## No. 06-15-00013-CV

IN THE COURT OF APPEALS SIXTH DISTRICT OF TEXAS TEXARKANA

__________________________________________________________________

J OHN 

## A LEXANDER 

## S MITH 

## , Cross-Appellant

v.

C ITY 

## N ATIONAL 

## B ANK OF 

## S ULPHUR 

## S PRINGS 

## ,

Cross- Appellee

__________________________________________________________________

On appeal from the District Court of Hopkins County, Texas

62 Judicial District nd 

## The Honorable Will Biard Presiding

__________________________________________________________________

BRIEF OF CROSS-APPELLANT

__________________________________________________________________

J. Mark Sudderth Texas Bar No. 19461500
N OTEBOOM



## – T HE 

## L AW 

## F IRM 

## 669 Airport Freeway, Suite 100 Hurst, Texas 76053 (817) 282-9700 (817) 282-8073 (facsimile) Sudderth@Noteboom.com

Attorney for Cross-Appellant, John Alexander Smith

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

CLERK

## I D E N T I T Y O F P A R T I E S A N D C O U N S E L

P u r s u a n t t o R u l e 3 8

. 1 ( a ) o f t h e T e x a s R u l e s o f A p p e l l a t e P r o c e d u r e , t h e f o l l o w i n g i s a l i s t o f a l l p a r t i e s t o t h e t r i a l c o u r t ’ s j u d g m e n t
, a n d t h e n a m e s a n d

a d d r e s s e s o f a l l t r i a l a n d a p p e l l a t e c o u n s e l

.

P a r t i e s t o t h e T r i a l C o u r t ’ s J u d g m e n t :

J o h n A l e x a n d e r S m i t h P l a i n t i f f / C r o s s

- A p p e l l a n t

C i t y N a t i o n a l B a n k o f S u l p h u r S p r i n g s D e f e n d a n t / C r o s s

- A p p e l l e e

T r i a l a n d A p p e l l a t e C o u n s e l :

C h a r l e s M

. N o t e b o o m , J

. M a r k S u d d e r t h

, A t t o r n e y s f o r P l a i n t i f

f / C r o s s

a n d B r i a n W

. B u t c h e r A p p e l l a n t J o h n A l e x a n d e r S m i t h
N o t e b o o m

– T h e L a w F i r m 6 6 9 A i r p o r t F r e e w a y , S u i t e 1 0 0
H u r s t
, T e x a s 7 6 0 5 3

a n d
R

. W e s T i d w e l l
E l l i s & T i d w e l l

, L L P 1 0 1 W

. H o u s t o n P a r i s , T e x a s 7 5 4 6 0

C o y J o h n s o n a n d C l a y J o h n s o n A t t o r n e y s f o r D e f e n d a n t /
J o h n s o n L a w F i r m , P

. C

. C r o s s

- A p p e l l e e C i t y N a t i o n a l
6 0 9 G i l m e r S t r e e t B a n k o f S u l p h u r S p r i n g s S u l p h u r S p r i n g s , T e x a s 7 5 4 8 2

a n d
K e v i n L

. F e r r i e r 2 2 2 E

. A m h e r s t
, S u i t e 1 0 0
T y l e r , T e x a s 7 5 7 0 1

a n d
J o h n R

. M e r c y M e r c y , C a r t e r , T i d w e l l

, L

. L

. P

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C r o s s
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## R E Q U E S T F O R O R A L A R G U M E N T

C r o s s

- A p p e l l a n t J o h n A l e x a n d e r S m i t h r e s p e c t f u l l y r e q u e s t s t h e o p p o r t u n i t y

t o p r e s e n t o r a l a r g u m e n t

. T E X



## . R

. A P P



## . P

. 3 9

. 7

.

C r o s s
- A p p e l l a n t ’ s B r i e f

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## T A B L E O F C O N T E N T S

I D E N T I T Y O F P A R T I E S A N D C O U N S E L

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i i

R E Q U E S T F O R O R A L A R G U M E N T

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i i i

I N D E X O F A U T H O R I T I E S

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v i

A B B R E V I A T I O N S A N D R E C O R D R E F E R E N C E S

. . . . . . . . . . . . . . . . . . . . . . v i i

S T A T E M E N T O F T H E C A S E

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v i i i

I S S U E P R E S E N T E D

W h e t h e r t h e T r i a l C o u r t E r r e d b y I m p r o p e r l y D e t e r m i n i n g t h e A m o u n t o f
P r e

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. . . . . . . . . . . . . . . . . . . . . . 1

S T A T E M E N T O F F A C T S

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

S U M M A R Y O F A R G U M E N T

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

A R G U M E N T

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I

. T h e S t a n d a r d o f R e v i e w I s D e N o v o

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

I I

. T h e T r i a l C o u r t E r r e d b y I m p r o p e r l y D e t e r m i n i n g t h e A m o u n t o f
P r e j u d g m e n t I n t e r e s t t o B e A w a r d e d t o P l a i n t i f f

. . . . . . . . . . . . . . . . . . . . . . . 6

A

. P l a i n t i f

f ’ s A p p l i c a t i o n f

o r I n v e s t i g a t i v e D e p o s i t i o n s c o n s t i t u t e d

“ w r i t t e n n o t i c e o f a c l a i m ” u n d e r s e c t i o n 3 0 4

. 1 0 4 o f t h e T e x a s F i n a n c e C o d e

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

B

. P u r s u a n t t o s e c t i o n 3 0 4

. 1 0 4 o f t h e T e x a s F i n a n c e C o d e , t h e p r o p e r

a m o u n t o f p r e

j u d g m e n t i n t e r e s t t o b e a w a r d e d t o P l a i n t i f f i s $ 8 4

, 5 4 2

. 0 0

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, 2 4 3

. 0 0

. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 2

C r o s s
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- P a g e i v

## P R A Y E R

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3

C E R T I F I C A T E O F S E R V I C E

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C E R T I F I C A T E O F C O M P L I A N C E

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A P P E N D I X

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C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e v

## I N D E X O F A U T H O R I T I E S

C a s e s :

B e v e r s v

. S o u l e , 9 0 9 S

. W

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y C o

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. W

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n c

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. W

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. v

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g y , I n c

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## T

o s h i b a M

a c h i n e C o

. v

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P M F l o w C o n t r o l

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S t a t u t e s a n d R u l e :

T E X



## . R

. E V I D



## . 2 0 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3

T E X



## . C I V



## . P R A C



## . & R E M



## . C O D E 

## § 1 0 1

. 1 0 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1

T E X



## . F I N



## . C O D E 

## § 3 0 4

. 1 0 4

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

T E X



## . G O V



## . C O D E 

## § 3 1 1

. 0 1 1

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0

A B B R E V I A T I O N S A N D R E C O R D R E F E R E N C E S

A b b r e v i a t i o n s

P l a i n t i f f / C r o s s

- A p p e l l a n t
, J o h n A l e x a n d e r S m i t h

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “ S m i t h ” o r “ P l a i n t i f f ”

D e f e n d a n t / C r o s s

- A p p e l l e e C i t y N a t i o n a l B a n k o f S u l p h u r S p r i n g s

. . . . . . . “ C N B

, ” “ D e f e n d a n t ” o r “ t h e B a n k ”

A p p e n d i x t o t h i s B r i e f

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “ A p p x

. ”

R e c o r d R e f

e r e n c e s

R e f e r e n c e s t o C l e r k ’ s R e c o r d

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . “ C R : [ p a g e # ] ”

R e f e r e n c e s t o S u p p l e m e n t a l C l e r k ’ s R e c o r d

. . . . . . . . . . . . . . . . . . . “ S C R : [ p a g e # ] ”

R e f e r e n c e s t o R e p o r t e r ’ s R e c o r d

. . . . . . . . . . . . . . . . . . . . . . . . . . . . “ R R : [ p a g e # ] ”

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e v i i

## S T A T E M E N T O F T H E C A S E

S m i t h b r o u g h t a p e r s o n a l i n j u r y s u i t a g a i n s t t h e B a n k f o r m a l i c i o u s

p r o s e c u t i o n

. F o l l o w i n g a j u r y v e r d i c t
, a n d a t t h e r e q u e s t o f P l a i n t i f f

, t h e t r i a l 1 2 3



## c o u r t e n t e r e d a j u d g m e n t i n S m i t h ’ s f a v o r w h i c h i n c l u d e d $ 8 4

, 5 4 2

. 0 0 i n

p r e j u d g m e n t i n t e r e s t

. T h e B a n k f i l e d a m o t i o n t o m o d i f

y t h e j u d g m e n t
, a s s e r t i n g 4



## t h a t t h e t r i a l c o u r t h a d u s e d a n i n c o r r e c t s t a r t i n g d a t e f o r c a l c u l a t i n g p r e

-

j u d g m e n t

i n t e r e s t

. S m i t h o p p o s e d s u c h m o t i o n

. A f t e r a h e a r i n g , t h e t r i a l c o u r t g r a n t e d t h e 5 6



## B a n k ’ s m o t i o n a n d e n t e r e d a n o r d e r m o d i f y i n g t h e j u d g m e n t t o i n c l u d e o n l y

$ 5 4

, 2 4 3

. 0 0 i n p r e

j u d g m e n t i n t e r e s t

. 7



## T h e B a n k h a s a p p e a l e d t h e f i n a l j u d g m e n t

. I n t h i s c r o s s

- a p p e a l

, S m i t h

c o m p l a i n s o n l y t h a t t h e t r i a l c o u r t i m p r o p e r l y r e d u c e d t h e a m o u n t o f p r e j u d g m e n t

i n t e r e s t
, w h i c h s h o u l d b e r e s t o r e d t o t h e o r i g i n a l a n d p r o p e r a m o u n t

. 8



## C R : 4 0 3 ( P l a i n t i f

f ’ s F i f t h A m e n d e d O r i g i n a l P e t i t i o n ) 1



## C R : 5 3 5 ; A p p x

. C ( J u r y C h a r g e a n d V e r d i c t ) 2



## C R : 5 8 4 ; A p p x

. F ( P l a i n t i f f ’ s l e t t e r t o t r i a l c o u r t s u b m i t t i n g p r o p o s e d j u d g m e n t ) 3



## C R : 5 8 2 ; A p p x

. A ( C o u r t ’ s J u d g m e n t ) 4



## C R : 6 0 5 ; A p p x

. G ( D e f e n d a n t ’ s M o t i o n t o M o d i f y J u d g m e n t ) 5



## C R : 6 1 5 ; A p p x

. H ( P l a i n t i f f ’ s R e s p o n s e t o D e f

e n d a n t ’ s M o t i o n t o M o d i f y 6


## J u d g m e n t )

S C R : 5 ; A p p x

. B ( O r d e r o n M o t i o n t o M o d i f y J u d g m e n t ) 7



## C R : 6 4 9 ( P l a i n t i f

f ’ s N o t i c e o f C r o s s

- A p p e a l ) 8



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e v i i i

## I S S U E P R E S E N T E D

W h e t h e r t h e T r i a l C o u r t E r r e d b y I m p r o p e r l y D e t e r m i n i n g t h e A m o u n t o f

P r e j u d g m e n t I n t e r e s t t o B e A w a r d e d t o P l a i n t i f f

.

S T A T E M E N T O F F A C T S

O n O c t o b e r 2 4

, 2 0 0 8

, S m i t h s e r v e d t h e B a n k w i t h P l a i n t i f f ’ s “ A p p l i c a t i o n

F o r I n v e s t i g a t i v e D e p o s i t i o n s ” u n d e r T E X



## . R

. C I V



## . P

. 2 0 2 w h i c h c l e a r l y a n d

e x p l i c i t l y n o t i f

i e d D e f e n d a n t o f P l a i n t i f

f ’ s c l a i m f

o r m a l i c i o u s p r o s e c u t i o n

. 9



## I n p a r t i c u l a r , p a r a g r a p h s 6 t h r o u g h 1 4 o f t h e a p p l i c a t i o n s e t o u t t h e f a c t u a l

b a s e s o f t h e c l a i m i n s o m e d e t a i l

– d e s c r i b i n g h o w t h e b a n k “ c a u s e d a c r i m i n a l

c o m p l a i n t t o b e f

i l e d a g a i n s t J o h n A l e x a n d e r S m i t h

, ” l e a d i n g t o S m i t h ’ s a r r e s t a n d

i n d i c t m e n t a n d p r o x i m a t e l y c a u s i n g s u b s t a n t i a l d a m a g e s , a l l w h i l e t h e b a n k “ k n e w

h e w a s n o t g u i l t y o f t h e c r i m i n a l o f f e n s e ”

– a n d p a r a g r a p h 1 4 s p e c i f i c a l l y n o t i f

i e d

t h e b a n k o f S m i t h ’ s c l a i m f o r m a l i c i o u s p r o s e c u t i o n , s t a t i n g , “ P e t i t i o n e r a l l e g e s

t h a t h e b e l i e v e s t h a t h e h a s g r o u n d s f o r a l a w s u i t u n d e r t h e d o c t r i n e s o f f a l s e

i m p r i s o n m e n t
, f

a l s e a r r e s t
, a n d m a l i c i o u s p r o s e c u t i o n

. ” 1 0



## S m i t h u l t i m a t e l y s u e d t h e B a n k f o r m a l i c i o u s p r o s e c u t i o n

. S m i t h ’ s 1 1



## C R : 5 8 5 ; A p p x

. E ( P e t i t i o n e r ’ s A p p l i c a t i o n f o r I n v e s t i g a t i v e D e p o s i t i o n s

– 9



## e n c l o s e d w i t h P l a i n t i f

f ’ s l e t t e r t o t r i a l c o u r t s u b m i t t i n g p r o p o s e d j u d g m e n t )

.

C R : 5 8 6

- 5 8 8 ; A p p x

. E ( A p p l i c a t i o n p p

. 2

- 4

, p a r a g r a p h s 6

- 1 4 ) 1 0



## C R : 2 7 ( P l a i n t i f

f ’ s S e c o n d A m e n d e d O r i g i n a l P e t i t i o n ) 1 1



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1

## m a l i c i o u s p r o s e c u t i o n c a s e a g a i n s t t h e B a n k w e n t t o t r i a l

, r e s u l t i n g i n a j u r y v e r d i c t

i n S m i t h ’ s f

a v o r

. 1 2



## F o l l o w i n g t h e v e r d i c t
, S m i t h s u b m i t t e d a p r o p o s e d f o r m o f j u d g m e n t a l o n g

w i t h a c o p y o f t h e A p p l i c a t i o n F o r I n v e s t i g a t i v e D e p o s i t i o n s w h i c h h a d b e e n

s e r v e d o n t h e B a n k o n O c t o b e r 2 4

, 2 0 0 8

, a n d a l e t t e r e x p l a i n i n g h o w p r e j u d g m e n t

i n t e r e s t s h o u l d b e c a l c u l a t e d u s i n g a s t a r t i n g d a t e s i x m o n t h s a f t e r s u c h n o t i c e

. 1 3



## O n D e c e m b e r 1 5

, 2 0 1 4

, t h e t r i a l c o u r t e n t e r e d a j u d g m e n t w h i c h i n c l u d e d

$ 8 4

, 5 4 2 i n p r e

j u d g m e n t i n t e r e s t
, i n a c c o r d a n c e w i t h S m i t h ’ s l e t t e r

. T h e B a n k 1 4



## t h e n f i l e d a m o t i o n t o m o d i f

y t h e j u d g m e n t
, a s s e r t i n g t h a t p r e j u d g m e n t i n t e r e s t

s h o u l d h a v e b e e n c a l c u l a t e d f r o m t h e d a t e t h e B a n k w a s s u e d

, r a t h e r t h a n s i x

m o n t h s a f

t e r r e c e i v i n g S m i t h ’ s p e t i t i o n t o i n v e s t i g a t e c l a i m s

. S m i t h f i l e d a 1 5



## r e s p o n s e o p p o s i n g s u c h m o t i o n

. A f t e r c o n d u c t i n g a h e a r i n g , t h e C o u r t g r a n t e d 1 6



## t h e B a n k ’ s m o t i o n a n d e n t e r e d a n o r d e r m o d i f y i n g t h e j u d g m e n t s o a s t o r e d u c e

p r e j u d g m e n t i n t e r e s t t o $ 5 4

, 2 4 3

. 1 7



## C R : 5 3 5 ; A p p x

. C ( J u r y C h a r g e a n d V e r d i c t ) 1 2



## C R : 5 8 4 ; A p p x

. F ( P l a i n t i f f ’ s l e t t e r t o t r i a l c o u r t s u b m i t t i n g p r o p o s e d j u d g m e n t ) 1 3



## C R : 5 8 2 ; A p p x

. A ( C o u r t ’ s J u d g m e n t ) 1 4



## C R : 6 0 5 ; A p p x

. G ( D e f e n d a n t ’ s M o t i o n t o M o d i f y J u d g m e n t ) 1 5



## C R : 6 1 5 ; A p p x

. H ( P l a i n t i f f ’ s R e s p o n s e t o D e f

e n d a n t ’ s M o t i o n t o M o d i f y 1 6


## J u d g m e n t )

S C R : 5 ; A p p x

. B ( O r d e r o n M o t i o n t o M o d i f y J u d g m e n t ) 1 7



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 2

## T h e c o u r t c a l c u l a t e d s u c h p r e j u d g m e n t i n t e r e s t c o m m e n c i n g o n M a y 2

,

2 0 1 1

, t h e d a t e s u i t w a s f i l e d a g a i n s t t h e B a n k

, r a t h e r t h a n A p r i l 2 2

, 2 0 0 9

, t h e d a t e

o n e

- h u n d r e d

- a n d

- e i g h t y d a y s a f t e r t h e B a n k r e c e i v e d w r i t t e n n o t i c e o f S m i t h ’ s

c l a i m

. S m i t h n o w a p p e a l s , c o m p l a i n i n g o n l y t h a t t h e t r i a l c o u r t e r r e d i n

1 8



## m o d i f y i n g t h e j u d g m e n t a n d a w a r d i n g t h e i n c o r r e c t a m o u n t o f p r e j u d g m e n t

i n t e r e s t

.

S U M M A R Y O F A R G U M E N T

P r e j u d g m e n t i n t e r e s t s h o u l d h a v e b e e n c a l c u l a t e d b e g i n n i n g o n A p r i l 2 2

,

2 0 0 9

, w h i c h i s 1 8 0 d a y s a f t e r O c t o b e r 2 4

, 2 0 0 8

, t h e d a t e t h e B a n k r e c e i v e d w r i t t e n

n o t i c e o f S m i t h ’ s c l a i m

.

T h e a p p l i c a t i o n f

o r i n v e s t i g a t i v e d e p o s i t i o n s s e r v e d o n t h e B a n k c o n s t i t u t e d

“ w r i t t e n n o t i c e o f a c l a i m ” u n d e r s e c t i o n 3 0 4

. 1 0 4 o f t h e T e x a s F i n a n c e C o d e

b e c a u s e i t i n c l u d e d a n a s s e r t i o n o f a r i g h t t o b e p a i d

. N o “ d e m a n d ” f o r p a y m e n t

w a s r e q u i r e d

, n o r w a s t h e a c t u a l f i l i n g o f a l a w s u i t

. B y s p e c i f i c a l l y a l l e g i n g t h a t h e

h a d g r o u n d s f

o r a l a w s u i t b a s e d o n m a l i c i o u s p r o s e c u t i o n , S m i t h p r o v i d e d n o t i c e

o f h i s c l a i m u n d e r t h e p r e j u d g m e n t i n t e r e s t s t a t u t e

.

T h e o r d e r d o e s n o t s e t f o r t h t h i s c a l c u l a t i o n , b u t e x p r e s s l y g r a n t s D e f e n d a n t ’ s 1 8



## m o t i o n , w h i c h d i d

. S e e C R : 6 0 7 ; A p p x

. G ( D e f e n d a n t ’ s M o t i o n t o M o d i f y J u d g m e n t
, p

. 3 )

.

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 3

## A R G U M E N T

I

. T h e S t a n d a r d o f R e v i e w I s D e N o v o

A s a g e n e r a l r u l e , a t r i a l c o u r t ’ s f a c t u a l d e c i s i o n s r e g a r d i n g p r e j u d g m e n t

i n t e r e s t

– i n c l u d i n g d e t e r m i n a t i o n s o f w h e t h e r t h e r e h a s b e e n a d e l a y , w h e t h e r a n

a w a r d i s s u p p o r t e d b y e q u i t y , w h e t h e r t h e p a r t i e s h a v e a g r e e d t o a p a r t i c u l a r r a t e o f

i n t e r e s t
, a n d o t h e r d e t e r m i n a t i o n s t h a t t u r n o n d i s p u t e d i s s u e s o f f a c t

– a r e

r e v i e w e d u n d e r a n a b u s e o f d i s c r e t i o n s t a n d a r d

. S e e , e

. g

. , H e l e n a C h e m i c a l C o

. v

.

W a t k i n s , 1 8 S

. W

. 3 d 7 4 4

, 7 6 0 ( T e x

. A p p

. – S a n A n t o n i o 2 0 0 0 )

, a f f ’ d

. , o

. g

. , 4 7

S

. W

. 3 d 4 8 6 ( T e x

. 2 0 0 1 ) ( “ T h e t r i a l c o u r t ’ s d e c i s i o n i n r e f u s i n g t o o f

f s e t f r o m i t s

i n t e r e s t c a l c u l a t i o n s p e r i o d s o f d e l a y c a u s e d b y a l i t i g a n t a r e r e v i e w e d u n d e r t h e

a b u s e o f d i s c r e t i o n s t a n d a r d

. . . . B e c a u s e t h e o f f s e t i s d i s c r e t i o n a r y r a t h e r t h a n

m a n d a t o r y , w e d o n o t s u b s t i t u t e o u r o p i n i o n f o r t h a t o f t h e t r i a l c o u r t

. ” )

O n t h e o t h e r h a n d

, w h e n

– a s a t b a r

– a t r i a l c o u r t ’ s d e c i s i o n r e g a r d i n g p r e

j u d g m e n t i n t e r e s t t u r n s o n l e g a l r a t h e r t h a n f a c t u a l g r o u n d s , t h e d e n o v o s t a n d a r d

o f r e v i e w a p p l i e s

. S e e , e

. g

. , P r i n g l e v

. M o o n , 1 5 8 S

. W

. 3 d 6 0 7

, 6 0 9 ( T e x

. A p p

. –

F o r t W o r t h 2 0 0 5

, n o p e t

. ) ( “ T h e p r e j u d g m e n t i n t e r e s t r a t e i s c o n t r o l l e d b y s t a t u t e

.

. . . B e c a u s e s t a t u t o r y c o n s t r u c t i o n i s a q u e s t i o n o f l a w , w e r e v i e w t h e t r i a l c o u r t ' s

d e c i s i o n d e n o v o

. T

e x

. D e p ' t o f T r a n s p

. v

. N e e d h a m , 8 2 S

. W

. 3 d 3 1 4

, 3 1 8

( T e x

. 2 0 0 2 ) ” )

.

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 4

## R e g a r d i n g t h e s p e c i f i c i s s u e i n t h e c a s e a t b a r , “ t h e d a t e f r o m w h i c h

s t a t u t o r y p r e

j u d g m e n t i n t e r e s t s h o u l d b e g i n i s a q u e s t i o n o f l a w t h a t a n a p p e l l a t e

c o u r t m u s t r e v i e w d e n o v o

. ” M C N E n e r g y E n t e r s

. , I

n c

. v

. O m a g r o d e C o l o m b i a ,

L

. D

. C

. , 9 8 S

. W

. 3 d 7 6 6

, 7 7 3 ( T e x

. A p p

. – F o r t W o r t h 2 0 0 3

, p e t

. d e n i e d )

. S e e a l s o ,

T o s h i b a M

a c h i n e C o

. v

. S

P M F l o w C o n t r o l

, I n c

. , 1 8 0 S

. W

. 3 d 7 6 1

, 7 8 5 ( T e x

.

A p p

. – F o r t W o r t h 2 0 0 5

, p e t

. g r a n t e d

, c a u s e r e m a n d e d ) ( “ T h e a b u s e o f d i s c r e t i o n

s t a n d a r d a p p l i e s t o t h e t r i a l c o u r t ' s f a c t u a l f i n d i n g s a s t h e y r e l a t e t o p r e j u d g m e n t

i n t e r e s t ; b u t t h e d e n o v o s t a n d a r d a p p l i e s t o t h e t r i a l c o u r t ' s a p p l i c a t i o n o f t h e l a w

t o t h e f a c t s

. . . . T h e q u e s t i o n i s w h e t h e r t h e l e t t e r c o n s t i t u t e d n o t i c e o f S P M ' s c l a i m s

a s a m a t t e r o f l a w

. T h e r e f o r e , a s a p r a c t i c a l m a t t e r , o u r r e v i e w o f t h e p r e j u d g m e n t

i n t e r e s t i s s u e i n t h i s c a s e i s d e n o v o

. ” )

U n d e r t h e d e n o v o s t a n d a r d o f r e v i e w , t h i s c o u r t e x e r c i s e s i t s o w n j u d g m e n t

a n d r e d e t e r m i n e s e a c h l e g a l i s s u e

. Q u i c k v

. C i t y o f A u s t i n , 7 S

. W

. 3 d 1 0 9

, 1 1 6

( T e x

. 1 9 9 8 )

.

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 5

## I I

. T h e T r i a l C o u r t E r r e d b y I m p r o p e r l y D e t e r m i n i n g t h e A m o u n t o f

P r e j u d g m e n t I n t e r e s t t o B e A w a r d e d t o P l a i n t i f f

.

A

. P l a i n t i f

f ’ s A p p l i c a t i o n f

o r I n v e s t i g a t i v e D e p o s i t i o n s c o n s t i t u t e d

“ w r i t t e n n o t i c e o f a c l a i m ” u n d e r s e c t i o n 3 0 4

. 1 0 4 o f t h e T e x a s F i n a n c e C o d e
.

T h e i s s u e i n t h i s c r o s s

- a p p e a l c o n c e r n s t h e d e f i n i t i o n o f “ n o t i c e o f c l a i m ”

u n d e r t h e T e x a s F i n a n c e C o d e , w h i c h p r o v i d e s t h a t p r e j u d g m e n t i n t e r e s t b e g i n s t o

a c c r u e o n t h e e a r l i e r o f t h e d a t e s u i t i s f i l e d

, o r t h e 1 8 0 t h d a y a f

t e r a d e f e n d a n t

r e c e i v e s w r i t t e n “ n o t i c e o f a “ c l a i m

. ” T h e B a n k ’ s m o t i o n a s s e r t e d t h a t a “ c l a i m ” 1 9



## r e q u i r e s a “ d e m a n d f

o r p a y m e n t

. ” S m i t h d i s a g r e e d

, p o i n t i n g o u t t h a t “ a n

2 0



## a s s e r t i o n o f a r i g h t t o b e p a i d ” w i l l a l s o s u f f i c e

. 2 1



## W h i l e t h e F i n a n c e C o d e c o n t a i n s n o s t a t u t o r y d e f i n i t i o n , c a s e l a w

e s t a b l i s h e s t h a t
, i n t h e p r e j u d g m e n t i n t e r e s t c o n t e x t
, n o d e m a n d i s r e q u i r e d a s

“ c l a i m ” a l s o i n c l u d e s “ a n a s s e r t i o n o f a r i g h t t o b e p a i d

. ” 2 2



## T e x

. F i n

. C o d e 3 0 4

. 1 0 4 ( A p p x

. D ) 1 9



## C R : 6 0 7 ; A p p x

. G ( D e f e n d a n t ’ s M o t i o n t o M o d i f y J u d g m e n t
, p

. 3 ) 2 0



## C R : 6 1 6 ; A p p x

. H ( P l a i n t i f f ’ s R e s p o n s e t o D e f

e n d a n t ’ s M o t i o n t o M o d i f y 2 1


## J u d g m e n t
, p

. 2 )

S e e , e

. g

. , J

o h n s o n & H i

g g i n s o f T e x a s , I n c

. v

. K e n n e c o E n e r

g y , I n c

. , 9 6 2 S

. W

. 2 d 2 2


## 5 0 7

, 5 3 1 ( T e x

. 1 9 9 8 ) ( “ A ‘ c l a i m ’ i s ‘ a d e m a n d f o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a

r i g h t t o b e p a i d

. ” ) ( e m p h a s i s a d d e d ) ; B r o o k s h i r e G r o c e r

y C o

. v

. S m i t h

, 9 9 S

. W

. 3 d 8 1 9

, 8 2 4 ( T e x

. A p p

. – B e a u m o n t 2 0 0 3

, p e t

. d e n i e d ) ( I n T e x

. F i n

. C o d e § 3 0 4

. 1 0 4

, “ [ t ] h e t e r m

‘ c l a i m ’ d e s c r i b e s a d e m a n d f o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a r i g h t t o b e
p a i d

. ” ) ( e m p h a s i s a d d e d )

. S e e a l s o , R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 8 ( T e x

. A p p

. – A u s t i n 1 9 9 5

, w r i t d e n i e d 

## )

.

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 6

## T h e T e x a s S u p r e m e C o u r t a d d r e s s e d t h i s m e a n i n g o f “ c l a i m ” i n J o h n s o n &

H i g g i n s o f T e x a s , I n c

. v

. K e n n e c o E n e r

g y , I n c

. , 9 6 2 S

. W

. 2 d 5 0 7 ( T e x

. 1 9 9 8 )

, i n

w h i c h i t h e l d t h a t a s t a t u t e o f l i m i t a t i o n s t o l l i n g a g r e e m e n t c o n s t i t u t e d a “ w r i t t e n

n o t i c e o f c l a i m ” s u f

f i c i e n t t o t r i g g e r t h e a c c r u a l o f p r e j u d g m e n t i n t e r e s t

. T h e

a g r e e m e n t m e r e l y s t a t e d :

K e n n e c o a s s e r t s t h a t
, t o t h e e x t e n t u n d e r w r i t e r s a r e f o u n d n o t t o b e l i a b l e

. . . , J & H i s l i a b l e t o K e n n e c o f o r t h e a m o u n t s w h i c h K e n n e c o h a s c l a i m e d

u n d e r t h e P o l i c y

. 2 3



## A l t h o u g h a b s o l u t e l y n o “ d e m a n d ” f o r p a y m e n t o r c o m p e n s a t i o n w a s m a d e , t h e

C o u r t h e l d t h i s l a n g u a g e c o n s t i t u t e d a “ c l a i m ” b e c a u s e i t a s s e r t e d a r i g h t t o

c o m p e n s a t i o n

. T h e C o u r t s t a t e d t h e r u l e t h a t e i t h e r a d e m a n d o r a n a s s e r t i o n o f a

r i g h t w i l l s u f

f i c e :

W e h o l d t h a t t h e a g r e e m e n t c o n s t i t u t e s “ w r i t t e n n o t i c e o f a c l a i m

. ” A

“ c l a i m ” i s “ a d e m a n d f

o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a r i g h t t o b e p a i d

. ” S e e R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 8 ( T e x

. A p p

. — A u s t i n 1 9 9 5

, w r i t d e n i e d )

. . . . T h r o u g h t h e s t a n d s t i l l a g r e e m e n t
, J & H r e c e i v e d w r i t t e n n o t i c e
t h a t K e n n e c o w a s c l a i m i n g a r i g h t t o c o m p e n s a t i o n

. 2 4



## I n i t s m o t i o n t o t h e t r i a l c o u r t
, t h e B a n k c i t e d B r o o k s h i r e G r o c e r

y C o

. v

.

S m i t h

, 9 9 S

. W

. 3 d 8 1 9 ( T e x

. A p p

. – B e a u m o n t 2 0 0 3

, p e t

. d e n i e d ) i n s u p p o r t o f i t s

a s s e r t i o n t h a t “ t h e r e m u s t b e a d e m a n d f o r p a y m e n t o r c o m p e n s a t i o n ; ” h o w e v e r ,

J o h n s o n , 9 6 2 S

. W

. 2 d a t 5 3 1 

## ( a n a l y z i n g t h e c o m m o n

- l a w r e q u i r e m e n t o f 2 3



## “ w r i t t e n n o t i c e o f a c l a i m ” t o t r i g g e r p r e j u d g m e n t i n t e r e s t )

J o h n s o n , 9 6 2 S

. W

. 2 d a t 5 3 1

. 2 4



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 7

## B r o o k

s h i r e a c t u a l l y c o n f

i r m s t h a t e i t h e r a d e m a n d o r a n a s s e r t i o n o f a r i g h t t o b e

p a i d w i l l s u f

f i c e , s t a t i n g , “ T h e t e r m ‘ c l a i m ’ d e s c r i b e s a d e m a n d f o r c o m p e n s a t i o n

o r a n a s s e r t i o n o f a r i g h t t o b e p a i d

. ” B r o o k s h i r e , 9 9 S

. W

. 3 d a t 8 2 4

, c i t i n g

J o h n s o n , 9 6 2 S

. W

. 2 d a t 5 3 1 a n d R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 8 ( T e x

.

A p p

. – A u s t i n 1 9 9 5

, w r i t d e n i e d )

.

T h i s C o u r t ’ s o p i n i o n i n K M a r t C o r p

. v

. R h y n e , 9 3 2 S

. W

. 2 d 1 4 0 ( T e x

.

A p p

. – T e x a r k a n a 1 9 9 6

, n o p e t

. ) a l s o d e m o n s t r a t e s t h a t n o d e m a n d f o r p a y m e n t i s

r e q u i r e d i n o r d e r f

o r a w r i t i n g t o c o n s t i t u t e a “ c l a i m ” f o r p u r p o s e s o f p r e

-

j u d g m e n t

i n t e r e s t

. I n K M

a r t , t h i s C o u r t h e l d t h a t p r o v i d i n g a m e d i c a l r e l e a s e f o r m w h i c h

s i m p l y s t a t e d

, “ t h i s i n f

o r m a t i o n i s t o b e u s e d f o r t h e p u r p o s e s o f e v a l u a t i n g a n d

h a n d l i n g m y c l a i m f

o r i n j u r i e s ” c o n s t i t u t e d s u f

f i c i e n t w r i t t e n n o t i c e o f a c l a i m t o

s t a r t p r e j u d g m e n t i n t e r e s t

. N o “ d e m a n d ” f o r c o m p e n s a t i o n o r p a y m e n t w a s 2 5



## m a d e

.

I n r e a c h i n g i t s d e c i s i o n i n K M a r t , t h i s C o u r t c i t e d B e v e r s v

. S o u l e , 9 0 9

S

. W

. 2 d 5 9 9 ( T e x

. A p p

. – F o r t W o r t h 1 9 9 5

, n o p e t

. ) I n B e v e r s , a s i n K M a r t , n o

d e m a n d f

o r p a y m e n t w a s m a d e

. I n s t e a d

, t h e p l a i n t i f f s i m p l y s e n t a m e d i c a l

a u t h o r i z a t i o n a l o n g w i t h s o m e m e d i c a l r e c e i p t s a n d a l e t t e r s t a t i n g t h e

a u t h o r i z a t i o n w a s e n c l o s e d “ s o t h a t y o u c o u l d o b t a i n t h e n e c e s s a r y i n f o r m a t i o n t o

K Ma r t

, 9 3 2 S

. W

. 2 d a t 1 4 6

. 2 5



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 8

## p r o p e r l y c o n s i d e r m y i n j u r y c l a i m

. ” T h e d e f

e n d a n t a r g u e d t h e l e t t e r w a s n o t a 2 6



## “ c l a i m ” b e c a u s e i t “ d i d n o t s t a t e t h e n a t u r e o f t h e c o m p l a i n t o r t h e a m o u n t o f

d a m a g e s s o u g h t
, ” b u t t h e c o u r t c o n f i r m e d s u c h i s n o t r e q u i r e d

. 2 7



## T h e K M a r t o p i n i o n r e f

e r e n c e s t h e A u s t i n C o u r t o f A p p e a l s ’ h o l d i n g i n

R o b i n s o n v

. B r i c e t h a t m e r e “ n o t i c e o f a n a c c i d e n t a n d i n j u r i e s ” i s n o t s u f

f i c i e n t t o

c o n s t i t u t e n o t i c e o f a c l a i m , c o m m e n t i n g t h a t “ R o b i n s o n r e q u i r e s w r i t t e n n o t i c e o f

a c l a i m , i

. e

. , a l e g a l d e m a n d f o r p a y m e n t o r c o m p e n s a t i o n

. ” K M a r t

, 9 3 2 S

. W

. 2 d a t

1 4 5

. T h i s d i s t i n c t i o n b e t w e e n “ n o t i c e o f a n a c c i d e n t ” a n d a “ d e m a n d f o r p a y m e n t ”

s h o u l d n o t b e m i s u n d e r s t o o d a s c o n s t r u i n g R o b i n s o n t o a l w a y s r e q u i r e a

“ d e m a n d

. ” T h e o n l y i s s u e i n R o b i n s o n w a s w h e t h e r a n a c c i d e n t r e p o r t c o n s t i t u t e d

a n o t i c e o f c l a i m

. T h e R o b i n s o n o p i n i o n s t a t e s , “ A l t h o u g h t h e a c c i d e n t r e p o r t

n o t i f i e d H i g h l a n d s t h a t a n a c c i d e n t h a d o c c u r r e d

, a n d t h a t B r i c e h a d b e e n i n j u r e d

,

i t w a s n o t n o t i c e o f a d e m a n d f o r p a y m e n t o r c o m p e n s a t i o n b y B r i c e o r o n B r i c e ' s

b e h a l f

, a n d t h u s w a s n o t n o t i c e o f a c l a i m ; ” h o w e v e r , t h i s l a n g u a g e m u s t n o t b e

m i s

- c o n s t r u e d a s h o l d i n g t h a t a “ d e m a n d ” i s a l w a y s r e q u i r e d

, a s t h e o p i n i o n g o e s

o n t o e x p r e s s l y e x p l a i n t h a t e i t h e r a d e m a n d o r a n a s s e r t i o n o f a r i g h t t o b e p a i d

B e v e r s , 9 0 9 S

. W

. 2 d a t 6 0 3

. 2 6



## I d

. ( n o t i n g t h a t
, “ N o t h i n g i n [ t h e p r e j u d g m e n t i n t e r e s t s t a t u t e ] r e q u i r e s t h e 2 7



## c l a i m a n t t o d e m a n d a n e x a c t a m o u n t o r l i s t e v e r y e l e m e n t o f d a m a g e c l a i m e d i n o r d e r t o
t r i g g e r t h e n o t i c e o f c l a i m p r o v i s i o n

. ” )

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 9

## w i l l s u f

f i c e :

T h e s t a t u t e d o e s n o t d e f i n e t h e t e r m “ c l a i m , ” a n d t h e r e f o r e , w e m u s t

c o n s t r u e i t a c c o r d i n g t o i t s o r d i n a r y m e a n i n g

. T e x

. G o v ' t C o d e A n n

. § 3 1 2

. 0 0 2 ( a ) ( W e s t 1 9 8 8 ) [ n o w s e e § 3 1 1

. 0 1 1 ] ; H o p k i n s v

. S

p r i n g I n d e p

. S c h

. D i s t

. , 7 3 6 S

. W

. 2 d 6 1 7

, 6 1 9 ( T e x

. 1 9 8 7 )

. T h e w o r d “ c l a i m ” o r d i n a r i l y m e a n s

a d e m a n d f

o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a r i g h t t o b e p a i d

.

. . . T h e a c c i d e n t r e p o r t f

a i l s a s w r i t t e n n o t i c e o f a c l a i m

. . . b e c a u s e i t i s n o t

n o t i c e o f a d e m a n d f

o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a r i g h t t o b e p a i d

. 2 8



## I n t h e c a s e a t b a r , S m i t h ’ s “ A p p l i c a t i o n F o r I n v e s t i g a t i v e D e p o s i t i o n s , ”

s e r v e d o n t h e B a n k o n O c t o b e r 2 4

, 2 0 0 8

, c o n s t i t u t e d a “ c l a i m , ” a s d e f i n e d i n a l l 2 9



## t h e s e a u t h o r i t i e s

. I t p l a i n l y a n d e x p l i c i t l y n o t i f i e d t h e B a n k o f P l a i n t i f

f ’ s c l a i m f

o r

m a l i c i o u s p r o s e c u t i o n

. I n d e e d

, i t s e t o u t t h e f a c t u a l b a s e s o f t h e c l a i m i n s o m e

d e t a i l

– d e s c r i b i n g h o w t h e b a n k “ c a u s e d a c r i m i n a l c o m p l a i n t t o b e f i l e d a g a i n s t

J o h n A l e x a n d e r S m i t h

, ” l e a d i n g t o S m i t h ’ s a r r e s t a n d i n d i c t m e n t a n d p r o x i m a t e l y

c a u s i n g s u b s t a n t i a l d a m a g e s , a l l w h i l e t h e B a n k “ k n e w h e w a s n o t g u i l t y o f t h e

c r i m i n a l o f

f e n s e o f h i n d e r i n g a s e c u r e d c r e d i t o r ”

– a n d s p e c i f i c a l l y n o t i f

i e d t h e

B a n k o f S m i t h ’ s c l a i m f o r m a l i c i o u s p r o s e c u t i o n , a s s e r t i n g , “ P e t i t i o n e r a l l e g e s t h a t

h e b e l i e v e s t h a t h e h a s g r o u n d s f o r a l a w s u i t u n d e r t h e d o c t r i n e s o f f a l s e

R o b i n s o n , 8 9 4 S

. W

. 2 d a t 5 2 8 ( e m p h a s i s a d d e d )

. 2 8



## C R : 5 8 5 ; A p p x

. E ( P e t i t i o n e r ’ s A p p l i c a t i o n f o r I n v e s t i g a t i v e D e p o s i t i o n s

– 2 9



## e n c l o s e d w i t h P l a i n t i f

f ’ s l e t t e r t o t r i a l c o u r t s u b m i t t i n g p r o p o s e d j u d g m e n t )

.

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1 0

## i m p r i s o n m e n t
, f a l s e a r r e s t
, a n d m a l i c i o u s p r o s e c u t i o n

. ” 3 0



## A n y a r g u m e n t t h a t S m i t h ’ s n o t i f i c a t i o n t h a t h e h a d g r o u n d s f o r a m a l i c i o u s

p r o s e c u t i o n l a w s u i t w a s n o t a “ c l a i m ” b e c a u s e i t w a s m e r e l y a “ p o t e n t i a l c l a i m , ”

h a s n o m e r i t

. T h e F i n a n c e C o d e , b y p r o v i d i n g t h a t i n t e r e s t b e g i n s t o a c c r u e o n t h e

e a r l i e r o f 1 8 0 d a y s a f

t e r n o t i c e o f a c l a i m o r t h e d a t e s u i t i s f i l e d

, s p e c i f

i c a l l y

r e c o g n i z e s t h a t “ n o t i c e o f a c l a i m ” d o e s n o t r e q u i r e a c t u a l l y f i l i n g a c l a i m

. B e f

o r e

a l a w s u i t i s f

i l e d

, a n y c l a i m m a y b e r e f e r r e d t o a s “ p o t e n t i a l ”

– a s w h e r e a p a r t y i s

a t t e m p t i n g t o i n v e s t i g a t e o r n e g o t i a t e b e f o r e d e t e r m i n i n g w h e t h e r a l a w s u i t w i l l

a c t u a l l y b e f

i l e d

– b u t i t i s s t i l l a “ c l a i m

. ” W r i t t e n n o t i c e t o t h e p o t e n t i a l d e f e n d a n t

a s s e r t i n g t h a t a c l a i m e x i s t s

– a s o p p o s e d t o t h e a c t u a l f i l i n g a n d p u r s u i t o f a c a u s e

o f a c t i o n

– i s a l l t h a t i s r e q u i r e d

.

B y w a y o f c l o s e a n a l o g y , t h e T e x a s T o r t C l a i m s A c t p r o v i d e s t h a t a

g o v e r n m e n t a l u n i t i s r e q u i r e d t o r e c e i v e “ n o t i c e o f a c l a i m ” w i t h i n s i x m o n t h s o f

t h e i n c i d e n t g i v i n g r i s e t o i t

. T E X



## . C I V



## . P R A C



## . & R E M



## . C O D E 

## § 1 0 1

. 1 0 1 ( a )

. T h e

s t a t u t e p r o v i d e s t h a t t h e n o t i c e m u s t r e a s o n a b l y d e s c r i b e t h e i n j u r y o r d a m a g e

c l a i m e d

, t h e t i m e a n d p l a c e o f t h e i n c i d e n t
, a n d t h e i n c i d e n t
, b u t c o n t a i n s n o

r e q u i r e m e n t t h a t a n y s o r t o f d e m a n d f o r p a y m e n t b e i n c l u d e d

, o r t h a t a n y l a w s u i t

t o p u r s u e t h e c l a i m b e f i l e d

. I d

.

C R : 5 8 6

- 5 8 8 ; A p p x

. E ( A p p l i c a t i o n p p

. 2

- 4

, p a r a g r a p h s 6

- 1 4 ) 3 0



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1 1

## J u s t a s “ n o t i c e o f a c l a i m ” u n d e r t h e T o r t C l a i m s A c t d o e s n o t r e q u i r e a n y

d e m a n d

, l a w s u i t
, o r o t h e r a f f i r m a t i v e a c t i o n t o p u r s u e o r c o l l e c t a c l a i m , “ n o t i c e o f

a c l a i m ” u n d e r t h e T e x a s F i n a n c e C o d e l i k e w i s e r e q u i r e s o n l y “ n o t i c e ” o f a c l a i m ,

n o t a “ d e m a n d ” o r “ p u r s u i t ” o f a c l a i m

. T h e B a n k c l e a r l y r e c e i v e d w r i t t e n n o t i c e

t h a t S m i t h w a s a s s e r t i n g h e h e l d a m a l i c i o u s p r o s e c u t i o n c l a i m , a s w e l l a s t h e b a s i s

f o r s u c h c l a i m , w h e n i t r e c e i v e d S m i t h ’ s w r i t t e n a p p l i c a t i o n c o n t a i n i n g s u c h

a s s e r t i o n s o n O c t o b e r 2 4

, 2 0 0 8

.

B

. P u r s u a n t t o s e c t i o n 3 0 4

. 1 0 4 o f t h e T e x a s F i n a n c e C o d e , t h e p r o p e r

a m o u n t o f p r e j u d g m e n t i n t e r e s t t o b e a w a r d e d t o P l a i n t i f f i s $ 8 4 , 5 4 2

. 0 0 ,
r a t h e r t h a n $ 5 4 , 2 4 3

. 0 0

.

T h e t r i a l c o u r t ’ s o r i g i n a l j u d g m e n t p r o p e r l y c a l c u l a t e d p r e j u d g m e n t i n t e r e s t

a t $ 8 4

, 5 4 2

. 0 0

, a n d t h e c o u r t ’ s m a t h h a s n e v e r b e e n i n d i s p u t e

. T h e c a l c u l a t i o n s a r e

i n c l u d e d h e r e i n o r d e r t o e n s u r e f u l l b r i e f i n g

.

S e c t i o n 3 0 4

. 1 0 4 o f t h e T e x a s F i n a n c e C o d e p r o v i d e s t h a t p r e j u d g m e n t

i n t e r e s t a c c r u e s b e g i n n i n g o n t h e 1 8 0 t h d a y a f t e r t h e d a t e a d e f

e n d a n t r e c e i v e s

w r i t t e n n o t i c e o f a c l a i m a n d e n d i n g t h e d a y b e f o r e t h e j u d g m e n t i s s i g n e d

.

A s a d d r e s s e d a b o v e , t h e B a n k r e c e i v e d w r i t t e n n o t i c e o f P l a i n t i f f ’ s c l a i m o n

O c t o b e r 2 4

, 2 0 0 8

. O n e

- h u n d r e d

- a n d

- e i g h t y d a y s a f t e r t h i s d a t e w a s A p r i l 2 2

,

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1 2

## 2 0 0 9

. 3 1



## T h e t r i a l c o u r t ’ s j u d g m e n t i n t h i s c a s e w a s s i g n e d o n D e c e m b e r 1 5

, 2 0 1 4

. 3 2



## F r o m A p r i l 2 2

, 2 0 0 9

, t o D e c e m b e r 1 4

, 2 0 1 4

, i s 2

, 0 6 2 d a y s

. A t t h e a n n u a l r a t e o f

f i v e p e r c e n t
, y e a r l y i n t e r e s t o n $ 3 0 0

, 0 0 0

. 0 0 i s $ 1 5

, 0 0 0

. 0 0

. D i v i d i n g t h a t 3 3 3 4



## a m o u n t b y 3 6 5 d a y s , t h e d a i l y i n t e r e s t a m o u n t i s $ 4 1

. 0 0 ( r o u n d e d d o w n )

.

M u l t i p l y i n g $ 4 1

. 0 0 b y 2

, 0 6 2 d a y s y i e l d s t o t a l p r e j u d g m e n t i n t e r e s t o f $ 8 4

, 5 4 2

. 0 0

.

T h i s w a s t h e a m o u n t o r i g i n a l l y o r d e r e d b y t h e c o u r t
, p r i o r t o g r a n t i n g t h e B a n k ’ s

m o t i o n t o a m e n d

, a n d i s t h e p r o p e r a m o u n t o f p r e j u d g m e n t i n t e r e s t

.

P R A Y E R

F o r t h e f o r e g o i n g r e a s o n s , C r o s s

- A p p e l l a n t r e s p e c t f u l l y r e q u e s t s :

1

. t h a t t h i s C o u r t m o d i f y t h e t r i a l c o u r t ’ s j u d g m e n t s o a s t o i n c l u d e $ 8 4

, 5 4 2

. 0 0

i n p r e j u d g m e n t i n t e r e s t a n d a f f i r m i t a s s o

- m o d i f

i e d ; a n d / o r

C r o s s

- A p p e l l a n t r e s p e c t f u l l y r e q u e s t s t h i s C o u r t t o t a k e j u d i c i a l n o t i c e o f t h e 3 1


## d a t e s a n d m a t h e m a t i c a l c a l c u l a t i o n s s e t f o r t h i n t h i s s e c t i o n

. S e e F r e e d o m C o m

. , I n c

. v

. C o r o n a d o , 3 7 2 S

. W

. 3 d 6 2 1

, 6 2 3 ( T e x

. 2 0 1 2 ) ( “ A n a p p e l l a t e c o u r t m a y t a k e j u d i c i a l

n o t i c e o f a r e l e v a n t f

a c t t h a t i s

. . . c a p a b l e o f a c c u r a t e a n d r e a d y d e t e r m i n a t i o n b y r e s o r t t o

s o u r c e s w h o s e a c c u r a c y c a n n o t r e a s o n a b l y b e q u e s t i o n e d

. ” ) ; T E X



## . R

. E V ID



## . 2 0 1

.

C R : 5 8 2 ; A p p x

. A ( C o u r t ’ s J u d g m e n t ) 3 2



## T h e j u d g m e n t a w a r d e d $ 3 0 0

, 0 0 0

. 0 0 i n c o m p e n s a t o r y d a m a g e s , n o t 3 3


## i n c l u d i n g i n t e r e s t

. I

d

.

. 0 5 x 3 0 0

, 0 0 0 = 1 5

, 0 0 0

. 3 4



### C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1 3

## 2

. t h a t t h i s C o u r t r e v e r s e a n d r e n d e r j u d g m e n t
, i n p a r t
, s o a s t o i n c l u d e

$ 8 4

, 5 4 2

. 0 0 i n p r e

j u d g m e n t i n t e r e s t
, a f

f i r m i n g t h e r e m a i n d e r o f t h e j u d g m e n t ; a n d

3

. t h a t C r o s s

- A p p e l l a n t r e c o v e r t h e a p p e l l a t e c o s t s i n c u r r e d b y h i m h e r e i n ; a n d

4

. t h a t C r o s s

- A p p e l l a n t h a v e a l l o t h e r a n d / o r f u r t h e r r e l i e f t h a t t h e l a w a n d t h e

n a t u r e o f t h i s c a s e m a y r e q u i r e

.

R e s p e c t f u l l y s u b m i t t e d

,

/ s / J

. M a r k S u d d e r t h
J

. M a r k S u d d e r t h
T e x a s B a r N o
. 1 9 4 6 1 5 0 0
N O T E B O O M



## – T H E 

## L A W 

## F I R M 

## 6 6 9 A i r p o r t F r e e w a y , S u i t e 1 0 0
H u r s t
, T e x a s 7 6 0 5 3 ( 8 1 7 ) 2 8 2

- 9 7 0 0 ( 8 1 7 ) 2 8 2

- 8 0 7 3 ( f

a c s i m i l e ) S u d d e r t h @ N o t e b o o m

. c o m

A t t o r n e y s f

o r C r o s s

- A p p e l l a n t
, J o h n A l e x a n d e r S m i t h

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1 4

## C E R T I F I C A T E O F S E R V I C E

I c e r t i f y t h a t a t r u e a n d c o r r e c t c o p y o f t h e a t t a c h e d d o c u m e n t b e e n s e r v e d

u p o n a l l c o u n s e l r e c o r d o n t h e 1 6 d a y o f S e p t e m b e r , 2 0 1 5

, v i a e

- s e r v i c e , t o t h e th



## a t t o r n e y s o f r e c o r d f

o r C r o s s

- A p p e l l e e C i t y N a t i o n a l B a n k o f S u l p h u r S p r i n g s a s f o l l o w s :

J o h n R

. M e r c y M e r c y , C a r t e r , T i d w e l l

, L

. L

. P

. 1 7 2 4 G a l l e r i a O a k s D r i v e T e x a r k a n a , T e x a s 7 5 5 0 3
E

- m a i l : j m e r c y @ t e x a r k a n a l a w y e r s

. c o m

C o y J o h n s o n E

- m a i l : c o y @ c l a y

j o h n s o n l a w

. c o m C l a y J o h n s o n E

- m a i l : c l a y @ c l a y

j o h n s o n l a w

. c o i m J o h n s o n L a w F i r m , P

. C

. 6 0 9 G i l m e r S t r e e t S u l p h u r S p r i n g s , T e x a s 7 5 4 8 2 / s / J

. M a r k S u d d e r t h
J

. M a r k S u d d e r t h

C E R T I F I C A T E O F C O M P L I A N C E

T h i s d o c u m e n t c o m p l i e s w i t h t h e t y p e f a c e r e q u i r e m e n t s o f T E X



## . R

. A P P



## . P

. § 9

. 4 ( e ) b e c a u s e i t h a s b e e n p r e p a r e d i n a c o n v e n t i o n a l t y p e f a c e n o s m a l l e r t h a n 1 4

- p o i n t f

o r t e x t a n d 1 2

- p o i n t f

o r f o o t n o t e s

.

I c e r t i f y t h a t t h i s b r i e f w a s p r e p a r e d w i t h C o r e l W o r d P e r f e c t X 5

, a n d t h a t
,
a c c o r d i n g t o t h a t p r o g r a m ’ s w o r d

- c o u n t f u n c t i o n , t h e s e c t i o n s c o v e r e d b y T E X



## . R

. A P P



## . P

. § 9

. 4 ( i ) ( 1 ) c o n t a i n 2

, 9 0 5 w o r d s , t h u s b r i n g i n g t h e b r i e f i n t o c o m p l i a n c e

w i t h t h e w o r d

- c o u n t l i m i t a t i o n s o f t h a t R u l e

.

/ s / J

. M a r k S u d d e r t h
J

. M a r k S u d d e r t h

C r o s s
- A p p e l l a n t ’ s B r i e f

- P a g e 1 5

# APPENDIX

A. Fi na l J ud gm en t (C R: 58 2)

B. Ord er o n M ot io n t o M od ify Ju dg m en t (S CR: 5)

C. Ju ry

Ch arg e an d Ver di ct (CR: 53 5)

D. Tex . Fin . Cod e 3 04 .10 4

E. Pet it io ne r’s App li cat io n fo r In ve st ig at iv e Dep os it io ns (CR: 58 5)

F. Pl ai nt iff ’s let te r to tri al co ur t s ub m it ti ng pro po se d ju dg m en t (C R: 58 4)

G. Defen da nt ’s Mo ti on to Mo di fy Ju dg m en t (C R: 60 5)

H. Pl ai nt iff ’s Res po ns e to Defen da nt ’s Mo ti on to Mo di fy Ju dg m en t (C R: 61 5)

I. Bever

s v. S ou le (Tex . App .–F or t Wort h 1 99 5)

J. Bro ok

sh ir e Gro cer

y Co . v. Smi th (Tex . App .–B eau m on t 2 00 3)

K. Free do m Com., In c. v. Co ro na do (Tex . 20 12 )

L. Hele na Ch emic al

Co . v. W at ki ns (Tex . App .–S an Ant on io 20 00 )

M. Hop ki ns v. Sp ri ng

Ind ep . Sch . Dis t. (Tex .19 87 )

N. Jo hn so n & Hig

gi ns of Texa s, In c. v. Ken ne co Ener gy , Inc

. (Tex . 19 98 )

O. K Ma rt

Co rp . v. Rhyn e (Tex . App .–Tex ark an a 1 99 6)

P. MCN En er

gy v. Omag ro de Co lo mbi a (Tex . App .–F or t Wort h 2 00 3)

Q. Pri ng le v. Moo n (Tex . App .–F or t Wort h 2 00 5)

R. Qui ck v. Ci ty of

Aus ti n (Tex .19 98 )

S. Rob in so n v . Bri ce (Tex . App .–Au st in 19 95 )

# T. Tex. Dep 't o f Tr an sp . v. Need

ha m (Tex .20 02 )

U. To sh ib a Ma ch . Co. v. S PM Flow Co nt ro l, In c. (Tex . App .–F or t Wort h 2 00 5)

V. T E X



# . R. E V ID



# . 20 1

W

. T E X



# . C IV



# . P R A C



# . & R E M



# . C O D E 

# § 1 01 .10 1

X. T E X



# . G O V



# . C O D E 

# § 31 1.0 11

# A[ 

# .. 

# •

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

## " • 

# • •

$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

.

C I TY NAT I ONAL BA NK 

### OF SUL PI I UR SPR I NGS NO. CV40681



### IN THE D I STR I CT

### ff9**U~T** I I



# .
OF H OPK I NS COUNTY. ' I I : AAS



### 62"1J J UDIClAL DISTR I CT

OIW E I{**0~** MOTIO N TO MOD I F Y .JUDGME NT



### On February 5. 2015. 

### the Co u rt conside r ed Defendant City Na t ional B ank 

### of Sulphur**Spring~·** 

### Motion to Modify J u d gmc.:nt Altc.:r co n s1th.:ring th e •not ion und argumc.:nt of counsel. the

Co urt is 

### of the op i mon that tht: mo t io n sho uld be**gra nt** **~;t.l.**



## rr I S, Tll ERE f-ORl. ORDERE D t hn t D cl"cnda nt City National 

### Han k of' Sulphtu Spnng•·.'

Mo ti o n to 

### Mod if y 

### is GRANTED.

I T 

### I S**HJRTHI R**  

### O RD ER.ED t hu t the Cour t' s 

### Judgment ente r ed on**Dct;embcr ~.**  

### 20 14 

## i..,

modified to show that th e pro p er amo unt 

### o f' prc.:judgment i n tt: r es t awa rded to P la u llll'f'**111thi~ ca.;~.:**  1!-



### Filly-four Thousand Two llundrcd l

· nrty-thrcc Dollar., ($54.243.00).



### W ILl 1-J I ARD

. . luJ ge 

### Presiding 

# .·

# C

### '



## 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: 

# ,...., =

.r

### z 0 

### < N C)



### -·o ::!::



### w

.;::- U:J



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

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

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

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

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

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

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

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

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

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

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

the evidence in this case. 

## ""il i 

# """""-
ll'-'"'·**~** 

# rn

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

Page I

## 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

## 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 \

### 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

### 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

## Answer the following question only if you unanimously answered "Yes" to Question 1. 

## Otherwise, do not answer the following question.

To answer "Yes" to the following question, your answer must he unanimous. You may

answer "No" to the following question only upon a vote of ten or more jurors. Otherwise,
you must not answer the following question.

QUESTION 3:

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

"Clear and convincing evidence" means the measure or degree of proof that produces a firm belief

or conviction of the truth of the allegations sought to be established.

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

amount to a willful or wanton act.

Answer 11 

## Yes 11 

## or 11 

## N0. 11



## ANSWER: 

# "'tS

Page 6

## 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

## 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

### CERTJFICATENO. I

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

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

# s~q_~ PRESIDING JUROR

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

Page9

## 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

### 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., F inan ce C ode § 304.104

§ 304.104. Acc rual of

P rej udgme nt Intere st

Ex cept a s provided by

Section 304.105 or 304.108, pre judgme nt interest ac crue s on the amount of a judg ment during the per iod beg inning on the e arlier of the 180th day

afte r the da te the defe ndant re ceive s written notice of a cla im or the date the suit is fil ed and e nding on the day

prec eding the date judg ment is render ed. Prejudg ment interest is computed a s simple interest and does not compound.

Cre dits Amended by

Acts 1999, 76th L eg ., ch. 62, § 7.18(a ), ef f. Sept. 1, 1999.

# E

# .. 

# •

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: 

## "' 

# '"' = = 0 0 -j

0 

# " :::.:

w



# ..

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

# .. 

# • •

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

# • •

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. 

### ' 

# • •

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

# • •

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)

### • 

# • •

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

# NOTEBCIDM 

# •

-THE 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: (/)--.;' (""")**g~;-** 

## c:....: U1

### =s·~· 

# _ _.. -u**:<;..,~** 3:**--~~~** 

### fT'-:oo 

### >< :P J:_- 

# r 

# rn 0

U> N 

### As requested by the Court. Plaintiff hereby submits the enclosed proposed judgment. The dollar amounts

are calculated as follows:

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

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

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

In accordance with the verdict. the proposed judgment also includes punitive damages in the amount of $500.000.00. 

### It also includes an award of all taxable court costs to Plaintiff and provides for 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

## 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).

# 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

## 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

## 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

### 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

# 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

# Hi



### I', 

## I 

# • •

CAUSE NO. CV-40681

JOHN ALEXANDER SMITH 

## Plaintiff 

## § § 

## § § § § 

## § § IN THE DISTRICT COURT OF

\', ::;: 0 -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

# • •

By detailing the facts, asserting that the bank's conduct had proximately caused damages,

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

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

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

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

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

No 

### "Demand for Payment" Is Required

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

### the judgment asserts that, "to constitute a claim for purposes of the prejudgment interest

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

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



## either a demand for compensation 

## or an assertion of a right to be paid will suffice. No "demand"

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

damages need be mentioned.

The Texas Supreme Court addressed this rule in 

## Johnson & 

## Higgins of Texas. Inc. v.

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

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

The agreement merely stated:

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

... , 

## J & 

### His liable

to Kenneco for the amounts which Kenneco has claimed under the Policy 2



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



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

Plai1!1iff's Response to Defendam's Motion to Modif.r Judgment Page 2

# • •

language constituted a "claim" because it asserted a right to compensation. The Court stated the rule

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

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

.... Through the standstill agreement 

## J & 

## H received written notice that Kenneco was claiming a right to compensation 3



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

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

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

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

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

at 531 and Robinson v. 

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

Defendant's motion also mis-cites Robinson v. 

## Brice for the incorrect assertion that a

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

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

claim. The Robinson court explained:

The statute does not define the term "claim," and therefore, we must construe it according

to its ordinary meaning. Tex.Gov't Code Ann. § 312.002(a) (West 1988); Hopkins v. 

## Spring Indep. Sch. Dist., 736 S. W.2d 617, 619 (Tex.l987). The word "claim" ordinarily means a demand for compensation or an assertion of a right to be paid.

The accident report fails as written notice of a claim

... because it is not notice of a demand for compensation or an assertion of a right to be paid.'

3 

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

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

Plaillliff's Respouse to /Jefeudalll 's Motiou to 

### Modif.r Judgmeut Pagel

# • •

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

# • •

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

# • •

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

# • •

Exhibit A

# •

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

# • •

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

# • •

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

# • •

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

# • •

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:.~.;**

# • •

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

### 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 

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. 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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# IBevers v. Sou le, 909 S.W .2d 599 (199 5)

9 0 9 S

. W

. 2 d 5 9 9 C o u r t o f A p p e a l s o f T e x a s , F o r t W o r t h

.

L a u r e n B E V E R S
, A p p e l l a n t ,

v

. R o n a l d B

. S O U L E
, A p p e l l e e

. N o

. 2

– 9 4

– 1 6 0

– C V

. | O c t

. 1 9 , 1 9 9 5

.

M o t o r i s t w h o w a s i n v o l v e d i n c o l l i s i o n i n w h i c h h i s

a u t o m o b i l e w a s s t r u c k f r o m b e h i n d b r o u g h t a c t i o n a g a i n s t f o l l o w i n g d r i v e r , a n d t h e 9 6 t h D i s t r i c t C o u r t
, T a r r a n t C o u n t y , J e f f W a l k e r , J

. , e n t e r e d j u d g m e n t o n j u r y v e r d i c t f o r m o t o r i s t

. F o l l o w i n g d r i v e r a p p e a l e d

, a n d t h e C o u r t o f A p p e a l s , R i c h a r d s , J

. , h e l d t h a t : ( 1 ) f i n d i n g t h a t c o l l i s i o n w a s
p r o x i m a t e c a u s e o f m o t o r i s t 's h e r n i a t e d d i s k w a s s u p p o r t e d b y

e v i d e n c e ; ( 2 ) l e t t e r s e n t b y m o t o r i s t t o f o l l o w i n g d r i v e r 's
i n s u r e r w a s s u f

f i c i e n t t o c o n s t i t u t e n o t i c e o f c l a i m a n d

a l l o w e d a c c r u a l o f p r e j u d g m e n t i n t e r e s t b e g i n n i n g 1 8 0 d a y s

a f t e r r e c e i p t o f

l e t t e r ; b u t ( 3 ) j u d g m e n t w o u l d b e r e f o r m e d t o

r e f l e c t s i m p l e c o m p o u n d i n g o f p r e j u d g m e n t i n t e r e s t a n d

a n n u a l c o m p o u n d i n g o f p o s t j u d g m e n t i n t e r e s t

.

A f f i r m e d a s r e f

o r m e d

.

W e s t H e a d n o t e s ( 1 2 )

[ 1 ] A p p e a l a n d E r r o r

I n t e r r o g a t o r i e s a n d s p e c i a l v e r d i c t s A p p e a l a n d E r r o r S u f f i c i e n c y o f E v i d e n c e i n S u p p o r t

I n d e t e r m i n i n g n o e v i d e n c e p o i n t
, r e v i e w i n g c o u r t i s t o c o n s i d e r o n l y e v i d e n c e a n d i n f e r e n c e s t h a t

t e n d t o s u p p o r t f

i n d i n g a n d d i s r e g a r d a l l e v i d e n c e

a n d i n f e r e n c e s t o c o n t r a r y ; i f t h e r e i s m o r e t h a n

s c i n t i l l a o f e v i d e n c e t o s u p p o r t f i n d i n g , c l a i m i s

s u f f i c i e n t a s m a t t e r o f

l a w , a n d a n y c h a l l e n g e s g o

m e r e l y t o w e i g h t t o b e a c c o r d e d e v i d e n c e

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e [ 2 ] A p p e a l a n d E r r o r T o t a l f a i l u r e o f p r o o f

N o e v i d e n c e p o i n t o f e r r o r m a y o n l y b e s u s t a i n e d

w h e n r e c o r d d i s c l o s e s t h a t t h e r e i s c o m p l e t e

a b s e n c e o f e v i d e n c e o f v i t a l f a c t
, t h a t c o u r t i s b a r r e d b y r u l e s o f l a w o r e v i d e n c e f r o m g i v i n g

w e i g h t t o o n l y e v i d e n c e o f f e r e d t o p r o v e v i t a l
f a c t
, t h a t e v i d e n c e o f

f e r e d t o p r o v e v i t a l f

a c t i s n o

m o r e t h a n s c i n t i l l a o f e v i d e n c e , o r t h a t e v i d e n c e

e s t a b l i s h e s c o n c l u s i v e l y o p p o s i t e o f v i t a l f a c t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 ] A p p e a l a n d E r r o r

S u f f i c i e n c y o f E v i d e n c e i n S u p p o r t
A p p e a l a n d E r r o r T o t a l f a i l u r e o f p r o o f

T h e r e i s s o m e e v i d e n c e t o s u p p o r t f i n d i n g , a n d n o

e v i d e n c e p o i n t o f e r r o r m u s t b e d e n i e d

, w h e n
p r o o f s u p p l i e s r e a s o n a b l e b a s i s o n w h i c h

r e a s o n a b l e m i n d s m a y r e a c h d i f f e r e n t c o n c l u s i o n s

a b o u t e x i s t e n c e o f v i t a l f a c t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 ] A p p e a l a n d E r r o r

S u f f i c i e n c y o f E v i d e n c e i n S u p p o r t
A p p e a l a n d E r r o r G r e a t o r o v e r w h e l m i n g w e i g h t o r
p r e p o n d e r a n c e

A s s e r t i o n t h a t e v i d e n c e i s i n s u f f i c i e n t t o s u p p o r t f a c t f i n d i n g c a n m e a n t h a t e v i d e n c e s u p p o r t i n g f i n d i n g i s s o w e a k o r t h a t e v i d e n c e t o c o n t r a r y i s

s o o v e r w h e l m i n g t h a t f i n d i n g s h o u l d b e s e t a s i d e

a n d n e w t r i a l o r d e r e d

.

C a s e s t h a t c i t e t h i s h e a d n o t e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1Bevers v. Sou le, 909 S.W .2d 599 (199 5)

[ 5 ] A p p e a l a n d E r r o r

E x t e n t o f R e v i e w A p p e a l a n d E r r o r F o r m a n d r e q u i s i t e s

R e v i e w i n g c o u r t i s r e q u i r e d t o c o n s i d e r a l l

e v i d e n c e i n c a s e i n m a k i n g d e t e r m i n a t i o n o f

w h e t h e r e v i d e n c e i s i n s u f f i c i e n t t o s u p p o r t f

a c t u a l
f i n d i n g , a n d i f r e v e r s i n g t o d e t a i l t h a t e v i d e n c e i n

o p i n i o n

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 6 ] D a m a g e s

P e r s o n a l I n

j u r i e s a n d P h y s i c a l S u f f e r i n g

F i n d i n g t h a t c o l l i s i o n i n w h i c h m o t o r i s t 's

a u t o m o b i l e w a s s t r u c k f r o m b e h i n d b y f

o l l o w i n g

v e h i c l e w a s p r o x i m a t e c a u s e o f m o t o r i s t 's
h e r n i a t e d d i s k w a s s u p p o r t e d b y t e s t i m o n y o f
f o l l o w i n g d r i v e r t h a t h e r s p e e d w a s i n r a n g e o f 2 5

t o 3 0 m i l e s p e r h o u r a n d t h a t c o l l i s i o n w a s “ f a i r l y h a r d

, ” b y t e s t i m o n y o f m o t o r i s t t h a t p r i o r t o

a c c i d e n t h e h a d o n l y s u f f e r e d v e r y m i n o r b a c k

p r o b l e m s w h i c h h a d g o n e a w a y , a n d b y e v i d e n c e
t h a t U

- b o l t o n m o t o r i s t 's a u t o m o b i l e w a s d a m a g e d

a s r e s u l t o f c o l l i s i o n a n d t h a t e m p l o y m e n t

e x a m i n a t i o n o f m o t o r i s t o n e y e a r p r i o r t o a c c i d e n t h a d r e v e a l e d n o b a c k p r o b l e m s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 7 ] A n t i t r u s t a n d T r a d e R e g u l a t i o n

N o t i c e a n d d e m a n d r e q u i r e m e n t s ;

o p p o r t u n i t y t o c u r e

N o t i c e p r o v i s i o n s o f T e x a s D e c e p t i v e T r a d e P r a c t i c e s A c t r e q u i r e p o t e n t i a l p l a i n t i f f t o f i r s t i d e n t i f y n a t u r e o f

c o m p l a i n t a n d a m o u n t r e q u i r e d

t o c o m p e n s a t e h i m f

o r h i s d a m a g e s

. V

. T

. C

. A

. , B u s

. & C

. § 1 7

. 5 0 5 ( a )

.

C a s e s t h a t c i t e t h i s h e a d n o t e [ 8 ] I n t e r e s t
F o r m a n d s u f

f i c i e n c y o f d e m a n d

N o t h i n g i n s t a t u t e g o v e r n i n g a c c r u a l o f

p r e j u d g m e n t i n t e r e s t i n p e r s o n a l i n j u r y c a s e s

r e q u i r e s c l a i m a n t t o d e m a n d e x a c t a m o u n t o r l i s t

e v e r y e l e m e n t o f d a m a g e c l a i m e d i n o r d e r t o
t r i g g e r n o t i c e o f c l a i m p r o v i s i o n

. V e r n o n ' s A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 9 ] I n t e r e s t

F o r m a n d s u f

f i c i e n c y o f d e m a n d

L e t t e r s e n t b y m o t o r i s t w h o w a s i n j u r e d i n

a u t o m o b i l e a c c i d e n t t o i n s u r a n c e c a r r i e r o f

s e c o n d d r i v e r i n v o l v e d w a s s u f f i c i e n t t o c o n s t i t u t e

n o t i c e o f c l a i m , a n d p r e j u d g m e n t i n t e r e s t b e g a n

a c c r u i n g 1 8 0 d a y s a f

t e r r e c e i p t o f l e t t e r , w h e r e l e t t e r c o n t a i n e d i n f

o r m a t i o n t o a l l o w i n s u r e r t o b e g i n c o n s i d e r i n g m o t o r i s t 's i n j u r y c l a i m a n d
i n c l u d e d s i g n e d c o p y o f m e d i c a l a u t h o r i z a t i o n f o r m , e v e n t h o u g h l e t t e r d i d n o t s t a t e n a t u r e o f

c o m p l a i n t a n d a m o u n t o f d a m a g e s s o u g h t

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a )

.

5 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 0 ] I n t e r e s t

M o d e o f c o m p u t a t i o n i n g e n e r a l

L e g i s l a t u r e h a s s p e c i f i c a l l y m a n d a t e d t h a t

p r e j u d g m e n t i n t e r e s t i n w r o n g f u l d e a t h

, p e r s o n a l
i n j u r y , p r o p e r t y d a m a g e , a n d c o n d e m n a t i o n c a s e s b e c o m p u t e d o n l y a s s i m p l e i n t e r e s t

. V e r n o n 's
A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( g )

.

C a s e s t h a t c i t e t h i s h e a d n o t e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2Bevers v. Sou le, 909 S.W .2d 599 (199 5)

[ 1 1 ] I n t e r e s t

M o d e o f c o m p u t a t i o n i n g e n e r a l
I n t e r e s t C o m p o u n d i n t e r e s t

J u d g m e n t i n f

a v o r o f s u c c e s s f

u l l i t i g a n t i n
p e r s o n a l i n

j u r y a c t i o n s h o u l d r e f l e c t t w o

c a l c u l a t i o n s w i t h r e s p e c t t o i n t e r e s t ; c a l c u l a t i o n f o r p r e j u d g m e n t i n t e r e s t o n p l a i n t i f f 's d a m a g e s a t

a p p l i c a b l e i n t e r e s t r a t e , c o m p u t e d a s s i m p l e i n t e r e s t
, a n d p o s t

j u d g m e n t i n t e r e s t o n t o t a l s u m a t

a p p l i c a b l e i n t e r e s t r a t e , c o m p o u n d e d a n n u a l l y ,
a n d b e g i n n i n g o n d a t e j u d g m e n t i s s i g n e d a n d

u n t i l j u d g m e n t i s s a t i s f i e d

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § § 3 ( a )

, 6 ( g )

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 2 ] I n t e r e s t

C o m p o u n d i n t e r e s t

T r i a l c o u r t e r r e d i n e n t e r i n g j u d g m e n t i n p e r s o n a l
i n j u r y a c t i o n w h i c h i n c l u d e d p r e j u d g m e n t i n t e r e s t

a w a r d w h i c h w a s b a s e d o n a n n u a l c o m p o u n d i n g

o f i n t e r e s t ; j u d g m e n t w a s r e f o r m e d t o r e f

l e c t

c a l c u l a t i o n o f p r e j u d g m e n t i n t e r e s t b a s e d o n

s i m p l e c o m p o u n d i n g , w i t h p o s t j u d g m e n t i n t e r e s t

o n j u d g m e n t a m o u n t t o b e c o m p o u n d e d a n n u a l l y

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § §
3 ( a )

, 6 ( g )

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

A t t o r n e y s a n d L a w F i r m s

* 6 0 0 J o h n J

. D r a k e , S h a n n o n , G r a c e y , R a t l i f f & M i l l e r , L L P

, F o r t W o r t h

, f

o r a p p e l l a n t

.

L e l a n d A

. R e i n h a r d

, C a t t e r t o n & R e i n h a r d

, F o r t W o r t h

, f o r

a p p e l l e e

. B e f o r e D A Y

, D A U P H I N O T a n d R I C H A R D S

, J J

.

O P I N I O N R I C H A R D S

, J u s t i c e

.

T h i s a p p e a l i s f

r o m a p e r s o n a l i n

j u r y c a s e i n v o l v i n g a n

a u t o m o b i l e a c c i d e n t

. A p p e l l a n t L a u r e n B e v e r s ( “ B e v e r s ” ) w a s
t h e d e f e n d a n t i n t h e t r i a l c o u r t

. A p p e l l e e R o n a l d S o u l e ( “ S o u l e ” )

, p l a i n t i f

f i n t h e c o u r t b e l o w , a l l e g e d h e s u f f e r e d

p h y s i c a l i n

j u r i e s c a u s e d b y B e v e r s ' n e g l i g e n c e w h e n h e r

v e h i c l e s t r u c k h i s v e h i c l e i n a r e a r

- e n d c o l l i s i o n

. T r i a l w a s t o

a j u r y , w h i c h a w a r d e d S o u l e $ 1 8 7

, 5 0 0

. 0 0

.

B e v e r s p r e s e n t s t h r e e p o i n t s o f e r r o r o n a p p e a l

. I n p o i n t o f

e r r o r o n e , s h e c o m p l a i n s t h e r e w a s n o e v i d e n c e , o r , i n t h e

a l t e r n a t i v e , i n s u f

f i c i e n t e v i d e n c e t o s u p p o r t t h e j u r y 's f i n d i n g
t h e a c c i d e n t w a s t h e p r o x i m a t e c a u s e o f S o u l e 's i n j u r i e s

. I n
p o i n t o f e r r o r t w o , s h e c o n t e n d s t h e t r i a l c o u r t e r r e d i n

o r d e r i n g t h a t p r e j u d g m e n t i n t e r e s t a c c r u e o n t h e d a t e S o u l e f i r s t c o n t a c t e d h e r , r a t h e r t h a n o n t h e d a t e s u i t w a s f i l e d

. I n h e r
t h i r d p o i n t o f e r r o r , B e v e r s c o n t e n d s t h e t r i a l c o u r t e r r e d i n

o r d e r i n g t h a t p r e j u d g m e n t i n t e r e s t b e c o m p o u n d e d a n n u a l l y

r a t h e r t h a n a s s i m p l e i n t e r e s t

.

W e a f f i r m i n p a r t a n d r e f

o r m i n p a r t

.

T h e s u f f i c i e n c y c h a l l e n g e p r e s e n t e d i n B e v e r s ' i n i t i a l p o i n t o f

e r r o r r e q u i r e s r e v i e w o f t h e c i r c u m s t a n c e s o f t h e c o l l i s i o n a n d

t h e t e s t i m o n y r e l a t i n g t o S o u l e 's p h y s i c a l i n j u r i e s

.

O n t h e m o r n i n g o f A u g u s t 2 1

, 1 9 9 0

, S o u l e w a s t r a v e l i n g t o

w o r k i n h i s A m e r i c a n M o t o r C o m p a n y C o n c o r d o n I n t e r s t a t e H i g h w a y 3 5 n e a r d o w n t o w n F o r t W o r t h

. B e c a u s e o f h e a v y

r u s h

- h o u r t r a f

f i c , h e s l o w e d d o w n a n d u l t i m a t e l y c a m e t o a

c o m p l e t e s t o p d u e t o b u m p e r

- t o

- b u m p e r c o n g e s t i o n

. W h e n h e l o o k e d i n t o h i s r e a r

- v i e w m i r r o r , S o u l e s a w a C h e v r o l e t C a m a r o a p p r o a c h i n g f r o m b e h i n d a t a s p e e d s u g g e s t i n g t h e d r i v e r d i d n o t i n t e n d t o s t o p

. S o u l e i n i t i a l l y e s t i m a t e d t h e

s p e e d o f t h e C a m a r o a t f o r t y t o f i f t y m

. p

. h

. , b u t l a t e r t e s t i f i e d
i t m a y h a v e b e e n m o v i n g “ s o m e t h i n g l e s s t h a n t h a t

. ” B e c a u s e h e e x p e c t e d t h e c o l l i s i o n w o u l d t h r o w h i s b o d y f o r w a r d

, S o u l e b r a c e d h i m s e l f f

o r t h e i m p a c t

. T h e C a m a r o , d r i v e n b y B e v e r s ,
s t r u c k * 6 0 1 S o u l e 's c a r w i t h e n o u g h f o r c e t o c a u s e h i s v e h i c l e
t o s t r i k e t h e c a r p r e v i o u s l y s t o p p e d s i x f e e t i n f r o n t o f h i m

. T h e f o r c e o f t h e r e a r

- e n d c o l l i s i o n , c o n t r a r y t o S o u l e 's i n i t i a l

e x p e c t a t i o n , f

o r c e d h i s b o d y b a c k i n t o t h e s e a t

. H e w a s t h e n
t h r o w n f o r w a r d b y t h e s e c o n d a r y c o l l i s i o n w i t h t h e t h i r d c a r , b u t w a s p a r t i a l l y r e s t r a i n e d b y h i s s e a t b e l t

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3Bevers v. Sou le, 909 S.W .2d 599 (199 5)

I t a p p e a r e d t h e c o l l i s i o n c a u s e d o n l y m o d e r a t e d a m a g e t o S o u l e 's C o n c o r d ; h o w e v e r , a f t e r S o u l e 's w i f

e t o l d h i m t h a t t h e

r e a r e n d o f

t h e c a r d i d n o t a p p e a r t o b e p r o p e r l y f o l l o w i n g i t s f r o n t e n d

, i t w a s d i s c o v e r e d t h a t t h e i m p a c t h a d d a m a g e d t h e U

– B o l t
, w h i c h h a d t o b e r e p l a c e d

.

I n i t i a l l y , S o u l e d i d n o t b e l i e v e h e h a d b e e n i n j u r e d

. F o l l o w i n g
t h e a c c i d e n t
, h e d r o v e h i s w r e c k e d v e h i c l e t h r o u g h s t i l l

- h e a v y
t r a f f i c a p p r o x i m a t e l y f

o u r m i l e s t o h i s o f

f i c e

. A t a b o u t t h e
t i m e h e a r r i v e d a t h i s o f f i c e , h e b e g a n e x p e r i e n c i n g p a i n i n h i s

r i g h t c a l f a n d f

o o t

. T h i n k i n g t h e p a i n m i g h t g o a w a y , S o u l e

c o n t i n u e d t o w o r k ; h o w e v e r , i n s t e a d o f i m p r o v i n g , t h e p a i n i n h i s r i g h t l e g g r e w p r o g r e s s i v e l y w o r s e

. L a t e r i n t h e d a y , S o u l e f e l t a “ k i n d o f t i g h t n e s s ” i n h i s b a c k t h a t w a s n o t i n i t i a l l y
p a i n f u l

. S o u l e t r e a t e d t h e t i g h t n e s s w i t h T y l e n o l a n d m a d e a n

a p p o i n t m e n t w i t h t h e N o r t h e a s t M e d i c a l C l i n i c , w h e r e h i s f a m i l y d o c t o r o f f

i f t e e n y e a r s , D r

. D a v i d L a w , w a s a s s o c i a t e d

. B e c a u s e D r

. L a w 's s c h e d u l e w o u l d n o t h a v e p e r m i t t e d S o u l e
t o s e e h i m f

o r a w e e k

, S o u l e m a d e a n a p p o i n t m e n t w i t h

a n o t h e r a s s o c i a t e , D r

. T y s o n , f o r A u g u s t 2 4

, 1 9 9 0

.

D r

. T y s o n o r d e r e d a s e r i e s o f x

- r a y s a n d p r e s c r i b e d

a n t i

- i n f l a m m a t i o n a n d p a i n m e d i c a t i o n

. S i x d a y s l a t e r S o u l e

s a w D r

. L a w , w h o c o n t i n u e d w i t h t h e s a m e m e d i c a l t r e a t m e n t

o n a n a p p r o x i m a t e l y o n c e

- a

- m o n t h b a s i s f o r t h r e e m o n t h s

. T h e r e a f t e r , D r

. L a w r e f

e r r e d S o u l e t o D r

. J u a n C a p e l l o , a n

o r t h o p e d i c s u r g e o n

.

D r

. C a p e l l o p r e s c r i b e d m e d i c a t i o n s a n d s u g g e s t e d a f o u r

- m o n t h c o u r s e o f p h y s i c a l t h e r a p y ; h o w e v e r , S o u l e

c o n t i n u e d h a v i n g p a i n i n h i s l o w e r b a c k a n d r i g h t l e g

. A c c o r d i n g t o S o u l e , D r

. C a p e l l o d i d n o t b e l i e v e t h e r e w o u l d
b e a n y f u r t h e r i m p r o v e m e n t a n d s u g g e s t e d t h a t h e s i m p l y l e a r n
t o “ l i v e w i t h ” h i s i n

j u r y

. W h e n t h e p a i n s e e m e d t o g r o w w o r s e , S o u l e s a w a n o t h e r o r t h o p e d i c s u r g e o n , D r

. M y r o n G l i c k f e l d

,
w h o d i a g n o s e d t h e i n

j u r y a s a h e r n i a t e d d i s c w h i c h r e q u i r e d

s u r g e r y

. S o u l e t e s t i f

i e d t h a t h e d i d n o t i n i t i a l l y a g r e e t o

s u r g e r y b e c a u s e a h i g h s c h o o l f r i e n d h a d b e c o m e p a r a l y z e d
f r o m t h e c h e s t d o w n a s a r e s u l t o f n e r v e d a m a g e

. B e c a u s e o f
h i s f e a r o f n e r v e d a m a g e , S o u l e t r i e d t o c o n t r o l t h e p a i n w i t h

m e d i c a t i o n s f

o r t h e n e x t e i g h t m o n t h s

. W h e n t h e p a i n g o t

w o r s e , S o u l e r e l e n t e d a n d w a s o p e r a t e d o n b y D r

. G l i c k f e l d o n A u g u s t 1 9

, 1 9 9 2

. S o u l e t e s t i f i e d t h e s u r g e r y h e l p e d

, b u t d i d

n o t c o m p l e t e l y e l i m i n a t e t h e p a i n

.

