Court Opinion

ID: 4452259
Source: CourtListenerOpinion
Date Created: 2019-11-01 06:10:03.927736+00
Date Added: 2024-06-11T14:25:12.078657
License: Public Domain

Opinion issued October 31, 2019

                                      In The

                               Court of Appeals
                                      For The

                          First District of Texas
                             ————————————
                               NO. 01-18-00081-CV
                            ———————————
 AES VALVES, LLC AND IES INTERNATIONAL ENERGY SERVICES,
                       LTD., Appellants
                                         V.
       KOBI INTERNATIONAL, INC. D/B/A KOBI GROUP, Appellee

                    On Appeal from the 125th District Court
                             Harris County, Texas
                       Trial Court Case No. 2016-61999

                          MEMORANDUM OPINION

      In this restricted appeal, appellants, AES Valves, LLC (“AES”) and IES

International Energy Services, Ltd. (“IES”), argue that the trial court improperly

granted a no-answer default judgment in favor of appellee, Kobi International, Inc.

d/b/a Kobi Group (“Kobi”). In three issues, appellants argue that (1) the trial court
improperly granted a default judgment and (2) legally and factually insufficient

evidence supports the award of damages, attorney’s fees, and prejudgment interest.

      We affirm in part and reverse and remand in part.

                                   Background

      In 2012, Kobi and AES entered into a $1.25 million purchase order for

custom plug valves for a pipeline project in Peru. Although AES delivered the

plug valves, Kobi alleged that the plug valves were defective and inoperable for

the project. Despite AES and IES’s1 assurances that they would repair the plug

valves, Kobi alleged that the plug valves were never adequately repaired. Kobi

sued appellants for breach of contract, breach of implied warranty of

merchantability, breach of implied warranty of fitness for a particular purpose,

fraud, and violations of the Deceptive Trade Practices Act (“DTPA”). As relevant

here, Kobi sought economic damages, treble damages under the DTPA,2

exemplary damages for fraud, and attorney’s fees under section 38.001(8) of the

Texas Civil Practice and Remedies Code and section 17.50(d) of the DTPA. Kobi

also alleged that AES and IES were jointly and severally liable pursuant to alter

ego theories.

1
      IES is the parent company of AES.
2
      See TEX. BUS. & COM. CODE § 17.50(b)(1) (providing that trier of fact may award
      no more than three times amount of economic damages if it finds conduct of
      defendant was committed knowingly).

                                          2
      Kobi attempted to serve Robert Schmidt, the president and registered agent

of both AES and IES, multiple times with a private process server and a constable.

When those attempts at service were unsuccessful, Kobi filed a motion for

substituted service.3 Kobi asserted that it used reasonable diligence to find the

registered agent at appellants’ registered office, and Kobi attached the process

server’s affidavit, stating that she could not locate Robert Schmidt. Kobi requested

that the trial court allow Kobi to serve the secretary of state, as appellants’ agent

for service of process.4

      On December 27, 2016, the trial court granted Kobi’s motion for substituted

service, allowing service of process on appellants in one of five ways, including

serving the Texas Secretary of State, as agent for appellants.

      After appellants failed to answer, Kobi sought a default judgment on

liability, asserting that it completed substituted service by affixing “a true copy of

the citation and a copy of Plaintiff’s First Amended Petition to the front door of the

3
      A party seeking substituted service of process is required by the rules of civil
      procedure to file a motion supported “by affidavit stating the location of the
      defendant’s usual place of business or usual place of abode or other place where
      the defendant can probably be found and stating specifically the facts showing that
      service has been attempted under either [TEX. R. CIV. P. 106](a)(1) or (a)(2) at the
      location named in such affidavit but has not been successful[.]” TEX. R. CIV. P.
      106(b).
4
      See TEX. BUS. ORGS. CODE §§ 5.251 (providing that secretary of state is agent for
      entity when registered agent of entity cannot with reasonable diligence be found),
      5.252 (providing service on secretary of state is effected by delivering to secretary
      duplicate copies of process, notice, or demand).

