Court Opinion

ID: 9773217
Source: CourtListenerOpinion
Date Created: 2023-08-29 17:40:13.54239+00
Date Added: 2024-06-11T07:31:51.057435
License: Public Domain

ELLIS, Justice,
dissenting.
I agree with the court’s opinion regarding attorney’s fees and the directed verdict rendered in favor of Bank One. However, I respectfully dissent from that part of the court’s opinion upholding the arbitrators’ award of punitive damages.
Kline submitted a Demand For Arbitration and a copy of her Original Petition to the AAA. The Demand for Arbitration, which was submitted to the AAA first, defines the “nature of the dispute” as a “disagreement among attorneys over contingent fee recoveries.” As to the “claim or relief sought,” Kline’s demand states only that an amount “is unable to be determined without discovery from respondents.” The demand does not mention tort claims or punitive damages. The subsequent cover letter to the AAA accompanying her Original Petition declares that this pleading “states Ms. Kline’s position on the matters in controversy more clearly than the papers previously submitted.” As evidenced by Kline’s correspondence to the AAA, Kline’s Original Petition was intended to define the claims before the arbitrators as stated in her Demand for Arbitration and the parties’ agreement.
O’Quinn contends that he relied on Kline’s Original Petition in preparing his defense in the arbitration and that Kline’s petition does not support a recovery of punitive damages as a matter of law. O’Quinn’s contention is correct. The majority cites USX in holding that we are unable to review the sufficiency of pleadings before the arbitrators. However, in USX, the court reviewed the broad arbitration provision in the parties’ contract, the commercial rules of arbitration, and documents filed in the arbitration before determining that the issue of punitive damages was before the arbitrators. USX Corp. v. West, 781 S.W.2d 453, 455 (Tex.App. —Houston [1st Dist.] 1989) (original proceeding).
In contrast to the arbitration provision in USX, I would not read the arbitration provision in this case as broadly as the majority does. The arbitration provision at issue here provides that the parties would arbitrate “a dispute,” not “any controversy.” See USX 781 S.W.2d at 454. Kline specifically informed the AAA that “a dispute” meant a “disagreement among attorneys over contingent fee recoveries.” In other words, a dispute about the subject matter of the parties’ *788contract. Section 43 of the Commercial Arbitration Rules of the AAA provides that “the arbitrator may grant any remedy or relief that the arbitrator deems just and equitable and within the scope of the agreement of the parties....” Columbia University, Guide to International Arbitration and Arbitrators, 137,148 (2d ed. 1992). [emphasis added] In this case, Kline’s claim for punitive damages is beyond the scope of the agreement of the parties.
Where an arbitration clause is narrowly drawn, judicial review of the arbitrator’s jurisdiction as opposed to the merits of the arbitration award, is less deferential. The Babcock & Wilcox Co. v. PMAC, 863 S.W.2d 225, 230 (Tex.App.—Houston [14th Dist.] 1993, writ pending) (citing Container Prods., Inc. v. United Steelworkers of Am. and Its Local 5651, 873 F.2d 818, 819-20 (5th Cir. 1989)). In the instant ease, we are confronted not only with a narrow arbitration provision, but also with a pleading which was intended to broaden the scope of that provision. Therefore, I would not defer to the arbitrators with regard to the sufficiency of that pleading.1
In her Original Petition, Kline alleged causes of action against O’Quinn and Pearson for breach of contract, breach of a duty of good faith and fair dealing, and breach of a fiduciary duty. She alleged that O’Quinn and Pearson failed to pay her share of fees in the cases covered by the Second Attorneys’ Agreement. Specifically, she alleged that O’Quinn and Pearson failed to disclose the receipt “in trust” of settlement proceeds in cases covered by their agreement and then disbursed those proceeds without her knowledge or consent. There was no allegation of constructive trust or fraud. There was also no allegation of conscious indifference on the part of O’Quinn or Pearson and no allegation that their conduct was likely to cause serious harm to Kline. See Transportation Ins. Co. v. Moriel, 37 Sup.Ct.J. 883, 891-92 (June 8, 1994) (opinion on motion for rehearing).
