to submit a claim to arbitration altogether, the

party may not maintain legal action.

(4) THE PARTIES' ACTIONS

[8] In the present case, conflicting testimony exists as to

who was responsible for prolonging the investigation and

negotiation before the suit was commenced. The parties do

not dispute that the claim was not submitted to arbitration

until approximately sixteen months after the trial court

granted Helena's motion to compel arbitration. The parties

instead differ as to who bears the responsibility for causing
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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for the delay. In the end, the State Seed and Plant Board

refused to arbitrate the matter because they were unable to

examine the crops in “field conditions.” We note that the

parties were apparently attempting to effectuate a non-trial

resolution of the Wilkins' claims. We note also that Helena

could have moved to dismiss the suit at any time after the

trial court agreed to compel arbitration, rather than wait until

the board issued its findings. Such a motion, if made before

the Wilkins eventually sought arbitration, would have been

very compelling because the Wilkins had not fulfilled the

necessary conditions to maintaining their legal action.

In the present case, Helena waited until after the

Board determined “that the request did not qualify for

arbitration” (on October 16, 1996) before it moved to dismiss

the Wilkins' lawsuit (on November 16, 1996). A positive

outcome of the delay is that the parties were continuing to

attempt resolution of the claim without the consequences

of litigation. An unfortunate result of the delay is that

the arbitrators could not investigate the crops under “field

conditions.” Helena could not, therefore, have a neutral expert

investigate the efficacy of its seed. Helena was not, however,

without remedy. The trial court could have considered all of

the circumstances surrounding the delay in adjudicating the

case.

We find that an arbitration board's inability to investigate

crops in “field conditions” does not bar the plaintiff's claim

in a case that falls under Chapter 64 of the Texas Agriculture

Code. The defendant has adequate remedies that could have

been pursued after the trial court ordered arbitration. In

addition, the trial court has the necessary tools to fashion a

remedy itself during trial if necessary. We choose to exercise

restraint here. We do not wish to make law where our

legislature has already spoken. The trial court was empowered

to take such delay into account under *752 Section 64.004

of the Agriculture Code. Because the Wilkins submitted their

claim to arbitration, we conclude that their claim is not

barred. 3 The trial court had jurisdiction to hear the case.

2. Expert Testimony

In its fifth issue, Helena argues that the trial court abused

its discretion in admitting the testimony of Wilkins' expert,

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

argues that Pleunneke is unqualified to testify as an expert

and that his testimony as an expert is unreliable. Helena does

not complain that his testimony amounts to an unreliable

scientific opinion.

a. Standard of Review

[9] [10] Whether the trial court properly admitted Dr.

Pleunneke's testimony is subject to an abuse of discretion

standard of review. See E.I. du Pont de Nemours and Co.

v. Robinson, 923 S.W.2d 549, 558 (Tex.1995); Wal–Mart

Stores, Inc. v. Garcia, 974 S.W.2d 83, 86 (Tex.App.-San

Antonio 1998, no pet.). We examine the entire substance of

the expert's testimony “to determine if the opinion is based on

demonstrable facts and does not rely solely on assumptions,

possibility, speculation, and surmise.” Merrell Dow Pharms.,

Inc. v. Havner, 953 S.W.2d 706, 712–13 (Tex.1997). The

decision to admit evidence is in the discretion of the trial

court. See Robinson, 923 S.W.2d at 558 (citing Downer

v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241–42

(Tex.1985)); Ginsberg v. Fifth Court of Appeals, 686 S.W.2d

105, 108 (Tex.1985). We have stated that an abuse of

discretion exists when the court fails to analyze or apply the

law correctly. Muecke v. Hallstead, No. 04–97–00483–CV,

2000 WL 328129, at *2 (Tex.App.-San Antonio March 29,

2000, no pet. h.).

b. Admissibility

[11] Texas Rule of Evidence 702 permits a witness who

is “qualified as an expert by knowledge, skill, experience,

training, or education” to testify “in the form of an opinion

or otherwise” if “scientific, technical, or other specialized

knowledge will assist the trier of fact to understand the

evidence or to determine a fact in issue.” TEX.R. EVID.

702. Such testimony must not be substantially outweighed

by the danger of unfair prejudice, confusion of the issues,

or other factors. TEX.R. EVID. 403. There exists no brightline test to guide us as to whether a particular witness is

qualified to testify as an expert. See James v. Hudgins, 876

S.W.2d 418, 421 (Tex.App.-El Paso 1994, writ denied) *753

(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

instead on whether the expert's expertise “goes to the very

matter on which he or she is to give an opinion.” Broders v.

Heise, 924 S.W.2d 148, 153 (Tex.1996).

c. Did the Trial Court Err in Admitting Dr. Pleunneke's

Expert Testimony?
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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(1) QUALIFICATIONS

[12] Helena argues that Pleunneke is unqualified to render

an opinion regarding Cherokee's ability to tolerate charcoal

rot. Helena also claims that because Pleunneke is not a plant

pathologist, he is unqualified to render an opinion on diseases

affecting plants.

At trial, the Wilkins had the “burden to show that [Pleunneke]

possess[es] special knowledge as to the very matter on which

he” testified. Broders, 924 S.W.2d at 152–53; Negrini v.

State, 853 S.W.2d 128, 130–31 (Tex.App.-Corpus Christi

1993). The central issue regarding Pleunneke's qualifications

is not whether he is qualified to render an opinion with

respect to Cherokee's inherent susceptibility to charcoal rot.

Instead, the issue regarding his qualifications is whether he is

qualified to render an opinion regarding Cherokee's suitability

for dry land farming. In determining Pleunneke's qualification

to provide such an opinion an important factor to consider

is his ability to conduct research, gather information, and

assimilate the data in a meaningful manner relating to a plant's

performance. Is he able to marshal the necessary observations

in support of his conclusion?

Helena argues that Pleunneke's ability to testify as an expert

is limited to those areas within his experience and training.

See TEX.R. EVID. 702. Pleunneke is a plant scientist and

an agronomist. He does not have to be a pathologist (one

who studies plant disease). His occupational status does not

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

matter at issue and the expert's familiarity therewith, and

not on ... the expert's title”); Broders, 924 S.W.2d at 153

(cautioning that “[o]ur holding does not mean that only a

neurosurgeon can testify about the cause in fact of death

from an injury to the brain”) (emphasis added); Blan v. Ali,

7 S.W.3d 741, 745 (Tex.App.-Houston [14th Dist.] 1999, no

pet.) (indicating that a physician who serves as an expert

witness need not be a specialist in a particular branch of

the profession on which the physician offers testimony).

Pleunneke has had experience, “on occasion” with charcoal

rot in grain sorghum.

Agronomy is the “science of soil management and crop

production.” THE CONCISE OXFORD DICTIONARY 19

(7th ed.1988). The Wilkins offered evidence that Pleunneke

has experience addressing issues regarding plant physiology,

nutrition, and environmental factors that affect plant growth.

Although Pleunneke is not a plant pathologist, the trial

court's decision to allow him to testify is not an abuse of

discretion. The trial judge could have reasonably concluded

that Pleunneke's background qualifies him to testify as to

the viability of Cherokee seed in the harsh Starr County

environment. Although susceptibility to charcoal rot, a plant

disease, is the claimed Achilles' Heel of Cherokee, Pleunneke

need not necessarily be a pathologist to testify to that effect.

He used his experience to formulate a conclusion on the

basis of research, study of independent tests, and observations

regarding Cherokee's suitability for dry land farming. How

disease affects plants is undoubtedly an important part of

plant science and the ability to manage crop production

effectively. We have permitted, for example, an orthopedic

surgeon to give expert testimony regarding a radiologist's

interpretation of x-rays and the radiologist's subsequent

actions. See *754 Silvas v. Ghiatas, 954 S.W.2d 50,

53–54 (Tex.App.-San Antonio 1997, pet. denied) (stating

that “[t]heir professions are interrelated and their specialties

intertwined”).

The trial court had the opportunity to consider whether

Pleunneke was qualified to render expert testimony. We find

that Helena's voir dire and cross-examination of Pleunneke

could all have been factors that the jury considered as to

the weight of his testimony. We conclude that because his

qualifications match the area in which he offered testimony,

the trial court did not abuse its discretion in allowing

Pleunneke to testify as an expert.

(2) RELIABILITY

[13] Helena also argues that Pleunneke's testimony is

unreliable. Helena does not argue that Pleunneke's testimony

is scientifically unreliable, which would subject it to an

analysis of the elements articulated in E.I. du Pont de

Nemours and Co., Inc. v. Robinson, 923 S.W.2d 549

(Tex.1995). Yet, the testimony must still comport with the

principle of reliability articulated in Robinson. See Gammill

v. Jack Williams Chevrolet, Inc., 972 S.W.2d 713, 726

(Tex.1998). Even though the subject matter of Pleunneke's

testimony is scientific in nature, a Robinson inquiry is not

necessarily appropriate. See id. at 727. Following the lead of

Gammill, the inquiry becomes whether an “analytical gap”

exists; do Pleunneke's observations support his conclusions?

See id. at 727.

Pleunneke explained that Cherokee seed performs (that is, has

good characteristics of growth and a favorable yield) very

well when there is adequate rainfall. In non-irrigated trials
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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where precipitation was infrequent, Cherokee did not perform

(consistently) as well as other seed manufactured by Helena.

This observation, by itself, would suggest that Cherokee is

not suited to dry land farming because there is no expectation

of consistent precipitation in a dry land farming environment.

Yet, Pleunneke agreed with the statement that certain “tests

aren't really something that tells us very much about what

might happen in Starr County.” He testified, “They're

generated statistics and should be taken with a grain of

salt.” He acknowledged that a range of performance exists

for Cherokee, and that “[w]ith that kind of variability ...

comparing them all ...,” Pleunneke would have done more

than rely on the tests. (emphasis added). He recommended

inquiring of the local farmers “to see what varieties have been

working for them on large acreages.”

Because our inquiry is whether Pleunneke's observations

support his conclusions, we find the testimony to be reliable.

His observations include not only the trials in question, but

encompass research into other sources (weather and weed

control reports, disease publications, and testing). Pleunneke

also based his testimony on comparisons with crops adjacent

to the Wilkins' farm.

Based on Pleunneke's testimony and his supporting evidence,

his opinion as an expert is reliable. Although Helena asserts

that his discounting of the trials are fatal to his reliability,

we understand his statement to be that there are factors to

consider other than merely the trials. Because his conclusion

flows from his observation of these other factors, as well

as the trials, we conclude that the trial court did not err in

admitting his testimony.

3. Sufficiency of Evidence (First, Second, & Third Issues)

Helena complains that the Wilkins' evidence is legally

and factually insufficient to support the jury verdict as to

causation, liability, and damages.

a. Standard of Review

In considering a “no evidence” or legal sufficiency point, we

consider only the evidence favorable to the decision of the

trier of fact and disregard all evidence and inferences to the

contrary. See Davis v. City of San Antonio, 752 S.W.2d 518,

522 (Tex.1988). If more than a scintilla of evidence is offered

on a fact, the court should overrule the issue. See Kindred

v. *755 Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex.1983). In

reviewing a “great weight” or factual insufficiency point, the

court should assess all the evidence and reverse for a new

trial only if the challenged finding is so against the great

weight and preponderance of the evidence as to be manifestly

unjust. See Pool v. Ford Motor Co., 715 S.W.2d 629, 635

(Tex.1986); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986).

“Under this analysis, we are not fact finders, we do not

pass upon the credibility of witnesses, nor do we substitute

our judgment for that of the trier of fact, even if there

is conflicting evidence upon which a different conclusion

could be supported.” Thrift v. Hubbard, 974 S.W.2d 70, 76

(Tex.App.-San Antonio 1998, pet. denied).

b. Causation and Liability (First and Third Issues)

The court submitted the following questions to the jury; the

jury answered “yes” to each:

1. Did the defendant engage in any false, misleading, or

deceptive act or practice that was a producing cause

of damages to the plaintiffs? [“False, misleading, or

deceptive act or practice” defined.]

2. Did the defendant engage in any unconscionable action

or course of action that was a producing cause of any

damages to the plaintiffs? [“Unconscionable action or

course of action” explained.]

3. Was the failure, if any, of the defendant to comply with a

warranty a producing cause of damages to the plaintiffs?

[“Failure to comply with a warranty” defined.]

The jury answered “no” to the fourth question, which

addressed fraud. Questions 5–8 concern damages and

attorney's fees. An affirmative answer to any of the first three

questions would have been sufficient to allow the jury to

award damages. 5

(1) EVIDENCE SUFFICIENT TO SUPPORT

CAUSATION? (JURY QUESTIONS 1–3))

6

[14] The issue is whether legally and factually sufficient

evidence exists to support the proposition that Helena's failure

to comply with a warranty, or Helena's deceptive act or

unconscionable action, was a producing cause of the Wilkins'

damages. Because the trial court did not err in admitting Dr.

Pleunneke's expert testimony (discussed earlier), sufficient

evidence exists in support of the jury's verdict as to causation.

In addition to Pleunneke's testimony, the various field

trials that were performed across Texas also support
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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the possibility that Helena knew that its seed may

not be suited for dryland farming. Although some of

these trials were discussed during the testimony of

Pleunneke, others were referenced during the testimony of

Helena's corporate representative. Ample evidence exists

regarding the actual representations that Helena made

regarding the seed (promotional literature and statements

by sales representatives, for example). When evidence of

Cherokee's lackluster dryland performance is included, these

representations amount to mis-representations.

(A) FAILURE TO EXPLAIN OTHER CAUSES

[15] Helena asserts that the Wilkins' prior cotton crop is the

cause of the poor yield. Helena also argues that one of the

possible reasons for the Wilkins' poor yield is related to over

planting in 1993. The Texas Supreme Court has stated that

“if there are other plausible causes of the injury or condition

that could be negated, the plaintiff must offer evidence

excluding those causes with reasonable certainty.” Merrell

Dow Pharm. v. Havner, 953 S.W.2d 706, 720 (Tex.1997)

(emphasis added); see E.I. du Pont de Nemours & Co. v.

Robinson, 923 S.W.2d 549, 559 (Tex.1995) *756 (regarding

as speculation an expert who failed to rule out other causes

of the damage); Parker v. Employers Mut. Liab. Ins. Co., 440

S.W.2d 43, 47 (Tex.1969) (requiring other reasonable causal

explanations to be excluded in order for a possible cause to be

elevated to the status of “probable”). The Wilkins explained

that the cotton-grain rotation is required by the local cropmanagement 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

followed the recommendations of Helena in planting their

1993 crop.

Here, the jury could have considered the explanations that

the Wilkins offered to rebut the possibility of other causes. In

light of these explanations, we do not believe that the verdict

is against the great weight and preponderance of the evidence

so as to be manifestly unjust.

(B) NON–ACTIONABLE PUFFING

[16] Helena also contends that its actions are non-actionable

puffing. If the statements in question lack “the specificity

of an affirmation of fact upon which a warranty could

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

Cherokee's suitability for dry land farming on his acreage.

More importantly, Helena made written representations in

its seed catalogue that indicated Cherokee's suitability for

dryland farming was better than the other seed brands it

sold. Not every seed brand was purported to have “excellent”

dryland yield potential. Helena's statements regarding the

tolerance level of Cherokee to charcoal rot do not amount

to imprecise or vague opinions. Instead, they are used

for comparison purposes with other Helena brands, and

were made on multiple occasions both orally as well as in

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).

[17] The knowledge enjoyed by the buyer and seller is

important in determining whether statements amount to

puffing. The “decisive test ... is whether the seller asserts a

fact of which the buyer is ignorant or merely states an opinion

or judgment on a matter of which the seller has no special

knowledge and on which the buyer may be expected also to

have an opinion and to exercise his judgment.” Id. (citing

Royal Bus. Machs., Inc. v. Lorraine Corp., 633 F.2d 34, 42

(7th Cir.1980)). Although the Wilkins should be expected to

exercise their judgment as to which seed to plant, Helena had

“special knowledge” in light of their seed's performance in

previous trials.

We conclude that the statements do not amount to mere

puffing because of their specificity and the disparate positions

of knowledge enjoyed by the buyer and seller.

(C) ACCURACY OF STATEMENTS

Helena argues that the weight of the evidence supports

the accuracy of the statements relied upon by the Wilkins;

the brochure language is qualified by the statement that

the characteristics of the different seed are “averages”

and “can vary depending upon location, date of planting,

environmental conditions, [and] soil type.” Although Wilkins

does not respond to this point, Helena does not point to

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

a misrepresentation, other evidence of misrepresentations

exists in the record (testimony by Wilkins and Helena sales

representative) that is factually sufficient to support the jury

verdict.

(2) INSUFFICIENT EVIDENCE OF

UNCONSCIONABILITY (JURY QUESTION 2)
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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[18] Helena asserts, without extensive briefing, that no

evidence exists to support the jury's verdict regarding

unconscionability. Because we have concluded that *757

Helena's actions did not amount to mere puffing, at least a

scintilla of evidence exists (in the form of Wilkins' testimony)

that would support the verdict that Helena took “advantage

of the lack of knowledge, ability, experience, or capacity of

a person to a grossly unfair degree.” Because Helena does

not complain that the evidence is factually insufficient as to

unconscionability, we need not consider whether more than

a scintilla of evidence exists on this point. Even if it did not,

the verdict would still be upheld as to the first question in the

jury charge.

Helena argues that because it did not require payment for the

seed in 1994, then there is no consideration paid in order to

give rise to an unconscionability claim. Even if this is true, the

damages awarded could be supported by the result the jury

reached as to the first question.

(3) RELEVANT WARRANTIES WERE EXCLUDED

(JURY QUESTION 3)

[19] Helena argues that liability cannot be based on a breach

of warranty because “relevant warranties were excluded.”

Although a seed company may exclude implied warranties

by course of dealing and trade usage, we did not locate

any evidence to this effect in the record. Helena also

argues that it excluded the warranties by written document

(here, on the seed bag, purchase ticket, and invoices). The

purchase agreement (unsigned by the Wilkins) that is in the

record provides “conditions of sale” that exclude the implied

warranties of merchantability and fitness for a particular

purpose in what is relatively conspicuous print. The Wilkins

respond that “it would ‘be difficult’ to replace such a large

volume of seed” at the stage when the seed is delivered.

The Uniform Commercial Code adopted in Texas permits a

merchant to exclude or limit warranties on goods. See TEX.

BUS. & COM.CODE ANN. § 2.316 (Vernon 1994).

We have previously applied a non-warranty clause in favor

of a seed company. See Asgrow Seed Co. v. J.R. Gulick,

420 S.W.2d 438 (Tex.Civ.App.-San Antonio 1967, writ ref'd

n.r.e.). In Asgrow, this court reversed a trial court's judgment

in favor of a purchaser of seed; the sales contract, seed

bags, and invoices all contained a non-warranty clause that

provided, in part, “Asgrow gives no other or further warranty,

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.-

Beaumont 1969, no writ) (stating that the appellee “cannot

rely upon breach of implied warranties because implied

warranties were excluded in the written instrument” that the

appellee signed and accepted).

We find that the warranty language effectively disclaimed

the implied warranties of merchantability and fitness for

a particular purpose, as well as express warranties. We

conclude that a warranty upon which liability can be based

does not appear to exist in support of jury question number

3. Recovery under the first and second jury questions is still

possible.

c. Damages (Second Issue)

We have found no error in the trial court's entry of judgment

as to arbitration (fourth issue) or in the admission of expert

testimony (fifth issue). We also have found that the evidence

is legally and factually sufficient to support the jury verdict

as to causation (Helena's first issue, relating to jury questions

one and two). We now turn to the matter of damages. In its

second issue, Helena argues that the Wilkins failed to prove

the amount of their damages with reasonable certainty and

the Wilkins' prior losses do not support lost profit damages.

Helena also contends that damages should have been limited

to the purchase price of the seed.

(1) LIMITATION TO PURCHASE PRICE OF SEED

[20] Helena's limitation of liability to the purchase price of

the seed is effective only to damages arising from the breach

of warranty. See Southwestern Bell Tel. Co. v. FDP Corp.,

811 S.W.2d 572, 577 (Tex.1991). A contractual limitation on

damages *758 is not effective to statutorily created rights,

such as a right to recover for deceptive acts. See id. at 576.

Because we have concluded that the judgment should be

affirmed as to the first and second jury questions, we address

the argument regarding sufficiency of the evidence relating

to damages.

(2) REASONABLE CERTAINTY REGARDING

DAMAGES

[21] Helena argues that because the Wilkins have a history

of net losses from 1993–96 7 (which include years when they

did not farm with Cherokee), they have failed to establish

a history of profits. See Texas Instruments, Inc. v. Teletron

Energy Management, 877 S.W.2d 276, 278–80 (Tex.1994).

The Teletron court reiterated the rule established in Southwest
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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

Battery Corp. v. Owen, 131 Tex. 423, 115 S.W.2d 1097,

1098–1099 (1938):

In order that a recovery may be had on account of loss of

profits, the amount of the loss must be shown by competent

evidence with reasonable certainty. Where the business

is shown to have been already established and making a

profit at the time when the contract was breached or the tort

committed, such pre-existing profit, together with other

facts and circumstances, may indicate with reasonable

certainty the amount of profits lost.

Id. at 279 (citation omitted) (emphasis added). Yet, at least

one court of appeals has held that “the absence of a history

of profits does not, by itself, preclude a new business

from recovering lost future profits.” Orchid Software, Inc.

v. Prentice–Hall, Inc., 804 S.W.2d 208, 211 (Tex.App.-

Austin 1991, writ denied). The Fifth Circuit has recognized

this trend in Texas law. See Hiller v. Manufacturers Prod.

Research Group of N. Am., Inc., 59 F.3d 1514, 1519, 1521

(5th Cir.1995) (declining to regard “the absence of a profit

history ... as dispositive of the recoverability of lost profits”

with respect to a new business). Because history of loss

does not preclude a judgment for future lost profits, the

issue becomes whether the Wilkins proved their damages

properly and with certainty.

[22] [23] “[P]recise calculation of anticipated profits

has never been essential to recovery by any business. It

is sufficient if there is data from which the loss may be

ascertained with reasonable certainty.” Id. (emphasis added)

(citations omitted). In the present case, evidence exists from

which the jury could have determined damages. Helena

responds that the factors given to the jury, such as the possible

yield of the crops, were speculative in nature, thus making an

objective determination of the damages impossible.

Helena also argues that the Wilkins failed to account for

net profits. “The general rule for assessing damages for crop

losses, as expressed in a number of Texas precedents, is ‘the

market value of the lost portion of his crop, as measured

at maturity of the crop, less the cost he would have had in

harvesting and marketing the lost portion.’ ” See International

Harvester Co. v. Kesey, 507 S.W.2d 195, 197 (Tex.1974).

Another court has stated, “The correct measure of damages

for loss of profits is net profits, which is defined as ‘what

remains in the conduct of a business after deducting from its

total receipts all of the expenses incurred in carrying on the

business.’ ” See St. Paul Surplus Lines Ins. Co. v. Dal–Worth

Tank Co., 917 S.W.2d 29, 60 (Tex.App.-Amarillo 1995),

aff'd in part, reversed in part on other grounds, 974 S.W.2d

51 (Tex.1998). “In the calculation of net profits, allowance

should be made for expenditures which the plaintiff would

have been compelled to make....” Id.

Wilkins testified as to the method he used to arrive

at the damage calculation. For example, he relied upon

measurements by a government agency in order to determine

acreages to come up with deficits....

I took the yield per farm from

the [government *759 agency] and

multiplied it times the number of acres

of grain that was planted per farm to

come up with the number I have under

yield.... I took the actual yield based on

the sales records of what we produced

and subtracted that from what yield

should have been ... [t]o come up with

a deficit, and then I multiplied the

deficit times the number of acres, and

then I multiplied that times the price.

Wilkins admitted that he did not include expenses in

computing his estimated losses, such as additional lease

payments, grain elevator costs, and transportation charges.

These expenses would have been higher if the Wilkins

enjoyed a greater yield during the years in question. Yet,

the record reflects (both in the form of testimony as well as

exhibits) what the lease payments would have been. Wilkins

testified also that “check-off that the grain elevator deducts”

could have been refunded, which explains why he did not

add that potential cost to the damages sought. He testified

that he believed the costs for drying the grain “were reflected

as a shrinking in yield” rather than as an actual charge. A

copy of the statement in which Helena canceled the Wilkins'

debt for seed in 1994 was admitted as an exhibit as well.

Finally, Wilkins testified to the amount of acreage devoted

to seed other than Cherokee. With this evidence, the jury

could have reduced the yield attributable to non-Cherokee

seed in arriving at their damage award, recalculated the lease

payments, and regarded the various elevator costs as either

reflected in the yield or refundable (and not part of the net

cost calculation).

The Wilkins' estimated damages (which they submitted to

the jury) was $490,855.58. The jury's award of $360,000

is $130,855.58 lower than what the Wilkins sought. The

Wilkins did not fail to provide the necessary factual data

to support their claim of lost net profits with reasonable
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 14

certainty. Calculating the lost profits in consideration of all of

the relevant factors is not impossible, particularly in light of

the $130,855.58 deduction that the jury made to the Wilkins'

requested damages.

We find that the award is within the range of evidence offered

by the Wilkins. We conclude that the damages awarded are

supported with reasonable certainty.

4. Pre–Judgment Interest (Wilkins' Issue on Cross–

Appeal)

On cross-appeal, the Wilkins argue that the trial court erred

when it computed prejudgment interest from the date the court

lifted the abatement (October 23, 1996). The Wilkins claim

that the trial court's judgment should order pre-judgment

interest to accrue from November 17, 1994 (which reflects six

months after the date of the alleged “occurrence,” May 20,

1994).

a. Preservation of Error

Helena maintains that because the Wilkins argue a theory

of recovery regarding prejudgment interest on appeal that is

different from that argued below, they have not preserved

error regarding this issue. In their proposed judgment,

attached to their Motion for Entry of Judgment, “[p]rejudgment interest is calculated to commence 180 days [after

the Wilkins notified Helena of the Wilkins' problem with

the seed].” In their Motion to Modify, Correct or Reform

Judgment, the Wilkins ask for an award of pre-judgment

interest “pursuant to the terms of Article 5069–1.05(6),”

which the Texas Legislature repealed in 1997 and replaced

with Section 304.108 of the Finance Code. See TEX.

FIN.CODE ANN. § 304.108 (Vernon 1998 & Supp.2000).

On appeal, the Wilkins argue for an award of pre-judgment

interest under Cavnar v. Quality Control Parking, Inc., 696

S.W.2d 549 (Tex.1985). In their brief, the Wilkins appear to

concede that their reliance on the predecessor to Chapter 34 of

the Finance Code, Article 5069–1.05(6), “was inappropriate.”

The Wilkins may have waived their right to complain on

appeal regarding prejudgment interest because they state a

different ground for the relief sought. See TEX.R.APP. P.

33.1(a)(1)(A). Assuming, without *760 deciding, that the

issue is preserved for our review, we conclude that the trial

court's decision to award prejudgment interest beginning on

October 23, 1996 is not an abuse of discretion.

b. Standard of Review

[24] [25] The award of prejudgment interest during periods

of delay is generally left to the discretion of the trial court.

See Lege v. Jones, 919 S.W.2d 870, 875–76 (Tex.App.-

Houston [14th Dist.] 1996, no writ). 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. 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

S.W.2d 441, 446 (Tex.1997); W. Wendell Hall, Standards

of Review in Texas, 29 ST. MARY'S L.J. 351, 362 (1998).

Because the offset is discretionary rather than mandatory, we

do not substitute our opinion for that of the trial court. See City

of Alamo v. Casas, 960 S.W.2d 240, 260 (Tex.App.-Corpus

Christi 1997, pet. denied).

c. Discussion

In Cavnar, the Texas Supreme Court held that, “as a matter of

law, a prevailing plaintiff may recover prejudgment interest

compounded daily (based on a 365–day year) on damages that

have accrued by the time of judgment.” Cavnar v. Quality

Control Parking, 696 S.W.2d 549, 554 (Tex.1985). The court

later abrogated the Cavnar holding and explained that the

“[w]hen the Court decided Cavnar, there was no statute

governing prejudgment interest.” Johnson & Higgins of Tex.,

Inc. v. Kenneco Energy, 962 S.W.2d 507, 530 (Tex.1998).

In Johnson, the court adopted the statutory predecessor to

the Texas Finance Code and held that “prejudgment interest

begins to accrue on the earlier of (1) 180 days after the

date a defendant receives written notice of a claim or (2)

the date suit is filed.” Id. at 531; see TEX. FIN.CODE

ANN. § 304.104 (Vernon Supp.2000) (providing similar

provisions). The court recognized that the statutory approach

to prejudgment interest “ ‘works as a system of rewards and

penalties' intended to encourage settlements.” Johnson, 962

S.W.2d at 530–31 (citation omitted).

Accrual of prejudgment interest is not automatic. For

example, “a court may order that prejudgment interest does

not accrue during periods of delay in the trial.” Id. §

304.108(a). “A court shall consider: (1) periods of delay

caused by a defendant; and (2) periods of delay caused

by a claimant.” TEX. FIN.CODE ANN. § 304.108(b)

(Vernon Supp.2000). Johnson recognizes that this provision,

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
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 15

entirely within the discretion of the trial court.” Casas, 960

S.W.2d at 260.

[26] The record reflects the Wilkins' understanding of

Texas law regarding the necessity of arbitrating seed claims.

The Wilkins waited sixteen months after the trial court

abated the matter before submitting their claim to arbitration.

Conversely, the Wilkins argue that they did not cause any

delay. They argue that any delay stems from Helena's desire

to continue negotiations.

Given the parties' actions, the trial court could have

reasonably commenced prejudgment interest after it lifted the

abatement. It could have considered the role that each party

played in giving rise to the pretrial delay and concluded that

the Wilkins had the most discretion in determining when to

submit the claim for arbitration.

CONCLUSION

We affirm the trial court's judgment.

Dissenting opinion by: SARAH B. DUNCAN, Justice.

*761 SARAH B. DUNCAN, Justice, dissenting.

I respectfully dissent.

FAILURE TO PERFORM AS REPRESENTED

ON WARRANTY OR LABEL

The majority holds the Wilkins' claims are not barred because

they “submitted their claim to arbitration,” and “[t]he trial

court was empowered to take such delay into account under

Section 64.004 of the Agriculture Code.” Helena Chem. Co.

v. Wilkins, 18 S.W.3d 744, 751-52 (Tex.App.—San Antonio

2000, no pet. h.). However, it is undisputed the Wilkins did

not request arbitration until approximately sixteen months

after the suit was abated for that purpose and, as a result, their

claims that they were “damaged by the failure of the seed

to produce or perform as represented by warranty or by the

label required to be attached to the seed” 1 were not arbitrated;

rather, the arbitration board determined the Wilkins' “request

did not qualify for arbitration.” Accordingly, section 64.004

does not apply. See TEX. AGRIG. CODE ANN.. § 64.004

(Vernon 1995) (“In any litigation involving a complaint that

has been the subject of arbitration under this chapter, ...

[t]he court may also take into account ... any finding as

to the effect of delay in filing the arbitration claim ....”)

(emphasis added). Therefore, even if we view “must” in

section 64.002 of the Texas Agriculture Code as directory

rather than mandatory, and even if the Wilkins' failure

to timely institute arbitration was not jurisdictional, their

failure to timely submit their claim to arbitration during the

abatement ordered for that purpose should have resulted in the

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)

(A trial court should dismiss a plaintiff's DTPA suit if it fails

to give the notice required by the DTPA “while the action is

abated for that purpose.... See Miller v. Kossey, 802 S.W.2d

873, 876–77 (Tex.App.—Amarillo 1991, writ denied) (no

notice for more than six months after abatement granted until

date set for trial).”).

DTPA—MISREPRESENTATION

APART FROM LABEL OR WARRANTY

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

them that Cherokee was a “good” seed. However, this alleged

misrepresentation amounts to no more than non-actionable

puffing. Prudential Ins. Co. of America v. Jefferson Assocs.,

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

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

that Helena and Hyperformer committed an unconscionable

act or course of action. See Latham v. Castillo, 972 S.W.2d 66,

68 (Tex.1998) (“To be actionable under subsection (A), the

resulting unfairness must be ‘glaringly noticeable, flagrant,

complete and unmitigated.’ ” (quoting Chastain v. Koonce,

700 S.W.2d 579, 584 (Tex.1985))).

Because the Wilkins' claims arising out of alleged

misrepresentations apart from the label on the seed package

are not actionable, and their claims arising out of the label are

barred by their failure to timely institute arbitration, I would

reverse the trial court's judgment and render judgment in favor

of Helena and Hyperformer. Because the majority fails to

do so and instead affirms the trial court's judgment, I must

respectfully dissent.
Helena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)

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

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.
M
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)

42 Ed. Law Rep. 448

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

736 S.W.2d 617

Supreme Court of Texas.

Celeste Eugenia HOPKINS, a/n/f of

Celeste Adeline Hopkins, Petitioner,

v.

SPRING INDEPENDENT SCHOOL

DISTRICT et al., Respondents.

No. C–5209. | Feb. 25, 1987.

| Rehearing Denied Oct. 7, 1987.

Mother, as next friend of injured student, brought action

against school district, bus driver, principal, nurse, and

teacher for personal injuries suffered by student. The

11th District Court, Harris County, William N. Blanton,

Jr., J., granted defendants' motion for summary judgment,

and mother appealed. The Court of Appeals, 706 S.W.2d

325, affirmed, and mother appealed. The Supreme Court,

Campbell, J., held that: (1) failure of school employees to

adequately supervise children or to provide prompt medical

care for injured student was not “negligent discipline”

for purposes of statute eliminating immunity for negligent

discipline, and (2) even if student's injuries were aggravated

when she had seizures on bus, and negligent failure to

provide medical care continued while student was on bus, bus

supervisor and school district were immune from liability,

as injuries were not proximate result of use or operation of

school bus.

Affirmed.

Kilgarlin, J., dissented and filed opinion in which Ray and

Mauzy, JJ., joined.

West Headnotes (3)

[1] Statutes

Undefined terms

In construing statute, ordinary meaning of terms

will be applied if legislature does not define

terms.

36 Cases that cite this headnote

[2] Education

Injuries by other students

Education

Other particular injuries to students

Failure of school employees to supervise

children or to obtain prompt medical care for

student injured at school was not “negligent

discipline” for purposes of statute eliminating

immunity of school employees for injuries

arising from their negligent discipline of

students. V.T.C.A., Education Code § 21.912.

42 Cases that cite this headnote

[3] Education

Duties and liabilities in general

Education

Other particular injuries to students

Even if student's injuries were aggravated when

she had seizures on school bus, and school

officials were negligent in failing to provide

adequate medical care, school district and bus

supervisor were immune from liability for

injuries sustained when student struck her head

during school, as injury was not proximate result

of use or operation of school bus. V.T.C.A.,

Education Code § 21.912; V.T.C.A., Civil

Practice and Remedies Code § 101.051.

30 Cases that cite this headnote

Attorneys and Law Firms

*617 Victor R. Rodriguez, Hocker, Rodriguez & Morrow,

George W. Wilhite, Wilhite, Gilbreath, Squier, Hamm &

Caridi, Inc., Houston, for petitioner.

Daryl G. Dursum, Coats, Yale, Holm & Lee, James A.

McDaniel, Houston, for respondents.

Opinion

CAMPBELL, Justice.

This is an appeal from a summary judgment rendered

for Spring Independent School District and several of its

employees. The court of appeals affirmed the trial court's

judgment. 706 S.W.2d 325. We affirm the judgment of the

court of appeals.
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)

42 Ed. Law Rep. 448

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Celeste Adeline Hopkins, a student at an elementary school in

the Spring Independent School District, suffers from cerebral

palsy. Her mother, Celeste Eugenia Hopkins, alleges that

while the students were left unsupervised Celeste Adeline was

pushed into a stack of chairs and sustained a head injury.

She had mild convulsions, developed cold sweats and became

dazed and incoherent. The teacher did not call for help or

send her to the school nurse. Later, an occupational therapist

noticed her condition and took her to the nurse, who told

Celeste Adeline to stay at school. The nurse did not contact

her mother, an employee *618 of the school district, and did

not contact her doctors, although the school knew the names

of the doctors.

At the end of the school day, Celeste Adeline rode on

the school bus to the day care center. She suffered severe

convulsions while on the bus. The bus driver contacted a

supervisor, requesting a school nurse be provided at the next

stop, but none was provided. The driver was told to take her

to the day care center, where she finally received medical

treatment.

Two years later Celeste Adeline's mother sued Spring I.S.D.,

the bus supervisor, the school principal, the school nurse and

the teacher. She claimed the school personnel's negligence

and gross negligence in failing to provide adequate care

dramatically decreased Celeste Adeline's life expectancy.

Summary judgment was rendered for the school district and

the employees based on the immunity granted the school

district under the Tort Claims Act and the employees under

the Education Code.

We are asked to abrogate the immunity enjoyed by school

district employees under section 21.912 of the Texas

Education Code. This would require us to overrule the recent

Supreme Court case of Barr v. Bernhard, 562 S.W.2d 844

(Tex.1978).

Mrs. Hopkins contends that school personnel should be liable

for their negligent acts which result in serious bodily injury

to students. The Texas Education Code, section 21.912,

provides tort immunity to professional school employees

except:

No professional employee of any

school district within this state shall be

personally liable for any act incident

to or within the scope of the duties

of his position of employment, and

which act involves the exercise of

judgment or discretion on the part of

the employee, except in circumstances

where professional employees use

excessive force in the discipline of

students or negligence resulting in

bodily injury to students.

Tex.Educ.Code Ann. § 21.912 (Vernon Supp.1986). This

statute was construed in Barr v. Bernhard. This court held a

professional school employee is not personally liable for acts

done within the scope of employment and which involve the

exercise of judgment or discretion, except when disciplining

a student the employee uses excessive force or negligence

which results in bodily injury to the student. Barr, 562 S.W.2d

at 849.

The Barr court held the statute is ambiguous because “it is

inaccurate to say that a person ‘uses negligence’; negligence

occurs as a result of an act or omission by an individual.”

Therefore, the court determined the legislative intent of the

statute. Id. at 848. The court concluded that when subsection

(b) is read in conjunction with subsection (c), an interpretation

that the last clause of subsection (b) subjects employees

to liability for any negligent act which results in bodily

injury is untenable. Subsection (c) states, “This section is

not applicable to the operation, use, or maintenance of any

motor vehicle.” The court reasoned that if subsection (b)

were read to exclude from immunity all negligent acts of

school employees, not merely those incident to discipline,

there would be no need for subsection (c) to explicitly negate

immunity in the operation, use, or maintenance of a motor

vehicle.

Barr was decided eight years ago, and the legislature has had

ample time to change the statute if that construction did not

comport with legislative intent. It has not done so. Indeed, the

legislature has broadened the immunity provided by section

21.912(b) by enacting section 13.906 of the Texas Education

Code in 1981 and section 13.503 in 1984.

Section 13.906(a) applies to student teachers:

A person assigned to perform student

teaching in a student teacher center is

entitled to the same protection of law

accorded to the supervising teacher

and the principal of the school in

which the student teacher serves or

acts in the course of employment.
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)

42 Ed. Law Rep. 448

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

This protection includes the limitation

of liability accorded all professional

employees as specified in Section

21.912 of this Code. While serving as a

student teacher, a person shall comply

with the rules of the school and of the

board of trustees of the district *619

serving as the student teacher center.

Tex. Educ.Code Ann. §§ 13.503, 13.906(a) (Vernon

Supp.1986). Subsection (c) of section 13.503 states: “A noncertified teacher is immune from personal liability for acts

or omissions in the scope of employment to the same extent

that a certified teacher is immune....” The Barr decision had

been law for three years when the earliest of these statutes

was passed. The legislature had time to consider Barr' s effect

and chose to add to, not abrogate, the immunity granted by

section 21.912. This court stated in Barr, “We will adhere

to our decisions in the past that the waiver of governmental

immunity is a matter to be addressed by the legislature.” Lowe

v. Texas Tech University, 540 S.W.2d 297 (Tex.1976).

Hopkins also contends the school employees could be

liable under section 21.912 because their actions constituted

“negligent discipline.” She claims the child was disciplined

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.”

[1] [2] In construing a statute, if the legislature does not

define a term, its ordinary meaning will be applied. Satterfield

v. Satterfield, 448 S.W.2d 456 (Tex.1969). “Discipline” in the

school context ordinarily describes some form of punishment.

The opinion in Diggs v. Bales describes “negligent discipline”

as “punishment [which] involves no force, but rather requires

some action on the part of the student as a result of which

the student suffers bodily injury,” as in ordering a student to

run laps. 667 S.W.2d 916, 918 (Tex.App.—Dallas 1974, writ

ref'd n.r.e.) We hold “negligent discipline” is not involved.

Hopkins also asserts the court of appeals erred in holding the

school district and the bus supervisor immune from liability

under the Texas Tort Claims Act. That Act grants immunity

to school districts and their employees from liability for

damages caused by negligence except in circumstances

relating to the use, maintenance or operation of motor

vehicles. Tex.Civ.Prac. & Rem. Code Ann. § 101.051

(Vernon 1986) (formerly article 6252–19 § 19A).

[3] Hopkins argues the school district and the bus supervisor

cannot claim this immunity because 1) the child's injuries

were aggravated when she had seizures on the bus and

2) the defendants were negligent in failing to provide

adequate medical care. Therefore, she claims, the injuries

arose from the “use or operation of a motor vehicle.”

Several Texas courts have held that when injuries are not

the proximate result of the use or operation of the school

bus, but the bus provides the setting for the injury, the

actions do not fall within the section 101.051 exception to

immunity. See Jackson v. City of Corpus Christi, 484 S.W.2d

806 (Tex.Civ.App.—Corpus Christi 1972, writ ref'd n.r.e.);

Brantley v. City of Dallas, 545 S.W.2d 284 (Tex.Civ.App.—

Amarillo 1976, writ ref'd n.r.e.); Estate of Garza v. McAllen

Independent School District, 613 S.W.2d 526 (Tex.Civ.App.

—Beaumont 1981, writ ref'd n.r.e.); Pierson et al. v. Houston

Independent School District et al., 698 S.W.2d 377 (Tex.App.

—Houston [14th Dist.] 1985, writ ref'd n.r.e.). Applying the

common and ordinary meaning of the words “operation” and

“use”, Celeste Adeline's injury could not have arisen from the

use of a motor vehicle as contemplated by the statute.

We remain committed to our original interpretation of section

21.912 of the Education Code. The judgment of the court of

appeals is affirmed.

KILGARLIN, J., dissenting, joined by RAY and MAUZY, JJ.

KILGARLIN, Justice, dissenting.

I respectfully dissent. Even if the court were correct in its

adherence to Barr v. Bernhard, 562 S.W.2d 844 (Tex.1978),

this cause would have to be reversed and remanded as

to the defendant Charles Bammel, Spring's Director of

Transportation.

By its clear language, Tex.Educ.Code Ann. § 21.912(b)

is applicable to professional school district employees.

Bammel's summary judgment proof does not *620 place

him in this category. While his affidavit states his job involves

the exercise of judgment or discretion, it fails to state his

employment requires certification, as mandated by section

21.912(d).

But, I would go further. I would overrule Barr v. Bernhard.

The court's holding in that case was a product of faulty

reasoning and conflicts with a majority of other jurisdictions

which have followed the prevailing authority that the
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)

42 Ed. Law Rep. 448

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tort immunity of the school does not preclude liability

of professional school employees for their negligence. 1

Commentators have also recognized that teachers may be

liable to pupils for their negligence. 2 It is noteworthy that

the court in this cause does not attempt to justify such faulty

reasoning. Rather, the court says that because Bernhard has

not been overruled by the legislature, it must be correct.

This obeisance to a misguided notion of what constitutes

legislative intent is disheartening. When one considers all of

the rules operative in the respective houses of the legislature

that prevent proposed legislation from even coming to a vote,

it cannot be contended that legislative inaction amounts to

legislative intent. Nevertheless, such argument is repetitive of

the contention made by the dissent in Sanchez v. Schindler,

651 S.W.2d 249, 256 (Tex.1983). However, this court

disposed of that thesis by saying “[i]naction of the legislature

cannot be interpreted as prohibiting judicial reappraisal of the

judicially created pecuniary loss rule. Bedgood v. Madalin,

600 S.W.2d 773, 780 (Tex.1980) (Spears, J., concurring).

‘[A] legislature legislates by legislating, not by doing nothing,

not by keeping silent.’ Wycko v. Gnodtke, 361 Mich. 331, 105

N.W.2d 118, 121–22 (Mich.1960).”

Moreover, the court is extremely inconsistent in its

application of its misguided concept of legislative intent.

Almost contemporaneous with the handing down of this

opinion is the rendition of the opinion in Crawford v.

Coleman, 726 S.W.2d 9 (Tex.1987), wherein this court

overruled Deveroex v. Nelson, 529 S.W.2d 510 (Tex.1975).

Like this case, both of those cases involved interpretation of

statutory language. This court was not deterred in Crawford

from giving a new interpretation to Tex.Ins.Code Ann. art.

21.23, although the legislature had over eleven years in which

to amend the statute if it were dissatisfied with Deveroex.

Yet, the legislature has remained silent. Like Justice Spears

in Sanchez, I do not consider legislative inactivity to be

legislative intent. All that I ask of my colleagues who do, is

that they apply that concept uniformly. If legislative *621

inaction could not save Deveroex, why should it be used to

preserve Bernhard? While I dissented in Crawford, I at least

did so by giving support to the logic expressed in Deveroex,

which is more than can be said for this court's silence as to

the reasoning of Barr v. Bernhard.

If the court was wrong in Bernhard, we should admit so,

rather than reaffirming it simply because seven other jurists

reached a different conclusion from what we think right. As

Associate Justice Livington Lindsay, speaking for the court,

said over a century ago:

Certainly, in all doubtful cases, precedent and former

adjudication of what the law may be should have great

weight with all courts. But all courts would but subserve the

interest of society and fulfill the obligations of conscience,

by the observance of that remarkable institute of Justinian,

so replete with wisdom and so pre-eminently just, in which

it is ordered: ‘Let no judge or arbiter believe himself bound

to follow official opinions which he holds not to be correct;

nor even the judgment of the prefect or other magnates;

nor those of the supreme court of prefecture and of other

supreme courts; but we commend all our judges to follow

truth, justice and law. It does not seem good to us, that if

one judge decide wrong, his error should be extended to

others. The decision of the judge should be founded on law,

and not on precedents.’

Myers v. State, 33 Tex. 525, 542 (1870).

There can be little doubt that the court was wrong in its

conclusions as to legislative intent in Barr v. Bernhard.

Section 21.912 of the Texas Education Code became law

in 1971. Its origin was S.B. 74 introduced by Senator

Snelson of Midland. Section two of that bill provided that

“no employee of any school district ... shall be personally

liable for any act ... which act involves the exercise of

judgment or discretion on the part of the employee.”

Section three of the bill defined “employee” as including

“superintendents, principals, classroom teachers, counselors

and other employees of a school district whose employment

requires an exercise of discretion.”

The bill was amended in the Senate Education Committee

to change “employee” to “professional employee” and add

after “judgment or discretion on the part of the employee”

the language “except in circumstances where professional

employees use excessive force in the discipline of students.”

The definition of “professional employee” was changed

to read “whose employment requires certification and an

exercise of discretion” and to add “supervisors” to the

laundry list. After the bill, as amended by the Education

Committee, was favorably reported to the Senate, Senator

Snelson successfully tacked on two floor amendments, the

first one reading “[a]mend committee amendment to S.B. 74,

sec. 2, by striking the period at the end of the paragraph

following the word ‘students' and adding the following: ‘or

negligence resulting in bodily injury to students'.” That left

the bill in the form of the language ultimately adopted.
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)

42 Ed. Law Rep. 448

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The general rule in respect to statutory interpretation is that

“[c]ourts should carefully search out a statute's intent, giving

full effect to all of its terms. ‘But they must find its intent in

its language and not elsewhere. They are not the lawmaking

body. They are not responsible for omissions in legislation’.”

Seay v. Hall, 677 S.W.2d 19, 25 (Tex.1984). However, a

different rule attains when the statute is ambiguous. Section

21.912(b) of the Education Code is clearly ambiguous, as

was recognized by the court in Bernhard, 562 S.W.2d at 848.

Whether it was inartful drafting, or what, it is erroneous to say

that one “uses” negligence. If a statute is ambiguous, a court,

in interpreting that statute, is justified in looking to legislative

intent. Huntsville Independent School District v. McAdams,

148 Tex. 120, 221 S.W.2d 546 (1949).

Fortunately, we have a clear expression of legislative intent

in regards to section 21.912(b) in the form of a bill analysis

prepared by the House Committee on Judiciary when it

considered S.B. 74 after the measure, incorporating the

Snelson floor *622 amendments, passed the Senate. That

bill analysis states that the exception to non-liability of an

employee is “where the employee uses excessive force or is

negligent ” (emphasis added). The amended Senate version

passed the House intact and became law. Yet, the court in

Bernhard totally overlooked this important item of legislative

history. Instead, it rewrote the statute to in effect read that

a professional school employee was not personally liable

for acts done except in circumstances where disciplining a

student, the employee uses excessive force or his negligence

results in bodily injury to the student.

To reach its conclusion, the Bernhard court put great

emphasis on the conflict that would exist if liability were

imposed upon professional employees for their negligence

and the fact that the second Snelson floor amendment made

the statute inapplicable to the operation, use, or maintenance

of a motor vehicle. The court said “[i]f the interpretation

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

covered by the broader provisions of subdivision (b).” 562

S.W.2d at 849. This judicial legerdemain, if unexamined,

has initial appeal. However, it is plagued with one major

inconsistency. Paragraph (b) of section 21.912 deals with

liability of professional employees to students. Paragraph (c)

is an imposition of liability for all school district employees,

professional or otherwise, not just as to students, but to

the world at large, for their acts of negligence when motor

vehicles are involved. As was observed in a Comment,

Liability of Public Officials For Their Tortious Acts, 16

Hous.L.Rev. 100, 115 (1978):

This latter provision would be

rendered meaningless only if the

earlier provision encompassed all

negligent activities involving motor

vehicles that the latter language

covered. That the earlier section does

not purport to do, however. By its

terms, it empowers only students

suffering from negligently inflicted

‘bodily injury ’ to recover from official

malefactors; by its terms, it declines to

regulate personal or property injuries

to non-students. In contrast, the latter

subsection permits student and nonstudent alike to recover from officials

unreasonably operating, using, or

maintaining motor vehicles, whether

they sue for personal or property

damages.

Thus, it can be readily seen that the motor vehicle exemption

is not rendered meaningless by an interpretation that

professional school employees are liable for their negligent

acts towards students.