                                            3
usual place of abode of Defendants AES Valves, LLC’s and IES International

Energy Services, Ltd.’s registered agent, Robert Schmidt, 13714 Vinery, Cypress,

TX 77429.” Kobi stated that it received returns of service for both AES and IES

on February 16, 2017. Kobi asserted that because AES and IES had not answered,

it was entitled to a default judgment on liability and a hearing to establish the

amount of damages.

      On April 25, 2017, the trial court granted the default judgment on liability.

Kobi then moved for a default judgment on damages, asserting that it was entitled

to recover damages as stated in its first amended petition. Kobi sought economic

damages of $8,347,015.78 via its DTPA, fraud, and other causes of actions, and it

sought treble damages of $16,694,031.56 pursuant to the DTPA. Alternatively,

Kobi sought exemplary damages of $33,388,063.12 under its fraud cause of action

and section 41.003 of the Texas Civil Practice and Remedies Code.5 Kobi also

sought attorney’s fees under section 38.001(8) of the Texas Civil Practice and

Remedies Code and under section 17.50 of the DTPA.

      After a hearing on its motion for default judgment on damages on July 13,

2017,6 Kobi filed a supplement to its motion, asserting that the trial court requested

5
      See TEX. CIV. PRAC. & REM. CODE § 41.003 (providing that exemplary damages
      may be awarded if claimant proves by clear and convincing evidence that harm
      results from fraud, malice, or gross negligence).
6
      The hearing was not transcribed.
                                          4
that Kobi submit a revised proposed order that awarded treble damages but not

punitive damages and awarded attorney’s fees incurred on a contingency basis.

The trial court signed a July 26, 2017 final judgment, which awarded Kobi a lump

sum of $25,041,047.34 in damages, $400,640.00 in attorney’s fees, and

prejudgment interest. The trial court’s final judgment further provided that AES

and IES are jointly and severally liable to Kobi for all amounts in the judgment.

      On January 25, 2018, appellants filed a notice of restricted appeal.

                                Service of Process

      In their first issue, appellants argue that the default judgment cannot stand

because they were not properly served.

A.    Standard of Review

      To succeed on a restricted appeal, a party is required, among other things,7

to show that error is apparent on the face of the record. TEX. R. APP. P. 30; Barker

CATV Constr., Inc. v. Ampro, Inc., 989 S.W.2d 789, 791 (Tex. App.—Houston [1st

Dist.] 1999, no pet.); see Primate Constr., Inc. v. Silver, 884 S.W.2d 151, 152

(Tex. 1994). The face of the record consists of all the papers on file in the appeal,

including any reporter’s record. Osteen v. Osteen, 38 S.W.3d 809, 813 (Tex.

App.—Houston [14th Dist.] 2001, no pet.).         A review of a restricted appeal

7
      Because the parties only contest whether error is apparent on the face of the
      record, we limit our analysis to that issue.
                                         5
includes review of the legal and factual sufficiency of the evidence, including the

evidence of damages. Norman Commc’ns v. Tex. Eastman Co., 955 S.W.2d 269

270 (Tex. 1997); Regions Bank v. Centerpoint Apartments, 290 S.W.3d 510, 512

(Tex. App.—Amarillo 2009, no pet.).

      A restricted appeal is a direct attack. Barker CATV, 989 S.W.2d at 792; see

Primate, 884 S.W.2d at 152.          The record must affirmatively show strict

compliance with the rules for service of citation in order for a default judgment to

withstand direct attack. Barker CATV, 989 S.W.2d at 792; Primate, 884 S.W.2d at

152. If strict compliance is not affirmatively shown, the service of process is

invalid and has no effect. Barker CATV, 989 S.W.2d at 792. There are no

presumptions in favor of valid issuance, service, or return of citation in the face of

a restricted appeal attacking a default judgment. See Primate, 884 S.W.2d at 152.