“A dispute arising under or out of a contractual relationship may give rise to both breach of contract and tort claims at the same time since the breach of duty under the contract may involve tortious conduct.” Va-lero Energy Corp. v. Wagner & Brown II, 777 S.W.2d 564, 566 (Tex.App. — El Paso 1989, writ denied). However, to recover punitive damages attendant to a contract dispute, a plaintiff must plead and prove a distinct tortious injury with accompanying actual damages. See e.g. Moriel, 37 Sup. Ct.J. at 893; Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494-95 (Tex. 1991); International Bank, N.A v. Morales, 736 S.W.2d 622, 624 (Tex.1987); Texas Nat’l Bank v. Karnes, 717 S.W.2d 901, 903 (Tex. 1986) (and cases cited therein); Jim Walter Homes v. Reed, 711 S.W.2d 617, 618 (Tex. 1986); Bellefonte Underwriters Co. v. Brown, 704 S.W.2d 742, 744 (Tex.1986). Punitive damages are not recoverable for breach of contract alone. Karnes, 717 S.W.2d at 903. In determining whether an action is in tort or in contract, we must look to the substance of the cause of action, not the manner in which it was pleaded. Jim Walter Homes, 711 S.W.2d at 618.
As stated by the Texas Supreme Court: The acts of a party may breach duties in tort or contract alone or simultaneously in both. The nature of the injury most often determines which duty or duties are breached. When the injury is only the economic loss to the subject of a contract itself the action sounds in contract alone.
Southwestern Bell Tel. Co., 809 S.W.2d at 495 (citing Jim Walter Homes, 711 S.W.2d at 618).
Kline’s only claim of tort liability is for breach of a duty of good faith and fair dealing and for breach of a fiduciary duty. As for her claim of breach of a duty of good faith and fair dealing, Kline alleged a breach *789based solely on the fact that the parties’ agreement provided that the parties were to treat each other “fairly and in good faith.” “If an action is not maintainable without pleading and proving the contract, where the gist of the action is the breach of the contract, either by malfeasance or nonfeasance, it is in substance an action on the contract, whatever may be the form of the pleading.” International Printing Pressman and Assistants’ Union Am. v. Smith,-145 Tex. 399, 198 S.W.2d 729, 735 (1946). Here, the substance of Kline’s claim is based solely on the alleged breach of the Second Attorneys’ Agreement. Because her cause of action for breach of a duty of good faith and fair dealing is not maintainable without reference to the parties’ contract, Kline failed to state a proper tort cause of action.
As the majority correctly observed, a cause of action for breach of the duty of good faith and fair dealing is generally not recognized in contract outside of the insurance context or the public sector. See Crim Truck & Tractor v. Navistar Int’l Transp. Corp., 823 S.W.2d 591, 594 (Tex.1992); Houston Cable TV, Inc. v. Inuiood West Civic Assoc., 839 S.W.2d 497, 503 (Tex.App.—Houston [14th Dist.] 1992), writ dism’d, 860 S.W.2d 72 (Tex.1993). Aside from those circumstances, an allegation of breach of a duty of good faith and fair dealing gives rise only to a cause of action for breach of contract. See Crim Truck, 823 S.W.2d at 595, n. 5. As previously noted, Kline’s claim of a breach of good faith and fair dealing is nothing more than a claim for breach of contract. As a result, Kline could not recover punitive damages as a matter of law on that basis.
The same is true of her claim of a breach of fiduciary duty. Similar to her other tort claim, Kline alleges a fiduciary duty on the part of O’Quinn and Pearson simply because the parties agreement provided: (1) that Kline’s share of fees would be paid from settlement proceeds deposited in O’Quinn’s client trust account; and, (2) that Kline would be an “associate” of O’Quinn’s law firm for purpose of handling cases covered by the agreement.
A fiduciary duty arises from the relationship of the parties and not just from the contract. See Crim Truck, 823 S.W.2d at 594-97. In the instant case, Kline does not allege the existence of a confidential relationship which would give rise to a fiduciary duty outside of the parties’ contract. See Crim Truck, 823 S.W.2d at 594-97; see also American Medical Int’l, Inc. v. Giurintano, 821 S.W.2d 331, 339 (Tex.App. — Houston [14th Dist.] 1991, no writ) (opinion on motion for rehearing). Thus, Kline failed as a matter of law to state a cause of action for breach of fiduciary duty and was barred from recovering punitive damages on that ground.
Similarly, Kline’s only claim of injury was economic and to the subject matter of the contract, i.e., her share of contingent attorneys’ fees owed under the Second Attorneys’ Agreement. Economic injury to the subject matter of the contract will not automatically preclude a punitive damages award especially where there is an allegation of fraud. See Houston Cable, 839 S.W.2d at 503; see also Schindler v. Austwell Farmers Co-Op, 829 S.W.2d 283, 289-91 (Tex.App. — Corpus Christi 1992) (opinion on motion for rehearing), ajfd as modfd, 841 S.W.2d 853 (Tex. 1992).