Justice Sam Johnson articulated in his dissent in Bernhard

many of the arguments that I have presented here, and with the

exception of Justice Pope, met with the same lack of success

as I have in the convincing of colleagues. Nevertheless, I

believe that the court has erred, and therefore I dissent.

RAY and MAUZY, JJ., join in this dissenting opinion.

All Citations

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.
Hopkins v. Spring Independent School Dist., 736 S.W.2d 617 (1987)

42 Ed. Law Rep. 448

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

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

41 Tex. Sup. Ct. J. 268

962 S.W.2d 507

Supreme Court of Texas.

JOHNSON & HIGGINS OF TEXAS, INC., Petitioner,

v.

KENNECO ENERGY, INC., f/k/a Armada Supply Inc.,

Respondent.

No. 96–0244. | Argued Oct. 22, 1996. | Decided Jan.

16, 1998. | Dissenting Opinion Dec. 7, 1997.

After defending against similar suit in federal court, insurance

broker filed declaratory judgment action in state court to

determine its liability for insured's marine cargo. The 133rd

District Court, Harris County, Lamar McCorkle, J., entered

judgment in favor of broker, notwithstanding jury verdict in

favor of insured, and insured appealed. The Court of Appeals,

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

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,

they were barred by collateral estoppel; (3) insured's claim

based on insurance broker's breach of alleged agreement to

secure contingency coverage was not barred by collateral

estoppel; (4) broker's misrepresentation as to insured's

coverage did not amount to fraud; (5) under common law,

prejudgment interest begins to accrue on earlier of 180 days

after date defendant receives written notice of claim or date

suit is filed; and (6) prejudgment interest must be calculated

as simple interest.

Judgment of Court of Appeals modified and remanded with

directions.

Hecht, J., filed dissenting opinion, in which Gonzalez and

Owen, JJ., joined, and in part II of which Spector, J., joined.

West Headnotes (32)

[1] Limitation of Actions

Causes of action in general

Cause of action generally accrues, and statute of

limitations begins to run, when facts come into

existence that authorize claimant to seek judicial

remedy.

93 Cases that cite this headnote

[2] Limitation of Actions

Negligence

Insured sustained injury when coverage for loss of

profits on its oil shipment was denied, and,

therefore, limitations period on insured's cause of

action against broker for negligent breach of duty

to obtain insurance commenced on that date; all

facts required for cause of action existed at that

time.

15 Cases that cite this headnote

[3] Limitation of Actions

Estoppel to rely on limitation

Equitable estoppel did not bar insurance broker's

assertion of its limitations defense to insured's

negligence action, even though jury answered

“yes” to question of whether insured's failure to

take action earlier was caused by insurance broker

knowingly engaging in conduct solely calculated

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

submitted as independent, common-law issue.

3 Cases that cite this headnote

[4] Estoppel

Essential elements

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41 Tex. Sup. Ct. J. 268

Doctrine of equitable estoppel requires: (1) false

representation or concealment of material facts;

(2) made with knowledge, actual or constructive,

of those facts; (3) with intention that it should be

acted on; (4) to party without knowledge or

means of obtaining knowledge of facts; (5) who

detrimentally relies on representations.

98 Cases that cite this headnote

[5] Insurance

Duties and liabilities to insureds or other third

persons

On issue of applicable statute of limitations, jury

question whether insurance broker engaged in

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

language mirrored language of Insurance Code

provision, and question was taken from pattern

jury charge that referred to insurance code

provision, rather than DTPA. V.A.T.S. Insurance

Code, art. 21.21; V.T.C.A., Bus. & C. §

17.50(a)(4).

4 Cases that cite this headnote

[6] Antitrust and Trade Regulation

Insurance

Insurance

Of Insurers

If violations of Insurance Code and Deceptive

Trade Practices-Consumer Protection Act

(DTPA) are alleged, but only one cause of action

is submitted, that claim is not automatically

DTPA claim. V.A.T.S. Insurance Code, art.

21.21; V.T.C.A., Bus. & C. § 17.50(a)(4).

3 Cases that cite this headnote

[7] Antitrust and Trade Regulation

Time to Sue; Limitations

Insurance

Duties and liabilities to insureds or other third

persons

Two-year statute of limitations provision of

Deceptive Trade Practices-Consumer Protection

Act (DTPA) applied to insured's cause of action

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

certain sections of DTPA. V.A.T.S. Insurance

Code, art. 21.21, § 16(d); V.T.C.A., Bus. & C. §

17.50(a)(4).

11 Cases that cite this headnote

[8] Limitation of Actions

Limitation as affected by nature or form of

remedy in general

When statute lacks express limitations period,

courts look to analogous causes of action for

which express limitations period is available

either by statute or by case law.

4 Cases that cite this headnote

[9] Judgment

Persons not parties or privies

“Defensive collateral estoppel” is utilized by

defendants to prevent relitigation by plaintiff of

issues previously lost against another defendant.

27 Cases that cite this headnote

[10] Judgment

Matters actually litigated and determined

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41 Tex. Sup. Ct. J. 268

Collateral estoppel may preclude relitigation of

issues previously litigated even though

subsequent suit is based upon different cause of

action.

16 Cases that cite this headnote

[11] Judgment

Identity of Issues, in General

Judgment

Matters actually litigated and determined

Judgment

Essentials of Adjudication

If cause of action in second lawsuit involves

element already decided in first lawsuit, that cause

of action is barred under doctrine of collateral

estoppel; for this to be true, however, issue

decided in first action must be actually litigated,

essential to that lawsuit's judgment, and identical

to issue in pending action.

3 Cases that cite this headnote

[12] Judgment

Operation and effect

To extent insured's fraud and breach of contract

claims against broker were based on failure to

secure lost profits coverage, they were barred by

collateral estoppel in state court lawsuit against

insurance broker, even though federal district

court's findings of no coverage were based on

alternative findings of no agreement and no

authority; appellate court reviewed and affirmed

those findings, and they were thus essential to

judgment. Restatement (Second) of Judgments §

27 comment.

Cases that cite this headnote

[13] Judgment

Essentials of Adjudication

Exception exists to general rule of no issue

preclusion based on alternative holdings if they

are appealed and affirmed. Restatement (Second)

of Judgments § 27 comment.

8 Cases that cite this headnote

[14] Judgment

Operation and effect

Insured's claim based on insurance broker's

breach of alleged agreement to secure

contingency coverage was not barred by collateral

estoppel, even though parties had brought

previous suit in federal district court, where

federal courts never addressed whether agreement

was made to secure contingency coverage.

Cases that cite this headnote

[15] Fraud

Elements of Actual Fraud

Elements of common-law fraud are that: (1)

material representation was made; (2)

representation was false; (3) when representation

was made, speaker knew it was false or made it

recklessly without any knowledge of truth and as

positive assertion; (4) representation was made

with intention that it be acted upon by other party;

(5) party acted in reliance upon representation;

and (6) party suffered injury.

128 Cases that cite this headnote

[16] Judgment

Operation and effect

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41 Tex. Sup. Ct. J. 268

To extent that insured's state court fraud claim

was based on its allegation that insurance broker

knowingly or recklessly represented that insured's

lost profits on oil purchase contract were insured,

it was barred by collateral estoppel in that federal

court had already concluded in earlier lawsuit that

no such representation was made; however,

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

because that issue was not decided in federal suit.

Cases that cite this headnote

[17] Judgment

Operation and effect

Insurance broker's involvement in prior federal

action as witness on behalf of insured did not

extinguish collateral estoppel effect of federal

court's findings, with respect to insured's state

court action against broker, despite insured's

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.

1 Cases that cite this headnote

[18] Judgment

Operation and effect

Lack of opportunity for jury trial in federal court

did not, in and of itself, preclude application of

defensive collateral estoppel in state court.

Cases that cite this headnote

[19] Damages

Construction and operation

When prevailing party does not elect measure of

damages from among alternative measures, courts

should render judgment based on finding

affording greatest recovery.

2 Cases that cite this headnote

[20] Insurance

Duties and liabilities to insureds or other third

persons

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

broker recklessly misrepresented the coverage;

although broker should have known that his

representations may have been incorrect, such

evidence was akin to negligent misrepresentation,

not fraud.

2 Cases that cite this headnote

[21] Fraud

Knowledge of defendant

Fraud

Statements recklessly made; negligent

misrepresentation

Statement is not fraudulent unless speaker knew

it was false when made or speaker made it

recklessly without knowledge of truth.

34 Cases that cite this headnote

[22] Fraud

Falsity of representations and knowledge

thereof

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41 Tex. Sup. Ct. J. 268

Proof that defendant made statement knowing of

its falsity or without knowledge of its truth may

be proved by direct or circumstantial evidence.

14 Cases that cite this headnote

[23] Fraud

Statements recklessly made; negligent

misrepresentation

Speaker acts recklessly if he makes

representations without any knowledge of truth

and as positive assertion.

43 Cases that cite this headnote

[24] Insurance

Actions

Jury's finding that insurance broker breached

contract with insured to secure contingency

coverage for oil shipment was supported by

evidence demonstrating that either broker sold

insured insurance it did not need, or broker

agreed to sell insured additional coverage, which

broker ultimately did not do.

Cases that cite this headnote

[25] Interest

Prejudgment Interest in General

“Prejudgment interest” is compensation allowed

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.

Vernon's Ann.Texas Civ.St. art. 5069–1.01(a)

(Repealed).

104 Cases that cite this headnote

[26] Interest

Prejudgment Interest in General

There are two legal sources for award of

prejudgment interest: (1) general principles of

equity and (2) an enabling statute.

48 Cases that cite this headnote

[27] Interest

Torts; wrongful death

Tort reform statute providing that judgments in

wrongful death, personal injury, and property

damage cases must include prejudgment interest

applies only to wrongful death, personal injury,

and property damage cases. Vernon's Ann.Texas

Civ.St. art. 5069–1.05, § 6(a) (Repealed).

46 Cases that cite this headnote

[28] Interest

Insurance matters

Although contract concerned insurance coverage

for damages to insured's property by third party,

statute providing for prejudgment interest in

property damage cases did not apply where

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

coverage; thus, any recovery for prejudgment

interest would be governed by common law.

Vernon's Ann.Texas Civ.St. art. 5069–1.05, §

6(a) (Repealed).

56 Cases that cite this headnote

[29] Interest

Prejudgment Interest in General

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41 Tex. Sup. Ct. J. 268

Under common-law, prejudgment interest begins

to accrue on earlier of (1) 180 days after date

defendant receives written notice of claim or (2)

date suit is filed. Vernon's Ann.Texas Civ.St. art.

5069–1.05, § 6(a) (Repealed).

112 Cases that cite this headnote

[30] Interest

Insurance matters

Insured's standstill agreement with broker

delaying state court suit pending outcome of

federal suit against insurers was “written notice of

a claim” that triggered accrual of prejudgment

interest 180 days from date of agreement;

agreement preserved all of insured's rights,

including right to prejudgment interest, and all of

broker's liabilities.

78 Cases that cite this headnote

[31] Interest

Stay of proceedings

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;

however, parties may contractually provide

otherwise.

4 Cases that cite this headnote

[32] Interest

Mode of computation in general

Equitable prejudgment interest should be

computed as simple interest. Vernon's Ann.Texas

Civ.St. art. 5069–1.05, § 6(g) (Repealed).

32 Cases that cite this headnote

Attorneys and Law Firms

*511 Joe R. Greenhill, Bob E. Shannon, Austin, Stephen G.

Tipps,Jane A. Bland, Robert Harrison Pemberton, Amy Eikel,

Houston, for Petitioner.

John L. Russell, David J. Mullican, Jr., Robert Eikel, George

E. Pletcher, Kimberly Ann Warren Brown, Nina Cortell,

Houston, for Respondent.

Opinion

ABBOTT, Justice delivered the opinion of the Court, in which

PHILLIPS, Chief Justice, ENOCH, BAKER and

HANKINSON,Justices, join. SPECTOR,Justice, joined Parts

I, II, III, and IV of the Court's opinion.

We withdraw our opinion of December 11, 1997, and

substitute the following in its place. The parties' motions for

rehearing are overruled.

This insurance case involves statute of limitations and

collateral estoppel issues, and reevaluates the common-law

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

favor of Johnson & Higgins, and rendered judgment for

Kenneco Energy. We modify the court of appeals' judgment

and remand the cause to the trial court to render judgment in

accordance with this opinion.

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

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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

“C.I.F.” basis, meaning that Petrobas bore the cost of

shipment, insurance, and freight.

Petrobas purchased insurance for the cargo from Banorte, a

Brazilian underwriter, for the amount of the purchase price,

plus ten percent. This amount was the “primary coverage.” In

addition to the insurance provided by Petrobas, Kenneco

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).

The oil tanker sailed November 16, 1982. While the tanker

was en route, Kenneco contracted to sell the oil, upon delivery

in New York Harbor, to Sun Oil Trading Company (Sun) for

$30.55 per barrel. This contract was on a “delivered” basis

(rather than a C.I.F. basis), meaning that Kenneco retained

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

the purchase price to be determined by the market price upon

delivery.

After the tanker set sail, the market price of the oil began to

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

primary coverage amount under the Brazilian insurance

policy, which was tied to the market price Kenneco would pay

to Petrobas (plus ten percent), declined. Concerned about the

adequacy of insurance coverage for its increasing potential

profit, anticipated to be $1.5 million, Kenneco arranged a

meeting with J & H to discuss coverage under the London

policy. On November 30, 1982, while *512 the tanker of fuel

sailed to New York, Kenneco sent Carolyn Brown to meet

with Jim Anderson of J & H to discuss coverage.

According to Kenneco, Brown met with J & H to address two

primary concerns. First, Kenneco was worried that it would be

unable to collect on a claim under the Banorte policy because

Kenneco had heard that the Brazilian insurers had a dubious

reputation. To avoid that potential problem, Kenneco wanted

to claim the primary coverage amount directly from the

London underwriters. In essence, Kenneco wanted assurance

from the London underwriters that it would be able to recover

the amount insured by Banorte.

In response, Anderson prepared a certificate of insurance

under the contingency coverage Kenneco already had with the

London underwriters. Anderson did not, however, offer the

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

stated that contingency coverage required a back-to-back

C.I.F. sale, meaning that both the sale from Petrobas to

Kenneco and the sale from Kenneco to Sun needed to be

C.I.F.

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

would take title and accordingly bear the risk of loss of the

cargo during transport. In a back-to-back C.I.F. sale, Kenneco

would prepare a certificate of insurance under its contingency

coverage and deliver it to the purchaser of the cargo, who

would then replace Kenneco as the party asserting a claim.

As it turned out, the sale from Kenneco to Sun was contracted

on a delivered basis, not C.I.F.; therefore, Kenneco retained

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

their insurance obligations.

The second concern Brown expressed to J & H was that the

primary coverage through Banorte was insufficient to cover its

profits on the deal because Banorte insured only the purchase

price (i.e., the market price) plus ten percent. Kenneco wanted

to insure against the loss of the sizable profit it would make on

the Sun contract. Anderson responded by preparing a

certificate under Kenneco's preexisting increased value

coverage, increasing the insured value of the cargo from the

market price plus ten percent (the primary coverage amount)

to the contract amount of $30.55 per barrel (thereby including

the profit).

In preparing both certificates, Anderson apparently did not

realize that Kenneco could not recover under both the

increased value provision, under which Kenneco retained title

and bore the risk of loss, and the contingency coverage

provision, under which Kenneco's buyer held the title and the

risk. Nevertheless, Brown discerned from her meeting with

Anderson that Kenneco was protected by “contingency

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

the contingency coverage and the increased value coverage.

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41 Tex. Sup. Ct. J. 268

When the tanker arrived in New York Harbor, Sun rejected the

cargo and canceled the contract because the oil arrived both

short and contaminated. Before leaving Brazil, the cargo was

apparently deficient by 8,000 barrels. In addition, the tanker

crew used some of the cargo as fuel during the voyage,

pumping in seawater to replace the depleted amount.

Sun rescinded the contract. Had it not, Kenneco's profits

would have been about $1,690,780.00. Kenneco was able to

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,

Kenneco convinced the tanker captain to return, took control

of the cargo, and began to recondition the oil. As the

reconditioned oil became saleable, Kenneco sold it in several

parcels at various prices below the $30.55 per barrel contract

price.

Kenneco asserted insurance claims under both the Brazilian

and London policies, *513 claiming the full amount of its lost

profit under the canceled Sun contract. The London

underwriters refused Kenneco's contingency coverage because

the sale was not back-to-back C.I.F. as required under the

insurance policy. The London underwriters did recognize

coverage under the increased value provision; however, their

position was that the increased value coverage insured only

against physical loss or damage to the cargo up to the amount

insured, not the loss of profits due to cancellation of a

contract, as Kenneco urged. The London underwriters took a

formal position on the claim in March 1983, denying

contingency coverage and rejecting Kenneco's interpretation

of the increased value provision.

Kenneco filed suit against Banorte and the London

underwriters in April 1983 in New York federal district court.

Armada Supply, Inc. v. Wright, 665 F.Supp. 1047

(S.D.N.Y.1987), aff'd in part, rev'd in part, 858 F.2d 842 (2d

Cir.1988). With the contingency coverage in dispute, Kenneco

could not look solely to the London underwriters for coverage,

but had to bring suit against Banorte, which disputed

Kenneco's primary coverage. Kenneco did not name J & H as

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.

After a non-jury trial, the federal district court held that the

contingency coverage was inapplicable because the sale was

not back-to-back C.I.F. The court also concluded that the

increased value provision covered physical loss and damage,

but not the loss of the Sun contract. In determining the scope

of the lost profits and lost contract coverage, the court

considered J & H's conduct during and after the November 30

meeting to decide what agreements had been made regarding

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

F.2d 842, 851 (2d Cir.1988). The Second Circuit rendered its

decision on September 22, 1988.

While the federal action was pending in New York, Kenneco

indicated that it might file a separate suit against J & H for

mishandling its insurance needs. J & H and Kenneco signed a

standstill agreement on December 15, 1986, delaying any such

action pending the outcome of the federal litigation. The

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

determination of the New York Action.”

In June 1988, prior to the Second Circuit's decision, J & H

filed a declaratory judgment action in Texas state court,

seeking a ruling that res judicata and collateral estoppel barred

Kenneco from filing suit against it. Kenneco counterclaimed

and sought damages on a variety of claims. A jury found that

Kenneco suffered damages in the amounts of: $1,500,000 for

fraud; $1,500,000 for Insurance Code

2 violations; $1,560,000

for breach of the contract to secure lost profits coverage;

$412,273.66 for breach of the contract to secure contingency

coverage; and $1,700,000 for negligence. The jury also found

that Kenneco discovered or should have discovered the basis

for its Insurance Code claim by March 1983.

J & H moved for judgment based on the ground that the

Insurance Code and negligence claims were barred by their

respective statutes of limitations. J & H alternatively moved

for judgment notwithstanding the verdict on the grounds that:

(1) all of Kenneco's claims were barred by collateral estoppel

and res judicata, and (2) no evidence supported the jury's

findings of breach of contract and fraud. The trial court

granted J & H's motion without stating the grounds.

*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

was not barred by limitations; and (3) although Kenneco's

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negligence claim accrued in March 1983 and would otherwise

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

of Kenneco, awarding $1,972,273.66 in damages (based on

the breach of contract claims

3

), $275,000 in attorney's fees,

and $2,750,952.39 in prejudgment interest. To calculate the

prejudgment interest, the court of appeals held that the case

was controlled by Cavnar v. Quality Control Parking, Inc.,

696 S.W.2d 549 (Tex.1985), and not by Tex.Rev.Civ. Stat.

article 5069–1.05, section 6. As a result, the court of appeals

compounded the prejudgment interest on a daily basis

beginning six months from the date Sun rejected the cargo.

921 S.W.2d at 267.

We granted this application for writ of error to determine: (1)

whether limitations bars the negligence and Insurance Code

claims; (2) the appropriate preclusive effect of the federal

court judgment on the state court action under the doctrine of

collateral estoppel; and (3) the proper method for calculating

prejudgment interest on claims governed by Cavnar.

II. LIMITATIONS

J & H asserts that limitations bars Kenneco's negligence and

Insurance Code claims. We agree.

A. Negligence

The court of appeals held that Kenneco's negligence claim

against J & H accrued in March 1983, when the London

underwriters denied coverage of Kenneco's claim. 921 S.W.2d

at 262. However, it found that equitable estoppel barred J &

H's limitations defense based upon the jury's finding that

Kenneco's delay in filing suit was caused by J & H's conduct.

Id. at 265–66. In its application for writ of error, J & H asserts

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

limitations defense. Kenneco responds that the court of

appeals correctly found and applied equitable estoppel, or, in

the alternative, the court of appeals erred in determining the

date of accrual because Kenneco's negligence claim did not

arise until August 1988, the date when the Second Circuit

affirmed the district court's holding of no coverage and when

Kenneco first suffered injury. We agree with J & H that the

negligence cause of action accrued in March 1983, and that

equitable estoppel does not bar J & H's assertion of its

limitations defense.

[1] [2] A cause of action generally accrues, and the statute of

limitations begins to run, when facts come into existence that

authorize a claimant to seek a judicial remedy. Murray v. San

Jacinto Agency, Inc., 800 S.W.2d 826, 828 (Tex.1990); see

also Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351

(Tex.1990) (“[A] cause of action can generally be said to

accrue when the wrongful act effects an injury.”). Today we

are asked to decide whether, in a suit by an insured against its

agent for negligent breach of the agent's duty to obtain

insurance, the injury-producing event was the denial of

coverage by the insurance company, or the final resolution of

the coverage dispute by the courts. We hold that Kenneco

sustained injury when coverage was denied and, therefore,

limitations commenced on that date because all facts required

for a cause of action existed at that time. See Gilbreath v.

White, 903 S.W.2d 851, 856 (Tex.App.—Texarkana 1995, no

writ) (holding that legal injury occurred for purposes of

negligence action against insurance agent when insurance

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

Torstrick Ins. Agency, 712 S.W.2d 349, 350

(Ky.Ct.App.1986).

*515 In Murray v. San Jacinto Agency, Inc., 800 S.W.2d at

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

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

of action under article 21.21 of the Insurance Code accrued on

the date that insurer first denied coverage); Long v. State Farm

Fire & Cas. Co., 828 S.W.2d 125, 128 (Tex.App.—Houston

[1st Dist.] 1992, writ denied) (holding that a cause of action

under the DTPA accrues on the date that coverage is denied).

We believe that the reasoning of Murray is equally applicable

to Kenneco's negligence claim.

Although Arnold v. National County Mut. Fire Ins. Co., 725

S.W.2d 165, 168 (Tex.1987), held that limitations on a bad

faith claim does not begin to run until the underlying contract

claims are finally resolved, that rule was expressly modified in

Murray by our holding that limitations runs when coverage is

denied because, at that time, the insured “ha[s] sufficient facts

to seek a judicial remedy.” Murray, 800 S.W.2d at 829.

Kenneco's position that its negligence cause of action did not

accrue until the underlying coverage dispute was resolved “is

not consistent with the rule that limitations commences at the

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41 Tex. Sup. Ct. J. 268

time facts come into existence which authorize a claimant to

seek a judicial remedy.” Id. Regardless of whether a coverage

suit was ever filed against the London underwriters, sufficient

facts existed when coverage was denied in March 1983 for

Kenneco to seek a judicial remedy against J & H for

negligence.

Kenneco's reliance on Atkins v. Crosland, 417 S.W.2d 150

(Tex.1967), is misplaced. Atkins involved a suit by a taxpayer

against his accountant for negligence. We held that the statute

of limitations did not begin to run against the taxpayer in that

case until his tax deficiency was assessed by the IRS because

“[p]rior to assessment the plaintiff had not been injured.” Id.

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

accrued in March 1983, and the two-year limitations period

had run when Kenneco and J & H signed the standstill

agreement in 1986.

[3] We also hold that equitable estoppel does not bar J & H's

assertion of its limitations defense. The court of appeals, citing

Neeley v. Bankers Trust Co. of Texas, 757 F.2d 621, 632 & n.

14 (5th Cir.1985), found the jury's affirmative answer to the

following question to be equivalent to a finding of equitable

estoppel:

Was Kenneco's (Armada's) failure to take

action before December 15, 1986 [the date of

the standstill agreement], caused by J & H's

knowingly engaging in conduct solely

calculated to induce Kenneco (Armada) to

refrain from or postpone filing suit?

921 S.W.2d at 263.

J & H argues that this question is an insufficient

submission of equitable estoppel and that it was

merely a submission of the 180–day limitations

extension available under article 21.21,section 16(d)

of the Insurance Code or section 17.565 of the

DTPA. We agree. Section 16(d) provides:

The period of limitation provided in this

section may be extended for a period of 180

days if the person bringing the action proves

that the failure to timely commence the action

was caused by the defendant's engaging in

conduct solely calculated to induce the

plaintiff to refrain from or postpone the

commencement of the action.

Tex. Ins.Code art. 21.21, § 16(d) (emphasis added).

Section 17.565 of the DTPA contains virtually

identical language. Tex. Bus. & Com.Code § 17.565.

Kenneco's question tracks the language of sections

16(d) and 17.565 almost verbatim and submits the

exact question suggested by Pattern Jury Charge

102.23 for the 180–day extension under both

statutes.

[4] In contrast to thatstatutory language, the doctrine

of equitable estoppel requires: (1) a false

representation or concealment of material facts; (2)

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

means of obtaining knowledge of the facts; (5) who

detrimentally relies on the representations.

Schroeder v. Texas Iron Works, Inc., 813 S.W.2d

483, 489 (Tex.1991). Kenneco's jury question

clearly does not address most of the equitable

estoppel elements.

4 Even if the question could be

characterized as a partial submission of the equitable

estoppel issue, the language submitted is not

“necessarily referable” to equitable estoppel and

therefore should not be characterized as such on

appeal. Tex.R. Civ. P. 279; see also Martin v.

McKee Realtors, Inc., 663 S.W.2d 446, 446

(Tex.1984); Gold Kist, Inc. v. Carr, 886 S.W.2d

425, 431 (Tex.App.—Eastland 1994, writ denied)

(holding that jury question relating to breach of

contract and fraud did not necessarily refer to

promissory estoppel to the extent that defendant

would be put on notice of possibility of deemed or

express findings on that theory).

Furthermore, Kenneco's question was clearly

submitted as part of the DTPA/Insurance Code

claim—the jury was instructed not to answer it

unless it found that J & H had engaged in an “unfair

or deceptive act or practice” that was a producing

cause of damages to Kenneco. The question was not

submitted as an independent common-law issue.

Therefore, the wording of the question and its

placement after other questions concerning statutory

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41 Tex. Sup. Ct. J. 268

claims reveal that it was an attempt to submit the

180–day extension issue, either under the Insurance

Code or the DTPA. Because Kenneco's jury question

is a correct submission of the statutory 180–day

extension under the DTPA and Insurance Code, J &

H could not have objected to the question as

improperly submitted.

Further, holding that an affirmative answer to this

jury question, which tracks the language of sections

16(d) and 17.565, is equivalent to a finding of

equitable estoppel renders the 180–day extension

language meaningless in actions under the DTPA

and the new Insurance Code; anytime the question is

submitted, a “yes” answer would arguably establish

equitable estoppel and wholly preclude a defendant's

limitations defense instead of just allowing the

180–day extension.

In sum, J & H is not estopped from asserting its

limitations defense and Kenneco's negligence claim

is barred by the statute of limitations.

B. Insurance Code

1. Insurance Code vs. DTPA

[5] Kenneco asserted causes of action under the

DTPA and Insurance Code article 21.21. Under each

cause of action, Kenneco argued incorporation of the

other cause of action. On those issues, Kenneco

submitted a single liability question to the jury:

Did Johnson & Higgins engage in any unfair

or deceptive act or practice in its dealings with

Kenneco (Armada) on or about November 30,

1982?

The parties dispute whether this jury question is

properly characterized as an Insurance Code claim

or a DTPA claim. That determination must be made

before considering the applicable statute of

limitations.

J & H asserts that Kenneco abandoned its Insurance

Code claim and submitted only a DTPA claim to the

jury, and therefore the DTPA's two-year statute of

limitations applies. J & H's position is not supported

by the record. There is no indication that Kenneco

waived the Insurance Code claim and proceeded

only with its DTPA claim.

To support its position, J & H relies on the parties'

repeated references to the cause of action submitted

to the jury as dealing with “unfair or deceptive

practices.” J & H argues that such language refers to

a DTPA cause of action and, thus, indicates that

Kenneco submitted the claim under the DTPA.

However, article 21.21 also deals with unfair or

deceptive practices.

Article 21.21 is entitled “Unfair Competition and

Unfair Practices.” *517 Tex. Ins.Code art. 21.21.

Section 3 is captioned “Unfair methods of

competition or unfair and deceptive acts or practices

prohibited.” Id. § 3. Section 16 provides a cause of

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

Insurance Code claim as well as to a DTPA claim.

[6] J & H also argues that because violations of

article 21.21 are incorporated as violations of the

DTPA, Tex. Bus. & Com.Code § 17.50(a)(4), and

because Texas courts have held that the DTPA

limitations provision should be applied to all causes

of action submitted under the DTPA, see McAdams

v. Capitol Prods. Corp., 810 S.W.2d 290, 292

(Tex.App.—Fort Worth 1991, writ denied),

limitations bars this claim since Kenneco did not

request that the trial court submit an Insurance Code

claim as an alternative cause of action. J & H's

argument fails to consider the fact that, while the

DTPA does incorporate article 21.21, the converse

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).

Thus, if both DTPA and Insurance Code violations

are alleged, but only one cause of action is

submitted, that claim is not automatically a DTPA

claim.

We agree with Kenneco that the jury question is

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41 Tex. Sup. Ct. J. 268

grounded in the Insurance Code because it mirrors

the language of article 21.21. Pattern Jury Charge

(PJC) 102.14 (1990 ed.), entitled “Question for

Article 21.21 of the Insurance Code,” was the form

used for the jury question actually submitted. The

jury question language “unfair or deceptive act or

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

unmistakably resemble the Insurance Code.

Definition (1) tracks the language of article 21.21, §

4(1) and submits PJC 102.16, entitled

“Misrepresentation or False Advertising of Policy

Contracts—Insurance.” Definition (2) tracks the

language of article 21.21, § 4(2) and submits PJC

1 0 2 .1 7 , entitle d “Fa lse Info rma tio n o r

Advertising—Insurance.” Definition (3) tracks the

language of Insurance Board Order No. 41060 and

s u b m i t s P J C 1 0 2 . 1 9 , e n t i t l e d

“Misrepresentations—Insurance.” Additionally,

Question 12 (“What amount of the damages you

found, if any, ... occurred before December 15, 1984

[two years before the date of the standstill

agreement]?”) is applicable only to causes of action

under the pre–1985 Insurance Code, which excluded

recovery for “damages incurred beyond a point two

years prior to the institution of the action.” Tex.

Ins.Code art. 21.21, § 16(d) (Vernon 1981). This

question would not have been submitted if the

underlying liability claim concerned only the DTPA.

2. Applicable Limitations Period

[7] Having determined that the claim submitted is

sufficiently grounded in the Insurance Code, we

must determine what statute of limitations applies to

an Insurance Code cause of action that accrued prior

to April 4, 1985. Under the current version of article

21.21, a party has two years from the date on which

it discovered or should have discovered its cause of

action in which to file suit. Tex. Ins.Code art. 21.21,

§ 16(d). However, before April 4, 1985, article

21.21 contained no express statute of limitations.

6

*518 Tex. Ins.Code art. 21.21, § 16(d) (Vernon

1981); Act of June 7, 1951, 52d Leg., R.S., ch. 491,

§ 1, 1951 Tex. Gen. Laws 868, 1075, amended by

Act of April 4, 1985, 69th Leg., R.S., ch. 22, §§ 3, 4,

1985 Tex. Gen. Laws 395, 395–96. The date of

accrual of the article 21.21 cause of action

determines which version of the Insurance Code

applies. See Long v. State Farm Fire & Cas. Co.,

828 S.W.2d 125, 128 (Tex.App.—Houston [1st

Dist.] 1992, writ denied). The jury found, and

Kenneco concedes, that its insurance claim accrued

when coverage was denied in March 1983.

Therefore, the pre–1985 version of article 21.21,

section 16(d) applies to Kenneco's claim.

[8] When a statute lacks an express limitations

period, courts look to analogous causes of action for

which an express limitations period is available

either by statute or by case law. See Tectonic Realty

Inv. Co. v. CNA Lloyd's of Tex. Ins. Co., 812 S.W.2d

647, 655 (Tex.App.—Dallas 1991, writ denied);

Brooks Fashion Stores, Inc. v. Northpark Nat'l

Bank, 689 S.W.2d 937, 942 (Tex.App.—Dallas

1985, no writ). Texas courts of appeals have

repeatedly analogized an article 21.21 cause of

action to an action for breach of a written contract,

thus applying the four-year statute of limitations

applicable to actions for debt. See, e.g., Long, 828

S.W.2d at 128; Tectonic, 812 S.W.2d at 655; Nash

v. Carolina Cas. Ins. Co., 741 S.W.2d 598, 601

(Tex.App.—Dallas 1987, writ denied); Gibbs v.

Main Bank of Houston, 666 S.W.2d 554, 558

(Tex.App.—Houston [1st Dist.] 1984, no writ). See

also Kalis et al., Policyholder's Guide to the Law of

Insurance Coverage § 26.02[B], at 26–4

(1997)(“Lawsuits seeking to enforce a coverage

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

in this case cited Long and Tectonic to reach the

same conclusion. 921 S.W.2d at 262.

In deciding which limitations period applied to an

article 21.21 claim that arose before April 4, 1985,

the Tectonic court explained:

The key question is whether to analogize

article 21.21 claims to general tort actions, for

which a two-year limitations period applied, or

to actions for breach of a written contract, for

which a four-year limitations period applied.

Texas appellate courts interpreting article

21.21 have repeatedly analogized it to an

action for breach of a written contract. As a

result, the cases have applied the four-year

limitations period normally available for

actions to enforce a written contract.

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41 Tex. Sup. Ct. J. 268

Tectonic, 812 S.W.2d at 655 (citations omitted).

This reasoning is flawed, however, because it fails to

consider that an article 21.21 claim is more

analogous to a DTPA claim than to an action for

debt on a written contract. As discussed in the

preceding section in this opinion, Kenneco's article

21.21 claim is virtually indistinguishable from its

DTPA claim. The language of section 17.50(a)(4) of

the DTPA, by its terms, incorporates article 21.21 of

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

makes actionable any violation of section 17.46 of

the DTPA. Aetna Cas. & Sur. Co. v. Marshall, 724

S.W.2d 770 (Tex.1987). “The DTPA and the

Insurance Code each grant relief for unfair or

deceptive acts or practices in the business of

insurance.” Vail, 754 S.W.2d at 132.

We conclude that the close relationship between

article 21.21 and section 17.50(a)(4) of the DTPA

requires us to apply the two-year statute of

limitations provision of the DTPA to Kenneco's

article 21.21 claim. We 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.

Co., 812 S.W.2d 647, 655 (Tex.App.—Dallas 1991,

writ denied); Nash v. Carolina Cas. Ins. Co., 741

S.W.2d 598, 601 (Tex.App.—Dallas 1987, writ

denied); and Gibbs v. Main Bank of Houston, 666

S.W.2d 554, 558 (Tex.App.—Houston [1st Dist.]

1984, no writ); to the extent they differ from this

conclusion.

Kenneco's article 21.21 cause of action accrued in

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.

III. COLLATERAL ESTOPPEL

[9] Kenneco's arguments indicate that it regards J &

H's collateral estoppel plea as “offensive” collateral

estoppel. However, J & H correctly argues that its

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.

Parklane Hosiery Co. v. Shore, 439 U.S. 322, 329,

99 S.Ct. 645, 650–51, 58 L.Ed.2d 552 (1979);

Black's Law Dictionary 261–62 (6th ed.1990). J &

H's status as a “plaintiff” in the declaratory judgment

action is purely nominal; J & H asserted its plea of

collateral estoppel as a defense to Kenneco's claims

for affirmative relief. See Republic Ins. Co. v. Davis,

856 S.W.2d 158, 164 (Tex.1993).

J & H asserts that all of Kenneco's claims in the state

court action are barred by collateral estoppel.

7 The

court of appeals concluded that collateral estoppel

did not bar any of Kenneco's claims. Because

Kenneco, then known as Armada, actually was a

party in the first action, the critical collateral

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

facts were essential to the judgment in the first

action. Sysco Food Servs., Inc. v. Trapnell, 890

S.W.2d 796, 801 (Tex.1994); Eagle Properties, Ltd.

v. Scharbauer, 807 S.W.2d 714, 721 (Tex.1990).

A. Federal Court Findings

We must first ascertain exactly what issues were

decided in the federal action to determine whether

those findings might preclude Kenneco's claims in its

state court action. Although Kenneco's federal action

was brought against both the London and the

Brazilian underwriters, for our purposes we need

address only the claims against the London

underwriters. J & H was not a party in the federal

action; but, several of its employees were called to

testify in that case.

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

underwriters' retention of Kenneco's premium. The

district court rejected this argument, finding that the

London underwriters did not waive their reservation

of coverage, despite the fact that they received and

retained the premium from Kenneco. As to J & H's

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conduct, the court stated, “[I]t appears that Johnson

& Higgins did not clearly understand the situation

and mistakenly billed Armada for a premium for

contingency coverage.” Armada Supply, 665 F.Supp.

at 1062. The court further noted that “Johnson &

Higgins billed Armada for the contingency coverage

premium before the question of coverage was

resolved.” Id. at 1067. The court did not, however,

determine whether J & H was or was not liable to

Kenneco.

The federal district court also considered whether

the London underwriters were liable for Kenneco's

lost profits on the Sun contract under the increased

value provision. The court reasoned that the

increased value coverage included physical loss or

damage to the cargo, but not the loss of a contract or

its *520 profits. Id. at 1051. The court squarely

addressed Kenneco's argument that “even if the

normal interpretation of [the coverage provision]

would not allow recovery for loss of profits [on a

contract], nevertheless there was a separate

agreement to provide such coverage for this cargo.”

Id. at 1050. The district court held that no such

separate agreement was made, explicitly finding that

J & H “did not make an agreement binding the

London underwriters ... to coverage of the lost

profits on the Sun contract,” that “[J & H] did not

purport to make such an agreement,” and that “[J &

H] had neither actual nor apparent authority to do

so.” Id. at 1051. It is significant to note that these

findings relate to the loss of profits coverage under

the increased value provision and not to contingency

coverage.

In its conclusions of law regarding increased value

coverage, the federal district court phrased the issue

as follows: “[Kenneco] contends that Johnson &

Higgins agreed that the London insurance would

cover lost profits on the Sun contract.” Id. at 1058.

The court “found as a fact that Johnson & Higgins

did not purport to make any agreement to insure the

Sun contract or the profits on that contract,” and

found that J & H had no actual or apparent authority

to do so. Id. at 1066–67. Finally, the court concluded

that, “as a matter of fact and law, no agreement was

made at the November 30 meeting binding the

London underwriters to insurance against loss of the

Sun contract or the profits thereon.” Id. at 1067.

The district court also made other specific findings

about what occurred at the November 30 meeting.

The court drew the distinction “between the concept

of increasing the insured value based on the amount

of a contract and the concept of insuring against the

loss of a contract as such,” finding that only the

former was discussed at the November 30 meeting.

Id. at 1059. The court also found that “Brown said

nothing which apprised Anderson that [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

substance that Anderson ever agreed to such a

thing.” Id. at 1059–60. The court continued, “There

is nothing in Anderson's testimony to indicate that he

was agreeing to insure against the loss of the Sun

contract or the profits on that contract. Certainly

Anderson did not agree to something other than the

normal particular average method of adjustment in

the case of a contamination loss.”Id. at 1061. Again,

these conclusions by the court relate to lost profits

under the increased value provisions rather than

contingency coverage.

Kenneco appealed the district court's ruling to the

Second Circuit. The Second Circuit generally

affirmed the district court's findings regarding

increased value coverage that: (1) Brown and

Anderson did not discuss insurance against loss of

profits for the Sun contract at the November 30

meeting; (2) Brown did not ask for, nor did

Anderson agree to, coverage on lost profits; (3)

Anderson's testimony was consistent with the

London underwriters' position that the increased

value coverage insured against cargo loss or damage

rather than lost profits; (4) what was actually

discussed was Kenneco's desire to “protect” its

profits by utilizing the increased value coverage; and

(5) Brown and Anderson did not discuss the

difference between increasing the insured value

based on the amount of the contract and insuring

against the loss of a contract as such. Armada

Supply, 858 F.2d at 851. The Second Circuit found

that these findings were not clearly erroneous. Id.

The court also reviewed and affirmed the finding

that J & H lacked authority to bind the London

underwriters. Id. Finally, the court explicitly upheld

the district court's conclusion that “as a matter of fact

and law, no agreement was made at the November

30 meeting binding the London underwriters to

insurance against loss of the Sun contract or the

profits thereon.” Id.

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The Second Circuit also upheld the district court's

finding that the London underwriters were not liable

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

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

resolved and that the London underwriters denied

coverage as soon as the facts of the transaction

became fully known.” Id. The court held that “the

payment of a premium alone does not justify the

rewriting of an insurance contract,” reasoning that

waiver cannot change coverage. Id. at 851–52. Thus,

the court concluded that coverage could not be

created “where none clearly existed.” Id. at 852.

B. Preclusion of Kenneco's Claims

[10] [11] Collateral estoppel may preclude

relitigation of issues previously litigated even though

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

lawsuit, that cause of action is barred. For this to be

true, however, the issue decided in the first action

must be actually litigated, essential to that lawsuit's

judgment, and identical to the issue in the pending

action. Getty Oil v. Insurance Co. of N. Am., 845

S.W.2d 794, 802 (Tex.1992); Eagle Properties, 807

S.W.2d at 721–22; Tarter v. Metropolitan Sav. &

Loan Ass'n, 744 S.W.2d 926, 927 (Tex.1988); Van

Dyke v. Boswell, O'Toole, Davis & Pickering, 697

S.W.2d 381, 384 (Tex.1985). The federal courts

have applied the same test. See Interoceanica Corp.

v. Sound Pilots, Inc., 107 F.3d 86, 91 (2d Cir.1997);

Levy v. Kosher Overseers Ass'n of America, Inc.,

104 F.3d 38, 41 (2d Cir.1997); Hicks v. Quaker Oats

Co., 662 F.2d 1158, 1166 (5th Cir.1981).

Kenneco's state court claims include: (1) breach of

contract, (2) Insurance Code violations, (3)

common-law fraud, and (4) negligence. Kenneco's

negligence and Insurance Code claims are barred by

limitations. We hold that, to the extent Kenneco's

remaining claims are based on lost profits coverage,

they are barred by collateral estoppel and to the

extent they are based on contingency coverage, they

are not barred.

1. Breach of Contract Claims

a. lost profits coverage

[12] Kenneco's claim for breach of the alleged

agreement to secure lost profits coverage is barred

by collateral estoppel. In its state court claim,

Kenneco asserts that J & H “breached its agreement

to provide the type of coverage it assured [Kenneco]

it would secure.” The jury question submitted asks,

“Did Johnson & Higgins and Armada agree on

November 30, 1982, that Johnson & Higgins would

secure for Kenneco's (Armada's) benefit a policy of

insurance protecting the profits on the sale of the

cargo in question?” The instruction further clarifies

that the jury was asked to “decid[e] whether the

parties reached an agreement.” That identical issue

was previously decided against Kenneco in the

federal action.

In the federal suit, Kenneco argued that J & H

“specifically agreed” to lost profits coverage at the

November 30 meeting. Armada Supply, 665 F.Supp.

at 1057. Even a cursory reading of the federal

district court's opinion demonstrates its finding that

no such agreement to secure lost profits coverage

was made. At least twice in its opinion, the court

explicitly found that J & H neither made an

agreement to insure the profits on the contract nor

purported to make such an agreement. Armada

Supply, 665 F.Supp. at 1051, 1066–67. The Second

Circuit noted the district court's rejection of

Kenneco's argument that the parties agreed to

coverage of lost profits at the meeting, and affirmed

the finding that “Brown did not ask for, nor did

Anderson agree to, coverage on lost profits.”

Armada Supply, 858 F.2d at 847, 851. In order to

succeed on its breach of contract claim in state court,

Kenneco was required to establish that an agreement

concerning lost profits coverage was made. That

issue was already decided against Kenneco in the

prior action. Thus, Kenneco's claim for breach of a

contract to secure lost profits coverage is precluded

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if the claim was actually litigated and essential to the

judgment in the federal action.

The issue concerning whether J & H agreed to

secure lost profits coverage was actually litigated in

the federal action because the issue was properly

raised, submitted for determination, and determined.

Restatement (Second) of JudgmentsSSSSSSS § 27

cmt. *522 d (1982); Van Dyke v. Boswell, O'Toole,

Davis & Pickering, 697 S.W.2d 381, 384

(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.

Kenneco argues that, because the federal district

court's holding of no lost profits coverage was based

on the alternative findings of no agreement and no

authority, neither finding was “essential to the prior

judgment.” Section 27 of the Restatement (Second)

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

issue standing alone.” Id. § 27, cmt. i (1982). Thus,

according to the Restatement, the general rule is that

there cannot be estoppel by alternative holdings.

8

[13] In response, J & H correctly asserts that both of

the district court's findings can have a preclusive

effect because both were reviewed and affirmed by

the Second Circuit. An exception exists to the

general rule of no preclusion when alternative

holdings are appealed and affirmed. Comment o to

the Restatement provides:

If the judgment of the court of first instance

was based on a determination of two issues,

either of which standing independently would

be sufficient to support the result, and the

appellate court upholds both of these

determinations as sufficient, and accordingly

affirms the judgment, the judgment is

conclusive as to both determinations. In

contrast to the case discussed in Comment i,

the losing party has here obtained an appellate

decision on the issue, and thus the balance

weighs in favor of preclusion.

Restatement (Second) of Judgments § 27, cmt. o

(1982). The district court's alternative findings of no

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

was made to cover the Sun contract profits was

rigorously considered—the district court discussed

this issue extensively in its findings of fact and

conclusions of law. This finding was affirmed by the

Second Circuit and could, standing independently,

support the result of no coverage; it thus serves as a

valid estoppel in this action.

Because we conclude that alternative findings that

are in fact reviewed and affirmed by an appellate

court may have preclusive effect, we need not

address J & H's additional argument under Eagle

Properties, Ltd. v. Scharbauer, 807 S.W.2d 714,

721 (Tex.1990), that estoppel is allowed for

alternative holdings that were “rigorously

considered” and sufficient to sustain the judgment.

b. contingency coverage

[14] Kenneco's claim for breach of the alleged

agreement to secure “contingency coverage” is not

barred by collateral estoppel. The issue sought to be

litigated in this action, as framed by the submitted

jury question, is: “Did Johnson & Higgins and

Kenneco (Armada) agree on November 30, 1982,

that Johnson & Higgins would secure for Kenneco's

(Armada's) benefit ‘contingency coverage’?” The

jury found that such an agreement was made and

awarded Kenneco $412,273.66.

Kenneco's cause of action for breach of an

agreement to secure contingency coverage is not

collaterally estopped because, in contrast to their

consideration of whether J & H agreed to secure lost

profits coverage, the federal courts never addressed

whether an agreement was made to secure

contingency coverage.

It is undisputed that Brown went to J & H to obtain

“back up” insurance in the event the Brazilian

underwriters failed to pay on a claim. It is also

undisputed that Anderson told Brown such coverage

could be triggered by the policy's already existing

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41 Tex. Sup. Ct. J. 268

“contingency coverage.” The federal district court

found that the contingency coverage did not apply

because: (1) the sale was not back-to-back *523

C.I.F., and (2) the London underwriters did not

waive the coverage requirements. Armada Supply,

665 F.Supp. at 1051, 1067. Thus, the district court's

finding that the policy's contingency coverage did

not apply to the sale does not preclude a finding by

the jury in the state action that Anderson agreed to

secure contingency coverage.

Collateral estoppel is not proper because the issue

decided in the federal action is not identical to the

issue Kenneco litigated as a basis for the

contingency coverage breach of contract claim in the

state court. See Getty Oil, 845 S.W.2d at 802.

Similarly, the ultimate issues in Kenneco's state

action “were neither expressly nor necessarily

adjudicated” in the federal action nor were the

federal court findings inconsistent with the state

court findings. See Tarter v. Metropolitan Sav. &

Loan Ass'n, 744 S.W.2d 926, 928 (Tex.1988).

The federal courts never decided whether J & H

agreed to secure contingency coverage. Kenneco's

assertions in the federal courts regarding

contingency coverage were mainly that events after

the November 30 meeting (e.g., the underwriters'

receiving and retaining premiums for contingency

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

during the course of later events the London

underwriters waived the requirement of the cover

note.”). In contrast, the jury question in the state

action focused only on whether J & H agreed on

November 30 to secure coverage. The issue of

whether J & H mistakenly billed Kenneco for

premiums after the London underwriters disputed

coverage is not identical to whether Anderson agreed

on November 30 to secure contingency coverage.

Further, the federal district court's statements

regarding the state of knowledge of both parties as to

the nature of the sale from Kenneco to Sun (i.e., that

it was not back-to-back C.I.F.) should not support

collateral estoppel. These statements were not

affirmed on appeal and were not essential to the

district court's holdings that the sale was not covered

and that the back-to-back C.I.F. requirement was not

waived. Not every fact finding in the district court's

opinion may be afforded preclusive effect. To allow

such broad preclusion would eviscerate the

requirement that the finding be essential to the

judgment in the prior suit. Bonniwell v. Beech

Aircraft Corp., 663 S.W.2d 816, at 818–19

(Tex.1984); Eagle Properties, 807 S.W.2d at

721–22.

In federal court, Kenneco argued that the C.I.F.

back-to-back requirement was not a material term of

the cover note and that the underwriters waived the

requirement because they retained the contingency

premium. The district court made three inquiries that

were essential to its holding of no contingency

coverage: (1) whether the back-to-back C.I.F.

requirement of the cover note was a material term;

(2) if so, whether it was satisfied; and (3) if not

satisfied, whether the London underwriters waived

that requirement by accepting and retaining the

premium. The district court concluded that it was a

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

“affirmatively state” until December 1992 that the

sale to Sun was delivered, what Brown said and what

Anderson knew or understood regarding the sale to

Sun were not essential to the district court's holding.

Armada Supply, 665 F.Supp. at 1061–62.

Regarding Kenneco's “claim that the underwriters

waived the requirement of the cover note because

they received and retained the ‘contingency’

premium,” the district court made two alternative

holdings. Id. at 1067. First, it concluded that waiver

could not rewrite the requirements of the policy. Id.