S o u l e t e s t i f

i e d t h e o n l y p r i o r b a c k s y m p t o m s h e h a d e v e r

e x p e r i e n c e d w e r e t w o m u s c l e p u l l s w h i c h o c c u r r e d o v e r t w o
y e a r s p r i o r t o t h e a u t o a c c i d e n t

. O n e w a s a m u s c l e p u l l i n t h e

a r e a o f h i s a b d o m e n f

r o m s t r e t c h i n g a n d t h e o t h e r w a s “ m i n o r ”

p u l l i n t h e b a c k i m m e d i a t e l y b e h i n d t h e a b d o m e n i n j u r y

. H e t o o k m e d i c a t i o n f o r t w o w e e k s a n d n e v e r h a d a n o t h e r

s y m p t o m f

r o m e i t h e r i n

j u r y s i n c e t h a t t i m e

. S o u l e a l s o t e s t i f i e d

t h a t i n J u l y o f 1 9 8 9

, h e h a d a p p l i e d f o r a j o b w i t h A m e r i c a n A i r l i n e s a n d h a d u n d e r g o n e a c o m p l e t e p h y s i c a l t h a t i n c l u d e d

r a n g e o f m o t i o n t e s t s t o d i a g n o s e a n y s p i n e p r o b l e m s

. N o b a c k

p r o b l e m s w e r e f

o u n d a n d t h e a i r l i n e 's d o c t o r f o u n d S o u l e 's

s k e l e t a l s y s t e m t o b e “ n o r m a l

. ”

[ 1 ] I n d e t e r m i n i n g a “ n o e v i d e n c e ” p o i n t
, w e a r e t o c o n s i d e r

o n l y t h e e v i d e n c e a n d i n f e r e n c e s t h a t t e n d t o s u p p o r t t h e f i n d i n g a n d d i s r e g a r d a l l e v i d e n c e a n d i n f e r e n c e s t o t h e

c o n t r a r y

. T

. O

. S t a n l e

y B o o t C o

. v

. B a n k o f E l P a s o , 8 4 7
S

. W

. 2 d 2 1 8

, 2 2 1 ( T e x

. 1 9 9 2 ) ; O r o z c o v

. S a n d e r , 8 2 4 S

. W

. 2 d
5 5 5

, 5 5 6 ( T e x

. 1 9 9 2 ) ; I n r e K i n g '

s E s t a t e , 1 5 0 T e x

. 6 6 2

, 2 4 4
S

. W

. 2 d 6 6 0

, 6 6 1

– 6 2 ( 1 9 5 1 )

. I f t h e r e i s m o r e t h a n a s c i n t i l l a o f

s u c h e v i d e n c e t o s u p p o r t t h e f i n d i n g , t h e c l a i m i s s u f

f i c i e n t a s

a m a t t e r o f l a w , a n d a n y c h a l l e n g e s g o m e r e l y t o t h e w e i g h t t o b e a c c o r d e d t h e e v i d e n c e

. B r o w n i n g

– F e r r i s , I n c

. v

. R e

y n a , 8 6 5 S

. W

. 2 d 9 2 5

, 9 2 8 ( T e x

. 1 9 9 3 )

.

[ 2 ] [ 3 ] A “ n o e v i d e n c e ” p o i n t o f e r r o r m a y o n l y b e s u s t a i n e d

w h e n t h e r e c o r d d i s c l o s e s o n e o f t h e f o l l o w i n g : ( 1 ) a c o m p l e t e

a b s e n c e o f e v i d e n c e o f a v i t a l f a c t ; ( 2 ) t h e c o u r t i s b a r r e d b y

r u l e s o f l a w o r e v i d e n c e f r o m g i v i n g w e i g h t t o t h e o n l y

e v i d e n c e o f

f e r e d t o p r o v e a v i t a l f

a c t ; ( 3 ) t h e e v i d e n c e o f

f e r e d

t o * 6 0 2 p r o v e a v i t a l f

a c t i s n o m o r e t h a n a m e r e s c i n t i l l a o f

e v i d e n c e ; o r ( 4 ) t h e e v i d e n c e e s t a b l i s h e s c o n c l u s i v e l y t h e

o p p o s i t e o f a v i t a l f

a c t

. J u l i e t t e F o w l e r H o m e s , I n c

. v

. W e l c h
A s s o c

. , I n c

. , 7 9 3 S

. W

. 2 d 6 6 0

, 6 6 6 n

. 9 ( T e x

. 1 9 9 0 ) ; R o b e r t W

. C a l v e r t
, “ N o E v i d e n c e ” a n d “ I n s u f f i c i e n t E v i d e n c e ” P o i n t s o f
E r r o r , 3 8 T E X

. L

. R E V

. 3 6 1 ( 1 9 6 0 )

. T h e r e i s s o m e e v i d e n c e

w h e n t h e p r o o f s u p p l i e s a r e a s o n a b l e b a s i s o n w h i c h

r e a s o n a b l e m i n d s m a y r e a c h d i f f e r e n t c o n c l u s i o n s a b o u t t h e

e x i s t e n c e o f t h e v i t a l f

a c t

. O r o z c o , 8 2 4 S

. W

. 2 d a t 5 5 6

.

[ 4 ] [ 5 ] A n a s s e r t i o n t h a t t h e e v i d e n c e i s “ i n s u f f i c i e n t ” t o

s u p p o r t a f

a c t f i n d i n g c a n m e a n t h a t t h e e v i d e n c e s u p p o r t i n g
t h e f i n d i n g i s s o w e a k o r t h e e v i d e n c e t o t h e c o n t r a r y i s s o

o v e r w h e l m i n g t h a t t h e f i n d i n g s h o u l d b e s e t a s i d e a n d a n e w
t r i a l o r d e r e d

. G a r

z a v

. A l v i a r , 3 9 5 S

. W

. 2 d 8 2 1

, 8 2 3 ( T e x

. 1 9 6 5 )

. W e a r e r e q u i r e d t o c o n s i d e r a l l o f t h e e v i d e n c e i n
t h e c a s e i n m a k i n g t h i s d e t e r m i n a t i o n a n d

, i f r e v e r s i n g , t o d e t a i l t h a t e v i d e n c e i n t h e o p i n i o n

. J a f f e A i r c r a f t C o r p

. v

. C a r r , 8 6 7 S

. W

. 2 d 2 7

, 2 9 ( T e x

. 1 9 9 3 )

.

[ 6 ] W e f i n d t h e e v i d e n c e t o b e l e g a l l y s u f f i c i e n t t o s u p p o r t t h e j u r y 's d e t e r m i n a t i o n t h a t t h e a u t o m o b i l e a c c i d e n t w a s t h e
p r o x i m a t e c a u s e o f S o u l e 's i n j u r i e s

. M o r e o v e r , w e a r e

c o n v i n c e d t h e j u r y 's f

i n d i n g c o n c e r n i n g t h e i s s u e o f c a u s a t i o n , i n l i g h t o f t h e e n t i r e r e c o r d

, s h o u l d n o t b e o v e r t u r n e d f o r

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 4Bevers v. Sou le, 909 S.W .2d 599 (199 5)

f a c t u a l i n s u f

f i c i e n c y

.

B e v e r s s u g g e s t s t h r e e r e a s o n s w h y w e s h o u l d f i n d t h e

e v i d e n c e f

a c t u a l l y i n s u f

f i c i e n t : ( 1 ) t h e o n l y e v i d e n c e o f

c a u s a t i o n w a s D r

. G l i c k f e l d 's o p i n i o n , w h i c h w a s b a s e d o n t h e i n c o r r e c t a s s u m p t i o n t h a t a p p e l l a n t 's v e h i c l e w a s t r a v e l i n g

a p p r o x i m a t e l y f

i f t y m

. p

. h

. w h e n s h e s t r u c k S o u l e ; ( 2 ) h e r o w n

e x p e r t
, D r

. C h a r l e s H a t s e l l

, t e s t i f i e d t h a t B e v e r s w a s t r a v e l i n g

o n l y f o u r t e e n t o s i x t e e n m

. p

. h

. w h e n s h e s t r u c k S o u l e , c a u s i n g

a “ v e r y m i n o r ” a c c i d e n t t h a t c o u l d n o t h a v e c a u s e d S o u l e 's
h e r n i a t e d d i s c ; a n d ( 3 ) s e v e r a l o t h e r f a c t o r s c o u l d h a v e c a u s e d
S o u l e 's i n

j u r i e s : a p r e v i o u s f

a l l f r o m a l a d d e r , a n i n

j u r y w h e r e

a p i a n o f e l l o n h i m , a n d a j u m p f r o m a h i g h l o c a t i o n

.

O u r r e v i e w o f t h e r e c o r d s h o w s e a c h o f B e v e r s ' c o n c e r n s i n v o l v e d c o n t e s t e d i s s u e s p r e s u m a b l y w e i g h e d b y t h e j u r o r s d u r i n g t h e i r d e l i b e r a t i o n s

. F o r e x a m p l e , S o u l e 's t e s t i m o n y a t

t r i a l e s t a b l i s h e d a r a t i o n a l e x p l a n a t i o n w h y t h e s e p r i o r i n j u r i e s

c o u l d n o t h a v e c o n t r i b u t e d t o h i s h e r n i a t e d d i s c

. S o u l e
t e s t i f i e d t h e p i a n o i n

j u r y o c c u r r e d w h e n a p i a n o f e l l o n h i m

w h i l e b e i n g m o v e d a n d t h a t t h e i n j u r y w a s n o t t o h i s b a c k

. S i m i l a r l y , S o u l e e x p l a i n e d h i s f a l l f r o m t h e l a d d e r c a u s e d o n l y

a l e g a n d h e a d i n

j u r y

. T h e f

i n a l i n c i d e n t i n v o l v e d a m u s c l e i n h i s a b d o m e n a n d a m u s c l e i n h i s l o w e r b a c k

, i n j u r i e s t h a t w e r e f u l l y h e a l e d t w o y e a r s p r i o r t o t h e a u t o m o b i l e a c c i d e n t

. B e v e r s ' t h e o r y t h a t t h e p r o x i m a t e c a u s e o f t h e h e r n i a t e d d i s c

w a s n o t t h e a u t o a c c i d e n t w a s a l s o r e b u t t e d b y e v i d e n c e t h a t

a c o m p l e t e p h y s i c a l c o n d u c t e d b y A m e r i c a n A i r l i n e s s h o r t l y b e f o r e t h e a u t o m o b i l e a c c i d e n t r e v e a l e d n o d a m a g e t o S o u l e 's

s k e l e t a l s y s t e m

.

D r

. H a t s e l l ' s o p i n i o n t h a t B e v e r s ' v e h i c l e w a s t r a v e l i n g a t a

s p e e d o f o n l y f

o u r t e e n t o s i x t e e n m

. p

. h

. w a s a l s o c o n t e s t e d

. B e v e r s h e r s e l f e s t i m a t e d h e r c a r w a s t r a v e l i n g b e t w e e n
t w e n t y

- f i v e a n d t h i r t y m

. p

. h

. a t t h e t i m e s h e s a w S o u l e 's c a r

a p p r o x i m a t e l y o n e c a r l e n g t h a h e a d

. W h a t D r

. H a t s e l l

s u r m i s e d w a s a “ v e r y m i n o r c o l l i s i o n ” B e v e r s r e c a l l e d a s b e i n g “ f a i r l y h a r d

. ” M o r e o v e r , D r

. H a t s e l l 's c o n c l u s i o n a s t o
t h e s p e e d o f B e v e r s ' v e h i c l e d i d n o t t a k e i n t o a c c o u n t t h e b r o k e n U

– B o l t o n S o u l e 's C o n c o r d

. H a t s e l l 's e s t i m a t e o f t h e

s p e e d o f B e v e r s ' c a r w a s b a s e d o n h i s r e v i e w o f p h o t o g r a p h s
p r o v i d e d b y B e v e r s ' a t t o r n e y a n d i n i t i a l b o d y s h o p e s t i m a t e s

o f t h e p r o p e r t y d a m a g e

. D r

. H a t s e l l n e v e r e x a m i n e d S o u l e a n d

n e v e r s a w t h e d a m a g e t o S o u l e 's U

– B o l t

. M o r e o v e r , S o u l e 's

e x p e r t
, D r

. G l i c k f

e l d

, d i d n o t t e s t i f

y t h a t S o u l e 's i n

j u r i e s c o u l d
h a v e o n l y b e e n c a u s e d b y a f i f t y m

. p

. h

. c o l l i s i o n

.

B a s e d o n t h e a b o v e t e s t i m o n y , t h e m e d i c a l r e c o r d s , a n d
S o u l e 's l a y w i t n e s s t e s t i m o n y t h a t p r o v i d e d a l o g i c a l l y
t r a c e a b l e c o n n e c t i o n b e t w e e n t h e a c c i d e n t a n d h i s h e r n i a t e d d i s c , w e c a n n o t c o n c l u d e t h e e v i d e n c e w a s e i t h e r l e g a l l y o r f a c t u a l l y i n s u f

f i c i e n t t o s u p p o r t t h e j u r y 's d e t e r m i n a t i o n t h e

a u t o a c c i d e n t w a s t h e p r o x i m a t e c a u s e o f S o u l e 's i n j u r y

. T h e

o v e r a l l i m p r e s s i o n l e f

t u p o n r e v i e w o f t h e e n t i r e r e c o r d i s t h a t b o t h s i d e s w e r e r e p r e s e n t e d a t t r i a l b y s k i l l e d a n d

w e l l

- p r e p a r e d * 6 0 3 c o u n s e l w h o p r o v i d e d t h e j u r y w i t h

s u f f i c i e n t e v i d e n c e t o j u s t i f y s p e c i a l i s s u e a n s w e r s f a v o r i n g

e i t h e r p a r t y

.

P o i n t o f e r r o r o n e i s o v e r r u l e d

.

I n h e r s e c o n d p o i n t o f e r r o r , B e v e r s c o n t e n d s t h e t r i a l c o u r t

e r r e d i n o r d e r i n g t h a t p r e j u d g m e n t i n t e r e s t b e g i n o n A p r i l 2 8

, 1 9 9 1

, t h e 1 8 0 t h d a y f o l l o w i n g S o u l e 's r e t u r n o f a s i g n e d

m e d i c a l a u t h o r i z a t i o n f o r m a n d c l a i m l e t t e r t o B e v e r s '
i n s u r a n c e c a r r i e r , r a t h e r t h a n o n t h e d a t e S o u l e f i l e d s u i t

.

T e x a s l a w a l l o w s f

o r t h e a c c r u a l o f p r e j u d g m e n t i n t e r e s t i n
p e r s o n a l i n

j u r y c a s e s a s f

o l l o w s :

[ P ] r e j u d g m e n t i n t e r e s t a c c r u e s o n t h e a m o u n t

o f t h e j u d g m e n t d u r i n g t h e p e r i o d b e g i n n i n g

o n t h e 1 8 0 t h d a y a f

t e r t h e d a t e t h e d e f

e n d a n t

r e c e i v e s n o t i c e o f t h e c l a i m o r o n t h e d a y s u i t i s f i l e d

, w h i c h e v e r o c c u r s f i r s t
, a n d e n d i n g o n
t h e d a t e p r e c e d i n g t h e d a t e j u d g m e n t i s

e n t e r e d

.

T e x

. R e v

. C i v

. S t a t

. A n n

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a ) ( V e r n o n S u p p

. 1 9 9 5 )

.

B e v e r s a s k s u s t o i n t e r p r e t “ n o t i c e o f c l a i m ” s o a s t o

r e q u i r e n o t i c e o f t h e a m o u n t o f d a m a g e s s o u g h t a s

w e l l a s n o t i c e o f

t h e n a t u r e o f t h e c o m p l a i n t

. B e v e r s

n o t e s t h a t S o u l e 's e a r l i e s t w r i t t e n c o r r e s p o n d e n c e

w i t h h e r i n s u r a n c e c a r r i e r w a s a n O c t o b e r 3 0

, 1 9 9 0
l e t t e r w r i t t e n b y S o u l e t o D o n Y o u n g , a c l a i m

s p e c i a l i s t a t S t a t e F a r m M u t u a l I n s u r a n c e C o m p a n y

. I n p e r t i n e n t p a r t
, t h e l e t t e r s t a t e d :

R e : C l a i m N o

. : 4 3

– 7 0 8 0

– 0 2 0

I n s u r e d : R o y D

. B e v e r s

D e [ a ] r M r

. Y o u n g :

I e n c l o s e f

o r y o u r f

i l e s o n e ( 1 ) s i g n e d c o p y o f t h e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 5Bevers v. Sou le, 909 S.W .2d 599 (199 5)

“ A u t h o r i z a t i o n ” y o u s e n t m e s o t h a t y o u c o u l d

o b t a i n t h e n e c e s s a r y i n f o r m a t i o n t o p r o p e r l y

c o n s i d e r m y i n

j u r y c l a i m

.

I a l s o e n c l o s e f

o r y o u r p r o c e s s i n g c o p i e s o f s o m e o f

t h e m e d i c a l r e c e i p t s r e l a t i v e t o m y i n j u r y

. A s y o u

w i l l n o t e , I a m n o w s e e i n g a n o r t h o p e d i s t
, J u a n J

. C a p e l l o , M

. D

. I a m a b o u t t o s t a r t a p r o g r a m o f

p h y s i c a l t h e r a p y

.

S h o u l d y o u r e q u i r e a n y a d d i t i o n a l i n f o r m a t i o n , p l e a s e l e t m e k n o w

. M y o f f i c e n u m b e r i s [ n u m b e r l i s t e d ]

.

S i n c e r e l y ,

/ s / R o n a l d B

. S o u l e

[ 7 ] U n d e r B e v e r s ' v i e w , b e c a u s e t h e l e t t e r d i d n o t

s t a t e t h e n a t u r e o f t h e c o m p l a i n t o r t h e a m o u n t o f
d a m a g e s s o u g h t
, t h e e a r l i e s t d a t e p r e j u d g m e n t i n t e r e s t c o u l d h a v e b e e n o r d e r e d t o r u n w a s t h e d a t e S o u l e f i l e d s u i t

. B e v e r s c o r r e c t l y n o t e s t h a t t h e

n o t i c e p r o v i s i o n s o f t h e T e x a s D e c e p t i v e T r a d e P r a c t i c e A c t r e q u i r e a p o t e n t i a l p l a i n t i f f t o f i r s t i d e n t i f y t h e n a t u r e o f t h e c o m p l a i n t a n d t h e a m o u n t

r e q u i r e d t o c o m p e n s a t e h i m f o r h i s d a m a g e s

. T e x

. B u s

. & C o m m

. C o d e A n n

. § 1 7

. 5 0 5 ( a ) ( V e r n o n S u p p

. 1 9 9 5 )

.

[ 8 ] [ 9 ] I n r e s p o n s e , S o u l e n o t e s h i s c a u s e o f a c t i o n

w a s n o t b r o u g h t u n d e r t h e D e c e p t i v e T r a d e P r a c t i c e s A c t
, a n d s u g g e s t s B e v e r s ' c o m p l a i n t w o u l d b e b e t t e r

a d d r e s s e d t o t h e l e g i s l a t u r e

. W e a g r e e

. N o t h i n g i n

a r t i c l e 5 0 6 9

– 1

. 0 5 r e q u i r e s t h e c l a i m a n t t o d e m a n d

a n e x a c t a m o u n t o r l i s t e v e r y e l e m e n t o f d a m a g e

c l a i m e d i n o r d e r t o t r i g g e r t h e n o t i c e o f c l a i m
p r o v i s i o n

. S e e R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 8 ( T e x

. A p p

. — A u s t i n 1 9 9 5

, w r i t d e n i e d )

. T h e r e f o r e , t h e t r i a l c o u r t 's d e t e r m i n a t i o n t h a t w r i t t e n

n o t i c e o f t h e c l a i m w a s t r i g g e r e d b y S o u l e 's l e t t e r

a n d t h e s i g n e d m e d i c a l a u t h o r i z a t i o n f o r m w a s n o t i m p r o p e r

.

I n h e r f i n a l p o i n t o f e r r o r B e v e r s a r g u e s t h e t r i a l

c o u r t e r r e d i n o r d e r i n g t h a t p r e j u d g m e n t i n t e r e s t b e c o m p o u n d e d a n n u a l l y r a t h e r t h a n a s s i m p l e i n t e r e s t

. R e g a r d i n g p r e

j u d g m e n t i n t e r e s t
, T e x a s l a w p r o v i d e s
t h a t “ t h e r a t e o f p r e

-

j u d g m e n t i n t e r e s t s h a l l b e t h e

s a m e a s t h e r a t e o f p o s t

- j u d g m e n t i n t e r e s t a t t h e t i m e

o f j u d g m e n t a n d s h a l l b e c o m p u t e d a s s i m p l e i n t e r e s t

. ” T e x

. R e v

. C i v

. S t a t

. A n n

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( g ) ( V e r n o n S u p p

. 1 9 9 5 ) ( e m p h a s i s a d d e d )

.

[ 1 0 ] I n p r o v i d i n g t h a t j u d g m e n t s i n w r o n g f u l d e a t h s , p e r s o n a l i n

j u r y , p r o p e r t y d a m a g e , a n d c o n d e m n a t i o n

c a s e s b e c o m p u t e d o n l y a s s i m p l e i n t e r e s t
, t h e l e g i s l a t u r e h a s s p e c i a l l y m a n d a t e d t h a t p r e j u d g m e n t i n t e r e s t i n t h e s e t y p e s o f c a s e s m u s t b e c o m p u t e d a s

s i m p l e i n t e r e s t

. E n t e r p r i s e

– L a r e d o A s s o c

. v

. H a c h a r s I

n c

. , 8 3 9 S

. W

. 2 d 8 2 2

, 8 3 9 ( T e x

. A p p

. — S a n A n t o n i o 1 9 9 2

, w r i t d e n i e d ) ; s e e a l s o * 6 0 4 T r a n s p o r t
I n s

. C o

. v

. F a i r c l o t h

, 8 6 1 S

. W

. 2 d 9 2 6

, 9 4 1

– 4 2 ( T e x

. A p p

. — B e a u m o n t 1 9 9 3 ) ( p r e j u d g m e n t i n t e r e s t i n p e r s o n a l i n

j u r y c l a i m s h o u l d h a v e b e e n c a l c u l a t e d

a s s i m p l e i n t e r e s t u n d e r t h e s t a t u t e , r a t h e r t h a n

o r d e r e d c o m p o u n d e d a n n u a l l y )

, r e v ' d o n o t h e r
g r o u n d s , 8 9 8 S

. W

. 2 d 2 6 9 ( T e x

. 1 9 9 5 )

.

T h e t r i a l c o u r t 's w r i t t e n j u d g m e n t i n t h e i n s t a n t c a s e , i n p a r t
, p r o v i d e d t h a t t h e p r e j u d g m e n t i n t e r e s t b e

c o m p o u n d e d a n n u a l l y :

P r e j u d g m e n t i n t e r e s t o n [ S o u l e 's ] d a m a g e s o f $ 1 8 7

, 5 0 0

. 0 0 a t t h e r a t e o f 1 0 % p e r a n n u m ,
c o m p o u n d e d a n n u a l l y , f r o m A p r i l 2 8

, 1 9 9 1 t o
t h e d a t e t h i s j u d g m e n t i s s i g n e d i n t h e a m o u n t

o f $ 5 8

, 9 5 5

. 4 0

.

S o u l e u r g e s u s t o u p h o l d t h e t r i a l c o u r t 's j u d g m e n t
, b a s e d o n t h e f

o l l o w i n g l a n g u a g e f

r o m t h e T e x a r k a n a C o u r t o f A p p e a l s :

T h e c u r r e n t v e r s i o n o f A r t i c l e 5 0 6 9

– 1

. 0 5

, § 6 ( g )

p r o v i d e s t h a t “ [ t ] h e r a t e o f p r e j u d g m e n t i n t e r e s t s h a l l
b e t h e s a m e a s t h e r a t e o f p o s t j u d g m e n t i n t e r e s t a t

t h e t i m e o f j u d g m e n t a n d s h a l l b e c o m p u t e d a s

s i m p l e i n t e r e s t

. ” T e x

. R e v

. C i v

. S t a t

. A n n

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( g ) ( V e r n o n S u p p

. 1 9 9 1 )

. S e c t i o n 3 ( a )

p r o v i d e s t h a t “

j u d g m e n t s e a r n i n t e r e s t f o r t h e p e r i o d
b e g i n n i n g o n t h e d a y t h e j u d g m e n t i s r e n d e r e d a n d

e n d i n g o n t h e d a y t h e j u d g m e n t i s s a t i s f i e d

. I n t e r e s t

s h a l l b e c o m p o u n d e d a n n u a l l y ” ( e m p h a s i s a d d e d )

.

S a d l e r v

. D u v a l l

, 8 1 5 S

. W

. 2 d 2 8 5

, 2 9 4 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 1

, w r i t d e n i e d )

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 6Bevers v. Sou le, 909 S.W .2d 599 (199 5)

T h e S a d l e r c o u r t w e n t o n t o r e f o r m t h e t r i a l c o u r t 's j u d g m e n t “ s o t h a t p r e j u d g m e n t i n t e r e s t i s

c o m p o u n d e d a n n u a l l y a s p r o v i d e d u n d e r t h e s t a t u t e

. ”
I d

.

W e b e l i e v e t h e S a d l e r h o l d i n g i s b a s e d o n a

m i s i n t e r p r e t a t i o n o f t h e s t a t u t e

. T h e r e f e r e n c e t o

a n n u a l c o m p o u n d i n g i n s e c t i o n 3 ( a ) c o n c e r n s
p o s t j u d g m e n t c o m p o u n d i n g , i

. e

. , t h e a n n u a l

c o m p o u n d i n g o f i n t e r e s t f o r t h e p e r i o d b e g i n n i n g o n
t h e d a y t h e j u d g m e n t i s r e n d e r e d a n d e n d i n g t h e d a y
t h e j u d g m e n t i s s a t i s f

i e d

. P r e j u d g m e n t i n t e r e s t
, o n
t h e o t h e r h a n d

, i s g o v e r n e d b y s e c t i o n 6 ( g ) o f t h e

s a m e a r t i c l e

. I t p r o v i d e s t h a t p r e j u d g m e n t i n t e r e s t b e

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, t h e c o u r t r e p o r t e r e x p l a i n e d s h e n o l o n g e r h a d

n o t e s o f t h e 1 9 9 4 v e n u e h e a r i n g

. B y s t a t u t e , t h e c o u r t r e p o r t e r i s r e q u i r e d t o p r e s e r v e t h e n o t e s o f t h e h e a r i n g f o r “ t h r e e y e a r s f r o m t h e d a t e o n w h i c h t h e y w e r e t a k e n [

. ] ” T e x

. G o v 't C o d e A n n

. § 5 2

. 0 4 6 ( a ) ( 4 ) ( V e r n o n 1 9 9 8 )

. T h e T e x a s S u p r e m e C o u r t h a s s t a t e d t h a t “ [ i ] f a l i t i g a n t h a s n o t r e q u e s t e d t h e

r e p o r t e r t o p r e p a r e a s t a t e m e n t o f f a c t s w i t h i n t h r e e y e a r s , n o r

s p e c i f i c a l l y r e q u e s t e d t h a t t h e n o t e s o f a p r o c e e d i n g b e
p r e s e r v e d b e y o n d t h r e e y e a r s , t h e n t h e l i t i g a n t i s n o t f r e e f r o m f a u l t i f t h e n o t e s a r e d e s t r o y e d a s t h e s t a t u t e a u t h o r i z e s

. ”
P i o t r o w s k i v

. M i n n s , 8 7 3 S

. W

. 2 d 3 6 8

, 3 7 1 ( T e x

. 1 9 9 3 ) ; s e e G a n e s a n v

. V

a l l a b h a n e n i

, 9 6 S

. W

. 3 d 3 4 5

, 3 4 8

– 5 0 ( T e x

. A p p

. - A u s t i n 2 0 0 2

, p e t

. d e n i e d )

.

W e n e e d n o t d e c i d e v e n u e o n t h i s p r e s e r v a t i o n i s s u e , h o w e v e r

. B r o o k s h i r e G r o c e r y h a s a s s e r t e d o n a p p e a l

, s u p p o r t e d b y i t s

a t t o r n e y 's a f

f i d a v i t
, t h a t n o e v i d e n c e w a s o f f e r e d o r a d m i t t e d

a t t h e v e n u e h e a r i n g

. A p p e l l a n t 's a s s e r t i o n i s n o t d i s p u t e d b y

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3Brook shi re Groc ery Co. v. Smi th, 9 9 S.W .3d 819 (200 3)

S m i t h

, a n d w e t a k e a s t r u e a p p e l l a n t 's u n c o n t r a d i c t e d

s t a t e m e n t o f f

a c t

. S e e T e x

. R

. A p p

. P

. 3 8

. 1 ( f )

. T h e c l e r k 's

r e c o r d i s c o m p l e t e

. W h i l e w e e m p h a s i z e t h e i m p o r t a n c e o f a

c o m p l e t e r e c o r d o f t h e t r i a l c o u r t p r o c e e d i n g s a n d a r g u m e n t s
p r e s e n t e d a t t h e v e n u e h e a r i n g , w e w i l l a d d r e s s t h e m e r i t s o f

t h e v e n u e i s s u e i n t h i s c a s e o n t h e r e c o r d p r e s e n t e d h e r e

.

[ 1 ] T h e 1 9 8 5 v e n u e s t a t u t e a p p l i e s i n t h i s c a s e

. S e e A c t o f
M a y 1 7

, 1 9 8 5

, 6 9 t h L e g

. , R

. S

. , c h

. 9 5 9

, § 1

, 1 9 8 5 T e x

. G e n

. L a w s 3 2 4 6

– 3 2 5 1

. W h e n s u i t w a s f i l e d i n 1 9 9 4

, s e c t i o n 1 5

. 0 6 1

, q u o t e d b e l o w , s e t o u t t h e f o l l o w i n g r u l e r e g a r d i n g

v e n u e o v e r m u l t i p l e d e f e n d a n t s :

W h e n t w o o r m o r e p a r t i e s a r e j o i n e d a s d e f e n d a n t s i n t h e s a m e a c t i o n o r t w o o r m o r e

c l a i m s o r c a u s e s o f

a c t i o n a r e p r o p e r l y j o i n e d
i n o n e a c t i o n a n d t h e c o u r t h a s v e n u e o f a n

a c t i o n o r c l a i m a g a i n s t a n y o n e d e f e n d a n t
, t h e

c o u r t a l s o h a s v e n u e o f a l l c l a i m s o r a c t i o n s

a g a i n s t a l l d e f

e n d a n t s u n l e s s o n e o r m o r e o f

t h e c l a i m s o r c a u s e s o f a c t i o n i s g o v e r n e d b y

o n e o f t h e p r o v i s i o n s o f S u b c h a p t e r B [ m a n d a t o r y v e n u e p r o v i s i o n s ] r e q u i r i n g
t r a n s f e r o f t h e c l a i m o r c a u s e o f a c t i o n , o n
p r o p e r o b j e c t i o n , t o t h e m a n d a t o r y c o u n t y

. 1

T h e c u r r e n t s t a t u t e , a m e n d e d i n 1 9 9 5

, p r o v i d e s t h a t i n a s u i t i n w h i c h t h e p l a i n t i f f h a s e s t a b l i s h e d p r o p e r

v e n u e a g a i n s t a d e f

e n d a n t
, t h e c o u r t a l s o h a s v e n u e

o f a l l t h e d e f

e n d a n t s i n a l l c l a i m s o r a c t i o n s a r i s i n g

o u t o f t h e s a m e t r a n s a c t i o n , o c c u r r e n c e s , o r s e r i e s o f

t r a n s a c t i o n s o r o c c u r r e n c e s

. S e e T e x

. C i v

. P r a c

. &
R e m

. C o d e A n n

. § 1 5

. 0 0 5 ( V e r n o n 2 0 0 2 )

. S e c t i o n 1 5

. 0 6 4 1 o f t h e 1 9 9 5 v e n u e s t a t u t e a l s o p r o v i d e s t h a t i n a s u i t i n w h i c h t w o o r m o r e d e f e n d a n t s a r e j o i n e d

,
a n y a c t i o n o r o m i s s i o n b y o n e d e f e n d a n t i n r e l a t i o n
t o v e n u e , i n c l u d i n g a w a i v e r o f v e n u e b y o n e d e f e n d a n t
, d o e s n o t o p e r a t e t o i m p a i r o r d i m i n i s h t h e

r i g h t o f a n y o t h e r d e f e n d a n t t o * 8 2 2 p r o p e r l y

c h a l l e n g e v e n u e

. S e e T e x

. C i v

. P r a c

. & R e m

. C o d e A n n

. § 1 5

. 0 6 4 1 ( V e r n o n 2 0 0 2 )

. T h e 1 9 8 5 s t a t u t e ,
w h i c h a p p l i e s i n t h i s c a s e , d o e s n o t c o n t a i n t h a t

p r o v i s i o n

.

[ 2 ] W e n o t e t h a t a p p e l l a n t d o e s n o t r a i s e t h e
p r o c e d u r a l i s s u e s e t o u t i n G e o C h e m T e c h C o r p

. v

. V e r s e c k e s , 9 6 2 S

. W

. 2 d 5 4 1

, 5 4 3

– 4 4 ( T e x

. 1 9 9 8 )

. D e p e n d i n g o n t h e s t a t e o f t h e r e c o r d a t t h e t i m e o f

t h e f i l i n g o f a n o n s u i t
, i f a n o b j e c t i o n t o v e n u e h a s b e e n f i l e d a n d t h e p l a i n t i f

f t h e n t a k e s a n o n s u i t a n d
h a s n o t s p e c i f

i c a l l y d e n i e d t h e v e n u e f a c t s a v e r r e d b y t h e p a r t y s e e k i n g t r a n s f e r , t h e v e n u e f

a c t s a l l e g e d
i n t h e m o t i o n t o t r a n s f e r m a y b e t a k e n a s t r u e

. G e o C h e m T

e c h C o r p

. , 9 6 2 S

. W

. 2 d a t 5 4 3

. I t i s
p o s s i b l e t h e p r o c e d u r a l p o s t u r e a t t h e t i m e o f t h e

n o n s u i t h e r e w a s i n s u f f i c i e n t t o e s t a b l i s h v e n u e i n
t h e c o u n t y t o w h i c h a p p e l l a n t t h e n s o u g h t t r a n s f e r ; b u t w e d o n o t a d d r e s s t h e G e o C h e m i s s u e a s i t h a s

n o t b e e n a s s e r t e d i n t h i s c a s e

.

S m i t h m a d e H a r d i n C o u n t y h i s v e n u e c h o i c e

. B e c a u s e B r o o k s h i r e , I n c

. d i d n o t o b j e c t t o v e n u e i n H a r d i n C o u n t y b y f

i l i n g a t r a n s f

e r m o t i o n , t h e H a r d i n C o u n t y t r i a l c o u r t h a d v e n u e o v e r B r o o k s h i r e , I n c

. S e e T e x

. R

. C i v

. P

. 8 6 ( 1 )

. U n d e r t h e

a p p l i c a b l e s t a t u t e , i f t h e c o u r t h a d v e n u e o f a c l a i m

a s t o o n e d e f

e n d a n t
, t h e c o u r t h a d v e n u e o v e r t h e

c l a i m s a g a i n s t a l l d e f

e n d a n t s

. S e e T e x

. C i v

. P r a c

. &
R e m

. C o d e A n n

. § 1 5

. 0 6 1 ; P o l a r i s I n v

. M a n a g e m e n t C o r p

. v

. A b a s c a l

, 8 9 2 S

. W

. 2 d 8 6 0 ( T e x

. 1 9 9 5 )

. A s
t h e S u p r e m e C o u r t s t a t e d i n P o l a r i s , “ V e n u e i s a

c r e a t u r e o f l e g i s l a t i v e g r a c e , a n d

. . . t h e p o w e r t o

m a k e v e n u e c h a n g e s i s p u r e l y s t a t u t o r y

. ” I d

. a t 8 6 2

. T h e S u p r e m e C o u r t s t a t e d i n P o l a r i s t h a t t h e p l a i n

w o r d i n g o f s e c t i o n 1 5

. 0 6 1 a p p e a r s t o p e r m i t t h e j o i n d e r o f a d d i t i o n a l c l a i m s , a n d t h e C o u r t d e c l i n e d

t o r e i n t e r p r e t s e c t i o n 1 5

. 0 6 1 i n s u c h a w a y a s t o
p r o h i b i t w h a t P o l a r i s c h a r a c t e r i z e d a s t h e

“ t a g

- a l o n g ” v e n u e o f t h e p l a i n t i f f s : “ I t i s n o t w i t h i n
t h e p r o v i n c e o f t h i s C o u r t t o r e c o n s t r u e , r e w r i t e , o r

c o n t r a v e n e a v e n u e s t a t u t e w h e n t h e i n t e n t o f t h e L e g i s l a t u r e i s c l e a r

. ” I d

. ; s e e a l s o B l e e k e r v

. Vi l l a r r e a l

, 9 4 1 S

. W

. 2 d 1 6 3 ( T e x

. A p p

. - C o r p u s C h r i s t i 1 9 9 6

, w r i t d i s m 'd b y a g r e e m e n t ) ; b u t s e e W T F O

, I n c

. v

. B r a i t h w a i t e , 8 9 9 S

. W

. 2 d 7 0 9 ( T e x

. A p p

. - D a l l a s 1 9 9 5

, n o w r i t ) ( W a i v e r o f v e n u e b y o n e d e f

e n d a n t d o e s n o t p r e v e n t a n o t h e r d e f e n d a n t f r o m c h a l l e n g i n g v e n u e

. ) ; P e a r s o n v

. J o n e s C o

. , L t d

. , 8 9 8 S

. W

. 2 d 3 2 9 ( T e x

. A p p

. - E a s t l a n d 1 9 9 4

, n o

w r i t ) ( E v e n t h o u g h t w o o f f o u r d e f e n d a n t s f

i l e d a n

a n s w e r w i t h o u t c h a l l e n g i n g v e n u e , t h e y c o u l d n o t

w a i v e o t h e r d e f

e n d a n t s ' o b j e c t i o n s t o v e n u e

. )

. I n P o l a r i s , t h e S u p r e m e C o u r t i n d i c a t e d a n y c h a n g e i n

s e c t i o n 1 5

. 0 6 1 w a s u p t o t h e l e g i s l a t u r e

. S e e P o l a r i s , 8 9 2 S

. W

. 2 d a t 8 6 2

. I n t h e 1 9 9 5 v e n u e s t a t u t e , t h e l e g i s l a t u r e r e p e a l e d s e c t i o n 1 5

. 0 6 1 a n d a d d e d

s e c t i o n s 1 5

. 0 0 5 a n d 1 5

. 0 6 4 ; S e c t i o n 1 5

. 0 6 1 a p p l i e s h e r e b e c a u s e t h i s s u i t w a s f i l e d b e f o r e s e c t i o n 1 5

. 0 6 1 w a s r e p e a l e d a n d b e f o r e s e c t i o n s 1 5

. 0 0 5 a n d
1 5

. 0 6 4 w e r e a d d e d

. W e f i n d t h e l a n g u a g e o f t h e 1 9 8 5 s t a t u t e i s c l e a r

.

[ 3 ] B r o o k s h i r e G r o c e r y f u r t h e r m a i n t a i n s S m i t h

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 4Brook shi re Groc ery Co. v. Smi th, 9 9 S.W .3d 819 (200 3)

f a i l e d t o p u t o n a p r i m a f a c i e c a s e t h a t B r o o k s h i r e , I n c

. w a s p r o p e r l y j o i n e d t o j u s t i f y a p p e l l a n t ' s “ t a g

a l o n g ” v e n u e

. F r o m t h e r e c o r d b e f o r e u s , w e c a n n o t d e t e r m i n e t h a t B r o o k s h i r e , I n c

. w a s j o i n e d s o l e l y t o f i x v e n u e

. P r i o r t o d i s m i s s i n g B r o o k s h i r e , I n c

. f r o m
t h e s u i t
, S m i t h 's p l e a d i n g s a l l e g e d n e g l i g e n c e o n t h e
p a r t o f b o t h a p p e l l a n t a n d B r o o k s h i r e , I n c

. W e n o t e B r o o k s h i r e G r o c e r y p l e a d e d i n i t s a m e n d e d a n s w e r
t h a t a n y i n

j u r y s u s t a i n e d b y S m i t h w a s c a u s e d b y o r , i n e f f e c t
, a g g r a v a t e d b y “ s u b s e q u e n t l y o c c u r r i n g i n c i d e n t s a n d c o n d i t i o n s

. ” I t i s u n d i s p u t e d t h a t S m i t h

w o r k e d f o r B r o o k s h i r e , I n c

. i n H a r d i n C o u n t y a f t e r
t h e i n j u r y a t a p p e l l a n t 's s t o r e i n S m i t h C o u n t y

. A p p e l l a n t f

i l e d n o s p e c i a l e x c e p t i o n s r e q u e s t i n g S m i t h t o p l e a d m o r e p a r t i c u l a r l y h o w * 8 2 3
B r o o k s h i r e , I n c

. w a s n e g l i g e n t a n d c a u s e d i n j u r y t o S m i t h

.

[ 4 ] A p p e l l a n t f

u r t h e r a r g u e s t h a t
, i n o r d e r t o

e s t a b l i s h v e n u e i n H a r d i n C o u n t y , S m i t h m u s t

e s t a b l i s h h e a c t e d i n g o o d f a i t h i n j o i n i n g B r o o k s h i r e , I n c

. , t h e r e s i d e n t d e f e n d a n t

. A p p e l l a n t d i d n o t o b j e c t t o t h e j o i n d e r o f B r o o k s h i r e , I n c

. a n d

n e v e r s o u g h t a s e v e r a n c e ; a p p e l l a n t w a i v e d a n y

c l a i m r e g a r d i n g i m p r o p e r j o i n d e r

. S e e R o s a l e s v

. H

. E

. B u t t G r o c e r

y C o

. , 9 0 5 S

. W

. 2 d 7 4 5

, 7 5 1 ( T e x

. A p p

. - S a n A n t o n i o 1 9 9 5

, w r i t d e n i e d )

. W e a r e

u n a b l e t o d e t e r m i n e f

r o m t h i s r e c o r d t h e r e w a s a n y b a d f a i t h o n t h e p a r t o f S m i t h i n f i l i n g s u i t a g a i n s t
B r o o k s h i r e , I n c

. a n d a p p e l l a n t i n H a r d i n C o u n t y

.

W e c o n c l u d e t h e t r i a l c o u r t d i d n o t e r r i n

m a i n t a i n i n g v e n u e i n H a r d i n C o u n t y

. I s s u e o n e i s

o v e r r u l e d

.

E x c l u s i o n o f E v i d e n c e

[ 5 ] I n p o i n t o f e r r o r t w o , B r o o k s h i r e G r o c e r y

c o n t e n d s t h e t r i a l c o u r t e r r e d i n e x c l u d i n g e v i d e n c e
t h a t S m i t h f

a l s i f i e d a n a n s w e r o n h i s j o b a p p l i c a t i o n b y f a i l i n g t o d i s c l o s e h i s p r e v i o u s b a c k s u r g e r y

. A

q u e s t i o n o n t h e e m p l o y m e n t a p p l i c a t i o n a s k e d

w h e t h e r S m i t h h a d e v e r b e e n s e r i o u s l y i n j u r e d o n t h e j o b

. S m i t h a n s w e r e d “ n o

. ” I n t h e b i l l o f e x c e p t i o n
t e s t i m o n y , S m i t h i n d i c a t e d h e g a v e t h e “ n o ” a n s w e r b e c a u s e a t t h e t i m e h e d i d n o t c o n s i d e r h i s i n j u r y t o b e s e r i o u s

. U p o n r e f

l e c t i o n , h e a g r e e d t h e c o r r e c t

a n s w e r w o u l d h a v e b e e n “ y e s

. ” T h e e v i d e n c e

a r g u a b l y w a s a d m i s s i b l e f o r t h e p u r p o s e o f
i m p e a c h m e n t o f S m i t h 's c r e d i b i l i t y

. [ 6 ] [ 7 ] E v e n t h o u g h t h e e v i d e n c e w a s a d m i s s i b l e , B r o o k s h i r e G r o c e r y m u s t s t i l l s h o w t h e e x c l u s i o n o f

t h e e v i d e n c e w a s h a r m f u l

. S e e T

e x a s D e p ' t o f
T r a n s p

. v

. A b l e , 3 5 S

. W

. 3 d 6 0 8

, 6 1 7 ( T e x

. 2 0 0 0 )

.

“ [ A ] s u c c e s s f

u l c h a l l e n g e t o e v i d e n t i a r y r u l i n g s

u s u a l l y r e q u i r e s t h e c o m p l a i n i n g p a r t y t o s h o w t h a t

t h e j u d g m e n t t u r n s o n t h e p a r t i c u l a r e v i d e n c e

e x c l u d e d o r a d m i t t e d

. ” I d

. I n o u r r e v i e w , w e

c o n s i d e r t h e e n t i r e r e c o r d

. I d

. O r d i n a r i l y w e w i l l n o t

r e v e r s e a j u d g m e n t f o r e r r o n e o u s r u l i n g s o n

a d m i s s i b i l i t y o f e v i d e n c e w h e n t h e e v i d e n c e i s

c u m u l a t i v e a n d t h e e x c l u d e d e v i d e n c e i s n o t

c o n t r o l l i n g o n a m a t e r i a l i s s u e d i s p o s i t i v e o f t h e

c a s e

. I d

.

H e r e , t h e e v i d e n c e o f t h e a n s w e r o n t h e j o b

a p p l i c a t i o n i s n o t c o n t r o l l i n g o n a n y m a t e r i a l i s s u e i n
t h e c a s e

. T h e a n s w e r d o e s n o t a d d r e s s d i r e c t l y t h e

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a r e t w o l e t t e r s S m i t h s e n t t o E d d i e C r a w f o r d

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o r e t h e t r i a l j u d g e w h e n h e

m a d e t h e d e t e r m i n a t i o n t o u s e t h e N o v e m b e r 1 9 9 2
d a t e a s t h e s t a r t i n g p o i n t f o r c a l c u l a t i n g p r e j u d g m e n t i n t e r e s t

.

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. 2 d a t 5 2 8

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p a y m e n t o r c o m p e n s a t i o n

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t h a t t h e i n s u r a n c e c a r r i e r p a y c e r t a i n m e d i c a l b i l l s

a n d i n q u i r e d a s t o w h e n t h e n e x t l o s t w a g e s c h e c k

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t h e p r e j u d g m e n t i n t e r e s t s t a t u t e r e q u i r e s t h e c l a i m a n t

t o d e m a n d a n e x a c t a m o u n t o r l i s t e v e r y e l e m e n t o f
d a m a g e c l a i m e d i n o r d e r t o t r i g g e r t h e n o t i c e o f

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t h a t a p e r s o n 's m e d i c a l r e l e a s e p r e p a r e d b y h e r

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s u s p e n d o r s t o p a s u i t ) s t a t e d t h e f o l l o w i n g : “

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, t o t h e e x t e n t u n d e r w r i t e r s a r e f o u n d n o t t o b e * 8 2 5 l i a b l e [ i n t h e f e d e r a l a c t i o n ]

. . . . , J & H i s l i a b l e t o K e n n e c o f o r t h e a m o u n t s w h i c h
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u t u r e d a m a g e s

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. S

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. 6Brook shi re Groc ery Co. v. Smi th, 9 9 S.W .3d 819 (200 3)

o n f u t u r e d a m a g e s

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t h e m o t i o n t o e n t e r j u d g m e n t
, a p p e l l a n t 's a t t o r n e y

a c k n o w l e d g e d t h e i s s u e w a s s e t t l e d

. H e a r g u e s f o r a

c h a n g e i n t h e l a w

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c o u r t m u s t f

o l l o w S u p r e m e C o u r t p r e c e d e n t

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T h e j u d g m e n t o f t h e t r i a l c o u r t i s a f f i r m e d

.

A F F I R M E D

.

F o o t n o t e s



## 1 See A ct of May 17

, 19 85

, 69 th Le g., R.S., ch. 95 9, § 1, 19 85 Te x. G en. La w s 32 42

, 32 49

, repealed by A ct of May 8, 19 95

, 74 th Le g., R.S., ch.1 38

, § 10

, 19 95 Te x. G en. La w s 98 1 (current vers ion at Te x. C i v. P rac. & Rem .Cod e A nn

. §§ 15 .00 5, 15 .06 41 (V ernon 20 02 ) .)

End of Do cum ent © 20 15 Thomson R euters. No clai m t o origin al U.S. Go ver nm ent Wo rks.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 7

# KFreedom 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 headnoteFreedom 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. TheFreedom 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 thisFreedom 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.

# LHelena 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 ArbitrateHelena 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 sufficiencyHelena 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 submittingHelena 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. TexasHelena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 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 causingHelena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 8 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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 9 (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 trialsHelena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 10 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 supportHelena Chemical Co. v. Wilkins, 18 S.W.3d 744 (2000)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 11 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 explainedthat 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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 12 [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 SouthwestHelena 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 reasonableHelena 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 isHelena 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.

# MHopkins 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 theHopkins 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. 4 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



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

# NJoh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

9 6 2 S

. W

. 2 d 5 0 7 S u p r e m e C o u r t o f T e x a s

.

J O H N S O N & H I G G I N S O F T E X A S
, I N C

. , P e t i t i o n e r ,
v

. K E N N E C O E N E R G Y
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, 1 9 9 8

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. 7 , 1 9 9 7

.

A f t e r d e f e n d i n g a g a i n s t s i m i l a r s u i t i n f e d e r a l c o u r t
, i n s u r a n c e b r o k e r f i l e d d e c l a r a t o r y j u d g m e n t a c t i o n i n s t a t e c o u r t t o d e t e r m i n e i t s l i a b i l i t y f o r i n s u r e d 's m a r i n e c a r g o

. T h e 1 3 3 r d
D i s t r i c t C o u r t
, H a r r i s C o u n t y , L a m a r M c C o r k l e , J

. , e n t e r e d j u d g m e n t i n f

a v o r o f b r o k e r , n o t w i t h s t a n d i n g j u r y v e r d i c t i n f a v o r o f i n s u r e d

, a n d i n s u r e d a p p e a l e d

. T h e C o u r t o f A p p e a l s , L e e D u g g a n , J r

. , J

. ( R e t i r e d )

, 9 2 1 S

. W

. 2 d 2 5 4

, r e v e r s e d

. O n

a p p l i c a t i o n f

o r w r i t o f e r r o r , t h e S u p r e m e C o u r t
, A b b o t t
, J

. , h e l d t h a t : ( 1 ) i n s u r e d s u s t a i n e d i n j u r y w h e n c o v e r a g e f

o r l o s s

o f p r o f i t s w a s d e n i e d a n d

, t h e r e f o r e , l i m i t a t i o n s p e r i o d o n i n s u r e d 's n e g l i g e n c e c a u s e o f a c t i o n a g a i n s t i n s u r e r

c o m m e n c e d o n t h a t d a t e ; ( 2 ) t o t h e e x t e n t i n s u r e d 's f r a u d a n d
b r e a c h o f c o n t r a c t c l a i m s w e r e b a s e d o n l o s t p r o f i t s c o v e r a g e , t h e y w e r e b a r r e d b y c o l l a t e r a l e s t o p p e l ; ( 3 ) i n s u r e d 's c l a i m b a s e d o n i n s u r a n c e b r o k e r 's b r e a c h o f a l l e g e d a g r e e m e n t t o

s e c u r e c o n t i n g e n c y c o v e r a g e w a s n o t b a r r e d b y c o l l a t e r a l

e s t o p p e l ; ( 4 ) b r o k e r 's m i s r e p r e s e n t a t i o n a s t o i n s u r e d 's

c o v e r a g e d i d n o t a m o u n t t o f r a u d ; ( 5 ) u n d e r c o m m o n l a w , p r e j u d g m e n t i n t e r e s t b e g i n s t o a c c r u e o n e a r l i e r o f 1 8 0 d a y s

a f t e r d a t e d e f

e n d a n t r e c e i v e s w r i t t e n n o t i c e o f c l a i m o r d a t e

s u i t i s f i l e d ; a n d ( 6 ) p r e j u d g m e n t i n t e r e s t m u s t b e c a l c u l a t e d

a s s i m p l e i n t e r e s t

.

J u d g m e n t o f C o u r t o f A p p e a l s m o d i f i e d a n d r e m a n d e d w i t h
d i r e c t i o n s

.

H e c h t
, J

. , f

i l e d d i s s e n t i n g o p i n i o n , i n w h i c h G o n z a l e z a n d
O w e n , J J

. , j o i n e d

, a n d i n p a r t I I o f w h i c h S p e c t o r , J

. , j o i n e d

.

W e s t H e a d n o t e s ( 3 2 )

[ 1 ] L i m i t a t i o n o f A c t i o n s

C a u s e s o f a c t i o n i n g e n e r a l C a u s e o f a c t i o n g e n e r a l l y a c c r u e s , a n d s t a t u t e o f
l i m i t a t i o n s b e g i n s t o r u n , w h e n f a c t s c o m e i n t o

e x i s t e n c e t h a t a u t h o r i z e c l a i m a n t t o s e e k j u d i c i a l

r e m e d y

.

9 3 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 ] L i m i t a t i o n o f A c t i o n s

N e g l i g e n c e

I n s u r e d s u s t a i n e d i n

j u r y w h e n c o v e r a g e f

o r l o s s o f

p r o f i t s o n i t s o i l s h i p m e n t w a s d e n i e d

, a n d

, t h e r e f o r e , l i m i t a t i o n s p e r i o d o n i n s u r e d 's c a u s e o f

a c t i o n a g a i n s t b r o k e r f

o r n e g l i g e n t b r e a c h o f d u t y
t o o b t a i n i n s u r a n c e c o m m e n c e d o n t h a t d a t e ; a l l
f a c t s r e q u i r e d f

o r c a u s e o f a c t i o n e x i s t e d a t t h a t

t i m e

.

1 5 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 ] L i m i t a t i o n o f A c t i o n s

E s t o p p e l t o r e l y o n l i m i t a t i o n

E q u i t a b l e e s t o p p e l d i d n o t b a r i n s u r a n c e b r o k e r 's

a s s e r t i o n o f i t s l i m i t a t i o n s d e f e n s e t o i n s u r e d 's

n e g l i g e n c e a c t i o n , e v e n t h o u g h j u r y a n s w e r e d

“ y e s ” t o q u e s t i o n o f w h e t h e r i n s u r e d 's f a i l u r e t o
t a k e a c t i o n e a r l i e r w a s c a u s e d b y i n s u r a n c e b r o k e r k n o w i n g l y e n g a g i n g i n c o n d u c t s o l e l y c a l c u l a t e d

t o i n d u c e i n s u r e d t o r e f r a i n f r o m o r p o s t p o n e f i l i n g s u i t
, w h e r e j u r y q u e s t i o n w a s s u b m i t t e d a s
p a r t o f d e c e p t i v e p r a c t i c e s a c t c l a i m a n d w a s n o t

s u b m i t t e d a s i n d e p e n d e n t
, c o m m o n

- l a w i s s u e

.

3 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 ] E s t o p p e l

E s s e n t i a l e l e m e n t s

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

D o c t r i n e o f e q u i t a b l e e s t o p p e l r e q u i r e s : ( 1 ) f a l s e

r e p r e s e n t a t i o n o r c o n c e a l m e n t o f m a t e r i a l f a c t s ; ( 2 ) m a d e w i t h k n o w l e d g e , a c t u a l o r c o n s t r u c t i v e ,
o f t h o s e f

a c t s ; ( 3 ) w i t h i n t e n t i o n t h a t i t s h o u l d b e

a c t e d o n ; ( 4 ) t o p a r t y w i t h o u t k n o w l e d g e o r

m e a n s o f o b t a i n i n g k n o w l e d g e o f f a c t s ; ( 5 ) w h o d e t r i m e n t a l l y r e l i e s o n r e p r e s e n t a t i o n s

.

9 8 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 5 ] I n s u r a n c e

D u t i e s a n d l i a b i l i t i e s t o i n s u r e d s o r o t h e r t h i r d

p e r s o n s

O n i s s u e o f a p p l i c a b l e s t a t u t e o f l i m i t a t i o n s , j u r y
q u e s t i o n w h e t h e r i n s u r a n c e b r o k e r e n g a g e d i n

u n f a i r o r d e c e p t i v e a c t o r p r a c t i c e i n d e a l i n g s w i t h
i n s u r e d w a s g r o u n d e d i n I n s u r a n c e C o d e , r a t h e r
t h a n D e c e p t i v e T r a d e P r a c t i c e s

- C o n s u m e r P r o t e c t i o n A c t ( D T P A )

, w h e r e q u e s t i o n 's
l a n g u a g e m i r r o r e d l a n g u a g e o f I n s u r a n c e C o d e
p r o v i s i o n , a n d q u e s t i o n w a s t a k e n f r o m p a t t e r n j u r y c h a r g e t h a t r e f

e r r e d t o i n s u r a n c e c o d e
p r o v i s i o n , r a t h e r t h a n D T P A

. V

. A

. T

. S

. I n s u r a n c e C o d e , a r t

. 2 1

. 2 1 ; V

. T

. C

. A

. , B u s

. & C

. §
1 7

. 5 0 ( a ) ( 4 )

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 6 ] A n t i t r u s t a n d T r a d e R e g u l a t i o n

I n s u r a n c e I n s u r a n c e O f I n s u r e r s

I f v i o l a t i o n s o f I n s u r a n c e C o d e a n d D e c e p t i v e T r a d e P r a c t i c e s

- C o n s u m e r P r o t e c t i o n A c t ( D T P A ) a r e a l l e g e d

, b u t o n l y o n e c a u s e o f a c t i o n i s s u b m i t t e d

, t h a t c l a i m i s n o t a u t o m a t i c a l l y D T P A c l a i m

. V

. A

. T

. S

. I n s u r a n c e C o d e , a r t

. 2 1

. 2 1 ; V

. T

. C

. A

. , B u s

. & C

. § 1 7

. 5 0 ( a ) ( 4 )

.

3 C a s e s t h a t c i t e t h i s h e a d n o t e [ 7 ] A n t i t r u s t a n d T r a d e R e g u l a t i o n T i m e t o S u e ; L i m i t a t i o n s I n s u r a n c e D u t i e s a n d l i a b i l i t i e s t o i n s u r e d s o r o t h e r t h i r d

p e r s o n s

T w o

- y e a r s t a t u t e o f l i m i t a t i o n s p r o v i s i o n o f
D e c e p t i v e T r a d e P r a c t i c e s

- C o n s u m e r P r o t e c t i o n A c t ( D T P A ) a p p l i e d t o i n s u r e d 's c a u s e o f a c t i o n

a g a i n s t b r o k e r u n d e r p r e

- 1 9 8 5 v e r s i o n o f
I n s u r a n c e C o d e p r o v i s i o n c o n c e r n i n g u n f a i r o r d e c e p t i v e p r a c t i c e s , s i n c e c l o s e r e l a t i o n s h i p e x i s t s b e t w e e n I n s u r a n c e C o d e p r o v i s i o n a t i s s u e a n d

c e r t a i n s e c t i o n s o f D T P A

. V

. A

. T

. S

. I n s u r a n c e C o d e , a r t

. 2 1

. 2 1

, § 1 6 ( d ) ; V

. T

. C

. A

. , B u s

. & C

. §
1 7

. 5 0 ( a ) ( 4 )

.

1 1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 8 ] L i m i t a t i o n o f A c t i o n s

L i m i t a t i o n a s a f

f e c t e d b y n a t u r e o r f

o r m o f

r e m e d y i n g e n e r a l

W h e n s t a t u t e l a c k s e x p r e s s l i m i t a t i o n s p e r i o d

,
c o u r t s l o o k t o a n a l o g o u s c a u s e s o f a c t i o n f o r

w h i c h e x p r e s s l i m i t a t i o n s p e r i o d i s a v a i l a b l e

e i t h e r b y s t a t u t e o r b y c a s e l a w

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 9 ] J u d g m e n t

P e r s o n s n o t p a r t i e s o r p r i v i e s

“ D e f e n s i v e c o l l a t e r a l e s t o p p e l ” i s u t i l i z e d b y d e f e n d a n t s t o p r e v e n t r e l i t i g a t i o n b y p l a i n t i f f o f
i s s u e s p r e v i o u s l y l o s t a g a i n s t a n o t h e r d e f e n d a n t

.

2 7 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 0 ] J u d g m e n t

M a t t e r s a c t u a l l y l i t i g a t e d a n d d e t e r m i n e d

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

C o l l a t e r a l e s t o p p e l m a y p r e c l u d e r e l i t i g a t i o n o f
i s s u e s p r e v i o u s l y l i t i g a t e d e v e n t h o u g h

s u b s e q u e n t s u i t i s b a s e d u p o n d i f f e r e n t c a u s e o f

a c t i o n

.

1 6 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 1 ] J u d g m e n t

I d e n t i t y o f I s s u e s , i n G e n e r a l
J u d g m e n t
M a t t e r s a c t u a l l y l i t i g a t e d a n d d e t e r m i n e d
J u d g m e n t
E s s e n t i a l s o f A d

j u d i c a t i o n

I f c a u s e o f a c t i o n i n s e c o n d l a w s u i t i n v o l v e s

e l e m e n t a l r e a d y d e c i d e d i n f i r s t l a w s u i t
, t h a t c a u s e

o f a c t i o n i s b a r r e d u n d e r d o c t r i n e o f c o l l a t e r a l

e s t o p p e l ; f

o r t h i s t o b e t r u e , h o w e v e r , i s s u e d e c i d e d i n f

i r s t a c t i o n m u s t b e a c t u a l l y l i t i g a t e d

,
e s s e n t i a l t o t h a t l a w s u i t 's j u d g m e n t
, a n d i d e n t i c a l

t o i s s u e i n p e n d i n g a c t i o n

.

3 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 2 ] J u d g m e n t

O p e r a t i o n a n d e f

f e c t

T o e x t e n t i n s u r e d 's f

r a u d a n d b r e a c h o f c o n t r a c t

c l a i m s a g a i n s t b r o k e r w e r e b a s e d o n f a i l u r e t o

s e c u r e l o s t p r o f

i t s c o v e r a g e , t h e y w e r e b a r r e d b y

c o l l a t e r a l e s t o p p e l i n s t a t e c o u r t l a w s u i t a g a i n s t i n s u r a n c e b r o k e r , e v e n t h o u g h f e d e r a l d i s t r i c t

c o u r t 's f i n d i n g s o f n o c o v e r a g e w e r e b a s e d o n

a l t e r n a t i v e f

i n d i n g s o f n o a g r e e m e n t a n d n o

a u t h o r i t y ; a p p e l l a t e c o u r t r e v i e w e d a n d a f f i r m e d

t h o s e f i n d i n g s , a n d t h e y w e r e t h u s e s s e n t i a l t o j u d g m e n t

. R e s t a t e m e n t ( S e c o n d ) o f J u d g m e n t s §
2 7 c o m m e n t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 3 ] J u d g m e n t

E s s e n t i a l s o f A d

j u d i c a t i o n E x c e p t i o n e x i s t s t o g e n e r a l r u l e o f n o i s s u e
p r e c l u s i o n b a s e d o n a l t e r n a t i v e h o l d i n g s i f t h e y

a r e a p p e a l e d a n d a f

f i r m e d

. R e s t a t e m e n t ( S e c o n d )

o f J u d g m e n t s § 2 7 c o m m e n t

.

8 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 4 ] J u d g m e n t

O p e r a t i o n a n d e f

f e c t

I n s u r e d 's c l a i m b a s e d o n i n s u r a n c e b r o k e r 's
b r e a c h o f a l l e g e d a g r e e m e n t t o s e c u r e

c o n t i n g e n c y c o v e r a g e w a s n o t b a r r e d b y c o l l a t e r a l

e s t o p p e l

, e v e n t h o u g h p a r t i e s h a d b r o u g h t

p r e v i o u s s u i t i n f

e d e r a l d i s t r i c t c o u r t
, w h e r e f e d e r a l c o u r t s n e v e r a d d r e s s e d w h e t h e r a g r e e m e n t

w a s m a d e t o s e c u r e c o n t i n g e n c y c o v e r a g e

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 5 ] F r a u d

E l e m e n t s o f A c t u a l F r a u d

E l e m e n t s o f c o m m o n

- l a w f r a u d a r e t h a t : ( 1 )

m a t e r i a l r e p r e s e n t a t i o n w a s m a d e ; ( 2 )

r e p r e s e n t a t i o n w a s f

a l s e ; ( 3 ) w h e n r e p r e s e n t a t i o n

w a s m a d e , s p e a k e r k n e w i t w a s f a l s e o r m a d e i t

r e c k l e s s l y w i t h o u t a n y k n o w l e d g e o f t r u t h a n d a s
p o s i t i v e a s s e r t i o n ; ( 4 ) r e p r e s e n t a t i o n w a s m a d e

w i t h i n t e n t i o n t h a t i t b e a c t e d u p o n b y o t h e r p a r t y ; ( 5 ) p a r t y a c t e d i n r e l i a n c e u p o n r e p r e s e n t a t i o n ;

a n d ( 6 ) p a r t y s u f

f e r e d i n j u r y

.

1 2 8 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 6 ] J u d g m e n t

O p e r a t i o n a n d e f

f e c t

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

T o e x t e n t t h a t i n s u r e d ' s s t a t e c o u r t f r a u d c l a i m

w a s b a s e d o n i t s a l l e g a t i o n t h a t i n s u r a n c e b r o k e r k n o w i n g l y o r r e c k l e s s l y r e p r e s e n t e d t h a t i n s u r e d 's
l o s t p r o f i t s o n o i l p u r c h a s e c o n t r a c t w e r e i n s u r e d

, i t w a s b a r r e d b y c o l l a t e r a l e s t o p p e l i n t h a t f e d e r a l

c o u r t h a d a l r e a d y c o n c l u d e d i n e a r l i e r l a w s u i t t h a t

n o s u c h r e p r e s e n t a t i o n w a s m a d e ; h o w e v e r , i n s u r e d 's a l l e g a t i o n t h a t b r o k e r k n o w i n g l y o r

r e c k l e s s l y r e p r e s e n t e d t h a t i n s u r e d w a s f u l l y i n s u r e d f o r a n y l o s s t o w h i c h u n d e r w r i t e r s d i d n o t

r e s p o n d u n d e r c o n t i n g e n c y c l a u s e w a s n o t b a r r e d
b e c a u s e t h a t i s s u e w a s n o t d e c i d e d i n f e d e r a l s u i t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 7 ] J u d g m e n t

O p e r a t i o n a n d e f

f e c t

I n s u r a n c e b r o k e r 's i n v o l v e m e n t i n p r i o r f e d e r a l

a c t i o n a s w i t n e s s o n b e h a l f o f i n s u r e d d i d n o t

e x t i n g u i s h c o l l a t e r a l e s t o p p e l e f f e c t o f f e d e r a l

c o u r t 's f i n d i n g s , w i t h r e s p e c t t o i n s u r e d 's s t a t e

c o u r t a c t i o n a g a i n s t b r o k e r , d e s p i t e i n s u r e d 's

a r g u m e n t t h a t i t h a d n o i n c e n t i v e t o f u l l y l i t i g a t e

a g a i n s t b r o k e r i n f

e d e r a l a c t i o n ; p r o p e r i n q u i r y

w a s w h e t h e r i n s u r e d h a d i n c e n t i v e t o l i t i g a t e i s s u e

o f b r o k e r 's r e p r e s e n t a t i o n s

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 8 ] J u d g m e n t

O p e r a t i o n a n d e f

f e c t

L a c k o f o p p o r t u n i t y f

o r j u r y t r i a l i n f

e d e r a l c o u r t d i d n o t
, i n a n d o f i t s e l f

, p r e c l u d e a p p l i c a t i o n o f
d e f e n s i v e c o l l a t e r a l e s t o p p e l i n s t a t e c o u r t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 9 ] D a m a g e s

C o n s t r u c t i o n a n d o p e r a t i o n W h e n p r e v a i l i n g p a r t y d o e s n o t e l e c t m e a s u r e o f
d a m a g e s f

r o m a m o n g a l t e r n a t i v e m e a s u r e s , c o u r t s

s h o u l d r e n d e r j u d g m e n t b a s e d o n f i n d i n g

a f f o r d i n g g r e a t e s t r e c o v e r y

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 0 ] I n s u r a n c e

D u t i e s a n d l i a b i l i t i e s t o i n s u r e d s o r o t h e r t h i r d

p e r s o n s

I n s u r a n c e b r o k e r 's m i s r e p r e s e n t a t i o n a s t o i n s u r e d 's c o n t i n g e n c y c o v e r a g e w i t h r e s p e c t t o

s h i p m e n t o f o i l a n d t r a n s f e r o f t i t l e d i d n o t

a m o u n t t o f

r a u d w h e r e t h e r e w a s n o e v i d e n c e t h a t b r o k e r r e c k l e s s l y m i s r e p r e s e n t e d t h e c o v e r a g e ;

a l t h o u g h b r o k e r s h o u l d h a v e k n o w n t h a t h i s

r e p r e s e n t a t i o n s m a y h a v e b e e n i n c o r r e c t
, s u c h

e v i d e n c e w a s a k i n t o n e g l i g e n t m i s r e p r e s e n t a t i o n ,
n o t f r a u d

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 1 ] F r a u d

K n o w l e d g e o f d e f

e n d a n t
F r a u d
S t a t e m e n t s r e c k l e s s l y m a d e ; n e g l i g e n t

m i s r e p r e s e n t a t i o n

S t a t e m e n t i s n o t f

r a u d u l e n t u n l e s s s p e a k e r k n e w i t w a s f a l s e w h e n m a d e o r s p e a k e r m a d e i t

r e c k l e s s l y w i t h o u t k n o w l e d g e o f t r u t h

.

3 4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 2 ] F r a u d

F a l s i t y o f r e p r e s e n t a t i o n s a n d k n o w l e d g e
t h e r e o f

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 4Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

P r o o f t h a t d e f

e n d a n t m a d e s t a t e m e n t k n o w i n g o f
i t s f a l s i t y o r w i t h o u t k n o w l e d g e o f i t s t r u t h m a y b e p r o v e d b y d i r e c t o r c i r c u m s t a n t i a l e v i d e n c e

.

1 4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 3 ] F r a u d

S t a t e m e n t s r e c k l e s s l y m a d e ; n e g l i g e n t

m i s r e p r e s e n t a t i o n

S p e a k e r a c t s r e c k l e s s l y i f h e m a k e s

r e p r e s e n t a t i o n s w i t h o u t a n y k n o w l e d g e o f t r u t h

a n d a s p o s i t i v e a s s e r t i o n

.

4 3 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 4 ] I n s u r a n c e

A c t i o n s

J u r y 's f i n d i n g t h a t i n s u r a n c e b r o k e r b r e a c h e d

c o n t r a c t w i t h i n s u r e d t o s e c u r e c o n t i n g e n c y

c o v e r a g e f

o r o i l s h i p m e n t w a s s u p p o r t e d b y

e v i d e n c e d e m o n s t r a t i n g t h a t e i t h e r b r o k e r s o l d
i n s u r e d i n s u r a n c e i t d i d n o t n e e d

, o r b r o k e r

a g r e e d t o s e l l i n s u r e d a d d i t i o n a l c o v e r a g e , w h i c h
b r o k e r u l t i m a t e l y d i d n o t d o

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 5 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l

“ P r e j u d g m e n t i n t e r e s t ” i s c o m p e n s a t i o n a l l o w e d
b y l a w a s a d d i t i o n a l d a m a g e s f o r l o s t u s e o f

m o n e y d u e a s d a m a g e s d u r i n g l a p s e o f t i m e b e t w e e n a c c r u a l o f c l a i m a n d d a t e o f j u d g m e n t

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 1 ( a ) ( R e p e a l e d )

.

1 0 4 C a s e s t h a t c i t e t h i s h e a d n o t e [ 2 6 ] I n t e r e s t
P r e j u d g m e n t I n t e r e s t i n G e n e r a l

T h e r e a r e t w o l e g a l s o u r c e s f o r a w a r d o f

p r e j u d g m e n t i n t e r e s t : ( 1 ) g e n e r a l p r i n c i p l e s o f

e q u i t y a n d ( 2 ) a n e n a b l i n g s t a t u t e

.

4 8 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 7 ] I n t e r e s t

T o r t s ; w r o n g f

u l d e a t h

T o r t r e f o r m s t a t u t e p r o v i d i n g t h a t j u d g m e n t s i n

w r o n g f u l d e a t h

, p e r s o n a l i n

j u r y , a n d p r o p e r t y d a m a g e c a s e s m u s t i n c l u d e p r e j u d g m e n t i n t e r e s t

a p p l i e s o n l y t o w r o n g f u l d e a t h

, p e r s o n a l i n

j u r y ,
a n d p r o p e r t y d a m a g e c a s e s

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a ) ( R e p e a l e d )

.

4 6 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 8 ] I n t e r e s t

I n s u r a n c e m a t t e r s

A l t h o u g h c o n t r a c t c o n c e r n e d i n s u r a n c e c o v e r a g e f o r d a m a g e s t o i n s u r e d 's p r o p e r t y b y t h i r d p a r t y ,
s t a t u t e p r o v i d i n g f

o r p r e j u d g m e n t i n t e r e s t i n
p r o p e r t y d a m a g e c a s e s d i d n o t a p p l y w h e r e i n s u r e d d i d n o t b a s e i t s s u i t o n t h a t p r o p e r t y d a m a g e , b u t i n s t e a d b r o u g h t c l a i m s f o r p u r e l y

e c o n o m i c l o s s e s s t e m m i n g f r o m i n s u r a n c e b r o k e r 's b r e a c h o f

c o n t r a c t t o s e c u r e c o n t i n g e n c y

c o v e r a g e ; t h u s , a n y r e c o v e r y f o r p r e j u d g m e n t i n t e r e s t w o u l d b e g o v e r n e d b y c o m m o n l a w

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a ) ( R e p e a l e d )

.

5 6 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 9 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 5Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

U n d e r c o m m o n

- l a w , p r e j u d g m e n t i n t e r e s t b e g i n s
t o a c c r u e o n e a r l i e r o f ( 1 ) 1 8 0 d a y s a f t e r d a t e d e f e n d a n t r e c e i v e s w r i t t e n n o t i c e o f c l a i m o r ( 2 )
d a t e s u i t i s f

i l e d

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a ) ( R e p e a l e d )

.

1 1 2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 0 ] I n t e r e s t

I n s u r a n c e m a t t e r s

I n s u r e d 's s t a n d s t i l l a g r e e m e n t w i t h b r o k e r d e l a y i n g s t a t e c o u r t s u i t p e n d i n g o u t c o m e o f
f e d e r a l s u i t a g a i n s t i n s u r e r s w a s “ w r i t t e n n o t i c e o f

a c l a i m ” t h a t t r i g g e r e d a c c r u a l o f p r e j u d g m e n t i n t e r e s t 1 8 0 d a y s f

r o m d a t e o f a g r e e m e n t ;

a g r e e m e n t p r e s e r v e d a l l o f i n s u r e d 's r i g h t s , i n c l u d i n g r i g h t t o p r e j u d g m e n t i n t e r e s t
, a n d a l l o f
b r o k e r 's l i a b i l i t i e s

.

7 8 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 1 ] I n t e r e s t

S t a y o f p r o c e e d i n g s

I n m o s t c i r c u m s t a n c e s , s t a n d s t i l l a g r e e m e n t t o

m a i n t a i n s t a t u s q u o a n d t e m p o r a r i l y s u s p e n d o r

s t o p a l l a s p e c t s o f s u i t o p e r a t e s t o t o l l a c c r u a l o f

p r e j u d g m e n t i n t e r e s t w h i l e a g r e e m e n t i s i n e f f e c t ; h o w e v e r , p a r t i e s m a y c o n t r a c t u a l l y p r o v i d e

o t h e r w i s e

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 2 ] I n t e r e s t

M o d e o f c o m p u t a t i o n i n g e n e r a l E q u i t a b l e p r e j u d g m e n t i n t e r e s t s h o u l d b e

c o m p u t e d a s s i m p l e i n t e r e s t

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( g ) ( R e p e a l e d )

.

3 2 C a s e s t h a t c i t e t h i s h e a d n o t e

A t t o r n e y s a n d L a w F i r m s

* 5 1 1 J o e R

. G r e e n h i l l

, B o b E

. S h a n n o n , A u s t i n , S t e p h e n G

. T i p p s , J a n e A

. B l a n d

, R o b e r t H a r r i s o n P e m b e r t o n , A m y E i k e l

, H o u s t o n , f

o r P e t i t i o n e r

.

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. R u s s e l l

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. M u l l i c a n , J r

. , R o b e r t E i k e l

, G e o r g e E

. P l e t c h e r , K i m b e r l y A n n W a r r e n B r o w n , N i n a C o r t e l l

, H o u s t o n , f

o r R e s p o n d e n t

.

O p i n i o n

A B B O T T

, J u s t i c e d e l i v e r e d t h e o p i n i o n o f t h e C o u r t
, i n w h i c h
P H I L L I P S

, C h i e f J u s t i c e , E N O C H

, B A K E R a n d
H A N K I N S O N

, J u s t i c e s , j o i n

. S P E C T O R

, J u s t i c e , j o i n e d P a r t s I

, I I

, I I I

, a n d I V o f t h e C o u r t 's o p i n i o n

.

W e w i t h d r a w o u r o p i n i o n o f D e c e m b e r 1 1

, 1 9 9 7

, a n d

s u b s t i t u t e t h e f

o l l o w i n g i n i t s p l a c e

. T h e p a r t i e s ' m o t i o n s f o r

r e h e a r i n g a r e o v e r r u l e d

.

T h i s i n s u r a n c e c a s e i n v o l v e s s t a t u t e o f l i m i t a t i o n s a n d

c o l l a t e r a l e s t o p p e l i s s u e s , a n d r e e v a l u a t e s t h e c o m m o n

- l a w

m e t h o d o f c a l c u l a t i n g p r e j u d g m e n t i n t e r e s t u n d e r C a v n a r v

. Q u a l i t y C o n t r o l P a r k i n g , I

n c

. , 6 9 6 S

. W

. 2 d 5 4 9 ( T e x

. 1 9 8 5 )

. T h e c o u r t o f a p p e a l s r e v e r s e d t h e t r i a l c o u r t 's j u d g m e n t i n f a v o r o f J o h n s o n & H i g g i n s , a n d r e n d e r e d j u d g m e n t f o r K e n n e c o E n e r g y

. W e m o d i f y t h e c o u r t o f a p p e a l s ' j u d g m e n t

a n d r e m a n d t h e c a u s e t o t h e t r i a l c o u r t t o r e n d e r j u d g m e n t i n

a c c o r d a n c e w i t h t h i s o p i n i o n

.

I

. B A C K G R O U N D

I n 1 9 8 2

, K e n n e c o E n e r g y , a n o i l t r a d i n g c o m p a n y t h e n k n o w n

a s A r m a d a S u p p l y , p u r c h a s e d a t a n k e r c a r g o o f f u e l o i l f r o m P e t r o b a s , a B r a z i l i a n o i l c o m p a n y , t o b e s h i p p e d f r o m R i o d e J a n e i r o t o N e w Y o r k

. U n d e r t h e i r c o n t r a c t
, t h e p u r c h a s e p r i c e

o f t h e o i l w a s t o b e m e a s u r e d b y t h e m a r k e t p r i c e o n t h e d a y

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 6Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

t h e t a n k e r a r r i v e d i n N e w Y o r k

. T h e c o n t r a c t w a s o n a

“ C

. I

. F

. ” b a s i s , m e a n i n g t h a t P e t r o b a s b o r e t h e c o s t o f

s h i p m e n t
, i n s u r a n c e , a n d f r e i g h t

.

P e t r o b a s p u r c h a s e d i n s u r a n c e f o r t h e c a r g o f

r o m B a n o r t e , a B r a z i l i a n u n d e r w r i t e r , f o r t h e a m o u n t o f t h e p u r c h a s e p r i c e , p l u s t e n p e r c e n t

. T h i s a m o u n t w a s t h e “ p r i m a r y c o v e r a g e

. ” I n

a d d i t i o n t o t h e i n s u r a n c e p r o v i d e d b y P e t r o b a s , K e n n e c o

a l r e a d y h a d i t s o w n i n s u r a n c e f r o m a g r o u p o f L o n d o n

u n d e r w r i t e r s , w h i c h i t o b t a i n e d t h r o u g h a n i n s u r a n c e b r o k e r , J o h n s o n & H i g g i n s o f T e x a s , I n c

. ( J & H )

.

T h e o i l t a n k e r s a i l e d N o v e m b e r 1 6

, 1 9 8 2

. W h i l e t h e t a n k e r

w a s e n r o u t e , K e n n e c o c o n t r a c t e d t o s e l l t h e o i l

, u p o n d e l i v e r y i n N e w Y o r k H a r b o r , t o S u n O i l T r a d i n g C o m p a n y ( S u n ) f o r $ 3 0

. 5 5 p e r b a r r e l

. T h i s c o n t r a c t w a s o n a “ d e l i v e r e d ” b a s i s ( r a t h e r t h a n a C

. I

. F

. b a s i s )

, m e a n i n g t h a t K e n n e c o r e t a i n e d

t i t l e t o t h e o i l a n d a s s u m e d t h e r i s k o f l o s s u n t i l S u n a c c e p t e d

t h e c a r g o i n N e w Y o r k

. K e n n e c o 's p r o f i t o n t h e o i l w a s t o b e
t h e d i f f e r e n c e b e t w e e n t h e s a l e p r i c e o f $ 3 0

. 5 5 p e r b a r r e l a n d

t h e p u r c h a s e p r i c e t o b e d e t e r m i n e d b y t h e m a r k e t p r i c e u p o n d e l i v e r y

.

A f t e r t h e t a n k e r s e t s a i l

, t h e m a r k e t p r i c e o f t h e o i l b e g a n t o d e c l i n e

. B e c a u s e K e n n e c o 's p u r c h a s e p r i c e w a s d e t e r m i n e d b y
t h e m a r k e t p r i c e , a s t h e m a r k e t p r i c e d e c r e a s e d

, K e n n e c o 's

p o t e n t i a l p r o f

i t o n t h e s a l e i n c r e a s e d

. A t t h e s a m e t i m e , t h e
p r i m a r y c o v e r a g e a m o u n t u n d e r t h e B r a z i l i a n i n s u r a n c e
p o l i c y , w h i c h w a s t i e d t o t h e m a r k e t p r i c e K e n n e c o w o u l d p a y
t o P e t r o b a s ( p l u s t e n p e r c e n t )

, d e c l i n e d

. C o n c e r n e d a b o u t t h e

a d e q u a c y o f i n s u r a n c e c o v e r a g e f o r i t s i n c r e a s i n g p o t e n t i a l

p r o f i t
, a n t i c i p a t e d t o b e $ 1

. 5 m i l l i o n , K e n n e c o a r r a n g e d a

m e e t i n g w i t h J & H t o d i s c u s s c o v e r a g e u n d e r t h e L o n d o n
p o l i c y

. O n N o v e m b e r 3 0

, 1 9 8 2

, w h i l e * 5 1 2 t h e t a n k e r o f f u e l

s a i l e d t o N e w Y o r k

, K e n n e c o s e n t C a r o l y n B r o w n t o m e e t

w i t h J i m A n d e r s o n o f J & H t o d i s c u s s c o v e r a g e

.

A c c o r d i n g t o K e n n e c o , B r o w n m e t w i t h J & H t o a d d r e s s t w o
p r i m a r y c o n c e r n s

. F i r s t
, K e n n e c o w a s w o r r i e d t h a t i t w o u l d b e

u n a b l e t o c o l l e c t o n a c l a i m u n d e r t h e B a n o r t e p o l i c y b e c a u s e K e n n e c o h a d h e a r d t h a t t h e B r a z i l i a n i n s u r e r s h a d a d u b i o u s

r e p u t a t i o n

. T o a v o i d t h a t p o t e n t i a l p r o b l e m , K e n n e c o w a n t e d

t o c l a i m t h e p r i m a r y c o v e r a g e a m o u n t d i r e c t l y f r o m t h e L o n d o n u n d e r w r i t e r s

. I n e s s e n c e , K e n n e c o w a n t e d a s s u r a n c e f r o m t h e L o n d o n u n d e r w r i t e r s t h a t i t w o u l d b e a b l e t o r e c o v e r
t h e a m o u n t i n s u r e d b y B a n o r t e

.

