Court Opinion

ID: 4078114
Source: CourtListenerOpinion
Date Created: 2016-09-30 23:05:57.096067+00
Date Added: 2024-06-11T14:32:57.339283
License: Public Domain

ACCEPTED
                                                                     03-15-00409-CV
                                                                             8019009
                                                          THIRD COURT OF APPEALS
                                                                     AUSTIN, TEXAS
                                                               11/30/2015 4:14:06 PM
                                                                   JEFFREY D. KYLE
                                                                              CLERK

                   No. 03-15-00409-CV
                                                    FILED IN
                                             3rd COURT OF APPEALS
                                                  AUSTIN, TEXAS

          In the Third Court of Appeals      11/30/2015 4:14:06 PM
                                                 JEFFREY D. KYLE
                 Austin, Texas                        Clerk

                  SUSAN ENGLAND (LEE)
                        Appellant

                            v.

  JANICE KOLBE, AS GUARDIAN OF THE ESTATE OF EDNA MOON
                        Appellee

            APPEAL FROM CAUSE NO. 12-0361
207TH JUDICIAL DISTRICT COURT OF HAYS COUNTY, TEXAS
    THE HONORABLE JUDGE GARY STEEL, PRESIDING

                 APPELLANT’S BRIEF

                        David Junkin
                  State Bar No. 11058020
                Law Office of David Junkin
                       P.O. Box 2910
                  Wimberley, TX 78676
                       512/847-8600
                       512/847-8604
                david@junkinlawoffice.com

                  Attorney for Appellant

   ORAL ARGUMENT (CONDITIONALLY) REQUESTED
           STATEMENT REGARDING ORAL ARGUMENT

      Appellant believes that the Appellant’s Brief, Appellee’s Brief, Clerk’s

Record, and Reporter’s Record will adequately present the facts and legal

arguments involved in this appeal and that oral argument would not

significantly aid the decisional process of this Court. See Tex. R. App. P.

39.1. However, should the Court conclude that oral argument would be

helpful, Appellant stands ready and requests the opportunity to participate.

                                      i
                          TABLE OF CONTENTS

               IDENTITY OF PARTIES AND COUNSEL

      The following is a complete list of all parties to the trial court’s final

judgment, as well as the names and addresses of all trial and appellate counsel.

      Defendant /Appellant:             Counsel for Appellant:

      Susan England, now                David Junkin
      Susan Lee                         P.O. Box 2910
                                        Wimberley, Texas 78676

      Plaintiff /Appellee:              Counsel for Appellee:

      Janice Kolbe as                   Jonathan Hull
      Guardian of the Estate            c/o Reagan Burris PLLC
      Of Edna Moon                      401 Main Plaza, Suite 200
                                        New Braunfels, TX 78130

                                       ii
                                   TABLE OF CONTENTS

Index of Authorities .................................................................................... vii

Statement of the Case ....................................................................................1

Issues Presented

                                   THE SANCTIONS ORDER

         A.       Did the Trial Court Err in Entering Death Penalty
                  Sanctions Against Appellant Because There Was
                  No Direct Relationship Between the Offensive
                  Conduct and the Sanction Imposed? ..........................................3

         B.       Did the Trial Court Err in Entering Death Penalty
                  Sanctions Against Appellant Because Scope of the
                  Sanction Order Resulted in an Excessive Penalty? ...................3

         C.       Did the Trial Court Err in Entering Death Penalty
                  Sanctions Against Appellant Because the Scope of
                  The Sanction Order violated Appellant’s Constitutional
                  Due Process Rights? ...................................................................3

         D.       In Light of the General Standards for Review of
                  Death Penalty Sanctions, Did Section 10.001 of
                  the Texas Civil Practice and Remedies Code Provide
                  an Additional Appropriate Basis for Death Penalty
                  Sanctions Against Appellant? ....................................................3

         E.       In Light of General Standards for Review of Death
                  Penalty Sanctions, Did Rule 13 TRCP Provide
                  an Additional Appropriate Basis for Death Penalty
                  Sanctions Against Appellant? ....................................................3

         F.       In Light of the General Standards for Review of
                  Death Penalty Sanctions, Did Rule 215.5 TRCP
                  Provide an Additional Appropriate Basis for
                  Death Penalty Sanctions Against Appellant? ............................4

                                                     iii
                                  THE FINAL JUDGMENT

        G.       As to the La Playa, Park Place, RR 12, and
                 Rest Haven (Lake McQueeney) Properties,
                 Did the Final Judgment Violate the “One-
                 Satisfaction” Rule by Granting Appellee a Double
                 or Even Triple Recovery for Actual Damages,
                 the Property Itself, and a Constructive Trust? ...........................4

        H.       Did the Trial Court Err in Imposing a “Constructive
                 Trust Lien” Against Appellant’s Homestead and
                 Vehicle Because There Was No Election of Remedies
                 by Appellee and There is No Evidence or Insufficient
                 Evidence to Support the Amount of the Constructive
                 Trusts Set Out in the Final Judgment? .......................................4

        I.       Does the Final Judgment Improperly Place a Claim
                 on Appellant’s Homestead? .......................................................4

        J.       Did the Trial Court Err in Failing to Take Into
                 Consideration the Specific Allocation of Ownership
                 in the Joint Account Agreements? .............................................4

        K.       Did the Trial Court Err in “Setting Aside” and
                 Declaring “Void and Without Effect” the Gift Deeds
                 Because There is No or Insufficient Evidence of
                 Fraudulent Inducement of Those Deeds by Appellant
                 and the Final Judgment Improperly Clouds Title
                 of Non-Parties? ...........................................................................4

        L.       Is the $1,000,000 Punitive Damages Award Excessive
                 in Light of the Facts and Sanctions Order? ................................4

        M.       Does the Final Judgment Refer to an Improper
                 Authority for Assessment of Pre- and Post-
                 Judgement Interest? ....................................................................4

General Statement of Facts ...........................................................................5

Summary of the Argument ...........................................................................7

                                                    iv
Standard of Review ........................................................................................8

Argument

                                  THE SANCTIONS ORDER

        A.       The Trial Court Erred in Entering Death Penalty
                 Sanctions Against Appellant Because There is
                 Not a Direct Relationship Between the Offensive
                 Conduct and the Sanction Imposed.......................................... 11

        B.       The Trial Court Erred in Entering Death Penalty
                 Sanctions Against Appellant Because the Sanction
                 Order was an Excessive Penalty. ............................................. 16

        C.       The Trial Court Erred in Entering Death Penalty
                 Sanctions Against Appellant Because the Scope
                 of the Sanction Order Violated Appellant’s
                 Constitutional Due Process Rights........................................... 22

        D.       In Light of the General Standards for Review
                 of Death Penalty Sanctions, Section 10.001 of
                 the Texas Civil Practice and Remedies Code
                 Does Not Provide an Appropriate Basis for
                 Death Penalty Sanctions Against Appellant. ........................... 25

        E.       In Light of the General Standards for Review
                 of Death Penalty Sanctions, Rule 13 TRCP
                 Does Not Provide an Appropriate Basis for
                 Death Penalty Sanctions Against Appellant. ........................... 27

        F.       In Light of the Foregoing General Standards
                 for Review of Death Penalty Sanctions,
                 Rule 215.5 Does Not Provide an Appropriate
                 Basis for Death Penalty Sanctions Against
                 Appellant. ................................................................................. 31

                                                      v
                     THE FINAL JUDGMENT

G.   The Final Judgment Violated the “One-Satisfaction”
     Rule by Granting Appellee a “Double Recovery”
     for Actual Damages and the Property Itself. ............................ 32

            As to the La Playa and Park Place
            Properties....................................................................... 33

             As to the RR 12 and Rest Haven
             (Lake McQueeney) Properties ..................................... 34

H.   The Trial Court Erred in Imposing a “Constructive
     Trust Lien” Against Appellant’s Homestead
     and Vehicle Because it is Not the Proper
     Remedy and There is No Evidence or Insufficient
     Evidence to Support the Amount of the
     Constructive Trusts Set Out in the Final Judgment. ................ 35

             The Constructive Trust on Appellant’s
             Homestead for $306,000 is Improper ............................ 37

             The Constructive Trust on the Mercedes
             Benz for $12,182.36 is Improper .................................. 39

I.   The Final Judgment Improperly Places a Claim
     on Appellant’s Homestead. ..................................................... 41

J.   The Trial Court Erred in Using the Improper
     Measure of Damages When the Joint Account
     Agreements Specifically Identified the
     Allocation of Ownership of Such Joint
     Accounts and the Court Did Not Take Into
     Consideration the Appellant’s Contractual
     Ownership Interest in Those Joint Accounts............................ 42

                                      vi
        K.       The Trial Court Erred in “Setting Aside” and
                 Declaring “Void and Without Effect” the
                 Gift Deeds Because There is No or Insufficient
                 Evidence of Fraudulent Inducement of Those
                 Deeds by Appellant and the Final Judgment
                 Improperly Clouds Title of Non-Parties................................... 44

                           There is Insufficient Evidence of Fraudulent
                           Inducement of a Contract .............................................. 44

                           The Final Judgment Improperly Clouded
                           Title of Non-Parties ....................................................... 45

        L.       The $1,000,000 Punitive Damages Award is
                 Excessive in Light of the Facts and Sanctions Order ............... 47

        M.       The Final Judgment Refers to an Improper
                 Authority for Assessment of Pre- and Post-
                 Judgement Interest .................................................................... 48

Conclusion and Prayer ............................................................................... 48

Certification Regarding Length of Brief .................................................. 49

Certificate of Service .................................................................................. 49

Appendix

        Sanctions Order ............................................................................. Tab 1

        Final Judgment .............................................................................. Tab 2

        Statutes & Rules ............................................................................ Tab 3

        Cases .............................................................................................. Tab 4

                                                      vii
                                INDEX OF AUTHORITIES

Authority                                                                                        Page(s)

                                               Case Law

Alejandro v. Robstown ISD,
      131 S.W.3d 663 (Tex. App.--Corpus Christi 2004, no pet.) .............. 27

American Flood Research, Inc. v. Jones,
     192 S.W.3d 581 (Tex. 2006) .......................................................... 9, 10

Batmanis v. Batmanis,
     600 S.W.2d 887 (Tex. Civ. App.—Houston [14th Dist.] 1980,
     writ ref’d n.r.e.)................................................................................... 38

Bennett v. Grant,
     460 S.W.3d 220 (Tex. App.—Austin 2015, pet. filed) ...................... 47

Birchfield v. Texarkana Memorial Hosp.,
      747 S.W.2d 361 (Tex.1987) ............................................................... 32

Brooks v. Northglen Ass’n,
     141 S.W.3d 158 (Tex. 2004) .............................................................. 46

Brozynski v. Kerney,
     (Tex. App.-Waco Aug. 2, 2006, pet. denied) [unpublished].............. 26

Chrysler Corp. v. Blackmon,
      841 S.W.2d 844 (Tex. 1992) ........................................................ 15, 16

Cunningham v. Parkdale Bank,
     660 S.W.2d 810 (Tex. 1983) .............................................................. 45

Fairfield Financial Group, Inc. v. Synott,
       300 S.W.3d 316 (Tex. App.—Austin 2009, no pet)........................... 41

General Ass'n of Davidian S.D.A. v. General Ass'n, Etc.,
     410 S.W.2d 256 (Tex. Civ. App.—Waco 1966,
     writ ref’d n.r.e.)................................................................................... 38

                                                    viii
GTE Communications Sys. Corp. v. Tanner,
     856 S.W.2d 725 (Tex. 1993) ........................................................ 21, 27

Haase v. Glazner,
     62 S.W.3d 795 (Tex. 2001) ................................................................ 44

In re Guardianship of Patlan,
       350 S.W.2d 189 (Tex. App.—San Antonio 2011, no pet.) ................ 44

Jim Walter Homes, Inc. v. Reed,
     711 S.W.2d 617 (Tex. 1986) .............................................................. 42

Karagounis v. Property Co. of Am.,
     970 S.W.2d 761 (Tex. App.-Amarillo 1998, pet. denied) .................. 28

Lanfear v. Blackmon,
      827 S.W.2d 87 (Tex. Civ. - Corpus Christi 1992,
      orig. proceeding)................................................................................. 29

LAN/STV v. Martin K. Eby Constr. Co.,
     435 S.W.3d 234 (Tex. 2014) .............................................................. 43

Lone Star Gas Co. v. Childress,
      187 S.W.2d 936 (Tex. Civ. App.—Waco 1945, no writ) .................. 46

LTTS Charter School, Inc. v. Palasota,
     362 S.W.3d 202 (Tex. App.—Dallas 2012, no pet.) .......................... 35

Mattly v. Spiegel, Inc.,
      19 S.W.3d 890 (Tex. App.-Houston [14th Dist.] 2002, no pet.) ......... 26

Mid-South Telecommunications, Co. v. Best,
     184 S.W.3d 386 (Tex. App.—Austin 2006, no pet.) ......................... 17

Moody v. Pitts,
     708 S.W.2d 930 (Tex. Civ. App.—Corpus Christi 1986,
     no writ) ............................................................................................... 37

                                                      ix
Moreno v. Sterling Drug, Inc.,
     787 S.W.2d 348 (Tex. 1990) .............................................................. 17

Norfolk Southern Railway Co. v. Bailey,
      92 S.W.3d 577 (Tex. App.—Austin 2002, no pet.)............................ 14

Overman v. Baker,
     26 S.W.3d 506 (Tex. App.--Tyler 2000, no pet.) ............................... 28

R.M. Dudley Constr. Co., Inc. v. Dawson,
      258 S.W.3d 694 (Tex. App.—Waco 2008, pet. denied) .................... 26

Saden v. Smith,
     415 S.W.3d 450 (Tex. App.--Houston [1st Dist.] 2013,
     pet. denied) ......................................................................................... 32

Southern County Mut. Ins. Co. v. First Bank & Trust of Groves,
      750 S.W.2d 170 (Tex. 1988) .............................................................. 32

State v. Target Corp.,
       194 S.W.3d 46 (Tex. App.—Waco 2006, no pet ) ............................. 31

Stevenson v. Koutzarov,
      795 S.W.2d 313 (Tex. App.--Houston [1st Dist.] 1990,
      writ denied) ......................................................................................... 32

Sw. Bell Tel. Co. v. DeLanney,
      809 S.W.2d 493 (Tex. 1991) ......................................................... 42-43

TransAmerican Natural Gas Corp. v., Powell,
     811 S.W.2d 913 (Tex. 1991) ............................................ 10, 22, 23, 31

Wielgosz v. Millard,
     679 S.W.2d 163 (Tex. App.—Houston [14th Dist.]
     1984, no writ) ..................................................................................... 45
Will. v. Akzo Chemicals,
      999 S.W.2d 836 (Tex. App.—Tyler 1999, no pet.)...................... 22, 29

                                                      x
Willis v. Donnelly,
       118 S.W.3d 10 (Tex. App.—Houston [14th Dist.] 2003),
       aff’d in part and rev’d in part on other grounds,
       199 S.W.3d 262 (Tex. 2006) ........................................................ 36, 37

W.O. Bankston Nissan v. Walters,
     754 S.W.2d 127 (Tex. 1988) .............................................................. 42

                                                 Statutes

TEX. BUS. ORG. CODE § 152.101 .................................................................. 30

TEX. CIV. PRAC. & REM. CODE § 10.001 .......................................... 10, 25, 26

TEX. CIV. PRAC. & REM. CODE § 10.005 ................................................ 10, 26

TEX. CIV. PRAC. & REM. CODE § 37.006 ...................................................... 46

TEX. FIN. CODE § 304.003............................................................................. 48

TEX. FIN. CODE § 304.103............................................................................. 48

TEX. PROP. CODE § 41.001 ............................................................................ 41

                                                  Other

TEX. R. CIV. P. 13.......................................................................... 8, 10, 27, 28

TEX. R. CIV. P. 39.................................................................................. 4, 6, 47

TEX. R. CIV. P. 56.......................................................................................... 46

TEX. R. CIV. P. 97.......................................................................................... 47

TEX. R. CIV. P. 215.............................................................................. 8, 10, 28

W. Miller, NON-MONETARY RELIEF, EQUITABLE RELIEF ............................. 37

                                                      xi
TO THE HONORABLE THIRTEENTH COURT OF APPEALS:
      Appellant, Susan England, now Susan Lee, (“Appellant” or “Susan England”)

files this brief asking the Court to reverse the trial court’s entry of death penalty

sanctions against her and reverse the judgment awarding Janice Kolbe, as Guardian

of the Estate of Edna Moon (“Appellee” or “Janice Kolbe”) $1,458,251 in actual

damages and $1,000,000 in punitive damages and imposing constructive trusts.

Appellant respectfully shows:

                         STATEMENT OF THE CASE

Judgment signed by:       The Honorable Gary Steel

Trial Court:              207th Judicial District Court, Hays County, Texas.

The Appellant:            Susan England (now Susan Lee)

The Appellee:             Janice Kolbe as Guardian of the Estate of Edna Moon

Nature of the Case:       Appellant, Susan England (Lee), and Appellee, Janice
                          Kolbe, are the surviving daughters of Edna and Howard
                          Moon.1 The underlying nature of the case is the question
                          of whether or not Appellant misused funds of her mother,
                          Edna Moon.

Course of Proceedings: The suit was filed on February 23, 2012 by Appellee under
                       power of attorney. C.R. at 8. On March 12, 2013,
                       Appellee and Barbara McHale were appointed guardians

1
  Another sister, Barbara McHale, died during the course of this proceeding and a
fourth sister, Betty Jane Grossman Bish, died several years before suit was filed and
left a son, Patrick Grossman, who is an heir under Edna Moon’s will.

                                Appellant’s Brief – Page 1
                         of the estate and person, respectively, of Edna Moon. On
                         October 7, 2014, the trial court granted Appellee’s first
                         motion for sanctions for discovery abuse – primarily for
                         failing to identify bank account/real property information
                         – awarding Appellee monetary sanctions of $15,000 plus
                         an additional $3,000 in attorney’s fees (the “First Sanction
                         Order”). C.R. at 544 and R.R. Vol. 8 at 54-55. The trial
                         court also entered an Amended Docket Control Order
                         setting out various pretrial deadline and setting the matter
                         for jury trial on January 26, 2015.

                         In compliance with the Amended Docket Control Order,
                         on December 19, 2014 the Appellant filed her First
                         Supplemental Answer and Counterclaim. C.R. at 558.
                         Appellee sought additional discovery. The trial court was
                         unable to hear the case on January 26, 2015 and it was
                         reset for trial on March 9, 2015. C.R. at 846. The trial
                         court set new deadlines for filing amended pleadings. Id.
                         Appellant’s expert witness, Michael Turner, was deposed
                         on January 13, 2015 and Appellant was deposed a second
                         time on February 4, 2015. C.R. at 928 and 1067.

                         On February 20, 2015, Appellee filed a second Motion for
                         Sanctions based primarily on alleged inconsistencies in
                         Appellant’s testimony and allegations Appellant was
                         asserting “new” theories or claims. C.R. at 987. This
                         motion for sanctions was ultimately heard by the trial court
                         on March 2, 2015.

Trial Court’s Disposition: On March 10, 2015 the trial court signed the Order
                        Granting Plaintiff’s Motion for Sanctions (the “Sanctions
                        Order”) entering “death penalty” sanctions against
                        Appellant including denying the Appellant the right to a
                        jury trial on the damages issue. C.R. at 1621. The trial
                        court made it clear the sanctions were entered as a result
                        of false testimony and not based on Appellee’s allegations

                             Appellant’s Brief – Page 2
                      of Appellant asserting a new theory. R.R. Vol. 12 at 116,
                      lines 14-20.
                      Also on March 10, 2015, the trial court heard evidence on
                      Appellee’s claims for damages and entered judgment in
                      favor of Appellee for, among other things, $1,458,251 in
                      actual damages, $1,000,000 in punitive damages, and
                      imposed constructive trusts on accounts, a vehicle, and
                      Appellant’s homestead (“Final Judgment”). C.R. at 1640.

                          ISSUES PRESENTED

                         THE SANCTIONS ORDER

A.   Did the Trial Court Err in Entering Death Penalty Sanctions Against
     Appellant Because There Was No Direct Relationship Between the
     Offensive Conduct and the Sanction Imposed?

B.   Did the Trial Court Err in Entering Death Penalty Sanctions Against
     Appellant Because Scope of the Sanction Order Resulted in an Excessive
     Penalty?

C.   Did the Trial Court Err in Entering Death Penalty Sanctions Against
     Appellant Because the Scope of the Sanction Order violated Appellant’s
     Constitutional Due Process Rights?

D.   In Light of the General Standards for Review of Death Penalty Sanctions,
     Did Section 10.001 of the Texas Civil Practice and Remedies Code
     Provide an Additional Appropriate Basis for Death Penalty Sanctions
     Against Appellant?

E.   In Light of General Standards for Review of Death Penalty Sanctions,
     Did Rule 13 TRCP Provide an Additional Appropriate Basis for Death
     Penalty Sanctions Against Appellant?

                           Appellant’s Brief – Page 3
F.   In Light of the General Standards for Review of Death Penalty Sanctions,
     Did Rule 215.5 TRCP Provide an Additional Appropriate Basis for Death
     Penalty Sanctions Against Appellant?

                         THE FINAL JUDGMENT

G.   As to the La Playa, Park Place, RR 12, and Rest Haven (Lake
     McQueeney) Properties, Did the Final Judgment Violate the “One-
     Satisfaction” Rule by Granting Appellee a Double or Even Triple
     Recovery for Actual Damages, the Property Itself, and a Constructive
     Trust?

H.   Did the Trial Court Err in Imposing a “Constructive Trust Lien” Against
     Appellant’s Homestead and Vehicle Because There Was No Election of
     Remedies by Appellee and There is No Evidence or Insufficient Evidence
     to Support the Amount of the Constructive Trusts Set Out in the Final
     Judgment?

I.   Does the Final Judgment Improperly Place a Claim on Appellant’s
     Homestead?

J.   Did the Trial Court Err in Failing to Take Into Consideration the Specific
     Allocation of Ownership in the Joint Account Agreements?

K.   Did the Trial Court Err in “Setting Aside” and Declaring “Void and
     Without Effect” the Gift Deeds Because There is No or Insufficient
     Evidence of Fraudulent Inducement of Those Deeds by Appellant and the
     Final Judgment Improperly Clouds Title of Non-Parties?

L.   Is the $1,000,000 Punitive Damages Award Excessive in Light of the Facts
     and Sanctions Order?

M.   Does the Final Judgment Refer to an Improper Authority for Assessment
     of Pre- and Post-Judgement Interest?

                           Appellant’s Brief – Page 4
                     GENERAL STATEMENT OF FACTS

      1.    Beginning as early as March of 2000, Howard and Edna Moon gifted

real property to Appellant. By way of a gift deed dated March 3, 2000, Howard and

Edna Moon deeded a lot in the Hunter’s Glen subdivision in Hays County to

Appellant (the “Hunter’s Glen” property). C.R. at 1400. Similarly, by way of a Gift

Deeds dated May 4, 2006, Howard and Edna Moon deeded a property on Ranch

Road 12 in Hays County to Appellant (the “RR 12” property) and property in

Guadalupe County, Texas (the “Rest Haven” property or “Lake McQueeney”

property). Id. at 1434 and 1439 and RR Vol. 15 at 805-12. The RR 12 and Rest

Haven deeds are together referred to herein as the “Gift Deeds.”2 Edna Moon

actively participated in the acquisition of Rest Haven property executing purchase

related documents. Id. at 1409-32. Beginning no later than April 12 of 2000,

Howard Moon, Edna Moon, and Appellant also entered into multi-party bank

accounts with rights of survivorship and allocating ownership of the account in

proportion to net contributions to the account. Id. at 1407; see also id. at 1406

(similar account for Appellant and Edna Moon).

2
 The “RR 12” property description is recorded in Vol. 2916, Page 759 of the Official
Public Records of Hays County, Texas and the “Rest Haven” property is described
as Lot 140 and part of 139, Treasure Island Unit 1 in Guadalupe County, Texas.

                              Appellant’s Brief – Page 5
      2.     After Howard Moon died, Edna Moon revised her will leaving her

estate to her then living daughters (Appellant, Appellee, and Barbara McHale) and

to the son of her deceased daughter, Patrick Grossman, and acknowledging the debt

owed to her by Appellee. C.R. at 1444 (dated February 27, 2007). Appellant

continued to assisted her mother in the acquisition and disposition of other real

property interests and which have been described in this litigation as the “La Playa”

property and the “Park Place” property. Id. at 1460 and 1475.

      3.     By September 2008, the Appellee (and Barbara McHale) were making

complaints about the alleged misuse of Edna Moon’s estate to Mr. H.C. Kyle who

was the attorney for Howard and Edna Moon. Id. at 1467. A complaint was made

to Adult Protective Services in the summer of 2009. APS investigated and spoke to,

among others, Edna Moon, Mr. Kyle, and Edna Moon’s caregivers and ruled out

claims of exploitation of Edna Moon by Appellant as “invalid.” Id. at 1488 and R.R.

Vol. 15 at 128. Edna Moon then revised her will which included admonishments

against similar complaints against Appellant by Appellee and Barbara McHale. C.R.

at 1501 (will dated August 12, 2009). Appellee was notified of the change in the

will and the reasons for it by Mr. Kyle. Id. at 1514. Appellee responded to Mr. Kyle

in August 2009 again complaining of Appellant. Id. at 1516.

      4.     Upon Edna Moon’s return from an extended stay out of state, in

October of 2011 Appellee and Barbara McHale took Edna Moon to another attorney

                              Appellant’s Brief – Page 6
to “discuss taking over our mother’s financial affairs” and had Edna Moon change

her will and execute a statutory durable power of attorney naming Appellee as the

agent. RR Vol. 15 at 18 and 22. The Appellee then filed this suit in February 2012

alleging assorted causes of action based on alleged misuse of Edna Moon’s funds by

Appellant. In March of 2012, Appellee and Barbara McHale and Edna Moon opened

a multi-party account with rights of survivorship and with ownership in proportion

to net contributions similar to the accounts Edna Moon (and Howard Moon) opened

with Appellant. C.R. at 1521.

        5.   During the proceeding, the Appellee complained that Appellant would

not provide appropriate information and documents. C.R. at 306, 987. Ultimately,

the trial court agreed and entered the Sanctions Order striking all of Appellant’s

claims and defenses and prohibiting a jury trial. Id. at 1621 [Appendix 1]. The trial

court then held a bench trial solely on the issue of damages without allowing

Appellant to assert any defenses. The trial court then entered the Final Judgment.

Id. at 1640 [Appendix 2]. The trial court also entered its findings of fact and

conclusions of law in support of the Sanctions Order and the Final Judgment. Id. at

1678.

                      SUMMARY OF THE ARGUMENT

        6.   The Appellant appeals the Sanctions Order [C.R. at 1621 and

Appendix 1] and Final Judgment [C.R. at 1640 and Appendix 2] arising out of the

                                Appellant’s Brief – Page 7
Sanctions Order. The Appellant appeals the Sanctions Order as “unjust” because

the Sanctions Order imposed death penalty sanctions against Appellant when there

was no direct relationship between the alleged offensive conduct by the Appellant

and the ultimate scope of the Sanctions Order. The Appellant also appeals the

Sanctions Order because the scope of the Sanctions Order was excessive and

violated Appellant’s constitutional rights in striking all of Appellant’s claims and

defenses. Further, Rules 13 and 215 of the Texas Rules of Civil Procedure and

Chapter 10 of the Civil Practice & Remedies Code do not expand the analysis of

whether the Sanctions Order is “just.”

      7_.    If this Court upholds the Sanctions Order, the Appellant also appeals

the Final Judgment it is based on the overly broad Sanctions Order and because it

improperly purports to award the Appellee a double or even triple recovery in

violation of the one satisfaction rule. There was no allocation requested or made by

the trial court among multiple causes of action asserted by Appellee and the award

of Appellee’s actual/economic damages. However, with respect to some properties

at issue, the Final Judgment awarded Appellee not only the value of the property,

but also the property itself and, in one case the additional remedy of a constructive

trust against Appellant’s homestead for more than $300,000, resulting in a double or

even triple recovery by Appellee. Further, the damages calculations used for the

constructive trust in the Final Judgment also improperly fail to acknowledge the rule

                              Appellant’s Brief – Page 8
whereby the first funds taken from a co-mingled accounts are presumed to belong to

the person holding the trust funds.

      8.     There is insufficient evidence to support setting aside the “Gift Deeds”

from Howard and Edna Moon to Appellant, and by doing so, the Final Judgment

improperly clouds the title of third-parties who were not before the trial court. The

Final Judgment and damages awarded do not take into consideration the contractual

agreement and specific allocation of ownership of funds in, at least some, of the joint

accounts at issue. The punitive damages award in the Final Judgment is also

excessive in light of the facts and the impact of the Sanctions Order.

                            STANDARD OF REVIEW
      9.     A trial court’s ruling on a motion for sanctions is reviewed under an

abuse of discretion standard. See e.g., American Flood Research, Inc. v. Jones, 192
S.W.3d 581, 583 (Tex. 2006). The trial court entered findings of fact in support of

the Sanctions Order and Final Judgment. C.R. at 1678. However, in reviewing

sanctions orders, the appellate courts are not bound by a trial court's findings of fact

and conclusions of law and must independently review the entire record to determine

whether the trial court abused its discretion. Id. This Court should review the

appealed portions of the trial court’s judgment under an abuse of discretion standard.

The findings of fact by the trial court should be reviewed on a factual sufficiency

basis – is there sufficient evidence in the record to support the finding.

                                Appellant’s Brief – Page 9
                                   ARGUMENT
      10.    Appellant, Susan England (Lee) requests that the Court reverse, reform

and/or render the trial court’s Sanction Order and Final Judgment based on the

following:

                            THE SANCTIONS ORDER

      11.    On March 10, 2015 the trial court entered the Order Granting Plaintiff’s

Motion for Sanctions (the “Sanctions Order”). C.R. at 1621 [Appendix 1]. The

Sanctions Order was entered pursuant to Rules 13 and 215 Tex. R. Civ. P., Chapter

10 of the Tex. Civ. Prac. & Rem. Code, and the Court’s inherent power to sanction.

Id. The Court made findings in connection with the Sanctions Order and entered

“death penalty” type sanctions including, striking Appellant’s pleadings, granting a

default judgment on issues of liability to Appellee and on all claims and defenses –

with all facts determined in favor of Appellee, and denying Appellant’s right to a

jury trial. Id. at 1628 [Appendix 1, page 8].

      12.    While the imposition of sanctions is left to the sound discretion of the

trial court, any sanctions imposed must be "just.” TransAmerican Natural Gas Corp.

v., Powell, 811 S.W.2d 913, 917 (Tex. 1991). There are two general standards for

measuring whether the sanction is “just” -- there must be a direct relationship

between the offensive conduct and the sanction imposed and the sanction must not

be excessive. Am. Flood Research, Inc. v. Jones, 192 S.W.3d 581, 583 (Tex. 2006).

                              Appellant’s Brief – Page 10
The imposition of very severe sanctions, like the “death penalty” sanctions entered

in this case, is limited, not only by these two overriding standards, but by

constitutional due process. Id. In this case, the trial court erred in entering the death

penalty sanctions against Appellant because: a) there was no direct relationship

between the offensive conduct alleged and the scope of the Sanctions Order, b) the

scope of the Sanctions Order was excessive, and c) the scope of the Sanctions Order

improperly invaded Appellant’s constitutional rights.

A.    The Trial Court Erred in Entering Death Penalty Sanctions Against
      Appellant Because There is Not a Direct Relationship Between the
      Offensive Conduct and the Sanction Imposed.

      13.    In order to meet her burden of proof in justifying the death penalty

sanctions in this case, the Appellee must show that the conduct of the Appellant is

directly related to the scope of the sanction imposed. In this case, the Appellee

complains primarily of the Appellant’s failure to provide financial information and

her alleged changes in testimony/position. However, the Appellee did not offer any

evidence, and there was no finding by the Court, that anything the Appellant did

effectively prevented the Appellee’s from preparing for trial. On the contrary, the

Appellant, through her expert witness, accountant Mike Turner, accounted for all

expenditures of Edna Moon’s money from 2007 forward until Appellee took over

Edna Moon’s estate. Mr. Turner testified at the sanctions hearing:

                               Appellant’s Brief – Page 11
Q. (BY MR. JUNKIN) Mr. Turner, were you hired as an
expert witness in this case?
A. Yes.
Q. Approximately when?
A. January or February of 2014.
Q. And did you prepare an initial report in this case on
or about September the 11th of 2014?
A. That is correct.
Q. And is your report primarily responsive to the report
prepared by expert witnesses for the Plaintiff?
A. Yes, that part was primarily responsive.
Q. And that report, as you understand it, was provided
to opposing counsel?
A. I believe so by Mr. Morris and Mr. Wise.
Q. And did you prepare a supplemental report on or about
December 26th of 2014?
A. Yes, I did.
Q. What was the purpose of that supplemental report?
A. It was to go into more depth about the actual use of
the funds. Not just the transfer of the funds but the use.
Q. Was that supplemental report a change of your
original opinion?
A. No, it was just expounding on the information that
had not been provided.
...
Q. (BY MR. JUNKIN) Did your supplemental report
basically expand on your original report?
A. To be as clear as possible, the original report was
not comprehensive from Sol Schwartz, so I took and corrected
and, in fact, added amounts to their report that had been
transferred to Mrs. Moon and then continued forward with the
use and the proceeds of those funds, which I guess could --
could technically be considered supplementing where it went to
a conclusion.
Q. Were you able, in connection with the supplemental
report, to be able to account for the estate of Edna Moon from
back as far as 2007?
A. Yes. I was able to track all of the money that had
come out of the joint account and -- or joint accounts and

                Appellant’s Brief – Page 12
             where they went into the four categories that I created for
             the use of funds and then to ultimately where they were spent.
             Q. Are you aware of the implication that that report had
             been prepared and was ready as of the date the case was
             mediated?
             A. Yes, I was.
             Q. Are you aware of and participated some in that
             mediation; is that correct?
             A. Yes, I was there.
             Q. And is it true that the report was prepared in
             advance of the mediation?
             A. No, not at all. I had to work eight-and-a-half hours
             Christmas Eve, which was the 24th; I worked about nine hours
             on Christmas Day; and then another seven hours to finally
             finish it on Friday.
             Q. And subsequent to the preparation of that
             supplemental report were you deposed?
             A. Yes.
             Q. And are you aware of any limitations on opposing
             counsels' ability to ask you questions?
             A. I don't think there was any limitation, no.
             Q. And did you explain to them the nature and purpose of
             that supplemental report during that deposition?
             A. Yes, I did.

RR, Vol. 12, Page 35, line 8 trough Page 36, Line 6; Page 37, Line 11 through Page

38, Line 23. Mr. Turner further testified:

             Q. And I think you may have testified to this at the
             hearing last week, but have you been able to account for --
             going back as far as 2007, have you been able to account for
             all of Edna Moon's financial assets as a result of a careful
             review of the documentation?
             A. Yes. I've been able to ascertain the dollar amounts,
             yes.

                              Appellant’s Brief – Page 13
RR Vol. 14, Page 123, lines 10 – 16.3 In other words, it was Appellant’s expert, Mr.

Turner, who accounted for all of Edna Moon’s estate from approximately 2007

forward and expanded on the scope of the estate described by Appellee’s expert

witness (Sol Schwartz). There was no evidence presented that any record or records

that might identify the scope of Mrs. Moon’s estate was/were not provided.

      14.   The significance of this is that Appellee never argued or suggested that

she was not able to properly prepare for trial when all of Edna Moon’s estate had

been accounted for as early as September, 2014.4 There was also no evidence of

additional information on the scope of Edna Moon’s estate that Appellee could

produce. As the Texas Supreme Court found:

      We do not doubt that a failure to produce documents can prejudice a party's
      efforts to assert or defend a claim. But here, there has simply been no showing
      that the Garcias are unable to prepare for trial without the additional crash-
      test reports they seek. Furthermore, the record fails to demonstrate Chrysler's
      ability to produce the missing crash-test reports. There is no evidence in the
      record that the missing tests exist or are within Chrysler's possession, custody,

3
  See also, R.R. Vol. 15 at 847, 850 -- Defendant’s Exhibit 2 where Mr. Turner
outlined the corrections/changes from his September 11, 2014 report. The trial court
did not exclude this report and relied upon it in determining Appellee’s damages.
See generally, Norfolk Southern Railway Co. v. Bailey, 92 S.W.3d 577, 581 (Tex.
App.—Austin 2002, no pet.) (“In some instances, the change in an expert’s opinion
does not require supplementation. For example, an expert may refine calculations
or perfect a report up until the time of trial. An expert also may change an opinion
without supplementation if the opinion is an ‘expansion of an already disclosed
subject.’”) (citations omitted).
4
 Mr. Turner’s initial report was provided to Appellee’s counsel on September 12,
2014 in a supplemental response to request for disclosure. C.R. at 576, 579.
                              Appellant’s Brief – Page 14
      or control, either actual or constructive. A party cannot be penalized for
      failure to produce documents under such circumstances.

Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 849-50 (Tex. 1992) (“there was no

direct relationship between the offensive conduct and the sanction imposed, as the

plaintiffs did not show that they were unable to prepare for trial without the test

reports, and the record did not demonstrate Chrysler's ability to produce the test

reports”). There was no showing that all of the available records showing the

expenditures from the accounts at issue were not provided and no argument that the

Appellee could not properly prepare for trial with the information that had been

presented.

      15.    Further, to the extent that the testimony of Appellee was inconsistent or

even evasive with respect to the use of the funds in the accounts by Appellant vis a

vis Appellee, the Sanctions Order, in striking all of Appellant’s defenses, removed

defenses/claims (limitations, contractual, parol evidence, etc.) that were not

contingent on or did not factually depend on disputes as to the use of the funds. As

discussed in more detail in, for example, paragraphs 17-21, 36 and 37 below, the

scope of the Sanction Order was so broad in striking all of Appellant’s

defenses/claims that there was not a direct relationship between the offensive

conduct alleged and the defenses/claims impacted by the Sanctions Order.

                              Appellant’s Brief – Page 15
B.    The Trial Court Erred in Entering Death Penalty Sanctions Against
      Appellant Because the Sanction Order was an Excessive Penalty.

      16.    “Death penalty sanctions should not be used to deny a trial on the merits

unless the court finds that the sanctioned party's conduct "justifies a presumption

that its claims or defenses lack merit" and that "it would be unjust to permit the party

to present the substance of that position [which is the subject of the withheld

discovery] before the court." Chrysler Corp. v. Blackmon, 841 S.W.2d 844, 850

(Tex. 1992). The trial court found that Appellant was not truthful and changed her

testimony through the course of the proceeding. Rather than exclude Appellant’s

testimony or allow Appellant’s “changes” in testimony to be used for impeachment

or even strike those defenses directly correlated with the changes in testimony, the

trial court entered death penalty sanctions striking all of Appellant’s claims and

defenses.

      17.    For example, Appellant has a statute of limitations defense. Many of

the allegedly wrongful transactions on which Appellee’s damages were based took

place well over four (4) years before suit was filed in February 23, 2012. C.R. at 8.5

5
 For example, the Hunter’s Glen property was gifted to Appellant in March of 2000,
(C.R. at 1400), the Rest Haven property was purchased in April, 2005 (C.R. at 1427),
the RR 12 property was gifted to Appellant in May 2006 (R.R. Vol. 15 at 805), the
Rest Haven Property was gifted to Appellant in May 2006 (R.R. Vol. 15 at 809), the
La Playa property was purchased in October 2007 (C.R. at 1457), and the Hilliard
Road property was purchased in November 2007 (C.R. at 1462). See also, R.R.
Vol. 15 at 862 (timeline in Mr. Turner’s report).

                               Appellant’s Brief – Page 16
The accrual of Appellee’s causes of action is a question of law, to be determined by

the court and Appellant’s testimony does not turn the question of the accrual of any

asserted claims for limitations purposes into a fact question. See Moreno v. Sterling

Drug, Inc., 787 S.W.2d 348, 351 (Tex. 1990) (“[T]he question when a cause of

action accrues is a judicial one . . . .”); Mid-South Telecommunications, Co. v. Best,

184 S.W.3d 386, 390 (Tex. App.—Austin 2006, no pet.) (“When a cause of action

accrues is a question of law. A cause of action generally accrues at the time when

facts come into existence that authorize a claimant to seek a judicial remedy.”)

(citations omitted). There was no evidence that any action or inaction by Appellant

justifies a presumption that her limitations defenses lack merit. There was no

evidence or insufficient evidence of a direct correlation between the conduct of

Appellant resulting in the sanction prohibiting, for example, her limitations defense.6

      18.    Similarly, there were original contractual agreements with respect to

the use of the “joint accounts.” See C.R. 1403 (deposition on written questions of

Rosemary Petry, Frost Bank representative).7 The Frost Bank accounts ending in

6
 The parol evidence rule and statute of frauds would also tend to prohibit testimony
that contradicts evidence in the recorded gift deeds or the purpose for them. Both
the Gift Deeds to Appellant provide for the consideration for those deeds and
describe the nature of those conveyances.
7
 See RR, Vol 14 at 47, Line 17 through page 50, line 8 (admitting into evidence the
documents attached to Appellant’s Summary Response to Plaintiff’s Motion for
Sanctions).
                               Appellant’s Brief – Page 17
8650 and 9898 were created as multi-party accounts with right of survivorship and

provided that:

      The parties to the account own the account in proportion to the parties’ net
      contributions to the account. The financial institution may pay any sum in the
      account to a party at any time. On the death of a party, the party’s ownership
      of the account passes to the surviving parties.

Id. at 1406 and 1407. This agreement was signed by Edna Moon and Appellant for

the account ending in 8650 and initialed by Edna Moon, Howard Moon, and

Appellant with respect to the account ending in 9898. Id.8 The agreement governed

the use and ownership of the account and there is insufficient evidence to change

those terms. The Appellee made no specific claim that those agreements were

fraudulently induced.

      19.   There also was an Adult Protective Services investigation in July-

August of 2009 that contains evidence rebutting any presumption that may have been

raised by the conduct of Appellant. See C.R. 1485 and R.R. Vol. 15 at 125 (the

“APS Report”). In the APS Report, it is alleged that Appellant was “misusing” Edna

Moon’s funds. Id. at 1489. However, the APS investigator interviewed attorney

H.C. Kyle in August 2009 and noted:

      Mr. Kyle explained he has been Howard Moon (deceased) and Edna Moon’s
      attorney for years. Mr. Kyle is familiar with Deed of Gift of Lake McQueeney

8
  It is interesting to note that the Frost Bank accounts ending in 8381 and 4607
naming Edna Moon and/or Appellee or Barbara McHale and Kolbe were created as
the same kind of account with rights of survivorship. C.R. at 1522.

                             Appellant’s Brief – Page 18
      property, Deed of Gift of Ranch Road 12 property, and Edna Moon’s Last
      Will and Testament. Mr. Kyle reports that Barbara and Janice have
      complained to him about Ms. England’s mis-management of the client’s
      money. Mr. Kyle reports Ms. Moon has not complained about Susan
      England’s management of her resources or reported financial abuse.

Id. at 1495. There is no evidence or insufficient evidence that Edna Moon9 was not

aware of what she was doing with respect to signing deeds, prepared by her lawyer,

and in gifting the RR 12 and Rest Haven properties to Appellant. C.R. 1434-42.

      20.   Further, the investigator reported that: “Client [Edna Moon] states that

Cw should stop harassing Susan England. Client states Susan has always managed

the client’s financial affairs fairly and legally.” Id. at 1497. The allegation of

exploitation of Mrs. Moon by Appellant was found to be “invalid.” Shortly,

thereafter, Mrs. Moon amended her will, again naming Susan England as Executor,

and adding a provision:

      In the event my situation is ever again investigated by Texas Adult Protective
      Services or similar governmental agency, or in the event charges are ever filed
      against my daughter, SUSAN K. ENGLAND, in connection with her handling
      of my affairs and which charges do not result in a conviction, or in the even a
      civil suit is ever brought by either BARBARA JEANNE McHALE or
      JANICE LYNN KOLBE against SUSAN KAY ENGLAND for any reason,
      then the disposition and administration of my estate shall be as if BARBARA
      JEANNE McHALE AND JANIS LYNN KOLBE had both predeceased me
      without issue.”

9
 Or, for that matter, that Mr. Moon did not intend to gift the RR 12 and Rest Haven
property to Susan England.
                             Appellant’s Brief – Page 19
Id. at 1502-03 (Last Will and Testament of Edna Brackett Moon dated Aug. 12,

2009). At the request of Edna Moon, Mr. Kyle also notified Appellee of the change

in the will. C.R. at 1514.

      21.    There is additional evidence that Edna Moon was aware of what was

happening with respect to purchases of real property. For example, Mrs. Moon

signed closing documents for the purchase of the Rest Haven property. See e.g., CR

1418, 1419, and 1421. Even Tom Huth testified that:

             Q. When we took your deposition, you mentioned
             that you thought that Susan was a nice person but that
             she had done some things wrong, that she needed to
             correct that. Could you elaborate on what you think it
             is that she has done wrong.
             A. I -- I feel that she's just taken advantage of
             her mother and all her money on there. I think that she
             just needs to, you know, fess up and say, "Okay. Let's
             settle this all out. Let's give all this money back.
             It's all supposed to be split up four ways." And that
             was Morn's -- and her dad's plan. And that's the way --
             that's the way it should be.
             And I think that she's used up a -- these
             assets of her morn and her dad, and she used them for her
             own personal use or for buying her houses and stuff, or
             used them under the guise that Mom is really, you know,
             the owner of these things. And without Mom's money or
             -- and her dad's money, none of this would have -- could
             have occurred. So -- and she needs to -- you know, I
             said, "Mom intended" -- whenever Mom gave her any of
             this money, she -- Mom -- in fact, Edna always had told
             me this too, she said, "All this money that's going into
             all this stuff that I've invested in with Susan is
             basically for the" -- and it wasn't so much an
             investment with -- with Susan, it was an investment for

                             Appellant’s Brief – Page 20
            Edna, and it was supposed to be split up four ways to
            all the heirs after Mom's death, if she didn't spend it
            first.

CR 1542 at 1544-45.

      22.   There is no evidence or insufficient evidence that conduct complained

of by the Appellee justified a presumption that Appellant’s claims or defenses

relating to Mrs. Moon’s knowledge of the uses of funds in issue lack merit. At a

minimum, if such a presumption could arise, there is ample evidence outside of

Appellant’s testimony to rebut any such presumption.

      23.   The Appellant acknowledges that the trial court was not required to

actually impose lesser sanctions10 and that the Sanctions Order includes findings

indicating that the trial court did consider lesser sanctions and imposed a lesser

sanction in the First Sanction Order. However, there is no or insufficient evidence

that the sanction entered in the First Sanction Order was not effective. There was

sufficient information from Appellant to allow for a full accounting of all of the

10
  As the Texas Supreme Court explained in GTE Communications Sys. Corp. v.
Tanner, 856 S.W.2d 725 (Tex. 1993):

      We reaffirmed our TransAmerican holding in GTE, specifically noting that a
      trial court was required to consider the availability of lesser sanctions before
      imposing death penalty sanctions. Under this standard, the trial court need not
      test the effectiveness of each available lesser sanction by actually imposing
      the lesser sanction on the party before issuing the death penalty; rather, the
      trial court must analyze the available sanctions and offer a reasoned
      explanation as to the appropriateness of the sanction imposed.

                              Appellant’s Brief – Page 21
accounts in issue by Mr. Turner after the First Sanctions Order. While the Sanctions

Order does make specific findings/references to prior “admonitions” from the trial

court to Appellant and attaches some significance to them in connection with

attempts at lesser sanctions,11 admonitions are not sanctions. Williams v. Akzo

Chemicals, 999 S.W.2d 836, 843 (Tex. App.—Tyler 1999, no pet.) (“Although the

CMO [case management order] included a warning that noncompliance would result

in dismissal, neither a threat to sanction, without more, nor the intent to sanction, is

a sanction. . . . The CMO is not a sanction. It is an order and a threat.”). Any alleged

failure to comply with admonitions from the Court is no evidence or insufficient

evidence of an unwillingness to comply with a sanctions order. There is no or

insufficient evidence that Appellant failed to comply with the First Sanction Order.

C.    The Trial Court Erred in Entering Death Penalty Sanctions Against
      Appellant Because the Scope of the Sanction Order Violated Appellant’s
      Constitutional Due Process Rights.

      24.    The entry of death penalty sanctions also implicates the sanctioned

party’s constitutional due process rights. As the Texas Supreme Court discussed in

TransAmerican: “When a trial court strikes a party's pleadings and dismisses its

action or renders a default judgment against it for abuse of the discovery process,

the court adjudicates the party's claims without regard to their merits but based

11
  See e.g., C.R. at 1621 (paragraph 2) and 1627 (paragraph 48); see also RR Vol.
12, page 116, lines 21-23.
                               Appellant’s Brief – Page 22
instead upon the parties' conduct of discovery.” TransAmerican Natural Gas Corp.

v. Powell, 811 S.W.2d 913, 918 (Tex. 1991). Because of that, the Texas Supreme

Court noted:

      [T]here are constitutional limitations upon the power of courts, even in aid of
      their own valid processes, to dismiss an action without affording a party the
      opportunity for a hearing on the merits of his cause.

Id. (citations omitted). Because of the underlying due process issues, “[d]iscovery

sanctions cannot be used to adjudicate the merits of a party's claims or defenses

unless a party's hindrance of the discovery process justifies a presumption that its

claims or defenses lack merit.” Id. However, if a party refuses to produce material

evidence, despite the imposition of lesser sanctions, the court may presume that an

asserted claim or defense lacks merit and dispose of it. Id.

      25.      As discussed above, Appellee did present evidence sufficient to allow

for an accounting of all the accounts in issue from 2007 until the Appellee took over

Edna Moon’s accounts. While punishment and deterrence are legitimate purposes

for sanctions, they do not justify trial by sanctions. TransAmerican, 811 S.W.2d at

918. Sanctions which are so severe as to preclude presentation of the merits of the

case should not be assessed absent a party's flagrant bad faith or counsel's callous

disregard for the responsibilities of discovery under the rules. Id. As further

discussed above, there is ample evidence supporting claims and defenses of the

Appellant and such claims are not meritless.

                               Appellant’s Brief – Page 23
         26.   The Appellee did not establish that any evidence with respect to the

accounts was withheld by Appellant sufficient to justify a presumption that all of her

claims and defenses lacked merit. The Appellee did not produce any evidence of

information about the accounts that was withheld after the trial court’s First

Sanctions Order. There is insufficient evidence that the alleged misconduct of the

Appellant justifies a presumption that all of her claims and defenses are without

merit and death penalty sanctions should not have been used to deny the Appellant

a trial on the merits.

         27.   There are references in the Sanctions Order to selling property and

using money to pay fees and for Appellant’s own purposes. See e.g., CR 1624 and

1626, paragraphs 20, 21, 22, 23, and 36). There are also references to Appellant

providing false deposition testimony. Id. at 1623, paragraph 12. However, there is

no legal basis – no order, statute, rule, etc. – to authorize the trial court’s imposition

of sanctions for this conduct and it should not have been taken into consideration in

connection with entering the Sanctions Order.12 It was a violation of Appellant’s

due process rights for the trial court to have relied on this conduct as a basis for the

Sanctions Order.

12
     See e.g., paragraph 23 above.
                                Appellant’s Brief – Page 24
      28.    Accordingly, in striking all of the Appellant’s claims and defenses and

prohibiting a jury trial, the scope of the Sanctions Order violates the Appellant’s due

process right to presentation of the merits of her claims and defenses.

D.    In Light of the Foregoing General Standards for Review of Death Penalty
      Sanctions, Section 10.001 of the Texas Civil Practice and Remedies Code
      Does Not Provide an Appropriate Basis for Death Penalty Sanctions
      Against Appellant.

      29.    Section 10.001 of the Texas Civil Practice & Remedies Code provides

for imposition of sanctions in connection with the signing of pleadings and motions.

Section 10.001 provides:

      The signing of a pleading or motion as required by the Texas Rules of Civil
      Procedure constitutes a certificate by the signatory that to the signatory's best
      knowledge, information, and belief, formed after reasonable inquiry:
            (1) the pleading or motion is not being presented for any improper
            purpose, including to harass or to cause unnecessary delay or needless
            increase in the cost of litigation;
            (2) each claim, defense, or other legal contention in the pleading or
            motion is warranted by existing law or by a nonfrivolous argument for
            the extension, modification, or reversal of existing law or the
            establishment of new law;
            (3) each allegation or other factual contention in the pleading or motion
            has evidentiary support or, for a specifically identified allegation or
            factual contention, is likely to have evidentiary support after a
            reasonable opportunity for further investigation or discovery; and
            (4) each denial in the pleading or motion of a factual contention is
            warranted on the evidence or, for a specifically identified denial, is
            reasonably based on a lack of information or belief.

TEX. CIV. PRAC. & REM. CODE §10.001.

                               Appellant’s Brief – Page 25
      30.    In connection with the imposition of sanctions under Chapter 10, the

party moving for sanctions must prove the pleading party's subjective state of mind.

Brozynski v. Kerney, (Tex. App.--Waco Aug. 2, 2006, pet. denied), citing, Mattly v.

Spiegel, Inc., 19 S.W.3d 890, 896 (Tex. App.--Houston [14th Dist.] 2002, no pet.).

The movant must show, and the court must describe and explain, that the pleading

was filed for the improper purpose of harassment. See TEX. CIV. PRAC. & REM.

CODE ANN. § 10.001(1); § 10.005 ("A court shall describe in an order imposing a

sanction under this chapter the conduct the court has determined violated Section

10.001 and explain the basis for the sanction imposed."). The Appellee, as the

movant for sanctions, had the burden of proving violations of sections 10.001(1) and

10.001(3). R.M. Dudley Constr. Co., Inc. v. Dawson, 258 S.W.3d 694, 709 (Tex.

App.—Waco 2008, pet. denied).

      31.    Under § 10.001(3), the applicable standard is whether, to the signatory's

best knowledge, information, and belief, formed after reasonable inquiry, each

allegation or other factual contention in a pleading has evidentiary support or, for a

specifically identified allegation or factual contention, is likely to have evidentiary

support after a reasonable opportunity for further investigation or discovery. TEX.

CIV. PRAC. & REM.CODE ANN. § 10.001(3).

      32.    The Sanctions Order in this case does not identify with particularity the

specific motion or pleading the trial court found violated §10.001 or the Appellant’s

                               Appellant’s Brief – Page 26
role in the filing of such pleading or motion. There is insufficient evidence that

Appellant caused any pleading or motion to be filed for the purpose of harassment.13

As discussed in detail infra, there is evidence of factual support for Appellant’s

claims and defenses.

E.    In Light of the Foregoing General Standards for Review of Death Penalty
      Sanctions, Rule 13 TRCP Does Not Provide an Appropriate Basis for
      Death Penalty Sanctions Against Appellant.