Then, it stated, “In any event, the evidence does not

support the conclusion that the London underwriters

waived their objections to coverage through

retention of a premium.” Id. The district court's

statement that “it appears that Johnson & Higgins

did not clearly understand the situation and

mistakenly billed Armada for a premium for

contingency coverage,”id. at 1062, was not essential

in its evaluation of whether the conduct of the

underwriters resulted in waiver. The district court

focused on the fact *524 that the London

underwriters reserved decision on the contingency

coverage, did not waive their position after J & H

billed Kenneco for premiums, and plainly denied

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coverage when the facts were fully known. Id. at

1067–68. Thus, J & H's billing actions did not affect

the London underwriters' position. If J & H's act of

billing Kenneco was irrelevant to the determination

of no waiver, surely J & H's state of mind in so

doing was also irrelevant.

Simply put, the facts relevant to the contingency

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

contingency coverage breach of contract claim is not

collaterally estopped.

2. Common-law Fraud

In the state action, the court submitted the following

question to the jury:

Did Johnson & Higgins misrepresent

Kenneco's (Armada's) insurance coverage with

the London underwriters at the November 30,

1982, meeting?

The question did not differentiate between the

increased value coverage and the contingency

coverage, although the pleadings alleged that

Anderson misrepresented Kenneco's coverage under

both provisions. The jury answered affirmatively and

awarded Kenneco $1.5 million in damages.

[15] The elements of common-law fraud are that: (1)

a material representation was made; (2) the

representation was false; (3) when the representation

was made, the speaker knew it was false or made it

recklessly without any knowledge of the truth and as

a positive assertion; (4) the representation was made

with the intention that it be acted upon by the other

party; (5) the party acted in reliance upon the

representation; and (6) the party suffered injury. T.O.

Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d

218, 222 (Tex.1992); Eagle Properties, 807 S.W.2d

at 723.

[16] J & H argues that Kenneco's fraud claim is

estopped because Kenneco contended in the federal

action that Anderson misrepresented coverage under

the London policy, and the federal district court

found against Kenneco on that issue. To support its

position, J & H points to the federal district court's

statement that “[Kenneco] contends that [J & H]

agreed that the London insurance would cover lost

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

to now support its fraud claim.

Kenneco responds that its fraud claim could not be

estopped by the prior action because, in the federal

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

misrepresent coverage. Further, Kenneco argues that

the federal suit was nothing more than a contract

construction suit, and therefore the federal court's

determination of that suit should have no bearing on

Kenneco's fraud claim.

We hold that, to the extent that Kenneco's fraud

claim is based on its allegation that Anderson

knowingly or recklessly represented that Kenneco's

lost profits on the contract were insured by the

increased value provision, it is barred by collateral

estoppel. Kenneco's state court fraud claim

necessarily involves proof that a representation was

made, and that that representation was false.

Although Kenneco never contended that Anderson

or J & H mis-represented coverage in the federal

courts, Kenneco did contend that Anderson made

certain representations regarding lost profits

coverage, and the federal courts rejected that

contention. In fact, the Second Circuit specifically

characterized the issue being decided as “whether

the London underwriters were bound by the alleged

representations of J & H, a Houston broker, that the

insurance would cover lost profits.” Armada Supply,

858 F.2d at 851 (emphasis added). Even Kenneco's

own brief states that “Kenneco offered evidence

concerning representations made by Anderson of [J

& H] as to the extent of coverage” for lost profits.

Thus, insofar as Kenneco's fraud claim is based on

an alleged representation by Anderson that

Kenneco's lost profits were covered, the claim is

barred *525 by the federal courts' conclusion that no

such representation was made.

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However, Kenneco's allegation that Anderson

knowingly or recklessly represented that Kenneco

“was fully insured for any loss to which the Brazilian

underwriters did not respond under the ‘contingency’

clause” is not barred because that issue was not

decided in the federal suit. The federal courts made

no findings that would preclude a verdict in favor of

Kenneco on this claim, and the jury's findings are not

inconsistent with the federal courts' findings.

C. Full and Fair Litigation

[17] Kenneco argues that the federal court's findings

should not be afforded preclusive effect because of

the alignment of the parties in the federal action.

Kenneco asserts that it had no real incentive in the

federal action to develop testimony against J & H,

because J & H was participating on Kenneco's

behalf. Thus, according to Kenneco, there was no

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

rigorously considered.

J & H responds that the alignment of the parties

should not negate the collateral estoppel effect of the

federal court's findings. J & H admits that it assisted

Kenneco in asserting its claim against the London

underwriters, and even testified on Kenneco's behalf

in federal court as to how the claim should be

adjusted. However, J & H claims it did not align

itself with Kenneco concerning the events of the

November 30 meeting. J & H asserts that the issue of

what occurred at the meeting and what Anderson

said or did was “drawn” through the conflicting

testimony of Anderson and Brown and through the

dispute over that issue between Kenneco and the

London underwriters.

We 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

estoppel effect of the federal court's findings. There

would be no question as to the preclusive effect of

those findings had J & H not participated in the prior

action. Kenneco's argument that it had no incentive

to litigate against J & H fails because that is not the

test: the proper inquiry is whether Kenneco had

incentive to litigate the issue of Anderson's

representations regarding lost profits coverage at the

November 30 meeting. See Sysco Food Servs., Inc.

v. Trapnell, 890 S.W.2d 796, 802 (Tex.1994)

(“When the issue is properly identified, it becomes

clear that this issue was fully and fairly litigated in

the federal action.”). Kenneco had every incentive to

prove that Anderson made the alleged

representations concerning increased value

coverage; Kenneco's recovery for lost profits in the

federal coverage suit depended upon such a finding.

What Anderson said regarding lost profits coverage

was fully aired in the federal courts through the

testimony of Brown and Anderson and through the

conflicting positions of Kenneco and the London

underwriters regarding those representations. See

Armada Supply, 665 F.Supp. at 1050 (“London

underwriters ... den[y] that Johnson & Higgins

purported to make such an agreement.”). Thus, the

issue of what Anderson said at the November 30

meeting was fully and fairly litigated in the federal

courts.

[18] Kenneco also argues that collateral estoppel

should not apply because the “procedural

opportunity” of a jury trial was unavailable in the

New York action, citing Federal Rule of Civil

Procedure 38(e). The mere fact that Kenneco could

not avail itself of this opportunity does not, in and of

itself, preclude an application of defensive collateral

estoppel. Further, the United States Supreme Court

has previously rejected the position that collateral

estoppel violates a party's Seventh Amendment right

to a trial by jury. Parklane Hosiery Co. v. Shore, 439

U.S. 322, 333–37, 99 S.Ct. 645, 652–55, 58 L.Ed.2d

552 (1979). While the question remains open as a

matter of Texas constitutional law, see Sysco Food

Servs., 890 S.W.2d at 801 n. 7, Kenneco has not

raised any argument under the Texas Constitution in

this Court, and therefore we will not consider the

question. See Tilton v. Marshall, 925 S.W.2d 672,

677 n. 6 (Tex.1996).

*526 IV. DISPOSITION

[19] After application of J & H's limitations and

collateral estoppel defenses, Kenneco's remaining

jury awards include fraud ($1,500,000.00) and

breach of contract ($412,273.66), both of which

relate to the contingency coverage issue. When a

prevailing party does not elect a measure of damages

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41 Tex. Sup. Ct. J. 268

from among alternative measures, courts should

render judgment based on the finding affording the

greatest recovery. Birchfield v. Texarkana Memorial

Hosp., 747 S.W.2d 361, 367 (Tex.1987). Although

the fraud claim provides the greatest recovery,

Kenneco is not entitled to recover on the jury's fraud

award because there is no evidence to support the

jury's finding that J & H knowingly or recklessly

misrepresented Kenneco's contingency coverage.

A. Fraud

[20] The contingency coverage provisions in

Kenneco's insurance policy provided that “where the

Assured purchase goods on C.I.F. terms and sell on

C.I.F. terms, but wish to give their buyer a certificate

for their Sales Price ... they may issue certificates for

the full value hereunder.” Thus, the contingency

coverage policy language required a C.I.F. purchase

and a C.I.F. sale. Kenneco contends that Anderson,

on behalf of J & H, committed fraud by representing

on November 30 that the contingency coverage

applied even though Brown had informed Anderson

that the sale to Sun was on a delivered basis, not

C.I.F. J & H responds that, even if Anderson

misrepresented the contingency coverage, there is no

evidence that he made the misrepresentation

knowingly or recklessly. According to J & H,

Anderson was, at worst, negligent.

[21] [22] A statement is not fraudulent unless the

speaker knew it was false when made or the speaker

made it recklessly without knowledge of the truth.

Prudential Ins. Co. v. Jefferson Assocs., 896 S.W.2d

156, 163 (Tex.1995). Proof that a defendant made a

statement knowing of its falsity or without

knowledge of its truth may be proved by direct or

circumstantial evidence. See Spoljaric v. Percival

Tours, Inc., 708 S.W.2d 432, 435 (Tex.1986).

The evidence of the events surrounding the

November 30 meeting is as follows: Brown visited

J & H's offices to discuss insurance coverage for the

tanker cargo, already en route from Rio de Janeiro to

New York. Kenneco's normal account representative

was on vacation, so Brown met with Anderson, a

cargo claims adjuster. Anderson testified that,

because he was not familiar with the language of the

contingency coverage provision, he obtained a copy

of Kenneco's policy and read the provision aloud at

the meeting, including the language requiring

back-to-back C.I.F. sales. Brown testified that she

clearly informed Anderson that the sale to Sun was

on a delivered basis, and that Anderson told her that

the contingency coverage applied nonetheless.

Anderson admitted telling Brown that Kenneco had

contingency coverage, but testified that Brown had

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

purchase was C.I.F., but the notes were silent

regarding the sale to Sun. Anderson testified that

December 22, 1982, when Brown sent

documentation reflecting that the Sun sale was

delivered, was the first time he was informed that the

sale to Sun was not C.I.F. Despite that knowledge,

Anderson did not inform Kenneco or the London

underwriters of the potential problem with

contingency coverage. Instead, he calculated the

premium and billed Kenneco even though he

admittedly knew at that time that coverage was

“highly improbable.” Anderson testified that J & H

billed Kenneco for the premium to avoid difficulty

in processing a claim for lack of payment, and that J

& H at all times advocated to the London

underwriters that there was contingency coverage.

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.,

825 S.W.2d 456, 458 (Tex.1992), we conclude that

although Anderson did in fact misrepresent

Kenneco's coverage, there is no evidence that he

made the misrepresentation knowingly or recklessly.

Clearly Kenneco has provided no direct *527

evidence, such as Anderson's notes or a

memorandum, indicating that Anderson intentionally

or recklessly misled Brown and Kenneco. Thus,

Kenneco's claim must be supported, if at all, by

circumstantial evidence. But there is no

circumstantial evidence that Anderson knowingly

misrepresented the coverage. Brown herself

discounted such a theory, testifying that “[i]n

retrospect I believe that [Anderson] didn't appreciate

the difference [between a C.I.F. sale and a delivered

sale].” Further, there is no evidence to support a

motive for Anderson to intentionally misrepresent

the coverage. In contrast, Anderson testified that,

had he obtained coverage other than the existing

contingency coverage, J & H would have received a

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41 Tex. Sup. Ct. J. 268

better premium. Thus, there is no evidence that

Anderson acted knowingly.

[23] Further, there is no evidence that Anderson

recklessly misrepresented the coverage. A speaker

acts recklessly if he makes representations “without

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

representation is recklessly made if the speaker

knows that he does not have sufficient information

or basis to support it, Trenholm v. Ratcliff, 646

S.W.2d 927, 933 (Tex.1983), or if he realizes that he

does not know whether or not the statement is true.

Custom Leasing, Inc. v. Texas Bank & Trust Co.,

516 S.W.2d 138, 142 (Tex.1974) (citing

Restatement of Restitution § 8 (1957)). This

standard might apply if Anderson, with no

familiarity of the policy language, had told Brown

that the coverage applied without consulting the

policy itself. It is undisputed that that is not the case.

Anderson realized his ignorance of the policy

language, and obtained a copy of the policy and read

it over with Brown in an effort to answer her

concerns. See Jauregui v. Jones, 695 S.W.2d 258,

263–64 (Tex.App.—San Antonio 1985, writ ref'd

n.r.e.) (finding no fraud when defendant made

investigation before making assertion). Thus, the

evidence does not indicate that Anderson made the

representation “without any knowledge of the truth.”

At most, it establishes that Anderson should have

known that his representations may have been

incorrect; such evidence, however, is akin to

negligent misrepresentation, not fraud. See Federal

Land Bank Ass'n v. Sloane, 825 S.W.2d 439, 442

(Tex.1991) (standard for negligent misrepresentation

is that defendant “did not exercise reasonable care or

competence in obtaining or communicating the

information”).

Lastly, we do not believe that Anderson's conduct

weeks after the loss occurred constitutes evidence

that he acted fraudulently at the November 30

meeting. Taking all reasonable inferences favorable

to Kenneco, Anderson's conduct establishes, at most,

that he was reluctant to admit his mistake. That is not

evidence of fraud.

B. Breach of Contract

[24] J & H also challenges the legal sufficiency of

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

contingency coverage. We hold that there is some

evidence to support the jury's finding, and therefore

Kenneco is entitled to judgment on this claim.

Both Anderson and Brown testified that Brown went

to J & H on November 30, 1982 seeking, among

other things, insurance against the possibility that the

Brazilian underwriters would not pay on a claim by

Kenneco. Brown testified several times that she told

Anderson that the transaction for which the

additional insurance was sought “was a C.I.F.

purchase and a delivered sale.”

Brown further testified that:

[T]he end result was he [Anderson] agreed

that it [the additional coverage] would cover

exactly what we were looking for, the type of

purchase we had and type of sale we had. He

knew I told him that it was a delivered sale, so

that he was well aware that it was not a C.I.F.

back-to-back but was a purchase sale.

When asked whether she was “telling the Court and

jury that when you left Johnson and Higgins you

were convinced that you had the protection that you

went there specifically to get,” Brown succinctly and

unequivocally testified: “Without a doubt.” J & H

*528 charged, and Kenneco paid, a premium for this

insurance.

Anderson testified that he sold Brown contingency

coverage and told her he would make the

declarations. He further agreed that he would have

expected her to believe that she had contingency

coverage after the meeting, and that it was possible

for him to convince the underwriters to grant

coverage for the sale even were it not back-to-back

C.I.F.

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

transaction, Armada [Kenneco] would never have

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41 Tex. Sup. Ct. J. 268

any risk at all,” and consequently no need for the

contingency coverage which Anderson actually

procured for Kenneco. Either Anderson sold

Kenneco insurance that it did not need; or, contrary

to his later position, he actually agreed to sell

Kenneco the additional coverage that Brown claims

she requested.

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

contingency coverage, in the amount of

$412,273.66.

V. PREJUDGMENT INTEREST

[25] [26] We next consider the proper method of

calculating prejudgment interest under Cavnar v.

Quality Control Parking, Inc., 696 S.W.2d 549, 552

(Tex.1985). Prejudgment interest is “compensation

allowed by law as additional damages for lost use of

the money due as damages during the lapse of time

between the accrual of the claim and the date of

judgment.” Id. at 552 (citing McCormick, Damages,

§ 50 (1935)); see also Tex.Rev.Civ. Stat. art.

5069–1.01(a). There are two legal sources for an

award of prejudgment interest: (1) general principles

of equity and (2) an enabling statute. Cavnar, 696

S.W.2d at 552; Phillips Petroleum Co. v. Stahl

Petroleum Co., 569 S.W.2d 480, 483–85

(Tex.1978).

J & H argues that any award of prejudgment interest

in this case is governed by Tex.Rev.Civ. Stat. article

5069–1.05, section 6, or, alternatively, that we

should defer to the policy underlying section 6 even

if it does not expressly apply. Kenneco argues that

Cavnar controls this case and that general principles

of equity govern the award of prejudgment interest.

We hold that this case is governed by the common

law rather than by statute; however, we conform

Cavnar's common-law rule with the legislative

policy established by section 6.

9

In Cavnar, this Court overruled eighty-eight years of

judicial precedent and adopted a rule allowing

recovery of prejudgment interest on personal injury,

wrongful death, and survival actions. See generally

Cloud, Note, Cavnar v. Quality Control Parking,

Inc.: Prejudgment Interest is Now Recoverable in

Personal Injury, Wrongful Death and Survival

Action Cases, 38 Baylor *529 L.Rev. 385 (1986).

The decision to extend prejudgment interest

recovery to such cases was driven primarily by the

rationale that awarding prejudgment interest was

necessary to fully compensate injured plaintiffs.

Cavnar, 696 S.W.2d at 552.

Cavnar established that a prevailing plaintiff may

recover prejudgment interest, compounded daily

(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

occurrence of the incident giving rise to the cause of

action,”

10

and the rate of interest was to be computed

under Tex.Rev.Civ. Stat. article 5069–1.05, section

2

11 on the date of judgment. Cavnar, 696 S.W.2d at

554. Cavnar involved claims for personal injury, but

its application has been expanded to non-personal

injury scenarios. See, e.g., Perry Roofing Co. v.

Olcott, 744 S.W.2d 929, 930 (Tex.1988) (breach of

contract action for damages unascertainable from

contract); Rio Grande Land & Cattle Co. v. Light,

758 S.W.2d 747, 748 (Tex.1988) (same); City of

Houston v. Wolfe, 712 S.W.2d 228, 229

(Tex.App.—Houston [14th Dist.] 1986, writ ref'd)

(eminent domain).

In fashioning its prejudgment interest rule, the

Cavnar Court was primarily concerned with

advancing two ends: (1) encouraging settlements and

(2) expediting both settlements and trials by

removing incentives for defendants to delay without

creating such incentives for plaintiffs. Cavnar, 696

S.W.2d at 554–55; see also Perry Roofing, 744

S.W.2d at 930.

In 1987, two years after Cavnar was issued, the

Texas Legislature passed a comprehensive package

of legislation known as “tort reform.” See generally

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

legislation added section 6 to article 5069–1.05.

Section 6 somewhat codified and modified the

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41 Tex. Sup. Ct. J. 268

Cavnar rule by providing that “[j]udgments in

wrongful death, personal injury, and property

damage cases must include prejudgment interest.”

Tex.Rev.Civ. Stat. art. 5069–1.05, § 6(a). However,

under this section, the time period during which

prejudgment interest accrues is shorter than under

Cavnar. Instead of beginning six months after the

date of the incident, section 6 provides that

prejudgment interest generally begins to accrue on

the earlier of (1) 180 days after the date the

defendant receives written notice of a claim or (2)

the day the suit is filed. Id. Section 6(g) states that

“[t]he rate of prejudgment interest shall be the same

as the rate of postjudgment interest at the time of

judgment.” But, interest “shall be computed as

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

amount of a settlement offer during its pendency,

allowing a trial court the discretion to order accrual

or nonaccrual during periods of delay caused by a

defendant or a plaintiff, and allowing prejudgment

interest for future damages included in the judgment.

Id. §§ 6(a)-(d).

[27] J & H takes the position that section 6 's

calculation rules apply to all judgments, and

therefore apply to any judgment awarded to

Kenneco. Kenneco argues that the plain language of

section 6 applies only to wrongful death, personal

injury, and property damage cases. The courts of

appeals have split on this question. Compare e.g.,

Kuehnhoefer v. Welch, 893 S.W.2d 689, 694

(Tex.App.—Texarkana 1995, writ denied) and

Texas Commerce Bank v. Lebco Constructors, *530

Inc., 865 S.W.2d 68, 84 n. 13 (Tex.App.—Corpus

Christi 1993, writ denied)(holding that statute has

application beyond those actions listed) with

Spangler v. Jones, 861 S.W.2d 392, 397–98

(Tex.App.—Dallas 1993, writ denied); and H.E.

Butt Grocery Co. v. Bay, Inc., 808 S.W.2d 678, 680

(Tex.App.—Corpus Christi 1991, writ denied)

(holding that statute only applies to actions

specifically enumerated). We hold that section 6

means what it says: statutory prejudgment interest

applies only to wrongful death, personal injury, and

property damage cases.

The Legislature's codification and modification of

Cavnar did not purport to provide a statutory

framework for prejudgment interest in all cases. See

Spangler, 861 S.W.2d at 398. The limited

application of section 6 is evident from the statute's

plain language, especially when viewed in the

context of other sections of article 5069–1.05.

Whereas section 2 provides that interest shall accrue

on “all judgments,” section 6 provides only that

statutory prejudgment interest must be awarded for

“[j]udgments in wrongful death, personal injury, and

property damage cases.” Tex.Rev.Civ. Stat. art.

5069–1.05 §§ 2, 6(a). Further, the Legislature later

added section 7, which specifically allows for

prejudgment interest in condemnation cases. Id. § 7.

Surely if section 6 were applicable to all judgments,

the addition of section 7 would have been

superfluous.

[28] Given that section 6 is expressly limited to

wrongful death, personal injury, and property

damage cases, we must next determine whether

Kenneco's claims fall within any of those categories.

Clearly the only potentially applicable category

would be property damage. We have concluded that

Kenneco is entitled to recover only on its breach of

contract claim. Although the contract concerned

insurance coverage for damages to Kenneco's

property by a third party, Kenneco does not base its

suit on that property damage. Instead, Kenneco's

claims are for purely economic losses stemming

from J & H's breach of contract to secure

contingency coverage. Such claims do not fall within

the scope of “property damage cases,” which only

include claims for damage to tangible property, not

economic loss or loss of economic opportunity. See

Spangler, 861 S.W.2d at 398; Associated Telephone

Directory Publishers, Inc. v. Five D's Publishing

Co., 849 S.W.2d 894, 900 (Tex.App.—Austin 1993,

no writ); Ralston Purina Co. v. McKendrick, 850

S.W.2d 629, 633 (Tex.App.—San Antonio 1993,

writ denied). Thus, section 6 does not apply to this

case, and any award of prejudgment interest is

governed by the common law.

J & H argues that, even if section 6 does not

expressly apply, this Court should adopt the

Legislature's views, expressed in its enactment of

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

begin to accrue on the earlier of 180 days after a

defendant receives written notice of a claim or the

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day suit is filed, and that it should be calculated as

simple interest. Kenneco responds that Cavnar

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

554–55.

[29] When the Court decided Cavnar, there was no

statute governing prejudgment interest. See Act of

May 8, 1967, 60th Leg., R.S., ch. 274, § 2, 1967

Tex. Gen. Laws 608, 610; Tex.Rev.Civ. Stat. art.

5069–1.05 (Vernon 1987). Thus, the Cavnar Court

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

Cavnar. Section 6 is a “trade-off provision,”

effectuating some of the goals of tort reform while

preserving the availability of prejudgment interest

under Cavnar, and even expanding the scope of

recoverable interest to include future damages

awarded as part of the judgment. C & H Nationwide,

Inc. v. Thompson, 903 S.W.2d 315, 326–27

(Tex.1994) (citing Montford & Barber, 1987 Texas

Tort Reform: The Quest for a Fairer and More

Predictable Texas Civil Justice System, 25 Houston

L.Rev. 59, 102 (1988)). Section 6 works as a

“system of rewards and penalties” intended to

encourage settlements. *531 C & H Nationwide, 903

S.W.2d at 326. This Court has recognized the

importance of such a goal, and today we adopt the

Legislature's approach to effectuating that goal. See

Owens–Illinois, Inc. v. Estate of Burt, 897 S.W.2d

765, 769 (Tex.1995) (adopting a prejudgment

interest accrual rule for latent-injury cases

“consistent with the prejudgment interest statute”);

cf. Smith v. Merritt, 940 S.W.2d 602, 604–05

(Tex.1997) (fashioning a common-law social host

liability rule in accordance with legislative policy of

Dram Shop Act). We adopt the Legislature's

approach to prejudgment interest and hold that,

under the common law, prejudgment interest begins

to accrue on the earlier of (1) 180 days after the date

a defendant receives written notice of a claim or (2)

the date suit is filed. See Tex.Rev.Civ. Stat. art.

5069–1.05, § 6(a).

[30] Applying these time frames, Kenneco argues

that December 15, 1986, the date the tolling

agreement was signed, is the equivalent of the date

of suit, and therefore should be the date of accrual.

We disagree. The tolling agreement is not a lawsuit,

nor did it provide that it would be considered the

date of suit for any purpose.

Alternatively, Kenneco argues that prejudgment

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

April 15, 1988, 180 days after J & H received

Kenneco's DTPA notice letter. Thus, we must

determine whether the standstill agreement

constitutes “written notice of a claim” that triggers

accrual of prejudgment interest.

The standstill agreement plainly says that “Kenneco

asserts that, to the extent underwriters are found not

to be liable [in the federal action] ..., J & H is liable

to Kenneco for the amounts which Kenneco has

claimed under the Policy.” 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); see also Black's Law Dictionary

247 (6th ed.1991) (a “claim” is a “demand for

money or property as of right”). Through the

standstill agreement, J & H received written notice

that Kenneco was claiming a right to compensation.

See Robinson, 894 S.W.2d at 529 (claimant not

required to demand exact amount or list every

element of damage). Moreover, J & H had sufficient

information at that time to obtain a settlement

without incurring any prejudgment interest at all. See

Owens–Illinois, Inc. v. Estate of Burt, 897 S.W.2d

765, 769 (Tex.1995) (“[A] defendant must have

notice and an opportunity to settle a claim in order to

advance Cavnar's objective of expedited

settlements.”).

[31] The purpose of a standstill agreement is

normally to maintain the status quo and temporarily

suspend or stop all aspects of a suit. In most

circumstances, this would operate to toll the accrual

of prejudgment interest while the agreement is in

effect. However, parties to a standstill agreement

may contractually provide otherwise.

The standstill agreement in this case expressly

preserves all of Kenneco's rights and all of J & H's

liabilities. The terms of the agreement provide: “The

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period between December 15, 1986 and the date

when 30 days shall have elapsed following the final

determination of the New York Action ... shall not

be counted for purposes of the statute of limitations,

laches or any other defense which may be asserted in

any subsequent action.” The agreement continues,

“Except as expressly provided [in the previous

sentence], 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.”

Thus, the standstill's application is narrow—it

applies only to limitations, laches, and other

defenses. All of Kenneco's rights, which include

prejudgment interest, were expressly reserved.

12

Thus, prejudgment interest accrued *532 beginning

180 days from the date the standstill agreement was

signed.

[32] We further hold that prejudgment interest

accrues at the rate for postjudgment interest and it

shall be computed as simple interest. See

Tex.Rev.Civ. Stat. art. 5069–1.05, § 6(g). There has

been much confusion among Texas courts regarding

how prejudgment interest should be calculated in

cases following Cavnar. Crum & Forster, Inc. v.

M o n sa n to Co., 8 87 S.W .2d 1 03 , 1 5 3

(Tex.App.—Texarkana 1994, writ dism'd by agrmt).

Although the majority of appellate court cases have

held that equitable prejudgment interest awards

should be compounded daily, even after the

enactment of section 6, see, e.g., Spangler, 861

S.W.2d at 398–99; Shell Pipeline Corp. v. Coastal

States Trading, Inc., 788 S.W.2d 837, 848–49

(Tex.App.—Houston [1st Dist.] 1990, writ denied),

we hold that equitable prejudgment interest should

be computed in accordance with the legislative

policy supporting section 6. The Legislature

expressly provided that statutory prejudgment

interest shall be computed as simple interest.

Tex.Rev.Civ. Stat. art 5069–1.05, § 6(g). We will

follow the Legislature's lead and hold that equitable

prejudgment interest shall be computed as simple

interest.

Adoption of the statutory approach to prejudgment

interest continues to promote the policy goals

underlying the Cavnar decision. For example, the

accrual rule of section 6 effectively encourages

settlements without creating incentives for plaintiffs

to delay. In contrast to section 6, where interest

begins to accrue 180 days after a defendant receives

notice of the claim or the claim is filed, Cavnar

interest begins to accrue 180 days after the

occurrence giving rise to the claim, regardless of

whether a defendant knows of the claim. Allowing

plaintiffs to accrue prejudgment interest even before

the defendant becomes aware of the claim is at odds

with the principle we recognized in Owens–Illinois,

Inc. v. Estate of Burt, 897 S.W.2d 765, 769

(Tex.1995), that “[o]bviously, a defendant must have

notice and an opportunity to settle a claim in order to

advance Cavnar's objective of expedited settlements

and trials.”

In Estate of Burt, the Cavnar accrual rule required

an exception in cases of latent injury because the

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

reasoned thatsuch an accrual rule provides sufficient

compensation for plaintiffs, establishes a definite

date for accrual to begin, encourages expedited

settlements and trials, and removes incentives for

defendants to delay without creating such incentives

for plaintiffs. Id. at 769. Section 6—and, now, the

new common law rule—effectively serve each of

those policy goals even when the date of accrual of

the cause of action can be readily determined.

Applying the computation rules of section 6 to the

common law also serves the goal of compensating

plaintiffs, without overcompensating them or

simultaneously punishing defendants. Although the

rate of prejudgment interest is the same under

Cavnar and section 6, Cavnar's daily compounding

allows plaintiffs far greater recovery than under

section 6. It is not uncommon for Cavnar

prejudgment interest awards to greatly exceed the

amount of the actual judgment, as is true in this case

where the actual damages awarded were

$1,972,273.66 and the prejudgment interest award

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,

thereby overcompensating the plaintiff. The

computation rules of section 6 serve to more *533

accurately reflect the damages incurred by the

plaintiff for the lost use of money.

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41 Tex. Sup. Ct. J. 268

Finally, conforming the common law to legislative

policy serves the important goal of restoring

uniformity to the law of prejudgment interest. In

Cavnar, we reasoned that “[t]he time has come to

revise the prejudgment interest rule ... and restore

equity and symmetry to this area of the law.”

Cavnar, 696 S.W.2d at 553–54. Given the

Legislature's enactment of section 6, that time has

come again. Cavnar was a wrongful death case and,

by its express language, applied to personal injury,

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,

precludes the application of Cavnar to some of those

very claims, if they accrue after September 2, 1987.

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,

wrongful death, and property damage. Such a result

is as illogical as it is arbitrary, and is therefore no

longer the law in Texas.

Our common law prejudgment interest holding

applies to all cases in which judgment is rendered on

or after December 11, 1997, and to all other cases

currently in the judicial process in which the issue

has been preserved.

* * * * *

We conclude that limitations bars Kenneco's

negligence and Insurance Code claims and that there

is no legally sufficient evidence to support

Kenneco's fraud claim concerning contingency

coverage. We further hold that collateral estoppel

bars all of Kenneco's claims concerning an alleged

agreement to secure lost profits coverage and the

related fraud claims. We sustain, in part, J & H's

point of error regarding the calculation of

prejudgment interest. We overrule J & H's other

points of error.

Therefore, we conclude that Kenneco is entitled to

recover $412,273.66 from J & H on its claim for

breach of contract to secure contingency coverage,

plus attorney's fees in the amount of $300,000 as

stipulated by the parties. Kenneco is also entitled to

recover prejudgment interest on its $412,273.66

breach of contract award, calculated as simple

interest, accruing beginning 180 days from

December 15, 1986, as well as postjudgment interest

and costs as allowed by law. We accordingly modify

the judgment of the court of appeals and remand the

cause to the trial court for the calculation of the

amount of prejudgment interest and for rendition of

judgment in accordance with this opinion.

HECHT, Justice, filed a dissenting opinion, in which

GONZALEZ and OWEN, Justices, join, and in Part

II of which SPECTOR, Justice, joins.

HECHT, Justice, dissenting.

I do not disagree with the Court that prejudgment

interest awards on common law contract claims

should be guided by legislated policies for

prejudgment interest on wrongful death, personal

injury, and property damage claims. No good reason

is advanced for having different prejudgment interest

rules for different kinds of claims. In deference to

the Legislature's adoption of a rule for some cases, it

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

prejudgment interest—encouraging prompt

se ttlements and d is c o uraging d e lay b y

defendants—can be served when parties agree to

allow the plaintiff to delay deciding whether to file

suit. The Court's argument that the plaintiff in this

case reserved by agreement a right to prejudgment

interest that it would not have had otherwise—in

other words, that the defendant contracted to pay

prejudgment interest for plaintiff's delay in filing

suit—can hardly be taken seriously.

But I would not reach the prejudgment interest issue

because I conclude that Kenneco Energy, Inc.

(formerly Armada Supply Inc.) is not entitled to

judgment against Johnson & Higgins of Texas, Inc.

on any *534 claim Kenneco asserts. I agree with the

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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

limitations,

*

that there is no evidence to support

Kenneco's fraud claim, and that Kenneco's claims for

breach of contract based on Johnson & Higgins'

failure to obtain lost profits coverage are precluded

by findings in Armada Supply Inc. v. Wright, 665

F.Supp. 1047 (S.D.N.Y.1987), aff'd in part and

rev'd in part, 858 F.2d 842 (2d Cir.1988). Contrary

to the Court, however, I would hold that Kenneco's

contract claims for Johnson & Higgins' failure to

obtain contingency coverage are also precluded by

the federal court's findings. Thus, I would render

judgment for Johnson & Higgins.

Accordingly, I respectfully dissent.

I

Kenneco bought fuel oil from Petrobras in Rio de

Janeiro for resale to Sun Oil Trading Corp. in New

York. Kenneco's purchase price was the market

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

prevailing market price at the time of delivery.

Kenneco's purchase was on a C.I.F. basis, meaning

that although Kenneco took title to the oil in the

Brazilian port, Petrobras was obliged to insure the

oil during its voyage to New York. Kenneco's resale

of the oil was not on a C.I.F. basis, so that it had no

obligation to Sun Oil to insure the cargo during

shipment. But while the oil was en route, a steep and

steady decline in the fuel oil market moved Kenneco

to obtain additional insurance to protect what

appeared would very likely be a very substantial

profit from the resale to Sun.

Kenneco's concerns were two. Petrobras had

provided insurance from Brazilian underwriters for

110% of the purchase price, but because the

purchase price was tied to the market, as the market

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

sought to insure the oil at Sun's higher contract price.

Kenneco was also concerned that the Brazilian

underwriters might fail to pay a claim and so sought

insurance against that contingency. Through its

insurance broker, Johnson & Higgins, Kenneco

sought assurance that its marine insurance policies

issued by London underwriters would provide both

increased value coverage and contingency coverage.

When the ship arrived in New York, the cargo was

found to be contaminated, and some of it had been

lost. Sun canceled the contract, and eventually

Kenneco sold some of the oil at a reduced price. The

London and Brazilian underwriters disputed

Kenneco's claims, so Kenneco sued them—but not

Johnson & Higgins—in the United States District

Court for the Southern District of New York. In

essence, the London underwriters contended that the

increased value coverage applied only to damages

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

its sale to Sun was not. Kenneco argued that Johnson

& Higgins had agreed to provide Kenneco with the

coverage it claimed, and that because Johnson &

Higgins was the London underwriters' agent, the

underwriters were bound by that agreement.

The federal district court's finding that Johnson &

Higgins was not the London underwriters' agent was

sufficient reason to deny Kenneco's claims, but the

court went further. It also found, in the words of the

Second Circuit on appeal, that Kenneco “did not ask

for, nor did [Johnson & Higgins] agree to, coverage

on lost profits” as Kenneco contended. Armada, 858

F.2d at 851. This Court holds, and I agree, that

because the federal district court's findings of no

agency and no agreement regarding increased value

coverage were both affirmed *535 on appeal,

relitigation of either is barred by collateral estoppel.

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

that it also found that Johnson & Higgins did not

agree to provide the contingency coverage Kenneco

requested, and that finding, too, was affirmed on

appeal.

The federal district court found that Johnson &

Higgins' representative, Anderson, did not know

because Kenneco's representative, Brown, did not

tell him that Kenneco's sale to Sun was not on C.I.F.

terms. Specifically, the federal district court found:

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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

Anderson about whether the Sun contract was or

was not C.I.F.” Armada, 665 F.Supp. at 1059.

• “As to the question of coverage under the

contingency clause, Anderson understood Brown

to say that both the Petrobras–Armada sale and

the Armada–Sun sale were C.I.F.sales. As already

stated, this was contrary to the fact.” Id. at 1061.

• “It is important to note that [it was not until after

the meeting between Brown and Anderson and

after the dispute arose], according to evidence in

this case, that Armada had affirmatively stated

that the sale to Sun was on a delivered, rather than

a C.I.F. basis.” Id. at 1062.

Anderson could not have agreed to provide

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

told him that the sale to Sun was on C.I.F. terms. In

other words, Anderson could not have agreed to

provide coverage he did not even know was being

requested. Thus, the federal district court found that

“Johnson & Higgins did not clearly understand the

situation and mistakenly billed Armada for a

premium for contingency coverage.” Id. at 1062.

The Second Circuit approved this finding. Armada,

858 F.2d at 851 (“The evidence indicates that

[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,

it could hardly have agreed to provide such

coverage.

A simpler example makes the point clearer. Suppose

a person wants an automobile policy that applies

throughout Mexico, but he does not tell the agent,

and the agent understands from what the person says

that the car will not be operated in Mexico. The

agent procures a policy that clearly limits coverage

to operations in the United States. When the insured

is involved in an accident in Mexico City, how can

he successfully claim that the agent agreed to

provide coverage? Once it is established that the

agent did not know the automobile would be

operated in Mexico, that fact precludes an agreement

to provide such coverage.

The federal district court expressly found that

Kenneco did not tell Johnson & Higgins that it

wanted contingency coverage for a transaction that

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

insurance certificate that clearly conditioned

coverage on back-to-back sales on C.I.F. terms.

These facts having been determined, Johnson &

Higgins cannot be said to have agreed to provide the

contingency coverage Kenneco claims it wanted, or

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

back-to-back C.I.F. requirement was waived.

Kenneco had full opportunity to litigate in its federal

suit whether Johnson & Higgins agreed to provide

contingency coverage applicable in Kenneco's

circumstances. It could not prevail on its claim

against the London underwriters without proving

either a representation by Johnson & Higgins that it

would obtain the coverage, or a waiver of the

back-to-back C.I.F. sales requirement. Having lost

on both grounds, it should not be allowed to

relitigate the issue in Texas.

II

“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

toll the accrual of prejudgment interest while the

agreement is in effect.” Ante at 531. Prejudgment

interest encourages early settlements and

discourages delay by defendants. Obviously, a

plaintiff who wishes to maintain the status quo can

hardly complain of a defendant's delay or failure to

settle. A plaintiff should not be entitled to

prejudgment interest for a delay he has requested

and agreed to.

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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

recover prejudgment interest while the standstill

agreement was in effect because Johnson & Higgins

contracted to pay interest during such period. One

would naturally think that if anyone should pay for

a delay in the running of limitations requested by the

plaintiff, it should be the plaintiff. While 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

the language of their agreement, Johnson & Higgins

agreed to pay Kenneco prejudgment interest for the

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 fullscope

of Kenneco's rights and J & H's liabilities.

Ante at 531 n. 12. That is, Johnson & Higgins'

preservation of the full scope of its rights under a

standstill stipulation means that it preserved all but

one, the right not to pay prejudgment interest during

the period. The absurdity of this Orwellian

doublespeak and consequent result is lost on the

Court.

Parallel Citations

41 Tex. Sup. Ct. J. 268

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

41 Tex. Sup. Ct. J. 268

Footnotes

1 Sue and labor expenses are the reasonable expenses incurred by an insured to mitigate its loss and thus reduce the amount to be paid

by the underwriter. Armada Supply, 858 F.2d at 853.

2 The parties disagree as to whether the claim submitted to the jury is properly characterized as an Insurance Code claim or a DTPA

claim. Because we conclude that the claim submitted can be characterized as an Insurance Code claim, infra at 517, we will refer

to it as such.

3 When a prevailing party does not elect a measure of damages from among alternative measures, the court should render judgment

based on the finding affording the greatest recovery. Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 367 (Tex.1987).

4 Neeley v. Bankers Trust Co. of Texas, 757 F.2d 621 (5th Cir.1985), relied on by the court of appeals, is distinguishable because the

question submitted in that case at least included the necessary elements of false representation, materiality, and reliance, and did not

appear to be submitted as part of some other theory of recovery, whereas Kenneco's question was submitted as part of its Insurance

Code/DTPA claim.

5 “Unfair or deceptive act or practice” means any of the following:

(1) Making or causing to be made any statement misrepresenting the terms, benefits, or advantages of an insurance policy.

(2) Making, or directly or indirectly causing to be made, any assertion, representation, or statement with respect to insurance that was

untrue, deceptive, or misleading.

(3) Making any misrepresentation relating to insurance. ‘Misrepresentation’ means any of the following:

(a) any untrue statement of a material fact; or

(b) any failure to state a material fact that is necessary to prevent the statements from being misleading, when these statements are

considered in light of the circumstances under which they are made; or

(c) the making of any statement in such manner or order as to mislead a reasonably prudent person to a false conclusion of a material

fact.

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

a point two years prior to the institution of the action.” Tex. Ins.Code art. 21.21, § 16(d) (Vernon 1981). This provision has been

characterized as an exclusion on damages incurred more than two years before filing of the suit, rather than as a statute of limitations.

Tectonic Realty Inv. Co. v. CNA Lloyd's of Texas Ins. Co., 812 S.W.2d 647, 655 n. 4 (Tex.App.—Dallas 1991, writ denied). But see

Johnston v. Barnes, 717 S.W.2d 164, 165 (Tex.App.—Houston [14th Dist.] 1986, no writ)(applying pre–1985 § 16(d) as a two-year

limitations period). J & H admits that “[prior] to 1985, the Texas Insurance Code had no limitations provision, although it did have

a provision that limited recoverable damages to those incurred within two years of the date the lawsuit is filed.”

7 In Eagle Properties, Ltd. v. Scharbauer, 807 S.W.2d 714, 721 (Tex.1990), we declined to decide whether state or federal collateral

estoppel law governed the preclusive effect of a prior federal court judgment on a subsequent state court action because the same

result would have been reached under either state or federal law.See also Sysco Food Servs., Inc. v. Trapnell, 890 S.W.2d 796, 805

(Tex.1994). The same is true in this case. Accordingly, we do not decide the issue today.

8 The Second Restatement states a rule different from that of the First Restatement, which provided that each independently sufficient

alternative basis for the prior judgment was a valid estoppel. Restatement (First) of Judgments § 68 cmt. n (1942).

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

41 Tex. Sup. Ct. J. 268

9 Effective September 1, 1997, article 5069–1.05 was codified in Chapter 304 of the Texas Finance Code. See Act of May 24,1997,

75 th Leg., R.S., ch. 1008, § 1, 1997 Tex. Sess. Law Serv. 3435. No substantive change in law was intended by the codification. Tex.

Fin. Code § 1.001(a); Act of May 24, 1997, 75 th Leg., R.S., ch. 1008, § 7 & preamble, 1997 Tex. Sess. Law Serv. 3091, 3603. It

appears that the prejudgment language in the Texas Finance Code was then superseded by the subsequent enactment of similar

prejudgment interest language in the Texas Credit Title, Act of June 2, 1997, 75 th Leg., R.S., ch. 1396, § 1, 1997 Tex. Sess. Law

Serv. 5212–13. See Tex. Gov't Code § 311.031(c) (“The repeal of a statute by a code does not affect an amendment, revision, or

reenactment of the statute by the same legislature that enacted the code. The amendment, revision, or reenactment is preserved and

given effect as part of the code provision that revised the statute so amended, revised, or reenacted.”) & § 311.031(d) (“If any

provision of a code conflicts with a statute enacted by the same legislature that enacted the code, the statute controls.”). See also

Miller v. State, 708 S.W.2d 436, 446 (Tex.Crim.App.1984) (holding that amendment to statute controlled when same Legislature

amended statute and also enacted a new code that omitted the amendment).

The codification and subsequent reenactment of what has been Tex.Rev.Civ. Stat. article 5069–1.05, section 6 does not modify the

legislative policy established by section 6. We believe the legislative underpinnings of section 6 extend to that section's codification

in the Texas Finance Code and its subsequent reenactment in the Texas Credit Title.

In any event, at the time the trial court's judgment was rendered in this case, section 6 was the operative provision. As a result, the

opinion will refer to section 6 rather than to the Texas Finance Code or the Texas Credit Title.

10 For survival actions, interest accrual was to begin on either the date of death or six months after the injury-causing accident occurred,

whichever yielded the larger interest award. Cavnar, 696 S.W.2d at 555.

11 Section 2 provided that the interest rate should be computed by “taking the auction rate quoted on a discount basis for 52–week

treasury bills issued by the United States government as published by the Federal Reserve Board on the most recent date preceding

the date of computation,” except that “if the rate so computed is less than 10 percent, the judgment interest rate shall be 10 percent,

and if it be more than 20 percent, the judgment interest rate shall be 20 percent.” Tex.Rev.Civ. Stat. art. 5069–1.05, § 2 (Vernon

1987). The most recent version of section 2 is virtually identical. Id. (Supp.1997).

12 The standstill agreement was silent with regard to prejudgment interest. The parties easily could have included a provision that

prejudgment interest would abate during the specified standstill time period. Absent such provision, this court cannot imply one.

Tenneco Inc. v. Enterprise Products Co., 925 S.W.2d 640, 646 (Tex.1996).

The dissent distorts our conclusion by stating that we are holding that J & H “contracted to pay interest during such period [the

period of the standstill]” and that J & H “agreed to pay Kenneco prejudgment interest for the delayKenneco 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 Thomson Reuters. No claim to original U.S. Government W orks. 31
O
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

932 S.W.2d 140

Court of Appeals of Texas,

Texarkana.

K MART CORPORATION, Appellant,

v.

Allie Louise RHYNE and Curtis Olin Rhyne, Sr.,

Appellees.

No. 06–95–00042–CV. | June 4, 1996.

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

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)

sufficient evidence supported determination that store should

have known of condition caused by protruding plate; (2)

sufficient evidence supported damage award; (3) execution of

release to store for medical records provided notice to begin

accrual of prejudgment interest; and (4) improper admission

of testimony of chiropractor, who was not qualified to testify

as to costs of future surgeries, did not warrant reversal.

Affirmed.

West Headnotes (15)

[1] Appeal and Error

Interrogatories and Special Verdicts

Appeal and Error

Total Failure of Proof

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

probative evidence to support finding, Court of

Appeals must uphold verdict.

Cases that cite this headnote

[2] Negligence

Buildings and Other Structures

Determination that store had actual or

constructive knowledge of condition created by

metal plate protruding from floor, in patron's

negligence action against store that arose from

patron's trip on plate and fall to floor, was

supported by evidence that there was observable

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.

1 Cases that cite this headnote

[3] Appeal and Error

Clear or Palpable Weight or Preponderance

In reviewing factual sufficiency challenge, Court

of Appeals must examine all of evidence

presented at trial and may set aside finding only

when it is so contrary to overwhelming weight of

evidence as to be clearly wrong and unjust.

Cases that cite this headnote

[4] Damages

Discretion as to Amount of Damages

Jury has broad discretion in assessing amount of

damages in personal injury case.

1 Cases that cite this headnote

[5] Damages

Expenses

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 1
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

Recovery for future medical expenses is primarily

matter for jury to determine in its discretion.

1 Cases that cite this headnote

[6] Damages

Expenses

Recovery for future medical expenses requires

showing that there is reasonable probability that

such medical expenses will be incurred in future;

expert testimony, however, is not required.

2 Cases that cite this headnote

[7] Damages

Injuries to the Person

Damages

Medical Treatment and Custodial Care

Damages

Particular Cases

Damages

Construction and Operation

Damage award of $190,000 to patron in

negligence action against store in which patron

tripped over protruding metal plate and fell to

floor, was supported by evidence of both past and

future physical pain and mental anguish, physical

impairment, and medical care, and so jury could

have awarded entire amount on basis of past and

future pain and suffering, so as to preclude

requirement of recovery for future medical

expenses, of reasonable probability that such

medical expenses would be incurred in future.

3 Cases that cite this headnote

[8] Damages

Physical Suffering and Inconvenience in

General

Damages

Mental Suffering and Emotional Distress

Jury has great discretion in awarding damages in

a personal injury case for pain and mental

anguish.

Cases that cite this headnote

[9] Damages

Loss of Earnings, Services, or Consortium

Jury has discretion in awarding loss of consortium

damages.

Cases that cite this headnote

[10] Damages

Husband and Wife

Damage award of $10,500 for loss of consortium

to husband of store patron who brought

negligence action against store for injuries she

incurred in fall to store floor after trip over metal

plate that protruded from floor, was supported by

testimony that husband had been under stress

from seeing patron in pain, that husband had not

been able to sleep with patron since her injury,

that husband was required to perform household

duties such as cooking and gardening that had

previously been performed by patron, and that

husband and patron were no longer able to pursue

their plans to travel.

1 Cases that cite this headnote

[11] Appeal and Error

Amount of Recovery

Appeal and Error

Remission of Part of Recovery

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 2
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

In reviewing request for remittitur, proper

standard is factualsufficiency; appellate court will

examine all of evidence in record to determine

whether sufficient evidence supports damage

award, remitting only if some portion is so

factually insufficient as to be manifestly unjust.

1 Cases that cite this headnote

[12] Interest

Form and Sufficiency of Demand

Patron's execution of release to store for her

medical records, that indicated that information

was to be used for purposes of evaluating and

handling patron's claim for injury, was sufficient

to give notice to store of patron's claim for

compensation for her injuries, and so date of

execution of release was date of accrual of

prejudgment interest in patron's negligence action

against store. Vernon's Ann.Texas Civ.St. art.

5069–1.05, § 6(a).

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

Civ.St. art. 5069–1.05, § 6(g).

Cases that cite this headnote

[14] Evidence

Damages

Chiropractor was not qualified to testify as to cost

of surgeries, and so chiropractor's testimony was

improperly admitted in store patron's negligence

action against store, to recover damages for

injuries patron suffered when she fell to floor

after tripping over protruding metal plate. Rules

of Civ.Evid., Rule 702.

4 Cases that cite this headnote

[15] Appeal and Error

Opinions and Conclusions

Improper admission of testimony of chiropractor

in slip and fall negligence action by patron against

store, as to cost of future surgeries that patron

might need in future, did not warrant reversal of

judgment and award of $200,000 for patron, even

though jury could have included future medical

expenses as part of damage award, since jury

could have awarded entire amount to cover pain

and suffering, mental anguish, and physical

impairment, for which patron had sought

$215,000. Rules App.Proc., Rule 81(b)(1); Rules

of Civ.Evid., Rule 702.

2 Cases that cite this headnote

Attorneys and Law Firms

*141 J. Gene Bailey, Longview, for appellant.

John Graves, Sloan & Price, Longview, for appellees.