I n r e s p o n s e , A n d e r s o n p r e p a r e d a c e r t i f i c a t e o f i n s u r a n c e u n d e r t h e c o n t i n g e n c y c o v e r a g e K e n n e c o a l r e a d y h a d w i t h t h e L o n d o n u n d e r w r i t e r s

. A n d e r s o n d i d n o t
, h o w e v e r , o f f e r t h e
p o s s i b i l i t y o f a “ g u a r a n t e e o f c o l l e c t i b i l i t y , ” w h i c h w o u l d
i n s u r e K e n n e c o a g a i n s t t h e r i s k t h a t B a n o r t e w o u l d n o t p a y

. T h i s l a t e r p r o v e d p r o b l e m a t i c b e c a u s e t h e p o l i c y 's c o v e r s h e e t

s t a t e d t h a t c o n t i n g e n c y c o v e r a g e r e q u i r e d a b a c k

- t o

- b a c k
C

. I

. F

. s a l e , m e a n i n g t h a t b o t h t h e s a l e f r o m P e t r o b a s t o K e n n e c o a n d t h e s a l e f r o m K e n n e c o t o S u n n e e d e d t o b e C

. I

. F

.

A n d e r s o n t e s t i f

i e d t h a t h e b e l i e v e d t h e s a l e w a s b a c k

- t o

- b a c k
C

. I

. F

. I n a b a c k

- t o

- b a c k C

. I

. F

. s a l e , K e n n e c o w o u l d n o t h o l d

t i t l e t o t h e c a r g o d u r i n g t h e v o y a g e ; i n s t e a d

, K e n n e c o 's b u y e r

w o u l d t a k e t i t l e a n d a c c o r d i n g l y b e a r t h e r i s k o f l o s s o f t h e

c a r g o d u r i n g t r a n s p o r t

. I n a b a c k

- t o

- b a c k C

. I

. F

. s a l e , K e n n e c o

w o u l d p r e p a r e a c e r t i f

i c a t e o f i n s u r a n c e u n d e r i t s c o n t i n g e n c y

c o v e r a g e a n d d e l i v e r i t t o t h e p u r c h a s e r o f t h e c a r g o , w h o

w o u l d t h e n r e p l a c e K e n n e c o a s t h e p a r t y a s s e r t i n g a c l a i m

.

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, t h e s a l e f r o m K e n n e c o t o S u n w a s c o n t r a c t e d

o n a d e l i v e r e d b a s i s , n o t C

. I

. F

. ; t h e r e f o r e , K e n n e c o r e t a i n e d
b o t h t h e t i t l e a n d t h e r i s k

. A s a c o n s e q u e n c e , t h e c o n t i n g e n c y

c o v e r a g e p r o c u r e d b y J & H d i d n o t p r o t e c t K e n n e c o a g a i n s t

t h e p o s s i b i l i t y t h a t t h e B r a z i l i a n u n d e r w r i t e r s w o u l d n o t f u l f i l l

t h e i r i n s u r a n c e o b l i g a t i o n s

.

T h e s e c o n d c o n c e r n B r o w n e x p r e s s e d t o J & H w a s t h a t t h e
p r i m a r y c o v e r a g e t h r o u g h B a n o r t e w a s i n s u f f i c i e n t t o c o v e r i t s
p r o f i t s o n t h e d e a l b e c a u s e B a n o r t e i n s u r e d o n l y t h e p u r c h a s e
p r i c e ( i

. e

. , t h e m a r k e t p r i c e ) p l u s t e n p e r c e n t

. K e n n e c o w a n t e d

t o i n s u r e a g a i n s t t h e l o s s o f t h e s i z a b l e p r o f i t i t w o u l d m a k e o n
t h e S u n c o n t r a c t

. A n d e r s o n r e s p o n d e d b y p r e p a r i n g a

c e r t i f i c a t e u n d e r K e n n e c o 's p r e e x i s t i n g i n c r e a s e d v a l u e

c o v e r a g e , i n c r e a s i n g t h e i n s u r e d v a l u e o f t h e c a r g o f r o m t h e

m a r k e t p r i c e p l u s t e n p e r c e n t ( t h e p r i m a r y c o v e r a g e a m o u n t )

t o t h e c o n t r a c t a m o u n t o f $ 3 0

. 5 5 p e r b a r r e l ( t h e r e b y i n c l u d i n g
t h e p r o f i t )

.

I n p r e p a r i n g b o t h c e r t i f i c a t e s , A n d e r s o n a p p a r e n t l y d i d n o t

r e a l i z e t h a t K e n n e c o c o u l d n o t r e c o v e r u n d e r b o t h t h e i n c r e a s e d v a l u e p r o v i s i o n , u n d e r w h i c h K e n n e c o r e t a i n e d t i t l e

a n d b o r e t h e r i s k o f l o s s , a n d t h e c o n t i n g e n c y c o v e r a g e
p r o v i s i o n , u n d e r w h i c h K e n n e c o 's b u y e r h e l d t h e t i t l e a n d t h e

r i s k

. N e v e r t h e l e s s , B r o w n d i s c e r n e d f r o m h e r m e e t i n g w i t h
A n d e r s o n t h a t K e n n e c o w a s p r o t e c t e d b y “ c o n t i n g e n c y

c o v e r a g e ” i n t h e e v e n t t h e B r a z i l i a n u n d e r w r i t e r s f a i l e d t o p a y ,
a n d t h a t t h e p r o f

i t s o n t h e S u n c o n t r a c t w e r e c o v e r e d b y t h e i n c r e a s e d v a l u e p r o v i s i o n

. K e n n e c o p a i d p r e m i u m s f o r b o t h

t h e c o n t i n g e n c y c o v e r a g e a n d t h e i n c r e a s e d v a l u e c o v e r a g e

.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 7Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

W h e n t h e t a n k e r a r r i v e d i n N e w Y o r k H a r b o r , S u n r e j e c t e d t h e

c a r g o a n d c a n c e l e d t h e c o n t r a c t b e c a u s e t h e o i l a r r i v e d b o t h

s h o r t a n d c o n t a m i n a t e d

. B e f o r e l e a v i n g B r a z i l

, t h e c a r g o w a s

a p p a r e n t l y d e f

i c i e n t b y 8

, 0 0 0 b a r r e l s

. I n a d d i t i o n , t h e t a n k e r

c r e w u s e d s o m e o f t h e c a r g o a s f u e l d u r i n g t h e v o y a g e , p u m p i n g i n s e a w a t e r t o r e p l a c e t h e d e p l e t e d a m o u n t

.

S u n r e s c i n d e d t h e c o n t r a c t

. H a d i t n o t
, K e n n e c o 's p r o f i t s

w o u l d h a v e b e e n a b o u t $ 1

, 6 9 0

, 7 8 0

. 0 0

. K e n n e c o w a s a b l e t o
p a r t i a l l y r e n e g o t i a t e t h e c o n t r a c t w i t h S u n ; h o w e v e r , t h e

r e n e g o t i a t e d c o n t r a c t w a s a l s o l o s t w h e n t h e t a n k e r f l e d t h e h a r b o r t o a v o i d b e i n g s a n c t i o n e d f o r i t s c o n d u c t

. E v e n t u a l l y , K e n n e c o c o n v i n c e d t h e t a n k e r c a p t a i n t o r e t u r n , t o o k c o n t r o l

o f t h e c a r g o , a n d b e g a n t o r e c o n d i t i o n t h e o i l

. A s t h e

r e c o n d i t i o n e d o i l b e c a m e s a l e a b l e , K e n n e c o s o l d i t i n s e v e r a l

p a r c e l s a t v a r i o u s p r i c e s b e l o w t h e $ 3 0

. 5 5 p e r b a r r e l c o n t r a c t

p r i c e

.

K e n n e c o a s s e r t e d i n s u r a n c e c l a i m s u n d e r b o t h t h e B r a z i l i a n

a n d L o n d o n p o l i c i e s , * 5 1 3 c l a i m i n g t h e f u l l a m o u n t o f i t s l o s t

p r o f i t u n d e r t h e c a n c e l e d S u n c o n t r a c t

. T h e L o n d o n

u n d e r w r i t e r s r e f

u s e d K e n n e c o 's c o n t i n g e n c y c o v e r a g e b e c a u s e
t h e s a l e w a s n o t b a c k

- t o

- b a c k C

. I

. F

. a s r e q u i r e d u n d e r t h e i n s u r a n c e p o l i c y

. T h e L o n d o n u n d e r w r i t e r s d i d r e c o g n i z e

c o v e r a g e u n d e r t h e i n c r e a s e d v a l u e p r o v i s i o n ; h o w e v e r , t h e i r
p o s i t i o n w a s t h a t t h e i n c r e a s e d v a l u e c o v e r a g e i n s u r e d o n l y

a g a i n s t p h y s i c a l l o s s o r d a m a g e t o t h e c a r g o u p t o t h e a m o u n t i n s u r e d

, n o t t h e l o s s o f p r o f i t s d u e t o c a n c e l l a t i o n o f a

c o n t r a c t
, a s K e n n e c o u r g e d

. T h e L o n d o n u n d e r w r i t e r s t o o k a f o r m a l p o s i t i o n o n t h e c l a i m i n M a r c h 1 9 8 3

, d e n y i n g

c o n t i n g e n c y c o v e r a g e a n d r e j e c t i n g K e n n e c o 's i n t e r p r e t a t i o n

o f t h e i n c r e a s e d v a l u e p r o v i s i o n

.

K e n n e c o f

i l e d s u i t a g a i n s t B a n o r t e a n d t h e L o n d o n

u n d e r w r i t e r s i n A p r i l 1 9 8 3 i n N e w Y o r k f e d e r a l d i s t r i c t c o u r t

. A r m a d a S u

p p l y , I n c

. v

. W

r i g h t

, 6 6 5 F

. S u p p

. 1 0 4 7 ( S

. D

. N

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. 1 9 8 7 )

, a

f f ' d i n p a r t

, r e v ' d i n p a r t

, 8 5 8 F

. 2 d 8 4 2 ( 2 d
C i r

. 1 9 8 8 )

. W i t h t h e c o n t i n g e n c y c o v e r a g e i n d i s p u t e , K e n n e c o

c o u l d n o t l o o k s o l e l y t o t h e L o n d o n u n d e r w r i t e r s f o r c o v e r a g e , b u t h a d t o b r i n g s u i t a g a i n s t B a n o r t e , w h i c h d i s p u t e d
K e n n e c o 's p r i m a r y c o v e r a g e

. K e n n e c o d i d n o t n a m e J & H a s

a d e f e n d a n t
, b u t d i d o f

f e r e v i d e n c e a b o u t t h e e v e n t s a t t h e N o v e m b e r 3 0

, 1 9 8 2 m e e t i n g b e t w e e n B r o w n a n d A n d e r s o n ,
a n d K e n n e c o 's c o n t e n t i o n t h a t A n d e r s o n 's a n d J & H 's

r e p r e s e n t a t i o n s r e s u l t e d i n l o s t p r o f i t s c o v e r a g e

.

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-

j u r y t r i a l

, t h e f

e d e r a l d i s t r i c t c o u r t h e l d t h a t t h e c o n t i n g e n c y c o v e r a g e w a s i n a p p l i c a b l e b e c a u s e t h e s a l e w a s

n o t b a c k

- t o

- b a c k C

. I

. F

. T h e c o u r t a l s o c o n c l u d e d t h a t t h e i n c r e a s e d v a l u e p r o v i s i o n c o v e r e d p h y s i c a l l o s s a n d d a m a g e , b u t n o t t h e l o s s o f t h e S u n c o n t r a c t

. I n d e t e r m i n i n g t h e s c o p e

o f t h e l o s t p r o f

i t s a n d l o s t c o n t r a c t c o v e r a g e , t h e c o u r t

c o n s i d e r e d J & H 's c o n d u c t d u r i n g a n d a f t e r t h e N o v e m b e r 3 0

m e e t i n g t o d e c i d e w h a t a g r e e m e n t s h a d b e e n m a d e r e g a r d i n g

c o v e r a g e

. O n a p p e a l

, t h e S e c o n d C i r c u i t a f f i r m e d m o s t o f

t h e d i s t r i c t c o u r t 's j u d g m e n t
, b u t r e v e r s e d i n p a r t o n t h e i s s u e o f

s u e a n d l a b o r e x p e n s e s

. 1 A r m a d a S u p p l y , I n c

. v

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, 8 5 8
F

. 2 d 8 4 2

, 8 5 1 ( 2 d C i r

. 1 9 8 8 )

. T h e S e c o n d C i r c u i t r e n d e r e d i t s d e c i s i o n o n S e p t e m b e r 2 2

, 1 9 8 8

.

W h i l e t h e f

e d e r a l a c t i o n w a s p e n d i n g i n N e w Y o r k

, K e n n e c o i n d i c a t e d t h a t i t m i g h t f i l e a s e p a r a t e s u i t a g a i n s t J & H f o r

m i s h a n d l i n g i t s i n s u r a n c e n e e d s

. J & H a n d K e n n e c o s i g n e d a

s t a n d s t i l l a g r e e m e n t o n D e c e m b e r 1 5

, 1 9 8 6

, d e l a y i n g a n y s u c h

a c t i o n p e n d i n g t h e o u t c o m e o f t h e f e d e r a l l i t i g a t i o n

. T h e

s t a n d s t i l l a g r e e m e n t c o n t a i n e d a p r o v i s i o n t o l l i n g t h e s t a t u t e

o f l i m i t a t i o n s f

o r “ t h e p e r i o d b e t w e e n D e c e m b e r 1 5

, 1 9 8 6 a n d

t h e d a t e w h e n t h i r t y d a y s

. . . e l a p s e d f o l l o w i n g t h e f

i n a l
d e t e r m i n a t i o n o f t h e N e w Y o r k A c t i o n

. ”

I n J u n e 1 9 8 8

, p r i o r t o t h e S e c o n d C i r c u i t 's d e c i s i o n , J & H
f i l e d a d e c l a r a t o r y j u d g m e n t a c t i o n i n T e x a s s t a t e c o u r t
,
s e e k i n g a r u l i n g t h a t r e s j u d i c a t a a n d c o l l a t e r a l e s t o p p e l b a r r e d
K e n n e c o f

r o m f i l i n g s u i t a g a i n s t i t

. K e n n e c o c o u n t e r c l a i m e d

a n d s o u g h t d a m a g e s o n a v a r i e t y o f c l a i m s

. A j u r y f o u n d t h a t
K e n n e c o s u f

f e r e d d a m a g e s i n t h e a m o u n t s o f : $ 1

, 5 0 0

, 0 0 0 f o r f r a u d ; $ 1

, 5 0 0

, 0 0 0 f

o r I n s u r a n c e C o d e 2 v i o l a t i o n s ; $ 1

, 5 6 0

, 0 0 0
f o r b r e a c h o f t h e c o n t r a c t t o s e c u r e l o s t p r o f i t s c o v e r a g e ; $ 4 1 2

, 2 7 3

. 6 6 f

o r b r e a c h o f t h e c o n t r a c t t o s e c u r e c o n t i n g e n c y

c o v e r a g e ; a n d $ 1

, 7 0 0

, 0 0 0 f o r n e g l i g e n c e

. T h e j u r y a l s o f o u n d

t h a t K e n n e c o d i s c o v e r e d o r s h o u l d h a v e d i s c o v e r e d t h e b a s i s f o r i t s I n s u r a n c e C o d e c l a i m b y M a r c h 1 9 8 3

.

J & H m o v e d f

o r j u d g m e n t b a s e d o n t h e g r o u n d t h a t t h e I n s u r a n c e C o d e a n d n e g l i g e n c e c l a i m s w e r e b a r r e d b y t h e i r

r e s p e c t i v e s t a t u t e s o f l i m i t a t i o n s

. J & H a l t e r n a t i v e l y m o v e d
f o r j u d g m e n t n o t w i t h s t a n d i n g t h e v e r d i c t o n t h e g r o u n d s t h a t : ( 1 ) a l l o f K e n n e c o 's c l a i m s w e r e b a r r e d b y c o l l a t e r a l e s t o p p e l

a n d r e s j u d i c a t a , a n d ( 2 ) n o e v i d e n c e s u p p o r t e d t h e j u r y 's
f i n d i n g s o f b r e a c h o f c o n t r a c t a n d f r a u d

. T h e t r i a l c o u r t

g r a n t e d J & H 's m o t i o n w i t h o u t s t a t i n g t h e g r o u n d s

.

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a p p e a l s r e v e r s e d t h e t r i a l c o u r t 's j u d g m e n t
, f i n d i n g t h a t : ( 1 ) r e s j u d i c a t a a n d c o l l a t e r a l e s t o p p e l d i d n o t b a r

a n y o f K e n n e c o 's c l a i m s ; ( 2 ) K e n n e c o 's I n s u r a n c e C o d e c l a i m

w a s n o t b a r r e d b y l i m i t a t i o n s ; a n d ( 3 ) a l t h o u g h K e n n e c o 's

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 8Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

n e g l i g e n c e c l a i m a c c r u e d i n M a r c h 1 9 8 3 a n d w o u l d o t h e r w i s e b e b a r r e d b y l i m i t a t i o n s , e q u i t a b l e e s t o p p e l p r e v e n t e d J & H
f r o m a s s e r t i n g a l i m i t a t i o n s d e f e n s e

. 9 2 1 S

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. 2 d 2 5 4

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, 9 7 2

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. T o c a l c u l a t e t h e
p r e j u d g m e n t i n t e r e s t
, t h e c o u r t o f a p p e a l s h e l d t h a t t h e c a s e

w a s c o n t r o l l e d b y C a v n a r v

. Q u a l i t y C o n t r o l P a r k i n g , I

n c

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a r t i c l e 5 0 6 9

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. 9 2 1 S

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. 2 d a t 2 6 7

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W e g r a n t e d t h i s a p p l i c a t i o n f o r w r i t o f

e r r o r t o d e t e r m i n e : ( 1 )

w h e t h e r l i m i t a t i o n s b a r s t h e n e g l i g e n c e a n d I n s u r a n c e C o d e

c l a i m s ; ( 2 ) t h e a p p r o p r i a t e p r e c l u s i v e e f f e c t o f t h e f

e d e r a l

c o u r t j u d g m e n t o n t h e s t a t e c o u r t a c t i o n u n d e r t h e d o c t r i n e o f

c o l l a t e r a l e s t o p p e l ; a n d ( 3 ) t h e p r o p e r m e t h o d f o r c a l c u l a t i n g
p r e j u d g m e n t i n t e r e s t o n c l a i m s g o v e r n e d b y C a v n a r

.

I I

. L I M I T A T I O N S

J & H a s s e r t s t h a t l i m i t a t i o n s b a r s K e n n e c o 's n e g l i g e n c e a n d
I n s u r a n c e C o d e c l a i m s

. W e a g r e e

.

A

. N e g l i g e n c e

T h e c o u r t o f a p p e a l s h e l d t h a t K e n n e c o 's n e g l i g e n c e c l a i m

a g a i n s t J & H a c c r u e d i n M a r c h 1 9 8 3

, w h e n t h e L o n d o n

u n d e r w r i t e r s d e n i e d c o v e r a g e o f K e n n e c o 's c l a i m

. 9 2 1 S

. W

. 2 d

a t 2 6 2

. H o w e v e r , i t f

o u n d t h a t e q u i t a b l e e s t o p p e l b a r r e d J &
H 's l i m i t a t i o n s d e f

e n s e b a s e d u p o n t h e j u r y 's f i n d i n g t h a t
K e n n e c o 's d e l a y i n f

i l i n g s u i t w a s c a u s e d b y J & H 's c o n d u c t

. I d

. a t 2 6 5

– 6 6

. I n i t s a p p l i c a t i o n f o r w r i t o f e r r o r , J & H a s s e r t s
t h a t t h e c o u r t o f a p p e a l s c o r r e c t l y h e l d t h a t K e n n e c o 's

n e g l i g e n c e c l a i m a c c r u e d i n M a r c h 1 9 8 3

, b u t e r r e d i n h o l d i n g
t h a t e q u i t a b l e e s t o p p e l p r e v e n t s J & H f r o m a s s e r t i n g i t s l i m i t a t i o n s d e f

e n s e

. K e n n e c o r e s p o n d s t h a t t h e c o u r t o f

a p p e a l s c o r r e c t l y f

o u n d a n d a p p l i e d e q u i t a b l e e s t o p p e l

, o r , i n
t h e a l t e r n a t i v e , t h e c o u r t o f a p p e a l s e r r e d i n d e t e r m i n i n g t h e d a t e o f a c c r u a l b e c a u s e K e n n e c o 's n e g l i g e n c e c l a i m d i d n o t

a r i s e u n t i l A u g u s t 1 9 8 8

, t h e d a t e w h e n t h e S e c o n d C i r c u i t

a f f i r m e d t h e d i s t r i c t c o u r t 's h o l d i n g o f n o c o v e r a g e a n d w h e n K e n n e c o f

i r s t s u f f e r e d i n j u r y

. W e a g r e e w i t h J & H t h a t t h e

n e g l i g e n c e c a u s e o f a c t i o n a c c r u e d i n M a r c h 1 9 8 3

, a n d t h a t

e q u i t a b l e e s t o p p e l d o e s n o t b a r J & H 's a s s e r t i o n o f i t s l i m i t a t i o n s d e f e n s e

.

[ 1 ] [ 2 ] A c a u s e o f a c t i o n g e n e r a l l y a c c r u e s , a n d t h e s t a t u t e o f
l i m i t a t i o n s b e g i n s t o r u n , w h e n f a c t s c o m e i n t o e x i s t e n c e t h a t

a u t h o r i z e a c l a i m a n t t o s e e k a j u d i c i a l r e m e d y

. M u r r a y v

. S a n J a c i n t o A g e n c

y , I n c

. , 8 0 0 S

. W

. 2 d 8 2 6

, 8 2 8 ( T e x

. 1 9 9 0 ) ; s e e

a l s o M o r e n o v

. S t e r l i n g D r u g , I n c

. , 7 8 7 S

. W

. 2 d 3 4 8

, 3 5 1 ( T e x

. 1 9 9 0 ) ( “ [ A ] c a u s e o f a c t i o n c a n g e n e r a l l y b e s a i d t o

a c c r u e w h e n t h e w r o n g f u l a c t e f f e c t s a n i n

j u r y

. ” )

. T o d a y w e

a r e a s k e d t o d e c i d e w h e t h e r , i n a s u i t b y a n i n s u r e d a g a i n s t i t s

a g e n t f o r n e g l i g e n t b r e a c h o f t h e a g e n t 's d u t y t o o b t a i n i n s u r a n c e , t h e i n

j u r y

- p r o d u c i n g e v e n t w a s t h e d e n i a l o f

c o v e r a g e b y t h e i n s u r a n c e c o m p a n y , o r t h e f i n a l r e s o l u t i o n o f

t h e c o v e r a g e d i s p u t e b y t h e c o u r t s

. W e h o l d t h a t K e n n e c o

s u s t a i n e d i n

j u r y w h e n c o v e r a g e w a s d e n i e d a n d

, t h e r e f o r e , l i m i t a t i o n s c o m m e n c e d o n t h a t d a t e b e c a u s e a l l f a c t s r e q u i r e d
f o r a c a u s e o f a c t i o n e x i s t e d a t t h a t t i m e

. S e e G i l b r e a t h v

. W h i t e , 9 0 3 S

. W

. 2 d 8 5 1

, 8 5 6 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 5

, n o

w r i t ) ( h o l d i n g t h a t l e g a l i n j u r y o c c u r r e d f

o r p u r p o s e s o f

n e g l i g e n c e a c t i o n a g a i n s t i n s u r a n c e a g e n t w h e n i n s u r a n c e

c o m p a n y r e j e c t e d t h e c l a i m ) ; s e e a l s o B u s h v

. F o r d L i f e I n s

. C o

. , 6 8 2 S o

. 2 d 4 6

, 4 7

– 4 8 ( A l a

. 1 9 9 6 ) ; P l a z a B o t t l e S h o p v

. A l
T o r s t r i c k I n s

. A g e n c y , 7 1 2 S

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. 2 d 3 4 9

, 3 5 0 ( K y

. C t

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. 1 9 8 6 )

.

* 5 1 5 I n M u r r a y v

. S a n J a c i n t o A g e n c

y , I n c

. , 8 0 0 S

. W

. 2 d a t 8 2 8

, w e h e l d t h a t w h e n a n i n s u r e r w r o n g f u l l y d e n i e s c o v e r a g e , t h e d e n i a l i s t h e i n

j u r y

- p r o d u c i n g e v e n t a n d

, t h e r e f o r e , a c a u s e

o f a c t i o n f

o r b r e a c h o f t h e d u t y o f g o o d f a i t h a n d f

a i r d e a l i n g

a c c r u e s w h e n c o v e r a g e i s d e n i e d a n d n o t t h e d a t e u p o n w h i c h

t h e c o v e r a g e s u i t i s r e s o l v e d

. S e e a l s o C e l t i c L i f e I n s

. C o

. v

. C o a t s , 8 8 5 S

. W

. 2 d 9 6

, 1 0 0 ( T e x

. 1 9 9 4 ) ( h o l d i n g t h a t a c a u s e

o f a c t i o n u n d e r a r t i c l e 2 1

. 2 1 o f t h e I n s u r a n c e C o d e a c c r u e d o n
t h e d a t e t h a t i n s u r e r f

i r s t d e n i e d c o v e r a g e ) ; L o n g v

. S t a t e F a r m F i r e & C a s

. C o

. , 8 2 8 S

. W

. 2 d 1 2 5

, 1 2 8 ( T e x

. A p p

. — H o u s t o n [ 1 s t D i s t

. ] 1 9 9 2

, w r i t d e n i e d ) ( h o l d i n g t h a t a c a u s e o f a c t i o n

u n d e r t h e D T P A a c c r u e s o n t h e d a t e t h a t c o v e r a g e i s d e n i e d )

. W e b e l i e v e t h a t t h e r e a s o n i n g o f M u r r a y i s e q u a l l y a p p l i c a b l e
t o K e n n e c o 's n e g l i g e n c e c l a i m

.

A l t h o u g h A r n o l d v

. N

a t i o n a l C o u n t

y M u t

. F i r e I

n s

. C o

. , 7 2 5
S

. W

. 2 d 1 6 5

, 1 6 8 ( T e x

. 1 9 8 7 )

, h e l d t h a t l i m i t a t i o n s o n a b a d
f a i t h c l a i m d o e s n o t b e g i n t o r u n u n t i l t h e u n d e r l y i n g c o n t r a c t

c l a i m s a r e f

i n a l l y r e s o l v e d

, t h a t r u l e w a s e x p r e s s l y m o d i f i e d i n M u r r a y b y o u r h o l d i n g t h a t l i m i t a t i o n s r u n s w h e n c o v e r a g e i s d e n i e d b e c a u s e , a t t h a t t i m e , t h e i n s u r e d “ h a [ s ] s u f f i c i e n t f a c t s
t o s e e k a j u d i c i a l r e m e d y

. ” M u r r a y , 8 0 0 S

. W

. 2 d a t 8 2 9

. K e n n e c o 's p o s i t i o n t h a t i t s n e g l i g e n c e c a u s e o f a c t i o n d i d n o t

a c c r u e u n t i l t h e u n d e r l y i n g c o v e r a g e d i s p u t e w a s r e s o l v e d “ i s

n o t c o n s i s t e n t w i t h t h e r u l e t h a t l i m i t a t i o n s c o m m e n c e s a t t h e

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 9Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

t i m e f a c t s c o m e i n t o e x i s t e n c e w h i c h a u t h o r i z e a c l a i m a n t t o

s e e k a j u d i c i a l r e m e d y

. ” I d

. R e g a r d l e s s o f w h e t h e r a c o v e r a g e

s u i t w a s e v e r f

i l e d a g a i n s t t h e L o n d o n u n d e r w r i t e r s , s u f f i c i e n t f a c t s e x i s t e d w h e n c o v e r a g e w a s d e n i e d i n M a r c h 1 9 8 3 f o r K e n n e c o t o s e e k a j u d i c i a l r e m e d y a g a i n s t J & H f o r

n e g l i g e n c e

.

K e n n e c o 's r e l i a n c e o n A t k i n s v

. C r o s l a n d

, 4 1 7 S

. W

. 2 d 1 5 0 ( T e x

. 1 9 6 7 )

, i s m i s p l a c e d

. A t k i n s i n v o l v e d a s u i t b y a t a x p a y e r

a g a i n s t h i s a c c o u n t a n t f o r n e g l i g e n c e

. W e h e l d t h a t t h e s t a t u t e

o f l i m i t a t i o n s d i d n o t b e g i n t o r u n a g a i n s t t h e t a x p a y e r i n t h a t

c a s e u n t i l h i s t a x d e f

i c i e n c y w a s a s s e s s e d b y t h e I R S b e c a u s e

“ [ p ] r i o r t o a s s e s s m e n t t h e p l a i n t i f f h a d n o t b e e n i n

j u r e d

. ” I d

.
a t 1 5 3

. K e n n e c o , i n c o n t r a s t
, w a s n o t o n l y h a r m e d w h e n t h e L o n d o n u n d e r w r i t e r s d e n i e d c o v e r a g e o n i t s c l a i m , b u t a l s o k n e w o r s h o u l d h a v e k n o w n a t t h a t t i m e t h a t J & H m i g h t h a v e b e e n n e g l i g e n t

. T h u s , K e n n e c o 's n e g l i g e n c e c a u s e o f a c t i o n

a c c r u e d i n M a r c h 1 9 8 3

, a n d t h e t w o

- y e a r l i m i t a t i o n s p e r i o d
h a d r u n w h e n K e n n e c o a n d J & H s i g n e d t h e s t a n d s t i l l

a g r e e m e n t i n 1 9 8 6

.

[ 3 ] W e a l s o h o l d t h a t e q u i t a b l e e s t o p p e l d o e s n o t b a r J & H 's

a s s e r t i o n o f i t s l i m i t a t i o n s d e f e n s e

. T h e c o u r t o f a p p e a l s , c i t i n g N e e l e y v

. B a n k e r s T

r u s t C o

. o

f T e x a s , 7 5 7 F

. 2 d 6 2 1

, 6 3 2 & n

. 1 4 ( 5 t h C i r

. 1 9 8 5 )

, f

o u n d t h e j u r y 's a f

f i r m a t i v e a n s w e r t o t h e f o l l o w i n g q u e s t i o n t o b e e q u i v a l e n t t o a f i n d i n g o f e q u i t a b l e

e s t o p p e l :

W a s K e n n e c o 's ( A r m a d a 's ) f a i l u r e t o t a k e

a c t i o n b e f

o r e D e c e m b e r 1 5

, 1 9 8 6 [ t h e d a t e o f

t h e s t a n d s t i l l a g r e e m e n t ]

, c a u s e d b y J & H 's
k n o w i n g l y e n g a g i n g i n c o n d u c t s o l e l y

c a l c u l a t e d t o i n d u c e K e n n e c o ( A r m a d a ) t o

r e f r a i n f r o m o r p o s t p o n e f

i l i n g s u i t ?

9 2 1 S

. W

. 2 d a t 2 6 3

.

J & H a r g u e s t h a t t h i s q u e s t i o n i s a n i n s u f f i c i e n t

s u b m i s s i o n o f e q u i t a b l e e s t o p p e l a n d t h a t i t w a s

m e r e l y a s u b m i s s i o n o f t h e 1 8 0

– d a y l i m i t a t i o n s

e x t e n s i o n a v a i l a b l e u n d e r a r t i c l e 2 1

. 2 1

, s e c t i o n 1 6 ( d )

o f t h e I n s u r a n c e C o d e o r s e c t i o n 1 7

. 5 6 5 o f t h e D T P A

. W e a g r e e

. S e c t i o n 1 6 ( d ) p r o v i d e s :

T h e p e r i o d o f l i m i t a t i o n p r o v i d e d i n t h i s

s e c t i o n m a y b e e x t e n d e d f o r a p e r i o d o f 1 8 0
d a y s i f t h e p e r s o n b r i n g i n g t h e a c t i o n p r o v e s t h a t t h e f a i l u r e t o t i m e l y c o m m e n c e t h e a c t i o n

w a s c a u s e d b y t h e d e f e n d a n t 's e n g a g i n g i n

c o n d u c t s o l e l

y c a l c u l a t e d t o i n d u c e t h e
p l a i n t i f f t o r e f r a i n f r o m o r p o s t

p o n e t h e

c o m m e n c e m e n t o

f t h e a c t i o n

.

T e x

. I n s

. C o d e a r t

. 2 1

. 2 1

, § 1 6 ( d ) ( e m p h a s i s a d d e d )

. S e c t i o n 1 7

. 5 6 5 o f t h e D T P A c o n t a i n s v i r t u a l l y i d e n t i c a l l a n g u a g e

. T e x

. B u s

. & C o m

. C o d e § 1 7

. 5 6 5

. K e n n e c o 's q u e s t i o n t r a c k s t h e l a n g u a g e o f s e c t i o n s 1 6 ( d ) a n d 1 7

. 5 6 5 a l m o s t v e r b a t i m a n d s u b m i t s t h e

e x a c t q u e s t i o n s u g g e s t e d b y P a t t e r n J u r y C h a r g e 1 0 2

. 2 3 f

o r t h e 1 8 0

– d a y e x t e n s i o n u n d e r b o t h

s t a t u t e s

.

[ 4 ] I n c o n t r a s t t o t h a t s t a t u t o r y l a n g u a g e , t h e d o c t r i n e

o f e q u i t a b l e e s t o p p e l r e q u i r e s : ( 1 ) a f a l s e

r e p r e s e n t a t i o n o r c o n c e a l m e n t o f m a t e r i a l f a c t s ; ( 2 )

m a d e w i t h k n o w l e d g e , a c t u a l o r c o n s t r u c t i v e , o f

t h o s e f a c t s ; ( 3 ) w i t h t h e i n t e n t i o n t h a t i t s h o u l d * 5 1 6
b e a c t e d o n ; ( 4 ) t o a p a r t y w i t h o u t k n o w l e d g e o r

m e a n s o f o b t a i n i n g k n o w l e d g e o f t h e f a c t s ; ( 5 ) w h o d e t r i m e n t a l l y r e l i e s o n t h e r e p r e s e n t a t i o n s

. S c h r o e d e r v

. T e x a s I

r o n W o r k s , I n c

. , 8 1 3 S

. W

. 2 d
4 8 3

, 4 8 9 ( T e x

. 1 9 9 1 )

. K e n n e c o 's j u r y q u e s t i o n

c l e a r l y d o e s n o t a d d r e s s m o s t o f t h e e q u i t a b l e

e s t o p p e l e l e m e n t s

. 4 E v e n i f t h e q u e s t i o n c o u l d b e

c h a r a c t e r i z e d a s a p a r t i a l s u b m i s s i o n o f t h e e q u i t a b l e

e s t o p p e l i s s u e , t h e l a n g u a g e s u b m i t t e d i s n o t

“ n e c e s s a r i l y r e f

e r a b l e ” t o e q u i t a b l e e s t o p p e l a n d

t h e r e f o r e s h o u l d n o t b e c h a r a c t e r i z e d a s s u c h o n

a p p e a l

. T e x

. R

. C i v

. P

. 2 7 9 ; s e e a l s o M a r t i n v

. M c K e e R e a l t o r s , I

n c

. , 6 6 3 S

. W

. 2 d 4 4 6

, 4 4 6 ( T e x

. 1 9 8 4 ) ; G o l d K i s t

, I n c

. v

. C a r r , 8 8 6 S

. W

. 2 d
4 2 5

, 4 3 1 ( T e x

. A p p

. — E a s t l a n d 1 9 9 4

, w r i t d e n i e d ) ( h o l d i n g t h a t j u r y q u e s t i o n r e l a t i n g t o b r e a c h o f

c o n t r a c t a n d f

r a u d d i d n o t n e c e s s a r i l y r e f e r t o
p r o m i s s o r y e s t o p p e l t o t h e e x t e n t t h a t d e f e n d a n t

w o u l d b e p u t o n n o t i c e o f p o s s i b i l i t y o f d e e m e d o r

e x p r e s s f i n d i n g s o n t h a t t h e o r y )

.

F u r t h e r m o r e , K e n n e c o 's q u e s t i o n w a s c l e a r l y

s u b m i t t e d a s p a r t o f t h e D T P A / I n s u r a n c e C o d e

c l a i m

— t h e j u r y w a s i n s t r u c t e d n o t t o a n s w e r i t

u n l e s s i t f

o u n d t h a t J & H h a d e n g a g e d i n a n “ u n f a i r

o r d e c e p t i v e a c t o r p r a c t i c e ” t h a t w a s a p r o d u c i n g

c a u s e o f d a m a g e s t o K e n n e c o

. T h e q u e s t i o n w a s n o t

s u b m i t t e d a s a n i n d e p e n d e n t c o m m o n

- l a w i s s u e

. T h e r e f o r e , t h e w o r d i n g o f t h e q u e s t i o n a n d i t s
p l a c e m e n t a f

t e r o t h e r q u e s t i o n s c o n c e r n i n g s t a t u t o r y

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 0Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

c l a i m s r e v e a l t h a t i t w a s a n a t t e m p t t o s u b m i t t h e 1 8 0

– d a y e x t e n s i o n i s s u e , e i t h e r u n d e r t h e I n s u r a n c e C o d e o r t h e D T P A

. B e c a u s e K e n n e c o 's j u r y q u e s t i o n i s a c o r r e c t s u b m i s s i o n o f t h e s t a t u t o r y 1 8 0

– d a y

e x t e n s i o n u n d e r t h e D T P A a n d I n s u r a n c e C o d e , J &
H c o u l d n o t h a v e o b j e c t e d t o t h e q u e s t i o n a s i m p r o p e r l y s u b m i t t e d

.

F u r t h e r , h o l d i n g t h a t a n a f f i r m a t i v e a n s w e r t o t h i s j u r y q u e s t i o n , w h i c h t r a c k s t h e l a n g u a g e o f s e c t i o n s 1 6 ( d ) a n d 1 7

. 5 6 5

, i s e q u i v a l e n t t o a f i n d i n g o f

e q u i t a b l e e s t o p p e l r e n d e r s t h e 1 8 0

– d a y e x t e n s i o n l a n g u a g e m e a n i n g l e s s i n a c t i o n s u n d e r t h e D T P A

a n d t h e n e w I n s u r a n c e C o d e ; a n y t i m e t h e q u e s t i o n i s

s u b m i t t e d

, a “ y e s ” a n s w e r w o u l d a r g u a b l y e s t a b l i s h

e q u i t a b l e e s t o p p e l a n d w h o l l y p r e c l u d e a d e f e n d a n t 's
l i m i t a t i o n s d e f

e n s e i n s t e a d o f j u s t a l l o w i n g t h e 1 8 0

– d a y e x t e n s i o n

.

I n s u m , J & H i s n o t e s t o p p e d f r o m a s s e r t i n g i t s l i m i t a t i o n s d e f

e n s e a n d K e n n e c o 's n e g l i g e n c e c l a i m i s b a r r e d b y t h e s t a t u t e o f l i m i t a t i o n s

.

B

. I n s u r a n c e C o d e

1

. I n s u r a n c e C o d e v s
. D T P A

[ 5 ] K e n n e c o a s s e r t e d c a u s e s o f a c t i o n u n d e r t h e D T P A a n d I n s u r a n c e C o d e a r t i c l e 2 1

. 2 1

. U n d e r e a c h

c a u s e o f a c t i o n , K e n n e c o a r g u e d i n c o r p o r a t i o n o f t h e

o t h e r c a u s e o f a c t i o n

. O n t h o s e i s s u e s , K e n n e c o

s u b m i t t e d a s i n g l e l i a b i l i t y q u e s t i o n t o t h e j u r y :

D i d J o h n s o n & H i g g i n s e n g a g e i n a n y u n f a i r

o r d e c e p t i v e a c t o r p r a c t i c e i n i t s d e a l i n g s w i t h
K e n n e c o ( A r m a d a ) o n o r a b o u t N o v e m b e r 3 0

, 1 9 8 2 ?

T h e p a r t i e s d i s p u t e w h e t h e r t h i s j u r y q u e s t i o n i s
p r o p e r l y c h a r a c t e r i z e d a s a n I n s u r a n c e C o d e c l a i m

o r a D T P A c l a i m

. T h a t d e t e r m i n a t i o n m u s t b e m a d e b e f o r e c o n s i d e r i n g t h e a p p l i c a b l e s t a t u t e o f
l i m i t a t i o n s

.

J & H a s s e r t s t h a t K e n n e c o a b a n d o n e d i t s I n s u r a n c e C o d e c l a i m a n d s u b m i t t e d o n l y a D T P A c l a i m t o t h e j u r y , a n d t h e r e f

o r e t h e D T P A 's t w o

- y e a r s t a t u t e o f
l i m i t a t i o n s a p p l i e s

. J & H 's p o s i t i o n i s n o t s u p p o r t e d
b y t h e r e c o r d

. T h e r e i s n o i n d i c a t i o n t h a t K e n n e c o

w a i v e d t h e I n s u r a n c e C o d e c l a i m a n d p r o c e e d e d

o n l y w i t h i t s D T P A c l a i m

.

T o s u p p o r t i t s p o s i t i o n , J & H r e l i e s o n t h e p a r t i e s '

r e p e a t e d r e f

e r e n c e s t o t h e c a u s e o f

a c t i o n s u b m i t t e d

t o t h e j u r y a s d e a l i n g w i t h “ u n f a i r o r d e c e p t i v e
p r a c t i c e s

. ” J & H a r g u e s t h a t s u c h l a n g u a g e r e f e r s t o

a D T P A c a u s e o f a c t i o n a n d

, t h u s , i n d i c a t e s t h a t
K e n n e c o s u b m i t t e d t h e c l a i m u n d e r t h e D T P A

. H o w e v e r , a r t i c l e 2 1

. 2 1 a l s o d e a l s w i t h u n f a i r o r d e c e p t i v e p r a c t i c e s

.

A r t i c l e 2 1

. 2 1 i s e n t i t l e d “ U n f a i r C o m p e t i t i o n a n d
U n f a i r P r a c t i c e s

. ” * 5 1 7 T e x

. I n s

. C o d e a r t

. 2 1

. 2 1

. S e c t i o n 3 i s c a p t i o n e d “ U n f a i r m e t h o d s o f

c o m p e t i t i o n o r u n f

a i r a n d d e c e p t i v e a c t s o r p r a c t i c e s
p r o h i b i t e d

. ” I

d

. § 3

. S e c t i o n 1 6 p r o v i d e s a c a u s e o f

a c t i o n f o r p e r s o n s i n

j u r e d b y “ u n f

a i r a n d d e c e p t i v e

a c t s o r p r a c t i c e s i n t h e b u s i n e s s o f i n s u r a n c e

. ” I d

. §
1 6

. C l e a r l y , t h e r e f

e r e n c e t o “ a n y u n f

a i r o r d e c e p t i v e

a c t o r p r a c t i c e ” i n t h e j u r y q u e s t i o n c a n r e f e r t o a n I n s u r a n c e C o d e c l a i m a s w e l l a s t o a D T P A c l a i m

.

[ 6 ] J & H a l s o a r g u e s t h a t b e c a u s e v i o l a t i o n s o f

a r t i c l e 2 1

. 2 1 a r e i n c o r p o r a t e d a s v i o l a t i o n s o f t h e D T P A

, T e x

. B u s

. & C o m

. C o d e § 1 7

. 5 0 ( a ) ( 4 )

, a n d
b e c a u s e T e x a s c o u r t s h a v e h e l d t h a t t h e D T P A
l i m i t a t i o n s p r o v i s i o n s h o u l d b e a p p l i e d t o a l l c a u s e s

o f a c t i o n s u b m i t t e d u n d e r t h e D T P A

, s e e M c A d a m s

v

. C a p i t o l P r o d s

. C o r

p

. , 8 1 0 S

. W

. 2 d 2 9 0

, 2 9 2 ( T e x

. A p p

. — F o r t W o r t h 1 9 9 1

, w r i t d e n i e d )

, l i m i t a t i o n s b a r s t h i s c l a i m s i n c e K e n n e c o d i d n o t

r e q u e s t t h a t t h e t r i a l c o u r t s u b m i t a n I n s u r a n c e C o d e

c l a i m a s a n a l t e r n a t i v e c a u s e o f a c t i o n

. J & H 's

a r g u m e n t f

a i l s t o c o n s i d e r t h e f

a c t t h a t
, w h i l e t h e D T P A d o e s i n c o r p o r a t e a r t i c l e 2 1

. 2 1

, t h e c o n v e r s e i s a l s o t r u e

— a r t i c l e 2 1

. 2 1 i n c o r p o r a t e s c e r t a i n
p r a c t i c e s d e l i n e a t e d i n t h e D T P A

. A e t n a C a s

. & S u r

. C o

. v

. M a r s h a l l

, 7 2 4 S

. W

. 2 d 7 7 0

, 7 7 2 ( T e x

. 1 9 8 7 )

. T h u s , i f b o t h D T P A a n d I n s u r a n c e C o d e v i o l a t i o n s

a r e a l l e g e d

, b u t o n l y o n e c a u s e o f a c t i o n i s

s u b m i t t e d

, t h a t c l a i m i s n o t a u t o m a t i c a l l y a D T P A

c l a i m

.

W e a g r e e w i t h K e n n e c o t h a t t h e j u r y q u e s t i o n i s

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 1Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

g r o u n d e d i n t h e I n s u r a n c e C o d e b e c a u s e i t m i r r o r s
t h e l a n g u a g e o f a r t i c l e 2 1

. 2 1

. P a t t e r n J u r y C h a r g e ( P J C ) 1 0 2

. 1 4 ( 1 9 9 0 e d

. )

, e n t i t l e d “ Q u e s t i o n f o r A r t i c l e 2 1

. 2 1 o f t h e I n s u r a n c e C o d e , ” w a s t h e f o r m

u s e d f o r t h e j u r y q u e s t i o n a c t u a l l y s u b m i t t e d

. T h e j u r y q u e s t i o n l a n g u a g e “ u n f a i r o r d e c e p t i v e a c t o r
p r a c t i c e ” t r a c k s t h e l a n g u a g e o f a r t i c l e 2 1

. 2 1

, s e c t i o n 1 6

. A l s o , t h e d e f

i n i t i o n s p r o v i d e d i n t h e j u r y c h a r g e f o r “ u n f a i r o r d e c e p t i v e a c t o r p r a c t i c e ” 5

u n m i s t a k a b l y r e s e m b l e t h e I n s u r a n c e C o d e

. D e f i n i t i o n ( 1 ) t r a c k s t h e l a n g u a g e o f a r t i c l e 2 1

. 2 1

, §
4 ( 1 ) a n d s u b m i t s P J C 1 0 2

. 1 6

, e n t i t l e d

“ M i s r e p r e s e n t a t i o n o r F a l s e A d v e r t i s i n g o f P o l i c y C o n t r a c t s

— I n s u r a n c e

. ” D e f i n i t i o n ( 2 ) t r a c k s t h e l a n g u a g e o f a r t i c l e 2 1

. 2 1

, § 4 ( 2 ) a n d s u b m i t s P J C
1 0 2

. 1 7

, e n t i t l e d “ F a l s e I n f o r m a t i o n o r A d v e r t i s i n g

— I n s u r a n c e

. ” D e f i n i t i o n ( 3 ) t r a c k s t h e l a n g u a g e o f I n s u r a n c e B o a r d O r d e r N o

. 4 1 0 6 0 a n d

s u b m i t s P J C 1 0 2

. 1 9

, e n t i t l e d

“ M i s r e p r e s e n t a t i o n s

— I n s u r a n c e

. ” A d d i t i o n a l l y , Q u e s t i o n 1 2 ( “ W h a t a m o u n t o f t h e d a m a g e s y o u f o u n d

, i f a n y , . . . o c c u r r e d b e f o r e D e c e m b e r 1 5

, 1 9 8 4 [ t w o y e a r s b e f

o r e t h e d a t e o f t h e s t a n d s t i l l

a g r e e m e n t ] ? ” ) i s a p p l i c a b l e o n l y t o c a u s e s o f a c t i o n

u n d e r t h e p r e

– 1 9 8 5 I n s u r a n c e C o d e , w h i c h e x c l u d e d

r e c o v e r y f

o r “ d a m a g e s i n c u r r e d b e y o n d a p o i n t t w o
y e a r s p r i o r t o t h e i n s t i t u t i o n o f t h e a c t i o n

. ” T e x

. I n s

. C o d e a r t

. 2 1

. 2 1

, § 1 6 ( d ) ( V e r n o n 1 9 8 1 )

. T h i s
q u e s t i o n w o u l d n o t h a v e b e e n s u b m i t t e d i f t h e

u n d e r l y i n g l i a b i l i t y c l a i m c o n c e r n e d o n l y t h e D T P A

.

2

. A p p l i c a b l e L i m i t a t i o n s P e r i o d

[ 7 ] H a v i n g d e t e r m i n e d t h a t t h e c l a i m s u b m i t t e d i s

s u f f i c i e n t l y g r o u n d e d i n t h e I n s u r a n c e C o d e , w e

m u s t d e t e r m i n e w h a t s t a t u t e o f l i m i t a t i o n s a p p l i e s t o

a n I n s u r a n c e C o d e c a u s e o f a c t i o n t h a t a c c r u e d p r i o r
t o A p r i l 4

, 1 9 8 5

. U n d e r t h e c u r r e n t v e r s i o n o f a r t i c l e 2 1

. 2 1

, a p a r t y h a s t w o y e a r s f r o m t h e d a t e o n w h i c h
i t d i s c o v e r e d o r s h o u l d h a v e d i s c o v e r e d i t s c a u s e o f

a c t i o n i n w h i c h t o f

i l e s u i t

. T e x

. I n s

. C o d e a r t

. 2 1

. 2 1

, § 1 6 ( d )

. H o w e v e r , b e f o r e A p r i l 4

, 1 9 8 5

, a r t i c l e 2 1

. 2 1 c o n t a i n e d n o e x p r e s s s t a t u t e o f l i m i t a t i o n s

. 6

* 5 1 8 T e x

. I n s

. C o d e a r t

. 2 1

. 2 1

, § 1 6 ( d ) ( V e r n o n 1 9 8 1 ) ; A c t o f

J u n e 7

, 1 9 5 1

, 5 2 d L e g

. , R

. S

. , c h

. 4 9 1

, § 1

, 1 9 5 1 T e x

. G e n

. L a w s 8 6 8

, 1 0 7 5

, a m e n d e d b y A c t o f A p r i l 4

, 1 9 8 5

, 6 9 t h L e g

. , R

. S

. , c h

. 2 2

, § § 3

, 4

, 1 9 8 5 T e x

. G e n

. L a w s 3 9 5

, 3 9 5

– 9 6

. T h e d a t e o f

a c c r u a l o f t h e a r t i c l e 2 1

. 2 1 c a u s e o f a c t i o n d e t e r m i n e s w h i c h v e r s i o n o f t h e I n s u r a n c e C o d e

a p p l i e s

. S e e L o n g v

. S t a t e F a r m F i r e & C a s

. C o

. , 8 2 8 S

. W

. 2 d 1 2 5

, 1 2 8 ( T e x

. A p p

. — H o u s t o n [ 1 s t
D i s t

. ] 1 9 9 2

, w r i t d e n i e d )

. T h e j u r y f o u n d

, a n d
K e n n e c o c o n c e d e s , t h a t i t s i n s u r a n c e c l a i m a c c r u e d

w h e n c o v e r a g e w a s d e n i e d i n M a r c h 1 9 8 3

. T h e r e f o r e , t h e p r e

– 1 9 8 5 v e r s i o n o f a r t i c l e 2 1

. 2 1

,
s e c t i o n 1 6 ( d ) a p p l i e s t o K e n n e c o 's c l a i m

.

[ 8 ] W h e n a s t a t u t e l a c k s a n e x p r e s s l i m i t a t i o n s
p e r i o d

, c o u r t s l o o k t o a n a l o g o u s c a u s e s o f a c t i o n f o r

w h i c h a n e x p r e s s l i m i t a t i o n s p e r i o d i s a v a i l a b l e

e i t h e r b y s t a t u t e o r b y c a s e l a w

. S e e T e c t o n i c R e a l t

y I n v

. C o

. v

. C N

A L l o y d ' s o f T e x

. I n s

. C o

. , 8 1 2 S

. W

. 2 d
6 4 7

, 6 5 5 ( T e x

. A p p

. — D a l l a s 1 9 9 1

, w r i t d e n i e d ) ; B r o o k s F a s h i o n S t o r e s , I

n c

. v

. N o r t h

p a r k N a t ' l
B a n k

, 6 8 9 S

. W

. 2 d 9 3 7

, 9 4 2 ( T e x

. A p p

. — D a l l a s 1 9 8 5

, n o w r i t )

. T e x a s c o u r t s o f a p p e a l s h a v e

r e p e a t e d l y a n a l o g i z e d a n a r t i c l e 2 1

. 2 1 c a u s e o f

a c t i o n t o a n a c t i o n f

o r b r e a c h o f a w r i t t e n c o n t r a c t
, t h u s a p p l y i n g t h e f

o u r

- y e a r s t a t u t e o f l i m i t a t i o n s

a p p l i c a b l e t o a c t i o n s f

o r d e b t

. S e e , e

. g

. , L o n g , 8 2 8
S

. W

. 2 d a t 1 2 8 ; T

e c t o n i c , 8 1 2 S

. W

. 2 d a t 6 5 5 ; N a s h

v

. C a r o l i n a C a s

. I

n s

. C o

. , 7 4 1 S

. W

. 2 d 5 9 8

, 6 0 1 ( T e x

. A p p

. — D a l l a s 1 9 8 7

, w r i t d e n i e d ) ; G i b b s v

. M a i n B a n k o

f H o u s t o n , 6 6 6 S

. W

. 2 d 5 5 4

, 5 5 8 ( T e x

. A p p

. — H o u s t o n [ 1 s t D i s t

. ] 1 9 8 4

, n o w r i t )

. S e e

a l s o K a l i s e t a l

. , P o l i c y h o l d e r 's G u i d e t o t h e L a w o f
I n s u r a n c e C o v e r a g e § 2 6

. 0 2 [ B ]

, a t 2 6

– 4 ( 1 9 9 7 ) ( “ L a w s u i t s s e e k i n g t o e n f o r c e a c o v e r a g e

o b l i g a t i o n t y p i c a l l y a r e g o v e r n e d b y t h e g e n e r a l

s t a t u t e o f l i m i t a t i o n s a p p l i c a b l e t o a c t i o n s o n w r i t t e n

c o n t r a c t s

. ” ) ( c i t i n g F r a n c o v

. A l l s t a t e I n s

. C o

. , 5 0 5
S

. W

. 2 d 7 8 9

, 7 9 3 ( T e x

. 1 9 7 4 ) )

. T h e c o u r t o f a p p e a l s i n t h i s c a s e c i t e d L o n g a n d T e c t o n i c t o r e a c h t h e

s a m e c o n c l u s i o n

. 9 2 1 S

. W

. 2 d a t 2 6 2

.

I n d e c i d i n g w h i c h l i m i t a t i o n s p e r i o d a p p l i e d t o a n

a r t i c l e 2 1

. 2 1 c l a i m t h a t a r o s e b e f o r e A p r i l 4

, 1 9 8 5

, t h e T e c t o n i c c o u r t e x p l a i n e d :

T h e k e y q u e s t i o n i s w h e t h e r t o a n a l o g i z e

a r t i c l e 2 1

. 2 1 c l a i m s t o g e n e r a l t o r t a c t i o n s , f o r

w h i c h a t w o

- y e a r l i m i t a t i o n s p e r i o d a p p l i e d

, o r
t o a c t i o n s f

o r b r e a c h o f a w r i t t e n c o n t r a c t
, f o r

w h i c h a f

o u r

- y e a r l i m i t a t i o n s p e r i o d a p p l i e d

. T e x a s a p p e l l a t e c o u r t s i n t e r p r e t i n g a r t i c l e 2 1

. 2 1 h a v e r e p e a t e d l y a n a l o g i z e d i t t o a n

a c t i o n f o r b r e a c h o f a w r i t t e n c o n t r a c t

. A s a

r e s u l t
, t h e c a s e s h a v e a p p l i e d t h e f o u r

- y e a r l i m i t a t i o n s p e r i o d n o r m a l l y a v a i l a b l e f o r

a c t i o n s t o e n f

o r c e a w r i t t e n c o n t r a c t

.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 2Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

T e c t o n i c , 8 1 2 S

. W

. 2 d a t 6 5 5 ( c i t a t i o n s o m i t t e d )

.

T h i s r e a s o n i n g i s f

l a w e d

, h o w e v e r , b e c a u s e i t f a i l s t o

c o n s i d e r t h a t a n a r t i c l e 2 1

. 2 1 c l a i m i s m o r e

a n a l o g o u s t o a D T P A c l a i m t h a n t o a n a c t i o n f o r d e b t o n a w r i t t e n c o n t r a c t

. A s d i s c u s s e d i n t h e
p r e c e d i n g s e c t i o n i n t h i s o p i n i o n , K e n n e c o 's a r t i c l e 2 1

. 2 1 c l a i m i s v i r t u a l l y i n d i s t i n g u i s h a b l e f r o m i t s D T P A c l a i m

. T h e l a n g u a g e o f s e c t i o n 1 7

. 5 0 ( a ) ( 4 ) o f

t h e D T P A

, b y i t s t e r m s , i n c o r p o r a t e s a r t i c l e 2 1

. 2 1 o f

t h e I n s u r a n c e C o d e i n i t s e n t i r e t y

. V a i l v

. T e x a s F a r m B u r e a u M u t

. I

n s

. C o

. , 7 5 4 S

. W

. 2 d 1 2 9

, 1 3 2 ( T e x

. 1 9 8 8 )

. S i m i l a r l y , a r t i c l e 2 1

. 2 1

, s e c t i o n 1 6

m a k e s a c t i o n a b l e a n y v i o l a t i o n o f s e c t i o n 1 7

. 4 6 o f

t h e D T P A

. A e t n a C a s

. & S u r

. C o

. v

. M a r s h a l l

, 7 2 4
S

. W

. 2 d 7 7 0 ( T e x

. 1 9 8 7 )

. “ T h e D T P A a n d t h e I n s u r a n c e C o d e e a c h g r a n t r e l i e f f o r u n f a i r o r d e c e p t i v e a c t s o r p r a c t i c e s i n t h e b u s i n e s s o f
i n s u r a n c e

. ” V

a i l

, 7 5 4 S

. W

. 2 d a t 1 3 2

.

W e c o n c l u d e t h a t t h e c l o s e r e l a t i o n s h i p b e t w e e n

a r t i c l e 2 1

. 2 1 a n d s e c t i o n 1 7

. 5 0 ( a ) ( 4 ) o f t h e D T P A

r e q u i r e s u s t o a p p l y t h e t w o

- y e a r s t a t u t e o f
l i m i t a t i o n s p r o v i s i o n o f t h e D T P A t o K e n n e c o 's

a r t i c l e 2 1

. 2 1 c l a i m

. W e d i s a p p r o v e o f L o n g v

. S t a t e F a r m F i r e & * 5 1 9 C a s

. C o

. , 8 2 8 S

. W

. 2 d 1 2 5

, 1 2 8 ( T e x

. A p p

. — H o u s t o n [ 1 s t D i s t

. ] 1 9 9 2

, w r i t d e n i e d ) ; T e c t o n i c R e a l t

y I n v

. C o

. v

. C N

A L l o y d ' s o f T e x

. I n s

. C o

. , 8 1 2 S

. W

. 2 d 6 4 7

, 6 5 5 ( T e x

. A p p

. — D a l l a s 1 9 9 1

,
w r i t d e n i e d ) ; N a s h v

. C a r o l i n a C a s

. I n s

. C o

. , 7 4 1
S

. W

. 2 d 5 9 8

, 6 0 1 ( T e x

. A p p

. — D a l l a s 1 9 8 7

, w r i t d e n i e d ) ; a n d G i b b s v

. M a i n B a n k o f H o u s t o n , 6 6 6
S

. W

. 2 d 5 5 4

, 5 5 8 ( T e x

. A p p

. — H o u s t o n [ 1 s t D i s t

. ]
1 9 8 4

, n o w r i t ) ; t o t h e e x t e n t t h e y d i f f e r f r o m t h i s

c o n c l u s i o n

.

K e n n e c o 's a r t i c l e 2 1

. 2 1 c a u s e o f a c t i o n a c c r u e d i n M a r c h 1 9 8 3

. K e n n e c o a n d J & H s i g n e d t h e i r

s t a n d s t i l l a g r e e m e n t m o r e t h a n t w o y e a r s l a t e r o n D e c e m b e r 1 5

, 1 9 8 6

. A s a r e s u l t
, K e n n e c o 's
I n s u r a n c e C o d e c l a i m s a r e b a r r e d b y l i m i t a t i o n s

.

I I I

. C O L L A T E R A L E S T O P P E L

[ 9 ] K e n n e c o 's a r g u m e n t s i n d i c a t e t h a t i t r e g a r d s J &
H 's c o l l a t e r a l e s t o p p e l p l e a a s “ o f f e n s i v e ” c o l l a t e r a l

e s t o p p e l

. H o w e v e r , J & H c o r r e c t l y a r g u e s t h a t i t s i n v o c a t i o n o f t h e p l e a i s , i n f a c t
, “ d e f

e n s i v e

. ”
D e f e n s i v e c o l l a t e r a l e s t o p p e l i s u t i l i z e d b y d e f e n d a n t s t o p r e v e n t r e l i t i g a t i o n b y a p l a i n t i f f o f
i s s u e s p r e v i o u s l y l o s t a g a i n s t a n o t h e r d e f e n d a n t

. P a r k l a n e H o s i e r

y C o

. v

. S h o r e , 4 3 9 U

. S

. 3 2 2

, 3 2 9

, 9 9 S

. C t

. 6 4 5

, 6 5 0

– 5 1

, 5 8 L

. E d

. 2 d 5 5 2 ( 1 9 7 9 ) ; B l a c k 's L a w D i c t i o n a r y 2 6 1

– 6 2 ( 6 t h e d

. 1 9 9 0 )

. J &
H 's s t a t u s a s a “ p l a i n t i f

f ” i n t h e d e c l a r a t o r y j u d g m e n t

a c t i o n i s p u r e l y n o m i n a l ; J & H a s s e r t e d i t s p l e a o f

c o l l a t e r a l e s t o p p e l a s a d e f e n s e t o K e n n e c o 's c l a i m s f o r a f f i r m a t i v e r e l i e f

. S e e R e p u b l i c I n s

. C o

. v

. D a v i s , 8 5 6 S

. W

. 2 d 1 5 8

, 1 6 4 ( T e x

. 1 9 9 3 )

.

J & H a s s e r t s t h a t a l l o f K e n n e c o 's c l a i m s i n t h e s t a t e

c o u r t a c t i o n a r e b a r r e d b y c o l l a t e r a l e s t o p p e l

. 7 T h e

c o u r t o f a p p e a l s c o n c l u d e d t h a t c o l l a t e r a l e s t o p p e l
d i d n o t b a r a n y o f K e n n e c o 's c l a i m s

. B e c a u s e K e n n e c o , t h e n k n o w n a s A r m a d a , a c t u a l l y w a s a
p a r t y i n t h e f

i r s t a c t i o n , t h e c r i t i c a l c o l l a t e r a l

e s t o p p e l i s s u e s c o n c e r n o n l y w h e t h e r : ( 1 ) t h e f a c t s

s o u g h t t o b e l i t i g a t e d i n t h e s e c o n d a c t i o n w e r e f u l l y

a n d f a i r l y l i t i g a t e d i n t h e f

i r s t a c t i o n , a n d ( 2 ) t h o s e f a c t s w e r e e s s e n t i a l t o t h e j u d g m e n t i n t h e f i r s t

a c t i o n

. S y s c o F o o d S e r v s

. , I

n c

. v

. T r a p n e l l

, 8 9 0
S

. W

. 2 d 7 9 6

, 8 0 1 ( T e x

. 1 9 9 4 ) ; E a g l e P r o p e r t i e s , L t d

.

v

. S c h a r b a u e r , 8 0 7 S

. W

. 2 d 7 1 4

, 7 2 1 ( T e x

. 1 9 9 0 )

.

A

. F e d e r a l C o u r t F i n d i n g s

W e m u s t f

i r s t a s c e r t a i n e x a c t l y w h a t i s s u e s w e r e d e c i d e d i n t h e f

e d e r a l a c t i o n t o d e t e r m i n e w h e t h e r
t h o s e f i n d i n g s m i g h t p r e c l u d e K e n n e c o 's c l a i m s i n i t s

s t a t e c o u r t a c t i o n

. A l t h o u g h K e n n e c o 's f e d e r a l a c t i o n

w a s b r o u g h t a g a i n s t b o t h t h e L o n d o n a n d t h e B r a z i l i a n u n d e r w r i t e r s , f o r o u r p u r p o s e s w e n e e d

a d d r e s s o n l y t h e c l a i m s a g a i n s t t h e L o n d o n

u n d e r w r i t e r s

. J & H w a s n o t a p a r t y i n t h e f e d e r a l

a c t i o n ; b u t
, s e v e r a l o f i t s e m p l o y e e s w e r e c a l l e d t o
t e s t i f y i n t h a t c a s e

.

T h e f e d e r a l d i s t r i c t c o u r t c o n c l u d e d t h a t t h e L o n d o n

u n d e r w r i t e r s w e r e n o t l i a b l e f o r c o n t i n g e n c y

c o v e r a g e

. K e n n e c o a r g u e d t h a t t h e b a c k

- t o

- b a c k
C

. I

. F

. r e q u i r e m e n t w a s w a i v e d b y t h e L o n d o n

u n d e r w r i t e r s ' r e t e n t i o n o f K e n n e c o 's p r e m i u m

. T h e d i s t r i c t c o u r t r e

j e c t e d t h i s a r g u m e n t
, f

i n d i n g t h a t t h e L o n d o n u n d e r w r i t e r s d i d n o t w a i v e t h e i r r e s e r v a t i o n

o f c o v e r a g e , d e s p i t e t h e f a c t t h a t t h e y r e c e i v e d a n d

r e t a i n e d t h e p r e m i u m f r o m K e n n e c o

. A s t o J & H 's

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 3Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

c o n d u c t
, t h e c o u r t s t a t e d

, “ [ I ] t a p p e a r s t h a t J o h n s o n & H i g g i n s d i d n o t c l e a r l y u n d e r s t a n d t h e s i t u a t i o n

a n d m i s t a k e n l y b i l l e d A r m a d a f o r a p r e m i u m f

o r

c o n t i n g e n c y c o v e r a g e

. ” A r m a d a S u p p l y , 6 6 5 F

. S u p p

.
a t 1 0 6 2

. T h e c o u r t f

u r t h e r n o t e d t h a t “ J o h n s o n &
H i g g i n s b i l l e d A r m a d a f o r t h e c o n t i n g e n c y c o v e r a g e
p r e m i u m b e f

o r e t h e q u e s t i o n o f c o v e r a g e w a s

r e s o l v e d

. ” I

d

. a t 1 0 6 7

. T h e c o u r t d i d n o t
, h o w e v e r , d e t e r m i n e w h e t h e r J & H w a s o r w a s n o t l i a b l e t o K e n n e c o

.

T h e f e d e r a l d i s t r i c t c o u r t a l s o c o n s i d e r e d w h e t h e r
t h e L o n d o n u n d e r w r i t e r s w e r e l i a b l e f o r K e n n e c o 's
l o s t p r o f i t s o n t h e S u n c o n t r a c t u n d e r t h e i n c r e a s e d

v a l u e p r o v i s i o n

. T h e c o u r t r e a s o n e d t h a t t h e i n c r e a s e d v a l u e c o v e r a g e i n c l u d e d p h y s i c a l l o s s o r d a m a g e t o t h e c a r g o , b u t n o t t h e l o s s o f a c o n t r a c t o r i t s * 5 2 0 p r o f

i t s

. I d

. a t 1 0 5 1

. T h e c o u r t s q u a r e l y

a d d r e s s e d K e n n e c o 's a r g u m e n t t h a t “ e v e n i f t h e

n o r m a l i n t e r p r e t a t i o n o f [ t h e c o v e r a g e p r o v i s i o n ]

w o u l d n o t a l l o w r e c o v e r y f o r l o s s o f p r o f

i t s [ o n a

c o n t r a c t ]

, n e v e r t h e l e s s t h e r e w a s a s e p a r a t e

a g r e e m e n t t o p r o v i d e s u c h c o v e r a g e f o r t h i s c a r g o

. ”
I d

. a t 1 0 5 0

. T h e d i s t r i c t c o u r t h e l d t h a t n o s u c h

s e p a r a t e a g r e e m e n t w a s m a d e , e x p l i c i t l y f i n d i n g t h a t
J & H “ d i d n o t m a k e a n a g r e e m e n t b i n d i n g t h e L o n d o n u n d e r w r i t e r s

. . . t o c o v e r a g e o f t h e l o s t

p r o f i t s o n t h e S u n c o n t r a c t
, ” t h a t “ [ J & H ] d i d n o t

p u r p o r t t o m a k e s u c h a n a g r e e m e n t
, ” a n d t h a t “ [ J &
H ] h a d n e i t h e r a c t u a l n o r a p p a r e n t a u t h o r i t y t o d o

s o

. ” I d

. a t 1 0 5 1

. I t i s s i g n i f

i c a n t t o n o t e t h a t t h e s e f i n d i n g s r e l a t e t o t h e l o s s o f p r o f i t s c o v e r a g e u n d e r
t h e i n c r e a s e d v a l u e p r o v i s i o n a n d n o t t o c o n t i n g e n c y

c o v e r a g e

.

I n i t s c o n c l u s i o n s o f l a w r e g a r d i n g i n c r e a s e d v a l u e

c o v e r a g e , t h e f

e d e r a l d i s t r i c t c o u r t p h r a s e d t h e i s s u e

a s f o l l o w s : “ [ K e n n e c o ] c o n t e n d s t h a t J o h n s o n &
H i g g i n s a g r e e d t h a t t h e L o n d o n i n s u r a n c e w o u l d

c o v e r l o s t p r o f

i t s o n t h e S u n c o n t r a c t

. ” I d

. a t 1 0 5 8

. T h e c o u r t “ f

o u n d a s a f

a c t t h a t J o h n s o n & H i g g i n s d i d n o t p u r p o r t t o m a k e a n y a g r e e m e n t t o i n s u r e t h e S u n c o n t r a c t o r t h e p r o f i t s o n t h a t c o n t r a c t
, ” a n d
f o u n d t h a t J & H h a d n o a c t u a l o r a p p a r e n t a u t h o r i t y
t o d o s o

. I

d

. a t 1 0 6 6

– 6 7

. F i n a l l y , t h e c o u r t c o n c l u d e d

t h a t
, “ a s a m a t t e r o f f

a c t a n d l a w , n o a g r e e m e n t w a s

m a d e a t t h e N o v e m b e r 3 0 m e e t i n g b i n d i n g t h e L o n d o n u n d e r w r i t e r s t o i n s u r a n c e a g a i n s t l o s s o f t h e S u n c o n t r a c t o r t h e p r o f i t s t h e r e o n

. ” I

d

. a t 1 0 6 7

. T h e d i s t r i c t c o u r t a l s o m a d e o t h e r s p e c i f i c f i n d i n g s

a b o u t w h a t o c c u r r e d a t t h e N o v e m b e r 3 0 m e e t i n g

. T h e c o u r t d r e w t h e d i s t i n c t i o n “ b e t w e e n t h e c o n c e p t

o f i n c r e a s i n g t h e i n s u r e d v a l u e b a s e d o n t h e a m o u n t

o f a c o n t r a c t a n d t h e c o n c e p t o f i n s u r i n g a g a i n s t t h e l o s s o f a c o n t r a c t a s s u c h

, ” f i n d i n g t h a t o n l y t h e f o r m e r w a s d i s c u s s e d a t t h e N o v e m b e r 3 0 m e e t i n g

. I d

. a t 1 0 5 9

. T h e c o u r t a l s o f o u n d t h a t “ B r o w n s a i d

n o t h i n g w h i c h a p p r i s e d A n d e r s o n t h a t [ K e n n e c o ]

w i s h e d t o h a v e c o v e r a g e t h a t w o u l d d e p a r t f r o m t h e

n o r m a l m a r i n e i n s u r a n c e a n d w o u l d c o v e r p o s s i b l e l o s s o f a c o n t r a c t

. B r o w n d i d n o t t e s t i f y i n w o r d s o r

s u b s t a n c e t h a t A n d e r s o n e v e r a g r e e d t o s u c h a
t h i n g

. ” I d

. a t 1 0 5 9

– 6 0

. T h e c o u r t c o n t i n u e d

, “ T h e r e i s n o t h i n g i n A n d e r s o n 's t e s t i m o n y t o i n d i c a t e t h a t h e

w a s a g r e e i n g t o i n s u r e a g a i n s t t h e l o s s o f t h e S u n

c o n t r a c t o r t h e p r o f

i t s o n t h a t c o n t r a c t

. C e r t a i n l y A n d e r s o n d i d n o t a g r e e t o s o m e t h i n g o t h e r t h a n t h e

n o r m a l p a r t i c u l a r a v e r a g e m e t h o d o f a d j u s t m e n t i n
t h e c a s e o f a c o n t a m i n a t i o n l o s s

. ” I d

. a t 1 0 6 1

. A g a i n , t h e s e c o n c l u s i o n s b y t h e c o u r t r e l a t e t o l o s t p r o f i t s

u n d e r t h e i n c r e a s e d v a l u e p r o v i s i o n s r a t h e r t h a n

c o n t i n g e n c y c o v e r a g e

.

K e n n e c o a p p e a l e d t h e d i s t r i c t c o u r t 's r u l i n g t o t h e S e c o n d C i r c u i t

. T h e S e c o n d C i r c u i t g e n e r a l l y

a f f i r m e d t h e d i s t r i c t c o u r t 's f i n d i n g s r e g a r d i n g i n c r e a s e d v a l u e c o v e r a g e t h a t : ( 1 ) B r o w n a n d
A n d e r s o n d i d n o t d i s c u s s i n s u r a n c e a g a i n s t l o s s o f

p r o f i t s f o r t h e S u n c o n t r a c t a t t h e N o v e m b e r 3 0

m e e t i n g ; ( 2 ) B r o w n d i d n o t a s k f o r , n o r d i d
A n d e r s o n a g r e e t o , c o v e r a g e o n l o s t p r o f i t s ; ( 3 )
A n d e r s o n 's t e s t i m o n y w a s c o n s i s t e n t w i t h t h e L o n d o n u n d e r w r i t e r s ' p o s i t i o n t h a t t h e i n c r e a s e d

v a l u e c o v e r a g e i n s u r e d a g a i n s t c a r g o l o s s o r d a m a g e

r a t h e r t h a n l o s t p r o f i t s ; ( 4 ) w h a t w a s a c t u a l l y d i s c u s s e d w a s K e n n e c o 's d e s i r e t o “ p r o t e c t ” i t s
p r o f i t s b y u t i l i z i n g t h e i n c r e a s e d v a l u e c o v e r a g e ; a n d ( 5 ) B r o w n a n d A n d e r s o n d i d n o t d i s c u s s t h e d i f f e r e n c e b e t w e e n i n c r e a s i n g t h e i n s u r e d v a l u e b a s e d o n t h e a m o u n t o f t h e c o n t r a c t a n d i n s u r i n g

a g a i n s t t h e l o s s o f a c o n t r a c t a s s u c h

. A r m a d a S u p p l y , 8 5 8 F

. 2 d a t 8 5 1

. T h e S e c o n d C i r c u i t f o u n d

t h a t t h e s e f

i n d i n g s w e r e n o t c l e a r l y e r r o n e o u s

. I d

. T h e c o u r t a l s o r e v i e w e d a n d a f f i r m e d t h e f

i n d i n g
t h a t J & H l a c k e d a u t h o r i t y t o b i n d t h e L o n d o n

u n d e r w r i t e r s

. I

d

. F i n a l l y , t h e c o u r t e x p l i c i t l y u p h e l d

t h e d i s t r i c t c o u r t 's c o n c l u s i o n t h a t “ a s a m a t t e r o f f a c t

a n d l a w , n o a g r e e m e n t w a s m a d e a t t h e N o v e m b e r 3 0 m e e t i n g b i n d i n g t h e L o n d o n u n d e r w r i t e r s t o i n s u r a n c e a g a i n s t l o s s o f t h e S u n c o n t r a c t o r t h e
p r o f i t s t h e r e o n

. ” I

d

.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 4Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

T h e S e c o n d C i r c u i t a l s o u p h e l d t h e d i s t r i c t c o u r t 's
f i n d i n g t h a t t h e L o n d o n u n d e r w r i t e r s w e r e n o t l i a b l e f o r c o n t i n g e n c y c o v e r a g e

. I d

. a t 8 5 2

. T h e c o u r t

a d d r e s s e d K e n n e c o 's c l a i m “ t h a t t h e L o n d o n

u n d e r w r i t e r s ' a c c e p t a n c e a n d r e t e n t i o n o f a p r e m i u m f o r c o n t i n g e n c y c o v e r a g e w a i v e d a n y o b j e c t i o n t h e y

m a y h a v e h a d t o s u c h c o v e r a g e

. ” I d

. a t 8 5 1

. T h e

c o u r t n o t e d t h a t t h e “ e v i d e n c e i n d i c a t e s t h a t * 5 2 1 J
& H m i s t a k e n l y b i l l e d A r m a d a f o r [ c o n t i n g e n c y ]

c o v e r a g e b e f

o r e a n y q u e s t i o n o f c o v e r a g e h a d b e e n

r e s o l v e d a n d t h a t t h e L o n d o n u n d e r w r i t e r s d e n i e d

c o v e r a g e a s s o o n a s t h e f a c t s o f t h e t r a n s a c t i o n b e c a m e f

u l l y k n o w n

. ” I

d

. T h e c o u r t h e l d t h a t “ t h e
p a y m e n t o f a p r e m i u m a l o n e d o e s n o t j u s t i f y t h e

r e w r i t i n g o f a n i n s u r a n c e c o n t r a c t
, ” r e a s o n i n g t h a t

w a i v e r c a n n o t c h a n g e c o v e r a g e

. I d

. a t 8 5 1

– 5 2

. T h u s , t h e c o u r t c o n c l u d e d t h a t c o v e r a g e c o u l d n o t b e

c r e a t e d “ w h e r e n o n e c l e a r l y e x i s t e d

. ” I d

. a t 8 5 2

.

B

. P r e c l u s i o n o f K e n n e c o ' s C l a i m s

[ 1 0 ] [ 1 1 ] C o l l a t e r a l e s t o p p e l m a y p r e c l u d e

r e l i t i g a t i o n o f i s s u e s p r e v i o u s l y l i t i g a t e d e v e n t h o u g h

t h e s u b s e q u e n t s u i t i s b a s e d u p o n a d i f f e r e n t c a u s e o f

a c t i o n

. W i l h i t e v

. A d a m s , 6 4 0 S

. W

. 2 d 8 7 5 ( T e x

. 1 9 8 2 )

. I f a c a u s e o f a c t i o n i n t h e s e c o n d l a w s u i t i n v o l v e s a n e l e m e n t a l r e a d y d e c i d e d i n t h e f i r s t l a w s u i t
, t h a t c a u s e o f a c t i o n i s b a r r e d

. F o r t h i s t o b e
t r u e , h o w e v e r , t h e i s s u e d e c i d e d i n t h e f i r s t a c t i o n

m u s t b e a c t u a l l y l i t i g a t e d

, e s s e n t i a l t o t h a t l a w s u i t 's j u d g m e n t
, a n d i d e n t i c a l t o t h e i s s u e i n t h e p e n d i n g

a c t i o n

. G e t t

y O i l v

. I

n s u r a n c e C o

. o

f N

. A m

. , 8 4 5
S

. W

. 2 d 7 9 4

, 8 0 2 ( T e x

. 1 9 9 2 ) ; E a g l e P r o p e r t i e s , 8 0 7
S

. W

. 2 d a t 7 2 1

– 2 2 ; T

a r t e r v

. M e t r o

p o l i t a n S a v

. &
L o a n A s s '

n , 7 4 4 S

. W

. 2 d 9 2 6

, 9 2 7 ( T e x

. 1 9 8 8 ) ; V a n D y k e v

. B o s w e l l

, O ' T

o o l e , D a v i s & P i c k e r i n g , 6 9 7
S

. W

. 2 d 3 8 1

, 3 8 4 ( T e x

. 1 9 8 5 )

. T h e f e d e r a l c o u r t s h a v e a p p l i e d t h e s a m e t e s t

. S e e I n t e r o c e a n i c a C o r

p

.

v

. S o u n d P i l o t

s , I n c

. , 1 0 7 F

. 3 d 8 6

, 9 1 ( 2 d C i r

. 1 9 9 7 ) ; L e v y v

. K o s h e r O v e r s e e r s A s s ' n o f A m e r i c a , I

n c

. , 1 0 4 F

. 3 d 3 8

, 4 1 ( 2 d C i r

. 1 9 9 7 ) ; H i c k s v

. Q u a k e r O a t s C o

. , 6 6 2 F

. 2 d 1 1 5 8

, 1 1 6 6 ( 5 t h C i r

. 1 9 8 1 )

.

K e n n e c o 's s t a t e c o u r t c l a i m s i n c l u d e : ( 1 ) b r e a c h o f

c o n t r a c t
, ( 2 ) I n s u r a n c e C o d e v i o l a t i o n s , ( 3 )

c o m m o n

- l a w f

r a u d

, a n d ( 4 ) n e g l i g e n c e

. K e n n e c o 's

n e g l i g e n c e a n d I n s u r a n c e C o d e c l a i m s a r e b a r r e d b y l i m i t a t i o n s

. W e h o l d t h a t
, t o t h e e x t e n t K e n n e c o 's r e m a i n i n g c l a i m s a r e b a s e d o n l o s t p r o f i t s c o v e r a g e , t h e y a r e b a r r e d b y c o l l a t e r a l e s t o p p e l a n d t o t h e

e x t e n t t h e y a r e b a s e d o n c o n t i n g e n c y c o v e r a g e , t h e y

a r e n o t b a r r e d

.

1

. B r e a c h o

f C o n t r a c t C l a i m s

a
. l o s t p r o f

i t s c o v e r a g e

[ 1 2 ] K e n n e c o 's c l a i m f o r b r e a c h o f t h e a l l e g e d

a g r e e m e n t t o s e c u r e l o s t p r o f i t s c o v e r a g e i s b a r r e d
b y c o l l a t e r a l e s t o p p e l

. I n i t s s t a t e c o u r t c l a i m , K e n n e c o a s s e r t s t h a t J & H “ b r e a c h e d i t s a g r e e m e n t

t o p r o v i d e t h e t y p e o f c o v e r a g e i t a s s u r e d [ K e n n e c o ]
i t w o u l d s e c u r e

. ” T h e j u r y q u e s t i o n s u b m i t t e d a s k s ,

“ D i d J o h n s o n & H i g g i n s a n d A r m a d a a g r e e o n N o v e m b e r 3 0

, 1 9 8 2

, t h a t J o h n s o n & H i g g i n s w o u l d

s e c u r e f o r K e n n e c o 's ( A r m a d a 's ) b e n e f i t a p o l i c y o f
i n s u r a n c e p r o t e c t i n g t h e p r o f i t s o n t h e s a l e o f t h e

c a r g o i n q u e s t i o n ? ” T h e i n s t r u c t i o n f u r t h e r c l a r i f

i e s
t h a t t h e j u r y w a s a s k e d t o “ d e c i d [ e ] w h e t h e r t h e
p a r t i e s r e a c h e d a n a g r e e m e n t

. ” T h a t i d e n t i c a l i s s u e

w a s p r e v i o u s l y d e c i d e d a g a i n s t K e n n e c o i n t h e f e d e r a l a c t i o n

.

I n t h e f e d e r a l s u i t
, K e n n e c o a r g u e d t h a t J & H

“ s p e c i f i c a l l y a g r e e d ” t o l o s t p r o f i t s c o v e r a g e a t t h e N o v e m b e r 3 0 m e e t i n g

. A r m a d a S u p p l y , 6 6 5 F

. S u p p

.
a t 1 0 5 7

. E v e n a c u r s o r y r e a d i n g o f t h e f e d e r a l
d i s t r i c t c o u r t 's o p i n i o n d e m o n s t r a t e s i t s f i n d i n g t h a t

n o s u c h a g r e e m e n t t o s e c u r e l o s t p r o f i t s c o v e r a g e

w a s m a d e

. A t l e a s t t w i c e i n i t s o p i n i o n , t h e c o u r t

e x p l i c i t l y f

o u n d t h a t J & H n e i t h e r m a d e a n

a g r e e m e n t t o i n s u r e t h e p r o f i t s o n t h e c o n t r a c t n o r
p u r p o r t e d t o m a k e s u c h a n a g r e e m e n t

. A r m a d a S u p p l y , 6 6 5 F

. S u p p

. a t 1 0 5 1

, 1 0 6 6

– 6 7

. T h e S e c o n d
C i r c u i t n o t e d t h e d i s t r i c t c o u r t 's r e j e c t i o n o f
K e n n e c o 's a r g u m e n t t h a t t h e p a r t i e s a g r e e d t o

c o v e r a g e o f

l o s t p r o f i t s a t t h e m e e t i n g , a n d a f f i r m e d

t h e f i n d i n g t h a t “ B r o w n d i d n o t a s k f o r , n o r d i d
A n d e r s o n a g r e e t o , c o v e r a g e o n l o s t p r o f i t s

. ”
A r m a d a S u

p p l y , 8 5 8 F

. 2 d a t 8 4 7

, 8 5 1

. I n o r d e r t o

s u c c e e d o n i t s b r e a c h o f c o n t r a c t c l a i m i n s t a t e c o u r t
, K e n n e c o w a s r e q u i r e d t o e s t a b l i s h t h a t a n a g r e e m e n t

c o n c e r n i n g l o s t p r o f

i t s c o v e r a g e w a s m a d e

. T h a t i s s u e w a s a l r e a d y d e c i d e d a g a i n s t K e n n e c o i n t h e
p r i o r a c t i o n

. T h u s , K e n n e c o 's c l a i m f o r b r e a c h o f a

c o n t r a c t t o s e c u r e l o s t p r o f i t s c o v e r a g e i s p r e c l u d e d

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 5Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

i f t h e c l a i m w a s a c t u a l l y l i t i g a t e d a n d e s s e n t i a l t o t h e j u d g m e n t i n t h e f

e d e r a l a c t i o n

.