As previously noted, Kline’s Original Petition did not allege fraud or intentional conduct of any kind (i.e., malice or conscious indifference) nor did it specify punitive damages. Her petition requested actual damages, interest, attorney’s fees, declaratory relief, and “such other and further relief, whether at law or in equity, whether general or special, to which she may show herself to be entitled.”
It is well-settled that a pleading is sufficient only if it gives an opposing party fair and adequate notice of the claims at issue. See Garvey v. Vawter, 795 S.W.2d 741, 742 (Tex.1990) (per curiam). A general prayer for relief cannot enlarge a pleading to the extent that it embraces an entirely different cause of action for which fair notice does not exist. Stoner v. Thompson, 578 S.W.2d 679, 684 (Tex.1979). Only the relief consistent with the theory of the claim reflected in the petition may be granted under a general prayer. Kissman v. Bendix Home Sys., 587 S.W.2d 675, 677 (Tex.1979). The only viable theory of recovery alleged in Kline’s Original Petition was for breach of contract. The *790general prayer contained therein cannot be read to provide relief not pled. Thus, Kline’s Original Petition not only failed to state a claim upon which punitive damages could have been awarded, but also did not give O’Quinn fair and adequate notice that punitive damages could have been awarded by the arbitrators.2
I recognize that every reasonable presumption is indulged to uphold arbitration proceedings. Riha v. Smulcer, 843 S.W.2d 289, 292 (Tex.App. — Houston [14th Dist.] 1992, writ denied); Massey v. Galvan, 822 S.W.2d 309, 316 (Tex.App. — Houston [14th Dist.] 1992, writ denied). However, in view of the fact that Kline’s Original Petition was intended to define the scope of the arbitration under the parties’ agreement and the fact that this pleading did not allege facts which would support an award of punitive damages, I would hold that the trial court correctly determined that the arbitrators rendered an award on a matter not submitted to them and that the trial court properly struck the punitive damages award against O’Quinn.
I would also note that such a holding is compelled by the fact that this court is without a complete record. The record before this court does not include a transcription of the arbitration proceeding. The majority, citing House Grain Co. v. Obst, 659 S.W.2d 903, 906 (Tex.App. — Corpus Christi 1983, writ refd n.r.e.), holds that without a transcription of the arbitration proceeding, the court must presume adequate evidence to support the award. The case relied upon in House Grain for the aforementioned proposition, City of San Antonio v. McKenzie Constr., 136 Tex. 315, 150 S.W.2d 989, 996 (1941), says nothing of the kind, but merely recites the general rule requiring that all reasonable presumptions be indulged in favor of the award.
In the absence of a complete record, we must presume that evidence before the trial court supported its judgment. Beck & Mas-ten Pontiac-GMC v. Harris County Appraisal Dist., 830 S.W.2d 291, 295 (Tex. App. — Houston [14th Dist.] 1992, writ denied) (citing Tex.R.App.P. 50(d)). While Section 23 of the Commercial Arbitration Rules of the AAA does not place the burden on any party to request a “stenographic record” of the arbitration proceedings, the rules of appellate procedure clearly place the burden on the appellant “to see that a sufficient record is presented to show error requiring reversal.” Tex.RApp.P. 52(d); Columbia University, supra at 143. Because Kline did not bring forth a complete record on appeal, this court must presume the evidence before the trial court supported its judgment. See Beck & Masten, 830 S.W.2d at 295.
Accordingly, I would overrule Kline’s first point of error and affirm the judgment of the trial court.

. Notwithstanding Kline’s correspondence and pleadings submitted to the AAA, the majority points out that verbiage in O'Quinn's plea in abatement which requested arbitration of "all controversies or claims arising out of or relating to the [Second Attorneys’] Agreement” indicates that the arbitrators were to consider all matters. including punitive damages. As noted by the majority, the trial court never ruled on O'Quinn's plea in abatement nor was that motion submitted to the arbitrators. More importantly, that defensive pleading in no way enlarged or enhanced the allegations in Kline's Original Petition, which was submitted to the arbitrators.

. Similar to her petition, Kline’s post-evidentiary brief filed in the arbitration requested punitive damages based solely on the breach of the parties' agreement.