Before CORNELIUS, C.J., and GRANT, J.

1

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 Thomson Reuters. No claim to original U.S. Government W orks. 3
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

Corporation) in Longview, Texas, on March 7, 1991. Allie

Rhyne and her husband, Curtis Olin Rhyne, brought a

negligence suit against K Mart, and the jury awarded damages

in the amount of $200,000. Because the jury found K Mart

ninety-five percent negligent and Allie Rhyne five percent

negligent, her damages were reduced to $190,000. The jury

also awarded $10,500 in damages to her husband. Both were

also awarded prejudgment interest.

2

*142 On March 7, 1991, Rhyne was shopping in the garden

section of the Longview K Mart when she tripped and fell on

a three-inch metal plate protruding from the concrete floor.

The metal plate on which Rhyne fell was embedded in the

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. When she awoke, she

could not move, and her foot was caught underneath the metal

plate upon which she had stumbled. After she freed her foot,

she crawled several feet and collapsed. Rhyne sustained

injuries to her face, neck, and back.

Sharon Moore, the assistant manager on duty at the time of

Rhyne's fall, was summoned by another employee. Moore

filled out an accident report with Rhyne, listing the cause of

Rhyne's fall as “inadequate guard of fence.” Moore admitted

that the metal plate was a dangerous and hazardous condition

and that it was K Mart's responsibility to repair the condition.

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

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 retirement years, as they

had planned before his wife's injuries.

Dr. Roy Randall Northcutt, a chiropractor, testified that Rhyne

has a very limited range of motion in her neck and that her

condition is permanent. Dr. Frank R. Jackson, Rhyne's family

doctor, testified via videotape that Rhyne will continue to have

medical problems in the foreseeable future.

[1] By its first point of error, K Mart contends that the trial

court erred in rendering judgment on the verdict because the

evidence was legally insufficient to support the jury's answer

to question one, which addressed K Mart's negligence.

Because K Mart did not have the burden of proof on this issue,

it must demonstrate on appeal that there was no evidence to

support this finding. Croucher v. Croucher, 660 S.W.2d 55,

58 (Tex.1983). In reviewing a no evidence point, we consider

only the evidence and inferences that tend to support the

finding, disregarding all evidence and inferences to the

contrary. Weirich v. Weirich, 833 S.W.2d 942, 945

(Tex.1992); Havner v. E–Z Mart Stores, Inc., 825 S.W.2d

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.

Stafford, 726 S.W.2d 14, 16 (Tex.1987) (stating that if there

is “more than a scintilla of evidence” to support the finding, a

no evidence point fails); In re King's Estate, 150 Tex. 662,

664, 244 S.W.2d 660, 661 (1951).

The Texas Supreme Court listed the elements in a premises

liability negligence case as follows:

(1) Actual or constructive knowledge of some condition on

the premises by the owner/operator;

(2) That the condition posed an unreasonable risk of harm;

(3) That the owner/operator did not exercise reasonable

care to reduce or eliminate the risk; and

(4) That the owner/operator's failure to use such care

proximately caused the plaintiff's injuries.

Keetch v. Kroger Co., 845 S.W.2d 262, 264 (Tex.1992);

Corbin v. Safeway Stores, Inc., 648 S.W.2d 292, 296

(Tex.1983).

[2] K Mart argues that there was legally insufficient evidence

for the jury to infer K Mart's actual or constructive knowledge

of the condition which injured Rhyne. Moore, the assistant

manager on duty the day of Rhyne's accident, testified that no

one had previously been hurt on the metal plate and that K

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

the pipe while setting tables *143 in the garden area.

3 Moore

further testified that to dislodge the pipe, the employee would

had to have hit it with great force and, therefore, should have

assessed the situation after the impact.

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 4
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

K Mart argues that the evidence is legally insufficient because

a jury had to have stacked inferences to come to this

conclusion, citing McClure v. Allied Stores of Texas, 608

S.W.2d 901, 904 (Tex.1980). The Texas Supreme Court has

also held, however, that a number of inferences may be drawn

from a single fact situation. McClure, 608 S.W.2d at 904; see

also Farley v. M M Cattle Co., 529 S.W.2d 751, 757

(Tex.1975).

Whether inferences are stacked is often a matter of semantics,

and thus depends upon the wording of the inference. The

ultimate test on any inference should be its reasonable

probability.

In the first place, these conclusions were not based solely on

inferences made by the jury, but were founded upon direct

opinion evidence by the K Mart assistant manager. The

present case is analogous to the case of Coffee v. F.W.

Woolworth Co., 536 S.W.2d 539 (Tex.1976). In the Coffee

case, the Supreme Court concluded that there was sufficient

evidence to support the jury finding that the defendant store

owner created the condition based upon the testimony of a

supervisor in the defendant store. The supervisor testified that

the only two possible causes of the condition both involved

store personnel. (In the present case, the assistant manager on

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

that the evidence created a reasonable inference for the jury

that the defendants had caused the condition and therefore had

actual notice. (In the present case, there was evidence from

which the jury could have concluded that the defendant caused

the condition and therefore had actual notice of the condition.)

The jury did not have to make an inference that an employee

was actually aware of the pipe being broken, but only that the

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

presented by K Mart concerning her failure to keep a proper

lookout. If the jury determined that there was some negligence

on the part of Allie Rhyne, a customer coming down the aisle,

then the jury also certainly had a basis to believe that K Mart

employees, working in that area of the store, should have

known of the condition, because the workers, by spending

more time in the store, would have more opportunities to

observe the situation and to recognize the change that had

been created by the broken pipe.

In the present case, as in the Farley case, the inference that the

jury had to draw was based on direct evidence admitted at

trial. See Farley, 529 S.W.2d at 757. There was observable

physical evidence of the pipe, broken from the metal plate,

which extended three inches from the floor. When the pipe

was extended from the metal plate to the fence, it provided an

obvious barrier that called attention to the obstacle. After the

pipe was separated, it no longer extended into the air above

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

had been broken off from the metal plate by something or

someone requiring considerable force, which would have been

obvious to anyone involved in the breaking.

The other contended inference came from the opinion

evidence of the K Mart employee. It is drawn from the totality

of the circumstances and the personal knowledge of the

assistant manager. She gave direct testimony that a K Mart

employee had been working in that area with a fork truck, and

she concluded that it was probable that this K Mart employee

knocked the pipe down with the fork truck. Furthermore, even

if these were improper inferences, a jury could have concluded

because of the physical condition of the plate extended up

from the floor three inches in the middle of an aisle that the K

*144 Mart employees either knew or should have known of

the dangerous condition.

K Mart also contends that there was legally insufficient

evidence for the jury to find the third element, i.e., that the

owner/operator did not exercise reasonable care to reduce or

eliminate the risk. It was undisputed, however, that the

condition was hazardous when Rhyne fell and that K Mart did

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

customers after notice of the condition. This point of error is

therefore overruled.

By its second and third points of error, K Mart contends that

the trial court erred in rendering judgment on the verdict

because the evidence was factually insufficient to support the

jury's answer to question three (amount of damages to Ms.

Rhyne), and question four (amount of damages to Mr. Rhyne).

K Mart contends that the jury's award of $200,000 in damages

was factually insufficient because the damage award included

future damages, which K Mart argues were not proven by a

reasonable probability.

[3] In reviewing a factual sufficiency challenge, we must

examine all of the evidence presented at trial and may set aside

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 5
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

the finding only when it is so contrary to the overwhelming

weight of the evidence as to be clearly wrong and unjust. Cain

v. Bain, 709 S.W.2d 175, 176 (Tex.1986); In re King's Estate,

244 S.W.2d at 661; Wal–Mart Stores, Inc. v. Berry, 833

S.W.2d 587, 590 (Tex.App.—Texarkana 1992, writ denied).

[4] Because personal injury damages are unliquidated and are

not capable of certain measurement, the jury has broad

discretion in assessing the amount of damages in a personal

injury case. Transit Management Co. of Laredo v. Sanchez,

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 Worth 1992, writ

denied); Kansas City Southern Railway Co. v. Catanese, 778

S.W.2d 114, 119 (Tex.App.—Texarkana 1989, writ denied).

[5] [6] Likewise, recovery for future medical expenses is

primarily a matter for the jury to determine in its discretion.

Strahan v. Davis, 872 S.W.2d 828, 832 (Tex.App.—Waco

1994, writ denied); Berry Property Management v. Bliskey,

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

future medical expenses requires a showing that there is a

reasonable probability that such medical expenses will be

incurred in the future. Fisher v. Coastal Transport Co., 149

Tex. 224, 230 S.W.2d 522, 523 (1950); Fibreboard Corp. v.

Pool, 813 S.W.2d 658, 681 (Tex.App.—Texarkana 1991, writ

denied), cert. denied, 509 U.S. 923, 113 S.Ct. 3037, 125

L.Ed.2d 724 (1993). Expert testimony, however, is not

required. Strahan, 872 S.W.2d at 832; Hughett, 624 S.W.2d

at 405; see also Bliskey, 850 S.W.2d at 664 (stating that the

jury may estimate both the necessity of future medical

treatment and the cost of such treatment).

[7] [8] In the present case, the jury was given a broad-form

damage submission consisting of both past and future medical

damages for the following:

· physical pain and mental anguish;

· physical impairment; and

· medical care.

The jury was not asked to specify the amount of damages for

each damage element. The jury has great discretion in

awarding damages in a personal injury case for pain and

mental anguish. Kidd, 834 S.W.2d at 78; Exxon Corp. v.

Roberts, 724 S.W.2d 863, 868 (Tex.App.—Texarkana 1986,

writ ref'd n.r.e.); George C. Vaughan & Sons v. Dyess, 323

S.W.2d 261, 264–65 (Tex.Civ.App.—Texarkana 1959, writ

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

evidence to support the jury's damage award to Rhyne. The

jury's verdict is therefore not so contrary to the overwhelming

weight of *145 the evidence as to be clearly wrong and unjust.

This point of error is overruled.

[9] By its third point of error, K Mart contends that the

evidence was factually insufficient to support the jury's award

of $10,500 in loss of consortium damages to the husband. The

jury has discretion in awarding loss of consortium damages.

See Whittlesey v. Miller, 572 S.W.2d 665, 667 (Tex.1978)

(stating that the duty to compensate for loss of consortium

must be resolved by the “impartial conscience and judgment

of jurors who may be expected to act reasonably, intelligently

and in harmony with the evidence”).

[10] K Mart does not, however, argue this point in its brief.

The only reference regarding Rhyne's husband in this portion

of K Mart's brief details his testimony as it related to his wife's

injuries. Based on Tex.R.App. P. 74, an appellant waives any

issue not supported by argument and authority in his or her

brief. Trenholm v. Ratcliff, 646 S.W.2d 927, 934 (Tex.1983);

Gulf Coast State Bank v. Emenhiser, 562 S.W.2d 449, 452–53

(Tex.1978). Furthermore, there was sufficient evidence in the

record to support this award. Rhyne's husband testified that he

has been under stress seeing his wife in pain everyday and has

not been able to sleep with his wife since her injury. He also

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

retirement years as they had planned before his wife's injuries.

Therefore, the jury's award of $10,500 in damages to the

husband is not so contrary to the overwhelming weight of the

evidence as to be clearly wrong and unjust.

[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

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

determine whether sufficient evidence supports the damage

award, remitting only if some portion is so factually

insufficient as to be manifestly unjust. Pope v. Moore, 711

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 6
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

S.W.2d 622, 623–24 (Tex.1986); Carter, 778 S.W.2d at 915.

The jury's determination was not so factually insufficient as to

be manifestly unjust. Therefore, the trial court did not err in

refusing to order a remittitur. This point of error is overruled.

[12] By its fourth point of error, K Mart contends that the trial

court erred in failing to modify, correct, or reform the

judgment as it relates to prejudgment interest. First, K Mart

argues that the trial court used the incorrect date of accrual of

prejudgment interest.

The Texas statute dealing with prejudgment interest in a

personal injury case states that interest shall begin 180 days

after the defendant receives written notice of the plaintiff's

claim. Tex.Rev.Civ. Stat. Ann. art. 5069–1.05 § 6(a) (Vernon

Supp.1996). The court ordered that the prejudgment interest

would begin 180 days after Rhyne executed a release to K

Mart for her medical records on March 27, 1991. K Mart

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

after Rhyne provided written notice to a K Mart claims agent

on April 22, 1992.

A recent Austin appellate court opinion states that written

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

1995, writ denied). Robinson requires written notice of a

claim, i.e., a legal demand for payment or compensation.

Robinson, 894 S.W.2d at 528. The court in Robinson,

however, recognized that it was deciding an issue of first

impression. Robinson, 894 S.W.2d at 528.

The Fort Worth appellate court also recently addressed this

issue in Bevers v. Soule, 909 S.W.2d 599, 603–604

(Tex.App.—Fort Worth 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,”

was *146 sufficient to constitute notice under this statute.

Bevers, 909 S.W.2d at 603. K Mart distinguishes this case on

the basis that Rhyne made no similar request with her medical

release form. Rhyne's release, prepared by K Mart, indicates,

however, that “[t]his information is to be used for purposes of

evaluating and handling my claim for injury as a result of an

accident occurring on or about 3–7–91.” (Emphasis added.)

This notice is comparable to that given in Bevers and was

sufficient to give notice to K Mart of Rhyne's claim for

compensation for her injuries.

[13] Secondly, K Mart argues that the trial court erred in

compounding the prejudgment interest because the statute

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

postjudgment interest at the time of judgment and shall be

computed as simple interest.” Tex.Rev.Civ. Stat. Ann. art.

5069–1.05, § 6(g) (Vernon Supp.1996) (emphasis added); see

also Bevers, 909 S.W.2d at 603–04.

5

Rhyne argues that this section was modified by section 2 of the

same statute which states that all judgments earn interest

“compounded annually.” Tex.Rev.Civ. Stat. Ann. art.

5069–1.05, § 2 (Vernon Supp.1996). Section 2, however,

deals with postjudgment interest, not prejudgment interest. Id.

Because the plain language of Section 6(g) requires

prejudgment interest to be computed as simple interest, this

point of error is sustained.

[14] By its final point of error, K Mart argues the trial court

erred in admitting evidence from Dr. Roy Randall Northcutt,

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

is not competent to testify as to the costs of surgeries.

In support of this contention, K Mart cites a recent Texas

Supreme Court case holding that courts should more closely

scrutinize expert witness testimony before allowing it into

evidence. E.I. du Pont de Nemours and Co. v. Robinson, 923

S.W.2d 549, 38 Tex. S.Ct. J. 852 (June 15, 1995) (stating that

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

treatment, this evidence was improperly admitted. See Tex.R.

Civ. Evid. 702. We agree.

[15] We can only reverse based on this error, however, if this

error amounted to such a denial of K Mart's rights as was

reasonably calculated to cause and probably did cause the

rendition of an improper judgment. See Tex.R.App. P.

81(b)(1). As stated in point of error two, this Court cannot

ascertain the amount of future medical damages awarded by

the jury in this case because the damages were submitted by a

broad-form question and also included pain and suffering,

physical impairment, and past medical care. The other

damages could have amounted to this total without the cost of

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 7
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

surgical treatment.

On rehearing, K–Mart contendsthat 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. We

can only say that it was possible. We 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.

While there is much virtue in the simplicity of the broad-form

submission, the courts are deprived in many situations of

determining with exactitude what the jury found. This is

especially true in lumping of all damages together because it

renders the trial court and the reviewing court helpless in

knowing which damages were actually awarded. This point of

error is overruled.

Based on our disposition of K Mart's fourth point of error, the

prejudgment interest awards are reformed to $70,211

7

for Allie

Rhyne and $3,905

8

for Curtis Rhyne. The judgment of the trial

court is otherwise affirmed.

Footnotes

1 Justice Charles Bleil was a member of the Court when this case was argued and submitted, and participated fully in the consideration

of this case, but resigned from the Court before the opinion was issued.

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 8
K Mart Corp. v. Rhyne, 932 S.W.2d 140 (1996)

2 Prejudgment interest was included in the trial court's judgment pursuant to Tex.Rev.Civ. Stat. Ann. art. 5069–1.05 (Vernon

Supp.1996). Rhyne's prejudgment interest amounted to $65,812.33. Her husband's prejudgment interest amounted to $3,872.80.

3 Moore testified that “[t]he only—it probably got broken setting the tables with the fork truck.”

4 In a previous opinion, this Court held that prejudgment interest under this statute should be compounded annually pursuant to Section

3 of this Article 5069–1.05. See Sadler v. Duvall, 815 S.W.2d 285, 294 (Tex.App.—Texarkana 1991, writ denied). This opinion,

however, dealt with a case occurring before the Legislature amended Section 6(g) to require simple interest. See Sadler, 815 S.W.2d

at 294.

5 In Bevers, the Fort Worth Court asserted that this Court wrongly decided Sadler. Bevers v. Soule, 909 S.W.2d 599 (Tex.App.—Fort

Worth 1995, n.w.h.). The Fort Worth Court failed to recognize, however, that Sadler dealt with a case that occurred before the

Legislature amended Section 6(g) of Article 5069–1.05 to require simple interest. See Sadler, 815 S.W.2d at 294.

6 See Baylor Medical Plaza Services v. Kidd, 834 S.W.2d 69, 79 (Tex.App.—Texarkana 1992, writ denied)(on motion for rehearing);

see also Transit Management Co. of Laredo v. Sanchez, 886 S.W.2d 823, 826 (Tex.App.—San Antonio 1994, no writ) (stating that

the valuation of mental anguish damages are generally left to the trier of fact); Pipgras v. Hart, 832 S.W.2d 360, 366 (Tex.App.—Fort

Worth 1992, writ denied) (noting that future physical pain and mental anguish damages are left to the jury's discretion).

7 This amount was calculated as follows:

First three years (3/27/91—3/27/94), 10% of $190,000 per year x 3 = $57,000.

For partial year (3/27/94—2/24/95), 10% of $190,000 for 334 days = $17,386.

Total interest is $57,000 + $17,386 = $74,386.

The parties agreed to reduce this amount based upon settlement offers K Mart made to Rhyne. Accordingly, $4,175 was

subtracted from the above amount of $74,386 to reach a final figure of $70,211.

8 This amount was calculated in the same manner as above, except on a principal amount of $9,975, resulting in the amount of $3,905

in interest to be paid. Because K Mart made no settlement offers to Curtis Rhyne, no deductions apply.

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

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 9
P
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

98 S.W.3d 766

Court of Appeals of Texas,

Fort Worth.

MCN ENERGY ENTERPRISES, INC.,

formerly named MCN Investment

Corporation, Appellant and Appellee,

v.

OMAGRO DE COLOMBIA,

L.D.C., Appellee and Appellant.

No. 2–02–015–CV. | Feb. 6, 2003.

Manufacturing company brought action against prospective

investor for breach of contract, promissory estoppel, breach

of good faith and fair dealing, fraud, and negligent

misrepresentation. The 67th District Court, Tarrant County,

Don J. Cosby, J., entered judgment on jury verdict for

company. Prospective investor appealed, and company crossappealed. The Court of Appeals, Dixon W. Holman, J.,

held that: (1) evidence supported finding of negligent

misrepresentation; (2) damages of $2.2 million were not

excessive; and (3) company could not maintain claim for

promissory estoppel.

Affirmed.

West Headnotes (15)

[1] Appeal and Error

Verdict

When no objection was made to a jury

instruction, evidence to support a finding based

on the instruction should be assessed on appeal

in light of the instruction the trial court gave the

jury.

Cases that cite this headnote

[2] Fraud

Statements recklessly made; negligent

misrepresentation

Evidence legally supported finding that

prospective investor made negligent

misrepresentation to manufacturing company;

evidence showed that representatives of investor

repeatedly urged company to expend more

money by making it believe that investor would

be joining company in operation of plant.

Cases that cite this headnote

[3] Fraud

Duty to disclose facts

When one makes a representation to another that

later becomes misleading or false, he has a duty

to correct the false information to the misled

party and not continue to conceal the truth.

1 Cases that cite this headnote

[4] Fraud

Weight and Sufficiency

Both negligence and causation in a case of

negligent misrepresentation may be established

by either circumstantial or direct evidence.

1 Cases that cite this headnote

[5] Fraud

Amount awarded

Damages of $2.2 million were not excessive for

potential investor's negligent misrepresentation

that it would join manufacturing company

in operating plant; company spent $3.6

million of development costs in reliance on

misrepresentation.

1 Cases that cite this headnote

[6] Evidence

Tendency to mislead or confuse

Prejudicial effect of evidence that potential

investor withdrew from involvement with

manufacturing company because company paid

a bribe to the wife of a foreign government

official substantially outweighed probative

value; investor's letter to company did not

mention bribe as grounds for withdrawal, and

investor was not aware of bribe until three years

after it withdrew from project. Rules of Evid.,

Rule 403.
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Cases that cite this headnote

[7] Trial

Admission of evidence in general

A trial court has the sound discretion to admit

and exclude evidence.

Cases that cite this headnote

[8] Appeal and Error

Rulings as to Evidence in General

A party desiring to reverse a judgment on

evidentiary error must show that the error

probably resulted in an improper judgment.

Cases that cite this headnote

[9] Interest

Demand for Payment of Principal

Prejudgment interest on claim of negligent

misrepresentation by potential investor in

manufacturing company was to be calculated

beginning the day company sent letter to

potential investor, demanding to be paid.

V.T.C.A., Finance Code § 304.104.

1 Cases that cite this headnote

[10] Appeal and Error

Cases Triable in Appellate Court

The date from which statutory prejudgment

interest should begin is a question of law that an

appellate court must review de novo. V.T.C.A.,

Finance Code § 304.104.

1 Cases that cite this headnote

[11] Interest

Demand for Payment of Principal

A “claim,” for purposes of calculating

prejudgment interest, is a demand for

compensation or an assertion of a right to be paid.

V.T.C.A., Finance Code § 304.104.

1 Cases that cite this headnote

[12] Estoppel

Pleading as element of cause of action

Manufacturing company could not maintain

claim for promissory estoppel against potential

investor, based on investor's withdrawal from

proposed project; company did not identify or

make clear the specific nature of the promise or

promises it alleged.

1 Cases that cite this headnote

[13] Estoppel

Future events; promissory estoppel

If a promisee has reasonably and detrimentally

relied on an otherwise unenforceable promise,

he may have a cause of action for promissory

estoppel.

4 Cases that cite this headnote

[14] Estoppel

Future events; promissory estoppel

Although normally a defensive theory,

promissory estoppel may become available as a

cause of action to a promisee who has acted to his

detriment in reasonable reliance on an otherwise

unenforceable promise.

6 Cases that cite this headnote

[15] Estoppel

Future events; promissory estoppel

The elements of a cause of action for promissory

estoppel include: (1) a promise, (2) the promisor

foreseeing that the promisee will rely on it, and

(3) detrimental reliance by the promisee.

7 Cases that cite this headnote

Attorneys and Law Firms

*768 Godwin Gruber, P.C., Julia F. Pendery, Dallas, for

Appellant/Cross Appellee.

Shannon, Gracey, Ratliff, et al., Joseph W. Spence, Fort

Worth, for Appellee/Cross Appellant.
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

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

Panel B: HOLMAN, GARDNER, and WALKER, JJ.

OPINION

DIXON W. HOLMAN, Justice.

Appellant MCN Energy Enterprises, Inc. (MCN) asks that

we reverse the jury's verdict and trial court judgment

awarding Appellee Omagro De Colombia, L.D.C. (Omagro)

$2,781,041.36 for a claim of negligent misrepresentation and

that we render judgment that Omagro take nothing. We will

affirm.

The Agreement

Omagro is a company controlled by petroleum engineer

Naresh Vashisht. Omagro produces urea, a nitrogen fertilizer

used for plants and crops. In 1996, Vashisht decided to

operate a urea plant that he bought in Peru. He soon moved the

plant to Colombia. Unable to find adequate bank financing, he

approached MCN's president, Rai Bhargava, and asked him

to buy an interest in Omagro as an international investment.

Eventually, MCN and Omagro signed a memorandum of

understanding in which the two companies agreed they would

associate for the purpose of owning and operating the urea

plant.

Each party agreed to deal with the other in good faith.

The memorandum stated the companies' agreement that

as long as MCN was negotiating in good faith, Omagro

would share with MCN information to use in making

joint decisions about the project and would not solicit or

encourage proposals from others. The parties further agreed

that within thirty days the companies would sign “definitive

documents,” consisting of a stock purchase agreement and

documents concerning financing, plant construction and

operation, and the distribution of the plant's profits. *769

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.

Finally, the memorandum provided that MCN would conduct

a due diligence review within the first thirty days after

signing the memorandum and would have no obligation to

consummate the deal unless satisfied with that review. The

memorandum was signed July 14, 1997, and eventually it

was amended and extended six times. The final extension

of the memorandum was dated March 16, 1998, extending

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.

Due Diligence Efforts

In 1997, after the memorandum was signed, George Robles,

MCN's “point man” for the transaction, and Purna Pai, an

MCN chemical engineer, visited Colombia to conduct due

diligence for the urea project. When they returned after

inspecting the plant, they gave Omagro no indication that

MCN would not be interested in it. To the contrary, when they

came home from Colombia, Robles, Pai, and Shanti Sharma

(the man in charge of MCN's international investments) told

Omagro the plant looked fine to them. In August 1997, MCN

asked for a thirty-day extension within which to sign the

definitive documents. The request was granted by a sixty-day

extension letter the two companies signed, that also extended

the thirty-day period for MCN to conduct its due diligence.

Omagro continued to pursue the project, obtaining a

“mandate agreement” signed by International Finance

Corporation, MCN, and Omagro to proceed with the

financing of the project. Omagro then spent money to conduct

soil studies, design electrical systems, do engineering work,

and to continue repairing and cleaning the plant's equipment.

Because MCN and Omagro decided to transform the plant

into a “granular” operation, costs again increased, and

Omagro bought more equipment in the United States, storing

it in Houston. That equipment was inspected by MCN's

Robles and Pai, who once again indicated that MCN was

committed to the project. Meanwhile, Omagro sent a memo

to MCN containing Omagro's analysis of the bids received

for constructing and operating the plant and identifying the

party Omagro wished to hire for that purpose. Robles reacted

by calling Omagro to agree with the hiring recommendation.

Also, Omagro sent MCN a copy of a proposed gas contract

with Ecopetrol, to which MCN made no objection.

MCN Withdraws

Without warning, fourteen months into the transaction,

Robles and Sharma telephoned Vashisht in September 1998

to tell him that MCN would not invest in the project

with Omagro. Vashisht then wrote a letter to MCN's new

president, Williams, to protest MCN's sudden withdrawal.
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

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

MCN responded to Omagro with a letter dated November

10, 1998, stating that MCN would not invest in the

operation of Omagro's urea plant because MCN believed

the memorandum of understanding had “expired.” The

September telephone call and November letter were the

first times MCN expressed any concerns or reservations to

Omagro about the Colombia urea plant.

Omagro Sues MCN

In September 1999, Omagro sued MCN alleging causes of

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

negligently misrepresented to Omagro, through words and

conduct, that MCN was committed to making an investment

in the construction and operation of the urea plant, and

that Omagro relied to its detriment on the negligent

misrepresentations of MCN's words and conduct.

From the evidence, the jury answered “yes” to question

3 of the charge, which asked whether MCN made a

negligent misrepresentation on which Omagro justifiably

relied. Question 3 defined “misrepresentation” as “any

manifestation by words or other conduct by one person to

another that, under the circumstances, amounts to an assertion

not in accordance with the facts.” The question instructed

jurors that a “negligent misrepresentation” occurs when a

party, acting either in the course of his business, or in a

transaction in which he has a pecuniary interest, makes a

representation that supplies false information to guide others

in their business, and without exercising reasonable care or

competence in obtaining or communicating the represented

information.

On direct examination, Robles conceded that, despite his

favorable comments to Omagro, he had determined in

1998 that the urea project would not get done. On crossexamination, Robles agreed that “from the very beginning,”

he did not believe it would fit MCN. Moreover, Robles

conceded that he felt he could not be honest with Omagro

because it might hurt his own employment at MCN. Pai

testified that soon after his first visit to the plant in Colombia,

he concluded that the project was not technically feasible.

Pai did not tell that to Omagro. Pai also admitted that when

he went to Houston in January 1998 to inspect equipment

Omagro had bought to transform the plant to a “granular”

plant, he concluded the equipment was substandard, but he

did not report that to Omagro. Pai conceded that he knew

Omagro was continuing to spend a lot of money on the

project. Pai also admitted that the MCN people with whom

Omagro was talking should have been informed that Pai had

made two negative reports to MCN about the project. In

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

incurred in connection with the urea plant project. The trial

court signed a final judgment for Omagro for $2.2 million,

plus $581,041.36 in prejudgment interest.

MCN's Appeal

MCN presents five issues on appeal. The first complains that

Omagro relied on the same evidence to prove its three theories

of liability against MCN: breach of contract; fraud; and

negligent misrepresentation. MCN asserts that because the

jury found MCN neither breached the contract, nor committed

fraud related to it, the jury had no reasonable basis for finding

that Omagro independently proved a compensable injury for

negligent misrepresentation in the transaction. MCN's second

issue contends Omagro presented both legally and factually

insufficient evidence of the essential elements of negligent

misrepresentation. Omagro counters the second issue by

arguing that MCN has failed to preserve a factual sufficiency

complaint because MCN failed to file a motion for new trial

after the jury verdict. Because MCN concedes in its reply brief

that its claim of factual insufficiency is waived, that portion

of the second issue is moot. We will address the first and the

remainder of the second issues together.

*771 [1] With regard to MCN's legal sufficiency

challenge, we are required to consider all of the evidence

in the light most favorable to Omagro, the party for

whom the verdict has been rendered, and to indulge every

reasonable inference from that evidence in Omagro's favor.

See Merrell Dow Pharms., Inc. v. Havner, 953 S.W.2d 706,

711 (Tex.1997). Our review must be based on the actual

wording of the question and instructions submitted to the

jury. Wal–Mart Stores, Inc. v. Sturges, 52 S.W.3d 711,

715 n. 5 (Tex.2001). MCN complains about jury question

3, arguing MCN cannot be considered liable for negligent

misrepresentation without evidence of an “affirmative”

misrepresentation it made to Omagro. However, MCN's

complaint is contrary to the wording of the jury charge. The
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

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

jury's instruction in question 3 does not mention the word

“affirmative.” Instead, it defines only a “misrepresentation”

as “any manifestation by words or other conduct by one

person to another that, under the circumstances, amounts to

an assertion not in accordance with the facts.” MCN's appeal

does not complain of the word “misrepresentation,” and the

jury charge does not limit the definition to only “affirmative”

misrepresentations. When, as here, no objection was made to

a jury instruction, evidence to support a finding based on the

instruction should be assessed in light of the instruction the

trial court gave the jury. City of Fort Worth v. Zimlich, 29

S.W.3d 62, 71 (Tex.2000).

[2] [3] [4] Legally sufficient evidence exists to show that

the words and conduct of MCN's point man, Robles, and its

petroleum engineer, Pai, were misrepresentations of the type

defined in jury question 3. Their words and conduct, along

with that of Sharma, repeatedly spurred Omagro to expend

more money by making Omagro believe MCN would be

joining Omagro in the operation of the urea plant. The specific

words and conduct of the negligent misrepresentations have

been stated above and will not be repeated. Suffice it to say

that evidence of the negligent misrepresentations made by

Robles, Pai, and Sharma establishes conclusively that they

were made on behalf of MCN in the course of its business

and in connection with the transaction in which MCN had a

pecuniary interest—but were not in accord with the true facts

and were false when made to Omagro. MCN never attempted

to correct the false or misleading statements. When one makes

a representation to another that later becomes misleading

or false, he has a duty to correct the false information

to the misled party and not continue to conceal the truth.

Anderson, Greenwood & Co. v. Martin, 44 S.W.3d 200,

212–13 (Tex.App.-Houston [14th Dist.] 2001, pet. denied).

Both negligence and causation may be established by either

circumstantial or direct evidence. Birmingham v. Gulf Oil

Corp., 516 S.W.2d 914, 917 (Tex.1974) (op. on reh'g).

The evidence of the words and conduct of MCN's personnel,

done over a period of fourteen months while Omagro was

expending millions of dollars for the joint benefit of MCN and

Omagro, is legally sufficient to have proven to a reasonable

jury that MCN did not exercise reasonable care or competence

and, indeed, that MCN worked to hide the truth from Omagro,

until after September 1998. A reasonable jury was able

to conclude that no reasonably prudent person would have

acted as MCN acted. The evidence also is legally sufficient

to demonstrate to a reasonable jury that Omagro relied on

MCN's negligent representations. Vashisht testified that if

he had been told the truth as soon as it became apparent

to MCN's personnel, Omagro could and would have found

another investor partner. Pai testified that he knew Omagro

was spending more money on the project and, for that reason,

*772 conceded MCN should have told Omagro the truth

early in the transaction. We overrule MCN's first and second

issues.

MCN's third issue asserts that because the jury awarded

Omagro damages that equal the benefit of the bargain,

Omagro erroneously is placed in the same position it would

have enjoyed if MCN had signed the definitive documents.

MCN insists that in this case, Omagro is controlled by

a contract/tort principle that prevents any plaintiff from

recovering breach of contract damages for liability under a

tort theory. See D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973

S.W.2d 662 (Tex.1998).

To apply the contract/tort principle here, the parties first

must have an agreement, the breach of which will create

identifiable “benefit of the bargain” damages. Id. at 663.

Nevertheless, MCN also relies on the jury's answer to

question 1, that there never was a binding and enforceable

agreement obligating it to execute definitive documents,

or otherwise continue with the project, or to reimburse

forty percent of Omagro's development costs. Yet, when

jury question 1 asked whether MCN failed to comply with

the terms of the memorandum of understanding, the jury

answered “no.” And by answering “no” to question 1, the

jury accepted MCN's theory, that no agreement legally

obligated MCN to execute definitive documents or reimburse

forty percent of Omagro's development costs. Thus, the jury

found that the so-called “benefit of the bargain,” an alleged

obligation to pay Omagro forty percent of its costs, was not

available to Omagro in its action for breach of contract.

For a long time, the Texas Supreme Court has held that

obligations and duties separately imposed by contract and

by tort may co-exist. See Formosa Plastics Corp. USA v.

Presidio Eng'rs. & Contractors, Inc., 960 S.W.2d 41, 44

(Tex.1998); Jim Walter Homes, Inc. v. Reed, 711 S.W.2d

617, 618 (Tex.1986); Int'l Printing Pressmen & Assistants'

Union v. Smith, 145 Tex. 399, 198 S.W.2d 729, 735–36

(1946). And these cases are not altered by D.S.A., Inc.,

973 S.W.2d at 663 (stating that the court was not deciding

whether a party breached a legal duty independent of its

contractual duty). We hold here MCN had a tort duty not

to make negligent misrepresentations, and we decline to

apply contract/tort principles in this case. Even without the
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

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

memorandum of understanding, MCN had a duty not to

negligently misrepresent that it was committed to a business

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,

pet. denied).

[5] The damages of $2.2 million found by the jury's

answer to question 4 are not limited to reimbursing forty

percent of Omagro's development costs. Instead, question

4 allowed the jury to award any damages proximately

caused by MCN's negligent misrepresentation, including

reimbursement of Omagro's expenses incurred in connection

with the project. That includes the sixty percent of Omagro's

costs MCN had no obligation, except from breaching its tort

duty, to reimburse. MCN failed to object to the wording of

the instruction about the measure of damages or submit its

own instruction specifically limiting the jury to consideration

of only MCN's contractual share of development costs. The

evidence in the record clearly supports the conclusion that the

jury's award of damages from MCN's misrepresentations is

for an independent tort injury. Here, the undisputed evidence

shows that Omagro spent $3.6 million of development costs

in reliance on MCN's negligent misrepresentations. A jury

may award damages anywhere within the trial court's range

of the presented evidence. *773 Clary Corp. v. Smith, 949

S.W.2d 452, 467 (Tex.App.-Fort Worth 1997, pet. denied).

The jury therefore had before it sufficient evidence to support

its $2.2 million verdict. We overrule the third issue.

[6] The fourth issue contends that the trial court denied

MCN the right to provide the jury with evidence of one

of its “most important reasons” for withdrawing from the

transaction. MCN suspected from evidence it gained outside

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

U.S.C.A. §§ 78dd–1—78dd–2 (West 1998). In connection

with its fourth issue, MCN argues that if the jury had

only known about the alleged bribe, Omagro's negligent

misrepresentation claim would have been defeated. Initially,

we note that the evidence shows that MCN's November 10,

1998 letter to Omagro does not mention the alleged “bribe”

as a reason for cancelling its participation in the transaction.

Next, Daniel Schiffer, former MCN senior vice president and

general counsel, testified to the trial court outside the jury's

presence that MCN was not aware of any such bribe until

three years after it withdrew from the urea plant project.

Finally, Vashisht denied to the court that he had paid a bribe.

Omagro objected to allowing the jury to hear the bribery

evidence by filing a motion in limine.

[7] [8] A trial court has the sound discretion to admit

and exclude evidence. Pack v. Crossroads, Inc., 53 S.W.3d

492, 499 (Tex.App.-Fort Worth 2001, pet. denied). A

party desiring to reverse a judgment on evidentiary error

must show that the error probably resulted in an improper

judgment. Id. The trial court granted the motion because the

alleged relevance and/or probative value of the evidence was

significantly outweighed by its prejudicial effect. TEX.R.

EVID. 403. The record reveals no abuse of discretion in the

court's ruling. We overrule the fourth issue.

[9] [10] [11] In the fifth issue, MCN asserts that the

trial court used an incorrect date for accrual of prejudgment

interest. The date from which statutory prejudgment interest

should begin is a question of law that an appellate court must

review de novo. See generally Johnson v. City of Fort Worth,

774 S.W.2d 653, 655–56 (Tex.1989). Prejudgment interest

accrues on the amount of a judgment during a period that

begins on the earlier of the 180th day after the date a defendant

like MCN receives written notice of a claim against it, or

the date the suit is filed. TEX. FIN.CODE ANN. § 304.104

(Vernon Supp.2003); Johnson & Higgins, 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.

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

On October 29, 1998, Vashisht sent a letter to MCN,

demanding Omagro's right to be paid by MCN. The letter was

Omagro's claim. Id. The trial court used this date to calculate

prejudgment interest. We overrule MCN's fifth issue.

Omagro's Cross–Point

[12] Once the evidence in the trial closed, the trial court

granted a directed verdict against Omagro on its cause of

action for promissory estoppel. In a sole cross-point, Omagro

complains that it is entitled to a new trial of its claim for

promissory estoppel.

In reviewing a directed verdict, we must consider all of

the evidence in the light most favorable to Omagro, the

party against whom the verdict was granted, disregarding all

evidence and inferences to the contrary. See Smith v. Elliott,

68 S.W.3d 844, 846 (Tex.App.-El Paso 2002, pet. denied). If

conflicting evidence of *774 probative value on any theory
MCN Energy Enterprises, Inc. v. Omagro de Colombia, L.D.C., 98 S.W.3d 766 (2003)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 7

of recovery exists, an instructed verdict is improper, and we

must remand the case for jury determination of the issue. Id.

[13] [14] [15] If a promisee has reasonably and

detrimentally relied on an otherwise unenforceable promise,

he may have a cause of action for promissory estoppel.

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

unenforceable promise. Id. at 97. The elements of that cause

of action include a promise, the promisor foreseeing that

the promisee will rely on it, and detrimental reliance by

the promisee. English v. Fischer, 660 S.W.2d 521, 524

(Tex.1983).

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

made by MCN representatives. We will not revisit that

evidence here. In connection with its sole cross-point,

Omagro now argues generally that the evidence showing

negligent misrepresentations via words and conduct of MCN

representatives (Robles, Sharma, and Pai), equals more than a

scintilla of evidence to support Omagro's promissory estoppel

claim. We disagree because Omagro does not identify or

make clear the specific nature of the promise or promises

it alleges the MCN representatives made. We overrule

Omagro's sole cross-point.

Conclusion

We have carefully considered and overruled MCN's five

issues for the reasons stated. We hold that on the issue of

negligent misrepresentation, the evidence is legally sufficient

to support the jury's finding for Omagro. The issue presented

by Omagro's sole cross-point is overruled. We affirm the trial

court's judgment.

All Citations

98 S.W.3d 766

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
Q
Pringle v. Moon, 158 S.W.3d 607 (2005)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

158 S.W.3d 607

Court of Appeals of Texas,

Fort Worth.

Helen PRINGLE, Independent Executrix of the

Estate of Brantley Pringle, Deceased, Appellant,

v.

Toby MOON, Appellee.

No. 2–04–012–CV. | Feb. 10, 2005.

Synopsis

Background: Motorist brought action against tree remover,

and tree remover counterclaimed to recover for personal

injuries that allegedly were sustained when motorist's car

struck piece of equipment, which pushed tree remover into

another piece of equipment. Due to settlements involving

tree remover's workers' compensation carrier and motorist's

liability insurer, motorist was assigned subrogation recovery

interest concerning workers' compensation benefits paid to

tree remover. Independent executrix of motorist's estate

was substituted as a party following motorist's death.

Following a jury trial, the 43rd District Court, Parker County,

Don Chrestman, J., rendered final judgment. Independent

executrix appealed.

Holdings: The Court of Appeals, John Cayce, C.J., held that:

[1] final judgment did not relate back to earlier judgment, and

thus applicable rate of prejudgment interest was rate in effect

at time that final judgment was signed, and

[2] amount of workers' compensation credit was required to

be deducted from amount of damages found by jury before

prejudgment interest could be calculated.

Reversed and remanded.

West Headnotes (8)

[1] Interest

Effect on Judgments

Judgment

Operation and Effect

Trial court's final judgment in personal injury

action arising from automobile accident did

not relate back to earlier judgment, and thus

applicable rate of prejudgment interest was rate

in effect at time that final judgment was signed,

although trial court intended that final judgment

would relate back to earlier judgment; earlier

judgment no longer existed once trial court

expressly vacated earlier judgment in granting

motion to modify judgment. V.T.C.A., Finance

Code §§ 304.003, 304.102, 304.103.

3 Cases that cite this headnote

[2] Judgment

Operation and Effect

Judgment that has been vacated has no legal

effect.

3 Cases that cite this headnote

[3] Judgment

Operation and Effect

When a judgment has been rendered and later set

aside or vacated, the matter stands precisely as if

there had been no judgment.

4 Cases that cite this headnote

[4] Interest

Mode of Computation in General

In tree remover's personal injury action that arose

from automobile accident involving motorist,

who was assigned as result of settlements

with insurers subrogation recovery interest

concerning workers' compensation benefits

paid to tree remover, amount of workers'

compensation credit had to be deducted from

amount of damages found by jury before

prejudgment interest could be calculated.

V.T.C.A., Finance Code §§ 304.003, 304.102,

304.103.

Cases that cite this headnote

[5] Appeal and Error

Cases Triable in Appellate Court
Pringle v. Moon, 158 S.W.3d 607 (2005)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

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.

1 Cases that cite this headnote

[6] Interest

Prejudgment Interest in General

“Prejudgment interest” is compensation allowed

by law as additional damages for lost use of

money due as damages during the lapse of time

between the accrual of the claim and the date of

judgment. V.T.C.A., Finance Code §§ 304.003,

304.102, 304.103.

1 Cases that cite this headnote

[7] Interest

Mode of Computation in General

Prejudgment interest is calculated on the

judgment amount, not the amount of damages

awarded by the jury. V.T.C.A., Finance Code §§

304.003, 304.102, 304.103.

2 Cases that cite this headnote

[8] Interest

Mode of Computation in General

Any credits or offsets due a defendant should be

deducted from the total damages awarded before,

not after, prejudgment interest is calculated.

V.T.C.A., Finance Code §§ 304.003, 304.102,

304.103.

1 Cases that cite this headnote

Attorneys and Law Firms

*608 Wright & Greenhill, P.C., Brantley Ross Pringle Jr.,

Austin, for Appellant.

Dan Stroup, P.C., Dan Stroup, Longview, for Appellee.

Panel A: CAYCE, C.J.; DAUPHINOT and GARDNER, JJ.

OPINION

JOHN CAYCE, Chief Justice.

In this personal injury case, Helen Pringle, as independent

executrix of the estate of Brantley Pringle, appeals from a

judgment for Toby Moon. In two issues, Helen contends

that the trial court erred in applying the wrong prejudgment

interest rate and in calculating prejudgment interest on the

damages found by the jury rather than on the judgment

amount. We *609 will reverse the part of the judgment

relating to prejudgment interest and remand to the trial court

to recalculate prejudgment interest in accordance with this

opinion.

On July 18, 2000, Brantley was driving in Parker County

when he came upon a construction zone where Moon was

working with tree removal equipment. Brantley's car struck a

piece of equipment, which pushed Moon into another piece

of equipment and caused him to sustain injuries. Because

Moon sustained his injuries in the course and scope of his

employment, he sought and received workers' compensation

insurance benefits totaling $39,430.69 from Texas Mutual

Insurance Company (Texas Mutual). Brantley filed suit

against Moon, and Moon counterclaimed.

Before trial, Texas Mutual asserted a right to recovery

of benefits paid to Moon. Brantley's liability insurance

carrier, GEICO, then entered into an agreement with Texas

Mutual whereby, in exchange for GEICO's cash payment,

Texas Mutual assigned to GEICO Texas Mutual's right to

recovery of the statutory workers' compensation lien in the

amount of $39,430.69. GEICO then assigned to Brantley the

subrogation recovery interest Texas Mutual had previously

assigned to GEICO.

The case was tried to a jury in Parker County in June 2003.

At the conclusion of the evidence, the jury returned a verdict

finding Brantley negligent and liable to Moon for $44,243.06.

The trial court rendered judgment on the verdict on July

7, 2003. Thereafter, Brantley filed a motion to modify the

judgment because it did not reflect the amount of his workers'

compensation lien. On August 20, 2003, the trial court

granted Brantley's motion and vacated the July 7 judgment.

Brantley died suddenly on September 2, 2003. Helen, as

independent executrix of Brantley's estate, was substituted as

a party on October 24, 2003.
Pringle v. Moon, 158 S.W.3d 607 (2005)

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

The trial court rendered a final judgment on October 30, 2003,

allowing the credit for Brantley's workers' compensation lien

and calculating prejudgment interest at the rate of ten percent

per annum on the entire amount of damages found by the jury.

Helen filed a motion to modify both the interest rate and the

interest calculation in the judgment, which was overruled by

operation of law. This appeal followed.

[1] In her first issue, Helen contends that the trial court

erred in applying the wrong prejudgment interest rate to the

damages award. Helen argues that the correct prejudgment

interest rate was the greater of five percent or the prime

interest rate in effect when the final judgment was signed.

Moon contends that the final judgment was signed July 7,

2003, that the October 30 judgment was merely a judgment

nunc pro tunc, and that the trial court properly determined that

the applicable interest rate is ten percent.

The prejudgment interest rate is controlled by statute.

See TEX. FIN.CODE ANN. §§ 304.003, 304.103 (Vernon

Supp.2004–05). 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);

Town of Flower Mound v. Stafford Estates, L.P., 71 S.W.3d

18, 26 (Tex.App.-Fort Worth 2002, no pet.). Under a de

novo standard of review, the reviewing court exercises its

own judgment and redetermines each legal issue. Subaru of

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

(Tex.1998).

A judgment in a personal injury case earns prejudgment

interest. TEX. FIN.CODE ANN. § 304.102 (Vernon

Supp.2004–05). The prejudgment interest rate is *610 equal

to the postjudgment rate applicable at the time of judgment.

Id. § 304.103. During the regular 2003 legislative session,

the legislature passed House Bills 4 and 2415, both of which

contained nearly identical amendments to the finance code

that effectively reduced the postjudgment interest rate from

ten to five percent. 1 Both bills provided that the new interest

rate would apply in a case in which a final judgment was

“signed or subject to appeal on or after the effective date of

this Act.” Tex. H.B. 2415, § 2(a), 78th Leg., R.S., 2003 Tex.

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

into effect on September 1, 2003, H.B. 4, § 23.02, 2003 Tex.

Gen. Laws 847, 898, its prejudgment interest rate applies in

any case in which a final judgment was signed or subject to

appeal on or after September 1, 2003. 2 Burke v. Union Pac.

Res. Co., 138 S.W.3d 46, 74 (Tex.App.-Texarkana 2004, no

pet.); see also Columbia Med. Ctr. of Las Colinas v. Bush,

122 S.W.3d 835, 865 (Tex.App.-Fort Worth 2003, no pet.)

(holding that judgment is “subject to appeal” when it fully

and finally disposes of all parties and is therefore capable of

being appealed).

The final judgment in this case was signed October 30, 2003.

Moon's argument that the October 30 judgment was nunc pro

tunc and therefore related back to the July 7 judgment is not

supported by the record. The trial court expressly vacated

the July 7 judgment in its order granting Pringle's motion

to modify and at a later hearing twice acknowledged setting

aside that judgment. 3

[2] [3] A judgment that has been vacated has no legal

effect. Shelby Operating Co. v. City of Waskom, 964 S.W.2d

75, 80 (Tex.App.-Texarkana 1997, pet. denied). When a

judgment has been rendered and later set aside or vacated,

the matter stands precisely as if there had been no judgment.

Ferguson v. Naylor, 860 S.W.2d 123, 127 (Tex.App.-

Amarillo 1993, writ denied); *611 Sawyer v. Donley County

Hosp. Dist., 513 S.W.2d 106, 109 (Tex.Civ.App.-Amarillo

1974, no writ). Therefore, despite the trial court's statement of

its intention that the October 30 judgment would relate back

to the July 7 judgment, the October 30 judgment could not

relate back because the July 7 judgment no longer existed.

Because the final judgment in this case was signed and

became subject to appeal after September 1, 2003, the trial

court erred in applying a prejudgment interest rate of ten

percent instead of five percent. We sustain Helen's first issue.

[4] In her second issue, Helen contends that the trial

court improperly calculated prejudgment interest on the

entire amount of damages found by the jury rather than

the amount awarded to Moon after the credit for Brantley's

workers' compensation lien. Helen argues that the trial court

should have deducted the amount of Brantley's workers'

compensation lien from the total damages before calculating

prejudgment interest. Moon contends that the trial court

correctly calculated prejudgment interest on the full amount

of damages found by the jury. 4

[5] Because the calculation of prejudgment interest is a

question of law, Travelers Ins. Co. v. Wilson, 28 S.W.3d

42, 47 (Tex.App.-Texarkana 2000, no pet.); Morgan v. Ebby

Halliday Real Estate, Inc., 873 S.W.2d 385, 391 (Tex.App.-
Pringle v. Moon, 158 S.W.3d 607 (2005)

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

Fort Worth 1993, no writ); Strickland v. Coleman, 824

S.W.2d 188, 192–93 (Tex.App.-Houston [1 Dist.] 1991, no

writ), we will review the issue de novo, Mayhew v. Town of

Sunnyvale, 964 S.W.2d 922, 928 (Tex.1998), cert. 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.

