Court Opinion

ID: 3073649
Source: CourtListenerOpinion
Date Created: 2015-10-16 00:56:28.666347+00
Date Added: 2024-06-11T07:38:01.473669
License: Public Domain

COURT OF APPEALS
                       SECOND DISTRICT OF TEXAS
                                FORT WORTH

                            NO. 02-14-00332-CV

CHILDRESS ENGINEERING                                            APPELLANT
SERVICES, INC.

                                       V.

NATIONWIDE MUTUAL                                                 APPELLEE
INSURANCE COMPANY, AS
SUBROGEE TO MERITAGE
HOMES OF TEXAS, L.L.C.

                                   ------------

        FROM THE 67TH DISTRICT COURT OF TARRANT COUNTY
                  TRIAL COURT NO. 067-264677-13

                                  ------------

                                 OPINION
                                  ------------

     Meritage Homes of Texas, L.L.C., a homebuilder, and appellant Childress

Engineering Services, Inc. (CES) entered a contract for CES to provide design

and engineering specifications for home foundations; the contract contained an

indemnity clause.   Meritage asked CES to indemnify or defend it after a
homebuyer sued Meritage for negligence, gross negligence, breach of contract,

breach of warranty, violations of the deceptive trade practices act, fraud, fraud in

the inducement, and fraud in a real estate transaction based on an allegedly

defective foundation. CES refused. 1

      Meritage and the homebuyer ultimately settled, but while the homebuyer’s

suit remained pending in the 48th District Court of Tarrant County, appellee

Nationwide Mutual Insurance Company, as Meritage’s subrogee, 2 filed a

separate suit in the 67th District Court of Tarrant County against CES for breach

of contract for failing to defend and indemnify Meritage and seeking as damages

the defense costs, litigation expenses, attorneys’ fees, and settlement sums paid

on Meritage’s behalf in connection with the homebuyer’s claim, as well as all of

its attorneys’ fees and costs associated with bringing the new action. 3

      On August 6, 2014, CES moved to dismiss Nationwide’s suit, arguing that

this was an action arising out of the provision of service by a licensed or

registered professional and therefore required a certificate of merit under civil

      1
       CES sent Meritage a letter on April 26, 2011, declining to indemnify or
defend Meritage in response to Meritage’s demand letters and informing
Meritage that Meritage would have to furnish a certificate of merit if it elected to
add CES as a party.
      2
      In 2007, Nationwide issued a general liability insurance policy that
covered Meritage as an additional insured.
      3
       Meritage and Tealstone Concrete, Inc. contracted for Tealstone to build
home foundations; this contract also contained an indemnity clause. In its
lawsuit against CES, Nationwide also sued Tealstone; Tealstone settled with
Nationwide.

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practice and remedies code section 150.002. The trial court denied the motion

after a hearing, and CES brought this accelerated interlocutory appeal. See Tex.

Civ. Prac. & Rem. Code Ann. § 150.002(f) (West 2011).

      In two issues, CES argues that Nationwide had to file a certificate of merit

to proceed with its suit because a claim for indemnity is not excluded from civil

practice and remedies code section 150.002, that the core of Nationwide’s claim

is based in tort because of the professional services CES rendered under its

subcontract with Meritage, and that the trial court therefore abused its discretion

by denying CES’s motion to dismiss. Nationwide responds that chapter 150 was

never intended to apply to contractual indemnity claims and that whether an

indemnity provision is enforceable is a question of law for which a certificate of

merit is unnecessary.

      Civil practice and remedies code section 150.002(a) provides that “[i]n any

action . . . for damages arising out of the provision of professional services by a

licensed or registered professional, the plaintiff shall be required to file with the

complaint an affidavit of a third-party licensed architect, licensed professional

engineer, registered landscape architect, or registered professional land

surveyor” who is competent to testify, holds the same professional license or

registration as the defendant, is knowledgeable in the defendant’s area of

practice, and offers testimony based on his or her knowledge, skill, experience,

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education, training, and practice.    Id. § 150.002(a) (emphasis added). 4      The

affidavit has to set forth specifically, for each theory of recovery for which

damages are sought, “the negligence, if any, or other action, error, or omission of

the licensed or registered professional in providing the professional service.” Id.