      When, as here, the defendants’ registered agent cannot be found at its

registered office with reasonable diligence, the plaintiff is permitted to seek

substituted service on the secretary of state.        See TEX. BUS. ORGS. CODE

§ 5.251(1)(B). Service of process on the secretary of state is accomplished by

delivering duplicate copies of the process and any required fee. See id. § 5.252.

Thereafter, the secretary of state shall forward the process to the entity’s most

recent address on file with the secretary of state by certified mail, return receipt

requested. See id. § 5.253. The secretary may issue a certificate of service known

                                          6
as a Whitney Certificate. See Wright Bros. Energy, Inc. v. Krough, 67 S.W.3d 271,

n.1 (Tex. App.—Houston [1st Dist.] 2001, no pet.) (stating that “Whitney

certificate” is issued by secretary of state when it has received two copies of

petition and citation and has forwarded one copy of each to defendant) (citing

Whitney v. L & L Realty Corp., 500 S.W.2d 94, 95–96 (Tex. 1973)). “Absent fraud

or mistake, the Secretary of State’s certificate is conclusive evidence that the

Secretary of State, as agent of [the defendant], received service of process for [the

defendant] and forwarded the service as required by the statute.” Capitol Brick,

Inc. v. Fleming Mfg. Co., 722 S.W.2d 399, 401 (Tex. 1986).

B.    Analysis

      Appellants argue that the return of service was improper and that the default

judgment must be set aside. Specifically, appellants argue that the original return

of citation, amended return of citation, and second amended return of citation state

that the process server received the documents before the order for alternative

service was even signed. Appellants argue that although the returns of service

show that the process server stated that he received the documents around

December 14 or December 15, the trial court’s order granting substituted service

was not signed until December 27.

                                         7
      Kobi responds that appellants were served with process twice, by posting

and through the secretary of state, both of which were authorized by court order

after appellants’ registered agent, Robert Schmidt, could not be found.

      The record reflects that the trial court granted Kobi’s motion for substituted

service of its first amended petition. The trial court’s order allowed process to be

served on appellants, among other ways, by serving the secretary of state, as agent

for service of process of appellants with a true copy of the citation and a copy of

plaintiff’s first amended petition.

      The face of the record shows that the secretary of state issued Whitney

Certificates for appellants on March 29, 2017. The certificates state that it received

a copy of the citation and plaintiff’s first amended petition8 on January 17, 2017

and that a copy was forwarded on January 23, 2017, by certified mail, return

receipt requested, to AES and IES via Registered Agent Robert Schmidt, 13714

Vinery, Cypress, TX 77429, the address on file with the secretary of state.9

8
      Section 5.252 states that service on the secretary of state is effected by “delivering
      to the secretary duplicate copies of the process, notice, or demand[.]” TEX. BUS.
      ORGS. CODE § 5.252.
9
      Section 5.253 provides that, after service in compliance with section 5.252, the
      secretary of state shall immediately send one of the copies of the process, notice,
      or demand to the named entity with the notice “addressed to the most recent
      address of the entity on file with the secretary of state[.]” TEX. BUS. ORGS. CODE
      § 5.253.

                                            8
      Appellants do not allege fraud or mistake in the issuance of the Whitney

certificates. Instead, appellants argue that service is defective because the citations

and the returns of citations contain an incorrect address. Appellants claim that the

citations for AES and IES list an address at 13714 Vinery Cypress, Texas 77429,

while other affidavits of service include an address at P.O. Box 13375, Austin, TX

78711. Appellants argue that the proper address for service on the Texas Secretary

of State is P.O. Box 12079, Austin, Texas 78711-2079. Because the citations and

the affidavits of certified mailing contain an incorrect address served, appellants

assert that the default judgment cannot stand.