T h e i s s u e c o n c e r n i n g w h e t h e r J & H a g r e e d t o

s e c u r e l o s t p r o f

i t s c o v e r a g e w a s a c t u a l l y l i t i g a t e d i n
t h e f e d e r a l a c t i o n b e c a u s e t h e i s s u e w a s p r o p e r l y

r a i s e d

, s u b m i t t e d f

o r d e t e r m i n a t i o n , a n d d e t e r m i n e d

. R e s t a t e m e n t ( S e c o n d ) o f J u d g m e n t s S S S S S S S § 2 7

c m t

. * 5 2 2 d ( 1 9 8 2 ) ; V

a n D y k e v

. B o s w e l l

, O ' T o o l e , D a v i s & P i c k e r i n g , 6 9 7 S

. W

. 2 d 3 8 1

, 3 8 4 ( T e x

. 1 9 8 5 )

. T h e r e a l q u e s t i o n c o n c e r n s t h e e x t e n t t o

w h i c h t h e f

e d e r a l d i s t r i c t c o u r t 's f

i n d i n g t h a t n o s u c h

a g r e e m e n t w a s m a d e w a s e s s e n t i a l t o i t s j u d g m e n t

.

K e n n e c o a r g u e s t h a t
, b e c a u s e t h e f e d e r a l d i s t r i c t

c o u r t 's h o l d i n g o f n o l o s t p r o f i t s c o v e r a g e w a s b a s e d

o n t h e a l t e r n a t i v e f

i n d i n g s o f n o a g r e e m e n t a n d n o

a u t h o r i t y , n e i t h e r f

i n d i n g w a s “ e s s e n t i a l t o t h e p r i o r j u d g m e n t

. ” S e c t i o n 2 7 o f t h e R e s t a t e m e n t ( S e c o n d )

o f J u d g m e n t s p r o v i d e s i n p a r t : “ I f a j u d g m e n t o f a

c o u r t o f f

i r s t i n s t a n c e i s b a s e d o n d e t e r m i n a t i o n s o f

t w o i s s u e s , e i t h e r o f w h i c h s t a n d i n g i n d e p e n d e n t l y

w o u l d b e s u f

f i c i e n t t o s u p p o r t t h e r e s u l t
, t h e j u d g m e n t i s n o t c o n c l u s i v e w i t h r e s p e c t t o e i t h e r i s s u e s t a n d i n g a l o n e

. ” I d

. § 2 7

, c m t

. i ( 1 9 8 2 )

. T h u s ,
a c c o r d i n g t o t h e R e s t a t e m e n t

, t h e g e n e r a l r u l e i s t h a t

t h e r e c a n n o t b e e s t o p p e l b y a l t e r n a t i v e h o l d i n g s

. 8

[ 1 3 ] I n r e s p o n s e , J & H c o r r e c t l y a s s e r t s t h a t b o t h o f

t h e d i s t r i c t c o u r t 's f

i n d i n g s c a n h a v e a p r e c l u s i v e

e f f e c t b e c a u s e b o t h w e r e r e v i e w e d a n d a f f i r m e d b y
t h e S e c o n d C i r c u i t

. A n e x c e p t i o n e x i s t s t o t h e
g e n e r a l r u l e o f n o p r e c l u s i o n w h e n a l t e r n a t i v e h o l d i n g s a r e a p p e a l e d a n d a f f i r m e d

. C o m m e n t o t o
t h e R e s t a t e m e n t p r o v i d e s :

I f t h e j u d g m e n t o f t h e c o u r t o f f i r s t i n s t a n c e

w a s b a s e d o n a d e t e r m i n a t i o n o f t w o i s s u e s ,
e i t h e r o f w h i c h s t a n d i n g i n d e p e n d e n t l y w o u l d
b e s u f f i c i e n t t o s u p p o r t t h e r e s u l t
, a n d t h e

a p p e l l a t e c o u r t u p h o l d s b o t h o f t h e s e d e t e r m i n a t i o n s a s s u f

f i c i e n t
, a n d a c c o r d i n g l y

a f f i r m s t h e j u d g m e n t
, t h e j u d g m e n t i s

c o n c l u s i v e a s t o b o t h d e t e r m i n a t i o n s

. I n

c o n t r a s t t o t h e c a s e d i s c u s s e d i n C o m m e n t i

, t h e l o s i n g p a r t y h a s h e r e o b t a i n e d a n a p p e l l a t e d e c i s i o n o n t h e i s s u e , a n d t h u s t h e b a l a n c e

w e i g h s i n f

a v o r o f p r e c l u s i o n

.

R e s t a t e m e n t ( S e c o n d ) o f J u d g m e n t s § 2 7

, c m t

. o ( 1 9 8 2 )

. T h e d i s t r i c t c o u r t 's a l t e r n a t i v e f i n d i n g s o f n o

a g r e e m e n t t o i n s u r e t h e S u n c o n t r a c t a n d n o

a u t h o r i t y t o d o s o w e r e b o t h a p p e a l e d a n d a f f i r m e d
b y t h e S e c o n d C i r c u i t

. T h e f i n d i n g t h a t n o a g r e e m e n t

w a s m a d e t o c o v e r t h e S u n c o n t r a c t p r o f i t s w a s

r i g o r o u s l y c o n s i d e r e d

— t h e d i s t r i c t c o u r t d i s c u s s e d

t h i s i s s u e e x t e n s i v e l y i n i t s f i n d i n g s o f f

a c t a n d

c o n c l u s i o n s o f l a w

. T h i s f i n d i n g w a s a f

f i r m e d b y t h e S e c o n d C i r c u i t a n d c o u l d

, s t a n d i n g i n d e p e n d e n t l y ,
s u p p o r t t h e r e s u l t o f n o c o v e r a g e ; i t t h u s s e r v e s a s a

v a l i d e s t o p p e l i n t h i s a c t i o n

.

B e c a u s e w e c o n c l u d e t h a t a l t e r n a t i v e f i n d i n g s t h a t

a r e i n f a c t r e v i e w e d a n d a f

f i r m e d b y a n a p p e l l a t e

c o u r t m a y h a v e p r e c l u s i v e e f f e c t
, w e n e e d n o t

a d d r e s s J & H ' s a d d i t i o n a l a r g u m e n t u n d e r E a g l e P r o p e r t i e s , L t d

. v

. S c h a r b a u e r , 8 0 7 S

. W

. 2 d 7 1 4

, 7 2 1 ( T e x

. 1 9 9 0 )

, t h a t e s t o p p e l i s a l l o w e d f o r

a l t e r n a t i v e h o l d i n g s t h a t w e r e “ r i g o r o u s l y

c o n s i d e r e d ” a n d s u f

f i c i e n t t o s u s t a i n t h e j u d g m e n t

.

b

. c o n t i n g e n c y c o v e r a g e

[ 1 4 ] K e n n e c o 's c l a i m f o r b r e a c h o f t h e a l l e g e d

a g r e e m e n t t o s e c u r e “ c o n t i n g e n c y c o v e r a g e ” i s n o t b a r r e d b y c o l l a t e r a l e s t o p p e l

. T h e i s s u e s o u g h t t o b e l i t i g a t e d i n t h i s a c t i o n , a s f r a m e d b y t h e s u b m i t t e d j u r y q u e s t i o n , i s : “ D i d J o h n s o n & H i g g i n s a n d
K e n n e c o ( A r m a d a ) a g r e e o n N o v e m b e r 3 0

, 1 9 8 2

, t h a t J o h n s o n & H i g g i n s w o u l d s e c u r e f o r K e n n e c o 's ( A r m a d a 's ) b e n e f

i t ‘ c o n t i n g e n c y c o v e r a g e ’ ? ” T h e j u r y f o u n d t h a t s u c h a n a g r e e m e n t w a s m a d e a n d

a w a r d e d K e n n e c o $ 4 1 2

, 2 7 3

. 6 6

.

K e n n e c o 's c a u s e o f a c t i o n f o r b r e a c h o f a n

a g r e e m e n t t o s e c u r e c o n t i n g e n c y c o v e r a g e i s n o t

c o l l a t e r a l l y e s t o p p e d b e c a u s e , i n c o n t r a s t t o t h e i r

c o n s i d e r a t i o n o f w h e t h e r J & H a g r e e d t o s e c u r e l o s t

p r o f i t s c o v e r a g e , t h e f

e d e r a l c o u r t s n e v e r a d d r e s s e d

w h e t h e r a n a g r e e m e n t w a s m a d e t o s e c u r e

c o n t i n g e n c y c o v e r a g e

.

I t i s u n d i s p u t e d t h a t B r o w n w e n t t o J & H t o o b t a i n

“ b a c k u p ” i n s u r a n c e i n t h e e v e n t t h e B r a z i l i a n

u n d e r w r i t e r s f

a i l e d t o p a y o n a c l a i m

. I t i s a l s o

u n d i s p u t e d t h a t A n d e r s o n t o l d B r o w n s u c h c o v e r a g e

c o u l d b e t r i g g e r e d b y t h e p o l i c y 's a l r e a d y e x i s t i n g

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 6Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

“ c o n t i n g e n c y c o v e r a g e

. ” T h e f e d e r a l d i s t r i c t c o u r t f o u n d t h a t t h e c o n t i n g e n c y c o v e r a g e d i d n o t a p p l y b e c a u s e : ( 1 ) t h e s a l e w a s n o t b a c k

- t o

- b a c k * 5 2 3
C

. I

. F

. , a n d ( 2 ) t h e L o n d o n u n d e r w r i t e r s d i d n o t

w a i v e t h e c o v e r a g e r e q u i r e m e n t s

. A r m a d a S u p p l y , 6 6 5 F

. S u p p

. a t 1 0 5 1

, 1 0 6 7

. T h u s , t h e d i s t r i c t c o u r t 's
f i n d i n g t h a t t h e p o l i c y 's c o n t i n g e n c y c o v e r a g e d i d

n o t a p p l y t o t h e s a l e d o e s n o t p r e c l u d e a f i n d i n g b y
t h e j u r y i n t h e s t a t e a c t i o n t h a t A n d e r s o n a g r e e d t o

s e c u r e c o n t i n g e n c y c o v e r a g e

.

C o l l a t e r a l e s t o p p e l i s n o t p r o p e r b e c a u s e t h e i s s u e d e c i d e d i n t h e f

e d e r a l a c t i o n i s n o t i d e n t i c a l t o t h e i s s u e K e n n e c o l i t i g a t e d a s a b a s i s f o r t h e

c o n t i n g e n c y c o v e r a g e b r e a c h o f c o n t r a c t c l a i m i n t h e

s t a t e c o u r t

. S e e G e t t

y O i l

, 8 4 5 S

. W

. 2 d a t 8 0 2

. S i m i l a r l y , t h e u l t i m a t e i s s u e s i n K e n n e c o 's s t a t e

a c t i o n “ w e r e n e i t h e r e x p r e s s l y n o r n e c e s s a r i l y

a d j u d i c a t e d ” i n t h e f

e d e r a l a c t i o n n o r w e r e t h e f e d e r a l c o u r t f

i n d i n g s i n c o n s i s t e n t w i t h t h e s t a t e

c o u r t f i n d i n g s

. S e e T

a r t e r v

. M e t r o

p o l i t a n S a v

. &
L o a n A s s '

n , 7 4 4 S

. W

. 2 d 9 2 6

, 9 2 8 ( T e x

. 1 9 8 8 )

.

T h e f e d e r a l c o u r t s n e v e r d e c i d e d w h e t h e r J & H

a g r e e d t o s e c u r e c o n t i n g e n c y c o v e r a g e

. K e n n e c o 's

a s s e r t i o n s i n t h e f e d e r a l c o u r t s r e g a r d i n g

c o n t i n g e n c y c o v e r a g e w e r e m a i n l y t h a t e v e n t s a f t e r
t h e N o v e m b e r 3 0 m e e t i n g ( e

. g

. , t h e u n d e r w r i t e r s '

r e c e i v i n g a n d r e t a i n i n g p r e m i u m s f o r c o n t i n g e n c y

c o v e r a g e ) r e s u l t e d i n a w a i v e r o f t h e b a c k

- t o

- b a c k
C

. I

. F

. r e q u i r e m e n t

. A r m a d a S u p p l y , 6 6 5 F

. S u p p

. a t 1 0 6 1

– 6 3

, 1 0 6 7

– 6 8

, 1 0 6 1 ( “ [ K e n n e c o ] c l a i m s t h a t d u r i n g t h e c o u r s e o f l a t e r e v e n t s t h e L o n d o n

u n d e r w r i t e r s w a i v e d t h e r e q u i r e m e n t o f t h e c o v e r

n o t e

. ” )

. I n c o n t r a s t
, t h e j u r y q u e s t i o n i n t h e s t a t e

a c t i o n f o c u s e d o n l y o n w h e t h e r J & H a g r e e d o n N o v e m b e r 3 0 t o s e c u r e c o v e r a g e

. T h e i s s u e o f

w h e t h e r J & H m i s t a k e n l y b i l l e d K e n n e c o f o r
p r e m i u m s a f

t e r t h e L o n d o n u n d e r w r i t e r s d i s p u t e d

c o v e r a g e i s n o t i d e n t i c a l t o w h e t h e r A n d e r s o n a g r e e d

o n N o v e m b e r 3 0 t o s e c u r e c o n t i n g e n c y c o v e r a g e

.

F u r t h e r , t h e f

e d e r a l d i s t r i c t c o u r t 's s t a t e m e n t s

r e g a r d i n g t h e s t a t e o f k n o w l e d g e o f b o t h p a r t i e s a s t o
t h e n a t u r e o f

t h e s a l e f

r o m K e n n e c o t o S u n ( i

. e

. , t h a t i t w a s n o t b a c k

- t o

- b a c k C

. I

. F

. ) s h o u l d n o t s u p p o r t

c o l l a t e r a l e s t o p p e l

. T h e s e s t a t e m e n t s w e r e n o t

a f f i r m e d o n a p p e a l a n d w e r e n o t e s s e n t i a l t o t h e d i s t r i c t c o u r t 's h o l d i n g s t h a t t h e s a l e w a s n o t c o v e r e d

a n d t h a t t h e b a c k

- t o

- b a c k C

. I

. F

. r e q u i r e m e n t w a s n o t w a i v e d

. N o t e v e r y f a c t f i n d i n g i n t h e d i s t r i c t c o u r t 's

o p i n i o n m a y b e a f

f o r d e d p r e c l u s i v e e f

f e c t

. T o a l l o w

s u c h b r o a d p r e c l u s i o n w o u l d e v i s c e r a t e t h e

r e q u i r e m e n t t h a t t h e f i n d i n g b e e s s e n t i a l t o t h e j u d g m e n t i n t h e p r i o r s u i t

. B o n n i w e l l v

. B e e c h
A i r c r a f t C o r p

. , 6 6 3 S

. W

. 2 d 8 1 6

, a t 8 1 8

– 1 9 ( T e x

. 1 9 8 4 ) ; E a g l e P r o p e r t i e s , 8 0 7 S

. W

. 2 d a t
7 2 1

– 2 2

.

I n f e d e r a l c o u r t
, K e n n e c o a r g u e d t h a t t h e C

. I

. F

. b a c k

- t o

- b a c k r e q u i r e m e n t w a s n o t a m a t e r i a l t e r m o f

t h e c o v e r n o t e a n d t h a t t h e u n d e r w r i t e r s w a i v e d t h e

r e q u i r e m e n t b e c a u s e t h e y r e t a i n e d t h e c o n t i n g e n c y
p r e m i u m

. T h e d i s t r i c t c o u r t m a d e t h r e e i n q u i r i e s t h a t

w e r e e s s e n t i a l t o i t s h o l d i n g o f n o c o n t i n g e n c y

c o v e r a g e : ( 1 ) w h e t h e r t h e b a c k

- t o

- b a c k C

. I

. F

.
r e q u i r e m e n t o f t h e c o v e r n o t e w a s a m a t e r i a l t e r m ; ( 2 ) i f s o , w h e t h e r i t w a s s a t i s f i e d ; a n d ( 3 ) i f n o t

s a t i s f i e d

, w h e t h e r t h e L o n d o n u n d e r w r i t e r s w a i v e d

t h a t r e q u i r e m e n t b y a c c e p t i n g a n d r e t a i n i n g t h e
p r e m i u m

. T h e d i s t r i c t c o u r t c o n c l u d e d t h a t i t w a s a

m a t e r i a l t e r m , i t w a s n o t s a t i s f i e d

, a n d t h a t i t w a s n o t

w a i v e d

. A l t h o u g h t h e d i s t r i c t c o u r t s t a t e d t h a t

“ A n d e r s o n u n d e r s t o o d B r o w n t o s a y ” t h a t t h e s a l e

w a s b a c k

- t o

- b a c k C

. I

. F

. a n d t h a t K e n n e c o d i d n o t

“ a f f i r m a t i v e l y s t a t e ” u n t i l D e c e m b e r 1 9 9 2 t h a t t h e

s a l e t o S u n w a s d e l i v e r e d

, w h a t B r o w n s a i d a n d w h a t A n d e r s o n k n e w o r u n d e r s t o o d r e g a r d i n g t h e s a l e t o S u n w e r e n o t e s s e n t i a l t o t h e d i s t r i c t c o u r t 's h o l d i n g

. A r m a d a S u

p p l y , 6 6 5 F

. S u p p

. a t 1 0 6 1

– 6 2

.

R e g a r d i n g K e n n e c o 's “ c l a i m t h a t t h e u n d e r w r i t e r s

w a i v e d t h e r e q u i r e m e n t o f t h e c o v e r n o t e b e c a u s e
t h e y r e c e i v e d a n d r e t a i n e d t h e ‘ c o n t i n g e n c y ’

p r e m i u m , ” t h e d i s t r i c t c o u r t m a d e t w o a l t e r n a t i v e h o l d i n g s

. I

d

. a t 1 0 6 7

. F i r s t
, i t c o n c l u d e d t h a t w a i v e r

c o u l d n o t r e w r i t e t h e r e q u i r e m e n t s o f t h e p o l i c y

. I d

. T h e n , i t s t a t e d

, “ I n a n y e v e n t
, t h e e v i d e n c e d o e s n o t

s u p p o r t t h e c o n c l u s i o n t h a t t h e L o n d o n u n d e r w r i t e r s

w a i v e d t h e i r o b j e c t i o n s t o c o v e r a g e t h r o u g h

r e t e n t i o n o f a p r e m i u m

. ” I d

. T h e d i s t r i c t c o u r t 's

s t a t e m e n t t h a t “ i t a p p e a r s t h a t J o h n s o n & H i g g i n s d i d n o t c l e a r l y u n d e r s t a n d t h e s i t u a t i o n a n d

m i s t a k e n l y b i l l e d A r m a d a f o r a p r e m i u m f

o r

c o n t i n g e n c y c o v e r a g e , ” i d

. a t 1 0 6 2

, w a s n o t e s s e n t i a l
i n i t s e v a l u a t i o n o f w h e t h e r t h e c o n d u c t o f t h e

u n d e r w r i t e r s r e s u l t e d i n w a i v e r

. T h e d i s t r i c t c o u r t f o c u s e d o n t h e f

a c t * 5 2 4 t h a t t h e L o n d o n

u n d e r w r i t e r s r e s e r v e d d e c i s i o n o n t h e c o n t i n g e n c y

c o v e r a g e , d i d n o t w a i v e t h e i r p o s i t i o n a f t e r J & H b i l l e d K e n n e c o f

o r p r e m i u m s , a n d p l a i n l y d e n i e d

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 7Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

c o v e r a g e w h e n t h e f

a c t s w e r e f

u l l y k n o w n

. I

d

. a t 1 0 6 7

– 6 8

. T h u s , J & H 's b i l l i n g a c t i o n s d i d n o t a f f e c t

t h e L o n d o n u n d e r w r i t e r s ' p o s i t i o n

. I f J & H 's a c t o f
b i l l i n g K e n n e c o w a s i r r e l e v a n t t o t h e d e t e r m i n a t i o n

o f n o w a i v e r , s u r e l y J & H 's s t a t e o f m i n d i n s o d o i n g w a s a l s o i r r e l e v a n t

.

S i m p l y p u t
, t h e f

a c t s r e l e v a n t t o t h e c o n t i n g e n c y

c l a i m s i n t h i s c a s e w e r e n o t i d e n t i c a l t o t h e f a c t s d e c i d e d i n t h e f

e d e r a l c a s e a n d w e r e n o t e s s e n t i a l t o
t h e f e d e r a l c o u r t 's h o l d i n g

. T h e r e f o r e , t h e

c o n t i n g e n c y c o v e r a g e b r e a c h o f c o n t r a c t c l a i m i s n o t

c o l l a t e r a l l y e s t o p p e d

.

2

. C o m m o n - l a w F r a u d

I n t h e s t a t e a c t i o n , t h e c o u r t s u b m i t t e d t h e f o l l o w i n g
q u e s t i o n t o t h e j u r y :

D i d J o h n s o n & H i g g i n s m i s r e p r e s e n t
K e n n e c o 's ( A r m a d a 's ) i n s u r a n c e c o v e r a g e w i t h

t h e L o n d o n u n d e r w r i t e r s a t t h e N o v e m b e r 3 0

, 1 9 8 2

, m e e t i n g ?

T h e q u e s t i o n d i d n o t d i f f e r e n t i a t e b e t w e e n t h e i n c r e a s e d v a l u e c o v e r a g e a n d t h e c o n t i n g e n c y

c o v e r a g e , a l t h o u g h t h e p l e a d i n g s a l l e g e d t h a t A n d e r s o n m i s r e p r e s e n t e d K e n n e c o 's c o v e r a g e u n d e r b o t h p r o v i s i o n s

. T h e j u r y a n s w e r e d a f f i r m a t i v e l y a n d

a w a r d e d K e n n e c o $ 1

. 5 m i l l i o n i n d a m a g e s

.

[ 1 5 ] T h e e l e m e n t s o f c o m m o n

- l a w f r a u d a r e t h a t : ( 1 )

a m a t e r i a l r e p r e s e n t a t i o n w a s m a d e ; ( 2 ) t h e

r e p r e s e n t a t i o n w a s f

a l s e ; ( 3 ) w h e n t h e r e p r e s e n t a t i o n

w a s m a d e , t h e s p e a k e r k n e w i t w a s f a l s e o r m a d e i t

r e c k l e s s l y w i t h o u t a n y k n o w l e d g e o f t h e t r u t h a n d a s

a p o s i t i v e a s s e r t i o n ; ( 4 ) t h e r e p r e s e n t a t i o n w a s m a d e

w i t h t h e i n t e n t i o n t h a t i t b e a c t e d u p o n b y t h e o t h e r
p a r t y ; ( 5 ) t h e p a r t y a c t e d i n r e l i a n c e u p o n t h e

r e p r e s e n t a t i o n ; a n d ( 6 ) t h e p a r t y s u f f e r e d i n j u r y

. T

. O

. S t a n l e y B o o t C o

. v

. B a n k o

f E l P a s o , 8 4 7 S

. W

. 2 d
2 1 8

, 2 2 2 ( T e x

. 1 9 9 2 ) ; E a g l e P r o p e r t i e s , 8 0 7 S

. W

. 2 d

a t 7 2 3

.

[ 1 6 ] J & H a r g u e s t h a t K e n n e c o ' s f r a u d c l a i m i s

e s t o p p e d b e c a u s e K e n n e c o c o n t e n d e d i n t h e f e d e r a l

a c t i o n t h a t A n d e r s o n m i s r e p r e s e n t e d c o v e r a g e u n d e r t h e L o n d o n p o l i c y , a n d t h e f e d e r a l d i s t r i c t c o u r t f o u n d a g a i n s t K e n n e c o o n t h a t i s s u e

. T o s u p p o r t i t s
p o s i t i o n , J & H p o i n t s t o t h e f e d e r a l d i s t r i c t c o u r t 's

s t a t e m e n t t h a t “ [ K e n n e c o ] c o n t e n d s t h a t [ J & H ]

a g r e e d t h a t t h e L o n d o n i n s u r a n c e w o u l d c o v e r l o s t

p r o f i t s o n t h e S u n c o n t r a c t

. ” 6 6 5 F

. S u p p

. a t 1 0 5 8

. J
& H f u r t h e r a r g u e s t h a t K e n n e c o r e l i e s o n t h e s a m e

a r g u m e n t s a n d f

a c t s t h a t i t r e l i e d o n i n f e d e r a l c o u r t

t o n o w s u p p o r t i t s f

r a u d c l a i m

.

K e n n e c o r e s p o n d s t h a t i t s f r a u d c l a i m c o u l d n o t b e

e s t o p p e d b y t h e p r i o r a c t i o n b e c a u s e , i n t h e f e d e r a l

a c t i o n , i t c o n t e n d e d t h a t A n d e r s o n d i d n o t

m i s r e p r e s e n t c o v e r a g e b e c a u s e J & H c o r r e c t l y

r e p r e s e n t e d t h e c o v e r a g e u n d e r t h e L o n d o n p o l i c y ,
w h e r e a s h e r e i t s p o s i t i o n i s t h a t J & H d i d

m i s r e p r e s e n t c o v e r a g e

. F u r t h e r , K e n n e c o a r g u e s t h a t

t h e f e d e r a l s u i t w a s n o t h i n g m o r e t h a n a c o n t r a c t

c o n s t r u c t i o n s u i t
, a n d t h e r e f o r e t h e f e d e r a l c o u r t 's
d e t e r m i n a t i o n o f

t h a t s u i t s h o u l d h a v e n o b e a r i n g o n K e n n e c o 's f

r a u d c l a i m

.

W e h o l d t h a t
, t o t h e e x t e n t t h a t K e n n e c o 's f r a u d

c l a i m i s b a s e d o n i t s a l l e g a t i o n t h a t A n d e r s o n k n o w i n g l y o r r e c k l e s s l y r e p r e s e n t e d t h a t K e n n e c o 's
l o s t p r o f i t s o n t h e c o n t r a c t w e r e i n s u r e d b y t h e i n c r e a s e d v a l u e p r o v i s i o n , i t i s b a r r e d b y c o l l a t e r a l

e s t o p p e l

. K e n n e c o 's s t a t e c o u r t f r a u d c l a i m

n e c e s s a r i l y i n v o l v e s p r o o f t h a t a r e p r e s e n t a t i o n w a s

m a d e , a n d t h a t t h a t r e p r e s e n t a t i o n w a s f a l s e

. A l t h o u g h K e n n e c o n e v e r c o n t e n d e d t h a t A n d e r s o n

o r J & H m i s

- r e p r e s e n t e d c o v e r a g e i n t h e f e d e r a l

c o u r t s , K e n n e c o d i d c o n t e n d t h a t A n d e r s o n m a d e

c e r t a i n r e p r e s e n t a t i o n s r e g a r d i n g l o s t p r o f i t s

c o v e r a g e , a n d t h e f

e d e r a l c o u r t s r e j e c t e d t h a t

c o n t e n t i o n

. I n f

a c t
, t h e S e c o n d C i r c u i t s p e c i f i c a l l y

c h a r a c t e r i z e d t h e i s s u e b e i n g d e c i d e d a s “ w h e t h e r
t h e L o n d o n u n d e r w r i t e r s w e r e b o u n d b y t h e a l l e g e d

r e p r e s e n t a t i o n s o f J & H

, a H o u s t o n b r o k e r , t h a t t h e i n s u r a n c e w o u l d c o v e r l o s t p r o f i t s

. ” A r m a d a S u

p p l y , 8 5 8 F

. 2 d a t 8 5 1 ( e m p h a s i s a d d e d )

. E v e n K e n n e c o 's

o w n b r i e f s t a t e s t h a t “ K e n n e c o o f f e r e d e v i d e n c e

c o n c e r n i n g r e p r e s e n t a t i o n s m a d e b y A n d e r s o n o f [ J
& H ] a s t o t h e e x t e n t o f c o v e r a g e ” f o r l o s t p r o f

i t s

. T h u s , i n s o f

a r a s K e n n e c o 's f

r a u d c l a i m i s b a s e d o n

a n a l l e g e d r e p r e s e n t a t i o n b y A n d e r s o n t h a t
K e n n e c o 's l o s t p r o f

i t s w e r e c o v e r e d

, t h e c l a i m i s b a r r e d * 5 2 5 b y t h e f

e d e r a l c o u r t s ' c o n c l u s i o n t h a t n o

s u c h r e p r e s e n t a t i o n w a s m a d e

.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 8Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

H o w e v e r , K e n n e c o 's a l l e g a t i o n t h a t A n d e r s o n k n o w i n g l y o r r e c k l e s s l y r e p r e s e n t e d t h a t K e n n e c o

“ w a s f u l l y i n s u r e d f

o r a n y l o s s t o w h i c h t h e B r a z i l i a n

u n d e r w r i t e r s d i d n o t r e s p o n d u n d e r t h e ‘ c o n t i n g e n c y ’

c l a u s e ” i s n o t b a r r e d b e c a u s e t h a t i s s u e w a s n o t d e c i d e d i n t h e f

e d e r a l s u i t

. T h e f

e d e r a l c o u r t s m a d e

n o f i n d i n g s t h a t w o u l d p r e c l u d e a v e r d i c t i n f a v o r o f
K e n n e c o o n t h i s c l a i m , a n d t h e j u r y 's f i n d i n g s a r e n o t i n c o n s i s t e n t w i t h t h e f

e d e r a l c o u r t s ' f

i n d i n g s

.

C

. F u l l a n d F a i r L i t i g a t i o n

[ 1 7 ] K e n n e c o a r g u e s t h a t t h e f e d e r a l c o u r t 's f

i n d i n g s

s h o u l d n o t b e a f

f o r d e d p r e c l u s i v e e f

f e c t b e c a u s e o f

t h e a l i g n m e n t o f t h e p a r t i e s i n t h e f e d e r a l a c t i o n

. K e n n e c o a s s e r t s t h a t i t h a d n o r e a l i n c e n t i v e i n t h e f e d e r a l a c t i o n t o d e v e l o p t e s t i m o n y a g a i n s t J & H

, b e c a u s e J & H w a s p a r t i c i p a t i n g o n K e n n e c o 's
b e h a l f

. T h u s , a c c o r d i n g t o K e n n e c o , t h e r e w a s n o f u l l a n d f a i r l i t i g a t i o n o f i s s u e s r e l a t i n g t o J & H 's

c o n d u c t
, a n d t h e a l i g n m e n t o f t h e p a r t i e s c r e a t e d a

s i t u a t i o n i n w h i c h J & H 's c o n d u c t w a s n o t

r i g o r o u s l y c o n s i d e r e d

.

J & H r e s p o n d s t h a t t h e a l i g n m e n t o f t h e p a r t i e s

s h o u l d n o t n e g a t e t h e c o l l a t e r a l e s t o p p e l e f f e c t o f t h e f e d e r a l c o u r t 's f

i n d i n g s

. J & H a d m i t s t h a t i t a s s i s t e d
K e n n e c o i n a s s e r t i n g i t s c l a i m a g a i n s t t h e L o n d o n

u n d e r w r i t e r s , a n d e v e n t e s t i f i e d o n K e n n e c o 's b e h a l f
i n f e d e r a l c o u r t a s t o h o w t h e c l a i m s h o u l d b e

a d j u s t e d

. H o w e v e r , J & H c l a i m s i t d i d n o t a l i g n i t s e l f w i t h K e n n e c o c o n c e r n i n g t h e e v e n t s o f t h e N o v e m b e r 3 0 m e e t i n g

. J & H a s s e r t s t h a t t h e i s s u e o f

w h a t o c c u r r e d a t t h e m e e t i n g a n d w h a t A n d e r s o n

s a i d o r d i d w a s “ d r a w n ” t h r o u g h t h e c o n f l i c t i n g
t e s t i m o n y o f A n d e r s o n a n d B r o w n a n d t h r o u g h t h e d i s p u t e o v e r t h a t i s s u e b e t w e e n K e n n e c o a n d t h e L o n d o n u n d e r w r i t e r s

.

W e a g r e e w i t h J & H a n d h o l d t h a t J & H ' s i n v o l v e m e n t i n t h e p r i o r a c t i o n a s a w i t n e s s o n b e h a l f o f K e n n e c o d o e s n o t e x t i n g u i s h t h e c o l l a t e r a l

e s t o p p e l e f

f e c t o f t h e f e d e r a l c o u r t 's f

i n d i n g s

. T h e r e

w o u l d b e n o q u e s t i o n a s t o t h e p r e c l u s i v e e f f e c t o f

t h o s e f i n d i n g s h a d J & H n o t p a r t i c i p a t e d i n t h e p r i o r

a c t i o n

. K e n n e c o 's a r g u m e n t t h a t i t h a d n o i n c e n t i v e
t o l i t i g a t e a g a i n s t J & H f a i l s b e c a u s e t h a t i s n o t t h e
t e s t : t h e p r o p e r i n q u i r y i s w h e t h e r K e n n e c o h a d
i n c e n t i v e t o l i t i g a t e t h e i s s u e o f A n d e r s o n 's r e p r e s e n t a t i o n s r e g a r d i n g l o s t p r o f i t s c o v e r a g e a t t h e N o v e m b e r 3 0 m e e t i n g

. S e e S y s c o F o o d S e r v s

. , I

n c

.

v

. T r a p n e l l

, 8 9 0 S

. W

. 2 d 7 9 6

, 8 0 2 ( T e x

. 1 9 9 4 ) ( “ W h e n t h e i s s u e i s p r o p e r l y i d e n t i f i e d

, i t b e c o m e s

c l e a r t h a t t h i s i s s u e w a s f u l l y a n d f

a i r l y l i t i g a t e d i n
t h e f e d e r a l a c t i o n

. ” )

. K e n n e c o h a d e v e r y i n c e n t i v e t o
p r o v e t h a t A n d e r s o n m a d e t h e a l l e g e d

r e p r e s e n t a t i o n s c o n c e r n i n g i n c r e a s e d v a l u e

c o v e r a g e ; K e n n e c o 's r e c o v e r y f o r l o s t p r o f

i t s i n t h e f e d e r a l c o v e r a g e s u i t d e p e n d e d u p o n s u c h a f i n d i n g

. W h a t A n d e r s o n s a i d r e g a r d i n g l o s t p r o f i t s c o v e r a g e

w a s f u l l y a i r e d i n t h e f

e d e r a l c o u r t s t h r o u g h t h e
t e s t i m o n y o f B r o w n a n d A n d e r s o n a n d t h r o u g h t h e

c o n f l i c t i n g p o s i t i o n s o f K e n n e c o a n d t h e L o n d o n

u n d e r w r i t e r s r e g a r d i n g t h o s e r e p r e s e n t a t i o n s

. S e e A r m a d a S u

p p l y , 6 6 5 F

. S u p p

. a t 1 0 5 0 ( “ L o n d o n

u n d e r w r i t e r s

. . . d e n [ y ] t h a t J o h n s o n & H i g g i n s
p u r p o r t e d t o m a k e s u c h a n a g r e e m e n t

. ” )

. T h u s , t h e i s s u e o f w h a t A n d e r s o n s a i d a t t h e N o v e m b e r 3 0

m e e t i n g w a s f

u l l y a n d f

a i r l y l i t i g a t e d i n t h e f

e d e r a l

c o u r t s

.

[ 1 8 ] K e n n e c o a l s o a r g u e s t h a t c o l l a t e r a l e s t o p p e l

s h o u l d n o t a p p l y b e c a u s e t h e “ p r o c e d u r a l

o p p o r t u n i t y ” o f a j u r y t r i a l w a s u n a v a i l a b l e i n t h e N e w Y o r k a c t i o n , c i t i n g F e d e r a l R u l e o f C i v i l
P r o c e d u r e 3 8 ( e )

. T h e m e r e f a c t t h a t K e n n e c o c o u l d

n o t a v a i l i t s e l f o f t h i s o p p o r t u n i t y d o e s n o t
, i n a n d o f
i t s e l f

, p r e c l u d e a n a p p l i c a t i o n o f d e f e n s i v e c o l l a t e r a l

e s t o p p e l

. F u r t h e r , t h e U n i t e d S t a t e s S u p r e m e C o u r t h a s p r e v i o u s l y r e j e c t e d t h e p o s i t i o n t h a t c o l l a t e r a l

e s t o p p e l v i o l a t e s a p a r t y 's S e v e n t h A m e n d m e n t r i g h t

t o a t r i a l b y j u r y

. P a r k l a n e H o s i e r y C o

. v

. S h o r e , 4 3 9
U

. S

. 3 2 2

, 3 3 3

– 3 7

, 9 9 S

. C t

. 6 4 5

, 6 5 2

– 5 5

, 5 8 L

. E d

. 2 d
5 5 2 ( 1 9 7 9 )

. W h i l e t h e q u e s t i o n r e m a i n s o p e n a s a

m a t t e r o f T e x a s c o n s t i t u t i o n a l l a w , s e e S y s c o F o o d
S e r v s

. , 8 9 0 S

. W

. 2 d a t 8 0 1 n

. 7

, K e n n e c o h a s n o t

r a i s e d a n y a r g u m e n t u n d e r t h e T e x a s C o n s t i t u t i o n i n
t h i s C o u r t
, a n d t h e r e f

o r e w e w i l l n o t c o n s i d e r t h e
q u e s t i o n

. S e e T i l t o n v

. M a r s h a l l

, 9 2 5 S

. W

. 2 d 6 7 2

, 6 7 7 n

. 6 ( T e x

. 1 9 9 6 )

.

* 5 2 6 I V

. D I S P O S I T I O N

[ 1 9 ] A f t e r a p p l i c a t i o n o f J & H 's l i m i t a t i o n s a n d

c o l l a t e r a l e s t o p p e l d e f e n s e s , K e n n e c o 's r e m a i n i n g j u r y a w a r d s i n c l u d e f r a u d ( $ 1

, 5 0 0

, 0 0 0

. 0 0 ) a n d
b r e a c h o f c o n t r a c t ( $ 4 1 2

, 2 7 3

. 6 6 )

, b o t h o f w h i c h

r e l a t e t o t h e c o n t i n g e n c y c o v e r a g e i s s u e

. W h e n a
p r e v a i l i n g p a r t y d o e s n o t e l e c t a m e a s u r e o f d a m a g e s

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 9Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

f r o m a m o n g a l t e r n a t i v e m e a s u r e s , c o u r t s s h o u l d

r e n d e r j u d g m e n t b a s e d o n t h e f i n d i n g a f f o r d i n g t h e
g r e a t e s t r e c o v e r y

. B i r c h f i e l d v

. T e x a r k a n a M e m o r i a l
H o s p

. , 7 4 7 S

. W

. 2 d 3 6 1

, 3 6 7 ( T e x

. 1 9 8 7 )

. A l t h o u g h

t h e f r a u d c l a i m p r o v i d e s t h e g r e a t e s t r e c o v e r y , K e n n e c o i s n o t e n t i t l e d t o r e c o v e r o n t h e j u r y 's f r a u d

a w a r d b e c a u s e t h e r e i s n o e v i d e n c e t o s u p p o r t t h e j u r y ' s f i n d i n g t h a t J & H k n o w i n g l y o r r e c k l e s s l y

m i s r e p r e s e n t e d K e n n e c o 's c o n t i n g e n c y c o v e r a g e

.

A

. F r a u d

[ 2 0 ] T h e c o n t i n g e n c y c o v e r a g e p r o v i s i o n s i n K e n n e c o 's i n s u r a n c e p o l i c y p r o v i d e d t h a t “ w h e r e t h e A s s u r e d p u r c h a s e g o o d s o n C

. I

. F

. t e r m s a n d s e l l o n C

. I

. F

. t e r m s , b u t w i s h t o g i v e t h e i r b u y e r a c e r t i f i c a t e f o r t h e i r S a l e s P r i c e

. . . t h e y m a y i s s u e c e r t i f i c a t e s f o r
t h e f u l l v a l u e h e r e u n d e r

. ” T h u s , t h e c o n t i n g e n c y

c o v e r a g e p o l i c y l a n g u a g e r e q u i r e d a C

. I

. F

. p u r c h a s e

a n d a C

. I

. F

. s a l e

. K e n n e c o c o n t e n d s t h a t A n d e r s o n ,
o n b e h a l f o f J & H

, c o m m i t t e d f r a u d b y r e p r e s e n t i n g

o n N o v e m b e r 3 0 t h a t t h e c o n t i n g e n c y c o v e r a g e

a p p l i e d e v e n t h o u g h B r o w n h a d i n f o r m e d A n d e r s o n
t h a t t h e s a l e t o S u n w a s o n a d e l i v e r e d b a s i s , n o t C

. I

. F

. J & H r e s p o n d s t h a t
, e v e n i f A n d e r s o n

m i s r e p r e s e n t e d t h e c o n t i n g e n c y c o v e r a g e , t h e r e i s n o

e v i d e n c e t h a t h e m a d e t h e m i s r e p r e s e n t a t i o n k n o w i n g l y o r r e c k l e s s l y

. A c c o r d i n g t o J & H

, A n d e r s o n w a s , a t w o r s t
, n e g l i g e n t

.

[ 2 1 ] [ 2 2 ] A s t a t e m e n t i s n o t f r a u d u l e n t u n l e s s t h e

s p e a k e r k n e w i t w a s f

a l s e w h e n m a d e o r t h e s p e a k e r

m a d e i t r e c k l e s s l y w i t h o u t k n o w l e d g e o f t h e t r u t h

. P r u d e n t i a l I

n s

. C o

. v

. J

e f f e r s o n A s s o c s

. , 8 9 6 S

. W

. 2 d
1 5 6

, 1 6 3 ( T e x

. 1 9 9 5 )

. P r o o f t h a t a d e f

e n d a n t m a d e a

s t a t e m e n t k n o w i n g o f i t s f a l s i t y o r w i t h o u t k n o w l e d g e o f i t s t r u t h m a y b e p r o v e d b y d i r e c t o r

c i r c u m s t a n t i a l e v i d e n c e

. S e e S p o l j a r i c v

. P e r c i v a l
T o u r s , I n c

. , 7 0 8 S

. W

. 2 d 4 3 2

, 4 3 5 ( T e x

. 1 9 8 6 )

.

T h e e v i d e n c e o f t h e e v e n t s s u r r o u n d i n g t h e N o v e m b e r 3 0 m e e t i n g i s a s f o l l o w s : B r o w n v i s i t e d
J & H 's o f

f i c e s t o d i s c u s s i n s u r a n c e c o v e r a g e f o r t h e
t a n k e r c a r g o , a l r e a d y e n r o u t e f r o m R i o d e J a n e i r o t o N e w Y o r k

. K e n n e c o 's n o r m a l a c c o u n t r e p r e s e n t a t i v e

w a s o n v a c a t i o n , s o B r o w n m e t w i t h A n d e r s o n , a

c a r g o c l a i m s a d

j u s t e r

. A n d e r s o n t e s t i f i e d t h a t
, b e c a u s e h e w a s n o t f

a m i l i a r w i t h t h e l a n g u a g e o f t h e

c o n t i n g e n c y c o v e r a g e p r o v i s i o n , h e o b t a i n e d a c o p y o f K e n n e c o 's p o l i c y a n d r e a d t h e p r o v i s i o n a l o u d a t

t h e m e e t i n g , i n c l u d i n g t h e l a n g u a g e r e q u i r i n g b a c k

- t o

- b a c k C

. I

. F

. s a l e s

. B r o w n t e s t i f i e d t h a t s h e

c l e a r l y i n f

o r m e d A n d e r s o n t h a t t h e s a l e t o S u n w a s

o n a d e l i v e r e d b a s i s , a n d t h a t A n d e r s o n t o l d h e r t h a t

t h e c o n t i n g e n c y c o v e r a g e a p p l i e d n o n e t h e l e s s

. A n d e r s o n a d m i t t e d t e l l i n g B r o w n t h a t K e n n e c o h a d

c o n t i n g e n c y c o v e r a g e , b u t t e s t i f i e d t h a t B r o w n h a d
i n c o r r e c t l y i n f

o r m e d h i m t h a t K e n n e c o 's d e a l w a s b a c k

- t o

- b a c k C

. I

. F

. , w h i c h w o u l d t r i g g e r

c o n t i n g e n c y c o v e r a g e

. A n d e r s o n 's c o n t e m p o r a n e o u s

n o t e s o f t h e m e e t i n g r e f l e c t e d t h a t K e n n e c o 's

p u r c h a s e w a s C

. I

. F

. , b u t t h e n o t e s w e r e s i l e n t

r e g a r d i n g t h e s a l e t o S u n

. A n d e r s o n t e s t i f i e d t h a t
D e c e m b e r 2 2

, 1 9 8 2

, w h e n B r o w n s e n t d o c u m e n t a t i o n r e f

l e c t i n g t h a t t h e S u n s a l e w a s d e l i v e r e d

, w a s t h e f

i r s t t i m e h e w a s i n f

o r m e d t h a t t h e

s a l e t o S u n w a s n o t C

. I

. F

. D e s p i t e t h a t k n o w l e d g e , A n d e r s o n d i d n o t i n f

o r m K e n n e c o o r t h e L o n d o n

u n d e r w r i t e r s o f t h e p o t e n t i a l p r o b l e m w i t h

c o n t i n g e n c y c o v e r a g e

. I n s t e a d

, h e c a l c u l a t e d t h e
p r e m i u m a n d b i l l e d K e n n e c o e v e n t h o u g h h e

a d m i t t e d l y k n e w a t t h a t t i m e t h a t c o v e r a g e w a s

“ h i g h l y i m p r o b a b l e

. ” A n d e r s o n t e s t i f i e d t h a t J & H b i l l e d K e n n e c o f

o r t h e p r e m i u m t o a v o i d d i f f i c u l t y i n p r o c e s s i n g a c l a i m f

o r l a c k o f

p a y m e n t
, a n d t h a t J
& H a t a l l t i m e s a d v o c a t e d t o t h e L o n d o n

u n d e r w r i t e r s t h a t t h e r e w a s c o n t i n g e n c y c o v e r a g e

.

C o n s t r u i n g t h e e v i d e n c e i n t h e l i g h t m o s t f a v o r a b l e
t o K e n n e c o a n d d i s r e g a r d i n g a l l c o n t r a r y e v i d e n c e

a n d i n f e r e n c e s , s e e H a v n e r v

. E

– Z M a r t S t o r e s , I n c

. , 8 2 5 S

. W

. 2 d 4 5 6

, 4 5 8 ( T e x

. 1 9 9 2 )

, w e c o n c l u d e t h a t

a l t h o u g h A n d e r s o n d i d i n f a c t m i s r e p r e s e n t
K e n n e c o 's c o v e r a g e , t h e r e i s n o e v i d e n c e t h a t h e

m a d e t h e m i s r e p r e s e n t a t i o n k n o w i n g l y o r r e c k l e s s l y

. C l e a r l y K e n n e c o h a s p r o v i d e d n o d i r e c t * 5 2 7

e v i d e n c e , s u c h a s A n d e r s o n 's n o t e s o r a

m e m o r a n d u m , i n d i c a t i n g t h a t A n d e r s o n i n t e n t i o n a l l y

o r r e c k l e s s l y m i s l e d B r o w n a n d K e n n e c o

. T h u s , K e n n e c o 's c l a i m m u s t b e s u p p o r t e d

, i f a t a l l

, b y

c i r c u m s t a n t i a l e v i d e n c e

. B u t t h e r e i s n o

c i r c u m s t a n t i a l e v i d e n c e t h a t A n d e r s o n k n o w i n g l y

m i s r e p r e s e n t e d t h e c o v e r a g e

. B r o w n h e r s e l f
d i s c o u n t e d s u c h a t h e o r y , t e s t i f y i n g t h a t “ [ i ] n

r e t r o s p e c t I b e l i e v e t h a t [ A n d e r s o n ] d i d n 't a p p r e c i a t e
t h e d i f f e r e n c e [ b e t w e e n a C

. I

. F

. s a l e a n d a d e l i v e r e d

s a l e ]

. ” F u r t h e r , t h e r e i s n o e v i d e n c e t o s u p p o r t a

m o t i v e f o r A n d e r s o n t o i n t e n t i o n a l l y m i s r e p r e s e n t

t h e c o v e r a g e

. I n c o n t r a s t
, A n d e r s o n t e s t i f i e d t h a t
, h a d h e o b t a i n e d c o v e r a g e o t h e r t h a n t h e e x i s t i n g

c o n t i n g e n c y c o v e r a g e , J & H w o u l d h a v e r e c e i v e d a

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 0Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

b e t t e r p r e m i u m

. T h u s , t h e r e i s n o e v i d e n c e t h a t A n d e r s o n a c t e d k n o w i n g l y

.

[ 2 3 ] F u r t h e r , t h e r e i s n o e v i d e n c e t h a t A n d e r s o n

r e c k l e s s l y m i s r e p r e s e n t e d t h e c o v e r a g e

. A s p e a k e r

a c t s r e c k l e s s l y i f

h e m a k e s r e p r e s e n t a t i o n s “ w i t h o u t

a n y k n o w l e d g e o f t h e t r u t h a n d a s a p o s i t i v e

a s s e r t i o n

. ” T

. O

. S t a n l e

y B o o t C o

. v

. B a n k o

f E l P a s o , 8 4 7 S

. W

. 2 d 2 1 8

, 2 2 2 ( T e x

. 1 9 9 2 )

. I n o t h e r w o r d s , a

r e p r e s e n t a t i o n i s r e c k l e s s l y m a d e i f t h e s p e a k e r k n o w s t h a t h e d o e s n o t h a v e s u f f i c i e n t i n f o r m a t i o n

o r b a s i s t o s u p p o r t i t
, T r e n h o l m v

. R a t c l i

f f

, 6 4 6
S

. W

. 2 d 9 2 7

, 9 3 3 ( T e x

. 1 9 8 3 )

, o r i f h e r e a l i z e s t h a t h e d o e s n o t k n o w w h e t h e r o r n o t t h e s t a t e m e n t i s t r u e

. C u s t o m L e a s i n g , I

n c

. v

. T e x a s B a n k & T

r u s t C o

. , 5 1 6 S

. W

. 2 d 1 3 8

, 1 4 2 ( T e x

. 1 9 7 4 ) ( c i t i n g R e s t a t e m e n t o f R e s t i t u t i o n § 8 ( 1 9 5 7 ) )

. T h i s

s t a n d a r d m i g h t a p p l y i f A n d e r s o n , w i t h n o f a m i l i a r i t y o f t h e p o l i c y l a n g u a g e , h a d t o l d B r o w n
t h a t t h e c o v e r a g e a p p l i e d w i t h o u t c o n s u l t i n g t h e
p o l i c y i t s e l f

. I t i s u n d i s p u t e d t h a t t h a t i s n o t t h e c a s e

. A n d e r s o n r e a l i z e d h i s i g n o r a n c e o f t h e p o l i c y l a n g u a g e , a n d o b t a i n e d a c o p y o f t h e p o l i c y a n d r e a d
i t o v e r w i t h B r o w n i n a n e f f o r t t o a n s w e r h e r

c o n c e r n s

. S e e J

a u r e g u i v

. J

o n e s , 6 9 5 S

. W

. 2 d 2 5 8

, 2 6 3

– 6 4 ( T e x

. A p p

. — S a n A n t o n i o 1 9 8 5

, w r i t r e f 'd

n

. r

. e

. ) ( f

i n d i n g n o f

r a u d w h e n d e f

e n d a n t m a d e i n v e s t i g a t i o n b e f

o r e m a k i n g a s s e r t i o n )

. T h u s , t h e

e v i d e n c e d o e s n o t i n d i c a t e t h a t A n d e r s o n m a d e t h e

r e p r e s e n t a t i o n “ w i t h o u t a n y k n o w l e d g e o f t h e t r u t h

. ”
A t m o s t
, i t e s t a b l i s h e s t h a t A n d e r s o n s h o u l d h a v e k n o w n t h a t h i s r e p r e s e n t a t i o n s m a y h a v e b e e n i n c o r r e c t ; s u c h e v i d e n c e , h o w e v e r , i s a k i n t o

n e g l i g e n t m i s r e p r e s e n t a t i o n , n o t f r a u d

. S e e F e d e r a l
L a n d B a n k A s s '

n v

. S l o a n e , 8 2 5 S

. W

. 2 d 4 3 9

, 4 4 2 ( T e x

. 1 9 9 1 ) ( s t a n d a r d f

o r n e g l i g e n t m i s r e p r e s e n t a t i o n i s t h a t d e f

e n d a n t “ d i d n o t e x e r c i s e r e a s o n a b l e c a r e o r

c o m p e t e n c e i n o b t a i n i n g o r c o m m u n i c a t i n g t h e i n f o r m a t i o n ” )

.

L a s t l y , w e d o n o t b e l i e v e t h a t A n d e r s o n 's c o n d u c t

w e e k s a f t e r t h e l o s s o c c u r r e d c o n s t i t u t e s e v i d e n c e
t h a t h e a c t e d f

r a u d u l e n t l y a t t h e N o v e m b e r 3 0

m e e t i n g

. T a k i n g a l l r e a s o n a b l e i n f e r e n c e s f a v o r a b l e
t o K e n n e c o , A n d e r s o n 's c o n d u c t e s t a b l i s h e s , a t m o s t
, t h a t h e w a s r e l u c t a n t t o a d m i t h i s m i s t a k e

. T h a t i s n o t

e v i d e n c e o f f

r a u d

.

B

. B r e a c h o f C o n t r a c t [ 2 4 ] J & H a l s o c h a l l e n g e s t h e l e g a l s u f f i c i e n c y o f

t h e j u r y 's a w a r d f

o r b r e a c h o f c o n t r a c t t o s e c u r e

c o n t i n g e n c y c o v e r a g e

. S p e c i f i c a l l y , J & H a r g u e s
t h a t t h e r e i s n o e v i d e n c e t h a t i t a g r e e d t o s e c u r e

c o n t i n g e n c y c o v e r a g e

. W e h o l d t h a t t h e r e i s s o m e

e v i d e n c e t o s u p p o r t t h e j u r y 's f i n d i n g , a n d t h e r e f

o r e K e n n e c o i s e n t i t l e d t o j u d g m e n t o n t h i s c l a i m

.

B o t h A n d e r s o n a n d B r o w n t e s t i f i e d t h a t B r o w n w e n t

t o J & H o n N o v e m b e r 3 0

, 1 9 8 2 s e e k i n g , a m o n g

o t h e r t h i n g s , i n s u r a n c e a g a i n s t t h e p o s s i b i l i t y t h a t t h e B r a z i l i a n u n d e r w r i t e r s w o u l d n o t p a y o n a c l a i m b y K e n n e c o

. B r o w n t e s t i f

i e d s e v e r a l t i m e s t h a t s h e t o l d
A n d e r s o n t h a t t h e t r a n s a c t i o n f o r w h i c h t h e

a d d i t i o n a l i n s u r a n c e w a s s o u g h t “ w a s a C

. I

. F

. p u r c h a s e a n d a d e l i v e r e d s a l e

. ”

B r o w n f u r t h e r t e s t i f

i e d t h a t :

[ T ] h e e n d r e s u l t w a s h e [ A n d e r s o n ] a g r e e d

t h a t i t [ t h e a d d i t i o n a l c o v e r a g e ] w o u l d c o v e r

e x a c t l y w h a t w e w e r e l o o k i n g f o r , t h e t y p e o f

p u r c h a s e w e h a d a n d t y p e o f s a l e w e h a d

. H e k n e w I t o l d h i m t h a t i t w a s a d e l i v e r e d s a l e , s o
t h a t h e w a s w e l l a w a r e t h a t i t w a s n o t a C

. I

. F

. b a c k

- t o

- b a c k b u t w a s a p u r c h a s e s a l e

.

W h e n a s k e d w h e t h e r s h e w a s “ t e l l i n g t h e C o u r t a n d j u r y t h a t w h e n y o u l e f t J o h n s o n a n d H i g g i n s y o u

w e r e c o n v i n c e d t h a t y o u h a d t h e p r o t e c t i o n t h a t y o u

w e n t t h e r e s p e c i f

i c a l l y t o g e t
, ” B r o w n s u c c i n c t l y a n d

u n e q u i v o c a l l y t e s t i f

i e d : “ W i t h o u t a d o u b t

. ” J & H

* 5 2 8 c h a r g e d

, a n d K e n n e c o p a i d

, a p r e m i u m f o r t h i s i n s u r a n c e

.

A n d e r s o n t e s t i f

i e d t h a t h e s o l d B r o w n c o n t i n g e n c y

c o v e r a g e a n d t o l d h e r h e w o u l d m a k e t h e d e c l a r a t i o n s

. H e f

u r t h e r a g r e e d t h a t h e w o u l d h a v e

e x p e c t e d h e r t o b e l i e v e t h a t s h e h a d c o n t i n g e n c y

c o v e r a g e a f

t e r t h e m e e t i n g , a n d t h a t i t w a s p o s s i b l e f o r h i m t o c o n v i n c e t h e u n d e r w r i t e r s t o g r a n t

c o v e r a g e f

o r t h e s a l e e v e n w e r e i t n o t b a c k

- t o

- b a c k
C

. I

. F

.

A l t h o u g h A n d e r s o n c l a i m s t h a t B r o w n i n d i c a t e d t o h i m t h a t t h e t r a n s a c t i o n w a s C

. I

. F

. b a c k

- t o

- b a c k

, B r o w n e x p l a i n e d t h a t “ o n a b a c k

- t o

- b a c k

t r a n s a c t i o n , A r m a d a [ K e n n e c o ] w o u l d n e v e r h a v e

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 1Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

a n y r i s k a t a l l

, ” a n d c o n s e q u e n t l y n o n e e d f o r t h e

c o n t i n g e n c y c o v e r a g e w h i c h A n d e r s o n a c t u a l l y
p r o c u r e d f

o r K e n n e c o

. E i t h e r A n d e r s o n s o l d
K e n n e c o i n s u r a n c e t h a t i t d i d n o t n e e d ; o r , c o n t r a r y
t o h i s l a t e r p o s i t i o n , h e a c t u a l l y a g r e e d t o s e l l
K e n n e c o t h e a d d i t i o n a l c o v e r a g e t h a t B r o w n c l a i m s

s h e r e q u e s t e d

.

T h i s i s l e g a l l y s u f

f i c i e n t e v i d e n c e t o s u p p o r t t h e j u r y 's v e r d i c t

. T h e r e f

o r e , K e n n e c o i s e n t i t l e d t o

r e c o v e r o n i t s c l a i m f

o r b r e a c h o f c o n t r a c t t o s e c u r e

c o n t i n g e n c y c o v e r a g e , i n t h e a m o u n t o f $ 4 1 2

, 2 7 3

. 6 6

.

V

. P R E J U D G M E N T I N T E R E S T

[ 2 5 ] [ 2 6 ] W e n e x t c o n s i d e r t h e p r o p e r m e t h o d o f

c a l c u l a t i n g p r e j u d g m e n t i n t e r e s t u n d e r C a v n a r v

. Q u a l i t y C o n t r o l P a r k i n g , I

n c

. , 6 9 6 S

. W

. 2 d 5 4 9

, 5 5 2 ( T e x

. 1 9 8 5 )

. P r e j u d g m e n t i n t e r e s t i s “ c o m p e n s a t i o n

a l l o w e d b y l a w a s a d d i t i o n a l d a m a g e s f o r l o s t u s e o f

t h e m o n e y d u e a s d a m a g e s d u r i n g t h e l a p s e o f t i m e b e t w e e n t h e a c c r u a l o f t h e c l a i m a n d t h e d a t e o f j u d g m e n t

. ” I

d

. a t 5 5 2 ( c i t i n g M c C o r m i c k

, D a m a g e s , § 5 0 ( 1 9 3 5 ) ) ; s e e a l s o T e x

. R e v

. C i v

. S t a t

. a r t

. 5 0 6 9

– 1

. 0 1 ( a )

. T h e r e a r e t w o l e g a l s o u r c e s f o r a n

a w a r d o f p r e

j u d g m e n t i n t e r e s t : ( 1 ) g e n e r a l p r i n c i p l e s

o f e q u i t y a n d ( 2 ) a n e n a b l i n g s t a t u t e

. C a v n a r , 6 9 6
S

. W

. 2 d a t 5 5 2 ; P h i l l i p s P e t r o l e u m C o

. v

. S t a h l
P e t r o l e u m C o

. , 5 6 9 S

. W

. 2 d 4 8 0

, 4 8 3

– 8 5 ( T e x

. 1 9 7 8 )

.

J & H a r g u e s t h a t a n y a w a r d o f p r e j u d g m e n t i n t e r e s t i n t h i s c a s e i s g o v e r n e d b y T e x

. R e v

. C i v

. S t a t

. a r t i c l e 5 0 6 9

– 1

. 0 5

, s e c t i o n 6

, o r , a l t e r n a t i v e l y , t h a t w e

s h o u l d d e f

e r t o t h e p o l i c y u n d e r l y i n g s e c t i o n 6 e v e n i f i t d o e s n o t e x p r e s s l y a p p l y

. K e n n e c o a r g u e s t h a t C a v n a r c o n t r o l s t h i s c a s e a n d t h a t g e n e r a l p r i n c i p l e s

o f e q u i t y g o v e r n t h e a w a r d o f p r e j u d g m e n t i n t e r e s t

. W e h o l d t h a t t h i s c a s e i s g o v e r n e d b y t h e c o m m o n l a w r a t h e r t h a n b y s t a t u t e ; h o w e v e r , w e c o n f o r m C a v n a r 's c o m m o n

- l a w r u l e w i t h t h e l e g i s l a t i v e
p o l i c y e s t a b l i s h e d b y s e c t i o n 6

. 9

I n C a v n a r , t h i s C o u r t o v e r r u l e d e i g h t y

- e i g h t y e a r s o f j u d i c i a l p r e c e d e n t a n d a d o p t e d a r u l e a l l o w i n g

r e c o v e r y o f p r e j u d g m e n t i n t e r e s t o n p e r s o n a l i n j u r y ,
w r o n g f u l d e a t h

, a n d s u r v i v a l a c t i o n s

. S e e g e n e r a l l y C l o u d

, N o t e , C a v n a r v

. Q u a l i t y C o n t r o l P a r k i n g , I n c

. : P r e j u d g m e n t I n t e r e s t i s N o w R e c o v e r a b l e i n P e r s o n a l I

n j u r y , W r o n g f u l D e a t h a n d S u r v i v a l
A c t i o n C a s e s , 3 8 B a y l o r * 5 2 9 L

. R e v

. 3 8 5 ( 1 9 8 6 )

. T h e d e c i s i o n t o e x t e n d p r e j u d g m e n t i n t e r e s t

r e c o v e r y t o s u c h c a s e s w a s d r i v e n p r i m a r i l y b y t h e

r a t i o n a l e t h a t a w a r d i n g p r e j u d g m e n t i n t e r e s t w a s

n e c e s s a r y t o f

u l l y c o m p e n s a t e i n

j u r e d p l a i n t i f

f s

. C a v n a r , 6 9 6 S

. W

. 2 d a t 5 5 2

.

C a v n a r e s t a b l i s h e d t h a t a p r e v a i l i n g p l a i n t i f f m a y

r e c o v e r p r e j u d g m e n t i n t e r e s t
, c o m p o u n d e d d a i l y ( b a s e d o n a 3 6 5

– d a y y e a r )

, o n d a m a g e s t h a t a c c r u e d
b y t h e t i m e o f j u d g m e n t

. I d

. a t 5 5 4

. T h e s t a r t i n g d a t e f o r a c c r u a l o f p r e j u d g m e n t i n t e r e s t o n c l a i m s
g o v e r n e d b y C a v n a r w a s “ s i x m o n t h s a f t e r t h e

o c c u r r e n c e o f t h e i n c i d e n t g i v i n g r i s e t o t h e c a u s e o f

a c t i o n , ” 1 0 a n d t h e r a t e o f i n t e r e s t w a s t o b e c o m p u t e d

u n d e r T e x

. R e v

. C i v

. S t a t

. a r t i c l e 5 0 6 9

– 1

. 0 5

, s e c t i o n 2 1 1 o n t h e d a t e o f j u d g m e n t

. C a v n a r , 6 9 6 S

. W

. 2 d a t
5 5 4

. C a v n a r i n v o l v e d c l a i m s f o r p e r s o n a l i n

j u r y , b u t i t s a p p l i c a t i o n h a s b e e n e x p a n d e d t o n o n

- p e r s o n a l
i n j u r y s c e n a r i o s

. S e e , e

. g

. , P e r r y R o o f i n g C o

. v

. O l c o t t

, 7 4 4 S

. W

. 2 d 9 2 9

, 9 3 0 ( T e x

. 1 9 8 8 ) ( b r e a c h o f

c o n t r a c t a c t i o n f

o r d a m a g e s u n a s c e r t a i n a b l e f r o m

c o n t r a c t ) ; R i o G r a n d e L a n d & C a t t l e C o

. v

. L i g h t

, 7 5 8 S

. W

. 2 d 7 4 7

, 7 4 8 ( T e x

. 1 9 8 8 ) ( s a m e ) ; C i t y o f
H o u s t o n v

. W

o l f e , 7 1 2 S

. W

. 2 d 2 2 8

, 2 2 9 ( T e x

. A p p

. — H o u s t o n [ 1 4 t h D i s t

. ] 1 9 8 6

, w r i t r e f 'd ) ( e m i n e n t d o m a i n )

.

I n f a s h i o n i n g i t s p r e j u d g m e n t i n t e r e s t r u l e , t h e C a v n a r C o u r t w a s p r i m a r i l y c o n c e r n e d w i t h

a d v a n c i n g t w o e n d s : ( 1 ) e n c o u r a g i n g s e t t l e m e n t s a n d ( 2 ) e x p e d i t i n g b o t h s e t t l e m e n t s a n d t r i a l s b y

r e m o v i n g i n c e n t i v e s f

o r d e f e n d a n t s t o d e l a y w i t h o u t

c r e a t i n g s u c h i n c e n t i v e s f o r p l a i n t i f

f s

. C a v n a r , 6 9 6
S

. W

. 2 d a t 5 5 4

– 5 5 ; s e e a l s o P e r r y R o o f i n g , 7 4 4
S

. W

. 2 d a t 9 3 0

.

I n 1 9 8 7

, t w o y e a r s a f t e r C a v n a r w a s i s s u e d

, t h e T e x a s L e g i s l a t u r e p a s s e d a c o m p r e h e n s i v e p a c k a g e

o f l e g i s l a t i o n k n o w n a s “ t o r t r e f o r m

. ” S e e g e n e r a l l

y S a n d e r s & J o y c e , “ O

f f t o t h e R a c e s ” : T

h e 1 9 8 0 s T o r t C r i s i s a n d t h e L a w R e f o r m P r o c e s s , 2 7
H o u s t o n L

. R e v

. 2 0 7 ( 1 9 9 0 )

. P a r t o f t h e t o r t r e f o r m l e g i s l a t i o n a d d e d s e c t i o n 6 t o a r t i c l e 5 0 6 9

– 1

. 0 5

.

S e c t i o n 6 s o m e w h a t c o d i f i e d a n d m o d i f

i e d t h e

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 2Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

C a v n a r r u l e b y p r o v i d i n g t h a t “ [ j ] u d g m e n t s i n

w r o n g f u l d e a t h

, p e r s o n a l i n j u r y , a n d p r o p e r t y d a m a g e c a s e s m u s t i n c l u d e p r e j u d g m e n t i n t e r e s t

. ”
T e x

. R e v

. C i v

. S t a t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

. H o w e v e r ,
u n d e r t h i s s e c t i o n , t h e t i m e p e r i o d d u r i n g w h i c h

p r e j u d g m e n t i n t e r e s t a c c r u e s i s s h o r t e r t h a n u n d e r C a v n a r

. I n s t e a d o f b e g i n n i n g s i x m o n t h s a f t e r t h e d a t e o f t h e i n c i d e n t
, s e c t i o n 6 p r o v i d e s t h a t

p r e j u d g m e n t i n t e r e s t g e n e r a l l y b e g i n s t o a c c r u e o n
t h e e a r l i e r o f ( 1 ) 1 8 0 d a y s a f t e r t h e d a t e t h e d e f e n d a n t r e c e i v e s w r i t t e n n o t i c e o f a c l a i m o r ( 2 )

t h e d a y t h e s u i t i s f

i l e d

. I d

. S e c t i o n 6 ( g ) s t a t e s t h a t

“ [ t ] h e r a t e o f

p r e j u d g m e n t i n t e r e s t s h a l l b e t h e s a m e

a s t h e r a t e o f p o s t

j u d g m e n t i n t e r e s t a t t h e t i m e o f j u d g m e n t

. ” B u t
, i n t e r e s t “ s h a l l b e c o m p u t e d a s

s i m p l e i n t e r e s t

. ” I

d

. § 6 ( g )

. S e c t i o n 6 a l s o p r o v i d e d

o t h e r m o d i f

i c a t i o n s t o t h e C a v n a r r u l e , s u c h a s
t o l l i n g a c c r u a l o f p r e

j u d g m e n t i n t e r e s t a s t o t h e

a m o u n t o f a s e t t l e m e n t o f f e r d u r i n g i t s p e n d e n c y ,
a l l o w i n g a t r i a l c o u r t t h e d i s c r e t i o n t o o r d e r a c c r u a l

o r n o n a c c r u a l d u r i n g p e r i o d s o f d e l a y c a u s e d b y a d e f e n d a n t o r a p l a i n t i f

f

, a n d a l l o w i n g p r e j u d g m e n t i n t e r e s t f o r f u t u r e d a m a g e s i n c l u d e d i n t h e j u d g m e n t

. I d

. § § 6 ( a )

- ( d )

.

[ 2 7 ] J & H t a k e s t h e p o s i t i o n t h a t s e c t i o n 6 's

c a l c u l a t i o n r u l e s a p p l y t o a l l j u d g m e n t s , a n d

t h e r e f o r e a p p l y t o a n y j u d g m e n t a w a r d e d t o K e n n e c o

. K e n n e c o a r g u e s t h a t t h e p l a i n l a n g u a g e o f

s e c t i o n 6 a p p l i e s o n l y t o w r o n g f u l d e a t h

, p e r s o n a l
i n j u r y , a n d p r o p e r t y d a m a g e c a s e s

. T h e c o u r t s o f

a p p e a l s h a v e s p l i t o n t h i s q u e s t i o n

. C o m p a r e e

. g

. , K u e h n h o e

f e r v

. W

e l c h

, 8 9 3 S

. W

. 2 d 6 8 9

, 6 9 4 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 5

, w r i t d e n i e d ) a n d
T e x a s C o m m e r c e B a n k v

. L e b c o C o n s t r u c t o r s , * 5 3 0
I n c

. , 8 6 5 S

. W

. 2 d 6 8

, 8 4 n

. 1 3 ( T e x

. A p p

. — C o r p u s C h r i s t i 1 9 9 3

, w r i t d e n i e d ) ( h o l d i n g t h a t s t a t u t e h a s

a p p l i c a t i o n b e y o n d t h o s e a c t i o n s l i s t e d ) w i t h
S p a n g l e r v

. J

o n e s , 8 6 1 S

. W

. 2 d 3 9 2

, 3 9 7

– 9 8 ( T e x

. A p p

. — D a l l a s 1 9 9 3

, w r i t d e n i e d ) ; a n d H

. E

. B u t t G r o c e r

y C o

. v

. B a y , I

n c

. , 8 0 8 S

. W

. 2 d 6 7 8

, 6 8 0 ( T e x

. A p p

. — C o r p u s C h r i s t i 1 9 9 1

, w r i t d e n i e d ) ( h o l d i n g t h a t s t a t u t e o n l y a p p l i e s t o a c t i o n s

s p e c i f i c a l l y e n u m e r a t e d )

. W e h o l d t h a t s e c t i o n 6

m e a n s w h a t i t s a y s : s t a t u t o r y p r e j u d g m e n t i n t e r e s t

a p p l i e s o n l y t o w r o n g f

u l d e a t h

, p e r s o n a l i n

j u r y , a n d

p r o p e r t y d a m a g e c a s e s

.

T h e L e g i s l a t u r e 's c o d i f i c a t i o n a n d m o d i f

i c a t i o n o f
C a v n a r d i d n o t p u r p o r t t o p r o v i d e a s t a t u t o r y f r a m e w o r k f

o r p r e j u d g m e n t i n t e r e s t i n a l l c a s e s

. S e e S p a n g l e r , 8 6 1 S

. W

. 2 d a t 3 9 8

. T h e l i m i t e d

a p p l i c a t i o n o f s e c t i o n 6 i s e v i d e n t f r o m t h e s t a t u t e 's

p l a i n l a n g u a g e , e s p e c i a l l y w h e n v i e w e d i n t h e

c o n t e x t o f o t h e r s e c t i o n s o f a r t i c l e 5 0 6 9

– 1

. 0 5

. W h e r e a s s e c t i o n 2 p r o v i d e s t h a t i n t e r e s t s h a l l a c c r u e

o n “ a l l j u d g m e n t s , ” s e c t i o n 6 p r o v i d e s o n l y t h a t

s t a t u t o r y p r e j u d g m e n t i n t e r e s t m u s t b e a w a r d e d f o r

“ [ j ] u d g m e n t s i n w r o n g f u l d e a t h

, p e r s o n a l i n

j u r y , a n d

p r o p e r t y d a m a g e c a s e s

. ” T e x

. R e v

. C i v

. S t a t

. a r t

. 5 0 6 9

– 1

. 0 5 § § 2

, 6 ( a )

. F u r t h e r , t h e L e g i s l a t u r e l a t e r

a d d e d s e c t i o n 7

, w h i c h s p e c i f i c a l l y a l l o w s f

o r
p r e j u d g m e n t i n t e r e s t i n c o n d e m n a t i o n c a s e s

. I d

. § 7

. S u r e l y i f s e c t i o n 6 w e r e a p p l i c a b l e t o a l l j u d g m e n t s , t h e a d d i t i o n o f s e c t i o n 7 w o u l d h a v e b e e n

s u p e r f l u o u s

.

[ 2 8 ] G i v e n t h a t s e c t i o n 6 i s e x p r e s s l y l i m i t e d t o

w r o n g f u l d e a t h

, p e r s o n a l i n j u r y , a n d p r o p e r t y d a m a g e c a s e s , w e m u s t n e x t d e t e r m i n e w h e t h e r K e n n e c o 's c l a i m s f

a l l w i t h i n a n y o f t h o s e c a t e g o r i e s

. C l e a r l y t h e o n l y p o t e n t i a l l y a p p l i c a b l e c a t e g o r y

w o u l d b e p r o p e r t y d a m a g e

. W e h a v e c o n c l u d e d t h a t
K e n n e c o i s e n t i t l e d t o r e c o v e r o n l y o n i t s b r e a c h o f

c o n t r a c t c l a i m

. A l t h o u g h t h e c o n t r a c t c o n c e r n e d
i n s u r a n c e c o v e r a g e f o r d a m a g e s t o K e n n e c o 's

p r o p e r t y b y a t h i r d p a r t y , K e n n e c o d o e s n o t b a s e i t s

s u i t o n t h a t p r o p e r t y d a m a g e

. I n s t e a d

, K e n n e c o 's

c l a i m s a r e f

o r p u r e l y e c o n o m i c l o s s e s s t e m m i n g f r o m J & H 's b r e a c h o f c o n t r a c t t o s e c u r e

c o n t i n g e n c y c o v e r a g e

. S u c h c l a i m s d o n o t f a l l w i t h i n
t h e s c o p e o f “ p r o p e r t y d a m a g e c a s e s , ” w h i c h o n l y i n c l u d e c l a i m s f

o r d a m a g e t o t a n g i b l e p r o p e r t y , n o t

e c o n o m i c l o s s o r l o s s o f e c o n o m i c o p p o r t u n i t y

. S e e S p a n g l e r , 8 6 1 S

. W

. 2 d a t 3 9 8 ; A s s o c i a t e d T e l e p h o n e D i r e c t o r y P u b l i s h e r s , I

n c

. v

. F i v e D '

s P u b l i s h i n g C o

. , 8 4 9 S

. W

. 2 d 8 9 4

, 9 0 0 ( T e x

. A p p

. — A u s t i n 1 9 9 3

,
n o w r i t ) ; R a l s t o n P u r i n a C o

. v

. M c K e n d r i c k

, 8 5 0
S

. W

. 2 d 6 2 9

, 6 3 3 ( T e x

. A p p

. — S a n A n t o n i o 1 9 9 3

,
w r i t d e n i e d )

. T h u s , s e c t i o n 6 d o e s n o t a p p l y t o t h i s

c a s e , a n d a n y a w a r d o f p r e j u d g m e n t i n t e r e s t i s
g o v e r n e d b y t h e c o m m o n l a w

.

J & H a r g u e s t h a t
, e v e n i f s e c t i o n 6 d o e s n o t

e x p r e s s l y a p p l y , t h i s C o u r t s h o u l d a d o p t t h e L e g i s l a t u r e 's v i e w s , e x p r e s s e d i n i t s e n a c t m e n t o f

s e c t i o n 6

, c o n c e r n i n g t h e a p p r o p r i a t e b a l a n c i n g o f
i n t e r e s t s

. S p e c i f

i c a l l y , J & H a r g u e s t h a t t h i s C o u r t

c o u l d f o l l o w t h e p o l i c y o f s e c t i o n 6 a n d h o l d t h a t
,
u n d e r t h e c o m m o n l a w , p r e j u d g m e n t i n t e r e s t s h o u l d
b e g i n t o a c c r u e o n t h e e a r l i e r o f 1 8 0 d a y s a f t e r a d e f e n d a n t r e c e i v e s w r i t t e n n o t i c e o f a c l a i m o r t h e

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 3Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

d a y s u i t i s f

i l e d

, a n d t h a t i t s h o u l d b e c a l c u l a t e d a s

s i m p l e i n t e r e s t

. K e n n e c o r e s p o n d s t h a t C a v n a r

r e q u i r e s b o t h d a i l y c o m p o u n d i n g a n d a c c r u a l
b e g i n n i n g s i x m o n t h s a f t e r t h e o c c u r r e n c e g i v i n g r i s e
t o t h e c a u s e o f a c t i o n

. C a v n a r , 6 9 6 S

. W

. 2 d a t
5 5 4

– 5 5

.

[ 2 9 ] W h e n t h e C o u r t d e c i d e d C a v n a r , t h e r e w a s n o

s t a t u t e g o v e r n i n g p r e j u d g m e n t i n t e r e s t

. S e e A c t o f
M a y 8

, 1 9 6 7

, 6 0 t h L e g

. , R

. S

. , c h

. 2 7 4

, § 2

, 1 9 6 7
T e x

. G e n

. L a w s 6 0 8

, 6 1 0 ; T e x

. R e v

. C i v

. S t a t

. a r t

. 5 0 6 9

– 1

. 0 5 ( V e r n o n 1 9 8 7 )

. T h u s , t h e C a v n a r C o u r t f a s h i o n e d i t s r u l e w i t h o u t t h e g u i d a n c e o f l e g i s l a t i v e
p o l i c y

. T h e e n a c t m e n t o f s e c t i o n 6 i n v o l v e d m a n y o f

t h e s a m e p o l i c y c o n c e r n s u n d e r l y i n g t h e d e c i s i o n i n C a v n a r

. S e c t i o n 6 i s a “ t r a d e

- o f f p r o v i s i o n , ”

e f f e c t u a t i n g s o m e o f t h e g o a l s o f t o r t r e f o r m w h i l e
p r e s e r v i n g t h e a v a i l a b i l i t y o f p r e j u d g m e n t i n t e r e s t

u n d e r C a v n a r , a n d e v e n e x p a n d i n g t h e s c o p e o f

r e c o v e r a b l e i n t e r e s t t o i n c l u d e f u t u r e d a m a g e s

a w a r d e d a s p a r t o f t h e j u d g m e n t

. C & H N a t i o n w i d e , I n c

. v

. T

h o m p s o n , 9 0 3 S

. W

. 2 d 3 1 5

, 3 2 6

– 2 7 ( T e x

. 1 9 9 4 ) ( c i t i n g M o n t f o r d & B a r b e r , 1 9 8 7 T

e x a s T o r t R e f o r m : T h e Q u e s t f

o r a F a i r e r a n d M o r e P r e d i c t a b l e T

e x a s C i v i l J

u s t i c e S y s t e m , 2 5 H o u s t o n L

. R e v

. 5 9

, 1 0 2 ( 1 9 8 8 ) )

. S e c t i o n 6 w o r k s a s a

“ s y s t e m o f r e w a r d s a n d p e n a l t i e s ” i n t e n d e d t o

e n c o u r a g e s e t t l e m e n t s

. * 5 3 1 C & H N a t i o n w i d e , 9 0 3
S

. W

. 2 d a t 3 2 6

. T h i s C o u r t h a s r e c o g n i z e d t h e i m p o r t a n c e o f s u c h a g o a l

, a n d t o d a y w e a d o p t t h e L e g i s l a t u r e 's a p p r o a c h t o e f f e c t u a t i n g t h a t g o a l

. S e e O w e n s

– I l l i n o i s , I

n c

. v

. E s t a t e o

f B u r t

, 8 9 7 S

. W

. 2 d
7 6 5

, 7 6 9 ( T e x

. 1 9 9 5 ) ( a d o p t i n g a p r e j u d g m e n t i n t e r e s t a c c r u a l r u l e f o r l a t e n t

- i n

j u r y c a s e s

“ c o n s i s t e n t w i t h t h e p r e j u d g m e n t i n t e r e s t s t a t u t e ” ) ;

c f

. S m i t h v

. M e r r i t t

, 9 4 0 S

. W

. 2 d 6 0 2

, 6 0 4

– 0 5 ( T e x

. 1 9 9 7 ) ( f

a s h i o n i n g a c o m m o n

- l a w s o c i a l h o s t l i a b i l i t y r u l e i n a c c o r d a n c e w i t h l e g i s l a t i v e p o l i c y o f
D r a m S h o p A c t )

. W e a d o p t t h e L e g i s l a t u r e 's

a p p r o a c h t o p r e j u d g m e n t i n t e r e s t a n d h o l d t h a t
,
u n d e r t h e c o m m o n l a w , p r e j u d g m e n t i n t e r e s t b e g i n s
t o a c c r u e o n t h e e a r l i e r o f ( 1 ) 1 8 0 d a y s a f t e r t h e d a t e

a d e f e n d a n t r e c e i v e s w r i t t e n n o t i c e o f a c l a i m o r ( 2 )

t h e d a t e s u i t i s f

i l e d

. S e e T e x

. R e v

. C i v

. S t a t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

.

[ 3 0 ] A p p l y i n g t h e s e t i m e f r a m e s , K e n n e c o a r g u e s
t h a t D e c e m b e r 1 5

, 1 9 8 6

, t h e d a t e t h e t o l l i n g

a g r e e m e n t w a s s i g n e d

, i s t h e e q u i v a l e n t o f t h e d a t e

o f s u i t
, a n d t h e r e f

o r e s h o u l d b e t h e d a t e o f a c c r u a l

. W e d i s a g r e e

. T h e t o l l i n g a g r e e m e n t i s n o t a l a w s u i t
, n o r d i d i t p r o v i d e t h a t i t w o u l d b e c o n s i d e r e d t h e d a t e o f s u i t f

o r a n y p u r p o s e

.

A l t e r n a t i v e l y , K e n n e c o a r g u e s t h a t p r e j u d g m e n t i n t e r e s t b e g a n t o a c c r u e o n J u n e 1 3

, 1 9 8 7

, 1 8 0 d a y s f r o m t h e d a t e t h e t o l l i n g a g r e e m e n t w a s s i g n e d

. J &
H c o u n t e r s t h a t i n t e r e s t d i d n o t b e g i n t o a c c r u e u n t i l
A p r i l 1 5

, 1 9 8 8

, 1 8 0 d a y s a f t e r J & H r e c e i v e d
K e n n e c o 's D T P A n o t i c e l e t t e r

. T h u s , w e m u s t d e t e r m i n e w h e t h e r t h e s t a n d s t i l l a g r e e m e n t

c o n s t i t u t e s “ w r i t t e n n o t i c e o f a c l a i m ” t h a t t r i g g e r s

a c c r u a l o f p r e j u d g m e n t i n t e r e s t

.

T h e s t a n d s t i l l a g r e e m e n t p l a i n l y s a y s t h a t “ K e n n e c o

a s s e r t s t h a t
, t o t h e e x t e n t u n d e r w r i t e r s a r e f o u n d n o t

t o b e l i a b l e [ i n t h e f

e d e r a l a c t i o n ]

. . . , J & H i s l i a b l e
t o K e n n e c o f

o r t h e a m o u n t s w h i c h K e n n e c o h a s

c l a i m e d u n d e r t h e P o l i c y

. ” W e h o l d t h a t t h e

a g r e e m e n t c o n s t i t u t e s “ w r i t t e n n o t i c e o f a c l a i m

. ” A

“ c l a i m ” i s “ a d e m a n d f o r c o m p e n s a t i o n o r a n

a s s e r t i o n o f a r i g h t t o b e p a i d

. ” S e e R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 8 ( T e x

. A p p

. — A u s t i n 1 9 9 5

, w r i t d e n i e d ) ; s e e a l s o B l a c k 's L a w D i c t i o n a r y 2 4 7 ( 6 t h e d

. 1 9 9 1 ) ( a “ c l a i m ” i s a “ d e m a n d f o r

m o n e y o r p r o p e r t y a s o f r i g h t ” )

. T h r o u g h t h e

s t a n d s t i l l a g r e e m e n t
, J & H r e c e i v e d w r i t t e n n o t i c e
t h a t K e n n e c o w a s c l a i m i n g a r i g h t t o c o m p e n s a t i o n

. S e e R o b i n s o n , 8 9 4 S

. W

. 2 d a t 5 2 9 ( c l a i m a n t n o t

r e q u i r e d t o d e m a n d e x a c t a m o u n t o r l i s t e v e r y

e l e m e n t o f d a m a g e )

. M o r e o v e r , J & H h a d s u f f i c i e n t i n f o r m a t i o n a t t h a t t i m e t o o b t a i n a s e t t l e m e n t

w i t h o u t i n c u r r i n g a n y p r e j u d g m e n t i n t e r e s t a t a l l

. S e e O w e n s

– I l l i n o i s , I

n c

. v

. E s t a t e o

f B u r t

, 8 9 7 S

. W

. 2 d
7 6 5

, 7 6 9 ( T e x

. 1 9 9 5 ) ( “ [ A ] d e f e n d a n t m u s t h a v e

n o t i c e a n d a n o p p o r t u n i t y t o s e t t l e a c l a i m i n o r d e r t o

a d v a n c e C a v n a r ' s o b j e c t i v e o f e x p e d i t e d

s e t t l e m e n t s

. ” )

.

