Source: https://www.texascommerciallitigator.blog/
Timestamp: 2019-04-21 13:09:54+00:00

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“It is cheaper to kill a mare than it is to cripple her.” This was considered the law in Texas until the recent Texas Supreme Court decision of J & D Towing, LLC v. Am. Alternative Ins. Corp., 478 S.W.3d 649, 652 (Tex. 2016) involving the question of first impression before the Texas Supreme Court of whether the owner of personal property totally destroyed by another’s negligence is entitled to recover loss of use damages in addition to the fair market value of the destroyed property.
In an effort to explain the history of the right to recover loss of use damages and to make a dry subject interesting, the court begins its analysis by discussing a 1932 Amarillo case in which the owner of a horse that was killed sued the party at fault to recover not only the value of the horse but also the loss of use of the horse since it was used in the owner’s hauling business. That Court held there was no right to recover loss of use damages when property is totally destroyed. See City of Canadian v. Guthrie, 87 S.W.2d 316 (Tex. Civ. App.–Amarillo 1932, no writ). After the Guthrie case, many other Texas courts of appeals followed this rule that, although loss of use damages were recoverable when property was partially damaged, these damages were not recoverable when property was totally destroyed.
The Texas Supreme Court finally settled this issue once and for all. In the J & D Towing case cited above, the plaintiff’s tow truck was destroyed in an accident caused by the negligence of the defendant. The issue of first impression before the court was whether the owner of property destroyed by another’s negligence was entitled to recover loss of use damages from the party at faulty. The Court recognized that under our tort system when a plaintiff sustains damages due to a defendant’s wrongful conduct, i.e. negligence, the plaintiff is entitled to be fully compensated for the damages incurred. Thus, the Court held that the plaintiff was not only entitled to recover damages for the fair market value of the tow truck but also for loss of use of the truck.
The court stated that the owner of property totally destroyed is entitled to recover loss of use damages for the reasonable period the owner is deprived of the vehicle. The court indicated that in these types of cases that, depending upon the circumstances, loss of use damages could be measured by lost profits, the cost to rent replacement property, or the reasonable rental value of the property destroyed.
Thus, if you find yourself haggling with an insurance adjuster over whether loss of use damages are recoverable when your personal property has been totally destroyed, let the adjuster know that in Texas it is no longer cheaper to kill a horse than to maim it.
(See Mercedes-Benz USA, LLC v. Carduco, Inc., supra, at *4). Carduco’s Area of Influence under the agreement included McAllen, Texas.
According to the record, two months after signing the agreement, Mercedes-Benz entered into an agreement with another dealer allowing the dealer to open a Mercedes dealership in McAllen, Texas. After learning of this, Carduco requested authorization from Mercedes to relocate to the McAllen area. Mercedes denied the request.
Carduco sued Mercedes and other related defendants alleging that the defendants fraudulently induced Carduco to believe that Mercedes would give Carduco the opportunity to relocate to McAllen as the exclusive Mercedes dealership. This was apparently based, at least in part, upon discussions that Carduco had with Mercedes representatives prior to entering the Dealer Agreement. After hearing the evidence, the jury found that Mercedes and the other named defendants fraudulently induced Carduco into making the related dealership acquisition, and awarded $15.3 million in actual damages and $100 million in punitive damages against Mercedes. The trial court entered a judgment based upon the jury’s findings. On appeal, the appellate court upheld the award for actual damages and suggested a reduction in the punitive damages award.
Holding. The Texas Supreme Court overturned the judgment based upon the jury verdict and rendered that Carduco take nothing. The court found that in order to recover on a fraud claim, the claimant must show that the claimant justifiably relied upon the alleged improper conduct and actions of the defendant. The court held that a party cannot justifiably rely on improper conduct and actions that directly conflict with the terms of the signed contract. The court held that the terms quoted above in the Dealership Agreement directly contradicted Carduco’s fraudulent inducement claims and Carduco’s reliance upon the alleged misconduct and improper actions of Mercedes was unjustified as a matter of law.
Lessons learned. It is becoming more difficult in Texas for a buyer in a business transaction to recover on fraudulent inducement claims. A seller to a transaction can avoid liability for fraud through carefully drafting the written sale agreement. Buyer’s should specify in the written agreement all terms material to the buyer’s decision to make the purchase.
Background. In the Bombardier case, the plaintiffs sued defendant for breach of contract, breach of warranty, and fraud. In 2010, plaintiffs purchased a Challenger 300 aircraft from defendant for $19,850,000. In the purchase negotiations the plaintiffs specified that the aircraft was to be new. However, the written purchase and aircraft management agreements contained limitation of liability clauses under which the plaintiffs agreed to waive their rights to recover punitive damages.
Subsequent to the purchase, plaintiffs discovered that the aircraft was sold with used engines. The jury awarded the plaintiffs $2,694,160 in actual damages and $5,388,320 in punitive damages. The trial court entered judgment based upon the verdict and the Dallas Court of Appeals affirmed.
Holding. The Texas Supreme Court reversed the Court of Appeals regarding the portion of the judgment awarding $5 million+ in punitive damages on the grounds that the plaintiffs waived their rights under the contracts to recover punitive damages. The Court held that, generally, contractual limitation of damages clauses are valid and enforceable. This is the law even when a party to a contract commits fraud.
Lessons learned. This case shows why a purchasing party to a contract should carefully consider whether to accept clauses limiting the right to recover damages or waiving a claim for fraud. It also shows how the seller under a contract can limit exposure to liability through careful and meticulous drafting.