[6] [7] [8] Prejudgment interest is compensation allowed

by law as “additional damages for lost use of money due

as damages during the lapse of time between the accrual of

the claim and the date of judgment.” Johnson & Higgins

of Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507,

528 (Tex.1998). Prejudgment interest is calculated on the

judgment amount, not the amount of damages awarded by the

jury. C & H Nationwide, Inc. v. Thompson, 810 S.W.2d 259,

275 (Tex.App.-Houston [1st Dist.] 1991), aff'd in part and

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

credits or offsets due a defendant should be deducted from

the total damages awarded before—not after—prejudgment

interest is calculated. Roberts v. Grande, 868 S.W.2d 956,

960 (Tex.App.-Houston [14th Dist.] 1994, no writ); Berry

Prop. Mgt., Inc. v. Bliskey, 850 S.W.2d 644, 671 (Tex.App.-

Corpus Christi 1993, writ dism'd by agr.); Sisters of Charity

of Incarnate Word v. Dunsmoor, 832 S.W.2d 112, 118

(Tex.App.-Austin 1992, writ denied).

The trial court erred in failing to deduct the amount of

Brantley's workers' compensation credit before it calculated

prejudgment interest. Prejudgment interest should have been

calculated on the sum of $4,812.37, which is the amount of

the damages award less the offsetting credit for the workers'

compensation lien. We sustain Helen's second issue.

*612 Having sustained both of Helen's issues, we reverse

the part of the judgment awarding prejudgment interest and

remand to the trial court to recalculate prejudgment interest

in accordance with this opinion.

All Citations

158 S.W.3d 607

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

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

7 S.W.3d 109

Supreme Court of Texas.

Jerry J. QUICK, Kaira G. Quick, John M. Bryant,

Ruth E. Bryant, Joe Cox, Dolores Cox, Florence

Turck and Circle C Land Corp., Petitioners,

v.

CITY OF AUSTIN, Save Our Springs Legal

Defense Fund, Inc. and Al St. Louis, Respondents.

No. 96–1154. | Argued Nov. 3,

1997. | Decided May 8, 1998. |

Opinion Granting Rehearing Sept. 30, 1999.

Owners of land within city's extraterritorial jurisdiction

brought declaratory judgment action challenging water

pollution control ordinance. The 22nd Judicial District Court,

Hays County, John Forbis, J., entered judgment declaring

ordinance to be null and void. City appealed. The Austin

Court of Appeals reversed in part and modified in part,

930 S.W.2d 678. On writ of error, the Supreme Court,

Abbott, J., held that: (1) review did not violate separation

of powers doctrine; (2) ordinance was rationally related

to city's interest in protecting water quality; (3) ordinance

was not subject to statutory procedures for adopting zoning

ordinances; (4) city was not required to obtain approval

from the Natural Resource Conservation Commission before

ordinance became effective; and (5) ordinance was proper

subject of the initiative and referendum process under city

charter. On rehearing, the Court further held (6) repealed

statute locking in development regulations in existence at

time of original permit application continued to apply to

applications filed or approved before repeal.

Affirmed in part, reversed and modified in part.

Enoch, J., filed a concurring opinion on original submission.

Hankinson, J., filed dissenting opinion on rehearing, which

Enoch, Baker, and O'Neill, JJ., joined.

West Headnotes (30)

[1] Constitutional Law

Nature and scope in general

Legislative function cannot, under the separation

of powers doctrine, be reviewed de novo by

any other branch of government. Vernon's

Ann.Texas Const. Art. 2, § 1.

Cases that cite this headnote

[2] Constitutional Law

To Judiciary

Environmental Law

Validity

Water Code provision that permitted persons

located outside city limits, but affected by

water pollution control ordinance, to bring suit

challenging such ordinance as “invalid, arbitrary,

unreasonable, inefficient, or ineffective,” and

permitted reviewing court to “overturn or

modify” city's action, did not allow de

novo review of legislative action, as would

violate separation of powers doctrine. Vernon's

Ann.Texas Const. Art. 2, § 1; V.T.C.A., Water

Code § 26.177(d).

4 Cases that cite this headnote

[3] Constitutional Law

Avoidance of constitutional questions

In analyzing the constitutionality of a statute,

court should, if possible, interpret the statute in a

manner that avoids constitutional infirmity.

10 Cases that cite this headnote

[4] Statutes

Effect of Partial Invalidity; Severability

If any provision of statute is held to be invalid,

the invalidity does not affect other provisions

that can properly be given effect in the absence

of the invalid provisions.

5 Cases that cite this headnote

[5] Constitutional Law

Policy

Municipal Corporations

Conformity to constitutional and statutory

provisions in general
Quick v. City of Austin, 7 S.W.3d 109 (1998)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Judiciary has no power to allow a jury to

redecide the policy behind legislative issues by

a preponderance of the evidence; instead, in

reviewing an ordinance, the court is to consider

all the circumstances and determine as a matter

of law whether the legislation is invalidated by

a relevant statute or constitutional provision.

Vernon's Ann.Texas Const. Art. 2, § 1.

6 Cases that cite this headnote

[6] Administrative Law and Procedure

Scope of Review in General

Standard of review is more than just words;

rather, it embodies principles regarding the

amount of deference a reviewing tribunal

accords the original tribunal's decision.

4 Cases that cite this headnote

[7] Administrative Law and Procedure

Trial De Novo

Key to determining whether statute authorizes a

de novo review is the amount of deference the

statute requires the reviewing tribunal to give to

the original tribunal's decision.

28 Cases that cite this headnote

[8] Administrative Law and Procedure

Trial De Novo

When conducting a de novo review, the

reviewing tribunal exercises its own judgment

and redetermines each issue of fact and law.

95 Cases that cite this headnote

[9] Administrative Law and Procedure

Trial De Novo

In conducting de novo review, the reviewing

tribunal accords the original tribunal's decision

absolutely no deference.

42 Cases that cite this headnote

[10] Municipal Corporations

Presumptions and burden of proof

Party attacking municipal ordinance bears

the extraordinary burden to establish that no

conclusive or even controversial or issuable fact

or condition existed that would authorize the

passage of the ordinance.

3 Cases that cite this headnote

[11] Municipal Corporations

Public safety and welfare

Court reviewing municipal ordinance considers

all the circumstances and determines, as a

substantive matter, if reasonable minds could

differ as to whether the ordinance has a

substantial relationship to the protection of the

general health, safety, or welfare of the public; if

the evidence reveals a fact issue in this respect,

the ordinance must be upheld.

6 Cases that cite this headnote

[12] Environmental Law

Validity

Water pollution control ordinance that restricted

new development in watershed area, including

areas within city's extraterritorial jurisdiction,

was rationally related to city's governmental

interest in protecting water quality, and was

not invalid, arbitrary, unreasonable, inefficient,

or ineffective, even insofar as it established

strict runoff standards, provided only limited

opportunity for variance, and severely affected

some property values. V.T.C.A., Water Code §

26.177(d).

3 Cases that cite this headnote

[13] Eminent Domain

What Constitutes a Taking; Police and

Other Powers Distinguished

Governmental regulation can restrict, or even

take, property for public benefit, but if the

regulation of property rights goes too far,

compensation must be provided.

Cases that cite this headnote

[14] Environmental Law
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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

Effluent Limitations and Guidelines

Statutory procedures for adopting municipal

rules governing plats and subdivisions of land,

which required public hearing, did not apply to

adoption of municipal water pollution control

ordinance. V.T.C.A., Local Government Code

§§ 212.002, 212.003.

2 Cases that cite this headnote

[15] Zoning and Planning

Procedural Requirements

Municipal water pollution control ordinance was

not in effect a zoning ordinance that would

be subject to statutory procedures for adopting

municipal rules governing plats and subdivisions

of land, though ordinance included impervious

cover limitations that clearly had effect on

land use. V.T.C.A., Local Government Code §§

212.002, 212.003.

2 Cases that cite this headnote

[16] Municipal Corporations

Local legislation

Home rule city was not required to

obtain approval from the Natural Resource

Conservation Commission before its water

control ordinance became effective; Water

Code provision requiring that water pollution

or abatement program be submitted to the

Commission for “review and approval” did not,

with unmistakable clarity, limit effectiveness

of home rule city's program pending appeal.

Vernon's Ann.Texas Const. Art. 11, § 5;

V.T.C.A., Water Code § 26.177(a, c).

1 Cases that cite this headnote

[17] Municipal Corporations

Local legislation

Home-rule city is not dependent on the

Legislature for a grant of authority; rather, the

Legislature may provide limits on the power

of home-rule cities, but only if the limitation

appears with unmistakable clarity. Vernon's

Ann.Texas Const. Art. 11, § 5.

7 Cases that cite this headnote

[18] Municipal Corporations

Matters subject to initiative

Water pollution control ordinance was proper

subject of the initiative and referendum process

under city charter, and was not impliedly

withdrawn by charter provision requiring

comprehensive plan to regulate development and

planning commission to review development

proposals.

2 Cases that cite this headnote

[19] Municipal Corporations

Initiative

City charter provisions are to be liberally

construed in favor of the power of initiative and

referendum.

3 Cases that cite this headnote

[20] Municipal Corporations

Initiative

While the initiative power may be either

expressly or impliedly limited by the city charter,

such a limitation will not be implied unless

the provisions of the charter are clear and

compelling.

2 Cases that cite this headnote

[21] Appeal and Error

Intervention

Any error in failing to grant citizens group's plea

in intervention was harmless, in suit challenging

city's water pollution control ordinance, where

group sought to intervene because it believed

city could not adequately protect its interest, but

city prevailed on appeal in upholding ordinance

against all the challenges. Rules App.Proc., Rule

61.1.

1 Cases that cite this headnote

[22] Statutes
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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

Repealing Statutes

Generally, when a statute is repealed without

a savings clause limiting the effect of the

repeal, the repeal of that statute is usually given

immediate effect.

3 Cases that cite this headnote

[23] Statutes

Repealing Statutes

When a right or remedy is dependent on a statute,

the unqualified repeal of that statute operates to

deprive the party of all such rights that have not

become vested or reduced to final judgment.

7 Cases that cite this headnote

[24] Appeal and Error

Effect of change in law

Statutes

Pending Actions and Proceedings

Ordinarily all suits filed in reliance on statute

must cease when the repeal of statute becomes

effective, and if final relief has not been granted

before the repeal goes into effect, final relief

cannot be granted thereafter, even if the cause is

pending on appeal; repeal of the statute deprives

the court of subject matter jurisdiction.

9 Cases that cite this headnote

[25] Statutes

Saving clauses

Existence of the specific savings clause in repeal

of legislation does not preclude application

of the general savings provision of the Code

Construction Act to the repeal. V.T.C.A.,

Government Code § 311.031(a, b).

1 Cases that cite this headnote

[26] Statutes

Saving clauses

General savings clause of Code Construction Act

is presumed to apply to repeal of legislation

unless a contrary legislative intent is shown

by clear expression or necessary implication.

V.T.C.A., Government Code § 311.031(a, b).

29 Cases that cite this headnote

[27] Zoning and Planning

Constitutional and Statutory Provisions

Repeal of statute locking in development

regulations in existence at time of original

permit application was subject to general savings

clause of Code Construction Act, though repeal

included specific savings clause, where repeal

did not expressly make general savings clause

inapplicable, and specific savings clause was

not redundant of and did not conflict with

general clause. V.T.C.A., Government Code §

311.031(a, b); V.T.C.A., Government Code §

481.143 (Repealed).

1 Cases that cite this headnote

[28] Zoning and Planning

Retroactive operation

Subsequent applications were covered by statute

locking in development regulations in existence

at time of original permit application even if

original application was filed before effective

date of statute. V.T.C.A., Government Code §

481.143 (Repealed).

2 Cases that cite this headnote

[29] Statutes

Property

Zoning and Planning

Retroactive operation

Statute locking in development regulations in

existence at time of original permit application

was not improperly given retroactive effect to

extent it was determined to apply even when

original application was filed before effective

date of statute, with result that subsequent

applications, filed after effective date, were

governed by regulations in effect before effective

date. V.T.C.A., Government Code § 481.143

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

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

4 Cases that cite this headnote

[30] Zoning and Planning

Constitutional and Statutory Provisions

By application of general savings clause of Code

Construction Act, repealed statute locking in

development regulations in existence at time of

original permit application precluded application

of current water pollution control ordinance,

restricting new development in watershed area,

to permit applications first filed or approved

before repeal, but not those first filed after repeal.

V.T.C.A., Government Code § 311.031(a, b).

2 Cases that cite this headnote

Attorneys and Law Firms

*112 Roy Q. Minton, John L. Foster, Bob E. Shannon,

Joseph R. Knight, Robert I. Howell, Scott K. Field, Joe R.

Greenhill, Austin, for Petitioners.

William G. Bunch, Thomas H. Watkins, Andrew F. Martin,

Elizabeth G. Bloch, James K. McClendon, Frank C. Cooksey,

Pamela Stanton Baron, Austin, Michael A. Hatchell, Tyler,

Dick DeGuerin, Houston, Teresa L. Todd, Marfa, for

Respondents.

Opinion

Justice ABBOTT delivered the opinion of the Court.

We are confronted with a challenge to the City of Austin's

Save Our Springs Ordinance, a water pollution control

measure enacted in 1992. Petitioners, who own land within

the City of Austin's extraterritorial jurisdiction, brought

this action contesting the Ordinance. Petitioners claim that

the Ordinance is arbitrary, unreasonable, and inefficient.

Petitioners also assert that the Ordinance is void because

it was enacted without a public hearing, it impermissibly

regulates the number, use, and size of buildings in the City's

extraterritorial jurisdiction, and it has not been approved by

the Texas Natural Resource Conservation Commission. The

trial court rendered judgment in favor of Petitioners, holding

that the Ordinance was null and void. The court of appeals

reversed in part and modified in part, rendering judgment that

the Ordinance was valid. 930 S.W.2d 678. Although we do

not agree with all of the court of appeals' analysis, we affirm

its judgment upholding the Ordinance's validity.

I

Frustrated by their perception that the Austin City Council

was failing to safeguard Barton Springs adequately, a group

of Austin citizens interested in protecting the environment

initiated the Save Our Springs Ordinance and placed it

on the Austin municipal ballot for a local referendum

election. In August 1992, the Austin citizens participating

in the referendum election overwhelmingly approved the

Ordinance. Two days after the voters approved the Ordinance,

the Austin City Council enacted the Ordinance and

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

The provisions of the *113 Ordinance apply to those

areas within Austin and Austin's extraterritorial jurisdiction

that contain watersheds contributing to Barton Springs. The

Ordinance limits impervious or non-porous cover on land

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

site area. The Ordinance also requires that new developments

be set back from streams and not contribute to an increase

in the amount of pollution constituents commonly found in

urban rainfall runoff water. Construction in the “critical water

quality zone” of the Barton Creek watershed is prohibited

by the Ordinance. The Ordinance provides for no waivers or

exceptions unless necessary to avoid conflict with state and

federal laws.

Petitioners Jerry J. Quick, Kaira G. Quick, John M. Bryant,

Ruth E. Bryant, Joe Cox, Dolores Cox, Florence Turck, and

Circle C Land Corporation all own land outside the city limits

of Austin but within its extraterritorial jurisdiction. Because

their land is within Austin's extraterritorial jurisdiction,

any development of their property must comply with the

Ordinance. The Petitioners sued the City in Hays County,

seeking a declaratory judgment that the Ordinance was void

because it was illegally enacted. Additionally, Petitioners

challenged the Ordinance under section 26.177(d) of the

Texas Water Code, which authorizes a party aggrieved by

a water pollution control ordinance to appeal to district

court to review whether the ordinance is invalid, arbitrary,

unreasonable, inefficient, or ineffective.
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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

Save Our Springs Alliance, Inc., an incorporated association

of individuals led by the citizen initiators of the Ordinance,

moved to intervene in the suit. The Alliance urged that the

City was incapable of adequately advocating the Alliance's

interest due to previous hostilities over the Ordinance. See,

e.g., City Council of Austin v. Save Our Springs Coalition,

828 S.W.2d 340 (Tex.App.—Austin 1992, no writ)(citizens

sued City to force election on the Ordinance). The trial court,

however, struck the plea in intervention, leaving the City to

defend the Ordinance.

The Petitioners and the City proceeded to try the case to

a jury. The jury answered “yes” to all the questions in the

charge inquiring whether the Ordinance and its impervious

cover limitations, its prohibition against increases in pollution

constituents, and its failure to contain variances were an

unreasonable, arbitrary, and inefficient attempt to control

water quality. The jury also found that the Ordinance was

not a proper subject for the initiative and referendum process

and that the Ordinance regulated the number, use, and size of

buildings in the City's extraterritorial jurisdiction (a violation

of section 212.003 of the Texas Local Government Code).

Based on the jury's answers, the trial court rendered judgment

for the Petitioners declaring the Ordinance null and void.

The trial court's final judgment also contained conclusions

of law, including that the Ordinance was ineffective because

the Texas Natural Resource Conservation Commission had

not approved it and that the Ordinance was void because it

was enacted without a public hearing in violation of section

212.002 of the Local Government Code. The trial court

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

preliminary subdivision approval was filed, which, in some

cases, pre-dated the enactment of the Ordinance.

The court of appeals reversed and rendered in part and

modified in part the trial court's judgment. 930 S.W.2d 678.

The appellate court first determined that the trial court did

not abuse its discretion in striking the Alliance's plea in

intervention. 930 S.W.2d at 683. The court of appeals then

concluded that the trial court erred in rendering judgment

that the Ordinance *114 was unreasonable, arbitrary, and

inefficient pursuant to section 26.177(d) of the Texas Water

Code because section 26.177(d) was unconstitutional under

article II, section 1 of the Texas Constitution, the separation

of powers provision. Id. at 685. The court of appeals further

held that the Ordinance was not illegally enacted because (1)

it did not require approval by the Texas Natural Resource

Conservation Commission before it could become effective,

(2) it was not subject to sections 212.002 and 212 .003 of

the Local Government Code, and (3) it was a proper subject

of the initiative and referendum process. Id. at 686–91. The

appellate court accordingly reversed the trial court's judgment

in part and rendered judgment that the Ordinance was a valid

legislative act. The court of appeals also modified the trial

court's judgment in part, holding that any permit required

by Circle C would be considered only under the regulations

and ordinances in effect when the original application for

preliminary subdivision approval was filed, as long as the

permit application was filed after September 1, 1987. Id. at

693–94.

Petitioners challenged the court of appeals' judgment by filing

an application for writ of error with this Court. Petitioners

allege that the court of appeals erred by holding (1) that

section 26.177(d) of the Water Code is unconstitutional as

a violation of separation of powers, (2) that the Ordinance

is not subject to sections 212.002 and 212.003 of the

Local Government Code, (3) that the Ordinance is effective

without the City first obtaining the Texas Natural Resource

Conservation Commission's approval, (4) that the Ordinance

was a proper subject of the initiative and referendum process,

and (5) that only Circle C's permit applications filed after

September 1, 1987 would be considered on the basis of the

regulations and ordinances in effect at that time. The Alliance

also filed its own application for writ of error, contending that

the court of appeals erred in upholding the trial court's striking

of its plea in intervention.

II

We first consider the constitutionality of section 26.177(d)

of the Texas Water Code. Section 26.177(d) provides in

pertinent part:

Any person affected by any ...

ordinance ... relating to water pollution

control and abatement outside the

corporate limits of such city adopted

pursuant to this section or any other

statutory authorization may appeal

such action to the [Texas Natural

Resource Conservation Commission]

or district court.... The issue on appeal

is whether the action or program
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is invalid, arbitrary, unreasonable,

inefficient, or ineffective in its

attempt to control water quality. The

commission or district court may

overturn or modify the action of the

city.

TEX. WATER CODE § 26.177(d).

The trial court submitted several questions to the jury

inquiring whether various provisions of the Ordinance were

“unreasonable,” “arbitrary,” or “inefficient.” Based on the

jury's affirmative answers to these questions, the court then

rendered judgment that the Ordinance was invalid under

section 26.177(d).

The court of appeals, however, concluded that section

26.177(d) violates the separation of powers doctrine of the

Texas Constitution because it requires a de novo review of

a legislative act. The court of appeals reasoned that the trial

court conducted a de novo review of the statute as evidenced

by the court's charge asking the jury to determine, by a

preponderance of the evidence, whether the jury thought

the Ordinance was unreasonable, arbitrary, or inefficient.

The court of appeals further ruled that section 26.177(d)

authorized such an unconstitutional de novo review by

permitting the reviewing court to “modify” a legislative act

and to determine whether a legislative act was “inefficient”

or “ineffective.”

A

[1] A legislative function cannot, under the separation of

powers doctrine, be reviewed *115 de novo 2 by any other

branch of government. Article II, section 1 of the Texas

Constitution divides the functions of government as follows:

[T]hree distinct departments, each of which shall be

confided to a separate body of magistracy, to wit: Those

which are Legislative to one; those which are Executive

to another, and those which are Judicial to another; and

no person, or collection of persons, being of one of these

departments, shall exercise any power properly attached to

either of the others.

TEX. CONST. art. II, § 1. Consistent with this division

of power, we have recognized that, when the Legislature

delegates a legislative function to a municipality or an

administrative agency, a de novo review by the judiciary of

the delegated function violates the Constitution. Chemical

Bank & Trust Co. v. Falkner, 369 S.W.2d 427, 432–33

(Tex.1963); Davis v. City of Lubbock, 160 Tex. 38, 326

S.W.2d 699, 712–14 (1959); Southern Canal Co. v. State

Bd. of Water Eng'rs, 159 Tex. 227, 318 S.W.2d 619, 621–

22 (1958).

[2] The Petitioners concede that, if section 26.177(d) in

fact confers the power on the courts to review a legislative

function de novo, the statute is unconstitutional as a violation

of the separation of powers provision of our state constitution.

Petitioners also concede that the Ordinance represents the

exercise of a legislative function the Legislature has delegated

to the City. Accordingly, the only issue we must determine is

whether section 26.177(d) necessitates a de novo review by

the judiciary. If it does, it is unconstitutional; if it does not,

it is constitutional.

[3] [4] In analyzing the constitutionality of a statute, we

should, if possible, interpret the statute in a manner that

avoids constitutional infirmity. Barshop v. Medina County

Underground Water Conservation Dist., 925 S.W.2d 618,

629 (Tex.1996). Moreover, if any provision of the statute

is held to be invalid, the invalidity does not affect other

provisions that can properly be given effect in the absence

of the invalid provisions. Rose v. Doctors Hosp., 801 S.W.2d

841, 844 (Tex.1990); see also TEX. GOV'T CODE §

311.032(c).

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

Legislature did not expressly mandate de novo review, but

rather used neutral terms consistent with the constitutionally

appropriate standard for judicial review of legislative acts.

Petitioners observe that section 26.177(d) employs terms such

as “unreasonable” and “arbitrary,” which are consistent with

the standard of review traditionally employed in reviewing

city ordinances. See City of Brookside Village v. Comeau,

633 S.W.2d 790, 792 (Tex.), cert. denied, 459 U.S. 1087,

103 S.Ct. 570, 74 L.Ed.2d 932 (1982)(city ordinance is

presumed valid unless the ordinance is unreasonable and

arbitrary); Hunt v. City of San Antonio, 462 S.W.2d 536,

539 (Tex.1971)(same). Petitioners also rely on this Court's

holding in Edgewood Indep. Sch. Dist. v. Kirby, 777 S.W.2d

391, 394 (Tex.1989), that legislative acts can be reviewed

for “efficiency.” Petitioners alternatively urge that, even

assuming that certain words in the statute impermissibly
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connote a de novo review, this Court should excise those

words and uphold the remaining portions of the statute.

The City responds that section 26.177(d)'s effect is to

require a court to reweigh the City's legislative decisions

regarding the reasonableness, effectiveness, and efficiency

of the Ordinance, which is an unconstitutional judicial

review of public policy determinations. The intrusiveness

of section 26.177(d) is demonstrated, according to the City,

by the fact that the jury was asked to decide in this case,

by a *116 preponderance of the evidence, whether the

Ordinance was “inefficient,” “unreasonable,” or “arbitrary.”

Section 26.177(d) is not, the City continues, similar to a

permitted review of whether a legislative act is unreasonable

or arbitrary. Moreover, the City argues that Edgewood, 777

S.W.2d at 394, does not apply because our decision in that

case was premised on a unique state constitutional provision,

article VII, section 1, which charged the Legislature with

the duty to provide for “an efficient system of public free

schools.” Because there is no constitutional mandate that a

water quality ordinance be “efficient,” the City avers that

Edgewood does not mean that courts may routinely review the

efficiency of legislation. Finally, the City asserts that severing

any offending terms in section 26.177(d) would contravene

legislative intent and would render the statute devoid of

meaning.

[5] The City correctly argues that the trial court erred in

submitting a question for the jury to determine, based on

a preponderance of the evidence, whether the Ordinance

was arbitrary, unreasonable, or inefficient. The judiciary has

no power to allow a jury to redecide the policy behind

legislative issues by a preponderance of the evidence. See

Southern Canal, 318 S.W.2d at 623–24. Instead, in reviewing

an ordinance, the court is to consider all the circumstances

and determine as a matter of law whether the legislation is

invalidated by a relevant statute or constitutional provision.

Cf. Comeau, 633 S.W.2d at 793. Nevertheless, the fact that

the trial court in this case impermissibly submitted these

questions to the jury does not mandate that the statute

is unconstitutional. The submitted jury questions, being

questions of law, are immaterial and will not be considered.

Spencer v. Eagle Star Ins. Co., 876 S.W.2d 154, 157

(Tex.1994)(court may disregard as immaterial a jury's finding

on a question of law). We will instead rely on the provisions

of the statute itself to determine its constitutionality.

[6] [7] The court of appeals focused on certain words in the

statute, such as “inefficient,” “ineffective,” and “modify,” as

the basis for its conclusion that the statute unconstitutionally

authorizes a de novo review for legislative acts. However,

a standard of review is more than just words; rather, it

embodies principles regarding the amount of deference a

reviewing tribunal accords the original tribunal's decision.

The key to determining whether section 26.177(d) authorizes

a de novo review is therefore the amount of deference the

statute requires the reviewing tribunal to give to the original

tribunal's decision.

[8] [9] When conducting a de novo review, the reviewing

tribunal exercises its own judgment and redetermines each

issue of fact and law. Key Western Life Ins. Co. v. State

Bd. of Ins., 163 Tex. 11, 350 S.W.2d 839, 846 (1961); Lone

Star Gas Co. v. State, 137 Tex. 279, 153 S.W.2d 681, 692

(1941); Ysleta Ind. Sch. Dist. v. Meno, 933 S.W.2d 748,

751 n. 5 (Tex.App.—Austin 1996, writ denied). In such a

review, the reviewing tribunal accords the original tribunal's

decision absolutely no deference. See, e.g., State v. Heal,

917 S.W.2d 6, 9 (Tex.1996); Ysleta, 933 S.W.2d at 751 n.

5. Accordingly, then, the controlling issue is whether section

26.177(d) requires that the Ordinance be given practically no

deference by the reviewing court.

We hold that section 26.177(d) does not mandate such a

result. In reaching this conclusion, we abide by the maxim

that courts should, if possible, interpret statutes in a manner

that avoids constitutional infirmities. Barshop, 925 S.W.2d

at 629. We note that section 26.177(d) utilizes two words,

“unreasonable” and “arbitrary,” that this Court has repeatedly

stated connote the proper deferential standard of reviewing a

city ordinance. Comeau, 633 S.W.2d at 792 (city ordinance is

presumed to be valid unless the ordinance is unreasonable and

arbitrary); Thompson v. City of Palestine, 510 S.W.2d 579,

581–82 (Tex.1974)(describing extraordinary burden *117

on party attacking ordinance to show that reasonable minds

could not differ on whether the ordinance has a substantial

relationship to the general welfare and that the city acted

arbitrarily); Hunt, 462 S.W.2d at 539 (city ordinance is

presumed to be valid unless the ordinance is unreasonable and

arbitrary).

In the context of the deferential standard predicated by

the words “unreasonable” and “arbitrary,” we cannot agree

with the court of appeals that the inclusion of “inefficient”

and “ineffective” somehow requires a transformation of the

standard of review from the proper deferential standard

to a standard in which the City's decision is afforded

no deference. In fact, on prior occasions, albeit under
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different circumstances, this Court has interpreted the

word “efficient” in a more deferential manner than would

have been required under a de novo review. See, e.g.,

Edgewood, 777 S.W.2d at 398–99 (utilizing the term

“efficient” in article VII, section 1 of the Texas Constitution

to provide a standard to measure the constitutionality

of the Texas system for financing public education in

Texas, but recognizing that the Legislature, rather than the

courts, had “the primary responsibility to decide how best

to achieve an efficient system”); Central Educ. Agency

of State of Texas v. Upshur County Com'rs Court, 731

S.W.2d 559, 561 (Tex.1987)(holding that Commissioner

of Education's responsibility to “promote efficiency and

improvement” did not mean that Commissioner could

conduct a de novo review of county commissioners'

detachment and annexation decisions). We accordingly

perceive no constitutional impediment to judicial review

of an ordinance to determine whether it is “inefficient” or

“ineffective” under the appropriate deferential standard of

review.

[10] [11] The principles that underlie this deferential

standard of review for municipal legislation are summarized

in our decision in Comeau, 633 S.W.2d at 792–93. The party

attacking the ordinance bears the “extraordinary burden”

to establish “ ‘that no conclusive or even controversial or

issuable fact or condition existed’ ” that would authorize the

passage of the ordinance. Id. (quoting Thompson, 510 S.W.2d

at 581). We consider all the circumstances and determine,

as a substantive matter, if reasonable minds could differ as

to whether the ordinance has a substantial relationship to

the protection of the general health, safety, or welfare of the

public. Id. at 793. If the evidence reveals a fact issue in this

respect, the ordinance must be upheld. Id. Accordingly, we

hold that, under this deferential standard of review, the Texas

Constitution is not violated by the judiciary considering,

according to the mandates of section 26.177(d) of the Water

Code, whether a water control ordinance is invalid, arbitrary,

unreasonable, inefficient, or ineffective in its attempt to

control water quality.

We further do not believe that the provision in section

26.177(d) allowing the reviewing court to “modify” the city's

action connotes an impermissible de novo review. Courts

ordinarily cannot strike down an entire ordinance as invalid

based on the invalidity of only a part of the ordinance,

unless all the provisions of the ordinance are so dependent

or connected that it cannot be presumed that one provision

would have been passed without the others. Rose v. Doctors

Hosp., 801 S.W.2d 841, 844 (Tex.1990). If a reviewing

court were to determine that one portion of a water control

ordinance was invalid, the court would therefore be required

to “modify” the ordinance to delete the invalid portion if the

remainder of the ordinance was complete in itself and capable

of being executed in accordance with the apparent legislative

intent. See id. The Legislature's use of the word “modify”

thus does not render section 26.177(d) unconstitutional. We

disagree with the court of appeals' holding that section

26.177(d) violates the separation of powers doctrine and is

unconstitutional. Rather, we will interpret and apply section

26.177(d) consistent with the deferential *118 standard of

review this Court articulated in Comeau.

B

[12] Petitioners urge that the Ordinance's invalidity under

the Comeau standard is manifest. Petitioners rely upon

evidence in the record that, before the passage of the

Ordinance, the City already had the most stringent water

quality standards in Texas. Moreover, a city engineer and the

head of Austin's Environmental Services admitted during trial

that no discernible trend of pollution existed in Barton Springs

prior to the Ordinance's enactment. Accordingly, Petitioners

maintain that the Ordinance was unnecessary and based on

flawed data.

Petitioners also complain that it is impossible to comply with

the Ordinance. The Ordinance requires that a development

not increase annual pollution loadings of thirteen identified

constituents. Petitioners contend that the rules implemented

by the City of Austin to execute the Ordinance require runoff

surface water from a development to have lower average

concentrations of some of these constituents than was found

in certain rain samples taken in Austin. 3 In fact, Petitioners

point out that the Ordinance requires that runoff surface water

have less average nitrogen than contained in some namebrand bottled drinking water. 4

 Petitioners allege that the

Ordinance's practical effect is therefore a preclusion of all

development in the watershed areas.

Petitioners also attack the lack of variances in the Ordinance.

For instance, even if a landowner could establish that no

increase in pollution would result from constructing a greater

percentage of impervious cover than allowed under the

Ordinance, no variance is permitted.
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Finally, Petitioners impugn the Ordinance's financial impact.

The City's own expert economist concluded that the

Ordinance would, over a fifteen-year period, decrease

property values in the watershed areas in the range of $229

million to $379 million. The Petitioners introduced evidence

at trial that some land lost ninety percent of its value because

of the Ordinance.

The City presented evidence at trial that sharply contradicted

the Petitioners' arguments. In response to the Petitioners'

evidence regarding the effectiveness of the water control

ordinances in place before the Save Our Springs Ordinance,

the City provided testimony that the Ordinance was cheaper

and easier to administer than earlier measures. Further,

the evidence also established that eighty-six percent of all

development applications received a variance under the water

quality ordinance in effect immediately prior to the Save Our

Springs Ordinance. This excessive grant of variances under

the prior ordinance, according to the City, obviously undercut

its effectiveness.

To rebut the Petitioners' claim that it is impossible to comply

with the Ordinance because its rules require that runoff be

purer than rain, the City elicited testimony from Stephen

Stecher, the project director of the Barton Creek watershed

study. He testified that soil and plants on the ground *119

typically capture much of the nitrogen and some other

constituents in urban rainfall before the constituents reach

a creek or tributary. Accordingly, even assuming that the

Petitioners' evidence regarding the rainfall samples was

reliable, see ante at n. 3, the City contends that compliance

with the technical rules is still possible because runoff

is naturally less contaminated with certain pollutants than

rainfall. In further support of its argument that it is not

impossible to comply with the Ordinance, the City presented

testimony from two developers that it is not only possible,

but actually profitable to develop land in the watershed areas

in compliance with the Ordinance. These developers both

testified that they were anticipating sizable profits from their

developments complying with the strictures of the Ordinance.

Finally, the City offered evidence that the impervious cover

limitations in the Ordinance reduce polluting runoff and are

a nationally-recognized method of protecting water quality.

According to the City, the provisions restricting the pollutant

constituents are only a small percentage of the 138 pollutants

that the City is required to monitor under federal law. The

restrictions on impervious cover and pollutant constituents,

the City therefore urges, are clearly related to its goal of

protecting the watershed from pollution in order to preserve

water quality.

In light of the conflicting evidence presented at trial regarding

the Ordinance, we cannot conclude that the Petitioners met

their “extraordinary burden” of establishing that reasonable

minds could not differ regarding whether the Ordinance was

invalid, arbitrary, unreasonable, inefficient, or ineffective

in its attempt to control water quality. While Petitioners

presented evidence tending to establish that prior water

control ordinances were sufficient such that the Ordinance

was not necessary, the City's evidence regarding the excessive

grant of variances under the prior measure precludes a

determination that reasonable minds could not differ on the

need for the Ordinance.

The trial testimony conflicts regarding a landowner's ability to

comply with the Ordinance. The Petitioners offered scientific

testimony attempting to establish that it was virtually

impossible to comply with the Ordinance, but this testimony

was refuted by the City. Moreover, the City also presented

the testimony of two developers that, not only did the

City approve their developments under the Ordinance, they

actually anticipate profitable returns on their investments.

The conflict in this evidence demonstrates that reasonable

minds could indeed differ on whether compliance with the

Ordinance is possible.

While the Petitioners decry the lack of a variance procedure in

the Ordinance, the Ordinance does actually provide a limited

variance to keep the Ordinance from running afoul of federal

and state laws. Moreover, the Petitioners' complaint regarding

the lack of a variance procedure ignores the evidence that

the excessive grant of variances under prior water control

measures had undercut their effectiveness.

We perceive that the real crux of the Petitioners' complaint

is that the Ordinance unreasonably reduces property values

and requires excessive expenditures in order to comply with

its provisions. The Petitioners established that the Ordinance

will result in at least a $225 million decrease in property

values in regulated areas, and that the Ordinance has caused

some parcels of land to lose ninety percent of their value. The

City has not refuted this evidence.

However, in this case, the fact that the Ordinance severely

impacts some property values does not make it invalid,

arbitrary, unreasonable, inefficient, or ineffective in its

attempt to control water quality. While the Ordinance's
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impervious cover limitations undoubtedly substantially affect

the value of some property parcels, such limitations are a

nationally-recognized method of preserving water quality.

Further, *120 it is indisputable that limiting pollutants in

runoff water will aid in preserving water quality. We therefore

conclude that the Ordinance's provisions are rationally related

to its goal of protecting water quality.

[13] Because we have concluded that the Ordinance is

rationally related to the governmental interest in protecting

water quality, the City has the right to significantly limit

development in watershed areas in furtherance of this interest.

See Day–Brite Lighting, Inc. v. Missouri, 342 U.S. 421,

424, 72 S.Ct. 405, 96 L.Ed. 469 (1952). A governmental

regulation can restrict, or even take, property for such a public

benefit; however, if the regulation of property rights goes

too far, compensation must be provided. See Barshop, 925

S.W.2d at 628. To the extent that the City's limitations on

development deny all economically viable use of property

or unreasonably interfere with the right to use and enjoy

property, affected property owners may have a remedy in

takings law. See Mayhew v. Town of Sunnyvale, 964 S.W.2d

922, 935 (Tex.1998)(recognizing that a compensable taking

can occur if a governmental regulation totally destroys a

property's value or if the regulation has a severe enough

economic impact and the regulation interferes with distinct

investment-backed expectations). Such a challenge is not part

of this lawsuit. Our holding today that the Ordinance is not

invalid, arbitrary, unreasonable, inefficient, or ineffective in

its attempt to control water quality accordingly has no impact

on any potential claim that the Ordinance unconstitutionally

interferes with a landowner's property rights.

III

[14] The Petitioners next attack the court of appeals'

conclusion that the Ordinance is not void under sections

212.002 and 212.003 of the Local Government Code. Local

Government Code section 212.002 provides:

After a public hearing on the matter,

the governing body of a municipality

may adopt rules governing plats

and subdivisions of land within the

municipality's jurisdiction to promote

the health, safety, morals, or general

welfare of the municipality and

the safe, orderly, and healthful

development of the municipality.

TEX. LOC. GOV'T CODE § 212.002. Local Government

Code section 212.003 provides in pertinent part:

(a) The governing body of a municipality by ordinance may

extend to the extraterritorial jurisdiction of the municipality

the application of municipal ordinances adopted under

Section 212.002 and other municipal ordinances relating

to access to public roads. However, unless otherwise

authorized by state law, in its extraterritorial jurisdiction a

municipality shall not regulate:

(1) the use of any building or property for business,

industrial, residential, or other purposes;

(2) the bulk, height, or number of buildings constructed

on a particular tract of land;

(3) the size of a building that can be constructed on a

particular tract of land, including without limitation any

restriction on the ratio of building floor space to the land

square footage; or

(4) the number of residential units that can be built per

acre of land.

Id. § 212.003.

Petitioners argue that (1) sections 212.002 and 212.003

govern the Ordinance, (2) the Ordinance was enacted without

a public hearing in violation of section 212.002, and (3)

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

responds that sections 212.002 *121 and 212.003 do not

apply because these sections are zoning statutes and the

Ordinance is a water pollution control measure. We agree

with the City.

By their express terms, sections 212.002 and 212.003 apply

to ordinances that “govern plats and subdivisions of land.”

Further, the statutes' legislative history indicates that they

govern a city's zoning authority, not a city's authority to apply

water quality requirements. For instance, House Bill 3187,

which amended section 212.003, “prohibits the application

of zoning regulations in ETJ areas.” COMMITTEE ON

URBAN AFFAIRS, BILL ANALYSIS, Tex. H.B. 3187, 71st

Leg., R.S. (1989). In fact, the Legislature made it clear that
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section 212.003 was not intended “to affect the ability of

a municipality to apply water control requirements” in its

extraterritorial jurisdiction. CONFERENCE COMMITTEE

REPORT, Tex. H.B. No. 3187, 71st Leg., R.S. (1989). We

therefore conclude that sections 212.002 and 212.003 apply

only to zoning statutes, not water control measures such as

the Ordinance.

[15] Petitioners nevertheless assert that the Ordinance is,

in effect, a zoning ordinance, not a water control ordinance.

Petitioners argue that the Ordinance's impervious cover

limitations effectively constitute a regulation on the use,

bulk, height, number, and size of buildings in the City's

extraterritorial jurisdiction in violation of section 212.003.

Petitioners contend that we should consider the actual effect

of the Ordinance, not its stated purpose, in determining

whether the Ordinance must comply with these statutes.

However, we disagree with Petitioners' assertion that the

Ordinance effectively constitutes a zoning regulation. The

Ordinance's stated goal is to protect and preserve a “clean

and safe drinking water supply” and “to prevent further

degradation of the water quality in Barton Creek, Barton

Springs, and the Barton Springs Edwards Aquifer.” While

the Ordinance clearly has effects on land use through its

imposition of impervious cover limitations, these cover

limitations are typical features in ordinances protecting

water quality. Indeed, as discussed previously, such cover

limitations are a nationally-recognized method of preserving

water quality, and therefore we conclude that the cover

limitations further the Ordinance's stated goal. On balance,

the Ordinance is not a zoning regulation seeking to shape

urban development, but rather is a measure designed

to protect water quality. We accordingly hold that the

requirements of sections 212.002 and 212.003 are not

applicable to the Ordinance, and the Ordinance cannot be

invalidated by these statutes.

IV

[16] Petitioners also complain that the court of appeals erred

in holding that the Ordinance is effective without the City

first obtaining approval from the Texas Natural Resource

Conservation Commission. Section 26.177(a) of the Water

Code allows municipalities with populations in excess of five

thousand to establish water pollution control and abatement

programs. Section 26 .177(c) provides in pertinent part:

The water pollution and abatement

program ... must be submitted

to the [Texas Natural Resource

Conservation] commission for review

and approval. The commission may

adopt rules providing the criteria for

the establishment of those programs

and the review and approval of those

programs.

TEX. WATER CODE § 26.177(c).

Petitioners argue that the Legislature clearly contemplated

by the phrase “review and approval” that the Texas Natural

Resource Conservation Commission would actually approve

a city's water pollution and abatement control program before

the program could become effective. Otherwise, Petitioners

maintain that a city ordinance would remain effective even

if the Commission later expressly disapproved the ordinance.

Additionally, Petitioners *122 rely on the statute's bill

analysis, which stated that:

Current law requires the preparation of

pollution abatement plans by cities ...

but does not require submittal, review

and approval of the plans. There is

currently no requirement for cities

to notify anyone when a pollution

abatement plan is established. Water

pollution abatement plans, when

properly prepared, can be beneficial

in reducing water pollution. However,

if a city fails to submit a plan,

or submits an inadequate plan, there

is no procedure for carrying out

the intent of the law. This bill

would provide for direct Texas Water

Commission oversight of pollution

abatement plans.

SENATE NATURAL RESOURCES COMM., BILL

ANALYSIS, Tex. H.B. 1546, 71st Leg., R.S. (1989).

Petitioners assert that the Commission cannot “provide

oversight” of the pollution abatement plans if the plans can

become effective before approval is obtained. Because the

Ordinance undisputedly has not yet been approved by the

Commission, Petitioners urge that it is not effective.
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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The City responds that its own charter prescribes when

ordinances become effective. Any legislative limits on the

City's authority to control the effective date of its ordinances

cannot be implied, but must be set forth with unmistakable

clarity. Lower Colorado River Auth. v. City of San Marcos,

523 S.W.2d 641, 643–45 (Tex.1975). According to the City,

section 26.177(c) does not state with unmistakable clarity

that a water pollution control ordinance is not effective until

the Commission approves it. Moreover, the City maintains

that the statute's legislative history supports its position. The

City also points out that the Commission itself considers

any ordinance submitted for review to be effective prior to

Commission approval. Indeed, the Commission has filed an

amicus curiae brief in this Court requesting that we affirm the

court of appeals' holding on this issue.

[17] The City of Austin is a home-rule city deriving its

power from article XI, section 5 of the Texas Constitution.

A home-rule city is not dependent on the Legislature for a

grant of authority. Lower Colorado River Auth., 523 S.W.2d

at 643. Rather, the Legislature may provide limits on the

power of home-rule cities, but only if the limitation appears

with “unmistakable clarity.” Id. at 645; City of Sweetwater v.

Geron, 380 S.W.2d 550, 552 (Tex.1964).

Under Austin's city charter, the Ordinance is effective.

Accordingly, unless the Legislature limited the City's

authority to set the Ordinance's effective date with

unmistakable clarity in section 26.177(c), the Ordinance does

not require Commission approval before it becomes effective.

We conclude that the Legislature has not so limited the City's

authority.

While section 26.177(c) states that a water pollution or

abatement program must be submitted to the Commission

for “review and approval,” the statute is silent as to whether

the program is effective pending approval. We find this

silence significant because, in other Water Code sections,

the Legislature has specifically stated that an act was not

effective until the Commission approved it. For instance,

section 11.121 of the Water Code provides that any project

for “the storage, taking, or diversion of water” shall not begin

“without first obtaining a permit from the commission. ”

TEX. WATER CODE § 11.121 (emphasis added). Similarly,

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

obtain the commission's written approval.” Act of May 26,

1985, 69th Leg., R.S., ch. 795, § 1.079(c), 1985 Tex. Gen.

Laws 2760 (emphasis added), repealed by Act of June 17,

1987, 70th Leg., R .S., ch. 406, § 2, 1987 Tex. Gen. Laws

1938. Thus, while the Legislature clearly was well-versed in

drafting statutes that explicitly provided that a local act was

not *123 effective until approved by the Commission, the

Legislature chose not to include such an express provision

in section 26.177(c). We presume that this omission has a

purpose. See Cameron v. Terrell & Garrett, 618 S.W.2d

535, 540 (Tex.1981). The only purpose that we can ascribe

for such an omission is that the Legislature did not intend

that water pollution programs such as the Ordinance require

Commission approval before becoming effective.

Section 26.177(c)'s legislative history also supports our

holding. The author of the bill that added the review and

approval provision stated that the provision was not intended

to take away local control, but was designed to gather

information and to assist cities in developing their programs.

Debate on Tex. H.B. 1546 on the Floor of the House, 71st

Leg., R.S., Floor Tape 72, Side 2 (May 2, 1989)(remarks

of Representative Terral Smith). See also Hearing on Tex.

H.B. No. 1546 before the House Resources Committee, 71st

Leg., R.S., House Tape Excerpts, Tape 2–B (March 22,

1989)(Executive Director of the Commission testified that

the Commission viewed the legislation as establishing an

information-gathering process). Nothing in the bill analysis

relied upon by the Petitioners compels a contrary conclusion.

Finally, we note that our holding is consistent with

the Commission's interpretation of the statute. While not

controlling, the contemporaneous construction of a statute by

the administrative agency charged with its enforcement is

entitled to great weight. State v. Public Util. Comm'n, 883

S.W.2d 190, 196 (Tex.1994); Dodd v. Meno, 870 S.W.2d

4, 7 (Tex.1994). According to the Commission's amicus

brief, the Commission has refrained from acting on submitted

water pollution control and abatement programs until it

can analyze and adopt rules and standards to guide its

consideration. Therefore, a holding that a water pollution

control and abatement program requires pre-approval by

the Commission would essentially render ineffective every

municipality's program passed since 1989. This is a result

that we cannot presume the Legislature intended by enacting

section 26.177(c).

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

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[18] Petitioners next urge that the Ordinance is invalid

because it is not a proper subject of the initiative and

referendum process under Austin's city charter. Article IV,

section 1 of the City's charter contains the following provision

regarding legislation by public initiative:

The people of the city reserve

the power of direct legislation by

initiative, and in the exercise of such

power may propose any ordinance, not

in conflict with this Charter, the state

constitution, or the state laws except

an ordinance appropriating money or

authorizing the levy of taxes.

Austin City Charter art. IV, § 1.

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,

water, and other natural resources. Article X also establishes

a planning commission which “shall” review and make

recommendations on proposals to “adopt or amend land

development regulations,” including “zoning, subdivision,

building and construction, environmental and other police

power regulations controlling, regulating, or affecting the use

or development of land.” Austin City Charter art. X, § 4.

Finally, the charter provides that the city council may adopt

amendments to the comprehensive plan only after at least one

public hearing. Id. § 5. Petitioners claim that these provisions

of the charter remove water pollution regulations, such as the

Ordinance, from the domain of citizen initiators. The City

responds that such a withdrawal of the power of initiative

must be clearly stated, and no such clear statement exists in

this case.

*124 [19] [20] Charter provisions are to be liberally

construed in favor of the power of initiative and referendum.

Glass v. Smith, 150 Tex. 632, 244 S.W.2d 645, 649 (1951);

Taxpayers' Ass'n of Harris County v. City of Houston, 129

Tex. 627, 105 S.W.2d 655, 657 (1937). While the initiative

power may be either expressly or impliedly limited by the

city charter, such a limitation will not be implied unless the

provisions of the charter are clear and compelling. Glass, 244

S.W.2d at 649.

Petitioners make no contention that the Austin city charter

expressly provides that a water control regulation, such

as the Save Our Springs Ordinance, may not be adopted

by the people at an initiative election. Rather, Petitioners

claim that, because the charter requires a comprehensive

plan to regulate development and a planning commission

to review development proposals, the subject matter of

the Ordinance has been implicitly withdrawn from the

people. However, such an implicit withdrawal must be

“clear and compelling.” The provisions of article X do not

clearly compel the conclusion that the Ordinance cannot be

passed through the initiative and referendum process. The

planning commission's review and recommendation powers

over development can reasonably coexist with the adoption

of a water quality regulation through public initiative. Indeed,

article X does not grant the planning commission the power

to establish a water pollution and abatement program under

section 26.177(d) of the Water Code. Accordingly, we hold

that the SOS Ordinance was a proper subject of the initiative

and referendum process.

VI

Petitioners finally contend that the court of appeals erred

by holding that only projects where the original permit

applications were filed after September 1, 1987 were required

to be considered on the basis of the City's regulations

and ordinances in effect at that time. Circle C made

applications for preliminary subdivision approval for five

different sections of the Circle C development, four of which

were filed in 1985 and the fifth of which was filed in 1992.

In furtherance of its ongoing development from these permit

applications, Circle C applied for site development permits

after the enactment of the Ordinance.