§ 150.002(b) (emphasis added).        The professional service at issue here is

engineering services. See TDIndustries, Inc. v. Citicorp N. Am. Inc., 378 S.W.3d
1, 5 (Tex. App.—Fort Worth 2011, no pet.) (referring to the occupation code’s

definition of the practice of engineering to determine what the “provision of

professional [engineering] services” means). 5

      4
         On July 3, 2014, the supreme court, on facts virtually identical to the case
before us, concluded that section 150.002(a)’s certificate-of-merit requirement
does not apply to a defendant or third-party defendant who files a third-party
claim or cross-claim against a licensed or registered professional because they
are not “the plaintiff” in the action. Jaster v. Comet II Constr., Inc., 438 S.W.3d
556, 558–59, 565, 571 (Tex. 2014). That is, the statute specifically requires “the
plaintiff” to file a supporting expert affidavit “with the complaint,” and because
Comet was not the party who had initiated suit, it was not a “plaintiff” under the
statute’s meaning. Id. Here, however, Meritage did not opt to file a third-party
claim or cross-claim against CES in the homebuyer’s lawsuit; instead,
Nationwide instituted suit as a plaintiff against CES. Therefore, we must address
whether a certificate of merit is required under section 150.002 when the
subrogee is a plaintiff suing a licensed professional for indemnity under a
contract.
      5
       The occupations code defines “practice of engineering” as “the
performance of or an offer or attempt to perform any public or private service or
creative work, the adequate performance of which requires engineering
education, training, and experience in applying special knowledge or judgment of
the mathematical, physical, or engineering sciences to that service or creative
work.” Tex. Occ. Code Ann. § 1001.003(b) (West 2012). The practice of
engineering includes, among other services, “design, conceptual design, or
conceptual design coordination of engineering works or systems.”              Id.
§ 1001.003(c)(2).     An engineer is responsible for engineering plans and

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      While we review a trial court’s ruling on a motion to dismiss for an abuse of

discretion, statutory construction is a question of law that we review de novo.

Parker Cnty. Veterinary Clinic, Inc. v. GSBS Batenhorst, Inc., No. 02-08-380-CV,

2009 WL 3938051, at *1–2 (Tex. App.—Fort Worth Nov. 19, 2009, no pet.)

(mem. op.) (citing Jernigan v. Langley, 195 S.W.3d 91, 93 (Tex. 2006); Palladian

Bldg. Co. v. Nortex Found. Designs, Inc., 165 S.W.3d 430, 433 (Tex. App.—Fort

Worth 2005, no pet.)).

      Additionally, we are not bound by the labels used by the parties with

regard to their claims; rather, we look to the pleadings to determine for ourselves

what claims have been asserted, considering the source of the duty owed to the

plaintiff and the nature of the remedy sought by the plaintiff. Id. at *3; see also

TDIndustries, 378 S.W.3d at 6 (stating that section 150.002 contemplates

determining whether a certificate of merit is required when the claim is filed).

With regard to the source of a duty, generally, an action in contract is one for the

breach of an express or implied duty arising out of a contract while an action in

tort is for a breach of a duty imposed by law. GSBS, 2009 WL 3938051, at *3.

And when the only loss or damage is to a contract’s subject matter, a plaintiff’s

action is ordinarily on the contract. Id. at *4. “When determining whether an

action arises out of the provision of professional services, the issue is not

whether the alleged tortious acts constituted the provision of professional

specifications, which includes foundation design. Id. § 1001.0031(c)(3) (West
2012).

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services, but rather whether the tort claims arise out of the provision of

professional services.” Found. Assessment, Inc. v. O’Connor, 426 S.W.3d 827,

834 (Tex. App.—Fort Worth 2014, pet. denied) (“[T]he certificate of merit must

state any action or omission in providing the professional service.”).

      We held in GSBS, under the 2005 version of the statute, 6 that section

150.002 does not apply in a suit other than one for negligence arising out of the

provision of professional services.     2009 WL 3938051, at *3.          In GSBS, a

veterinary clinic sued GSBS, an architectural firm, for breach of contract

regarding GSBS’s building plans’ failure to comply with city legal requirements.

Id. at *1. GSBS moved to dismiss the claim because the clinic did not file a

certificate of merit, and the trial court granted the motion. Id. We concluded that

the trial court abused its discretion by granting the motion because the clinic

sued GSBS for breach of the specific provision of the contract that provided that

GSBS would research and apply local and state codes and city ordinances, and

the clinic sought only damages for economic loss directly related to the contract’s

      6
        The 2005 version of the statute replaced “alleging professional
negligence” with “arising out of the provision of professional services.” See Act
of May 18, 2005, 79th Leg., R.S., ch. 208, § 2, sec. 150.002(a), 2005 Tex. Gen
Laws 369, 370 (amended 2009) (current version at Tex. Civ. Prac. & Rem. Code
Ann. § 150.002(a) (West 2011)). The 2009 version did not alter this section of
the 2005 statute. See Act of May 29, 2009, 81st Leg., R.S., ch. 789, § 2, sec.
150.002, 2009 Tex. Gen. Laws 1991, 1992. In 2009, the legislature added to the
affidavit requirements in section 150.002(b), replacing its requirement to set forth
specifically “at least one negligent act, error, or omission,” with, “for each theory
of recovery for which damages are sought, the negligence, if any, or other action,
error, or omission of the licensed or registered professional in providing the
professional service, including any error or omission in providing advice,
judgment, opinion, or a similar professional skill.” Id.