      33.    Rule 13 directs a trial court to presume that a pleading was filed in good

faith. TEX. R. CIV. P. 13; GTE Communications Systems Corp. v. Tanner, 856
S.W.2d 725, 731 (Tex. 1993). “Thus, the burden is on the party moving for sanctions

to overcome this presumption." Id. Rule 13 provides:

      The signatures of attorneys or parties constitute a certificate by them that they
      have read the pleading, motion, or other paper; that to the best of their
      knowledge, information, and belief formed after reasonable inquiry the
      instrument is not groundless and brought in bad faith or groundless and
      brought for the purpose of harassment. Attorneys or parties who shall bring a
      fictitious suit as an experiment to get an opinion of the court, or who shall file
      any fictitious pleading in a cause for such a purpose, or shall make statements
      in pleading which they know to be groundless and false, for the purpose of
      securing a delay of the trial of the cause, shall be held guilty of a contempt. If
      a pleading, motion or other paper is signed in violation of this rule, the court,
      upon motion or upon its own initiative, after notice and hearing, shall impose

13
   A trial court must hold an evidentiary hearing to make the necessary factual
determinations about the party's or attorney's motives and credibility. Alejandro v.
Robstown ISD, 131 S.W.3d 663, 670 (Tex. App.--Corpus Christi 2004, no pet.). The
pleading alone cannot establish that the represented party or its attorney brought their
case in bad faith or to harass.

                               Appellant’s Brief – Page 27
      an appropriate sanction available under Rule 215-2b, upon the person who
      signed it, a represented party, or both.

      Courts shall presume that pleadings, motions, and other papers are filed in
      good faith. No sanctions under this rule may be imposed except for good
      cause, the particulars of which must be stated in the sanction order.
      "Groundless" for purposes of this rule means no basis in law or fact and not
      warranted by good faith argument for the extension, modification, or reversal
      of existing law. A general denial does not constitute a violation of this rule.
      The amount requested for damages does not constitute a violation of this rule.

TEX. R. CIV. P. 13.

      34.    In determining whether a party conducted a reasonable inquiry, the

facts and evidence available to the party and the circumstances existing when the

party filed the pleading must be examined. See Karagounis v. Property Co. of Am.,

970 S.W.2d 761, 764 (Tex. App.--Amarillo 1998, pet. denied) ("the circumstances

pivotal to the determination of whether sanctions should issue are those in existence

at the time the pleading in question was signed and filed. Sanctions for frivolous or

groundless pleadings do not apply to the pursuit of an action later determined to be

groundless after pleadings were filed. Overman v. Baker, 26 S.W.3d 506, 509 (Tex.

App.--Tyler 2000, no pet.); Karagounis, 970 S.W.2d at 764 (Rule 13 "says nothing

about levying sanctions if one pursues an action or pleading thought legitimate when

filed but subsequently found baseless.").

      35.    The Sanctions Order in this case does not specifically identify the

motion or pleading the trial court found violated Rule 13 or the Appellant’s role in

                              Appellant’s Brief – Page 28
the filing of such an improper motion or pleading. As discussed herein, there are

sufficient facts to support Appellant’s claims/defenses. However, the Sanctions

Order refers to discovery responses and an affidavit filed in support of removing a

lis pendens claim as documents signed by Appellant and forming part of the basis of

the Sanctions Order.

      36.    As to the discovery responses, the trial court found the responses were

unreasonably frivolous, made for the purpose of delay, groundless, brought in bad

faith, and evasive. However, those findings alone are not necessarily sufficient to

support a finding that Appellant’s claims and defenses lacked merit or to justify entry

of death penalty sanctions. See Lanfear v. Blackmon, 827 S.W.2d 87, 90-91 (Tex.

Civ. App.--Corpus Christi 1992, orig. proceeding) (“That the answers were

incomplete or intentionally evasive is not such an obstruction of discovery to justify

the conclusion that the claim or defense lacked merit without more. The ‘crime’ did

not justify the punishment. The trial court abused its discretion by striking Lanfear's

pleadings in its first sanction order.”); see also Williams v. Akzo Chemicals, 999
S.W.2d 836, 843 (Tex. App.—Tyler 1999, no pet.) (“That their original answers

were incomplete or even intentionally evasive is not such an obstruction of discovery

to justify the conclusion that their claims lacked merit without more.”). No specific

discovery responses were identified in the Sanctions Order as lacking merit.

                               Appellant’s Brief – Page 29
      37.    As to the affidavit made in connection with lifting the Lis Pendens,

Appellant testified that Edna Moon “has never had any ownership interest” in the La

Playa property or the Hilliard Road property. CR at 58. The Sanctions Order makes

a finding that Appellant lied in making that statement. CR at 1623 (paragraph 11).

Both of these properties were, at one time, held in the name of Appellant. See CR

1457 and 1462. There is no evidence that either of these properties was ever deeded

to, or otherwise titled in the name of, Edna Moon. Additionally, part of Appellee’s

argument for sanctions was that Appellant “changed” her story to allege a “silent

partnership.” While Appellant denies there was a partnership relating to these two

(2) properties, if there was, Appellant would be correct that Appellee (and Appellant)

had no ownership interest in these properties. See TEX. BUS. ORG. CODE §152.101

(“Partnership property is not the property of the partners.”). While Appellant’s

intent behind the statement may differ from its technical legal veracity, it is clear

that the trial court did not rely on that statement in expunging the Lis Pendens. See

CR at 67 (the court struck out two findings relating to Appellee’s claim to the real

property but went ahead and expunged the lis pendens because Appellee did not

provide proper service of the required notice). The intent behind Rule 13 does not

justify the imposition of death penalty sanctions for the statement in the affidavit,

particularly when it was disregarded by the trial court in expunging the lis pendens.

                              Appellant’s Brief – Page 30
F.    In Light of the Foregoing General Standards for Review of Death Penalty
      Sanctions, Rule 215.5 Does Not Provide an Appropriate Basis for Death
      Penalty Sanctions Against Appellant.

      38.    Before a court may deprive a party of its right to present the merits of

its case because of discovery abuse, it must determine that a party's hindrance of the

discovery process justifies a presumption that the party’s claims lack merit.

TransAmerican, 811 S.W.2d at 918. As discussed above, there was no direct

correlation made between any conduct by Appellant in connection with responding

to discovery that would lead to a presumption that all of Appellant’s claims and

defenses lacked merit.

      39.    For all the reasons set out hereinabove, the trial court erred in striking

all of Appellant’s claims and defenses because: a) there was no direct relationship

between the allegedly offensive conduct by Appellant and the scope of the Sanctions

Order, b) the scope of the Sanctions Order was excessive, and c) the scope of the

Sanctions Order improperly invaded Appellant’s constitutional rights. See State v.

Target Corp., 194 S.W.3d 46, 52 n.6 (Tex. App.—Waco 2006, no pet.) (“We do

note, however, that authority supports the State's position that a due process analysis

under TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913 (Tex. 1991), is

appropriate when application of the discovery rules results in merits-preclusive or

death-penalty sanctions”).

                               Appellant’s Brief – Page 31
                             THE FINAL JUDGMENT14

G.    The Final Judgment Violated the “One-Satisfaction” Rule by Granting
      Appellee a “Double Recovery” for Actual Damages and the Property
      Itself.

      40.    It is well-established law that a plaintiff may not recover the same

actual damages twice under alternative causes of action or remedies. See e.g.,

Southern County Mut. Ins. Co. v. First Bank & Trust of Groves, 750 S.W.2d 170,

173-74 (Tex. 1988); Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361, 367

(Tex. 1987); Stevenson v. Koutzarov, 795 S.W.2d 313, 322 (Tex. App.--Houston [1st

Dist.] 1990, writ denied). The plaintiff is required to segregate or allocate economic

damages among any of the different causes of action asserted to avoid violation of

the one satisfaction rule. See e.g., Saden v. Smith, 415 S.W.3d 450, 469 (Tex. App.-

-Houston [1st Dist.] 2013, pet. denied) (“In sum, Smith demonstrated his entitlement

to a unified recovery for one broadly described injury with one damages model

sponsored by accountant Shields. Accordingly, Smith failed to justify separate

awards for alternate theories of liability, as the theories as presented at trial did not

depend on separate and distinct injuries resulting in separate and distinct damages.

14
  For the reasons set out above, the Appellant also appeals the entry of the Final
Judgment based on the striking of Appellant’s pleadings, claims, and defenses in
the Sanctions Order. However, if this Court finds the Sanctions Order is proper,
the Appellant appeals the Final Judgment for the reasons set out below.

                               Appellant’s Brief – Page 32
Under such circumstances, allowing the recovery of actual damages for both breach

of contract and breach of fiduciary duty violates the one-satisfaction rule, and is

therefore error.”) (citations omitted).

      41.    The trial court entered judgment based on calculations and accounting

information primarily presented by Appellant’s expert witness, Michael Turner,

CPA. See C.R. 1699 (the trial court’s actual damages calculations) and R.R., Vol.

15 at 312-17 (portions of Mr. Turner’s revised supplemental report [2/5/15]). Those

actual economic damage calculations do not segregate or allocate economic damages

among any of the different causes of action asserted by Appellee and preclude

Appellee from now allocating damages among her causes of action. Because of that,

those damages calculations also reflect violations of the one satisfaction rule and an

improper double/triple recovery for Appellee.

                         La Playa and Park Place Properties

      42.    The first entry on the trial court’s damages calculations (C.R. at 1699)

reflects an amount of $683,394 (less $5,410) as “Funds from Edna spent by

England.” C.R. at 1699. That amount includes the funds for the purchase of the “La

Playa” (“LP”) and “Park Place” (“PP”) properties. See R.R., Vol. 15 at 313 and 315.

However, the next entry on the judgment calculation sheet includes additional actual

damages of sale proceeds from the sale of those two properties – described as the

“Cash Out at Sale” on Mr. Tuner’s report. Id. at 315. Both of these properties sold

                               Appellant’s Brief – Page 33
at a net loss. So, the Final Judgment awarded the Appellee not only the money used

to purchase the properties, but also the proceeds from the sale of the properties which

necessarily would have included the funds to purchase the properties – especially

when the properties sold at a loss. There was no evidence or insufficient evidence

of the market value of the properties at the time they were sold and no evidence that

more than market value was paid at the time of the purchase of those properties.

Awarding the Appellee all of the fund used to purchase the property and the sale

proceeds, when the properties sold at a loss, is not a proper measure of damages and

amounts to an improper double recovery.

               RR 12 and Rest Haven (Lake McQueeney) Properties

      43.    The Final Judgment also includes an award of actual damages of

$338,631 for the sale proceeds from the RR 12 property and $96,524 for the sale

proceed from the Rest Haven property. C.R. 1699. However, the Final Judgement

went on to award Appellee the properties themselves by declaring the Gift Deeds

“set aside . . . void and without effect.” C.R. 1641. There was no showing by the

Appellee that the sales price for the properties was under or less than market value.

The Final Judgment awards the Appellee not only the market value of the properties,

but also the properties themselves. Accordingly, in awarding both the sales price

and voiding the Gift Deeds, the Final Judgment improperly grants the Plaintiff a

double recovery and violates the one satisfaction rule.

                               Appellant’s Brief – Page 34
         44.   Despite the plain language of the Gift Deeds and the statute of frauds

and parol evidence rule that would tend to prohibit testimony that the deeds of these

properties were not “gifts” to Appellant, the Appellee pled that Appellant

represented that she would “hold title in a nominee/agency capacity for the benefit

of . . . [Edna Moon’s] other daughters and grandson Patrick.” C.R. 1588 (page 8 of

Plaintiff’s Fifth Amended Original Petition). However, to the extent that the

Appellant was holding these assets in trust for beneficiaries (including herself) there

was no evidence of any limits placed on Appellant’s management of such trust assets

or that she not would have all rights and powers granted to a trustee under the Texas

Property Code (Texas Trust Code).15 If there was no trust relationship created, but

the transfer was not intended as a gift, the Appellee, in her representative capacity,

lacks standing to bring an action for recovery of property held for the purported

benefit of other persons.

H.       The Trial Court Erred in Imposing a “Constructive Trust Lien” Against
         Appellant’s Homestead and Vehicle Because it is Not the Proper Remedy
         and There is No Evidence or Insufficient Evidence to Support the
         Amount of the Constructive Trusts Set Out in the Final Judgment.

         45.   “Imposition of a constructive trust is not a cause of action, but rather an

equitable remedy.” LTTS Charter School, Inc. v. Palasota, 362 S.W.3d 202, 209

(Tex. App.—Dallas 2012, no pet.). Effectively, the Final Judgment awards the

15
     See Chapters 112, 113, 114, and 115 of the Texas Property Code.

                                 Appellant’s Brief – Page 35
Appellee a double recovery for the La Playa property and triple recovery for the RR

12 property – the sales proceeds from the sale of the RR 12 and La Playa properties,

the RR 12 property itself, and a constructive trust for the RR 12 sale proceeds. The

Final Judgment does not allocate actual damages for any particular cause of action

and there was no election of remedies. Appellee is not entitled to a combined

recovery of actual economic damages under each of her alleged claims

      46.   For example, in Willis v. Donnelly, the 14th Court of Appeals was faced

with the impact of a constructive trust remedy when actual damages were awarded.

The Willis court found:

             Lastly, appellants argue that the constructive trust triples Donnelly's
      recovery. Donnelly concedes that the constructive trust duplicates the money
      judgment and seeks remand for an election of remedies. "A party who seeks
      redress under two or more theories of recovery for a single wrong must elect,
      before the judgment is rendered, under which remedy he wishes the court to
      enter judgment." If the prevailing party fails to elect a remedy, the trial court
      should render a judgment affording the greater recovery. If the trial court fails
      to do so, generally, we will reform the judgment to effect such an election.
      See id.

            However, appellate courts sometimes remand a case for an election of
      remedies. We remand the constructive trust in this case for two reasons. First,
      the portion of the constructive trust imposed upon 50% of URB stock and 10%
      of WHE stock duplicates recovery for breach of contract, which we have
      reversed and remanded. Thus, the constructive trust on the URB and WHE
      stock is also reversed and remanded. Second, we are unable to determine
      which remedy for breach of fiduciary duty (the money damages or the
      constructive trust on the realty) provides a greater recovery. Accordingly, we
      remand for an election of remedies for breach of fiduciary duty.

                              Appellant’s Brief – Page 36
Willis v. Donnelly, 118 S.W.3d 10, 43-44 (Tex. App.—Houston [14th Dist.] 2003),

aff’d in part and rev’d in part on other grounds, 199 S.W.3d 262 (Tex. 2006)

(citations omitted). In this case the Final Judgment does not reflect an election of

remedies by the Appellee and improperly purports to allow for the recovery of actual

damages in addition to a constructive trust.16

     The Constructive Trust on Appellant’s Homestead for $306,000 is Improper

       47.   If this Court finds a constructive trust is the proper remedy, the Final

Judgement purports to impose a constructive trust in the specific amount of $306,000

on Appellant’s homestead at 4919 West Frances Place in Austin. C.R. 1641 (page

2 of Final Judgment) and C.R. 1685 (findings of fact, paragraph 53). Based on the

evidence before the court, the amount of the constructive trust is incorrect and

therefore there is insufficient evidence to support it.

       48.   When “trust” funds are commingled with personal funds and funds are

drawn out, it is presumed that the first funds drawn out were personal funds. See

e.g., Moody v. Pitts, 708 S.W.2d 930, 937 (Tex. Civ. App.—Corpus Christi 1986,

16
  See generally W. Miller, NON-MONETARY RELIEF, EQUITABLE RELIEF, Article for
State Bar of Texas 7th Annual Damages in Civil Litigation, page 2 (February 26-27,
2015) (“Where multiple causes of action are asserted at trial, if the verdict is returned
favorably to the plaintiff, they must elect their remedy. Often the imposition of the
constructive trust can be a viable option, but the plaintiff will usually have to forgo
any damages that may be awarded. Counsel will have to evaluate both the benefits
and consequences of electing the most favorable remedy.”).

                               Appellant’s Brief – Page 37
no writ) (“When a trustee has commingled funds and has expended funds, the money

expended is presumed to be the trustee's own.”); Batmanis v. Batmanis, 600 S.W.2d
887, 890 (Tex. Civ. App.—Houston [14th Dist.] 1980, writ ref’d n.r.e.) (“And where,

as here, the trustee comingles trust money with his own and money is expended, it

will be presumed that his own money is expended first”); General Ass'n of Davidian

S.D.A. v. General Ass'n, Etc., 410 S.W.2d 256, 259 (Tex. Civ. App.—Waco 1966,

writ ref’d n.r.e.). The Final Judgment does not take into account this rule of law and

the presumption was not rebutted by Appellee.

      49.    The evidence from Appellee suggests that $100,452.53 was deposited

into account 8533 from the sale of the La Playa property and then, the next day,

$100,000 was transferred into the 8739 account. R.R. 15 at 748-49. The balance of

the 8533 account just before the transfer was $103,994.76 of which $100,452.53 was

from the sale of the La Playa property and the balance, $3,542.23, were Appellant’s

funds. Because of the foregoing rule, the first $3,542.23 transferred to the 8739

account was Appellant’s and only the balance of $96,457.77 in the $100,000 transfer

could be attributable to the La Playa sale. As to the 8739 account, there is

insufficient evidence to support the trial court’s finding that a “[c]onstructive trust

of $100,000 results [sic] at this time. July 2013.” C.R. at 1685.

      50.    Several months later, $188,244.59 was transferred into the 8533

account from the sale of Appellant’s former homestead at 331 Hunter’s Glen in San

                               Appellant’s Brief – Page 38
Marcos, Texas – the Hunter’s Glen property – and the next day, $188,000 was

transferred to the 8739 account.        Id. at 752-53.       The trial court’s findings

acknowledge that the $188,000 was proceeds from the sale of Appellant’s property.

When the $201,000 was transferred out of the 8739 account for the purchase of

Appellant’s home at 4919 West Frances Place in Austin, the balance in the 8739

account was $278,008.89. Id. at 760 (balance on July 2 was $77,008.89 after the

$201,000 withdrawal). Using the rule referred to above, of the $201,000 paid for

the West Frances Place home, $188,000 was Appellant’s and only $13,000 could be

attributable to the sale of the La Playa property.

      51.    Even if the court were to find that the RR 12 property was not a gift and

that a constructive trust should be applied to the proceeds from the sale of that

property, the $206,007.09 that could be attributable to the sale of the RR 12 property

taken together with the $13,000 traceable as proceeds from the sale of the La Playa

property – a total of $219,007.09 – does not support a constructive trust in the

amount of $306,007.09.

     The Constructive Trust on the Mercedes Benz for $12,182.36 is Improper

      52.     As discussed in paragraph 48 above, with respect to “commingled”

accounts, it is presumed that the first funds drawn out were personal funds. The trial

court found that in September 2012, a deposit of $55,752.81 was made into account

8533. C.R. at 1685. From the evidence this appears to be a typographical error

                               Appellant’s Brief – Page 39
because on August 31, 2012 $50,752.81 was deposited into account 8533. RR Vol.

15 at 739. The trial court found this deposit was attributable to the sale of the Park

Place property. Id. The records do reflect a transfer of $55,000 to account 8739 on

September 4, 2012. Id. at 740-41. However, after the transfer of the $55,000 on

September 4, the balance of the 8533 account was $7,567.94, meaning that under

the first out rule, the most of the $50,752.81 proceeds from the sale of the Park Place

property that could have been transferred to the 8739 account was $43,184.8717 and

therefore remaining $11,815.13 out of the $55,000 was attributable to Appellant’s

funds. Id. at 739.

         53.   The balance in the 8739 account just before the time of the $55,000

deposit was $10,421.53 [Id. at 741 (September 4, 2012 daily balance of $65,421.53

less $55,000 transferred)] and after the deposit the amount in that account

attributable to Appellant was $22,236.66.18 The evidence shows that between the

deposit on September 4, 2012 and the payment made to Mercedes Benz Financial

on September 9, 2012 in the amount of $12,182.36, the balance in the 8739 account

exceeded the amount attributable to the proceeds from the sale of the Park Place

property by more than the payment to Mercedes Benz Financial and, under the first

17
     $50,752.81 - $7,567.94.
18
     The sum of $11,815.13 and $10,421.53.

                               Appellant’s Brief – Page 40
out presumption, establishes that funds separately attributable to Appellant were

used to make the payment to Mercedes Benz.

      54.    There is insufficient evidence to support the trial court’s finding that a

“[c]onstructive trust of $12,182.36 [was] created” or that there was “no evidence by

[Appellant] that funds other than Edna Moon’s funds were used for this payoff.”

C.R. at 1685-86.      The record itself establishes that the imposition of such

constructive trust in the Final Judgment is improper under the first out rule.

I.    The Final Judgment Improperly Places a Claim on Appellant’s
      Homestead.

      55.    “Constitutional homestead rights protect citizens from losing their

homes, and statutes relating to homestead rights are liberally construed to protect the

homestead.” Fairfield Financial Group, Inc. v. Synott, 300 S.W.3d 316, 320 (Tex.

App.—Austin 2009, no pet). A homestead is exempt from seizure for the claims of

creditors except for encumbrances properly fixed on homestead property. TEX. PROP.

CODE § 41.001(a). As this Court has further noted in Fairfield, the Property Code

lists the types of encumbrances that may be properly fixed upon homestead property,

which includes purchase money liens. Id. § 41.001(b)(1). Based on the foregoing,

even if there is evidence in this case warranting imposition of a constructive trust

based on a purchase money type lien, the scope of the purchase money used for the

Appellant’s homestead has not been properly established and therefore the

                               Appellant’s Brief – Page 41
“constructive trust lien” imposed on Appellant’s homestead in the Final Judgment is

improper.

      56.    In addition, the RR 12 property was a gift to Appellant and there is

insufficient proper evidence to set that conveyance aside and to impose a

constructive trust on the proceeds from the sale of that property. Accordingly, for

this additional reason the constructive trust of $206,007.09 against Appellant’s

homestead is improper.

J.    The Trial Court Erred in Using the Improper Measure of Damages When
      the Joint Account Agreements Specifically Identified the Allocation of
      Ownership of Such Joint Accounts and the Court Did Not Take Into
      Consideration the Appellant’s Contractual Ownership Interest in Those
      Joint Accounts.

      57.    The Appellee had the burden to establish the proper measure of

damages. See generally, W.O. Bankston Nissan v. Walters, 754 S.W.2d 127, 128

(Tex. 1988) (“Walters' burden of proof in this case was to show either the difference

between the fair market value of the pickup as delivered and the value of the truck

as it was represented; or the difference in value between that with which he parted

and that which he received. He did neither. Walters had the burden of requesting

jury issues on the proper measure of damages. Having failed to do so, his cause of

action must fail.”). Further, “[w]hen the injury is only the economic loss to the

subject of a contract itself, the action sounds in contract alone." Jim Walter Homes,

Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986); see also Sw. Bell Tel. Co. v.

                              Appellant’s Brief – Page 42
DeLanney, 809 S.W.2d 493, 494 (Tex. 1991) ("When the only loss or damage is to

the subject matter of the contract, the plaintiff's action is ordinarily on the contract.").

The Texas Supreme Court has “repeatedly reaffirmed this rule.” LAN/STV v. Martin

K. Eby Constr. Co., 435 S.W.3d 234, 242 n.35 (Tex. 2014).

        58.    As discussed above,19 Howard Moon, Edna Moon, and Appellant

entered into contractual joint account agreements governing the use and ownership

of the Frost Bank joint accounts ending in 8650 and 9898. See C.R. 1406 and 1407.

These accounts were created as multi-party accounts with right of survivorship

whereby the parties agreed they owned the accounts in proportion to their

contributions to the account, that Frost Bank could pay any sum in the account to a

party at any time, and on the death of a party, the deceased party’s ownership of the

account passes to the surviving parties. Id. The subject matter of the Appellee’s

claims was, in large part, for economic losses arising out of alleged misuse of funds

in these accounts (in particular the account ending in 9898). Appellee and the Final

Judgment made no attempt to allocate damages based on the parties’ contractual

agreements20 and violated the economic loss rule by attempting to convert such

actual damages arising out of contract into tort damages/claims.

19
     See paragraph 18.
20
  For example, the Appellee has taken the position that none of the funds in the joint
accounts was Appellant’s. However, even if Appellant made no contributions to the
                                Appellant’s Brief – Page 43
K.    The Trial Court Erred in “Setting Aside” and Declaring “Void and
      Without Effect” the Gift Deeds Because There is No or Insufficient
      Evidence of Fraudulent Inducement of Those Deeds by Appellant and the
      Final Judgment Improperly Clouds Title of Non-Parties.

            Insufficient Evidence of Fraudulent Inducement of a Contract

      59.    The Appellee asserted an untimely claim for fraudulent inducement.

The trial court overruled Appellant’s special exception to the claim seeking to

require Appellee to identify the contractual agreement. See C.R. 1609 (special

exception) and 1638 (order). However, in order to make a claim for fraudulent

inducement, Appellee needed to prove the existence of a contractual agreement. It

has been held that:

      In order to bring a claim for fraud in the inducement, a plaintiff must show
      the elements of fraud and must show that she has been fraudulently induced
      to enter into a binding agreement.

In re Guardianship of Patlan, 350 S.W.2d 189, 198 (Tex. App.—San Antonio 2011,

no pet.), citing, Haase v. Glazner, 62 S.W.3d 795, 798 (Tex. 2001) (“Without a

binding agreement, there is no detrimental reliance, and thus no fraudulent

inducement claim. That is, when a party has not incurred a contractual obligation,

it has not been induced to do anything.”). In this case the trial court should not have

allowed the untimely filing and should not have overruled the Appellant’s special

9898 account, on Howard Moon’s death, his interest in the account would have
passed 50% to Edna Moon and 50% to Appellant.
                               Appellant’s Brief – Page 44
exception. The only “contracts” referred to by the Appellant as the Gift Deeds.

There was no pleading identifying the joint account agreements as being

fraudulently induced. There was no specific “contract” identified and there is no

evidence or insufficient evidence of any contract that Edna Moon was induced to

sign by Appellant.

      60.    There also is insufficient evidence of a fiduciary relationship to support

any presumption of fraudulent intent. Further, as noted above, the parol evidence

rule and statute of frauds would also tend to prohibit testimony that contradicts

evidence in the recorded gift deeds or the purpose for them. In this case, both the

Gift Deeds to Appellant provide for the consideration as love and affection for

Appellant and there was no evidence or insufficient evidence to set aside the stated

consideration.

            The Final Judgment Improperly Clouded Title of Non-Parties

      61.    A party should not be granted relief in the absence of pleadings that

support that relief. See Cunningham v. Parkdale Bank, 660 S.W.2d 810, 813 (Tex.

1983). Hence, a judgment after a trial on the merits that is not supported by the

pleadings is improper. See Wielgosz v. Millard, 679 S.W.2d 163, 166 (Tex. App.—

Houston [14th Dist.] 1984, no writ).

                              Appellant’s Brief – Page 45
         62.   Despite there being no specific request for such relief,21 the Final

Judgment orders that the Gift Deeds of the RR 12 property and the Rest Haven

property are set aside, void, and without effect. C.R. 1640, 1641. However, the

Plaintiff did not join the current owners of these properties whose rights were are

issue and whose title is now clouded. Rule 39, like the Declaratory Judgment Act,

mandates joinder of persons whose interests would be affected by the judgment. See

Brooks v. Northglen Ass’n, 141 S.W.3d 158, 162 (Tex. 2004), citing, Tex. Civ. Prac.

& Rem. Code § 37.006 ("When declaratory relief is sought, all persons who have or

claim any interest that would be affected by the declaration must be made parties.")

(emphasis added); TEX. R. CIV. P. 39(a) ("A person who is subject to service of

process shall be joined as a party in the action if ... he claims an interest relating to

the subject of the action ....") (emphasis added). Because Plaintiff had not pled for

this specific relief, the trial court should not have rendered the Gift Deeds void. See

Tex. R. Civ. P. 56 (“When items of special damages are claimed, they shall be

specifically stated”); see also, Lone Star Gas Co. v. Childress, 187 S.W.2d 936, 939

(Tex. Civ. App.—Waco 1945, no writ) (“We think the rule in Texas is 'that in order

to warrant a court of equity to grant injunctive relief, the petitioner must specify the

precise relief sought and a court is without jurisdiction to grant relief beyond and in

21
     See Plaintiff’s Fifth Amended Petition, at 9 (“Damages and Relief Requested”).

                               Appellant’s Brief – Page 46
addition to that particularly specified.”) (citations omitted). The Appellee’s prayer

controlled the nature of the relief the trial court could grant and the Final Judgment

cannot properly grant relief not prayed for by Appellee.

      63.    The Trial Court erred in entering a Final Judgment that exceeded the

scope of relief prayed for by Plaintiff. Based on the relief entered by the trial court,

the current owners of the RR 12 and Rest Haven properties (the Gift Deed properties)

were necessary parties needed for a just adjudication. See generally Bennett v.

Grant, 460 S.W.3d 220, 239 (Tex. App.—Austin 2015, pet. filed) (“Thus, non-

parties must be joined as additional defendants to a counterclaim if in their absence

complete relief cannot be afforded among the parties.”); see also, TEX. R. CIV. P. 39

and 97.

L.    The $1,000,000 Punitive Damages Award is Excessive in Light of the
      Facts and Sanctions Order.

      64.    Given the contractual nature of the underlying issues in this case

discussed in paragraphs 18 and 58 above, and the double recovery issues addressed

in paragraphs 40-46 above, there is insufficient evidence to support the imposition

of punitive damages. Because of that, the award of punitive damages is excessive

and an unconstitutional and unreasonable penalty and punishment in light of the facts

of this case, particularly when taken in consideration of the extreme scope of the

sanctions imposed against Appellant by way of the Sanctions Order.

                               Appellant’s Brief – Page 47
M.    The Final Judgment Refers to an Improper Authority for Assessment of
      Pre- and Post-Judgement Interest.

      65.    The Final Judgment incorrectly bases its award of $229.856.82 in pre-

judgment interest based on §304.003 of the Texas Finance Code because which is a

post-judgement interest rate provision and incorrectly bases its award of post-

judgment interest based on §304.103 of the Texas Finance Code which is a pre-

judgement interest provision. C.R. at 1643. However, the similarities in the actual

pre- and post- judgment rates, makes complaint more technical than substantive.

                         CONCLUSION AND PRAYER

      The trial court erred in awarding Appellee the full scope of the death penalty

sanctions and the damages set out in the Final Judgment. Accordingly, this Court

should reverse the Sanctions Order and Final Judgment for the reasons set out above.

Appellant requests all such other and further relief to which she might be entitled.

                                       Respectfully submitted,

                                       _______________________
                                       David Junkin
                                       State Bar No. 11058020
                                       P.O. Box 2910
                                       Wimberley, Texas 78676
                                       512/847-8600
                                       512/847-8604 (fax)
                                       david@junkinlawoffice.com
                                       Attorney for Appellant,
                                       Susan England (Lee)

                              Appellant’s Brief – Page 48
            CERTIFICATION REGARDING LENGTH OF BRIEF

      Counsel for Appellant, Susan England (Lee), hereby certifies that the length

of this Brief as indicated by the word processing system used to generate it,

excluding appendices, is 7,439 words. While not required, this word count includes

the caption, table of contents, index of authorities, statement of the case and issues

presented, signature block, this certificate, and the certificate of service.

                                                     _______________________
                                                         David Junkin

                           CERTIFICATE OF SERVICE

       I hereby certify that a copy of this brief was served on the following counsel
of record and in the manner indicated on November 30, 2015.

      ESERVE AND/OR CERTIFIED MAIL, RETURN RECEIPT
      REQUESTED #7013 3020 0001 5964 7437

             Jonathan Hull
             c/o Reagan Burris PLLC
             401 Main Plaza, Suite 200
             New Braunfels, TX 78130

                                                ______________________________
                                                David Junkin

                               Appellant’s Brief – Page 49
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                         BUSINESS ORGANIZATIONS CODE

                                TITLE 4. PARTNERSHIPS

                    CHAPTER 152. GENERAL PARTNERSHIPS

                  SUBCHAPTER C. PARTNERSHIP PROPERTY

       Sec. 152.101. NATURE OF PARTNERSHIP PROPERTY. Partnership
property is not property of the partners. A partner or a partner's spouse does not
have an interest in partnership property.

Acts 2003, 78th Leg., ch. 182, Sec. 1, eff. Jan. 1, 2006.
                    CIVIL PRACTICE AND REMEDIES CODE

                  TITLE 2. TRIAL, JUDGMENT, AND APPEAL

                      SUBTITLE A. GENERAL PROVISIONS

     CHAPTER 10. SANCTIONS FOR FRIVOLOUS PLEADINGS AND
                          MOTIONS

         Sec. 10.001. SIGNING OF PLEADINGS AND MOTIONS. The signing of
a pleading or motion as required by the Texas Rules of Civil Procedure constitutes
a certificate by the signatory that to the signatory's best knowledge, information, and
belief, formed after reasonable inquiry:

         (1) the pleading or motion is not being presented for any improper purpose,
         including to harass or to cause unnecessary delay or needless increase in the
         cost of litigation;

         (2) each claim, defense, or other legal contention in the pleading or motion
         is warranted by existing law or by a nonfrivolous argument for the
         extension, modification, or reversal of existing law or the establishment of
         new law;

         (3) each allegation or other factual contention in the pleading or motion has
         evidentiary support or, for a specifically identified allegation or factual
         contention, is likely to have evidentiary support after a reasonable
         opportunity for further investigation or discovery; and

         (4) each denial in the pleading or motion of a factual contention is warranted
         on the evidence or, for a specifically identified denial, is reasonably based
         on a lack of information or belief.

Added by Acts 1995, 74th Leg., ch. 137, Sec. 1, eff. Sept. 1, 1995.

        Sec. 10.002. MOTION FOR SANCTIONS. (a) A party may make a motion
for sanctions, describing the specific conduct violating Section 10.001.
        (b) The court on its own initiative may enter an order describing the specific
         conduct that appears to violate Section 10.001 and direct the alleged violator
         to show cause why the conduct has not violated that section.

        (c) The court may award to a party prevailing on a motion under this section
         the reasonable expenses and attorney's fees incurred in presenting or
         opposing the motion, and if no due diligence is shown the court may award
         to the prevailing party all costs for inconvenience, harassment, and out-of-
         pocket expenses incurred or caused by the subject litigation.

Added by Acts 1995, 74th Leg., ch. 137, Sec. 1, eff. Sept. 1, 1995.

        Sec. 10.003. NOTICE AND OPPORTUNITY TO RESPOND. The court
shall provide a party who is the subject of a motion for sanctions under Section
10.002 notice of the allegations and a reasonable opportunity to respond to the
allegations.

Added by Acts 1995, 74th Leg., ch. 137, Sec. 1, eff. Sept. 1, 1995.

        Sec. 10.004. VIOLATION; SANCTION. (a) A court that determines that
a person has signed a pleading or motion in violation of Section 10.001 may impose
a sanction on the person, a party represented by the person, or both.

        (b) The sanction must be limited to what is sufficient to deter repetition of
         the conduct or comparable conduct by others similarly situated.

        (c) A sanction may include any of the following:

                (1) a directive to the violator to perform, or refrain from performing,
                  an act;

                (2) an order to pay a penalty into court; and
                (3) an order to pay to the other party the amount of the reasonable
                  expenses incurred by the other party because of the filing of the
                  pleading or motion, including reasonable attorney's fees.

        (d) The court may not award monetary sanctions against a represented party
         for a violation of Section 10.001(2).

        (e) The court may not award monetary sanctions on its own initiative unless
         the court issues its order to show cause before a voluntary dismissal or
         settlement of the claims made by or against the party or the party's attorney
         who is to be sanctioned.

        (f) The filing of a general denial under Rule 92, Texas Rules of Civil
         Procedure, shall not be deemed a violation of this chapter.

Added by Acts 1995, 74th Leg., ch. 137, Sec. 1, eff. Sept. 1, 1995.

       Sec. 10.005. ORDER. A court shall describe in an order imposing a sanction
under this chapter the conduct the court has determined violated Section 10.001 and
explain the basis for the sanction imposed.

Added by Acts 1995, 74th Leg., ch. 137, Sec. 1, eff. Sept. 1, 1995.

       Sec. 10.006. CONFLICT. Notwithstanding Section 22.004, Government
Code, the supreme court may not amend or adopt rules in conflict with this chapter.

Added by Acts 1995, 74th Leg., ch. 137, Sec. 1, eff. Sept. 1, 1995.
                    CIVIL PRACTICE AND REMEDIES CODE

                   TITLE 2. TRIAL, JUDGMENT, AND APPEAL

                               SUBTITLE C. JUDGMENTS

                  CHAPTER 37. DECLARATORY JUDGMENTS

       Sec. 37.006. PARTIES. (a) When declaratory relief is sought, all persons
who have or claim any interest that would be affected by the declaration must be
made parties. A declaration does not prejudice the rights of a person not a party to
the proceeding.

        (b) In any proceeding that involves the validity of a municipal ordinance or
franchise, the municipality must be made a party and is entitled to be heard, and if
the statute, ordinance, or franchise is alleged to be unconstitutional, the attorney
general of the state must also be served with a copy of the proceeding and is
entitled to be heard.

Acts 1985, 69th Leg., ch. 959, Sec. 1, eff. Sept. 1, 1985.
                                      FINANCE CODE

    TITLE 4. REGULATION OF INTEREST, LOANS, AND FINANCED
                       TRANSACTIONS

                                SUBTITLE A. INTEREST

                      CHAPTER 304. JUDGMENT INTEREST

                    SUBCHAPTER A. GENERAL PROVISIONS

        Sec. 304.003. JUDGMENT INTEREST RATE: INTEREST RATE OR
TIME PRICE DIFFERENTIAL NOT IN CONTRACT. (a) A money judgment of
a court of this state to which Section 304.002 does not apply, including court costs
awarded in the judgment and prejudgment interest, if any, earns postjudgment
interest at the rate determined under this section.
        (b) On the 15th day of each month, the consumer credit commissioner
shall determine the postjudgment interest rate to be applied to a money judgment
rendered during the succeeding calendar month.
        (c) The postjudgment interest rate is:
                (1) the prime rate as published by the Board of Governors of the
                  Federal Reserve System on the date of computation;
                (2) five percent a year if the prime rate as published by the Board of
                  Governors of the Federal Reserve System described by
                  Subdivision (1) is less than five percent; or
                (3) 15 percent a year if the prime rate as published by the Board of
                  Governors of the Federal Reserve System described by
                  Subdivision (1) is more than 15 percent.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999; Acts 2003, 78th Leg.,
ch. 204, Sec. 6.01, eff. Sept. 1, 2003; Acts 2003, 78th Leg., ch. 676, Sec. 1, eff. June 20, 2003.
Amended by:
          Acts 2005, 79th Leg., Ch. 387 (S.B. 1450), Sec. 1, eff. September 1, 2005.
         Acts 2005, 79th Leg., Ch. 1018 (H.B. 955), Sec. 7.01, eff. September 1, 2005.
        Sec. 304.103. PREJUDGMENT INTEREST RATE FOR WRONGFUL
DEATH, PERSONAL INJURY, OR PROPERTY DAMAGE CASE. The
prejudgment interest rate is equal to the postjudgment interest rate applicable at the
time of judgment.

Amended by Acts 1999, 76th Leg., ch. 62, Sec. 7.18(a), eff. Sept. 1, 1999.
                              PROPERTY CODE

                TITLE 5. EXEMPT PROPERTY AND LIENS

   SUBTITLE A. PROPERTY EXEMPT FROM CREDITORS' CLAIMS

                    CHAPTER 41. INTERESTS IN LAND

           SUBCHAPTER A. EXEMPTIONS IN LAND DEFINED

       Sec. 41.001. INTERESTS IN LAND EXEMPT FROM SEIZURE. (a) A
homestead and one or more lots used for a place of burial of the dead are exempt
from seizure for the claims of creditors except for encumbrances properly fixed on
homestead property.

       (b) Encumbrances may be properly fixed on homestead property for:
             (1) purchase money;

             (2) taxes on the property;

             (3) work and material used in constructing improvements on the
               property if contracted for in writing as provided by Sections
               53.254(a), (b), and (c);

             (4) an owelty of partition imposed against the entirety of the property
               by a court order or by a written agreement of the parties to the
               partition, including a debt of one spouse in favor of the other spouse
               resulting from a division or an award of a family homestead in a
               divorce proceeding;

             (5) the refinance of a lien against a homestead, including a federal tax
               lien resulting from the tax debt of both spouses, if the homestead is
               a family homestead, or from the tax debt of the owner;

             (6) an extension of credit that meets the requirements of Section
               50(a)(6), Article XVI, Texas Constitution; or
                (7) a reverse mortgage that meets the requirements of Sections 50(k)-
                  (p), Article XVI, Texas Constitution.

        (c) The homestead claimant's proceeds of a sale of a homestead are not
subject to seizure for a creditor's claim for six months after the date of sale.

Amended by Acts 1985, 69th Leg., ch. 840, Sec. 1, eff. June 15, 1985; Acts 1993, 73rd Leg., ch.
48, Sec. 2, eff. Sept. 1, 1993; Acts 1995, 74th Leg., ch. 121, Sec. 1.01, eff. May 17, 1995; Acts
1995, 74th Leg., ch. 121, Sec. 2.01; Acts 1997, 75th Leg., ch. 526, Sec. 1, eff. Sept. 1, 1997; Acts
2001, 77th Leg., ch. 516, Sec. 1, eff. Sept. 1, 2001.
RULE 13. EFFECT OF SIGNING PLEADINGS, MOTIONS AND OTHER
PAPERS; SANCTIONS

The signatures of attorneys or parties constitute a certificate by them that they have
read the pleading, motion, or other paper; that to the best of their knowledge,
information, and belief formed after reasonable inquiry the instrument is not
groundless and brought in bad faith or groundless and brought for the purpose of
harassment. Attorneys or parties who shall bring a fictitious suit as an experiment to
get an opinion of the court, or who shall file any fictitious pleading in a cause for
such a purpose, or shall make statements in pleading which they know to be
groundless and false, for the purpose of securing a delay of the trial of the cause,
shall be held guilty of a contempt. If a pleading, motion or other paper is signed in
violation of this rule, the court, upon motion or upon its own initiative, after notice
and hearing, shall impose an appropriate sanction available under Rule 215-2b, upon
the person who signed it, a represented party, or both.

Courts shall presume that pleadings, motions, and other papers are filed in good
faith. No sanctions under this rule may be imposed except for good cause, the
particulars of which must be stated in the sanction order. "Groundless" for purposes
of this rule means no basis in law or fact and not warranted by good faith argument
for the extension, modification, or reversal of existing law. A general denial does
not constitute a violation of this rule. The amount requested for damages does not
constitute a violation of this rule.

                                     Notes and Comments

Comment to 1990 change: To require notice and hearing before a court determines to impose
sanctions, to specify that any sanction imposed be appropriate, and to eliminate the 90-day “grace"
period provided in the former version of the rule.
RULE 39. JOINDER OF PERSONS NEEDED FOR JUST ADJUDICATION

(a) Persons to Be Joined If Feasible. A person who is subject to service of process
shall be joined as a party in the action if

      (1) in his absence complete relief cannot be accorded among those already
      parties, or

      (2) he claims an interest relating to the subject of the action and is so situated
      that the disposition of the action in his absence may

             (i) as a practical matter impair or impede his ability to protect that
             interest or

             (ii) leave any of the persons already parties subject to a substantial risk
             of incurring double, multiple, or otherwise inconsistent obligations by
             reason of his claimed interest. If he has not been so joined, the court
             shall order that he be made a party. If he should join as a plaintiff but
             refuses to do so, he may be made a defendant, or, in a proper case, an
             involuntary plaintiff.

(b) Determination by Court Whenever Joinder Not Feasible. If a person as
described in subdivision (a)(1)-(2) hereof cannot be made a party, the court shall
determine whether in equity and good conscience the action should proceed among
the parties before it, or should be dismissed, the absent person being thus regarded
as indispensable. The factors to be considered by the court include: first, to what
extent a judgment rendered in the person's absence might be prejudicial to him or
those already parties; second, the extent to which, by protective provisions in the
judgment, by the shaping of relief, or other measures, the prejudice can be lessened
or avoided; third, whether a judgment rendered in the person's absence will be
adequate; fourth, whether the plaintiff will have an adequate remedy if the action is
dismissed for non-joinder.

(c) Pleading Reasons for Nonjoinder. A pleading asserting a claim for relief shall
state the names, if known to the pleader, of any persons as described in subdivision
(a)(1)-(2) hereof who are not joined, and the reasons why they are not joined.

(d) Exception of Class Actions. This rule is subject to the provisions of Rule 42.
RULE 56. SPECIAL DAMAGE

When items of special damage are claimed, they shall be specifically stated.
RULE 97. COUNTERCLAIM AND CROSS-CLAIM

(a) Compulsory Counterclaims. A pleading shall state as a counterclaim any claim
within the jurisdiction of the court, not the subject of a pending action, which at the
time of filing the pleading the pleader has against any opposing party, if it arises out
of the transaction or occurrence that is the subject matter of the opposing party's
claim and does not require for its adjudication the presence of third parties of whom
the court cannot acquire jurisdiction; provided, however, that a judgment based upon
a settlement or compromise of a claim of one party to the transaction or occurrence
prior to a disposition on the merits shall not operate as a bar to the continuation or
assertion of the claims of any other party to the transaction or occurrence unless the
latter has consented in writing that said judgment shall operate as a bar.

(b) Permissive Counterclaims. A pleading may state as a counterclaim any claim
against an opposing party whether or not arising out of the transaction or occurrence
that is the subject matter of the opposing party's claim.

(c) Counterclaim Exceeding Opposing Claim. A counterclaim may or may not
diminish or defeat the recovery sought by the opposing party. It may claim relief
exceeding in amount or different in kind from that sought in the pleading of the
opposing party, so long as the subject matter is within the jurisdiction of the court.

(d) Counterclaim Maturing or Acquired After Pleading. A claim which either
matured or was acquired by the pleader after filing his pleading may be presented as
a counterclaim by amended pleading.

(e) Cross-Claim Against Co-Party. A pleading may state as a cross-claim any
claim by one party against a co-party arising out of the transaction or occurrence that
is the subject matter either of the original action or of a counterclaim therein. Such
cross-claim may include a claim that the party against whom it is asserted is or may
be liable to the cross-claimant for all or part of a claim asserted in the action against
the cross-claimant.

(f) Additional Parties. Persons other than those made parties to the original action
may be made parties to a third party action, counterclaim or cross-claim in
accordance with the provisions of Rules 38, 39 and 40.

(g) Tort shall not be the subject of set-off or counterclaim against a contractual
demand nor a contractual demand against tort unless it arises out of or is incident to
or is connected with same.
(h) Separate Trials; Separate Judgments. If the court orders separate trials as
provided in Rule 174, judgment on a counterclaim or cross-claim may be rendered
when the court has jurisdiction so to do, even if the claims of the opposing party
have been dismissed or otherwise disposed of.
215.1 Motion for Sanctions or Order Compelling Discovery.

A party, upon reasonable notice to other parties and all other persons affected
thereby, may apply for sanctions or an order compelling discovery as follows:

(a) Appropriate court. On matters relating to a deposition, an application for an
order to a party may be made to the court in which the action is pending, or to any
district court in the district where the deposition is being taken. An application for
an order to a deponent who is not a party shall be made to the court in the district
where the deposition is being taken. As to all other discovery matters, an application
for an order will be made to the court in which the action is pending.

(b) Motion.

      (1) If a party or other deponent which is a corporation or other entity fails to
      make a designation under Rules 199.2(b)(1) or 200.1(b); or

      (2) if a party, or other deponent, or a person designated to testify on behalf of
      a party or other deponent fails:

              (A) to appear before the officer who is to take his deposition, after being
              served with a proper notice; or

              (B) to answer a question propounded or submitted upon oral
              examination or upon written questions; or

      (3) if a party fails:

              (A) to serve answers or objections to interrogatories submitted under
                  Rule 197, after proper service of the interrogatories; or

              (B) to answer an interrogatory submitted under Rule 197; or

              (C) to serve a written response to a request for inspection submitted
                  under Rule 196, after proper service of the request; or

              (D) to respond that discovery will be permitted as requested or fails to
              permit discovery as requested in response to a request for inspection
              submitted under Rule 196; the discovering party may move for an order
              compelling a designation, an appearance, an answer or answers, or
             inspection or production in accordance with the request, or apply to the
             court in which the action is pending for the imposition of any sanction
             authorized by Rule 215.2(b) without the necessity of first having
             obtained a court order compelling such discovery.

             When taking a deposition on oral examination, the proponent of the
             question may complete or adjourn the examination before he applies
             for an order. If the court denies the motion in whole or in part, it may
             make such protective order as it would have been empowered to make
             on a motion pursuant to Rule 192.6.

(c) Evasive or incomplete answer. For purposes of this subdivision an evasive or
incomplete answer is to be treated as a failure to answer.

(d) Disposition of motion to compel: award of expenses. If the motion is granted,
the court shall, after opportunity for hearing, require a party or deponent whose
conduct necessitated the motion or the party or attorney advising such conduct or
both of them to pay, at such time as ordered by the court, the moving party the
reasonable expenses incurred in obtaining the order, including attorney fees, unless
the court finds that the opposition to the motion was substantially justified or that
other circumstances make an award of expenses unjust. Such an order shall be
subject to review on appeal from the final judgment.

If the motion is denied, the court may, after opportunity for hearing, require the
moving party or attorney advising such motion to pay to the party or deponent who
opposed the motion the reasonable expenses incurred in opposing the motion,
including attorney fees, unless the court finds that the making of the motion was
substantially justified or that other circumstances make an award of expenses unjust.
If the motion is granted in part and denied in part, the court may apportion the
reasonable expenses incurred in relation to the motion among the parties and persons
in a just manner.

In determining the amount of reasonable expenses, including attorney fees, to be
awarded in connection with a motion, the trial court shall award expenses which are
reasonable in relation to the amount of work reasonably expended in obtaining an
order compelling compliance or in opposing a motion which is denied.

(e) Providing person's own statement. If a party fails to comply with any person's
written request for the person's own statement as provided in Rule 192.3(h), the
person who made the request may move for an order compelling compliance. If the
motion is granted, the movant may recover the expenses incurred in obtaining the
order, including attorney fees, which are reasonable in relation to the amount of work
reasonably expended in obtaining the order.

215.2 Failure to Comply with Order or with Discovery Request.

(a) Sanctions by court in district where deposition is taken. If a deponent fails to
appear or to be sworn or to answer a question after being directed to do so by a
district court in the district in which the deposition is being taken, the failure may be
considered a contempt of that court.

(b) Sanctions by court in which action is pending. If a party or an officer, director,
or managing agent of a party or a person designated under Rules 199.2(b)(1) or
200.1(b) to testify on behalf of a party fails to comply with proper discovery requests
or to obey an order to provide or permit discovery, including an order made under
Rules 204 or 215.1, the court in which the action is pending may, after notice and
hearing, make such orders in regard to the failure as are just, and among others the
following:

      (1) an order disallowing any further discovery of any kind or of a particular
          kind by the disobedient party;

      (2) an order charging all or any portion of the expenses of discovery or taxable
      court costs or both against the disobedient party or the attorney advising him;

      (3) an order that the matters regarding which the order was made or any other
      designated facts shall be taken to be established for the purposes of the action
      in accordance with the claim of the party obtaining the order;

      (4) an order refusing to allow the disobedient party to support or oppose
      designated claims or defenses, or prohibiting him from introducing designated
      matters in evidence;

      (5) an order striking out pleadings or parts thereof, or staying further
      proceedings until the order is obeyed, or dismissing with or without prejudice
      the action or proceedings or any part thereof, or rendering a judgment by
      default against the disobedient party;
      (6) in lieu of any of the foregoing orders or in addition thereto, an order
      treating as a contempt of court the failure to obey any orders except an order
      to submit to a physical or mental examination;

      (7) when a party has failed to comply with an order under Rule 204 requiring
      him to appear or produce another for examination, such orders as are listed in
      paragraphs (1), (2), (3), (4) or (5) of this subdivision, unless the person failing
      to comply shows that he is unable to appear or to produce such person for
      examination.

      (8) In lieu of any of the foregoing orders or in addition thereto, the court shall
      require the party failing to obey the order or the attorney advising him, or
      both, to pay, at such time as ordered by the court, the reasonable expenses,
      including attorney fees, caused by the failure, unless the court finds that the
      failure was substantially justified or that other circumstances make an award
      of expenses unjust. Such an order shall be subject to review on appeal from
      the final judgment.

(c) Sanction against nonparty for violation of Rules 196.7 or 205.3. If a nonparty
fails to comply with an order under Rules 196.7 or 205.3, the court which made the
order may treat the failure to obey as contempt of court.

215.3 Abuse of Discovery Process in Seeking, Making, or Resisting Discovery.

If the court finds a party is abusing the discovery process in seeking, making or
resisting discovery or if the court finds that any interrogatory or request for
inspection or production is unreasonably frivolous, oppressive, or harassing, or that
a response or answer is unreasonably frivolous or made for purposes of delay, then
the court in which the action is pending may, after notice and hearing, impose any
appropriate sanction authorized by paragraphs (1), (2), (3), (4), (5), and (8) of Rule
215.2(b). Such order of sanction shall be subject to review on appeal from the final
judgment.

215.4 Failure to Comply with Rule 198

(a) Motion. A party who has requested an admission under Rule 198 may move to
determine the sufficiency of the answer or objection. For purposes of this
subdivision an evasive or incomplete answer may be treated as a failure to answer.
Unless the court determines that an objection is justified, it shall order that an answer
be served. If the court determines that an answer does not comply with the
requirements of Rule 198, it may order either that the matter is admitted or that an
amended answer be served. The provisions of Rule 215.1(d) apply to the award of
expenses incurred in relation to the motion.

(b) Expenses on failure to admit. If a party fails to admit the genuineness of any
document or the truth of any matter as requested under Rule 198 and if the party
requesting the admissions thereafter proves the genuineness of the document or the
truth of the matter, he may apply to the court for an order requiring the other party
to pay him the reasonable expenses incurred in making that proof, including
reasonable attorney fees. The court shall make the order unless it finds that (1) the
request was held objectionable pursuant to Rule 193, or (2) the admission sought
was of no substantial importance, or (3) the party failing to admit had a reasonable
ground to believe that he might prevail on the matter, or (4) there was other good
reason for the failure to admit.

215.5 Failure of Party or Witness to Attend to or Serve Subpoena; Expenses.

(a) Failure of party giving notice to attend. If the party giving the notice of the
taking of an oral deposition fails to attend and proceed therewith and another party
attends in person or by attorney pursuant to the notice, the court may order the party
giving the notice to pay such other party the reasonable expenses incurred by him
and his attorney in attending, including reasonable attorney fees.

(b) Failure of witness to attend. If a party gives notice of the taking of an oral
deposition of a witness and the witness does not attend because of the fault of the
party giving the notice, if another party attends in person or by attorney because he
expects the deposition of that witness to be taken, the court may order the party
giving the notice to pay such other party the reasonable expenses incurred by him
and his attorney in attending, including reasonable attorney fees.