      Appellants appear to argue that the address of the Texas Secretary of State is

incorrect, and it asks us to take judicial notice of the correct service address for the

Texas Secretary of State. However, appellants have cited no authority that service

is defective when an allegedly incorrect address is used for the secretary of state.

See TEX. R. APP. P. 38.1(i). Moreover, in a restricted appeal, we are concerned

with errors apparent on the face of the record. Whether the Texas Secretary of

State’s address is correct or not, the correct address is not apparent from the face of

the record. See Wright Bros. Energy, 67 S.W.3d at 274 (stating that entity’s

correct address is nowhere apparent in trial court’s record). More importantly, the

Whitney certificates are conclusive that the secretary of state received service of

process as agent for appellants, and appellants do not assert fraud or mistake in the

                                           9
issuance of the Whitney Certificates. See Campus Invs., Inc. v. Cullever, 144
S.W.3d 464, 466 (Tex. 2004) (stating that certificate from secretary of state

conclusively establishes that process was served). Thus, we conclude that the

secretary’s certificates conclusively established service of process, and the trial

court had personal jurisdiction over appellants.

      We overrule appellants’ first issue.10

                                          DTPA

      In their second issue, appellants argue that the trial court erred in granting

default judgment on Kobi’s DTPA claim.             Specifically, appellants argue that

Kobi’s DTPA claim is legally and factually insufficient to support a default

judgment.

      Appellants argue that Kobi alleged in its first amended petition that it

entered into a contract for $1,250,000 with appellants. Because the DTPA does

not allow a cause of action for a suit involving more than $500,000, appellants

argue that, on the face of Kobi’s petition, its DTPA claim is invalid.          In its

appellee’s brief, Kobi does not respond to appellants’ argument that the DTPA

claim is invalid. In their reply brief, appellants note that Kobi did not address the

10
      Appellants assert a number of additional arguments as to why service of process
      was not effective. Because we have concluded that the Whitney Certificates are
      conclusive, it is unnecessary to address appellants’ remaining complaints about
      service of process. See TEX. R. APP. P. 47.1.

                                         10
invalidity of its DTPA claim and that Kobi abandoned all causes of action other

than the DTPA claim.11

      A petition is inadequate to support a default judgment when: (1) the petition

does not attempt to state a cause of action within the court’s jurisdiction; (2) the

petition does not give the defendant fair notice of the claim asserted; or (3) the

petition affirmatively shows the invalidity of the claim. Paramount Pipe & Supply

Co. v. Muhr, 749 S.W.2d 491, 494 (Tex. 1988).

      The DTPA contains an exemption if the cause of action arises from a

transaction or set of transactions relating to the same project if the total

consideration by the consumer amounts to more than $500,000. TEX. BUS. & COM.

CODE § 17.49(g). The purpose of this exemption is to maintain the DTPA as a

viable source of relief for consumers in small transactions and to remove litigation

between businesses over large transactions from the scope of the DTPA. See

11
      Although we agree that Kobi did not address the invalidity of its DTPA claim on
      appeal, appellants do not provide any authority or point to anywhere in the record
      showing that Kobi abandoned its breach of contract, fraud, and breach of warranty
      causes of action. In a supplement to Kobi’s motion for default judgment, Kobi
      stated that, after a hearing on July 13, 2017, the trial court requested that Kobi
      submit a revised proposed order that awarded treble damages, but not punitive
      damages, and awarded attorney’s fees incurred on a contingency basis, but not on
      an hourly basis. Nothing in the record indicates that Kobi abandoned its other
      causes of action in its first amended petition. We therefore conclude that Kobi
      asserted and continued to assert all of the causes of action referenced in its first
      amended petition.

                                           11
Citizens Nat’l Bank v. Allen Rae Invs., Inc., 142 S.W.3d 459, 473–74 (Tex. App.—

Fort Worth 2004, no pet.).

      In its first amended petition, Kobi alleged that it had entered into a contract

for $1,250,000 with appellants for custom plug valves. By its own pleading, Kobi

was statutorily precluded from seeking DTPA damages because Kobi’s transaction

with appellants exceeded the $500,00 limit imposed by the DTPA. See TEX. BUS.