The trial court concluded that, under former section 481.143

of the Government Code, the ordinances in effect when Circle

C filed its original permit applications in 1985 and 1992

governed the City's consideration of Circle C's subsequent

permit applications for the same development. The court of

appeals, however, modified the trial court's judgment, holding

that because section 481.143 became effective September 1,

1987, only initial permits filed between September 1, 1987

and the effective date of the Ordinance (August 10, 1992)

were not subject to the strictures of the Ordinance. Circle C

contends that the court of appeals erred in modifying the trial

court's judgment.

Generally, the right to develop property is subject to

intervening regulations or regulatory changes. Connor v. City

of University Park, 142 S.W.2d 706, 709 (Tex.Civ.App.—
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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Dallas 1940, writ ref'd). In adopting sections 481.141–.143

of the Texas Government Code on September 1, 1987, the

Texas Legislature significantly altered this rule by locking in

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

section 481.143 in effect at the time of the dispute provided:

The approval, disapproval, or

conditional approval of an application

for a permit shall be considered

by each regulatory agency solely on

the basis of any orders, regulations,

ordinances, or other duly adopted

requirements in effect at the time the

original application for the permit is

filed. If a series of permits is required

for a project, the orders, regulations,

ordinances, or other requirements in

effect at the time the original *125

application for the first permit in that

series is filed shall be the sole basis

for consideration of all subsequent

permits required for the completion of

the project.

Act of June 16, 1987, 70th Leg., R.S., ch. 374, § 1, 1987 Tex.

Gen. Laws 1838–39, amended by 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 3966.

However, the Legislature repealed section 481.143 while this

case was pending before this Court. Act of June 1, 1997, 75th

Leg., R.S., ch. 1041, § 51(b), 1997 Tex. Gen. Laws 3966.

Because of this repeal, we conclude that we cannot address

Circle C's argument that the court of appeals erred in its

modification of the trial court's judgment.

When a cause of action is based on a statute, the repeal

of that statute without a savings clause for pending suits

is usually given immediate effect. Knight v. International

Harvester Credit Corp., 627 S.W.2d 382, 384 (Tex.1982).

Ordinarily, all suits filed in reliance on the statute must cease

when the repeal becomes effective; if final relief has not

been granted before the repeal goes into effect, final relief

cannot be granted thereafter, even if the cause is pending

on appeal. Knight, 627 S.W.2d at 384; National Carloading

Corp. v. Phoenix–El Paso Express, Inc., 142 Tex. 141, 176

S.W.2d 564, 568 (1943); Dickson v. Navarro County Levee

Improvement Dist. No. 3, 135 Tex. 95, 139 S.W.2d 257, 259

(1940). The repeal of the statute in such instances deprives a

court of subject matter jurisdiction over the cause. See Knight,

627 S.W.2d at 384; Dickson, 139 S.W.2d at 259.

The Legislature, in its repeal of section 481.143, did not

include a savings clause providing that section 481.143

remained in effect for pending litigation. Accordingly, we

must give its repeal immediate effect, and we cannot review

Circle C's argument that the court of appeals erred in

concluding that its original permit applications filed before

September 1, 1987 were not covered by section 481.143.

We were confronted with a similar situation in Dickson v.

Navarro County Levee Improvement Dist. No. 3, 135 Tex. 95,

139 S.W.2d 257 (1940). In Dickson, a bondholder instituted

suit to collect delinquent taxes owed by the defendants to a

levee improvement district under a statute allowing holders

of bonds issued by such districts to commence suit if the

district failed to do so within sixty days after the taxes became

delinquent. The trial court rendered judgment in favor of the

bondholder, and defendants appealed. While the case was

pending in the court of appeals, the Legislature repealed

the statute allowing bondholders to bring such actions. Id.

at 259. The court of appeals nevertheless affirmed the trial

court's judgment for the bondholder, but this Court vacated

the appellate court's judgment and dismissed the cause. Id . at

260. We reasoned that the Legislature's repeal of the statute

precluded the bondholder from maintaining the suit because

the Legislature had not incorporated a savings clause in the

repealing statute. Id. at 259.

We similarly cannot review Circle C's claim that the court of

appeals erred by holding that section 481.143 did not apply

to subsequent permit applications when the original permit

application was filed before September 1, 1987. Because the

Legislature did not include a savings provision in its repeal

of section 481.143, we must give the repeal immediate effect

since Circle C had not obtained “final relief” prior to the

repeal.

However, no party challenged the court of appeals' holding

that section 481.143 applied to Circle C's original permit

applications filed after September 1, 1987. The court of

appeals' holding on this issue therefore constituted “final

relief” in Circle C's favor. When “final relief” has been

granted before the repeal of a statute, the relief is not usually

affected by the statute's *126 subsequent repeal, unless the

Legislature has provided to the contrary. Cf. Knight, 627

S.W.2d at 384.
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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In sum, we dismiss Circle C's point of error challenging the

court of appeals' modification to the trial court's judgment.

However, that portion of the court of appeals' judgment

holding that any permit Circle C required be considered on the

basis of the ordinances in effect when the original application

for preliminary subdivision approval was filed, as long as

the original application was filed after September 1, 1987,

remains intact as it was not challenged in this Court.

VII

[21] As a final matter, we must consider Save Our Springs

Alliance's argument that the trial court erred in striking

its plea in intervention and the court of appeals erred in

affirming the trial court's striking of its intervention. The

Alliance, comprised of the citizen initiators of the Save

Our Springs Ordinance, maintains that the City could not

adequately defend the Ordinance in court because the City

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

attempted to preclude a vote on the Ordinance. See City

Council of Austin v. Save Our Springs Coalition, 828 S.W.2d

340 (Tex.App.—Austin 1992, no writ)(citizens sued City to

force election on the Ordinance). Under these circumstances,

the Alliance urges that its intervention was essential to protect

its interests. See Guaranty Fed. Savings Bank v. Horseshoe

Operating Co., 793 S.W.2d 652, 657 (Tex.1990)(trial court

abuses its discretion in striking intervention when (1) the

intervenor, in its own name, could have either brought, or

defended and defeated the same action; (2) the intervention

will not complicate the case by an excessive multiplication

of the issues; and (3) the intervention is almost essential

to effectively protect the intervenor's interest). The Alliance

contends that the court of appeals erred in concluding

that the City could adequately protect its interests. The

Alliance further asserts that citizen initiative sponsors have an

absolute right to intervene in litigation involving the initiated

legislation.

However, we do not believe it is necessary to reach the

merits of the Alliance's argument. Even assuming the trial

court erred in striking the Alliance's intervention and the

court of appeals erred by affirming the trial court's action,

the error was harmless. Under the Texas Rules of Appellate

Procedure, no judgment may be reversed on appeal unless

we conclude that the error complained of probably caused

the rendition of an improper judgment. TEX. R. APP. P.

61.1. The Alliance admits that the only remedy for the alleged

improper striking of its intervention is a new trial. Because the

City has prevailed in upholding the Ordinance against all the

challenges raised by Petitioners, a new trial would do nothing

to further the Alliance's interests. We accordingly conclude

that any alleged error in striking the Alliance's intervention

was harmless.

* * * * * *

For the foregoing reasons, we affirm the court of appeals'

judgment holding that the Ordinance is a valid legislative

act that need not be approved by the Texas Natural

Resource Conservation Commission to become effective and

enforceable. We dismiss Circle C's point of error regarding

the court of appeals' modification of the trial court's judgment

with regard to section 481.143 of the Government Code

because Circle C did not obtain final relief prior to the repeal

of section 481.143.

Justice ENOCH filed a concurring opinion.

Justice ENOCH, concurring.

I join in the Court's opinion and in the judgment. I write

separately only to mention one facet of this case that troubles

me: *127 by conferring on Austin the authority to control

land use outside its boundaries, the Legislature has partially

disenfranchised a class of citizens. This disenfranchisement

is at its most obvious in this case, in which the citizens of one

community by their vote have placed land use restrictions on

citizens of neighboring communities who had no vote. It is

also a disenfranchisement that may very well violate the “one

man, one vote” principle inherent in the right to participate in

the political process and guaranteed by the Equal Protection

Clause of the Fourteenth Amendment to the United States

Constitution. See Holt Civic Club v. City of Tuscaloosa, 439

U.S. 60, 68, 99 S.Ct. 383, 58 L.Ed.2d 292 (1978).

In Holt, the United States Supreme Court decided that

the City of Tuscaloosa's extraterritorial jurisdiction, which

extended police jurisdiction and sanitary regulations over

several unincorporated areas, did not violate the voting rights

of those areas' residents. Id. at 70, 99 S.Ct. at 389-90. The

Court declined to invalidate the extraterritorial jurisdiction

because of “the extraordinarily wide latitude that States
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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have in creating various types of political subdivisions and

conferring authority upon them.” Id. at 71, 99 S.Ct. at 390.

But however wide the states' latitude is, it is not without

boundaries, and two aspects of the Holt opinion indicate that

this case might be distinguishable.

First, the jurisdictional extension in Holt provided substantial

benefits to the residents in the form of municipal services

such as police, fire, and health protection. See id. at 74, 99

S.Ct. at 392. Second, the Court stated that an extraterritorialjurisdiction statute conferring broader powers than those at

issue in Holt could run afoul of the “one man, one vote”

principle. See id. at 72 n. 8, 99 S.Ct. at 391; id. at 79, 99

S.Ct. at 394-95 (Stevens, J., concurring) (noting the Court's

“limited” holding and stating that extraterritorial jurisdiction

“might sometimes operate to deny the franchise to individuals

who share the interests of their voting neighbors”).

In this case, by contrast, the Petitioners appear to bear most

of the burdens and the City appears to enjoy most of the

benefits. Perhaps the extraterritorial jurisdiction at issue here

is onerous enough to violate the Petitioners' constitutional

rights. However, though they hint at it, the Petitioners do not

brief this issue, and the Court properly omits considering it.

See TEX. R. APP. P. 38.1(h). On the other hand, I think that

this is a serious question that should be kept in mind.

Justice ABBOTT delivered the opinion of the Court on

Motion for Rehearing as to Section VI, in which Chief Justice

PHILLIPS, Justice HECHT, Justice OWEN, and Justice

GONZALES join.

We granted Petitioners' Motion for Rehearing. We now

withdraw Part VI of our opinion and substitute the following.

VI

Petitioners finally contend that the court of appeals erred

by holding that only projects in which the original permit

applications were filed after September 1, 1987 are required

to be considered on the basis of the City's regulations

and ordinances in effect at the time the original permit

applications were filed. Circle C made applications for

preliminary subdivision approval for five different sections of

the Circle C development, four of which were filed in 1985

and the fifth of which was filed in 1992. In furtherance of its

ongoing development from these permit applications, Circle

C applied for site development permits after the enactment

of the Ordinance. These subsequent permit applications are

at issue.

The trial court concluded that, under former section 481.143

of the Government Code, the ordinances in effect when Circle

C filed its original permit applications in 1985 and 1992

governed the City's consideration of Circle C's subsequent

permit applications for the same development. The court of

appeals, however, modified *128 the trial court's judgment,

holding that because section 481.143 became effective

September 1, 1987, only projects in which the initial permits

were filed between September 1, 1987 and the effective date

of the Ordinance (August 10, 1992) were not subject to the

strictures of the Ordinance. Petitioners contend that the court

of appeals erred in modifying the trial court's judgment in this

manner.

Generally, the right to develop property is subject to

intervening regulations or regulatory changes. See Connor v.

City of University Park, 142 S.W.2d 706, 709 (Tex.Civ.App.

—Dallas 1940, writ ref'd). In adopting sections 481.141–.143

of the Texas Government Code on September 1, 1987, the

Texas Legislature significantly altered this rule by requiring

that each permit in a series required for a development

project be subject to only the regulations in effect at

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

the processing and issuance of permits and approvals

by governmental regulatory agencies in order to alleviate

bureaucratic obstacles to economic development. See Act of

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,

1997, 74th Leg., R.S., ch. 794, § 1, sec. 481.141(b), 1995 Tex.

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

provided:

The approval, disapproval, or

conditional approval of an application

for a permit shall be considered

by each regulatory agency solely on

the basis of any orders, regulations,

ordinances, or other duly adopted

requirements in effect at the time the

original application for the permit is

filed. If a series of permits is required

for a project, the orders, regulations,

ordinances, or other requirements
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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in effect at the time the original

application for the first permit in that

series is filed shall be the sole basis

for consideration of all subsequent

permits required for the completion of

the project.

Act of May 30, 1987, 70th Leg., R.S., ch. 374, § 1, sec.

7.003(a), 1987 Tex. Gen. Laws 1823, 1839, amended by Act

of May 24, 1995, 74th Leg., R.S., ch. 794, § 1, sec. 481.143,

1995 Tex. Gen. Laws 4147, 4147, repealed by Act of June

1, 1997, 75th Leg., R.S., ch. 1041, § 51(b), 1997 Tex. Gen.

Laws 3943, 3966.

[22] [23] [24] The Legislature repealed section 481.143

while this case was pending before this Court. See Act of June

1, 1997, 75th Leg., R . S., ch. 1041, § 51(b), 1997 Tex. Gen.

Laws 3943, 3966. The general rule is that when a statute is

repealed without a savings clause limiting the effect of the

repeal, the repeal of that statute is usually given immediate

effect. See Knight v. International Harvester Credit Corp.,

627 S.W.2d 382, 384 (Tex.1982). When a right or remedy is

dependent on a statute, the unqualified repeal of that statute

operates to deprive the party of all such rights that have not

become vested or reduced to final judgment. Ordinarily, all

suits filed in reliance on the statute must cease when the

repeal becomes effective; if final relief has not been granted

before the repeal goes into effect, final relief cannot be

granted thereafter, even if the cause is pending on appeal. See

id.; National Carloading Corp. v. Phoenix–El Paso Express,

Inc., 142 Tex. 141, 176 S.W.2d 564, 568 (1943); Dickson v.

Navarro County Levee Improvement Dist. No. 3, 135 Tex.

95, 139 S.W.2d 257, 259 (1940). The repeal of the statute in

such instances deprives a court of subject matter jurisdiction

over the cause. See Knight, 627 S.W.2d at 384; Dickson, 139

S.W.2d at 259.

[25] This common-law rule of abatement may be modified

by a specific savings clause in the repealing legislation or

by a general savings statute limiting the effect of repeals.

Most states, including Texas, *129 have adopted some form

of general savings statute. See Ruud, The Savings Clause—

Some Problems in Construction and Drafting, 33 TEX. L.

REV. 285, 296–97 (1955). Texas's general savings clause is

codified in section 311.031 of the Government Code, which

states:

(a) Except as provided by Subsection (b), the reenactment,

revision, amendment, or repeal of a statute does not affect:

(1) the prior operation of the statute or any prior action

taken under it;

(2) any validation, cure, right, privilege, obligation,

or liability previously acquired, accrued, accorded, or

incurred under it;

(3) any violation of the statute or any penalty, forfeiture,

or punishment incurred under the statute before its

amendment or repeal; or

(4) any investigation, proceeding, or remedy concerning

any privilege, obligation, liability, penalty, forfeiture,

or punishment; and the investigation, proceeding, or

remedy may be instituted, continued, or enforced, and

the penalty, forfeiture, or punishment imposed, as if the

statute had not been repealed or amended.

(b) If the penalty, forfeiture, or punishment for any offense

is reduced by a reenactment, revision, or amendment of

a statute, the penalty, forfeiture, or punishment, if not

already imposed, shall be imposed according to the statute

as amended.

TEX. GOV'T CODE § 311.031(a), (b).

Petitioners assert that the general savings provision of the

Code Construction Act applies to the repeal of section

481.143. See TEX. GOV'T CODE § 311.002 (application of

the Code Construction Act); Knight, 627 S.W.2d at 385. The

City argues that the general savings clause does not apply

because a much narrower specific savings clause is included

in section 52 of the repealing legislation, which provides:

The rules, policies, procedures, and decisions of the

Texas Department of Commerce are continued in effect

as rules, policies, procedures, and decisions of the Texas

Department of Economic Development until superseded by

a rule or other appropriate action of the Texas Department

of Economic Development.

The validity of a rule, form, or procedure adopted,

contract or acquisition made, proceeding begun, obligation

incurred, right accrued, or other action taken by or in

connection with the authority of the Texas Department of

Commerce before it is abolished under ... this section is not

affected by this Act. To the extent those actions continue

to have any effect on or after September 1, 1997, they are

considered to be the actions of the Texas Department of

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

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Act of June 1, 1997, 75th Leg., R.S., ch. 1041, §§ 52(g),

52(h), 1997 Tex. Gen. Laws 3943, 3967. The City argues

that because the repealing legislation contains a specific

savings clause, application of the general savings provision

is preempted. See Ex parte Mangrum, 564 S.W.2d 751, 755

(Tex.Crim.App.1978) (“The general savings clause of the

Code Construction Act, however, is inapplicable to the new

Penal Code because a specific savings clause was provided

by the Legislature.”); Scott v. State, 916 S.W.2d 40, 41

(Tex.App.—Houston [1st Dist.] 1995, no pet.); Wilson v.

State, 899 S.W.2d 36, 38 (Tex.App.—Amarillo 1995, pet.

ref'd); see also TEX. GOV'T CODE § 311.026.

We conclude that section 52 contains a specific savings

clause. But the existence of the specific savings clause does

not preclude application of the general savings provision of

the Code Construction Act to the repeal of section 481.143.

[26] The Legislature's adoption of the general savings clause

in the Code Construction Act indicates a general legislative

policy that the repeal of any statute shall not affect the prior

operation of that statute nor extinguish any liability incurred

or *130 affect any right accrued or claim arising before

the repeal takes effect. Given this general policy and the

broad applicability of the Code Construction Act, we will

presume that the general savings clause applies unless a

contrary legislative intent is shown by clear expression or

necessary implication. See Great N. Ry. Co. v. United States,

208 U.S. 452, 465, 28 S.Ct. 313, 52 L.Ed. 567 (1908) (“[T]he

provisions of [the general savings clause] are to be treated

as incorporated in and as a part of subsequent enactments,

and therefore under the general principles of construction

requiring, if possible, that effect be given to all parts of a

law the section must be enforced unless either by express

declaration or necessary implication, arising from the terms

of the law, as a whole, it results that the legislative mind will

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.

[27] Section 52 does not expressly state that only the

enumerated items are saved, nor does it expressly negate

application of the general savings statute. See State v.

Fenter, 89 Wash.2d 57, 569 P.2d 67, 70 (1977) (en banc)

(“Although [the specific savings clause] exempts three

categories from repeal and thus acts as a mini-savings statute,

it does not expressly state that these three categories are

the only three categories exempt from repeal. Therefore, we

find no express legislative intent that the general savings

statute ... does not apply [to the repealed statute].”). Nor is

application of the general savings clause negated by necessary

implication. Although in many cases it could be argued

that the Legislature's inclusion of a specific savings clause

despite its awareness of the existence of the general savings

clause renders the specific savings clause redundant, see

State v. Showers, 34 Kan. 269, 8 P. 474, 477 (1885), that

is not the case here. The specific savings clause in section

52 is not redundant of the general savings provision. The

purpose of Senate Bill 932, which repealed section 481.143,

was to “abolish[ ] the Texas Department of Commerce and

transfer [ ] its powers and duties to the newly created Texas

Department of Economic Development and to certain other

economic development programs.” Act of June 1, 1997,

75th Leg., ch. 1041, 1997 Tex. Gen. Laws 3943, 3943.

Sections 52(g) and (h) ensured that proceedings begun, rights

accrued, and other actions taken by or in connection with

the authority of the Texas Department of Commerce before

it was abolished were not affected by the Act, and, as of

the September 1, 1997 effective date of the Act, would be

continued in effect as the actions of the newly created Texas

Department of Economic Development. This result may not

have been achieved by the general savings clause. Thus, both

the general and specific clauses were needed to effectuate

legislative intent.

Additionally, in contrast to the cases that have held that a

specific savings clause “trumps” application of the general

savings clause, the specific savings clause in section 52

does not irreconcilably conflict with the general savings

clause. See TEX. GOV'T CODE § 311.026(a) (providing

that a special provision prevails over a general provision

only if the conflict between the provisions is irreconcilable).

Accordingly, we conclude that the general savings clause

applies to the repeal of section 481.143. Applying the clause,

the prior operation of section 481.143 is not affected by the

repeal, and we may address Petitioners' point of error.

A

[28] The parties do not dispute whether section 481.143

applies to subsequent permit applications when the original

permit application was filed after September 1, 1987, such as

the one application for preliminary subdivision approval filed

in 1992. The issue we must decide is whether the statute is

applicable to Circle C's subsequent permit applications filed

after September 1, 1987, when the original application *131

in the series was filed before September 1, 1987, such as
Quick v. City of Austin, 7 S.W.3d 109 (1998)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 20

the four applications for preliminary subdivision approval

filed in 1985. The City argues that, in order to apply the

statute to original permit applications filed before September

1, 1987, the statute must be applied retroactively, and that

the law disfavors such retroactive application. See Houston

Indep. Sch. Dist. v. Houston Chronicle, 798 S.W.2d 580,

585 (Tex.App.—Houston [1st Dist.] 1990, writ denied); see

also TEX. GOV'T CODE § 311.022 (“A statute is presumed

to be prospective in its operation unless expressly made

retroactive.”). Because section 481.143 does not expressly

or impliedly indicate that it has a retroactive effect, the City

asserts that the court of appeals correctly concluded that the

statute does not apply to original permit applications filed

before September 1, 1987. 930 S.W.2d at 693. Petitioners

respond that they are not requesting a retroactive application

of section 481.143, but rather a prospective application of the

law to Circle C's subsequent permits filed after September 1,

1987.

Our first task is to determine whether the Legislature has

expressly prescribed the statute's proper reach. See Landgraf

v. USI Film Prods., 511 U.S. 244, 280, 114 S.Ct. 1483, 128

L.Ed.2d 229 (1994). The statute provides that if a series of

permits is required for a project, the ordinances in effect at the

time the original application for the first permit is filed shall

be the sole basis for consideration of all subsequent permits

required for the completion of the project. Nowhere does the

statute require that the original application for the first permit

in the series be filed after September 1, 1987. But neither

does the statute expressly state that it will apply to projects

in progress before that date. Thus, the plain language of the

statute does not expressly delineate its reach.

Petitioners contend that the statute applies to the treatment

of any subsequent permit application filed after September

1, 1987, regardless of when the first permit was filed. This

construction is consistent with the plain language of section

481.143, which states that “the ... ordinances ... in effect at the

time the original application for the first permit in that series is

filed [the ordinances in effect in 1985 in this case] shall be the

sole basis for consideration of all subsequent permits required

for completion of the project [the subsequent permits filed by

Circle C in 1992].”

1

 Moreover, this construction complies

with the Legislature's mandate to construe statutes liberally to

achieve their purposes. See TEX. GOV'T CODE § 312.006.

If we were to apply the construction urged by the City and the

dissent, the statute would at least partially fail of its intended

purpose to “alleviat[e] bureaucratic obstacles” that “inhibit

the economic development of the state.” Obviously, “current

administrative practices” can present bureaucratic obstacles

to both ongoing and future projects. If the statute only applies

to projects in *132 which initial permit applications are

filed after the statute's effective date, the benefit of the statute

would be denied to existing projects even though they too play

a role in the State's economic development. Accordingly, we

agree with Petitioners' construction of the statute.

[29] Our next step is to determine whether this construction

renders the statute retroactive, thereby invoking the

presumption against retroactivity. See Landgraf, 511 U.S.

at 280, 114 S.Ct. 1483. As the Supreme Court observed

in Landgraf v. USI Film Products, “[w]hile statutory

retroactivity has long been disfavored, deciding when a

statute operates ‘retroactively’ is not always a simple or

mechanical task.” Id. at 268, 114 S.Ct. 1483. The Court in

Landgraf did not attempt to precisely define what constitutes

a retroactive law, instead preferring a “functional” approach.

The Court instructed:

A statute does not operate

“retrospectively” merely because it is

applied in a case arising from conduct

antedating the statute's enactment, or

upsets expectations based in prior

law. Rather, the court must ask

whether the new provision attaches

new legal consequences to events

completed before its enactment. The

conclusion that a particular rule

operates “retroactively” comes at

the end of a process of judgment

concerning the nature and extent of

the change in the law and the degree

of connection between the operation

of the new rule and a relevant

past event. Any test of retroactivity

will leave room for disagreement

in hard cases, and is unlikely to

classify the enormous variety of legal

changes with perfect philosophical

clarity. However, retroactivity is

a matter on which judges tend

to have “sound ... instinct[s],”

and familiar considerations of fair

notice, reasonable reliance, and settled

expectations offer sound guidance.

Id. at 269–70, 114 S.Ct. 1483 (citations and footnote omitted).
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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Applying these principles, we conclude that our construction

does not operate retroactively. Contrary to the court of

appeals' conclusion, section 481.143 does not affect any

applications for permits filed before September 1, 1987.

That would be retroactive. But applying section 481.143

to subsequent permit applications filed after September 1,

1987, when the original permit application was filed before

September 1, 1987, is not a retroactive application of the law.

The statute operates prospectively on new permits for existing

projects. It affects only new permits to be issued in the future.

It does not annul or affect prior permits, or require the City to

issue a permit retroactively.

When Circle C filed its original permit applications in 1985,

the City's ordinances in effect at that time governed the

City's evaluation of those applications. Although subsequent

applications in the series required for a project would

normally be subject to any new ordinances and regulations

in effect at the time of their filing, the Legislature provided

that these subsequent applications, if filed after September

1, 1987, would be governed by only the ordinances and

regulations in effect at the time the original permit application

was filed. Thus, when Circle C filed subsequent permit

applications after September 1, 1987, the City was required

to apply only the ordinances in effect in 1985 to those

applications. The statute is not retroactive merely because it

requires the City to evaluate future permits based on past law.

The dissent argues that application to existing projects is

retroactive because it reaches back in time and attaches new

legal consequences to past acts. But the only new legal

consequences it attaches to prior acts is in determining which

“orders, regulations, ordinances, and other requirements”

may be applied in the future to new permits. The Legislature

could have passed a law comprehensively setting out criteria

for new permits. Instead, section 481.143 adopts by reference

to original *133 permits the appropriate orders, regulations,

ordinances, and other requirements to apply to new permits

—those in effect at the time the original application for the

first permit in the series was filed. As the Landgraf opinion

states, “a statute ‘is not made retroactive merely because it

draws upon antecedent facts for its operation.’ ” Id. at 270 n.

24, 114 S.Ct. 1483 (quoting Cox v. Hart, 260 U.S. 427, 435,

43 S.Ct. 154, 67 L.Ed. 332 (1922)); accord Regions Hosp.

v. Shalala, 522 U.S. 448, 456, 118 S.Ct. 909, 139 L.Ed.2d

895 (1998); General Dynamics Corp. v. Sharp, 919 S.W.2d

861, 866 (Tex.App.—Austin 1996, writ denied); American

Home Assurance v. Texas Dep't of Ins., 907 S.W.2d 90, 94

(Tex.App.—Austin 1995, writ denied); see also Walls v. First

State Bank of Miami, 900 S.W.2d 117, 121 (Tex.App.—

Amarillo 1995, writ denied) (discussing Landgraf ). Here, the

statute merely draws upon an antecedent fact—the date of the

first permit application—to determine what law will apply to

subsequent permit applications.

Accordingly, we hold that the court of appeals erred in

holding that only the subsequent permit applications from

original permit applications filed after September 1, 1987

were governed by the ordinances in effect at the time of the

original application.

B

[30] That does not end our inquiry, however, for we must

also consider the effect of the repeal on Circle C's rights. The

general savings clause of the Code Construction Act saves

both the prior operation of the statute and “any validation,

cure, right, privilege, obligation, or liability previously

acquired, accrued, accorded, or incurred under it.” TEX.

GOV'T CODE § 311.031(a)(2).

We begin by identifying Circle C's rights under section

481.143. As we have concluded, by its terms, section 481.143

gives Circle C the right to have the City consider an

application for a permit “solely on the basis of any orders,

regulations, ordinances, or other duly adopted requirements

in effect at the time the original application for the permit

is filed,” which in this case would be the regulations and

ordinances in effect in 1985 when the original applications for

preliminary subdivision approval were filed and approved.

The general savings clause saves this right only if it was

acquired, accrued, or accorded under section 481.143 before

the September 1, 1997 effective date of the repeal. 2See

Iowa Dep't of Transp. v. Iowa Dist. Ct. for Buchanan County,

587 N.W.2d 774, 776 (Iowa 1998) (“[O]ne relying on [the

general savings clause] must demonstrate that the privilege

he seeks to save is one that he possessed, or that had vested,

or that had been granted prior to the date the statute providing

such a privilege was repealed.”). This right would not accrue

until Circle C filed an application for a permit; it is only

when an application is filed that the right granted by section

481.143 is due and attaches to the review of the application.

As each subsequent application for a permit is filed, Circle

C's right accrues with respect to that application. With respect

to applications filed after the repeal of section 481.143, Circle

C's right would not have accrued before the effective date
Quick v. City of Austin, 7 S.W.3d 109 (1998)

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of the repeal, and nothing is saved by the general savings

clause. Thus, the City may not apply current regulations

and ordinances to its evaluation of permit applications filed

or approved during *134 the prior operation of section

481.143, but it may do so with respect to any applications filed

after its repeal, subject, of course, to the effects, if any, of the

statute as reenacted in 1999. See Act of April 29, 1999, 76th

Leg., R.S., ch. 73, 1999 Tex. Gen. Laws 431 to be codified at

TEX. LOC. GOV'T CODEE § 245.001 et. seq.).

In sum, we hold that the general savings clause applies

to the repeal of section 481.143. Considering Petitioners'

point of error, we conclude that, under the 1987 version of

section 481.143, any subsequent permit applications filed or

approved between September 1, 1987 and September 1, 1997

are governed by only the rules, regulations, and ordinances in

effect in 1985 when the original applications for preliminary

subdivision approval were filed. Because we hold that this

is not a retroactive application of the statute, we reverse the

court of appeals' judgment in that regard, and we modify the

judgment accordingly.BAKER and Justice O'NEILL join.

Justice HANKINSON filed a dissenting opinion on rehearing

as to Section VI, in which Justice ENOCH, Justice BAKER,

and Justice O'NEILL join.

Justice HANKINSON, dissenting.

While I agree with the Court's resolution of the first issue

we address on rehearing, I dissent from what I perceive to

be its impermissible and unnecessary retroactive application

of Texas Government Code § 481.143. For the reasons

expressed by the court of appeals, 930 S.W.2d 678, 693, I

would hold that for section 481.143 to apply to a particular

series of permits, the first permit in the series must have been

filed after the effective date of section 481.143.

The presumption is very strong that

a statute was not meant to act

retrospectively, and it ought never to

receive such a construction if it is

susceptible of any other. It ought not

to receive such a construction unless

the words used are so clear, strong,

and imperative that no other meaning

can be annexed to them or unless the

intention of the legislature cannot be

otherwise satisfied.

United States Fidelity & Guar. Co. v. United States ex rel.

Struthers Wells Co., 209 U.S. 306, 314, 28 S.Ct. 537, 52 L.Ed.

804 (1908).

Texas has its own “well-entrenched legal hostility to

retroactive laws.” Houston Indep. Sch. Dist. v. Houston

Chronicle Publ'g Co., 798 S.W.2d 580, 585 (Tex.App.—

Houston [1st Dist.] 1990, writ denied). “Texas law militates

strongly against the retroactive application of laws,” id., and

any doubts must be resolved against retroactive operation

of a statute. See Government Personnel Mut. Life Ins. Co.

v. Wear, 151 Tex. 454, 251 S.W.2d 525, 529 (1952). The

Legislature has codified the presumption that statutes apply

prospectively: “A statute is presumed to be prospective in

its operation unless expressly made retroactive.” Tex. Gov't

Code § 311.022 (emphasis added).

The Court misconstrues the proper temporal reach of the

statute before us. It seems reasonably clear to me that while

section 481.143 is not retroactive on its face, the Court's

application of it creates a retroactive effect that can easily be

avoided. The Court creates this retroactive effect by applying

a statute not effective until September 1, 1987, to permit

applications originally filed in 1985. Section 481.143 has

retroactive effect if applied in this manner—it reaches back

before its effective date and attaches new legal consequences

to past acts by changing what the law was before section

481.143 was enacted.

Before the Legislature enacted section 481.143, under wellestablished law cities could pass or amend ordinances in

the proper exercise of their police power, and citizens were

bound by those intervening ordinances even if they were

passed while an application for a permit was pending. See

*135 Connor v. City of Univ. Park, 142 S.W.2d 706,

709 (Tex.Civ.App.—Dallas 1940, writ ref'd). Thus, permit

applications were subject to any intervening ordinances

and amendments. Section 481.143 essentially eliminated

any intervening ordinances and amendments passed by any

city, including changes to fire, electrical, plumbing, and

mechanical codes designed to further public safety. For

example, if someone filed an application for a building

permit in 1970, under the Court's reading of section 481.143,

that person would only have to meet the safety standards

of 1970 when applying in 1987 for the next permit in

the series, and any ordinances passed in the intervening

seventeen years would have no effect. In this manner, the

Court's reading attaches new legal consequences to the

1985 permit applications and retroactively changes the law
Quick v. City of Austin, 7 S.W.3d 109 (1998)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 23

governing those 1985 applications, which were filed before

the Legislature enacted section 481.143 in 1987. This is not

“merely draw[ing] upon an antecedent fact,” as the Court

proposes. And I must emphasize that the Court's reading

is what creates the retroactive effect, not the language of

the Legislature as expressed in the statute itself; the Court

agrees that the statute “does not expressly delineate its

reach.” Precisely because section 481.143 contains no clear

expression that it operates retroactively, and because the Code

Construction Act mandates that statutes operate prospectively

in the absence of such clear expression, we are bound to read

the statute in a way that does not create a retroactive effect.

Moreover, the Legislature knows precisely how to make the

statute retroactive—it did so by amending section 481.143

in 1995 so that the section then expressly applied to projects

“in progress on or commenced after” September 1, 1987. Act

of May 24, 1995, 74th Leg., R.S., ch. 794, § 1, 1995 Tex.

Gen. Laws 4147. That amendment bolsters the conclusion

that we should not apply the 1987 version, which was not

expressly retroactive, to have a retroactive effect. Thus, the

Court's reading of the 1987 statute has the effect of making the

1995 amendments mere surplusage. The 1995 amendments

also included an exemption for adopting the kind of codes

affecting public safety mentioned above, highlighting that the

Legislature is the proper body to decide what the best policy

is and how best to redress particular problems.

The practical danger of ignoring the Legislature's policy

choice, as expressed in the Code Construction Act, and

applying section 481.143 retroactively, is that we have no

idea what rules, regulations, ordinances, or orders will be

affected. Section 481.143 applies not just to the city of

Austin, or to all cities in Texas, but to every “agency,

bureau, department, division, or commission of the state or

any department or other agency of a political subdivision

that processes and issues permits.” TEX. GOV'T CODE §

481.142(4). The statute applies not just to land development

projects, but to every “endeavor over which a regulatory

agency exerts its jurisdiction and for which a permit is

required before initiation of the endeavor.” TEX. GOV'T

CODE § 481.142(3). The definition of permit is equally

broad: “ ‘Permit’ means a license, certificate, approval,

registration, consent, permit, or other form of authorization

required by law, rule, regulation, or ordinance....” Id. §

481.142(2). In striving to reach its result in this particular

case, the Court ignores the fact that the implications of

its decision are unknown. I would argue that is precisely

why the Legislature has codified its decision that statutes

not be applied retroactively without the Legislature itself

saying so, without it's having weighed the consequences

after considering the potential effects of retroactivity and

expressed its decision that those consequences are desirable.

Courts simply are not empowered or endowed with the

jurisdiction or the resources to make those kinds of openended policy decisions.

The Court struggles to find legislative intent on retroactivity

where none is apparent and uses that phantom intent to *136

circumvent the express language of the Code Construction

Act. Nothing in the language of the statute or its history

supports the Court's assertion that the usual prospective

reading would cause the statute to “at least partially fail

of its intended purpose.” Without some expression by the

Legislature that it intended section 481.143 to apply to

existing projects, how do we know whether it intended

precisely the opposite, perhaps as part of a legislative

compromise, or perhaps as a result of the Legislature's

understanding that statutes operate prospectively in the

absence of clear expression to the contrary. Moreover, how

can we liberally construe a statute on a point on which the

statute is admittedly silent, without any proof of legislative

intent, and when the Code Construction Act unequivocally

mandates the opposite of the Court's reading. Whether to

apply a statute retroactively is, for very good reasons, a

legislative policy choice:

Because [prospectivity] accords

with widely held intuitions about

how statutes ordinarily operate, a

presumption against retroactivity will

generally coincide with legislative

and public expectations. Requiring

clear intent assures that Congress

itself has affirmatively considered

the potential unfairness of retroactive

application and determined that it

is an acceptable price to pay for

the countervailing benefits. Such a

requirement allocates to Congress

responsibility for fundamental policy

judgments concerning the proper

temporal reach of statutes, and has the

additional virtue of giving legislators

a predictable background rule against

which to legislate.

Landgraf v. USI Film Prods., 511 U.S. 244, 272–73, 114

S.Ct. 1483 (1994). Through the Code Construction Act,
Quick v. City of Austin, 7 S.W.3d 109 (1998)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 24

the Legislature has clearly expressed its policy choice

that its laws will not operate retroactively without its

own deliberation and manifest expression of the value of

retroactivity in the statute at issue. Ignoring the Code

Construction Act, especially in the absence of any statutory

language or legislative history to the contrary, is, in my view,

tantamount to legislating.

The Court points out that “[n]owhere does [the 1987] statute

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

prospectively. Applying section 481.143 prospectively, I

would hold that because section 481.143 was not effective

until 1987, it did not apply to Circle C's 1985 applications

for preliminary subdivision approval. I would further hold

that section 481.143 governs Circle C's one application

filed after the effective date of section 481.143 and before

the SOS ordinance became effective, but that any other

applications in that series must have been filed before

section 481.143 was repealed for section 481.143 to govern

those applications. Any other reading flouts our longstanding

principles disfavoring retroactive lawmaking. Accordingly, I

dissent.

All Citations

7 S.W.3d 109

Footnotes

1 The Barton Springs Edwards Aquifer is that portion of an underground system of water-bearing formations in Central

Texas that recharges Barton Springs. Barton Springs is a spring surfacing in Austin that is fed by and feeds Barton Creek.

Barton Springs and Barton Creek provide a significant source of Austin's water supply. Barton Springs also contributes

to a unique recreational attraction in Austin, Barton Springs Pool, a spring-fed outdoor swimming pool open throughout

the year.

2 In a de novo review, the reviewing tribunal determines each issue of fact and law without according deference to the

original tribunal's decision. See Post at 116.

3 As support for this contention, Petitioners rely on a water quality analysis of sixteen rainfall samples taken at three

locations. The City, however, elicited testimony that the water quality analysis of the samples was unreliable because

not enough rain was collected and several of the samples were contaminated.

4 Petitioners introduced into evidence a label from a bottle of Evian natural spring water showing a nitrate concentration

exceeding the runoff requirements under the Ordinance's technical rules. Because the purpose of the Ordinance's rules is

to ensure that no increases occur in the average annual loadings of constituents such as nitrogen, Petitioners' comparison

to Evian merely establishes that natural runoff in the Barton Creek watershed has a lower concentration of nitrates than the

spring waters producing Evian bottled water. Accordingly, this evidence is actually not probative of whether compliance

with the technical requirements of the Ordinance is possible.

1 Chapter 481 was amended in 1995. See Act of May 24, 1995, 74th Leg., R.S., ch. 794, § 1, 1995 Tex. Gen. Laws

4147, repealed by Act of June 1, 1997, 75th Leg., R.S., ch. 1041, § 51(b), 1997 Tex. Gen. Laws 3943, 3966. The 1995

amendments provided that section 481.143 applied “to all projects in progress on or commenced after the effective date of

this subchapter as originally enacted.” Act of May 24, 1995, 74th Leg., R.S. ch. 794, § 1, sec. 481.143(b), 1995 Tex. Gen.

Laws 4147, 4147 (repealed). Although the 1995 amendments were expressly made retroactive to September 1, 1987,

Circle C concedes that the amendments do not apply to its claims. See Act of May 24, 1995, 74th Leg., R.S., ch. 794, §

3, 1995 Tex. Gen. Laws 4147, 4148 (“Nothing in this Act shall be construed to diminish or impair the rights or remedies of

any person or entity under a final judgment rendered by, or in any pending litigation brought in, any court concerning an

interpretation of the provisions of Subchapter I, Chapter 481, Government Code.”). Subchapter I was reenacted in 1999

as Local Government Code, Subtitle C, Title 7, Chapter 245, but the reenacted version contains a similar provision and

is thus also inapplicable to this litigation. See Act of April 29, 1999, 76th Leg., R.S., ch. 73, § 4, 1999 Tex. Gen. Laws

___, ___ (to be codified at TEX. LOC. GOV'T CODE E § ___). Moreover, given the Legislature's mandate, we do not

consider the 1995 amendments in construing section 481.143 as enacted.

2 It is unclear whether the terms “accorded” and “acquired” relate to rights. Certainly, not all terms in the general savings

clause relate to rights—for example, incur, which generally means “become liable or subject to” would not refer to a

party's rights. In addition, if we apply the general definition of “accord,” which is “grant” or “allow,” then any right of action

granted or allowed by a statute would be saved despite a repeal, regardless of whether it had accrued before repeal.

This cannot have been the Legislature's intent in enacting the general savings clause, for repeals of statutory causes of
Quick v. City of Austin, 7 S.W.3d 109 (1998)

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 25

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.
S
Robinson v. Brice, 894 S.W.2d 525 (1995)

894 S.W.2d 525

Court of Appeals of Texas,

Austin.

Bryan D. ROBINSON, Appellant,

v.

Kevin R. BRICE, Appellee.

No. 03–93–00123–CV. | March 8, 1995. | Rehearing

Overruled April 12, 1995.

Passenger injured in accident while riding in automobile

which belonged to driver's employer brought action against

driver. The 368th Judicial District Court, Williamson County,

Burt Carnes, J., entered judgment for passenger and awarded

prejudgment interest accruing on date action was filed. After

driver appealed portion of judgment awarding prejudgment

interest on future damages, passenger cross-appealed

regarding determination of accrual date, and the Court of

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

for prejudgment interest; but (3) letter sent two months after

accident in which passenger requested that insurer pay certain

medical bills and inquired as to when next lost wages check

was due did not constitute written notice of claim.

Reversed and rendered.

West Headnotes (12)

[1] Appeal and Error

Cross-appeals or writs of error

Plaintiff was not required to perfect independent

appeal in order to bring cross-appeal concerning

date on which prejudgment interest accrued

following defendant's appeal regarding award of

prejudgment interest on judgment in favor of

plaintiff where defendant's appeal included that

portion of judgment which awarded prejudgment

interest on future damages.

Cases that cite this headnote

[2] Statutes

Purpose

In interpreting statute, court must consider its

object and purpose.

Cases that cite this headnote

[3] Interest

Unreasonable or vexatious delay in payment

In addition to ensuring that plaintiffs are fully

compensated, prejudgment interest statute

provides series of incentives designed to

encourage expeditious settlement of claims.

Vernon's Ann.Texas Civ.St. art. 5069–1.05, §

6(a).

2 Cases that cite this headnote

[4] Interest

Prejudgment Interest in General

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 1
Robinson v. Brice, 894 S.W.2d 525 (1995)

Prejudgment interest statute plainly requires not

merely written notice of accident and resulting

injuries, but also written notice of claim, in order

for award of prejudgment interest to accrue.

Vernon's Ann.Texas Civ.St. art. 5069–1.05, §

6(a).

Cases that cite this headnote

[5] Statutes

Undefined terms

Where statute does not define term, term must be

construed according to its ordinary meaning.

V.T.C.A, Government Code § 312.002(a).

Cases that cite this headnote

[6] Interest

Prejudgment Interest in General

Term “claim,” as used in provision of

prejudgment interest statute which requires

plaintiff to provide written notice of claim in

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.

5069–1.05, § 6(a).

10 Cases that cite this headnote

[7] Interest

Prejudgment Interest in General

Accident report submitted by passenger, who was

injured in automobile accident which occurred

while passenger was riding in automobile

belonging to driver's employer, to insurer of

driver's employer did not constitute “written

notice of claim” as would accrue claim for

prejudgment interest under statute in action

against driver where report was not notice of

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, §

6(a).

7 Cases that cite this headnote

[8] Costs

Attorney Fees

Provision of statute governing recovery of

attorney fees which requires claimant to present

claim to opposing party is similar to prejudgment

interest statute in that there is no indication what

information must be included in claim. V.T.C.A.,

Civil Practice & Remedies Code § 38.002(2);

Vernon's Ann.Texas Civ.St. art. 5069–1.05, §

6(a).

Cases that cite this headnote

[9] Costs

Attorney Fees

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 Thomson Reuters. No claim to original U.S. Government W orks. 2
Robinson v. Brice, 894 S.W.2d 525 (1995)

[10] Interest

Torts; wrongful death

Letter sent by passenger injured in automobile

accident, which occurred while passenger was

riding in automobile belonging to driver's

employer, to insurer of driver's employer in which

passenger requested that insurer pay certain

medical bills and inquired as to when next lost

wages check was due constituted “written notice

of claim” so as to satisfy requirements of

prejudgment interest and accrue claim for

prejudgment interest in action against driver

where letter was sufficient to notify insurer that

passenger was claiming compensation for his

injuries, even though letter was phrased as

request. Vernon's Ann.Texas Civ.St. art.

5069–1.05, § 6(a).

7 Cases that cite this headnote

[11] Interest

Prejudgment Interest in General

Prejudgment interest statute does not require

claimant to demand exact amount or list every

element of damage claimed in order to provide

written notice of claim as will accrue claim for

prejudgment interest. Vernon's Ann.Texas Civ.St.

art. 5069–1.05, § 6(a).

6 Cases that cite this headnote

[12] Interest

Prejudgment Interest in General

Prejudgment interest statute is construed liberally

to achieve its purposes of fully compensating

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).

2 Cases that cite this headnote

Attorneys and Law Firms

*526 Ranelle M. Meroney, Wright & Greenhill, Austin, David

C. Kent, Hughes & Luce, L.L.P., Dallas, for appellant.

Danny S. Ashby, Hughes & Luce, L.L.P., Dallas, for appellee.

Before POWERS, JONES and KIDD, JJ.

Opinion

POWERS, Justice.

[1] Kevin Brice appeals the portion of a trial-court judgment

fixing the date from which prejudgment interest began to

accrue.

1 We will reverse that part of the judgment *527 and

render judgment consistent with this opinion.

THE CONTROVERSY

On February 2, 1989, Bryan Robinson and Brice were

involved in a one-car accident in which Robinson was the

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 st P r o d u c ts C o r p o r a t i o n

(“Temple–Inland”). Temple–Inland's insurance carrier was

Highlands Insurance Company (“Highlands”).

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

injuries. Subsequently, a claims adjustor at Highlands,

Marthilyn Collins, began an investigation and on February 15

obtained tape-recorded statements from Brice and Robinson.

The next day, Collins filled out a report, noting that liability

was present and that Brice had told her he only wanted

payment of lost wages and medical bills that were not covered

by his own health insurance policy. Highlands began to pay

these items periodically.

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

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 Thomson Reuters. No claim to original U.S. Government W orks. 3
Robinson v. Brice, 894 S.W.2d 525 (1995)

bills until shortly before the statute of limitations ran. At that

point, Brice requested a substantial amount for future

damages. Shortly thereafter, on January 31, 1991, he filed suit

against Robinson and Temple–Inland.

2

At trial, the jury found Robinson's negligence had proximately

caused the accident and fixed damages in the amount of

$676,248.97. Brice filed a motion for judgment on the jury's

verdict

3

and requested prejudgment interest. See

Tex.Rev.Civ.Stat.Ann. art. 5069–1.05 § 6(a) (West

Supp.1995) (the “Statute”).

4 According to the Statute,

prejudgment interest accrues beginning on the 180th day after

the date the defendant receives written notice of a claim, or on

the date suit is filed, whichever occurs first. Id. Brice asserted

that prejudgment interest should be calculated beginning

August 14, 1989, 180 days after Highlands received the

accident report from Temple–Inland. Robinson contended that

prejudgment interest should accrue from the day Brice filed

suit (January 31, 1991).

After a hearing, the trial court found that Highlands had not

received written notice of Brice's claim more than 180 days

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.

The sole issue on appeal is whether the trial court correctly

determined that Highlands had not received written notice of

Brice's claim before Brice filed suit.

DISCUSSION AND HOLDING

Brice asserts the trial court erred in finding Highlands did not

receive written notice of a claim before Brice filed suit so as

to *528 trigger the 180–day provision in the statute. Brice

argues that the statute does not require written notice to come

from the claimant, and therefore, the accident report that

Highlands received on February 14 from its insured,

Temple–Inland, constituted written notice of his claim.

Robinson asserts that notice of an accident from an insured

who is a potential defendant is not notice of a third party's

claim.

[2] [3] The prejudgment interest statute does not set forth

requirements for what constitutes adequate “written notice of

a claim.”

5 Apparently, no court has addressed the question. In

interpreting the statute, we must consider its object and

purpose. De Leon v. Harlingen Consol. Indep. Sch. Dist., 552

S.W.2d 922, 925 (Tex.Civ.App.—Corpus Christi 1977, no

writ). In addition to ensuring plaintiffs are fully compensated,

the prejudgment interest statute provides a series of incentives

designed to encourage the expeditious settlement of claims. C

& H Nationwide, Inc. v. Thompson, 37 Tex.Sup.Ct.J. 1059,

903 S.W.2d 315, 1994 WL 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

penalty, conduct an investigation and settle claims with merit.

He argues that the accident report was sufficient to fulfill this

purpose because it apprised Highland that he was injured, the

time, place and manner of the accident, and its probable cause.

[4] [5] [6] [7] The statute, however, plainly requires not

merely written notice of an accident and resulting injuries, but

also written notice of a claim. 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.1987). The word “claim” ordinarily means a

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

not notice of a demand for payment or compensation by Brice

or on Brice's behalf, and thus was not notice of a claim.

[8] [9] Brice refers us to cases construing “notice of claim”

provisions in other statutes to support his contention that

Highland's receipt of the accident report was sufficient

“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.”

Tex.Civ.Prac. & Rem.Code Ann. § 38.002(2) (West 1986).