215.6 Exhibits to Motions and Responses.

Motions or responses made under this rule may have exhibits attached including
affidavits, discovery pleadings, or any other documents.
NON-MONETARY RELIEF, EQUITABLE RELIEF

    WILLIAM W. MILLER, JR., Texarkana
             Greer & Miller

           State Bar of Texas
             7th ANNUAL
     DAMAGES IN CIVIL LITIGATION
          February 26-27, 2015
                Houston

              CHAPTER 10
WILLIAM W. MILLER , JR.
                              WILLIAM W. MILLER, JR.
                              Born Dallas, Texas, March 28, 1971
                              Admitted to Texas Bar in 1996 and the Arkansas Bar in 1997
                              A 2006, 2007, 2008, 2009 & 2011 Super Lawyer: Rising Star

                              Practice Areas:
                              • Business & Commercial Litigation
                              • Personal Injury Litigation
                              • Construction Litigation
                              • Products Litigation

Licensed by:
• Supreme Court of Texas
• Supreme Court of Arkansas
• Admitted to Practice in the United States District Courts for:
  – The Eastern District of Texas
  – The Northern District of Texas
  – The Eastern and Western Districts of Arkansas

Admitted to practice in the Fifth & Eighth Circuit Courts of Appeals

 Education:
• Vanderbilt University (B.A. 1993)
• Texas Tech School of Law (J.D.,1996),

Board of Barristers, 1995-96
Super Lawyer: Rising Star
2006, 2007, 2008, 2009 & 2011

Member:
• State Bar of Texas
   - Board of Directors (2006-2009)
    - SBOT EC (2006-2008)
• Arkansas Bar Association
• Texas Young Lawyers Association
   - President (2007-2008)
   - President-elect (2006-2007)
  - Chair-Elect of the Board of Directors (2004-2005)
   - Chair of the Board of Directors (2005-2006)
   - District 1 Director (2001-2003, 2003-2005)
• Texarkana Young Lawyers Association
   - President 1999-2000
   - Vice President, 1998-1999
• Northeast Texas Bar Association
• Texarkana Bar Association
• American Bar Association
• Defense Research Institute

Civic/Other:
• Member, St. James Episcopal Church;
• Texarkana Soccer Association Referee/Coach
• University Interscholastic League (UIL) Soccer Referee
• Arkansas Association of Officials Soccer Referee
• United States Soccer Federation Referee

"Outstanding Director of the Year" 2002-2003 bar year, Texas Young Lawyers Association

"President's Award of Merit" 2001-2002 bar year, Texas Young Lawyers Association.
Non-Monetary Relief, Equitable Relief                                                                                                       Chapter 10

                                                          TABLE OF CONTENTS

A. CONSTRUCTIVE TRUSTS................................................................................................................................... 1

B.    QUANTUM MERUIT/RESTITUTION AND UNJUST ENRICHMENT............................................................. 2

C.    RESCISSION AND REFORMATION................................................................................................................... 3

                                                                             i
Non-Monetary Relief, Equitable Relief                                                                         Chapter 10

NON-MONETARY RELIEF,                                              344 (Tex. 19944); Tuck v. Miller, 483 S.W.2d 898, 905
                                                                  (Tex. 1972).
EQUITABLE RELIEF                                                        Because a confidential relationship can arise from
                                                                  a number of different situations (including informal
A. CONSTRUCTIVE TRUSTS                                            moral, social, or purely personal relationships, see,
     Constructive trusts are an equitable remedy that             Thigpen v. Locke, supra,) a jury’s determination of
permits a party wronged or damaged by another’s                   whether the relationship between the parties was a
fraud, duress, mistake, breach of fiduciary duty or               confidential one should be raised as a fact issue when
other unconscionable conduct an opportunity to                    one party seeks a constructive trust. See, also Andrews
recover as against the property acquired by the                   v. Andrews, 677 S.W.2d 171 (Tex.App. — Austin
wrongdoer as a result of the wrongful conduct. The                1984, no writ) (Cohabitation as confidential
underlying purpose is to “do equity” and impose a                 relationship); Hatton v. Turner, 622 S.W.2d 450
remedy that redresses wrongs and unjust enrichment.               (Tex.App. — Tyler 1981, no writ) (Family relationship
Meadows v. Bierschwale, 515 S.W.2d 125 (Tex. 1974);               may support confidential relationship); Holland v.
Bocanegra v. Aetna Life Ins. Co., 605 S.W.2d 848                  Lesene, 350 S.W.2d 859 (Tex.App. — San Antonio
(Tex. 1980); Holmes v. Kent, 221 S.W.3d 622, n. 21                1961, writ ref’d n.r.e.) (close personal friendship may
(Tex. 2007); Medford v. Medford, 68 S.W.3d 242, 248               constitute fiduciary relationship). From a defense
(Tex. App. — Fort Worth 2002, no pet.); Hubbard v.                perspective, the defeat of the confidential relationship
Shankle, 138 S.W.3d 474, 485 (Tex. App.—Fort Worth                precludes the imposition of the trust. On the other
2004, pet. denied); Mowbray v. Avery, 76 S.W.3d 663,              hand, simply proving a confidential relationship is only
681 n.27 (Tex. App. — Corpus Christi 2002, pet.                   the fist step in showing the violation of that
denied).                                                          relationship before seeking the imposition of the
     It is important to note that a constructive trust is         constructive trust.
not a cause of action in itself, but merely a remedy that               Constructive trusts can also be imposed on
can be sought for wrongful conduct. Dawson v.                     fraudulent transfers or when there is an attempt to
Lowrey, 441 S.W.3d 825, 837, n. 20 (Tex.App. —                   defraud creditors by selling property for less than
Texarkana 2014, no pet.). Often the underlying cause              market value. See, e.g., Wheeler v. Blacklands
of action arises from claims of fraud or constructive             Production Credit, 627 S.W.2d 846, Tex.App.—Ft.
fraud. See, e.g., Thigpen v. Locke, 363 S.W.2d 247,               Worth, 1983 no writ). Constructive trusts have also
250 (Tex. 1962); Blankenship v. Citizens National                 been imposed as the result of mistakes, e.g., Cocke v.
Bank of Lubbock, 449 S.W.2d 77, 79 (Tex.App.—                    Pacific Gulf Development Corp., 594 S.W.2d 545
Amarillo 1969, writ ref’d, n.r.e); Towne v. Towne, 707            (Tex.App. —Houston [1st Dist.] 1980, no writ);
S.W.2d 745 (Tex.App.—Ft. Worth 1986, no writ).                    Blankenship v. Citizens, supra., and to prevent unjust
                                                                  enrichment generally, e.g., Pope v. Garrett, 211 S.W.2d
     “To establish that a constructive trust exists,              559 (Tex. 1948); Meadows v. Bierschwale, supra,;
     the proponent must prove (1) breach of a                     Omohundro v. Matthews, 341 S.W.2d 401 (Tex. 1960);
     special trust, fiduciary relationship, or actual             Bright v. Addison, 171 S.W.3d 588 (Tex.App.— Dallas
     fraud; (2) unjust enrichment of the                          2005, pet. granted); Ellisor v. Ellisor, 630 s.W.2d 746
     wrongdoer; and (3) tracing to an identifiable                (Tex.App.— Houston [1st. Dist.] 1982, no writ); Hatton
     res.” Hahn v. Love, 321 S.W.3d 517                           v. Turner, 622 S.W.2d 450 (Tex.App. — Tyler 1981,
     (Tex.App. —Houston[1st Dist.] 2009, pet.                     no writ).
     denied).                                                           In order to impose a constructive trust there must
                                                                  be identifiable property to impose the trust upon and
Quite often the imposition of a constructive trust arises         proven that the trust should be imposed on that
from the breach of a fiduciary duty or confidential               particular property to remedy the wrong complained
relationship. See, e.g., Fitz-Gerald v. Hull, 237 S.W.2d          about. See., e.g., Renfrow v. Lineberry, 271 S.W.2d
256 (1951); Thigpen v. Locke, supra,; International               440 (Tex.App.—El Paso 1954, writ ref’d n.r.e);
Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567                 Wheeler v. Backlands, supra,; May v. Little, 473 S.W.
(Tex. 1963); Rankin v. Naftalis, 557 S.W.2d 940 (Tex.             2d 632 (Tex.App.—El Paso, 1971, writ ref’d n.r.e.);
1977); Consolidated Bearing v. First Nat. Bank, 720               Sheldon Petroleum Co. v. Peirce, 546 S.W.2d 954
S.W.2d 647 (Tex.App.—Amarillo 1986, no writ);                     (Tex.App.— Dallas 1977, no writ). The property over
Stout v. Clayton, 674 S.W.2d 821 (Tex.App.—San                    which the trust is to be imposed, must be clearly traced
Antonio 1984, writ ref’d n.r.e.). Whether a confidential          back to the wrongdoing of the defendant. “The party
relationship exists, that may be the basis for a                  seeking to impose a constructive trust has the burden of
constructive trust, is often a fact question itself for the       tracing funds to the specific property sought to be
jury to decide. See, Macdonald v. Follen, 180 S.W.2d              recovered.” Wilz v. Flournoy, 228 S.W.3d 674, 676
                                                              1
Non-Monetary Relief, Equitable Relief                                                                            Chapter 10

(Tex. 2007). Once the fund have been traced to the                  contractual agreement exists. Generally, “quantum
property, however, the burden shifts to the defendants              meruit is an equitable theory of recovery founded in
to show that property was acquired or purchased                     the principle of unjust enrichment based on an implied
without wrongdoing (typically through separate funds).              agreement to pay for benefits received.” Vortt
Id.; Eaton v. Husted 172 S.W.2d 493, 498 (Tex. 1943).               Exploration Co. v. Chevron U.S.A., Inc., 787 S.W.2d
      However, even if comingled, a constructive trust              942, 944 (Tex. 1990); Bashara v. Baptist Mem'l Hosp.
can still be imposed on the comingled funds or the                  Sys., 685 S.W.2d 307, 310 (Tex. 1985). To meet the
proceeds of such. See, Logan v. Logan, 156 S.W.2d                   requirements for recovery, the pleading party must
507 (Tex. 1941); Peirce v. Sheldon Petroleum Co., 589               generally prove that “(i) valuable services and/or
S.W.2d 849 (Tex.App. — Amarillo 1979, no writ);                     materials were furnished, (ii) to the party sought to be
General Ass’n of Davidian Seventh Day Adventists v.                 charged, (iii) which were accepted by the party sought
General Ass’n of Davidian Seventh Day Adventists,                   to be charged, and (iv) under such circumstances as
410 S.W.2d 256 (Tex.App.—Waco 1966, writ ref’d                     reasonably notified the recipient that the plaintiff, in
n.r.e.) and Wilz v. Flournoy, supra. However, if the                performing, expected to be paid by the recipient.”
property that would have been subject to the trust is               Heldenfels Bros., Inc. v. City of Corpus Christi, 832
sold to a bona fide purchaser by the Defendant, but the             S.W.2d 39, 41 (Tex. 1992).
funds can be traced, the property itself may no longer                   Likewise, unjust enrichment is a theory applicable
be the subject of the trust, but the proceeds of the sale,          where a party has obtained some advantage or benefit,
including any profits, can be. See, Meadows v.                      often by fraud, duress, or some other unfair advantage,
Bierschwale, 516 S.W.2d 125 (Tex. 1974). See, also,                 but in circumstances that give rise to an implied or
Marineau v. General American Life Insurance Co.,                    quasi-contractual obligation to reimburse the proposing
898 S.W.2d 397 (Tex.App. — Ft. Worth, writ denied)                  party for the benefit incurred by the defendant. See,
where the constructive trust was impose on not only                 e.g., Sherer v. Sherer, 393 S.W.3d 480, n. 22
the amount of the traced funds, but the also the                    (Tex.App. — Texarkana 2013, pet. denied); Christus
increase in value. There, the premiums of a policy had              Health v. Quality Infusion Care, 359 S.W.3d 719
been paid with funds wrongfully obtained, but the                   (Tex.App. — Houston [1st Dist.] 2011, no pet.);
court imposed the trust on the proceeds of the policy               Walker v. Cotter Props, Inc. 181 S.W.3d 895
itself, which were greater than the original wrongfully             (Tex.App. — Dallas 2006, no pet.).
obtained funds.                                                          Normally, where a contract has been executed
      Where a third party is has knowledge of the                   between the parties that covers the subject matter of the
plaintiff’s wrongful conduct or is on notice of the                 dispute, claims for unjust enrichment are defeated.
plaintiff’s claimed right, the purchaser of the property            See, e.g., Fortune Production, Co. v. Conoco, Inc., 52
can also be declared a constructive trustee for the                 S.W.3d 671 (Tex. 2000); Raven Res. V. Legacy
benefit of the plaintiff. See, Ginther v. Taub, 675                 Reserves Operating, 363 S.W.3d 865 (Tex.App. —
S.W.2d 724 (Tex. 1984); Duncan v. Woolf, 380 S.W.2d                 Eastland 2012, pet. denied); Transamerican Natural
862 (Tex.App.—Ft. Worth, writ ref’d n.r.e.).                        Gas v. Finkelstein, 933 S.W.2d 591 (Tex.App. — San
However, the question will usually turn on whether the              Antonio 1996, writ denied). However, if the contract
new owner of the property is unjustly enriched either               is void, not fully performed or otherwise
because of the reduced value in acquiring the property              unenforceable, the theory may still be applicable. See,
or because of the use of the knowledge of the                       City of Harker Heights v. Sun Meadows Land, Ltd.,
wrongdoing. See, Ginther, supra.; Hahn v. Love,                     830 S.W.2d 313 (Tex.App. — Austin 1992, no writ);
supra.                                                              McCullough v. Scarbrough, Medlin & Assocs., 435
      Where multiple causes of action are asserted at               S.W.3d 871 (Tex.App. — Dallas 2014, pet. denied);
trial, if the verdict is returned favorably to the plaintiff,       Sherer v. Sherer, supra.
they must elect their remedy. Often the imposition of                    Likewise, under quantum meruit, where an
the constructive trust can be a viable option, but the              express agreement has been executed between the
plaintiff will usually have to forgo any damages that               parties on the subject matter, recovery under the theory
may be awarded. Counsel will have to evaluate both                  is denied. See, Truly v. Austin, 744 S.W.2d 934 (Tex.
the benefits and consequences of electing the most                  1988); Woodard v. Southwest States, Inc., 384 S.W.2d
favorable remedy.                                                   674 (Tex. 1964); concept Gen. Contr. V. Asbestos
                                                                    Maintenance, 346 S.W.3d 172 (Tex.App. — Amarillo
B.   QUANTUM MERUIT/RESTITUTION AND                                 2011, pet. denied). However, exceptions to this rule
     UNJUST ENRICHMENT                                              exist as well. For example, a contractor may recover
     Often combined in a plaintiff’s pleadings,                     under quantum meruit despite breach or failure to fully
quantum meruit, restitution and unjust enrichment                   perform under an express contract, for the reasonable
claims seek enforcement of equity when no written                   value of services or materials. See, e.g., Murray v.
                                                                2
Non-Monetary Relief, Equitable Relief                                                                       Chapter 10

Crest Const., Inc., 900 S.W.2d 342 (Tex. 1995);               wrongful retention of the property. See, MGA Ins. Co.
Chilton Ins. v. Pate & Pate Enterprises, 930 S.W.2d v. Chesnutt, supra; Doss v. Homecomings Fin.
877 (Tex.App. — San Antonio 1996, writ denied).               Network, Inc. 201 S.W.3d 706 (Tex.App. — Corpus
Also, when the contract is a unilateral contract, the         Christi, 2006 pet. denied); Everett v. TK-Taito, L.L.C.,
plaintiff who has partially performed may still recover       178 S.W.3d 844 (Tex.App. — Fort Worth 2005, no
under quantum meruit as no duty is imposed on the             pet.). In other words, contrary to a conversion claim,
other party to the agreement. See., e.g., Colbert v.          all the plaintiff must show is that the defendant ended
Dallas Joint Stock Land Bank of Dallas, 102 S.W.2d            up with the money that belonged to the plaintiff,
1031 (Tex. 1937); Truly v. Austin, supra; Benson v.           regardless of whether the defendant’s acquisition of the
Harrell, 324 S.W.2d 620 (Tex.App. — Fort Worth                money was fraudulent, by mistake or otherwise
1959, writ ref’d n.r.e.)                                      wrongfully procured. See, e.g., H.E.B., LLC v.
     Under both quantum meruit and unjust                     Ardinger, 369 S.W.3d 496 (Tex.App — Fort Worth
enrichment, the party can plead alternative claims            2012, no pet.); Edwards v. Mid-Continent Office, 252
compared to the contract and seek recovery under both         S.W.3d 833 (Tex.App. — Dallas, pet. denied).
contractual and equitable theories. See, Fortune                    Of course, where the plaintiff can show the
Production Co. v. Conoco, Inc., supra; Fraud-Tech,            wrongful acquisition of the funds, the law should find
Inc. v. Choicepoint, Inc., 102 S.W.3d 366 (Tex.App. —         for the plaintiff. See, e.g., Briggs v. Rodriguez, 236
Ft. Worth 2003, pet denied).                                  S.W.2d 510 (Tex.App — Dallas 1951, writ dism’d);
     Quantum meruit is governed by the four year              Wichita County v. Title, 27 S.W.2d 649 (Tex.App. —
statute of limitations, Pepsi Corp. v. Galliford, 254         Amarillo 1930), aff’d, 41 S.W.2d 11 (Tex.Comm.App
S.W.3d 457 (Tex.App. — Houston [1st. Dist.] 2007, no          1931, jdgmt adopted); Orgain v. Butler, 478 S.W.2d
pet); Quigley v. Bennett, 256 S.W.3d 356 (Tex.App. —          610 (Tex.App. — 1972, no writ); Barrett v. Ferrell,
San Antonio 2008, no pet.); while claims for unjust           550 S.W.2d 138 (Tex.App. — Tyler 1977, writ ref’d
enrichment appear to be governed by a two-year statute        n.r.e.). Nonetheless, wrongdoing is not an element of
of limitations, Elledge v. Friberg-Cooper Water Supply        the equitable claim and, if wrongdoing is asserted,
Corp., 240 S.W.3d 869 (Tex. 2007); Wagner & Brown,            alternative claims based on the wrongdoing (such as
Ltd. v. Horwood, 58 S.W.3d 732, 737 (Tex. 2001);              conversion or fraud) should also be alleged.
HECI Exploration Co. v. Neel, 982 S.W.2d 881 (Tex.
1988); Sherer v. Sherer, supra.; Mobil Producing
Texas & N.M. v. Cantor, 93 S.W.3d 916 (Tex.App. —             C. RESCISSION AND REFORMATION
Corpus Christi 2002, no pet.).                                     Rescission and reformation are equitable remedies
                                                              available when the party has a contract action, but seek
    “Money had and received” is quite often                   to either avoid the contractual remedies or modify the
    claimed under the theory of unjust                        agreement to conform to the actual agreement of the
    enrichment. To assert such a claim, the                   parties. Both remedies are most often applicable when
    plaintiff need only show that the defendant               there has been either a provable mutual or unilateral
    holds money or the equivalent of money that               mistake in the making of the agreement.
    “in equity and good conscious” belongs to                      When a party seeks rescission of the contract, the
    the plaintiff. Best Buy v. Berrera, 248                   proponent of the remedy must generally show that “ (1)
    S.W.3d 160 (Tex. 2007); Stonebridge Life                  the mistake is of so great a consequence that to enforce
    Ins. Co. v. Pitts, 236 S.W.3d 201 (Tex.                   the contract as made would be unconscionable; (2) the
    2007); Staats v. Miller, 243 S.W.2d 686                   mistake relates to a material feature of the contract; (3)
    (Tex. 1951); See, also, Stewart Title Guar.               the mistake must have been made regardless of the
    Co. v. Mims, 405 S.W.3d 319 (Tex.App. —                   exercise of ordinary care; and (4) the parties can be
    Dallas, 2013, no pet.); MGA Ins. Co. v.                   placed in status quo in the equity sense, i.e., rescission
    Charles R. Chesnutt, P.C., 358 S.W.3d 808                 must not result in prejudice to the other party except
    (Tex.App — Dallas 2012, no pet.); Tri-State               for the loss of his bargain.” James T. Taylor & son,
    Chemicals v. Western Organics, 83 S.W.3d                  Inc. v. Arlington Independent School Dist., 335 S.W.2d
189 (Tex.App. — Amarillo 2002, pet                        371, 373 (Tex. 1960); Monarch Marking System Co. v.
    denied).                                                  Reed’s Photo Mart, Inc., 485 S.W.2d 905 (Tex. 1972).
                                                              Often, the contract is set aside because of fraud,
Money had and received is distinguished from a                mistake or some other reason to prevent unjust
conversion claim in that the property need not still be       enrichment and is often plead in response to a claim for
in the possession of the defendant. Moreover, the             breach of contract. See, e.g., Koral Industries v.
plaintiff does not have to prove wrongdoing, in               Security-Connecticut Life Ins. Co., 802 S.W.2d 650
particular, the wrongful taking of the property or the        (Tex. 1990); Isaacs v. Bishop, 249 S.W.3d 100
                                                          3
Non-Monetary Relief, Equitable Relief                                                                        Chapter 10

(Tex.App. — Texarkana 2008, pet. denied); Scott v.                S.W.2d 939 (Tex. 1980). The successful application of
Commercial services of Perry, Inc., 121 S.W.3d 26                 the remedy often includes claims of fraud or other
(Tex.App. — Tyler 2003, pet. denied); Nelson v. Najm,             inequitable conduct. See., e.g., Cherokee Water Co.
127 S.W.3d 170 (Tex.App. — Houston [1st Dist.]                   Forderhause, 741 S.W.2d 377 (Tex. 1977); Gail v.
2003, pet. denied); Barker v. Roelke, 105 S.W.3d 75               Berry, 343 S.W.3d 520 (Tex.App. — Eastland 2011,
(Tex.App. — Eastland 2003, pet. denied).                          no pet.); Veterans Land Bd. v. Lesley, 281 S.W.3d 602
     Under the theory that one who seeks equity must              (Tex.App. — Eastland 2009, pet. denied); Givens v.
do equity, in order to successfully seek the rescission           Ward, 272 S.W.3d 63 (Tex.App. — Waco 2008, no
of a contract, a party seeking to rescind a contract must         pet.). Likewise, if the other party took advantage of
generally give the other party notice that the contract is        the unilateral mistake, even absent fraud, reformation
being rescinded and tender, or offer to tender, any               may be appropriate. See, Hill v. Spencer & Son, 973
property received under the contract or the value of any          S.W.2d 772 (Tex.App. — Texarkana 1998, no pet.).
benefit it obtained by the contract back to the other             However, if the reformation sought is the reformation
party. See, e.g., Carrow v. Bayliner Marine Corp., 781            of a deed, transfer of the property to a bona fide
S.W. 2d 691 (Tex.App. — Austin 1989, no writ);                    purchaser may defeat the proposed reformation. See.,
David McDavid Pontiac, Inc. v. Nix, 681 S.W.2d 831                e.g., Richmond v. Wells, 395 S.W.3d 262 (Tex.App. —
(Tex. App. —Dallas 1984, writ ref’d n.r.e). However,              Eastland 2012, no pet.).
see, e.g., Cruz v. Andrews Restoration, Inc. 364
S.W.3d 817 (Tex. 2012) and Morton v. Hung Nguyen,
412 S.W.3d 506 (Tex. 2013) where the Supreme Court
held that under certain statutes, i.e., the DTPA and
Chapter 5, Subchapter D of the Texas Property Code,
the tender of the benefits many not be necessary “as
long as the affirmative relief to the consumer can be
reduced by (or made subject to) the consumer's
reciprocal obligation of restitution.” Cruz, at 827
Morton, at 512. Presumably, the Supreme Court would
extend this requirement to other codes that may appear
to codify the common law remedy of rescission.
Likewise, the inability to place the parties back in their
original positions could be considered as a basis for
denying rescission. See, e.g., Isaacs v. Bishop, 249
S.W.3d 100 (Tex.App. — Texarkana 2008, ).
     A party may also lose the right to rescission if the
party sits on their rights or is contributorily responsible
for the fraud or mistake. See, Barker v. Roekle, supra;
Nelson v. Najm, supra, Isaacs v. Bishop, supra.
     Like other equitable remedies, the plaintiff must
elect their remedy before judgment. Accordingly, if a
verdict for damages and rescission are rendered, if
rescission is selected as the remedy for judgment, a
party may not be awarded damages. See, e.g., Dallas
Farm Mach. Co. v. Reaves, 307 S.W.2d 233 (Tex.
1957); Scott v. Sebree, 986 S.W.2d 364 (Tex.App. —
Austin 1999, pet. denied).
     Reformation, in contrast to rescission, does not
seek to negate the contract, but rather seeks the Court’s
enforcement of the contract on a “rewritten” basis.
This equitable remedy is generally also only available
where a party can show the contract is subject to
mistake, accident or fraud.            See, Nat’l Resort
Communities, Inc. v. Cain, 526 S.W.2d 510 (Tex.
1975). Generally, a party “must [1.] prove the true
agreement of the parties. 2. He must prove that the
provision erroneously written into the instrument was
there by mutual mistake.” Brown v. Havard, 593
                                                              4
Katarzyna Brozynski, Law offices of Cornel Walker                discretion standard. Cire v. Cummings, 134 S.W.3d 835,
P.C., and Cornel Walker, Appellants                              838 (Tex. 2004).

v.                                                                    The determination of whether a trial court abused its
                                                                 discretion is a question of law. Jackson v. Van Winkle, 660
Jared Kerney and Sheila Kerney, Appellees                        S.W.2d 807, 810 (Tex. 1983) , overruled in part on other
                                                                 grounds by Moritz v. Preiss, 121 S.W.3d 715, 721 (Tex.
No. 10-05-00300-CV                                               2003). A trial court abuses its discretion when it acts
                                                                 arbitrarily and unreasonably, without reference to guiding
Court of Appeals of Texas, Tenth District
                                                                 rules or principles, or when it misapplies the law to the
                                                                 established facts of the case. Beaumont Bank, N.A. v.
August 2, 2006
                                                                 Buller, 806 S.W.2d 223, 226 (Tex. 1991); Downer v.
    From the 413th District Court Johnson County, Texas          Aquamarine Operators, Inc., 701 S.W.2d 238, 241 (Tex.
Trial Court No. 2004-00466                                       1985). “A trial court has no discretion to determine what
                                                                 the law is or in applying the law to the facts and,
   Before Chief Justice Gray, Justice Vance, and Justice         consequently, the trial court's failure to analyze or apply the
Reyna.                                                           law correctly is an abuse of discretion.” In re American
                                                                 Homestar of Lancaster, Inc., 50 S.W.3d 480, 483 (Tex.
     MEMORANDUM OPINION                                          2001). A trial court also abuses its discretion in imposing
                                                                 sanctions if it bases the order on a clearly erroneous
     BILL VANCE, Justice                                         assessment of the evidence. Monroe, 884 S.W.2d at 816.

     Appellants Katarzyna Brozynski, Cornel Walker, and              The Pleadings and Evidence
the Law Offices of Cornel Walker, P.C. appeal the trial
court's Rule 13 sanctions ruling that awarded $7,200 in               The Brozynskis' original petition alleged the following
attorney's fees to Jared and Sheila Kerney. Their sole issue     facts:
asserts that the trial court abused its discretion by imposing
sanctions. We will reverse the trial court's sanctions             5. Beginning on or about October 1, 2003, Defendants
judgment and render a take-nothing judgment.                     erected a large wooden play set, which site is directly south
                                                                 of and immediately adjacent to Plaintiffs' property.
     Background                                                  Defendants had not consulted with Plaintiffs nor had they
                                                                 asked for permission to erect such construction knowing
      Katarzyna (Kathy) and Krzysztof Brozynski sued the         fully well that the play set had been erected in violation of
Kerneys, their next-door neighbors in Cleburne, initially        the residential deed and to intentionally harass and disrupt
alleging causes of action for private nuisance, trespass, and    Plaintiffs' life. Specifically, in the course of using this
assault. The Kerneys filed a counterclaim, asserting that the    equipment extensively, children who are playing on the
Brozynskis' suit was groundless and was filed in bad faith       play set are constantly screaming and trespassing by
and for the purpose of harassment. After the Kerneys             looking into the Plaintiffs' entire backyard, and especially
moved out of state, the Brozynskis filed a motion to dismiss     the swimming pool area, resulting in constant disruption of
(i.e., a nonsuit) their own claims without prejudice. The        life during afternoon and evening hours when Plaintiffs
Kerneys then filed a motion for sanctions, asserting that the    return from work, as well as during the weekend. In an
Brozynskis' suit was frivolous. After a hearing, the trial       effort to resolve the matter amicably and avoid court
court granted the motion and sanctioned Kathy (who is an         proceedings on or about August 17, 2004, Plaintiff, Kathy
attorney practicing in Dallas) and her attorney of record by     Brozynski, approached Sheila Kerney and requested the
making particularized findings and entering a final              play set be removed permanently or transferred further
judgment that awarded the Kerneys their attorney's fees in       away from the adjacent property line. Defendant Sheila
defending the suit.                                              Kerney used obscene and uncensored language. The
                                                                 particulars of the assault are as follows: Defendant Sheila
     Standard of Review
                                                                 Kerney stepped very close to Kathy Brozynski and
                                                                 threatened her in front of other neighbors by saying “Now,
    Imposing Rule 13 sanctions is within the trial court's
                                                                 I'll show you where shits like you belong.” Kathy
sound discretion. Monroe v. Grider, 884 S.W.2d 811, 816
                                                                 Brozynski felt such apprehension that she immediately
(Tex. App.—Dallas 1994, writ denied). Accordingly, we
                                                                 retreated to her house in fear of imminent harm. Prior to this
review a trial court's order for sanctions under an abuse of
                                                                 event, Defendant Jared Kerney used obscene language
towards Plaintiffs' minor children, Max and Martina,             to otherwise place this wooden construction. This was a
causing the children great distress and nervousness.             direct breach of the Declaration of Covenants, Conditions,
Defendant Sheila Kerney continues to use obscene language        and Restriction for Beckley Heights, Phase 3, subdivision.
whenever she hears the Brozynski family out in their             Defendants never notified me nor asked for permission to
backyard.                                                        assemble the play set in such close proximity to the fence.

 6. Furthermore, immediately adjacent to Plaintiffs' property     8. I observed Defendants' children as well as other children
on Defendants' driveway, the Defendants entertain the            playing on this wooden construction since early October
entire neighborhood, consuming alcohol, allowing young           2003. At times there were 10-15 children playing on this
children to play on the driveway, using obscene language         wooden construction, at least 4 times a week between 7
and partying until late night hours. Needless to say, this       p.m. and 11 p.m. shouting and hollering at each other. I
obnoxious and harassing behavior causes disruption in            observed them playing during the weekend at different
Plaintiffs' life. Furthermore, the lights which light up the     hours. . . .
Defendants' driveway are illuminated from early afternoon
hours until the next morning and are intentionally and            9. I observed Defendants' child and children of their guests
maliciously focused upon Plaintiffs' master bedroom              throwing trash and rocks and yelling while standing on the
windows causing constant bright glare and preventing             top of the play set.
Plaintiff from getting a decent night's sleep. The viciousness
of Defendants' conduct prevents Plaintiffs from the use and       10. At all times relevant, I was working in Dallas, Texas; I
enjoyment of their property.                                     would leave early in the morning and return at about 7 p.m.
                                                                 When I was at home, I was not able to relax or enjoy my
     The Brozynskis' original petition, which was filed on       home, inside or out. I was frequently disturbed by yelling,
September 29, 2004, requested a temporary injunction that        screaming and loud music played from the Defendants
the Kerneys be enjoined from engaging in the conduct and         property. I cried frequently and was not able to sleep. . . .
activities at issue and a permanent injunction ordering either
the removal of the play set or its movement to at least           11. Our neighbors' activities on the play set escalated to the
fifteen feet from the adjacent property line.                    point that during spring, summer and fall of 2004, neither
                                                                 myself, my husband, nor my children were able to use our
     On November 2, 2004, Mr. Walker, the Brozynskis'            backyard and swimming pool when Defendants were at
attorney, wrote the court to cancel the hearing on the           home. I was afraid that I would be observed and my privacy
Brozynskis' request for a temporary injunction, stating: “It     violated. I was depressed and withdrew socially. I was
is my understanding that the Defendants have removed the         unable to invite friends over for fear of being embarrassed
play set and, therefore, there is no longer any need for a       or very uncomfortable having to tell them that we are not
hearing on the Temporary Injunction since the play set           able to use our backyard and swimming pool. My children
removal issue is moot.”                                          were not able to invite their friends over because they
                                                                 feared being observed and laughed at by the children on the
     Thereafter, the Kerneys filed a no-evidence motion for      play set.
summary judgment (which the trial court never ruled on). In
response to that motion, the Brozynskis filed their own               Kathy's affidavit concludes with a reiteration of the
affidavits. Kathy's affidavit states in pertinent part:          alleged assault by Sheila Kerney and with a description of
                                                                 actual damages, including $480 in damage to the
  6. Furthermore, Defendants illuminated their driveway          Brozynskis' fence caused by hooks of the play set that had
with very bright light bulbs that were directed at my            been attached to the fence. Krzysztof Brozynski's affidavit
bedroom windows. On one occasion, I approached Jared             sets out nearly identical facts.
Kerney and asked him to re-direct the light. Not only was
the light not re-directed, but the existing bulbs were               The Brozynskis next filed (on March 3, 2005) an
replaced with higher wattage bulbs that shined throughout        amended petition whose facts remained as set out above. It
the night and sometimes during the day. Prior to their           added a cause of action for intentional infliction of
moving, Defendants programmed their light system in such         emotional distress but no longer sought injunctive relief. At
a way that the lights in the driveway stayed on all day,         a hearing held on March 14, 2005, the trial court gave the
every day. . . .                                                 Brozynskis thirty days to amend their petition to plead
                                                                 viable causes of action. Instead of repleading, the
 7. Sometime in 2003, when I came from work, I noticed a         Brozynskis filed their motion to dismiss without prejudice
wooden construction about 12 feet high protruding over my        on April 11, and two weeks later, the Kerneys filed their
fence. It had been erected immediately adjacent to our           motion for sanctions.
property fence, although Defendants had considerable space
    Rule 13 Sanctions                                             was filed in good faith. Tex. R. Civ. P. 13; GTE Comm. Sys.
                                                                  v. Tanner, 856 S.W.2d 725, 731 (Tex. 1993). “Thus, the
    The trial court's judgment expressly imposed sanctions        burden is on the party moving for sanctions to overcome
under Texas Rule of Civil Procedure 13. Appellants first          this presumption.” GTE, 856 S.W.2d at 731. A groundless
argue that the trial court abused its discretion by imposing      pleading is not sanctionable unless it also was brought in
sanctions under Rule 13 when the Kerneys' motion for              bad faith or for the purpose of harassment. Id. The trial
sanctions was brought under chapters 9 and 10 of the Civil        court must hold an evidentiary hearing to make the
Practice and Remedies Code. See Tex. Civ. Prac. & Rem.            necessary factual determinations about the party's or
Code Ann. §§ 9.011-.014, 10.001-.06 (Vernon 2002). We             attorney's motives and credibility. Alejandro v. Robstown
assume without deciding that the Kerneys' motion and              ISD, 131 S.W.3d 663, 670 (Tex. App.—Corpus Christi
counterclaim for sanctions is a sufficient basis for the          2004, no pet.). Without such an evidentiary hearing, the
imposition of Rule 13 sanctions.                                  trial court has no evidence before it to determine that a
                                                                  pleading was filed in bad faith or to harass. Id.;accord
     Rule 13 authorizes a trial court to impose sanctions         Karlock v. Schattman, 894 S.W.2d 517, 523 (Tex.
against an attorney, a represented party, or both, who file a     App.—Fort Worth 1994, orig. proceeding) (“Without
groundless pleading brought in bad faith or brought for the       hearing evidence on the circumstances surrounding the
purpose of harassment. Tex. R. Civ. P. 13. The rule defines       filing of the pleading signer's credibility and motives, a trial
“groundless” as having “no basis in law or fact and not           court has no evidence to determine that a pleading was filed
warranted by good faith argument for the extension,               in bad faith or to harass.”). The party moving for sanctions
modification, or reversal of existing law.” Id. In                must prove the pleading party's subjective state of mind:
determining whether sanctions are appropriate, the trial          bad faith does not exist when a party exercises bad
court must examine the facts available to the litigant and the    judgment or negligence; under Rule 13, bad faith exists
circumstances existing when the litigant filed the pleading.      only for the conscious doing of a wrong for dishonest,
Alejandro v. Bell, 84 S.W.3d 383, 392 (Tex. App.—Corpus           discriminatory, or malicious purposes. SeeMattly v. Spiegel,
Christi 2002, no pet.). The trial court uses an objective         Inc., 19 S.W.3d 890, 896 (Tex. App.—Houston [14th Dist.]
standard to determine if a pleading was groundless: did the       2002, no pet.). Improper motive is an essential element of
party and counsel make a reasonable inquiry into the legal        bad faith for purposes of imposing sanctions for groundless,
and factual basis of the claim? In re United Servs. Auto          bad-faith pleadings. Wallace v. Investment Advisors, Inc.,
Ass'n, 76 S.W.3d 112, 115 (Tex. App.—San Antonio 2002,            960 S.W.2d 885, 889 (Tex. App.—Texarkana 1997, pet.
orig. proceeding).                                                denied).

     Rule 13 also provides: “No sanctions under this rule               On the above three allegedly groundless allegations, the
may be imposed except for good cause, the particulars of          trial court did not make a particular finding of bad faith or
which must be stated in the sanction order.” Tex. R. Civ. P.      harassment. SeeMcCain v. NME Hosps., Inc., 856 S.W.2d
13. In reviewing an award of sanctions, we ordinarily look        751, 757 (Tex. App.—Dallas 1993, no writ) (“The trial
to the particulars of good cause set out in the sanction order.   court must find that the pleadings are in fact groundless and
Woodward v. Jaster, 933 S.W.2d 777, 782 (Tex.                     were brought in bad faith or to harass.”). The trial court's
App.—Austin 1996, no writ).                                       failure to make a particular finding on bad faith or
                                                                  harassment is an abuse of discretion. “Trial courts are not
    Analysis
                                                                  at liberty to ignore the clear and unambiguous language of
                                                                  this rule. When imposing Rule 13 sanctions, the trial court
     The trial court's judgment found that the following
                                                                  is required to make particularized findings of good cause
three allegations in the Brozynskis' original and amended
                                                                  justifying the sanctions. Failure to comply with this clear
petitions were “not warranted by existing law and not
                                                                  directive is an abuse of discretion.” Texas-Ohio Gas, Inc.
supported by any reasonable request for the extension,
modification, or reversal of existing law”: (1) the               v. Mecom, 28 S.W.3d 129, 135-36 (Tex. App.—Texarkana
                                                                  2000, no pet.).
contention—allegedly made by the Brozynskis—that the
Kerneys had a duty to secure the Brozynskis' permission to
                                                                       We recognize that Mecom also holds that failure to
erect the swing set on the Kerneys' property;[1] (2) the
                                                                  object to the form of the sanctions order results in the
Brozynskis' contention that the act of looking at adjacent
                                                                  forfeiture of an objection to the absence of a bad faith or
property with one's eyes is a physical entry or “airspace
                                                                  harassment finding.[2] See id. at 135. Other courts agree.[3]
invasion” sufficient to constitute trespass; (3) the
                                                                  We have found no Texas Supreme Court case addressing
Brozynskis' contention of an “airspace invasion” by the
                                                                  the issue.
use of household lighting is a trespass.
                                                                      Nevertheless, because Appellants may have waived
    Rule 13 directs a trial court to presume that a pleading
                                                                  that objection to the order, we focus on whether the
evidentiary record supports an implied finding of bad faith     moved out of state.
or harassment. See id. at 136; McCain, 856 S.W.2d at 757.
No evidence of Appellants' improper motive was adduced          6) Plaintiffs' filing of the First Amended Petition
at the hearing.[4] At the hearing, the Kerneys' attorney        complaining of a continual course of conduct and seeking
testified on the amount of attorney's fees incurred in          continuing damages from their next-door neighbor months
defending the suit. He also offered his opinion that the        after the Kerneys removed the swing set, sold their home,
Brozysnkis' pleadings were “groundless, filed in bad faith      and moved out of state constitutes a bad faith, if not outright
for the purpose of harassment,” but such conclusory             fraudulent, pleading filed with the Court.
opinion testimony is not evidence of Walker's or Kathy
Brozynski's motives or credibility. Walker was not present           As we note above, in filing their amended petition, the
at the hearing, and the Kerneys did not call Kathy (who         Brozynskis removed their claim for injunctive relief but
argued the motion for sanctions for Appellants) as a            added a claim for intentional infliction of emotional
witness. Evidence must be admitted under the rules of           distress. Again, we find that the trial court had no evidence
evidence at the evidentiary hearing for a trial court to        before it to determine Appellants' motives and credibility as
consider it in a Rule 13 context. Bell, 84 S.W.3d at 393; see   to these particular allegations.[5] Furthermore, Appellants'
McCain, 856 S.W.2d at 757 (motions and arguments of             failure to amend their petition to reflect that the situation
counsel are not evidence in a Rule 13 context). The             had changed and that they were no longer seeking future
pleading alone cannot establish that the represented party or   damages is only an inadvertent or negligent oversight in the
its attorney brought their case in bad faith or to harass.      pleading process. See Mattly, 19 S.W.3d at 896 (“bad faith
McCain, 856 S.W.2d at 757. And the Brozynskis' filing of a      does not exist when a party exercises bad judgment or
motion to dismiss (a nonsuit) is not, by itself, evidence of    negligence”). These particular pleading errors were
bad faith. See Mattly, 19 S.W.3d at 896-97.                     borderline trivial mistakes. The trial court abused its
                                                                discretion in finding these allegations to have been made in
     The trial court had no evidence before it to determine     bad faith.
Appellants' motives and credibility. Accordingly, we need
not address the groundlessness findings, and we hold that            Conclusion
the trial court abused its discretion in assessing Rule 13
                                                                    We sustain Appellants' sole issue. We reverse the trial
sanctions against Appellants on the above three allegations
                                                                court's judgment and render judgment that the Kerneys take
in the Brozynskis' petitions. See Alejandro, 131 S.W.3d at
                                                                nothing on their counterclaim and motion for sanctions.
670; Bell, 84 S.W.3d at 393; Karlock, 894 S.W.2d at
523-24; McCain, 856 S.W.2d at 757-58.
                                                                     Reversed and rendered
    The only other pleading that the trial court cited in the
                                                                     DISSENTING OPINION
sanctions judgment was the amended petition's allegations
of a continual course of conduct and continuing damages.             TOM GRAY, Chief Justice.
The trial court faulted these allegations because the
amended petition was filed after the play set had been               The complaints about frivolous lawsuits or lawsuits that
removed and after the Kerneys had moved. The trial court        include frivolous claims, bombard us through the media
found:                                                          and, as in this case, requests for sanctions. On more than
                                                                this occasion, this Court has reversed or refused to consider
4) On November 9, 2004, Plaintiffs' attorney/co-counsel         sanction awards for filing a frivolous case or claim.
Cornel W. Walker in a letter to the Court cancelling [sic]
the hearing on Plaintiffs' Request for Temporary Injunction          At this juncture, no useful purpose will be served by
acknowledged that the Defendants had removed the swing          picking apart the majority's recitation of the factual or legal
set.                                                            development of this appeal or their legal analysis. So I will
                                                                simply state that, based upon my review of the issues as
5) Plaintiffs' First Amended Original Petition seeking          presented challenging the trial court's judgment for
continuing damages “of $500.00 per month from October           sanctions, I do not find an abuse of discretion. I would
1, 2003 until the activity made the basis of this action        affirm the judgment for sanctions. Accordingly, I
ceases” for Trespass by “airspace invasion” caused by           respectfully dissent.
“children who are playing on the play set . . . (who) are
constantly screaming and trespassing by looking into the        ---------
Plaintiffs' entire back yard and especially the swimming
pool area . . .” was filed with the Court on March 3, 2005,     Notes:
a date well after the Plaintiffs were aware that the
Defendants had removed the swing set, sold their home and       [1] Specifically, the trial court found that “the Brozynskis
requested the Court to enter a Temporary Injunction              I think . . . the Motion for Sanctions is well-founded in this
requiring the removal of a swing set which Defendants            case. It's well-founded because the Plaintiffs' case has not
erected on Defendants' property on the grounds that the          stated a cause of action under Texas law. That's not to say
swing set was erected 'without the consent or permission of      that the problems that you felt you incurred living next door
Plaintiffs.' The contention that Defendants had a duty to        to the Kerneys, that's not a comment on the merits of how
secure Plaintiffs' permission to erect a swing set on            you felt or how you felt your privacy was invaded or how
Defendants' property is not warranted by existing law and        you felt it was living next to them.
not supported by any reasonable request for the extension,
modification, or reversal of existing law.” This part of the     [5] At the March 14 hearing, Kathy acknowledged to the
trial court's judgment misquotes and mischaracterizes the        trial court that the Brozynskis were seeking damages for
Brozynskis' allegations in several respects.                     only past conduct.

 First, nothing in the record refers to the play set as a mere   ---------
“swing set.” The petition refers to it as a “large wooden
play set.” Kathy's affidavit describes it as a “wooden
construction about 12 feet high . . . erected immediately
adjacent to our property fence, although Defendants had
considerable space to otherwise place this wooden
construction.” Second, the trial court's quotation from the
Brozynskis' petition ('without the consent or permission of
Plaintiffs') is inaccurate. The petition alleged: “Defendants
had not consulted with Plaintiffs nor had they asked for
permission to erect such construction knowing fully well
that the play set had been erected in violation of the
residential deed and to intentionally harass and disrupt
Plaintiffs' life.” The Brozyinskis did not allege that the
Kerneys had a duty to secure their permission to erect the
play set; they alleged (as explained in detail in Kathy's
affidavit) that the Kerneys had not received permission to
breach the subdivision's deed restrictions by building such a
large wooden structure. At the hearing, Appellants argued
that this allegation was that the Kerneys were required to
obtain the permission of the subdivision's architectural
guidelines committee. Finally, as part of the trespass claim,
the petition alleged that the play set's hooks had been
attached to the Brozynskis' fence and thus was an invasion
(i.e., without permission) of the Brozynskis' property, and
Kathy's affidavit described that damage that the play set's
hooks had caused to the Brozynskis' fence.

[2] We note that Rule 13 uses the obligatory term “must”
for the trial court's duty to state the good cause particulars
in the sanction order. See Tex. R. Civ. P. 13.

[3] Alexander v. Alexander, 956 S.W.2d 712, 714 (Tex.
App.—Houston [14th Dist.] 1997, pet. denied); Land v. AT
& S Transp., Inc., 947 S.W.2d 665, 667 (Tex. App.—Austin
1997, no writ); Campos v. Ysleta Gen. Hosp., Inc., 879
S.W.2d 67, 70 (Tex. App.—El Paso 1994, writ denied);
McCain v. NME Hosps., Inc., 856 S.W.2d 751, 755-56
(Tex. App.—Dallas 1993, no writ).

[4] During the hearing, the trial court appeared to believe
that the Brozynskis' motive was not one of bad faith or to
harass, stating to Kathy:
Page 10                                                   Page 19

118 S.W.3d 10 (Tex.App.—Houston [14th Dist.] 2003)        [Copyrighted Material Omitted]

Michael T. WILLIS, Francie Willis, Willis Hite            Page 20
Enterprises, Inc., and Urban Retreat of Houston, Inc.,
Appellants,                                               [Copyrighted Material Omitted]

v.                                                        Page 21

Dan DONNELLY, Appellee and Cross-Appellant,               [Copyrighted Material Omitted]

v.                                                        Page 22

Michael T. Willis, Cross-Appellee.                            Billy Shepherd, Houston, for appellants.

No. 14-00-00569-CV.                                           Jeff Nobles, Michael H. Norman, Houston, for
                                                          appellees.
Court of Appeals of Texas, Fourteenth District, Houston
                                                             Panel consists of Justices YATES, SEYMORE, and
June 19, 2003.                                            GUZMAN.

     Rehearing Oct. 30, 2003.                                 OPINION

Page 11                                                       CHARLES W. SEYMORE, Justice.

[Copyrighted Material Omitted]                                 This is a double appeal involving shareholders'
                                                          ownership of two closely held corporations, breach of
Page 12                                                   fiduciary duty, breach of contract, and attorney's fees.

[Copyrighted Material Omitted]                                 In the first appeal, consisting of 37 issues (some
                                                          overlapping and some containing numerous subparts),
Page 13                                                   Michael T. Willis, Francie Willis, Urban Retreat of
                                                          Houston, Inc., and Willis Hite Enterprises, Inc. seek
[Copyrighted Material Omitted]
                                                          reversal of a judgment awarding Dan Donnelly $1.7 million
Page 14                                                   for breach of contract, $1.7 million for breach of fiduciary
                                                          duty, and a constructive trust on Urban Retreat stock and
[Copyrighted Material Omitted]                            realty. First, we reverse and remand the breach of contract
                                                          claim as more specifically delineated in this opinion
Page 15                                                   because the trial court submitted an improper measure of
                                                          damages. Because liability was contested, we may not
[Copyrighted Material Omitted]                            reverse solely for a new trial on damages. Second, we
                                                          affirm the judgment for breach of fiduciary duty. However,
Page 16                                                   because the constructive trust partially provides a double
                                                          recovery for breach of fiduciary duty and partially secures
[Copyrighted Material Omitted]
                                                          damages for breach of contract, which we are reversing and
                                                          remanding, we remand for an election of remedies
Page 17
                                                          pertaining to breach of fiduciary duty and reverse that
[Copyrighted Material Omitted]                            portion of the constructive trust relating to breach of
                                                          contract.
Page 18
                                                                In the second appeal, Dan Donnelly contends that the
[Copyrighted Material Omitted]                            trial court erroneously awarded $400,000 in attorney's fees
                                                          in connection with his $26,982.58 default on a loan made to
                                                          him by Mike Willis. We reverse and remand for a
determination of properly segregated and reasonable                   However, Urban Retreat's costs were great, and the
attorney's fees incurred in prosecuting the defaulted loan.      construction expense had exceeded projections. Further,
                                                                 Willis and one other minimal shareholder had provided
     BACKGROUND                                                  only $1,000 as capital contribution. The $800,000
                                                                 construction loan was in URB's name, although Willis
     A. Urban Retreat                                            provided a $600,000 certificate of deposit as collateral.
                                                                 Additionally, although Willis personally transferred almost
     Urban Retreat, a Houston day spa, had its genesis in
                                                                 $297,000 to URB, he listed it as a loan instead of capital
1989 through the planning of its visionary, Mike Willis, a
                                                                 contribution. [2] Thus, just six weeks after its grand
Houston businessman. He and a hired consultant, Richard
                                                                 opening, URB was over $1,000,000 in debt.
Hite, located a site for the spa adjacent to an exclusive
neighborhood, negotiated a lease for the property, and                 Willis quickly recognized the need to "stop the
obtained a loan to renovate the facility. Willis also formed     bleeding." There is evidence that he proposed suspending
two corporations, Urban Retreat of Houston, Inc. (the day        Hite's $7,000 a month salary even before the grand opening.
spa, hereinafter "URB") and Willis Hite Enterprises, Inc.        He also considered transferring Hite's employment to WHE
(envisioned as a management business for a chain of spas,        instead of URB. In early 1990, Hite left Urban Retreat. [3]
hereinafter "WHE"). [1]                                          On January 1, 1990, just two weeks after the spa opening,
                                                                 the minimal shareholder transferred his 100 shares to
      Having created the shell of Urban Retreat, Willis
                                                                 Willis, leaving Willis the sole shareholder of URB's 1,000
needed only to find staff and clientele. To this end, Hite
                                                                 issued shares. [4] In April 1990, Willis hired a second
approached Dan Donnelly, a popular hairstylist and
                                                                 consultant as URB's "non-operating chief financial officer."
president of an established local salon. Willis and Hite
                                                                 Willis promised to sell this man 25% of URB stock for $1
suggested that Donnelly could transfer his clientele and
                                                                 after Willis's "capital investment" had been repaid.
staff to the soon-to-open day spa. Donnelly would manage
the spa, continue his hairstyling business, and strive to              Nonetheless, URB continued to lose money. Willis
increase business.                                               was thus faced with a financial quandary: he had personally
                                                                 guaranteed URB's $14,000 a month lease, pledged his
Page 23
                                                                 $600,000 CD as collateral for the construction loan, and
                                                                 invested $540,500 of cash by December 31, 1990. If URB
In exchange, if certain longevity or gross revenue goals
                                                                 did not meet its outside financial obligations, Willis would
were met, Donnelly would gain ownership in URB and
                                                                 personally lose a large amount of money. The Letter
WHE, an increase in salary, and a seat on WHE's board of
                                                                 Agreement with Donnelly added to the financial quagmire.
directors. Willis personally assured Donnelly that he would
                                                                 It prevented Willis from firing Donnelly within the first 12
provide the financial backing for the business.
                                                                 months of business, except for gross misconduct. It also
     Donnelly executed a Letter Agreement on July 10,
1989, which set forth the levels of URB and WHE stock            Page 24
ownership and salary he would attain over the years: (1)
                                                                 guaranteed Donnelly's stock ownership at the 12-month
25% URB stock and 10% of WHE stock after 12 months'
                                                                 mark because gross revenues were on track. After 12
employment or when the spa's gross revenues equaled those
                                                                 months, Willis could fire Donnelly and his shares would be
made in Donnelly's salon the prior year; (2) annual
                                                                 worthless under the Termination provision of the Letter
increases of URB stock, up to 50%, contingent on yearly
                                                                 Agreement. However, Donnelly was by far the greatest
half-million-dollar gains in gross revenues; (3) $110,000
                                                                 revenue producer in the spa.
salary for two years; and (4) five percent of gross revenues
as salary in year three and beyond. The Letter Agreement               In March 1991 (after Donnelly met revenue goals
also provided each shareholder the right of first refusal to     ensuring him 25% URB stock and 10% WHE stock), Willis
purchase another shareholder's stock. Further, it set forth      sought to change Donnelly's status. Willis was no longer
the value of Donnelly's shares should his employment             willing to provide 100% of the financing unless he was still
terminate: the greater of two times earnings in the prior year   "100% owner." He wanted Donnelly to "step up" and "act
or assets minus liabilities.                                     like an owner." Legal documents were prepared, but never
                                                                 signed, capping Donnelly's ownership at 25% of URB stock
     Donnelly transferred his profitable business to URB,
                                                                 and rescinding the Letter Agreement. Willis also wanted
bringing several hairstylists, manicurists, and other salon
                                                                 Donnelly to assume some of the debt, but Donnelly
personnel with him. URB held its grand opening in
                                                                 declined to do so.
mid-December 1989. The gross revenues soon surpassed
those of Donnelly's previous salon.                                  Certainly, it made good business sense for Willis to
minimize his potential losses and work towards                  Donnelly an additional $20,000. He rolled the previous note
profitability. However, Willis then continued to control        into the second, for a total principal of $31,183.70, at eight
Urban Retreat in disregard of Donnelly throughout the           percent annual interest, to be repaid from Donnelly's
years. He rationalized that Donnelly had relinquished           paychecks. The entire amount would become due if
ownership when he refused to "act like an owner." When          Donnelly's employment at URB terminated. After
Donnelly asked about stock issuance, Willis would assure        November 1994, Donnelly stopped paying the loan. Francie
him that he intended to live up to the Letter Agreement, but    sent him a demand letter, wishing him well in his new
asked to delay until the business "turned the corner." At the   endeavor and urging him to "honor the trust that Mike
same time, Willis continued to use URB as a                     [Willis] placed in you."
wholly-owned, sub-chapter S-corporation for tax benefits.
Willis also unilaterally cut Donnelly's salary [5] in March          C. The Lawsuit
1992, supposedly temporarily, and diminished his
management responsibilities. Willis continued to make                When Donnelly ignored Francie's demand letter, Willis
"loans" to URB although there is no evidence such loans         filed suit for the outstanding $26,982.58. Donnelly
were approved by the board of directors. [6]                    reciprocated by suing Willis, Francie, URB, and WHE for
                                                                breach of the Letter Agreement and breach of fiduciary
     Additionally, Willis controlled Urban Retreat through      duty, among other claims. The jury ultimately found that
his wife, Francie. He supposedly transferred all of his URB     URB and WHE breached the Letter Agreement; Willis and
stock to her. A "unanimous consent of the board" was            Francie ratified it; Donnelly was entitled to 50% of URB
prepared in March 1991, but never signed, reflecting URB's      stock and 10% of WHE stock; and that contract damages
permission for Francie to convey to Willis a beneficial         were $1.7 million. The jury further found that Willis had
interest in URB's option to buy its realty. Then, on July 30,   breached his fiduciary duty to Donnelly and that those
1992, Willis and Francie personally purchased the URB           damages were $1.7 million. The jury rejected limitations
realty for $1.6 million. On that day, Francie, acting as        questions for both issues. As for the loans to Donnelly, the
president, signed a waiver of URB's option. Included in the     jury found that he defaulted on the promissory note and
waiver was the statement that a "third party" wished to buy     owed $26,982.56 to Willis. Finally, the jury awarded both
the realty and that "said third party has required a release"   sides $400,000 in attorney's fees.
of URB's option. One week after closing, the Willises
amended URB's lease, increasing its total rent over the lease        Under the trial court's judgment, Donnelly was
term by $280,000. URB's monthly rent of $14,000 remained        awarded (1) $1.7 million for the fiduciary duty claim; (2)
the same, though the Willises' monthly note was then only       $1.7 million for the contract claim; (3) a constructive trust
$10,800. Further, in the new lease, the Willises obligated      on the Urban Retreat realty and on 50% of all URB stock
URB to pay the property taxes. Finally, in March 1993,          and 10% of all WHE stock possessed by the Willises or
Francie signed a promissory note on behalf of URB,              Urban Retreat; and (4) $400,000 in attorney's fees. The trial
documenting that it owed her husband $1,897,896 in loans.       court awarded Mike Willis (1) $26,982.56 for the
[7]                                                             promissory note and (2) $400,000 in attorney's fees.