& COM. CODE § 17.49(g) (imposing $500,000 limit on DTPA); East Hill Marine,

Inc. v. Rinker Boat Co., 229 S.W.3d 813, 821 (Tex. App.—Fort Worth 2007, pet.

denied) (holding that trial court did not err in granting summary judgment when

transaction exceeded $500,000 limit of DTPA). We therefore conclude that Kobi

could not assert a valid DTPA cause of action and such error is apparent on the

face of the record.12

      We sustain appellants’ second issue.13

12
      Appellants raise additional arguments as to why Kobi’s DTPA claim fails.
      Because we have concluded that Kobi is precluded from bringing a DTPA claim,
      it is unnecessary for us to address appellants’ additional arguments. See TEX. R.
      APP. P. 47.1.
13
      Although we have held that Kobi’s DTPA claim is invalid and thus cannot support
      the trial court’s granting of a default judgment, Kobi also asserted breach of
      contract, fraud, and breach of warranty causes of action that are unchallenged on
      appeal. Because these additional causes of action are unchallenged on appeal, the
      default judgment on liability is proper. See Walling v. Metcalfe, 863 S.W.2d 56,
      58 (Tex. 1993) (“We have held repeatedly that the courts of appeals may not
      reverse the judgment of a trial court for a reason not raised in a point of error.”);
      Britton v. Tex. Dep’t of Criminal Justice, 95 S.W.3d 676, 681 (Tex. App.—
      Houston [1st Dist.] 2002, no pet.) (stating that if independent ground fully
                                           12
                                  Unliquidated Damages

      In their third issue, appellants argue that the unliquidated damages were not

supported by legally and factually sufficient evidence.14 Appellants also argue that

Kobi sought unliquidated damages pursuant to its prayer in its first amended

petition, but the “prayer does not seek purported delay penalties nor CMGC15-

threatened charges or offsets,” “[t]he alleged delay penalties CMG[C] threatened

charges or offsets are neither pleaded nor may they be recovered,” and “Kobi is not

entitled to relief or damages beyond its pleadings.”

A. Standard of Review and Applicable Law

      In conducting a legal-sufficiency review, we credit favorable evidence if a

reasonable factfinder could and disregard contrary evidence unless a reasonable

factfinder could not. City of Keller v. Wilson, 168 S.W.3d 802, 827 (Tex. 2005).

We will sustain a legal sufficiency challenge if the record shows (1) a complete

absence of a vital fact; (2) rules of law or evidence bar the court from giving

      supports judgment, but appellant assigns no error to that independent ground, then
      court of appeals must accept validity of unchallenged independent ground).
14
      Also within its third issue, appellants argue that Kobi did not present legally or
      factually sufficient evidence that a misrepresentation caused the problems with the
      plug valves. Specifically, appellants argue that Kobi had to show that a DTPA
      violation constituted a producing cause of its alleged economic damages. Because
      we have already concluded that Kobi’s DTPA cause of action is invalid, it is
      unnecessary for us to address appellants’ argument. See TEX. R. APP. P. 47.1.
15
      CGMC is the abbreviated name for GyM-Conciviles, the consortium that ran the
      Peruvian project.
                                          13
weight to the only evidence offered to prove a vital fact; (3) the evidence offered to

prove a vital fact is no more than a scintilla; or (4) the evidence conclusively

establishes the opposite of a vital fact. Id. at 810. We consider the evidence in the

light most favorable to the finding and indulge every reasonable inference that

would support it. Id. at 822. In reviewing a factual-sufficiency challenge, we

examine all the evidence. Castanon v. Monsevais, 703 S.W.2d 295, 297 (Tex.

App.—San Antonio 1985, no writ). We will reverse only if the finding is against

the great weight and preponderance of the evidence. Id.

