Opinion ID: 895336
Heading Depth: 2
Heading Rank: 2

Heading: Does Applying Section 38.001(8) to a Section 3.414 Claim Disrupt Article 3's Statutory Scheme?

Text: UAIC argues that even if the plain language of section 38.001(8) applies to a holder's claim under section 3.414, we should decline to apply it here in order to avoid disrupting article 3's statutory scheme. UAIC correctly contends that the resolution of this issue is governed by the intersection of our opinions in Southwest Bank, JCW Electronics, and Medical City, cases which concerned the propriety of importing external statutory provisions into the UCC. In Southwest Bank, we held that Texas Civil Practice and Remedies Code Chapter 33's proportionate responsibility statute did not apply to an article 3 conversion claim. Sw. Bank v. Info. Support Concepts, Inc., 149 S.W.3d 104, 111 (Tex.2004). In reaching this holding, we observed that article 3 establishes a comprehensive and carefully considered allocation of responsibility among parties to banking relationships, and contains its own comparative negligence provisions. Id. at 107. To import Chapter 33 into article 3, we reasoned, would upset that article's comprehensive liability scheme and [do] violence to the UCC. Id. at 110. Conversely, in JCW Electronics, we did apply Chapter 33 to an article 2 breach of implied warranty tort claim. JCW Elecs., Inc. v. Garza, 257 S.W.3d 701, 707 (Tex. 2008). We distinguished Southwest Bank by stating: Unlike UCC article 3, article 2 does not undertake a comprehensive fault scheme. Id. at 706. We therefore concluded that because article 2 does not contain a fault allocation scheme relevant to breach of implied warranty claims, Chapter 33 could apply without disrupting the UCC. See id. at 706-07. Finally, as discussed above, we held in Medical City that section 38.001(8) attorney's fees were available to a plaintiff who prevailed on an article 2 breach of express warranty claim. Med. City, 251 S.W.3d at 61, 63. In aggregate, these cases establish the rule that it is legitimate to apply a non-UCC statutory provision to a claim brought under the UCC, so long as doing so does not ignore the UCC itself and thwart its underlying purpose. JCW Elecs., 257 S.W.3d at 709 (Jefferson, C.J., concurring) (quoting Sw. Bank, 149 S.W.3d at 111). UAIC contends applying section 38.001(8) here would violate this rulethat it would disrupt article 3's comprehensive and carefully considered allocation of responsibility among parties to banking relationships, in the same manner applying Chapter 33 to an article 3 conversion claim would have done in Southwest Bank. See Sw. Bank, 149 S.W.3d at 107. We disagree. Compelling reasons existed for the disparate results in Southwest Bank and JCW Electronics, both of which involved tort actions, that are inapplicable to Medical City and this case. First, Southwest Bank and JCW Electronics concerned whether importing external proportionate liability statutory provisions would disrupt the UCC's comprehensive fault and liability scheme. Medical City and the instant case, on the other hand, bear on the particular remedy of attorney's fees. Attorney's fees do not dictate fault or liabilitythey are awarded as a remedy after a party has been determined liable on a contract claim. Both article 2 and article 3 create detailed and comprehensive frameworks for contract remedies. Compare TEX. BUS. & COM. CODE §§ 2.701-.725 (providing remedies for both sellers and buyers, including consequential damages, nonmonetary remedies, specific performance, and so forth), with id. §§ 3.401-.420. Nonetheless, in Medical City, we applied section 38.001(8) to an article 2 contract claim so that the claimant could recover attorney's fees in addition to the appropriate measure of damages for breach of express warranty. Med. City, 251 S.W.3d at 63. The same result is warranted here. Attorney's fees under section 38.001(8) are, in essence, an additional remedy so that a prevailing plaintiff may recoup the cost of trying a case and do not generally interrupt the measure of damages for a particular claim; thus, to permit the recovery of attorney's fees here, as in Medical City, does not disrupt the relevant remedies provisions of the UCC. Second, the causes of action in Medical City and the instant case both touch on provisions of the UCC that are silent as to attorney's fees, a similarity that was not present in Southwest Bank and JCW Electronics. In Southwest Bank, applying Chapter 33 would have disrupted article 3's liability scheme