     Over these years, Donnelly's personal hairstyling               BREACH OF CONTRACT
revenues had increased, as did the overall gross revenues of
                                                                     In nine of the Willises' issues and three of Urban
the spa. In fact, every revenue goal in the Letter Agreement
                                                                Retreat's issues, they attack the judgment against them for
was met. Each time he asked
                                                                breach of contract.
Page 25
                                                                     A. Breach of Contract Jury Findings
about his stock, Willis would assure Donnelly that he would
                                                                     In their first, second, and third issues, the Willises
live up to the agreement. Finally, in late November 1994,
                                                                argue that Donnelly waived breach of contract because he
Francie learned that Donnelly was helping a friend plan a
                                                                failed to request jury findings that Willis and Francie
new day spa. When she learned of this, she asked Donnelly
                                                                breached the Letter Agreement. However, whether a party
to leave Urban Retreat.
                                                                has breached a contract is a question of law for the court,
     B. Loans to Donnelly                                       not a question of fact for the jury. Meek v. Bishop, Peterson
                                                                & Sharp, P.C., 919 S.W.2d 805, 808 (Tex.App.-Houston
     In January 1992, Donnelly asked Willis to borrow           [14th Dist.] 1996, writ denied); Garza v. Southland Corp.,
$18,000. He signed a promissory note for that amount at         836 S.W.2d 214, 219 (Tex.App.-Houston [14th Dist.] 1992,
eight percent annual interest, to be repaid $500 a month        no writ). "The court determines what conduct is required by
from Donnelly's paychecks. On July 1, 1993, Willis loaned       the parties, and, insofar as a dispute exists concerning the
failure of a party to perform the contract, the court submits      conduct. K.B. v. N.B., 811 S.W.2d 634, 638 (Tex.App.-San
the disputed fact questions to the jury." Meek, 919 S.W.2d         Antonio 1991, writ denied); seeStable Energy, L.P. v.
at 808; seeITT Commercial Fin. Corp. v. Riehn, 796 S.W.2d          Newberry, 999 S.W.2d 538, 547 (Tex.App.-Austin 1999,
248, 253 n. 3 (Tex.App.-Dallas 1990, no writ). When facts          pet. denied) (ratification can occur if one affirmatively
are undisputed or conclusively established, there is no need       acknowledges a contract). Further, whether Hite was the
to submit those issues to the jury.                                Willises' authorized agent is of no consequence. SeeHays v.
                                                                   Marble, 213 S.W.2d 329, 333 (Tex.Civ.App.-Amarillo
Page 26                                                            1948, writ dism'd). "One may ratify the acts or contract of
                                                                   another ... whether the other was his agent and exceeded his
Sullivan v. Barnett, 471 S.W.2d 39, 44 (Tex.1971); Meek,           authority as such or was not his agent at all." Id. Thus, it is
919 S.W.2d at 808.                                                 the Willises' ratification of the contract that binds them to
                                                                   perform, not their signatures. We overrule the Willises'
      Here, the existence of the Letter Agreement was
                                                                   fourth and fifth issues.
undisputed; it was also undisputed that Donnelly never
received the benefits promised in the Letter Agreement. The             C. Ratification
issues that were disputed, such as whether Donnelly waived
enforcement of the contract (Question 6) and whether the                 In their sixth issue, the Willises contend that their
Willises ratified it (Question 10), were submitted to the          ratification of the contract is insufficient to support
jury. It is uncontroverted that the Willises failed to abide by    recovery for breach of contract. They again urge that a
the Letter Agreement. Thus, it was not necessary to submit         separate jury finding of breach is necessary. We have
the question about their breach to the jury, and Donnelly's        already overruled this contention in our disposition of
failure to request such a question does not result in waiver.      issues one through three.
Accordingly, we overrule the Willises' first three issues.
                                                                        Additionally, in a single sentence in issue six, the
     B. Signatories to the Contract                                Willises argue the evidence is legally and factually
                                                                   insufficient to show that they ratified or breached the Letter
     In their fourth and fifth issues, the Willises argue they     Agreement. Bare assertions of error, without citation to the
could not have breached the Letter Agreement because they          record, present
were not signatories to it. The parties listed in the Letter
Agreement were Willis, Hite, URB, WHE, and Donnelly. It            Page 27
was signed by Hite (individually and as president of WHE)
and Donnelly. Willis's signature line was crossed out.             nothing for review. TEX.R.APP. P. 38.1(h); Thedford v.
                                                                   Union Oil Co. of Ca., 3 S.W.3d 609, 615 (Tex.App.-Dallas
     The Willises contend their signatures or an authorized        1999, pet. denied). When a party fails to include citation of
agent's signature was required under the statute of frauds.        authority or discussion of relevant facts to support its
The statute of frauds provides:                                    sufficiency contention, we will not perform an independent
                                                                   review of the record and applicable law to determine
(a) A promise or agreement ... is not enforceable unless the       whether the error complained of occurred. Ryan v.
promise or agreement, or a memorandum of it, is                    Abdel-Salam, 39 S.W.3d 332, 336 (Tex.App.-Houston [1st
                                                                   Dist.] 2001, pet. denied). Thus, the Willises' sufficiency
(1) in writing; and
                                                                   challenge is waived. Further, their bald assertion of legally
(2) signed by the person to be charged with the promise or         insufficient evidence is readily defeated, given Mike
agreement or by someone lawfully authorized to sign for            Willis's own testimony that he intended to abide by the
him.                                                               Letter Agreement and their admission that Donnelly never
                                                                   received his stock.
TEX. BUS. & COM.CODE ANN. § 26.01(a)(2) (Vernon
2002). The Willises argue that they did not sign the contract           D. Waiver through Pre-Suit Conduct
nor is there evidence that Hite had authority to bind them.
                                                                        In the Willises' seventh issue and Urban Retreat's first
      In their argument, the Willises ignore the jury's finding    and third issues, appellants contend that, as a matter of law,
that they ratified the contract. Ratification is the adoption or   Donnelly waived breach of contract by his pre-suit conduct.
confirmation by a person with knowledge of all material            Waiver is an affirmative defense. TEX.R. CIV. P. 94;
facts of a prior act that did not then legally bind him and        Rogers v. Cont'l Airlines, Inc., 41 S.W.3d 196, 198
that he had the right to repudiate. Avary v. Bank of Am.,          (Tex.App.-Houston [14th Dist.] 2001, no pet.). "In Texas,
N.A., 72 S.W.3d 779, 788 (Tex.App.-Dallas 2002, pet.               waiver occurs when a party intentionally relinquishes a
denied). Such approval can be given through act, word, or          known right or engages in intentional conduct inconsistent
with claiming that right." Frost Nat'l Bank v. Burge, 29               Limitations is an affirmative defense, which the
S.W.3d 580, 592 (Tex.App.-Houston [14th Dist.] 2000, no          asserting party must prove. Woods v. William M. Mercer,
pet.) (citing Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d      Inc., 769 S.W.2d 515, 517 (Tex.1988). Generally, a cause
640, 643 (Tex.1996)). A party's express renunciation of a        of action accrues, and the statute of limitations begins to
known right may establish waiver. Id. It is well established     run, when facts come into existence that authorize a
that waiver turns on the question of intent. Ford v.             claimant to seek a judicial remedy. Johnson & Higgins of
Culbertson, 158 Tex. 124, 308 S.W.2d 855, 865 (1958).            Tex., Inc. v. Kenneco Energy, Inc., 962 S.W.2d 507, 514
Whether waiver has occurred is therefore ordinarily a            (Tex.1998). The time for accrual of a cause of action is a
question of fact for a jury to decide. Tenneco, 925 S.W.2d       question of law. Moreno v. Sterling Drug, Inc., 787 S.W.2d
at 643. In this case, the jury found in Question 6 that          348, 351 (Tex.1990). A breach of contract claim accrues
Donnelly had not waived breach of contract. [8]                  when the contract is breached. Stine v. Stewart, 80 S.W.3d
586, 592 (Tex.2002). Appellants argue that when they
      When an appellant attacks the legal sufficiency of an      failed to transfer the first 25% of stock in 1990, the contract
adverse answer to a finding on which it has the burden of        was breached and Donnelly's statute of limitations began to
proof, the appellant must overcome two hurdles. Victoria         run.
Bank & Trust Co. v. Brady, 811 S.W.2d 931, 940
(Tex.1991). First, the record must be examined for evidence           In contrast, Donnelly argues that his suit was timely,
that supports the finding, while ignoring all evidence to the    citing two cases with facts substantially similar to the facts
contrary. Second, if no evidence supports the fact finder's      in this case, Pickett v. Keene, 47 S.W.3d 67
answer, then the entire record must be examined to see if        (Tex.App.-Corpus Christi 2001, pet. dism'd), and
the contrary proposition is established as a matter of law.      Intermedics, Inc. v. Grady, 683 S.W.2d 842
Id.;Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690             (Tex.App.-Houston [1st Dist.] 1984, writ ref'd n.r.e.). Both
(Tex.1989).                                                      Pickett and Intermedics involved contracts in which
                                                                 portions of ownership in businesses were to be transferred
     There is evidence in the record supporting the jury's       to parties working for each business. In each case, deadlines
finding that Donnelly did not intentionally relinquish a         for such transfers were delayed by the parties. In each case,
known legal right. Donnelly testified, "Mr. Willis ...           the business ultimately tried to avoid transferring any
continually told me that ... once we turned the corner, you      portion of ownership and fired the worker. And in each
know, that he would at some point live up to the Letter          case, the business claimed on appeal that because breach
Agreement. But until that time, I had to live by whatever        had occurred with the first missed deadline many years
compensation changes were enacted by Mr. Willis."                before, the case was barred by the statute of limitations. In
According to Donnelly, Willis would tell him that he could       both cases, the appellate court held that the cause of action
"not issue stock at this time." Mike Willis's testimony          accrued at the employee's termination (when the employer
corroborates Donnelly's account. He stated that he merely        clearly repudiated the agreement to transfer ownership).
delayed issuing the stock and that had he been asked, he         Pickett, 47 S.W.3d at 77; Intermedics, 683 S.W.2d at 847.
would have complied with the Letter Agreement. Because
there is evidence supporting the jury's finding, we do not             In asserting the statute of limitations, appellants
review the record for evidence to the contrary. Accordingly,     disregard the undisputed evidence that deadlines were
we overrule                                                      postponed so the Willises could reap tax benefits and URB
                                                                 could "turn the corner." "Even when an exact date of
Page 28                                                          performance is specified in the contract, this provision can
                                                                 be waived by the parties." Sieber & Calicutt, Inc. v. La
the Willises' seventh issue and Urban Retreat's first and        Gloria Oil & Gas Co., 66 S.W.3d 340, 347 (Tex.App.-Tyler
third issues.                                                    2001, pet. denied); seeIntermedics, 683 S.W.2d at 846; see,
                                                                 e.g.,Pickett, 47 S.W.3d at 77. Further, an extension of time
     E. Statute of Limitations
                                                                 to perform can be express or implied and does not affect the
                                                                 other provisions of the contract. Intermedics, 683 S.W.2d at
     In the Willises' eighth issue and subpart (a) of Urban
                                                                 846. The evidence indicates that appellants intended to
Retreat's second issue, they contend that Donnelly's breach
                                                                 honor the agreement "at some point." Donnelly relied on
of contract claim is barred by the statute of limitations. A
breach of contract action is subject to a four-year statute of   Willis's assurances and accepted the delays. There was no
                                                                 clear intent by appellants to repudiate the Letter Agreement
limitations. TEX. CIV. PRAC. & REM.CODE ANN. §
                                                                 until Donnelly's termination. SeePickett, 47 S.W.3d at 77;
16.004 (Vernon 2002). Donnelly filed his lawsuit in August
1995. The jury found there was no failure to comply before       Intermedics, 683 S.W.2d at 847. Thus, the contract claim
August 24, 1991, making Donnelly's claim timely.                 did not accrue before August 24, 1991, and Donnelly's
                                                                 claims were timely asserted in August 1995. We overrule
                                                                 the Willises' issue eight and Urban Retreat's issue two,
subpart (a).                                                     denied) (emphasis added). Appellants' oral request is thus
                                                                 unsatisfactory. Further, the appellants filed a written request
Page 29                                                          for this question too late, after the jury returned its verdict.
                                                                 Waiting until after verdict to file a request for a
     F. Response to Jury Note                                    supplemental jury instruction is untimely. SeeScott Fetzer
                                                                 Co. v. Read, 945 S.W.2d 854, 871 (Tex.App.-Austin 1997),
     In the Willises' ninth issue and Urban Retreat's issue
                                                                 aff'd, 990 S.W.2d 732 (Tex.1999).
two, subpart (b), appellants contend the trial court
improperly responded to the following jury note about the             Additionally, appellants have not provided case law
statute of limitations:                                          that their proposed supplemental question was legally
                                                                 correct, while Question 7 was not. The statute of limitations
Does an answer of yes to question no. 7 [the statute of
                                                                 was their affirmative defense, and they voiced no objection
limitations question] indicate that the failure to comply
                                                                 to Question 7 during the charge conference. Lastly,
[with the Letter Agreement] happened before that date and
                                                                 appellants' argument about their proposed supplemental
excludes the possibility that it happened on or after that
                                                                 jury question simply reiterates their previous points of error,
date? [9]
                                                                 which
We find that appellants' complaint is waived because (1) the
                                                                 Page 30
record fails to sufficiently reflect (a) that a supplemental
instruction was given to the jury or (b) the contents of such    we have overruled, about accrual of a contract claim.
an instruction; and (2) appellants incorrectly and untimely
presented their requested supplemental instruction to the             For the above reasons, we overrule the Willises' issue
trial court.                                                     nine and Urban Retreat's issue two, subpart (b).

      To show error regarding a supplemental jury                     BREACH OF FIDUCIARY DUTY
instruction, the record must reflect the contents of the
instruction and that the instruction was given. Keene Corp.           The Willises' next ten issues address Mike Willis's
v. Gardner, 837 S.W.2d 224, 228-29 (Tex.App.-Dallas              breach of fiduciary duty.
1992, writ denied). In this case, neither the jury's note nor
the trial court's written response are included in the clerk's       A. Existence of Majority Shareholder/Minority
record. [10] Further, while the reporter's record repeats the    Shareholder Relationship
jury's question word-for-word, it does not contain the trial
court's supplemental instruction verbatim. The trial court's          In their tenth, eleventh, and twelfth issues, the Willises
response was apparently written, extensively discussed by        argue that there is no evidence of breach of fiduciary duty
the parties and the court, and altered throughout the            because, after October 1990, there was never a
discussion. However, the final wording of the response is        majority-minority shareholder relationship between Willis
not reflected in the reporter's record. Additionally, at the     and Donnelly. Specifically, Willis argues that Francie
end of discussion about the jury's note, the reporter's record   became sole shareholder of Urban Retreat in October 1990,
denotes only "jury deliberating," not whether an instruction     and thus he had no majority shareholder's duty after that
was actually delivered to the jury. See id. (holding court       time. Further, he argues that Donnelly was never a
reporter's notation that "whereupon the jury continued to        shareholder.
deliberate" was insufficient to show court delivered
                                                                       When a party without the burden of proof challenges
additional charge). Thus, there is an insufficient record
                                                                 the legal sufficiency of the evidence to support an adverse
showing either the contents of the supplemental instruction
                                                                 jury finding, we construe the issue as a "no evidence" point.
or that the instruction was given to the jury.
                                                                 SeeGooch v. Am. Sling Co., 902 S.W.2d 181, 183-84
     Next, appellants argue the trial court should have          (Tex.App.-Fort Worth 1995, no writ). In determining a "no
provided the supplemental question, "What is the earliest of     evidence" point, we are to consider only the evidence and
any breach you have found?" in response to the jury's note.      inferences that tend to support the finding and disregard all
However, appellants have waived error because they               evidence and inferences to the contrary. Catalina v. Blasdel,
requested this supplemental question orally during jury          881 S.W.2d 295, 297 (Tex.1994). If there is more than a
deliberations. "To complain of the trial court's omission of a   scintilla of such evidence to support the finding, the claim is
requested instruction on appeal, a party is obliged to make a    sufficient as a matter of law. Browning-Ferris, Inc. v.
written request to the trial court for a substantially correct   Reyna, 865 S.W.2d 925, 928 (Tex.1993).
instruction." Jarrin v. Sam White Oldsmobile Co., 929
                                                                      The record includes evidence that Willis transferred
S.W.2d 21, 25 (Tex.App.-Houston [1st Dist.] 1996, writ
                                                                 stock to Francie as late as October or November 1991.
Additionally, Francie testified that a magazine article in        (Tex.App.-Houston [1st Dist.] 1996, no writ).
January 1991 identified her husband and Donnelly as the
owners of Urban Retreat. This article was written                       In this case, breach of contract arose from failure to
approximately one month after the Letter Agreement                transfer shares to Donnelly and failure to compensate him at
contemplated transfer of 25% of URB stock and 10% WHE             the rate set forth in the Letter Agreement. Donnelly alleged
stock to Donnelly. Further, shortly after March 1991, she         that breach of fiduciary duty arose from Willis's (1)
was privy to a meeting between her husband and Donnelly           purchase of the URB realty; (2) lease of the realty to URB
in which Willis asked Donnelly to cap his ownership               for the total debt on the property; (3) treatment of capital
interest in URB at 25%. This is more than a scintilla of          contributions as loans; (4) representation that Urban Retreat
evidence showing that both Donnelly and Willis were               was worthless; and (5) personal use of Urban Retreat's tax
shareholders in Urban Retreat after October 1990.                 benefits. The damages for breach of contract, more fully
Accordingly, we overrule issues ten, eleven, and twelve.          addressed below, were the unpaid compensation and fair
                                                                  market value of the Urban Retreat stock. In contrast, the
     B. Claim Sounds in Contract Only                             damages for breach of fiduciary duty involved the value of
                                                                  the realty and the benefits personally taken by Willis. Thus,
     In issue 13, the Willises contend that a party cannot        Donnelly's injuries did not arise solely from breach of the
claim breach of fiduciary duty when the only alleged              Letter Agreement. Accordingly, we do not agree that the
damages are the subject of a contract. The Willises argue         damages sought were solely contract damages. We overrule
that Donnelly's only alleged damages arise from breach of         issue thirteen.
the Letter Agreement; thus, the claim sounds only in
contract. SeeSouthwestern Bell Tel. v. DeLanney, 809                   C. Existence of Fiduciary Relationship
S.W.2d 493, 494 (Tex.1991). It is often difficult to
determine whether a party's cause of actions sound in                   In their fourteenth issue, the Willises contend the trial
contract or tort or both--i.e., a "contort." Ludlow v.            court erred in finding that a fiduciary relationship existed
DeBerry, 959 S.W.2d 265, 275 (Tex.App.-Houston [14th              between Willis and Donnelly and in instructing the jury that
Dist.] 1998, no pet.); seeJim Walter Homes, Inc. v. Reed,         such a relationship existed. [11] Whether a fiduciary
711 S.W.2d 617, 617 (Tex.1986). A two-part test, set forth        relationship exists is normally a question of fact for the
in DeLanney, guides this determination. 809 S.W.2d at             jury. Procom Energy, L.L.A. v. Roach, 16 S.W.3d 377, 382
494-95.                                                           (Tex.App.-Tyler 2000, pet. denied); Hoggett v. Brown, 971
S.W.2d 472, 488 (Tex.App.-Houston [14th Dist.] 1997, pet.
     First, we look to the source of the duty to act. Id. at      denied); Farah, 927 S.W.2d at 675. "When the issue is one
494. If the conduct in question gives rise to liability only      of no evidence or conclusive evidence, the issue is a
because it breaches an agreement between the parties, the         question of law." Farah, 927 S.W.2d at 675. Here, the
claim ordinarily sounds in contract. Id. In this first step, we   Willises contend that there was no evidence of a fiduciary
"must look to the substance of the cause of action and not        relationship or, conversely, the evidence conclusively
necessarily the manner in which it was pleaded." Reed, 711        shows no fiduciary relationship exists.
S.W.2d at 617-18.
                                                                        "[A] co-shareholder in a closely held corporation does
Page 31                                                           not as a matter of law owe a fiduciary duty to his
                                                                  co-shareholder." Hoggett, 971 S.W.2d at 488. Instead, the
Second, we consider the nature of the remedy or damages           existence of such a duty depends on the circumstances.
sought by the claimant. DeLanney, 809 S.W.2d at 494. "The         Pabich v. Kellar, 71 S.W.3d 500, 504-05 (Tex.App.-Fort
nature of the injury most often determines which duty or          Worth 2002, pet. denied). For example, a fiduciary duty
duties are breached. When the injury is only the economic         exists if a confidential or "informal" relationship exists. Id.
loss to the subject of a contract itself, the action sounds in    at 505; In re Estate of Fawcett, 55 S.W.3d 214, 220
contract alone." Reed, 711 S.W.2d at 618.                         (Tex.App.-Eastland 2001, pet. denied). Further, fiduciary
                                                                  relationships may be created by contract; through the
      Additionally, the contract between the parties may          repurchase of a shareholder's stock in a closely held
create both contract and tort duties. Id.; seeDeLanney, 809       corporation, seeFawcett, 55 S.W.3d at 220; in
S.W.2d at 494 n. 1 ("[S]ome contracts involve special
relationships that may give rise to duties enforceable as         Page 32
torts...."). "[A] plaintiff is not precluded from asserting a
tort cause of action solely because his damages are               certain circumstances in which a majority shareholder in a
analogous to the damages sought in a contractual claim."          closely held corporation dominates control over the
Farah v. Mafrige & Kormanik, P.C., 927 S.W.2d 663, 674            business, Hoggett, 971 S.W.2d at 488 n. 13; and in closely
                                                                  held corporations in which the shareholders "operate more
as partners than in strict compliance with the corporate        extend this opportunity to Donnelly. SeeThompson v.
form." DeBord v. Circle Y of Yoakum, Inc., 951 S.W.2d           Hambrick, 508 S.W.2d 949, 951-54 (Tex.Civ.App.-Dallas
127, 133 (Tex.App.-Corpus Christi 1997), rev'd on other         1974, writ ref'd n.r.e.) (fact issue whether majority
grounds, 967 S.W.2d 352 (Tex.1998).                             shareholder's sale of shares without offering right of first
                                                                refusal to minority shareholder was a breach of fiduciary
      We disagree that there was no evidence of, or             duty). Further, Willis unilaterally cut Donnelly's salary and
alternatively evidence conclusively disproving, a fiduciary     tried to cap his ownership interest, after delaying issuance
relationship. There is evidence tending to show that Mike       of his stock. Willis's own discovery answers reveal that he
Willis engaged in oppressive conduct [12] and dominated         decided Donnelly was not acting like an owner, and he
control over the business. SeeHoggett, 971 S.W.2d at 488 n.     justified treating him like a nonowner for that reason.
13. For instance, Willis alone reaped personal tax              SeeDavis v. Sheerin, 754 S.W.2d 375, 382
advantages by treating URB as a wholly-owned business.          (Tex.App.-Houston [1st Dist.] 1988, writ denied)
Willis, not Urban Retreat or the board of directors, hired a    (conspiring to deprive one of ownership in a corporation is
new CEO and promised him ownership in URB if Willis's           oppressive conduct). Finally, case law indicates Willis
capital investment was repaid. Further, the evidence shows      would owe a fiduciary duty to Donnelly in repurchasing his
that although Willis promised to provide cash capital           shares. SeeFawcett, 55 S.W.3d at 219-20.
contributions, he continually treated all but $1,000 of such
contributions over the years as loans. There is evidence that         These examples defeat the Willises' argument that only
Willis's promises to provide capital were inducements to        legal absolutes existed, i.e., no evidence supported the
Donnelly to join the business. SeeWillis, 997 S.W.2d at 801     existence of a fiduciary relationship or that they
(defining oppressive conduct as that which defeats the          conclusively disproved the existence of a fiduciary
minority shareholder's expectations that were reasonable        relationship. [15]
and central to the decision to join the venture). The
evidence shows that Willis kept Urban Retreat thinly                 Lastly, the Willises contend because it is a question of
capitalized and thus limited its on-going ability to operate.   fact, the trial court erred in instructing the jury that a
And, if debts always surpassed income and assets,               fiduciary relationship existed. [16] However, the Willises
Donnelly's shares would be worth little to nothing under the    failed to object to Question 22 in the charge on this basis.
Termination provision of the Letter Agreement (defining         [17] Instead, they objected as follows:
share value as the greater of two times prior year's earnings
or assets minus liabilities).                                   Plaintiffs would object to Question No. 22 in that there is
                                                                no evidence to support submission of the issue.
     Further, after Willis could not convince Donnelly to
cap his ownership interest, he found a way to purchase the      Plaintiffs object to the submission of Question No. 22
spa realty for himself. First, a corporate document was         because as a matter of law, Mike Willis owes no fiduciary
prepared allowing Francie to assign Willis an interest in the   duty to Dan Donnelly.
spa's option. Later, he bought the realty, having Francie
                                                                Page 34
waive URB's option the day of closing. Although URB
supposedly could not afford to buy the realty, the Willises     These objections were insufficient to alert the trial court
then charged the total debt to URB through rent. [13] By        that existence of a fiduciary relationship was a fact question
purchasing the realty, Willis also ensured that Donnelly's      for the jury. SeeState Dept. of Highways & Pub. Transp. v.
stock value decreased under the Letter Agreement. [14]
                                                                Payne, 838 S.W.2d 235, 241 (Tex.1992) (test is whether the
These could be construed as purposeful actions to dilute the    party made the trial court aware of the complaint, timely
value of shares while employing the business and its assets     and plainly, and obtained a ruling); see, e.g.,McAllister v.
solely for Willis's own benefit. See generallyDuncan v.
                                                                Oman, 2001 WL 870037, at *1 (Tex.App.-Houston [14th
Lichtenberger, 671 S.W.2d 948, 953 (Tex.App.-Fort Worth         Dist.] Aug. 2, 2001, no pet.) (not designated for
1984, writ ref'd n.r.e.) (citing Patton v. Nicholas, 154 Tex.   publication). Instead, the objections raise "no evidence" and
385, 279 S.W.2d 848 (1955), regarding lowering of               "conclusive evidence," which we rejected above. To
minority's share value).                                        preserve error, the Willises were required to object that the
                                                                question was omitted. See TEX.R. CIV. P. 278. The record
Page 33
                                                                is devoid of the slightest indication from the Willises that
     Additionally, the evidence shows that Willis               existence of a fiduciary relationship was a jury question.
transferred all the URB stock to Francie as late as             Thus, the trial court's error, if any, is not a ground for
November 1991. By that time, Donnelly was a minority            reversal in this case. See id.
owner in the business, and he had a right of first refusal to
                                                                     Accordingly, we overrule issue 14.
purchase the shares per the Letter Agreement. Willis did not
     D. Failure to Obtain Findings                               error. Further, we disagreed with the Willises' two
                                                                 contentions that (1) there was "no evidence" of a fiduciary
     In their fifteenth issue, the Willises argue that           relationship; or (2) they conclusively proved the
Donnelly failed to obtain a jury finding on the existence of     nonexistence of such a relationship. We believe the
a fiduciary relationship. As we addressed in regard to issue     evidence raised a fact issue on the existence of a fiduciary
14, the Willises did not preserve error to complain about the    relationship between Willis and Donnelly, individually.
lack of a jury finding. In their sixteenth issue, the Willises
contend that Donnelly "failed to secure a finding as to               Accordingly, we overrule issue 18.
ownership of any shares." This point of error is vague, and
the Willises offer no argument, citation to the record, nor          G. Statute of Limitations on Breach of Fiduciary
authority in support of it. They have waived this issue.         Duty
Thedford, 3 S.W.3d at 615; Casteel-Diebolt v. Diebolt, 912
S.W.2d 302, 304-05 (Tex.App.-Houston [14th Dist.] 1995,                In their nineteenth issue, the Willises contend that
no writ) (an issue not supported by authority is waived).        Donnelly's claim for breach of fiduciary duty is barred by
Accordingly, we overrule issues 15 and 16.                       the statute of limitations. There is a four-year statute of
                                                                 limitations for breach of fiduciary duty. TEX. CIV. PRAC.
     E. Burden of Proof                                          & REM.CODE ANN. § 16.004 (Vernon 2002). The
                                                                 Willises argue that the only alleged breach of fiduciary duty
      In issue 17, the Willises complain that the trial court    was Willis's failure to disclose information before Donnelly
improperly placed the burden of proof for breach of              executed the Letter Agreement on July 10, 1989. Donnelly
fiduciary duty on Mike Willis. The Willises argue that           did not sue until August 25, 1995, more than four years
before the burden of proof could be placed on Mike Willis,       later.
Donnelly was first required to establish the existence of a
fiduciary relationship. This argument is an attempt to                 However, Donnelly's petition also alleged Mike
circumvent the Willises' failure to object or to request the     Willis's self-dealing, treating capital contributions as loans,
missing jury question on the existence of a fiduciary            failing to keep proper and accurate financial records, and
relationship. Further, the profiting fiduciary has the burden    improperly transferring stock to Francie. Evidence shows
to prove questioned transactions were "fair, honest, and         that (1) Francie received 100% of the URB shares as late as
equitable." Estate of Townes v. Townes, 867 S.W.2d 414,          October or November 1991; (2) Mike Willis made
417 (Tex.App.-Houston [14th Dist.] 1993, writ denied);           numerous "loans" to URB after August 1991; and (3) Mike
Miller v. Miller, 700 S.W.2d 941, 947 (Tex.App.-Dallas           and Francie bought the URB property and waived the spa's
1985, writ ref'd n.r.e.); seeTex. Bank & Trust Co. v. Moore,     option to purchase it in July 1992. Because these alleged
595 S.W.2d 502, 508-09 (Tex.1980). The trial court did not       breaches of fiduciary duty occurred within four years of
misplace the burden of proof. We overrule issue seventeen.       suit, Donnelly's claims are not barred by the statute of
                                                                 limitations. We overrule issue nineteen.
     F. Standing to Sue
                                                                      CONSTRUCTIVE TRUST
     In issue 18, the Willises argue that Donnelly was
required to bring a shareholder's derivative suit to assert            In their twentieth, twenty-first, and twenty-second
claims on behalf of the corporation for breaches of fiduciary    issues, the Willises contend that the trial court erroneously
duty. However, from our review of Donnelly's pleadings,          imposed a constructive trust on the URB realty, 50% of
we conclude that he did not sue on behalf of the                 URB stock and 10% of WHE stock because (1) a fiduciary
corporation. He only sued in an individual capacity.             relationship did not exist or did not exist apart from the
                                                                 dealings made the basis of the lawsuit; (2) no fraud was
     To the extent the Willises are actually arguing that no     established; (3) no pleadings support imposition of
fiduciary duties flowed to Donnelly individually, we refer       equitable relief; (4) there was no commingling; (5)
to our analysis of issue fourteen. As discussed, there are       equitable relief is improper to enforce contractual
instances in Texas law in which shareholders in closely held     obligations and where the plaintiff gave services; (6)
corporations owe other shareholders fiduciary duties. As we      post-verdict evidence was improperly admitted; (7)
acknowledged in discussing issue fourteen, the existence of      imposition of the constructive trust violates their right to
such a fiduciary relationship is a question of fact for the      trial by jury and due process; (8) there was no evidence,
jury. As we further held, the Willises cannot complain on        insufficient evidence, and no finding upon which to impose
appeal about the absence of a jury finding because they          a constructive trust; (9) constructive trusts should not be
failed to preserve                                               imposed where money damages are available; and (10) a
                                                                 constructive trust is improper because Donnelly had
Page 35                                                          unclean hands. In issues five, six, and seven, Urban Retreat
argues many of these same subissues and also claims that          closely held corporation wrongly sold corporate assets and
laches prevent imposition of the constructive trust.              mingled proceeds with his own assets); Andrews v. Estate of
                                                                  Andrews, 326 S.W.2d 203, 207 (Tex.Civ.App.-Waco 1971,
     A. Error in Imposing Constructive Trust                      no writ) (plaintiffs sought percentage of deceased's estate
                                                                  on theory that farm income from their land had been
     We address the first eight subissues, which constitute       commingled with the estate). However, neither case stands
the Willises' issue 20 and Urban Retreat's issue five and         for the proposition that commingling is a prerequisite for
portions of issue six. [18]                                       imposition of a constructive trust. Further, commingling
                                                                  was not an issue at trial in this case. Appellants' argument is
      Again, appellants contend no fiduciary relationship
                                                                  thus inapposite.
existed. Accordingly, we refer to our disposition of issue
14. Second, appellants argue that fraud must be shown                   Fifth, appellants argue that a constructive trust was
before a constructive trust is imposed. However, "[a]ctual        improper (1) to enforce contract rights and (2) because
fraud, as well as breach of a confidential relationship,          Donnelly "parted with services, not property," and the
justifies the imposition of a constructive                        proper remedy for services is payment. As detailed later in
                                                                  this opinion, we are reversing the contract claim because the
Page 36
                                                                  jury considered the wrong measure of damages. Thus, we
                                                                  are also reversing the portion of the constructive trust that
trust." Meadows v. Bierschwale, 516 S.W.2d 125, 128
                                                                  addressed Donnelly's contract remedies. Additionally, we
(Tex.1974); seeGaines v. Hamman, 163 Tex. 618, 358
                                                                  have already held that Donnelly sought damages for breach
S.W.2d 557, 560 (1962); Omohundro v. Matthews, 161
                                                                  of fiduciary duty different from and in addition to those for
Tex. 367, 341 S.W.2d 401, 405 (1960); see alsoDuncan v.
                                                                  breach of contract. Further, a constructive trust has a "very
Lichtenberger, 671 S.W.2d 948, 952, 954 (Tex.App.-Fort
                                                                  broad function of redressing wrong or unjust enrichment in
Worth 1984, writ ref'd n.r.e.) (stating fraud is not required
                                                                  keeping with the basic principles of equity and justice."
for breach of fiduciary duty; equitable relief is available for
such breach).                                                     Ginther v. Taub, 675 S.W.2d 724, 728 (Tex.1984). To
                                                                  disallow a constructive trust because a party renders
      Third, appellants contend that there are no pleadings to    services only is "an unduly restrictive view of the remedy of
justify imposition of the constructive trust on the realty.       constructive trust." Meadows, 516 S.W.2d at 131. We
They do not cite any authority for the proposition that           overrule this subissue.
Donnelly, in seeking a constructive trust, must plead the
specific property to which it should attach. In his petition,          Sixth, appellants protest that the trial court improperly
                                                                  admitted evidence post-verdict, specifically the affidavit of
Donnelly sought a constructive trust because the Willises
had been unjustly enriched by retaining all the Urban             Sal Rodriguez, which was attached to Donnelly's
Retreat stock. His pleadings for a constructive trust also
                                                                  Page 37
refer to and incorporate pleadings about Willis's
self-dealing, false characterization of capital, complete         supplemental motion to enter judgment. Donnelly attached
control of the business, and inaccurate record keeping.           the affidavit as support for his post-verdict request to order
Further, Donnelly generally sought "all such other damages        amended URB tax returns. Appellants objected to the
as [he] may be justly entitled," and all "relief, at law or in    affidavit, but there is no ruling in the record as required by
equity[,] to which [he] is justly entitled." The appellants did   Rule of Appellate Procedure 33.1(a)(2). Further, the record
not specially except to the pleadings for equitable relief.       does not reflect whether the trial court actually considered
"When a party fails to specially except, courts should            the affidavit. To the contrary, the trial court did not order
construe the pleadings liberally in favor of the pleader."        amendments to the tax return. We thus overrule this
Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887,              subissue.
897 (Tex.2000). We hold that Donnelly's pleadings are
sufficient to support a claim for equitable relief, justifying          Seventh, appellants contend that imposition of the
the court's imposition of a constructive trust. Accordingly,      constructive trust violates their right to due process and trial
we overrule this subissue.                                        by jury. Specifically, they complain that the trial court
                                                                  entered judgment on claims neither pleaded nor submitted
     Fourth, appellants argue that a constructive trust was       to the jury. We have already addressed these claims as
improper because the URB realty was never commingled              follows: (1) we found Donnelly's pleadings for equitable
with Urban Retreat stock. The cases appellants cite show          relief sufficient for imposition of a constructive trust and (2)
that a constructive trust is proper when a fiduciary              we also found that appellants failed to preserve error that
commingles assets. SeeGraham v. Turner, 472 S.W.2d 831,           the existence of a fiduciary relationship was a fact question
840 (Tex.Civ.App.-Waco 1971, no writ) (shareholder in             for the jury. The jury's finding of breach of fiduciary duty
permits imposition of a constructive trust. SeeCarr v. Weiss,    relation."). The trial court was not precluded from imposing
984 S.W.2d 753, 767 (Tex.App.-Amarillo 1999, pet.                a constructive trust. Accordingly, we overrule the Willises'
denied).                                                         issue 21 and Urban Retreat's issue seven.

      Eighth, the Willises contend in one sentence, without           C. Unclean Hands
citation to the record or to authority, that "there was no
evidence, no legally sufficient evidence, no factually                 In the Willises' issue 22 [20] and the second portion of
sufficient evidence, and no finding of any basis upon which      Urban Retreat's issue six, appellants argue that Donnelly's
to impose a constructive trust on the stock or real property."   claims for equitable relief are barred by the doctrine of
In the context of the Willises' issue 20, this one sentence is   unclean hands. One who seeks a constructive trust must
merely a catch-all included at the end of briefing               come with clean hands regarding the issue in dispute.
four-and-one-half pages long. Because it is multifarious,        SeeOmohundro, 341 S.W.2d at 410; see alsoWynne v.
lacking in substantive analysis, and devoid of citation to       Fischer, 809 S.W.2d 264, 267 (Tex.App.-Dallas 1991, writ
authority and the record, they have waived this eighth           denied). It is within a trial court's sound discretion to
subissue. SeeRyan v. Abdel-Salam, 39 S.W.3d 332, 336             determine whether a party has unclean hands and whether
(Tex.App.-Houston [1st Dist.] 2001, pet. denied); Interstate     the party's alleged fraudulent actions should bar equitable
Northborough P'ship, 8 S.W.3d at 7 n. 2; Keever v. Finlan,       relief. Thomas v. McNair, 882 S.W.2d 870, 880
988 S.W.2d 300, 314 (Tex.App.-Dallas 1999, pet. dism'd).         (Tex.App.-Corpus Christi 1994, no writ).

      Accordingly, having addressed these eight subissues,             Appellants contend Donnelly's hands are unclean
we overrule the Willises' issue 20, Urban Retreat's issue        because he breached his contract with them. Specifically,
five, and the first portion of Urban Retreat's issue six.        they contend he failed to bring his entire former staff to
                                                                 Urban Retreat, produced less revenue than promised, and
     B. Money Damages Available                                  attempted to establish a competing business. [21] However,
                                                                 breach of contract is an issue separate from breach of
     We next address the ninth subissue, which comprises         fiduciary duty. To bar equitable relief, a plaintiff's
the Willises' twenty-first issue and Urban Retreat's seventh     inequitable conduct should arise with regard to the issue in
issue. Appellants contend that the trial court erred in          dispute. Wynne, 809 S.W.2d at 267. Further, a party
awarding equitable relief because Donnelly failed to             complaining of an opponent's unclean hands " 'must show
establish that he lacked an adequate remedy at law. In other     that he himself has been injured by such conduct to justify
words, appellants claim that where money damages are             the application of the principle to the case.' " Omohundro,
available, a constructive trust may not be imposed. [19] 341 S.W.2d at 410 (quoting 2 Pomeroy's Equity
                                                                 Jurisprudence at 99); seeThomas, 882 S.W.2d at 880; see
      The thrust of appellants' argument is that (1) a           alsoNorris of Houston, Inc. v. Gafas, 562 S.W.2d 894, 897
constructive trust is an equitable remedy; (2) equitable         (Tex.Civ.App.-Houston [1st Dist.] 1978, writ ref'd n.r.e.)
remedies such as injunctions and specific performance            (hairstylist claimed salon sought equity with unclean hands,
require a lack of an adequate remedy at law; (3) thus, an        but she failed to show harm). Even if we assume Donnelly
inadequate remedy at law is a prerequisite to imposition of      breached his contract, appellants have neither argued nor
a constructive trust; (4) money damages are available to         shown they were harmed. For instance, they do not set forth
compensate any breach of fiduciary duty in this case; and        the difference in revenue promised by Donnelly versus
(5) Donnelly is accordingly not entitled to a constructive       revenue earned, nor do they show that Urban Retreat's
trust. However, the forms of constructive trusts are             revenue suffered because of Donnelly's assistance in
"practically without limit" and may be "applied wherever         creating a competing salon.
necessary for the obtaining of complete justice, although
the law may also give the remedy of damages against the               Because (1) Donnelly's alleged unclean hands involve
wrong-doer." Fitz-Gerald v. Hull, 150 Tex. 39, 237 S.W.2d        contract--a separate issue--and (2) appellants have not
256, 263 (1951) (emphasis added); Wheeler v. Blacklands          shown harm, the trial court did not abuse its discretion in
Prod. Credit Ass'n., 627 S.W.2d 846, 849 (Tex.App.-Fort          disregarding appellants' argument of "unclean hands."
Worth 1982, no writ); cf. RESTATEMENT OF                         Accordingly, we overrule issue 22 and the second portion
RESTITUTION                                                      of Urban Retreat's issue six.

Page 38                                                               D. Laches

§ 160 cmt. e (1937) (constructive trust appropriate for cases        In the remainder of issue six, Urban Retreat argues that
involving title to land or where "payment or transfer was        Donnelly's claim for equitable relief is barred by laches.
procured by an abuse of a fiduciary or confidential              There are two essential elements of laches: "(1)
unreasonable delay by one having legal or equitable rights        determining what sum would compensate the injured
in asserting them; and (2) a good faith change of position by     party." Allied Vista, Inc. v. Holt, 987 S.W.2d 138, 141
another to his detriment because                                  (Tex.App.-Houston [14th Dist.] 1999, pet. denied). The
                                                                  proper measure of damages is a question of law. Id. In the
Page 39                                                           jury charge, the trial court instructed the jury to measure the
                                                                  value of Donnelly's shares under a provision in the Letter
of the delay." Rogers v. Ricane Enter., Inc., 772 S.W.2d 76,      Agreement entitled "Other Matters Relating to Shares." The
80 (Tex.1989). Extraordinary circumstances, which would           Letter Agreement contains two provisions about share
work a grave injustice, must exist before laches bars a suit      valuation, one under the heading "Termination" and the
filed within the limitations period. Caldwell v. Barnes, 975      other under "Other Matters Relating to Shares." The
S.W.2d 535, 538 (Tex.1998).                                       "Termination" provision requires Donnelly to sell his shares
                                                                  back if his employment terminates after 12 months. [22]
      Urban Retreat argues that it has been prejudiced
                                                                  Under the
because memories have faded over time. However, fading
memory "is one of the policy reasons behind the statute of        Page 40
limitations." Wakefield v. Bevly, 704 S.W.2d 339, 345
(Tex.App.-Corpus Christi 1985, no writ). Faded memory             "Termination" provision, share value equals the greater of
does not establish laches in a suit filed before the statute of   (a) assets minus liabilities or (b) two times previous year's
limitations has expired. Id. The case cited by Urban Retreat,     earnings. Using this provision, Donnelly's shares are
Fazakerly v. Fazakerly, 996 S.W.2d 260, 265                       valueless because Urban Retreat's liabilities and costs have
(Tex.App.-Eastland 1999, pet. denied), is distinguishable. It     always outstripped its tangible assets and revenue.
involved a daughter's challenge to her father and                 Appellants urge that this provision should be used as the
stepmother's antenuptial agreement after expiration of the        measure of damages because Donnelly was terminated.
statute of limitations; 25 years after the agreement was
signed; eight years after the father's death; and after the            In contrast, the shares have value if the provision in
stepmother became incapacitated by Alzheimer's. In                "Other Matters Relating to Shares" applies. Under that
contrast, in this case, the statute of limitations did not        provision, share value equals the market value of the real
expire, and the essential parties are alive and competent.        estate plus the previous 12 months' gross revenue. [23]
Further, Urban Retreat has not identified its good faith but      Thus, Urban Retreat's debts would not be considered.
detrimental change in position due to Donnelly's delay in         However, the plain language of the Letter Agreement
filing suit. SeeRogers, 772 S.W.2d at 80. For these two           reveals that "Other Matters Related to Shares" is activated
reasons, we overrule Urban Retreat's assertion of laches.         only in two situations: (1) when a shareholder exercises a
We overrule Urban Retreat's issue six.                            right of first refusal and (2) in an exchange of stock if
                                                                  multiple "Urban Retreat companies" combine.
     DAMAGES
                                                                        The parties simply disagree regarding which of the two
     In their twenty-third, twenty-fourth, and twenty-fifth       provisions should be used to value the shares. However,
issues, the Willises contend that the trial court improperly      neither of the two is a liquidated damages provision
instructed the jury about the measure of damages for breach       applicable in the event of breach of contract. SeeLafarge
of contract and breach of fiduciary duty and improperly           Corp. v. Wolff, Inc., 977 S.W.2d 181, 188 n. 13
"stacked" the damages, which permitted a triple recovery.         (Tex.App.-Austin 1998, pet. denied). Although parties may
Urban Retreat urges these same issues in points of error          stipulate the amount of damages to be recovered in the
eight, nine, and ten.                                             event of breach of contract, "[s]uch an agreement ... must be
                                                                  expressed, and in the absence of an express agreement for
     A. Breach of Contract Damages                                liquidated damages the court will not make one for the
                                                                  parties." Id.; see alsoNewsom v. State, 922 S.W.2d 274, 281
     First, appellants argue that the trial court submitted the
                                                                  (Tex.App.-Austin 1996, writ denied) ("Damages become
wrong measure of damages for breach of contract to the
                                                                  'liquidated' when the parties have agreed to the amount at
jury. The jury awarded $1,707,684.30 in damages for
                                                                  issue."). In the absence of an express agreement for
unpaid salary and for stock value using the equation found
                                                                  liquidated damages, courts apply a common-law measure of
in the Letter Agreement's "Other Matters Relating to
                                                                  damages for breach of contract. SeeGeneral Elec. Supply
Shares." We agree that the jury considered the wrong
                                                                  Co. v. Gulf Electroquip, Inc., 857 S.W.2d 591, 599
measure of damages for the stock value, although we
                                                                  (Tex.App.-Houston [1st Dist.] 1993, writ denied).
disagree with the measure of damages urged by appellants.
                                                                       Further, appellants cannot take advantage of provisions
      "Damages must be measured by a legal standard, and
                                                                  favorable to them in the very contract they breached.
that standard must be used to guide the fact finder in
SeeBaker Marine Corp. v. Weatherby Eng'g Co., 710                 (d) The earning capacity of the company.
S.W.2d 690, 696 (Tex.App.-Corpus Christi 1986, no writ).
One who has broken a contract cannot thereafter enforce the       (e) The dividend paying capacity.
remaining terms. SeeJoseph v. PPG Indus., Inc., 674
S.W.2d 862, 867 (Tex.App.-Austin 1984, writ ref'd n.r.e.);        (f) Whether or not the enterprise has good will or other
accordII Deerfield Ltd. P'ship v. Henry Bldg., Inc., 41           intangible values. [24]
S.W.3d 259, 265 (Tex.App.-San Antonio 2001, pet.
                                                                  (g) Sales of stock and the size of the block of the stock to be
denied); Interceramic, Inc. v. S. Orient R.R. Co., 999
                                                                  valued.
S.W.2d 920, 924 (Tex.App.-Texarkana 1999, pet. denied).
Having breached the contract, appellants cannot then              (h) The market price of stocks of corporations engaged in
enforce the Termination provision as though it were a             the same or similar line of business having their stocks
liquidated damages clause or the common-law measure of            actively traded in a free and open market, either on an
damages, which it is not.                                         exchange or over-the-counter.
     In a breach of contract action for failure to transfer
                                                                  InterFirst Bank Dallas, 739 S.W.2d at 892 (citing Rev. Rul.
shares of a closely held corporation, "[t]he proper measure       59-60, 1951-1 C.B. 237). If there is no evidence of fair
of damages is the fair market value of the stock...."             market value, the value of stock in a closely held
SeeBowers Steel, Inc. v. DeBrooke, 557 S.W.2d 369, 373            corporation is predicated upon the market value of the
(Tex.Civ.App.-San Antonio 1977, no writ) (employee was            assets of the company after deducting its liabilities.
promised 20% of stock in closely held corporation, but
                                                                  SeeWilliams v. Gaines, 943 S.W.2d 185, 193
never received it); see alsoMiga v. Jensen, 96 S.W.3d 207,        (Tex.App.-Amarillo 1997, writ denied) (op. on reh'g).
215 (Tex.2003) (in breach of agreement to purchase
securities, damages are the difference between the contract             Regardless, the calculation should reflect the value at
price and the fair market value of the asset). Market value       the time of injury. SeeBendalin, 406 S.W.2d at 901; Pabich,
of 71 S.W.3d at 509; Williams, 943 S.W.2d at 193-94;
                                                                  Intermedics, Inc. v. Grady, 683 S.W.2d 842, 848
Page 41                                                           (Tex.App.-Houston [1st Dist.] 1984, writ ref'd n.r.e.)
                                                                  (employee entitled to stock's value at time of his
closed-corporate stock is what a willing purchaser would
                                                                  termination from employment); Bowers Steel, Inc., 557
pay to a willing seller under no compulsion to sell.
                                                                  S.W.2d at 373 (stock promised to employee as
InterFirst Bank Dallas, N.A. v. Risser, 739 S.W.2d 882, 889
                                                                  compensation was valued at time of termination); see
(Tex.App.-Texarkana 1987, no writ); accordFisher v. Yates,
                                                                  alsoMiga, 96 S.W.3d at 214 (explaining long-standing rule
953 S.W.2d 370, 378 (Tex.App.-Texarkana 1997), writ
                                                                  in Texas that contract damages are measured at the time of
denied per curiam, 988 S.W.2d 730 (Tex.1998); see
                                                                  breach). In this case, appellants clearly repudiated the Letter
alsoCity of Harlingen v. Estate of Sharboneau, 48 S.W.3d
                                                                  Agreement in November 1994, which is coincidentally the
177, 182 (Tex.2001) (measure of damages in
                                                                  date of Donnelly's termination. Donnelly is thus entitled to
condemnation). Book value "is entitled to little, if any,
                                                                  damages because of appellants' wrongful breach of the
weight in determining the value of a corporation's stock,
                                                                  Letter Agreement, not because he was terminated in
and many other factors must be taken into consideration."
                                                                  accordance with the Termination provision.
Bendalin v. Delgado, 406 S.W.2d 897, 900-01 (Tex.1966);
accordPabich v. Kellar, 71 S.W.3d 500, 509                             We hold that the correct measure of damages is the fair
(Tex.App.-Fort Worth 2002, pet. denied); McRae                    market value of the stock in URB and in WHE at the time
Exploration & Prod., Inc. v. Reserve Petroleum Co., 962           of Donnelly's termination in November 1994. Accordingly,
S.W.2d 676 (Tex.App.-Waco 1998, no pet.). When too few            the trial court erred in submitting the wrong measure of
stock sales exist to establish a market price, other factors to   damages.
assess fair market value include:
                                                                  Page 42
(a) The nature of the business and the history of the
enterprise from its inception.                                    When a trial court erroneously instructs the jury on the
                                                                  measure of damages, the submission is reversible error.
(b) The economic outlook in general and the condition and
                                                                  SeeArthur Andersen & Co. v. Perry Equip. Corp., 945
outlook of the specific industry in particular.                   S.W.2d 812, 817 (Tex.1997). When a defective damages
                                                                  question is submitted, the proper remedy is to remand for
(c) The book value of the stock and the financial condition
                                                                  new trial. SeeJackson v. Fontaine's Clinics, Inc., 499
of the business.
                                                                  S.W.2d 87, 90 (Tex.1973). The rules of appellate procedure
                                                                  do not permit a new trial solely on unliquidated damages if
liability is contested. TEX.R.APP. P. 44.1(b). Accordingly,      tenth issue, appellants contend that the trial court
we reverse and remand for a new trial on Donnelly's cause        erroneously stacked the damages, permitting a triple
of action for breach of contract. [25]                           recovery. First, they contend that the jury awarded the same
                                                                 amount of money for breach of contract and breach of
     B. Breach of Fiduciary Duty Damages                         fiduciary duty, which constitute a single injury. They then
                                                                 contend that the trial court tripled the recovery by imposing
     In the Willises' issue 24 and Urban Retreat's issue nine,   a constructive trust.
appellants contend that the trial court erred in omitting a
measure of damages in the breach of fiduciary duty                     "A double recovery exists when a plaintiff obtains
question. In Question 25, the court asked the jury, "What        more than one recovery for the same injury." Waite Hill
sum of money, if any, if paid now in cash, would fairly and      Servs., Inc. v. World Class Metal Works, Inc., 959 S.W.2d
reasonably compensate Dan Donnelly for his damages, if           182, 184 (Tex.1998). Here, the jury awarded the same
any, that were proximately caused by such conduct [Mike          amount of money for both breach of contract and breach of
Willis's breach of fiduciary duty]?" The court, however, did     fiduciary duty. Appellants contend that these awards, along
not instruct the jury on what items to consider in assessing     with Donnelly's jury arguments, prove that he has suffered
damages.                                                         but one injury. However, we have reversed and remanded
                                                                 the breach of contract claim. Thus, there is no double
     "[W]hen the trial court has erroneously failed to           recovery of identical amounts for both causes of action.
include instructions on the proper measure of damages, it is     Additionally, when a plaintiff pleads alternate theories of
the complaining party's burden both to object to the charge      liability, a judgment awarding damages on more than one
and to tender such instructions in substantially correct         theory may stand if the theories of liability arise from
form." Tex. Commerce Bank v. Lebco Constructors, Inc.,           separate and distinct injuries and separate and distinct
865 S.W.2d 68, 75 (Tex.App.-Corpus Christi 1993, writ            damage findings are entered on each theory of liability.
denied); see TEX.R. CIV. P. 278; accordR & R Contractors         SeeBirchfield v. Texarkana Mem'l Hosp., 747 S.W.2d 361,
v. Torres, 88 S.W.3d 685, 695 (Tex.App.-Corpus Christi           367 (Tex.1987). There is evidence supporting damages for
2002, no pet.); Campbell v. C.D. Payne & Geldermann              two "separate and distinct" causes of action in this case: (1)
Sec., Inc., 894 S.W.2d 411, 420 (Tex.App.-Amarillo 1995,         unpaid salary and stock value for breach of the Letter
writ denied); Gilgon, Inc. v. Hart, 893 S.W.2d 562, 565          Agreement; and (2) real estate value and capital
(Tex.App.-Corpus Christi 1994, writ denied). [26]                contributions listed as loans for breach of fiduciary duty.
                                                                 Real estate value and "loans" should not be considered in
     Although appellants objected, they failed to tender an
                                                                 determining breach of contract damages.
instruction in substantially correct form. Their proposed
measure of damages was the "Termination" provision from                Lastly, appellants argue that the constructive trust
the Letter Agreement, which would limit damages for              triples Donnelly's recovery. Donnelly concedes that the
breach of fiduciary duty to stock value calculated at the        constructive trust duplicates the money judgment and seeks
greater of (1) assets minus liabilities or (2) two times the     remand for an election of remedies. "A party who seeks
prior year's earnings. However, Donnelly presented               redress under two or more theories of recovery for a single
evidence that Willis's purchase of the URB realty and his        wrong must elect, before the judgment is rendered, under
characterization of capital contributions as loans were          which remedy he wishes the court to enter judgment." Star
breaches of fiduciary duty. Appellants' proposed measure of      Houston, Inc. v. Shevack, 886 S.W.2d 414, 422
damages would exclude consideration of realty value and          (Tex.App.-Houston [1st Dist.] 1994), writ denied per
the amount of money mischaracterized as loans. Thus,             curiam, 907 S.W.2d 452 (Tex.1995). If the prevailing party
                                                                 fails to elect a remedy, the trial court should render a
Page 43
                                                                 judgment affording the greater recovery. Pitman v.
assuming that Question 25 was deficient, [27] appellants         Lightfoot, 937 S.W.2d 496, 533 (Tex.App.-San Antonio
have waived error by failing to tender an instruction on the     1996, writ denied). If the trial court fails to do so, generally,
                                                                 we will reform the judgment to effect such an election. See
correct measure of damages. SeeMiller v. Kendall, 804
S.W.2d 933, 942 (Tex.App.-Houston [1st Dist.] 1990, no           id.
writ) (complaining party waived error by tendering
                                                                      However, appellate courts sometimes remand a case
instruction with incorrect measure of damages).
                                                                 for an election of remedies. See, e.g.,Waite Hill Servs., 959
Accordingly, we overrule the Willises' issue 24 and Urban
                                                                 S.W.2d at 185; Gunn Infiniti, Inc. v. O'Byrne, 18 S.W.3d
Retreat's issue nine.
                                                                 715, 718 (Tex.App.-San Antonio 2000, no pet.); Jim Walter
                                                                 Homes, Inc. v. Samuel, 701 S.W.2d 351, 354
     C. Stacking
                                                                 (Tex.App.-Beaumont 1986, no writ). We remand the
     In the Willises' twenty-fifth issue and Urban Retreat's
constructive trust in this                                       remand the attorney's fees issue. Because of this
                                                                 disposition, we need not address issue 27 or the remainder
Page 44                                                          of Urban Retreat's issue four.