[ 3 1 ] T h e p u r p o s e o f a s t a n d s t i l l a g r e e m e n t i s

n o r m a l l y t o m a i n t a i n t h e s t a t u s q u o a n d t e m p o r a r i l y

s u s p e n d o r s t o p a l l a s p e c t s o f a s u i t

. I n m o s t

c i r c u m s t a n c e s , t h i s w o u l d o p e r a t e t o t o l l t h e a c c r u a l

o f p r e j u d g m e n t i n t e r e s t w h i l e t h e a g r e e m e n t i s i n

e f f e c t

. H o w e v e r , p a r t i e s t o a s t a n d s t i l l a g r e e m e n t

m a y c o n t r a c t u a l l y p r o v i d e o t h e r w i s e

.

T h e s t a n d s t i l l a g r e e m e n t i n t h i s c a s e e x p r e s s l y
p r e s e r v e s a l l o f K e n n e c o 's r i g h t s a n d a l l o f J & H 's
l i a b i l i t i e s

. T h e t e r m s o f t h e a g r e e m e n t p r o v i d e : “ T h e

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 4Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

p e r i o d b e t w e e n D e c e m b e r 1 5

, 1 9 8 6 a n d t h e d a t e

w h e n 3 0 d a y s s h a l l h a v e e l a p s e d f o l l o w i n g t h e f

i n a l
d e t e r m i n a t i o n o f t h e N e w Y o r k A c t i o n

. . . s h a l l n o t b e c o u n t e d f

o r p u r p o s e s o f t h e s t a t u t e o f l i m i t a t i o n s , l a c h e s o r a n y o t h e r d e f

e n s e w h i c h m a y b e a s s e r t e d i n

a n y s u b s e q u e n t a c t i o n

. ” T h e a g r e e m e n t c o n t i n u e s ,

“ E x c e p t a s e x p r e s s l y p r o v i d e d [ i n t h e p r e v i o u s

s e n t e n c e ]

, n o t h i n g i n t h i s a g r e e m e n t
, o r t h e r e c i t a l s

s e t f o r t h h e r e i n , s h a l l p r e j u d i c e , i n f l u e n c e o r i n a n y

w a y a f f e c t a n y r i g h t s , l i a b i l i t i e s , d e f e n s e s ,
c o u n t e r c l a i m s o r s e t o f

f s w h i c h m a y b e a s s e r t e d b y

e i t h e r p a r t y h e r e t o i n t h i s o r a n y o t h e r p r o c e e d i n g

. ”
T h u s , t h e s t a n d s t i l l 's a p p l i c a t i o n i s n a r r o w

— i t

a p p l i e s o n l y t o l i m i t a t i o n s , l a c h e s , a n d o t h e r d e f e n s e s

. A l l o f K e n n e c o 's r i g h t s , w h i c h i n c l u d e
p r e j u d g m e n t i n t e r e s t
, w e r e e x p r e s s l y r e s e r v e d

. 1 2
T h u s , p r e j u d g m e n t i n t e r e s t a c c r u e d * 5 3 2 b e g i n n i n g 1 8 0 d a y s f

r o m t h e d a t e t h e s t a n d s t i l l a g r e e m e n t w a s

s i g n e d

.

[ 3 2 ] W e f

u r t h e r h o l d t h a t p r e

j u d g m e n t i n t e r e s t

a c c r u e s a t t h e r a t e f

o r p o s t j u d g m e n t i n t e r e s t a n d i t

s h a l l b e c o m p u t e d a s s i m p l e i n t e r e s t

. S e e T e x

. R e v

. C i v

. S t a t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( g )

. T h e r e h a s b e e n m u c h c o n f

u s i o n a m o n g T e x a s c o u r t s r e g a r d i n g h o w p r e j u d g m e n t i n t e r e s t s h o u l d b e c a l c u l a t e d i n

c a s e s f o l l o w i n g C a v n a r

. C r u m & F o r s t e r , I n c

. v

. M o n s a n t o C o

. , 8 8 7 S

. W

. 2 d 1 0 3

, 1 5 3 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 4

, w r i t d i s m 'd b y a g r m t )

. A l t h o u g h t h e m a

j o r i t y o f a p p e l l a t e c o u r t c a s e s h a v e h e l d t h a t e q u i t a b l e p r e j u d g m e n t i n t e r e s t a w a r d s

s h o u l d b e c o m p o u n d e d d a i l y , e v e n a f t e r t h e

e n a c t m e n t o f s e c t i o n 6

, s e e , e

. g

. , S p a n g l e r , 8 6 1
S

. W

. 2 d a t 3 9 8

– 9 9 ; S h e l l P i p e l i n e C o r

p

. v

. C o a s t a l
S t a t e s T r a d i n g , I

n c

. , 7 8 8 S

. W

. 2 d 8 3 7

, 8 4 8

– 4 9 ( T e x

. A p p

. — H o u s t o n [ 1 s t D i s t

. ] 1 9 9 0

, w r i t d e n i e d )

,
w e h o l d t h a t e q u i t a b l e p r e j u d g m e n t i n t e r e s t s h o u l d
b e c o m p u t e d i n a c c o r d a n c e w i t h t h e l e g i s l a t i v e
p o l i c y s u p p o r t i n g s e c t i o n 6

. T h e L e g i s l a t u r e

e x p r e s s l y p r o v i d e d t h a t s t a t u t o r y p r e j u d g m e n t i n t e r e s t s h a l l b e c o m p u t e d a s s i m p l e i n t e r e s t

. T e x

. R e v

. C i v

. S t a t

. a r t 5 0 6 9

– 1

. 0 5

, § 6 ( g )

. W e w i l l
f o l l o w t h e L e g i s l a t u r e 's l e a d a n d h o l d t h a t e q u i t a b l e
p r e j u d g m e n t i n t e r e s t s h a l l b e c o m p u t e d a s s i m p l e i n t e r e s t

.

A d o p t i o n o f t h e s t a t u t o r y a p p r o a c h t o p r e j u d g m e n t i n t e r e s t c o n t i n u e s t o p r o m o t e t h e p o l i c y g o a l s

u n d e r l y i n g t h e C a v n a r d e c i s i o n

. F o r e x a m p l e , t h e

a c c r u a l r u l e o f s e c t i o n 6 e f f e c t i v e l y e n c o u r a g e s

s e t t l e m e n t s w i t h o u t c r e a t i n g i n c e n t i v e s f o r p l a i n t i f

f s t o d e l a y

. I n c o n t r a s t t o s e c t i o n 6

, w h e r e i n t e r e s t

b e g i n s t o a c c r u e 1 8 0 d a y s a f t e r a d e f e n d a n t r e c e i v e s

n o t i c e o f t h e c l a i m o r t h e c l a i m i s f i l e d

, C a v n a r i n t e r e s t b e g i n s t o a c c r u e 1 8 0 d a y s a f t e r t h e

o c c u r r e n c e g i v i n g r i s e t o t h e c l a i m , r e g a r d l e s s o f

w h e t h e r a d e f

e n d a n t k n o w s o f t h e c l a i m

. A l l o w i n g
p l a i n t i f f s t o a c c r u e p r e j u d g m e n t i n t e r e s t e v e n b e f o r e
t h e d e f e n d a n t b e c o m e s a w a r e o f t h e c l a i m i s a t o d d s

w i t h t h e p r i n c i p l e w e r e c o g n i z e d i n O w e n s

– I l l i n o i s , I n c

. v

. E s t a t e o

f B u r t

, 8 9 7 S

. W

. 2 d 7 6 5

, 7 6 9 ( T e x

. 1 9 9 5 )

, t h a t “ [ o ] b v i o u s l y , a d e f e n d a n t m u s t h a v e

n o t i c e a n d a n o p p o r t u n i t y t o s e t t l e a c l a i m i n o r d e r t o

a d v a n c e C a v n a r 's o b j e c t i v e o f e x p e d i t e d s e t t l e m e n t s

a n d t r i a l s

. ”

I n E s t a t e o

f B u r t

, t h e C a v n a r a c c r u a l r u l e r e q u i r e d

a n e x c e p t i o n i n c a s e s o f l a t e n t i n j u r y b e c a u s e t h e d a t e o f t h e o c c u r r e n c e o f t h e i n c i d e n t g i v i n g r i s e t o
t h e c a u s e o f a c t i o n w a s o f t e n d i f f i c u l t t o d e t e r m i n e

. I n a d o p t i n g a n a c c r u a l d a t e b e g i n n i n g w h e n a d e f e n d a n t r e c e i v e s n o t i c e o r s u i t i s f i l e d

, w e

r e a s o n e d t h a t s u c h a n a c c r u a l r u l e p r o v i d e s s u f f i c i e n t

c o m p e n s a t i o n f

o r p l a i n t i f

f s , e s t a b l i s h e s a d e f

i n i t e d a t e f o r a c c r u a l t o b e g i n , e n c o u r a g e s e x p e d i t e d

s e t t l e m e n t s a n d t r i a l s , a n d r e m o v e s i n c e n t i v e s f o r d e f e n d a n t s t o d e l a y w i t h o u t c r e a t i n g s u c h i n c e n t i v e s f o r p l a i n t i f

f s

. I d

. a t 7 6 9

. S e c t i o n 6

— a n d

, n o w , t h e

n e w c o m m o n l a w r u l e

— e f f e c t i v e l y s e r v e e a c h o f

t h o s e p o l i c y g o a l s e v e n w h e n t h e d a t e o f a c c r u a l o f

t h e c a u s e o f a c t i o n c a n b e r e a d i l y d e t e r m i n e d

.

A p p l y i n g t h e c o m p u t a t i o n r u l e s o f s e c t i o n 6 t o t h e

c o m m o n l a w a l s o s e r v e s t h e g o a l o f c o m p e n s a t i n g
p l a i n t i f f s , w i t h o u t o v e r c o m p e n s a t i n g t h e m o r

s i m u l t a n e o u s l y p u n i s h i n g d e f e n d a n t s

. A l t h o u g h t h e

r a t e o f p r e j u d g m e n t i n t e r e s t i s t h e s a m e u n d e r C a v n a r a n d s e c t i o n 6

, C a v n a r 's d a i l y c o m p o u n d i n g

a l l o w s p l a i n t i f

f s f a r g r e a t e r r e c o v e r y t h a n u n d e r

s e c t i o n 6

. I t i s n o t u n c o m m o n f o r C a v n a r
p r e j u d g m e n t i n t e r e s t a w a r d s t o g r e a t l y e x c e e d t h e

a m o u n t o f t h e a c t u a l j u d g m e n t
, a s i s t r u e i n t h i s c a s e

w h e r e t h e a c t u a l d a m a g e s a w a r d e d w e r e $ 1

, 9 7 2

, 2 7 3

. 6 6 a n d t h e p r e j u d g m e n t i n t e r e s t a w a r d

w a s $ 2

, 7 5 0

, 9 5 2

. 3 9

. F u r t h e r , C a v n a r o f t e n a l l o w s f

o r

a l a r g e r r e c o v e r y o f i n t e r e s t t h a n t h e p l a i n t i f f c o u l d
h a v e r e c e i v e d b y i n v e s t i n g t h e m o n e y h i m s e l f

, t h e r e b y o v e r c o m p e n s a t i n g t h e p l a i n t i f f

. T h e

c o m p u t a t i o n r u l e s o f s e c t i o n 6 s e r v e t o m o r e * 5 3 3

a c c u r a t e l y r e f

l e c t t h e d a m a g e s i n c u r r e d b y t h e
p l a i n t i f f f o r t h e l o s t u s e o f m o n e y

.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 5Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

F i n a l l y , c o n f

o r m i n g t h e c o m m o n l a w t o l e g i s l a t i v e
p o l i c y s e r v e s t h e i m p o r t a n t g o a l o f r e s t o r i n g

u n i f o r m i t y t o t h e l a w o f p r e j u d g m e n t i n t e r e s t

. I n C a v n a r , w e r e a s o n e d t h a t “ [ t ] h e t i m e h a s c o m e t o

r e v i s e t h e p r e j u d g m e n t i n t e r e s t r u l e

. . . a n d r e s t o r e

e q u i t y a n d s y m m e t r y t o t h i s a r e a o f t h e l a w

. ”
C a v n a r , 6 9 6 S

. W

. 2 d a t 5 5 3

– 5 4

. G i v e n t h e L e g i s l a t u r e 's e n a c t m e n t o f s e c t i o n 6

, t h a t t i m e h a s

c o m e a g a i n

. C a v n a r w a s a w r o n g f u l d e a t h c a s e a n d

, b y i t s e x p r e s s l a n g u a g e , a p p l i e d t o p e r s o n a l i n j u r y ,
w r o n g f u l d e a t h

, a n d s u r v i v a l a c t i o n c a s e s

. I d

. T h u s ,
w h i l e C a v n a r 's a p p l i c a t i o n h a s e x p a n d e d b e y o n d

t h o s e s p e c i f

i c c a u s e s o f a c t i o n , i t i s t h e c o n t e x t o f

t h o s e c a u s e s o f a c t i o n i n w h i c h t h e r u l e w a s f a s h i o n e d

. T h e e n a c t m e n t o f s e c t i o n 6

, h o w e v e r , p r e c l u d e s t h e a p p l i c a t i o n o f C a v n a r t o s o m e o f t h o s e

v e r y c l a i m s , i f

t h e y a c c r u e a f

t e r S e p t e m b e r 2

, 1 9 8 7

. T h e r e s u l t i s t h a t s e c t i o n 6 a p p l i e s o n e r u l e t o
p e r s o n a l i n

j u r y , w r o n g f

u l d e a t h

, a n d p r o p e r t y d a m a g e c a s e s , w h i l e C a v n a r a p p l i e s a d i f f e r e n t r u l e ,
a n d o n l y i n c a s e s n o t i n v o l v i n g p e r s o n a l i n j u r y ,
w r o n g f u l d e a t h

, a n d p r o p e r t y d a m a g e

. S u c h a r e s u l t i s a s i l l o g i c a l a s i t i s a r b i t r a r y , a n d i s t h e r e f o r e n o l o n g e r t h e l a w i n T e x a s

.

O u r c o m m o n l a w p r e j u d g m e n t i n t e r e s t h o l d i n g

a p p l i e s t o a l l c a s e s i n w h i c h j u d g m e n t i s r e n d e r e d o n

o r a f t e r D e c e m b e r 1 1

, 1 9 9 7

, a n d t o a l l o t h e r c a s e s

c u r r e n t l y i n t h e j u d i c i a l p r o c e s s i n w h i c h t h e i s s u e h a s b e e n p r e s e r v e d

.

* * * * *

W e c o n c l u d e t h a t l i m i t a t i o n s b a r s K e n n e c o 's

n e g l i g e n c e a n d I n s u r a n c e C o d e c l a i m s a n d t h a t t h e r e i s n o l e g a l l y s u f

f i c i e n t e v i d e n c e t o s u p p o r t
K e n n e c o 's f

r a u d c l a i m c o n c e r n i n g c o n t i n g e n c y

c o v e r a g e

. W e f

u r t h e r h o l d t h a t c o l l a t e r a l e s t o p p e l
b a r s a l l o f K e n n e c o 's c l a i m s c o n c e r n i n g a n a l l e g e d

a g r e e m e n t t o s e c u r e l o s t p r o f i t s c o v e r a g e a n d t h e

r e l a t e d f r a u d c l a i m s

. W e s u s t a i n , i n p a r t
, J & H 's

p o i n t o f e r r o r r e g a r d i n g t h e c a l c u l a t i o n o f

p r e j u d g m e n t i n t e r e s t

. W e o v e r r u l e J & H 's o t h e r
p o i n t s o f e r r o r

.

T h e r e f o r e , w e c o n c l u d e t h a t K e n n e c o i s e n t i t l e d t o

r e c o v e r $ 4 1 2

, 2 7 3

. 6 6 f r o m J & H o n i t s c l a i m f o r b r e a c h o f c o n t r a c t t o s e c u r e c o n t i n g e n c y c o v e r a g e , p l u s a t t o r n e y 's f

e e s i n t h e a m o u n t o f $ 3 0 0

, 0 0 0 a s s t i p u l a t e d b y t h e p a r t i e s

. K e n n e c o i s a l s o e n t i t l e d t o

r e c o v e r p r e j u d g m e n t i n t e r e s t o n i t s $ 4 1 2

, 2 7 3

. 6 6
b r e a c h o f c o n t r a c t a w a r d

, c a l c u l a t e d a s s i m p l e i n t e r e s t
, a c c r u i n g b e g i n n i n g 1 8 0 d a y s f r o m D e c e m b e r 1 5

, 1 9 8 6

, a s w e l l a s p o s t j u d g m e n t i n t e r e s t

a n d c o s t s a s a l l o w e d b y l a w

. W e a c c o r d i n g l y m o d i f y
t h e j u d g m e n t o f

t h e c o u r t o f

a p p e a l s a n d r e m a n d t h e

c a u s e t o t h e t r i a l c o u r t f o r t h e c a l c u l a t i o n o f t h e

a m o u n t o f p r e j u d g m e n t i n t e r e s t a n d f o r r e n d i t i o n o f j u d g m e n t i n a c c o r d a n c e w i t h t h i s o p i n i o n

.

H E C H T

, J u s t i c e , f

i l e d a d i s s e n t i n g o p i n i o n , i n w h i c h
G O N Z A L E Z a n d O W E N

, J u s t i c e s , j o i n , a n d i n P a r t
I I o f w h i c h S P E C T O R

, J u s t i c e , j o i n s

.

H E C H T

, J u s t i c e , d i s s e n t i n g

.

I d o n o t d i s a g r e e w i t h t h e C o u r t t h a t p r e j u d g m e n t i n t e r e s t a w a r d s o n c o m m o n l a w c o n t r a c t c l a i m s

s h o u l d b e g u i d e d b y l e g i s l a t e d p o l i c i e s f o r
p r e j u d g m e n t i n t e r e s t o n w r o n g f u l d e a t h

, p e r s o n a l
i n j u r y , a n d p r o p e r t y d a m a g e c l a i m s

. N o g o o d r e a s o n i s a d v a n c e d f

o r h a v i n g d i f

f e r e n t p r e j u d g m e n t i n t e r e s t

r u l e s f o r d i f f e r e n t k i n d s o f c l a i m s

. I n d e f e r e n c e t o
t h e L e g i s l a t u r e 's a d o p t i o n o f a r u l e f o r s o m e c a s e s , i t i s a p p r o p r i a t e f

o r t h e c o m m o n l a w t o a p p l y t h e s a m e

r u l e i n o t h e r c a s e s

. I d o d i s a g r e e w i t h t h e C o u r t 's
h o l d i n g t h a t p r e j u d g m e n t i n t e r e s t s h o u l d a c c r u e d u r i n g a p e r i o d w h e n t h e p a r t i e s h a v e a g r e e d t o t a k e

n o a c t i o n

. N e i t h e r o f t h e t w o p u r p o s e s o f

p r e j u d g m e n t i n t e r e s t

— e n c o u r a g i n g p r o m p t

s e t t l e m e n t s a n d d i s c o u r a g i n g d e l a y b y d e f e n d a n t s

— c a n b e s e r v e d w h e n p a r t i e s a g r e e t o

a l l o w t h e p l a i n t i

f f t o d e l a y d e c i d i n g w h e t h e r t o f i l e

s u i t

. T h e C o u r t 's a r g u m e n t t h a t t h e p l a i n t i f f i n t h i s

c a s e r e s e r v e d b y a g r e e m e n t a r i g h t t o p r e j u d g m e n t i n t e r e s t t h a t i t w o u l d n o t h a v e h a d o t h e r w i s e

— i n

o t h e r w o r d s , t h a t t h e d e f e n d a n t c o n t r a c t e d t o p a y
p r e j u d g m e n t i n t e r e s t f o r p l a i n t i f

f 's d e l a y i n f

i l i n g

s u i t

— c a n h a r d l y b e t a k e n s e r i o u s l y

.

B u t I w o u l d n o t r e a c h t h e p r e j u d g m e n t i n t e r e s t i s s u e b e c a u s e I c o n c l u d e t h a t K e n n e c o E n e r g y , I n c

. ( f o r m e r l y A r m a d a S u p p l y I n c

. ) i s n o t e n t i t l e d t o j u d g m e n t a g a i n s t J o h n s o n & H i g g i n s o f T e x a s , I n c

.
o n a n y * 5 3 4 c l a i m K e n n e c o a s s e r t s

. I a g r e e w i t h t h e

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 6Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

C o u r t t h a t K e n n e c o 's n e g l i g e n c e c l a i m i s b a r r e d b y l i m i t a t i o n s , * t h a t t h e r e i s n o e v i d e n c e t o s u p p o r t
K e n n e c o 's f

r a u d c l a i m , a n d t h a t K e n n e c o 's c l a i m s f o r b r e a c h o f c o n t r a c t b a s e d o n J o h n s o n & H i g g i n s '
f a i l u r e t o o b t a i n l o s t p r o f i t s c o v e r a g e a r e p r e c l u d e d
b y f i n d i n g s i n A r m a d a S u

p p l y I n c

. v

. W r i g h t

, 6 6 5
F

. S u p p

. 1 0 4 7 ( S

. D

. N

. Y

. 1 9 8 7 )

, a f f ' d i n p a r t a n d

r e v ' d i n p a r t

, 8 5 8 F

. 2 d 8 4 2 ( 2 d C i r

. 1 9 8 8 )

. C o n t r a r y
t o t h e C o u r t
, h o w e v e r , I w o u l d h o l d t h a t K e n n e c o 's

c o n t r a c t c l a i m s f

o r J o h n s o n & H i g g i n s ' f a i l u r e t o

o b t a i n c o n t i n g e n c y c o v e r a g e a r e a l s o p r e c l u d e d b y
t h e f e d e r a l c o u r t 's f

i n d i n g s

. T h u s , I w o u l d r e n d e r j u d g m e n t f

o r J o h n s o n & H i g g i n s

.

A c c o r d i n g l y , I r e s p e c t f u l l y d i s s e n t

.

I

K e n n e c o b o u g h t f

u e l o i l f r o m P e t r o b r a s i n R i o d e J a n e i r o f o r r e s a l e t o S u n O i l T r a d i n g C o r p

. i n N e w Y o r k

. K e n n e c o 's p u r c h a s e p r i c e w a s t h e m a r k e t

v a l u e o f t h e o i l u p o n a r r i v a l i n N e w Y o r k h a r b o r

. T h e r e s a l e t o S u n w a s a t a f i x e d c o n t r a c t p r i c e ,
w h i c h K e n n e c o h o p e d w o u l d b e h i g h e r t h a n t h e
p r e v a i l i n g m a r k e t p r i c e a t t h e t i m e o f d e l i v e r y

. K e n n e c o 's p u r c h a s e w a s o n a C

. I

. F

. b a s i s , m e a n i n g
t h a t a l t h o u g h K e n n e c o t o o k t i t l e t o t h e o i l i n t h e B r a z i l i a n p o r t
, P e t r o b r a s w a s o b l i g e d t o i n s u r e t h e

o i l d u r i n g i t s v o y a g e t o N e w Y o r k

. K e n n e c o 's r e s a l e

o f t h e o i l w a s n o t o n a C

. I

. F

. b a s i s , s o t h a t i t h a d n o

o b l i g a t i o n t o S u n O i l t o i n s u r e t h e c a r g o d u r i n g

s h i p m e n t

. B u t w h i l e t h e o i l w a s e n r o u t e , a s t e e p a n d

s t e a d y d e c l i n e i n t h e f

u e l o i l m a r k e t m o v e d K e n n e c o
t o o b t a i n a d d i t i o n a l i n s u r a n c e t o p r o t e c t w h a t

a p p e a r e d w o u l d v e r y l i k e l y b e a v e r y s u b s t a n t i a l

p r o f i t f r o m t h e r e s a l e t o S u n

.

K e n n e c o 's c o n c e r n s w e r e t w o

. P e t r o b r a s h a d

p r o v i d e d i n s u r a n c e f

r o m B r a z i l i a n u n d e r w r i t e r s f o r 1 1 0 % o f t h e p u r c h a s e p r i c e , b u t b e c a u s e t h e
p u r c h a s e p r i c e w a s t i e d t o t h e m a r k e t
, a s t h e m a r k e t f e l l

, s o d i d t h e a m o u n t o f i n s u r a n c e , l e a v i n g a l a r g e
p a r t o f t h e p o t e n t i a l v a l u e o f t h e o i l a t r e s a l e

— a n d

a l m o s t a l l o f K e n n e c o 's p r o f i t s

— u n i n s u r e d

. K e n n e c o

s o u g h t t o i n s u r e t h e o i l a t S u n 's h i g h e r c o n t r a c t p r i c e

. K e n n e c o w a s a l s o c o n c e r n e d t h a t t h e B r a z i l i a n

u n d e r w r i t e r s m i g h t f

a i l t o p a y a c l a i m a n d s o s o u g h t i n s u r a n c e a g a i n s t t h a t c o n t i n g e n c y

. T h r o u g h i t s i n s u r a n c e b r o k e r , J o h n s o n & H i g g i n s , K e n n e c o s o u g h t a s s u r a n c e t h a t i t s m a r i n e i n s u r a n c e p o l i c i e s i s s u e d b y L o n d o n u n d e r w r i t e r s w o u l d p r o v i d e b o t h
i n c r e a s e d v a l u e c o v e r a g e a n d c o n t i n g e n c y c o v e r a g e

.

W h e n t h e s h i p a r r i v e d i n N e w Y o r k

, t h e c a r g o w a s f o u n d t o b e c o n t a m i n a t e d

, a n d s o m e o f i t h a d b e e n l o s t

. S u n c a n c e l e d t h e c o n t r a c t
, a n d e v e n t u a l l y K e n n e c o s o l d s o m e o f t h e o i l a t a r e d u c e d p r i c e

. T h e L o n d o n a n d B r a z i l i a n u n d e r w r i t e r s d i s p u t e d
K e n n e c o ' s c l a i m s , s o K e n n e c o s u e d t h e m

— b u t n o t
J o h n s o n & H i g g i n s

— i n t h e U n i t e d S t a t e s D i s t r i c t C o u r t f o r t h e S o u t h e r n D i s t r i c t o f N e w Y o r k

. I n

e s s e n c e , t h e L o n d o n u n d e r w r i t e r s c o n t e n d e d t h a t t h e i n c r e a s e d v a l u e c o v e r a g e a p p l i e d o n l y t o d a m a g e s f r o m t h e d e s t r u c t i o n o f t h e o i l a n d n o t t o d a m a g e s f r o m S u n 's c a n c e l l a t i o n o f t h e c o n t r a c t
, a n d t h a t t h e

c o n t i n g e n c y c o v e r a g e a p p l i e d o n l y i f K e n n e c o 's

p u r c h a s e a n d r e s a l e w e r e b o t h o n C

. I

. F

. t e r m s , a n d
i t s s a l e t o S u n w a s n o t

. K e n n e c o a r g u e d t h a t J o h n s o n & H i g g i n s h a d a g r e e d t o p r o v i d e K e n n e c o w i t h t h e

c o v e r a g e i t c l a i m e d

, a n d t h a t b e c a u s e J o h n s o n &
H i g g i n s w a s t h e L o n d o n u n d e r w r i t e r s ' a g e n t
, t h e

u n d e r w r i t e r s w e r e b o u n d b y t h a t a g r e e m e n t

.

T h e f e d e r a l d i s t r i c t c o u r t 's f i n d i n g t h a t J o h n s o n &
H i g g i n s w a s n o t t h e L o n d o n u n d e r w r i t e r s ' a g e n t w a s

s u f f i c i e n t r e a s o n t o d e n y K e n n e c o 's c l a i m s , b u t t h e

c o u r t w e n t f

u r t h e r

. I t a l s o f

o u n d

, i n t h e w o r d s o f

t h e S e c o n d C i r c u i t o n a p p e a l

, t h a t K e n n e c o “ d i d n o t a s k
f o r , n o r d i d [ J o h n s o n & H i g g i n s ] a g r e e t o , c o v e r a g e

o n l o s t p r o f

i t s ” a s K e n n e c o c o n t e n d e d

. A r m a d a , 8 5 8
F

. 2 d a t 8 5 1

. T h i s C o u r t h o l d s , a n d I a g r e e , t h a t b e c a u s e t h e f

e d e r a l d i s t r i c t c o u r t 's f i n d i n g s o f n o

a g e n c y a n d n o a g r e e m e n t r e g a r d i n g i n c r e a s e d v a l u e

c o v e r a g e w e r e b o t h a f f i r m e d * 5 3 5 o n a p p e a l

,
r e l i t i g a t i o n o f e i t h e r i s b a r r e d b y c o l l a t e r a l e s t o p p e l

. R e s t a t e m e n t ( S e c o n d ) o f J u d g m e n t s § 2 7 c m t

. o ( 1 9 8 2 )

. B u t c o n t r a r y t o t h e C o u r t
, I b e l i e v e a f a i r

r e a d i n g o f t h e f

e d e r a l d i s t r i c t c o u r t 's o p i n i o n s h o w s
t h a t i t a l s o f

o u n d t h a t J o h n s o n & H i g g i n s d i d n o t

a g r e e t o p r o v i d e t h e c o n t i n g e n c y c o v e r a g e K e n n e c o

r e q u e s t e d

, a n d t h a t f

i n d i n g , t o o , w a s a f

f i r m e d o n

a p p e a l

.

T h e f e d e r a l d i s t r i c t c o u r t f o u n d t h a t J o h n s o n &
H i g g i n s ' r e p r e s e n t a t i v e , A n d e r s o n , d i d n o t k n o w b e c a u s e K e n n e c o 's r e p r e s e n t a t i v e , B r o w n , d i d n o t

t e l l h i m t h a t K e n n e c o 's s a l e t o S u n w a s n o t o n C

. I

. F

. t e r m s

. S p e c i f

i c a l l y , t h e f

e d e r a l d i s t r i c t c o u r t f

o u n d :

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 7Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

• “ S h e [ B r o w n ] d i d n o t s t a t e w h a t s h e t o l d
A n d e r s o n a b o u t w h e t h e r t h e S u n c o n t r a c t w a s o r

w a s n o t C

. I

. F

. ” A r m a d a , 6 6 5 F

. S u p p

. a t 1 0 5 9

.

• “ A s t o t h e q u e s t i o n o f c o v e r a g e u n d e r t h e

c o n t i n g e n c y c l a u s e , A n d e r s o n u n d e r s t o o d B r o w n
t o s a y t h a t b o t h t h e P e t r o b r a s

– A r m a d a s a l e a n d

t h e A r m a d a

– S u n s a l e w e r e C

. I

. F

. s a l e s

. A s a l r e a d y

s t a t e d

, t h i s w a s c o n t r a r y t o t h e f a c t

. ” I d

. a t 1 0 6 1

.

• “ I t i s i m p o r t a n t t o n o t e t h a t [ i t w a s n o t u n t i l a f t e r
t h e m e e t i n g b e t w e e n B r o w n a n d A n d e r s o n a n d

a f t e r t h e d i s p u t e a r o s e ]

, a c c o r d i n g t o e v i d e n c e i n
t h i s c a s e , t h a t A r m a d a h a d a f f i r m a t i v e l y s t a t e d

t h a t t h e s a l e t o S u n w a s o n a d e l i v e r e d

, r a t h e r t h a n

a C

. I

. F

. b a s i s

. ” I

d

. a t 1 0 6 2

.

A n d e r s o n c o u l d n o t h a v e a g r e e d t o p r o v i d e

c o n t i n g e n c y c o v e r a g e d e s p i t e t h e f a c t t h a t t h e s a l e t o S u n w a s n o t o n C

. I

. F

. t e r m s w h e n , a s t h e f e d e r a l

c o u r t f o u n d

, A n d e r s o n u n d e r s t o o d f r o m w h a t B r o w n
t o l d h i m t h a t t h e s a l e t o S u n w a s o n C

. I

. F

. t e r m s

. I n

o t h e r w o r d s , A n d e r s o n c o u l d n o t h a v e a g r e e d t o
p r o v i d e c o v e r a g e h e d i d n o t e v e n k n o w w a s b e i n g

r e q u e s t e d

. T h u s , t h e f

e d e r a l d i s t r i c t c o u r t f

o u n d t h a t

“ J o h n s o n & H i g g i n s d i d n o t c l e a r l y u n d e r s t a n d t h e

s i t u a t i o n a n d m i s t a k e n l y b i l l e d A r m a d a f o r a
p r e m i u m f

o r c o n t i n g e n c y c o v e r a g e

. ” I d

. a t 1 0 6 2

. T h e S e c o n d C i r c u i t a p p r o v e d t h i s f i n d i n g

. A r m a d a , 8 5 8 F

. 2 d a t 8 5 1 ( “ T h e e v i d e n c e i n d i c a t e s t h a t [ J o h n s o n & H i g g i n s ] m i s t a k e n l y b i l l e d A r m a d a f o r
t h i s c o v e r a g e

. . . . ” )

. I f J o h n s o n & H i g g i n s d i d n o t

u n d e r s t a n d t h a t K e n n e c o w a s r e q u e s t i n g c o v e r a g e

e v e n t h o u g h t h e s a l e t o S u n w a s n o t o n C

. I

. F

. t e r m s , i t c o u l d h a r d l y h a v e a g r e e d t o p r o v i d e s u c h

c o v e r a g e

.

A s i m p l e r e x a m p l e m a k e s t h e p o i n t c l e a r e r

. S u p p o s e

a p e r s o n w a n t s a n a u t o m o b i l e p o l i c y t h a t a p p l i e s
t h r o u g h o u t M e x i c o , b u t h e d o e s n o t t e l l t h e a g e n t
,
a n d t h e a g e n t u n d e r s t a n d s f r o m w h a t t h e p e r s o n s a y s
t h a t t h e c a r w i l l n o t b e o p e r a t e d i n M e x i c o

. T h e

a g e n t p r o c u r e s a p o l i c y t h a t c l e a r l y l i m i t s c o v e r a g e
t o o p e r a t i o n s i n t h e U n i t e d S t a t e s

. W h e n t h e i n s u r e d
i s i n v o l v e d i n a n a c c i d e n t i n M e x i c o C i t y , h o w c a n h e s u c c e s s f

u l l y c l a i m t h a t t h e a g e n t a g r e e d t o
p r o v i d e c o v e r a g e ? O n c e i t i s e s t a b l i s h e d t h a t t h e a g e n t d i d n o t k n o w t h e a u t o m o b i l e w o u l d b e

o p e r a t e d i n M e x i c o , t h a t f a c t p r e c l u d e s a n a g r e e m e n t

t o p r o v i d e s u c h c o v e r a g e

.

T h e f e d e r a l d i s t r i c t c o u r t e x p r e s s l y f o u n d t h a t
K e n n e c o d i d n o t t e l l J o h n s o n & H i g g i n s t h a t i t

w a n t e d c o n t i n g e n c y c o v e r a g e f o r a t r a n s a c t i o n t h a t d i d n o t i n v o l v e b a c k

- t o

- b a c k s a l e s o n C

. I

. F

. t e r m s , J o h n s o n & H i g g i n s u n d e r s t o o d f r o m K e n n e c o t h a t

t h e t r a n s a c t i o n d i d i n v o l v e b a c k

- t o

- b a c k s a l e s o n C

. I

. F

. t e r m s , a n d J o h n s o n & H i g g i n s p r o v i d e d a n i n s u r a n c e c e r t i f

i c a t e t h a t c l e a r l y c o n d i t i o n e d

c o v e r a g e o n b a c k

- t o

- b a c k s a l e s o n C

. I

. F

. t e r m s

. T h e s e f a c t s h a v i n g b e e n d e t e r m i n e d

, J o h n s o n &
H i g g i n s c a n n o t b e s a i d t o h a v e a g r e e d t o p r o v i d e t h e

c o n t i n g e n c y c o v e r a g e K e n n e c o c l a i m s i t w a n t e d

, o r
t o h a v e r e p r e s e n t e d t h a t i t w o u l d p r o v i d e s u c h

c o v e r a g e

. H a d t h e f

e d e r a l d i s t r i c t c o u r t c o n c l u d e d

o t h e r w i s e , i t w o u l d n o t h a v e b e e n n e c e s s a r y t o

a d d r e s s , a s i t d i d

, K e n n e c o 's a r g u m e n t t h a t t h e b a c k

- t o

- b a c k C

. I

. F

. r e q u i r e m e n t w a s w a i v e d

.

K e n n e c o h a d f

u l l o p p o r t u n i t y t o l i t i g a t e i n i t s f e d e r a l

s u i t w h e t h e r J o h n s o n & H i g g i n s a g r e e d t o p r o v i d e

c o n t i n g e n c y c o v e r a g e a p p l i c a b l e i n K e n n e c o 's

c i r c u m s t a n c e s

. I t c o u l d n o t p r e v a i l o n i t s c l a i m

a g a i n s t t h e L o n d o n u n d e r w r i t e r s w i t h o u t p r o v i n g

e i t h e r a r e p r e s e n t a t i o n b y J o h n s o n & H i g g i n s t h a t i t

w o u l d o b t a i n t h e c o v e r a g e , o r a w a i v e r o f t h e b a c k

- t o

- b a c k C

. I

. F

. s a l e s r e q u i r e m e n t

. H a v i n g l o s t

o n b o t h g r o u n d s , i t s h o u l d n o t b e a l l o w e d t o

r e l i t i g a t e t h e i s s u e i n T e x a s

.

I I

“ T h e p u r p o s e o f a s t a n d s t i l l a g r e e m e n t
, ” t h e C o u r t

e x p l a i n s , “ i s n o r m a l l y t o m a i n t a i n * 5 3 6 t h e s t a t u s
q u o a n d t e m p o r a r i l y s u s p e n d o r s t o p a l l a s p e c t s o f a

s u i t

. I n m o s t c i r c u m s t a n c e s , t h i s w o u l d o p e r a t e t o
t o l l t h e a c c r u a l o f p r e j u d g m e n t i n t e r e s t w h i l e t h e

a g r e e m e n t i s i n e f

f e c t

. ” A n t e a t 5 3 1

. P r e j u d g m e n t i n t e r e s t e n c o u r a g e s e a r l y s e t t l e m e n t s a n d
d i s c o u r a g e s d e l a y b y d e f e n d a n t s

. O b v i o u s l y , a
p l a i n t i f f w h o w i s h e s t o m a i n t a i n t h e s t a t u s q u o c a n h a r d l y c o m p l a i n o f a d e f e n d a n t 's d e l a y o r f

a i l u r e t o

s e t t l e

. A p l a i n t i f

f s h o u l d n o t b e e n t i t l e d t o
p r e j u d g m e n t i n t e r e s t f o r a d e l a y h e h a s r e q u e s t e d

a n d a g r e e d t o

.

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 8Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

T h e C o u r t n e v e r t h e l e s s h o l d s t h a t K e n n e c o s h o u l d

r e c o v e r p r e j u d g m e n t i n t e r e s t w h i l e t h e s t a n d s t i l l

a g r e e m e n t w a s i n e f

f e c t b e c a u s e J o h n s o n & H i g g i n s

c o n t r a c t e d t o p a y i n t e r e s t d u r i n g s u c h p e r i o d

. O n e

w o u l d n a t u r a l l y t h i n k t h a t i f a n y o n e s h o u l d p a y f o r

a d e l a y i n t h e r u n n i n g o f l i m i t a t i o n s r e q u e s t e d b y t h e
p l a i n t i f f

, i t s h o u l d b e t h e p l a i n t i f f

. W h i l e i t i s

c e r t a i n l y p o s s i b l e t h a t a d e f e n d a n t m i g h t a g r e e n o t

o n l y t o d e l a y t h e r u n n i n g o f l i m i t a t i o n s b u t a l s o t o
p a y a p l a i n t i f

f i n t e r e s t f

o r t h a t d e l a y , n o r e a s o n f o r

s u c h a n a g r e e m e n t s u g g e s t s i t s e l f

, a n d t h e C o u r t

s u p p l i e s n o n e

. T h e C o u r t 's p o s i t i o n i s s i m p l y t h a t b y
t h e l a n g u a g e o f

t h e i r a g r e e m e n t
, J o h n s o n & H i g g i n s

a g r e e d t o p a y K e n n e c o p r e j u d g m e n t i n t e r e s t f o r t h e d e l a y K e n n e c o r e q u e s t e d

, s t r a n g e a s t h a t m a y s e e m

. T h e o n l y l a n g u a g e t o w h i c h t h e C o u r t p o i n t s i s t h i s :

E x c e p t a s e x p r e s s l y p r o v i d e d

, n o t h i n g i n t h i s

a g r e e m e n t
, o r t h e r e c i t a l s s e t f o r t h h e r e i n , s h a l l

p r e j u d i c e , i n f

l u e n c e o r i n a n y w a y a f f e c t a n y

r i g h t s , l i a b i l i t i e s , d e f

e n s e s , c o u n t e r c l a i m s o r

s e t o f f s w h i c h m a y b e a s s e r t e d b y e i t h e r p a r t y h e r e t o i n t h i s o r a n y o t h e r p r o c e e d i n g

.

B y t h i s l a n g u a g e b o t h p a r t i e s a t t e m p t e d t o p r e s e r v e
t h e i r r i g h t s

. S i n c e a s a g e n e r a l r u l e , a c c o r d i n g t o t h e C o u r t
, a d e f

e n d a n t w o u l d n o t o w e p r e j u d g m e n t i n t e r e s t w h i l e a s t a n d s t i l l a g r e e m e n t w a s i n e f f e c t
, J o h n s o n & H i g g i n s s h o u l d h a v e p r e s e r v e d i t s r i g h t

n o t t o p a y i n t e r e s t f

o r t h a t p e r i o d

, a n d K e n n e c o h a d

n o r i g h t t o i n t e r e s t t o b e p r e s e r v e d

. T h e C o u r t s i m p l y

c h a n g e s t h e p h r a s e , “ w h i c h m a y b e a s s e r t e d b y

e i t h e r p a r t

y ”

, t o “ w h i c h m a y b e a s s e r t e d b y K e n n e c o ”

. M i s c o n s t r u e d

, t h e l a n g u a g e d o e s n o t

p r e s e r v e e a c h p a r t y 's r i g h t s b u t g i v e s K e n n e c o m o r e

r i g h t s t h a n i t w o u l d o t h e r w i s e h a v e h a d a n d t a k e s

a w a y a r i g h t o f J o h n s o n & H i g g i n s '.

H a d t h e q u o t e d s e n t e n c e b e e n o m i t t e d

, t h e C o u r t

w o u l d h o l d t h a t K e n n e c o h a d n o r i g h t t o
p r e j u d g m e n t i n t e r e s t d u r i n g t h e p e r i o d o f t h e

s t a n d s t i l l a g r e e m e n t :

T h a t “ r i g h t ” [ n o t t o p a y p r e j u d g m e n t i n t e r e s t d u r i n g a s t a n d s t i l l p e r i o d ]

, w h i c h m a y e x i s t

u n d e r a g e n e r a l s t i p u l a t i o n , w a s e l i m i n a t e d
b e c a u s e t h e s t i p u l a t i o n p r o t e c t e d t h e f u l l s c o p e

o f K e n n e c o 's r i g h t s a n d J & H 's l i a b i l i t i e s

.

A n t e a t 5 3 1 n

. 1 2

. T h a t i s , J o h n s o n & H i g g i n s ' p r e s e r v a t i o n o f t h e f u l l s c o p e o f i t s r i g h t s u n d e r a

s t a n d s t i l l s t i p u l a t i o n m e a n s t h a t i t p r e s e r v e d a l l b u t

o n e , t h e r i g h t n o t t o p a y p r e j u d g m e n t i n t e r e s t d u r i n g
t h e p e r i o d

. T h e a b s u r d i t y o f t h i s O r w e l l i a n d o u b l e s p e a k a n d c o n s e q u e n t r e s u l t i s l o s t o n t h e C o u r t

.

P a r a l l e l C i t a t i o n s

4 1 T e x

. S u p

. C t

. J

. 2 6 8

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 9Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8

F o o t n o t e s



## 1 Sue and labo r expenses are the reasonable expenses incu rred by an insu red to m itigate its loss and thu s reduce the am ou nt to be paid by th e un derw riter. Armad

a S up ply, 85 8 F .2d at 8 53

.


## 2 The parties di sag ree as to w heth er the cla im

s ub m itted to the jury

is pro perly

c haracterize d as an Insurance C od e claim or a DT P A claim

. Beca

use w e conclu de that the claim submitted can be characteriz ed as an Insu rance Cod e claim

, infra at 51 7, w e w ill ref er to it as such

.


## 3 When a prevailing party do es not elect a m easure of dam age s f rom a m on g alternative m easures, the cou rt sho uld rend er jud gm ent based o n t he findin g af

f ord ing th e grea

test recovery

. Birchfield

v. Texarkan a Memorial

Hosp

., 74 7 S .W.2d 36 1, 36 7 (Tex .19 87 ).



## 4 Neeley v. Ban kers Trust Co. of Texas, 75 7 F.2 d 62 1 (5th Cir.1 98 5), relied on by the court of appeals, is distin guishable because the
qu estion submitted in that case at least inclu ded the necessa ry elem ents of f

alse representation

, m ateriality

, and reliance, and did no t
appear to be submitted as part of som e oth er theo ry of recove ry , w hereas Kenneco's qu estion w as submitted as part of its Insu rance Cod e/DT P A

claim

.


## 5 “Unf

air or deceptive act or p ractice ” m eans any of the follo w ing: (1) M aking or causing to be ma de any statem ent misre presentin g the term s, ben ef its, o r advantages of an in surance po licy

. (2) Making, or directly or ind irectly causing to be m ade, any asse rtion

, representation

, or statem ent w ith respect to insu rance that w as

un true, deceptive, or m isleading.

(3) M aking any

m isrepresentation relating to in surance. ‘Mi srepresentation ’ m eans any of the follo w ing:

(a) any un true statem ent o f

a m aterial f

act; or

(b) an y fa ilure t o state a m aterial f act that is n ece ssary

to prevent the statem ents from bein g m isleading, when th ese sta tem ents are consid ered in light o f

th e circum stances und er w hich th ey are m ade; or

(c) the m aking of any statem ent in such m anner or ord er as to m islead a reasonably pru dent person to a f alse conclu sion of a m aterial f act.



## 6 P rior to the 19 85 am endme nt, § 16 (d) read: “In an action un der this section, dam age s m ay no t inclu de any dam age s incu rred bey on d

a po int tw o ye ars p rior to the instit utio n of t he action. ” Te x. Ins.Co de art. 21 .21

, § 16 (d) (V ernon 19 81 ). This pro vision has been characteriz ed as an exc lusio n on dam age s incu rred m ore than tw o y ears before f ilin g of the suit, rather than as a statute of lim itation s. Tecton ic Realty Inv. Co. v. CNA Llo yd' s of Texas Ins. Co., 81 2 S.W.2d 64 7, 65 5 n. 4 (Te x.A pp .—Dallas 19 91

, w

rit deni ed). But see John ston v. Barn es, 71 7 S.W.2d 16 4, 16 5 (Te x.A pp .—Hou ston [ 14 th Dist.] 19 86

, no w rit)(app ly ing pre–1 98 5 § 16 (d) as a tw o-y ear lim itation s perio d). J & H adm its that “[p rior] to 19 85

, the Te xas Insu rance Cod e had no lim itation s pro vision, altho ugh it did have
a pro vision that l im ited recoverable dam age s to tho se incurred w ithi n t w o ye ars of the date th e law suit is filed.”



## 7 In Eag le Prop erties, Ltd

. v. Scha rbau er, 80 7 S.W.2d 71 4, 72 1 (Te x.199 0), w e declined to decide w heth er state or f

ederal collateral estopp el law governed the preclusive ef f ect o f a prio r f

ederal court jud gm ent on a subseq uent state co urt action because the sam e result w ou ld have been reac hed un der either state or f ederal law

. See also Sysco Foo d Servs., Inc. v. Trap nell, 89 0 S.W.2d 79 6, 80 5 (Te x.199 4). The sa

m e is tru e in this case . Ac cordi ngly , we do no t d ecide the issu e tod ay

.


## 8 The Second Restatem ent states a rule diff erent f rom that of the First Restatem ent, w hich pro vided that eac h ind epend ently suff icient alternative basis f

or t he p rior jud gm ent wa s a valid estop pel. Restatem ent (F irst) o f Jud gm ents § 68 cm

t. n (19 42 ).

© 2 0 1 5 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3 0Joh nso n & Hig gin s o f Tex as, Inc . v. Kenn eco Energ y, Inc. , 96 2 S.W .2d 507 (199 8)

41 Tex . Sup . Ct. J . 26 8



## 9 Eff

ective Sept em

ber 1 , 1 99 7, article 506 9– 1.0 5 w as codi f ied in Chapter 304 of the T exa s Fin ance Cod e. See A ct of May 24 ,19 97

, 75 th Le g., R.S., ch. 10 08

, § 1, 19 97 Te x. Sess. La w Serv. 34 35

. No substan tive change in law w as inten ded by the codi f ication

. T ex. Fin . Co de § 1. 00 1(a); Act of May 24, 199 7, 75 th Le g., R.S., ch. 10 08 , § 7 & pream ble, 19 97 Te x. Sess. La

w Serv. 30 91 , 3 60 3. It
appears that the preju dgm ent language in the Te xas Fin ance Cod e w as then superseded by the subseq uent en ac t men t o f sim ilar preju dgm ent in terest language in the T exa s Credit T itle, A ct of June 2 , 1 99 7, 75 th Le g., R.S. , ch. 13 96 , § 1, 19 97 Te x. Sess. La w Serv. 52 12 –1 3. See T ex. G ov't Cod e § 31 1.0 31 (c) (“T he repeal of a statute by a code do es no t af f ect an am endme nt, revision, or reenactm ent of

the statute by the sam e legislature that enacted the code. The am endme nt, revision, or ree nactm ent is preserve d and giv en ef f ect as part of the code pro vision that revise d the statute so am ended

, rev i se d

, o r r ee nacted.”) & § 31 1.0 31 (d) (“If any p r o vi si o n of a code conflicts w ith a statute enacted by the sam e legislature t hat enacted the code, the statute cont rols.” )

. S ee a l so Miller v. Sta te, 70 8 S.W.2d 43 6, 44 6 (Te x.Crim .A pp .19 84 ) (ho ldin g t hat am endme nt to statute con troll ed when sam e L egisla ture

am ended statute an d also enacted a n ew cod e that o m itted the am endme nt). The codi f ication and subseq uent reenactm ent of w hat has been Te x.Rev .Civ. Stat. article 50 69 –1 .05

, section 6 do es no t m od ify the legislativ e po licy established by section 6

. We believe the legislativ e un derpi nn ings of section 6 exte nd to that section's codi f ication in the Tex as Finan ce Code and its su bsequ ent reenactm ent in th e T exa s Credit Title. In any e vent, a t the tim e the tri al court 's judgm ent wa s rendered in this case , section 6 w as the operative pro vision. A s a result, the
op inio n will ref

er to section 6 rather th an to th e T exa s Fin ance Code o r th e T exa s Credit Title.



## 10 For survival actions, interest acc rual w as to begin on either the date of death or six m on ths af ter the inju ry -causing acc iden t occurred,

w hich eve r y ielded the larger interest aw ard. Cavna r, 69 6 S .W.2d at 55 5.



## 11 Section 2 pro vided that the interest r at e sh o u l d b e com pu ted by “tak ing the auction rate qu oted on a discou nt basis f or 52 –we ek treasury bill s issued by the United States governm ent as pu blish ed by the Federal Reserv e Board on the m ost rece nt date preceding the date of com

pu tation ,” exc ept that “if the rate so com pu ted is less than 10 percent, the jud gm ent interest rate shall be 10 percent, and if it be m ore than 20 percent, the jud gm ent interest rate sh all be 20 percent.” Te x.Rev .C i v. S t at

. art

. 50 69 –1 .05

, § 2 (V ernon 19 87 ). The m ost recent version of section 2 is virtually identical. Id. (Su pp .19 97 ).



## 12 The standstil l agre em ent w as silent w ith rega rd to preju dgm ent interest. The parti es ea si l y coul d have inclu ded a pro vision that preju dgm ent i n t er es t w ou ld abate du ring the specif ied standstil l tim e perio d. A bsent such pro vision, this court canno t im ply on e. Tenn eco Inc. v. En terprise Prod ucts Co

., 92 5 S .W.2d 64 0, 64 6 (Tex .19 96 ). The dissent disto rts ou r conclu sion by stating that w e are h o l d i n g t h at J & H “ cont racted to pa y interest du ring such perio d [ the perio d of the standstil l] ” and that J & H “ ag reed to pa y Kenneco prejud

gment interest f

or the delay Kenneco requested. ” 96 2 S.W.2d

at 53 4 (em

ph asis added )

. Th e st i p u l at ion do es no t ref erence interest, preju dgm ent or oth erw ise. The agre em ent do es, ho w eve r, express ly preserve the “rights and liabi lities” of t he p arties. Kenneco h as the legal right to preju dgm ent in terest and J & H h as the lega l liabili ty to pay p r ejud gm ent interest—un less oth erw ise stipu lated. Con trary to the dissent, J & H do es no t have an inh erent “right no t to pay

in terest” durin g the stip ulatio n p eriod

. That “right, ” w hich m ay exist u nd er a genera l stipu lation

, w as eliminated because the stip ulatio n p rotected th e f ull scope o f

Kenneco's rights an d J & H's liabil ities.



## * The Cou rt ho lds that Kenneco's negligence action acc ru ed when the insu rer deni ed covera ge, no t w hen the lack of covera ge w as f inally adju dicated y ears later. Jo hn son & Higg ins do es n ot argue for a diff erent acc rual date. I do no t read the Cou rt's o pin ion to f oreclose the po sition

, had it been argued, that Kenneco's negligence claim acc rued eve n earlier, w hen John son & Higg ins f

ailed to
pro vide the co vera ge Ke nn eco claim s it req uested, bu t th at lim itation s w as tolled un til co vera ge w as denied.

End of Do cum ent © 20 15 Thomson R euters. No clai m t o origin al U.S. Go ver nm ent Wo rks.

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D e t e r m i n a t i o n t h a t s t o r e h a d a c t u a l o r

c o n s t r u c t i v e k n o w l e d g e o f c o n d i t i o n c r e a t e d b y

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[ 4 ] D a m a g e s

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J u r y h a s b r o a d d i s c r e t i o n i n a s s e s s i n g a m o u n t o f
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1 C a s e s t h a t c i t e t h i s h e a d n o t e

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s u c h m e d i c a l e x p e n s e s w i l l b e i n c u r r e d i n f u t u r e ;

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[ 1 1 ] A p p e a l a n d E r r o r

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. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)

I n r e v i e w i n g r e q u e s t f o r r e m i t t i t u r , p r o p e r

s t a n d a r d i s f

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c o m p e n s a t i o n f

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j u r i e s , a n d s o d a t e o f

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p r e j u d g m e n t i n t e r e s t i n p a t r o n 's n e g l i g e n c e a c t i o n

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[ 1 3 ] I n t e r e s t

M o d e o f C o m p u t a t i o n i n G e n e r a l

P r e j u d g m e n t i n t e r e s t a w a r d e d i n p a t r o n 's

n e g l i g e n c e a c t i o n a g a i n s t s t o r e s h o u l d h a v e b e e n

c o m p u t e d a s s i m p l e i n t e r e s t

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[ 1 4 ] E v i d e n c e

D a m a g e s C h i r o p r a c t o r w a s n o t q u a l i f i e d t o t e s t i f

y a s t o c o s t

o f s u r g e r i e s , a n d s o c h i r o p r a c t o r 's t e s t i m o n y w a s i m p r o p e r l y a d m i t t e d i n s t o r e p a t r o n 's n e g l i g e n c e

a c t i o n a g a i n s t s t o r e , t o r e c o v e r d a m a g e s f o r i n j u r i e s p a t r o n s u f

f e r e d w h e n s h e f

e l l t o f l o o r

a f t e r t r i p p i n g o v e r p r o t r u d i n g m e t a l p l a t e

. R u l e s

o f C i v

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[ 1 5 ] A p p e a l a n d E r r o r

O p i n i o n s a n d C o n c l u s i o n s

I m p r o p e r a d m i s s i o n o f t e s t i m o n y o f c h i r o p r a c t o r i n s l i p a n d f

a l l n e g l i g e n c e a c t i o n b y p a t r o n a g a i n s t

s t o r e , a s t o c o s t o f f

u t u r e s u r g e r i e s t h a t p a t r o n

m i g h t n e e d i n f

u t u r e , d i d n o t w a r r a n t r e v e r s a l o f j u d g m e n t a n d a w a r d o f $ 2 0 0

, 0 0 0 f o r p a t r o n , e v e n
t h o u g h j u r y c o u l d h a v e i n c l u d e d f u t u r e m e d i c a l

e x p e n s e s a s p a r t o f d a m a g e a w a r d

, s i n c e j u r y

c o u l d h a v e a w a r d e d e n t i r e a m o u n t t o c o v e r p a i n

a n d s u f f e r i n g , m e n t a l a n g u i s h

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, f

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2 C a s e s t h a t c i t e t h i s h e a d n o t e

A t t o r n e y s a n d L a w F i r m s

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. B e f o r e C O R N E L I U S

, C

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O P I N I O N

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.

T h i s i s a p r e m i s e s l i a b i l i t y c a s e i n w h i c h t h e a p p e l l e e , A l l i e L o u i s e R h y n e , s l i p p e d a n d f e l l i n t h e a p p e l l a n t 's s t o r e ( K M a r t

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)

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, 1 9 9 1

. A l l i e R h y n e a n d h e r h u s b a n d

, C u r t i s O l i n R h y n e , b r o u g h t a

n e g l i g e n c e s u i t a g a i n s t K M a r t
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, 0 0 0

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, 5 0 0 i n d a m a g e s t o h e r h u s b a n d

. B o t h w e r e

a l s o a w a r d e d p r e j u d g m e n t i n t e r e s t

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a t h r e e

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l o o r

. T h e m e t a l p l a t e o n w h i c h R h y n e f e l l w a s e m b e d d e d i n t h e

m i d d l e o f t h e c o n c r e t e w a l k w a y a n d w a s u s e d t o h o l d a p i p e
t h a t r a n b e t w e e n t h e c o n c r e t e a n d t h e f e n c e t o s t a b i l i z e t h e f e n c e

. S h e b l a c k e d o u t a f t e r s h e f e l l

. W h e n s h e a w o k e , s h e

c o u l d n o t m o v e , a n d h e r f o o t w a s c a u g h t u n d e r n e a t h t h e m e t a l

p l a t e u p o n w h i c h s h e h a d s t u m b l e d

. A f t e r s h e f r e e d h e r f

o o t
,
s h e c r a w l e d s e v e r a l f e e t a n d c o l l a p s e d

. R h y n e s u s t a i n e d
i n j u r i e s t o h e r f

a c e , n e c k

, a n d b a c k

.

S h a r o n M o o r e , t h e a s s i s t a n t m a n a g e r o n d u t y a t t h e t i m e o f
R h y n e 's f

a l l

, w a s s u m m o n e d b y a n o t h e r e m p l o y e e

. M o o r e f i l l e d o u t a n a c c i d e n t r e p o r t w i t h R h y n e , l i s t i n g t h e c a u s e o f
R h y n e 's f

a l l a s “ i n a d e q u a t e g u a r d o f f e n c e

. ” M o o r e a d m i t t e d

t h a t t h e m e t a l p l a t e w a s a d a n g e r o u s a n d h a z a r d o u s c o n d i t i o n

a n d t h a t i t w a s K M a r t 's r e s p o n s i b i l i t y t o r e p a i r t h e c o n d i t i o n

.

R h y n e 's h u s b a n d t e s t i f

i e d t h a t h e h a s b e e n u n d e r s t r e s s s e e i n g h i s w i f e i n p a i n e v e r y d a y a n d t h a t t h e t w o o f t h e m h a v e n o t

s l e p t t o g e t h e r s i n c e R h y n e 's a c c i d e n t

. H e a l s o t e s t i f i e d t h a t h e

m u s t n o w p e r f

o r m w h a t w e r e p r e v i o u s l y h i s w i f e 's h o u s e h o l d
d u t i e s , s u c h a s c o o k i n g a n d g a r d e n i n g

. F i n a l l y , h e t e s t i f i e d t h a t

t h e t w o a r e n o t a b l e t o t r a v e l i n h i s r e t i r e m e n t y e a r s , a s t h e y h a d p l a n n e d b e f

o r e h i s w i f

e 's i n j u r i e s

.

D r

. R o y R a n d a l l N o r t h c u t t
, a c h i r o p r a c t o r , t e s t i f i e d t h a t R h y n e h a s a v e r y l i m i t e d r a n g e o f m o t i o n i n h e r n e c k a n d t h a t h e r

c o n d i t i o n i s p e r m a n e n t

. D r

. F r a n k R

. J a c k s o n , R h y n e 's f a m i l y d o c t o r , t e s t i f

i e d v i a v i d e o t a p e t h a t R h y n e w i l l c o n t i n u e t o h a v e

m e d i c a l p r o b l e m s i n t h e f o r e s e e a b l e f

u t u r e

.

[ 1 ] B y i t s f

i r s t p o i n t o f e r r o r , K M a r t c o n t e n d s t h a t t h e t r i a l

c o u r t e r r e d i n r e n d e r i n g j u d g m e n t o n t h e v e r d i c t b e c a u s e t h e

e v i d e n c e w a s l e g a l l y i n s u f f i c i e n t t o s u p p o r t t h e j u r y 's a n s w e r
t o q u e s t i o n o n e , w h i c h a d d r e s s e d K M a r t 's n e g l i g e n c e

. B e c a u s e K M a r t d i d n o t h a v e t h e b u r d e n o f p r o o f o n t h i s i s s u e , i t m u s t d e m o n s t r a t e o n a p p e a l t h a t t h e r e w a s n o e v i d e n c e t o

s u p p o r t t h i s f

i n d i n g

. C r o u c h e r v

. C r o u c h e r , 6 6 0 S

. W

. 2 d 5 5

, 5 8 ( T e x

. 1 9 8 3 )

. I n r e v i e w i n g a n o e v i d e n c e p o i n t
, w e c o n s i d e r

o n l y t h e e v i d e n c e a n d i n f e r e n c e s t h a t t e n d t o s u p p o r t t h e f i n d i n g , d i s r e g a r d i n g a l l e v i d e n c e a n d i n f e r e n c e s t o t h e

c o n t r a r y

. W

e i r i c h v

. W e i r i c h

, 8 3 3 S

. W

. 2 d 9 4 2

, 9 4 5 ( T e x

. 1 9 9 2 ) ; H a v n e r v

. E

– Z M a r t S t o r e s , I n c

. , 8 2 5 S

. W

. 2 d
4 5 6

, 4 5 8 ( T e x

. 1 9 9 2 ) ; E

– Z M a r t S t o r e s , I n c

. v

. H a l e , 8 8 3
S

. W

. 2 d 6 9 5

, 6 9 9 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 4

, w r i t d e n i e d )

. I f t h e r e i s a n y p r o b a t i v e e v i d e n c e t o s u p p o r t t h e f i n d i n g , w e

m u s t u p h o l d t h e v e r d i c t

. S o u t h e r n S t a t e s T r a n s p o r t a t i o n , I

n c

.

v

. S t a t e , 7 7 4 S

. W

. 2 d 6 3 9

, 6 4 0 ( T e x

. 1 9 8 9 ) ; S t a f f o r d v

. S t a f f o r d

, 7 2 6 S

. W

. 2 d 1 4

, 1 6 ( T e x

. 1 9 8 7 ) ( s t a t i n g t h a t i f t h e r e i s “ m o r e t h a n a s c i n t i l l a o f e v i d e n c e ” t o s u p p o r t t h e f i n d i n g , a

n o e v i d e n c e p o i n t f

a i l s ) ; I n r e K i n g '

s E s t a t e , 1 5 0 T e x

. 6 6 2

, 6 6 4

, 2 4 4 S

. W

. 2 d 6 6 0

, 6 6 1 ( 1 9 5 1 )

.

T h e T e x a s S u p r e m e C o u r t l i s t e d t h e e l e m e n t s i n a p r e m i s e s l i a b i l i t y n e g l i g e n c e c a s e a s f o l l o w s :

( 1 ) A c t u a l o r c o n s t r u c t i v e k n o w l e d g e o f s o m e c o n d i t i o n o n
t h e p r e m i s e s b y t h e o w n e r / o p e r a t o r ;

( 2 ) T h a t t h e c o n d i t i o n p o s e d a n u n r e a s o n a b l e r i s k o f h a r m ;

( 3 ) T h a t t h e o w n e r / o p e r a t o r d i d n o t e x e r c i s e r e a s o n a b l e

c a r e t o r e d u c e o r e l i m i n a t e t h e r i s k ; a n d

( 4 ) T h a t t h e o w n e r / o p e r a t o r 's f a i l u r e t o u s e s u c h c a r e
p r o x i m a t e l y c a u s e d t h e p l a i n t i f f 's i n j u r i e s

.

K e e t c h v

. K r o g e r C o

. , 8 4 5 S

. W

. 2 d 2 6 2

, 2 6 4 ( T e x

. 1 9 9 2 ) ; C o r b i n v

. S a

f e w a y S t o r e s , I

n c

. , 6 4 8 S

. W

. 2 d 2 9 2

, 2 9 6 ( T e x

. 1 9 8 3 )

.

[ 2 ] K M a r t a r g u e s t h a t t h e r e w a s l e g a l l y i n s u f f i c i e n t e v i d e n c e f o r t h e j u r y t o i n f

e r K M a r t 's a c t u a l o r c o n s t r u c t i v e k n o w l e d g e

o f t h e c o n d i t i o n w h i c h i n j u r e d R h y n e

. M o o r e , t h e a s s i s t a n t

m a n a g e r o n d u t y t h e d a y o f R h y n e 's a c c i d e n t
, t e s t i f i e d t h a t n o

o n e h a d p r e v i o u s l y b e e n h u r t o n t h e m e t a l p l a t e a n d t h a t K
M a r t h a d n o p r e v i o u s n o t i c e o f t h e c o n d i t i o n

. M o o r e a l s o
t e s t i f i e d

, h o w e v e r , t h a t t h e m o s t p r o b a b l e e x p l a n a t i o n f o r t h e

c o n d i t i o n w a s t h a t a K M a r t e m p l o y e e i n a f o r k t r u c k b r o k e
t h e p i p e w h i l e s e t t i n g t a b l e s * 1 4 3 i n t h e g a r d e n a r e a

. 3 M o o r e f u r t h e r t e s t i f

i e d t h a t t o d i s l o d g e t h e p i p e , t h e e m p l o y e e w o u l d
h a d t o h a v e h i t i t w i t h g r e a t f o r c e a n d

, t h e r e f

o r e , s h o u l d h a v e

a s s e s s e d t h e s i t u a t i o n a f t e r t h e i m p a c t

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 4K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)

K M a r t a r g u e s t h a t t h e e v i d e n c e i s l e g a l l y i n s u f f i c i e n t b e c a u s e

a j u r y h a d t o h a v e s t a c k e d i n f e r e n c e s t o c o m e t o t h i s

c o n c l u s i o n , c i t i n g M c C l u r e v

. A l l i e d S t o r e s o f T e x a s , 6 0 8
S

. W

. 2 d 9 0 1

, 9 0 4 ( T e x

. 1 9 8 0 )

. T h e T e x a s S u p r e m e C o u r t h a s

a l s o h e l d

, h o w e v e r , t h a t a n u m b e r o f i n f e r e n c e s m a y b e d r a w n f r o m a s i n g l e f

a c t s i t u a t i o n

. M c C l u r e , 6 0 8 S

. W

. 2 d a t 9 0 4 ; s e e

a l s o F a r l e

y v

. M M C a t t l e C o

. , 5 2 9 S

. W

. 2 d 7 5 1

, 7 5 7 ( T e x

. 1 9 7 5 )

.

W h e t h e r i n f

e r e n c e s a r e s t a c k e d i s o f t e n a m a t t e r o f s e m a n t i c s ,
a n d t h u s d e p e n d s u p o n t h e w o r d i n g o f t h e i n f e r e n c e

. T h e

u l t i m a t e t e s t o n a n y i n f e r e n c e s h o u l d b e i t s r e a s o n a b l e
p r o b a b i l i t y

.

I n t h e f i r s t p l a c e , t h e s e c o n c l u s i o n s w e r e n o t b a s e d s o l e l y o n i n f e r e n c e s m a d e b y t h e j u r y , b u t w e r e f o u n d e d u p o n d i r e c t

o p i n i o n e v i d e n c e b y t h e K M a r t a s s i s t a n t m a n a g e r

. T h e
p r e s e n t c a s e i s a n a l o g o u s t o t h e c a s e o f C o f f e e v

. F

. W

. W o o l w o r t h C o

. , 5 3 6 S

. W

. 2 d 5 3 9 ( T e x

. 1 9 7 6 )

. I n t h e C o f f e e

c a s e , t h e S u p r e m e C o u r t c o n c l u d e d t h a t t h e r e w a s s u f f i c i e n t

e v i d e n c e t o s u p p o r t t h e j u r y f i n d i n g t h a t t h e d e f

e n d a n t s t o r e

o w n e r c r e a t e d t h e c o n d i t i o n b a s e d u p o n t h e t e s t i m o n y o f a

s u p e r v i s o r i n t h e d e f

e n d a n t s t o r e

. T h e s u p e r v i s o r t e s t i f i e d t h a t

t h e o n l y t w o p o s s i b l e c a u s e s o f t h e c o n d i t i o n b o t h i n v o l v e d

s t o r e p e r s o n n e l

. ( I n t h e p r e s e n t c a s e , t h e a s s i s t a n t m a n a g e r o n d u t y a t t h e t i m e o f t h e a c c i d e n t t e s t i f i e d t h a t t h e p r o b a b l e

c a u s e o f t h e c o n d i t i o n w a s t h a t a K M a r t e m p l o y e e b r o k e t h e
p i p e w i t h a f

o r k t r u c k

. ) I n t h e C o

f f e e c a s e , t h e c o u r t c o n c l u d e d

t h a t t h e e v i d e n c e c r e a t e d a r e a s o n a b l e i n f e r e n c e f o r t h e j u r y
t h a t t h e d e f

e n d a n t s h a d c a u s e d t h e c o n d i t i o n a n d t h e r e f o r e h a d

a c t u a l n o t i c e

. ( I n t h e p r e s e n t c a s e , t h e r e w a s e v i d e n c e f r o m

w h i c h t h e j u r y c o u l d h a v e c o n c l u d e d t h a t t h e d e f e n d a n t c a u s e d

t h e c o n d i t i o n a n d t h e r e f o r e h a d a c t u a l n o t i c e o f t h e c o n d i t i o n

. )

T h e j u r y d i d n o t h a v e t o m a k e a n i n f e r e n c e t h a t a n e m p l o y e e

w a s a c t u a l l y a w a r e o f

t h e p i p e b e i n g b r o k e n , b u t o n l y t h a t t h e K M a r t e m p l o y e e w o r k i n g i n t h a t a r e a s h o u l d h a v e k n o w n o f

t h e c o n d i t i o n

. T h e j u r y f o u n d t h a t A l l i e R h y n e w a s f i v e
p e r c e n t n e g l i g e n t b a s e d u p o n t h e p l e a d i n g s a n d e v i d e n c e
p r e s e n t e d b y K M a r t c o n c e r n i n g h e r f a i l u r e t o k e e p a p r o p e r l o o k o u t

. I f t h e j u r y d e t e r m i n e d t h a t t h e r e w a s s o m e n e g l i g e n c e

o n t h e p a r t o f A l l i e R h y n e , a c u s t o m e r c o m i n g d o w n t h e a i s l e , t h e n t h e j u r y a l s o c e r t a i n l y h a d a b a s i s t o b e l i e v e t h a t K M a r t

e m p l o y e e s , w o r k i n g i n t h a t a r e a o f t h e s t o r e , s h o u l d h a v e k n o w n o f t h e c o n d i t i o n , b e c a u s e t h e w o r k e r s , b y s p e n d i n g

m o r e t i m e i n t h e s t o r e , w o u l d h a v e m o r e o p p o r t u n i t i e s t o

o b s e r v e t h e s i t u a t i o n a n d t o r e c o g n i z e t h e c h a n g e t h a t h a d
b e e n c r e a t e d b y t h e b r o k e n p i p e

.

I n t h e p r e s e n t c a s e , a s i n t h e F a r l e y c a s e , t h e i n f

e r e n c e t h a t t h e j u r y h a d t o d r a w w a s b a s e d o n d i r e c t e v i d e n c e a d m i t t e d a t

t r i a l

. S e e F a r l e

y , 5 2 9 S

. W

. 2 d a t 7 5 7

. T h e r e w a s o b s e r v a b l e
p h y s i c a l e v i d e n c e o f t h e p i p e , b r o k e n f r o m t h e m e t a l p l a t e ,
w h i c h e x t e n d e d t h r e e i n c h e s f r o m t h e f

l o o r

. W h e n t h e p i p e

w a s e x t e n d e d f

r o m t h e m e t a l p l a t e t o t h e f e n c e , i t p r o v i d e d a n

o b v i o u s b a r r i e r t h a t c a l l e d a t t e n t i o n t o t h e o b s t a c l e

. A f t e r t h e
p i p e w a s s e p a r a t e d

, i t n o l o n g e r e x t e n d e d i n t o t h e a i r a b o v e
t h e p l a t e t o t h e f

e n c e a n d l e f

t o n l y t h e m e t a l p l a t e p r o t r u d i n g f r o m t h e f

l o o r , w h i c h w a s n o t a n o b v i o u s o b s t a c l e

. F r o m t h e
p h y s i c a l e v i d e n c e , a n i n f e r e n c e c o u l d b e m a d e t h a t t h e p i p e h a d b e e n b r o k e n o f

f f r o m t h e m e t a l p l a t e b y s o m e t h i n g o r

s o m e o n e r e q u i r i n g c o n s i d e r a b l e f o r c e , w h i c h w o u l d h a v e b e e n

o b v i o u s t o a n y o n e i n v o l v e d i n t h e b r e a k i n g

.

T h e o t h e r c o n t e n d e d i n f e r e n c e c a m e f

r o m t h e o p i n i o n

e v i d e n c e o f t h e K M a r t e m p l o y e e

. I t i s d r a w n f r o m t h e t o t a l i t y

o f t h e c i r c u m s t a n c e s a n d t h e p e r s o n a l k n o w l e d g e o f t h e

a s s i s t a n t m a n a g e r

. S h e g a v e d i r e c t t e s t i m o n y t h a t a K M a r t

e m p l o y e e h a d b e e n w o r k i n g i n t h a t a r e a w i t h a f o r k t r u c k

, a n d

s h e c o n c l u d e d t h a t i t w a s p r o b a b l e t h a t t h i s K M a r t e m p l o y e e k n o c k e d t h e p i p e d o w n w i t h t h e f o r k t r u c k

. F u r t h e r m o r e , e v e n i f t h e s e w e r e i m p r o p e r i n f e r e n c e s , a j u r y c o u l d h a v e c o n c l u d e d
b e c a u s e o f t h e p h y s i c a l c o n d i t i o n o f t h e p l a t e e x t e n d e d u p f r o m t h e f

l o o r t h r e e i n c h e s i n t h e m i d d l e o f a n a i s l e t h a t t h e K

* 1 4 4 M a r t e m p l o y e e s e i t h e r k n e w o r s h o u l d h a v e k n o w n o f

t h e d a n g e r o u s c o n d i t i o n

.

K M a r t a l s o c o n t e n d s t h a t t h e r e w a s l e g a l l y i n s u f f i c i e n t

e v i d e n c e f

o r t h e j u r y t o f

i n d t h e t h i r d e l e m e n t
, i

. e

. , t h a t t h e

o w n e r / o p e r a t o r d i d n o t e x e r c i s e r e a s o n a b l e c a r e t o r e d u c e o r

e l i m i n a t e t h e r i s k

. I t w a s u n d i s p u t e d

, h o w e v e r , t h a t t h e

c o n d i t i o n w a s h a z a r d o u s w h e n R h y n e f e l l a n d t h a t K M a r t d i d

n o t r e p a i r t h e c o n d i t i o n u n t i l a f t e r R h y n e f

e l l

. T h e r e f

o r e , t h e j u r y c o u l d h a v e c o n c l u d e d t h a t K M a r t d i d n o t e x e r c i s e

r e a s o n a b l e c a r e t o r e d u c e o r e l i m i n a t e t h e r i s k o f h a r m t o i t s

c u s t o m e r s a f

t e r n o t i c e o f t h e c o n d i t i o n

. T h i s p o i n t o f e r r o r i s
t h e r e f o r e o v e r r u l e d

.

B y i t s s e c o n d a n d t h i r d p o i n t s o f e r r o r , K M a r t c o n t e n d s t h a t

t h e t r i a l c o u r t e r r e d i n r e n d e r i n g j u d g m e n t o n t h e v e r d i c t b e c a u s e t h e e v i d e n c e w a s f a c t u a l l y i n s u f

f i c i e n t t o s u p p o r t t h e j u r y 's a n s w e r t o q u e s t i o n t h r e e ( a m o u n t o f d a m a g e s t o M s

. R h y n e )

, a n d q u e s t i o n f

o u r ( a m o u n t o f d a m a g e s t o M r

. R h y n e )

. K M a r t c o n t e n d s t h a t t h e j u r y 's a w a r d o f $ 2 0 0

, 0 0 0 i n d a m a g e s

w a s f a c t u a l l y i n s u f

f i c i e n t b e c a u s e t h e d a m a g e a w a r d i n c l u d e d
f u t u r e d a m a g e s , w h i c h K M a r t a r g u e s w e r e n o t p r o v e n b y a

r e a s o n a b l e p r o b a b i l i t y

.

[ 3 ] I n r e v i e w i n g a f

a c t u a l s u f

f i c i e n c y c h a l l e n g e , w e m u s t

e x a m i n e a l l o f t h e e v i d e n c e p r e s e n t e d a t t r i a l a n d m a y s e t a s i d e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 5K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)

t h e f i n d i n g o n l y w h e n i t i s s o c o n t r a r y t o t h e o v e r w h e l m i n g

w e i g h t o f t h e e v i d e n c e a s t o b e c l e a r l y w r o n g a n d u n j u s t

. C a i n

v

. B a i n , 7 0 9 S

. W

. 2 d 1 7 5

, 1 7 6 ( T e x

. 1 9 8 6 ) ; I n r e K i n g '

s E s t a t e , 2 4 4 S

. W

. 2 d a t 6 6 1 ; W a l

– M a r t S t o r e s , I

n c

. v

. B e r r

y , 8 3 3
S

. W

. 2 d 5 8 7

, 5 9 0 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 2

, w r i t d e n i e d )

.

[ 4 ] B e c a u s e p e r s o n a l i n j u r y d a m a g e s a r e u n l i q u i d a t e d a n d a r e

n o t c a p a b l e o f c e r t a i n m e a s u r e m e n t
, t h e j u r y h a s b r o a d
d i s c r e t i o n i n a s s e s s i n g t h e a m o u n t o f d a m a g e s i n a p e r s o n a l
i n j u r y c a s e

. T

r a n s i t M a n a g e m e n t C o

. o f L a r e d o v

. S a n c h e z , 8 8 6 S

. W

. 2 d 8 2 3

, 8 2 6 ( T e x

. A p p

. — S a n A n t o n i o 1 9 9 4

, n o w r i t ) ; B a y l o r M e d i c a l P l a z a S e r v i c e s v

. K i d d

, 8 3 4 S

. W

. 2 d 6 9

, 7 8 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 2

, w r i t d e n i e d ) ; P i p g r a s v

. H a r t

, 8 3 2 S

. W

. 2 d 3 6 0

, 3 6 6 ( T e x

. A p p

. — F o r t W o r t h 1 9 9 2

, w r i t d e n i e d ) ; K a n s a s C i t

y S o u t h e r n R a i l w a y C o

. v

. C a t a n e s e , 7 7 8
S

. W

. 2 d 1 1 4

, 1 1 9 ( T e x

. A p p

. — T e x a r k a n a 1 9 8 9

, w r i t d e n i e d )

.

[ 5 ] [ 6 ] L i k e w i s e , r e c o v e r y f o r f u t u r e m e d i c a l e x p e n s e s i s
p r i m a r i l y a m a t t e r f

o r t h e j u r y t o d e t e r m i n e i n i t s d i s c r e t i o n

. S t r a h a n v

. D a v i s , 8 7 2 S

. W

. 2 d 8 2 8

, 8 3 2 ( T e x

. A p p

. — W a c o 1 9 9 4

, w r i t d e n i e d ) ; B e r r y P r o p e r t y M a n a g e m e n t v

. B l i s k e y , 8 5 0 S

. W

. 2 d 6 4 4

, 6 6 4 ( T e x

. A p p

. — C o r p u s C h r i s t i 1 9 9 3

, w r i t d i s m 'd b y a g r

. ) ; H u g h e t t v

. D w y r e , 6 2 4 S

. W

. 2 d 4 0 1

, 4 0 5 ( T e x

. A p p

. — A m a r i l l o 1 9 8 1

, w r i t r e f 'd n

. r

. e

. )

. R e c o v e r y f

o r f u t u r e m e d i c a l e x p e n s e s r e q u i r e s a s h o w i n g t h a t t h e r e i s a

r e a s o n a b l e p r o b a b i l i t y t h a t s u c h m e d i c a l e x p e n s e s w i l l b e i n c u r r e d i n t h e f

u t u r e

. F i s h e r v

. C o a s t a l T r a n s p o r t C o

. , 1 4 9
T e x

. 2 2 4

, 2 3 0 S

. W

. 2 d 5 2 2

, 5 2 3 ( 1 9 5 0 ) ; F i b r e b o a r d C o r p

. v

. P o o l

, 8 1 3 S

. W

. 2 d 6 5 8

, 6 8 1 ( T e x

. A p p

. — T e x a r k a n a 1 9 9 1

, w r i t d e n i e d )

, c e r t

. d e n i e d

, 5 0 9 U

. S

. 9 2 3

, 1 1 3 S

. C t

. 3 0 3 7

, 1 2 5
L

. E d

. 2 d 7 2 4 ( 1 9 9 3 )

. E x p e r t t e s t i m o n y , h o w e v e r , i s n o t

r e q u i r e d

. S t r a h a n , 8 7 2 S

. W

. 2 d a t 8 3 2 ; H u g h e t t

, 6 2 4 S

. W

. 2 d

a t 4 0 5 ; s e e a l s o B l i s k e

y , 8 5 0 S

. W

. 2 d a t 6 6 4 ( s t a t i n g t h a t t h e j u r y m a y e s t i m a t e b o t h t h e n e c e s s i t y o f f u t u r e m e d i c a l

t r e a t m e n t a n d t h e c o s t o f s u c h t r e a t m e n t )

.

[ 7 ] [ 8 ] I n t h e p r e s e n t c a s e , t h e j u r y w a s g i v e n a b r o a d

- f o r m d a m a g e s u b m i s s i o n c o n s i s t i n g o f b o t h p a s t a n d f u t u r e m e d i c a l
d a m a g e s f

o r t h e f o l l o w i n g :

· p h y s i c a l p a i n a n d m e n t a l a n g u i s h ;

· p h y s i c a l i m p a i r m e n t ; a n d

· m e d i c a l c a r e

.

T h e j u r y w a s n o t a s k e d t o s p e c i f y t h e a m o u n t o f d a m a g e s f o r

e a c h d a m a g e e l e m e n t

. T h e j u r y h a s g r e a t d i s c r e t i o n i n

a w a r d i n g d a m a g e s i n a p e r s o n a l i n j u r y c a s e f

o r p a i n a n d m e n t a l a n g u i s h

. K i d d

, 8 3 4 S

. W

. 2 d a t 7 8 ; E x x o n C o r p

. v

. R o b e r t s , 7 2 4 S

. W

. 2 d 8 6 3

, 8 6 8 ( T e x

. A p p

. — T e x a r k a n a 1 9 8 6

,
w r i t r e f 'd n

. r

. e

. ) ; G e o r

g e C

. V a u g h a n & S o n s v

. D y e s s , 3 2 3
S

. W

. 2 d 2 6 1

, 2 6 4

– 6 5 ( T e x

. C i v

. A p p

. — T e x a r k a n a 1 9 5 9

, w r i t d i s m 'd )

. T h u s , t h e j u r y c o u l d h a v e a w a r d e d t h e e n t i r e a m o u n t

o n t h e b a s i s o f p a s t a n d f u t u r e p a i n a n d s u f

f e r i n g

. S e e K i d d

, 8 3 4 S

. W

. 2 d a t 7 9 ( o n m o t i o n f o r r e h e a r i n g )

. T h e r e w a s

e v i d e n c e t o s u p p o r t t h e j u r y 's d a m a g e a w a r d t o R h y n e

. T h e j u r y 's v e r d i c t i s t h e r e f

o r e n o t s o c o n t r a r y t o t h e o v e r w h e l m i n g

w e i g h t o f * 1 4 5 t h e e v i d e n c e a s t o b e c l e a r l y w r o n g a n d u n j u s t

. T h i s p o i n t o f e r r o r i s o v e r r u l e d

.

