Opinion ID: 1798395
Heading Depth: 1
Heading Rank: 4

Heading: The Admissibility of the LAN Report

Text: Brookhollow complains of the court of appeals' holding that the LAN report was hearsay and inadmissible, even for a limited purpose. So the trial court may have guidance in the proper treatment of the report, we hold that it was admissible for the limited purpose for which it was offered. The report is a forty-page document in which Lockwood, Andrews & Newnam evaluated several different alternatives for getting sewer service to the Brookhollow development. Several of these alternatives involved partial or complete sliplining of the defective sewer line, which had been TCB's recommendation. LAN concluded, however, that Brookhollow's best alternative, in terms of cost and reliability, would be to abandon the defective line and construct a new one. Brookhollow followed this recommendation. The report in no way touched on the cause of the sewer's defects. It is well established that the plaintiff in a breach of contract action can only recover such damages as he could not have prevented with reasonable exertions and expense. Walker v. Salt Flat Water Co., 128 Tex. 140, 96 S.W.2d 231, 232 (Tex.1936). At trial, Brookhollow introduced the LAN report for the limited purpose of showing that it had acted reasonably in abandoning the linei.e., that it had met its duty to mitigate damages. TCB objected on grounds the report was hearsay and had not been authenticated. The trial court instructed the jury that evidence introduced for a limited purpose could not be considered for any other purpose. The court of appeals quoted from McAfee v. Travis Gas Corporation, 137 Tex. 314, 153 S.W.2d 442 (1941): Where the question is whether a party has acted prudently, wisely or in good faith, the information on which he acted, whether true or false, is original and material evidence, and not hearsay. See also, Texas Employers' Insurance Association v. McDonald, 238 S.W.2d 817, 820 (Tex.Civ.App.Austin 1951, writ ref'd). Notwithstanding this rule, the court of appeals held the LAN report inadmissible, stating that [e]ven though the court admitted [it] for a limited purpose, it encompassed many facets of the case which were in issue and on which appellant was entitled to cross-examine. The court of appeals seemed to imply by this that the jury disregarded its limiting instruction and considered the LAN report for purposes other than to determine whether Brookhollow acted reasonably to mitigate damages. An appellate court must assume that a jury properly followed the trial court's instructions. The LAN report, admitted for the limited purpose of showing that Brookhollow met its duty to mitigate damages, is not hearsay. Evidence of an out-of-court statement is hearsay only if it is being introduced to prove the truth of the matter asserted in the statement. Hartford Accident & Indemnity Co. v. McCardell, 369 S.W.2d 331, 337 (Tex.1963). In this case, there was no need for the jury to inquire into the truthfulness of the LAN report; it had only to determine Brookhollow's reasonableness in relying on the report. We also hold that the LAN report was adequately authenticated in light of the limited purpose for which it was admitted. Thomas Martin, Brookhollow's executive vice-president, testified that on TCB's recommendation, they sought out another engineering firm to study the problem. After considering various Houston firms, Brookhollow retained LAN to investigate the situation and recommend the best way to provide the subdivision with sewer service. The admitted report was the one received from LAN and relied on by Brookhollow in making its decision to abandon the line. Because of our judgment remanding the entire cause to the trial court, we need not consider Brookhollow's and TCB's other points of error. We affirm the court of appeals' reversal of the trial court's judgment against TCB on Brookhollow's cross-claim for negligent performance; we reverse the remainder of the court of appeals' judgment and remand the entire cause to the trial court for a new trial.