case for two reasons. First, the portion of the constructive          B. Fees Awarded to Mike Willis
trust imposed upon 50% of URB stock and 10% of WHE
stock duplicates recovery for breach of contract, which we             In his cross-appeal, Donnelly contends in two issues
have reversed and remanded. Thus, the constructive trust on      that the trial court erred in awarding Mike Willis $400,000
the URB and WHE stock is also reversed and remanded.             in attorney's fees for a $26,982.58 defaulted promissory
Second, we are unable to determine which remedy for              note. Donnelly complains that the attorney's fees were not
breach of fiduciary duty (the money damages or the               segregated and thus include the costs of defending his suit
constructive trust on the realty) provides a greater recovery.   against Urban Retreat and the Willises. "One of the
Accordingly, we remand for an election of remedies for           thorniest and most frequently litigated issues involved in
breach of fiduciary duty.                                        proof of attorney's fees concerns segregation of recoverable
                                                                 fees." Scott A. Brister, Proof of Attorney's Fees in Texas, 24
     In summary, we overrule the Willises' issue 25 and          ST. MARY'S L.J. 313, 342 (1993). We agree that the
Urban Retreat's issue ten to the extent appellants contend       attorney's fees awarded to Mike Willis were not properly
fiduciary duty damages are the same as contract damages.         segregated, and we reverse and remand the issue.
We partially sustain the issues as follows. First, we reverse
and remand the constructive trust imposed on Urban Retreat            In his first cross-issue, Donnelly argues the trial court
stock because it duplicates damages for breach of contract,      erred in overruling his objections
which we have reversed and remanded for a new trial.
Second, we remand the constructive trust imposed on the          Page 45
realty for an election of remedies because it duplicates
money damages awarded for breach of fiduciary duty.              to Question 4, in which the trial court asked the jury to
                                                                 determine Willis's reasonable attorney's fees "in this case."
     ATTORNEY'S FEES                                             [28] We interpret Donnelly's briefing to contend that the
                                                                 trial court erred in awarding Mike Willis fees for all the
     A. Fees Awarded to Donnelly                                 legal work performed in the lawsuit, including defense of
                                                                 Donnelly's counterclaims involving the Letter Agreement
     In the Willises' issue 26 and a portion of Urban            and Urban Retreat, and including fees incurred by Francie
Retreat's issue four, appellants contend that Donnelly was       and Urban Retreat (who were not parties to the promissory
not entitled to attorney's fees. In the Willises' issue 27 and   note). In other words, Donnelly argues that Willis failed to
the remainder of Urban Retreat's issue four, they argue that     segregate the attorney's fees related to his successful
Donnelly failed to properly present his claim, timely            recovery on the promissory note, which was the sole basis
disclose expert opinions regarding the fees, and offer           for his entitlement to an award of attorney's fees. We agree.
evidence about a reasonable fee.
                                                                      We review such a claim of jury charge error for abuse
     Donnelly was awarded attorney's fees in conjunction         of discretion. Tex. Dept. of Human Servs. v. E.B., 802
with his breach of contract claim. TEX. CIV. PRAC. &             S.W.2d 647, 649 (Tex.1990); KPH Consolidation, Inc. v.
REM.CODE ANN. § 38.001 (Vernon 1997) (permitting                 Romero, 102 S.W.3d 135, 156 (Tex.App.-Houston [14th
attorney's fees for a "valid" claim on a contract). Because      Dist.], 2003, no pet. h.). The trial court has broad discretion
we have reversed and remanded the contract claim,                in submitting the jury charge; it abuses its discretion only
Donnelly has no longer proved a "valid" contract claim.          when it acts unreasonably or arbitrarily, or without
SeeWright Way Const. Co., Inc. v. Harlingen Mall Co., 799        reference to any guiding principles. Downer v. Aquamarine
S.W.2d 415, 425 (Tex.App.-Corpus Christi 1990, writ              Operators, Inc., 701 S.W.2d 238, 241-42 (Tex.1985). We
denied); Hartford Cas. Ins. Co. v. Budget Rent-A-Car Sys.,       may not reverse for jury charge error unless the error, when
Inc., 796 S.W.2d 763, 772 (Tex.App.-Dallas 1990, writ            viewed in light of the totality of the circumstances,
denied) (attorney's fees not recoverable for claims on which     amounted to such a denial of the rights of the complaining
a party does not prevail). Additionally, Donnelly may not        party as was reasonably calculated and probably did cause
recover attorney's fees for his breach of fiduciary duty         rendition of an improper judgment. TEX.R.APP. P.
claim. SeeMaeberry v. Gayle, 955 S.W.2d 875, 881                 44.1(a)(1). Our analysis must consider the pleadings of the
(Tex.App.-Corpus Christi 1997, no pet.); Spangler v. Jones,      parties, the evidence presented at trial, and the charge in its
861 S.W.2d 392, 397 (Tex.App.-Dallas 1993, writ denied).         entirety. Island Recreational Dev. Corp. v. Republic of Tex.
Accordingly, we sustain the Willises' issue 26 and the first     Sav. Ass'n, 710 S.W.2d 551, 555 (Tex.1986). Absent a
portion of Urban Retreat's issue four. We reverse and            showing of an abuse of discretion, the award or failure to
award fees will not be disturbed on appeal. See,                 (Tex.App.-Austin 1986, writ ref'd) (fraud, contract, DTPA,
e.g.,Houston Lighting & Power Co. v. Dickinson Indep.            and insurance code claims arose from same set of facts). In
Sch. Dist., 641 S.W.2d 302, 311 (Tex.App.-Houston [14th          other words, segregation of attorney's fees is not required
Dist.] 1982, writ ref'd n.r.e.); Fowler v. Stone, 600 S.W.2d     where the services rendered relate to (1) multiple claims
351, 353 (Tex.Civ.App.-Houston [14th Dist.] 1980, no             arising out of the same facts or transaction and (2) the
writ).                                                           prosecution or defense entails proof or denial of essentially
                                                                 the same facts, so as to render the attorney's fees
     Whether attorney's fees are authorized in a particular      inseparable. SeeSterling, 822 S.W.2d at 11; Flint & Assocs.
case is a question of law to be determined by the court.         v. Intercont'l Pipe & Steel, Inc., 739 S.W.2d 622, 624-25
Holland v. Wal-Mart Stores, 1 S.W.3d 91, 94 (Tex.1999);          (Tex.App.-Dallas 1987, writ denied) (claim and
Leon Ltd. v. Albuquerque Commons P'ship, 862 S.W.2d              counterclaim arose out of same transaction--the sale of
693, 708 (Tex.App.-El Paso 1993, no writ). The Texas             pipe). The determination of the amount to be awarded as a
Supreme Court has consistently held that "a prevailing party     reasonable attorney's fee is a question of fact to be
cannot recover attorney's fees from an opposing party            determined by the trier of fact and the award, if any, must
unless permitted by statute or by contract between the           be supported by competent evidence. Great Am. Reserve
parties." Holland, 1 S.W.3d at 95. A party may not recover       Ins. Co. v. Britton, 406 S.W.2d 901, 907 (Tex.1966).
attorney's fees for claims on which the party did not prevail.
Budget Rent-A-Car Sys., Inc., 796 S.W.2d at 772.                      Originally, Mike Willis sued Dan Donnelly for the
                                                                 balance owing on a $31,183.70 promissory note. The loan
     As a general rule, the party seeking to recover             was made between the men in 1993, several years after
attorney's fees carries the burden of proof. Stewart Title       Urban Retreat opened. The loan proceeds were for
Guar. Co. v. Sterling, 822 S.W.2d 1, 10 (Tex.1991); Lesikar      Donnelly's personal use; he asserted affirmative defenses to
v. Rappeport, 33 S.W.3d 282, 317 (Tex.App.-Texarkana             recovery on the note and a usury counterclaim, the facts of
2000, pet. denied). Specifically, when a lawsuit involves        which were unrelated to the business of Urban Retreat or
multiple claims or multiple parties, the proponent has a duty    the Letter Agreement. Donnelly stopped paying the note
to segregate non-recoverable fees from recoverable fees,         when he was terminated from Urban Retreat in 1994. The
and to segregate the fees owed by different parties. Sterling,   jury found he owed the balance of $26,982.58. Mike Willis
822 S.W.2d at 10-11. As a result, the fees incurred for          successfully overcame affirmative defenses to the
successful prosecution of a breach of contract claim must be     promissory note and the usury counterclaim.
segregated from those claims in the case for which
attorney's fees may not be recovered. Id. at 11 (remanding             Donnelly's claims for breach of the Letter Agreement,
                                                                 breach of fiduciary duty, fraud in the inducement, and
Page 46                                                          tortious interference against Willis, Francie, WHE, and
                                                                 URB all involved the Urban Retreat business. Most of the
for segregation of attorney's fees attributable to recovering    copious discovery and trial evidence addressed these
policy benefits among various defendants); Int'l Sec. Life       claims, not the promissory note. Donnelly's claims against
Ins. Co. v. Finck, 496 S.W.2d 544, 546-47 (Tex.1973)             the Willises and Urban Retreat did not involve the creation,
(remanding for segregation of attorney's fees incurred for       execution, and non-payment of the promissory note. The
fraud and deceit claims from recovery on policy claim);          promissory note arose from a separate transaction.
Z.A.O., Inc. v. Yarbrough Drive Ctr. J.V., 50 S.W.3d 531,        Prosecution and defense of the promissory note did not
550-51 (Tex.App.-El Paso 2001, no pet.) (remanding for           require proof or denial of essentially the same facts. The
segregation of attorney's fees for prosecuting trespass and      only similarity of facts is that Willis and Donnelly were
nuisance claims from contract claim).                            parties to both.

      In the absence of segregation, a trial court may refuse         Because Mike Willis prevailed at trial to recover the
to award attorney's fees. SeeS. Concrete Co. v. Metrotec         balance of the promissory note, attorney's fees are
Fin., Inc., 775 S.W.2d 446, 450 (Tex.App.-Dallas 1989, no        authorized for prosecuting that claim. See TEX. CIV.
writ); Bullock v. Kehoe, 678 S.W.2d 558, 560                     PRAC. & REM.CODE ANN. § 38.001(8) (Vernon 1997).
(Tex.App.-Houston [14th Dist.] 1984, writ ref'd n.r.e.). "But    However, this statute does not authorize
when the claims 'are dependent upon the same set of facts
or circumstances and thus are "intertwined to the point of       Page 47
being inseparable," the party suing for attorney's fees may
recover the entire amount covering all claims.' " Stewart        recovery of attorney's fees for a party's defense of breach of
Title Guar. Co. v. Aiello, 941 S.W.2d 68, 73 (Tex.1997)          contract, fraudulent inducement, tortious interference, or
(quoting Sterling, 822 S.W.2d at 11); accordVillage Mobile       breach of fiduciary duty claims. Id. There is no authority
Homes, Inc. v. Porter, 716 S.W.2d 543, 552                       that entitles Willis to recover attorney's fees for his defense
of Donnelly's breach of the Letter Agreement, breach of           SeeStewart Title, 822 S.W.2d at 12; Aetna Cas. & Sur. v.
fiduciary duty, tortious interference, and fraud in the           Wild,
inducement counterclaims.
                                                                  Page 48
     Willis relies upon the case of RepublicBank Dallas v.
Shook, 653 S.W.2d 278 (Tex.1983), in arguing he should be         944 S.W.2d 37, 41 (Tex.App.-Amarillo 1997, writ denied).
awarded attorney's fees for defending all of Donnelly's           The jury cannot award attorney's fees to Mike Willis for
claims. He asserts that his defense of them was inseparable       fees incurred by WHE, URB, Francie, or Willis in
from prosecuting his claim against Donnelly on the                defending Donnelly's claims for breach of fiduciary duty,
promissory note. In RepublicBank, because the facts were          tortious interference, fraud in the inducement, and breach of
so integrally related, the prevailing party suing on a            the Letter Agreement. Lastly, as a result of our disposition
promissory note was entitled to recover attorney's fees for       of cross-issue one, we need not address Donnelly's second
successfully defending a usury claim and overcoming               cross-issue.
affirmative defenses to the note's collection. We agree that
Willis is entitled to recover those attorney's fees incurred in        CONCLUSION
defeating Donnelly's affirmative defenses to the promissory
                                                                       In summary, we affirm the judgment against Mike
note and overcoming the usury counterclaim. However, in
                                                                  Willis for breach of fiduciary duty. However, the
urging the application RepublicBank, Willis glaringly fails
                                                                  constructive trust awards a double recovery for breach of
to acknowledge the existence of Donnelly's other
                                                                  fiduciary duty. We therefore remand for an election of
counterclaims, i.e., the claims relating to Urban Retreat and
                                                                  remedies between the constructive trust on the realty and
the Letter Agreement.
                                                                  the $1.7 million awarded by the jury for breach of fiduciary
      At trial, Willis was not seeking to recover only his        duty.
attorney's fees on the promissory note and the usury
                                                                       Next, we overrule the Willises and Urban Retreat's
counterclaim. Instead, the jury question asked: "What is a
                                                                  challenges to liability for breach of contract. We further
reasonable fee for the necessary service of Mike Willis's
                                                                  hold that the statute of limitations for breach of contract did
attorneys in this case, stated in dollars and cents?" The
                                                                  not accrue before August 24, 1991. However, the jury
question failed to limit recovery only for attorney's fees
                                                                  charge contained an incorrect measure of damages for
Mike Willis incurred in prosecuting the note, overcoming
                                                                  breach of contract. Accordingly, we reverse and remand for
defenses to it, and defeating Donnelly's usury counterclaim,
                                                                  a new trial on contract damages. Because we are reversing
which was the sole counterclaim inextricably related to the
                                                                  and remanding the damages issue, we also reverse and
promissory note. RepublicBank is thus not support for
                                                                  remand the portion of the constructive trust imposed on
Willis's assertion that, as a matter of law, all of Donnelly's
                                                                  URB and WHE stock, which duplicates contract damages.
counterclaims were so intertwined with the promissory note
                                                                  As a consequence of the new trial on contract damages, we
as to allow recovery of attorney's fees for the whole case.
                                                                  must also reverse and remand the contract liability issues,
      Willis next argues that the expert testimony of Finis       found in Questions 5, 6, 8, 9, and 10. Finally, because
Cowan supports recovery of total attorney's fees. We have         Donnelly is no longer a prevailing party, we reverse and
reviewed this witness's testimony. Although he testified that     remand the attorney's fees awarded to him on his breach of
he considered RepublicBank in arriving at his opinion, this       contract claim.
is insufficient to demonstrate that the facts surrounding
                                                                       In Donnelly's cross-appeal, we hold that the trial court
Willis's recovery on the promissory note were integrally
                                                                  erred in permitting the jury to consider unsegregated
related to Donnelly's other claims against the Willises and
                                                                  attorney's fees incurred by the Willises and Urban Retreat,
Urban Retreat. It was Mike Willis's burden to present
                                                                  instead of those incurred solely by Mike Willis in
evidence segregating the attorney's fees and he failed to do
                                                                  prosecuting Donnelly for defaulting on a promissory note
so.
                                                                  and prevailing on Donnelly's usury counterclaim.
     Accordingly, we sustain Donnelly's cross-issue one.
                                                                       Accordingly, we affirm the judgment for breach of
Question 4 was erroneous because it did not properly limit
                                                                  fiduciary duty, remand for an election of remedies
recovery and because there was no evidence of segregated
                                                                  consistent with this opinion, reverse and remand all breach
fees. [29] Because the determination of reasonable
                                                                  of contract issues, except the limitations question, reverse
attorney's fees is a question for the trier of fact, we remand
                                                                  and remand the award of attorney's fees to Donnelly, and
the attorney's fees issue for determination of what portion of
                                                                  reverse and remand the award of attorney's fees to Mike
the $400,000 in attorney's fees is attributable to the
                                                                  Willis.
successful prosecution of Mike Willis's claim on the
promissory note and defense of the usury counterclaim.
     SUPPLEMENTAL OPINION ON REHEARING                              (Tex.App.-Tyler 2001, pet. denied). It is improper for an
                                                                    appellant to couch such an argument in terms of standing.
     Michael T. Willis, Francie Willis, Willis Hite                 Id. at 466.
Enterprises, Inc., and Urban Retreat of Houston, Inc., have
filed a motion for rehearing and motion for rehearing en                 Further, to challenge capacity, a party must file a
banc from our opinion. While we change nothing in our               verified denial. See TEX.R. CIV. P. 93(2); see alsoPledger
opinion or disposition of the appeal, we supplement the             v. Schoellkopf, 762 S.W.2d 145, 146 (Tex.1988). If Rule 93
opinion to address three issues raised in the motion for            is not followed, the issue of capacity is waived on appeal.
rehearing. The motion for rehearing is denied.                      Nootsie, 925 S.W.2d at 662. In this case, appellants did not
                                                                    file a verified denial of Donnelly's capacity to recover
     RATIFICATION                                                   Urban Retreat's damages.

      In issue eight of their motion for rehearing, appellants            REMAND OF LIMITATIONS ISSUE
contend ratification by Michael and Francie Willis must
also conform to requirements of the statute of frauds                    In their tenth issue, appellants contend we must reverse
because the Letter Agreement was subject to the statute of          and remand the limitations issue because we reversed and
frauds. This issue is raised for the first time in the motion       remanded breach of contract and damages questions. Texas
for rehearing. An assignment of error raised for the first          Rule of Appellate Procedure 44.1 permits an appellate court
time in a motion for rehearing is too late to be considered.        to reverse those portions of a matter in controversy that are
Lee v. Lee, 47 S.W.3d 767, 799 (Tex.App.-Houston [14th              affected by the error. The rule prohibits a separate trial
Dist.] 2001, pet. denied). Originally, appellants argued in         solely on unliquidated damages if liability is contested.
their ratification issue that a jury finding on both ratification   TEX.R.APP. P. 44.1(b). In this case, the trial court
and breach of contract was necessary as to Mike and                 erroneously submitted the wrong measure of damages for
Francie                                                             breach of contract. Because liability was contested, we
                                                                    reversed and remanded not only the damages question, but
Page 49                                                             also questions about breach of contract, ratification, waiver,
                                                                    and percentages of ownership in the corporations. We did
Willis. They did not argue statute of frauds under their            not reverse and remand the contract statute of limitations
ratification issue. [1] The sole purpose of a motion for            issue.
rehearing is to provide the court an opportunity to correct
any errors on issues already presented. Phifer v.                        Accrual of the statute of limitations is a question of
Nacogdoches County Cent. Appraisal Dist., 45 S.W.3d 159,            law. Moreno v. Sterling Drug, Inc., 787 S.W.2d 348, 351
166 (Tex.App.-Tyler 2000, pet. denied). Because this issue          (Tex.1990); Waxler v. Household Credit Servs., Inc., 106
is raised for the first time in appellant's motion for              S.W.3d 277, 279 (Tex.App.-Dallas 2003, no pet.).
rehearing, we do not address it.                                    Appellants assigned error to the jury's rejection of the
                                                                    statute of limitations, contending that suit was barred as a
     STANDING VERSUS CAPACITY                                       matter of law. We concluded that the cause of action for
                                                                    breach
     In issue seven of their motion for rehearing, appellants
contend that Donnelly lacks standing to sue for Urban               Page 50
Retreat's damages. Appellants confuse "capacity," which
has been waived, with "standing," which we addressed in             of contract accrued within four years of suit. On remand,
our original opinion.                                               questions of law answered by an appellate court are
                                                                    considered law of the case. SeeBriscoe v. Goodmark, Corp.,
     "A plaintiff has standing when it is personally                102 S.W.3d 714, 716 (Tex.2003). As there is no issue to
aggrieved, regardless of whether it is acting with legal            relitigate upon remand, we decline to reverse and remand
authority." Nootsie, Ltd. v. Williamson County Appraisal            the limitations issue.
Dist., 925 S.W.2d 659, 661 (Tex.1996). In contrast, "a party
has capacity when it has the legal authority to act,                    Finding it unnecessary to write regarding the
regardless of whether it has a justiciable interest in the          remaining seven points in their motion, we deny appellant's
controversy." Id. Standing is jurisdictional and cannot be          motion for rehearing.
waived, but capacity may be waived. Tex. Ass'n of Bus. v.
Tex. Air Control Bd., 852 S.W.2d 440, 446 (Tex.1993).               ---------
Whether a stockholder may recover damages personally for
a wrong done to the corporation is an argument about                Notes:
capacity--that is, whether the stockholder has legal
authority. Mackie v. Guthrie, 78 S.W.3d 462, 465-66                 [1] Collectively, we refer to URB and WHE as Urban
Retreat.                                                        Willis v. Bydalek, 997 S.W.2d 798, 801 (Tex.App.-Houston
                                                                [1st Dist.] 1999, pet. denied).
[2] This "loan" was not approved by resolution of URB's
board of directors, as required by the URB by-laws. In          [13] The Willises argued that URB could not afford to buy
contrast, the $800,000 construction loan had been approved      the realty, although evidence suggests that Willis's improper
by the board (consisting of Willis, the minimal shareholder,    characterization of capital as debt helped place the business
and Hite).                                                      in its allegedly poor financial condition.

[3] By terminating his employment so quickly, Hite never        [14] Under the Letter Agreement, Donnelly could sell his
earned 25% of URB stock as contemplated in his own letter       stock but first had to offer to sell them to other shareholders
agreement with Willis.                                          using the equation "real estate appraised at market value
                                                                plus previous twelve months' gross revenue."
[4] URB was authorized to issue up to 100,000 shares.
                                                                [15] The Willises include a catchall, multifarious assertion
[5] From 5% of gross revenues to $3,000 per month, 60%          of error at the end of this portion of their argument,
of his hair styling, 10% of his product sales, and a 5%         contending there is "no evidence, no legally sufficient
commission each month the Hair Department exceeded              evidence, and no factually sufficient evidence that Michael
$100,000 in revenue.                                            Willis had a fiduciary relationship with Donnelly...." We
                                                                are not required to address multifarious issues. SeeState v.
[6] By 1992's end, Willis's cash loans equaled $1,746,643.      Interstate Northborough P'ship, 8 S.W.3d 4, 7 n. 2
At 1993's end, this amount had increased to $1,897,896.         (Tex.App.-Houston [14th Dist.] 1999), rev'd on other
                                                                grounds, 66 S.W.3d 213 (Tex.2001); Shull v. United Parcel
[7] Again, no evidence exists that URB's board of directors
                                                                Serv., 4 S.W.3d 46, 51 (Tex.App.-San Antonio 1999, pet.
approved this "evidence of indebtedness ... issued in its
                                                                denied). Factual sufficiency analysis requires us to detail
name" as required by the by-laws. Supposedly, Willis,
                                                                the evidence relevant to the issue and, if reversing, clearly
Francie, Donnelly, and two others were board members
                                                                state in what regard the contrary evidence greatly outweighs
until March 17, 1993, when Francie, as "sole shareholder,"
                                                                the evidence in support of the issue. SeePool v. Ford Motor
made herself sole director.
                                                                Co., 715 S.W.2d 629, 635 (Tex.1986) (op. on reh'g). Given
[8] Question 6: "Was the failure to comply [with the Letter     the Willises' bare assertion of error, without substantive
Agreement] excused? Failure to comply with an agreement         analysis, legal authority regarding factual insufficiency, and
is excused ... if compliance was waived by Dan Donnelly.        appropriate citation to the record for factual insufficiency,
A waiver is an intentional surrender of a known right or        seeRyan v. Abdel-Salam, 39 S.W.3d 332, 336
intentional conduct inconsistent with that right." The jury     (Tex.App.-Houston [1st Dist.] 2001, pet. denied); Keever v.
answered, "No."                                                 Finlan, 988 S.W.2d 300, 314 (Tex.App.-Dallas 1999, pet.
                                                                dism'd), we decline to perform a review of the record and
[9] Question 7: "Did the failure to comply ... occur prior to   law to determine whether there is factually insufficient
August 24, 1991?"                                               evidence of a fiduciary relationship.

[10] Nine other notes from the jury, and the trial court's      [16] It is error for a trial court to instruct a jury that
responses, do appear in the clerk's record.                     shareholders in a closely held corporation owe each other a
                                                                fiduciary duty as a matter of law. Pabich, 71 S.W.3d at 505;
[11] In Question 22, the trial court instructed the jury,       Kaspar v. Thorne, 755 S.W.2d 151, 155 (Tex.App.-Dallas
"Mike Willis owed Dan Donnelly a fiduciary duty."               1988, no writ).

[12] "Oppressive conduct" is defined as:                        [17] The Texas Pattern Jury Charges includes a chapter
                                                                about fiduciary duty. TEX. PATTERN JURY CHARGES
1. majority shareholders' conduct that substantially defeats    PJC 104.1-104.2 (2000). PJC 104.1 asks whether a
the minority's expectations that, objectively viewed, were      fiduciary duty exists between parties. In this case, no one
both reasonable under the circumstances and central to the      requested PJC 104.1 in the charge, and Willis did not object
minority shareholder's decision to join the venture; or         to its omission. PJC 104.2 then asks if one party complied
                                                                with its fiduciary duty to another. In Question 22, the trial
2. burdensome, harsh, or wrongful conduct; a lack of            court tracked the language of PJC 104.2 almost
probity and fair dealing in the company's affairs to the        word-for-word.
prejudice of some members; or a visible departure from the
standards of fair dealing and a violation of fair play on       [18] Urban Retreat does not argue subissues three and eight.
which each shareholder is entitled to rely.
[19] The jury awarded $1,707,684.30 for Mike Willis's             (Tex.App.-Fort Worth 1994, writ denied) (almost identical
breach of fiduciary duty.                                         question held to be proper under Texas law when
                                                                  challenged for improper measure of damages).
[20] The Willises fail to brief issue 22. We thus address the
argument as presented in Urban Retreat's brief.                   [28] Donnelly objected that in answering Question 4, the
                                                                  jury was not limited to assessing attorney's fees incurred
[21] The Letter Agreement states that Donnelly agreed to          solely by Mike Willis for only the promissory note claim.
"use his best efforts" to persuade his entire staff and           Donnelly also objected that there was no evidence
clientele to transfer to Urban Retreat. The Letter Agreement      segregating the fees.
also states that while employed at Urban Retreat, Donnelly
may not compete in the Houston area by performing                 [29] Donnelly does not assert points of error for legal or
"personal care, beauty, and hair" services or owning an           factual insufficiency of the evidence. Even if he had done
interest in a competing business.                                 so, we could not reverse and render. If a party does not
                                                                  properly segregate attorney's fees, it is error to completely
[22] "After twelve (12) months of employment, if Mr.              deny recovery of attorney's fees on a contract claim, as
Donnelly is terminated, Mr. Donnelly would likewise be            evidence of unsegregated attorney's fees is more than a
required to sell his shares of the Urban Retreat and              scintilla of evidence of segregated fees. Int'l Sec.Life Ins.
Willis/Hite to those companies and would receive book             Co., 496 S.W.2d at 546-47; Panizo v. Young Men's
value of such shares or the value of such shares as               Christian Ass'n of Greater Houston Area, 938 S.W.2d 163,
determined by multiplying two times prior year's earnings         171 (Tex.App.-Houston [1st Dist.] 1996, no writ).
..., whichever is greater. 'Book Value' is defined as the
assets minus liabilities...."                                     [1] A brief survey of the law after the motion for rehearing
                                                                  was filed uncovered divergence in whether jurisdictions
[23] "Book Value of Owners' Equity = Real Estate                  require ratification to conform with the statute of frauds.
Appraised at Market Value Plus Previous Twelve (12)               The case law cited in the motion for rehearing was not
Months Gross Revenues."                                           urged in the appellate briefing, further demonstrating that
                                                                  the issue is newly raised in the motion for rehearing.
[24] Per the Letter Agreement, WHE owns "all rights to the
name 'The Urban Retreat.' " WHE's ownership of the name           ---------
is confirmed in a "URH/URC Contract." The evidence does
not reveal whether WHE had liabilities or other assets when
Donnelly's employment terminated.

[25] Under Rule 44.1(b), we remand the portion of the
matter in controversy that is affected by the error and that is
fairly separable. Accordingly, we remand Question 5 (the
breach of contract question), Question 6 (whether the
failure to comply was excused), Question 8 (the percentage
of URB stock to which Donnelly was entitled), Question 9
(the percentage of WHE stock to which Donnelly was
entitled), Question 10 (ratification), and Question 11
(damages incurred for breach of contract).

[26] When a measure of damages is omitted, the
complaining party must request the correct measure.
TEX.R. CIV. P. 278; seeFairfield Estates, L.P. v. Griffin,
986 S.W.2d 719, 724 (Tex.App.-Eastland 1999, no pet.).
When an incorrect measure is submitted, i.e., a defective
submission, the complaining party need only object.
SeeReligious of the Sacred Heart v. City of Houston, 836
S.W.2d 606, 613-14 (Tex.1992); R & R Contractors, 88
S.W.3d at 695; see alsoOperation Rescue-Nat'l v. Planned
Parenthood of Houston & S.E. Tex., Inc., 937 S.W.2d 60,
69 (Tex.App.-Houston [14th Dist.] 1997), aff'd as modified,
975 S.W.2d 546 (Tex.1998).

[27] But seeRowe v. Rowe, 887 S.W.2d 191, 199
Page 663                                                       verdict. We reverse the trial court's sanctions order and
                                                               render judgment that appellees' motion for Texas Rule of
131 S.W.3d 663 (Tex.App.—Corpus Christi 2004)                  Civil Procedure 13 sanctions be denied.

Jesus ALEJANDRO, Appellant,                                         A. FACTUAL BACKGROUND

v.                                                                 As part of his duties as RISD's                 Assistant
                                                               Superintendent for Business and Finance,
ROBSTOWN INDEPENDENT SCHOOL DISTRICT,
et al., Appellees.                                             Page 666

No. 13-01-00780-CV.                                            appellant reviewed and approved purchase orders for travel
                                                               and related expenses for RISD employees and school board
Court of Appeals of Texas, Thirteenth District, Corpus         members. In September 1998, RISD school board members
Christi-Edinburg.                                              Adolfo Lopez and Oscar Lopez went on an RISD business
                                                               trip accompanied by their spouses. RISD paid the airfare for
April 1, 2004.
                                                               both board members and their spouses. Appellant reviewed
                                                               and approved the purchase orders for the travel and
Page 664
                                                               authorized the check to be issued to the travel agency. After
[Copyrighted Material Omitted]                                 the trip, Adolfo Lopez and Oscar Lopez reimbursed RISD
                                                               for their respective spouses' flights.
Page 665
                                                                    On December 9, 1998, appellant wrote to
     William J. Kolb, Alice, for Appellant.                    Superintendent Cano, alleging that Adolfo Lopez and Oscar
                                                               Lopez had engaged in the misuse of public funds, abuse of
    Angelica E. Rodriguez Barrera, Phillip A. McKinney,        office, and official misconduct. In the letter, appellant
Hornblower, Manning & Ward, Corpus Christi, for                claimed that Adolfo Lopez and Oscar Lopez had illegally
Appellees.                                                     used RISD funds to pay for their respective spouses' airfare,
                                                               and that such conduct violated article 3, section 52(a) of the
   Before        Justices   HINOJOSA,         YAÑEZ,    and    Texas Constitution[2] and section 39.02(a) of the penal
CASTILLO.                                                      code.[3] Appellant further claimed that expenses for a
                                                               second hotel room,[4] the personal use of a van rented by
     OPINION
                                                               RISD for the business trip, and $30 in valet parking were
                                                               unnecessary and unreasonable expenses and, thus, violated
     HINOJOSA, Justice.
                                                               section 45.105 of the Texas Education Code.[5] Lastly,
      Appellant, Jesus Alejandro, was terminated from his      appellant alleged that claiming a full per diem
position as the Assistant Superintendent for Business and      reimbursement when receiving a complimentary meal
Finance with the Robstown Independent School District          violated section 37.10 of the penal code.[6]
("RISD"). Appellant sued the following appellees: RISD;
                                                                    B. DIRECTED VERDICT
Leobardo Cano, individually and in his official capacity as
RISD's Superintendent of Schools ("Superintendent Cano");
                                                                    By his first point of error, appellant contends the trial
and Adolfo Lopez and Oscar Lopez, individually and in
                                                               court erred in granting appellees' motion for directed
their official capacities as members of the RISD Board of
                                                               verdict. He asserts there are disputed issues of material fact
Trustees. Appellant alleged retaliatory discharge under the
                                                               on each element of his claim that cannot be resolved as a
Texas Whistleblower Act ("the Act").[1] The trial court
                                                               matter of law and require submission to a jury.
granted appellees' motion for directed verdict and assessed
sanctions against appellant and his attorney in the amount            A court may direct a verdict when a plaintiff fails to
of $23,764.77 for the costs, expenses, and attorneys fees      present evidence raising a fact issue essential to the
incurred by appellees in defending the suit. By two points     plaintiff's right of recovery. Prudential Ins. Co. of Am. v.
of error, appellant contends: (1) the trial court erred in     Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex.2000). A
granting a directed verdict; and (2) the evidence is legally   trial court
insufficient to support the sanctions imposed against him.
We affirm the trial court's judgment granting the directed     Page 667
may also direct a verdict for a defendant if the plaintiff        conduct; (2) expression of a negative attitude toward the
admits or the evidence conclusively establishes a defense to      employee's report of the conduct; (3) failure to adhere to
the plaintiff's cause of action. Reyna v. First Nat'l Bank, 55    established company policies regarding employment
S.W.3d 58, 69 (Tex.App.-Corpus Christi 2001, no pet.).            decisions; (4) discriminatory treatment in comparison to
                                                                  similarly situated employees; and (5) evidence that the
      On review, we examine the evidence in the light most        stated reason for the adverse employment action was false.
favorable to the party against whom the verdict was               Id.
rendered and disregard all contrary evidence and inferences.
Qantel Bus. Sys. v. Custom Controls, 761 S.W.2d 302,                    The record in this case shows that in February 1999,
303-04 (Tex.1988). When reasonable minds may differ as            after appellant's report concerning the actions of Adolfo
to the truth of controlling facts, the issue must go to the       Lopez and Oscar Lopez, Superintendent Cano conducted
jury. Collora v. Navarro, 574 S.W.2d 65, 68 (Tex.1978);           appellant's annual performance review. Despite some
Villegas v. Griffin Indus., 975 S.W.2d 745, 749                   evidence of weak performance in a few vital areas,
(Tex.App.-Corpus Christi 1998, pet. denied). When no              appellant's employment continued on the same terms.
evidence of probative force on an ultimate fact element
exists, or when the probative force of testimony is so weak            On April 1, 1999, TEA issued its final report in an
that only a mere surmise or suspicion is raised as to the         investigation of RISD that
existence of essential facts, the trial court has a duty to
instruct the verdict. Villarreal v. Art Inst. of Houston, Inc.,   Page 668
20 S.W.3d 792, 796 (Tex.App.-Corpus Christi 2000, no
                                                                  had been initiated prior to appellant's report. TEA revealed
pet.). The reviewing court may affirm a directed verdict
                                                                  several instances of deviations from RISD policy by the
even if the trial court's rationale for granting the directed
                                                                  business office. For example, on one occasion, the business
verdict is erroneous, provided it can be supported on any
                                                                  manager failed to obtain the superintendent's approval
other basis. Id.
                                                                  before he ordered payment to the district's legal counsel, in
     1. Causal Link between Report and Termination                violation of local policy. In view of these problems, TEA
                                                                  assigned a monitor to oversee operations at RISD and
     Appellant asserts he satisfied the elements of a             recommended an audit of RISD's financial practices and
whistleblower claim because he reported, in good faith, the       procedures.
alleged misuse of public funds, abuse of office, and official
misconduct by Adolfo Lopez and Oscar Lopez to the                       Effective May 20, 1999, Superintendent Cano
County Attorney, District Attorney, and Texas Education           reassigned appellant from the business office to a position
Agency ("TEA").                                                   within RISD with supervision over: (1) the energy
                                                                  conservation program; (2) the records management
        Under the Texas Whistleblower Act, public                 program; and (3) the workers' compensation and safety
employees are protected from retaliation for reporting, in        program. The letter of reassignment stated, "[n]othing in
good faith, violations of law by the employing                    this reassignment of your duties will cause any change in
governmental entity or another public employee to an              your compensation, benefits, or contract status. You will
appropriate law enforcement authority. TEX. GOV'T                 continue to have the same pay rate and benefits in your new
CODE ANN. § 554.002(a) (Vernon Supp.2004). To                     position." The letter listed the results of the TEA
establish causation in a whistleblower action, a public           investigation as support for Superintendent Cano's decision.
employee must prove that without the report of a violation        The school board upheld the reassignment.
of law, the employer's prohibited conduct would not have
occurred when it did. Tex. Dep't of Human Servs. v. Hinds,             Concurrently, in compliance with the TEA report and
904 S.W.2d 629, 636 (Tex.1995). The plaintiff is required         the TEA monitor's request, Superintendent Cano ordered a
to establish a "but for" causal nexus between the report of       special audit of the business office. As a result of that audit,
misconduct and the employer's actions. Tex. Natural Res.          TEA uncovered appellant's violation of competitive bidding
Conservation Comm'n v. McDill, 914 S.W.2d 718, 723                laws and appellant's own unreimbursed expense for a trip to
(Tex.App.-Austin 1996, no writ). A jury may not infer             New York City.
causation without some evidence from the plaintiff to
                                                                        In August 1999, Superintendent Cano and the school
support such a finding. City of Fort Worth v. Zimlich, 29
                                                                  board initiated the process to terminate appellant's
S.W.3d 62, 68 (Tex.2000). The Texas Supreme Court has
                                                                  employment. Superintendent Cano provided appellant with
noted that certain circumstantial evidence may be sufficient
                                                                  written notice of the reasons for termination, including
to establish a causal link between the adverse employment
                                                                  failure to comply with board policies and TEA regulations,
action and the reporting of illegal conduct. Id. at 69. Such
                                                                  appellant's violation of competitive bidding laws, and
evidence includes: (1) knowledge of the report of illegal
appellant's use of: (1) RISD property for personal business,              Imposing an available sanction is left to the sound
(2) RISD computer to visit inappropriate internet sites, and       discretion of the trial court. Koslow's v. Mackie, 796 S.W.2d
(3) unauthorized telephone recording equipment. Finally,           700, 704 (Tex.1990). Thus, we review the trial court's
on October 25, 1999, appellant's employment was                    actions under an abuse-of-discretion standard of review.
terminated as a result of Superintendent Cano's                    Rudisell v. Paquette, 89 S.W.3d 233, 236 (Tex.App.-Corpus
recommendation and school board vote.                              Christi 2002, no pet.). The test for determining whether the
                                                                   trial court abused its discretion is whether it acted without
      Considering the evidence in the light most favorable         reference to any guiding rules and principles. Downer v.
to the party against whom the verdict was rendered, we             Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42
cannot say that the trial court erred in directing a verdict in    (Tex.1985). A trial court abuses its discretion in imposing
favor of appellees. Appellant's termination occurred more          sanctions only if it bases its order on an incorrect view of
than ten months after his report. Thus, appellant was not          the law or an erroneous assessment of the evidence.
entitled to a presumption that his termination was                 Randolph v. Jackson Walker, L.L.P., 29 S.W.3d 271, 276
retaliatory. See TEX. GOV'T CODE ANN.§ 554.004(a)                  (Tex.App.-Houston [14th Dist.] 2000, pet. denied).
(Vernon Supp.2004) (allowing for rebuttable presumption
of causal connection if adverse employment action occurs                Rule 13 authorizes a trial court to impose sanctions
not later than 90 days after employee reports violation of         against an attorney, a represented party, or both, who file a
law).                                                              groundless pleading brought in bad faith or brought for the
                                                                   purpose of harassment. TEX.R. CIV. P. 13. In determining
      In light of the stated reasons for appellant's termination   whether sanctions are appropriate, the trial court must
and the evidence presented in support thereof, we conclude         examine the facts available to the litigant and the
that the evidence fails to establish a "but for" causal nexus      circumstances existing when the litigant filed the pleading.
between appellant's report and appellant's reassignment and        Rudisell, 89 S.W.3d at 237.
eventual termination. Accordingly, we hold that appellant
failed to present any evidence raising a fact issue essential             Courts must presume that pleadings, motions, and
to his right of recovery. SeePrudential Ins. Co., 29 S.W.3d        other papers are filed in good faith, and the party moving
at 77.                                                             for sanctions bears the burden of overcoming this
                                                                   presumption. TEX.R. CIV. P. 13; GTE Communications
     2. Personal Liability of the Individual Defendants            Sys. Corp. v. Tanner, 856 S.W.2d 725, 731 (Tex.1993)
                                                                   (orig.proceeding). Rule 13 requires that the trial court
     The Act creates a private cause of action against the         provide notice and hold an evidentiary hearing to make the
employing "state or local governmental entity." See TEX.           necessary factual determinations about the motives and
GOV'T CODE ANN. § 554.002(a) (Vernon Supp.2004).                   credibility of the person filing the groundless pleading. N.Y.
However, the Act limits personal liability for individual          Underwriters Ins. Co. v. State Farm Mut. Auto. Ins. Co.,
defendants to a civil penalty. See TEX. GOV'T CODE                 856 S.W.2d 194, 205 (Tex.App.-Dallas 1993, no writ);
ANN. § 554.008(e)                                                  Home Owners Funding Corp. of Am. v. Scheppler, 815
S.W.2d 884, 888-89 (Tex.App.-Corpus Christi 1991, no
Page 669
                                                                   writ). Without such a hearing, the trial court has no
(Vernon Supp.2004).[7] Thus, under the Act, appellant has          evidence before it to determine that a pleading was filed in
no private right of action against any of the appellees in         bad faith or to harass. New York Underwriters, 856 S.W.2d
their individual capacities. SeeAustin v. Healthtrust, Inc.,       at 205.
967 S.W.2d 400, 401 (Tex.1998) (declining to create
                                                                         In the instant case, appellees filed a motion for rule 13
private common-law cause of action). Therefore, the trial
                                                                   sanctions after the trial court granted their motion for
court did not err in granting a directed verdict on appellant's
                                                                   directed verdict. After notice, the trial court held an
claims against appellees in their individual capacities.
                                                                   evidentiary hearing. At the hearing, appellees argued that
     We overrule appellant's first point of error.                 appellant did not file his whistleblower suit in good faith,

     C. SANCTIONS                                                  Page 670

     By his second point of error, appellant contends the          relying on the relevant facts of appellant's conduct
evidence is legally insufficient to support the sanctions          introduced at trial. The trial court then stated: "All right. All
imposed against him. Appellees contend the trial court             I've heard from so far are the lawyers. Do we have any
properly imposed sanctions based entirely on the testimony         evidence on the sanction request?" Appellees then
adduced at trial.                                                  presented evidence regarding the amount of costs and
                                                                   attorneys fees they had incurred in defending the suit. The
trial court found the suit to be groundless and ordered            association, or corporation. TEX. CONST. art. III, § 52(a).
sanctions.                                                         This section is intended to prevent the gratuitous grant of
                                                                   public funds for private purposes. Edgewood Indep. Sch.
       A movant seeking rule 13 sanctions must establish           Dist. v. Meno, 917 S.W.2d 717, 740 (Tex.1995).
both: (1) the frivolity of the opponent's claim; and (2) the
improper motives underlying the decision to file the suit,         [3] Under section 39.02(a) of the penal code, a public
motion, or document. Karagounis v. Prop. Co. of Am., 970           servant commits an offense if, with intent to obtain a benefit
S.W.2d 761, 765 (Tex.App.-Amarillo 1998, pet. denied).             or with intent to harm or defraud another, he intentionally
"This in turn makes it imperative for the trial court to           or knowingly violates a law relating to his employment, or
convene and conduct an evidentiary hearing." Id. (Emphasis         misuses government property, services, personnel, or any
in original).                                                      other thing of value belonging to the government that has
                                                                   come into his custody or possession by virtue of his
      While some facts adduced during the trial of this case       employment. TEX. PEN.CODE ANN. § 39.02(a) (Vernon
arguably established appellant's improper motives,[8]              2003).
appellees never offered or introduced any such evidence at
the sanctions hearing. At the hearing, appellees presented         [4] Appellant reasoned that because Oscar Lopez and
evidence only on the amount of costs, expenses, and                Adolfo Lopez were traveling together, it was reasonable to
attorneys fees incurred in defending the suit. They did not        expect them to have shared a room. But, because their
ask the trial court to consider or take judicial notice of any     spouses were traveling with them, the additional cost was
evidence heard during the trial. As we have held previously,       tantamount to paying for the spouses' hotel rooms.
evidence must be admitted in compliance with the rules of
evidence at the evidentiary hearing for a trial court to           [5] Section 45.105 of the education code authorizes the
consider it in a rule 13 context. Alejandro v. Bell, 84            expenditure of local school funds for the purposes listed for
S.W.3d 383, 393 (Tex.App.-Corpus Christi 2002, no pet.);           state and county available funds and for other purposes
see alsoMcCain v. NME Hosps., Inc., 856 S.W.2d 751, 757            necessary in the conduct of the public schools determined
(Tex.App.-Dallas 1993, no writ) (reaffirming that motions          by the board of trustees. TEX. EDUC.CODE ANN. §
and arguments of counsel are not evidence in a rule 13             45.105(c) (Vernon Supp.2004).
context).
                                                                   [6] A person commits an offense under section 37.10 of the
      Having failed to receive into evidence the relevant          penal code if he knowingly makes a false entry in a
facts regarding the circumstances surrounding the filing of        governmental record or presents a record with knowledge of
the lawsuit, the trial court had no evidence before it to          its falsity and with intent that it be taken as a genuine
determine the motives and credibility of the person filing         governmental record. TEX. PEN.CODE ANN. §
the allegedly groundless pleading or the relevant culpability      37.10(a)(1)-(2) (Vernon 2003).
of appellant or his attorneys. SeeNew York Underwriters,
856 S.W.2d at 205. Accordingly, we hold that the trial court       [7] The Act limits the personal liability of a supervisor or
abused its discretion in assessing rule 13 sanctions against       other individual who violates the Act to a civil penalty not
appellant. Appellant's second point of error is sustained.         to exceed $15,000, which is to be deposited into the state
                                                                   treasury after prosecution by the attorney general or
     We affirm the trial court's judgment granting appellees'      appropriate prosecuting attorney. TEX. GOV'T CODE
motion for directed verdict. We reverse the trial court's          ANN. § 554.008 (Vernon Supp.2004).
sanctions order and render judgment that appellees' motion
for sanctions be denied.                                           [8] The evidence included, inter alia, testimony from
                                                                   appellant that he probably would have dismissed his claims
---------                                                          against Adolfo Lopez and Oscar Lopez if they only had
                                                                   expressed regret to him for voting in favor of his
Notes:                                                             termination. Further, in his brief to TEA on the appeal of
                                                                   his termination, appellant expressly stated it was not his
[1] In his first amended petition, appellant also alleged          intention to prove retaliation.
violations of article 1, sections 8 and 19 of the Texas
Constitution. However, he does not pursue these claims on          ---------
appeal. See TEX.R.APP. P. 38.1.

[2] Article three, section 52(a) of the Texas Constitution
prohibits the Legislature from authorizing a county, city,
town, or subdivision of the State to lend its credit or to grant
public money or thing of value to any individual,
Page 158                                                      homeowners association for six Harris County subdivisions
                                                              or "sections" encompassing more than 1600 single-family
141 S.W.3d 158 (Tex. 2004)                                    residences. Each section is governed by a separate set of
                                                              deed restrictions through which every property owner is a
Geneva BROOKS, et al, Petitioners,                            member of the Association. The restrictions subject each
                                                              homeowner to an annual assessment that is deposited into a
v.
                                                              maintenance fund for such services as maintaining common
                                                              areas, contracting for garbage disposal, and constructing
NORTHGLEN ASSOCIATION, Respondent.
                                                              parks.
No. 02-0492.
                                                              Page 161
Supreme Court of Texas
                                                                    In 1994, Northglen's Board of Directors amended the
June 25, 2004.                                                deed restrictions to expand the Board and to assess late fees
                                                              on unpaid assessments. Geneva Brooks and other Northglen
     Argued Sept. 3, 2003                                     property owners ("Brooks") organized a committee, called
                                                              the Committee to Remove the Board, to remove certain
     Rehearing Denied Sept. 3, 2004.                          Board members who, they complained, acted outside the
                                                              bounds of the deed restrictions by adopting the
Page 159                                                      amendments. Northglen responded by suing for injunctive
                                                              and declaratory relief. Northglen sought an order enjoining
[Copyrighted Material Omitted]
                                                              the eight homeowners from conveying the false impression
                                                              that Brooks's committee was formed pursuant to
Page 160
                                                              Northglen's bylaws and from other conduct designed to
     Sue Auclair, Houston, TX, pro se.                        disrupt the Board's activities. Northglen also sought a
                                                              judgment declaring that its actions in electing the Board and
    David Alfred Kahne, Law Office of David A. Kahne,         assessing late fees were valid exercises of its authority.
Robin Rankin Willis, P.C., Houston, for Petitioner.           Brooks counterclaimed for a declaratory judgment that
                                                              Northglen had no authority to raise assessments or charge
     John Bradley Mitchell, Clayton Rowland Hearn, Marc       late fees without a vote of the property owners. Northglen
D. Markel, Stephanie Lee Quade, Roberts Markel Guerry,        eventually nonsuited its claims, and the case proceeded on
P.C., Houston, for Respondent.                                Brooks's declaratory judgment action.