[ 9 ] B y i t s t h i r d p o i n t o f e r r o r , K M a r t c o n t e n d s t h a t t h e

e v i d e n c e w a s f

a c t u a l l y i n s u f

f i c i e n t t o s u p p o r t t h e j u r y 's a w a r d

o f $ 1 0

, 5 0 0 i n l o s s o f c o n s o r t i u m d a m a g e s t o t h e h u s b a n d

. T h e j u r y h a s d i s c r e t i o n i n a w a r d i n g l o s s o f c o n s o r t i u m d a m a g e s

. S e e W h i t t l e s e y v

. M i l l e r , 5 7 2 S

. W

. 2 d 6 6 5

, 6 6 7 ( T e x

. 1 9 7 8 ) ( s t a t i n g t h a t t h e d u t y t o c o m p e n s a t e f o r l o s s o f c o n s o r t i u m

m u s t b e r e s o l v e d b y t h e “ i m p a r t i a l c o n s c i e n c e a n d j u d g m e n t

o f j u r o r s w h o m a y b e e x p e c t e d t o a c t r e a s o n a b l y , i n t e l l i g e n t l y

a n d i n h a r m o n y w i t h t h e e v i d e n c e ” )

.

[ 1 0 ] K M a r t d o e s n o t
, h o w e v e r , a r g u e t h i s p o i n t i n i t s b r i e f

. T h e o n l y r e f

e r e n c e r e g a r d i n g R h y n e 's h u s b a n d i n t h i s p o r t i o n

o f K M a r t 's b r i e f d e t a i l s h i s t e s t i m o n y a s i t r e l a t e d t o h i s w i f e 's
i n j u r i e s

. B a s e d o n T e x

. R

. A p p

. P

. 7 4

, a n a p p e l l a n t w a i v e s a n y i s s u e n o t s u p p o r t e d b y a r g u m e n t a n d a u t h o r i t y i n h i s o r h e r b r i e f

. T r e n h o l m v

. R a t c l i

f f

, 6 4 6 S

. W

. 2 d 9 2 7

, 9 3 4 ( T e x

. 1 9 8 3 ) ; G u l f C o a s t S t a t e B a n k v

. E m e n h i s e r , 5 6 2 S

. W

. 2 d 4 4 9

, 4 5 2

– 5 3 ( T e x

. 1 9 7 8 )

. F u r t h e r m o r e , t h e r e w a s s u f f i c i e n t e v i d e n c e i n t h e

r e c o r d t o s u p p o r t t h i s a w a r d

. R h y n e 's h u s b a n d t e s t i f i e d t h a t h e h a s b e e n u n d e r s t r e s s s e e i n g h i s w i f e i n p a i n e v e r y d a y a n d h a s

n o t b e e n a b l e t o s l e e p w i t h h i s w i f e s i n c e h e r i n

j u r y

. H e a l s o
t e s t i f i e d t h a t h e m u s t n o w p e r f o r m w h a t w e r e p r e v i o u s l y h i s

w i f e 's h o u s e h o l d d u t i e s , s u c h a s c o o k i n g a n d g a r d e n i n g

. F i n a l l y , h e t e s t i f

i e d t h a t t h e t w o a r e n o t a b l e t o t r a v e l i n h i s

r e t i r e m e n t y e a r s a s t h e y h a d p l a n n e d b e f o r e h i s w i f

e 's i n j u r i e s

. T h e r e f o r e , t h e j u r y 's a w a r d o f $ 1 0

, 5 0 0 i n d a m a g e s t o t h e h u s b a n d i s n o t s o c o n t r a r y t o t h e o v e r w h e l m i n g w e i g h t o f t h e

e v i d e n c e a s t o b e c l e a r l y w r o n g a n d u n j u s t

.

[ 1 1 ] K M a r t a l t e r n a t i v e l y c o n t e n d s t h a t t h e t r i a l c o u r t e r r e d i n

r e f u s i n g t o o r d e r a r e m i t t i t u r

. I n r e v i e w i n g a r e q u e s t f o r a

r e m i t t i t u r , t h e p r o p e r s t a n d a r d i s f a c t u a l s u f

f i c i e n c y

. K a n s a s C i t y S o u t h e r n R a i l w a y C o

. v

. C a r t e r , 7 7 8 S

. W

. 2 d 9 1 1

, 9 1 5 ( T e x

. A p p

. — T e x a r k a n a 1 9 8 9

, w r i t d e n i e d )

. T h e a p p e l l a t e

c o u r t w i l l e x a m i n e a l l o f t h e e v i d e n c e i n t h e r e c o r d t o d e t e r m i n e w h e t h e r s u f f i c i e n t e v i d e n c e s u p p o r t s t h e d a m a g e

a w a r d

, r e m i t t i n g o n l y i f s o m e p o r t i o n i s s o f a c t u a l l y i n s u f f i c i e n t a s t o b e m a n i f

e s t l y u n j u s t

. P o p e v

. M o o r e , 7 1 1

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 6K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)

S

. W

. 2 d 6 2 2

, 6 2 3

– 2 4 ( T e x

. 1 9 8 6 ) ; C a r t e r , 7 7 8 S

. W

. 2 d a t 9 1 5

.

T h e j u r y 's d e t e r m i n a t i o n w a s n o t s o f a c t u a l l y i n s u f

f i c i e n t a s t o b e m a n i f e s t l y u n j u s t

. T h e r e f

o r e , t h e t r i a l c o u r t d i d n o t e r r i n

r e f u s i n g t o o r d e r a r e m i t t i t u r

. T h i s p o i n t o f e r r o r i s o v e r r u l e d

.

[ 1 2 ] B y i t s f

o u r t h p o i n t o f e r r o r , K M a r t c o n t e n d s t h a t t h e t r i a l

c o u r t e r r e d i n f

a i l i n g t o m o d i f

y , c o r r e c t
, o r r e f

o r m t h e j u d g m e n t a s i t r e l a t e s t o p r e j u d g m e n t i n t e r e s t

. F i r s t
, K M a r t

a r g u e s t h a t t h e t r i a l c o u r t u s e d t h e i n c o r r e c t d a t e o f a c c r u a l o f

p r e j u d g m e n t i n t e r e s t

.

T h e T e x a s s t a t u t e d e a l i n g w i t h p r e j u d g m e n t i n t e r e s t i n a
p e r s o n a l i n

j u r y c a s e s t a t e s t h a t i n t e r e s t s h a l l b e g i n 1 8 0 d a y s

a f t e r t h e d e f

e n d a n t r e c e i v e s w r i t t e n n o t i c e o f t h e p l a i n t i f f 's

c l a i m

. T e x

. R e v

. C i v

. S t a t

. A n n

. a r t

. 5 0 6 9

– 1

. 0 5 § 6 ( a ) ( V e r n o n S u p p

. 1 9 9 6 )

. T h e c o u r t o r d e r e d t h a t t h e p r e j u d g m e n t i n t e r e s t

w o u l d b e g i n 1 8 0 d a y s a f t e r R h y n e e x e c u t e d a r e l e a s e t o K
M a r t f o r h e r m e d i c a l r e c o r d s o n M a r c h 2 7

, 1 9 9 1

. K M a r t

c o n t e n d s t h a t t h i s i s n o t s u f f i c i e n t t o c o n s t i t u t e n o t i c e o f a

c l a i m a s r e q u i r e d b y t h e s t a t u t e

. K M a r t a r g u e s t h a t t h e

a p p r o p r i a t e d a t e f

o r p r e j u d g m e n t i n t e r e s t t o b e g i n i s 1 8 0 d a y s

a f t e r R h y n e p r o v i d e d w r i t t e n n o t i c e t o a K M a r t c l a i m s a g e n t

o n A p r i l 2 2

, 1 9 9 2

.

A r e c e n t A u s t i n a p p e l l a t e c o u r t o p i n i o n s t a t e s t h a t w r i t t e n

n o t i c e o f a n a c c i d e n t a n d i n j u r i e s i s n o t s u f

f i c i e n t t o c o n s t i t u t e

n o t i c e o f a c l a i m u n d e r t h e p r e j u d g m e n t i n t e r e s t s t a t u t e

. R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 8 ( T e x

. A p p

. — A u s t i n 1 9 9 5

, w r i t d e n i e d )

. R o b i n s o n r e q u i r e s w r i t t e n n o t i c e o f a

c l a i m , i

. e

. , a l e g a l d e m a n d f o r p a y m e n t o r c o m p e n s a t i o n

. R o b i n s o n , 8 9 4 S

. W

. 2 d a t 5 2 8

. T h e c o u r t i n R o b i n s o n , h o w e v e r , r e c o g n i z e d t h a t i t w a s d e c i d i n g a n i s s u e o f f i r s t i m p r e s s i o n

. R o b i n s o n , 8 9 4 S

. W

. 2 d a t 5 2 8

.

T h e F o r t W o r t h a p p e l l a t e c o u r t a l s o r e c e n t l y a d d r e s s e d t h i s i s s u e i n B e v e r s v

. S o u l e , 9 0 9 S

. W

. 2 d 5 9 9

, 6 0 3

– 6 0 4 ( T e x

. A p p

. — F o r t W o r t h 1 9 9 5

, n

. w

. h

. )

, w h e r e i t c o n c l u d e d t h a t

a s i g n e d m e d i c a l a u t h o r i z a t i o n f o r m , c o u p l e d w i t h a l e t t e r

a s k i n g t h e c o m p a n y t o “ p r o p e r l y c o n s i d e r [ p l a i n t i f f 's ] c l a i m , ”

w a s * 1 4 6 s u f

f i c i e n t t o c o n s t i t u t e n o t i c e u n d e r t h i s s t a t u t e

. B e v e r s , 9 0 9 S

. W

. 2 d a t 6 0 3

. K M a r t d i s t i n g u i s h e s t h i s c a s e o n
t h e b a s i s t h a t R h y n e m a d e n o s i m i l a r r e q u e s t w i t h h e r m e d i c a l

r e l e a s e f o r m

. R h y n e 's r e l e a s e , p r e p a r e d b y K M a r t
, i n d i c a t e s , h o w e v e r , t h a t “ [ t ] h i s i n f o r m a t i o n i s t o b e u s e d f o r p u r p o s e s o f

e v a l u a t i n g a n d h a n d l i n g m y c l a i m f o r i n j u r y a s a r e s u l t o f a n

a c c i d e n t o c c u r r i n g o n o r a b o u t 3

– 7

– 9 1

. ” ( E m p h a s i s a d d e d

. )
T h i s n o t i c e i s c o m p a r a b l e t o t h a t g i v e n i n B e v e r s a n d w a s

s u f f i c i e n t t o g i v e n o t i c e t o K M a r t o f R h y n e 's c l a i m f o r c o m p e n s a t i o n f

o r h e r i n j u r i e s

.

[ 1 3 ] S e c o n d l y , K M a r t a r g u e s t h a t t h e t r i a l c o u r t e r r e d i n

c o m p o u n d i n g t h e p r e j u d g m e n t i n t e r e s t b e c a u s e t h e s t a t u t e

a u t h o r i z i n g p r e j u d g m e n t i n t e r e s t s p e c i f i c a l l y r e q u i r e s s i m p l e i n t e r e s t

. 4 A r t i c l e 5 0 6 9

– 1

. 0 5 p r o v i d e s t h a t “ [ t ] h e r a t e o f

p r e j u d g m e n t i n t e r e s t s h a l l b e t h e s a m e a s t h e r a t e o f

p o s t j u d g m e n t i n t e r e s t a t t h e t i m e o f j u d g m e n t a n d s h a l l b e

c o m p u t e d a s s i m p l e i n t e r e s t

. ” T e x

. R e v

. C i v

. S t a t

. A n n

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( g ) ( V e r n o n S u p p

. 1 9 9 6 ) ( e m p h a s i s a d d e d ) ; s e e

a l s o B e v e r s , 9 0 9 S

. W

. 2 d a t 6 0 3

– 0 4

. 5

R h y n e a r g u e s t h a t t h i s s e c t i o n w a s m o d i f i e d b y s e c t i o n 2 o f t h e

s a m e s t a t u t e w h i c h s t a t e s t h a t a l l j u d g m e n t s e a r n i n t e r e s t

“ c o m p o u n d e d a n n u a l l y

. ” T e x

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. 5 0 6 9

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. S e c t i o n 2

, h o w e v e r , d e a l s w i t h p o s t

j u d g m e n t i n t e r e s t
, n o t p r e j u d g m e n t i n t e r e s t

. I d

. B e c a u s e t h e p l a i n l a n g u a g e o f S e c t i o n 6 ( g ) r e q u i r e s
p r e j u d g m e n t i n t e r e s t t o b e c o m p u t e d a s s i m p l e i n t e r e s t
, t h i s
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.

[ 1 4 ] B y i t s f

i n a l p o i n t o f e r r o r , K M a r t a r g u e s t h e t r i a l c o u r t

e r r e d i n a d m i t t i n g e v i d e n c e f r o m D r

. R o y R a n d a l l N o r t h c u t t
,
w h i c h h e w a s i n c o m p e t e n t t o r e n d e r

. K M a r t c o m p l a i n s t h a t
D r

. N o r t h c u t t
, a c h i r o p r a c t o r , e s t i m a t e d t h e c o s t o f f u t u r e

s u r g e r i e s R h y n e m i g h t n e e d

. K M a r t a s s e r t s t h a t a c h i r o p r a c t o r i s n o t c o m p e t e n t t o t e s t i f y a s t o t h e c o s t s o f s u r g e r i e s

.

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s c r u t i n i z e e x p e r t w i t n e s s t e s t i m o n y b e f o r e a l l o w i n g i t i n t o

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. R o b i n s o n , 9 2 3
S

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. K M a r t a r g u e s t h a t b e c a u s e t h e r e w a s n o s h o w i n g t h a t a

c h i r o p r a c t o r w a s q u a l i f i e d t o o p i n e a b o u t c o s t o f s u r g i c a l

t r e a t m e n t
, t h i s e v i d e n c e w a s i m p r o p e r l y a d m i t t e d

. S e e T e x

. R

. C i v

. E v i d

. 7 0 2

. W e a g r e e

.

[ 1 5 ] W e c a n o n l y r e v e r s e b a s e d o n t h i s e r r o r , h o w e v e r , i f t h i s

e r r o r a m o u n t e d t o s u c h a d e n i a l o f K M a r t 's r i g h t s a s w a s

r e a s o n a b l y c a l c u l a t e d t o c a u s e a n d p r o b a b l y d i d c a u s e t h e

r e n d i t i o n o f a n i m p r o p e r j u d g m e n t

. S e e T e x

. R

. A p p

. P

. 8 1 ( b ) ( 1 )

. A s s t a t e d i n p o i n t o f e r r o r t w o , t h i s C o u r t c a n n o t

a s c e r t a i n t h e a m o u n t o f f u t u r e m e d i c a l d a m a g e s a w a r d e d b y
t h e j u r y i n t h i s c a s e b e c a u s e t h e d a m a g e s w e r e s u b m i t t e d b y a b r o a d

- f o r m q u e s t i o n a n d a l s o i n c l u d e d p a i n a n d s u f f e r i n g , p h y s i c a l i m p a i r m e n t
, a n d p a s t m e d i c a l c a r e

. T h e o t h e r d a m a g e s c o u l d h a v e a m o u n t e d t o t h i s t o t a l w i t h o u t t h e c o s t o f

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 7K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)

s u r g i c a l t r e a t m e n t

.

O n r e h e a r i n g , K

– M a r t c o n t e n d s t h a t t h e r e c o r d r e f l e c t s t h a t t h e

c h i r o p r a c t o r 's t e s t i m o n y a s t o f u t u r e m e d i c a l e x p e n s e s
p r o b a b l y h a d a n e f

f e c t o n t h e j u r y 's v e r d i c t

. K

– M a r t s t a t e s t h a t

t h e o p p o s i n g c o u n s e l h a d e m p h a s i z e d t h e c o s t o f f u t u r e

s u r g e r i e s i n t h e f

i n a l a r g u m e n t a n d t h a t h e h a d a s k e d f o r $ 3 9 5

, 0 0 0 i n d a m a g e s o f w h i c h t h e c o s t o f t h e f u t u r e m e d i c a l

e x p e n s e s a m o u n t e d t o m o r e t h a n f o r t y p e r c e n t

. I t m u s t b e
p o i n t e d o u t
, h o w e v e r , t h a t t h e j u r y d i d n o t a w a r d t h e $ 3 9 5

, 0 0 0

a r g u e d f o r b y c o u n s e l

, b u t i n s t e a d * 1 4 7 a w a r d e d $ 2 0 0

, 0 0 0

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s h o u l d f u r t h e r b e p o i n t e d o u t t h a t i n a d d i t i o n t o t h e a r g u m e n t f o r t h e c o s t o f f

u t u r e m e d i c a l e x p e n s e s , c o u n s e l f o r R h y n e
p l a c e d a g r e a t d e a l o f e m p h a s i s a n d s p e n t c o n s i d e r a b l e t i m e i n d i s c u s s i n g p a i n a n d s u f f e r i n g , m e n t a l a n g u i s h

, a n d p h y s i c a l
i m p a i r m e n t t h a t h a d r e s u l t e d f r o m t h e i n

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. I n a r g u m e n t
,
c o u n s e l a s k e d t h e j u r y t o a w a r d $ 2 1 5

, 0 0 0 f o r p a i n a n d

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, 0 0 0 a w a r d e d b y t h e j u r y m a y h a v e b e e n t o c o v e r p a i n

a n d s u f f e r i n g , m e n t a l a n g u i s h

, a n d p h y s i c a l i m p a i r m e n t a n d

n o t t h e c o s t o f f

u t u r e m e d i c a l e x p e n s e s

. T h e f i n d i n g o f h a r m i s n o t t o b e b a s e d u p o n s p e c u l a t i o n , b u t o n w h e t h e r t h e e r r o r
p r o b a b l y d i d c a u s e t h e r e n d i t i o n o f a n i m p r o p e r j u d g m e n t

. W e

c a n o n l y s a y t h a t i t w a s p o s s i b l e

. W e d o n o t f i n d t h a t i t w a s
p r o b a b l e t h a t t h e j u r y i n c l u d e d t h e f u t u r e m e d i c a l e x p e n s e s a s

a p a r t o f t h e d a m a g e s

. B e c a u s e t h e j u r y c o u l d h a v e a w a r d e d

t h e e n t i r e a m o u n t o n t h e b a s i s o f e l e m e n t s o t h e r t h a n t h e c o s t

o f f u t u r e m e d i c a l e x p e n s e s , 6 n o h a r m f u l e r r o r h a s b e e n
p r e s e n t e d t o t h i s C o u r t

.

W h i l e t h e r e i s m u c h v i r t u e i n t h e s i m p l i c i t y o f t h e b r o a d

- f

o r m

s u b m i s s i o n , t h e c o u r t s a r e d e p r i v e d i n m a n y s i t u a t i o n s o f
d e t e r m i n i n g w i t h e x a c t i t u d e w h a t t h e j u r y f o u n d

. T h i s i s

e s p e c i a l l y t r u e i n l u m p i n g o f a l l d a m a g e s t o g e t h e r b e c a u s e i t

r e n d e r s t h e t r i a l c o u r t a n d t h e r e v i e w i n g c o u r t h e l p l e s s i n k n o w i n g w h i c h d a m a g e s w e r e a c t u a l l y a w a r d e d

. T h i s p o i n t o f

e r r o r i s o v e r r u l e d

.

B a s e d o n o u r d i s p o s i t i o n o f K M a r t 's f o u r t h p o i n t o f e r r o r , t h e
p r e j u d g m e n t i n t e r e s t a w a r d s a r e r e f o r m e d t o $ 7 0

, 2 1 1 7 f

o r A l l i e R h y n e a n d $ 3

, 9 0 5 8 f

o r C u r t i s R h y n e

. T h e j u d g m e n t o f t h e t r i a l

c o u r t i s o t h e r w i s e a f

f i r m e d

.

F o o t n o t e s



## 1 Justice Charles Bleil w as a m em ber of the Cou rt w

hen this case w as argued and submitted, and particip ated f ully in the consid eration of this case, bu t resigned from th e Cou rt b ef

ore th e op inio n was issued.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 8K M art Corp . v. Rhyne, 9 32 S. W .2d 140 (199 6)



## 2 P rejud gm ent interest w as inclu ded in the trial court 's jud gm ent pu rsuant to Te x.Rev .Civ. Stat. An n

. art. 50 69 –1 .05 (V ernon Sup p.1 99 6). Rhy

ne's prejud gm ent in terest am ou nted to $6 5,8 12 .33 . Her hu sband 's prejud gm ent in terest am ou nted to $3 ,87 2.8 0.



## 3 Moo re testif

ied th at “[t ] he o nly

—it p rob ably

got b roken settin g the tabl es w ith the fork truck.”



## 4 In a previou s op inio n, this Cou rt held that preju dgm ent interest un der this statute shou ld be com po un ded annu ally pu rsuant to Section 3 of t his A rticle 50 69 –1 .05

. See Sa dler v. Duvall

, 81 5 S .W.2d 28 5, 29 4 (Tex .A pp .—Te xark ana 19 91

, w

rit deni ed). This op inio n, ho w eve r, dealt w ith a case occurrin g before the Le gislature am ended Section 6(g) to requi re sim ple interest. See Sa dler, 81 5 S.W.2d at 29 4.



## 5 In Bever

s, the Fort Worth Cou rt asse rted that this Cou rt w ron gly decided Sa dler. Bever s v. So ule, 90 9 S.W.2d 59 9 (Te x.A pp .—Fo rt Worth 19 95

, n.w.h. )

. Th e Fort Worth Cou rt f ailed to recognize, ho w eve r, that Sa dler dealt w ith a case that occurred before the Le gislature am ended Section 6(g) of A rticle 50 69 –1 .05 to requ ire sim ple in terest. See Sa dler, 81 5 S .W.2d at 29 4.



## 6 See Baylo r Medical Plaza Services v. Kidd

, 83 4 S.W.2d 69

, 79 (Te x.A pp .—Te xark ana 19 92

, w

rit deni ed)(on m otio n f

or rehearing);

see also Tran sit Mana gement Co. of Laredo v. Sa nchez, 88 6 S.W.2d 82 3, 82 6 (Te x.A pp .—San A nto nio 19 94

, no w rit) (stating that the valuation of m ental anguish dam age s are genera lly lef t to the trier of f

act); Pipg ras v. Hart, 83 2 S.W.2d 36 0, 36 6 (Te x.A pp .—Fo rt Worth 1 99 2, w

rit d enied) ( no ting th at f

utu re ph y sical pain and m ental anguish dam age s are lef t to th e jury 's discretion).



## 7 This am ou nt w as calc ulated as f ollo w s: First t hree y ears (3/27 /91 —3/2 7/9 4), 10 % of $19 0,0 00 per ye ar x 3 = $ 57 ,00 0.

For partial y ear (3/2 7/9 4—2 /24 /95 ), 1 0% of $1 90 ,00 0 for 3 34 day s = $1 7,3 86

.

Total interest is $ 57 ,00 0 + $ 17 ,38 6 = $ 74 ,38 6.

The parties ag reed to reduce th is am ou nt based u po n settlem ent o f f ers K Mart m ade to Rhy

ne. Acc ord ingly , $ 4,1 75 w as subt racted f

rom the above am ou nt of $74 ,38 6 t o reach a final fig ure o f $7 0,2 11

.



## 8 This am ou nt w as calculated in the sam e m anner as above, exc ept on a prin cipal am ou nt of $9 ,97 5, resultin g in the am ou nt of $3 ,90 5 in interest to be p aid. Beca use K Mart made no settlem ent o f f ers to Cu rtis Rh y

ne, n o d eductio ns app ly

.

End of Do cum ent © 20 14 Thomson R euters. No clai m t o origin al U.S. Go ver nm ent Wo rks.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 9

# PMCN 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 forcompany. 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 in1998 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. TheMCN 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 theMCN 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 theoryMCN 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.

# QPringle 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 CourtPringle 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.

# RQuick 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 generalQuick 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 LawQuick 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] StatutesQuick 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 programQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 7 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 impermissiblyQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 8 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 underQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 9 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 waterhave 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.Quick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 10 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'sQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 11 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 thatQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 12 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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 13 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)

.

VQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 14 [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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 15 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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 16 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 StatesQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 17 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 requirementsQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 18 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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 19 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 asQuick 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)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 21 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. 2 

### See 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 dateQuick v. City of Austin, 7 S.W.3d 109 (1998)



### © 2015 Thomson Reuters. No claim to original U.S. Government Works. 22 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 CODE E § 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 lawQuick 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 thejurisdiction 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 ofQuick 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.

# SRobin son v. Brice , 89 4 S.W .2d 525 (199 5)

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. T h e 3 6 8 t h J u d i c i a l D i s t r i c t C o u r t
, W i l l i a m s o n C o u n t y , B u r t C a r n e s , J

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. A f t e r d r i v e r a p p e a l e d p o r t i o n o f j u d g m e n t a w a r d i n g p r e j u d g m e n t i n t e r e s t o n f

u t u r e d a m a g e s , p a s s e n g e r c r o s s

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r e g a r d i n g d e t e r m i n a t i o n o f a c c r u a l d a t e , a n d t h e C o u r t o f
A p p e a l s , P o w e r s , J

. , h e l d t h a t : ( 1 ) p a s s e n g e r w a s n o t r e q u i r e d

t o p e r f e c t i n d e p e n d e n t a p p e a l ; ( 2 ) a c c i d e n t r e p o r t s u b m i t t e d
b y p a s s e n g e r t o e m p l o y e r 's i n s u r e r s h o r t l y a f t e r a c c i d e n t d i d

n o t c o n s t i t u t e w r i t t e n n o t i c e o f c l a i m a s w o u l d a c c r u e c l a i m f o r p r e j u d g m e n t i n t e r e s t ; b u t ( 3 ) l e t t e r s e n t t w o m o n t h s a f t e r

a c c i d e n t i n w h i c h p a s s e n g e r r e q u e s t e d t h a t i n s u r e r p a y c e r t a i n

m e d i c a l b i l l s a n d i n q u i r e d a s t o w h e n n e x t l o s t w a g e s c h e c k

w a s d u e d i d n o t c o n s t i t u t e w r i t t e n n o t i c e o f c l a i m

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R e v e r s e d a n d r e n d e r e d

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W e s t H e a d n o t e s ( 1 2 )

[ 1 ] A p p e a l a n d E r r o r

C r o s s

- a p p e a l s o r w r i t s o f e r r o r P l a i n t i f f w a s n o t r e q u i r e d t o p e r f e c t i n d e p e n d e n t

a p p e a l i n o r d e r t o b r i n g c r o s s

- a p p e a l c o n c e r n i n g d a t e o n w h i c h p r e j u d g m e n t i n t e r e s t a c c r u e d
f o l l o w i n g d e f

e n d a n t 's a p p e a l r e g a r d i n g a w a r d o f

p r e j u d g m e n t i n t e r e s t o n j u d g m e n t i n f a v o r o f

p l a i n t i f f w h e r e d e f

e n d a n t 's a p p e a l i n c l u d e d t h a t

p o r t i o n o f

j u d g m e n t w h i c h a w a r d e d p r e j u d g m e n t i n t e r e s t o n f

u t u r e d a m a g e s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 ] S t a t u t e s

P u r p o s e

I n i n t e r p r e t i n g s t a t u t e , c o u r t m u s t c o n s i d e r i t s

o b j e c t a n d p u r p o s e

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 ] I n t e r e s t

U n r e a s o n a b l e o r v e x a t i o u s d e l a y i n p a y m e n t

I n a d d i t i o n t o e n s u r i n g t h a t p l a i n t i f f s a r e f u l l y

c o m p e n s a t e d

, p r e j u d g m e n t i n t e r e s t s t a t u t e
p r o v i d e s s e r i e s o f i n c e n t i v e s d e s i g n e d t o

e n c o u r a g e e x p e d i t i o u s s e t t l e m e n t o f c l a i m s

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a )

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1Robin son v. Brice , 89 4 S.W .2d 525 (199 5)

P r e j u d g m e n t i n t e r e s t s t a t u t e p l a i n l y r e q u i r e s n o t

m e r e l y w r i t t e n n o t i c e o f a c c i d e n t a n d r e s u l t i n g i n j u r i e s , b u t a l s o w r i t t e n n o t i c e o f c l a i m , i n o r d e r f o r a w a r d o f p r e j u d g m e n t i n t e r e s t t o a c c r u e

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a )

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 5 ] S t a t u t e s

U n d e f i n e d t e r m s

W h e r e s t a t u t e d o e s n o t d e f i n e t e r m , t e r m m u s t b e

c o n s t r u e d a c c o r d i n g t o i t s o r d i n a r y m e a n i n g

. V

. T

. C

. A

, G o v e r n m e n t C o d e § 3 1 2

. 0 0 2 ( a )

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 6 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l

T e r m “ c l a i m , ” a s u s e d i n p r o v i s i o n o f

p r e j u d g m e n t i n t e r e s t s t a t u t e w h i c h r e q u i r e s
p l a i n t i f f t o p r o v i d e w r i t t e n n o t i c e o f c l a i m i n

o r d e r f o r c l a i m f

o r p r e j u d g m e n t i n t e r e s t t o a c c r u e ,
m e a n s d e m a n d f

o r c o m p e n s a t i o n o r a s s e r t i o n o f

r i g h t t o b e p a i d

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

.

1 0 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 7 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l A c c i d e n t r e p o r t s u b m i t t e d b y p a s s e n g e r , w h o w a s i n j u r e d i n a u t o m o b i l e a c c i d e n t w h i c h o c c u r r e d

w h i l e p a s s e n g e r w a s r i d i n g i n a u t o m o b i l e b e l o n g i n g t o d r i v e r 's e m p l o y e r , t o i n s u r e r o f
d r i v e r 's e m p l o y e r d i d n o t c o n s t i t u t e “ w r i t t e n

n o t i c e o f c l a i m ” a s w o u l d a c c r u e c l a i m f o r
p r e j u d g m e n t i n t e r e s t u n d e r s t a t u t e i n a c t i o n

a g a i n s t d r i v e r w h e r e r e p o r t w a s n o t n o t i c e o f
d e m a n d f

o r p a y m e n t o r c o m p e n s a t i o n b y
p a s s e n g e r o n p a s s e n g e r 's b e h a l f

, e v e n t h o u g h

r e p o r t n o t i f

i e d i n s u r e r t h a t a c c i d e n t h a d o c c u r r e d

. V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a )

.

7 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 8 ] C o s t s

A t t o r n e y F e e s

P r o v i s i o n o f s t a t u t e g o v e r n i n g r e c o v e r y o f

a t t o r n e y f

e e s w h i c h r e q u i r e s c l a i m a n t t o p r e s e n t

c l a i m t o o p p o s i n g p a r t y i s s i m i l a r t o p r e j u d g m e n t i n t e r e s t s t a t u t e i n t h a t t h e r e i s n o i n d i c a t i o n w h a t i n f o r m a t i o n m u s t b e i n c l u d e d i n c l a i m

. V

. T

. C

. A

. , C i v i l P r a c t i c e & R e m e d i e s C o d e § 3 8

. 0 0 2 ( 2 ) ; V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a )

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 9 ] C o s t s

A t t o r n e y F e e s I n t e r e s t
P r e j u d g m e n t I n t e r e s t i n G e n e r a l

F a c t t h a t p r e s e n t m e n t o f c l a i m r e q u i r e d u n d e r

s t a t u t e t o a c c r u e c l a i m f o r p r e j u d g m e n t i n t e r e s t o r f o r a t t o r n e y f

e e s m a y b e i n f

o r m a l d o e s n o t

o b v i a t e n e c e s s i t y f

o r a s s e r t i o n o f c l a i m

. V

. T

. C

. A

. , C i v i l P r a c t i c e & R e m e d i e s C o d e § 3 8

. 0 0 2 ( 2 ) ; V e r n o n 's A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, §
6 ( a )

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2Robin son v. Brice , 89 4 S.W .2d 525 (199 5)

[ 1 0 ] I n t e r e s t

T o r t s ; w r o n g f

u l d e a t h

L e t t e r s e n t b y p a s s e n g e r i n j u r e d i n a u t o m o b i l e

a c c i d e n t
, w h i c h o c c u r r e d w h i l e p a s s e n g e r w a s

r i d i n g i n a u t o m o b i l e b e l o n g i n g t o d r i v e r 's

e m p l o y e r , t o i n s u r e r o f d r i v e r 's e m p l o y e r i n w h i c h

p a s s e n g e r r e q u e s t e d t h a t i n s u r e r p a y c e r t a i n

m e d i c a l b i l l s a n d i n q u i r e d a s t o w h e n n e x t l o s t

w a g e s c h e c k w a s d u e c o n s t i t u t e d “ w r i t t e n n o t i c e

o f c l a i m ” s o a s t o s a t i s f y r e q u i r e m e n t s o f

p r e j u d g m e n t i n t e r e s t a n d a c c r u e c l a i m f o r
p r e j u d g m e n t i n t e r e s t i n a c t i o n a g a i n s t d r i v e r

w h e r e l e t t e r w a s s u f

f i c i e n t t o n o t i f

y i n s u r e r t h a t

p a s s e n g e r w a s c l a i m i n g c o m p e n s a t i o n f o r h i s i n j u r i e s , e v e n t h o u g h l e t t e r w a s p h r a s e d a s

r e q u e s t

. V e r n o n ' s A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

.

7 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 1 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l

P r e j u d g m e n t i n t e r e s t s t a t u t e d o e s n o t r e q u i r e

c l a i m a n t t o d e m a n d e x a c t a m o u n t o r l i s t e v e r y

e l e m e n t o f d a m a g e c l a i m e d i n o r d e r t o p r o v i d e

w r i t t e n n o t i c e o f c l a i m a s w i l l a c c r u e c l a i m f o r
p r e j u d g m e n t i n t e r e s t

. V e r n o n 's A n n

. T e x a s C i v

. S t

.
a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

.

6 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 2 ] I n t e r e s t

P r e j u d g m e n t I n t e r e s t i n G e n e r a l

P r e j u d g m e n t i n t e r e s t s t a t u t e i s c o n s t r u e d l i b e r a l l y
t o a c h i e v e i t s p u r p o s e s o f f u l l y c o m p e n s a t i n g
p l a i n t i f f a n d e n c o u r a g i n g s e t t l e m e n t s

. V

. T

. C

. A

. , G o v e r n m e n t C o d e § 3 1 2

. 0 0 6 ( a ) ; V e r n o n 's
A n n

. T e x a s C i v

. S t

. a r t

. 5 0 6 9

– 1

. 0 5

, § 6 ( a )

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e A t t o r n e y s a n d L a w F i r m s

* 5 2 6 R a n e l l e M

. M e r o n e y , W r i g h t & G r e e n h i l l

, A u s t i n , D a v i d
C

. K e n t
, H u g h e s & L u c e , L

. L

. P

. , D a l l a s , f o r a p p e l l a n t

.

D a n n y S

. A s h b y , H u g h e s & L u c e , L

. L

. P

. , D a l l a s , f o r a p p e l l e e

. B e f o r e P O W E R S

, J O N E S a n d K I D D

, J J

.

O p i n i o n

P O W E R S

, J u s t i c e

.

[ 1 ] K e v i n B r i c e a p p e a l s t h e p o r t i o n o f a t r i a l

- c o u r t j u d g m e n t f i x i n g t h e d a t e f

r o m w h i c h p r e j u d g m e n t i n t e r e s t b e g a n t o

a c c r u e

. 1 W e w i l l r e v e r s e t h a t p a r t o f t h e j u d g m e n t * 5 2 7 a n d

r e n d e r j u d g m e n t c o n s i s t e n t w i t h t h i s o p i n i o n

.

T H E C O N T R O V E R S Y

O n F e b r u a r y 2

, 1 9 8 9

, B r y a n R o b i n s o n a n d B r i c e w e r e i n v o l v e d i n a o n e

- c a r a c c i d e n t i n w h i c h R o b i n s o n w a s t h e d r i v e r a n d B r i c e w a s t h e p a s s e n g e r

. B r i c e s u s t a i n e d s e v e r e
p e r s o n a l i n

j u r i e s

. T h e c a r b e l o n g e d t o R o b i n s o n 's e m p l o y e r , T e m p l e

– I n l a n d F o r e s t P r o d u c t s C o r p o r a t i o n ( “ T e m p l e

– I n l a n d ” )

. T e m p l e

– I n l a n d 's i n s u r a n c e c a r r i e r w a s H i g h l a n d s I n s u r a n c e C o m p a n y ( “ H i g h l a n d s ” )

.

O n F e b r u a r y 1 4

, a p p r o x i m a t e l y t w o w e e k s a f t e r t h e a c c i d e n t
, T e m p l e

– I n l a n d s e n t H i g h l a n d s a “ M o t o r V e h i c l e A c c i d e n t
R e p o r t ” w i t h R o b i n s o n 's h a n d w r i t t e n a c c o u n t o f t h e a c c i d e n t

a t t a c h e d

. T h e s e d o c u m e n t s d e s c r i b e d t h e a c c i d e n t a n d B r i c e 's
i n j u r i e s

. S u b s e q u e n t l y , a c l a i m s a d j u s t o r a t H i g h l a n d s , M a r t h i l y n C o l l i n s , b e g a n a n i n v e s t i g a t i o n a n d o n F e b r u a r y 1 5

o b t a i n e d t a p e

- r e c o r d e d s t a t e m e n t s f r o m B r i c e a n d R o b i n s o n

. T h e n e x t d a y , C o l l i n s f i l l e d o u t a r e p o r t
, n o t i n g t h a t l i a b i l i t y

w a s p r e s e n t a n d t h a t B r i c e h a d t o l d h e r h e o n l y w a n t e d

p a y m e n t o f l o s t w a g e s a n d m e d i c a l b i l l s t h a t w e r e n o t c o v e r e d
b y h i s o w n h e a l t h i n s u r a n c e p o l i c y

. H i g h l a n d s b e g a n t o p a y
t h e s e i t e m s p e r i o d i c a l l y

.

O n A p r i l 1

, B r i c e s e n t a n o t e t o H i g h l a n d s , a t t a c h i n g c e r t a i n

m e d i c a l b i l l s n o t c o v e r e d u n d e r h i s o w n i n s u r a n c e p o l i c y

. H e

r e q u e s t e d t h a t H i g h l a n d s p a y t h e b i l l s a n d a s k e d w h e n h e

w o u l d r e c e i v e h i s n e x t l o s t w a g e s c h e c k

. H i g h l a n d s c o n t i n u e d

t o p a y B r i c e 's m e d i c a l b i l l s a n d l o s t w a g e s o v e r t h e n e x t f e w

m o n t h s , e v e n t u a l l y p a y i n g a t o t a l o f $ 2 3

, 0 9 1

. 9 4

. C o l l i n s
t e s t i f i e d a t t h e h e a r i n g o n p r e j u d g m e n t i n t e r e s t t h a t B r i c e

r e q u e s t e d p a y m e n t s o l e l y f o r l o s t w a g e s a n d u n p a i d m e d i c a l

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3Robin son v. Brice , 89 4 S.W .2d 525 (199 5)

b i l l s u n t i l s h o r t l y b e f

o r e t h e s t a t u t e o f l i m i t a t i o n s r a n

. A t t h a t

p o i n t
, B r i c e r e q u e s t e d a s u b s t a n t i a l a m o u n t f o r f u t u r e d a m a g e s

. S h o r t l y t h e r e a f t e r , o n J a n u a r y 3 1

, 1 9 9 1

, h e f i l e d s u i t

a g a i n s t R o b i n s o n a n d T e m p l e

– I n l a n d

. 2

A t t r i a l

, t h e j u r y f

o u n d R o b i n s o n 's n e g l i g e n c e h a d p r o x i m a t e l y

c a u s e d t h e a c c i d e n t a n d f i x e d d a m a g e s i n t h e a m o u n t o f $ 6 7 6

, 2 4 8

. 9 7

. B r i c e f

i l e d a m o t i o n f

o r j u d g m e n t o n t h e j u r y 's

v e r d i c t 3 a n d r e q u e s t e d p r e j u d g m e n t i n t e r e s t

. S e e T e x

. R e v

. C i v

. S t a t

. A n n

. a r t

. 5 0 6 9

– 1

. 0 5 § 6 ( a ) ( W e s t S u p p

. 1 9 9 5 ) ( t h e “ S t a t u t e ” )

. 4 A c c o r d i n g t o t h e S t a t u t e , p r e j u d g m e n t i n t e r e s t a c c r u e s b e g i n n i n g o n t h e 1 8 0 t h d a y a f t e r
t h e d a t e t h e d e f

e n d a n t r e c e i v e s w r i t t e n n o t i c e o f a c l a i m , o r o n
t h e d a t e s u i t i s f

i l e d

, w h i c h e v e r o c c u r s f i r s t

. I d

. B r i c e a s s e r t e d

t h a t p r e j u d g m e n t i n t e r e s t s h o u l d b e c a l c u l a t e d b e g i n n i n g A u g u s t 1 4

, 1 9 8 9

, 1 8 0 d a y s a f t e r H i g h l a n d s r e c e i v e d t h e

a c c i d e n t r e p o r t f

r o m T e m p l e

– I n l a n d

. R o b i n s o n c o n t e n d e d t h a t

p r e j u d g m e n t i n t e r e s t s h o u l d a c c r u e f r o m t h e d a y B r i c e f

i l e d

s u i t ( J a n u a r y 3 1

, 1 9 9 1 )

.

A f t e r a h e a r i n g , t h e t r i a l c o u r t f o u n d t h a t H i g h l a n d s h a d n o t

r e c e i v e d w r i t t e n n o t i c e o f B r i c e 's c l a i m m o r e t h a n 1 8 0 d a y s b e f o r e t h e f

i l i n g o f s u i t

. T h e c o u r t t h e r e f o r e c a l c u l a t e d

p r e j u d g m e n t i n t e r e s t f

r o m t h e d a t e B r i c e f

i l e d s u i t ( J a n u a r y 3 1

, 1 9 9 1 ) t h r o u g h t h e d a y b e f o r e t h e d a t e j u d g m e n t w a s r e n d e r e d

. T h e s o l e i s s u e o n a p p e a l i s w h e t h e r t h e t r i a l c o u r t c o r r e c t l y d e t e r m i n e d t h a t H i g h l a n d s h a d n o t r e c e i v e d w r i t t e n n o t i c e o f
B r i c e 's c l a i m b e f

o r e B r i c e f

i l e d s u i t

.

D I S C U S S I O N A N D H O L D I N G

B r i c e a s s e r t s t h e t r i a l c o u r t e r r e d i n f i n d i n g H i g h l a n d s d i d n o t

r e c e i v e w r i t t e n n o t i c e o f a c l a i m b e f o r e B r i c e f

i l e d s u i t s o a s
t o * 5 2 8 t r i g g e r t h e 1 8 0

– d a y p r o v i s i o n i n t h e s t a t u t e

. B r i c e

a r g u e s t h a t t h e s t a t u t e d o e s n o t r e q u i r e w r i t t e n n o t i c e t o c o m e f r o m t h e c l a i m a n t
, a n d t h e r e f o r e , t h e a c c i d e n t r e p o r t t h a t
H i g h l a n d s r e c e i v e d o n F e b r u a r y 1 4 f r o m i t s i n s u r e d

, T e m p l e

– I n l a n d

, c o n s t i t u t e d w r i t t e n n o t i c e o f h i s c l a i m

. R o b i n s o n a s s e r t s t h a t n o t i c e o f a n a c c i d e n t f r o m a n i n s u r e d

w h o i s a p o t e n t i a l d e f

e n d a n t i s n o t n o t i c e o f a t h i r d p a r t y 's

c l a i m

.

[ 2 ] [ 3 ] T h e p r e

j u d g m e n t i n t e r e s t s t a t u t e d o e s n o t s e t f o r t h

r e q u i r e m e n t s f

o r w h a t c o n s t i t u t e s a d e q u a t e “ w r i t t e n n o t i c e o f

a c l a i m

. ” 5 A p p a r e n t l y , n o c o u r t h a s a d d r e s s e d t h e q u e s t i o n

. I n i n t e r p r e t i n g t h e s t a t u t e , w e m u s t c o n s i d e r i t s o b j e c t a n d

p u r p o s e

. D e L e o n v

. H a r l i n g e n C o n s o l

. I n d e p

. S c h

. D i s t

. , 5 5 2
S

. W

. 2 d 9 2 2

, 9 2 5 ( T e x

. C i v

. A p p

. — C o r p u s C h r i s t i 1 9 7 7

, n o

w r i t )

. I n a d d i t i o n t o e n s u r i n g p l a i n t i f f s a r e f u l l y c o m p e n s a t e d

, t h e p r e j u d g m e n t i n t e r e s t s t a t u t e p r o v i d e s a s e r i e s o f i n c e n t i v e s d e s i g n e d t o e n c o u r a g e t h e e x p e d i t i o u s s e t t l e m e n t o f c l a i m s

. C
& H N a t i o n w i d e , I

n c

. v

. T h o m p s o n , 3 7 T e x

. S u p

. C t

. J

. 1 0 5 9

, 9 0 3 S

. W

. 2 d 3 1 5

, 1 9 9 4 W L 2 7 8 1 6 7 ( J u n e 2 2

, 1 9 9 4 )

. B r i c e

c o n t e n d s t h e e v i d e n t p u r p o s e o f t h e 1 8 0

– d a y p r o v i s i o n i s t o
p r o v i d e a t i m e p e r i o d w i t h i n w h i c h t h e d e f e n d a n t m a y , w i t h o u t

p e n a l t y , c o n d u c t a n i n v e s t i g a t i o n a n d s e t t l e c l a i m s w i t h m e r i t

. H e a r g u e s t h a t t h e a c c i d e n t r e p o r t w a s s u f f i c i e n t t o f

u l f i l l t h i s
p u r p o s e b e c a u s e i t a p p r i s e d H i g h l a n d t h a t h e w a s i n j u r e d

, t h e
t i m e , p l a c e a n d m a n n e r o f t h e a c c i d e n t
, a n d i t s p r o b a b l e c a u s e

.

[ 4 ] [ 5 ] [ 6 ] [ 7 ] T h e s t a t u t e , h o w e v e r , p l a i n l y r e q u i r e s n o t

m e r e l y w r i t t e n n o t i c e o f a n a c c i d e n t a n d r e s u l t i n g i n j u r i e s , b u t

a l s o w r i t t e n n o t i c e o f a c l a i m

. T h e s t a t u t e d o e s n o t d e f i n e t h e
t e r m “ c l a i m , ” a n d t h e r e f o r e , w e m u s t c o n s t r u e i t a c c o r d i n g t o i t s o r d i n a r y m e a n i n g

. T e x

. G o v 't C o d e A n n

. § 3 1 2

. 0 0 2 ( a ) ( W e s t 1 9 8 8 ) ; H o

p k i n s v

. S

p r i n g I n d e p

. S c h

. D i s t

. , 7 3 6 S

. W

. 2 d
6 1 7

, 6 1 9 ( T e x

. 1 9 8 7 )

. T h e w o r d “ c l a i m ” o r d i n a r i l y m e a n s a d e m a n d f

o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a r i g h t t o b e p a i d

. A l t h o u g h t h e a c c i d e n t r e p o r t n o t i f i e d H i g h l a n d s t h a t a n

a c c i d e n t h a d o c c u r r e d

, a n d t h a t B r i c e h a d b e e n i n j u r e d

, i t w a s

n o t n o t i c e o f a d e m a n d f o r p a y m e n t o r c o m p e n s a t i o n b y B r i c e

o r o n B r i c e 's b e h a l f

, a n d t h u s w a s n o t n o t i c e o f a c l a i m

.

[ 8 ] [ 9 ] B r i c e r e f

e r s u s t o c a s e s c o n s t r u i n g “ n o t i c e o f c l a i m ”

p r o v i s i o n s i n o t h e r s t a t u t e s t o s u p p o r t h i s c o n t e n t i o n t h a t
H i g h l a n d 's r e c e i p t o f t h e a c c i d e n t r e p o r t w a s s u f f i c i e n t

“ w r i t t e n n o t i c e o f a c l a i m ” u n d e r t h e p r e j u d g m e n t i n t e r e s t

s t a t u t e

. S e c t i o n 3 8

. 0 0 2 o f t h e C i v i l P r a c t i c e a n d R e m e d i e s C o d e p r o v i d e s t h a t i n o r d e r t o r e c o v e r a t t o r n e y 's f e e s “ t h e

c l a i m a n t m u s t p r e s e n t t h e c l a i m t o t h e o p p o s i n g p a r t y

. ”
T e x

. C i v

. P r a c

. & R e m

. C o d e A n n

. § 3 8

. 0 0 2 ( 2 ) ( W e s t 1 9 8 6 )

. T h i s p r o v i s i o n i s s i m i l a r t o t h e p r e j u d g m e n t i n t e r e s t s t a t u t e i n
t h a t i t d o e s n o t i n d i c a t e w h a t i n f o r m a t i o n m u s t b e i n c l u d e d i n
t h e c l a i m

. B r i c e c i t e s c a s e s h o l d i n g t h a t p r e s e n t m e n t m a y b e i n f o r m a l a n d i n n o p a r t i c u l a r f o r m

. J o n e s v

. K e l l e

y , 6 1 4
S

. W

. 2 d 9 5

, 1 0 0 ( T e x

. 1 9 8 1 )

. T h e f a c t t h a t p r e s e n t m e n t m a y b e i n f o r m a l d o e s n o t o b v i a t e t h e n e c e s s i t y f o r a s s e r t i o n o f a

c l a i m

. S e e , e

. g

. , A d a m s v

. P e t r a d e I n t ' l

, I n c

. , 7 5 4 S

. W

. 2 d 6 9 6

, 7 1 9 ( T e x

. A p p

. — H o u s t o n [ 1 s t D i s t

. ] 1 9 8 8

, w r i t d e n i e d ) ( n o t i n g s e c t i o n 3 8

. 0 0 2 m e r e l y r e q u i r e s s o m e t y p e o f a s s e r t i o n

o f d e b t o r c l a i m t o o p p o s i n g p a r t y a n d r e q u e s t f o r

c o m p l i a n c e ) ; K i n g O

p t i c a l v

. A u t o m a t i c D a t a P r o c e s s i n g o f
D a l l a s , I

n c

. , 5 4 2 S

. W

. 2 d 2 1 3

, 2 1 7 ( T e x

. C i v

. A p p

. — W a c o 1 9 7 6

, w r i t r e f

'd n

. r

. e

. ) ( h o l d i n g c l a i m a n t m u s t m e r e l y a s s e r t

r i g h t t o b e p a i d a n d r e q u e s t p a y m e n t i n o r d e r t o r e c o v e r

a t t o r n e y f

e e s )

. A d d i t i o n a l l y , B r i c e a r g u e s t h a t c o u r t s h a v e

c o n s t r u e d s e c t i o n 1 0 1

. 1 0 1 o f t h e T e x a s T o r t C l a i m s A c t a s

r e q u i r i n g m e r e l y a d e s c r i p t i o n o f t h e i n j u r y , a n d t h e t i m e , p l a c e a n d m a n n e r o f t h e i n c i d e n t

. T e x

. C i v

. P r a c

. & R e m

. C o d e A n n

. § 1 0 1

. 1 0 1 ( W e s t 1 9 8 6 )

. H e c o n t e n d s t h a t t h e a c c i d e n t

r e p o r t i n t h e p r e s e n t c a s e i n c l u d e s a l l o f t h e a b o v e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 4Robin son v. Brice , 89 4 S.W .2d 525 (199 5)

i n f o r m a t i o n

. T h e a c c i d e n t r e p o r t f a i l s a s w r i t t e n n o t i c e o f a

c l a i m n o t b e c a u s e o f i n s u f f i c i e n t f o r m o r d e t a i l

, b u t b e c a u s e i t i s n o t n o t i c e o f

a d e m a n d f

o r c o m p e n s a t i o n o r a n a s s e r t i o n o f

a r i g h t t o b e p a i d

.

* 5 2 9 [ 1 0 ] [ 1 1 ] [ 1 2 ] A l t e r n a t i v e l y , B r i c e c o n t e n d s t h a t h i s l e t t e r o f A p r i l 1

, s t a m p e d “ R e c e i v e d ” b y H i g h l a n d s o n A p r i l
1 0

, i n w h i c h h e r e q u e s t e d t h a t H i g h l a n d s p a y c e r t a i n m e d i c a l
b i l l s a n d i n q u i r e d a s t o w h e n t h e n e x t l o s t w a g e s c h e c k w a s d u e , c o n s t i t u t e d w r i t t e n n o t i c e o f a c l a i m s o a s t o s a t i s f y t h e

s t a t u t o r y r e q u i r e m e n t

. 6 W e a g r e e

. A l t h o u g h p h r a s e d a s a

r e q u e s t
, B r i c e p l a i n l y a s s e r t e d i n t h e l e t t e r a r i g h t t o p a y m e n t

o f h i s m e d i c a l b i l l s a n d l o s t w a g e s

. S e e H u f f v

. F i d e l i t

y U n i o n L i f e I n s

. C o

. , 1 5 8 T e x

. 4 3 3

, 3 1 2 S

. W

. 2 d 4 9 3

, 5 0 0 ( 1 9 5 8 ) ( n o t i n g d e m a n d n e e d n o t b e e v i d e n c e d b y f i r m a n d

c o m m a n d i n g l a n g u a g e , b u t m a y b e p h r a s e d i n c u s t o m a r i l y

u s e d p o l i t e l a n g u a g e )

. T h e s t a t u t e d o e s n o t r e q u i r e t h e

c l a i m a n t t o d e m a n d a n e x a c t a m o u n t o r l i s t e v e r y e l e m e n t o f
d a m a g e c l a i m e d

, a n d w e d e c l i n e t o r e a d s u c h r e q u i r e m e n t s i n t o i t

. W e m u s t c o n s t r u e t h e s t a t u t e l i b e r a l l y t o a c h i e v e i t s
p u r p o s e s o f f

u l l y c o m p e n s a t i n g t h e p l a i n t i f f a n d e n c o u r a g i n g

s e t t l e m e n t s

. S e e T e x

. G o v 't C o d e A n n

. § 3 1 2

. 0 0 6 ( a ) ( W e s t 1 9 8 8 )

. B r i c e 's l e t t e r w a s s u f f i c i e n t t o n o t i f

y H i g h l a n d s t h a t h e

w a s c l a i m i n g c o m p e n s a t i o n f o r h i s i n j u r i e s a n d a f

f o r d e d i t t h e

o p p o r t u n i t y t o s e t t l e t h e c l a i m w i t h o u t i n c u r r i n g l i a b i l i t y f o r
p r e j u d g m e n t i n t e r e s t

. T h e r e f o r e , B r i c e i s e n t i t l e d t o
p r e j u d g m e n t i n t e r e s t c a l c u l a t e d f r o m 1 8 0 d a y s a f

t e r A p r i l 1 0

, 1 9 8 9

, t h e d a t e H i g h l a n d r e c e i v e d B r i c e 's l e t t e r o f A p r i l 1

, u n t i l

t h e d a y b e f

o r e r e n d i t i o n o f j u d g m e n t

. W e s u s t a i n B r i c e 's

c r o s s

- p o i n t o f e r r o r

.

W e r e v e r s e t h a t p o r t i o n o f t h e t r i a l

- c o u r t j u d g m e n t a w a r d i n g B r i c e p r e j u d g m e n t i n t e r e s t c a l c u l a t e d f r o m t h e d a t e t h i s l a w s u i t w a s f

i l e d

. W e r e n d e r j u d g m e n t t h a t p r e j u d g m e n t i n t e r e s t a c c r u e f

r o m 1 8 0 d a y s a f

t e r A p r i l 1 0

, 1 9 8 9

, t h e d a t e H i g h l a n d s r e c e i v e d B r i c e 's l e t t e r o f A p r i l 1

, t h r o u g h t h e d a y
p r e c e d i n g t h e d a t e j u d g m e n t w a s r e n d e r e d

.

F o o t n o t e s



## 1 Initi ally

, Bry an Rob inso n appealed that po rtion of the jud gm ent aw ardi n g B r i ce preju dgm ent interest on f utu re dam age s. Brice cross-appealed rega

r d ing the trial court 's d eterm inatio n of t he date f rom which preju dgm ent interest acc rued. Rob inso n m oved to dism iss the en tire app eal in l ight o f the supr em e court 's d ecision in C & H Natio nwid e, Inc. v. Tho mpson , 37 Te x.Sup .Ct.J. 10 59

, 90 3 S.W.2d 31 5, 19 94 WL 27 81 67 (Jun e 22 , 1 99 4). In his m otio n to dism iss, Robin son cont ends Brice is not entitled to the re lief

so u gh t b y h i s cross-po int because Brice did no t perfe ct an ind epend ent appeal. Howe ver, it w as un necessa ry f or Brice to do so because Rob inso n's appeal in clud ed “[ t] hat p ortio n o f th e jud gm ent which aw ards pre-ju dgm ent in terest on f utu re dam age s.”



## 2 A ltho ugh Te m

ple– Inlan d w as a defe nd ant at trial, the trial court granted its m otio n f or directed verdict before the case w as submitted

to the ju ry . It is no t a p arty to th is app eal.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 5Robin son v. Brice , 89 4 S.W .2d 525 (199 5)



## 3 Brice credited Ro bin son f or Highland's prev iou s pay m ent of m edical bill s and lost w age s in the am ou nt of $23 ,09 1.9 4, requestin g jud gm ent f

or t he d iff

erence betw een $2 3,0 91 .94 and th e aw ard o f $6 76 ,24 8.9 7 i n t he am ou nt of $65 3,1 57 .03 . The cour t rend ered jud gm ent for Brice and calculated p rejud gm ent in terest on the adj usted am ou nt.



## 4 The statute pro vides: Judgm ents in w

ron gf ul death, person al inju ry , and prope r t y da m a g e case s m

ust inclu de preju dgm ent interest...

. [ P ] rejud gm ent interest

acc rues on the am ou nt of the ju dgm ent d urin g the p eriod beginn ing o n t he 1 80 th day af ter the date the defe nd ant rece ives written

no tice of a claim or on the day the suit is f iled, w hich eve r occurs f

irst, and endi ng on the day preceding the date jud gm ent is rendered. Te x.Rev .Civ.Stat.Ann. art. 5 06 9– 1.0 5 § 6(a) (West Sup p.1 99 5)

.



## 5 Many “not ice of claim ” pro visions do pro vide detailed requi rem ents f or w hat the notice m

ust contain

. See, e.g., Te xas Tort Claim s A ct, Te x.Civ.P rac. & Rem .Cod e A nn

. § 1 01 .10 1(a)(1)– (3) (Wes t 1 98 6) (statin g not ice of cla im m ust reason ably

describe d am age

or inju ry claim ed, the incid ent and its tim e and place); Dece ptive Tra de P ractice s—Consu m er P rotectio n A ct, Te x.Bus. & Com .Cod e A nn

. § 17 .50 5(a) (We st Sup p.1 99 5) (stating w ritten no tice m

ust advise in reasonable detail o f the consu m er's specif ic com plain t, actual dam age s, and expenses reas on ably in curred i n asserting claim ).



## 6 The day af

ter Highland s rece ived the acc iden t report
, Brice inform ed Highland s that he w anted com pensatio n f

or lost w age s and

m edical bill s, thu s ef

f ective ly giv ing no tice of a claim

, bu t this com m un ication w as no t in w

ritin g as requi red by the statute. The A pril 1st l etter read as f

ollo w s: Marthi ly n—These are th e bill s that P rud ential won't p ay because they

a re appl y ing to m

y deductib le. A lso includ ed a re oth er bill s I have submitted to y ou previou sly bu t h ave no resolut ion on

. P lease pro cess th ese as qu ickly as y ou can, as I h ave had to pay ou t of m y po cke t o n t hese. A lso, w hen is next lo st w age s check due? I'll call thi s w eek . Thank y ou , Kevin Brice.

End of Do cum ent © 20 14 Thomson R euters. No clai m t o origin al U.S. Go ver nm ent Wo rks.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 6

# TTexas 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. BACKGROUNDTexas 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 qualificationTexas 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 vehicleswhile 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 enforcementTexas 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.

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– C V

. | N o v

. 1 0 , 2 0 0 5

.

S y n o p s i s B a c k g r o u n d : M a n u f

a c t u r e r o f h e a v y

- d u t y o i l f i e l d p u m p s b r o u g h t b r e a c h o f c o n t r a c t a c t i o n a g a i n s t m a k e r o f m a c h i n e
t o o l s

. T h e 2 3 6 t h D i s t r i c t C o u r t
, T a r r a n t C o u n t y , T h o m a s W i l s o n L o w e I I I

, J

. , e n t e r e d j u d g m e n t o n a j u r y v e r d i c t f o r

m a n u f a c t u r e r a n d a w a r d e d m a n u f a c t u r e r a t t o r n e y f

e e s

. B o t h

p a r t i e s a p p e a l e d

.

H o l d i n g s : O n r e h e a r i n g , t h e C o u r t o f A p p e a l s , A n n e G a r d n e r , J

. , h e l d t h a t :

[ 1 ] t h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t m a n u f a c t u r e r 's

u s e o f n o n c o n f

o r m i n g m a c h i n e t o o l s w a s r e a s o n a b l e a n d d i d

n o t c o n s t i t u t e a c c e p t a n c e n o r p r e c l u d e r e v o c a t i o n o f

a c c e p t a n c e ;

[ 2 ] t h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t a d d e n d u m t o
p u r c h a s e o r d e r w a s p a r t o f t h e p a r t i e s ' c o n t r a c t ;

[ 3 ] t h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t m a k e r b r e a c h e d
i t s c o n t r a c t s ;

[ 4 ] t h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t m a n u f a c t u r e r

w a s d a m a g e d i n a m o u n t o f $ 6

, 0 0 7

, 2 2 6 ;

[ 5 ] t h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t m a n u f a c t u r e r

m a d e r e a s o n a b l e e f

f o r t s t o c o v e r a n d m i t i g a t e i t s d a m a g e s ;

[ 6 ] t r i a l c o u r t d i d n o t a b u s e i t s d i s c r e t i o n b y e x c e e d i n g t h e l o d e s t a r a m o u n t a n d a w a r d i n g m a n u f a c t u r e r a t t o r n e y f

e e s i n

a m o u n t o f $ 1

. 5 m i l l i o n t h r o u g h t h e d a t e o f j u d g m e n t ; a n d [ 7 ] l e t t e r f r o m m a n u f

a c t u r e r t o m a k e r d i d n o t c o n s t i t u t e a

w r i t t e n n o t i c e o f a c l a i m a n d

, t h u s , d i d n o t t r i g g e r a c c r u a l o f

p r e j u d g m e n t i n t e r e s t

.

A f f i r m e d

.

W e s t H e a d n o t e s ( 4 3 )

[ 1 ] S a l e s

E f f e c t o f A c c e p t a n c e S a l e s P r o t e s t
, o b j e c t i o n , n o t i c e , o r c o n d i t i o n a l

a c c e p t a n c e , a n d e f

f e c t t h e r e o f

A b u y e r ' s r e j e c t i o n o r a c c e p t a n c e o f

n o n c o n f o r m i n g g o o d s d e t e r m i n e s t h e r e m e d i e s

a v a i l a b l e t o h i m

. V

. T

. C

. A

. , B u s

. & C

. § § 2

. 6 0 1

, 2

. 7 1 1

, 2

. 7 1 4

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 ] S a l e s

U s e o r o t h e r d i s p o s i t i o n b y b u y e r

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h

, i n b r e a c h

o f c o n t r a c t a c t i o n , t h a t h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r ' s 1 7

, 0 0 0 h o u r s o f u s e o f

n o n c o n f o r m i n g m a c h i n e t o o l s o v e r f o u r y e a r s w a s

r e a s o n a b l e a n d

, t h u s , d i d n o t c o n s t i t u t e

a c c e p t a n c e o f m a c h i n e t o o l s n o r p r e c l u d e

m a n u f a c t u r e r 's r e v o c a t i o n o f a c c e p t a n c e ; t h e r e

w a s e v i d e n c e t h a t m a k e r o f m a c h i n e t o o l s a g r e e d

t o p r o v i d e a s p e c i f

i c b o r i n g f

u n c t i o n w i t h b o t h

m a c h i n e s , t h a t m a c h i n e t o o l s w e r e d e l i v e r e d

w i t h o u t t h e s o f

t w a r e n e c e s s a r y f

o r b o r i n g f u n c t i o n , t h a t m a k e r r e p e a t e d l y p r o m i s e d i t w o u l d
d e l i v e r t h e b o r i n g s o f

t w a r e , t h a t m a k e r d i d n o t

a n n o u n c e t h a t i t w o u l d n o t d e l i v e r t h e s o f t w a r e

u n t i l 1 7 m o n t h s a f

t e r d e l i v e r y o f f

i r s t m a c h i n e
t o o l

, t h a t m a n u f

a c t u r e r 's u s e o f m a c h i n e t o o l s

m i t i g a t e d i t s d a m a g e s , a n d t h a t r e p l a c e m e n t

m a c h i n e t o o l s h a v i n g t h e r e q u i r e d b o r i n g f u n c t i o n h a d a l o n g l e a d t i m e

. V

. T

. C

. A

. , B u s

. & C

. § §
1

. 2 0 5

, 2

. 6 0 2

, 2

. 6 0 6

, 2

. 6 0 8

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 ] S a l e s

U s e o r o t h e r d i s p o s i t i o n b y b u y e r S a l e s A c c e p t a n c e o f g o o d s

W h a t c o n s t i t u t e s r e a s o n a b l e u s e , s u c h t h a t a b u y e r 's u s e o f n o n c o n f o r m i n g g o o d s d o e s n o t

u n d o a r e j e c t i o n o r r e v o c a t i o n o f a c c e p t a n c e , i s a
q u e s t i o n o f f

a c t t o b e d e c i d e d u n d e r t h e

c i r c u m s t a n c e s o f e a c h c a s e , t h o u g h g e n e r a l l y

u s i n g g o o d s d u r i n g t h e t i m e w h e n t h e s e l l e r i s
p r o m i s i n g o r t r y i n g u n s u c c e s s f u l l y t o c u r e t h e

n o n c o n f o r m i t y w i l l n o t a d v e r s e l y a f f e c t t h e b u y e r 's r i g h t s

. V

. T

. C

. A

. , B u s

. & C

. § § 2

. 6 0 2

, 2

. 6 0 6

, 2

. 6 0 7 ( b )

, 2

. 6 0 8

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 ] C o u r t s

D e c i s i o n s o f C o u r t s o f O t h e r S t a t e I n d e t e r m i n i n g a n d a p p l y i n g t h e T e x a s v e r s i o n o f

t h e U n i f o r m C o m m e r c i a l C o d e ( U C C )

, T e x a s

c o u r t s m a y c o n s i d e r a n d a p p l y p e r t i n e n t d e c i s i o n s f r o m o t h e r j u r i s d i c t i o n s

. V

. T

. C

. A

. , G o v e r n m e n t C o d e § 3 1 1

. 0 2 8 ; V

. T

. C

. A

. , B u s

. & C

. § 1

. 1 0 3

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 5 ] S a l e s

U s e o r o t h e r d i s p o s i t i o n b y b u y e r

F a c t o r s r e l e v a n t t o a b u y e r 's r e a s o n a b l e u s e o f

n o n c o n f o r m i n g g o o d s , s u c h t h a t t h e u s e d o e s n o t

u n d o a r e j e c t i o n o r r e v o c a t i o n o f a c c e p t a n c e , i n c l u d e t h e d e g r e e o f e c o n o m i c h a r d s h i p t h e b u y e r w o u l d s u f

f e r i f i t d i s c o n t i n u e d u s i n g t h e d e f e c t i v e g o o d s a n d t h e r e a s o n a b l e n e s s o f t h e b u y e r ' s u s e a f

t e r r e v o c a t i o n a s a m e t h o d o f

m i t i g a t i n g d a m a g e s

. V

. T

. C

. A

. , B u s

. & C

. § §
1

. 2 0 5

, 2

. 6 0 2

, 2

. 6 0 6

, 2

. 6 0 8

.

5 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 6 ] S a l e s

U s e o r o t h e r d i s p o s i t i o n b y b u y e r

U s e o f n o n c o n f

o r m i n g g o o d s m a y b e t h e m o s t

a p p r o p r i a t e m e a n s o f a c h i e v i n g m i t i g a t i o n u n t i l

t h e b u y e r c a n o b t a i n s u i t a b l e r e p l a c e m e n t s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 7 ] S a l e s

A c c e p t a n c e o f o f

f e r

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t

a d d e n d u m t h a t h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r a t t a c h e d t o i t s p u r c h a s e o r d e r f o r

m a c h i n e t o o l w a s p a r t o f c o n t r a c t b e t w e e n

m a n u f a c t u r e r a n d m a k e r o f m a c h i n e t o o l

, i n

m a n u f a c t u r e r 's b r e a c h o f c o n t r a c t a c t i o n ;

m a n u f a c t u r e r 's p u r c h a s e o r d e r w a s a n o f f e r t o b u y
t h e m a c h i n e t o o l

, t e r m s a n d c o n d i t i o n s o f

p u r c h a s e r e c i t e d o n b a c k o f o r d e r s t a t e d t h a t

m a k e r 's s h i p m e n t o f t h e m a c h i n e t o o l w a s

a c c e p t a n c e o f t h e p u r c h a s e o r d e r , m a k e r s h i p p e d

t h e m a c h i n e t o o l

, t e r m s a n d c o n d i t i o n s a l s o s t a t e d

t h a t a c c e p t a n c e o f o r d e r w a s a c c e p t a n c e o f a l l

t e r m s o n f

r o n t a n d b a c k o f p u r c h a s e o r d e r , m e r g e r

c l a u s e o n o r d e r s t a t e d t h a t t h e o r d e r a n d a l l
d o c u m e n t s r e f

e r r e d t o o n i t s f

a c e c o n s t i t u t e d

p a r t i e s ' e n t i r e a g r e e m e n t
, a n d f r o n t o f o r d e r

s p e c i f i c a l l y r e f e r r e d t o a d d e n d u m

. V

. T

. C

. A

. , B u s

. & C

. § 2

. 2 0 7

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 8 ] S a l e s

Q u a l i t y , F i t n e s s , a n d C o n d i t i o n o f G o o d s

T h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h t h a t m a k e r

o f m a c h i n e t o o l s b r e a c h e d c o n t r a c t s t o s e l l

m a c h i n e t o o l s t o h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r , i n m a n u f

a c t u r e r 's b r e a c h o f c o n t r a c t

a c t i o n ; t h e r e w a s e v i d e n c e t h a t m a k e r o f m a c h i n e
t o o l s f a i l e d t o d e l i v e r b o r i n g f u n c t i o n s o f

t w a r e , t o o l l i s t s a n d p a r t p r o g r a m s , p r o c e s s c y c l e s t u d y
t i m e s a n d a t e s t r u n

- o f f o f a f l u i d e n d f

o r o n e o f

m a n u f a c t u r e r 's p u m p s , a l l o f w h i c h t h e c o n t r a c t s

r e q u i r e d m a k e r o f m a c h i n e t o o l s t o d e l i v e r

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 9 ] S a l e s

E f f e c t o f d e l i v e r y U n d e r t h e U n i f o r m C o m m e r c i a l C o d e ( U C C )

, d e l i v e r y o f g o o d s i s a n e c e s s a r y p r e d i c a t e t o

a c c e p t a n c e o r r e j e c t i o n , b u t d e l i v e r y b y i t s e l f d o e s

n o t d e t e r m i n e t h e b u y e r 's r e m e d i e s

. V

. T

. C

. A

. , B u s

. & C

. § § 2

. 7 1 1

, 2

. 7 1 3

, 2

. 7 1 4

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 0 ] S a l e s

E f f e c t o f A c c e p t a n c e S a l e s P r o t e s t
, o b j e c t i o n , n o t i c e , o r c o n d i t i o n a l

a c c e p t a n c e , a n d e f

f e c t t h e r e o f

A s s u m i n g t h e s e l l e r d e l i v e r s s o m e t h i n g , t h e b u y e r 's a c c e p t a n c e o r r e j e c t i o n d e t e r m i n e s t h e b u y e r 's r e m e d i e s u n d e r t h e U n i f o r m C o m m e r c i a l
C o d e ( U C C )

. V

. T

. C

. A

. , B u s

. & C

. § § 2

. 7 1 1

, 2

. 7 1 3

, 2

. 7 1 4

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 1 ] S a l e s

A c t s C o n s t i t u t i n g D e l i v e r y

“ C o n f o r m i t y ” d o e s n o t m e a n s u b s t a n t i a l

p e r f o r m a n c e , f

o r p u r p o s e s o f d e t e r m i n i n g w h e t h e r

a s e l l e r b r e a c h e d a c o n t r a c t u n d e r t h e U n i f o r m C o m m e r c i a l C o d e ( U C C ) ; i t m e a n s c o m p l e t e
p e r f o r m a n c e

. V

. T

. C

. A

. , B u s

. & C

. § 2

. 6 0 1

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 2 ] D a m a g e s

P a r t i c u l a r c a s e s

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 3Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h w i t h

r e a s o n a b l e c e r t a i n t y t h a t h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r w a s d a m a g e d i n t h e a m o u n t o f $ 6

, 0 0 7

, 2 2 6 a s a r e s u l t o f b r e a c h o f c o n t r a c t s b y

m a k e r o f m a c h i n e t o o l s , i n m a n u f a c t u r e r 's b r e a c h

o f c o n t r a c t a c t i o n ; m a n u f a c t u r e r 's v i c e p r e s i d e n t

o f f i n a n c e t e s t i f

i e d

, t o a r e a s o n a b l e c e r t a i n t y , t h a t

m a n u f a c t u r e r l o s t p r o f

i t s i n t h e a m o u n t o f $ 6

, 0 3 8

, 2 9 2

, a n d t h e r e w a s e v i d e n c e t h a t

m a n u f a c t u r e r i n c u r r e d i n c i d e n t a l d a m a g e s f o r
t h i n g s s u c h a s p o u r i n g f o u n d a t i o n s a n d d e s i g n i n g
t o o l s f o r t h e m a c h i n e s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 3 ] D a m a g e s

L o s s o f p r o f

i t s

A p a r t y s e e k i n g t o r e c o v e r l o s t p r o f i t s m u s t p r o v e
t h e l o s s t h r o u g h c o m p e t e n t e v i d e n c e w i t h

r e a s o n a b l e c e r t a i n t y

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 4 ] D a m a g e s

L o s s o f p r o f

i t s E v i d e n c e D a m a g e s

W h i l e t h e r e q u i r e m e n t
, t h a t a p a r t y s e e k i n g t o

r e c o v e r l o s t p r o f

i t s m u s t p r o v e t h e l o s s t h r o u g h

c o m p e t e n t e v i d e n c e w i t h r e a s o n a b l e c e r t a i n t y , i s

a f l e x i b l e o n e i n o r d e r t o a c c o m m o d a t e t h e

m y r i a d c i r c u m s t a n c e s i n w h i c h c l a i m s f o r l o s t

p r o f i t s a r i s e , a t a m i n i m u m , o p i n i o n s o r e s t i m a t e s

o f l o s t p r o f

i t s m u s t b e b a s e d o n o b j e c t i v e f a c t s , f i g u r e s , o r d a t a f

r o m w h i c h t h e a m o u n t o f l o s t

p r o f i t s c a n b e a s c e r t a i n e d

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 5 ] D a m a g e s

L o s s o f p r o f

i t s “ R e a s o n a b l e c e r t a i n t y ” n e c e s s a r y t o r e c o v e r o n a

c l a i m f o r l o s t p r o f

i t s i s n o t d e m o n s t r a t e d w h e n t h e
p r o f i t s c l a i m e d t o b e l o s t a r e l a r g e l y s p e c u l a t i v e

o r a m e r e h o p e f

o r s u c c e s s , a s f

r o m a n a c t i v i t y d e p e n d e n t o n u n c e r t a i n o r c h a n g i n g m a r k e t

c o n d i t i o n s , o n c h a n c y b u s i n e s s o p p o r t u n i t i e s , o r

o n p r o m o t i o n o f u n t e s t e d p r o d u c t s o r e n t r y i n t o

u n k n o w n o r u n p r o v e n e n t e r p r i s e s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 6 ] D a m a g e s

L o s s o f p r o f

i t s

T h e m e r e a s s e r t i o n t h a t c o n t r a c t s w e r e l o s t d o e s

n o t d e m o n s t r a t e a r e a s o n a b l y c e r t a i n o b j e c t i v e d e t e r m i n a t i o n o f l o s t p r o f i t s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 7 ] D a m a g e s

Q u e s t i o n s f

o r J u r y

W h e t h e r e v i d e n c e i s s p e c u l a t i v e o r r e a s o n a b l y

c e r t a i n , s u c h t h a t a c l a i m f o r l o s t p r o f

i t s i s

e s t a b l i s h e d

, i s a f

a c t u a l i s s u e w i t h i n t h e e x c l u s i v e
p r o v i n c e o f t h e j u r y t o d e t e r m i n e

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 8 ] D a m a g e s

L o s s o f p r o f

i t s

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 4Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

R e a s o n a b l y c e r t a i n l o s t p r o f i t s m a y b e p r o v e d b y

r e l y i n g o n s u c h f

a c t o r s a s : ( 1 ) t h e e x p e r i e n c e o f

t h e b u s i n e s s p r i n c i p a l s , ( 2 ) t h e n a t u r e o f t h e b u s i n e s s , ( 3 ) t h e n a t u r e o f t h e m a r k e t
, ( 4 ) t h e

n a t u r e o f t h e c l i e n t b a s e , ( 5 ) t h e s a l e s f o r c e , ( 6 )

t h e m a r k e t i n g p l a n , a n d ( 7 ) t h e c o m p a n y 's t r a c k

r e c o r d o f s a l e s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 1 9 ] D a m a g e s

L o s s o f p r o f

i t s

W h e n a b u s i n e s s i s a l r e a d y e s t a b l i s h e d a n d

m a k i n g a p r o f

i t a t t h e t i m e t h e c o n t r a c t w a s b r e a c h e d o r t h e t o r t c o m m i t t e d

, p r e

- e x i s t i n g
p r o f i t
, t o g e t h e r w i t h o t h e r f a c t s a n d

c i r c u m s t a n c e s , m a y i n d i c a t e w i t h r e a s o n a b l e

c e r t a i n t y t h e a m o u n t o f p r o f i t s l o s t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 0 ] E v i d e n c e

D a m a g e s

V i c e p r e s i d e n t o f f

i n a n c e f o r o i l f i e l d p u m p

m a n u f a c t u r e r w a s q u a l i f

i e d t o t e s t i f

y a s a n e x p e r t

o n i s s u e o f m a n u f

a c t u r e r 's l o s t p r o f

i t s , i n

m a n u f a c t u r e r 's b r e a c h o f c o n t r a c t a c t i o n a g a i n s t

t h e m a k e r o f m a c h i n e t o o l s p u r c h a s e d b y

m a n u f a c t u r e r , w h e r e v i c e p r e s i d e n t h a d a B B A i n

a c c o u n t i n g , a n d h e h a d m o r e t h a n 3 0 y e a r s '

e x p e r i e n c e m a n a g i n g t h e f i n a n c i a l a n d a c c o u n t i n g f u n c t i o n s o f c o m p a n i e s e n g a g e d i n t h e

m a n u f a c t u r e a n d d i s t r i b u t i o n o f v a r i o u s p r o d u c t s

. R u l e s o f E v i d

. , R u l e 7 0 2

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 1 ] E v i d e n c e

K n o w l e d g e , e x p e r i e n c e , a n d s k i l l i n g e n e r a l A w i t n e s s i s q u a l i f i e d t o t e s t i f

y a s a n e x p e r t i f h e h a s t h e a p p r o p r i a t e k n o w l e d g e , s k i l l

, e x p e r i e n c e , t r a i n i n g , o r e d u c a t i o n

. R u l e s o f E v i d

. , R u l e 7 0 2

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 2 ] A p p e a l a n d E r r o r

C o m p e t e n c y o f w i t n e s s E v i d e n c e D e t e r m i n a t i o n o f q u e s t i o n o f c o m p e t e n c y

T h e d e c i s i o n t o a d m i t e x p e r t t e s t i m o n y i s w i t h i n
t h e t r i a l c o u r t 's d i s c r e t i o n a n d w i l l b e d i s t u r b e d o n

a p p e a l o n l y i f t h e r e h a s b e e n a n a b u s e o f t h a t d i s c r e t i o n

. R u l e s o f E v i d

. , R u l e 7 0 2

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 3 ] E v i d e n c e

D a m a g e s

T r i a l c o u r t d i d n o t a b u s e i t s d i s c r e t i o n , i n b r e a c h

o f c o n t r a c t a c t i o n b r o u g h t b y h e a v y

- d u t y o i l f i e l d

p u m p m a n u f

a c t u r e r a g a i n s t m a k e r o f m a c h i n e
t o o l s , b y a d m i t t i n g m a n u f a c t u r e r 's v i c e p r e s i d e n t 's

e x p e r t t e s t i m o n y o n l o s t p r o f i t s , t h o u g h i t w a s b a s e d o n c o n t a c t s v i c e p r e s i d e n t m a d e w i t h

m a n u f a c t u r e r 's c u s t o m e r s , a n d v i c e p r e s i d e n t 's

t e s t i m o n y r e g a r d i n g c u s t o m e r 's r e s p o n s e s w a s h e a r s a y ; e x p e r t c o u l d r e l y o n i n a d m i s s i b l e f a c t s o r d a t a t o f o r m a n o p i n i o n i f t h e f

a c t s o r d a t a w e r e o f

t y p e r e a s o n a b l y r e l i e d u p o n b y e x p e r t s i n t h e
p a r t i c u l a r f

i e l d

, a n d a s k i n g c u s t o m e r s w a s a n

a p p r o p r i a t e w a y t o d e t e r m i n e w h y s a l e s w e r e l o s t

. R u l e s o f E v i d

. , R u l e 7 0 3

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 4 ] D a m a g e s

L o s s o f p r o f

i t s

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 5Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T e s t i m o n y b y v i c e p r e s i d e n t o f f i n a n c e o f
h e a v y

- d u t y o i l f

i e l d p u m p m a n u f

a c t u r e r r e g a r d i n g

m a n u f a c t u r e r 's l o s t p r o f

i t s w a s n o t s o s p e c u l a t i v e

a s t o b e l e g a l l y i n s u f

f i c i e n t
, i n b r e a c h o f c o n t r a c t

a c t i o n a g a i n s t m a k e r o f m a c h i n e t o o l s , t h o u g h

v i c e p r e s i d e n t f

a i l e d t o d e t e r m i n e w h a t p r i c e o r d e l i v e r y t i m e w o u l d h a v e i n d u c e d c u s t o m e r s t o b u y p u m p s f

r o m m a n u f

a c t u r e r , w h e r e t h e l o s t

s a l e s t o w h i c h v i c e p r e s i d e n t t e s t i f i e d c o n c e r n e d

t h e l o s s o f s a l e s o f p r o v e n p r o d u c t s t o e x i s t i n g

c u s t o m e r s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 5 ] D a m a g e s

N a t u r e a n d t h e o r y o f c o m p e n s a t i o n

D a m a g e s a w a r d e d t o h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r , i n b r e a c h o f c o n t r a c t a c t i o n a g a i n s t

m a k e r o f m a c h i n e t o o l s , f o r l o s t p r o f

i t s d u e t o i n c r e a s e d p r o d u c t i o n c o s t s a n d f o r l o s t p r o f

i t s d u e
t o l o s t s a l e s d i d n o t o v e r l a p a n d d i d n o t r e s u l t i n

a n i m p e r m i s s i b l e d o u b l e r e c o v e r y f o r

m a n u f a c t u r e r ; t h o u g h c a l c u l a t i o n o f b o t h e l e m e n t s h i n g e d o n t h e s l o w s p e e d o f m a k e r 's m a c h i n e s , i f

m a c h i n e s h a d p e r f o r m e d a s e x p e c t e d

,
m a n u f a c t u r e r w o u l d h a v e s a v e d t i m e a n d m a d e

m o r e p r o f

i t o n t h e p u m p s a c t u a l l y p r o d u c e d

, a n d

w i t h t h e t i m e s a v e d m a n u f a c t u r e r c o u l d h a v e a l s o

m a d e m o r e p u m p s a n d t h u s a d d i t i o n a l p r o f i t s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 6 ] D a m a g e s

P r e p a r a t i o n a n d F o r m o f I n t e r r o g a t o r i e s o r F i n d i n g s T r i a l c o u r t d i d n o t e r r b y f a i l i n g t o s u b m i t d a m a g e s q u e s t i o n s t h a t p r o v i d e d s e p a r a t e b l a n k s f o r e a c h e l e m e n t o f d a m a g e s c l a i m e d b y h e a v y

- d u t y o i l f

i e l d p u m p m a n u f

a c t u r e r , i n i t s b r e a c h o f c o n t r a c t a c t i o n a g a i n s t m a k e r o f

m a c h i n e t o o l s , a s t h e r e w a s l e g a l l y s u f f i c i e n t

e v i d e n c e t o s u p p o r t a l l o f t h e e l e m e n t s i n

m a n u f a c t u r e r 's d a m a g e m o d e l

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 7 ] A p p e a l a n d E r r o r

S u b m i s s i o n o f I s s u e s o r Q u e s t i o n s t o J u r y

A t r i a l c o u r t c o m m i t s r e v e r s i b l e e r r o r w h e n i t

s u b m i t s a b r o a d

- f

o r m d a m a g e i s s u e t h a t i n c o r p o r a t e s a n e l e m e n t o f d a m a g e s o n w h i c h

t h e r e i s n o e v i d e n c e , a s s u c h a s u b m i s s i o n
p r e v e n t s t h e a p p e l l a t e c o u r t f r o m d e t e r m i n i n g

w h e t h e r t h e j u r y b a s e d i t s v e r d i c t o n t h e i m p r o p e r l y s u b m i t t e d e l e m e n t o f d a m a g e

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 8 ] S a l e s

P u r c h a s e o f s i m i l a r p r o p e r t y e l s e w h e r e a n d

p r e v e n t i o n o f d a m a g e s

I t i s i m m a t e r i a l t h a t h i n d s i g h t m a y l a t e r p r o v e t h a t

t h e m e t h o d o f

c o v e r u s e d w a s n o t t h e c h e a p e s t o r

m o s t e f f e c t i v e , w h e n d e t e r m i n i n g w h e t h e r a b u y e r

m i t i g a t e d i t s d a m a g e s a n d t h u s w a s n o t b a r r e d
f r o m r e c o v e r i n g c o n s e q u e n t i a l d a m a g e s

. V

. T

. C

. A

. , B u s

. & C

. § § 2

. 7 1 2

, 2

. 7 1 5 ( b ) ( 1 )

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 2 9 ] S a l e s

P r e s u m p t i o n s a n d b u r d e n o f p r o o f

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 6Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T h e b u r d e n o f e s t a b l i s h i n g t h a t d a m a g e s c o u l d

n o t h a v e b e e n r e a s o n a b l y p r e v e n t e d b y c o v e r i s

o n t h e b u y e r s e e k i n g c o n s e q u e n t i a l d a m a g e s i n a b r e a c h o f c o n t r a c t a c t i o n

. V

. T

. C

. A

. , B u s

. & C

. § §
2

. 7 1 2

, 2

. 7 1 5 ( b ) ( 1 )

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 0 ] D a m a g e s

D u t y o f P e r s o n I n

j u r e d t o P r e v e n t o r R e d u c e D a m a g e

M i t i g a t i o n o f d a m a g e s i s a r u l e r e q u i r i n g t h e i n j u r e d p a r t y t o u s e r e a s o n a b l e d i l i g e n c e t o

m i n i m i z e h i s d a m a g e s

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 1 ] D a m a g e s

M i t i g a t i o n o f d a m a g e s a n d r e d u c t i o n o f l o s s

T h o u g h m i t i g a t i o n i s s i m i l a r t o c o v e r a n d a
p l a i n t i f f i n a b r e a c h o f c o n t r a c t a c t i o n h a s t h e b u r d e n o f e s t a b l i s h i n g t h a t d a m a g e s c o u l d n o t h a v e b e e n r e a s o n a b l y p r e v e n t e d b y c o v e r , t h e b u r d e n o f d i s p r o v i n g m i t i g a t i o n l i e s w i t h t h e d e f e n d a n t

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 2 ] S a l e s

P u r c h a s e o f s i m i l a r p r o p e r t y e l s e w h e r e a n d

p r e v e n t i o n o f d a m a g e s T h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h

, i n b r e a c h

o f c o n t r a c t a c t i o n a g a i n s t m a k e r o f m a c h i n e t o o l s , t h a t h e a v y

- d u t y o i l f

i e l d p u m p m a n u f

a c t u r e r m a d e

r e a s o n a b l e e f

f o r t s t o l i m i t i t s c o n s e q u e n t i a l
d a m a g e s b y m a k i n g a p r o p e r a t t e m p t a t c o v e r ;
t h e r e w a s e v i d e n c e t h a t m a n u f a c t u r e r p u r c h a s e d

t w o m a c h i n e s f

r o m a n o t h e r m a k e r w h e n i t b e c a m e

c l e a r t h a t m a c h i n e t o o l s i n q u e s t i o n w o u l d n o t

p e r f o r m a s r e p r e s e n t e d

, a n d t h a t o n c e n e w

m a c h i n e s b e c a m e o p e r a t i o n a l m a n u f a c t u r e r

s t o p p e d u s i n g m a c h i n e s i n q u e s t i o n

. V

. T

. C

. A

. , B u s

. & C

. § § 2

. 7 1 2

, 2

. 7 1 5 ( b ) ( 1 )

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 3 ] D a m a g e s

W e i g h t a n d S u f

f i c i e n c y

T h e r e w a s s o m e e v i d e n c e t o e s t a b l i s h

, i n b r e a c h

o f c o n t r a c t a c t i o n a g a i n s t m a k e r o f m a c h i n e t o o l s , t h a t h e a v y

- d u t y o i l f

i e l d p u m p m a n u f

a c t u r e r

m i t i g a t e d i t s d a m a g e s ; t h o u g h m a c h i n e s d i d n o t

p e r f o r m a s r e p r e s e n t e d

, t h e r e w a s e v i d e n c e t h a t

m a n u f a c t u r e r u s e d m a c h i n e t o o l s t o t h e e x t e n t

p o s s i b l e a n d r e d u c e d i t s d a m a g e s i n t h e a m o u n t o f $ 2

, 2 5 0 p e r f

l u i d e n d

, w h i c h w a s o n e o f t h e

c o m p o n e n t s o f m a n u f

a c t u r e r 's p u m p s

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 4 ] C o s t s

C o n t r a c t s

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 7Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

E i g h t f a c t o r s a r e w e i g h e d i n d e t e r m i n i n g

r e a s o n a b l e n e s s a n d n e c e s s i t y o f a t t o r n e y f e e s f o r b r e a c h o f c o n t r a c t c l a i m : ( 1 ) t i m e a n d l a b o r

r e q u i r e d

, n o v e l t y a n d d i f f i c u l t y o f t h e q u e s t i o n s i n v o l v e d

, a n d s k i l l r e q u i r e d t o p e r f o r m t h e l e g a l

s e r v i c e s p r o p e r l y , ( 2 ) l i k e l i h o o d t h a t a c c e p t a n c e

o f t h e p a r t i c u l a r e m p l o y m e n t w i l l p r e c l u d e o t h e r

e m p l o y m e n t b y l a w y e r , ( 3 ) f e e c u s t o m a r i l y

c h a r g e d i n t h e l o c a l i t y f o r s i m i l a r l e g a l s e r v i c e s , ( 4 ) t h e a m o u n t i n v o l v e d a n d r e s u l t s o b t a i n e d

, ( 5 )

t i m e l i m i t a t i o n s i m p o s e d b y c l i e n t o r b y

c i r c u m s t a n c e s , ( 6 ) n a t u r e a n d l e n g t h o f t h e
p r o f e s s i o n a l r e l a t i o n s h i p w i t h c l i e n t
, ( 7 )

e x p e r i e n c e , r e p u t a t i o n , a n d a b i l i t y o f t h e l a w y e r

o r l a w y e r s p e r f

o r m i n g s e r v i c e s , a n d ( 8 ) w h e t h e r
t h e f e e i s f i x e d o r c o n t i n g e n t o n r e s u l t s o b t a i n e d

o r u n c e r t a i n t y o f c o l l e c t i o n b e f o r e t h e l e g a l

s e r v i c e s h a v e b e e n r e n d e r e d

. V

. T

. C

. A

. , C i v i l
P r a c t i c e & R e m e d i e s C o d e § 3 8

. 0 0 1 ; S t a t e B a r R u l e s , V

. T

. C

. A

. , G o v e r n m e n t C o d e T i t l e 2

, S u b t i t l e G A p p

. A

, A r t

. 1 0

, § 9

, R u l e s o f
P r o f

. C o n d u c t
, R u l e 1

. 0 4 ( b )

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 5 ] C o s t s

C o n t r a c t s

O n e m e t h o d o f c o m p u t i n g r e a s o n a b l e a t t o r n e y f e e s t h a t c a n b e a w a r d e d f o r a v a l i d b r e a c h o f

c o n t r a c t c l a i m i s t h e “ l o d e s t a r m e t h o d

, ” o r t h e
p r o d u c t o f r e a s o n a b l e h o u r s t i m e s a r e a s o n a b l e

r a t e

. V

. T

. C

. A

. , C i v i l P r a c t i c e & R e m e d i e s C o d e § 3 8

. 0 0 1 ; S t a t e B a r R u l e s , V

. T

. C

. A

. , G o v e r n m e n t C o d e T i t l e 2

, S u b t i t l e G A p p

. A

, A r t

. 1 0

, § 9

, R u l e s o f P r o f

. C o n d u c t
, R u l e 1

. 0 4 ( b )

.