      When a no-answer default judgment is rendered, the defendant’s liability for

all causes of action pled is conclusively established and all allegations of fact in the

petition, except the amount of unliquidated damages, are deemed admitted.

Morgan v. Compugraphic Corp., 675 S.W.2d 729, 731 (Tex. 1984). The plaintiff

must prove by competent evidence the amount of his unliquidated damages and

must prove that the injury for which damages are sought was proximately caused

by the event for which liability has been established. Id. at 732. “The damages

must be ascertainable in some manner other than by mere speculation or

conjecture, and by reference to some fairly definite standard, established

experience, or direct inference from known facts.” A.B.F. Freight Sys., Inc. v.

Austrian Imp. Serv., Inc., 798 S.W.2d 606, 615 (Tex. App.—Dallas 1990, writ

denied). During a default-judgment proceeding, affidavit testimony will support

                                          14
the award of unliquidated damages if the affidavit avers personal knowledge of the

facts, describes the circumstances that resulted in the loss, and identifies the total

amount owed as a result. See Tex. Commerce Bank, Nat’l Ass’n v. New, 3 S.W.3d
515, 517 (Tex. 1999) (per curiam).

      Special damages must be pled. TEX. R. CIV. P. 56. Whether particular

damages must be specifically pled depends on whether they constitute general

damages (also known as “direct damages”) or special damages (also known as

“consequential damages”). See id. (“When items of special damage are claimed,

they shall be specifically stated.”); Arthur Andersen & Co. v. Perry Equip. Corp.,

945 S.W.2d 812, 816 (Tex. 1997) (sub. op.) (using the terms “direct damages” and

“consequential damages”); Anderson Dev. Corp. v. Coastal States Crude

Gathering Co., 543 S.W.2d 402, 405 (Tex. App.—Houston [14th Dist.] 1976, writ

ref’d n.r.e.) (using terms “general damages” and “special damages”).              The

distinction turns on whether the damages “usually” or “necessarily” flow from the

wrongful act. See Arthur Andersen & Co., 945 S.W.2d at 816 (explaining that

“[d]irect damages are the necessary and usual result of the defendant’s wrongful

act,” whereas consequential damages “result naturally, but not necessarily, from

the defendant’s wrongful acts”); Anderson Dev. Corp., 543 S.W.2d at 405 (stating

that “[g]eneral damages are those which naturally and necessarily flow from a

wrongful act,” whereas “[s]pecial damages arise naturally but not necessarily from

                                         15
the wrongful act”). General damages need not be pleaded because they “are so

usual an accompaniment of the kind of breach alleged that the mere allegation of

the breach gives sufficient notice” that such damages were sustained. Hess Die

Mold, Inc. v. Am. Plasti–Plate Corp., 653 S.W.2d 927, 929 (Tex. App.—Tyler

1983, no writ). Special damages, on the other hand, “are so unusual as to normally

vary with the circumstances of each individual case, and must be shown to have

been contemplated or foreseen by the parties.” Id. A default judgment, like all

judgments, must conform to the pleadings. TEX. R. CIV. P. 301; Mullen v. Roberts,

423 S.W.2d 576, 578 (Tex. 1968).

B. Analysis

      In its motion for default judgment on damages, Kobi asked to be awarded

unliquidated damages as previously requested in its prayer of its first amended

petition. Kobi’s prayer of its first amended petition asked that it be awarded

judgment against defendants, jointly and severally, for the following:

      (a)     The $1.25 million that Kobi paid under the purchase order;

      (b)     Damages and loss caused by the Defendants’ contractual and
              tortious breaches, including costs incurred by KOBI to purchase
              replacement plug valves for the pipeline in Peru, to air freight
              the plug valves to Peru because they were delivered late to
              KOBI by AES, on plane tickets and hotel rooms for AES repair
              people to travel to Peru to attempt to fix the defects in the field,
              to warehouse the defective plug valves in Peru, and to
              otherwise investigate the cause and potential solutions to the
              defective plug valves;
      ...
                                           16
      (e)   Exemplary damages.