     JEFFERSON, Justice.                                            The trial court granted summary judgment for
                                                              Northglen, declaring that, without a vote of the
     This is a declaratory judgment action involving eight    homeowners, Northglen had the authority to: (1) raise the
property owners' challenge to their homeowners                assessment for Sections One, Two, and Three; (2) raise the
association's attempt to increase and accumulate annual       assessment for Sections Four, Five, and Six by ten percent
assessments and impose late fees. The trial court held that   each year or accumulate and assess the increase after a
chapter 204 of the Texas Property Code [1] authorized the     number of years; and (3) charge delinquent homeowners a
Board to raise assessments unilaterally. The court of         $35 late fee. Finding that both parties had pursued
appeals affirmed the trial court's judgment in part and       legitimate interests, the trial court elected not to award
reversed in part. Both parties petitioned this Court for      attorney's fees.
review. We granted the petitions to review the interplay
between Texas Property Code chapter 204 and Northglen               The court of appeals affirmed the trial court's judgment
Association's deed restrictions. We affirm the court of       in part and reversed in part. 76 S.W.3d 162, 176. It reversed
appeals' judgment in part, vacate in part, and reverse and    as to Sections One, Two, and Three, holding that the deed
render judgment in part.                                      restrictions did not permit annual assessments exceeding
                                                              $120. As to Sections Four, Five, and Six, the court of
     I                                                        appeals held that because the deed restrictions contained no
                                                              language expressly forbidding accumulation, Northglen
     Background                                               could accumulate previous assessments under Property
                                                              Code section 204.010(16). Id. at 167. The court also held
     Northglen    Association    ("Northglen")    is    the
                                                              that section 204.010(10) gave Northglen the right to assess
a $35 late fee in addition to the interest charge permitted by    named homeowners, who are "interested under a deed, ...
the deed restrictions. Id. at 174. Because the property           written contract, or other writings constituting a contract or
owners did not have prior notice of the late fee, the court of    whose rights, status, or other legal relations are affected by
appeals held that Northglen could not foreclose on any            a statute...." Tex. Civ. Prac. & Rem.Code §§ 37.003(a) and
homesteads to collect those fees. Id. at 175. The court of        37.004(a). The question, then, is not "whether jurisdiction is
appeals affirmed the trial court's denial of attorney's fees.     lacking," as Northglen asserts, but whether the trial court
Id. at 176.                                                       should have refused to enter a judgment when a subset of
                                                                  the homeowners was not joined in the lawsuit. SeeCooper v.
     We hold that Northglen cannot accumulate unassessed          Tex. Gulf Indus., Inc., 513 S.W.2d 200, 204 (Tex.1974)
fee increases because the language in the deed restrictions       ("[the] concern is less that of the jurisdiction of a court to
prevails over chapter 204, and we reverse that portion of the     proceed and is more a question of whether the court ought
court of appeals' judgment. We affirm the portion of the          to proceed with those who are present"). To answer that
court of appeals' judgment restricting increases in               prudential question, we turn to Rule 39, which governs
assessments to $120 and holding that Northglen has the            joinder of persons under the Declaratory Judgment Act.
authority to assess late charges for unpaid fees, in addition     Tex.R. Civ. P. 39; Clear Lake City Water Auth. v. Clear
to the interest charges described in the deed restrictions. We    Lake Util., 549 S.W.2d 385, 390 (Tex.1977) (applying Rule
conclude, however, that Northglen may not foreclose on the        39 to actions under the Declaratory Judgment Act).
property if late charges are not paid. Finally, we affirm the
court of appeals' judgment regarding attorney's fees.                  Rule 39, like the Declaratory Judgment Act, mandates
                                                                  joinder of persons whose interests would be affected by the
     II                                                           judgment. See Tex. Civ. Prac. & Rem.Code § 37.006
                                                                  ("When declaratory relief is sought, all persons who have
     Jurisdiction                                                 or claim any interest that would be affected by the
                                                                  declaration must be made parties.") (emphasis added);
     We first consider Northglen's contention that the trial
                                                                  Tex.R. Civ. P. 39(a) ("A person who is subject to service of
court lacked subject matter jurisdiction because Brooks did
                                                                  process shall be joined as a party in the action if ... he
not join all Northglen property owners as parties. Northglen
                                                                  claims an interest relating to the subject of the action ....")
argues that Brooks was required to join all property owners
                                                                  (emphasis added). Rule 39 determines whether a trial court
in each affected section before the trial court could render a
                                                                  has authority to proceed without joining a person whose
declaratory judgment and, alternatively,
                                                                  presence in the litigation is made mandatory by the
                                                                  Declaratory Judgment Act. Clear Lake City Water Auth.,
Page 162
549 S.W.2d at 390.
that the trial court was without jurisdiction to render a
                                                                        Rule 39(a) (1) requires the presence of all persons who
declaratory judgment interpreting the deed restrictions for
                                                                  have an interest in the litigation so that any relief awarded
Sections Three and Six because property owners from those
                                                                  will effectively and completely adjudicate the dispute. In
sections were not represented in the lawsuit.
                                                                  this case, nothing in the rule precluded the trial court from
      We do not have the benefit of the lower courts' views       rendering complete relief among Northglen and the eight
on jurisdiction because Northglen did not raise the issue         homeowners who had sued for a declaration of rights.
either in the trial court or the court of appeals. Northglen      Although the parties continue to litigate its correctness, the
contends that the doctrine of fundamental error excuses it        trial court's judgment represents a final and complete
from "the usual requirements of preservation of the error or      adjudication of the dispute for the parties who were before
briefing of the ... argument" because the absence of              the court. SeeCaldwell v. Callender Lake Prop. Owners
jurisdiction may be raised for the first time on appeal. We       Improvement        Ass'n,    888 S.W.2d 903,     907
disagree that the absence of parties within the represented       (Tex.App.-Texarkana 1994, writ denied). Rule 39(a) (2)
sections deprived the court of jurisdiction and therefore         relates to situations in which the absent party:
reject Northglen's contention as to Sections One, Two, Four
and Five; however, because no property owners in Sections         Page 163
Three or Six were joined in the suit, we agree with
                                                                  [C]laims an interest relating to the subject of the action and
Northglen that any judgment affecting those sections would
                                                                  is so situated that the disposition of the action in his absence
be advisory.
                                                                  may (i) as a practical matter impair or impede his ability to
                                                                  protect that interest or (ii) leave any of the persons already
     A
                                                                  parties subject to a substantial risk of incurring double,
     No one disputes that the trial court had jurisdiction to     multiple, or otherwise inconsistent obligations by reason of
declare the "rights, status, and other legal relations" for the
his claimed interest.                                                    B

Tex.R. Civ. P. 39.                                                        Sections Three and Six present a different question --
                                                                    does a trial court have jurisdiction to declare the rights of
     Section 37.006(a) of the Declaratory Judgment Act,             parties who are not before the court? A declaratory
which provides that a trial court's declaration does not            judgment requires a justiciable
prejudice the rights of any person not a party to the
proceeding, dispenses with the first of these concerns. See         Page 164
Tex. Civ. Prac. & Rem.Code § 37.006(a). Any non-joined
homeowner would be entitled to pursue individual claims             controversy as to the rights and status of parties actually
contesting Northglen's authority to raise assessments or            before the court for adjudication, and the declaration sought
impose fees, notwithstanding the trial court's judgment in          must actually resolve the controversy. See, e.g.,The M.D.
the current case. [2] SeeCooper, 513 S.W.2d at 204 ("[I]t           Anderson Cancer Ctr. v. Novak, 52 S.W.3d 704, 708
would be rare indeed if there were a person whose presence          (Tex.2001); Texas Workers' Comp. Comm'n v. Garcia, 893
was so indispensable in the sense that his absence deprives         S.W.2d 504, 517-18 (Tex.1995). A judicial decision
a court of jurisdiction ...").                                      reached without a case or controversy is an advisory
                                                                    opinion, which is barred by the separation of powers
     We appreciate the risk that, unless each homeowner is          provision of the Texas Constitution. Tex. Const. art. II, § 1;
joined in one suit, Northglen may be subject to inconsistent        seeSouthwestern Elec. Power Co. v. Grant, 73 S.W.3d 211
judgments. Tex.R. Civ. P. 39(a) (2) (ii). Northglen's               (Tex.2002); Texas Ass'n of Bus. v. Tex. Air Control Bd., 852
dilemma, however, is the product of its own inaction.               S.W.2d 440, 444 (Tex.1993). We must decide, then,
Northglen could have sought relief at trial by urging the           whether there is a case or controversy with respect to these
court, among other things, to abate the case, join absent           sections.
homeowners, or grant special exceptions. See, e.g.,Pirtle v.
Gregory, 629 S.W.2d 919, 920 (Tex.1982); Dahl v.                         Because there are no "plaintiffs" from Sections Three
Hartman, 14 S.W.3d 434, 436 (Tex.App.-Houston [14th                 and Six, there is no person in those sections for whom rights
Dist.] 2000, pet. denied); Adams v. Owens, 519 S.W.2d 260,          could be declared in this declaratory judgment action. As a
261 (Tex.Civ.App.-Beaumont 1975, writ ref'd n.r.e.); Pan            consequence, the trial court was without jurisdiction to
Am. Petroleum Corp. v. Vines, 459 S.W.2d 911, 912                   issue a judgment with respect to those sections, and any
(Tex.Civ.App.1970, writ ref'd n.r.e.); Texaco, Inc. v.              opinion interpreting those sections would be purely
Lettermann, 343 S.W.2d 726, 733 (Tex.Civ.App.-Amarillo,             advisory. Accordingly, we vacate those portions of the
1961, writ ref'd n.r.e.). Instead, it waited until the case         lower courts' judgments relating to Sections Three and Six
reached this Court to first raise the specter of multiple or        and dismiss those claims for want of jurisdiction.
inconsistent judgments.
                                                                         Having resolved Northglen's appellate pleas to the
      Northglen counters that the doctrine of fundamental           jurisdiction, we reach the merits for Sections One, Two,
error excuses its failure to preserve error. However, when          Four and Five.
Rule 39 was amended, a young law professor remarked:
                                                                         III
Henceforth, it will be rare indeed when an appellate court
properly determines that the trial court lacked jurisdiction to          Sections One and Two
adjudicate a dispute when the nonjoining person's absence
                                                                           We first decide whether the deed restrictions for
is raised for the first time on appeal by one of the parties in
                                                                    Sections One and Two, which are identical, allow
the trial court, at least insofar as the judgment affects parties
                                                                    Northglen to assess additional maintenance fees above the
who participated in the trial, directly or indirectly, or who
                                                                    restrictive covenant's express limitation. The restrictions
purposely bypassed the proceedings. The doctrine of
                                                                    provide:
fundamental error should no longer protect persons from the
binding force of judgments when they have had an
                                                                    Each Lot in said Subdivision, when said Lot is certified by
opportunity to raise the absence of the nonjoined person and
                                                                    the Subdivision Engineer to be a completed building site, is
waived it.
                                                                    hereby subjected to an annual maintenance charge and
                                                                    assessment not to exceed $10 per month or $120 per
William V. Dorsaneo, III, Compulsory Joinder of Parties in
                                                                    annum, for the purpose of creating a fund to be designated
Texas, 14 Hous. L.Rev. 345, 369 (1977). We conclude that
                                                                    and and [sic] known as the "maintenance fund", [sic] which
Northglen "had an opportunity to raise the absence of the
                                                                    maintenance charge and assessment will be paid by the
nonjoined person and waived it." Id.; Tex.R.App. P. 33.1.
                                                                    Owner or Owners of each Lot within said Subdivision, and
                                                                    any annexed areas, to Northglen Association in advance
annually, commencing as to all Lots on the first day of the      another provision of that deed restriction which stated
month following their certification of completion. The rate      explicitly that the assessment was "not to exceed" a
at which each Lot will be assessed will be determined            particular amount.
annually by the Board of Directors of Northglen
Association at least thirty (30) days in advance of each              The Northglen deed restrictions subject each property
annual assessment. Said rate and when same is payable may        owner to "an annual maintenance charge and assessment
be adjusted from year to year by said Board of Directors as      not to exceed $10 per month or $120 per annum, for the
the needs of the Subdivision may in the judgment of the          purpose of creating ... the 'maintenance fund'...." (Emphasis
Directors require.                                               added.) The restrictions further provide that "[t]he rate at
                                                                 which each Lot will be assessed will be determined
The restrictions also outline requirements for amendment.        annually" by Northglen, and that "[s]aid rate and when
Article VIII provides that "... the covenants and restrictions   same is payable may be adjusted from year to year by
of this Declaration may be amended during the first forty        [Northglen] as the needs of the Subdivision may in the
(40) year period by an instrument signed by not less than        judgment of [Northglen] require."
ninety percent (90%) of the Lot Owners, and thereafter by
an instrument signed by not less than seventy-five percent            Northglen's argument does not survive the restrictions'
(75%) of the Lot Owners." Therefore, a small number of           plain language. First, the annual assessment is not to exceed
homeowners may exert enormous influence on the extent to         $10 per month or $120 per year. The restrictions do not
which amendments will be adopted. [3]                            require that Northglen charge the maximum amount.
                                                                 Rather, Northglen may charge any amount so long as the
Page 165                                                         amount does not exceed $120 per year. So, if Northglen had
                                                                 been assessing $50 per year and decided the next year that
      Although there are practical hurdles to persuading         $120 was necessary, it has the authority to raise the rates
seventy-five or ninety percent of homeowners to modify the       unilaterally. Second, the deed restrictions neither
restrictions or agree to an additional assessment, it is clear   contemplate nor permit an additional assessment once the
that the restrictions provide a mechanism by which               maintenance fund is whole because the language says
Northglen can assess an annual fee greater than $120. The        plainly that the assessment is not to exceed $10 per month
court of appeals agreed, holding that because the deed           or $120 per year. There is no language permitting an
restriction provided that the annual assessments were "not       additional assessment beyond that which is included in the
to exceed" $10 per month or $120 per annum, Northglen            maintenance fund, aside from the special assessment for
did not have the authority to exceed the stated limits           capital improvements.
without first obtaining the homeowners' consent in
accordance with the restrictions. 76 S.W.3d at 174.              Page 166

      Northglen disputes this holding, arguing that the deed          We hold that the court of appeals correctly concluded
restrictions should be read in three steps. First, the           that Northglen cannot increase assessments beyond the
restrictions create a maintenance fund, for which the            $120 limitation set forth in the deed restrictions, and we
assessment shall not exceed $10 per month or $120 per            affirm that part of the court of appeals' judgment.
annum. Second, when the maintenance fund is created, the
Board of Directors has discretion to determine the rate at            IV
which each lot will be assessed above the $120. Third, the
assessment rate and date payable may be adjusted from year            Sections Four and Five
to year, as the needs of the subdivision require.
                                                                       Northglen argues -- and the court of appeals held --
     In support of its argument, Northglen cites Samms v.        that the deed restrictions permit accumulation of unassessed
Autumn Run Cmty. Improvement Ass'n. 23 S.W.3d 398                increases in maintenance fees for Sections Four and Five.
(Tex.App.-Houston [1st Dist.] 2000, pet. denied). The 76 S.W.3d at 167. Northglen contends, specifically, that
Samms court held that a deed restriction with language           Property Code section 204.010 allows it to accumulate and
similar to Section One and Two granted the homeowners            assess a $430 single-year increase -- raising the assessment
association the authority, from year to year, to determine       from $120 to $550. That section provides:
the rate at which property owners would be assessed. Id. at
                                                                 § 204.010. Powers of Property Owners' Association
402. The court held that the homeowners association had
authority to raise the assessment without limitation because
                                                                 (a) Unless otherwise provided by the restrictions or the
a phrase in the deed restriction said "the rate at which each
                                                                 association's articles of incorporation or bylaws, the
Lot will be assessed ... will be determined annually by the
                                                                 property owners' association, acting through its board of
Board of Directors...." Id. But the court did not discuss
directors or trustees, may:                                     Until January 1 of the year immediately following the date
                                                                of commencement of the first annual assessment as
(16) if the restrictions allow for an annual increase in the    determined by the Board of Directors, the maximum annual
maximum regular assessment without a vote of the                assessment shall be $120.00 per Lot. From and after the
membership, assess the increase annually or accumulate and      first day of January of the year immediately following the
assess the increase after a number of years.                    date of commencement of the first annual assessment, the
                                                                maximum annual assessment may be increased by the
Tex. Prop.Code § 204.010.                                       Board of Directors of the Association, effective the first day
                                                                of January of each year, in conformance with the rise, if
     The property owners counter that the trial court
                                                                any, in the Consumer Price Index for Urban Wage Earners
properly interpreted Sections Four and Five as to allowable
                                                                and Clerical Workers published by the Department of
increases. They argue that by limiting the annual
                                                                Labor, Washington, D.C., or any successor publication, for
assessment increase to ten percent, the deed restrictions
                                                                the preceding month of July or alternatively, by an amount
"otherwise provide" that accumulation is not permitted. We
                                                                equal to a ten percent (10%) increase over the prior
examine the competing contentions first by analyzing the
                                                                years [sic] annual assessment, whichever is greater,
deed restrictions and then by determining the extent to
                                                                without a vote of the Members of the Association. The
which they are affected by the Property Code.
                                                                maximum annual assessment may be increased above that
     A                                                          established by the Consumer Price Index formula or the
                                                                above-mentioned percentage increase only by approval of
     Determining whether the statute applies requires an        two-thirds (2/3rds) of each class of Members in the
understanding of the deed restrictions. The deed restrictions   Association present and voting at a meeting duly called for
for Section Four provide:                                       this purpose. In lieu of notice and a meeting of Members as
                                                                provided by the By-Laws of the Association, a door to door
Until January 1 of the year immediately following the           canvass may be used to secure the written approval of
conveyance of the first Lot to an Owner, the maximum            two-thirds (2/3rds) of each class of Members for such
annual assessment shall not exceed Ten ($10.00) Dollars         increase in the annual assessment or in the special
per month, or One Hundred Twenty ($120.00) Dollars per          assessment for capital improvements as provided.... After
annum, per lot; provided, however, that from and after          consideration of current maintenance costs and future needs
January 1 immediately following the conveyance of the first     of the Association, the Board of Directors may fix the
Lot to an Owner, the Board of Directors of the Association      annual assessment at an amount not in excess of the
shall be empowered to increase said rate as the needs of the    maximum amount approved by the Members.
Association require; except that if any such increase shall
cause the annual assessment to be greater than the              (Emphasis added.)
aforesaid $120.00 plus the rise, if any, of the Consumer
                                                                     Both Sections Four and Five maintain an initial $120
Price Index as published by the United States
                                                                per annum limit on assessments, followed by discretionary
Department of Labor for the preceding month of July;
                                                                increases of up to ten percent or the rise in the Consumer
or more than One Hundred Ten (110%) percent of the
                                                                Price Index, whichever is greater. Those increases are tied
amount assessed in the preceding calendar year,
                                                                to the previous year's assessment.
whichever is greater, then shall such an increase require
the vote of two-thirds (2/3) of each class of Members of
                                                                     B
the Association who are voting in person or by proxy, at a
meeting duly called for that purpose.                                 We now consider how the Texas Property Code
                                                                applies to the preceding deed restrictions. One of the stated
(Emphasis added.)
                                                                purposes in chapter 204 is to provide a mechanism "to
      Section Four thus permits an increase of ten percent      readily facilitate increases in the amount of the regular or
more than the previous year's assessment, and a greater         special assessments to allow the property owners'
increase if the Consumer Price Index is higher. The             associations to better provide services to the subdivisions."
restriction requires a vote of the homeowners to raise the      Tex. Prop.Code § 204.001 historical note, [Act of May 27,
assessment beyond those amounts.                                1995, 74th Leg., R.S., ch. 1040, § 1, 1995 Tex. Gen. Laws
                                                                5170, 5171]. The Legislature observed that severe
    The restrictions for Section Five are similar to Section    restrictions on the ability to adjust regular assessments
Four:                                                           "may result in the inability of an ineffective property
                                                                owners' association to maintain common area facilities,
Page 167                                                        including swimming pools, tennis courts, clubhouses,
                                                                greenbelt areas, or jogging trails, or to provide services,
including streetlights, security, architectural control, and      so, whether such a construction violates the Contract Clause
deed restriction enforcement." Id. Read in isolation, the         of the U.S. or Texas Constitution. The trial court held that
legislature's preamble to section 204 offers some support         Northglen could charge a late fee under section 204.010(a)
for Northglen's argument that it has the authority to             (10), and the court of appeals affirmed. Both courts noted
accumulate previously unassessed fee increases beyond the         that the deed restrictions did not expressly prohibit late fees
maximum stated in the restrictions to maintain common             nor limit penalties to the interest charge. We hold that
facilities or to provide services. The Legislature, however,      Northglen may charge a $35 late fee and that such a charge
inserted a caveat that governs here: the statutory provision      is constitutional.
permitting accumulation does not apply if the deed
restrictions "otherwise provide." Tex. Prop.Code § 204.010.            A

     In this case, the Northglen deed restrictions for                  The homeowners argue that permitting Northglen to
Sections Four and Five "otherwise provide" that                   unilaterally assess late charges would defeat the purpose of
accumulation is not permitted. Section Four limits the ten        the deed restrictions, which already impose a six percent
                                                                  interest charge for nonpayment. Additionally, the
Page 168                                                          homeowners argue that by expressly including the interest
                                                                  charge in the restrictions, the homeowners necessarily
percent increase to "the amount assessed in the preceding         rejected late charges, under the doctrine of expressio unius
calendar year." (Emphasis added.) Section Five also limits        est exclusio alterius (to include one thing implies the
the "increase over the prior years [sic] annual assessment."      exclusion of the other). Black's Law Dictionary 602 (7th
(Emphasis added.) The natural consequence of each                 ed.1999).
restriction's language is that if the annual assessment for
this year is $120, then next year's assessment may not be              The court of appeals disagreed with the homeowners'
raised to the $550 that Northglen seeks. Rather, next year's      argument and held that Northglen could assess late charges.
assessment may be no more than $132. By specifically              The court considered the language of section 204.010(a)
tying any increase to the previous year's annual assessment,      (10), which provides, in pertinent part:
the deed restrictions do not permit accumulation over
multiple years.                                                   (a) Unless otherwise provided by the restrictions or the
                                                                  association's articles of incorporation or bylaws, the
      Additionally, in Section Four, Northglen may increase       property owners' association, acting through its board of
fees beyond the limits by receiving a "vote of two-thirds         directors or trustees, may:
(2/3) of each class of Members of the Association who are
voting in person or by proxy, at a meeting duly called for        (10) impose interest, late charges, and, if applicable,
that purpose." In Section Five the Board must receive             returned check charges for
"approval of two-thirds (2/3rds) of each class of Members
in the Association present and voting at a meeting duly           Page 169
called for this purpose." Although a two-thirds vote may be
                                                                  late payments      of   regular    assessments    or   special
difficult to achieve, the deed restrictions offer Northglen a
                                                                  assessments.
procedure for increasing fee assessments beyond the
ten-percent limit other than accumulation. The voting
                                                                  Tex. Prop.Code § 204.010(a) (10). The court held that this
mechanism, combined with the increase being tied to the
                                                                  statutory language granted Northglen authority to assess the
previous year's assessment, establishes that the deed
                                                                  late charge in the absence of specific language to the
restrictions "otherwise provide."
                                                                  contrary. Because the deed restrictions do not mention late
                                                                  charges specifically, the court held that silence could not
    Because we conclude that the statute does not permit
                                                                  mean "otherwise provide." 76 S.W.3d at 174.
accumulation or fee increases above the deed restrictions,
we need not address Brooks's contention that the statute's              We agree that nothing in the Northglen deed
accumulation provisions are unconstitutional.
                                                                  restrictions could be considered "otherwise providing."
                                                                  Each deed restriction contains the same provision for failing
     V
                                                                  to pay assessments:
     Late Fees
                                                                  Effect of Non-payment of Assessments: Remedies of the
      We next consider whether section 204.010(a) (10)            Association. Any assessment not paid within thirty (30)
authorized Northglen to impose a $35 late charge, in              days after the due date shall bear interest from the due date
addition to the interest charge included in the deed              at the rate of six percent (6%) per annum. The Association
restrictions, for failure to pay the annual assessments, and if   may bring an action at law against the Owner personally
obligated to pay the same, or foreclose the lien against the      remove any contractual obligation. If the statute required
property. No Owner may waive or otherwise escape                  the assessment of late fees where late fees were expressly
liability for the assessments provided for herein by non-use      prohibited by the deed restrictions, this would likely be a
of any Common Area or abandonment of his Lot.                     different case. SeeTravelers' Ins. Co. v. Marshall, 124 Tex.
45, 76 S.W.2d 1007 (1934) (discussing statutes that declare
Contrary to Brooks's argument, the deed restrictions do not       a complete moratorium on particular contracts). We are not
say the penalties are the exclusive remedies for late             faced with that circumstance here. Thus, applying the
payments, nor do they say that late charges are not               statute to authorize a late fee is not unconstitutional.
permitted. The deed restrictions only set the rate at which
Northglen may charge interest on unpaid assessments.                   VI

      When construing a statute, the Court must presume                Foreclosure
that every word of the legislation has meaning. Riverside
Nat'l Bank v. Lewis, 603 S.W.2d 169, 173 (Tex.1980). The                Because we hold that Northglen may charge late fees
statute unequivocally says the Board may impose both              for unpaid fee assessments, we must address whether it has
interest charges and late charges. That the deed restriction      the authority to foreclose on the homestead if a property
mentions interest charges but not late charges is not             owner fails to pay the late fee. This Court has clarified that
sufficient to "otherwise provide."                                Texas' homestead laws authorize a homeowners association
                                                                  to foreclose on homesteads for the nonpayment of fee
     B                                                            assessments. Inwood Homeowners' Ass'n v. Harris, 736
S.W.2d 632, 635-36 (Tex.1987). In Inwood, we considered
      Brooks argues that the assessment of a late fee would       whether the homestead laws of Texas protect a homeowner
violate the U.S. [4] and Texas [5] Constitutions'                 against foreclosure for failure to pay homeowners
impairment-of-contracts provisions because the deed               association assessments. Id. at 633. As a general rule, a
restrictions do not provide for late fees. The court of           homestead is protected against the debts of those who live
appeals examined the constitutionality of the statute and         in the homestead. Id. at 634. However, the deed restrictions
held that Section 204.010 "is not directed to any specific        for the subdivision included a vendor's lien permitting
kind of contracts, and it does not directly contradict any        foreclosure on the homestead for failure to pay the fee
contractual provision...." 76 S.W.3d at 168. The court            assessment. Id. at 633. Because the property owner had
further noted that the statute is a permissible exercise of the   notice when purchasing the property that a lien attached to
State's police power because "it was enacted to promote the       the land, we held that foreclosure was permissible. Id. at
public welfare with regard to the property owners                 635-36.
associations' ability to better provide services to the
homeowners, maintain the common area facilities, and                    The court of appeals, in our case, focused on the notice
provide for the common security and restriction                   requirement and held that foreclosure was not a potential
enforcement." Id. at 168-69. We agree and hold that the           remedy against unpaid late charges. 76 S.W.3d at 175. The
same rationale applies to the late fees imposed pursuant to       court noted that the lien to enforce the late charges attached
chapter 204.                                                      to the property after the homestead was acquired because
                                                                  late charges were not included in the deed restriction. Id.
      A statute is presumptively constitutional. Barshop v.
Medina Cty. Underground Water Conservation Dist., 925                   The court cited as authority an Attorney General
S.W.2d 618, 625 (Tex.1996). As such, we are obligated to          opinion that said costs imposed upon property owners
avoid constitutional problems if possible. Id. In this case,      because of Chapter 204, which were not part of the deed
we must consider two factors: first, whether the                  restriction, could not be enforced through foreclosure. Id.
                                                                  (citing Tex. Att'y Gen. Op. LO-97-019 (1997)). The
Page 170                                                          Attorney General concluded that, in determining whether
                                                                  foreclosure is a remedy, the issue is "whether the lien for
statute substantially impairs the contract; and second, if so,    those costs (i) attached to the property prior to the
whether the Legislature acted within its police powers in         homestead right and (ii) is the result of a restriction that
enacting the legislation. SeeAllied Structural Steel Co. v.       runs with the land." Tex. Att'y Gen. Op. LO-97-019. The
Spannaus, 438 U.S. 234, 244-45, 98 S. Ct. 2716, 57 L.Ed.2d         court of appeals considered the two elements and held that
727 (1978).                                                       because late charges were not part of the deed restrictions
                                                                  but rather a function of the statute, Northglen could not
       Section 204.010 does not substantially impair
                                                                  foreclose for failure to pay late charges. 76 S.W.3d at
Northglen's deed restrictions. The statute operates only
                                                                  175-76.
where the deed restrictions do not "otherwise provide." Tex.
Prop.Code § 204.010. It does not serve to withdraw or
     Northglen argues that a developer has the authority to             Attorney's Fees
create liens to ensure the payment of fee assessments, and
under Inwood, an appropriate remedy for failure to pay                 The final issue is whether the property owners should
assessments is foreclosure. Northglen also contends that          be awarded attorney's fees. The trial court declined to award
because property                                                  attorney fees, finding that "the parties each had legitimate
                                                                  interests to pursue." The court of appeals affirmed, holding
Page 171                                                          that "[i]n the judgment we render, neither side would be
                                                                  considered a prevailing party." 76 S.W.3d at 176. The
owners were aware that delinquent assessments would be            Declaratory Judgment act permits a court to "award costs
subject to late charges, in the form of an interest charge, the   and reasonable and necessary attorney's fees as are
property owners had actual notice sufficient to satisfy           equitable and just." Tex. Civ. Prac. & Rem.Code §§ 37.009.
Inwood. Thus, because the property owners had actual              Although we reverse
notice, Northglen asserts, the late charge should also run
with the land as the interest charge does.                        Page 172

      We disagree with Northglen and agree with the court         part of the court of appeals' judgment, the basis for the trial
of appeals. Northglen's argument essentially amends the           court's decision for denying fees -- that each side pursued
deed restrictions to include both late fees and interest          legitimate interests -- has not changed. Accordingly, we
charges. But the restrictions did not provide any notice that     will not disturb the trial court's discretionary decision in that
a late fee would be imposed in addition to the interest           regard. We affirm the court of appeals' judgment on
charge. As a result, the property owners did not have notice      attorney's fees.
of the late charge. Therefore, in light of Inwood 's notice
requirement, foreclosure is not an appropriate remedy for a             IX
failure to pay the late charge. [6]
                                                                        Conclusion
     VII
                                                                       We (1) affirm the court of appeals' judgment as to the
     Non-profit Corporation Act                                   increased assessments in Sections One and Two, the
                                                                  assessment of late fees, and foreclosure; (2) reverse the
       Northglen challenges that portion of the trial court's     court of appeals' judgment and render judgment as to
judgment providing that "the bylaws may only be amended           accumulation of fee increases under Sections Four and Five;
by the members...." Northglen argues that, even absent            (3) vacate the trial court's and the court of appeals'
Property Code chapter 204, it had the authority to increase       judgments as to Sections Three and Six and dismiss for
assessments because it may amend the deed restrictions            want of jurisdiction Brooks's claim as to those sections; and
unilaterally under the Texas Non-Profit Corporation Act.          (4) affirm the court of appeals' judgment regarding
Tex.Rev.Civ. Stat. art. 1396-1.01 et seq. That statute            attorney's fees. Tex.R.App. P. 60.2(a), (c), (e).
provides, among other things, that a board of directors has
the authority to amend bylaws unless the articles of              ---------
incorporation reserve the power exclusively to the
members. We cannot reach this issue. Northglen did not file       Notes:
a notice of appeal from the trial court's judgment, did not
                                                                  [1] Chapter 204 applies to residential real estate
notice a cross-appeal, and did not petition this court for
                                                                  subdivisions in a county with a population of 2.8 million or
review on the point. Accordingly, Northglen did not
                                                                  more. Tex. Prop.Code § 204.002. According to the 2000
preserve this issue for our review. Tex.R.App. P. 25.1(c)
                                                                  U.S. Census, of the 254 counties in Texas, only Harris
("[A] party who seeks to alter the trial court's judgment or
                                                                  County comes within the chapter's purview. 2000 United
other appealable order must file a notice of appeal.... The
                                                                  States             Census,            available           at
appellate court may not grant a party who does not file a
                                                                  http://quickfacts.census.gov/qfd/states/48/48201.html.
notice of appeal more favorable relief than did the trial
court except for just cause."), 53.1 ("A party who seeks to
                                                                  [2] Despite the notoriety this dispute engendered in the
alter the court of appeals' judgment must file a petition for
                                                                  neighborhood, the record does not disclose that any other
review."); see alsoDean v. Lafayette Place (Section One)
                                                                  homeowners filed suit or were otherwise disposed to contest
Council of Co-Owners, Inc., 999 S.W.2d 814, 818                   Northglen's actions.
(Tex.App.-Houston [1st Dist.] 1999, no pet.).
                                                                  [3] A similar, though less onerous, supermajority is
     VIII                                                         required to charge a special assessment in a given year. The
restrictions provide that Northglen may:

[l]evy, in any assessment year, a special assessment
applicable to that year only for the purpose of defraying, in
whole or in part, the cost of any acquisition, construction,
reconstruction, repair or replacement of a capital
improvement ... provided that any such assessment shall
have the assent of two-thirds (2/3rds) of the votes of each
class of members....

(Emphasis in original.)

[4] "No State shall ... pass any Bill of Attainder, ex post
facto Law, or Law impairing the Obligation of Contracts...."
U.S. Const. art. I, § 10.

[5] "No bill of attainder, ex post facto law, retroactive law,
or any law impairing the obligation of contracts shall be
made." Tex. Const. art. I, § 16.

[6] We express no opinion on the court of appeals' holding
that "any new type of assessment ... or attorney's fee that is
imposed solely through the authority of Chapter 204 of the
Texas Property Code cannot be enforced by foreclosure
against a homestead." 76 S.W.3d at 175. Inasmuch as we
have reversed the court of appeals' judgment regarding
accumulation, we need not decide whether foreclosure
would be an appropriate remedy for accumulated
assessments. Similarly, attorney's fees imposed through
Chapter 204 are not at issue in this case.

---------
Page 386                                                             The summary judgment record reflects the following.
                                                                On January 27, 1999, VidiMedix
184 S.W.3d 386 (Tex.App.—Austin 2006)
                                                                Page 388
MID-SOUTH                    TELECOMMUNICATIONS
COMPANY, Appellant,                                             executed a "Convertible Promissory Note" (the "Note") in
                                                                favor of Mid-South for $250,000. The Note was made
v.                                                              payable on or before December 31, 1999. Paragraph 3 of
                                                                the Note, titled "Default," provided that VidiMedix "will be
Norman K. BEST and Philip W. Faris, Jr., Appellees.             deemed in default under this Note if [it] fails to meet its
                                                                payment obligations hereunder." On the same date, in
No. 03-04-00586-CV.
                                                                consideration for the loan and Note, four guarantors,
                                                                including Faris and Best, [1] executed a guaranty under
Court of Appeals of Texas, Third District, Austin.
                                                                which
January 27, 2006
                                                                each of the undersigned guarantors. .. hereby severally,
   FROM THE DISTRICT COURT OF TRAVIS                            unconditionally and irrevocably guarantees the prompt and
COUNTY, 200TH JUDICIAL DISTRICT NO. GN401565,                   complete payment of all amounts [VidiMedix] owes to
HONORABLE ROSE SPECTOR, JUDGE PRESIDING                         [Mid-South] under the Note, in strict accordance with its
                                                                terms.
Page 387
                                                                Each guarantor agreed to be liable for a specified pro-rata
      W. Michael Stephens, Thomas W. Stephens, Houston,         share of the unpaid debt and accrued interest. Best and
for appellant.                                                  Faris's shares were 8.1% and 2.36%, respectively. Further,
                                                                each guarantor explicitly waived any right to require
     James G. Ruiz, Winstead Sechrest & Minick, PC,             Mid-South to proceed first against VidiMedix, to exhaust
Austin, for appellees.                                          any security held by VidiMedix, or to exercise any other
                                                                remedy Mid-South might possess before seeking recovery
   Before Justices B.A. SMITH, PURYEAR and                      from them.
PEMBERTON.
                                                                     Paragraph 6 of the Guarantee provided:
     OPINION
                                                                One or more of the following shall constitute an Event of
     BOB PEMBERTON, Justice.                                    Default under the Guaranty[:] if Guarantor purports to
                                                                revoke or otherwise avoid any obligation under this
      This case presents the issue of when a creditor's claim
                                                                Guaranty; or if a Guarantor dies, becomes insolvent,
against a guarantor of a debt accrues. Norman K. Best and
                                                                commences or has commenced against him an action under
Philip W. Faris, Jr. were among the guarantors of a loan
                                                                the United States Bankruptcy Code, becomes subject to any
from Mid-South Telecommunications Company to
                                                                criminal prosecution, suffers a judgment or judgments for
VidiMedix Corporation. After VidiMedix defaulted on the
                                                                the payment of money individually or in the aggregate in
loan when it came due on December 31, 1999, Mid-South
                                                                excess of $100,000, or suffers any portion of his assets to be
demanded payment from the guarantors. Eventually, in May
                                                                attached, seized or levied upon; or any circumstances
2004, Mid-South sued Best and Faris, asserting a
                                                                arising causing [Mid-South] in good faith, to become
breach-of-contract claim for failure to perform under the
                                                                insecure as to the satisfaction of any of Guarantors'
Guaranty. Mid-South sought summary judgment on that
                                                                obligations under this Guaranty.
claim. Best and Faris filed both a response and a
cross-motion for summary judgment raising the four-year                It is undisputed that VidiMedix defaulted on the Note
statute of limitations. See Tex. Civ. Prac. & Rem. Code         when it became due on December 31, 1999. On April 26,
Ann. § 16.004(a)(3) (West 2002). The district court denied      2000, Michael Stephens, attorney for Mid-South, sent a
Mid-South's motion and granted that of Best and Faris,          letter to VidiMedix (through Faris, its President and CEO)
finding that Mid-South's claims were barred. For the            demanding payment of all principal and accrued interest
reasons stated below, we will affirm.                           due on the Note. On the same day, Stephens also sent letters
                                                                to both Faris and Best demanding payment of their
     BACKGROUND
                                                                respective pro-rata percentages of principal and accrued
interest for which they were each liable under the               cross-motion for summary judgment, finding that
Guaranty.[2] Subsequently, on June 15, 2000, Michael L.          Mid-South's claims were barred, denied Mid-South's
Patrick, Mid-South's Executive Vice-President, wrote Faris,      motion, and rendered a take-nothing judgment in favor of
as VidiMedix's president and CEO, "relative to our               Best and Faris. This appeal followed.
concerns in how you, on behalf of VidiMedix, have handled
our Note." Patrick stated that Mid-South had granted a                DISCUSSION
three-month extension of the note's due date to March 2000,
that VidiMedix had still not performed, that Faris had                Mid-South presents a single issue on appeal: whether
subsequently indicated that VidiMedix was experiencing           the district court erred in determining that Mid-South's
financial difficulties and would likely file for bankruptcy,     breach-of-contract claim accrued more than four years
and that Faris had advised that the guarantors could not         before it filed suit so as to be barred by limitations. See
honor the Guaranty. Patrick added that Faris had been            Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(3).
furtive and misleading in his communications with
                                                                      Standard of review
Mid-South. Patrick suggested that if the guarantors would
restructure the Guaranty, "likely Mid-South will consent to
                                                                       We review the district court's summary judgment de
converting the Note into eMedSoft.com shares on the same
                                                                 novo. Valence Operating Co. v. Dorsett, 164 S.W.3d 656,
basis as other Bridge Noteholders."
                                                                 661 (Tex. 2005); Provident Life & Accident Ins. Co. v.
                                                                 Knott, 128 S.W.3d 211, 215 (Tex. 2003). When reviewing a
Page 389
                                                                 summary judgment, we take as true all evidence favorable
       The record reflects further negotiations between          to the nonmovant, and we indulge every reasonable
Mid-South and the guarantors over the ensuing four years.        inference and resolve any doubts in the nonmovant's favor.
It is undisputed, however, that neither Faris nor Best ever      Valence Operating Co., 164 S.W.3d at 661; Knott, 128
performed their obligations under the Guaranty. Mid-South        S.W.3d at 215; Science Spectrum, Inc. v. Martinez, 941
ultimately filed suit against Faris and Best on May 17,          S.W.2d 910, 911 (Tex. 1997). Summary judgment is proper
2004, for breach of contract based on their failure to           when there are no disputed issues of material fact and the
perform under the Guaranty. Faris and Best answered with         movant is entitled to judgment as a matter of law. Tex. R.
a general denial and the affirmative defense that the            Civ. P. 166a(c); Shell Oil Co. v. Khan, 138 S.W.3d 288,
four-year statute of limitations barred Mid-South's claims.      291 (Tex. 2004) (citing Knott, 128 S.W.3d at 215-16).
See Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(3) (suit        When, as here, both parties move for summary judgment
on debt must be filed not later than four years after cause of   and the district court grants one motion and denies the
action accrues).                                                 other, we review the summary-judgment evidence presented
                                                                 by both sides, determine all questions presented,
       Mid-South moved for summary judgment as to both
liability and damages on its claims against Faris and Best.      Page 390
Faris and Best filed a cross-motion for summary judgment
                                                                 and render the judgment the district court should have
and a response to Mid-South's motion, relying on their
                                                                 rendered. Texas Workers' Comp. Comm'n v. Patient
limitations defense and their affidavits that neither ever
                                                                 Advocates of Tex., 136 S.W.3d 643, 648 (Tex. 2004); FM
made payments in accordance with the Guaranty. Best and
                                                                 Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872
Faris contended that, as a matter of law, Mid-South's
                                                                 (Tex. 2000).
breach-of-contract claims against them accrued on
December 31, 1999, the date that VidiMedix defaulted on
                                                                      Best and Faris' summary judgment motion
the Note. Mid-South countered that, under the terms of the
Guaranty, its claims accrued only upon an "Event of                    We will consider first whether the district court erred
Default" defined in paragraph 6 of the agreement and that        in granting summary judgment for Best and Faris. Best and
Best and Faris failed to conclusively establish that such an     Faris sought summary judgment on the ground that "[t]he
event occurred earlier than four years before Mid-South          statute of limitations bars Mid-South's claims."[4] There is
filed suit. According to Mid-South, the earliest evidence in     no dispute that this case is governed by the four-year statute
the summary judgment record of an Event of Default was           of limitations for suits on debts, see Tex. Civ. Prac. & Rem.
its June 15, 2000 letter to Faris, which it characterized as a   Code Ann. §16.004(a)(3), or that this provision required
memorialization of "circumstances arising causing                Mid-South to bring its breach-of-contract action no later
[Mid-South] in good faith, to become insecure as to the          than four years after the day its cause of action accrued. The
satisfaction of any of Guarantors' obligations under this        parties' dispute centers on the date on which Mid-South's
Guaranty."[3]                                                    cause of action accrued. When a cause of action accrues is a
                                                                 question of law. Moreno v. Sterling Drug, 787 S.W.2d 348,
     The    district   court   granted   Best   and    Faris's
                                                                 351 (Tex. 1990). A cause of action generally accrues at the
time when facts come into existence that authorize a             tends to denote an absolute guaranty, or one made
claimant to seek a judicial remedy. Murray v. San Jacinto        contingent solely upon the default of the principal obligor.
Agency, Inc., 800 S.W.2d 826, 828 (Tex. 1990).                   See Universal Metals & Mach., Inc. v. Bohart, 539 S.W.2d
874, 877-78 (Tex. 1976). Under an absolute guaranty, a
      Best     and    Faris    argue    that    Mid-South's      guarantor is primarily liable on the underlying obligation;
breach-of-contract claim accrued on December 31, 1999,           thus, "[t]he terms of the note must be examined to ascertain
when the Note matured and VidiMedix defaulted on its             the guarantor's obligations under his unconditional
repayment obligation. Best and Faris do not purport to           guarantee, for by that guaranty he agrees to pay the
adopt the date at which Mid-South's claim under the Note         instrument according to its terms if it is not paid when due."
against VidiMedix accrued, nor are they attempting to            Hopkins v. First Nat'l Bank at Brownsville, 551 S.W.2d
incorporate any limitations defense that VidiMedix might         343, 345 (Tex. 1977); see Reece v. First State Bank of
have asserted against such a claim. See, e.g., Beddall v.        Denton, 566 S.W.2d 296, 297 (Tex. 1978).
Reader's Wholesale Distribs., Inc., 408 S.W.2d 237, 240
(Tex. Civ. App.--Austin 1966, no writ) (where guarantor                Each guarantor also explicitly waived "all
can be sued independently from principal obligor, guarantor      presentments, demands for performance, notices of
cannot invoke principal obligor's limitation's defense); see     performance, protest, notices of protest, notices of dishonor,
also Willis v. Chowning, 90 Tex. 617, 40 S.W. 395, 396-97        and notices of acceptance of the Guaranty and its existence,
(1897) (in cases where surety could be sued without joining      creation, or incurring of new or additional indebtedness"
principal, surety could not assert maker's limitations           and any right to require Mid-South to proceed against
defense on note); Western Casket Co. v. Estrada, 116 S.W.        VidiMedix, to exhaust any security interest held by
113, 113-14 (Tex. Civ. App.--El Paso 1909, no writ)              VidiMedix, or to seek any other remedy. See, e.g., Ocean
(applying principles announced in Willis to guarantors).         Transp., Inc. v. Greycas, Inc., 878 S.W.2d 256, 267-68
Instead, to determine when Mid-South's claim against them        (Tex. App.-Corpus Christi 1994, writ denied). Thus,
accrued, Best and Faris recognize that we must look to the       demand was not an integral part of the cause of action or a
source of their obligations to Mid-South--the terms of the       condition precedent to Mid-South's right to enforce the
guarantee. See Vastine v. Bank of Dallas, 808 S.W.2d 463,        Guaranty. See id.
464 (Tex. 1991); Wiman v. Tomaszewicz, 877 S.W.2d 1, 6
(Tex. App.--Dallas 1994, no writ).                                     Paragraph 6 defines an "Event of Default" under the
                                                                 Guaranty: if a guarantor "purports to revoke or otherwise
      We construe a guaranty as any other contract. The          avoid any obligation under this Guaranty," dies, becomes
construction of a contract is a question of law for the court.   insolvent, commences bankruptcy or has bankruptcy
Buys v. Buys, 924 S.W.2d 369, 372 (Tex. 1996). We                commenced against him, is criminally prosecuted, incurs a
examine the entire document and consider each part with          money judgment greater than $100,000, has assets attached,
every other part so that the effect and meaning of one part      seized, or levied upon; or "any circumstances aris[e]
on any other part may be determined. Heritage Res. v.            causing [Mid-South] in good faith, to become insecure as to
NationsBank, 939 S.W.2d 118, 121 (Tex. 1996); Steeger v.         the satisfaction of any of Guarantors' obligations under this
Beard Drilling, Inc., 371 S.W.2d 684, 688 (Tex. 1963). We        Guaranty." Construing paragraph 6 in the context of the
interpret the contract by ascertaining the true objective        Guaranty as a whole, seeColumbia Gas Transmission Corp.,
intentions of the parties, based on the contract language. 940 S.W.2d at 589, we find that it operates to identify acts
SAS Inst, Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex.         and omissions that constitute a failure to perform under the
2005). We presume that the parties to a contract intend          Guaranty, but it does not limit the central promise that Best
every clause to have some effect. Heritage Res., 939             and Faris made concerning "the prompt and complete
S.W.2d at 121; Ogden v. Dickinson State Bank, 662 S.W.2d         payment of all amounts that Borrower owes [Mid-South]
330, 331 (Tex. 1983). We                                         under the Note, in strict accordance of its terms." In other
                                                                 words, Best and Faris made themselves bound, when
Page 391                                                         guaranteeing the loan, to the payment obligations of the
                                                                 Note. Paragraph 6, then, adds events that could constitute
give words their plain, common, or generally accepted            an event of default on the part of a guarantor that do not
meaning unless the instrument shows that the parties used        arise from the terms of the Note itself. In the end, the
them in a technical or different sense. Heritage Res., 939       guarantors had a payment obligation immediately upon
S.W.2d at 121.                                                   VidiMedix's default and, from that point forward, were in
                                                                 breach of that obligation as long as they failed to perform.
       Under the Guaranty, Best and Faris "unconditionally
                                                                 Cf.Ocean Transp., 878 S.W.2d at 268.
and irrevocably" guaranteed "the prompt and complete
payment" of VidiMedix's obligations under the Note "in                All parties agree that VidiMedix defaulted on the Note
strict accordance with its terms." This type of language         on December 31, 1999. Best and Faris became obligated to
make payment under the terms of their guaranty agreements
on that date. Thus, Mid-South's claim against Best and Faris
accrued on December 31, 1999. Other than its reliance on
paragraph 6, Mid-South did not present any grounds for
finding a later accrual date. Accordingly, the district court
did not err in granting summary

Page 392

judgment for Best and Faris and denying Mid-South's
motion.

      CONCLUSION

     We affirm the district court's grant of summary
judgment in favor of Best and Faris.

---------

Notes:

[1] The record indicates that each guarantor was a principal
of VidiMedix. Faris was the company's president and CEO.

[2] The letter indicates that Stephens also enclosed a copy
of the demand letter he had sent to VidiMedix.

[3] Alternatively, Mid-South suggested that limitations did
not begin to run until it filed its petition on May 17, 2004.

[4] Best and Faris also asserted as a summary judgment
ground that a contractual waiver of limitations within the
Guaranty was void and unenforceable. Mid-South did not
dispute this proposition in the district court, nor has it
attempted to invoke the waiver on appeal.

---------
Page 936                                                         recover from defendant the sum of $500 for damages; and
                                                                 (2) that 'a strip of land thirty feet wide for each right-of-way
187 S.W.2d 936 (Tex.Civ.App. 1945)                               grant will be sufficient and reasonable for all use by the
                                                                 defendant under its easements, that plaintiffs have no
LONE STAR GAS CO.                                                adequate remedy at law in the premises, and that the writ of
                                                                 injunction prayed for by plaintiffs should issue as herein
v.
                                                                 decreed.' The court awarded the $500 to plaintiffs, with
                                                                 interest and costs, and permanently enjoined defendant
CHILDRESS et ux.
                                                                 from using under its right-of-way grants (and specifically
No. 2638.                                                        referred to instruments evidencing such grants and the
                                                                 recording thereof) 'a strip of land in excess of thirty feet in
Court of Civil Appeals of Texas, Waco.                           width constituting each right-of-way in all of its operations
                                                                 thereon; said defendant, its agents and employees, are
May 17, 1945                                                     further permanently enjoined from using any gate or gates
                                                                 owned by the plaintiffs and not located upon defendant's
     Appeal from District Court, Eastland County; Floyd          aforesaid rights-of-way.' No request was made for findings
Jones, Judge.                                                    of fact and conclusions of law and none was filed.

       Action by D. L. Childress and wife against Lone Star             Points 1 to 5 inclusive assail the judgment
Gas Company for damages alleged to have been done by             substantially to the effect that the court erred in finding that
defendant when it removed one of its pipe lines from             a strip of land thirty feet wide for each right-of-way granted
plaintiff's land, and to enjoin defendant from using any         will be sufficient for all use by the defendant under its
portion of their land not included in right of way deed. The     easements; that plaintiffs have no adequate remedy at law in
trial court awarded plaintiffs $500 damages and granted the      the premises, and that the writ of injunction should issue;
injunction, and defendant appeals.                               and in permanently enjoining defendant from using a strip
                                                                 of land in excess of thirty feet in width; and in permanently
     Judgment granting injunction reversed, and judgment
                                                                 enjoining defendant from using fence gates located on the
awarding damages affirmed.
                                                                 lands covered by defendant's right-of-way deeds but not
                                                                 located upon such thirty foot strip; that such decree in effect
      Conner & Conner, of Eastland, and Marshall
                                                                 reforms the right-of-way deeds and that the pleadings do
Newcomb, Warren J. Collins, and J. L. Toone, all of Dallas,
                                                                 not warrant or support the reformation. We sustain these
for appellant.
                                                                 contentions.
     Turner & Seaberry, of Eastland, for appellee.
                                                                       The defendant, by right-of-way deeds, duly recorded,
Page 937                                                         acquired the right to construct, maintain and operate pipe
                                                                 lines as well as telegraph and telephone lines in connection
     TIREY, Justice.                                             therewith and to build future pipe and telegraph and
                                                                 telephone lines over and through the land in question prior
      The plaintiffs brought this suit against the defendant     to the time of the purchase of any part of the lands by the
to recover certain items of damage alleged to have been          plaintiffs. Defendant constructed two pipe lines, one 10
done by defendant when it removed one of its pipe lines          inches and the other twelve inches in diameter, and
from their land and to enjoin defendant from using any           telephone wires over said property prior to the time
portion of their land 'not included in defendant's               plaintiffs acquired the same. The provisions of said
right-of-way and from using any gate or gates owned by the       right-of-way deeds are identical except as to grantors,
plaintiffs and not located upon the right-of-way, and from       consideration and description of the land covered. We quote
using any portion of said premises for any purpose not           the pertinent parts of one of the deeds:
contemplated by the right-of-way deed or deeds.' A jury
failed to reach a verdict and a mistrial resulted. The parties        'That for and in consideration of Thirty and 50/100
then agreed to submit the case to the trial court upon the       ($30.50) Dollars to the undersigned, J. M. Ray and wife, L.
record made during the jury trial.                               V. Ray (herein styled Grantor, whether one or more) paid,
                                                                 the receipt of which is hereby acknowledged, the said
     The court rendered judgment in favor of plaintiffs and      Grantor does hereby Grant, Sell and Convey unto Lone Star
found in the judgment substantially (1) that plaintiffs should   Gas Company, a corporation (herein styled Grantee), its
successors and assigns, the right of way and easement to           respective heirs, legal representatives,      successors and
construct, maintain and operate pipe lines and                     assigns of the parties hereto.
appurtenances thereto, and to construct, maintain and
operate telegraph and telephone lines in connection                      'It is hereby understood that the party securing this
therewith together with the necessary poles, guy wires and         grant in behalf of Grantee is without authority to make any
anchors, over and through the following described lands            covenant or agreement not herein expressed.'
situate in Eastland County, State of Texas, to-wit: 670
acres, more or less, out of Section 53, Block 4, H. & T. C.              In November 1942, defendant began the removal of
RR. Co., survey and being the same land more fully                 the twelve inch pipe line. Plaintiffs were living on the ranch
described in deed from A. F. Bentley to R. W.                      from which the pipe line was removed and they had actual
Higginbotham recorded in Volume 84, page 74, Deed                  notice of the work being done. Mr. Childress testified, in
Records of said County, to which reference is here made for        part, as follows:
further description.
                                                                         'A. I saw them down there and I saw they had a Lone
      'To have and to hold unto said Grantee, its successors       Star truck and I drove up and they had cut the wire and he
and assigns, so long as such lines and appurtenances thereto       didn't have anything to block it with except an ordinary
shall be maintained, with ingress to and egress from the           fence post and he attempted to block it put up a brace post
premises, for the purpose of constructing, inspecting,             four or five feet from the corner where he cut it.
repairing, maintaining, and replacing the property of
                                                                         'Q. Did you have any conversation with that man? A. I
Grantee above described, and the removal of such at will, in
                                                                   said, 'I thought you were going to put in heavy posts to
whole or in part.
                                                                   block this fence to keep it from getting loose.' He said they
Page 938                                                           were sorry, they didn't have any posts--I told him I was
                                                                   disappointed in it. I didn't like for them to do it that way. *
      'The said Grantor is to fully use and enjoy the said         **
premises except for the purposes hereinbefore granted to the
said Grantee, which hereby agrees to bury all pipes to a                'Q. These places (where) they cut your fence, did they
sufficient depth so as not to interfere with cultivation of soil   attempt to build any other gates? A. Temporary wire gates.
and to pay any damages which may arise to growing crops
                                                                         'Q. Were those wire gates left open? A. Yes. I had a
or fences from the construction, maintenance and operation
                                                                   young fellow, Mr. Lorance's boy. I saw it was looking kind
of said pipe, telegraph and telephone lines; said damages, if
                                                                   of dangerous, and he worked for me about three weeks
not mutually agreed upon, to be ascertained and determined
                                                                   guarding the pasture and looking after the cattle and stock.
by three disinterested persons, one thereof to be appointed
                                                                   * * * I worked about three weeks.
by the said Grantor, one by the said Grantee, and the third
by the two so appointed as aforesaid, and the written award              'Q. How did you manage to do that, Mr. Childress? A.
of such three persons shall be final and conclusive. Should        I would get up every morning and jump in my pick-up and
more than one pipe line be laid under this grant at any time,      look after things, and then at noon I would get off a little
the sum of twenty-five cents per lineal rod for each               early and run out to see how they were.
additional line shall be paid, besides the damages above
provided for.                                                           'Q. That is a twenty-mile trip. A Yes.