This provision is similar to the prejudgment interest statute in

that it does not indicate what information must be included in

the claim. Brice cites cases holding that presentment may be

informal and in no particular form. Jones v. Kelley, 614

S.W.2d 95, 100 (Tex.1981). The fact that presentment may be

informal does not obviate the necessity for assertion of a

claim. See, e.g., Adams v. Petrade Int'l, Inc., 754 S.W.2d 696,

719 (Tex.App.—Houston [1st Dist.] 1988, writ denied)

(noting section 38.002 merely requires some type of assertion

of debt or claim to opposing party and request for

compliance); King Optical v. Automatic Data Processing of

Dallas, Inc., 542 S.W.2d 213, 217 (Tex.Civ.App.—Waco

1976, writ ref'd n.r.e.) (holding claimant must merely assert

right to be paid and request payment in order to recover

attorney fees). Additionally, Brice argues that courts have

construed section 101.101 of the Texas Tort Claims Act as

requiring merely a description of the injury, and the time,

place and manner of the incident. Tex.Civ.Prac. & Rem.Code

Ann. § 101.101 (West 1986). He contends that the accident

report in the present case includes all of the above

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 4
Robinson v. Brice, 894 S.W.2d 525 (1995)

information. The accident report fails as written notice of a

claim not because of insufficient form or detail, but because it

is not notice of a demand for compensation or an assertion of

a right to be paid.

*529 [10] [11] [12] Alternatively, Brice contends that his

letter of April 1, stamped “Received” by Highlands on April

10, in which he requested that Highlands pay certain medical

bills and inquired as to when the next lost wages check was

due, constituted written notice of a claim so as to satisfy the

statutory requirement.

6 We 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. We 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) (West

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. We sustain Brice's

cross-point of error.

We reverse that portion of the trial-court judgment awarding

Brice prejudgment interest calculated from the date this

lawsuit was filed. We 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 Thomson Reuters. No claim to original U.S. Government W orks. 5
Robinson v. Brice, 894 S.W.2d 525 (1995)

3 Brice credited Robinson for Highland's previous payment of medical bills and lost wages in the amount of $23,091.94, requesting

judgment for the difference between $23,091.94 and the award of $676,248.97 in the amount of $653,157.03. The court rendered

judgment for Brice and calculated prejudgment interest on the adjusted amount.

4 The statute provides:

Judgments in wrongful death, personal injury, and propertydamage 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 claimor on the day the suit is filed, whichever occurs first, and ending on the day preceding the date judgment is rendered.

Tex.Rev.Civ.Stat.Ann. art. 5069–1.05 § 6(a) (West Supp.1995).

5 Many “notice of claim” provisions do provide detailed requirements for what the notice must contain. See, e.g., Texas Tort Claims

Act, Tex.Civ.Prac. & Rem.Code Ann. § 101.101(a)(1)–(3) (West 1986) (stating notice of claim must reasonably describe damage

or injury claimed, the incident and its time and place); Deceptive Trade Practices—Consumer Protection Act, Tex.Bus. & Com.Code

Ann. § 17.505(a) (West Supp.1995) (stating written notice must advise in reasonable detail of the consumer's specific complaint,

actual damages, and expenses reasonably incurred in asserting claim).

6 The day after Highlands received the accident report, Brice informed Highlands that he wanted compensation for lost wages and

medical bills, thus effectively giving notice of a claim, but this communication was not in writing as required by the statute. The April

1st letter read as follows:

Marthilyn—These are the bills that Prudential won't pay because they are applying to my deductible. Also included are other bills

I have submitted to you previously but have no resolution on. Please process these as quickly as you can, as I have had to pay out

of my pocket on these. Also, when is next lost wages check due? I'll call this week. Thank you, Kevin Brice.

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

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 6
T
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

82 S.W.3d 314

Supreme Court of Texas.

TEXAS DEPARTMENT OF

TRANSPORTATION, Petitioner,

v.

Eddie William NEEDHAM, Respondent.

No. 01–0383. | Argued April 10,

2002. | Delivered May 9, 2002.

| Rehearing Denied Sept. 12, 2002.

Former employee sued Department of Transportation (DOT),

alleging DOT violated Whistleblower Act when it retaliated

against employee for reporting a co-worker's alleged unlawful

conduct to DOT supervisors. The District Court, Travis

County, 353rd Judicial District, W. Jeanne Muerer, J.,

entered judgment on jury verdict in favor of employee. DOT

appealed. The Austin Court of Appeals affirmed. DOT filed

petition for review. The Supreme Court, Baker, J., held,

as matter of first impression, that: (1) as a matter of law,

DOT was not an appropriate law enforcement authority under

Act for employee to report co-worker's alleged violation of

driving while intoxicated laws, and (2) evidence did not

support finding that employee had good faith belief that DOT

was an appropriate law enforcement authority under Act to

report co-worker's alleged drunk driving.

Reversed.

West Headnotes (11)

[1] Statutes

Intent

In construing a statute, a court's objective is to

determine and give effect to the Legislature's

intent.

38 Cases that cite this headnote

[2] Statutes

Defined terms; definitional provisions

Ordinarily, a court first looks at the statute's plain

and common meaning, but if a statute defines a

term, a court is bound to construe that term by its

statutory definition only. V.T.C.A., Government

Code § 311.011(b).

30 Cases that cite this headnote

[3] Statutes

Construing together; harmony

Courts should not give an undefined statutory

term a meaning out of harmony or inconsistent

with other provisions, although it might be

susceptible of such a construction if standing

alone.

35 Cases that cite this headnote

[4] Statutes

Similarity or difference

In ascertaining a term's meaning, courts look

primarily to how that term is used throughout the

statute as a whole.

7 Cases that cite this headnote

[5] Statutes

Similarity or difference

Statutory terms should be interpreted

consistently in every part of an act.

6 Cases that cite this headnote

[6] Statutes

Questions of law or fact

Statutory construction is a question of law for the

court to decide.

9 Cases that cite this headnote

[7] Appeal and Error

Cases Triable in Appellate Court

Supreme Court reviews legal questions de novo.

53 Cases that cite this headnote

[8] Officers and Public Employees

Grounds for removal or discipline

Department of Transportation (DOT) was not an

entity charged with regulating under, enforcing,
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

investigating, or prosecuting driving while

intoxicated (DWI) laws and, thus, as a matter of

law, was not an “appropriate law enforcement

authority” to whom former employee could have

reported co-worker's alleged violation of DWI

laws, within meaning of Whistleblower Act.

V.T.C.A., Government Code § 554.002(b).

39 Cases that cite this headnote

[9] Officers and Public Employees

Grounds for removal or discipline

Under the Whistleblower Act's statutory

definition of an “appropriate law enforcement

agency,” it is clearly not enough that a

government entity has general authority to

regulate, enforce, investigate, or prosecute;

rather, the particular law the public employee

reported violated is critical to the determination.

V.T.C.A., Government Code § 554.002(b).

65 Cases that cite this headnote

[10] Officers and Public Employees

Grounds for removal or discipline

In the context of provision of Whistleblower

Act requiring public employee to have a good

faith belief that report of misconduct is made

to an appropriate law enforcement agency,

“good faith” means: (1) the employee believed

the governmental entity was authorized to (a)

regulate under or enforce the law alleged to

be violated in the report, or (b) investigate or

prosecute a violation of criminal law; and (2) the

employee's belief was reasonable in light of the

employee's training and experience. V.T.C.A.,

Government Code § 554.002(b).

79 Cases that cite this headnote

[11] Officers and Public Employees

Grounds for removal or discipline

Evidence regarding Department of

Transportation's (DOT) disciplinary process,

former employee's participation therein, and his

belief that DOT could forward information to

another entity to prosecute a drunk driving

allegation against a coworker did not support

finding that employee had a good faith belief

that DOT was an appropriate law enforcement

authority under the Whistleblower Act to report

co-worker's alleged drunk driving. V.T.C.A.,

Government Code § 554.002(b).

51 Cases that cite this headnote

Attorneys and Law Firms

*315 Julie Caruthers Parsley, Office of Solicitor Gen. of

Texas, John Cornyn, Jeffrey S. Boyd, Philip A. Lionberger,

Katherine E. Kasten, Cavitt Wendlandt, Danica Lynn Milios,

Office of Attys Gen. of Texas, Howard G. Baldwin, First

Asst. Atty. Gen., Austin, for petitioner.

John Judge, Judge & Brim, Mark W. Robinett, Jefferson K.

Brim, III, Brim Arnette & Robinett, Austin, for respondent.

Opinion

Justice BAKER delivered the opinion of the Court.

In this Texas Whistleblower Act suit we determine whether

the Texas Department of Transportation is an appropriate

law enforcement authority to which a public employee

may report an alleged driving while intoxicated incident.

If TxDOT is not, we must determine whether the public

employee had a good faith belief that it was an appropriate

law enforcement authority. The trial court rendered judgment

based on the jury's verdict for Eddie Needham, TxDOT's

former employee who TxDOT allegedly retaliated against

because he reported a co-worker's alleged unlawful conduct

to TxDOT supervisors. The court of appeals affirmed the trial

court's judgment. 76 S.W.3d 15.

We conclude, under the circumstances in this case, that

TxDOT was not an appropriate law enforcement authority as

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

enforcement authority. Accordingly, we reverse the court of

appeals' judgment and render judgment that Needham take

nothing.

I. BACKGROUND
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

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

By 1996, Eddie Needham had worked for TxDOT's

information systems division *316 for twenty-three years.

Needham was a crew chief in TxDOT's Geodetic Control

Section. He traveled around the state with other TxDOT

employees to perform global positioning surveys. On January

10, 1996, Needham and a crew member were returning

from Orange to Austin. The two stopped for the night at

College Station. When they arrived at the motel, Needham

encountered another TxDOT crew chief, Sam Garnett, and

his two crew members. The two crews decided to eat dinner

together. One of Garnett's crew members, who drove a

separate vehicle to the restaurant, called Needham on the

radio for directions. Needham testified at trial that the coworker's voice was slurred and that he was weaving as he

walked into the restaurant. Needham also said that during

dinner the co-worker's breath smelled of alcohol. Because

he concluded that the co-worker was too intoxicated to

drive, Needham instructed another employee to drive the

intoxicated employee's car back to the motel after dinner.

Needham testified that he did not immediately report the

co-worker's conduct to TxDOT because he believed that

the worker's crew chief, Garnett, should do so, and because

Needham feared retaliation. Accordingly, Needham waited

until February 23 to report the co-worker's conduct to Lewis

Keller, a supervisor at the same level as Needham's immediate

supervisor, Frank Howard. Needham met with Keller to

discuss whether Needham could transfer to Keller's section.

During the meeting, Needham also discussed the co-worker's

conduct in College Station and sought Keller's advice about

what to do. Keller told Needham that TxDOT's Human

Resources Manual required Needham to report the incident to

Needham's immediate superior. That same day, Needham met

with Howard and discussed the possible transfer to Keller's

department as well as the drunk driving incident involving the

co-worker.

On March 1, Needham talked to Leah Coffman, Howard's

supervisor, about various work matters. Needham did not

mention the co-worker's conduct in College Station to

Coffman, because he had already told Keller and Howard

about the incident. In fact, Needham saw Keller on that day to

again bring up the drunk driving incident, because Needham

thought nothing was being done about the situation. On this

occasion, Keller told Needham to talk to Barry Six, a TxDOT

employee who dealt with human resources issues.

Needham thus met with Six later that afternoon. When

Needham started to tell Six about the drunk driving incident,

Six said that he already knew about the incident, management

was deciding what to do, and Needham had already done

everything he needed to do.

From March 4 through March 6, Needham was out with flu.

When he returned to work, he again spoke to Six about the

co-worker's conduct. Then, Needham suffered a relapse from

the flu and stayed home until March 11.

When Needham returned to work, Coffman escorted him

into Six's office to discuss concerns about Needham's travel

and work assignment practices. A week later, Howard

and Needham met with the division head, Coffman, Six,

and another TxDOT supervisor. At that time, Howard

gave Needham a progressive disciplinary action document

charging Needham with thirteen violations of TxDOT

policies and procedures. The violations included a charge

that Needham unnecessarily traveled to College Station

with no TxDOT business to conduct, secured lodging in

College Station rather than return to Austin headquarters, and

encouraged other employees to do the same. Based on *317

these allegations, Howard demoted Needham and placed him

on probation for twelve months. Needham testified that he

was shocked and devastated about these charges, because he

had never received a reprimand during his twenty-three years

with TxDOT.

In early April 1996, Needham initiated an administrative

appeal of the adverse employment decision. Needham also

left work on sick leave and eventually took early retirement

on December 31, 1996. After abandoning his administrative

appeal, Needham sued TxDOT and alleged, among other

things, a Whistleblower Act claim. See TEX. GOV'T CODE

§§ 554.001–010.

TxDOT moved for summary judgment on the Whistleblower

Act claim. TxDOT asserted that Needham had not reported a

violation of law to an appropriate law enforcement authority

as the Whistleblower Act requires. However, the trial court

denied TxDOT's motion. After a trial, the jury found in

Needham's favor. Needham moved for judgment on the

verdict, and TxDOT moved for judgment notwithstanding the

verdict. The trial court entered judgment on the jury's verdict,

and, in response to TxDOT's request, filed findings of fact

and conclusions of law. The trial court found and concluded

that Needham reported a violation of law to an appropriate

law enforcement authority, and that TxDOT took adverse

personnel action against Needham in retaliation for the report.
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

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

TxDOT appealed and asserted that there was no evidence

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

being reported.” 76 S.W.3d at 23. Thus, the court of appeals

held, TxDOT qualified as an appropriate law enforcement

authority. 76 S.W.3d at 21. The court of appeals also held

that there was sufficient evidence for a jury to find that

“Needham's report of [the co-worker's] conduct constituted a

good faith report of a violation of law to an appropriate law

enforcement authority.” 76 S.W.3d at 21. Finally, the court

of appeals held that the evidence was sufficient to support a

finding that TxDOT retaliated against Needham because of

his report. 76 S.W.3d at 21. We granted TxDOT's petition for

review to determine if the court of appeals correctly applied

the Whistleblower Act to conclude that Needham reported a

violation of law to a government entity that he in good faith

believed was an “appropriate law enforcement authority.”

II. APPLICABLE LAW

A. THE WHISTLEBLOWER ACT

Texas's Whistleblower Act prohibits a state or local

governmental entity from taking adverse personnel action

against “a public employee who in good faith reports a

violation of law by the employing governmental entity or

another public employee to an appropriate law enforcement

authority.” TEX. GOV'T CODE § 554.002(a). Before 1995,

the Whistleblower Act did not define the term “appropriate

law enforcement authority.” However, the Legislature's 1995

amendments to the statute added a provision to do so. See Act

of May 25, 1995, 74th Leg., R.S. ch. 721, §§ 1–12, 1995 Tex.

Gen. Laws 3812 (current version at TEX. GOV'T CODE §

554.002(b)). Thus, section 554.002 of the Whistleblower Act

provides:

(b) In this section, a report is made to an appropriate law

enforcement authority if the authority is part of a state or

local governmental entity or the federal government that

the employee *318 in good faith believes is authorized

to:

(1) regulate under or enforce the law alleged to be

violated in the report; or

(2) investigate or prosecute a violation of criminal law.

TEX. GOV'T CODE § 554.002(b).

B. STATUTORY CONSTRUCTION

[1] [2] In construing a statute, “our objective is to

determine and give effect to the Legislature's intent.” Nat'l

Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527

(Tex.2000); see Albertson's, Inc. v. Sinclair, 984 S.W.2d 958,

960 (Tex.1999). Ordinarily, we first look at the statute's plain

and common meaning. Allen, 15 S.W.3d at 527; Fitzgerald v.

Advanced Spine Fixation Systems, Inc., 996 S.W.2d 864, 865

(Tex.1999). But if a statute defines a term, a court is bound

to construe that term by its statutory definition only. TEX.

GOV'T CODE § 311.011(b); Transp. Ins. Co. v. Faircloth,

898 S.W.2d 269, 274 (Tex.1995); Tijerina v. City of Tyler,

846 S.W.2d 825, 827 (Tex.1992).

[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

such a construction if standing alone. See Barr v. Bernhard,

562 S.W.2d 844, 849 (Tex.1978); Dallas Indep. Sch. Dist.

v. Finlan, 27 S.W.3d 220, 228 (Tex. App.-Dallas 2000,

pet. denied). In ascertaining a term's meaning, courts look

primarily to how that term is used throughout the statute as

a whole. See Barr, 562 S.W.2d at 849; Finlan, 27 S.W.3d

at 228. Statutory terms should be interpreted consistently in

every part of an act. See Finlan, 27 S.W.3d at 228.

[6] [7] Statutory construction is a question of law for

the court to decide. Havlen v. McDougall, 22 S.W.3d 343,

345 (Tex.2000); Johnson v. City of Fort Worth, 774 S.W.2d

653, 656 (Tex.1989). We review legal questions de novo.

See Mayhew v. Town of Sunnyvale, 964 S.W.2d 922, 928

(Tex.1998).

III. ANALYSIS

[8] In this case, we interpret for the first time the term

“appropriate law enforcement authority” under the post–

1995 Whistleblower Act. TxDOT argues that the statutory

definition's plain meaning does not support the court of

appeals' conclusion that TxDOT was an appropriate law

enforcement authority. TxDOT further asserts that the

court of appeals misconstrued and interpreted the statute

too broadly by reading a power-to-discipline qualification
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

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

into the statutory definition. TxDOT contends that it is

not an entity charged with regulating under, enforcing,

investigating, or prosecuting the state's criminal laws,

including those that penalize driving while intoxicated.

On the other hand, Needham contends that the governmental

entity's function, and the authority the state grants it, do

not solely determine whether it is an “appropriate law

enforcement authority.” Rather, Needham contends that the

perception of the employee who makes the report also

determines what constitutes an appropriate law enforcement

authority. Here, Needham argues, he reported the co-worker's

conduct to his superiors believing in good faith that TxDOT

had authority to investigate allegations that an employee

drove a TxDOT vehicle while intoxicated in order to regulate

its employees by prohibiting their driving TxDOT vehicles

while intoxicated. Further, Needham contends that any longtime TxDOT employee would believe that TxDOT had the

authority to investigate a report that an employee violated

a criminal law not *319 only for TxDOT's own internal

disciplinary process but also to forward the report to another

entity to prosecute.

In analyzing whether TxDOT was an appropriate law

enforcement authority, the court of appeals recognized that

the pre–1995 Whistleblower Act did not define the term. The

court of appeals also recognized that the post–1995 version

now defines “appropriate law enforcement authority” as a

governmental entity that the public employee in good faith

believes is authorized to: (1) regulate under or enforce the

law alleged to be violated in the report; or (2) investigate or

prosecute a violation of criminal law. See 76 S.W.3d at 23

(citing TEX. GOV'T CODE § 554.002(b)).

But then the court of appeals considered a pre–1995

amendment case that discussed the undefined term

“appropriate law enforcement authority.” 76 S.W.3d at 21

(citing City of Dallas v. Moreau, 697 S.W.2d 472 (Tex.App.-

Dallas 1985, no writ)). In Moreau, the court of appeals held

that an appropriate law enforcement authority must have:

(1) the power and duty under the law to decide disputes

concerning the lawfulness of the matter being reported; (2)

the power and duty to order a halt or a change in the matter

reported; (3) the power to legislate or regulate with respect

thereto; or (4) the power to arrest, prosecute, or otherwise

discipline on account of the alleged violation being reported.

Moreau, 697 S.W.2d at 474.

Relying on Moreau's fourth category, the court of appeals

determined that TxDOT was an appropriate law enforcement

authority, because TxDOT could “otherwise discipline”

employees under its progressive disciplinary action policy.

76 S.W.3d at 24. The court of appeals explained that

TxDOT's policy identifies conduct warranting disciplinary

action, including illegal activity committed while carrying

out official duties and behavioral problems occurring during

work hours that relate to alcohol and substance abuse.

76 S.W.3d at 24. Then, the court of appeals noted that

the policy requires supervisors to take certain progressive

disciplinary action when an employee fails to meet behavior

or performance standards. 76 S.W.3d at 24. Because TxDOT's

policy gave it the power to discipline an employee based on

a reported violation, the court of appeals held that TxDOT

qualified as an appropriate law enforcement authority under

Moreau. 76 S.W.3d at 23.

We disagree with the court of appeals' conclusion, because it

relies on a pre–1995 amendment case. The court of appeals'

analysis ignores the limiting nature of the Legislature's

1995 amendment to the Whistleblower Act that defines

“appropriate law enforcement authority.” And, in doing so,

the court of appeals' analysis expands the statutory definition

to include an employer's general obligation to internally

discipline its own employees.

[9] When Needham made his drunk driving “report”

to TxDOT, the Legislature had already amended the

Whistleblower Act to define the term “appropriate law

enforcement authority.” Thus, the Whistleblower Act

provided, as it does today, that an appropriate law

enforcement authority is a governmental entity authorized to

“regulate under or enforce the law alleged to be violated in the

report.” TEX. GOV'T CODE § 554.002(b)(1). Alternatively,

an appropriate law enforcement authority is a governmental

entity authorized to “investigate or prosecute a violation

of a criminal law.” TEX. GOV'T CODE § 554.002(b)

(2). Under the statutory definition, it is clearly not enough

that a government entity has general authority to regulate,

enforce, investigate, or prosecute. Rather, to determine if

a governmental entity qualifies as an “appropriate law

enforcement authority,” we are bound to construe *320

that term as the statute defines it. See TEX. GOV'T CODE

§ 311.011(b); Faircloth, 898 S.W.2d at 274; Tijerina,

846 S.W.2d at 827. And the statute defines that term

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.”
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

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

See TEX. GOV'T CODE § 554.002(b). In other words,

the particular law the public employee reported violated is

critical to the determination. Thus, here, we must determine

whether TxDOT has the authority to regulate under, enforce,

investigate, or prosecute a violation of Texas's driving while

intoxicated laws. See TEX. GOV'T CODE § 554.002(b).

Here, after analyzing the reported violation of law—

driving while intoxicated—under the statutory definition,

we conclude that TxDOT was not an appropriate law

enforcement authority. TxDOT has no authority to regulate

under or enforce the Texas's driving while intoxicated laws.

See TEX. GOV'T CODE § 554.002(b)(1). Nor does it have

authority to investigate or prosecute these criminal laws. See

TEX. GOV'T CODE § 554.002(b)(2). At most, TxDOT has

authority to regulate and investigate its employees' conduct

only to carry out its internal disciplinary process procedures.

But construing the statutory terms to include a public

employer's internal disciplinary power would mean all public

employers with a disciplinary policy for handling employees'

alleged illegal conduct are “appropriate law enforcement

authorities” for purposes of reporting any alleged violation.

We reject such an interpretation. See TEX. GOV'T CODE §

311.023(5). Accordingly, we hold that, as a matter of law,

TxDOT is not an appropriate law enforcement authority under

section 554.002(b) for a public employee to report another

employee's violation of Texas's driving while intoxicated

laws.

However, our conclusion that TxDOT is not a governmental

entity authorized to regulate under, enforce, investigate, or

prosecute Texas's driving while intoxicated laws does not end

our inquiry. Needham may still obtain Whistleblower Act

protection if he in good faith believed that TxDOT was an

appropriate law enforcement authority as the statute defines

the term. See TEX. GOV'T CODE § 554.002(b). Because we

have not defined what “good faith” means in this context, this

issue is also one of first impression.

Though we have not defined “good faith” under subsection

(b), we have defined the term in the context of subsection

(a)'s requirement that the reporting employee have a good

faith belief that another employee violated the law. See TEX.

GOV'T CODE § 554.002(a). Specifically, in Wichita County

v. Hart, this Court held:

“Good faith” means that (1) the

employee believed that the conduct

reported was a violation of law and (2)

the employee's belief was reasonable

in light of the employee's training and

experience.

917 S.W.2d 779, 784 (Tex.1996).

The test's first element—the “honesty in fact” element—

ensures that an employee seeking a Whistleblower Act

remedy believed he was reporting an actual violation of

law. Hart, 917 S.W.2d at 784–85. The test's second element

ensures that, even if the reporting employee honestly believed

that the reported act was a violation of law, the reporting

employee only receives Whistleblower Act protection if a

reasonably prudent employee in similar circumstances would

have believed that the facts as reported were a violation of

law. Hart, 917 S.W.2d at 785. Thus, the Hart test includes

both a subjective and objective element.

[10] We conclude the same test applies to determine

if a public employee in good *321 faith believed the

governmental entity to which he reported a violation of

law was an appropriate law enforcement authority. Applying

this test upholds the statutory construction principle that,

when feasible, we should consistently interpret terms used

throughout a statute. See Barr, 562 S.W.2d at 849; Finlan,

27 S.W.3d at 228. And it allays the same concerns expressed

in Hart that public employees receive Whistleblower Act

protection when they attempt to report illegal activity while,

at the same time, public employers retain the right to

discipline employees who, in reporting the alleged violation,

act unreasonably or only with ill motive. See Hart, 917

S.W.2d at 784–85. Thus, in the context of section 554.002(b),

“good faith” means:

(1) the employee believed the governmental entity was

authorized to (a) regulate under or enforce the law

alleged to be violated in the report, or (b) investigate or

prosecute a violation of criminal law; and

(2) the employee's belief was reasonable in light of the

employee's training and experience.

Accordingly, we must determine if, under the test we adopt

today, there is any evidence to support the conclusion that

Needham had a good faith belief that he reported the alleged

drunk driving incident to the appropriate law enforcement

authority.

[11] Here, the court of appeals applied the Hart test to

determine that Needham had a good faith belief that he was

reporting the violation to an appropriate law enforcement
Texas Dept. of Transp. v. Needham, 82 S.W.3d 314 (2002)

45 Tex. Sup. Ct. J. 631

 © 2015 Thomson Reuters. No claim to original U.S. Government Works. 7

authority. See 76 S.W.3d at 21. The court of appeals relied

on the same evidence as Needham does here to argue he

had a good faith belief under the Hart test. First, the court

of appeals decided that Needham's persistence in reporting

the drunk driving incident to various TxDOT supervisors

demonstrates that he subjectively believed TxDOT was the

appropriate law enforcement authority. Second, the court of

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

authorities.” 76 S.W.3d at 24.

But the court of appeals' analysis, and Needham's contention

that the evidence supports his good faith belief under the

Hart test, are both based on the erroneous assumption that

section 554.002(b)'s “appropriate law enforcement authority”

definition includes an employer's power to discipline an

employee for allegedly violating a law. 76 S.W.3d 24. As we

have already held, the statutory definition's limiting language

—regulate under, enforce, investigate, and prosecute—does

not include an employer's power to internally discipline

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

to the appropriate law enforcement authority is TxDOT's

disciplinary process, his participation therein, and his belief

that TxDOT could forward information to another entity

to prosecute a drunk driving allegation. Therefore, we hold

that there is no evidence to support a finding that Needham

had a good faith belief that TxDOT was an appropriate

law enforcement authority under the Whistleblower Act to

report a co-worker's drunk driving. See Bradford v. Vento, 48

S.W.3d 749, 754 (Tex.2001); Faircloth, 898 S.W.2d at 275–

76.

IV. CONCLUSION

We hold that, as a matter of law, TxDOT is not an appropriate

law enforcement authority under section 554.002(b) to which

a public employee may report an alleged *322 drunk driving

incident. We further hold that there is no evidence to support a

finding that Needham had a good faith belief that he reported

the alleged drunk driving to an appropriate law enforcement

authority. Because these conclusions dispose of this appeal,

we need not reach TxDOT's second argument that Needham's

causation evidence is legally sufficient. Accordingly, we

reverse the court of appeals' judgment and render judgment

that Needham take nothing.

All Citations

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.
U
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

180 S.W.3d 761

Court of Appeals of Texas,

Fort Worth.

TOSHIBA MACHINE CO., AMERICA, Appellant,

v.

SPM FLOW CONTROL, INC., Appellee.

No. 2–03–156–CV. | Nov. 10, 2005.

Synopsis

Background: Manufacturer of heavy-duty oilfield pumps

brought breach of contract action against maker of machine

tools. The 236th District Court, Tarrant County, Thomas

Wilson Lowe III, J., entered judgment on a jury verdict for

manufacturer and awarded manufacturer attorney fees. Both

parties appealed.

Holdings: On rehearing, the Court of Appeals, Anne

Gardner, J., held that:

[1] there was some evidence to establish that manufacturer's

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

[7] letter from manufacturer to maker did not constitute a

written notice of a claim and, thus, did not trigger accrual of

prejudgment interest.

Affirmed.

West Headnotes (43)

[1] Sales

Effect of Acceptance

Sales

Protest, objection, notice, or conditional

acceptance, and effect thereof

A buyer's rejection or acceptance of

nonconforming goods determines the remedies

available to him. V.T.C.A., Bus. & C. §§ 2.601,

2.711, 2.714.

4 Cases that cite this headnote

[2] Sales

Use or other disposition by buyer

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 1
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

There was some evidence to establish, in breach

of contract action, that heavy-duty oilfield pump

manufacturer's 17,000 hours of use of

nonconforming machine tools over four years was

reasonable and, thus, did not constitute

acceptance of machine tools nor preclude

manufacturer's revocation of acceptance; there

was evidence that maker of machine tools agreed

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

deliver the boring software, that maker did not

announce that it would not deliver the software

until 17 months after delivery of first machine

tool, that manufacturer's use of machine tools

mitigated its damages, and that replacement

machine tools having the required boring function

had a long lead time. V.T.C.A., Bus. & C. §§

1.205, 2.602, 2.606, 2.608.

2 Cases that cite this headnote

[3] Sales

Use or other disposition by buyer

Sales

Acceptance of goods

What constitutes reasonable use, such that a

buyer's use of nonconforming goods does not

undo a rejection or revocation of acceptance, is a

question of fact to be decided under the

circumstances of each case, though generally

using goods during the time when the seller is

promising or trying unsuccessfully to cure the

nonconformity will not adversely affect the

buyer's rights. V.T.C.A., Bus. & C. §§ 2.602,

2.606, 2.607(b), 2.608.

4 Cases that cite this headnote

[4] Courts

Decisions of Courts of Other State

In determining and applying the Texas version of

the Uniform Commercial Code (UCC), Texas

courts may consider and apply pertinent decisions

from other jurisdictions. V.T.C.A., Government

Code § 311.028; V.T.C.A., Bus. & C. § 1.103.

1 Cases that cite this headnote

[5] Sales

Use or other disposition by buyer

Factors relevant to a buyer's reasonable use of

nonconforming goods, such that the use does not

undo a rejection or revocation of acceptance,

include the degree of economic hardship the

buyer would suffer if it discontinued using the

defective goods and the reasonableness of the

buyer's use after revocation as a method of

mitigating damages. V.T.C.A., Bus. & C. §§

1.205, 2.602, 2.606, 2.608.

5 Cases that cite this headnote

[6] Sales

Use or other disposition by buyer

Use of nonconforming goods may be the most

appropriate means of achieving mitigation until

the buyer can obtain suitable replacements.

Cases that cite this headnote

[7] Sales

Acceptance of offer

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 2
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

There was some evidence to establish that

addendum that heavy-duty oilfield pump

manufacturer attached to its purchase order for

machine tool was part of contract between

manufacturer and maker of machine tool, in

manufacturer's breach of contract action;

manufacturer's purchase order was an offer to buy

the machine tool, terms and conditions of

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

that acceptance of order was acceptance of all

terms on front and back of purchase order, merger

clause on order stated that the order and all

documents referred to on its face constituted

parties' entire agreement, and front of order

specifically referred to addendum. V.T.C.A., Bus.

& C. § 2.207.

Cases that cite this headnote

[8] Sales

Quality, Fitness, and Condition of Goods

There was some evidence to establish that maker

of machine tools breached contracts to sell

machine tools to heavy-duty oilfield pump

manufacturer, in manufacturer's breach of contract

action; there was evidence that maker of machine

tools failed to deliver boring function software,

tool lists and part programs, process cycle study

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.

Cases that cite this headnote

[9] Sales

Effect of delivery

Under the Uniform Commercial Code (UCC),

delivery of goods is a necessary predicate to

acceptance or rejection, but delivery by itself does

not determine the buyer's remedies. V.T.C.A.,

Bus. & C. §§ 2.711, 2.713, 2.714.

1 Cases that cite this headnote

[10] Sales

Effect of Acceptance

Sales

Protest, objection, notice, or conditional

acceptance, and effect thereof

Assuming the seller delivers something, the

buyer's acceptance or rejection determines the

buyer's remedies under the Uniform Commercial

Code (UCC). V.T.C.A., Bus. & C. §§ 2.711,

2.713, 2.714.

2 Cases that cite this headnote

[11] Sales

Acts Constituting Delivery

“Conformity” does not mean substantial

performance, for purposes of determining whether

a seller breached a contract under the Uniform

Commercial Code (UCC); it means complete

performance. V.T.C.A., Bus. & C. § 2.601.

1 Cases that cite this headnote

[12] Damages

Particular cases

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 3
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

There was some evidence to establish with

reasonable certainty that heavy-duty oilfield pump

manufacturer was damaged in the amount of

$6,007,226 as a result of breach of contracts by

maker of machine tools, in manufacturer's breach

of contract action; manufacturer's vice president

of finance testified, to a reasonable certainty, that

manufacturer lost profits in the amount of

$6,038,292, and there was evidence that

manufacturer incurred incidental damages for

things such as pouring foundations and designing

tools for the machines.

Cases that cite this headnote

[13] Damages

Loss of profits

A party seeking to recover lost profits must prove

the loss through competent evidence with

reasonable certainty.

Cases that cite this headnote

[14] Damages

Loss of profits

Evidence

Damages

While the requirement, that a party seeking to

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

profits arise, at a minimum, opinions or estimates

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

“Reasonable certainty” necessary to recover on a

claim for lost profits is not demonstrated when the

profits claimed to be lost are largely speculative

or a mere hope for success, as from an activity

dependent on uncertain or changing market

conditions, on chancy business opportunities, or

on promotion of untested products or entry into

unknown or unproven enterprises.

Cases that cite this headnote

[16] Damages

Loss of profits

The mere assertion that contracts were lost does

not demonstrate a reasonably certain objective

determination of lost profits.

Cases that cite this headnote

[17] Damages

Questions for Jury

Whether evidence is speculative or reasonably

certain, such that a claim for lost profits is

established, is a factual issue within the exclusive

province of the jury to determine.

Cases that cite this headnote

[18] Damages

Loss of profits

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 4
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

Reasonably certain lost profits may be proved by

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 client base, (5) the sales force, (6)

the marketing plan, and (7) the company's track

record of sales.

Cases that cite this headnote

[19] Damages

Loss of profits

When a business is already established and

making a profit at the time the contract was

breached or the tort committed, pre-existing

profit, together with other facts and

circumstances, may indicate with reasonable

certainty the amount of profits lost.

Cases that cite this headnote

[20] Evidence

Damages

Vice president of finance for oilfield pump

manufacturer was qualified to testify as an expert

on issue of manufacturer's lost profits, in

manufacturer's breach of contract action against

the maker of machine tools purchased by

manufacturer, where vice president had a BBA in

accounting, and he had more than 30 years'

experience managing the financial and accounting

functions of companies engaged in the

manufacture and distribution of various products.

Rules of Evid., Rule 702.

1 Cases that cite this headnote

[21] Evidence

Knowledge, experience, and skill in general

A witness is qualified to testify as an expert if he

has the appropriate knowledge, skill, experience,

training, or education. Rules of Evid., Rule 702.

2 Cases that cite this headnote

[22] Appeal and Error

Competency of witness

Evidence

Determination of question of competency

The decision to admit expert testimony is within

the trial court's discretion and will be disturbed on

appeal only if there has been an abuse of that

discretion. Rules of Evid., Rule 702.

1 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

pump manufacturer against maker of machine

tools, by admitting manufacturer's vice president's

expert testimony on lost profits, though it was

based on contacts vice president made with

manufacturer's customers, and vice president's

testimony regarding customer's responses was

hearsay; expert could rely on inadmissible facts or

data to form an opinion if the facts or data were of

type reasonably relied upon by experts in the

particular field, and asking customers was an

appropriate way to determine why sales were lost.

Rules of Evid., Rule 703.

Cases that cite this headnote

[24] Damages

Loss of profits

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 5
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

Testimony by vice president of finance of

heavy-duty oilfield pump manufacturer regarding

manufacturer's lost profits was not so speculative

as to be legally insufficient, in breach of contract

action against maker of machine tools, though

vice president failed to determine what price or

delivery time would have induced customers to

buy pumps from manufacturer, where the lost

sales to which vice president testified concerned

the loss of sales of proven products to existing

customers.

Cases that cite this headnote

[25] Damages

Nature and theory of compensation

Damages awarded to heavy-duty oilfield pump

manufacturer, in breach of contract action against

maker of machine tools, for lost profits due to

increased production costs and for lost profits due

to lost sales did not overlap and did not result in

an impermissible double recovery for

manufacturer; though calculation of both elements

hinged on the slow speed of maker's machines, if

machines had performed as expected,

manufacturer would have saved time and made

more profit on the pumps actually produced, and

with the time saved manufacturer could have also

made more pumps and thus additional profits.

Cases that cite this headnote

[26] Damages

Preparation and Form of Interrogatories or

Findings

Trial court did not err by failing to submit

damages questions that provided separate blanks

for each element of damages claimed by

heavy-duty oilfield pump manufacturer, in its

breach of contract action against maker of

machine tools, as there was legally sufficient

evidence to support all of the elements in

manufacturer's damage model.

Cases that cite this headnote

[27] Appeal and Error

Submission of Issues or Questions to Jury

A trial court commits reversible error when it

submits a broad-form damage issue that

incorporates an element of damages on which

there is no evidence, as such a submission

prevents the appellate court from determining

whether the jury based its verdict on the

improperly submitted element of damage.

Cases that cite this headnote

[28] Sales

Purchase of similar property elsewhere and

prevention of damages

It is immaterial that hindsight may later prove that

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.

V.T.C.A., Bus. & C. §§ 2.712, 2.715(b)(1).

2 Cases that cite this headnote

[29] Sales

Presumptions and burden of proof

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 6
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

The burden of establishing that damages could

not have been reasonably prevented by cover is

on the buyer seeking consequential damages in a

breach of contract action. V.T.C.A., Bus. & C. §§

2.712, 2.715(b)(1).

1 Cases that cite this headnote

[30] Damages

Duty of Person Injured to Prevent or Reduce

Damage

Mitigation of damages is a rule requiring the

injured party to use reasonable diligence to

minimize his damages.

1 Cases that cite this headnote

[31] Damages

Mitigation of damages and reduction of loss

Though mitigation is similar to cover and a

plaintiff in a breach of contract action has the

burden of establishing that damages could not

have been reasonably prevented by cover, the

burden of disproving mitigation lies with the

defendant.

Cases that cite this headnote

[32] Sales

Purchase of similar property elsewhere and

prevention of damages

There was some evidence to establish, in breach

of contract action against maker of machine tools,

that heavy-duty oilfield pump manufacturer made

reasonable efforts to limit its consequential

damages by making a proper attempt at cover;

there was evidence that manufacturer purchased

two machines from another maker when it became

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.,

Bus. & C. §§ 2.712, 2.715(b)(1).

1 Cases that cite this headnote

[33] Damages

Weight and Sufficiency

There was some evidence to establish, in breach

of contract action against maker of machine tools,

that heavy-duty oilfield pump manufacturer

mitigated its damages; though machines did not

perform as represented, there was evidence that

manufacturer used machine tools to the extent

possible and reduced its damages in the amount of

$2,250 per fluid end, which was one of the

components of manufacturer's pumps.

Cases that cite this headnote

[34] Costs

Contracts

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 7
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

Eight factors are weighed in determining

reasonableness and necessity of attorney fees for

breach of contract claim: (1) time and labor

required, novelty and difficulty of the questions

involved, and skill required to perform the legal

services properly, (2) likelihood that acceptance

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)

time limitations imposed by client or by

circumstances, (6) nature and length of the

professional relationship with client, (7)

experience, reputation, and ability of the lawyer

or lawyers performing services, and (8) whether

the fee is fixed or contingent on results obtained

or uncertainty of collection before the legal

services have been rendered. V.T.C.A., Civil

Practice & Remedies Code § 38.001; State Bar

Rules, V.T.C.A., Government Code Title 2,

Subtitle G App. A, Art. 10, § 9, Rules of

Prof.Conduct, Rule 1.04(b).

1 Cases that cite this headnote

[35] Costs

Contracts

One method of computing reasonable attorney

fees that can be awarded for a valid breach of

contract claim is the “lodestar method,” or the

product of reasonable hours times a reasonable

rate. V.T.C.A., Civil Practice & Remedies Code

§ 38.001; State Bar Rules, V.T.C.A., Government

Code Title 2, Subtitle G App. A, Art. 10, § 9,

Rules of Prof.Conduct, Rule 1.04(b).

20 Cases that cite this headnote

[36] Appeal and Error

Attorney fees

Court of Appeals reviews a court-ordered award

of attorney fees under the abuse of discretion

standard.

1 Cases that cite this headnote

[37] Costs

Contracts

Costs

Attorney fees on appeal or error

Trial court did not abuse its discretion, in

heavy-duty oilfield pump manufacturer's breach

of contract action against maker of machine tools,

by exceeding the lodestar amount and awarding

manufacturer attorney fees in amount of $1.5

million through date of judgment, plus $200,000

if maker was unsuccessful in appeal, plus $35,000

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

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

and receiving nothing over its $150,000 base fee,

that $1.5 million were reasonable fees, and that

such fees represented about 25% of jury verdict,

which was less than the 30% to 50% typically

charged in contingent fee cases. V.T.C.A., Civil

Practice & Remedies Code § 38.001; State Bar

Rules, V.T.C.A., Government Code Title 2,

Subtitle G App. A, Art. 10, § 9, Rules of

Prof.Conduct, Rule 1.04(b).

4 Cases that cite this headnote

[38] Costs

Effect of fee agreement with attorney

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Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

The use of a multiplier based upon the contingent

nature of a fee is allowed when awarding attorney

fees under Texas statutes allowing recovery of

attorney fees.

4 Cases that cite this headnote

[39] Sales

Acceptance of goods

Evidence that machine tool never was able to

perform specific boring function that maker of

machine tool agreed to provide and that maker

repeatedly promised it would deliver software for

the boring function before announcing that it

would not deliver software raised fact issue for

jury as to whether heavy-duty oilfield pump

manufacturer never accepted machine tool, and

thus whether manufacturer did not owe maker

contract price for machine, in manufacturer's

breach of contract action against maker.

V.T.C.A., Bus. & C. § 2.607(a).

Cases that cite this headnote

[40] Interest

Form and sufficiency of demand

A written notice of a “claim,” which triggers

accrual of prejudgment interest 180 days after the

claim is made, is a demand for compensation or

an assertion of a right to be paid. V.T.C.A.,

Finance Code § 304.104.

3 Cases that cite this headnote

[41] Interest

Form and sufficiency of demand

A written notice of “claim,” which triggers

accrual of prejudgment interest 180 days after the

claim is made, need not demand an exact amount

or list every element of damage. V.T.C.A.,

Finance Code § 304.104.

2 Cases that cite this headnote

[42] Appeal and Error

Cases Triable in Appellate Court

Appeal and Error

Costs and Allowances

In a review of a trial court award of prejudgment

interest, 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.

4 Cases that cite this headnote

[43] Interest

Form and sufficiency of demand

Letter from heavy-duty oilfield pump

manufacturer to maker of machine tools,

complaining that machines did not perform to the

specifications represented by maker, did not

constitute a written notice of a “claim,” and thus

letter did not trigger accrual of prejudgment

interest on judgment for manufacturer in breach

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

liability, and letter did not demand payment or

assert a right to be paid. V.T.C.A., Finance Code

§ 304.104.

1 Cases that cite this headnote

Attorneys and Law Firms

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 9
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

*767 Munsch, Hardt, Kopf & Harr, PC and Michael G. Foster,

Dallas,Jackson Walker, LLP and Albon O. Head, and William

R. Jenkins, Jr., Fort Worth, and Dorsey & Whitney, LLP and

Creighton R. Magid, and Kevin B. Bedell, Washington, D.C.,

for Appellant.

Kelly Hart & Hallman, PC and Marshall M. Searcy, Jr., Hugh

G. O'Connor, II and Brian S. Stagner, Fort Worth, for

Appellee.

Panel A: CAYCE, C.J.; GARDNER and McCOY, JJ.

OPINION ON REHEARING

ANNE GARDNER, Justice.

After reviewing Appellant, Toshiba Machine Co., America's

motion for rehearing, we deny the motion. We withdraw our

June 2, 2005 opinion and judgment and substitute the

following. Our ultimate conclusions remain unchanged.

I. Introduction

This case arises from the sale of two large machine tools.

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

complains of legally insufficient evidence to support jury

findings on various aspects of SPM's breach of contract

claims, mutually exclusive and inconsistent theories of

recovery, overlapping damage awards, and excessive

attorney's fees. In a single issue, SPM complains that the trial

court used the wrong date to compute prejudgment interest.

We affirm the judgment in all respects.

II. Factual and Procedural Background

SPM manufactures heavy-duty oilfield pumps. The pumps

consist of two components: *768 a “power end” and a “fluid

end.” SPM makes the fluid ends from blocks of solid steel

weighing 3,000–4,000 pounds. The fluid ends have a complex

internal shape machined through a process called “internal

contouring.”

In 1996, SPM began to shop for new machine tools to make

fluid ends. The machines SPM used at the time dated from the

1960s and required 115 hours to make a single fluid end.

SPM's primary goal in replacing the old machines was to

reduce the time required to make a fluid end. SPM enlisted the

help of Maruka, U.S.A., Inc., a machine tool distributor, to

find suitable replacements. Maruka presented SPM with

literature and quotes for several machine tools, including

Toshiba's BMC 1000 Horizontal Machining Center

(“BMC–1000”).

SPM initially rejected Toshiba's quote because the BMC–1000

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

process it controlled, “orbit boring.” Toshiba told SPM that

Toshiba customers in Japan were already using the

orbit-boring software on BMC–1000 machines.

Toshiba represented that orbit boring on the BMC–1000 could

make fluid ends in much less time than SPM's existing tools.

According to Toshiba, orbit boring allowed one cutting tool to

do the work of many. The time saved by not having to change

cutting tools would, said Toshiba, reduce the time needed to

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

allow SPM to make a fluid end in anywhere from fifteen to

fifty hours.

A key issue at trial was what the term “orbit boring” meant.

According to SPM's president, Dan Lowrance, Toshiba

promoted orbit boring, also called “shake turning,” as a new

process that would bring new functionality to the BMC–1000.

According to Toshiba's regional sales manager, Steve

Oliphant, orbit boring on the BMC–1000 was simply a

combination of older techniques called “Hale Interpolation”

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

touted as a “revolutionary” new process—a process also called

“orbit boring.” The parties hotly disputed whether shake

turning on the BMC–1000 was the same process as orbit

boring on the NX–76. SPM argued that Toshiba sold SPM

orbit boring but delivered Hale and Archimedes Interpolation.

Toshiba argued that orbit boring and shake turning were two

names for the same process, regardless of which machine was

involved.

In December 1997, SPM issued a purchase order for a

BMC–1000 that Toshiba had available for immediate delivery.

SPM's purchase order incorporated a proposal from Maruka

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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,

and stipulated that Toshiba would provide a five-year warranty

on “[o]rbit machining software, including support, updates and

revisions as they become available.” SPM also attached to the

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

a raw forging that SPM had already shipped to Japan, and

provide to SPM the data gathered during the machining

process;

*769 • Toshiba would provide a process cycle time, i.e., the

time it should take to machine a fluid end on the

BMC–1000;

• Toshiba would provide the technical support and training

needed to make a fluid end on the BMC–1000; and

• SPM's acceptance of the BMC–1000 was conditioned on

the successful production of a fluid end on the machine at

SPM's factory.

Toshiba accepted SPM's purchase order and down payment

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

perform orbit boring.

In late April 1998, Toshiba sent a programmer, Takeshi Ohki,

to install orbit boring software on the BMC–1000 at SPM's

factory. Ohki testified that this was the first time he had

attempted to combine Hale Interpolation and Archimedes

Interpolation to create the orbit boring function on a

BMC–1000. He was unable to make the software perform to

SPM's requirements and returned to Japan.

Soon after Ohki left SPM, Toshiba's Steve Oliphant sent a

memorandum to Tony Tani, Toshiba's assistant general

manager, raising several issues related to the BMC–1000.

Oliphant wrote:

SPM is a Beta site for this very unique [orbit boring] software.

Orbit Boring vs Hale Interpolation: There seems to be some

confusion as to the definition and capabilities of these two

programs. In the beginning we were told that the Orbit Boring

option was available and process descriptions were supplied

to the field. This was sold to SPM.... What further complicates

this definition issue is that Mr. Oki [sic] told [Maruka] that

Orbit and Hale were two different things and that the

BMC1000 was not capable of Orbit.

On May 8, 1998, SPM complained that the BMC–1000 did

not perform as expected and requested written confirmation

that the machine could produce fluid ends. Toshiba replied

that Ohki would return to Fort Worth later in May and again

attempt to install the orbit boring software. Ohki returned to

SPM on May 18, but still the BMC–1000 could not perform

internal contouring. Around the same time, SPM offered to

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

software solution was imminent.

Meanwhile, SPM ordered a second machine tool from Toshiba

in late July. This second tool, the BMC–800, was slightly

smaller than the BMC–1000 but had the same purported

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

paid the BMC–1000 balance.

Five days later, Toshiba sent SPM an “acceptance” of the

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. When SPM confronted Toshiba about these

statements, Toshiba dismissed them as a miscommunication.

Toshiba said it planned to showcase the orbit boring software

along with the new NX–76 at a Chicago tool show in

September. SPM would receive the software immediately after

the show, promised Toshiba.

SPM sent a representative to the Chicago tool show. Toshiba

did exhibit orbit boring on the new NX–76, but told SPM's

*770 representative that the NX–76 software would not be

available for the BMC–1000 until January.

SPM and Toshiba continued to wrangle over the BMC

performance issues, and especially the orbit boring software,

for another year. As late as May 13, 1999, Toshiba's Oliphant

sent a memorandum to SPM promising delivery of the orbit

boring software within two months. SPM, Maruka, and

Toshiba scheduled a meeting at SPM's factory for August

1999. At the meeting, Toshiba definitively announced that

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Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

SPM would not receive the orbit boring software.

From June 1998, when the BMC–1000 became operational at

SPM, until November 2001, SPM used the Toshiba machines

extensively to help make fluid ends. Although the lack of orbit

boring software made the Toshibas useless for internal

contouring, they could be used for rough machining. Using the

Toshiba machinesfor 15,000 hours in conjunction with 18,600

hours on other machines, SPM produced 344 fluid ends at the

average rate of 100 hours per fluid end—down from 115 hours

per fluid end before the Toshibas went online, but far longer

than the fifteen to fifty hours predicted by Toshiba.