because that article specifically set forth its own unique comparative negligence structure. JCW Electronics, on the other hand, implicated an article of the UCC that was silent as to comparative negligence. This distinction implicitly led to the disparate results in those cases, and is a difference starkly absent when comparing this case to Medical City. Here, as was true in Medical City, the relevant statutory provision is silent on the issue of attorney's fees, and so to import section 38.001(8) would not disrupt any element of that provision. Thus, to be clear, we do not today state that section 38.001(8) may always apply to a UCC contract claim. If, for example, a provision allowed for the recovery of attorney's fees, but in a manner more restrictive than section 38.001(8), a plaintiff could not circumvent that limitation by recovering attorney's fees under section 3 8.001(8). The question to be answered in each instance is whether allowing a plaintiff to recover attorney's fees under section 38.001(8) would [do] violence to a particular UCC article's statutory scheme. See Sw. Bank, 149 S.W.3d at 110. Article 3's concern with banking relationships does not dictate a different result. We have previously allowed for section 38.001(8) attorney's fees in an article 5 letter of credit case, even though a letter of credit is a financial instrument issued by a bank, with no apparent disturbance to banking relationships. See Temple-Eastex Inc. v. Addison Bank, 672 S.W.2d 793, 798 (Tex.1984). Further, the UCC allows for damages not only specifically provided by the Code, but also by other rule of law. See TEX. BUS. & COM.CODE § 1.305(a). This provision extends to all portions of the UCC, including those articles concerning banking relationships. UAIC next directs us to statutes from other states where attorney's fees are specifically provided for in suits involving dishonored checks. [28] UAIC contends that these statutes, each representing complex policy judgments, signify that the Texas Legislature deliberately intended as a policy matter not to allow for the recovery of attorney's fees for dishonored checks in this state. But these legislative enactments are not instructive here. As we have concluded, under the laws of this state and our precedent, section 3 8.001(8) applies to Half-Price's claim by its plain terms, and to do so would not disrupt article 3. See TEX. CIV. PRAC. & REM.CODE §§ 38.001(8), .005; Med. City, 251 S.W.3d at 63. And, in any event, decisions from other jurisdictions support ourand not UAIC'sconclusion. Other courts, including the Fifth Circuit, have allowed general attorney's fees provisions outside of the UCC to apply to a contract action under the UCC, including a contract action under article 3. [29] The UCC should be construed to promote uniformity with other jurisdictions. See In re King-Porter Co., 446 F.2d 722, 732 (5th Cir.1971); see also TEX. GOV'T CODE § 311.028 (A uniform act included in a code shall be construed to effect its general purpose to make uniform the law of those states that enact it.). Our interpretation furthers this goal. UAIC finally argues that the existence of other provisions in the UCC that expressly provide for attorney's fees in suits concerning financial instrumentsspecifically section 5.111(e) for letters of credit suggests that the Legislature did not intend to allow for attorney's fees in section 3.414. [30] We are not persuaded. As discussed above, we have previously allowed a plaintiff to recover attorney's fees under section 38.001(8) in a UCC contract action, both in Medical City (article 2) and Temple-Eastex (article 5). Moreover, section 5.111(e)'s allowance for attorney's fees says little about the Legislature's reason for not specifically providing for attorney's fees in section 3.414. Section 5.111, unlike section 38.001, allows a prevailing party to recover attorney's fees, not merely a prevailing claimant as in section 38.001. Compare TEX. BUS. & COM.CODE § 5.111(e), with TEX. CIV. PRAC. & REM.CODE § 38.001. Because section 5.111(e) establishes a different rule from section 38.001, it is just as likely that the Legislature enacted section 5.111(e) to displace section 38.001's oneway fee shift where letters of credit are concerned, but remained satisfied as to section 38.001's application to a claim arising under section 3.414. [31] In sum, we conclude that allowing a holder who has prevailed on a section 3.414 contract claim to recover attorney's fees under section 38.001(8) does not disrupt article 3.