      'Upon written application to the Grantee at Dallas,               'Q. How long did that last? A. About three weeks.'
Texas, the Grantee will make or cause to be made a tap on
any gas pipe line constructed by Grantee on Grantor's                   And he further testified in part:
premises for the purpose of supplying gas to the Grantor for
domestic use only, the cost of meter, saddle and labor to be             '* * * I didn't make any objections to anything they
borne by said Grantee, all other expenses, including fittings      did. * * *
to be borne by Grantor, gas to be measured and furnished at
the main line of Grantee at the same price and under the                'Q. You are not complaining, I believe you said about
same rules and regulations as prevail in the nearest city or       the Gas Company using its right of ingress and egress on its
town where Grantee is supplying gas.                               property there? A. No.

     'The consideration first above recited as being paid to              'Q. Whatever rights the Gas Company has under its
Grantor by Grantee is in full satisfaction of every right          contracts and easement you recognize them? A. I certainly
hereby granted. All covenants and agreements herein                will.'
contained shall extend to and be binding upon the
                                                                        After the removal of the pipe line had been completed
plaintiffs made a claim for damages to their land, fences          for.' Iford v. Nickel, Tex.Civ.App., 1 S.W.2d 751, 753. It is
and grass and for other items. The Gas Company refused to          equally as well settled that 'the rules which control the
pay the damages claimed by plaintiffs and this suit was            courts in determining the rights under an easement are, in
filed.                                                             general, the same as those applied to deeds and other
                                                                   written instruments.'      Armstrong v. Skelly Oil Co.,
      Plaintiffs, in their pleadings, among other things,          Tex.Civ.App., 81 S.W.2d 735, 736, writ ref. It necessarily
alleged: 'That previous to their purchase of this land, the        follows that under this rule the right-of-way deeds must be
grantors of these plaintiffs had executed a right-of-way or        construed most strongly against the grantor, and most
right-of-way deeds to the defendant, creating an easement          favorably to the grantee, so as to confer the largest estate
in each instrument, and authorizing the defendant to lay and       which a fair interpretation will permit.         Stevens v.
maintain a pipe line across said premises. That plaintiffs'        Galveston, H. & S. F. Ry. Co., Tex.Com.App., 212 S.W.
purchase of said land was                                          639;     Texas & N. O. Ry. Co. v. Orange County,
                                                                   Tex.Civ.App., 206 S.W. 539, writ ref.; Gladewater County
Page 939                                                           Line Independent School Dist. v. Hughes, Tex.Civ.App., 59
S.W.2d 351; Stanbery v. Wallace, Tex.Com.App., 45
subject to the rights thereby granted. That said deed or
                                                                   S.W.2d 198. 'The language of a deed is the language of the
deeds granted the right to the defendant to construct,
                                                                   grantor, and, if there be a doubt as to its construction, it
maintain and operate pipe lines and to remove the same
                                                                   should be resolved against him.' Curdy v. Stafford, 88 Tex.
from these premises. That it further provided in said deed or
                                                                   120, 30 S.W. 551, 552.
deeds that the grantors therein had the right fully to use and
enjoy the premises except for the purpose specifically                   Appellees say that the evidence can be summarized as
granted. In said deed or deeds the grantee agreed to pay           follows: 'Appellant's employees, once or twice a week, and
damages which might arise to growing crops or fences from          more often in the winter time, use appellees' private roads
such operations * * *.'                                            and gates, not on the right-of-way; that gates are left open
                                                                   so that cattle and goats go from one pasture to the other;
      Plaintiffs prayed substantially for (1) $892 for
                                                                   that appellees keep their registered cattle in one pasture and
damages sustained and for general and special relief in law
                                                                   their grade cattle in another; that they are breeders and are
or in equity, and (2) 'that * * * the court issue its writ of
                                                                   engaged in building up a desirable strain of high grade
injunction, permanently restraining the defendant, its agents
                                                                   cattle.' Appellees contend substantially that since the Gas
and employees, from using any portion of the above
                                                                   Company's district foreman (supervisor of pipe line
described premises not included in defendant's
                                                                   construction, maintenance, repairs, regulating pressure on
right-of-way, and from using any gate or gates owned by
                                                                   main line transmission, all installations relating to pipe line
the plaintiffs and not located on the right-of-way, and from
                                                                   transmission and production) testified substantially to the
using any portion of said premises for any purpose not
                                                                   effect that (1) twenty-five or thirty feet was sufficient width
contemplated by the right-of-way deed or deeds.'
                                                                   in which to take up the twelve inch line which was
       After a careful review of this record it is clear to us     removed, as well as take up the ten inch line still in the
that plaintiffs are not entitled to any injunctive relief. First   ground and sufficient width for trucks and cars to go on the
of all, the right-of-way deeds are clear, Plaintiffs do not        ground for maintenance purposes and wide enough for any
allege any ambiguity in said deeds, nor do they allege any         purpose the Gas Company might have on plaintiffs'
fraud, accident or mistake between the parties in the              property and that the graded thirty foot right-of-way was a
execution of the grants. In fact, the original grantors were       more convenient means of ingress and egress and that the
not parties to the action and the deeds were executed and          Gas Company would stay on this right-of-way if plaintiffs
recorded and fixed the rights of the parties before the            wanted them to do so, the trial court was justified in finding
plaintiffs purchased the property. There is nothing in the         that a right-of-way thirty feet wide was all that defendant's
pleading of plaintiffs, nor in their prayer for relief, to put     convenience and necessity required. We do not so
defendant on notice that plaintiffs would seek to limit            understand that law. First of all, the right-of-way deeds did
defendant's use of their lands to a strip of land thirty feet      not
wide. We think the rule in Texas is 'that in order to warrant
                                                                   Page 940
a court of equity to grant injunctive relief, the petitioner
must specify the precise relief sought and a court is without      stipulate that the defendant should confine its operations to
jurisdiction to grant relief beyond and in addition to that        a strip of land thirty feet wide. The deeds, among other
particularly specified.' Fletcher v. King, Tex.Civ.App., 75        things, granted to the defendant 'the right-of-way and
S.W.2d 980, point 1 p. 982 (writ ref.), and cases therein          easement to construct, maintain and operate pipe lines and
cited. 'The prayer controlled the nature of the relief, and the    appurtenances thereto, and to construct, maintain and
latter could not be changed so as to cover relief not prayed       operate telegraph and telephone lines in connection
therewith, together with the necessary poles, guy wires and      would necessarily result in a multiplicity of suits. As before
anchors over and through the following described lands * *       stated, there was no complaint of the use made of plaintiffs'
* so long as such lines and appurtenances thereto shall be       property by defendant until the pipe line was removed. The
maintained, with ingress to and egress from the premises,        injunction suit was filed after the defendant refused to pay
for the purpose of constructing, inspecting, repairing,          the damages claimed by plaintiffs. The damages assessed
maintaining and replacing the property of Grantee, above         by the trial court are not assailed by plaintiffs as being
described, and the removal of such at will, in whole or in       inadequate to recompense them for damages sustained. We
part. * * * Should more than one pipe line be laid under this    think the rule is: 'An application for injunction is uniformly
grant at any time, the sum of twenty-five cents per lineal       subjected to a strict construction. * * * Mere uncertainty or
rod for each additional line shall be paid, besides the          mere apprehension of injury is not sufficient.' Thomas v.
damages above provided for. * * * It is hereby understood        Bunch, Tex.Civ.App., 41 S.W.2d 359, 362, affirmed 121
that the party securing this Grant in behalf of Grantee is       Tex. 225, 49 S.W.2d 421. See also                  Southern Oil
without authority to make any covenant or agreement not          Corporation v. Waggoner, Tex.Civ.App., 224 S.W. 230;
herein expressed.' Since the deeds do not confine the            Browning v. Hinerman, Tex.Civ.App., 224 S.W. 236. Again:
defendant's use to a strip of land thirty feet wide, it is       'It is held that an injunction will not lie to prevent an alleged
elementary that the court could not re-define the terms of       threatened act, the commission of which is speculative and
the grant and restrict the use granted by the instruments on     the injury from which is purely conjectural.' Haden
the testimony of a district foreman, absent fraud, accident or   Employees' Ass'n v. Lovett, Tex.Civ.App., 122 S.W.2d 230,
mistake. 'It is elementary that no agent has any implied         232. Moreover 'the court cannot grant an injunction to allay
authority to surrender the vested rights of his principal, * *   the fears and apprehensions of individuals.' Southern Oil
*.' Bell v. Moody, Tex.Civ.App., 147 S.W.2d 852, writ            Corporation v. Waggoner, supra [224 S.W. 232]. See also
dism., points 3-4, p. 855. See also: 2 Tex.Jur. p. 446, sec.     King's Estate v. School Trustees of Willacy County,
51; Kentucky River Coal Co. v. Williams, 226 Ky. 93, 10          Tex.Civ.App., 33 S.W.2d 783, writ ref. Under the trial
S.W.2d 617. It is clear to us that the amount of space           court's judgment the defendant would be required to seek
reasonably needed in the past in any particular operation is     the aid of the
a question of fact, and the testimony of the district foreman
on such issue would be pertinent. But the defendant is           Page 941
entitled to use in the future as much of the land as each
occasion may reasonably demand, and such testimony does          court each time its operations may require the use of a strip
not authorize the court to deprive the defendant of what has     of land more than thirty feet wide. We think such action of
been legally granted to it by the terms of the right-of-way      the court restricts the provisions of the right-of-way deeds
deeds. 'It is for parties, and not courts, to make deeds of      and necessarily such decree must fail. Moreover, the
conveyance. Men are presumed to be able among                    contention that defendant's agents and employees will in the
themselves to make deeds expressive of their intentions,         future go through the gates on the premises and leave them
and, if they fail to do so, or to furnish the means by which     open and thereby permit the herds to mix has no support in
their intention can be determined, it would be an usurpation     the record. The district foreman, defendant's witness,
of authority for courts to undertake to make deeds for them.'    testified in part:
Gorham v. Settegast, 44 Tex. Civ. App. 254, 98 S.W. 665,
                                                                      '* * * if Mr. Childress had told me to go around we
669. See also Babler v. Shell Pipe Line Corporation, D.C.,
                                                                 would go around.
34 F. Supp. 10; 15 Tex.Jur. 800, sec. 28; Gulf Pipe Line Co.
v. Thomason, Tex.Civ.App., 299 S.W. 532; 19 C.J. 907, 908,            'Q. If he wanted you to stay on the right-of-way you
909, 975; 28 C.J.S., Easements, §§ 25, 26, 27, 77; Texas         would. A. We would.'
Power & Light Co. v. Casey, Tex.Civ.App., 138 S.W.2d
594, writ dis.; 110 A.L.R. 175, 176.                                   Appellant further contends that the court erred in
                                                                 finding that plaintiffs should recover from the defendants
      Appellees further contend substantially that they are      the sum of $500. As a basis for this contention defendant
entitled to injunctive relief because plaintiffs use the         says 'that there is no evidence, or at least the evidence is
premises for a stock ranch; that it is highly improved for       insufficient, to support the judgment for damages * * *
stock raising; that plaintiffs are engaged in raising both       because of a lack of evidence showing that the alleged
registered and grade cattle; and that defendant, while           damages were personally caused by the negligence of the
engaged in removing said pipe line, failed to close said         defendant.' For rule of law, see Lone Star Gas Co. v.
gates and thereby permitted an indiscriminate mixing of the
                                                                 Hutton, Tex.Com.App., 58 S.W.2d 19, points 10-11. We
registered and grade cattle, thereby interfering with            overrule this contention. The award was in a lump sum of
breeding purposes; and that such injuries are irreparable and    $500. Appellees sued for various items of damages
that legal remedies are inadequate and that such conduct         aggregating $892, the three principal items being (a) injury
to land $250; (b) damage to fences $350; (c) damage to
surface tank $75. We have carefully reviewed the evidence
on these items and we think that it is sufficient to support
the implied finding of the trial court that the damages were
caused by the negligence of the Gas Company and
sufficient to support the amount awarded. We feel that it
would unduly extend this opinion to review the evidence as
to damages and we do not believe it would serve any useful
purpose to do so. The damages to the land and to the fences
and to the water tank are clear and it was a question of fact
for the trial court to determine whether or not such damages
were due to the negligence of the defendant, as well as to
find the amount.

       It follows from what we have said that we are of the
opinion that the trial court erred in issuing the injunction
and that this injunction must be dissolved. It further
appearing to us that the cause has been fully developed,
there is no occasion to reverse and remand the cause and the
judgment with respect to the injunction must be reversed
and rendered. It further appears to us that the judgment
awarding damages to plaintiffs in the sum of $500 must be
sustained and the judgment of the trial court in this respect
is affirmed.

      Accordingly, the judgment as to the injunction granted
is reversed and rendered and the judgment of the trial court
awarding damages to the plaintiffs is in all things affirmed.

      We are further of the opinion that it would be
equitable for the costs incurred in the trial court to be
adjudged against the defendant and the costs incurred on
this appeal to be adjudged equally against appellant and
appellees, and it is so ordered. See Rule 448, T.R.C.P.;
Hake v. Dilworth, Tex.Civ.App., 96 S.W.2d 121, point 13,
p. 126, writ dism.; J. I. Case Threshing Machine Co. v.
Manes, Tex.Com.App., 254 S.W. 929, point 10, p. 932. See
also: Baker Hotel v. Rogers, Tex.Civ.App., 157 S.W.2d
940, error refused, 138 Tex. 398, 160 S.W.2d 522; Wichita
Nat. Bank v. United States Fidelity & Guaranty Co.,
Tex.Civ.App., 147 S.W.2d 295; Parsons v. John Deere
Plow Co., Tex.Civ.App., 113 S.W.2d 970.
Page 581                                                         recuse the trial judge, arguing that he was biased against
                                                                 attorney Jones. A hearing on the motions was scheduled for
192 S.W.3d 581 (Tex. 2006)                                       January 10, 2003. In the meantime, Jones notified AFR that
                                                                 the employees would not appear for depositions until the
AMERICAN FLOOD RESEARCH, INC., Petitioner                        motions had been ruled upon. As promised, his clients did
                                                                 not appear on January 6. The employees later withdrew
v.
                                                                 their recusal motion and then abandoned their motion for
                                                                 reconsideration.
Harry JONES, Respondent.
                                                                       On January 15, 2003, the employees terminated Jones,
No. 05-0271.
                                                                 who then withdrew as counsel of record. AFR moved for
Supreme Court of Texas                                           sanctions–pursuant to Texas Rules of Civil Procedure 13
                                                                 and 215 and Texas Civil Practice and Remedies Code
May 5, 2006                                                      sections 9.012 and 10.012–against both the employees and
                                                                 Jones, alleging discovery abuse. After an evidentiary
      On Petition for Review from the Court of Appeals for       hearing, the trial court sanctioned only Jones, ordering him
the Fifth District of Texas                                      to pay AFR $15,000. At Jones's request, the court issued
                                                                 findings of fact and conclusions of law, in which the court
Page 582                                                         found that while the employees did not abuse the discovery
                                                                 process, Jones's conduct was sanctionable under Rule of
     Richard M. Abernathy, Charles J. Crawford,
                                                                 Civil Procedure 215.3. The trial court granted Jones's
Abernathy Roeer, Boyd & Joplin, P.C., McKinney, for
                                                                 motion to sever the sanctions order against him for purposes
Respondent.
                                                                 of appeal.
     John R. Roach Jr., William D. Cramer, Roach LLP,
                                                                 Page 583
Piano, for Petitioner.
                                                                       On appeal, Jones argued that his actions did not
     PER CURIAM.
                                                                 amount to discovery abuse and, alternatively, that the
                                                                 sanction amount was excessive. Because the trial court
      Attorney Harry Jones was sanctioned for discovery
                                                                 found that the attorney, but not the party, abused the
abuse committed in the course of representing a group of
                                                                 discovery process, the court of appeals held that the trial
employees in a suit brought by American Flood Research,
                                                                 court abused its discretion in imposing sanctions on Jones,
Inc. (AFR). Jones appealed the sanctions order, and the
                                                                 since sanctions under Rule 215.3 are reserved for discovery
court of appeals reversed the judgment, holding that the trial
                                                                 abuse by "a party."[1] 153 S.W.3d 718, 724. AFR now
court abused its discretion in imposing sanctions. Because
                                                                 petitions for review, arguing that the court of appeals erred
the court of appeals erred in its review of the sanctions
                                                                 in reversing the sanctions order.
order, we reverse and remand the matter to that court for
further proceedings.
                                                                        We review a trial court's imposition of sanctions for
                                                                 an abuse of discretion. Cire v. Cummings, 134 S.W.3d 835,
       AFR sued three of its former employees in state
                                                                 838 (Tex. 2004). The ruling will be reversed only if the trial
district court for trade secret violations and destruction of
                                                                 court acted "without reference to any guiding rules and
company property. Concurrently, the employees sued AFR
                                                                 principles," such that its ruling was arbitrary or
in federal court for employment discrimination. Initially,
                                                                 unreasonable. Id.at 839. In determining whether the trial
the employees were represented by attorney Jones in both
                                                                 court abused its discretion, the appellate court must ensure
suits. During the course of discovery, the parties disagreed
                                                                 that the sanctions were appropriate or just. TransAmerican
over which side would be deposed first. AFR first noticed
                                                                 Nat. Gas Corp. v. Powell, 811 S.W.2d 913, 916 (Tex.
the employees' depositions for mid-December 2002. The
                                                                 1991). We have articulated a two-part inquiry that appellate
employees, through Jones, moved to quash those
                                                                 courts must conduct in making this determination. Id.at 917.
depositions and requested a hearing. A few weeks later,
                                                                 First, the court must ensure that there is a direct relationship
however, the employees withdrew the motion, and AFR
                                                                 between the improper conduct and the sanction imposed; in
moved to compel the depositions. The state trial court
                                                                 other words, the court should examine whether punishment
conducted a hearing and ordered the employees' depositions
                                                                 was imposed upon the true offender and tailored to remedy
to begin on January 6, 2003. Shortly thereafter, the
                                                                 any prejudice discovery abuse caused. Id.Thus, the trial
employees moved for reconsideration of this order and to
                                                                 court must determine whether sanctions should be imposed
on the party, its counsel, or both. Id.Second, the court must     depositions until motion is heard). Rather, Jones simply
make certain that less severe sanctions would not have been       informed AFR that the employees would not appear on
sufficient to promote compliance. Id.                             January 6, in direct violation of the court's order. As soon as
                                                                  the deposition date passed, however, Jones moved to
       In this case, the court of appeals reversed the            continue the motion to reconsider and withdrew the motion
sanctions order after holding that a trial court must             to recuse. The employees never rescheduled a hearing on
specifically find that the party–not just the                     the motion to reconsider. A week after the employees
attorney–abused the discovery process in order to impose          missed their deposition date, they terminated Jones, and he
sanctions under Texas Rule of Civil Procedure 215.3. 153          withdrew as counsel of record.
S.W.3d at 724. We disagree. A trial court's discretion to
impose sanctions does not depend on whether it issues a                  While there is no direct evidence that the employees
specific finding that the "party"–in this case, the               knew of the depositions and deliberately failed to attend, in
employees–abused the discovery process. In reviewing              the context of an enduring attorney-client relationship,
sanctions orders, the appellate courts are not bound by a         knowledge acquired by the attorney is imputed to the client.
trial court's findings of fact and conclusions of law; rather,    See Gavenda v. Strata Energy, Inc., 705 S.W.2d 690, 693
appellate courts must independently review the entire             (Tex. 1986) (noting that the "attorney-client relationship is
record to determine whether the trial court abused its            an agency relationship"). Jones was present when the trial
discretion. See Chrysler Corp. v. Blackmon, 841 S.W.2d            judge ordered in open court that depositions begin January
844, 852 (Tex. 1992)(citing Rossa v. United States Fidelity       6, yet neither Jones nor the employees appeared. Thus, a
& Guar. Co. v. Rossa, 830 S.W.2d 668, 672 (Tex.                   Rule 215.2 prerequisite to imposing sanctions–a party's
App.–Waco 1992, writ denied)). Thus, the court of appeals         failure to comply with an order to permit discovery–was
should have examined the entire record–not merely the             satisfied. See TEX. R. CIV. P. 215.2(b). Accordingly, the
trial court's findings of fact and conclusions of law–to          trial court, after serving notice and holding a hearing, had
determine whether the trial court properly sanctioned Jones.      the discretion to impose any "just" sanction authorized by
                                                                  Rule 215.2(b). Id. Paragraphs (2) and (8) of Rule 215.2(b)
      The order imposing sanctions neither referred to a          allow the trial court to impose sanctions against the party or
specific rule nor tracked the language of any particular rule;    the attorney advising the party, which may include charging
thus, contrary to the court of appeals' analysis, whether the     the sanctioned individual for court costs or the reasonable
trial court properly sanctioned Jones is not governed by          expenses caused by the failure to comply with the discovery
Rule 215.3 alone. Contra Metzger v. Sebek, 892 S.W.2d 20,         order. TEX. R. CIV. P. 215.2(b)(2), (b)(8).
51 (Tex.App.–Houston [1st Dist.] 1994, writ denied)
(holding that when a sanctions order names a specific rule              Our holding in TransAmerican required the trial court
or tracks a rule's language, the appellate court is confined to   to determine whether sanctions should be imposed on the
determining whether sanctions are proper                          employees, Jones, or both. See TransAmerican, 811 S.W.2d
                                                                  at 917. Sanctions may be visited exclusively on the attorney
Page 584                                                          if the evidence demonstrates that the offensive conduct is
                                                                  attributable to counsel alone. See id.( holding that "a party
under that rule alone). Here, there is ample evidence to          should not be punished for counsel's conduct in which it is
support a sanction against Jones pursuant to Texas Rule of        not implicated apart from having entrusted to counsel its
Civil Procedure 215.2, a rule AFR cited in its motion for         legal representation"). Here, the employees' noncompliance
sanctions. Rule 215.2 provides that the trial court may           with the discovery order can be attributed to Jones's advice
impose sanctions against the party or the attorney advising       and conduct during the course of his representation.
the party when the party fails to comply with an order to         Specifically, the record supports the trial court's finding that
permit discovery. TEX. R. CIV. P. 215.2(b); see also TEX.         Jones's dilatory tactics and his refusal to produce the
R. CIV. P. 215.1(a) (allowing for court orders compelling         employees for examination directly violated the trial court's
depositions).                                                     order. The employees, who required a translator when
                                                                  making court appearances, were particularly dependent on
      Our review reveals that the employees did not obey
                                                                  Jones's advice during the course of litigation. Because the
the court's order compelling depositions. On his clients'
                                                                  record supports a finding that only Jones's conduct
behalf, Jones moved for reconsideration of the order
compelling depositions and also moved to recuse the               Page 585
presiding judge. Neither the employees nor Jones, however,
moved to stay the depositions, as the Rules of Civil              was sanctionable, the trial court was within its discretion to
Procedure allow. See, e.g., TEX. R. CIV. P. 199.4 (motion         impose sanctions on him alone and, therefore, the court of
objecting to time and place of depositions filed within three     appeals erred in reversing the sanctions order.
days of receiving notice of them automatically stays
       Jones also complains, however, that the amount of the
sanctions imposed–$15,000–was excessive. See TEX. R.
CIV. P. 215.2, 215.3 (requiring that sanctions be "just" or
"appropriate"). As we held in TransAmerican, when an
appellate court reviews a sanctions order, it must ensure not
only that sanctions are visited upon the true offender, but
that less severe sanctions would not promote compliance.
811 S.W.2d at 917. Because the court of appeals' holding
that the trial court erred in imposing sanctions disposed of
the case, it did not complete the two-part TransAmerican
inquiry. Thus, we remand this matter to the court of appeals
for that analysis.

      Accordingly, without hearing oral argument, we
reverse the court of appeals' judgment and remand to that
court for further proceedings consistent with this opinion.
See TEX. R. APP. P. 59.1, 60.2(d).

---------

Notes:

[1] The rule states, in relevant part:

If the court finds a party is abusing the discovery process in
seeking, making or resisting discovery . . ., then the court . .
. may, after notice and hearing, impose any appropriate
sanction authorized by paragraphs (1), (2), (3), (4), (5), and
(8) of Rule 215.2(b).

TEX. R. CIV. P. 215.3 (emphasis added).

---------
Page 46                                                        loss of parking. Target's appraisal expert testimony included
                                                               as much as $472,457 in damages for the loss of 35 parking
194 S.W.3d 46 (Tex.App.—Waco 2006)                             spaces. The State's appraisal expert determined that Target's
                                                               loss-of-parking damages were only $72,000 for 24 spaces,
The STATE of Texas, Appellant,                                 but the jury did not hear the State's expert on those damages
                                                               or on the amount of total compensation owed to Target. On
v.
                                                               the Friday before the Monday, June 7, 2004 trial, Target
                                                               filed a motion to exclude the testimony of Steven Lovett,
TARGET CORPORATION, Appellee.
                                                               the State's appraiser, and Jack Holford, the State's land
No. 10-04-00326-CV.                                            planning consultant. After the jury had been impaneled and
                                                               the parties had made opening statements, a hearing was held
Court of Appeals of Texas, Tenth District, Waco.               on Target's motion. The next day, the trial court granted
                                                               Target's motion and then later clarified its ruling to prohibit
May 10, 2006                                                   Lovett from testifying about remainder damages (including
                                                               loss of parking) and total compensation.
     Rehearing Overruled June 6, 2006.
                                                                     Target's motion complained that the State's
     From the County Court at Law No. 1 Brazos County,         supplementation of discovery responses—done 31 days
Texas Trial Court No. 419-CC.                                  before trial—was untimely. This supplementation included
                                                               the identity of consulting experts or persons with whom the
Page 47
                                                               State's testifying experts consulted and the persons with
                                                               knowledge of relevant facts on whom its testifying experts
     Susan Desmerais Bonnen, Office of the Atty. Gen.
                                                               relied.[1] Although Target did not complain that the experts
Transportation Division, Austin, for appellant.
                                                               themselves had not been timely identified or that their
     H. Dixon Montague and Charles B. McFarland,               reports had not been timely produced, it complained that the
Vinson & Elkins LLP, Houston, for appellee.                    State untimely produced Lovett's one page of calculations
                                                               that supported his opinion that the utilization level of the
    Before Chief Justice Gray, Justice Vance, and Justice      remote parking spaces lost by Target was 20% and thus
Reyna
                                                               Page 49
Page 48
                                                               should be discounted by 80%.[2] This analysis, including
     OPINION                                                   the 20% utilization factor, was in Lovett's timely produced
                                                               expert report and was examined by Target in Lovett's first
     BILL VANCE, Justice.                                      deposition on April 28, 2004. Lovett's working file had
                                                               been provided to Target's counsel a few days before his
      In its appeal of an adverse judgment in a                deposition, but during Lovett's deposition, he realized that
condemnation case, the State asserts that the trial court      the calculations page was missing.[3] On May 7, the State
erred in excluding the State's expert testimony on Target's    produced this page, and the State tendered Lovett for a
damages and the total compensation owed to Target. We          second deposition (on May 28) in which Target was able to
agree and will reverse the trial court's judgment and remand   question him about the page.
the case for a new trial.
                                                                     The trial court ruled that Lovett and Holford would
      The State condemned 0.184 of an acre (8,013 sq. ft.)     not be allowed to testify about opinions that were based on
of a 9.0232 acre tract owned by Target in the city of          information provided by persons who had not been timely
College Station. The tract is improved with a Target retail    identified: Lovett could not testify to the importance of
store. The acquisition was a fifteen-foot wide strip of land   parking within a 300-foot radius of a business's front door
being used by Target for landscaping and parking. The          or that Target's parking situation was adequate; and Holford
acquisition's purpose was to widen Highway 6, which the        could not testify about his conversations with the City
strip fronted. Special commissioners awarded Target            Development Services staff about his site plan, that his plan
compensation of $156,812 for the taking, and Target            would be approved if submitted, or about safety issues
objected. A jury awarded Target $564,290.                      affecting Target's parking lot. Lastly, the trial court ruled
                                                               that Lovett could not testify about his 20% utilization
     The primary dispute at trial was Target's damages for
                                                               factor, which prevented the State from offering Lovett's
opinion testimony on remainder damages and total                        The discovery rule requiring disclosure of experts
compensation.                                                     before trial is intended to provide adequate information
                                                                  about the experts' opinions to allow the opposing party the
     Target's appraisal expert testified at trial that Target     necessary information to prepare to cross-examine the
was entitled to total compensation of $704,458, including as      experts and to rebut the testimony with their own experts.
much as $472,457 in damages for loss of parking. The State        Taylor Foundry Co. v. Wichita Falls Gram Co., 51 S.W.3d
estimates that the jury awarded Target as much as $383,081        766, 773 (Tex. App.—Fort Worth 2001, no pet.). Rule 193.6
in loss of parking damages as a part of the total                 governs untimely discovery supplementation:
compensation award of $564,290.
                                                                  (a) Exclusion of Evidence and Exceptions. A party who fails
       The State made an offer of proof that Lovett would         to make, amend, or supplement a discovery response in a
have testified that the property suffered remainder damages       timely manner may not introduce in evidence the material
of $72,000 and that the total compensation amount was             or information that was not timely disclosed, or offer the
$253,209 and that Holford would have testified that the           testimony of a witness (other than a named party) who was
City's Development Services staff had indicated that his          not timely identified, unless the court finds that:
plans would be accepted if submitted by Target and that he
was of the opinion that Target's parking lot was not unsafe       (1) there was good cause for the failure to timely make,
after the State's acquisition.                                    amend, or supplement the discovery response; or

     In its first issue, the State asserts that the trial court   (2) the failure to timely make, amend, or supplement the
abused its discretion in excluding Lovett's and Holford's         discovery response will not unfairly surprise or unfairly
expert testimony for three reasons: (1) the State's               prejudice the other parties.
supplementation was timely; (2) the State established good
cause if its supplementation was untimely; and (3) Target         (b) Burden of Establishing Exception. The burden of
was not unfairly surprised or prejudiced if the State's           establishing good cause or the lack of unfair surprise or
supplementation was untimely.                                     unfair prejudice is on the party seeking to introduce the
                                                                  evidence or call the witness. A finding of good cause or of
      The standard of review of a trial court's ruling to         the lack of unfair surprise or unfair prejudice must be
admit or exclude evidence based on the discovery rules is         supported by the record.
abuse of discretion. See F & H Investments Inc. v. State, 55
S.W.3d 663, 668-72 (Tex. App.—Waco 2001, no pet.); Best           Tex. R. Civ. P. 193.6(a), (b). This rule provides a less
Indus. Uniform Supply Co. v. Gulf Coast Alloy Welding,            burdensome alternative to the draconian sanction of
Inc., 41 S.W.3d 145, 147-48 (Tex. App.—Amarillo 2000,             automatic exclusion under former Rule 215(5), which
pet. denied). The test for abuse of discretion is whether,        required a showing of good cause.[4] Elliott v. Elliott, 21
under the circumstances of the particular case, the trial         S.W.3d 913, 921 n.7 (Tex. App.—Fort Worth 2000, pet.
court's action was arbitrary or unreasonable. Downer v.           denied).
Aquamarine Operators, Inc., 701 S.W.2d 238, 242 (Tex.
1985).                                                                   We conclude that the trial court abused its discretion
                                                                  in excluding the State's expert testimony because the record
Page 50                                                           establishes that Target would not have been unfairly
                                                                  surprised or prejudiced by the State's supplementation. See,
      We will assume without deciding that the State's            e.g., Best, 41 S.W.3d at 148-49; Elliott, 21 S.W.3d at 921;
supplementation—done 31 days before trial—of the                  Rutledge v. Staner, 9 S.W.3d 469, 472
additional persons that Lovett and Holford had spoken with
and of Lovett's one page of calculations supporting his 20%       Page 51
utilization factor was untimely. See Tex. R. Civ. P.
193.5(b); cf. Snider v.Stanley, 44 S.W.3d 713, 715-16 (Tex.       (Tex. App.—Tyler 2000, pet. denied). Regarding the May 7
App.—Beaumont 2001, pet. denied) (trial court did not             production of Lovett's one-page calculation of his 20%
abuse its discretion in excluding expert whom party               utilization factor, we note first that his timely expert report
identified 31 days before trial after waiting to supplement       discussed this factor and that when Target deposed Lovett
for over a year). But see Elhamad v. Quality Oil Trucking         on April 28, he explained how he determined the factor.
Serv., Inc., 2003 WL 22211543, at *6-7 (Tex. App.—Fort            Next, after the page was produced, Target again questioned
Worth Sept.25, 2003, no pet.) (mem. op.) (distinguishing          Lovett on it in his second deposition on May 28. The trial
complete failure to identify expert from inadequacy in            court, which was made aware of this history, should have
expert disclosure).                                               found that Target would not have been unfairly surprised or
                                                                  prejudiced by Lovett's trial testimony on the 20% utilization
                                                                  factor, remainder damages, and the total compensation
amount. See, e.g., Parker Plaza West, Ltd. v. Boniuk Invs.,     ---------
Ltd., 153 S.W.3d 729, 733-34 (Tex. App.—Dallas 2005, no
pet.); Pilgrim's Pride Corp. v. Smoak, 134 S.W.3d 880,          Notes:
902-03 (Tex. App.—Texarkana 2004, pet. denied); Norfolk
So. Ry. v. Bailey, 92 S.W.3d 577, 581 (Tex. App.—Austin         [1] Most of these persons had previously been identified in
2002, no pet.).                                                 earlier discovery responses. Specifically, Target complained
                                                                of the following persons as to Lovett: Bill Carson, B.J.
       Regarding the belated supplementation of the             Cornelius, and Clint Connell. Carson and Cornelius are land
additional persons (Carson, Cornelius, and Connell) that        planners whom Lovett spoke with and relied on (along with
Lovett had spoken with, Target was able to explore those        Holford) in determining that the lost parking spaces that
conversations in Lovett's two depositions. As for the City's    were more than 300 feet from the store's main entrance
Development Services staff (Kee, Reeves, Ruiz, and              should be discounted. Lovett also relied on Connell, a real
Hardin) whom Lovett and Holford had spoken with,                estate consultant for Wal-Mart, for this determination and
Holford's timely land planning report disclosed discussions     for Lovett's determination of Target's peak volume periods
with the staff and specifically identified Reeves, and Target   and his 80% discount factor for the remote parking spaces.
itself had identified Kee as a person with knowledge of         We agree with the State that these three were not
relevant facts. Holford was deposed 32 days before trial,       "consulting experts" for whom the State owed consulting
and Target was able to explore his discussions with city        expert discovery to Target; they were not "consulted,
staff. Target also had the opportunity to explore Lovett's      retained, or specially employed by a party." See Tex. R.
conversations with city staff in his two depositions. The       Civ. P. 192.7(d). Instead, they were at most persons having
trial court should have found that Target would not have        knowledge of relevant facts, and the State additionally
been unfairly surprised or prejudiced by Lovett's and           identified them as such, as did Target with the persons
Holford's trial testimony on their opinions that were based     whom its appraisal expert contacted. If these three persons
in part on these persons.                                       had in fact been true consulting experts, our analysis below
                                                                on whether Target was unfairly surprised or prejudiced
       The trial court's erroneous exclusion of evidence        might be different.
requires reversal if the error was reasonably calculated to
cause, and probably did cause, the rendition of an improper     As to both Lovett and Holford, Target principally
judgment. Tex. R. App. P. 44.1(a)(1); McCraw v. Maris,          complained of the State's identification of several City
828 S.W.2d 756, 757 (Tex. 1992). In closing argument,           Development Services staff members whom Lovett and
Target argued that the State had failed to provide evidence     Holford had spoken with: Jane Kee, Jennifer Reeves,
on remainder damages and on the total amount of                 Natalie Ruiz, and Edwin Hardin.
compensation due, that the jury should award the amount
testified to by Target's expert, that Holford had no support    [2] Lovett calculated remainder damages by determining
for his opinion that his land plan complied with city           the net operating income per parking space and by
ordinances, and that Holford and the State did not care         multiplying that number by the 20% utilization factor and
whether Target's driveways were safe.                           then by the number of lost spaces to arrive at a total lost net
                                                                operating income figure. He then capitalized the lost net
      The jury awarded Target $564,290 in total                 operating income to determine a total loss in value
compensation, which was $311,081 more than the State's          attributable to lost parking.
expert's opinion on total compensation of $253,209, which
was erroneously excluded from evidence. We conclude that        [3] Our review of the parties' dispute over why this page
the error was reasonably calculated to cause and probably       was not produced (in Lovett's working file) before his first
did cause the rendition of an improper judgment. [5] See        deposition leads us to conclude that the failure was an
Crane v. Texas Dep't Transp., 880 S.W.2d 55, 59 (Tex.           accident or mistake.
App.—Tyler 1994, writ denied).
                                                                [4] The rule further provides:
Page 52
                                                                (c) Continuance. Even if the party seeking to introduce the
We sustain the State's first issue.[6]                          evidence or call the witness fails to carry the burden under
                                                                paragraph (b), the court may grant a continuance or
     We reverse the trial court's judgment and remand the       temporarily postpone the trial to allow a response to be
cause to the trial court for a new trial.                       made, amended, or supplemented, and to allow opposing
                                                                parties to conduct discovery regarding any new information
      Chief Justice Gray concurs only in the judgment but       presented by that response.
not in the opinion of the Court.
                                                                Tex. R. Civ. P. 193.6(c). The State moved for a continuance
several times during trial, but each time the trial court
denied the motion. While the State does not complain of
these rulings in this appeal, we note that the obvious
purpose of Rule 193.6(c) is to alleviate the harshness of the
exclusion of evidence by vesting the trial court with
discretion to grant a continuance in situations where a party
such as Target files a motion to exclude an opponent's
critical evidence on the eve of trial.

[5] Target argues that, irrespective of the Rule 193.6
analysis, any error by the trial court was harmless because
the trial court should have granted Target's motion to
exclude Lovett's testimony on the 20% utilization factor on
the ground that it was unreliable under a Daubert/Robinson
analysis. We review a trial court's ruling on the
admissibility of expert testimony for abuse of discretion.
Exxon Pipeline Co. v. Zwahr, 88 S.W.3d 623, 629 (Tex.
2002).

Target argued in the trial court that Lovett's methodology
behind his 20% utilization factor was flawed because in
calculating the loss in net operating income per lost parking
space, he did not consider the income attributable to those
spaces during peak volume periods, but instead considered
the average income per space over the course of a year.
Lovett testified that he properly used the average income
per space because net operating income was based on rental
income that did not vary during the year. He said that he
had used this methodology before and had observed other
appraisers use it. The State also offered evidence that
Target's own appraisal expert had utilized the same
methodology in other appraisals. The trial court did not
abuse its discretion in denying Target's motion to exclude
Lovett's testimony as unreliable.

[6] Because we have sustained the State's first issue, we
need not address its second issue, which complains that the
trial court abused its discretion because its rulings were
tantamount to a death-penalty sanction. We do note,
however, that authority supports the State's position that a
due process analysis under TransAmerican Nat. Gas Corp.
v. Powell, 811 S.W.2d 913 (Tex. 1991), is appropriate when
application of the discovery rules results in
merits-preclusive or death-penalty sanctions. See, e.g.,
Wheeler v. Green, 157 S.W.3d 439, 443 (Tex. 2005); Best,
41 S.W.3d at 147-49; Vaughn v. Ford Motor Co., 91
S.W.3d 387, 391-92 (Tex. App.—Eastland 2002, pet.
denied); Crane v. Texas Dep't Transp., 880 S.W.2d 55, 59
(Tex. App.—Tyler 1994, writ denied). We also need not
address the State's third issue.

---------
Page 890                                                        court and render judgment that appellees take nothing in
                                                                their counterclaim for sanctions.
19 S.W.3d 890 (Tex.App. —Houston [14 Dist.] 2000)
2000)                                                                FACTUAL AND PROCEDURAL HISTORY

Diane S. MATTLY and David Vallance, Appellants,                       Diane Mattly had experienced problems with credit
                                                                card fraud in the past. In the few years before this lawsuit,
v.                                                              imposters had obtained Mattly's name and social security
                                                                number and obtained approximately eighteen credit cards in
SPIEGEL, INC. and First Consumers National Bank,                her name. Mattly contacted several credit reporting
Appellees.                                                      agencies about these problems, and they advised her to
                                                                place a red flag on her credit report. This "flag" would alert
No. 14-98-00239-CV.
                                                                credit agencies that no credit accounts should be opened in
Court of Appeals of Texas, Fourteenth District, Houston         Mattly's name unless the credit application was confirmed
                                                                by calling Mattly at her home telephone number.
June 8, 2000
                                                                      Mattly alleged that, after she had put a red flag on her
Page 891                                                        credit report, Spiegel and/or FCNB issued a credit card to
                                                                an imposter without checking Mattly's credit report. [1] The
[Copyrighted Material Omitted]                                  individual charged over two thousand dollars in
                                                                merchandise through Spiegel's catalogue. One of Spiegel's
Page 892                                                        employees contacted Mattly about the charges. Mattly
                                                                explained that she did not apply for the credit card and had
     Lori Massey Cliffe, Houston, for appellants.               placed a red flag on her credit report to prevent
                                                                unauthorized charges. Spiegel alleges that seven months
     Billy Marin Donely, Shari L. Heyen, Houston, for
                                                                before a representative contacted Mattly, she knew that
appellees.
                                                                Spiegel was listed in her credit report and failed to notify
                                                                Spiegel of the problem.
    Panel consists of Justices YATES, FOWLER and
FROST.
                                                                      Because of Mattly's refusal to pay the charges, Spiegel
                                                                gave the account to a credit agency that began efforts to
     OPINION
                                                                collect the debt from Mattly. Mattly ended up hiring both an
     WANDA McKEE FOWLER, Justice.                               investigator and an attorney to help her resolve the problem.
                                                                Even after hiring the investigator and a lawyer, Spiegel and
      Diane S. Mattly and David Vallance appeal from a          FCNB continued to contact Mattly regarding the debt. At
sanctions order awarding Spiegel, Inc. and First Consumers      some point, FCNB sent Mattly a document entitled
National Bank (FCNB) a judgment of $5,000.00, plus              "affidavit of forgery", requesting that she fill it out. Because
interest and taxable court costs. In five points of error,      of her previous problems with credit card fraud, she showed
Mattly and Vallance                                             the form to her investigator and asked him if she should fill
                                                                it out. He gave her several reasons why she should not
Page 893                                                        complete the form. First, he noted that the form asked for
                                                                confidential information such as her social security number.
complain of the following: (1) the trial court lacked plenary   Next, he told her that the name of the company requesting
jurisdiction to enter the sanctions award; (2) the sanctions    the information--FCNB--was not listed with Dunn and
order was not sufficiently specific; (3) Mattly and Vallance    Bradstreet. And, finally, he said that FCNB was not listed
did not bring the claim in bad faith; and (4) Mattly's claim    with directory assistance in the city listed on the return
was not groundless. Spiegel and FCNB filed an appeal as         address, nor did the fire department or police department in
well, complaining that the amount of sanctions awarded          the city recognize the name. The investigator told her that
was so low that it was unjust and against the great weight      he was worried it was not a request from a legitimate
and preponderance of the evidence. We find that the trial       company. Based on this information and advice, Mattly did
court abused its discretion (1) when it entered a sanctions     not return the form. However, she did give FCNB some
order that was not sufficiently specific, and (2) when it       information; her investigator testified that he spoke with
found that Mattly and Vallance brought this claim in bad        someone representing FCNB and provided that person with
faith. Consequently, we reverse the judgment of the trial       the names of the personnel with the various law
enforcement agencies who were investigating the fraudulent        S.W.2d at 880; Leon Springs Gas Co. v. Restaurant Equip.
use of Mattly's credit and name. However, not having              Leasing Co., 961 S.W.2d 574, 577 (Tex.App.--San Antonio
received the affidavit of forgery form, FCNB and Spiegel          1997, no pet.). "A claim for frivolous lawsuit damages is a
continued to attempt to collect the account.                      claim for affirmative relief." Page v. Page, 780 S.W.2d 1, 3
                                                                  (Tex.App.--Fort Worth 1989, no writ). A request for rule 13
Page 894                                                          sanctions under the Texas Rules of Civil Procedure is also a
                                                                  request for affirmative relief. See id.
      Mattly originally filed this suit against Spiegel and
FCNB alleging that they negligently issued credit to an                 Here, Spiegel and FCNB filed counterclaims under
imposter who claimed to be Mattly. She also alleged that          rule 13, seeking damages for a groundless suit brought in
they violated the Fair Credit Reporting Act. The sole actual      bad faith or for purposes of harassment. Mattly's nonsuit did
damages requested in the lawsuit were (1) the attorney's          not affect these claims for affirmative relief; they were still
fees incurred by Mattly through her California lawyer (who        properly before the court after the nonsuit. Therefore, the
helped her clear up the problem with Spiegel), and (2) the        trial court acted within its jurisdictional power when it
attorney's fees incurred through David Vallance, who              granted the order awarding sanctions, and Mattly's and
represented Mattly in her suit against Spiegel. Spiegel and       Vallance's first point of error is overruled.
FCNB denied the charges, and counterclaimed for
sanctions, alleging that the pleading was groundless and               Specificity of Sanctions Order
should be subject to sanctions under rule 13 of the Texas
Rules of Civil Procedure. After the suit had been on file for            In their second point of error, Mattly and Vallance
almost one year, Spiegel moved for summary judgment on            argue that the trial court's order does not comply with (1)
the merits of Mattly's negligence claim, but it was never         that part of rule 13, which requires the court to state the
heard because Mattly nonsuited her case. The counterclaim         particularities upon which sanctions were issued and (2)
for damages was tried to the trial court which awarded            section 10.005 of the Civil Practice and Remedies Code,
Spiegel and FCNB only $5,000 (plus interest and taxable           which requires the court to describe the conduct warranting
court costs) of the $70,000 they requested.                       sanctions. We find nothing in the order reflecting that the
                                                                  judge ruled on the basis of section 10.005; therefore, we
     DISCUSSION AND HOLDINGS                                      will address only rule 13.

     Plenary Jurisdiction                                         Page 895

       In their first point of error, Mattly and Vallance argue          As to that rule, Mattly and Vallance argue that the
that the trial court did not have jurisdiction to enter the       trial court failed to specify facts showing that Mattly's case
sanctions award against them. They argue that a nonsuit is a      was groundless, and brought in bad faith or for purposes of
final judgment disposing of all claims, and that the trial        harassment. We agree.
court's plenary power extended only thirty days after the
nonsuit was signed. Because the trial court did not enter its            Whether to impose rule 13 sanctions is within the
written order awarding sanctions until forty-three days after     trial court's sound discretion. See Monroe v. Grider, 884
it granted Mattly's nonsuit, Mattly and Vallance claim it         S.W.2d 811, 816 (Tex.App.--Dallas 1994, writ denied). We
acted outside its plenary power, rendering the sanctions          will not set aside a sanctions order under rule 13 unless an
order void. As we explain below, their argument is                abuse of discretion is shown. See Falk & Mayfield L.L.P. v.
misplaced.                                                        Molzan, 974 S.W.2d 821, 824 (Tex.App.--Houston [14 th
                                                                  Dist.] 1998, pet. denied). Nonetheless,"rule 13 imposes a
       Mattly and Vallance are correct that, "the plaintiff's     duty on the trial court to point out with particularity the acts
right to take a nonsuit is unqualified and absolute as long as    or omissions on which sanctions are based." Zarsky v.
the defendant has not made a claim for affirmative relief."       Zurich Management, Inc., 829 S.W.2d 398, 399
BHP Petroleum Co. Inc. v. Millard, 800 S.W.2d 838, 840            (Tex.App.--Houston [14 th Dist.] 1992, no writ). Requiring
(Tex.1990); Georgiades v. Di Ferrante, 871 S.W.2d 878,            the trial court to state the particulars of the good cause for
880 (Tex.App.--Houston [14 th Dist.] 1994, writ denied).          imposing       sanctions     is    mandatory.     See      GTE
However, when a defendant has filed a counterclaim                Communications Sys. Corp. v. Curry, 819 S.W.2d 652, 654
seeking affirmative relief, a plaintiff cannot discontinue the    (Tex.App.--San Antonio 1991, no writ). A mere statement
suit and preclude the counterclaim from being heard. See          in the order that good cause was shown is insufficient to
TEX.R. CIV. P. 96. A claim for affirmative relief must state      sustain the sanctions order. See id.
a cause of action independent of the plaintiff's claim, that
entitles the defendant to relief even if the plaintiff abandons         As we explain below, this judgment ordering
or fails to establish her cause of action. See Georgiades, 871    sanctions does not meet these mandatory requirements. The
judgment recites only the ultimate conclusions the court is     Murphy v. Friendswood Development Co., 965 S.W.2d 708,
required to make in assessing sanctions, and does not state     710 (Tex.App.--Houston [1 st Dist.] 1998, no pet.);
any facts to support it. The judgment states the following:     Schexnider v. Scott & White Memorial Hosp., 953 S.W.2d
439, 441 (Tex.App.--Austin 1997, no pet.)
1. Plaintiff/Counter-Defendant and her attorney, Mr. David
Vallance, filed this lawsuit in bad faith and for improper      Page 896
purposes,          including         harassment         of
Defendants/Counter-Plaintiffs.                                   . One purpose of the particularity requirement is to justify
                                                                the imposition of sanctions and to show that the trial court
 2. At the time that Plaintiff/Counter-Defendant and her        properly weighed the sanctions request and imposed
attorney, Mr. David Vallance, filed this lawsuit, they lacked   sanctions in an appropriate manner when justified by the
any basis to believe that the contentions that were made        circumstances. See Murphy 965 S.W.2d at 710.
against Defendants/Counter-Plaintiffs were warranted by
existing law or by a nonfrivolious argument for the                   Neither the sanctions order nor the findings of fact
extension, modification, or reversal of existing law or the     contain any facts justifying the imposition of sanctions.
establishment of new law.                                       This failure by the court to comply with rule 13 is an abuse
                                                                of discretion that renders the order unenforceable and
     The trial court also entered findings of fact and          warrants a reversal. See Thomas v. Thomas, 917 S.W.2d
conclusions of law. The pertinent findings are set out          425, 432 (Tex.App.--Waco 1996, no writ). Mattly's second
below.                                                          point of error is sustained. [2]