      Kobi’s motion for default judgment on damages also requested additional

economic damages, consisting of $1,106,048 in lost income, “when CMGC

refused to pay Kobi Group this amount for the plug valves,” and $3,450,247.81 for

“Contugas’s16 intent ‘to purchase and install at its own expense the valves and

deduct that expense . . . from the outstanding balance due to CGMC,’ which

expense CGMC will pass on to Kobi Group.”

      In its first amended petition, the live pleading, Kobi did not request damages

for (1) Kobi’s lost income of $1,106,048.00 and (2) “Contugas’s intent ‘to

purchase and install at its own expense the valves and deduct that expense. . . from

the outstanding balance due to CGMC,’ which expense CGMC will pass on to

Kobi Group” of $3,450,247.81.         These damages were consequential damages

because they result naturally, but not necessarily, from the acts complained of. See

Arthur Andersen & Co., 945 S.W.2d at 816; Mood v. Kronos Prods., Inc., 245
S.W.3d 8, 12 (Tex. App.—Dallas 2007, pet. denied) (stating that profits lost on

other contracts or relationships resulting from breach are consequential damages);

Boat Superstore, Inc. v. Haner, 877 S.W.2d 376, (Tex. App.—Houston [1st Dist.]

1994, no pet.); Harper v. Wellbeing Genomics Pty. Ltd., No. 03-17-00035-CV,

16
      Contugas is a company that distributes and markets natural gas in the Ica region of
      Peru, and CGMC’s client on the pipeline project.
                                          17
2018 WL 6318876, at *11 (Tex. App.—Austin Dec. 4, 2018, pet. filed) (stating

that profits lost on other contracts or relationships resulting from breach are

indirect or consequential damages).         As these are consequential or special

damages, they must be specifically pled. TEX. R. CIV. P. 56 (special damages shall

be specifically stated), 301 (judgment must conform to pleadings); Henry S. Miller

Co. v. Bynum, 836 S.W.2d 160, 164 (Tex. 1992) (Phillips, J., concurring) (stating

that “consequential damages must be specifically pled”). By failing to specifically

plead for these consequential damages, the trial court committed error by awarding

at least some damages that did not conform to the pleadings. Therefore, the

evidence was legally insufficient to support $4,556,295.81 out of the

$25,041,047.34 in unliquidated damages awarded by the trial court, and error is

apparent on the face of the record.

      We sustain appellants’ third issue.

      Because of our conclusion in appellants’ third issue, this court must reverse

all of the damages awarded and remand the claims for a new trial on unliquidated

damages. See Holt Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 86 (Tex. 1992)

(holding that when appellate court sustains no evidence point after an uncontested

hearing on unliquidated damages following no-answer default judgment,

appropriate disposition is to remand for trial on issue of unliquidated damages); see

also Argyle Mech., Inc. v. Unigus Steel, Inc., 156 S.W.3d 685, 688 (Tex. App.—

                                            18
Dallas 2005, no pet.) (if no-evidence point sustained as to unliquidated damages

resulting from no-answer default judgment, appropriate disposition is remand for

new trial on issue of unliquidated damages). We therefore reverse the trial court’s

award of damages, prejudgment interest, and attorney’s fees. See Holt Atherton

Indus., 835 S.W.2d at 86; see, e.g., Barker v. Eckman, 213 S.W.3d 306, 315 (Tex.

2006) (remanding for new trial on attorney’s fees when damages were reduced

significantly).

                                   Conclusion

      We affirm the trial court’s default judgment as to liability. We reverse the

remainder of the portion of the default judgment awarding unliquidated damages

and remand for a new trial on the issue of unliquidated damages only.

                                                   Sherry Radack
                                                   Chief Justice

Panel consists of Chief Justice Radack and Justices Goodman and Countiss.

                                        19