2 0 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 6 ] A p p e a l a n d E r r o r

A t t o r n e y f

e e s C o u r t o f A p p e a l s r e v i e w s a c o u r t

- o r d e r e d a w a r d

o f a t t o r n e y f

e e s u n d e r t h e a b u s e o f d i s c r e t i o n

s t a n d a r d

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 7 ] C o s t s

C o n t r a c t s C o s t s A t t o r n e y f

e e s o n a p p e a l o r e r r o r

T r i a l c o u r t d i d n o t a b u s e i t s d i s c r e t i o n , i n h e a v y

- d u t y o i l f

i e l d p u m p m a n u f

a c t u r e r 's b r e a c h

o f c o n t r a c t a c t i o n a g a i n s t m a k e r o f m a c h i n e t o o l s , b y e x c e e d i n g t h e l o d e s t a r a m o u n t a n d a w a r d i n g

m a n u f a c t u r e r a t t o r n e y f

e e s i n a m o u n t o f $ 1

. 5

m i l l i o n t h r o u g h d a t e o f j u d g m e n t
, p l u s $ 2 0 0

, 0 0 0
i f m a k e r w a s u n s u c c e s s f u l i n a p p e a l

, p l u s $ 3 5

, 0 0 0
i f m a k e r f i l e d a p e t i t i o n f

o r r e v i e w w i t h S u p r e m e C o u r t o f T e x a s a n d p e t i t i o n w a s d e n i e d

, o r $ 6 5

, 0 0 0 i f t h e S u p r e m e C o u r t g r a n t e d t h e p e t i t i o n b u t r u l e d a g a i n s t m a k e r o n t h e m e r i t s , a s t h e r e

w a s s o m e e v i d e n c e t h a t a w a r d o f f e e s w a s

r e a s o n a b l e ; m a n u f

a c t u r e r 's a t t o r n e y t e s t i f i e d t h a t h i s f i r m 's s e r v i c e s h a d a l o d e s t a r v a l u e o f $ 6 6 7

, 1 1 4

, t h a t h i s f

i r m t o o k r i s k o f l o s i n g c a s e

a n d r e c e i v i n g n o t h i n g o v e r i t s $ 1 5 0

, 0 0 0 b a s e f e e , t h a t $ 1

. 5 m i l l i o n w e r e r e a s o n a b l e f e e s , a n d t h a t

s u c h f e e s r e p r e s e n t e d a b o u t 2 5 % o f j u r y v e r d i c t
,
w h i c h w a s l e s s t h a n t h e 3 0 % t o 5 0 % t y p i c a l l y

c h a r g e d i n c o n t i n g e n t f e e c a s e s

. V

. T

. C

. A

. , C i v i l
P r a c t i c e & R e m e d i e s C o d e § 3 8

. 0 0 1 ; S t a t e B a r R u l e s , V

. T

. C

. A

. , G o v e r n m e n t C o d e T i t l e 2

, S u b t i t l e G A p p

. A

, A r t

. 1 0

, § 9

, R u l e s o f
P r o f

. C o n d u c t
, R u l e 1

. 0 4 ( b )

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 8 ] C o s t s

E f f e c t o f f e e a g r e e m e n t w i t h a t t o r n e y

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 8Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T h e u s e o f a m u l t i p l i e r b a s e d u p o n t h e c o n t i n g e n t

n a t u r e o f a f

e e i s a l l o w e d w h e n a w a r d i n g a t t o r n e y f e e s u n d e r T e x a s s t a t u t e s a l l o w i n g r e c o v e r y o f

a t t o r n e y f

e e s

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 3 9 ] S a l e s

A c c e p t a n c e o f g o o d s

E v i d e n c e t h a t m a c h i n e t o o l n e v e r w a s a b l e t o
p e r f o r m s p e c i f

i c b o r i n g f

u n c t i o n t h a t m a k e r o f

m a c h i n e t o o l a g r e e d t o p r o v i d e a n d t h a t m a k e r

r e p e a t e d l y p r o m i s e d i t w o u l d d e l i v e r s o f t w a r e f o r
t h e b o r i n g f

u n c t i o n b e f

o r e a n n o u n c i n g t h a t i t

w o u l d n o t d e l i v e r s o f

t w a r e r a i s e d f

a c t i s s u e f

o r j u r y a s t o w h e t h e r h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r n e v e r a c c e p t e d m a c h i n e t o o l

, a n d

t h u s w h e t h e r m a n u f

a c t u r e r d i d n o t o w e m a k e r

c o n t r a c t p r i c e f

o r m a c h i n e , i n m a n u f a c t u r e r 's
b r e a c h o f c o n t r a c t a c t i o n a g a i n s t m a k e r

. V

. T

. C

. A

. , B u s

. & C

. § 2

. 6 0 7 ( a )

.

C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 0 ] I n t e r e s t

F o r m a n d s u f

f i c i e n c y o f d e m a n d

A w r i t t e n n o t i c e o f a “ c l a i m , ” w h i c h t r i g g e r s

a c c r u a l o f p r e j u d g m e n t i n t e r e s t 1 8 0 d a y s a f t e r t h e

c l a i m i s m a d e , i s a d e m a n d f o r c o m p e n s a t i o n o r

a n a s s e r t i o n o f a r i g h t t o b e p a i d

. V

. T

. C

. A

. , F i n a n c e C o d e § 3 0 4

. 1 0 4

.

3 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 1 ] I n t e r e s t

F o r m a n d s u f

f i c i e n c y o f d e m a n d A w r i t t e n n o t i c e o f “ c l a i m , ” w h i c h t r i g g e r s

a c c r u a l o f p r e j u d g m e n t i n t e r e s t 1 8 0 d a y s a f t e r t h e

c l a i m i s m a d e , n e e d n o t d e m a n d a n e x a c t a m o u n t

o r l i s t e v e r y e l e m e n t o f d a m a g e

. V

. T

. C

. A

. , F i n a n c e C o d e § 3 0 4

. 1 0 4

.

2 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 2 ] A p p e a l a n d E r r o r

C a s e s T r i a b l e i n A p p e l l a t e C o u r t
A p p e a l a n d E r r o r C o s t s a n d A l l o w a n c e s

I n a r e v i e w o f a t r i a l c o u r t a w a r d o f p r e j u d g m e n t i n t e r e s t
, t h e a b u s e o f d i s c r e t i o n s t a n d a r d a p p l i e s
t o t h e t r i a l c o u r t 's f

a c t u a l f i n d i n g s a s t h e y r e l a t e t o
p r e j u d g m e n t i n t e r e s t
, b u t t h e d e n o v o s t a n d a r d

a p p l i e s t o t h e t r i a l c o u r t 's a p p l i c a t i o n o f t h e l a w t o
t h e f a c t s

.

4 C a s e s t h a t c i t e t h i s h e a d n o t e

[ 4 3 ] I n t e r e s t

F o r m a n d s u f

f i c i e n c y o f d e m a n d

L e t t e r f

r o m h e a v y

- d u t y o i l f i e l d p u m p

m a n u f a c t u r e r t o m a k e r o f m a c h i n e t o o l s ,
c o m p l a i n i n g t h a t m a c h i n e s d i d n o t p e r f o r m t o t h e

s p e c i f i c a t i o n s r e p r e s e n t e d b y m a k e r , d i d n o t

c o n s t i t u t e a w r i t t e n n o t i c e o f a “ c l a i m , ” a n d t h u s l e t t e r d i d n o t t r i g g e r a c c r u a l o f p r e j u d g m e n t i n t e r e s t o n j u d g m e n t f

o r m a n u f

a c t u r e r i n b r e a c h

o f c o n t r a c t a c t i o n a g a i n s t m a k e r , w h e r e l e t t e r

u r g e d m a k e r t o a v o i d a f u t u r e c l a i m b y c u r i n g t h e d e f e c t s r a t h e r t h a n t o a c c e p t a n a c c r u e d

, e x i s t i n g l i a b i l i t y , a n d l e t t e r d i d n o t d e m a n d p a y m e n t o r

a s s e r t a r i g h t t o b e p a i d

. V

. T

. C

. A

. , F i n a n c e C o d e § 3 0 4

. 1 0 4

.

1 C a s e s t h a t c i t e t h i s h e a d n o t e

A t t o r n e y s a n d L a w F i r m s

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 9Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

* 7 6 7 M u n s c h

, H a r d t
, K o p f & H a r r , P C a n d M i c h a e l G

. F o s t e r , D a l l a s , J a c k s o n W a l k e r , L L P a n d A l b o n O

. H e a d

, a n d W i l l i a m R

. J e n k i n s , J r

. , F o r t W o r t h

, a n d D o r s e y & W h i t n e y , L L P a n d
C r e i g h t o n R

. M a g i d

, a n d K e v i n B

. B e d e l l

, W a s h i n g t o n , D

. C

. , f o r A p p e l l a n t

.

K e l l y H a r t & H a l l m a n , P C a n d M a r s h a l l M

. S e a r c y , J r

. , H u g h
G

. O 'C o n n o r , I I a n d B r i a n S

. S t a g n e r , F o r t W o r t h

, f o r A p p e l l e e

. P a n e l A : C A Y C E

, C

. J

. ; G A R D N E R a n d M c C O Y

, J J

.

O P I N I O N O N R E H E A R I N G

A N N E G A R D N E R

, J u s t i c e

.

A f t e r r e v i e w i n g A p p e l l a n t
, T o s h i b a M a c h i n e C o

. , A m e r i c a 's

m o t i o n f o r r e h e a r i n g , w e d e n y t h e m o t i o n

. W e w i t h d r a w o u r J u n e 2

, 2 0 0 5 o p i n i o n a n d j u d g m e n t a n d s u b s t i t u t e t h e f o l l o w i n g

. O u r u l t i m a t e c o n c l u s i o n s r e m a i n u n c h a n g e d

.

I

. I n t r o d u c t i o n T h i s c a s e a r i s e s f

r o m t h e s a l e o f t w o l a r g e m a c h i n e t o o l s

. T o s h i b a M a c h i n e C o m p a n y o f A m e r i c a ( “ T o s h i b a ” ) a p p e a l s

a $ 9

. 2 5 m i l l i o n j u d g m e n t o n a j u r y v e r d i c t i n f a v o r o f S

. P

. M

. F l o w C o n t r o l

, I n c

. ( “ S P M ” )

. I n t w e l v e i s s u e s , T o s h i b a

c o m p l a i n s o f l e g a l l y i n s u f f i c i e n t e v i d e n c e t o s u p p o r t j u r y f i n d i n g s o n v a r i o u s a s p e c t s o f S P M 's b r e a c h o f c o n t r a c t

c l a i m s , m u t u a l l y e x c l u s i v e a n d i n c o n s i s t e n t t h e o r i e s o f

r e c o v e r y , o v e r l a p p i n g d a m a g e a w a r d s , a n d e x c e s s i v e

a t t o r n e y 's f

e e s

. I n a s i n g l e i s s u e , S P M c o m p l a i n s t h a t t h e t r i a l

c o u r t u s e d t h e w r o n g d a t e t o c o m p u t e p r e j u d g m e n t i n t e r e s t

. W e a f f i r m t h e j u d g m e n t i n a l l r e s p e c t s

.

I I

. F a c t u a l a n d P r o c e d u r a l B a c k g r o u n d
S P M m a n u f

a c t u r e s h e a v y

- d u t y o i l f i e l d p u m p s

. T h e p u m p s

c o n s i s t o f t w o c o m p o n e n t s : * 7 6 8 a “ p o w e r e n d ” a n d a “ f l u i d

e n d

. ” S P M m a k e s t h e f l u i d e n d s f

r o m b l o c k s o f s o l i d s t e e l

w e i g h i n g 3

, 0 0 0

– 4

, 0 0 0 p o u n d s

. T h e f l u i d e n d s h a v e a c o m p l e x i n t e r n a l s h a p e m a c h i n e d t h r o u g h a p r o c e s s c a l l e d “ i n t e r n a l

c o n t o u r i n g

. ”

I n 1 9 9 6

, S P M b e g a n t o s h o p f o r n e w m a c h i n e t o o l s t o m a k e f l u i d e n d s

. T h e m a c h i n e s S P M u s e d a t t h e t i m e d a t e d f r o m t h e 1 9 6 0 s a n d r e q u i r e d 1 1 5 h o u r s t o m a k e a s i n g l e f l u i d e n d

. S P M 's p r i m a r y g o a l i n r e p l a c i n g t h e o l d m a c h i n e s w a s t o r e d u c e t h e t i m e r e q u i r e d t o m a k e a f l u i d e n d

. S P M e n l i s t e d t h e h e l p o f M a r u k a , U

. S

. A

. , I n c

. , a m a c h i n e t o o l d i s t r i b u t o r , t o f i n d s u i t a b l e r e p l a c e m e n t s

. M a r u k a p r e s e n t e d S P M w i t h
l i t e r a t u r e a n d q u o t e s f o r s e v e r a l m a c h i n e t o o l s , i n c l u d i n g T o s h i b a 's B M C 1 0 0 0 H o r i z o n t a l M a c h i n i n g C e n t e r ( “ B M C

– 1 0 0 0 ” )

.

S P M i n i t i a l l y r e

j e c t e d T o s h i b a 's q u o t e b e c a u s e t h e B M C

– 1 0 0 0
l a c k e d t h e a b i l i t y t o p e r f o r m i n t e r n a l c o n t o u r i n g

. S o o n
t h e r e a f t e r , h o w e v e r , T o s h i b a i n f o r m e d S P M t h a t i t h a d
d e v e l o p e d n e w s o f

t w a r e f o r t h e B M C

– 1 0 0 0 t h a t m a d e i n t e r n a l

c o n t o u r i n g p o s s i b l e

. T o s h i b a c a l l e d t h e s o f t w a r e , a n d t h e
p r o c e s s i t c o n t r o l l e d

, “ o r b i t b o r i n g

. ” T o s h i b a t o l d S P M t h a t
T o s h i b a c u s t o m e r s i n J a p a n w e r e a l r e a d y u s i n g t h e

o r b i t

- b o r i n g s o f

t w a r e o n B M C

– 1 0 0 0 m a c h i n e s

.

T o s h i b a r e p r e s e n t e d t h a t o r b i t b o r i n g o n t h e B M C

– 1 0 0 0 c o u l d

m a k e f l u i d e n d s i n m u c h l e s s t i m e t h a n S P M 's e x i s t i n g t o o l s

. A c c o r d i n g t o T o s h i b a , o r b i t b o r i n g a l l o w e d o n e c u t t i n g t o o l t o d o t h e w o r k o f m a n y

. T h e t i m e s a v e d b y n o t h a v i n g t o c h a n g e

c u t t i n g t o o l s w o u l d

, s a i d T o s h i b a , r e d u c e t h e t i m e n e e d e d t o

a m a k e a f

l u i d e n d

, e v e n t h o u g h t h e c u t t i n g s p e e d o f t h e B M C

– 1 0 0 0 w a s s l o w e r t h a n t h a t o f S P M 's e x i s t i n g e q u i p m e n t

. S P M e m p l o y e e s t e s t i f i e d t h a t T o s h i b a e m p l o y e e s s a i d

, a t

v a r i o u s t i m e s b e f

o r e a n d a f

t e r t h e s a l e , t h a t o r b i t b o r i n g w o u l d

a l l o w S P M t o m a k e a f l u i d e n d i n a n y w h e r e f r o m f i f t e e n t o f i f t y h o u r s

.

A k e y i s s u e a t t r i a l w a s w h a t t h e t e r m “ o r b i t b o r i n g ” m e a n t

. A c c o r d i n g t o S P M ' s p r e s i d e n t
, D a n L o w r a n c e , T o s h i b a
p r o m o t e d o r b i t b o r i n g , a l s o c a l l e d “ s h a k e t u r n i n g , ” a s a n e w
p r o c e s s t h a t w o u l d b r i n g n e w f u n c t i o n a l i t y t o t h e B M C

– 1 0 0 0

. A c c o r d i n g t o T o s h i b a 's r e g i o n a l s a l e s m a n a g e r , S t e v e O l i p h a n t
, o r b i t b o r i n g o n t h e B M C

– 1 0 0 0 w a s s i m p l y a

c o m b i n a t i o n o f o l d e r t e c h n i q u e s c a l l e d “ H a l e I n t e r p o l a t i o n ”

a n d “ A r c h i m e d e s I n t e r p o l a t i o n

. ” C o m p l i c a t i n g t h e i s s u e , T o s h i b a 's p a r e n t c o m p a n y i n J a p a n d e v e l o p e d a n e w

“ c o n c e p t ” m a c h i n e t o o l

, t h e N X

– 7 6

, t o s h o w c a s e w h a t i t

t o u t e d a s a “ r e v o l u t i o n a r y ” n e w p r o c e s s

— a p r o c e s s a l s o c a l l e d

“ o r b i t b o r i n g

. ” T h e p a r t i e s h o t l y d i s p u t e d w h e t h e r s h a k e
t u r n i n g o n t h e B M C

– 1 0 0 0 w a s t h e s a m e p r o c e s s a s o r b i t b o r i n g o n t h e N X

– 7 6

. S P M a r g u e d t h a t T o s h i b a s o l d S P M

o r b i t b o r i n g b u t d e l i v e r e d H a l e a n d A r c h i m e d e s I n t e r p o l a t i o n

. T o s h i b a a r g u e d t h a t o r b i t b o r i n g a n d s h a k e t u r n i n g w e r e t w o

n a m e s f o r t h e s a m e p r o c e s s , r e g a r d l e s s o f w h i c h m a c h i n e w a s i n v o l v e d

.

I n D e c e m b e r 1 9 9 7

, S P M i s s u e d a p u r c h a s e o r d e r f o r a B M C

– 1 0 0 0 t h a t T o s h i b a h a d a v a i l a b l e f o r i m m e d i a t e d e l i v e r y

. S P M 's p u r c h a s e o r d e r i n c o r p o r a t e d a p r o p o s a l f r o m M a r u k a

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 0Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

i n w h i c h M a r u k a l i s t e d “ o r b i t m a c h i n i n g ” a s a $ 2 0

, 0 0 0 o p t i o n ,
a n d s t i p u l a t e d t h a t T o s h i b a w o u l d p r o v i d e a f i v e

- y e a r w a r r a n t y

o n “ [ o ] r b i t m a c h i n i n g s o f t w a r e , i n c l u d i n g s u p p o r t
, u p d a t e s a n d

r e v i s i o n s a s t h e y b e c o m e a v a i l a b l e

. ” S P M a l s o a t t a c h e d t o t h e
p u r c h a s e o r d e r a l i s t o f t e r m s c a p t i o n e d “ A d d e n d u m ‘ A ’

. ”
T h o s e t e r m s i n c l u d e d t h e f o l l o w i n g :

• T o s h i b a w o u l d m a c h i n e a f l u i d e n d o n a B M C

– 1 0 0 0 f r o m

a r a w f o r g i n g t h a t S P M h a d a l r e a d y s h i p p e d t o J a p a n , a n d

p r o v i d e t o S P M t h e d a t a g a t h e r e d d u r i n g t h e m a c h i n i n g
p r o c e s s ;

* 7 6 9 • T o s h i b a w o u l d p r o v i d e a p r o c e s s c y c l e t i m e , i

. e

. , t h e
t i m e i t s h o u l d t a k e t o m a c h i n e a f l u i d e n d o n t h e B M C

– 1 0 0 0 ;

• T o s h i b a w o u l d p r o v i d e t h e t e c h n i c a l s u p p o r t a n d t r a i n i n g

n e e d e d t o m a k e a f

l u i d e n d o n t h e B M C

– 1 0 0 0 ; a n d

• S P M 's a c c e p t a n c e o f t h e B M C

– 1 0 0 0 w a s c o n d i t i o n e d o n
t h e s u c c e s s f

u l p r o d u c t i o n o f a f

l u i d e n d o n t h e m a c h i n e a t S P M 's f a c t o r y

.

T o s h i b a a c c e p t e d S P M 's p u r c h a s e o r d e r a n d d o w n p a y m e n t

w i t h o u t c o m m e n t i n g o n A d d e n d u m A

. T o s h i b a d e l i v e r e d t h e B M C

– 1 0 0 0 t o S P M 's f a c t o r y i n M a r c h 1 9 9 8

. S i g n i f i c a n t l y , T o s h i b a d e l i v e r e d t h e m a c h i n e w i t h o u t t h e s o f t w a r e n e e d e d t o
p e r f o r m o r b i t b o r i n g

.

I n l a t e A p r i l 1 9 9 8

, T o s h i b a s e n t a p r o g r a m m e r , T a k e s h i O h k i

, t o i n s t a l l o r b i t b o r i n g s o f t w a r e o n t h e B M C

– 1 0 0 0 a t S P M 's
f a c t o r y

. O h k i t e s t i f

i e d t h a t t h i s w a s t h e f i r s t t i m e h e h a d

a t t e m p t e d t o c o m b i n e H a l e I n t e r p o l a t i o n a n d A r c h i m e d e s I n t e r p o l a t i o n t o c r e a t e t h e o r b i t b o r i n g f u n c t i o n o n a B M C

– 1 0 0 0

. H e w a s u n a b l e t o m a k e t h e s o f t w a r e p e r f

o r m t o S P M 's r e q u i r e m e n t s a n d r e t u r n e d t o J a p a n

.

S o o n a f t e r O h k i l e f

t S P M

, T o s h i b a 's S t e v e O l i p h a n t s e n t a

m e m o r a n d u m t o T o n y T a n i

, T o s h i b a 's a s s i s t a n t g e n e r a l

m a n a g e r , r a i s i n g s e v e r a l i s s u e s r e l a t e d t o t h e B M C

– 1 0 0 0

. O l i p h a n t w r o t e :

S P M i s a B e t a s i t e f

o r t h i s v e r y u n i q u e [ o r b i t b o r i n g ] s o f t w a r e

.

O r b i t B o r i n g v s H a l e I n t e r p o l a t i o n : T h e r e s e e m s t o b e s o m e

c o n f u s i o n a s t o t h e d e f

i n i t i o n a n d c a p a b i l i t i e s o f t h e s e t w o
p r o g r a m s

. I n t h e b e g i n n i n g w e w e r e t o l d t h a t t h e O r b i t B o r i n g

o p t i o n w a s a v a i l a b l e a n d p r o c e s s d e s c r i p t i o n s w e r e s u p p l i e d t o t h e f i e l d

. T h i s w a s s o l d t o S P M

. . . . W h a t f u r t h e r c o m p l i c a t e s
t h i s d e f i n i t i o n i s s u e i s t h a t M r

. O k i [ s i c ] t o l d [ M a r u k a ] t h a t O r b i t a n d H a l e w e r e t w o d i f f e r e n t t h i n g s a n d t h a t t h e B M C 1 0 0 0 w a s n o t c a p a b l e o f O r b i t

.

O n M a y 8

, 1 9 9 8

, S P M c o m p l a i n e d t h a t t h e B M C

– 1 0 0 0 d i d

n o t p e r f o r m a s e x p e c t e d a n d r e q u e s t e d w r i t t e n c o n f i r m a t i o n
t h a t t h e m a c h i n e c o u l d p r o d u c e f l u i d e n d s

. T o s h i b a r e p l i e d

t h a t O h k i w o u l d r e t u r n t o F o r t W o r t h l a t e r i n M a y a n d a g a i n

a t t e m p t t o i n s t a l l t h e o r b i t b o r i n g s o f t w a r e

. O h k i r e t u r n e d t o S P M o n M a y 1 8

, b u t s t i l l t h e B M C

– 1 0 0 0 c o u l d n o t p e r f o r m i n t e r n a l c o n t o u r i n g

. A r o u n d t h e s a m e t i m e , S P M o f f e r e d t o

r e t u r n t h e m a c h i n e t o T o s h i b a i n e x c h a n g e f o r a r e f u n d o f i t s d o w n p a y m e n t i f T o s h i b a h a d a n y c o n c e r n a b o u t t h e B M C

– 1 0 0 0 's a b i l i t y t o p e r f o r m

. T o s h i b a p r o m i s e d t h a t a

s o f t w a r e s o l u t i o n w a s i m m i n e n t

.

M e a n w h i l e , S P M o r d e r e d a s e c o n d m a c h i n e t o o l f r o m T o s h i b a i n l a t e J u l y

. T h i s s e c o n d t o o l

, t h e B M C

– 8 0 0

, w a s s l i g h t l y

s m a l l e r t h a n t h e B M C

– 1 0 0 0 b u t h a d t h e s a m e p u r p o r t e d
f u n c t i o n a l i t y

— i n c l u d i n g o r b i t b o r i n g

. T o s h i b a a d v i s e d S P M

t h a t i t w o u l d n o t s h i p t h e B M C

– 8 0 0 u n t i l S P M p a i d t h e $ 7 4 2

, 5 0 0 b a l a n c e d u e o n t h e B M C

– 1 0 0 0

. O n A u g u s t 1 0

, S P M

p a i d t h e B M C

– 1 0 0 0 b a l a n c e

.

F i v e d a y s l a t e r , T o s h i b a s e n t S P M a n “ a c c e p t a n c e ” o f t h e B M C

– 8 0 0 p u r c h a s e o r d e r

. T h e a c c e p t a n c e s t a t e d t h a t “ t h e r e i s n o o r b i t b o r i n g s o f t w a r e ” a n d “ t h e r e w i l l n e v e r b e a n y

r e v i s i o n s o r u p d a t e s ” t o t h e s o f t w a r e p r o v i d e d w i t h t h e B M C

– 8 0 0

. W h e n S P M c o n f r o n t e d T o s h i b a a b o u t t h e s e

s t a t e m e n t s , T o s h i b a d i s m i s s e d t h e m a s a m i s c o m m u n i c a t i o n

. T o s h i b a s a i d i t p l a n n e d t o s h o w c a s e t h e o r b i t b o r i n g s o f t w a r e

a l o n g w i t h t h e n e w N X

– 7 6 a t a C h i c a g o t o o l s h o w i n S e p t e m b e r

. S P M w o u l d r e c e i v e t h e s o f t w a r e i m m e d i a t e l y a f

t e r
t h e s h o w , p r o m i s e d T o s h i b a

.

S P M s e n t a r e p r e s e n t a t i v e t o t h e C h i c a g o t o o l s h o w

. T o s h i b a d i d e x h i b i t o r b i t b o r i n g o n t h e n e w N X

– 7 6

, b u t t o l d S P M 's

* 7 7 0 r e p r e s e n t a t i v e t h a t t h e N X

– 7 6 s o f t w a r e w o u l d n o t b e

a v a i l a b l e f

o r t h e B M C

– 1 0 0 0 u n t i l J a n u a r y

.

S P M a n d T o s h i b a c o n t i n u e d t o w r a n g l e o v e r t h e B M C

p e r f o r m a n c e i s s u e s , a n d e s p e c i a l l y t h e o r b i t b o r i n g s o f t w a r e , f o r a n o t h e r y e a r

. A s l a t e a s M a y 1 3

, 1 9 9 9

, T o s h i b a 's O l i p h a n t

s e n t a m e m o r a n d u m t o S P M p r o m i s i n g d e l i v e r y o f t h e o r b i t b o r i n g s o f

t w a r e w i t h i n t w o m o n t h s

. S P M

, M a r u k a , a n d
T o s h i b a s c h e d u l e d a m e e t i n g a t S P M 's f a c t o r y f o r A u g u s t 1 9 9 9

. A t t h e m e e t i n g , T o s h i b a d e f i n i t i v e l y a n n o u n c e d t h a t

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 1Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

S P M w o u l d n o t r e c e i v e t h e o r b i t b o r i n g s o f t w a r e

.

F r o m J u n e 1 9 9 8

, w h e n t h e B M C

– 1 0 0 0 b e c a m e o p e r a t i o n a l a t S P M

, u n t i l N o v e m b e r 2 0 0 1

, S P M u s e d t h e T o s h i b a m a c h i n e s

e x t e n s i v e l y t o h e l p m a k e f l u i d e n d s

. A l t h o u g h t h e l a c k o f o r b i t b o r i n g s o f

t w a r e m a d e t h e T o s h i b a s u s e l e s s f o r i n t e r n a l

c o n t o u r i n g , t h e y c o u l d b e u s e d f o r r o u g h m a c h i n i n g

. U s i n g t h e T o s h i b a m a c h i n e s f

o r 1 5

, 0 0 0 h o u r s i n c o n

j u n c t i o n w i t h 1 8

, 6 0 0
h o u r s o n o t h e r m a c h i n e s , S P M p r o d u c e d 3 4 4 f l u i d e n d s a t t h e

a v e r a g e r a t e o f 1 0 0 h o u r s p e r f l u i d e n d

— d o w n f

r o m 1 1 5 h o u r s
p e r f l u i d e n d b e f

o r e t h e T o s h i b a s w e n t o n l i n e , b u t f a r l o n g e r
t h a n t h e f

i f t e e n t o f i f t y h o u r s p r e d i c t e d b y T o s h i b a

.

W h e n T o s h i b a a n n o u n c e d t h a t S P M w o u l d n o t r e c e i v e t h e

o r b i t b o r i n g s o f

t w a r e , S P M b e g a n t o s h o p f o r m a c h i n e s t o

r e p l a c e t h e T o s h i b a s

. I n M a y 2 0 0 0

, S P M p u r c h a s e d t h e f i r s t

o f t w o m a c h i n e t o o l s f

r o m T o s h i b a r i v a l G o s s T r e v i s a n

. T h e f i r s t G o s s w e n t o n l i n e i n J u l y 2 0 0 0

. A s e c o n d G o s s w e n t

o n l i n e i n M a y 2 0 0 1

. I n N o v e m b e r 2 0 0 1

, S P M s t o p p e d u s i n g
t h e T o s h i b a m a c h i n e s a l t o g e t h e r

. S P M o f f e r e d t e s t i m o n y a t

t r i a l t h a t t h e G o s s m a c h i n e s c o u l d p r o d u c e a c o m p l e t e f l u i d

e n d i n t h i r t y

- f

o u r h o u r s

.

I n F e b r u a r y 2 0 0 0

, S P M s u e d T o s h i b a f o r f r a u d

, n e g l i g e n t

m i s r e p r e s e n t a t i o n , b r e a c h o f c o n t r a c t a n d b r e a c h o f w a r r a n t y

. 1
T o s h i b a c o u n t e r c l a i m e d f o r t h e u n p a i d b a l a n c e o f t h e B M C

– 8 0 0

.

T h e c a s e w a s t r i e d t o a j u r y

. S P M c l a i m e d t h r e e b r o a d

c a t e g o r i e s o f d a m a g e s : r e f u n d o f t h e $ 8 9 8

, 2 0 0 S P M p a i d f o r
t h e t w o T o s h i b a m a c h i n e s ; $ 9 6 9

, 9 4 5 i n i n c i d e n t a l e x p e n s e s f o r i t e m s s u c h a s p o u r i n g f o u n d a t i o n s f

o r t h e T o s h i b a

m a c h i n e s a n d t i m e s p e n t d e s i g n i n g t o o l s f o r t h e T o s h i b a

m a c h i n e s ; a n d $ 6

, 0 3 8

, 4 9 2 i n l o s t p r o f i t s

.

T h e j u r y r e t u r n e d a v e r d i c t i n f a v o r o f S P M o n e v e r y c a u s e o f

a c t i o n

. S P M e l e c t e d t o r e c o v e r o n t h e b a s i s o f i t s b r e a c h o f

c o n t r a c t c l a i m , f

o r w h i c h t h e j u r y a w a r d e d S P M $ 3

, 0 0 3

, 6 1 3
f o r e a c h m a c h i n e , f

o r a t o t a l o f $ 6

, 0 0 7

, 2 2 6

. T h e i s s u e o f

a t t o r n e y 's f

e e s w a s s u b m i t t e d t o t h e t r i a l c o u r t b y a g r e e m e n t o f

t h e p a r t i e s

. T h e t r i a l c o u r t f o u n d t h a t S P M w a s e n t i t l e d t o $ 1

. 5

m i l l i o n i n a t t o r n e y 's f

e e s t h r o u g h t h e d a t e o f j u d g m e n t
, p l u s

a d d i t i o n a l f

e e s i f T o s h i b a u n s u c c e s s f u l l y a p p e a l e d t h e t r i a l

c o u r t 's j u d g m e n t

. T h e t r i a l c o u r t a l s o f o u n d t h a t S P M w a s

e n t i t l e d t o p r e j u d g m e n t i n t e r e s t b e g i n n i n g o n t h e d a y S P M
f i l e d s u i t t h r o u g h t h e d a t e o f j u d g m e n t

. B o t h p a r t i e s a p p e a l e d

.

I I I

. D i s c u s s i o n A

. T o s h i b a ' s I s s u e s

1

. D i d S P M a c c e p t t h e m a c h i n e s a s a m a t t e r o f l a w ?
A t h r e s h o l d q u e s t i o n i n t h i s c a s e , a n d k e y t o s e v e r a l o f
T o s h i b a 's i s s u e s , i s w h e t h e r S P M a c c e p t e d o r r e j e c t e d t h e T o s h i b a m a c h i n e s

. T h e j u r y f o u n d t h a t S P M a c c e p t e d b u t l a t e r

r e v o k e d i t s a c c e p t a n c e o f t h e B M C

– 1 0 0 0 a n d f a i l e d t o f

i n d

t h a t S P M a c c e p t e d t h e B M C

– 8 0 0

. I n i t s s e c o n d * 7 7 1 i s s u e , T o s h i b a a r g u e s t h a t t h e r e i s n o e v i d e n c e t o s u p p o r t t h e j u r y 's
f i n d i n g t h a t S P M r e v o k e d i t s a c c e p t a n c e o f t h e B M C

– 1 0 0 0

,
a n d t h e r e i s c o n c l u s i v e e v i d e n c e t h a t S P M a c c e p t e d t h e B M C

– 8 0 0

. T h e g i s t o f T o s h i b a 's a r g u m e n t i s t h a t S P M 's

e x t e n s i v e u s e o f t h e B M C m a c h i n e s

— 1 7

, 0 0 0 h o u r s o f u s e

o v e r f o u r y e a r s

— c o n s t i t u t e s a c c e p t a n c e a n d p r e c l u d e s

r e v o c a t i o n o f a c c e p t a n c e a s a m a t t e r o f l a w

. W e d i s a g r e e

.

a
. S t a n d a r d s o f r e v i e w

( 1 ) N o e v i d e n c e W e r e v i e w t h e j u r y 's f

i n d i n g t h a t S P M r e v o k e d i t s a c c e p t a n c e

o f t h e B M C

– 1 0 0 0 u n d e r t h e “ n o e v i d e n c e ” s t a n d a r d

. I n d e t e r m i n i n g a “ n o e v i d e n c e ” i s s u e , w e a r e t o c o n s i d e r o n l y t h e

e v i d e n c e a n d i n f

e r e n c e s t h a t t e n d t o s u p p o r t t h e f i n d i n g o f t h e d i s p u t e d f

a c t a n d d i s r e g a r d a l l e v i d e n c e a n d i n f e r e n c e s t o t h e

c o n t r a r y

. B r a d

f o r d v

. V e n t o , 4 8 S

. W

. 3 d 7 4 9

, 7 5 4 ( T e x

. 2 0 0 1 ) ; C o n t ' l C o

f f e e P r o d s

. C o

. v

. C a z a r e z , 9 3 7 S

. W

. 2 d 4 4 4

, 4 5 0 ( T e x

. 1 9 9 6 ) ; I

n r e K i n g '

s E s t a t e , 1 5 0 T e x

. 6 6 2

, 2 4 4 S

. W

. 2 d
6 6 0

, 6 6 1 ( 1 9 5 1 )

. A n y t h i n g m o r e t h a n a s c i n t i l l a o f e v i d e n c e i s l e g a l l y s u f

f i c i e n t t o s u p p o r t t h e f

i n d i n g

. C o n t ' l C o

f f e e , 9 3 7
S

. W

. 2 d a t 4 5 0 ; L e i t c h v

. H o r n s b y , 9 3 5 S

. W

. 2 d 1 1 4

, 1 1 8 ( T e x

. 1 9 9 6 )

. M o r e t h a n a s c i n t i l l a o f e v i d e n c e e x i s t s i f t h e

e v i d e n c e f

u r n i s h e s s o m e r e a s o n a b l e b a s i s f o r d i f f e r i n g

c o n c l u s i o n s b y r e a s o n a b l e m i n d s a b o u t t h e e x i s t e n c e o f a v i t a l
f a c t

. R o c o r I

n t ' l

, I n c

. v

. N a t ' l U n i o n F i r e I

n s

. C o

. , 7 7 S

. W

. 3 d
2 5 3

, 2 6 2 ( T e x

. 2 0 0 2 )

. A “ n o e v i d e n c e ” i s s u e m a y o n l y b e

s u s t a i n e d w h e n ( 1 ) t h e r e c o r d d i s c l o s e s a c o m p l e t e a b s e n c e o f

e v i d e n c e o f a v i t a l f

a c t
, ( 2 ) t h e c o u r t i s b a r r e d b y r u l e s o f l a w

o r o f e v i d e n c e f

r o m g i v i n g w e i g h t t o t h e o n l y e v i d e n c e o f f e r e d

t o p r o v e a v i t a l f

a c t
, ( 3 ) t h e e v i d e n c e o f f e r e d t o p r o v e a v i t a l
f a c t i s n o m o r e t h a n a m e r e s c i n t i l l a , o r ( 4 ) t h e e v i d e n c e

e s t a b l i s h e s c o n c l u s i v e l y t h e o p p o s i t e o f a v i t a l f a c t

. U n i r o y a l
G o o d r i c h T i r e C o

. v

. M a r t i n e z , 9 7 7 S

. W

. 2 d 3 2 8

, 3 3 4 ( T e x

. 1 9 9 8 )

, c e r t

. d e n i e d

, 5 2 6 U

. S

. 1 0 4 0

, 1 1 9 S

. C t

. 1 3 3 6

, 1 4 3
L

. E d

. 2 d 5 0 0 ( 1 9 9 9 )

.

( 2 ) M a t t e r o f l a w W e r e v i e w t h e j u r y 's f a i l u r e t o f

i n d t h a t S P M a c c e p t e d t h e B M C

– 8 0 0 u n d e r t h e “ a s a m a t t e r o f l a w ” s t a n d a r d

. W h e n a n

a p p e l l a n t a t t a c k s t h e l e g a l s u f f i c i e n c y o f a n a d v e r s e a n s w e r t o

a n i s s u e o n w h i c h h e h a d t h e b u r d e n o f p r o o f

, t h e a p p e l l a n t

m u s t o v e r c o m e t w o h u r d l e s

. Vi c t o r i a B a n k & T r u s t C o

. v

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 2Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

B r a d y , 8 1 1 S

. W

. 2 d 9 3 1

, 9 4 0 ( T e x

. 1 9 9 1 )

. F i r s t
, t h e r e c o r d

m u s t b e e x a m i n e d f

o r e v i d e n c e t h a t s u p p o r t s t h e f i n d i n g , w h i l e i g n o r i n g a l l e v i d e n c e t o t h e c o n t r a r y

. D o w C h e m

. C o

. v

. F r a n c i s , 4 6 S

. W

. 3 d 2 3 7

, 2 4 1 ( T e x

. 2 0 0 1 )

. S e c o n d

, i f t h e r e i s

n o e v i d e n c e t o s u p p o r t t h e f i n d i n g , t h e n t h e e n t i r e r e c o r d m u s t b e e x a m i n e d t o s e e i f t h e c o n t r a r y p r o p o s i t i o n i s e s t a b l i s h e d a s

a m a t t e r o f l a w

. I

d

. ; S t e r n e r v

. M a r a t h o n O i l C o

. , 7 6 7 S

. W

. 2 d
6 8 6

, 6 9 0 ( T e x

. 1 9 8 9 )

. T h e i s s u e s h o u l d b e s u s t a i n e d o n l y i f t h e

c o n t r a r y p r o p o s i t i o n i s c o n c l u s i v e l y e s t a b l i s h e d

. D o w C h e m

. , 4 6 S

. W

. 3 d a t 2 4 1

– 4 2

.

b

. A n a l y s i s [ 1 ] W h e r e g o o d s f

a i l t o c o n f

o r m t o t h e c o n t r a c t
, t h e b u y e r m a y

r e j e c t o r a c c e p t t h e g o o d s

. T e x

. B u s

. & C o m

. C o d e A n n

. §
2

. 6 0 1 ( V e r n o n 1 9 9 4 )

. A b u y e r 's r e j e c t i o n o r a c c e p t a n c e o f

n o n c o n f o r m i n g g o o d s d e t e r m i n e s t h e r e m e d i e s a v a i l a b l e t o h i m

. I d

. § § 2

. 7 1 1

, 2

. 7 1 4 ( V e r n o n 1 9 9 4 ) ; S o u t h w e s t e r n B e l l
T e l

. C o

. v

. F

D P C o r p

. , 8 1 1 S

. W

. 2 d 5 7 2

, 5 7 6 ( T e x

. 1 9 9 1 ) ( o p

.
o n r e h 'g ) ; P a u l M u e l l e r C o

. v

. A l c o n L a b s

. , I n c

. 9 9 3 S

. W

. 2 d
8 5 1

, 8 5 5 ( T e x

. A p p

. - F o r t W o r t h 1 9 9 9

, n o p e t

. )

.

A b u y e r a c c e p t s g o o d s i f h e a g r e e s t o a c c e p t t h e m d e s p i t e t h e i r

n o n c o n f o r m i t y , f a i l s t o m a k e a n e f

f e c t i v e r e j e c t i o n , o r d o e s

a n y a c t i n c o n s i s t e n t w i t h t h e s e l l e r 's o w n e r s h i p

. T e x

. B u s

. &
C o m

. C o d e A n n

. § 2

. 6 0 6 ( V e r n o n 1 9 9 4 )

. W h e r e a b u y e r

a c c e p t s g o o d s w i t h k n o w l e d g e o f a n o n

- c o n f

o r m i t y , * 7 7 2 t h e b u y e r m a y n o t r e v o k e a c c e p t a n c e u n l e s s t h e a c c e p t a n c e w a s

m a d e o n t h e r e a s o n a b l e a s s u m p t i o n t h a t t h e n o n

- c o n f o r m i t y

w o u l d b e s e a s o n a b l y c u r e d

. I d

. § § 2

. 6 0 7 ( b )

, 2

. 6 0 8 ( a ) ( 1 ) ( V e r n o n 1 9 9 4 )

. W h e r e a b u y e r a c c e p t s g o o d s w i t h o u t k n o w l e d g e o f a n o n

- c o n f o r m i t y , t h e b u y e r m a y r e v o k e i t s

a c c e p t a n c e i f a c c e p t a n c e w a s r e a s o n a b l y i n d u c e d e i t h e r b y t h e d i f f i c u l t y o f d i s c o v e r y b e f o r e a c c e p t a n c e o r b y t h e s e l l e r 's

a s s u r a n c e s

. I

d

. § 2

. 6 0 8 ( a ) ( 2 )

.

R e j e c t i o n o f g o o d s m u s t o c c u r w i t h i n a r e a s o n a b l e t i m e a f t e r
t h e i r d e l i v e r y

. I

d

. § 2

. 6 0 2 ( a ) ( V e r n o n 1 9 9 4 )

. L i k e w i s e ,
r e v o c a t i o n o f a c c e p t a n c e m u s t o c c u r a r e a s o n a b l e t i m e a f t e r
t h e b u y e r d i s c o v e r s t h e g r o u n d s f o r r e v o c a t i o n

. I

d

. § 2

. 6 0 8 ( b )

. W h e t h e r r e

j e c t i o n o r r e v o c a t i o n o c c u r r e d w i t h i n a r e a s o n a b l e
t i m e d e p e n d s o n t h e f

a c t s o f a p a r t i c u l a r c a s e

. I d

. § 1

. 2 0 5 ( a ) ( V e r n o n S u p p

. 2 0 0 4

– 0 5 ) ( p r o v i d i n g t h a t “ [ w ] h e t h e r a t i m e f o r
t a k i n g a n a c t i o n r e q u i r e d b y t h i s t i t l e i s r e a s o n a b l e d e p e n d s o n
t h e n a t u r e , p u r p o s e , a n d c i r c u m s t a n c e s o f t h e a c t i o n

. ” ) ; P u r n e l l v

. G u a r

. B a n k

, 6 2 4 S

. W

. 2 d 3 5 7

, 3 5 9 ( T e x

. A p p

. - D a l l a s 1 9 8 1

, w r i t r e f 'd n

. r

. e

. ) ( h o l d i n g t h a t w h e t h e r
t h i r t y

- m o n t h d e l a y p r e c l u d e d r e v o c a t i o n o f a c c e p t a n c e o f
d e f e c t i v e p l e a s u r e b o a t w a s a f a c t q u e s t i o n ) ; D o n '

s M a r i n e , I n c

. v

. H a l d e m a n , 5 5 7 S

. W

. 2 d 8 2 6

, 8 2 9 ( T e x

. A p p

. - C o r p u s C h r i s t i 1 9 7 7

, w r i t r e f

'd n

. r

. e

. )

. A f t e r r e j e c t i o n o r r e v o c a t i o n o f a c c e p t a n c e , a n y e x e r c i s e o f

o w n e r s h i p b y t h e b u y e r w i t h r e s p e c t t o t h e g o o d s i s w r o n g f u l

a s a g a i n s t t h e s e l l e r

. T e x

. B u s

. & C o m

. C o d e A n n

. §
2

. 6 0 2 ( b ) ( 1 )

.

[ 2 ] A s n o t e d a b o v e , t h e g i s t o f T o s h i b a ' s a r g u m e n t i s t h a t S P M 's e x t e n s i v e u s e o f t h e B M C m a c h i n e s

— 1 7

, 0 0 0 h o u r s o f

u s e o v e r f

o u r y e a r s

— c o n s t i t u t e s a c c e p t a n c e a n d p r e c l u d e s

r e v o c a t i o n o f a c c e p t a n c e a s a m a t t e r o f l a w

. A c c o r d i n g t o T o s h i b a , u s e e q u a l s i r r e v o c a b l e a c c e p t a n c e b e c a u s e i t i s a n a c t i n c o n s i s t e n t w i t h T o s h i b a 's o w n e r s h i p u n d e r § 2

. 6 0 6 ( a ) ( 3 ) a n d

a w r o n g f

u l e x e r c i s e o f o w n e r s h i p u n d e r § 2

. 6 0 2 ( b ) ( 1 )

. T o s h i b a c i t e s s e v e r a l T e x a s a n d f o r e i g n c a s e s t o s u p p o r t i t s

a r g u m e n t

. G e n e r a l l y , t h e s e c a s e s s t a n d f o r t h e p r o p o s i t i o n t h a t

a b u y e r w h o e x e r c i s e s d o m i n i o n a n d c o n t r o l o v e r

n o n c o n f o r m i n g g o o d s a c c e p t s t h o s e g o o d s

. S e e , e

. g

. , B a c c h u s I n d u s

. , I n c

. v

. F r o n t i e r M e c h

. C o n t r a c t o r s , 3 6 S

. W

. 3 d 5 7 9

, 5 8 5 ( T e x

. A p p

. - E l P a s o 2 0 0 0

, n o p e t

. ) ( h o l d i n g t h a t b u y e r w h o

m a d e s u b s t a n t i a l r e p a i r s a n d m o d i f i c a t i o n s t o a i r c o n d i t i o n i n g

u n i t s a c c e p t e d t h e m a s a m a t t e r o f l a w ) ; D a n j e e , I n c

. v

. A d d r e s s o g r a

p h M u l t i g r a

p h C o r p

. , 4 4 N

. C

. A p p

. 6 2 6

, 2 6 2
S

. E

. 2 d 6 6 5

, 6 6 9

– 7 0 ( 1 9 8 0 ) ( s t a t i n g i n d i c t a t h a t r e v o c a t i o n n o t

a v a i l a b l e t o b u y e r w h o , w i t h f u l l k n o w l e d g e o f d e f

e c t s , u s e d

p r i n t i n g p r e s s e s f

o r a “ l o n g p e r i o d o f t i m e ” a n d n e v e r

a t t e m p t e d t o r e j e c t t h e m o r r e v o k e a c c e p t a n c e ) ; E x p l o r e r s M o t o r H o m e C o r

p

. v

. A l d r i d

g e , 5 4 1 S

. W

. 2 d 8 5 1

, 8 5 3

– 5 4 ( T e x

. A p p

. - B e a u m o n t 1 9 7 6

, w r i t r e f 'd n

. r

. e

. ) ( h o l d i n g t h a t b u y e r s w h o t r a v e l e d 1 4

, 0 0 0 m i l e s i n m o t o r h o m e o v e r t w o
y e a r s d i d n o t e f

f e c t i v e l y r e

j e c t t h e m o t o r h o m e ) ; B o w e n v

. Y o u n g , 5 0 7 S

. W

. 2 d 6 0 0

, 6 0 3

– 0 4 ( T e x

. A p p

. - E l P a s o 1 9 7 4

, n o

w r i t ) ( h o l d i n g t h a t b u y e r w h o m o v e d i n t o n o n c o n f o r m i n g

m o b i l e h o m e a n d c o n v e r t e d i t s h e a t e r f r o m e l e c t r i c t o g a s

a c c e p t e d t h e h o m e a s a m a t t e r o f l a w )

.

[ 3 ] [ 4 ] B u t t h e c a s e s c i t e d b y T o s h i b a d o n o t g i v e a c o m p l e t e

a n s w e r t o t h e q u e s t i o n o f w h e t h e r “ u s e e q u a l s a c c e p t a n c e ”

u n d e r t h e U C C

. M o s t c o u r t s h a v e i n d i c a t e d t h a t w h e t h e r t h e b u y e r 's c o n t i n u e d u s e o f g o o d s u n d o e s a p u r p o r t e d r e j e c t i o n

o r r e v o c a t i o n o f a c c e p t a n c e d e p e n d s u p o n w h e t h e r t h e u s e w a s

r e a s o n a b l e

. A n d e r s o n o n t h e U n i f o r m C o m m e r c i a l C o d e , §
2

– 6 0 8 : 2 8 1 ( 2 0 0 4 ) ; W i l l i s t o n o n C o n t r a c t s , § § 4 0 : 1 9

, 4 0 : 3 0 ( 4 t h e d

. )

. W h a t c o n s t i t u t e s r e a s o n a b l e u s e i s a q u e s t i o n o f f a c t

t o b e d e c i d e d u n d e r t h e c i r c u m s t a n c e s o f e a c h c a s e , b u t c o u r t s
g e n e r a l l y h o l d t h a t * 7 7 3 u s i n g g o o d s d u r i n g t h e t i m e w h e n t h e

s e l l e r i s p r o m i s i n g o r t r y i n g u n s u c c e s s f u l l y t o c u r e t h e

n o n c o n f o r m i t y w i l l n o t a d v e r s e l y a f f e c t t h e b u y e r 's r i g h t s

. W i l l i s t o n o n C o n t r a c t s , § 4 0 : 3 0 ; s e e A l u m i n u m L i n e P r o d s

. C o

. v

. R o l l s

– R o y c e M o t o r s , I n c

. , 9 8 O h i o A p p

. 3 d 7 5 9

, 6 4 9
N

. E

. 2 d 8 8 7

, 8 9 4 ( 1 9 9 4 ) ( h o l d i n g t h a t b u y e r w a s n o t p r e c l u d e d
f r o m r e v o k i n g a c c e p t a n c e o f a u t o m o b i l e a f

t e r t h r e e y e a r s a n d
1 5

, 0 0 0 m i l e s o f u s e w h e n s e l l e r m a d e r e p e a t e d a t t e m p t s t o

r e p a i r t h e v e h i c l e , a n d b u y e r 's c o n t i n u e d u s e a f t e r r e v o c a t i o n

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 3Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

d i d n o t u n d o r e v o c a t i o n ) ; 2 N o r t h A m

. L i g h t i n g , I n c

. v

. H o p k i n s M f g

. , I n c

. , 3 7 F

. 3 d 1 2 5 3

, 1 2 5 8

– 5 9 ( 7 t h C i r

. 1 9 9 4 ) ( h o l d i n g

s e l l e r 's r e p e a t e d p r o m i s e s t o u p d a t e s o f t w a r e f o r h e a d l i g h t

t e s t i n g a p p a r a t u s j u s t i f i e d b u y e r 's u s e o f a p p a r a t u s d u r i n g
t w o

- y e a r d e l a y i n r e v o k i n g a c c e p t a n c e ) ; W i l k P a v i n g , I n c

. v

. S o u t h w o r t h M i l t o n , I

n c

. , 1 6 2 V t

. 5 5 2

, 6 4 9 A

. 2 d 7 7 8

, 7 8 2 ( 1 9 9 4 ) ( h o l d i n g b u y e r 's c o n t i n u e d u s e o f a s p h a l t p a v i n g

m a c h i n e a f

t e r r e v o c a t i o n o f a c c e p t a n c e w a s r e a s o n a b l e w h e r e
t h e s e l l e r c o n t i n u e d t o a s s u r e b u y e r t h a t s e l l e r c o u l d r e p a i r

m a c h i n e ) ; F o u r S o n s B a k e r y , I n c

. v

. D u l m a n , 5 4 2 F

. 2 d 8 2 9

, 8 3 2 ( 1 0 t h C i r

. 1 9 7 6 ) ( h o l d i n g s e l l e r 's r e p e a t e d a s s u r a n c e s t h a t i t w o u l d f

i x c o m m e r c i a l o v e n j u s t i f i e d c o n t i n u e d u s e o f o v e n

a f t e r r e v o c a t i o n o f a c c e p t a n c e )

. A s t h e S e v e n t h C i r c u i t h e l d i n N o r t h A m e r i c a n L i g h t i n g , a “ u s e e q u a l s a c c e p t a n c e ” a r g u m e n t

c o m e s d a n g e r o u s l y c l o s e t o s u g g e s t i n g a r u l e t h a t w o u l d a l l o w

s e l l e r s t o ‘ l o c k i n ’ p u r c h a s e r s o f g o o d s b y p r o m i s i n g t h e m t h e

m o o n

— o n l y t o b r i n g t h e m b a c k t o e a r t h w h e n t h e y a t t e m p t e d

t o r e v o k e t h e a c c e p t a n c e t h a t t h e y w e r e p e r s u a d e d t o g i v e b e c a u s e o f t h e i r f

a i l u r e t o f

u l l y u n d e r s t a n d a s u b s t a n t i a l d e f e c t

. N o r t h A m

. L i g h t i n g , 3 7 F

. 3 d a t 1 2 5 8

– 5 9

. [ 5 ] [ 6 ] O t h e r f

a c t o r s r e l e v a n t t o a b u y e r 's r e a s o n a b l e u s e o f

n o n c o n f o r m i n g g o o d s i n c l u d e t h e d e g r e e o f e c o n o m i c h a r d s h i p t h e b u y e r w o u l d s u f f e r i f i t d i s c o n t i n u e d u s i n g t h e d e f e c t i v e g o o d s a n d t h e r e a s o n a b l e n e s s o f t h e b u y e r 's u s e a f t e r

r e v o c a t i o n a s a m e t h o d o f m i t i g a t i n g d a m a g e s

. L i a r i k o s v

. M e l l o , 4 1 8 M a s s

. 6 6 9

, 6 3 9 N

. E

. 2 d 7 1 6

, 7 1 9 ( 1 9 9 4 ) ( h o l d i n g
t h a t c o n t i n u e d u s e o f a u t o m o b i l e a f t e r r e v o c a t i o n o f

a c c e p t a n c e w a s r e a s o n a b l e w h e r e b u y e r r e l i e d o n c a r t o r u n h e r b u s i n e s s )

. U s e o f n o n c o n f o r m i n g g o o d s m a y b e t h e m o s t

a p p r o p r i a t e m e a n s o f a c h i e v i n g m i t i g a t i o n u n t i l t h e b u y e r c a n

o b t a i n s u i t a b l e r e p l a c e m e n t s

. F a b l o k M i l l s , I n c

. v

. C o c k e r M a c h

. & F o u n d r

y C o

. , 1 2 5 N

. J

. S u p e r

. 2 5 1

, 3 1 0 A

. 2 d 4 9 1

, 4 9 4 ( 1 9 7 3 ) ( h o l d i n g t w o

- y e a r d e l a y i n r e v o c a t i o n o f

a c c e p t a n c e a n d e x t e n s i v e u s e b y b u y e r o f d e f e c t i v e k n i t t i n g

m a c h i n e s w a s r e a s o n a b l e , d u r i n g w h i c h s e l l e r a t t e m p t e d t o f i x
t h e m a c h i n e s o n m a n y o c c a s i o n s ) ; s e e D e e r e & C o

. v

. J o h n s o n , 2 7 1 F

. 3 d 6 1 3

, 6 1 9

– 2 0 ( 5 t h C i r

. 2 0 0 1 ) ( a p p l y i n g M i s s i s s i p p i l a w a n d h o l d i n g t h a t f a r m e r 's c o n t i n u e d u s e o f
d e f e c t i v e t r a c t o r a f

t e r r e v o k i n g a c c e p t a n c e w a s r e a s o n a b l e b e c a u s e t r a c t o r w a s e s s e n t i a l t o f a r m e r 's w o r k

, r e p l a c e m e n t

w a s d i f f i c u l t t o o b t a i n , a n d f

a r m e r m i t i g a t e d h i s d a m a g e s b y

u s i n g t h e t r a c t o r )

.

I n o u r c a s e , T o s h i b a a g r e e d t o p r o v i d e t h e o r b i t b o r i n g f u n c t i o n w i t h b o t h B M C m a c h i n e s

. S P M 's p r e s i d e n t
, D a n L o w r a n c e , * 7 7 4 t e s t i f i e d t h a t T o s h i b a d e l i v e r e d t h e B M C

– 1 0 0 0 i n M a r c h 1 9 9 8 w i t h o u t t h e s o f t w a r e n e e d e d t o
p e r f o r m o r b i t b o r i n g

. L o w r a n c e t e s t i f i e d t h a t S P M a s k e d
T o s h i b a a b o u t t h e m i s s i n g o r b i t b o r i n g s o f t w a r e s o o n a f

t e r t h e m a c h i n e a r r i v e d

. A c c o r d i n g t o L o w r a n c e , T o s h i b a a s s u r e d

S P M t h a t i t s p r o g r a m m e r w o u l d t r a v e l t o S P M 's f a c t o r y “ v e r y
q u i c k l y ” a n d i n s t a l l t h e s o f t w a r e

. T o s h i b a 's p r o g r a m m e r

a t t e m p t e d b u t f

a i l e d t o i n s t a l l t h e s o f

t w a r e i n A p r i l 1 9 9 8 a n d

a g a i n i n M a y

. L o w r a n c e t e s t i f i e d t h a t a f

t e r t h e p r o g r a m m e r 's
f i r s t a t t e m p t
, L o w r a n c e t o l d T o s h i b a 's a s s i s t a n t g e n e r a l

m a n a g e r , T o n y T a n i

, t h a t S P M w o u l d r e t u r n t h e B M C

– 1 0 0 0
f o r a r e f u n d i f T o s h i b a h a d a n y d o u b t a b o u t i t s a b i l i t y t o m a k e f l u i d e n d s

. C h r i s W a l l

, S P M 's d i r e c t o r o f m a n u f a c t u r i n g ,
a d m i t t e d t h a t S P M a c c e p t e d t h e B M C

– 1 0 0 0 w h e n i t p a i d t h e $ 7 4 2

, 5 0 0 b a l a n c e d u e , b u t L o w r a n c e t e s t i f i e d t h a t S P M p a i d

t h e b a l a n c e o n l y b e c a u s e T o s h i b a a s s u r e d S P M t h a t r e s o l u t i o n

o f t h e o r b i t b o r i n g p r o b l e m w a s “ r i g h t a r o u n d t h e c o r n e r ” a n d

r e f u s e d t o s h i p t h e B M C

– 8 0 0 o t h e r w i s e

.

T o s h i b a d e l i v e r e d t h e B M C

– 8 0 0 i n S e p t e m b e r 1 9 9 8

. L o w r a n c e t e s t i f

i e d t h a t T o s h i b a 's S t e v e O l i p h a n t t o l d h i m t h a t S P M w o u l d r e c e i v e t h e o r b i t b o r i n g s o f t w a r e i m m e d i a t e l y f o l l o w i n g t h e d e b u t o f t h e N X

– 7 6 i n C h i c a g o t h a t s a m e

m o n t h

. C h r i s W a l l t e s t i f i e d t h a t O l i p h a n t t o l d h i m o n S e p t e m b e r 1 8

, 1 9 9 8 t h a t T o s h i b a w a s w o r k i n g o n t h e o r b i t b o r i n g s o f

t w a r e a n d w o u l d d e l i v e r i t i n J a n u a r y o f t h e f o l l o w i n g y e a r

. O n M a y 1 3

, 1 9 9 9

, O l i p h a n t s e n t a m e m o t o S P M ' s G e o r g e R e e v e i n w h i c h h e s t a t e d t h a t T o s h i b a w o u l d
d e l i v e r o r b i t b o r i n g s o f

t w a r e w i t h i n t w o m o n t h s

. G e n e B u r k e s , g e n e r a l m a n a g e r o f M a r u k a U

. S

. A

. , t e s t i f i e d t h a t h e c a l l e d
O l i p h a n t o n S P M 's b e h a l f a t l e a s t a d o z e n t i m e s b e t w e e n J a n u a r y a n d M a y 1 9 9 9

. A c c o r d i n g t o B u r k e s , O l i p h a n t “ k e p t

s a y i n g t h e s o f

t w a r e i s c o m i n g

. ” I n A u g u s t 1 9 9 9

, T o s h i b a

a n n o u n c e d t h a t i t w o u l d n o t d e l i v e r o r b i t b o r i n g s o f t w a r e t o S P M

.

R a y G i l b e r t
, S P M 's v i c e p r e s i d e n t o f f i n a n c e , t e s t i f

i e d t h a t t h e B M C m a c h i n e s w e r e w o r t h l e s s t o S P M w i t h o u t t h e o r b i t b o r i n g f u n c t i o n

. N e v e r t h e l e s s , a s d e t a i l e d l a t e r i n t h i s o p i n i o n

u n d e r t h e i s s u e s o f d a m a g e s a n d m i t i g a t i o n , S P M c u t t h e t i m e

n e e d e d t o m a k e a f

l u i d e n d f

r o m 1 1 5 h o u r s t o 1 0 0 h o u r s b y

m a k i n g w h a t u s e i t c o u l d o f t h e B M C m a c h i n e s , t h o u g h t h e
p r o d u c t i o n t i m e w a s f

a r l o n g e r t h a n t h e f

i f t e e n t o f i f t y h o u r s S P M e x p e c t e d t o a c h i e v e

. I t i s u n d i s p u t e d t h a t S P M u s e d t h e B M C m a c h i n e s f

o r 1 7

, 0 0 0 h o u r s

.

W e n o t e t h a t i t i s u n c l e a r f r o m t h e r e c o r d w h e n a n d h o w S P M

n o t i f i e d T o s h i b a t h a t i t w a s r e v o k i n g i t s a c c e p t a n c e o f t h e B M C

– 1 0 0 0 a n d r e j e c t i n g t h e B M C

– 8 0 0

. B u t T o s h i b a d o e s

n o t c o m p l a i n o f l a c k o f n o t i c e , s o w e w i l l n o t d w e l l o n t h i s
p o i n t

.

W e t u r n t o t h e q u e s t i o n o f S P M 's r e v o c a t i o n o f

a c c e p t a n c e o f

t h e B M C

– 1 0 0 0 u n d e r s e c t i o n 2

. 6 0 8

. T h e n o n

- c o n f o r m i t y

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 4Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

i d e n t i f i e d b y S P M w a s t h e l a c k o f t h e o r b i t b o r i n g f u n c t i o n

. G i l b e r t t e s t i f

i e d t h a t t h e l a c k o f o r b i t b o r i n g s u b s t a n t i a l l y i m p a i r e d t h e B M C

– 1 0 0 0 's v a l u e t o S P M

. T h e j u r y c o u l d

r e a s o n a b l y c o n c l u d e t h a t S P M d i d n o t d i s c o v e r t h e

n o n

- c o n f o r m i t y u n t i l T o s h i b a a n n o u n c e d i n A u g u s t 1 9 9 9 t h a t i t w o u l d n o t d e l i v e r t h e o r b i t b o r i n g s o f t w a r e , a n d t h a t S P M 's
f a i l u r e t o d i s c o v e r t h e n o n

- c o n f o r m i t y w a s i n d u c e d b y T o s h i b a 's m a n y a s s u r a n c e s t h a t i t w o u l d d e l i v e r t h e o r b i t b o r i n g s o f

t w a r e

. B o t h T o s h i b a 's a s s u r a n c e s a n d S P M 's u s e o f

t h e B M C

– 1 0 0 0 t o m i t i g a t e i t s d a m a g e s u n t i l i t c o u l d o b t a i n

r e p l a c e m e n t s t e n d t o s u p p o r t t h e c o n c l u s i o n t h a t S P M 's

e x t e n s i v e u s e o f t h e B M C

– 1 0 0 0 w a s r e a s o n a b l e , b e f o r e a n d

a f t e r S P M r e v o k e d i t s a c c e p t a n c e

. M o r e o v e r , C h r i s W a l l

t e s t i f i e d t h a t r e p l a c e m e n t m a c h i n e s s u i t a b l e t o S P M 's n e e d s

w e r e n o t e a s y t o o b t a i n , a n d t h e r e p l a c e m e n t m a c h i n e s * 7 7 5
S P M u l t i m a t e l y b o u g h t h a d a l o n g l e a d t i m e

. W h e t h e r S P M 's

u s e o f t h e B M C

– 1 0 0 0 w a s r e a s o n a b l e w a s a f a c t q u e s t i o n f

o r
t h e j u r y t o d e c i d e

. T h e e v i d e n c e s u p p o r t s t h e c o n c l u s i o n t h a t S P M 's u s e w a s r e a s o n a b l e

. W e h o l d t h a t t h e r e w a s m o r e t h a n

a s c i n t i l l a o f e v i d e n c e t o s u p p o r t t h e j u r y 's f i n d i n g t h a t S P M

r e v o k e d i t s a c c e p t a n c e o f t h e B M C

– 1 0 0 0

.

W i t h r e g a r d t o t h e B M C

– 8 0 0

, t h e s a m e f a c t o r s

— T o s h i b a 's

r e p e a t e d a s s u r a n c e s o f a n i m m i n e n t f i x , S P M 's u s e o f t h e B M C

– 8 0 0 t o m i t i g a t e i t s d a m a g e s , a n d t h e d i f f i c u l t y o f

o b t a i n i n g r e p l a c e m e n t m a c h i n e s

— t e n d t o j u s t i f y S P M 's u s e o f

,
a n d d e l a y i n r e j e c t i n g , t h e B M C

– 8 0 0

. W e h o l d t h a t t h e r e i s

m o r e t h a n a s c i n t i l l a o f e v i d e n c e t o s u p p o r t t h e j u r y 's f a i l u r e
t o f i n d t h a t S P M a c c e p t e d t h e B M C

– 8 0 0

.

W e o v e r r u l e t h e p a r t o f T o s h i b a 's s e c o n d i s s u e t h a t c o n c e r n s

a c c e p t a n c e o f

t h e B M C m a c h i n e s ( t h e s a m e i s s u e r a i s e s o t h e r

c o m p l a i n t s , w h i c h w e a d d r e s s i n t h e n e x t s e c t i o n o f t h i s

o p i n i o n )

. T h i s c o n c l u s i o n i s t h e s t a r t i n g p o i n t f o r o u r a n a l y s i s

o f T o s h i b a 's o t h e r i s s u e s

.

2

. D i d T o s h i b a b r e a c h t h e c o n t r a c t s ?
A l s o i n i t s s e c o n d i s s u e , T o s h i b a c o n t e n d s t h a t e v e n i f S P M

r e j e c t e d t h e m a c h i n e s , t h e r e i s n o e v i d e n c e t h a t T o s h i b a b r e a c h e d s a l e s c o n t r a c t s

. T o s h i b a a r g u e s t h a t i t s f a i l u r e t o d e l i v e r o r b i t b o r i n g s o f t w a r e c a n n o t g i v e r i s e t o a b r e a c h o f

c o n t r a c t c l a i m a n d t h a t t h e r e i s n o e v i d e n c e t o s u p p o r t t h e j u r y ' s f i n d i n g t h a t T o s h i b a b r e a c h e d t h e c o n t r a c t s

. A s a

s u b i s s u e , T o s h i b a a r g u e s t h a t A d d e n d u m A t o t h e B M C

– 1 0 0 0

c o n t r a c t w a s n o t a p a r t o f t h e a g r e e m e n t b e t w e e n T o s h i b a a n d
S P M a n d t h e r e f

o r e c o u l d n o t g i v e r i s e t o a b r e a c h o f c o n t r a c t

c l a i m

.

a
. W a s A d d e n d u m A p a r t o f t h e c o n t r a c t ? [ 7 ] T h e j u r y f

o u n d t h a t T o s h i b a a n d S P M i n t e n d e d t o “ b i n d t h e m s e l v e s t o a n a g r e e m e n t r e g a r d i n g t h e B M C

– 1 0 0 0 t h a t i n c l u d e d a l l p r o v i s i o n s c o n t a i n e d i n A d d e n d u m A ” t o S P M 's

p u r c h a s e o r d e r

. T o s h i b a a r g u e s t h a t t h e r e i s n o e v i d e n c e t o

s u p p o r t t h e j u r y 's f

i n d i n g

.

T o s h i b a r e l i e s o n s e c t i o n 2

. 2 0 7 o f t h e T e x a s B u s i n e s s a n d
C o m m e r c e C o d e

. T e x

. B u s

. & C o m

. C o d e A n n

. § 2

. 2 0 7 ( V e r n o n 1 9 9 4 )

. S e c t i o n 2

. 2 0 7

, c a p t i o n e d “ A d d i t i o n a l T e r m s i n A c c e p t a n c e o r C o n f i r m a t i o n ” a n d o f

t e n r e f e r r e d t o a s t h e

“ b a t t l e o f t h e f

o r m s ” s e c t i o n o f t h e U C C

, p r o v i d e s i n p a r t a s f o l l o w s :

( a ) A d e f

i n i t e a n d s e a s o n a b l e e x p r e s s i o n o f a c c e p t a n c e o r a

w r i t t e n c o n f

i r m a t i o n w h i c h i s s e n t w i t h i n a r e a s o n a b l e t i m e

o p e r a t e s a s a n a c c e p t a n c e e v e n t h o u g h i t s t a t e s t e r m s

a d d i t i o n a l t o o r d i f

f e r e n t f r o m t h o s e o f

f e r e d o r a g r e e d u p o n ,
u n l e s s a c c e p t a n c e i s e x p r e s s l y m a d e c o n d i t i o n a l o n a s s e n t t o
t h e a d d i t i o n a l o r d i f

f e r e n t t e r m s

.

( b ) T h e a d d i t i o n a l t e r m s a r e t o b e c o n s t r u e d a s p r o p o s a l s f o r

a d d i t i o n t o t h e c o n t r a c t

. B e t w e e n m e r c h a n t s s u c h t e r m s b e c o m e p a r t o f t h e c o n t r a c t u n l e s s :

( 1 ) t h e o f

f e r e x p r e s s l y l i m i t s a c c e p t a n c e t o t h e t e r m s o f t h e

o f f e r ;

( 2 ) t h e y m a t e r i a l l y a l t e r i t ; o r

( 3 ) n o t i f i c a t i o n o f o b j e c t i o n t o t h e m h a s a l r e a d y b e e n g i v e n o r i s g i v e n w i t h i n a r e a s o n a b l e t i m e a f t e r n o t i c e o f t h e m i s

r e c e i v e d

.

( c ) C o n d u c t b y b o t h p a r t i e s w h i c h r e c o g n i z e s t h e e x i s t e n c e o f

a c o n t r a c t i s s u f

f i c i e n t t o e s t a b l i s h a c o n t r a c t f o r s a l e a l t h o u g h

t h e w r i t i n g s o f t h e p a r t i e s d o n o t o t h e r w i s e e s t a b l i s h a

c o n t r a c t

. I n s u c h c a s e t h e t e r m s o f t h e p a r t i c u l a r c o n t r a c t

c o n s i s t o f t h o s e t e r m s o n w h i c h t h e w r i t i n g s o f t h e p a r t i e s

a g r e e , t o g e t h e r w i t h a n y s u p p l e m e n t a r y t e r m s i n c o r p o r a t e d

* 7 7 6 u n d e r a n y o t h e r p r o v i s i o n s o f t h i s t i t l e

.

S i g n i f i c a n t l y , T o s h i b a d o e s n o t a r g u e t h a t M a r u k a 's D e c e m b e r 1 6

, 1 9 9 7 p r o p o s a l t o S P M w a s a n o f f e r

. N o r d o e s T o s h i b a
p o i n t t o a n y o t h e r w r i t i n g t h a t i t c l a i m s w a s a n o f f e r a c c e p t e d
b y S P M 's p u r c h a s e o r d e r

. R a t h e r , T o s h i b a c o n t e n d s t h a t t h i s

c a s e i s g o v e r n e d b y s e c t i o n 2

. 2 0 7 ( c ) ; a c c o r d i n g t o T o s h i b a , t h e w r i t i n g s o f t h e p a r t i e s d o n o t e s t a b l i s h a c o n t r a c t

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 5Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T o s h i b a 's a r g u m e n t f

a i l s b e c a u s e S P M 's p u r c h a s e o r d e r w a s a n

o f f e r t o b u y t h e B M C

– 1 0 0 0

. T h e “ T e r m s a n d C o n d i t i o n s o f
P u r c h a s e ” r e c i t e d o n t h e b a c k o f t h e p u r c h a s e o r d e r s t a t e t h a t
T o s h i b a 's s h i p m e n t o f

t h e B M C

– 1 0 0 0 c o n s t i t u t e s a c c e p t a n c e

o f t h e p u r c h a s e o r d e r

. T h e r e f o r e , T o s h i b a a c c e p t e d t h e
p u r c h a s e o r d e r w h e n i t s h i p p e d t h e B M C

– 1 0 0 0 t o S P M

. T h e

“ T e r m s a n d C o n d i t i o n s o f P u r c h a s e ” a l s o s t a t e t h a t a c c e p t a n c e

o f t h e p u r c h a s e o r d e r i s a c c e p t a n c e o f a l l t e r m s o n t h e f r o n t

a n d b a c k o f

t h e p u r c h a s e o r d e r

. A n d t h e m e r g e r c l a u s e o n t h e b a c k o f t h e p u r c h a s e o r d e r r e c i t e s t h a t “ [ t ] h i s p u r c h a s e o r d e r ,

a n d a n y d o c u m e n t s r e

f e r r e d t o o n t h e f

a c e h e r e o

f

, c o n s t i t u t e
t h e e n t i r e a g r e e m e n t b e t w e e n t h e p a r t i e s

. ” ( E m p h a s i s a d d e d

. )
T h e f r o n t o f t h e p u r c h a s e o r d e r s p e c i f i c a l l y r e f

e r s t o A d d e n d u m A

. G e o r g e R e e v e , t h e S P M e m p l o y e e w h o
g e n e r a t e d t h e p u r c h a s e o r d e r a n d A d d e n d u m A

, t e s t i f i e d t h a t h e d i s c u s s e d t h e s p e c i f i c t e r m s o f t h e a d d e n d u m w i t h
T o s h i b a 's O l i p h a n t a n d M a r u k a 's D a v e n p o r t d u r i n g a
t h r e e

- h o u r p h o n e c o n f e r e n c e o n D e c e m b e r 9

, 1 9 9 8 a n d t h a t
T o s h i b a n e v e r o b j e c t e d t o t h e A d d e n d u m A t e r m s a f t e r i t

r e c e i v e d t h e p u r c h a s e o r d e r

. W e h o l d t h a t S P M a d d u c e d m o r e
t h a n a s c i n t i l l a o f e v i d e n c e t o s u p p o r t t h e j u r y 's f i n d i n g t h a t A d d e n d u m A w a s p a r t o f t h e c o n t r a c t

.

b

. I s t h e r e a n y e v i d e n c e o f b r e a c h ? [ 8 ] N e x t
, T o s h i b a a r g u e s t h a t t h e r e i s n o e v i d e n c e t o s u p p o r t

t h e j u r y 's f

i n d i n g t h a t i t b r e a c h e d t h e c o n t r a c t s

. I n t h e s a m e

s u b i s s u e , T o s h i b a c l a i m s t h a t i t s d e l i v e r y o f t h e B M C

m a c h i n e s t o S P M p r e c l u d e s a b r e a c h o f c o n t r a c t c l a i m , e v e n i f t h e m a c h i n e s w e r e m i s s i n g c r i t i c a l f e a t u r e s

. W e d i s a g r e e

.

[ 9 ] [ 1 0 ] T h e r e m e d i e s a v a i l a b l e t o a b u y e r u n d e r t h e U C C
d e p e n d o n w h e t h e r t h e b u y e r a c c e p t s o r r e j e c t s t h e g o o d s i n
q u e s t i o n

. S e e T e x

. B u s

. & C o m

. C o d e A n n

. § § 2

. 7 1 1

, 2

. 7 1 4

. I f a b u y e r r e j e c t s g o o d s ( o r r e v o k e s a c c e p t a n c e )

, t h e b u y e r i s

e n t i t l e d t o t h e r e m e d i e s s e t f o r t h i n s e c t i o n s 2

. 7 1 1 a n d 2

. 7 1 3

. I d

. § 2

. 7 1 3 ( V e r n o n 1 9 9 4 )

. I f

, o n t h e o t h e r h a n d

, a b u y e r

a c c e p t s g o o d s , t h e b u y e r 's r e m e d y i s d e t e r m i n e d b y s e c t i o n 2

. 7 1 4

. B e c a u s e a b u y e r c a n n o t a c c e p t w h a t a s e l l e r d o e s n o t d e l i v e r , d e l i v e r y o f g o o d s i s a n e c e s s a r y p r e d i c a t e t o

a c c e p t a n c e o r r e

j e c t i o n ; b u t d e l i v e r y b y i t s e l f d o e s n o t d e t e r m i n e t h e b u y e r 's r e m e d i e s

. A s s u m i n g t h e s e l l e r d e l i v e r s

s o m e t h i n g , t h e b u y e r 's a c c e p t a n c e o r r e j e c t i o n d e t e r m i n e s t h e b u y e r 's r e m e d i e s

.