The Texas Supreme Court has finally put to rest the question of whether the implied warranty to repair or modify tangible goods or property in a good and workmanlike manner can only be brought by a consumer under the Texas Deceptive Trade Practices Act (DTPA) or whether it can be brought under the common law as well. The Court held it could in fact be brought under both, in Nghiem v. Sajib, 2019 WL 406123 (Tex.), 1 (Tex., 2019). This is significant because a consumer must bring an action under the DTPA for the breach of this implied warranty within two years or the action will be barred by the DTPA two-year statute of limitations. On the other hand, it appears that a consumer has up to four years to bring an action for breach of this implied warranty under the common law before being barred by the applicable statute of limitations. Further, there are additional criteria that must be met to bring a claim under the DTPA that do not have to be met under the common law.
In the Ngheiem case, the consumer’s airplane was damaged in a crash-landing when the airplane engine failed. The consumer made a claim against the company that had serviced the airplane for years and made repairs to it immediately before the crash. The consumer alleged that the defendant company breached the common law implied warranty to make repairs in a good and workmanlike manner. The defendant company alleged that the consumer’s claim could only be brought under the DTPA and not under common law. Therefore, the claim was barred by the DTPA two-year statute of limitations because the consumer waited too long to file the lawsuit. The trial court agreed and rendered judgment for the defendant and court of appeals affirmed.
The Texas Supreme Court granted the consumer’s petition for review and held that this implied warranty could be brought both under the common law and the DTPA. Since the consumer brought the action under the common law, the claims were not barred by the DTPA two-year statute of limitations.
The result of this opinion is that it will give consumers including large corporations who may not qualify for consumer status under the DTPA the right to bring an action for breach of this implied warranty. Further, it should also give consumers up to four years from the date of the breach to bring this action.
In the recent case of Meredith v. Chezem , 03-18-00256-CV, 2018 WL 6425017 (Tex. App.—Austin Dec. 7, 2018, no pet. h.), the Austin Court of Appeals overturned a judgment based upon a jury verdict finding that a landowner’s negligence proximately caused injuries to a 12-year-old girl while riding an ATV on the landowner’s property. The minor child, Carli, was visiting her 12-year-old friend, Courtney Meredith, at the Meredith’s home in Burnet County. During the visit, the Merediths gave the 12-year-old girls permission to drive around on the Meredith’s property on the family ATV. The Merediths did not supervise the girls and Courtney made a sharp turn while driving the ATV causing it to flip over and break Carli’s ankle requiring surgery. Carli’s father filed suit on Carli’s behalf and the jury found that the Meredith’s negligence proximately caused Carli’s injuries and awarded $88,620 in damages. However, the jury found that the conduct of the Merediths did not constitute gross negligence.
The Merediths cited the recreational-use-statute and moved the trial court to enter a take nothing judgment since there was no finding by the jury of gross negligence. The trial court denied the request and entered a judgment awarding the damages in the amount found by the jury.
The Austin Court of appeals held that the Texas recreational-use statute applied because the Meredith’s property was agricultural land and Carli was invited as a social guest to the Meredith’s property for recreational purposes. Since the statute applied, Carli’s father was required to prove that Carli’s injuries were the result of the Meredith’s gross negligence, malicious intent, or bad faith. Given that the jury found that the Meredith’s were only negligent but not grossly negligent, then under the statute, the Merediths were not liable for the injuries. The court of appeals reversed the trial court’s judgment and rendered judgment that Carli take nothing on her injury claims.
The case of Am. Bank, N.A. Tr. of Lisa Marie Buckley Tr. v. Moorehead Oil & Gas, Inc., 13-17-00641-CV, 2018 WL 6219635, (Tex. App.—Corpus Christi Nov. 29, 2018, no pet. h.) involved stock held in 3 testamentary trusts set up by the Decedent for his 3 children. The stock was owned in the Moorehead company which later reorganized itself through a plan of merger to become a limited liability company. As a result, the stock held by the trusts was converted to cash. The beneficiaries of two of the trusts and the trustee of the other trust objected to the valuation of the stock, under Chapter 10 of the Texas Business & Organizations Code entitling a dissenting shareholder to obtain a judicial determination of the value. When the lawsuit was originally filed, it only named the trusts as plaintiffs. The lawsuit was later amended to name the beneficiaries of two of the trusts and the trustee of the other as the plaintiffs.
Defendant Moorehead filed a motion for summary judgment asking the court to render judgment against the plaintiffs as a matter of law on the grounds that the plaintiffs’ claims were barred by the statute of limitations. Although, the original lawsuit was filed before the expiration of the statute of limitations it did not properly name the trustees of each of the trusts as plaintiffs. A trust is not considered a separate legal entity and the lawsuit typically must be filed by the trustee on behalf of the trust. The court held that even though the lawsuit was initially improperly filed in the name of the trusts, it was sufficient to give Defendant Moorehead notice of the allegations and toll the running of the statute of limitations. Thus, Moorhead’s motion for summary judgment based upon this defense was denied.
Defendant Moorehead also requested summary judgment against the plaintiffs on the grounds that the two plaintiff beneficiaries did not have standing to bring the lawsuit as amended on behalf of the trusts. Only a trustee can bring the lawsuit, unless an exception is plead. The court agreed with Moorehead and held that the plaintiff beneficiaries did not have standing to bring the lawsuit on behalf of the trusts. Beneficiaries can only bring a lawsuit on behalf of a trust if the trustee cannot or will not bring the lawsuit. The beneficiaries failed to plead this. Thus, the court of appeals affirmed the summary judgment rendered by the trial court against the beneficiaries and overturned the summary judgment that had been rendered against the trustee.
In conclusion, this case is an example of why it is important to retain experienced counsel in handling corporate and trust litigation. Often by proper planning and pleading, the types of problems that the plaintiffs incurred in this case can be avoided.

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