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subject matter. Id. at *1, *4–5 (distinguishing Averitt v. PriceWaterhouseCoopers

L.L.P., 89 S.W.3d 330, 332–35 (Tex. App.—Fort Worth 2002, no pet.), in which

the contract merely served as the foundation for Averitt’s right to enjoy the

benefits of a duty imposed by law—the degree of care applicable to

accountants—and there was no asserted breach of a specific provision of the

parties’ contract).

      As CES does here, GSBS argued that a certificate of merit would be

necessary for the trial court to determine if the clinic’s claim had merit because

such expertise was necessary to establish whether it failed to adequately perform

under the contract.   Id. at *6.   However, we stated in GSBS that while this

scenario might present a fact issue at trial, testimony about breach of a standard

of care would serve no relevant purpose beforehand because “[a] trial court is

perfectly capable of determining whether the contract required [GSBS] to apply

the law in its design,” whether the law prohibited the use of the system proposed

by GSBS, and whether the design included the system. Id. (concluding that a

certificate of merit would not be required for the trial court to determine if the

contract claim had merit); cf. Found. Assessment, 426 S.W.3d at 834–35

(affirming dismissal when appellee alleged that appellants had fraudulently stated

in their engineering reports that they inspected the site and their provision of the

reports constituted provision of professional services); Capital One v. Carter &

Burgess, Inc., 344 S.W.3d 477, 481–83 (Tex. App.—Fort Worth 2011, no pet.)

(affirming dismissal when appellant’s claims for negligent misrepresentation,

                                          7
statutory fraud, and aiding and abetting fraud were all recharacterized claims for

negligence arising out of the provision of professional services by a licensed or

registered professional).

      The Meritage-CES contract contained the following indemnity clause:

      INDEMNIFICATION. [CES] shall fully protect, indemnify and defend
      [Meritage] and hold [Meritage] harmless from and against any and all
      claims, demands, liens, damages, causes of actions, liabilities of any
      and every nature whatsoever, losses and expenses, including but
      not limited to personal injury, property damage, attorneys’ fees and
      court costs, arising in any manner, directly or indirectly, out of or in
      connection with or in the course of or incidental to any of [CES’] work
      and obligations as provided in the Subcontract Agreement, including
      any extra work, REGARDLESS OF CAUSE OR ANY FAULT OR
      NEGLIGENCE OF [MERITAGE] OR ITS AGENTS, OFFICERS OR
      EMPLOYEES AND WITHOUT REGARD OF CAUSES OR OF ANY
      CONCURRENT OR CONTRIBUTING FAULT OR NEGLIGENCE,
      WHETHER SOLE, JOINT OR CONCURRENT, ACTIVE OR
      PASSIVE BY [MERITAGE].

Nationwide sued CES for breach of contract based on this indemnity clause,

seeking damages provided under the clause. Like in GSBS, the trial court here

is equipped to determine the indemnity clause’s viability as a matter of law and to

interpret it without requiring recourse to an expert’s report.      See 2009 WL
3938051, at *6; see also Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d
194, 214 (Tex. 2011) (op. on reh’g) (stating that when the parties do not raise

ambiguity, the interpretation of a contract is a question of law); Storage &

Processors, Inc. v. Reyes, 134 S.W.3d 190, 192 (Tex. 2004) (setting out fair

notice requirements); Expro Ams., LLC v. Sanguine Gas Exploration, LLC, 351
S.W.3d 915, 927 (Tex. App.—Houston [14th Dist.] 2011, pet. denied) (“Whether

                                          8
an indemnity provision complies with the fair-notice requirements is a question of

law, and an indemnity provision that fails to satisfy the requirements is

unenforceable as a matter of law.”). Further, the alleged error resulting in the

breach of contract claim was CES’s failure to comply with a contractual

obligation, not a specific act, error, or omission performed in its provision of

engineering services.     Cf. Tex. Civ. Prac. & Rem. Code Ann. § 150.002(b)

(requiring expert’s affidavit to set forth specifically for each theory of recovery the

negligence, other act, error, or omission of the licensed or registered professional

in providing the professional service); TDIndustries, 378 S.W.3d at 5 (stating that

based on the occupation code’s definitions and former section 150.002(a)’s plain

language, a claim for damages asserted against a professional engineer arises

out of the provision of professional services and requires a certificate of merit if

the claim implicates the engineer’s education, training, and experience in

applying special knowledge or judgment).

      Under the circumstances presented here, we conclude that the trial court

did not abuse its discretion by denying the motion to dismiss, we affirm the trial

court’s order, and we remand this case to the trial court for further proceedings.

                                                     /s/ Dixon W. Holman

                                                     DIXON W. HOLMAN
                                                     JUSTICE

PANEL: WALKER and MEIER, JJ.; and DIXON W. HOLMAN (Senior Justice,
Retired, Sitting by Assignment).

DELIVERED: February 12, 2015

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