I t i s u n d i s p u t e d t h a t T o s h i b a d e l i v e r e d t h e B M C m a c h i n e s t o S P M

. T h e j u r y f

o u n d t h a t S P M r e

j e c t e d t h e B M C

– 8 0 0 a n d

r e v o k e d i t s a c c e p t a n c e o f t h e B M C

– 1 0 0 0

. T h e q u e s t i o n , t h e n , i s w h e t h e r S P M p r o d u c e d a n y e v i d e n c e t o s u p p o r t t h e j u r y 's
f i n d i n g t h a t T o s h i b a b r e a c h e d t h e c o n t r a c t s

. [ 1 1 ] A s e l l e r b r e a c h e s a c o n t r a c t i f i t s d e l i v e r y f a i l s i n a n y

r e s p e c t t o c o n f

o r m t o t h e c o n t r a c t

. I d

. § 2

. 6 0 1

. T h i s i s

s o m e t i m e s r e f

e r r e d t o a s t h e “ p e r f

e c t t e n d e r ” r u l e

. T

e x

. I m p s

.

v

. A l l d a y , 6 4 9 S

. W

. 2 d 7 3 0

, 7 3 7 ( T e x

. A p p

. - T y l e r 1 9 8 3

, w r i t

r e f 'd n

. r

. e

. )

. C o n f

o r m i t y d o e s n o t m e a n s u b s t a n t i a l

p e r f o r m a n c e ; i t m e a n s c o m p l e t e p e r f o r m a n c e

. P r i n t i n g C t r

. , I n c

. v

. S u

p e r m i n d P u b l '

g C o

. , 6 6 9 S

. W

. 2 d 7 7 9

, 7 8 3 ( T e x

. A p p

. - H o u s t o n [ 1 4 t h D i s t

. ] 1 9 8 4

, n o w r i t )

.

* 7 7 7 S P M i d e n t i f

i e s f o u r s p e c i f

i c c o n t r a c t i t e m s t h a t T o s h i b a f a i l e d t o d e l i v e r : t h e o r b i t b o r i n g s o f t w a r e , t o o l l i s t s a n d p a r t

p r o g r a m s , p r o c e s s c y c l e t i m e s t u d i e s , a n d a t e s t r u n

- o f f o f a f l u i d e n d

. S P M o f

f e r e d e v i d e n c e t h a t T o s h i b a f a i l e d t o d e l i v e r
t h e s e i t e m s

. E x c e p t f

o r t h e o r b i t b o r i n g s o f

t w a r e , T o s h i b a d o e s

n o t d i s p u t e i t s f

a i l u r e t o d e l i v e r t h e s e i t e m s

. T h e r e f o r e , S P M

p r o d u c e d a t l e a s t s o m e e v i d e n c e t o s h o w t h a t T o s h i b a 's
d e l i v e r y d i d n o t c o n f

o r m t o t h e c o n t r a c t i n a l l r e s p e c t s

.

W e h o l d t h a t T o s h i b a 's d e l i v e r y o f t h e B M C m a c h i n e s d o e s

n o t p r e c l u d e S P M 's b e a c h o f c o n t r a c t c l a i m s a n d t h a t t h e r e i s

s o m e e v i d e n c e t o s u p p o r t t h e j u r y 's f i n d i n g s t h a t T o s h i b a b r e a c h e d t h e c o n t r a c t s

. W e o v e r r u l e T o s h i b a 's s e c o n d i s s u e

.

3

. D a m a g e s T o s h i b a ' s f

i r s t
, f o u r t h

, s i x t h

, s e v e n t h

, a n d e l e v e n t h i s s u e s

c o m p l a i n a b o u t v a r i o u s a s p e c t s o f S P M 's d a m a g e s

.

a
. I s t h e r e a n y e v i d e n c e t o s u p p o r t S P M ' s l o s t p r o f i t s ? [ 1 2 ] I n i s s u e 7 a , 3 T o s h i b a c o m p l a i n s t h a t t h e r e i s n o e v i d e n c e
t o s u p p o r t S P M 's c l a i m o f l o s t p r o f i t s

. I n i t s c l o s e l y

- r e l a t e d
i s s u e 4

, T o s h i b a c o m p l a i n s t h a t t h e t r i a l c o u r t e r r e d b y

a d m i t t i n g t h e t e s t i m o n y o f S P M 's d a m a g e w i t n e s s , R a y G i l b e r t
, o n t h e q u e s t i o n o f l o s t p r o f i t

. W e d i s a g r e e

.

[ 1 3 ] [ 1 4 ] [ 1 5 ] [ 1 6 ] [ 1 7 ] [ 1 8 ] [ 1 9 ] A p a r t y s e e k i n g t o r e c o v e r l o s t p r o f i t s m u s t p r o v e t h e l o s s t h r o u g h c o m p e t e n t e v i d e n c e

w i t h r e a s o n a b l e c e r t a i n t y

. S z c z e p a n i k v

. F i r s t S o u t h e r n T r u s t C o

. , 8 8 3 S

. W

. 2 d 6 4 8

, 6 4 9 ( T e x

. 1 9 9 4 ) ; Vi n g C a r d A

. S

. v

. M e r r i m a c H o s

p i t a l i t y S y s

. , I n c

. , 5 9 S

. W

. 3 d 8 4 7

, 8 6 3 ( T e x

. A p p

. - F o r t W o r t h 2 0 0 1

, p e t

. d e n i e d )

. W h i l e t h i s t e s t i s a f l e x i b l e o n e i n o r d e r t o a c c o m m o d a t e t h e m y r i a d

c i r c u m s t a n c e s i n w h i c h c l a i m s f o r l o s t p r o f

i t s a r i s e , a t a

m i n i m u m , o p i n i o n s o r e s t i m a t e s o f l o s t p r o f i t s m u s t b e b a s e d

o n o b j e c t i v e f

a c t s , f i g u r e s , o r d a t a f

r o m w h i c h t h e a m o u n t o f
l o s t p r o f

i t s c a n b e a s c e r t a i n e d

. T e x

. I n s t r u m e n t s , I

n c

. v

. T e l e t r o n E n e r

g y M g m t

. , I n c

. , 8 7 7 S

. W

. 2 d 2 7 6

, 2 7 9 ( T e x

. 1 9 9 4 ) ; S

z c z e p a n i k

, 8 8 3 S

. W

. 2 d a t 6 4 9 ; Vi n g C a r d A

. S

. , 5 9 S

. W

. 3 d a t 8 6 3

. I n o t h e r w o r d s , “ r e a s o n a b l e c e r t a i n t y ” i s n o t d e m o n s t r a t e d w h e n t h e p r o f i t s c l a i m e d t o b e l o s t a r e l a r g e l y

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 6Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

s p e c u l a t i v e o r a m e r e h o p e f o r s u c c e s s , a s f

r o m a n a c t i v i t y d e p e n d e n t o n u n c e r t a i n o r c h a n g i n g m a r k e t c o n d i t i o n s , o n

c h a n c y b u s i n e s s o p p o r t u n i t i e s , o r o n p r o m o t i o n o f u n t e s t e d

p r o d u c t s o r e n t r y i n t o u n k n o w n o r u n p r o v e n e n t e r p r i s e s

. T e l e t r o n E n e r

g y M g m t

. , I n c

. , 8 7 7 S

. W

. 2 d a t 2 7 9

– 8 0 ; V i n g C a r d A

. S

. , 5 9 S

. W

. 3 d a t 8 6 3

. T h e m e r e a s s e r t i o n t h a t

c o n t r a c t s w e r e l o s t d o e s n o t d e m o n s t r a t e a r e a s o n a b l y c e r t a i n

o b j e c t i v e d e t e r m i n a t i o n o f l o s t p r o f i t s

. H o l t A t h e r t o n I

n d u s

. , I n c

. v

. H e i n e , 8 3 5 S

. W

. 2 d 8 0

, 8 5 ( T e x

. 1 9 9 2 )

. W h e t h e r

e v i d e n c e i s s p e c u l a t i v e o r r e a s o n a b l y c e r t a i n i s a f a c t u a l i s s u e

w i t h i n t h e e x c l u s i v e p r o v i n c e o f t h e j u r y t o d e t e r m i n e

. Vi n g C a r d A

. S

. , 5 9 S

. W

. 3 d a t 8 6 3

. R e a s o n a b l y c e r t a i n l o s t

p r o f i t s m a y b e p r o v e d b y r e l y i n g o n s u c h f a c t o r s a s ( 1 ) t h e

e x p e r i e n c e o f t h e b u s i n e s s p r i n c i p a l s , ( 2 ) t h e n a t u r e o f t h e b u s i n e s s , ( 3 ) t h e n a t u r e o f t h e m a r k e t
, ( 4 ) t h e n a t u r e o f t h e

c l i e n t b a s e , ( 5 ) t h e s a l e s f o r c e , ( 6 ) t h e m a r k e t i n g p l a n , a n d ( 7 )

t h e c o m p a n y 's t r a c k r e c o r d o f s a l e s

. I d

. a t 8 6 4

. F o r e x a m p l e ,
w h e n a b u s i n e s s i s a l r e a d y e s t a b l i s h e d a n d m a k i n g a p r o f i t a t

t h e t i m e t h e c o n t r a c t w a s b r e a c h e d o r t h e t o r t c o m m i t t e d

, p r e

- e x i s t i n g p r o f

i t
, t o g e t h e r w i t h o t h e r f a c t s a n d

c i r c u m s t a n c e s , m a y i n d i c a t e w i t h r e a s o n a b l e c e r t a i n t y t h e

a m o u n t o f p r o f

i t s l o s t

. T

e l e t r o n E n e r

g y M g m t

. , I n c

. , 8 7 7
S

. W

. 2 d a t 2 7 9 ; * 7 7 8 A n t h o n y E q u i p

. C o r p

. v

. I r w i n S t e e l
E r e c t o r s , I

n c

. , 1 1 5 S

. W

. 3 d 1 9 1

, 2 0 4 ( T e x

. A p p

. - D a l l a s 2 0 0 3

, p e t

. d i s m 'd )

.

R a y G i l b e r t
, S P M 's v i c e p r e s i d e n t o f f i n a n c e , w a s S P M 's s o l e

w i t n e s s o n d a m a g e s

. T o b e g i n o u r a n a l y s i s , w e w i l l s u m m a r i z e G i l b e r t 's t e s t i m o n y o n t h e q u e s t i o n o f S P M 's l o s t p r o f i t s

.

G i l b e r t b r o k e S P M 's l o s t p r o f i t s i n t o t h r e e c o m p o n e n t s

. F i r s t

w a s t h e i n c r e a s e d c o s t o f p r o d u c i n g t h e 3 4 4 f l u i d e n d s S P M

m a d e i n p a r t o n t h e T o s h i b a m a c h i n e s

. G i l b e r t t e s t i f i e d t h a t i t

t o o k S P M 3 4

, 0 2 5 h o u r s t o p r o d u c e t h e 3 4 4 f l u i d e n d s

. F r o m
t h a t h e s u b t r a c t e d 1 2

, 0 4 0 h o u r s , t h e t i m e i t w o u l d h a v e t a k e n
t o p r o d u c e 3 4 4 f

l u i d e n d s i f t h e T o s h i b a m a c h i n e s c o u l d

p r o d u c e a f

l u i d e n d i n t h i r t y

- f

i v e h o u r s

. G i l b e r t t h e n m u l t i p l i e d

t h e r e m a i n d e r , 2 1

, 9 8 5 h o u r s , b y S P M 's “ s h o p r a t e ” o f $ 1 5 0

p e r h o u r , f

o r a t o t a l o f

$ 3

, 2 9 7

, 7 5 0

. G i l b e r t t e s t i f i e d t h a t $ 1 5 0

p e r h o u r w a s t h e i n d u s t r y s t a n d a r d s h o p r a t e ; h e a l s o p r o d u c e d

c a l c u l a t i o n s t o s h o w t h a t t h e s h o p r a t e w a s r e a s o n a b l y a c c u r a t e f o r S P M

.

G i l b e r t 's s e c o n d c a t e g o r y o f l o s t p r o f i t s s t e m m e d f

r o m t h e

s a l e s o f 2 9 6 f

l u i d e n d s S P M l o s t b e c a u s e i t q u o t e d p r i c e s t o o h i g h o r d e l i v e r y t i m e s t o o l o n g t o s u i t i t s c u s t o m e r s

. G i l b e r t

t e s t i f i e d t h a t S P M l o s t t h e s e s a l e s “ b e c a u s e t h e T o s h i b a s d i d n 't

p e r f o r m a s r e p r e s e n t e d a n d w e h a d t o q u o t e l o n g e r d e l i v e r i e s

a n d o u r p r i c e s w e r e n o t c o m p e t i t i v e b e c a u s e i n s t e a d o f d o i n g i t i n 3 5 h o u r s , w e w e r e u p c l o s e r t o 1 0 0 h o u r s

. ” H e p e r s o n a l l y

c o n t a c t e d c u s t o m e r s w h o c a n c e l l e d o r d e r s o r r e j e c t e d S P M q u o t e s t o a s c e r t a i n w h e t h e r t h e c a n c e l l a t i o n o r r e j e c t i o n w a s d u e t o S P M 's p r i c e o r d e l i v e r y t i m e

. G i l b e r t t h e n m u l t i p l i e d

t h e g r o s s s a l e s l o s t b e c a u s e o f p r i c e o r d e l i v e r y t i m e b y S P M 's
2 8

. 6 8 % p r o f

i t m a r g i n t o c o m p u t e S P M 's n e t l o s t p r o f i t s

. G i l b e r t d e r i v e d t h e p r o f i t m a r g i n f

r o m S P M 's c o n s o l i d a t e d
f i n a n c i a l s t a t e m e n t s f

o r t h e y e a r s 1 9 9 4 t h r o u g h 2 0 0 1

. W h i l e G i l b e r t a d m i t t e d t h a t h e d i d n o t k n o w p r e c i s e l y w h a t p r i c e o r d e l i v e r y t i m e S P M w o u l d h a v e h a d t o q u o t e t o m a k e t h e s a l e s i n q u e s t i o n , h e o p i n e d t h a t S P M w o u l d h a v e m a d e t h e s a l e s i f

t h e T o s h i b a m a c h i n e s c o u l d m a k e a f l u i d e n d i n t h i r t y

- f

i v e h o u r s

. H e a t t r i b u t e d a t o t a l o f $ 2

, 3 6 2

, 8 2 1 i n l o s t p r o f i t s t o l o s t f l u i d e n d s a l e s

.

G i l b e r t 's t h i r d c a t e g o r y o f l o s t p r o f i t a r o s e f r o m l o s t s a l e s o f
f l o w c o n t r o l p r o d u c t s

— v a l v e s , p i p i n g , a n d c o n n e c t i o n s

— t h a t S P M w o u l d h a v e s o l d a s p a r t o f i t s l o s t f l u i d e n d s a l e s

. G i l b e r t

e x a m i n e d S P M ' s s a l e s h i s t o r y t o d e t e r m i n e w h i c h c u s t o m e r s
t y p i c a l l y p u r c h a s e d f

l o w c o n t r o l p r o d u c t s a l o n g w i t h p u m p s

a n d f l u i d e n d s

. H e t e s t i f

i e d t h a t t h e f

l u i d e n d s a l e s S P M l o s t t o
t h o s e c u s t o m e r s w o u l d h a v e g e n e r a t e d a d d i t i o n a l s a l e s o f $ 1

, 3 1 7

, 0 2 2 i n f

l o w c o n t r o l p r o d u c t s

. G i l b e r t m u l t i p l i e d t h e l o s t f l o w c o n t r o l s a l e s b y S P M 's 2 8

. 6 8 p e r c e n t p r o f i t m a r g i n f o r a l o s t n e t p r o f

i t o f $ 3 7 7

, 7 2 1

.

F i n a l l y , G i l b e r t t e s t i f

i e d t h a t S P M h a d t h e s a m e c u s t o m e r b a s e f o r d e c a d e s

. S P M s o l d t h e s a m e p r o d u c t l i n e s “ f o r s o m e t i m e , ”

a n d t h o s e p r o d u c t l i n e s h a d a l w a y s b e e n p r o f i t a b l e

. H e
t e s t i f i e d t h a t S P M h a s t u r n e d a p r o f i t s i n c e a t l e a s t 1 9 9 1

, t h e
y e a r G i l b e r t j o i n e d t h e c o m p a n y

.

[ 2 0 ] [ 2 1 ] [ 2 2 ] T o s h i b a c h a l l e n g e s G i l b e r t 's t e s t i m o n y o n t h r e e
g r o u n d s

. F i r s t
, T o s h i b a a r g u e s t h a t G i l b e r t d i d n o t q u a l i f y a s

a n e x p e r t

. A w i t n e s s i s q u a l i f i e d t o t e s t i f

y a s a n e x p e r t i f h e h a s t h e a p p r o p r i a t e k n o w l e d g e , s k i l l

, e x p e r i e n c e , t r a i n i n g , o r

e d u c a t i o n

. R o b e r t s v

. W i l l i a m s o n , 1 1 1 S

. W

. 3 d 1 1 3

, 1 2 1 ( T e x

. 2 0 0 3 ) ; T e x

. R

. E v i d

. 7 0 2

. T h e d e c i s i o n t o a d m i t e x p e r t

t e s t i m o n y i s w i t h i n t h e t r i a l c o u r t 's d i s c r e t i o n a n d w i l l b e d i s t u r b e d o n a p p e a l o n l y i f t h e r e h a s b e e n a n a b u s e o f t h a t d i s c r e t i o n

. G a m m i l l v

. J a c k W i l l i a m s C h e v r o l e t

, I n c

. , 9 7 2
S

. W

. 2 d 7 1 3

, 7 1 8

– 1 9 ( T e x

. 1 9 9 8 )

. I n t h i s c a s e , t h e s p e c i f i c

s u b j e c t m a t t e r o f G i l b e r t 's * 7 7 9 t e s t i m o n y i s S P M 's d a m a g e s

a r i s i n g f r o m i t s p u r c h a s e o f t h e T o s h i b a m a c h i n e s

. T h e
q u e s t i o n w e c o n s i d e r i s w h e t h e r G i l b e r t h a s s p e c i a l i z e d
k n o w l e d g e t h a t w o u l d a s s i s t t h e j u r y i n u n d e r s t a n d i n g t h a t i s s u e

. S e e H e l e n a C h e m

. C o

. v

. W i l k i n s , 4 7 S

. W

. 3 d 4 8 6

, 5 0 0 ( T e x

. 2 0 0 1 )

.

G i l b e r t e a r n e d a B B A i n a c c o u n t i n g i n 1 9 6 8

. F r o m 1 9 6 8 t o 1 9 9 1 h e w o r k e d a s a n a c c o u n t a n t
, c o n t r o l l e r , a n d v i c e
p r e s i d e n t o f s a l e s a n d f

i n a n c e f o r s e v e r a l c o m p a n i e s

. I n 1 9 9 1

,

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 7Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

G i l b e r t w e n t t o w o r k f o r S P M

, f

i r s t a s v i c e

- p r e s i d e n t a n d

g e n e r a l m a n a g e r w i t h f u l l r e s p o n s i b i l i t y f

o r S P M 's

m a n u f a c t u r i n g , s a l e s , m a r k e t i n g , a n d a c c o u n t i n g , t h e n
g r a d u a l l y n a r r o w i n g h i s f o c u s t o s a l e s a n d a c c o u n t i n g a s S P M 's v i c e p r e s i d e n t o f f i n a n c e

. H e t e s t i f

i e d t h a t h e h a d m o r e
t h a n t h i r t y y e a r s ' e x p e r i e n c e m a n a g i n g t h e f i n a n c i a l a n d

a c c o u n t i n g f

u n c t i o n s o f c o m p a n i e s e n g a g e d i n t h e m a n u f a c t u r e

a n d d i s t r i b u t i o n o f v a r i o u s p r o d u c t s

. A f t e r r e v i e w i n g G i l b e r t 's

t e s t i m o n y a b o u t h i s e d u c a t i o n , w o r k h i s t o r y , e x p e r i e n c e , a n d
f a m i l i a r i t y w i t h S P M 's b u s i n e s s , w e c a n n o t s a y t h a t t h e t r i a l

c o u r t a b u s e d i t s d i s c r e t i o n b y a l l o w i n g G i l b e r t t o t e s t i f y a s a n

e x p e r t a b o u t S P M 's d a m a g e s

.

[ 2 3 ] S e c o n d

, T o s h i b a a r g u e s t h a t t h e t r i a l c o u r t e r r e d b y

a d m i t t i n g G i l b e r t 's t e s t i m o n y a b o u t l o s t s a l e s b e c a u s e i t w a s

r i f e w i t h i n a d m i s s i b l e h e a r s a y

. G i l b e r t t e s t i f i e d t h a t h e
p e r s o n a l l y c o n t a c t e d S P M c u s t o m e r s t o a s c e r t a i n w h y c e r t a i n

s a l e s w e r e l o s t o r c e r t a i n o r d e r s c a n c e l l e d

. T o s h i b a m a d e
t i m e l y h e a r s a y o b j e c t i o n s t o G i l b e r t 's t e s t i m o n y

.

W e r e v i e w a t r i a l c o u r t 's r u l i n g s i n a d m i t t i n g o r e x c l u d i n g

e v i d e n c e u n d e r a n a b u s e o f d i s c r e t i o n s t a n d a r d

. N

a t ' l L i a b

. &
F i r e I n s

. C o

. v

. A l l e n , 1 5 S

. W

. 3 d 5 2 5

, 5 2 7 ( T e x

. 2 0 0 0 )

. W e

m u s t u p h o l d t h e t r i a l c o u r t 's e v i d e n t i a r y r u l i n g i f t h e r e i s a n y l e g i t i m a t e b a s i s i n t h e r e c o r d f o r t h e r u l i n g

. O w e n s

– C o r n i n g F i b e r g l a s C o r p

. v

. M a l o n e , 9 7 2 S

. W

. 2 d 3 5

, 4 3 ( T e x

. 1 9 9 8 )

.

A n e x p e r t m a y r e l y o n i n a d m i s s i b l e f a c t s o r d a t a t o f

o r m a n

o p i n i o n o r i n f

e r e n c e i f t h e f

a c t s o r d a t a a r e o f a t y p e

r e a s o n a b l y r e l i e d u p o n b y e x p e r t s i n t h e p a r t i c u l a r f i e l d

. T e x

. R

. E v i d

. 7 0 3 ; I

n r e A

. J

. L

. , 1 3 6 S

. W

. 3 d 2 9 3

, 3 0 1 ( T e x

. A p p

. - F o r t
W o r t h 2 0 0 4

, n o p e t

. )

. W e c a n n o t t h i n k o f a m o r e a p p r o p r i a t e

m e t h o d t o d e t e r m i n e w h y s a l e s w e r e l o s t t h a n t o a s k t h e

c u s t o m e r

. W e h o l d t h a t t h e t r i a l c o u r t d i d n o t a b u s e i t s d i s c r e t i o n b y a d m i t t i n g t h i s t e s t i m o n y

.

[ 2 4 ] F i n a l l y , T o s h i b a a r g u e s t h a t G i l b e r t 's t e s t i m o n y a b o u t l o s t

s a l e s w a s p u r e l y s p e c u l a t i v e b e c a u s e G i l b e r t f a i l e d t o d e t e r m i n e w h a t p r i c e o r d e l i v e r y t i m e w o u l d h a v e i n d u c e d
S P M 's c u s t o m e r s t o b u y f l u i d e n d s f

r o m S P M

. W e f

i n d n o

c a s e l a w t o s u p p o r t T o s h i b a 's a r g u m e n t

. M e a s u r i n g l o s t p r o f i t s i s a n i n h e r e n t l y s p e c u l a t i v e u n d e r t a k i n g

. P e n a v

. L u d w i g , 7 6 6
S

. W

. 2 d 2 9 8

, 3 0 1 ( T e x

. A p p

. - W a c o 1 9 8 9

, n o w r i t )

. I n F o r m o s a P l a s t i c s C o r

p

. U S A v

. P r e s i d i o E n g i n e e r s a n d C o n t r a c t o r s , I n c

. , t h e S u p r e m e C o u r t o f T e x a s h e l d t h a t a h y p o t h e t i c a l b i d
f o r a c o n s t r u c t i o n p r o j e c t w a s “ e n t i r e l y s p e c u l a t i v e ” a n d
l e g a l l y i n s u f

f i c i e n t t o s u p p o r t a n a w a r d o f l o s t p r o f i t s b e c a u s e
t h e r e w a s n o e v i d e n c e t h a t t h e b i d w o u l d h a v e b e e n a c c e p t e d

. 9 6 0 S

. W

. 2 d 4 1

, 5 0 ( T e x

. 1 9 9 7 )

. B u t o u r c a s e i s r e a d i l y d i s t i n g u i s h a b l e f

r o m F o r m o s a P l a s t i c s

. I n t h a t c a s e , t h e r e w a s e v i d e n c e t h a t t w o o f t h e t h r e e o t h e r b i d s o n t h e s a m e p r o j e c t

w e r e l o w e r t h a n t h e c l a i m a n t 's h y p o t h e t i c a l b i d ; t h u s , t h e

a l l e g e d l o s t p r o f

i t s “ w e r e b a s e d o n a n e n t i r e l y h y p o t h e t i c a l

,
s p e c u l a t i v e b a r g a i n t h a t w a s n e v e r s t r u c k a n d w o u l d n o t h a v e b e e n c o n s u m m a t e d

. ” I

d

. T h e r e i s n o s u c h e v i d e n c e i n o u r c a s e

. M o r e o v e r , t h e l o s t s a l e s t o w h i c h G i l b e r t t e s t i f i e d c o n c e r n e d

t h e l o s s o f s a l e s o f p r o v e n p r o d u c t s t o e x i s t i n g c u s t o m e r s

. W e h o l d t h a t G i l b e r t ' s t e s t i m o n y r e g a r d i n g l o s t s a l e s w a s n o t s o

s p e c u l a t i v e a s t o b e l e g a l l y i n s u f f i c i e n t

.

* 7 8 0 I n s u m , G i l b e r t t e s t i f i e d t h a t S P M l o s t p r o f i t s o f $ 6

, 0 3 8

, 2 9 2

. A s n o t e d a b o v e , S P M a l s o c l a i m e d $ 9 7 0

, 0 0 0 i n i n c i d e n t a l d a m a g e s

. T h e j u r y a w a r d e d S P M a t o t a l o f $ 6

, 0 0 7

, 2 2 6 o n i t s b r e a c h o f c o n t r a c t c l a i m s

. E v e n i f w e

a s s u m e t h a t t h e j u r y b a s e d i t s a w a r d s o l e l y o n S P M 's l o s t

p r o f i t s , w e h o l d t h a t G i l b e r t 's t e s t i m o n y p r e s e n t e d m o r e t h a n

a s c i n t i l l a o f e v i d e n c e t o s u p p o r t t h e j u r y 's v e r d i c t

. G i l b e r t 's

t e s t i m o n y e s t a b l i s h e d S P M 's l o s t p r o f i t s t o a r e a s o n a b l e

c e r t a i n t y

. W e o v e r r u l e T o s h i b a 's i s s u e s 4 a n d 7 a

.

b

. D i d S P M ' s d a m a g e m o d e l r e s u l t i n a d o u b l e r e c o v e r y ? [ 2 5 ] I n i t s s i x t h i s s u e , T o s h i b a a r g u e s t h a t t w o o f S P M 's
d a m a g e e l e m e n t s

— l o s t p r o f i t s d u e t o i n c r e a s e d p r o d u c t i o n

c o s t s a n d l o s t p r o f

i t s d u e t o l o s t s a l e s

— o v e r l a p , a n d t o a l l o w S P M t o r e c o v e r b o t h r e s u l t s i n a n i m p e r m i s s i b l e d o u b l e

r e c o v e r y

. W e d i s a g r e e

.

T o s h i b a a r g u e s , a n d w e a g r e e , t h a t b o t h o f G i l b e r t 's l o s t p r o f i t

c a l c u l a t i o n s h i n g e o n t h e s p e e d o f t h e T o s h i b a m a c h i n e s

. A s d e t a i l e d a b o v e , S P M 's G i l b e r t t e s t i f i e d t h a t S P M i n c u r r e d

m o r e c o s t s a n d l o s t p r o f i t s o n t h e f

l u i d e n d s a c t u a l l y p r o d u c e d
b e c a u s e t h e T o s h i b a m a c h i n e s w e r e s l o w e r t h a n e x p e c t e d

. L i k e w i s e , S P M l o s t s a l e s b e c a u s e i t q u o t e d h i g h e r p r i c e s a n d
l o n g e r d e l i v e r y t i m e s t o i t s c u s t o m e r s b a s e d o n t h e s l o w e r t h a n

e x p e c t e d s p e e d o f t h e T o s h i b a m a c h i n e s

. H a d t h e m a c h i n e s
p e r f o r m e d a s e x p e c t e d

, S P M w o u l d h a v e r e a l i z e d a h i g h e r
p r o f i t o n t h e f

l u i d e n d s a c t u a l l y m a d e a n d s o l d a n d r e a l i z e d

a d d i t i o n a l s a l e s

. B u t w e d i s a g r e e w i t h T o s h i b a t h a t t h e f a c t

t h a t b o t h d a m a g e e l e m e n t s a r i s e f r o m t h e s p e e d o f t h e T o s h i b a

m a c h i n e s n e c e s s a r i l y m e a n s t h a t t h e e l e m e n t s o v e r l a p

.

T o s h o w t h a t t h e e l e m e n t s o v e r l a p , T o s h i b a a r g u e s t h a t t h e

e x t r a h o u r s n e e d e d t o m a k e t h e f l u i d e n d s a c t u a l l y p r o d u c e d

a r e t h e s a m e h o u r s S P M w o u l d h a v e u s e d t o m a k e a d d i t i o n a l
f l u i d e n d s f

o r a d d i t i o n a l s a l e s

. T h i s m a y b e t r u e , b u t i t m i s s e s
t h e p o i n t

. T o s h i b a c o n f u s e s t h e i s s u e s o f t i m e a n d p r o f i t

. T h e h o u r s m i g h t b e t h e s a m e , b u t t h e d o l l a r s a r e d i f f e r e n t

. U n d e r G i l b e r t 's a n a l y s i s , i f t h e T o s h i b a m a c h i n e s h a d p e r f o r m e d a s

e x p e c t e d

, S P M w o u l d h a v e s a v e d t i m e a n d r e a l i z e d m o r e
p r o f i t o n e a c h o f t h e f

l u i d e n d s a c t u a l l y p r o d u c e d

. W i t h t h e

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 8Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

t i m e s a v e d

, S P M c o u l d a l s o h a v e m a d e a n d s o l d m o r e f l u i d

e n d s a n d m a d e a d d i t i o n a l p r o f i t

. T h e t i m e u s e d t o m a k e f l u i d

e n d s i s t h e s a m e , b u t t h e l o s t p r o f i t s a r e s e p a r a t e a n d d i s t i n c t

.

W e o v e r r u l e T o s h i b a 's i s s u e s i x

.

c
. D i d t h e t r i a l c o u r t e r r b y s u b m i t t i n g b r o a d

- f o r m d a m a g e q u e s t i o n s ? [ 2 6 ] I n i t s e l e v e n t h i s s u e , T o s h i b a a r g u e s t h a t t h e t r i a l c o u r t

e r r e d i n f

a i l i n g t o s u b m i t d a m a g e q u e s t i o n s t h a t p r o v i d e d

s e p a r a t e b l a n k s f

o r e a c h e l e m e n t o f S P M 's d a m a g e m o d e l

. W e d i s a g r e e

.

[ 2 7 ] T o s h i b a 's c o m p l a i n t a b o u t t h e d a m a g e s u b m i s s i o n t u r n s

o n t h e p r o p o s i t i o n t h a t a t r i a l c o u r t c o m m i t s r e v e r s i b l e e r r o r

w h e r e i t s u b m i t s a b r o a d

- f o r m d a m a g e i s s u e t h a t i n c o r p o r a t e s

a n e l e m e n t o f d a m a g e s o n w h i c h t h e r e i s n o e v i d e n c e

. H a r r i s C o u n t y v

. S m i t h

, 9 6 S

. W

. 3 d 2 3 0

, 2 3 4 ( T e x

. 2 0 0 2 )

. S u c h a

s u b m i s s i o n p r e v e n t s t h e a p p e l l a t e c o u r t f r o m d e t e r m i n i n g

w h e t h e r t h e j u r y b a s e d i t s v e r d i c t o n a n i m p r o p e r l y s u b m i t t e d

e l e m e n t o f d a m a g e

. I

d

. T o s h i b a i d e n t i f

i e s l o s t p r o f

i t s a s t h e

e l e m e n t o f d a m a g e l a c k i n g e v i d e n t i a r y s u p p o r t

.

T o s h i b a 's a r g u m e n t f

a i l s b e c a u s e w e h a v e a l r e a d y c o n c l u d e d

t h a t t h e r e i s l e g a l l y s u f f i c i e n t e v i d e n c e t o s u p p o r t t h e j u r y 's

a w a r d

, e v e n i f t h e e n t i r e a w a r d c o n s i s t s o f l o s t p r o f i t s

. W e

o v e r r u l e T o s h i b a 's e l e v e n t h i s s u e

.

* 7 8 1 d

. M a y S P M r e c o v e r b o t h i t s p u r c h a s e m o n e y a n d

c o n s e q u e n t i a l d a m a g e s ?
I n i t s f i r s t i s s u e , T o s h i b a a r g u e s t h a t a p a r t y c l a i m i n g b r e a c h

o f c o n t r a c t m a y n o t r e c o v e r b o t h t h e p u r c h a s e m o n e y p a i d

u n d e r t h e c o n t r a c t

— w h a t T o s h i b a c a l l s “ r e s c i s s i o n d a m a g e s ”

— a n d c o n s e q u e n t i a l d a m a g e s

. B u t S P M 's p u r c h a s e

m o n e y w a s n o t s u b m i t t e d t o t h e j u r y a s a n e l e m e n t o f S P M 's

c o n t r a c t d a m a g e s

. T h e r e f o r e , T o s h i b a 's f

i r s t i s s u e i s m o o t
, a n d

w e n e e d n o t c o n s i d e r i t

. S e e T e x

. R

. A p p

. P

. 4 7

. 1

.

4

. D i d S P M f a i l t o m i t i g a t e i t s d a m a g e s ?
I n i s s u e 7 b

, T o s h i b a a r g u e s t h a t t h e t r i a l c o u r t e r r e d b y

a w a r d i n g d a m a g e s t h a t S P M c o u l d h a v e a v o i d e d b y c o v e r o r

m i t i g a t i o n

. T o s h i b a c l a i m s t h a t S P M d i d n o t h i n g t o m i t i g a t e i t s l o s s e s a n d t h e r e f

o r e i s b a r r e d f

r o m r e c o v e r i n g a n y

c o n s e q u e n t i a l d a m a g e s

.

[ 2 8 ] [ 2 9 ] A b u y e r m a y r e c o v e r c o n s e q u e n t i a l d a m a g e s t h a t

c o u l d n o t r e a s o n a b l y b e p r e v e n t e d b y c o v e r

. T e x

. B u s

. & C o m

. C o d e A n n

. § 2

. 7 1 5 ( b ) ( 1 ) ( V e r n o n 1 9 9 4 )

. A f t e r a b r e a c h
b y t h e s e l l e r , t h e b u y e r m a y “ c o v e r ” b y m a k i n g , i n g o o d f a i t h

a n d w i t h o u t u n r e a s o n a b l e d e l a y , a n y r e a s o n a b l e p u r c h a s e o f

g o o d s i n s u b s t i t u t i o n f o r t h o s e d u e f

r o m t h e s e l l e r

. I

d

. §
2

. 7 1 2 ( a )

. T o d e t e r m i n e i f a b u y e r e f

f e c t e d a p r o p e r a t t e m p t a t

c o v e r , w e c o n s i d e r “ w h e t h e r a t t h e t i m e a n d p l a c e t h e b u y e r

a c t e d i n g o o d f

a i t h a n d i n a r e a s o n a b l e m a n n e r

. . . . ” I d

. § 2

. 7 1 2

,
c m t 2

. “ [ I ] t i s i m m a t e r i a l t h a t h i n d s i g h t m a y l a t e r p r o v e t h a t

t h e m e t h o d o f c o v e r u s e d w a s n o t t h e c h e a p e s t o r m o s t

e f f e c t i v e

. ” I

d

. T h e b u r d e n o f

e s t a b l i s h i n g t h a t d a m a g e s c o u l d

n o t h a v e b e e n r e a s o n a b l y p r e v e n t e d b y c o v e r i s o n t h e
p l a i n t i f f

. W i l s o n v

. H a y s , 5 4 4 S

. W

. 2 d 8 3 3

, 8 3 6 ( T e x

. C i v

. A p p

. - W a c o 1 9 7 6

, w r i t r e f 'd n

. r

. e

. )

.

[ 3 0 ] [ 3 1 ] M i t i g a t i o n o f d a m a g e s i s a r u l e r e q u i r i n g t h e i n j u r e d

p a r t y t o u s e r e a s o n a b l e d i l i g e n c e t o m i n i m i z e h i s d a m a g e s

. L T V A e r o s

p a c e C o r

p

. v

. B a t e m a n , 4 9 2 S

. W

. 2 d 7 0 3

, 7 0 9 ( T e x

. C i v

. A p p

. - T y l e r 1 9 7 3

, w r i t r e f 'd n

. r

. e

. )

. T h o u g h

m i t i g a t i o n i s s i m i l a r t o c o v e r , t h e b u r d e n o f d i s p r o v i n g

m i t i g a t i o n l i e s w i t h t h e d e f e n d a n t

.

T h e t r i a l c o u r t s u b m i t t e d t h e i s s u e s o f c o v e r a n d m i t i g a t i o n t o
t h e j u r y a s l i m i t i n g i n s t r u c t i o n s o n t h e b r e a c h o f c o n t r a c t d a m a g e q u e s t i o n s , a s f

o l l o w s :

D o n o t i n c l u d e i n y o u r a n s w e r s a n y l o s s y o u f i n d S P M c o u l d h a v e a v o i d e d b y t h e e x e r c i s e

o f r e a s o n a b l e c a r e

. D o n o t i n c l u d e i n y o u r

a n s w e r a n y l o s s t h a t o c c u r r e d a f t e r t h e d a t e
t h a t r e p l a c e m e n t m a c h i n i n g c e n t e r s c o u l d h a v e b e e n r e a s o n a b l y o b t a i n e d a n d i n s t a l l e d b y S P M

.

T o s h i b a 's a r g u m e n t o n c o v e r a m o u n t s t o a

n o

- e v i d e n c e i s s u e ; i t s a r g u m e n t o n m i t i g a t i o n i s a

c o n c l u s i v e e v i d e n c e i s s u e

. U n d e r e i t h e r s t a n d a r d

, w e

m u s t a f f i r m i f t h e r e i s m o r e t h a n a s c i n t i l l a o f

e v i d e n c e i n S P M 's f

a v o r

.

[ 3 2 ] W i t h r e g a r d t o c o v e r , S P M p r o d u c e d e v i d e n c e

a t t r i a l t o s h o w t h a t i t p u r c h a s e d t w o G o s s T r e v i s a n

m a c h i n e s a s c o v e r w h e n i t b e c a m e c l e a r t h a t t h e T o s h i b a m a c h i n e s w o u l d n o t p e r f o r m a s r e p r e s e n t e d

. O n c e b o t h G o s s T r e v i s a n m a c h i n e s w e r e f u l l y

o p e r a t i o n a l

, S P M s t o p p e d u s i n g t h e T o s h i b a

m a c h i n e s

. T h i s i s s o m e e v i d e n c e o f t h a t S P M m a d e

r e a s o n a b l e e f

f o r t s t o l i m i t i t s c o n s e q u e n t i a l d a m a g e s

a n d i s e n o u g h t o s u p p o r t t h e j u r y 's a w a r d

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 1 9Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

[ 3 3 ] W i t h r e g a r d t o m i t i g a t i o n , S P M p r o d u c e d

e v i d e n c e t o s h o w t h a t i t l i m i t e d i t s d a m a g e s b y u s i n g
t h e T o s h i b a m a c h i n e s t o t h e e x t e n t p o s s i b l e

. A l t h o u g h t h e T o s h i b a m a c h i n e s d i d n o t p e r f o r m a s

e x p e c t e d

, t h e y c u t t h e t i m e i t t o o k S P M t o m a k e a f l u i d e n d f

r o m 1 1 5 h o u r s t o 1 0 0 h o u r s

. T h i s f i f t e e n h o u r s a v i n g s , w h e n * 7 8 2 m u l t i p l i e d b y S P M 's s h o p

r a t e o f $ 1 5 0 p e r h o u r , y i e l d e d a r e d u c t i o n i n S P M 's
d a m a g e s o f $ 2

, 2 5 0 p e r f l u i d e n d

. G i l b e r t 's d a m a g e

c o m p u t a t i o n p r o p e r l y a c c o u n t e d f o r t h i s s a v i n g s

.

T o s h i b a a r g u e s t h a t b y u s i n g t h e T o s h i b a m a c h i n e s , S P M a g g r a v a t e d i t s d a m a g e s , n o t m i t i g a t e d t h e m

. T o s h i b a r e a s o n s t h a t S P M 's d a m a g e m o d e l

m u l t i p l i e d t h e n u m b e r o f h o u r s S P M u s e d t h e T o s h i b a m a c h i n e s b y t h e s h o p r a t e ; t h u s e v e r y h o u r S P M u s e d t h e T o s h i b a m a c h i n e s i n c r e a s e d S P M 's
d a m a g e s b y $ 1 5 0

. B u t S P M c l a i m e d n o s u c h t h i n g

. S P M c l a i m e d a s d a m a g e s t h e d i f f e r e n c e b e t w e e n 1 0 0 h o u r s

— t h e t i m e i t a c t u a l l y t o o k a m a k e a f l u i d

e n d w i t h t h e h e l p o f t h e T o s h i b a m a c h i n e s

— a n d

t h i r t y

- f i v e h o u r s

— t h e t i m e T o s h i b a s a i d i t w o u l d

t a k e t h e m a c h i n e s t o m a k e a f l u i d e n d

— a n d

m u l t i p l i e d t h e d i f

f e r e n c e b y S P M 's $ 1 5 0 p e r h o u r

s h o p r a t e

. I f S P M h a d n o t u s e d t h e T o s h i b a

m a c h i n e s , i t s d a m a g e s w o u l d h a v e b e e n t h e d i f f e r e n c e b e t w e e n 1 1 5 h o u r s a n d t h i r t y

- f i v e h o u r s ,
m u l t i p l i e d b y t h e $ 1 5 0 p e r h o u r s h o p r a t e

. T h u s , b y

u s i n g t h e T o s h i b a m a c h i n e s , S P M m i t i g a t e d i t s d a m a g e s b y $ 2

, 2 5 0

— 1 5 h o u r s t i m e s t h e s h o p

r a t e

— f o r e v e r y f

l u i d e n d p r o d u c e d

.

W e h o l d t h a t S P M p r e s e n t e d s o m e e v i d e n c e o n t h e
q u e s t i o n o f c o v e r a n d t h a t T o s h i b a f a i l e d t o p r o v e

c o n c l u s i v e l y t h a t S P M d i d n o t m i t i g a t e i t s d a m a g e s

. W e o v e r r u l e T o s h i b a 's i s s u e 7 b

.

5

. D i d t h e t r i a l c o u r t e r r i n a w a r d i n g a t t o r n e y ' s f e e s t o S P M ?
I n i t s e i g h t h i s s u e , T o s h i b a c o m p l a i n s t h a t t h e t r i a l

c o u r t e r r e d b y a w a r d i n g a t t o r n e y 's f e e s t o S P M

. T o s h i b a 's c o m p l a i n t h a s t w o c o m p o n e n t s : F i r s t
, t h a t S P M i s n o t e n t i t l e d t o a t t o r n e y 's f e e s b e c a u s e i t d i d

n o t p r e v a i l o n i t s b r e a c h o f c o n t r a c t c l a i m ; a n d

s e c o n d

, t h a t t h e t r i a l c o u r t i m p e r m i s s i b l y e n h a n c e d
S P M 's “ l o d e s t a r ” a t t o r n e y 's f e e s

.

[ 3 4 ] [ 3 5 ] [ 3 6 ] A p a r t y m a y r e c o v e r r e a s o n a b l e

a t t o r n e y 's f

e e s f o r a v a l i d b r e a c h o f c o n t r a c t c l a i m

. T e x

. C i v

. P r a c

. & R e m

. C o d e A n n

. § 3 8

. 0 0 1 ( V e r n o n 1 9 9 7 )

. T e x a s c o u r t s w e i g h t h e e i g h t f a c t o r s r e c i t e d
i n r u l e 1

. 0 4 o f t h e r u l e s o f p r o f e s s i o n a l c o n d u c t t o d e t e r m i n e t h e r e a s o n a b l e n e s s a n d n e c e s s i t y o f

a t t o r n e y 's f

e e s

. T e x

. D i s c i p l i n a r y R

. P r o f 'l C o n d u c t 1

. 0 4 ( b )

, r e p r i n t e d i n T e x

. G o v 't C o d e A n n

. , t i t

. 2

,
s u b t i t

. G

, a p p

. A ( V e r n o n 2 0 0 5 ) ( T e x

. S t a t e B a r R

.
a r t

. X § 9 ) ; M i l l e r v

. K e n n e d y & M i n s h e w , P r o

f

. C o r p

. , 1 4 2 S

. W

. 3 d 3 2 5

, 3 3 6

– 3 7 ( T e x

. A p p

. - F o r t
W o r t h 2 0 0 3

, p e t

. d e n i e d )

. T h o s e f a c t o r s a r e ( 1 ) t h e
t i m e a n d l a b o r r e q u i r e d

, t h e n o v e l t y a n d d i f f i c u l t y o f

t h e q u e s t i o n s i n v o l v e d

, a n d t h e s k i l l r e q u i r e d t o
p e r f o r m t h e l e g a l s e r v i c e s p r o p e r l y ; ( 2 ) t h e l i k e l i h o o d t h a t t h e a c c e p t a n c e o f t h e p a r t i c u l a r

e m p l o y m e n t w i l l p r e c l u d e o t h e r e m p l o y m e n t b y t h e l a w y e r ; ( 3 ) t h e f

e e c u s t o m a r i l y c h a r g e d i n t h e l o c a l i t y f

o r s i m i l a r l e g a l s e r v i c e s ; ( 4 ) t h e a m o u n t i n v o l v e d a n d t h e r e s u l t s o b t a i n e d ; ( 5 ) t h e t i m e l i m i t a t i o n s i m p o s e d b y t h e c l i e n t o r b y t h e

c i r c u m s t a n c e s ; ( 6 ) t h e n a t u r e a n d l e n g t h o f t h e
p r o f e s s i o n a l r e l a t i o n s h i p w i t h t h e c l i e n t ; ( 7 ) t h e

e x p e r i e n c e , r e p u t a t i o n , a n d a b i l i t y o f t h e l a w y e r o r l a w y e r s p e r f

o r m i n g t h e s e r v i c e s ; a n d ( 8 ) w h e t h e r t h e f e e i s f i x e d o r c o n t i n g e n t o n r e s u l t s o b t a i n e d o r

u n c e r t a i n t y o f c o l l e c t i o n b e f o r e t h e l e g a l s e r v i c e s h a v e b e e n r e n d e r e d

. M i l l e r , 1 4 2 S

. W

. 3 d a t 3 3 6

– 3 7

. O n e m e t h o d o f c o m p u t i n g a r e a s o n a b l e f e e i s t h e

“ l o d e s t a r ” m e t h o d

, o r “ t h e p r o d u c t o f r e a s o n a b l e h o u r s t i m e s a r e a s o n a b l e r a t e

. ” C i t y o f B u r l i n g t o n v

. D a g u e , 5 0 5 U

. S

. 5 5 7

, 5 5 9

, 1 1 2 S

. C t

. 2 6 3 8

, 2 6 4 0

, 1 2 0 L

. E d

. 2 d 4 4 9 ( 1 9 9 2 )

. W e r e v i e w a c o u r t

- o r d e r e d

a w a r d o f a t t o r n e y 's f

e e s u n d e r t h e a b u s e o f d i s c r e t i o n

s t a n d a r d

. R i d

g e O i l C o

. , I

n c

. v

. G u i n n I

n v s

. , I n c

. , 1 4 8 S

. W

. 3 d 1 4 3

, 1 6 3 ( T e x

. 2 0 0 4 )

.

[ 3 7 ] I n t h i s c a s e , t h e i s s u e o f a t t o r n e y 's f e e s w a s

s u b m i t t e d t o t h e t r i a l c o u r t
, * 7 8 3 r a t h e r t h a n t h e j u r y , b y a g r e e m e n t o f t h e p a r t i e s

. S P M 's l e a d c o u n s e l

, M a r s h a l l S e a r c y , t e s t i f i e d a b o u t S P M 's a t t o r n e y 's
f e e s

. S P M ' s f

e e a g r e e m e n t w i t h S e a r c y 's f i r m

c o n s i s t e d o f t h r e e e l e m e n t s

. F i r s t
, S P M p a i d S e a r c y 's
f i r m a f l a t f e e o f $ 1 5 0

, 0 0 0 u p f

r o n t

. S e c o n d

, S P M

a g r e e d t o p a y S e a r c y 's f i r m 5 % o f S P M ' s u l t i m a t e

r e c o v e r y , i f a n y

. T h i r d

, S P M a g r e e d t h a t S e a r c y 's
f i r m c o u l d k e e p a n y a t t o r n e y 's f e e s a w a r d e d b y t h e
t r i a l c o u r t

. S P M a r g u e s t h a t t h i s t h i r d p r o v i s i o n

c o n t e m p l a t e s a f

e e h i g h e r t h a n t h e f

l a t $ 1 5 0

, 0 0 0 p l u s 5 %

, c o n t i n g e n t u p o n w h e t h e r t h e t r i a l c o u r t a w a r d e d

a t t o r n e y 's f

e e s

.

S e a r c y t e s t i f

i e d t h a t t h e s e r v i c e s h i s f i r m r e n d e r e d t o S P M h a d a l o d e s t a r v a l u e o f $ 6 6 7

, 1 1 4

. H e t h e n
t e s t i f i e d t h a t a r e a s o n a b l e f

e e w o u l d b e $ 1

. 5 m i l l i o n

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 0Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T o s u p p o r t a r e a s o n a b l e f e e i n e x c e s s o f t h e l o d e s t a r

v a l u e , S e a r c y t e s t i f

i e d a t l e n g t h a b o u t t h e r u l e 1

. 0 4

e l e m e n t s

. M o s t s i g n i f

i c a n t l y , S e a r c y t e s t i f

i e d t h a t t h e

r i s k h i s f

i r m t o o k o f l o s i n g t h e c a s e a n d r e c e i v i n g

n o t h i n g o v e r i t s $ 1 5 0

, 0 0 0 b a s e f e e j u s t i f i e d t h e $ 1

. 5

m i l l i o n f e e

. H e a l s o t e s t i f

i e d t h a t t h e l o d e s t a r v a l u e

w o u l d r e p r e s e n t a r e a s o n a b l e f e e i f S P M h a d p a i d
h i s f i r m o n a m o n t h l y b a s i s ; b u t s i n c e h i s f i r m h a d t o

w a i t u n t i l t h e c o n c l u s i o n o f t h e c a s e t o c o l l e c t i t s f e e , t h e l o d e s t a r v a l u e w a s i n s u f f i c i e n t

. F i n a l l y , S e a r c y
t e s t i f i e d t h a t $ 1

. 5 m i l l i o n r e p r e s e n t e d a b o u t 2 5 % o f

t h e j u r y 's v e r d i c t

— s i g n i f i c a n t l y l e s s t h a n t h e 3 0 %

– 5 0 % t y p i c a l l y c h a r g e d b y T a r r a n t C o u n t y

a t t o r n e y s i n c o n t i n g e n t f e e c a s e s

.

T h e t r i a l c o u r t m a d e f

i n d i n g s o f f

a c t a n d c o n c l u s i o n s

o f l a w t h a t s p e c i f

i c a l l y t o o k i n t o a c c o u n t t h e r u l e 1

. 0 4 f a c t o r s

. T h e t r i a l c o u r t f

o u n d t h a t t h e f

o l l o w i n g

a t t o r n e y 's f

e e s w e r e r e a s o n a b l e : $ 1

. 5 m i l l i o n t h r o u g h

t h e d a t e o f j u d g m e n t
, p l u s $ 2 0 0

, 0 0 0 i f T o s h i b a i s

u n s u c c e s s f

u l i n t h i s a p p e a l

, p l u s $ 3 5

, 0 0 0 i f T o s h i b a f i l e s a p e t i t i o n f

o r r e v i e w w i t h t h e S u p r e m e C o u r t o f
T e x a s a n d t h e p e t i t i o n i s d e n i e d

, o r $ 6 5

, 0 0 0 i f t h e S u p r e m e C o u r t g r a n t s t h e p e t i t i o n b u t r u l e s a g a i n s t
T o s h i b a o n t h e m e r i t s

. T h e t r i a l c o u r t i n c o r p o r a t e d

t h e s e f e e s i n t o i t s j u d g m e n t

.

T o s h i b a l o d g e s t w o c o m p l a i n t s a b o u t S P M 's

a t t o r n e y 's f

e e s

. F i r s t
, T o s h i b a c o n t e n d s t h a t S P M i s

n o t e n t i t l e d t o a n y a w a r d o f a t t o r n e y 's f e e s b e c a u s e S P M d i d n o t p r e v a i l o n i t s b r e a c h o f c o n t r a c t c l a i m

. W e h a v e a l r e a d y c o n c l u d e d t h a t S P M m a y r e c o v e r f o r b r e a c h o f c o n t r a c t ; t h e r e f o r e , S P M m a y a l s o

r e c o v e r i t s r e a s o n a b l e a t t o r n e y 's f e e s

. S e e T e x

. C i v

. P r a c

. & R e m

. C o d e A n n

. § 3 8

. 0 0 1

.

[ 3 8 ] S e c o n d

, T o s h i b a a r g u e s t h a t t h e t r i a l c o u r t e r r e d
b y a w a r d i n g m o r e t h a n t h e l o d e s t a r a m o u n t

. T o

s u p p o r t t h i s a r g u m e n t
, T o s h i b a c i t e s D a g u e , 5 0 5
U

. S

. a t 5 5 7

, 1 1 2 S

. C t

. a t 2 6 3 8

, a n d P P G I n d u s t r i e s , I n c

. v

. J M B / H o u s t o n C e n t e r s P a r t n e r s L t d

. P ' s h i p , 4 1 S

. W

. 3 d 2 7 0 ( T e x

. A p p

. - H o u s t o n [ 1 4 t h D i s t

. ]
2 0 0 1

, n o p e t

. )

, r e v '

d o n o t h e r g r o u n d s , 1 4 6 S

. W

. 3 d
7 9 ( T e x

. 2 0 0 4 )

. T h e q u e s t i o n i n D a g u e w a s w h e t h e r
t h e a t t o r n e y 's f

e e s s h i f t i n g p r o v i s i o n s o f t h e f e d e r a l
S o l i d W a s t e D i s p o s a l A c t a n d C l e a n W a t e r A c t

p e r m i t t e d “ e n h a n c e m e n t ” o f l o d e s t a r a t t o r n e y 's f

e e s

w h e r e t h e a t t o r n e y 's f

e e s w e r e c o n t i n g e n t

. D a g u e a t
5 5 9

, 1 1 2 S

. C t

. a t 2 6 3 9

. T h e S u p r e m e C o u r t h e l d t h a t

s u c h e n h a n c e m e n t w a s n o t p e r m i t t e d u n d e r t h e

s t a t u t e s i n q u e s t i o n

. I

d

. a t 5 6 7

, 1 1 2 S

. C t

. a t 2 6 4 8

. S i n c e t h i s c a s e i n v o l v e s n e i t h e r o f t h o s e s t a t u t e s , D a g u e o f

f e r s l i t t l e g u i d a n c e a n d i m p o s e s n o

r e s t r i c t i o n s h e r e

. M o r e o v e r , T e x a s c o u r t s

c o n s i s t e n t l y a l l o w t h e u s e o f a m u l t i p l i e r b a s e d u p o n
t h e c o n t i n g e n t n a t u r e o f a f e e u n d e r T e x a s s t a t u t e s

a l l o w i n g r e c o v e r y o f a t t o r n e y 's f e e s

. D i l l a r d D e

p t

. S t o r e s , I

n c

. v

. G o n z a l e s , 7 2 S

. W

. 3 d 3 9 8

, 4 1 3 ( T e x

. A p p

. - E l P a s o 2 0 0 2

, p e t

. d e n i e d )

.

N o r i s T o s h i b a 's a r g u m e n t s u p p o r t e d b y P P G
I n d u s t r i e s

. I n t h a t D T P A c a s e , t h e t r i a l c o u r t

a w a r d e d a “ b o n u s ” o f $ 3 0 0

, 0 0 0 o n t o p o f t h e
p l a i n t i f f 's l o d e s t a r a t t o r n e y 's * 7 8 4 f e e

. P P G I

n d u s

. 4 1 S

. W

. 3 d a t 2 8 5

. T h e c o u r t o f a p p e a l s h e l d t h a t t h e
t r i a l c o u r t h a d n o a u t h o r i t y t o c o n s i d e r t h e r e s u l t

o b t a i n e d a s a b a s i s f

o r a w a r d i n g t h e b o n u s a g a i n s t

t h e d e f e n d a n t

. I d

. B u t t h e c o u r t w e n t o n t o a f f i r m t h e b o n u s b e c a u s e t h e r e w a s s o m e e v i d e n c e , b e s i d e s t h e

r e s u l t o b t a i n e d

, t o s h o w t h a t t h e a t t o r n e y 's f e e , i n c l u d i n g t h e b o n u s , w a s r e a s o n a b l e

. I d

. T h e c o u r t

c o n c l u d e d t h a t t h e t r i a l c o u r t h a d n o t a b u s e d i t s d i s c r e t i o n i n a w a r d i n g t h e b o n u s

. I d

.

I n o u r c a s e , a s i n P P G I n d u s t r i e s , t h e r e i s s o m e

e v i d e n c e t h a t t h e t r i a l c o u r t 's a w a r d o f a t t o r n e y 's f e e s
t o S P M i s r e a s o n a b l e

. W e h o l d t h a t t h e t r i a l c o u r t d i d n o t a b u s e i t s d i s c r e t i o n b y a w a r d i n g t h o s e f e e s t o S P M

. W e o v e r r u l e T o s h i b a 's e i g h t h i s s u e

.

6

. D i d t h e t r i a l c o u r t e r r b y f a i l i n g t o s u b m i t
T o s h i b a ' s c o u n t e r c l a i m t o t h e j u r y ? [ 3 9 ] I n i t s n i n t h a n d t e n t h i s s u e s , T o s h i b a a r g u e s t h a t

t h e t r i a l c o u r t e r r e d b y f a i l i n g t o s u b m i t T o s h i b a 's

c o u n t e r c l a i m t o t h e j u r y a n d f a i l i n g t o d i r e c t t h e

v e r d i c t o n t h e c o u n t e r c l a i m

. T o s h i b a s u e d S P M f o r
t h e u n p a i d b a l a n c e o f t h e B M C

– 8 0 0

. T h e a m o u n t o f

t h e u n p a i d b a l a n c e , $ 6 5 8

, 8 0 0

, w a s n o t d i s p u t e d

.

A b u y e r m u s t p a y a t t h e c o n t r a c t r a t e f o r a n y g o o d s

a c c e p t e d

. T e x

. B u s

. & C o m

. C o d e A n n

. § 2

. 6 0 7 ( a )

. T o s h i b a a r g u e s t h a t i t w a s e n t i t l e d t o a d i r e c t e d

v e r d i c t o n i t s c o u n t e r c l a i m b e c a u s e S P M a c c e p t e d

t h e B M C

– 8 0 0 a s a m a t t e r o f l a w

. B u t t h e j u r y f

a i l e d

t o f i n d t h a t S P M a c c e p t e d t h e B M C

– 8 0 0

, a n d w e h a v e a l r e a d y c o n c l u d e d t h a t T o s h i b a f a i l e d t o p r o v e

a c c e p t a n c e a s a m a t t e r o f l a w

. T h u s , T o s h i b a w a s n o t

e n t i t l e d t o a d i r e c t e d v e r d i c t

.

N o r d i d t h e t r i a l c o u r t e r r b y r e f u s i n g t o s u b m i t

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 1Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

T o s h i b a 's c o u n t e r c l a i m t o t h e j u r y

. S i n c e t h e a m o u n t

o f t h e c o u n t e r c l a i m w a s u n d i s p u t e d

, t h e o n l y
q u e s t i o n f

o r t h e j u r y t o d e c i d e w a s w h e t h e r S P M

a c c e p t e d t h e B M C

– 8 0 0

. I f t h e j u r y h a d f o u n d t h a t S P M a c c e p t e d t h e m a c h i n e a n d d i d n o t r e v o k e i t s

a c c e p t a n c e , T o s h i b a w o u l d b e e n t i t l e d t o j u d g m e n t f o r t h e a m o u n t o f i t s c o u n t e r c l a i m

. B u t b e c a u s e t h e j u r y f a i l e d t o f i n d t h a t S P M a c c e p t e d t h e B M C

– 8 0 0

, S P M i s n o t l i a b l e f

o r t h e u n p a i d b a l a n c e

.

W e o v e r r u l e T o s h i b a 's n i n t h a n d t e n t h i s s u e s

.

7

. S P M ' s n o n
- c o n t r a c t c l a i m s I n i t s t h i r d a n d f

i f t h i s s u e s , T o s h i b a a r g u e s t h a t t h e
t r i a l c o u r t e r r e d b y s u b m i t t i n g S P M 's b r e a c h o f

w a r r a n t y , f

r a u d

, a n d n e g l i g e n t m i s r e p r e s e n t a t i o n

c l a i m s t o t h e j u r y

. B e c a u s e w e a f f i r m t h e j u d g m e n t

o n S P M 's b r e a c h o f c o n t r a c t c l a i m s , w e n e e d n o t

c o n s i d e r t h e s e t w o i s s u e s

. S e e T e x

. R

. A p p

. P

. 4 7

. 1

.

B

. S P M ' s I s s u e : W h e n d i d p r e j u d g m e n t i n t e r e s t
b e g i n t o a c c r u e ?
I n i t s s o l e i s s u e , S P M c o m p l a i n s t h a t t h e t r i a l c o u r t

c h o s e t h e w r o n g d a t e f r o m w h i c h t o c a l c u l a t e
p r e j u d g m e n t i n t e r e s t

. T h e t r i a l c o u r t c h o s e F e b r u a r y 2 9

, 2 0 0 0

, t h e d a t e S P M f i l e d s u i t

. S P M c o n t e n d s t h a t

p r e j u d g m e n t i n t e r e s t b e g a n t o a c c r u e o n M a y 3

, 1 9 9 9

, 1 8 0 d a y s a f

t e r S P M s e n t T o s h i b a w h a t S P M

c l a i m s w a s n o t i c e o f i t s c l a i m s

. T h e d i f f e r e n c e i s

s i g n i f i c a n t ; u s i n g t h e e a r l i e r d a t e y i e l d s a n a d d i t i o n a l $ 4 9 3

, 0 0 0 i n p r e j u d g m e n t i n t e r e s t

.

P r e j u d g m e n t i n t e r e s t a c c r u e s o n t h e a m o u n t o f a j u d g m e n t d u r i n g a p e r i o d t h a t b e g i n s o n t h e e a r l i e r

o f t h e 1 8 0 t h d a y a f

t e r t h e d a t e a d e f

e n d a n t r e c e i v e s

w r i t t e n n o t i c e o f a c l a i m a g a i n s t i t
, o r t h e d a t e t h e

s u i t i s f i l e d

. T e x

. F i n

. C o d e A n n

. § 3 0 4

. 1 0 4 ( V e r n o n S u p p

. 2 0 0 4

– 0 5 )

. A l t h o u g h s e c t i o n 3 0 4

. 1 0 1 s t a t e s t h a t

“ [ t ] h i s s u b c h a p t e r a p p l i e s o n l y t o a w r o n g f u l d e a t h

, p e r s o n a l i n

j u r y , o r p r o p e r t y d a m a g e c a s e , ” t h e S u p r e m e C o u r t o f T e x a s h a s e x t e n d e d t h e n o t i c e
p r o v i s i o n o f s e c t i o n 3 0 4

. 1 0 4 t o a l l c l a i m s

. I d

. §
3 0 4

. 1 0 1 ; J

o h n s o n & H i g g i n s * 7 8 5 o f T e x

. , I n c

. v

. K e n n e c o E n e r

g y , I n c

. , 9 6 2 S

. W

. 2 d 5 0 7

, 5 3 1 ( T e x

. 1 9 9 8 )

.

[ 4 0 ] [ 4 1 ] A “ c l a i m ” u n d e r s e c t i o n 3 0 4

. 1 0 4 i s a d e m a n d f

o r c o m p e n s a t i o n o r a n a s s e r t i o n o f a r i g h t

t o b e p a i d

. M C N E n e r

g y E n t e r s

. , I

n c

. v

. O m a g r o d e C o l o m b i a , L

. D

. C

. , 9 8 S

. W

. 3 d 7 6 6

, 7 7 3 ( T e x

. A p p

. - F o r t W o r t h 2 0 0 3

, p e t

. d e n i e d )

. A c l a i m

n e e d n o t d e m a n d a n e x a c t a m o u n t o r l i s t e v e r y

e l e m e n t o f d a m a g e

. B e v e r s v

. S o u l e , 9 0 9 S

. W

. 2 d
5 9 9

, 6 0 3 ( T e x

. A p p

. - F o r t W o r t h 1 9 9 5

, n o w r i t )

.

1

. S t a n d a r d o f r e v i e w B e f o r e w e t u r n t o t h e m e r i t s o f S P M 's i s s u e , w e m u s t d e t e r m i n e w h a t s t a n d a r d o f r e v i e w t o a p p l y

. I n M C N
E n e r g y E n t e r p r i s e s , w e w r o t e t h a t “ [ t ] h e d a t e f r o m

w h i c h s t a t u t o r y p r e

j u d g m e n t i n t e r e s t s h o u l d b e g i n i s

a q u e s t i o n o f l a w t h a t a n a p p e l l a t e c o u r t m u s t r e v i e w d e n o v o

. ” 9 8 S

. W

. 3 d a t 7 7 3

. W e c i t e d a s a u t h o r i t y f o r t h a t p r o p o s i t i o n J

o h n s o n v

. C i t

y o f F o r t W o r t h

, 7 7 4 S

. W

. 2 d 6 5 3

, 6 5 5

– 5 6 ( T e x

. 1 9 8 9 )

. J o h n s o n d i d

n o t c o n c e r n p r e j u d g m e n t i n t e r e s t ; i n s t e a d

, i t s t a n d s f o r t h e g e n e r a l p r o p o s i t i o n t h a t “ m a t t e r s o f s t a t u t o r y

c o n s t r u c t i o n a r e q u e s t i o n s o f l a w f o r t h e c o u r t t o d e c i d e r a t h e r t h a n i s s u e s o f f a c t

. ” I d

. a t 6 5 6

. I m p l i c i t i n J o h n s o n , a n d n e c e s s a r y t o b r i d g e t h e g a p b e t w e e n J o h n s o n a n d M C

N E n e r g y E n t e r p r i s e s , i s t h e r u l e
t h a t a p p e l l a t e c o u r t s r e v i e w q u e s t i o n s o f l a w d e

n o v o

. S e e , e

. g

. , G r a v e s v

. A l d e r s , 1 3 2 S

. W

. 3 d 1 2

, 1 7 ( T e x

. A p p

. - B e a u m o n t 2 0 0 4

, p e t

. d e n i e d )

.

O n t h e o t h e r h a n d

, w e h e l d t h a t “ [ a ] t r i a l c o u r t 's

a w a r d o f p r e j u d g m e n t i n t e r e s t i s r e v i e w e d u n d e r a n

a b u s e o f d i s c r e t i o n s t a n d a r d ” i n M a n u f a c t u r e r s A u t o L e a s i n g , I

n c

. v

. A u t o

f l e x L e a s i n g , I

n c

. , 1 3 9 S

. W

. 3 d
3 4 2

, 3 4 8 ( T e x

. A p p

. - F o r t W o r t h 2 0 0 4

, p e t

. d e n i e d )

. O u r s i s t e r c o u r t s g e n e r a l l y h o l d t h e s a m e

. 4

[ 4 2 ] T h e S a n A n t o n i o C o u r t o f A p p e a l s d e s c r i b e d

t h e s t a n d a r d o f r e v i e w t h i s w a y :

W e r e v i e w a t r i a l c o u r t 's a w a r d o f p r e j u d g m e n t i n t e r e s t u n d e r t h e a b u s e o f d i s c r e t i o n s t a n d a r d

. [ C i t a t i o n o m i t t e d

. ] U n d e r t h i s s t a n d a r d

, w e w i l l n o t d i s t u r b a t r i a l c o u r t 's f

i n d i n g s o n f

a c t u a l i s s u e s u n l e s s
t h e c o u r t r e a s o n a b l y c o u l d h a v e r e a c h e d o n l y o n e d e c i s i o n a n d i t f

a i l e d t o d o s o

. W

a l k e r v

. P a c k e r , 8 2 7
S

. W

. 2 d 8 3 3

, 8 3 9

– 4 0 ( T e x

. 1 9 9 2 )

. H o w e v e r , “ a t r i a l

c o u r t h a s n o d i s c r e t i o n i n d e t e r m i n i n g w h a t t h e l a w i s o r a p p l y i n g t h e l a w t o t h e f a c t s

. ” I d

. a t 8 4 0

.

J

. C

. P e n n e

y L i f e I n s

. C o

. v

. H e i n r i c h

, 3 2 S

. W

. 3 d
2 8 0

, 2 8 9 ( T e x

. A p p

. - S a n A n t o n i o 2 0 0 0

, p e t

. d e n i e d )

. W e c o n c l u d e t h a t H e i n r i c h c o r r e c t l y a r t i c u l a t e s t h e
g e n e r a l s t a n d a r d f

o r r e v i e w i n g a n a w a r d o f

p r e j u d g m e n t i n t e r e s t

. T h e a b u s e o f d i s c r e t i o n

s t a n d a r d a p p l i e s t o t h e t r i a l c o u r t 's f a c t u a l f i n d i n g s a s

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 2Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

t h e y r e l a t e t o p r e j u d g m e n t i n t e r e s t ; b u t t h e d e n o v o

s t a n d a r d a p p l i e s t o t h e t r i a l c o u r t 's a p p l i c a t i o n o f t h e l a w t o t h e f

a c t s

.

I n t h e c a s e b e f

o r e u s , t h e t r i a l c o u r t 's a w a r d o f

p r e j u d g m e n t i n t e r e s t d o e s n o t h i n g e o n a n y f a c t u a l
f i n d i n g

. I n s t e a d

, t h e i s s u e t u r n s o n t h e i n t e r p r e t a t i o n

o f a s i n g l e l e t t e r f

r o m S P M t o T o s h i b a

. T h e

e x i s t e n c e a n d c o n t e n t s o f t h e l e t t e r a r e n o t i n d i s p u t e

. T h e q u e s t i o n i s w h e t h e r t h e l e t t e r c o n s t i t u t e d n o t i c e

o f S P M 's c l a i m s a s a * 7 8 6 m a t t e r o f l a w

. T h e r e f

o r e ,
a s a p r a c t i c a l m a t t e r , o u r r e v i e w o f t h e p r e j u d g m e n t i n t e r e s t i s s u e i n t h i s c a s e i s d e n o v o

.

2

. F a c t s a n d a n a l y s i s [ 4 3 ] O n N o v e m b e r 4

, 1 9 9 8

, S P M s e n t a l e t t e r t o t h e
p r e s i d e n t o f T o s h i b a M a c h i n e C o

. , L t d

. i n J a p a n

. 5
S P M c o m p l a i n e d t h a t t h e B M C m a c h i n e s

w i l l n o t p e r f

o r m t o t h e s p e c i f

i c a t i o n s i n t h e m a c h i n e l i t e r a t u r e o r a s r e p r e s e n t e d b y T o s h i b a

. . . . [ W ] e a r e

c o n c e r n e d t h a t t h e m a c h i n e s w i l l n e v e r p e r f o r m

c o n s i s t e n t l y t o T o s h i b a 's s p e c i f i c a t i o n s a n d S P M 's

c o n t r a c t r e q u i r e m e n t s

. T h e l e t t e r s u m m a r i z e d t w e n t y

- o n e c o m p l a i n t s a b o u t

t h e B M C m a c h i n e s a n d T o s h i b a 's e a r l i e r r e s p o n s e s
t o t h o s e c o m p l a i n t s

. S P M s t a t e d t h a t i t h a d i n c u r r e d
d a m a g e s o f $ 9 9 8

, 2 5 0 a n d c o n t i n u e d t o i n c u r d a m a g e s a t t h e r a t e o f $ 5

, 7 7 5 f o r e a c h d a y t h e

m a c h i n e s d i d n o t p e r f

o r m

. S P M c o n c l u d e d i t s l e t t e r

w i t h t h e s e w o r d s :

S P M i s p r e p a r e d t o l i t i g a t e t h e i s s u e s i f

n e c e s s a r y

. H o w e v e r , S P M p r e f e r s t o r e s o l v e
t h e i s s u e s i f t h e m a c h i n e s c a n p e r f o r m t o

s p e c i f i c a t i o n a n d c o n t r a c t r e q u i r e m e n t s

. I f t h i s i s n o t a t t a i n a b l e , S P M p r e f e r s t o r e t u r n t h e

m a c h i n e s t o T o s h i b a , w i t h T o s h i b a t o a b s o r b
S P M 's c o s t s

- t o

- d a t e

. S P M c o n t e n d s t h a t t h i s l e t t e r w a s s u f f i c i e n t n o t i c e o f
i t s c l a i m s t o t r i g g e r a c c r u a l o f p r e j u d g m e n t i n t e r e s t 1 8 0 d a y s l a t e r

. T o s h i b a r e s p o n d s t h a t t h e l e t t e r d i d

n o t g i v e n o t i c e o f a c l a i m b e c a u s e i t d i d n o t m a k e a d e m a n d f

o r p a y m e n t o r a s s e r t a r i g h t t o b e p a i d

.

W e l o o k t o s i m i l a r c a s e s f o r g u i d a n c e

. I n B e v e r s , w e h e l d t h a t a s i g n e d m e d i c a l a u t h o r i z a t i o n f o r m , c o u p l e d w i t h a l e t t e r a s k i n g a n i n s u r a n c e c o m p a n y t o

“ p r o p e r l y c o n s i d e r [ p l a i n t i f f 's ] i n j u r y c l a i m , ”

c o n s t i t u t e d n o t i c e

. B e v e r s , 9 0 9 S

. W

. 2 d a t 6 0 3

. T h e T e x a r k a n a c o u r t r e a c h e d t h e s a m e c o n c l u s i o n w h e r e

a p e r s o n a l i n

j u r y p l a i n t i f

f

, a t t h e d e f

e n d a n t 's r e q u e s t
,
s i g n e d a m e d i c a l r e c o r d s r e l e a s e f o r m t h a t s t a t e d

,

“ [ t ] h i s i n f

o r m a t i o n i s t o b e u s e d f o r p u r p o s e s o f

e v a l u a t i n g a n d h a n d l i n g m y c l a i m f o r i n j u r y

. ” K
M a r t C o r

p

. v

. R h y n e , 9 3 2 S

. W

. 2 d 1 4 0

, 1 4 6 ( T e x

. A p p

. - T e x a r k a n a 1 9 9 6

, n o w r i t )

. L i k e w i s e , t h e A u s t i n c o u r t h e l d t h a t a r e q u e s t f r o m a p l a i n t i f

f t o a d e f e n d a n t 's i n s u r a n c e c o m p a n y a s k i n g t h e c o m p a n y
t o p a y c e r t a i n m e d i c a l b i l l s , a n d i n q u i r i n g w h e n h e

w o u l d r e c e i v e h i s n e x t l o s t w a g e s c h e c k

, w a s a

“ c l a i m ” f

o r p u r p o s e s o f p r e

j u d g m e n t i n t e r e s t

. R o b i n s o n v

. B r i c e , 8 9 4 S

. W

. 2 d 5 2 5

, 5 2 9 ( T e x

. A p p

. - A u s t i n 1 9 9 5

, w r i t d e n i e d )

. M o r e r e c e n t l y , t h e B e a u m o n t c o u r t c o n c l u d e d t h a t l e t t e r s r e q u e s t i n g

r e i m b u r s e m e n t f

o r m e d i c a l t r e a t m e n t c o n s t i t u t e d

w r i t t e n n o t i c e o f a c l a i m

. B r o o k s h i r e G r o c e r

y C o

. , 9 9 S

. W

. 3 d a t 8 2 5

.

T h e r e i s a k e y d i s t i n c t i o n b e t w e e n t h o s e c a s e s a n d

t h e c a s e n o w b e f

o r e u s

. I n e a c h o f t h o s e c a s e s , t h e

c l a i m s a s s e r t e d b y t h e w r i t i n g s i n q u e s t i o n w e r e

c e r t a i n a n d u n c o n d i t i o n a l

. T h e w r i t i n g s d i d n o t u r g e
t h e r e c i p i e n t s t o a v o i d a c o n t i n g e n t
, f u t u r e l i a b i l i t y , b u t t o a c c e p t a n a c c r u e d

, e x i s t i n g l i a b i l i t y

. S P M 's
l e t t e r d o e s j u s t t h e o p p o s i t e

. S P M u r g e s T o s h i b a t o

a v o i d a f

u t u r e c l a i m b y c u r i n g t h e d e f e c t s i n t h e B M C m a c h i n e s

. S P M d o e s n o t d e m a n d p a y m e n t o r

a s s e r t a r i g h t t o b e p a i d

. I n s t e a d

, S P M s u g g e s t s t h a t i t w i l l a s s e r t a c l a i m a n d d e m a n d p a y m e n t i n t h e f u t u r e i f T o s h i b a c a n n o t m a k e i t s m a c h i n e s p e r f o r m
t o s p e c i f i c a t i o n

.

W e h o l d t h a t S P M 's N o v e m b e r 4

, 1 9 9 8 l e t t e r d i d n o t

c o n s t i t u t e n o t i c e o f a c l a i m a s a m a t t e r o f l a w

. T h e
t r i a l c o u r t p r o p e r l y * 7 8 7 c o m p u t e d p r e j u d g m e n t i n t e r e s t f r o m t h e d a t e S P M f

i l e d s u i t

. W e o v e r r u l e S P M 's s o l e i s s u e

.

I V

. C o n c l u s i o n W e o v e r r u l e T o s h i b a ' s i s s u e s t w o , f o u r , a n d s i x
t h r o u g h e l e v e n

. W e d o n o t r e a c h T o s h i b a 's i s s u e s

o n e , t h r e e , a n d f

i v e

. W e o v e r r u l e S P M 's s o l e i s s u e

. W e t h e r e f

o r e a f f i r m t h e t r i a l c o u r t 's j u d g m e n t i n a l l

r e s p e c t s

. S e e T e x

. R

. A p p

. P

. 4 3

. 2 ( a )

.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 3Toshib a M ach ine Co., Am eric a v. SPM Flo w Contro l, In c., 180 S.W .3d 761 (200 5)

F o o t n o t e s



## 1 Toshiba sued SP M in Illin ois f or the un paid balance du e on the BMC–8 00 in Novem ber 19 99

. The Illin ois trial court dism issed that suit f or l ack of juri sdictio n.



## 2 Section 1.10 3 of the T exa s Busin ess and Com m erce Cod e states that th e Cod e shou ld be lib erally con strued “to ma

ke uniform

th e law am on g various jurisd iction s.” Te x. Bus. & Com .Cod e A nn

. § 1.1 03 (a)(3 ) ( V er n o n 19 94 ). Section 31 1.0 28 of the Te xas G overnm ent Cod e pro vides that “[a] un iform act

... shall be constru ed

... to m ake un iform the law of tho se states that enact it.” Te x. G ov't Cod e A nn

. § 31 1.0 28 (V ernon 20 05 ). Thus, in determ inin g and appl y ing the Te xas vers ion of the Uniform Com m ercial Cod e,

w e m ay consid er and appl y pertin ent decision s f rom o ther jurisd iction s. Rog ers v. Rican e Enterp ri se s, I n c. 93 0 S.W.2d 15 7, 17 1 (Te x.A pp .-A m arillo1 99 6, w

rit deni ed); Fin. Universal Corp. v. Mer cant ile Nat' l Ban k, 68 3 S.W.2d 81 5, 81 7 (Te x.A pp .-Dallas 19 84

, w rit ref' d n .r.e.).



## 3 Toshiba's “Issues P resented” lists two issues nu m bered “7.” We w ill ref

er to the first as “7a” and th e second, di scussed elsew here in this op inio n, as “7b.”



## 4 See, e .g. , Pro tective Life Ins. Co. v. Ru ssell, 11 9 S .W.3d 27 4, 28 8 (Tex .A pp .-Ty ler 20 03 , p et. d enied); Broo kshire Grocery Co. v. Smith

, 99 S.W.3d 81 9, 82 3 ( Te x.A pp .-Beaum on t 20 03

, pet. deni ed); Wilmer–Hutchin s ISD v. Smiley, 97 S.W.3d 70 2, 70 6 (Te x.A pp .-Dallas 20 03 , p et. d enied); Purcell Con stn., Inc. v. Welch, 17 S.W.3d 39 8, 40 2 (Tex .A pp .-Hou ston [ 1st Dist. ] 20 00 , n o pet.) (“W e revie w

a c hallenge to a trial c ou rt's aw ard of pre-judgm ent interest usin g an abuse of discretion standard

, giv ing lim ited defe rence to the court 's appl ication of the law to the f acts.”); Marsh v. Marsh, 94 9 S.W.2d 73 4, 74 4 (Te x.A pp .-Hou ston [ 14 th Dist.] 19 97 , n o writ).



## 5 Toshiba p oin ts ou t th at the letter is no t addressed to Toshiba Machin e Co., A m erica, b ut to its p arent company , Toshib a Machine Co., Ltd. Bu t Toshib a do es not com plain th at it d id no t receive th e letter, so the letter's addressee is no t a fa ctor in ou r analy sis.

End of Do cum ent © 20 14 Thomson R euters. No clai m t o origin al U.S. Go ver nm ent Wo rks.

© 2 0 1 4 T h o m s o n R e u t e r s

. N o c l a i m t o o r i g i n a l U

. S

. G o v e r n m e n t W o r k s

. 2 4

# V

## TX Rules of Evid ence, R ule 201

Rule 201. Judi cial Notice of Ad judicative F acts

(a) Scope . This rule g overns judicial notice of an a djudicative fa ct only , not a leg islative fac t.

(b) Kinds of

F acts That May Be Judicially Noticed. The c ourt may judicially notice a f act that is not subject to rea sonable dispute bec ause it:

(1) I s g ener ally

known within the trial court' s territorial jurisdiction; or

(2) can be acc urate ly

and re adily

deter mined from sourc es whose a ccur acy cannot r easona

bly be questioned.

(c) Taki ng Notice . The c ourt:

(1) may

take judicial notice on its own; or

(2) must take judicial notice if a party reque sts it and the court is supplied with the nece ssary information.

(d) Timing . The c ourt may take judicial notice at any stag e of the proce eding

.
(e) Opp ortunity to Be Hear d. On timely reque st, a party

is entitled to be hear d on the proprie ty of taking judicial notice and the nature of the fa ct to be noticed. I f the c ourt takes judicial notice befor e notify ing a

party , the par

ty , on reque st, is st ill entitl ed to be he ard.

(f) Instructing the Jury. I n a civil ca se, the c ourt must inst ruct the jury to acc ept the noticed f

act a s conclusive. I n a cr iminal case, the court must instruct the jury that it may

or may not acc ept the noticed fa ct as c onclusive.

Cre dits Eff. Ma rch 1, 1998. A mended by order s of Supreme Court Mar ch 10, 2015 and Court of Criminal Appea ls March 12, 2015, e ff. Apr il 1, 2015.

# W

## V.T.C.A., Civil P ract ice & Rem edies Code § 101.101

§ 101.101. Notice

(a) A g overnme ntal unit is entit led to rec eive notice of a c laim ag ainst it under this chapter not later than six months after the day that the incident g iving r ise to the claim occ urre d. The notice must

rea sonably

descr ibe:

(1) the damag e or injury claimed;

(2) the time and plac e of the incident; and

(3) the incident.

(b) A city ' s char

ter a nd ordinanc e provisions requir ing notice within a char ter pe riod permitted by law ar e ra tified and a

pproved.

(c) The notice require ments provided or r atified a nd approve d by

Subsections (a) a

nd (b) do not apply if the g overnme ntal unit has actua l notice that dea th has occ urre d, that the claimant ha s

rec eived some injury , or that the c laimant' s proper ty has bee n damag ed.

Credits Acts 1985, 69th L eg ., ch. 959, § 1, ef f. Sept. 1, 1985.

# X

## V.T.C.A., G overnm ent Code § 311.011

§ 311.011. Com m on and Technical Usage of Words

(a) Words and phrase s shall be re ad in context and construed a ccor ding to the r ules of
g rammar and common usag e.

(b) Words and phrase s that have a cquire d a tec hnical or pa rticular me aning , whether by leg islative definition or otherwise , shall be construe d acc ording ly

.

Cre dits Acts 1985, 69th L eg ., ch. 479, § 1, ef f. Sept. 1, 1985.