When Toshiba announced that SPM would not receive the

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

first Goss went online in July 2000. A second Goss went

online in May 2001. In November 2001, SPM stopped using

the Toshiba machines altogether. SPM offered testimony at

trial that the Goss machines could produce a complete fluid

end in thirty-four hours.

In February 2000, SPM sued Toshiba for fraud, negligent

misrepresentation, breach of contract and breach of warranty.

1

Toshiba counterclaimed for the unpaid balance of the

BMC–800.

The case was tried to a jury. SPM claimed three broad

categories of damages: refund of the $898,200 SPM paid for

the two Toshiba machines; $969,945 in incidental expenses

for items such as pouring foundations for the Toshiba

machines and time spent designing tools for the Toshiba

machines; and $6,038,492 in lost profits.

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

contract claim, for which the jury awarded SPM $3,003,613

for each machine, for a total of $6,007,226. The issue of

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

million in attorney's fees through the date of judgment, plus

additional fees if Toshiba unsuccessfully appealed the trial

court's judgment. The trial court also found that SPM was

entitled to prejudgment interest beginning on the day SPM

filed suit through the date of judgment. Both parties appealed.

III. Discussion

A. Toshiba's Issues

1. Did SPM accept the machines as a matter of law?

A threshold question in this case, and key to several of

Toshiba's issues, is whether SPM accepted or rejected the

Toshiba machines. The jury found that SPM accepted but later

revoked its acceptance of the BMC–1000 and failed to find

that SPM accepted the BMC–800. In its second *771 issue,

Toshiba argues that there is no evidence to support the jury's

finding that SPM revoked its acceptance of the BMC–1000,

and there is conclusive evidence that SPM accepted the

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

revocation of acceptance as a matter of law. We disagree.

a. Standards of review

(1) No evidence

We review the jury's finding that SPM revoked its acceptance

of the BMC–1000 under the “no evidence” standard. In

determining a “no evidence” issue, we are to consider only the

evidence and inferences that tend to support the finding of the

disputed fact and disregard all evidence and inferences to the

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

(Tex.1996); In re King's Estate, 150 Tex. 662, 244 S.W.2d

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

evidence furnishes some reasonable basis for differing

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

253, 262 (Tex.2002). A “no evidence” issue may only be

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

fact is no more than a mere scintilla, or (4) the evidence

establishes conclusively the opposite of a vital fact. Uniroyal

Goodrich Tire Co. v. Martinez, 977 S.W.2d 328, 334

(Tex.1998), cert. denied, 526 U.S. 1040, 119 S.Ct. 1336, 143

L.Ed.2d 500 (1999).

(2) Matter of law

We review the jury's failure to find that SPM accepted the

BMC–800 under the “as a matter of law” standard. When 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.

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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

must be examined for evidence that supports the finding, while

ignoring all evidence to the contrary. Dow Chem. Co. v.

Francis, 46 S.W.3d 237, 241 (Tex.2001). Second, if there is

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

686, 690 (Tex.1989). The issue should be sustained only if the

contrary proposition is conclusively established. Dow Chem.,

46 S.W.3d at 241–42.

b. Analysis

[1] Where goods fail to conform to the contract, the buyer may

reject or accept the goods. Tex. Bus. & Com.Code Ann. §

2.601 (Vernon 1994). A buyer's rejection or acceptance of

nonconforming goods determines the remedies available to

him. Id. §§ 2.711, 2.714 (Vernon 1994); Southwestern Bell

Tel. Co. v. FDP Corp., 811 S.W.2d 572, 576 (Tex.1991) (op.

on reh'g); Paul Mueller Co. v. Alcon Labs., Inc. 993 S.W.2d

851, 855 (Tex.App.-Fort Worth 1999, no pet.).

A buyer accepts goods if he agrees to accept them despite their

nonconformity, fails to make an effective rejection, or does

any act inconsistent with the seller's ownership. Tex. Bus. &

Com.Code Ann. § 2.606 (Vernon 1994). Where a buyer

accepts goods with knowledge of a non-conformity, *772 the

buyer may not revoke acceptance unless the acceptance was

made on the reasonable assumption that the non-conformity

would be seasonably cured. Id. §§ 2.607(b), 2.608(a)(1)

(Vernon 1994). Where a buyer accepts goods without

knowledge of a non-conformity, the buyer may revoke its

acceptance if acceptance was reasonably induced either by the

difficulty of discovery before acceptance or by the seller's

assurances. Id. § 2.608(a)(2).

Rejection of goods must occur within a reasonable time after

their delivery. Id. § 2.602(a) (Vernon 1994). Likewise,

revocation of acceptance must occur a reasonable time after

the buyer discovers the grounds for revocation. Id. § 2.608(b).

Whether rejection or revocation occurred within a reasonable

time depends on the facts of a particular case.Id. § 1.205(a)

(Vernon Supp.2004–05) (providing that “[w]hether a time for

taking an action required by this title is reasonable depends on

the nature, purpose, and circumstances of the action.”);

Purnell v. Guar. Bank, 624 S.W.2d 357, 359

(Tex.App.-Dallas 1981, writ ref'd n.r.e.) (holding that whether

thirty-month delay precluded revocation of acceptance of

defective pleasure boat was a fact question); Don's Marine,

Inc. v. Haldeman, 557 S.W.2d 826, 829 (Tex.App.-Corpus

Christi 1977, writ ref'd n.r.e.).

After rejection or revocation of acceptance, any exercise of

ownership by the buyer with respect to the goods is wrongful

as against the seller. Tex. Bus. & Com.Code Ann. §

2.602(b)(1).

[2] As noted above, 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

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

a wrongful exercise of ownership under § 2.602(b)(1).

Toshiba cites several Texas and foreign cases to support its

argument. Generally, these cases stand for the proposition that

a buyer who exercises dominion and control over

nonconforming goods accepts those goods. See, e.g., Bacchus

Indus., Inc. v. Frontier Mech. Contractors, 36 S.W.3d 579,

585 (Tex.App.-El Paso 2000, no pet.) (holding that buyer who

made substantial repairs and modifications to air conditioning

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

available to buyer who, with full knowledge of defects, used

printing presses for a “long period of time” and never

attempted to reject them or revoke acceptance); Explorers

Motor Home Corp. v. Aldridge, 541 S.W.2d 851, 853–54

(Tex.App.-Beaumont 1976, writ ref'd n.r.e.) (holding that

buyers who traveled 14,000 miles in motor home over two

years did not effectively reject the motor home); Bowen v.

Young, 507 S.W.2d 600, 603–04 (Tex.App.-El Paso 1974, no

writ) (holding that buyer who moved into nonconforming

mobile home and converted its heater from electric to gas

accepted the home as a matter of law).

[3] [4] But the cases cited by Toshiba do not give a complete

answer to the question of whether “use equals acceptance”

under the UCC. Most courts have indicated that whether the

buyer's continued use of goods undoes a purported rejection

or revocation of acceptance depends upon whether the use was

reasonable. Anderson on the Uniform Commercial Code, §

2–608:281 (2004); Williston on Contracts, §§ 40:19, 40:30

(4th ed.). What constitutes reasonable use is a question of fact

to be decided under the circumstances of each case, but courts

generally hold that *773 using goods during the time when the

seller is promising or trying unsuccessfully to cure the

nonconformity will not adversely affect the buyer's rights.

Williston on Contracts, § 40:30; see Aluminum Line Prods.

Co. v. Rolls–Royce Motors, Inc., 98 Ohio App.3d 759, 649

N.E.2d 887, 894 (1994) (holding that buyer was not precluded

from revoking acceptance of automobile after three years and

15,000 miles of use when seller made repeated attempts to

repair the vehicle, and buyer's continued use after revocation

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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

Mfg., Inc., 37 F.3d 1253, 1258–59 (7th Cir.1994) (holding

seller's repeated promises to update software for headlight

testing apparatus justified buyer's use of apparatus during

two-year delay in revoking acceptance); Wilk Paving, Inc. v.

Southworth Milton, Inc., 162 Vt. 552, 649 A.2d 778, 782

(1994) (holding buyer's continued use of asphalt paving

machine after revocation of acceptance was reasonable where

the seller continued to assure buyer that seller could repair

machine); Four Sons Bakery, Inc. v. Dulman, 542 F.2d 829,

832 (10th Cir.1976) (holding seller's repeated assurances that

it would fix commercial oven justified continued use of oven

after revocation of acceptance). As the Seventh Circuit held in

North American Lighting, a “use equals acceptance” argument

comes dangerously close to suggesting a rule that would allow

sellers to ‘lock in’ purchasers of goods by promising them the

moon—only to bring them back to earth when they attempted

to revoke the acceptance that they were persuaded to give

because of their failure to fully understand a substantial defect.

North Am. Lighting, 37 F.3d at 1258–59.

[5] [6] Other factors relevant to a buyer's reasonable use of

nonconforming goods include the degree of economic

hardship the buyer would suffer if it discontinued using the

defective goods and the reasonableness of the buyer's use after

revocation as a method of mitigating damages. Liarikos v.

Mello, 418 Mass. 669, 639 N.E.2d 716, 719 (1994) (holding

that continued use of automobile after revocation of

acceptance was reasonable where buyer relied on car to run

her business). Use of nonconforming goods may be the most

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,

494 (1973) (holding two-year delay in revocation of

acceptance and extensive use by buyer of defective knitting

machines was reasonable, during which seller attempted to fix

the machines on many occasions); see Deere & Co. v.

Johnson, 271 F.3d 613, 619–20 (5th Cir.2001) (applying

Mississippi law and holding that farmer's continued use of

defective tractor after revoking acceptance was reasonable

because tractor was essential to farmer's work, replacement

was difficult to obtain, and farmer mitigated his damages by

using the tractor).

In our case, Toshiba agreed to provide the orbit boring

function with both BMC machines. SPM's president, Dan

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

Toshiba about the missing orbit boring software soon after the

machine arrived. According to Lowrance, Toshiba assured

SPM that its programmer would travel to SPM's factory “very

quickly” and install the software. Toshiba's programmer

attempted but failed to install the software in April 1998 and

again in May. Lowrance testified that after the programmer's

first attempt, Lowrance told Toshiba's assistant general

manager, Tony Tani, that SPM would return the BMC–1000

for a refund if Toshiba had any doubt about its ability to make

fluid ends. Chris Wall, SPM's director of manufacturing,

admitted that SPM accepted the BMC–1000 when it paid the

$742,500 balance due, but Lowrance testified that SPM paid

the balance only because Toshiba assured SPM that resolution

of the orbit boring problem was “right around the corner” and

refused to ship the BMC–800 otherwise.

Toshiba delivered the BMC–800 in September 1998.

Lowrance testified that Toshiba's Steve Oliphant told him that

SPM would receive the orbit boring software immediately

following the debut of the NX–76 in Chicago that same

month. Chris Wall testified that Oliphant told him on

September 18, 1998 that Toshiba was working on the orbit

boring software and would deliver it in January of the

following year. On May 13, 1999, Oliphant sent a memo to

SPM's George Reeve in which he stated that Toshiba would

deliver orbit boring software within two months. Gene Burkes,

general manager of Maruka U.S.A., testified that he called

Oliphant on SPM's behalf at least a dozen times between

January and May 1999. According to Burkes, Oliphant “kept

saying the software is coming.” In August 1999, Toshiba

announced that it would not deliver orbit boring software to

SPM.

Ray Gilbert, SPM's vice president of finance, testified that the

BMC machines were worthless to SPM without the orbit

boring function. Nevertheless, as detailed later in this opinion

under the issues of damages and mitigation, SPM cut the time

needed to make a fluid end from 115 hours to 100 hours by

making what use it could of the BMC machines, though the

production time was far longer than the fifteen to fifty hours

SPM expected to achieve. It is undisputed that SPM used the

BMC machines for 17,000 hours.

We 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

not complain of lack of notice, so we will not dwell on this

point.

We turn to the question of SPM's revocation of acceptance of

the BMC–1000 under section 2.608. The non-conformity

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identified by SPM was the lack of the orbit boring function.

Gilbert testified that the lack of orbit boring substantially

impaired the BMC–1000's value to SPM. The jury could

reasonably conclude that SPM did not discover the

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's many assurances that it would deliver the orbit

boring software. Both Toshiba's assurances and SPM's use of

the BMC–1000 to mitigate its damages until it could obtain

replacements tend to support the conclusion that SPM's

extensive use of the BMC–1000 was reasonable, before and

after SPM revoked its acceptance. Moreover, Chris Wall

testified that replacement machines suitable to SPM's needs

were not easy to obtain, and the replacement machines *775

SPM ultimately bought had a long lead time. Whether SPM's

use of the BMC–1000 was reasonable was a fact question for

the jury to decide. The evidence supports the conclusion that

SPM's use was reasonable. We hold that there was more than

a scintilla of evidence to support the jury's finding that SPM

revoked its acceptance of the BMC–1000.

With 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

obtaining replacement machines—tend to justify SPM's use of,

and delay in rejecting, the BMC–800. We hold that there is

more than a scintilla of evidence to support the jury's failure

to find that SPM accepted the BMC–800.

We overrule the part of Toshiba's second issue that concerns

acceptance of the BMC machines (the same issue raises other

complaints, which we address in the next section of this

opinion). This conclusion is the starting point for our analysis

of Toshiba's other issues.

2. Did Toshiba breach the contracts?

Also in its second issue, Toshiba contends that even if SPM

rejected the machines, there is no evidence that Toshiba

breached sales contracts. Toshiba argues that its failure to

deliver orbit boring software cannot give rise to a breach of

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

SPM and therefore could not give rise to a breach of contract

claim.

a. Was Addendum A part of the contract?

[7] The jury found that Toshiba and SPM intended to “bind

themselves to an agreement regarding the BMC–1000 that

included all provisions contained in Addendum A” to SPM's

purchase order. Toshiba argues that there is no evidence to

support the jury's finding.

Toshiba relies on section 2.207 of the Texas Business and

Commerce Code. Tex. Bus. & Com.Code Ann. § 2.207

(Vernon 1994). Section 2.207, captioned “Additional Terms

in Acceptance or Confirmation” and often referred to as the

“battle of the forms” section of the UCC, provides in part as

follows:

(a) A definite and seasonable expression of acceptance or a

written confirmation which is sent within a reasonable time

operates as an acceptance even though it states terms

additional to or different from those offered or agreed upon,

unless acceptance is expressly made conditional on assent to

the additional or different terms.

(b) The additional terms are to be construed as proposals for

addition to the contract. Between merchants such terms

become part of the contract unless:

(1) the offer expressly limits acceptance to the terms of the

offer;

(2) they materially alter it; or

(3) notification of objection to them has already been given or

is given within a reasonable time after notice of them is

received.

(c) Conduct by both parties which recognizes the existence of

a contract is sufficient to establish a contract for sale although

the writings of the parties do not otherwise establish a

contract. In such case the terms of the particular contract

consist of those terms on which the writings of the parties

agree, together with any supplementary terms incorporated

*776 under any other provisions of this title.

Significantly, Toshiba does not argue that Maruka's December

16, 1997 proposal to SPM was an offer. Nor does Toshiba

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,

the writings of the parties do not establish a contract.

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Toshiba's argument fails because SPM's purchase order was an

offer to buy the BMC–1000. The “Terms and Conditions of

Purchase” recited on the back of the purchase order state that

Toshiba's shipment of the BMC–1000 constitutes acceptance

of the purchase order. Therefore, Toshiba accepted the

purchase order when it shipped the BMC–1000 to SPM. The

“Terms and Conditions of Purchase” also state that acceptance

of the purchase order is acceptance of all terms on the front

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

the entire agreement between the parties.” (Emphasis added.)

The front of the purchase order specifically refers to

Addendum A. George Reeve, the SPM employee who

generated the purchase order and Addendum A, testified that

he discussed the specific terms of the addendum with

Toshiba's Oliphant and Maruka's Davenport during a

three-hour phone conference on December 9, 1998 and that

Toshiba never objected to the Addendum A terms after it

received the purchase order. We hold that SPM adduced more

than a scintilla of evidence to support the jury's finding that

Addendum A was part of the contract.

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

subissue, Toshiba claims that its delivery of the BMC

machines to SPM precludes a breach of contract claim, even

if the machines were missing critical features. We disagree.

[9] [10] The remedies available to a buyer under the UCC

depend on whether the buyer accepts or rejects the goods in

question. See Tex. Bus. & Com.Code Ann. §§ 2.711, 2.714.

If a buyer rejects goods (or revokes acceptance), the buyer is

entitled to the remedies set forth in sections 2.711 and 2.713.

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

deliver, delivery of goods is a necessary predicate to

acceptance or rejection; but delivery by itself does not

determine the buyer's remedies. Assuming the seller delivers

something, the buyer's acceptance or rejection determines the

buyer's remedies.

It is undisputed that Toshiba delivered the BMC machines to

SPM. The jury found that SPM rejected the BMC–800 and

revoked its acceptance of the BMC–1000. The question, then,

is whether SPM produced any evidence to support the jury's

finding that Toshiba breached the contracts.

[11] A seller breaches a contract if its delivery fails in any

respect to conform to the contract. Id. § 2.601. This is

sometimes referred to as the “perfect tender” rule. Tex. Imps.

v. Allday, 649 S.W.2d 730, 737 (Tex.App.-Tyler 1983, writ

ref'd n.r.e.). Conformity does not mean substantial

performance; it means complete performance. Printing Ctr.,

Inc. v. Supermind Publ'g Co., 669 S.W.2d 779, 783

(Tex.App.-Houston [14th Dist.] 1984, no writ).

*777 SPM identifies four specific contract items that Toshiba

failed to deliver: the orbit boring software, tool lists and part

programs, process cycle time studies, and a test run-off of a

fluid end. SPM offered evidence that Toshiba failed to deliver

these items. Except for the orbit boring software, Toshiba does

not dispute its failure to deliver these items. Therefore, SPM

produced at least some evidence to show that Toshiba's

delivery did not conform to the contract in all respects.

We hold that Toshiba's delivery of the BMC machines does

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. We overrule Toshiba's second issue.

3. Damages

Toshiba's first, fourth, sixth, seventh, and eleventh issues

complain about various aspects of SPM's damages.

a. Is there any evidence to support SPM's lost profits?

[12] In issue 7a,

3

 Toshiba complains that there is no evidence

to support SPM's claim of lost profits. In its closely-related

issue 4, Toshiba complains that the trial court erred by

admitting the testimony of SPM's damage witness, Ray

Gilbert, on the question of lost profit. We disagree.

[13] [14] [15] [16] [17] [18] [19] A party seeking to recover

lost profits must prove the loss through competent evidence

with reasonable certainty. Szczepanik v. First Southern Trust

Co., 883 S.W.2d 648, 649 (Tex.1994); VingCard A.S. v.

Merrimac Hospitality Sys., Inc., 59 S.W.3d 847, 863

(Tex.App.-Fort Worth 2001, pet. denied). While this test is a

flexible one in order to accommodate the myriad

circumstances in which claims for lost profits arise, at a

minimum, opinions or estimates of lost profits must be based

on objective facts, figures, or data from which the amount of

lost profits can be ascertained.Tex. Instruments, Inc. v.

Teletron Energy Mgmt., Inc., 877 S.W.2d 276, 279

(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

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speculative or a mere hope for success, as from an activity

dependent on uncertain or changing market conditions, on

chancy business opportunities, or on promotion of untested

products or entry into unknown or unproven enterprises.

Teletron Energy Mgmt., Inc., 877 S.W.2d at 279–80;

VingCard A.S., 59 S.W.3d at 863. The mere assertion that

contracts were lost does not demonstrate a reasonably certain

objective determination of lost profits. Holt Atherton Indus.,

Inc. v. Heine, 835 S.W.2d 80, 85 (Tex.1992). Whether

evidence is speculative or reasonably certain is a factual issue

within the exclusive province of the jury to determine.

VingCard A.S., 59 S.W.3d at 863. Reasonably certain lost

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

client base, (5) the sales force, (6) the marketing plan, and (7)

the company's track record of sales. Id. at 864. For example,

when a business is already established and making a profit at

the time the contract was breached or the tort committed,

pre-existing profit, together with other facts and

circumstances, may indicate with reasonable certainty the

amount of profits lost. Teletron Energy Mgmt., Inc., 877

S.W.2d at 279; *778 Anthony Equip. Corp. v. Irwin Steel

Erectors, Inc., 115 S.W.3d 191, 204 (Tex.App.-Dallas 2003,

pet. dism'd).

Ray Gilbert, SPM's vice president of finance, was SPM's sole

witness on damages. To begin our analysis, we will summarize

Gilbert's testimony on the question of SPM's lost profits.

Gilbert broke SPM's lost profits into three components. First

was the increased cost of producing the 344 fluid ends SPM

made in part on the Toshiba machines. Gilbert testified that it

took SPM 34,025 hours to produce the 344 fluid ends. From

that he subtracted 12,040 hours, the time it would have taken

to produce 344 fluid ends if the Toshiba machines could

produce a fluid end in thirty-five hours. Gilbert then multiplied

the remainder, 21,985 hours, by SPM's “shop rate” of $150

per hour, for a total of $3,297,750. Gilbert testified that $150

per hour was the industry standard shop rate; he also produced

calculations to show that the shop rate was reasonably accurate

for SPM.

Gilbert's second category of lost profits stemmed from the

sales of 296 fluid ends SPM lost because it quoted prices too

high or delivery times too long to suit its customers. Gilbert

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

it in 35 hours, we were up closer to 100 hours.” He personally

contacted customers who cancelled orders or rejected SPM

quotes to ascertain whether the cancellation or rejection was

due to SPM's price or delivery time. Gilbert then multiplied

the gross sales lost because of price or delivery time by SPM's

28.68% profit margin to compute SPM's net lost profits.

Gilbert derived the profit margin from SPM's consolidated

financial statements for the years 1994 through 2001. While

Gilbert admitted that he did not know precisely what price or

delivery time SPM would have had to quote to make the sales

in question, he opined that SPM would have made the sales if

the Toshiba machines could make a fluid end in thirty-five

hours. He attributed a total of $2,362,821 in lost profits to lost

fluid end sales.

Gilbert's third category of lost profit arose from lost sales of

flow control products—valves, piping, and connections—that

SPM would have sold as part of its lost fluid end sales. Gilbert

examined SPM's sales history to determine which customers

typically purchased flow control products along with pumps

and fluid ends. He testified that the fluid end sales SPM lost to

those customers would have generated additional sales of

$1,317,022 in flow control products. Gilbert multiplied the

lost flow control sales by SPM's 28.68 percent profit margin

for a lost net profit of $377,721.

Finally, Gilbert testified that SPM had the same customer base

for decades. SPM sold the same product lines “for some time,”

and those product lines had always been profitable. He

testified that SPM has turned a profit since at least 1991, the

year Gilbert joined the company.

[20] [21] [22] Toshiba challenges Gilbert's testimony on three

grounds. First, Toshiba argues that Gilbert did not qualify as

an expert. A witness is qualified to testify as an expert if he

has the appropriate knowledge, skill, experience, training, or

education. Roberts v. Williamson, 111 S.W.3d 113, 121

(Tex.2003); Tex.R. Evid. 702. The decision to admit expert

testimony is within the trial court's discretion and will be

disturbed on appeal only if there has been an abuse of that

discretion. Gammill v. Jack Williams Chevrolet, Inc., 972

S.W.2d 713, 718–19 (Tex.1998). In this case, the specific

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

knowledge that would assist the jury in understanding that

issue. See Helena Chem. Co. v. Wilkins, 47 S.W.3d 486, 500

(Tex.2001).

Gilbert earned a BBA in accounting in 1968. From 1968 to

1991 he worked as an accountant, controller, and vice

president of sales and finance for several companies. In 1991,

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Gilbert went to work for SPM, first as vice-president and

general manager with full responsibility for SPM's

manufacturing, sales, marketing, and accounting, then

gradually narrowing his focus to sales and accounting as

SPM's vice president of finance. He testified that he had more

than thirty years' experience managing the financial and

accounting functions of companies engaged in the manufacture

and distribution of various products. After reviewing Gilbert's

testimony about his education, work history, experience, and

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.

[23] Second, Toshiba argues that the trial court erred by

admitting Gilbert's testimony about lost sales because it was

rife with inadmissible hearsay. Gilbert testified that he

personally contacted SPM customers to ascertain why certain

sales were lost or certain orders cancelled. Toshiba made

timely hearsay objections to Gilbert's testimony.

We review a trial court's rulings in admitting or excluding

evidence under an abuse of discretion standard. Nat'l Liab. &

Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527 (Tex.2000). We

must uphold the trial court's evidentiary ruling if there is any

legitimate basis in the record for the ruling. Owens–Corning

Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex.1998).

An expert may rely on inadmissible facts or data to form an

opinion or inference if the facts or data are of a type

reasonably relied upon by expertsin the particular field.Tex.R.

Evid. 703; In re A.J.L., 136 S.W.3d 293, 301 (Tex.App.-Fort

Worth 2004, no pet.). We cannot think of a more appropriate

method to determine why sales were lost than to ask the

customer. We hold that the trial court did not abuse its

discretion by admitting this testimony.

[24] Finally, Toshiba arguesthat Gilbert's testimony about lost

sales was purely speculative because Gilbert failed to

determine what price or delivery time would have induced

SPM's customers to buy fluid ends from SPM. We find no

case law to support Toshiba's argument. Measuring lost profits

is an inherently speculative undertaking. Pena v. Ludwig, 766

S.W.2d 298, 301 (Tex.App.-Waco1989, no writ). In Formosa

Plastics Corp. USA v. Presidio Engineers and Contractors,

Inc., the Supreme Court of Texas held that a hypothetical bid

for a construction project was “entirely speculative” and

legally insufficient to support an award of lost profits because

there was no evidence that the bid would have been accepted.

960 S.W.2d 41, 50 (Tex.1997). But our case is readily

distinguishable from Formosa Plastics. In that case, there was

evidence that two of the three other bids on the same project

were lower than the claimant's hypothetical bid; thus, the

alleged lost profits “were based on an entirely hypothetical,

speculative bargain that was never struck and would not have

been consummated.” Id. There is no such evidence in our case.

Moreover, the lost sales to which Gilbert testified concerned

the loss of sales of proven products to existing customers. We

hold that Gilbert's testimony regarding lost sales was not so

speculative as to be legally insufficient.

*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

$6,007,226 on its breach of contract claims. Even if we

assume that the jury based its award solely on SPM's lost

profits, we hold that Gilbert's testimony presented more than

a scintilla of evidence to support the jury's verdict. Gilbert's

testimony established SPM's lost profits to a reasonable

certainty. We overrule Toshiba's issues 4 and 7a.

b. Did SPM's damage model result in a double recovery?

[25] In its sixth issue, Toshiba argues that two of SPM's

damage elements—lost profits due to increased production

costs and lost profits due to lost sales—overlap, and to allow

SPM to recover both results in an impermissible double

recovery. We disagree.

Toshiba argues, and we agree, that both of Gilbert's lost profit

calculations hinge on the speed of the Toshiba machines. As

detailed above, SPM's Gilbert testified that SPM incurred

more costs and lost profits on the fluid ends actually produced

because the Toshiba machines were slower than expected.

Likewise, SPM lost sales because it quoted higher prices and

longer delivery times to its customers based on the slower than

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

additional sales. But we disagree with Toshiba that the fact

that both damage elements arise from the speed of the Toshiba

machines necessarily means that the elements overlap.

To show that the elements overlap, Toshiba argues that the

extra hours needed to make the fluid ends actually produced

are the same hours SPM would have used to make additional

fluid ends for additional sales. This may be true, but it misses

the point. Toshiba confuses the issues of time and profit. The

hours might be the same, but the dollars are different. Under

Gilbert's analysis, if the Toshiba machines had performed as

expected, SPM would have saved time and realized more

profit on each of the fluid ends actually produced. With the

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time saved, SPM could also have made and sold more fluid

ends and made additional profit. The time used to make fluid

ends is the same, but the lost profits are separate and distinct.

We overrule Toshiba's issue six.

c. Did the trial court err by submitting broad-form

damage questions?

[26] In its eleventh issue, Toshiba argues that the trial court

erred in failing to submit damage questions that provided

separate blanks for each element of SPM's damage model. We

disagree.

[27] Toshiba's complaint about the damage submission turns

on the proposition that a trial court commits reversible error

where it submits a broad-form damage issue that incorporates

an element of damages on which there is no evidence. Harris

County v. Smith, 96 S.W.3d 230, 234 (Tex.2002). Such a

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

element of damage lacking evidentiary support.

Toshiba's argument fails because we have already concluded

that there is legally sufficient evidence to support the jury's

award, even if the entire award consists of lost profits. We

overrule Toshiba's eleventh issue.

*781 d. May SPM recover both its purchase money and

consequential damages?

In its first issue, Toshiba argues that a party claiming breach

of contract may not recover both the purchase money paid

under the contract—what Toshiba calls “rescission

damages”—and consequential damages. But SPM's purchase

money was not submitted to the jury as an element of SPM's

contract damages. Therefore, Toshiba's first issue is moot, and

we need not consider it. See Tex.R.App. P. 47.1.

4. Did SPM fail to mitigate its damages?

In issue 7b, Toshiba argues that the trial court erred by

awarding damages that SPM could have avoided by cover or

mitigation. Toshiba claims that SPM did nothing to mitigate

its losses and therefore is barred from recovering any

consequential damages.

[28] [29] A buyer may recover consequential damages that

could not reasonably be prevented by cover. Tex. Bus. &

Com.Code Ann. § 2.715(b)(1) (Vernon 1994). After a breach

by the seller, the buyer may “cover” by making, in good faith

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

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

the method of cover used was not the cheapest or most

effective.” Id. The burden of establishing that damages could

not have been reasonably prevented by cover is on the

plaintiff. Wilson v. Hays, 544 S.W.2d 833, 836

(Tex.Civ.App.-Waco 1976, writ ref'd n.r.e.).

[30] [31] Mitigation of damages is a rule requiring the injured

party to use reasonable diligence to minimize his damages.

LTV Aerospace Corp. v. Bateman, 492 S.W.2d 703, 709

(Tex.Civ.App.-Tyler 1973, writ ref'd n.r.e.). Though

mitigation is similar to cover, the burden of disproving

mitigation lies with the defendant.

The trial court submitted the issues of cover and mitigation to

the jury as limiting instructions on the breach of contract

damage questions, as follows:

Do not include in your answers any loss you

find SPM could have avoided by the exercise

of reasonable care. Do not include in your

answer any loss that occurred after the date

that replacement machining centers could have

been reasonably obtained and installed by

SPM.

Toshiba's argument on cover amounts to a

no-evidence issue; its argument on mitigation is a

conclusive evidence issue. Under either standard, we

must affirm if there is more than a scintilla of

evidence in SPM's favor.

[32] With regard to cover, SPM produced evidence

at trial to show that it purchased two Goss Trevisan

machines as cover when it became clear that the

Toshiba machines would not perform asrepresented.

Once both Goss Trevisan machines were fully

operational, SPM stopped using the Toshiba

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.

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[33] With regard to mitigation, SPM produced

evidence to show that it limited its damages by using

the Toshiba machines to the extent possible.

Although the Toshiba machines did not perform as

expected, they cut the time it took SPM to make a

fluid end from 115 hours to 100 hours. This fifteen

hour savings, when *782 multiplied by SPM's shop

rate of $150 per hour, yielded a reduction in SPM's

damages of $2,250 per fluid end. Gilbert's damage

computation properly accounted for this savings.

Toshiba argues that by using the Toshiba machines,

SPM aggravated its damages, not mitigated them.

Toshiba reasons that SPM's damage model

multiplied the number of hours SPM used the

Toshiba machines by the shop rate; thus every hour

SPM used the Toshiba machines increased SPM's

damages by $150. But SPM claimed no such thing.

SPM claimed as damages the difference between

100 hours—the time it actually took a make a fluid

end with the help of the Toshiba machines—and

thirty-five hours—the time Toshiba said it would

take the machines to make a fluid end—and

multiplied the difference by SPM's $150 per hour

shop rate. If SPM had not used the Toshiba

machines, its damages would have been the

difference between 115 hours and thirty-five hours,

multiplied by the $150 per hour shop rate. Thus, by

using the Toshiba machines, SPM mitigated its

damages by $2,250—15 hours times the shop

rate—for every fluid end produced.

We hold that SPM presented some evidence on the

question of cover and that Toshiba failed to prove

conclusively that SPM did not mitigate its damages.

We overrule Toshiba's issue 7b.

5. Did the trial court err in awarding attorney's

fees to SPM?

In its eighth issue, Toshiba complains that the trial

court erred by awarding attorney's fees to SPM.

Toshiba's complaint has two components: First, that

SPM is not entitled to attorney's fees because it did

not prevail on its breach of contract claim; and

second, that the trial court impermissibly enhanced

SPM's “lodestar” attorney's fees.

[34] [35] [36] A party may recover reasonable

attorney's fees for a valid breach of contract claim.

Tex. Civ. Prac. & Rem.Code Ann. § 38.001 (Vernon

1997). Texas courts weigh the eight factors recited

in rule 1.04 of the rules of professional conduct to

determine the reasonableness and necessity of

attorney's fees. Tex. Disciplinary R. Prof'l Conduct

1.04(b), reprinted in Tex. Gov't Code Ann., tit. 2,

subtit. G, app. A (Vernon 2005) (Tex. State Bar R.

art. X § 9); Miller v. Kennedy & Minshew, Prof.

Corp., 142 S.W.3d 325, 336–37 (Tex.App.-Fort

Worth 2003, pet. denied). Those factors are (1) the

time and labor required, the novelty and difficulty of

the questions involved, and the skill required to

perform the legal services properly; (2) the

likelihood that the acceptance of the particular

employment will preclude other employment by the

lawyer; (3) the fee customarily charged in the

locality for similar legal services; (4) the amount

involved and the results obtained; (5) the time

limitations imposed by the client or by the

circumstances; (6) the nature and length of the

professional relationship with the client; (7) the

experience, reputation, and ability of the lawyer or

lawyers performing the services; and (8) whether the

fee is fixed or contingent on results obtained or

uncertainty of collection before the legal services

have been rendered. Miller, 142 S.W.3d at 336–37.

One method of computing a reasonable fee is the

“lodestar” method, or “the product of reasonable

hours times a reasonable rate.” City of Burlington v.

Dague, 505 U.S. 557, 559, 112 S.Ct. 2638, 2640,

120 L.Ed.2d 449 (1992). We review a court-ordered

award of attorney's fees under the abuse of discretion

standard. Ridge Oil Co., Inc. v. Guinn Invs., Inc.,

148 S.W.3d 143, 163 (Tex.2004).

[37] In this case, the issue of attorney's fees was

submitted to the trial court, *783 rather than the jury,

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

consisted of three elements. First, SPM paid Searcy's

firm a flat fee of $150,000 up front. Second, SPM

agreed to pay Searcy's firm 5% of SPM's ultimate

recovery, if any. Third, SPM agreed that Searcy's

firm could keep any attorney's fees awarded by the

trial court. SPM argues that this third provision

contemplates a fee higher than the flat $150,000 plus

5%, contingent upon whether the trial court awarded

attorney's fees.

Searcy testified that the services his firm rendered to

SPM had a lodestar value of $667,114. He then

testified that a reasonable fee would be $1.5 million.

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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

value, Searcy testified at length about the rule 1.04

elements. Mostsignificantly, Searcy testified that the

risk his firm took of losing the case and receiving

nothing over its $150,000 base fee justified the $1.5

million fee. He also testified that the lodestar value

would represent a reasonable fee if SPM had paid

his firm on a monthly basis; but since his firm had to

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

the jury's verdict—significantly less than the

30%–50% typically charged by Tarrant County

attorneys in contingent fee cases.

The trial court made findings of fact and conclusions

of law that specifically took into account the rule

1.04 factors. The trial court found that the following

attorney's fees were reasonable: $1.5 million through

the date of judgment, plus $200,000 if Toshiba is

unsuccessful in this appeal, plus $35,000 if Toshiba

files a petition for review with the Supreme Court of

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

these fees into its judgment.

Toshiba lodges two complaints about SPM's

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.

We have already concluded that SPM may recover

for breach of contract; therefore, SPM may also

recover its reasonable attorney's fees. See Tex. Civ.

Prac. & Rem.Code Ann. § 38.001.

[38] Second, Toshiba argues that the trial court erred

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,

Inc. v. JMB/Houston Centers Partners Ltd. P'ship,

41 S.W.3d 270 (Tex.App.-Houston [14th Dist.]

2001, no pet.), rev'd on other grounds, 146 S.W.3d

79 (Tex.2004). The question in Dague was whether

the attorney's fees shifting provisions of the federal

Solid Waste Disposal Act and Clean Water Act

permitted “enhancement” of lodestar attorney's fees

where the attorney's fees were contingent. Dague at

559, 112 S.Ct. at 2639. The Supreme Court held that

such enhancement was not permitted under the

statutes in question. Id. at 567, 112 S.Ct. at 2648.

Since this case involves neither of those statutes,

Dague offers little guidance and imposes no

restrictions here. Moreover, Texas courts

consistently allow the use of a multiplier based upon

the contingent nature of a fee under Texas statutes

allowing recovery of attorney's fees. Dillard Dept.

Stores, Inc. v. Gonzales, 72 S.W.3d 398, 413

(Tex.App.-El Paso 2002, pet. denied).

Nor is Toshiba's argument supported by PPG

Industries. In that DTPA case, the trial court

awarded a “bonus” of $300,000 on top of the

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

obtained as a basis for awarding the bonus against

the defendant. Id. But the court went on to affirm the

bonus because there was some evidence, besides the

result obtained, to show that the attorney's fee,

including the bonus, was reasonable. Id. The court

concluded that the trial court had not abused its

discretion in awarding the bonus. Id.

In our case, as in PPG Industries, there is some

evidence that the trial court's award of attorney's fees

to SPM is reasonable. We hold that the trial court

did not abuse its discretion by awarding those fees to

SPM. We overrule Toshiba's eighth issue.

6. Did the trial court err by failing to submit

Toshiba's counterclaim to the jury?

[39] In its ninth and tenth issues, Toshiba argues that

the trial court erred by failing to submit Toshiba's

counterclaim to the jury and failing to direct the

verdict on the counterclaim. Toshiba sued SPM for

the unpaid balance of the BMC–800. The amount of

the unpaid balance, $658,800, was not disputed.

A buyer must pay at the contract rate for any goods

accepted. Tex. Bus. & Com.Code Ann. § 2.607(a).

Toshiba argues that it was entitled to a directed

verdict on its counterclaim because SPM accepted

the BMC–800 as a matter of law. But the jury failed

to find that SPM accepted the BMC–800, and we

have already concluded that Toshiba failed to prove

acceptance as a matter of law. Thus, Toshiba was not

entitled to a directed verdict.

Nor did the trial court err by refusing to submit

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Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

Toshiba's counterclaim to the jury. Since the amount

of the counterclaim was undisputed, the only

question for the jury to decide was whether SPM

accepted the BMC–800. If the jury had found that

SPM accepted the machine and did not revoke its

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,

SPM is not liable for the unpaid balance.

We overrule Toshiba's ninth and tenth issues.

7. SPM's non-contract claims

In its third and fifth issues, Toshiba argues that the

trial court erred by submitting SPM's breach of

warranty, fraud, and negligent misrepresentation

claims to the jury. Because we affirm the judgment

on SPM's breach of contract claims, we need not

consider these two issues. See Tex.R.App. P. 47.1.

B. SPM's Issue: When did prejudgment interest

begin to accrue?

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

29, 2000, the date SPM filed suit. SPM contends that

prejudgment interest began to accrue on May 3,

1999, 180 days after SPM sent Toshiba what SPM

claims was notice of its claims. The difference is

significant; using the earlier date yields an additional

$493,000 in prejudgment interest.

Prejudgment interest accrues on the amount of a

judgment during a period that begins on the earlier

of the 180th day after the date a defendant receives

written notice of a claim against it, or the date the

suit is filed. Tex. Fin.Code Ann. § 304.104 (Vernon

Supp.2004–05). Although section 304.101 states that

“[t]his subchapter applies only to a wrongful death,

personal injury, or property damage case,” the

Supreme Court of Texas has extended the notice

provision of section 304.104 to all claims. Id. §

304.101; Johnson & Higgins *785 of Tex., Inc. v.

Kenneco Energy, Inc., 962 S.W.2d 507, 531

(Tex.1998).

[40] [41] A “claim” under section 304.104 is a

demand for compensation or an assertion of a right

to be paid. MCN Energy Enters., Inc. v. Omagro de

Colombia, L.D.C., 98 S.W.3d 766, 773

(Tex.App.-Fort Worth 2003, pet. denied). A claim

need not demand an exact amount or list every

element of damage. Bevers v. Soule, 909 S.W.2d

599, 603 (Tex.App.-Fort Worth 1995, no writ).

1. Standard of review

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

a question of law that an appellate court must review

de novo.” 98 S.W.3d at 773. We cited as authority

for that proposition Johnson v. City of Fort Worth,

774 S.W.2d 653, 655–56 (Tex.1989). Johnson did

not concern prejudgment interest; instead, it stands

for the general proposition that “matters of statutory

construction are questions of law for the court to

decide rather than issues of fact.” Id. at 656. Implicit

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

novo. See, e.g., Graves v. Alders, 132 S.W.3d 12, 17

(Tex.App.-Beaumont 2004, pet. denied).

On the other hand, we held that “[a] trial court's

award of prejudgment interest is reviewed under an

abuse of discretion standard” in Manufacturers Auto

Leasing, Inc. v. Autoflex Leasing, Inc., 139 S.W.3d

342, 348 (Tex.App.-Fort Worth 2004, pet. denied).

Our sister courts generally hold the same.

4

[42] The San Antonio Court of Appeals described

the standard of review this way:

We review a trial court's award of prejudgment

interest under the abuse of discretion standard.

[Citation omitted.] Under this standard, we will not

disturb a trial court's findings on factual issues unless

the court reasonably could have reached only one

decision and it failed to do so. Walker v. Packer, 827

S.W.2d 833, 839–40 (Tex.1992). However, “a trial

court has no discretion in determining what the law

is or applying the law to the facts.” Id. at 840.

J.C. Penney Life Ins. Co. v. Heinrich, 32 S.W.3d

280, 289 (Tex.App.-San Antonio 2000, pet. denied).

We conclude that Heinrich correctly articulates the

general standard for reviewing an award of

prejudgment interest. The abuse of discretion

standard applies to the trial court's factual findings as

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Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

they relate to prejudgment interest; but the de novo

standard applies to the trial court's application of the

law to the facts.

In the case before us, the trial court's award of

prejudgment interest does not hinge on any factual

finding. Instead, the issue turns on the interpretation

of a single letter from SPM to Toshiba. The

existence and contents of the letter are not in dispute.

The question is whether the letter constituted notice

of SPM's claims as a *786 matter of law. Therefore,

as a practical matter, our review of the prejudgment

interest issue in this case is de novo.

2. Facts and analysis

[43] On November 4, 1998, SPM sent a letter to the

president of Toshiba Machine Co., Ltd. in Japan.

5

SPM complained that the BMC machines

will not perform to the specifications in the machine

literature or as represented by Toshiba.... [W]e are

concerned that the machines will never perform

consistently to Toshiba's specifications and SPM's

contract requirements.

The letter summarized twenty-one complaints about

the BMC machines and Toshiba's earlier responses

to those complaints. SPM stated that it had incurred

damages of $998,250 and continued to incur

damages at the rate of $5,775 for each day the

machines did not perform. SPM concluded its letter

with these words:

SPM is prepared to litigate the issues if

necessary. However, SPM prefers to resolve

the issues if the machines can perform to

specification and contract requirements. If this

is not attainable, SPM prefers to return the

machines to Toshiba, with Toshiba to absorb

SPM's costs-to-date.

SPM contends that this letter was sufficient notice of

its claims to trigger accrual of prejudgment interest

180 days later. Toshiba responds that the letter did

not give notice of a claim because it did not make a

demand for payment or assert a right to be paid.

We look to similar cases for guidance. In Bevers, we

held that a signed medical authorization form,

coupled with a letter asking an insurance company to

“properly consider [plaintiff's] injury claim,”

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,

“[t]his information is to be used for purposes of

evaluating and handling my claim for injury.” K

Mart Corp. v. Rhyne, 932 S.W.2d 140, 146

(Tex.App.-Texarkana 1996, no writ). Likewise, the

Austin court held that a request from a plaintiff to a

defendant's insurance company asking the company

to pay certain medical bills, and inquiring when he

would receive his next lost wages check, was a

“claim” for purposes of prejudgment interest.

Robinson v. Brice, 894 S.W.2d 525, 529

(Tex.App.-Austin 1995, writ denied). More recently,

the Beaumont court concluded that letters requesting

reimbursement for medical treatment constituted

written notice of a claim. Brookshire Grocery Co.,

99 S.W.3d at 825.

There is a key distinction between those cases and

the case now before us. In each of those cases, the

claims asserted by the writings in question were

certain and unconditional. The writings did not urge

the recipients to avoid a contingent, future liability,

but to accept an accrued, existing liability. SPM's

letter does just the opposite. SPM urges Toshiba to

avoid a future claim by curing the defects in the

BMC machines. SPM does not demand payment or

assert a right to be paid. Instead, SPM suggests that

it will assert a claim and demand payment in the

future if Toshiba cannot make its machines perform

to specification.

We hold that SPM's November 4, 1998 letter did not

constitute notice of a claim as a matter of law. The

trial court properly *787 computed prejudgment

interest from the date SPM filed suit. We overrule

SPM's sole issue.

IV. Conclusion

We overrule Toshiba's issues two, four, and six

through eleven. We do not reach Toshiba's issues

one, three, and five. We overrule SPM's sole issue.

We therefore affirm the trial court's judgment in all

respects. See Tex.R.App. P. 43.2(a).

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 23
Toshiba Machine Co., America v. SPM Flow Control, Inc., 180 S.W.3d 761 (2005)

Footnotes

1 Toshiba sued SPM in Illinois for the unpaid balance due on the BMC–800 in November 1999. The Illinois trial court dismissed that

suit for lack of jurisdiction.

2 Section 1.103 of the Texas Business and Commerce Code states that the Code should be liberally construed “to make uniform the

law among various jurisdictions.” Tex. Bus. & Com.Code Ann. § 1.103(a)(3) (Vernon 1994). Section 311.028 of the Texas

Government Code provides that “[a] uniform act ... shall be construed ... to make uniform the law of those states that enact it.” Tex.

Gov't Code Ann. § 311.028 (Vernon 2005). Thus, in determining and applying the Texas version of the Uniform Commercial Code,

we may consider and apply pertinent decisions from other jurisdictions. Rogers v. Ricane Enterprises, Inc. 930 S.W.2d 157, 171

(Tex.App.-Amarillo1996, writ denied); Fin. Universal Corp. v. Mercantile Nat'l Bank, 683 S.W.2d 815, 817 (Tex.App.-Dallas 1984,

writ ref'd n.r.e.).

3 Toshiba's “Issues Presented” lists two issues numbered “7.” We will refer to the first as “7a” and the second, discussed elsewhere

in this opinion, as “7b.”

4 See, e.g., Protective Life Ins. Co. v. Russell, 119 S.W.3d 274, 288 (Tex.App.-Tyler 2003, pet. denied); Brookshire Grocery Co. v.

Smith, 99 S.W.3d 819, 823 (Tex.App.-Beaumont 2003, pet. denied); Wilmer–Hutchins ISD v. Smiley, 97 S.W.3d 702, 706

(Tex.App.-Dallas 2003, pet. denied); Purcell Constn., Inc. v. Welch, 17 S.W.3d 398, 402 (Tex.App.-Houston [1st Dist.] 2000, no

pet.) (“We review a challenge to a trial court's award of pre-judgment interest using an abuse of discretion standard, giving limited

deference to the court's application of the law to the facts.”); Marsh v. Marsh, 949 S.W.2d 734, 744 (Tex.App.-Houston [14th Dist.]

1997, no writ).

5 Toshiba points out that the letter is not addressed to Toshiba Machine Co., America, but to its parent company, Toshiba Machine

Co., Ltd. But Toshiba does not complain that it did not receive the letter, so the letter's addressee is not a factor in our analysis.

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

© 2014 Thomson Reuters. No claim to original U.S. Government W orks. 24
V
TX Rules of Evidence, Rule 201

Rule 201. Judicial Notice of Adjudicative Facts

(a) Scope. This rule governs judicial notice of an adjudicative fact only, not a legislative fact.

(b) Kinds of Facts That May Be Judicially Noticed. The court may judicially notice a fact that is

not subject to reasonable dispute because it:

(1) Is generally known within the trial court's territorial jurisdiction; or

(2) can be accurately and readily determined from sources whose accuracy cannot reasonably

be questioned.

(c) Taking Notice. The court:

(1) may take judicial notice on its own; or

(2) must take judicial notice if a party requests it and the court is supplied with the necessary

information.

(d) Timing. The court may take judicial notice at any stage of the proceeding.

(e) Opportunity to Be Heard. On timely request, a party is entitled to be heard on the propriety of

taking judicial notice and the nature of the fact to be noticed. If the court takes judicial notice

before notifying a party, the party, on request, is still entitled to be heard.

(f) Instructing the Jury. In a civil case, the court must instruct the jury to accept the noticed fact as

conclusive. In a criminal case, the court must instruct the jury that it may or may not accept the

noticed fact as conclusive.

Credits

Eff. March 1, 1998. Amended by orders of Supreme Court March 10, 2015 and Court of Criminal

Appeals March 12, 2015, eff. April 1, 2015.
W
V.T.C.A., Civil Practice & Remedies Code § 101.101

§ 101.101. Notice

(a) A governmental unit is entitled to receive notice of a claim against it under this chapter not later

than six months after the day that the incident giving rise to the claim occurred. The notice must

reasonably describe:

(1) the damage or injury claimed;

(2) the time and place of the incident; and

(3) the incident.

(b) A city's charter and ordinance provisions requiring notice within a charter period permitted by

law are ratified and approved.

(c) The notice requirements provided or ratified and approved by Subsections (a) and (b) do not

apply if the governmental unit has actual notice that death has occurred, that the claimant has

received some injury, or that the claimant's property has been damaged.

Credits

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985.
X
V.T.C.A., Government Code § 311.011

§ 311.011. Common and Technical Usage of Words

(a) Words and phrases shall be read in context and construed according to the rules of

grammar and common usage.

(b) Words and phrases that have acquired a technical or particular meaning, whether by

legislative definition or otherwise, shall be construed accordingly.

Credits

Acts 1985, 69th Leg., ch. 479, § 1, eff. Sept. 1, 1985.