The only damages sought by Plaintiff/Counter-Defendant               The Finding of Bad Faith
were attorney's fees. Plaintiff/Counter-Defendant suffered
no     actual     damages        as     a     result     of            In her fifth point of error, Mattly contends that the
Defendants/Counter-Plaintiffs alleged negligence.               trial court abused its discretion when it found that her
                                                                claims were brought in bad faith. As explained below, we
Plaintiff/Counter-Defendant lacked any basis to believe that    find no evidence in the record to support the trial court's
the      contentions   that     were     made        against    finding that Mattly and her attorney brought the suit in bad
Defendants/Counter-Plaintiffs were warranted by existing        faith.
law.
                                                                        A party cannot obtain rule 13 sanctions unless the
Plaintiff/Counter-Defendant lacked any basis to believe that    party proves that the claims are groundless and that the
the      contentions   that     were     made        against    opposing party brought the claim in bad faith or to harass
Defendants/Counter-Plaintiffs were warranted by existing        the party. See TEX.R. CIV. P.13. One purpose of rule 13 is
law or by a nonfrivolous argument for the extension,            to check abuses in the pleading process. See McCain v.
modification, or reversal of existing law or the                NME Hospitals, Inc., 856 S.W.2d 751, 757
establishment of new law.                                       (Tex.App.--Dallas 1993, no writ). As previously noted, rule
                                                                13 authorizes sanctions, available under rule 215(2)(b) [3] ,
Plaintiff/Counter-Defendant's pleadings were groundless         against an attorney, a represented party, or both, who files a
and brought in bad faith.                                       pleading that is groundless and brought in bad faith or
                                                                groundless and brought for the purpose of harassment. The
Plaintiff/Counter-Defendant's pleadings were brought for        trial court must examine the circumstances existing when
the purpose of harassment.                                      the litigant filed the pleadings to determine whether rule 13
                                                                sanctions are proper. See Monroe, 884 S.W.2d at 817. Bad
Plaintiff/Counter-Defendant's pleadings were signed by her
                                                                faith does not exist when a party exercises bad judgment or
attorney, Mr. David Vallance.
                                                                negligence; "it is the conscious doing of a wrong for
Plaintiff/Counter-Defendant's attorney failed to conduct a      dishonest, discriminatory, or malicious purposes." Falk, 974
reasonable investigation of the law and facts before            S.W.2d at 828, quoting Campos v. Ysleta Gen. Hosp., Inc.,
initiating this lawsuit.                                        879 S.W.2d 67, 71 (Tex.App.--El Paso 1994, writ denied).
                                                                Courts must presume that papers are filed in good faith, and
The acts that Plaintiff/Counter-Defendant complained of         the party moving for sanctions bears the burden of
were consistent with the requirements of The Fair Credit        overcoming this presumption. See Tarrant County v.
Reporting Act.                                                  Chancey, 942 S.W.2d 151, 154 (Tex.App.--Fort Worth
                                                                1997, no pet.). Spiegel and FCNB point to four actions
     The vast majority of these findings and conclusions        which, they claim, show that Mattly acted in bad faith: (1)
are conclusory; they fail to state any particulars. See         Mattly voluntarily nonsuited her claim after it was pending
for a year; (2) Mattly and Vallance did not adequately             usually are recoverable only if authorized by contract or
research the merits of her claims; (3) Mattly failed to            statute. However, during his research he located a Texas
respond to FCNB's request to investigate her credit                case recognizing that equity allows recovery of attorney's
complaint; and (4) Spiegel and FCNB gave Mattly and                fees and other litigation expenses "where a party was
Vallance notice that Mattly's claims had no legal merit.           required to prosecute or defend the previous suit as a
However, as we explain below, we find no evidence in the           consequence of the 'wrongful act' of the defendant." Baja
record that overcomes the presumption that Mattly and her          Energy, Inc. v. Ball, 669 S.W.2d 836, 838-39
attorney filed their pleadings in good faith.                      (Tex.App.--Eastland 1984, no writ); see also Estate of Arlitt
                                                                   v. Paterson, 995 S.W.2d 713, 721 (Tex.App.--San Antonio
       First, the record reflects that Mattly did not nonsuit      1999, pet. denied) (holding that although attorney's fees are
her claims because of bad faith. She testified at the hearing      usually not recoverable unless permitted by statute or
on the motion for sanctions that she could no longer afford        contract, contractual or statutory authorization was not
to continue her lawsuit. Up until the time of nonsuit, she         necessary in a malpractice claim to recover attorney's fees
had accumulated over fourteen thousand dollars in                  and costs as damages). This led him to believe that Mattly's
attorney's fees and was waiting for depositions to begin.          case was a unique situation, one presenting the exception
Moreover, in her motion for nonsuit, she stated that the case      discussed in Baja Energy. There was no other evidence on
had become too expensive for her to continue.                      the issue of reasonable inquiry as to Vallance. Thus, the
                                                                   only evidence in the record on the issue of reasonable
Page 897                                                           inquiry shows that both Mattly and Vallance made a
                                                                   reasonable inquiry before filing suit.
      She specifically stated that she was maintaining the
merit of her claims and that she was choosing to pursue a                  Next, we find no evidence that Mattly's failure to
different avenue, one that would procure legislative changes       respond to the FCNB's inquiry into her claim of fraud was
to make credit card fraud more difficult. The record               the result of bad faith. The FCNB contacted Mattly and
contains no evidence to show that Mattly acted in bad faith        asked her to fill out a form entitled "affidavit of forgery"
by filing a nonsuit, and we are unwilling to find that the         and also requested other information so that it could
filing of a nonsuit is, in and of itself, evidence of bad faith.   investigate her claim that the Spiegel credit card was issued
[4] See e.g. Delgado v. Methodist Hosp., 936 S.W.2d 479,           fraudulently. Mattly admits she did not fill out these forms,
487 (Tex.App.--Houston [14 th Dist.] 1996, no writ); Miller        but says she did not fill them out because her investigator
v. Armogida, 877 S.W.2d 361, 365 (Tex.App.--Houston [1             advised her not to complete them. The investigator, in turn,
st Dist.] 1994, writ denied)(where plaintiff, who sued             testified that, because Mattly had been a victim of credit
guardian ad litem for not prosecuting a case, non-suited           card fraud in the past, he wanted to insure that the company
after sanctions were filed and then re-filed in county court).     requesting the data was legitimate. When he could not
                                                                   locate the company with either Dunn and Bradstreet, the
       We also do not find evidence that Mattly and her
                                                                   local telephone directory of
attorney failed to conduct a reasonable pre-filing inquiry
into the merits of her claim. "Reasonable inquiry means the        Page 898
amount of examination that is reasonable under the
circumstances of the case." Monroe, 884 S.W.2d at 817.             the city listed on its return address, or with the police and
Mattly spoke with three attorneys to find out what she could       fire departments in the city, he advised her not to fill out the
do to recover her expenses incurred in stopping Spiegel and        form. However, he pointed out that, at some point, he gave
the Bank's collection efforts. In addition, her California         FCNB the names of several law enforcement personnel in
attorney suggested she contact a Texas attorney about              Houston who were investigating the fraudulent use of
recovering her fees because Spiegel and the Bank had               Mattly's name and credit. This notification, both from
Texas contacts. In addition, before she hired Vallance, a          Mattly and from her investigator, was sufficient under the
second attorney, her niece who lives in Texas, advised her         regulations to notify the card issuer--FCNB--of
that her lawsuit had merit. We find no evidence that Mattly,       unauthorized use of the card. See 12 C.F.R. § 226.12(b)(3).
a lay person, failed to make a reasonable pre-filing inquiry,      This evidence does not reflect a bad faith motive in refusing
especially when every lawyer with whom she spoke advised           to comply with the FCNB's request. [5]
her that she had a legitimate claim.
                                                                         Lastly, we find no evidence that Mattly and Vallance
       We reach the same conclusion as to Vallance, who            acted in bad faith in refusing to dismiss her case when
testified that he spent at least twelve hours of research into     Spiegel and the FCNB told Vallance that, in their opinion,
the merits of Mattly's claim. He spent at least a third of his     they thought Mattly's claims were not viable. In this case,
time researching which statutes were applicable to Mattly's        we decline to hold that this fact alone establishes bad faith.
negligence claim. He acknowledged that attorney's fees             The disagreement here concerned the interpretation and
application of case law and the Fair Credit Reporting Act.       contract or statutes. See Estate of Arlitt, 995 S.W.2d at 721
In virtually every case that comes before a judge, the parties   (holding that, although attorney's fees usually are not
disagree on these matters. Our conclusion might be               recoverable unless permitted by statute or contract,
different if Spiegel/FCNB had pointed out an easily              statutory or contractual authorization was not necessary in a
verifiable fatal flaw, see Miller v. Armogida, 877 S.W.2d        malpractice claim to recover attorney's fees and costs as
361, 365 (Tex.App.--Houston [1 st Dist.] 1994, writ denied)      damages); Standard Fire Ins. Co. v. Stephenson, 963
(where plaintiff, sued minor's guardian ad litem, not his        S.W.2d 81, 90-91 (Tex.App.--Beaumont 1997, no pet.)
attorney ad litem, for failure to prosecute a claim), or the     (holding that, in a bad faith claim, an insured could recover
case clearly had no merit and no argument for an extension       attorney's fees incurred as a result of the insurer's bad faith
of existing law, see e.g. Delgado, 936 S.W.2d at 487-88          where those fees were incurred in prior litigation between
(where plaintiff who had arranged for a private room but         the insurer and the insured); and Nationwide Mutual Ins.
received only a semi-private room, sued for negligence,          Co. v. Holmes, 842 S.W.2d 335, 340-42 (Tex.App.--San
intentional infliction of emotional distress, breach of          Antonio 1992, writ denied) (holding that insured, who
contract by hospital, and tortious interference with a           incurred unnecessary attorney's fees in order to induce
contract, all of which she alleged caused her mental             insurer to indemnify him, may recover those fees in a later
anguish). But, as we discuss below, these situations are not     suit "in the name of equitable principles"). And, even
present here.                                                    though no statute or contract authorized recovery of
                                                                 attorney's fees to the plaintiff, all three opinions--which
      Spiegel and FCNB alleged that Mattly's lawsuit was         have not been overturned--allowed the recovery of
patently meritless because (1) Mattly had no actual              attorney's fees. See Arlitt, 995 S.W.2d at 721; Standard Fire
damages--only attorneys fees--and (2) they owed no duty to       Ins. Co., 963 S.W.2d at 90; Nationwide Mutual Ins. Co.,
Mattly to check her credit report before issuing a 842 S.W.2d at 341-42.
pre-approved card. At trial, the parties and the judge did not
focus on duty, they focused on actual damages. Defendants               Spiegel and FCNB also rely on the Fair Credit
claimed, and the trial judge clearly believed, that Mattly       Reporting Act to argue that they owed no duty to Mattly to
could not, based on the extension or modification of             check her credit report before issuing a pre-approved credit
existing law or the establishment of new law, recover            card and, in fact, were precluded from viewing Mattly's
attorney's fees as damages in a negligence action.               credit report. However, Spiegel and FCNB have been
                                                                 unable to demonstrate with any clarity that Mattly's claim
      Mattly's petition prayed for Mattly to recover the         was precluded by the Fair Credit Reporting Act. [6] The
attorney's fees she incurred (1) in clearing up her credit       sections they cite do not directly or indirectly reveal that
problems with Spiegel, whom she alleged wrongfully               Mattly had no cause of action; in fact, if anything, they
issued the credit card, and (2) in prosecuting the case          show the opposite. See 15 U.S.C.A. § 1681b(a)(3)(A) (a
against Spiegel. However, by the time of the sanctions           consumer reporting agency may furnish a consumer report "
hearing, Vallance argued only that the expenses (attorney's      ... to a person which it has reason to believe intends to use
fees) incurred in resolving the problems created by              the information in connection with: a credit transaction
Spiegel's wrongful act should be recoverable. He relied on a     involving the consumer, a transaction involving the
Texas court of appeals opinion that has not been                 extension of credit to a consumer, reviewing an account of
overturned, and has, in fact, been cited by several other        the consumer, or collection of an account of the
courts of appeals. See Baja Energy, Inc., 669 S.W.2d at          consumer"); 15 U.S.C.A. § 1681b(c)(1)(B)(i) (a consumer
838-39. Baja Energy noted that, in certain situations, equity    reporting agency may furnish a consumer report relating to
allows the recovery of attorney's fees and other litigation      any consumer in a transaction not initiated by the consumer
expenses "where a                                                only if the transaction consists of a firm offer of credit); 15
                                                                 U.S.C.A. § 1681b(e) (concerning a consumer's right to be
Page 899                                                         excluded from lists provided by credit reporting agencies);
                                                                 15 U.S.C.A. § 1681m(d) (requiring persons who use a
party was required to prosecute or defend the previous suit
                                                                 consumer report on a consumer in connection with a credit
as a consequence of the 'wrongful act' of the defendant." Id.
                                                                 transaction not initiated by the customer, to provide the
at 839.
                                                                 customer with a clear and conspicuous statement that
      In opposition to this theory, Spiegel's counsel argued     information was used in connection with the transaction,
that the Baja case did not apply because in that case, the       that the consumer received the credit because the consumer
fees were recoverable because they were based in contract.       satisfied the criteria for credit worthiness ... ); and 15
However, as mentioned above, three subsequent courts of          U.S.C.A. § 1681t (outlining statute's relation to state laws).
appeal have noted the same exception to the general rule
                                                                       Even if we look beyond what Spiegel and FCNB have
that attorney's fees are not recoverable unless authorized by
                                                                 cited to us, we find nothing to indicate that Mattly's suit was
sanctionable. First, the purpose of the Act is to protect        Delgado, 936 S.W.2d at 487. The case law supports the
consumers, a point Congress made very clear:                     imposition of sanctions in such a case. See id.; Miller, 877
S.W.2d at 365. It is a totally different matter to sanction a
  It is the purpose of this Subchapter to require that           party on the basis of a complex statute, especially one
consumer reporting agencies adopt reasonable procedures          which does not directly address the matters in issue. We
for meeting the needs of commerce for consumer credit ...        have found no case law imposing sanctions in such an
and other information in a manner which is fair and              instance, and have been cited to none. This is not to say
equitable                                                        that, when a complex statute is involved, sanctions can
                                                                 never be imposed. We are merely saying that judges should
Page 900                                                         consider the complexity of the claim and underlying statute.

to the consumer, with regard to the confidentiality,                    Second, Spiegel and FCNB's own actions in this case
accuracy, relevancy and proper utilization of such               provide some indication that the alleged lack of merit was
information....                                                  not as readily apparent as they suggest. We find it
                                                                 noteworthy that, while steadfastly maintaining the
15 U.S.C.A. § 1681(b).
                                                                 frivolousness of Mattly's suit, Appellees incurred nearly
      Second, there is no Texas case law holding that a card     $70,000 in attorney's fees. And, this was in a case with
issuer does, or does not have, a duty to review the              minimal discovery and no apparent "Rambo tactics". Again,
cardholder's credit history prior to issuing a credit card.      this is not to say that parties may not incur large legal fees if
However, other state courts and federal courts have litigated    they are going to allege that a suit is frivolous, [7] but, in
issues between card issuers and victims of identity theft or     this case, this fact weighs against the imposition of
between card issuers and card holders. See Andrews v.            sanctions.
Trans Union Corp., 7 F. Supp. 2d 1056 (C.D.Ca.1998)
                                                                       Rule 13 "is a tool that must be available to trial courts
(involving a suit between a victim of identity theft and
                                                                 in those egregious situations where the worst of the bar uses
credit reporting agencies); In re Akins, 235 B.R. 866
                                                                 our honored system for ill motive without regard to reason
(W.D.Tex.1999) (containing an interesting and lively
                                                                 and the guiding principles of the law. The rule, however,
discussion of the credit card industry and the inaccuracies in
                                                                 cannot become a weapon used to punish those
reporting); Guzman v. Toyota Motor Credit Corp., 745
So. 2d 1123-24 (Fla.Dist.Ct.App.1999) (involving a suit           Page 901
between a card issuer and a victim of identity theft). These
cases confirm that this is a relatively new area of the law      with whose intellect or philosophic viewpoint the trial court
because identity theft is a relatively new crime. See            finds fault." Tarrant County v. Chancey, 942 S.W.2d 151,
Higgins, Identity Thieves, 84--Oct. A.B.A. J. 42. These          154 (Tex.App.--Fort Worth 1997, no pet.). We find no
cases do not resolve the main issue in contention in this        evidence that Mattly and her attorney consciously
case. However, they do contain some discussions that             continued the lawsuit for dishonest, discriminatory, or
would lead one to believe that Mattly could sue, and could       malicious purposes, and we sustain Mattly's fifth point of
argue that suit should be allowed as an extension of existing    error.
law or as the establishment of new law.
                                                                       CONCLUSION
     In short, after rather extensive research, much more
extensive than either of the parties appear to have done, we           In summary, the judgment and findings of fact are
cannot say that the Fair Credit Reporting Act precluded the      conclusory and therefore will not support the imposition of
type of claim Mattly brought. Thus, bringing such a claim        sanctions. Moreover, no evidence supports the trial court's
would not support the imposition of sanctions.                   finding that Mattly or her attorney acted in bad faith.
                                                                 Therefore, the trial court abused its discretion in imposing
       There are two other comments we feel compelled to         sanctions. Because we have held that sanctions were not
make, specifically with regard to Spiegel and FCNB's claim       properly imposed, we need not reach Spiegel's and FCNB's
that Mattly acted in bad faith by refusing to dismiss her case   cross-appeal that the sanctions award was too low, nor do
when told that she had no cause of action and, more              we reach Mattly and Vallance's points of error alleging that
generally with regard to Spiegel and FCNB's claim that the       the suit was not groundless.
claim was frivolous. First, by arguing that the case had no
merit, Spiegel and FCNB relied on an extremely complex                The judgment of the trial court is reversed, and we
federal statutory scheme. It is one thing to sanction a party    render judgment that appellees, Spiegel, Inc. and First
for bringing a non-existent common law claim. Often, one         Consumers National FCNB, take nothing in their
can easily determine if a cause of action exists. See e.g.       counterclaim for sanctions.
---------

Notes:

[1] Spiegel asserted that it issued the credit card in response
to a pre-approved application that it mailed directly to
Mattly.

[2] Although our disposition of this point alone requires that
we reverse the case, it would be only a reversal and remand
of the case to the trial court. The appellate rules require us
to reverse the court's judgment and render the judgment the
trial court should have rendered, unless we must remand for
further proceedings or must remand in the interests of
justice. See TEX.R.APP. P. 43.3. Because the fifth point of
error presents an issue that requires us to reverse and
render, we address it, as well.

[3] Texas Rule of Civil Procedure 215 governs sanctions for
discovery abuse.

[4] However, in a patently meritless suit, some courts have
held that failing to nonsuit may constitute some evidence
supporting sanctions. See Delgado, 936 S.W.2d at 487.

[5] Spiegel/FCNB argue that the Official Staff Commentary
to the regulations permits a card issuer to request
information in written form from a cardholder. See 12
C.F.R. § 226.12(b)-2,3 (1995). To begin with, we do not
find any language in the Commentary remotely resembling
Speigel/FCNB's contention, much less requiring a
cardholder to return a form sent to it by the card issuer. But,
beyond this fundamental problem with the argument, the
issue here is not whether the card issuer could obtain
written information from Mattly. The issue is whether
Mattly, someone who had been the victim of credit card
abuse on numerous occasions, acted in bad faith when she
refused to return a form (which requested confidential
information) to a company her investigator could not locate
through normal investigative channels. Citing to the same
commentary, Spiegel/FCNB also argue that if the
cardholder fails to comply with these requests from a card
issuer, the card issuer can terminate its investigation and
"seek payment from the cardholder." Our reading of the
Commentary does not reveal any explicit support for this
statement.

[6] Spiegel and FCNB did not raise preemption.

[7] Mattly took no action to cause Spiegel and FCNB's legal
fees to reach nearly $70,000, unlike some frivolous actions
in which a party will file numerous motions and discovery
requests that inflate the fees.

---------
Page 694                                                  Appellant R.M. Dudley Construction Company (Dudley
                                                          Construction), which is owned by Mark Dudley (Dudley).
258 S.W.3d 694 (Tex.App.-Waco 2008)                       Dudley Construction did some work for Appellee Dan
                                                          Dawson, and Martinez supervised the concrete crew on that
R.M. DUDLEY CONSTRUCTION COMPANY, INC.,                   job. Dawson subsequently hired Martinez to do some more
Appellant                                                 construction work " on the side," and in doing so, Martinez
                                                          used Dudley Construction's equipment, supplies, and
v.
                                                          employees who were being paid by Dudley Construction
                                                          while doing the work on the side. Martinez was thus able to
Dan DAWSON, William W. Dawson, Jr. (Dan Dawson's
                                                          charge Dawson significantly less than the going rate for
Dad), Rudy Briner, Steven Clark Hays and James K.
                                                          such work.
Ashlock, Appellees.
                                                                The other Appellees in this case-William W. Dawson,
No. 10-06-00228-CV.
                                                          Jr. (Dan Dawson's Dad), Rudy Briner, Steven Clark Hays,
Court of Appeals of Texas, Tenth District, Waco           and James K. Ashlock-all learned about Martinez's
                                                          discounted, on-the-side construction work from each other
May 28, 2008                                              and had Martinez do similarly discounted construction work
                                                          for them. Dudley learned that Martinez had done work for
     Rehearing Overruled July 29, 2008.                   the Appellees using Dudley Construction's equipment,
                                                          supplies, and employees, and he filed constitutional and
Page 695                                                  mechanic's and materialman's lien affidavits on the
                                                          Appellees' properties where Martinez had done the concrete
[Copyrighted Material Omitted]
                                                          work on the side.
Page 696
                                                                The Appellees filed a summary motion to remove
                                                          Dudley Construction's liens under section 53.160 of the
[Copyrighted Material Omitted]
                                                          Property Code, claiming that the liens were invalid because
Page 697                                                  they were filed on the Appellees' homestead properties and
                                                          no written contracts were executed before the construction
[Copyrighted Material Omitted]                            work commenced, as required by Property Code section
                                                          53.254.[1]See TEX. PROP.CODE ANN. § § 53.160, 53.254
Page 698                                                  (Vernon 2007). The Appellees requested the trial court to
                                                          remove the liens and to award them their attorney's fees
[Copyrighted Material Omitted]                            under section 53.156. See id. § § 53.156, 53.160. Dudley
                                                          Construction answered, filing a general denial. It also filed
Page 699                                                  a counterclaim entitled " Original Counterclaim and Suit to
                                                          Foreclose Lien" and alleging claims for unjust enrichment,
[Copyrighted Material Omitted]
                                                          fraud, theft liability act, conversion, conspiracy, tortious
Page 700                                                  interference with contractual relations, and quantum meruit.

     Robert A. Swearingen, Peterson & Swearingen LLP,     Page 701
College Station, TX, for Appellant.
                                                                 The trial court issued an order finding that the liens
     Billy M. Payne, Payne, Watson, Miller, Malecheck &   are invalid and should be removed and instructing the
Scherr PC, Bryan, TX, for Appellees.                      county clerk of Brazos County to file the order to show that
                                                          the liens are invalid and are to be removed so as not to be a
      Before Chief Justice GRAY, Justice VANCE, and       cloud on the Appellees' property titles. A hearing on
Justice REYNA.                                            attorney's fees incurred to have the liens removed took
                                                          place, but the trial court deferred ruling on the Appellees'
     OPINION                                              request for attorney's fees until all issues in the case had
                                                          been determined.
     BILL VANCE, Justice.
                                                               About ten months later, the Appellees answered
     Carlos Martinez was a concrete supervisor for        Dudley Construction's counterclaim, asserting a general
denial and their own counterclaim in which they claimed                 Nothing in the record suggests that the new attorney
that Dudley Construction's counterclaim was " groundless          was incapable of rendering adequate representation or did
in fact or brought in bad faith or brought for the purpose of     not render adequate representation. See Rehabilitation
harassment." The Appellees also sought to recover their           Facility, 962 S.W.2d at 156 (citing Echols v. Brewer, 524
attorney's fees in defending Dudley Construction's                S.W.2d 731, 734 (Tex.Civ.App.-Houston [14th Dist.] 1975,
counterclaim.                                                     no writ)). Dudley Construction points to

      A jury trial was held, and after Dudley Construction        Page 702
had rested, the trial court granted the Appellees' motion for
directed verdict on all of Dudley Construction's claims            the trial court's exclusion of some telephone records
except for its conspiracy-to-breach-fiduciary-duty claim          because they had not been timely produced, but the record
against Appellees Dan Dawson and Rudy Briner. The jury            does not reflect that a different ruling would have been
found against Dudley Construction on that claim, and              made if Dudley Construction's original attorney had been
Dudley Construction thus took nothing on its counterclaim.        present or that the records' exclusion prejudiced Dudley
The trial court did not submit any jury issues on the             Construction.
Appellees' remaining claims or on attorney's fees.
                                                                        Based on the circumstances in the record before us,
     Continuance                                                  we cannot say that the trial court abused its discretion. See
                                                                  id. at 155-56 (trial court did not abuse its discretion by
      We begin with Dudley Construction's second issue,           denying continuance on ground that lead counsel for
which asserts that the trial court erred by denying its first     hospital was in trial for another client in another city where
and only motion for continuance. We review a ruling on a          attorney from same law firm represented hospital at trial,
motion for continuance for abuse of discretion. Villegas v.       and record did not indicate lead counsel had tried to avoid
Carter, 711 S.W.2d 624, 626 (Tex.1986).                           scheduling conflict or had demonstrated why other case
                                                                  took precedence over hospital's case). We overrule Dudley
       On August 12, 2005, this case was set for jury trial on    Construction's second issue.
December 5, 2005, with a final pretrial on December 2. The
" notice of setting" states: " Conflicting settings of counsel         Directed Verdict
will not be a reasonable ground [for a continuance] unless
the conflicting setting was given prior in time to this notice,          The trial court directed a verdict and rendered
..." At the December 2 final pretrial, the trial court sua        judgment in favor Appellees William W. Dawson, Jr. (Dan
sponte moved the trial to December 7. On December 6,              Dawson's Dad), Hays, and Ashlock on all of Dudley
Dudley Construction filed a motion for continuance,               Construction's claims (unjust enrichment, fraud, theft
alleging that its attorney had received notice on November        liability act, conversion, conspiracy, tortious interference
30 that two of his clients in another legal proceeding had        with contractual relations, and quantum meruit) against
just been added to a NASD arbitration that was scheduled          them. It also directed a verdict in favor of Appellees Dan
to begin on December 6. The trial court denied the motion,        Dawson and Briner on Dudley Construction's claims for
and another attorney from the law firm of Dudley                  unjust enrichment, fraud, theft liability act, conversion,
Construction's attorney tried the case for Dudley                 tortious interference with contractual relations, and
Construction.                                                     quantum meruit, but not on the conspiracy claim. The only
                                                                  claim of Dudley Construction that the trial court submitted
       In general, absence of counsel is not good cause for a     to the jury was its claim for conspiracy to breach fiduciary
continuance, but the trial court has the discretion to allow a    duty against Appellees Dan Dawson and Briner (i.e., that
continuance if good cause is shown. TEX.R. CIV. P. 253;           they conspired with Martinez to breach his fiduciary duty to
see Rehabilitation Facility at Austin, Inc. v. Cooper, 962        Dudley Construction), and the jury found against Dudley
S.W.2d 151, 155 (Tex.App.-Austin 1998, no pet.)(citing            Construction on that claim.
State v. Crank, 666 S.W.2d 91, 94 (Tex.1984)). The record
does not show the efforts, if any, taken by Dudley                       Dudley Construction's third issue complains that the
Construction's attorney to have the conflicting arbitration       trial court erred by entering a directed verdict on Dudley
proceeding reset, nor does it adequately explain the              Construction's claims for quantum meruit and unjust
arbitration's precedence over the December 5 jury trial           enrichment against all the Appellees. Dudley Construction
setting for which notice was given on August 12.                  is not appealing the directed verdict in favor of Appellees
Furthermore, there is no explanation why the motion for           William W. Dawson, Jr. (Dan Dawson's Dad), Hays, and
continuance was filed after the pretrial and on the day           Ashlock on its claims for fraud, theft liability act,
before trial.                                                     conversion, conspiracy, and tortious interference with
                                                                  contractual relations. Dudley Construction is not appealing
the directed verdict in favor of Appellees Dan Dawson and              Unjust Enrichment
Rudy Briner on its claims for fraud, theft liability act,
conversion, and tortious interference with contractual             Unjust enrichment, itself, is not an independent cause of
relations, nor is it appealing the adverse jury finding on its    action but rather " characterizes the result of a failure to
conspiracy claim against Appellees Dan Dawson and                 make restitution of benefits either wrongfully or passively
Briner.                                                           received under circumstances that give rise to an implied or
                                                                  quasi-contractual obligation to repay." Friberg-Cooper
        In reviewing the granting of a motion for directed        Water Supply Corp. v. Elledge, 197 S.W.3d 826, 832
verdict, we follow the standards for assessing the legal          (Tex.App.-Fort Worth 2006, pet. filed) (quoting Walker v.
sufficiency of the evidence. City of Keller v. Wilson, 168        Cotter Props., Inc., 181 S.W.3d 895, 900 (Tex.App.-Dallas
S.W.3d 802, 809-28 (Tex.2005). There is legally                   2006, no pet.)), [rev'd on other grounds, 240 S.W.3d 869
insufficient evidence or " no evidence" of a vital fact when      (Tex.2007)]; Mowbray v. Avery, 76 S.W.3d 663, 679
(a) there is a complete absence of evidence of a vital fact;      (Tex.App.-Corpus Christi 2002, pet. denied); see Best Buy
(b) the court is barred by rules of law or of evidence from       Co. v. Barrera, 214 S.W.3d 66, 73 (Tex.App.-Corpus
giving weight to the only evidence offered to prove a vital       Christi 2006, pet. filed), [rev'd on other grounds, 248
fact; (c) the evidence offered to prove a vital fact is no more   S.W.3d 160 (Tex.2007)]. The doctrine applies the principles
than a mere scintilla; or (d) the evidence conclusively           of restitution to disputes where there is no actual contract,
establishes the opposite of the vital fact. Merrell Dow           based on the equitable principle that one who receives
Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex.1997);          benefits that would be unjust for him to retain ought to
see also Prudential Ins. Co. v. Fin. Review Servs., Inc., 29      make restitution. Friberg-Cooper, 197 S.W.3d at 832;
S.W.3d 74, 77 (Tex.2000) (directed verdict proper only            Mowbray, 76 S.W.3d at 679. Unjust enrichment is not a
when evidence conclusively establishes right of movant to         proper remedy " merely because it ' might appear expedient
judgment or negates right of opponent or evidence is              or generally fair that some recompense be afforded for an
insufficient to raise material fact issue);                       unfortunate loss' to the claimant, or because the benefits to
                                                                  the person sought to be charged amount to a windfall."
Page 703                                                          Heldenfels Bros. Inc. v. City of Corpus Christi, 832 S.W.2d
39, 42 (Tex.1992) (quoting Austin v. Duval, 735 S.W.2d
Cain v. Pruett, 938 S.W.2d 152, 160 (Tex.App.-Dallas              647, 649 (Tex.App.-Austin 1987, writ denied)); Mowbray,
1996, no writ) (directed verdict proper when evidence 76 S.W.3d at 679. To recover under an unjust enrichment
reflects no other verdict can be rendered and moving party        theory, the benefits to the other party must be actually
is entitled to judgment as matter of law).                        unjust under the principles of equity. Mowbray, 76 S.W.3d
                                                                  at 679; Burlington N. R.R. v. Sw. Elec. Power Co., 925
     Quantum Meruit
                                                                  S.W.2d 92, 97 (Tex.App.-Texarkana 1996), aff'd, 966
       Quantum meruit is an equitable theory of recovery          S.W.2d 467 (Tex.1998).
intended to prevent unjust enrichment when there is an
                                                                  Argyle ISD v. Wolf, 234 S.W.3d 229,   246-47
implied agreement to pay for goods or services provided. In
                                                                  (Tex.App.-Fort Worth 2007, no pet. h.).
re Kellogg Brown & Root, 166 S.W.3d 732, 740
(Tex.2005); Vortt Exploration Co. v. Chevron U.S.A., Inc.,              Unjust enrichment is also found under circumstances
787 S.W.2d 942, 944 (Tex.1990). " Generally, a party may          in which one person has obtained a benefit from another by
recover under quantum meruit only when there is no                fraud, duress, or the taking of an undue advantage.
express contract covering the services or materials               Heldenfels Bros., 832 S.W.2d at 41. In its brief, Dudley
furnished." Vortt Exploration, 787 S.W.2d at 944. Stated          Construction points to its allegations that the Appellees
another way, a party generally cannot recover under
quantum meruit when there is a valid contract covering the        Page 704
services or materials furnished. Murray v. Crest Constr.,
Inc., 900 S.W.2d 342, 345 (Tex.1995). In this case, it in          had obtained the benefit of Dudley Construction's labor and
undisputed that each of the Appellees had an express oral         materials through fraud and taking undue advantage of
contract with Martinez on their respective side jobs with         Dudley Construction in their transactions with Martinez,
him and that they paid him under those oral contracts. That       which includes the same factual matters as the alleged
precludes recovery under quantum meruit as a matter of            conspiracy with him to breach his fiduciary duty to Dudley
law, and Dudley Construction makes no contrary argument.          Construction by diverting concrete jobs.
The trial court did not err in entering a directed verdict on
Dudley Construction's quantum meruit claims.                           As with our disposition of Dudley Construction's
                                                                  quantum meruit claim, we note that on Dudley
                                                                  Construction's unjust enrichment claim, each of the
Appellees had an express oral contract with Martinez on          counterclaim, the Appellees filed a post-trial " motion to
their respective side jobs and they paid him under those         assess attorney's fees." It first recited the history of their
contracts. Thus, the equitable remedy of unjust enrichment       motion to remove the liens and their request for attorney's
is not applicable. See Argyle ISD, 234 S.W.3d at 246-47          fees in that motion, then it asserted that Dudley
(unjust enrichment doctrine applies principles of restitution    Construction's conspiracy claim " was groundless, was
to disputes where there is no actual contract).                  brought in bad faith and for the purpose of harassment."
                                                                 The motion sought recovery of all of the Appellees'
      Additionally, the availability of an adequate legal        attorney's fees. After Dudley Construction filed a response
remedy may render equitable claims like unjust enrichment
unavailable. See Best Buy Co. v. Barrera, 248 S.W.3d 160,        Page 705
161 n. 1 (Tex.2007) (citing and quoting BMG Direct Mktg.,
Inc. v. Peake, 178 S.W.3d 763, 770 (Tex.2005) (" Like             complaining that the Appellees' motion did not cite any
other equitable claims and defenses, an adequate legal           rules or statutes, the Appellees filed an amended motion
remedy may render equitable claims of unjust enrichment          that cited section 53.126 [sic ] for their request for
and equitable defenses of voluntary-payment unavailable."        attorney's fees to remove the liens and that cited for their
)). In this case, the trial court submitted Dudley               frivolous pleading claim section 53.156 " and/or" Rule of
Construction's common-law cause of action of conspiracy          Civil Procedure 13 " and/or" chapter 10 of the Civil Practice
to breach fiduciary duty, and the jury found against Dudley      and Remedies Code.
Construction. That adequate legal remedy was available to
Dudley Construction in its case against Appellees.                     Because the trial judge recused himself, an assigned
Moreover, the record shows that Dudley Construction had          judge presided over the Appellees' motion to assess
yet another available legal remedy-a separate lawsuit            attorney's fees. After a hearing, the assigned judge granted
pending against Martinez for his liability to Dudley             the motion, and an award of attorney's fees on the
Construction over the same side jobs.                            Appellees' motion was incorporated in the judgment " based
                                                                 on Section 53.156 of the Property Code, and/or Chapter 10
      Finally, unjust enrichment based on the Appellees'         of the Civil Practices & Remedies Code, and/or Rule 13,
alleged fraudulent conduct was subsumed within, or was a         Texas Rules of Civil Procedure." [2] The judgment awarded
close version in equity of, Dudley Construction's conspiracy     attorney's fees as follows: $35,259.93 through entry of
claim, which was submitted to the jury. Submitting a             judgment; $12,500 in the event of an unsuccessful appeal;
separate jury question on unjust enrichment would have           $10,000 in the event of an unsuccessful petition for review,
been superfluous and confusing. See Hyundai Motor Co. v.         and $7,500 in the event oral argument is presented on an
Rodriguez, 995 S.W.2d 661, 665-66 (Tex.1999) (trial court        unsuccessful petition for review.
should not submit differently worded questions that call for
same factual finding " to avoid confusing the jury and the             The assigned judge issued findings of fact and
possibility of inconsistent findings" ); Texas Genco, LP v.      conclusions of law, and the judgment closely tracked the
Valence Operating Co., 187 S.W.3d 118, 125                       language of the findings and conclusions. The summarized
(Tex.App-Waco 2006, pet. denied). For these reasons, the         findings or conclusions are:
trial court did not err in directing a verdict on Dudley
                                                                 1. The Appellees filed the case to invalidate the liens
Construction's unjust enrichment claims. We overrule
                                                                 wrongfully filed by Dudley Construction on their
Dudley Construction's third issue.
                                                                 homesteads.
     Attorney's Fees and Sanctions
                                                                 2. Dudley Construction's counterclaim sought to establish
       We now turn to Dudley Construction's first issue,         and foreclose liens on the Appellees' homesteads.
which complains that the trial court erred in awarding
                                                                 3. The liens were invalid and ordered stricken.
attorney's fees to the Appellees as sanctions. As noted
above, after the trial court ordered the removal of the liens,   4. The entire case was " of the type" referenced in section
a hearing took place on the Appellees' claim for attorney's      53.156 of the Property Code.
fees and costs incurred to have the liens removed. See TEX.
PROP.CODE ANN. § 53.156. The Appellees' attorney                 5. [Actual amounts of attorney's fees awarded, as noted
testified to attorney's fees and costs in the amount of          above].
$7,377.70 at that point in the litigation. The trial court
deferred ruling on the Appellees' request for attorney's fees    6. The amounts are both equitable and just.
at that time.
                                                                 7. Dudley Construction's filing liens against the Appellees'
       After the jury trial on Dudley Construction's
homesteads intended to harass them [as follows: [3]]             arbitrarily and unreasonably, without reference to guiding
                                                                 rules or principles, or when it misapplies the law to the
8. Dudley Construction's filing liens against the Appellees'     established facts of the case. Beaumont Bank, N.A. v.
homesteads without written and signed contracts is contrary      Buller, 806 S.W.2d 223, 226 (Tex.1991). " A trial court has
to Texas law.                                                    no discretion to determine what the law is or in applying the
                                                                 law to the facts and, consequently, the trial court's failure to
9. Dudley Construction's liens were fraudulent under             analyze or apply the law correctly is an abuse of
section 51.901 of the Government Code.                           discretion." In re American Homestar of Lancaster, Inc., 50
S.W.3d 480, 483 (Tex.2001).
10. Dudley Construction refused to release the liens after
receiving written demand delivered to it under section 32.49            Dudley Construction asserts that the assigned judge
of the Penal Code.                                               abused his discretion in awarding attorney's fees and costs
                                                                 under section 53.156 for fees and costs incurred after the
11. The specific dollar amounts claimed as due in the liens
                                                                 trial court found the liens invalid and ordered them stricken
were not supported by systematically kept records.
                                                                 on March 10, 2004. We agree. On March 24, 2004, the trial
12. The specific dollar amounts in a sworn affidavit in the      court held a hearing on the Appellees' request for attorney's
separate case against Martinez were for substantially            fees and costs under section 53.156, and the Appellees'
different amounts than the amounts sworn to in the liens.        attorney testified to attorney's fees and costs in the amount
                                                                 of $7,377.70. In its brief, Dudley Construction does not
13. The amounts claimed in a sworn affidavit in the              dispute that the " Appellees were entitled to reasonable
separate case against Martinez were merely estimates of the      attorney's fees in their efforts to remove the liens on their
amounts that Dudley Construction would have charged had          respective properties." (Appellant's Brief at 21).
it done the jobs at issue.
                                                                       Dudley Construction argues that once the trial court
Page 706                                                         found the liens invalid and ordered them stricken in the
                                                                 Appellees' section 53.160 summary-motion proceeding, no
  14. As to Appellees Hays, Ashlock, and William W.              proceeding to foreclose on a lien or to declare a lien invalid
Dawson (Dan Dawson's Dad), no credible evidence was              was pending and the Appellees could not recover attorney's
introduced showing that they conspired to defraud Dudley         fees under section 53.156 in defending Dudley
Construction.                                                    Construction's common-law and equitable counterclaims.
                                                                 We agree, as did the trial court before recusal occurred: At
     Property Code Section 53.156                                a January 23, 2006 hearing on the Appellees' motion for
                                                                 attorney's fees, the trial court stated that, upon the liens
      Section 53.156 of the Property Code provides: " In         being held unenforceable, " The way I view it at that point
any proceeding to foreclose a lien ... or in any proceeding to   in time, I basically took it [the lien issue in the case] out of
declare that any lien or claim is invalid or unenforceable in    the Property Code...."
whole or in part, the court may award costs and reasonable
attorney's fees as are equitable and just." TEX.                         The Appellees argued then and argue now that
PROP.CODE ANN. § 53.156. We review an award of                   because Dudley Construction left language seeking to
attorney's fees under a statute such as section 53.156 for an    establish liens on the Appellees' properties in its
abuse of discretion. See, e.g., Bocquet v. Herring, 972          counterclaim, the lien issue remained in the case. The trial
S.W.2d 19, 21 (Tex.1998); cf. TEX. CIV. PRAC. &                  court did not necessarily agree with the Appellees, but the
REM.CODE ANN. § 37.009 (Vernon 1997) (under                      assigned judge apparently
Declaratory Judgments Act, trial court may award "
reasonable and necessary attorney's fees as are equitable        Page 707
and just" ). " Whether to award attorney's fees, and to which
party, is a decision that is solely within the trial court's      did with his conclusion that the entire case was " of the
discretion and will not be reversed absent a clear abuse of      type" referenced in section 53.156 of the Property Code.
that discretion." Sammons v. Elder, 940 S.W.2d 276, 284          The language in Dudley Construction's pleading was an
(Tex.App.-Waco 1997, writ denied).                               alternative request for the imposition of and foreclosure on
                                                                 a judicial equitable lien and a constructive trust to enable
      The determination of whether a trial court abused its      Dudley Construction to recover damages. That pleading
discretion is a question of law. Jackson v. Van Winkle, 660      language, however, even if construed as a " proceeding to
S.W.2d 807, 810 (Tex.1983), overruled in part on other           foreclose a lien" as required by section 53.156, does not fall
grounds by Moritz v. Preiss, 121 S.W.3d 715, 721                 within the ambit of section 53.156 because judicial or
(Tex.2003). A trial court abuses its discretion when it acts     equitable liens are not governed by Title 5, Subtitle B of the
Property Code, which section 53.156 is a part of. See TEX.         13; see Appleton v. Appleton, 76 S.W.3d 78, 86
PROP.CODE ANN. § 51.001(2) (Vernon 2007) (" this                   (Tex.App.-Houston [14th Dist.] 2002, no pet.)(" the trial
subtitle does not affect ... a lien that is not treated in this    court is required to make particularized findings of good
subtitle, include a lien arising under common law, in              cause justifying the sanctions" ). In reviewing an award of
equity" ).                                                         sanctions, we ordinarily look to the particulars of good
                                                                   cause set out in the sanction order. Woodward v. Jaster, 933
      In conclusion, because the trial court ruled that            S.W.2d 777, 782 (Tex.App.-Austin 1996, no writ).
Dudley Construction's liens were invalid and ordered them
stricken, thus taking them out of the case, and because the        Page 708
request for the imposition of and foreclosure on a judicial
equitable lien is not governed by section 53.156, the                    Dudley Construction asserts that because the assigned
assigned judge abused his discretion by misapplying the            judge did not make a specific finding that Dudley
law in his conclusion that the entire proceeding was of the        Construction's counterclaims were groundless, the assigned
type referenced in section 53.156. We hold that the                judge abused his discretion in imposing sanctions under
Appellees cannot recover attorney's fees and costs under           Rule 13. We partially agree. In setting out its good cause
section 53.156 for the litigation that continued after the trial   findings with particularity, the trial court must find the
court's March 10, 2004 order declaring the liens invalid and       pleading groundless as part of the two-part test. See Tanner,
ordering their removal. But because the trial court held a 856 S.W.2d at 731 (to be sanctionable, pleading must be
hearing and received evidence of attorney's fees and costs at      groundless and also brought in bad faith or for the purpose
the conclusion of the section 53.160 summary-motion                of harassment); Estate of Davis, 9 S.W.3d at 297 (" First,
proceeding, we hold that the Appellees are entitled to             the party moving for sanctions must demonstrate that the
recover attorney's fees and costs in the amount of $7,377.70       opposing party's filings are groundless, ..." ); Karlock v.
under section 53.156.                                              Schattman, 894 S.W.2d 517, 522 (Tex.App.-Fort Worth
                                                                   1994, orig. proceeding) (" The trial court must find that the
     Rule 13 Sanctions                                             pleadings are in fact groundless and brought in bad faith or
                                                                   to harass." ); McCain v. NME Hosps., Inc., 856 S.W.2d 751,
      Imposing Rule 13 sanctions is within the trial court's       757 (Tex.App.-Dallas 1993, no writ) (" The trial court must
sound discretion. Monroe v. Grider, 884 S.W.2d 811, 816            find that the pleadings are in fact groundless and were
(Tex.App.-Dallas 1994, writ denied). Accordingly, we               brought in bad faith or to harass." ).
review a trial court's order for Rule 13 sanctions under an
abuse of discretion standard. Cire v. Cummings, 134                      In their amended motion to assess attorney's fees, the
S.W.3d 835, 838 (Tex.2004).                                        Appellees identified Dudley Construction's conspiracy
                                                                   claim as the pleading in question, and in his findings and
      Rule 13 authorizes a trial court to impose sanctions         conclusions, the assigned judge found or concluded: " As to
against an attorney, a represented party, or both, who file a      Steven Clark Hays, James K. Ashlock, and William W.
groundless pleading brought in bad faith or brought for the        Dawson (Dan Dawson's Dad), no credible evidence was
purpose of harassment. TEX.R. CIV. P. 13. " The                    introduced showing that they conspired to defraud R.M.
imposition of Rule 13 sanctions involves the satisfaction of       Dudley Construction Company, Inc." It is therefore clear
a two-part test. First, the party moving for sanctions must        that, if the assigned judge found a claim groundless and
demonstrate that the opposing party's filings are groundless,      sanctionable under Rule 13, it was Dudley Construction's
and second, it must be shown that the pleadings were filed         conspiracy claim. We will therefore apply Rule 13's
either in bad faith or for the purposes of harassment." Estate     groundlessness test to the pleading of that claim.
of Davis v. Cook, 9 S.W.3d 288, 297 (Tex.App.-San
Antonio 1999, no pet.).                                                  Rule 13 defines " groundless" as having " no basis in
                                                                   law or fact and not warranted by good faith argument for
      Rule 13 directs a trial court to presume that a pleading     the extension, modification, or reversal of existing law." Id.
was filed in good faith. TEX.R. CIV. P. 13; GTE Comm.              In determining whether sanctions are appropriate, the trial
Sys. v. Tanner, 856 S.W.2d 725, 731 (Tex.1993). " Thus,            court must examine the facts available to the litigant and the
the burden is on the party moving for sanctions to overcome        circumstances existing when the litigant filed the pleading.
this presumption." Tanner, 856 S.W.2d at 731. A                    Alejandro v. Bell, 84 S.W.3d 383, 392 (Tex.App.-Corpus
groundless pleading is not sanctionable unless it also was         Christi 2002, no pet.). The trial court uses an objective
brought in bad faith or for the purpose of harassment. Id.         standard to determine if a pleading was groundless: did the
                                                                   party and counsel make a reasonable inquiry into the legal
     Rule 13 also provides: " No sanctions under this rule         and factual basis of the claim? In re United Servs. Auto
may be imposed except for good cause, the particulars of           Ass'n, 76 S.W.3d 112, 115 (Tex.App.-San Antonio 2002,
which must be stated in the sanction order." TEX.R. CIV. P.
orig. proceeding).                                               pleadings and motions: " The signing of a pleading or
                                                                 motion...." TEX. CIV. PRAC. & REM.CODE ANN. §
      Because of the assigned judge's finding or conclusion      10.001; see Low, 221 S.W.3d at 614. The affidavits
that Dudley Construction did not introduce any credible          claiming liens that Dudley Construction filed with the
evidence that Hays, Ashlock, and William W. Dawson (Dan          county clerk of Brazos County are not pleadings or
Dawson's Dad) conspired to defraud Dudley Construction,          motions.
we know that the assigned judge plainly did not apply Rule
13's groundlessness test.[4] This misapplication of the law              It is unclear whether the assigned judge imposed
is an abuse of discretion. See In re American Homestar, 50       sanctions for a violation of section 10.001(1) with respect to
S.W.3d at 483 (" trial court's failure to analyze or apply the   Dudley Construction's counterclaim to establish and
law correctly is an abuse of discretion" ). Without a proper     foreclose on the liens, or with respect to Dudley
groundlessness finding under Rule 13, the Appellees cannot       Construction's filing of affidavits claiming liens. The
recover attorney's fees as sanctions under Rule 13, and any      findings and conclusions refer to the counterclaim and then
recovery under Rule 13 would be an abuse of discretion.          to the liens, and the judgment's principal references to the
                                                                 liens are to highlight how they played a role in Dudley
     Civil Practice and Remedies Code Chapter 10                 Construction's intent to harass the Appellees. The findings
Sanctions                                                        and the judgment do not expressly find or conclude that
                                                                 Dudley Construction's counterclaim was intended to harass
      Sanctions can be ordered for a violation of section        the Appellees. To the contrary, the judgment, after reciting
10.001.                                                          the case's procedural history, " concludes and finds that
                                                                 R.M. Dudley Construction Company, Inc. intended to
Page 709
                                                                 harass the Plaintiffs/Counter-Defendants for any one of the
TEX. CIV. PRAC. & REM.CODE ANN. § 10.002(a)                      following reasons: ..." Those following reasons are Findings
(Vernon 2002). The assigned judge's findings and the             8 to 14, set forth above. Therefore, to the extent that the
judgment reflect that sanctions were ordered under sections      assigned judge's findings and judgment assessed chapter 10
10.001(1) and 10.001(3). Under section 10.001, signing a         sanctions for the filing of the lien affidavits because their
pleading or motion constitutes a certificate by the signatory    filing by Dudley Construction was intended to harass the
that to the signatory's best knowledge, information, and         Appellees, in violation of section 10.001(1), the assigned
belief, formed after reasonable inquiry:                         judge abused his discretion by not correctly applying the
                                                                 law.
(1) the pleading or motion is not being presented for any
improper purpose, including to harass or to cause                      Regardless, if Dudley Construction's counterclaim
unnecessary delay or needless increase in the cost of            was the offending pleading, sanctions under section
litigation;                                                      10.001(1) fail for another reason. A trial court must hold an
                                                                 evidentiary hearing to make the necessary factual
...                                                              determinations about the party's or attorney's motives and
                                                                 credibility. Alejandro v. Robstown ISD, 131 S.W.3d 663,
(3) each allegation or other factual contention in the           670 (Tex.App.-Corpus Christi 2004, no pet.); see, e.g., Low,
pleading or motion has evidentiary support or, for a 221 S.W.3d at 613, 617 (referring to trial court's evidentiary
specifically identified allegation or factual contention, is     hearing on motion for chapter 10 sanctions); Trantham v.
likely to have evidentiary support after a reasonable            Isaacks, 218 S.W.3d 750, 752, 755-56 (Tex.App.-Fort
opportunity for further investigation or discovery.              Worth 2007, pet. denied) (same), cert. denied,

Id. § 10.001(1), (3) (emphases added).                           Page 710

       Sanctions under chapter 10 are reviewed for abuse of      __ U.S. __, 128 S. Ct. 340, 169 L. Ed. 2d 155 (2007); Law
discretion. Low v. Henry, 221 S.W.3d 609, 614 (Tex.2007).        Offices of Windle Turley, P.C. v. French, 164 S.W.3d 487,
Rule 13 directs a trial court to presume that a pleading was     491-92 (Tex.App.-Dallas 2005, no pet.)(same). Without
filed in good faith. TEX.R. CIV. P. 13; Tanner, 856 S.W.2d       such an evidentiary hearing, the trial court has no evidence
at 731. " Thus, the burden is on the party moving for            before it to determine that a pleading was filed in bad faith
sanctions to overcome this presumption." Tanner, 856             or to harass. Robstown ISD, 131 S.W.3d at 670; Karlock,
S.W.2d at 731. The Appellees, as the movants for sanctions, 894 S.W.2d at 523.The party moving for sanctions must
had the burden of proving violations of sections 10.001(1)       prove the pleading party's subjective state of mind.
and 10.001(3).                                                   Brozynski v. Kerney, 2006 WL 2160841, at *4
                                                                 (Tex.App.-Waco Aug. 2, 2006, pet. denied) (citing Mattly v.
      Chapter 10, by its own terms, is limited to frivolous      Spiegel, Inc., 19 S.W.3d 890, 896 (Tex.App.-Houston [14th
Dist.] 2002, no pet.)). In the case of section 10.001(1), the     sanctions
movant must show, and the court must describe and
explain, that the pleading was filed for the improper             Page 711
purpose of harassment. See TEX. CIV. PRAC. &
REM.CODE ANN. § 10.001(1); id. § 10.005 (" A court                under section 10.001(1) is an abuse of discretion.
shall describe in an order imposing a sanction under this
                                                                           The only other finding that could support the
chapter the conduct the court has determined violated
                                                                  imposition of chapter 10 sanctions is Finding 14, which
Section 10.001 and explain the basis for the sanction
                                                                  states that, as to Appellees Hays, Ashlock, and William W.
imposed." ).
                                                                  Dawson (Dan Dawson's Dad), " no credible evidence was
        Evidence must be admitted under the rules of              introduced showing that they conspired to defraud" Dudley
evidence at the evidentiary hearing for a trial court to          Construction. The applicable standard in section 10.001(3)
consider it in a sanctions context. Bell, 84 S.W.3d at 393;       is that, to the signatory's best knowledge, information, and
see McCain, 856 S.W.2d at 757 (motions and arguments of           belief, formed after reasonable inquiry, each allegation or
counsel are not evidence in a sanctions hearing context).         other factual contention in a pleading has evidentiary
The pleading alone cannot establish that the represented          support or, for a specifically identified allegation or factual
party or its attorney brought their case in bad faith or to       contention, is likely to have evidentiary support after a
harass. McCain, 856 S.W.2d at 757.                                reasonable opportunity for further investigation or
                                                                  discovery. TEX. CIV. PRAC. & REM.CODE ANN. §
      At the hearing on the Appellees' motion to assess           10.001(3). Case law under Rule 13 is instructive in
attorney's fees as sanctions, the Appellees requested that the    interpreting section 10.001(3). Griffin Indus. v. Grimes,
assigned judge take judicial notice of the file and include       2003 WL 1911993, at *4-6 (Tex.App.-San Antonio April
the evidence from the jury trial as a part of the record of the   23, 2003, no pet.).
hearing. The assigned judge, however, presided over only
this one hearing, and the only evidence filed for the                     In determining whether a party conducted a
Appellees' motion was Dudley's affidavit that detailed his        reasonable inquiry, the facts and evidence available to the
pre-suit investigation.                                           party and the circumstances existing when the party filed
                                                                  the pleading must be examined. See Estate of Davis, 9
       In some circumstances, a trial court may take judicial     S.W.3d at 297; Karagounis v. Property Co. of Am., 970
notice of the case file for purposes of ruling on a sanctions     S.W.2d 761, 764 (Tex.App.-Amarillo 1998, pet. denied) ("
motion. Elkins v. Stotts-Brown, 103 S.W.3d 664, 667               the circumstances pivotal to the determination of whether
(Tex.App.-Dallas 2003, no pet.)(citing Tex.-Ohio Gas, Inc.        sanctions should issue are those in existence at the time the
v. Mecom, 28 S.W.3d 129, 139 (Tex.App.-Texarkana 2000,            pleading in question was signed and filed" ); see, e.g., Low,
no pet.)(noting that, under some circumstances, trial court 221 S.W.3d at 616-17 (court evaluated attorney's inquiry
may be able to make determination regarding motives and           and knowledge as of time of lawsuit's filing). Sanctions for
credibility of person signing petition by taking judicial         frivolous or groundless pleadings do not apply to the pursuit
notice of items in case file)); see also Walston v. Lockhart,     of an action later determined to be groundless after
2005 WL 428433, at *3 (Tex.App.-Waco Feb. 23, 2005,               pleadings were filed. Overman v. Baker, 26 S.W.3d 506,
pet. denied); cf. Emmons v. Purser, 973 S.W.2d 696, 701           509 (Tex.App.-Tyler 2000, no pet.); Karagounis, 970
(Tex.App.-Austin 1998, no pet.)(reversing sanctions order         S.W.2d at 764 (Rule 13" says nothing about levying
and noting that parties were present at hearing but weren't       sanctions if one pursues an action or pleading thought
called to testify, and although court took judicial notice of     legitimate when filed but subsequently found baseless" ).
case file, nothing in case file proved bad faith or
harassment). But this case is not a circumstance where the              On Dudley Construction's conspiracy claim against
assigned judge could take judicial notice of the case file and    Appellees Hays, Ashlock, and William W. Dawson (Dan
include the trial evidence-which the assigned judge heard         Dawson's Dad), the assigned judge's finding fails to apply
none of-as a part of the evidentiary record on the Appellees'     section 10.001(3)'s standard, and it also does not provide
motion for attorney's fees as sanctions.                          the proper temporal link to the offending pleading.
                                                                  Therefore, any sanction under section 10.001(3) is an abuse
      Except for Dudley's uncontroverted affidavit,[5] the        of discretion.
assigned judge had no evidence before him to determine
Dudley's motives and credibility in filing Dudley                        We sustain Dudley Construction's first issue in part
Construction's counterclaim. With no evidence that Dudley         and overrule it in part. To the extent the assigned judge
Construction's counterclaim was filed to harass the               sanctioned Dudley Construction under Rule 13 or chapter
Appellees, the assigned judge's award of attorney's fees as       10 or awarded attorney's fees under section 53.156 for the
                                                                  litigation that continued after the trial court's March 10,
2004 order declaring the liens invalid and ordering their
removal, he abused his discretion. And because this appeal
is part of the litigation that continued after March 10, 2004
and Dudley Construction has not appealed the trial court's
order finding the liens invalid and ordering their removal,
the Appellees cannot recover additional attorney's fees for
this appeal under section 53.156.

     The Appellees are only entitled to recover attorney's
fees and costs in the amount of $7,377.70 under section
53.156, and we modify the judgment to provide that the
Appellees shall recover that sum from Dudley Construction.

      Conclusion

      We modify the judgment to find that the Appellees
shall recover from Dudley Construction $7,377.70 as
attorney's fees and court costs. As modified, the judgment is
affirmed.

Page 712

       Chief Justice GRAY dissents. A separate opinion will
not issue.

---------

Notes:

[1] What the Appellees term a " lien" was actually Dudley
Construction's " Affidavit Claiming Constitutional and
Mechanic's and Materialman's Lien," all of which included
this notice: " Notice: This is not a Lien. This is only an
affidavit claiming a Lien."

[2] Trial courts should eschew " and/or" language like that
used in the judgment to identify the legal bases for a
sanctions award. For notice purposes and for more efficient
appellate review, trial courts should precisely specify the
legal basis for sanctions, rather than providing a " shotgun"
or " cover-all-the bases" approach.

[3] In the judgment, the assigned judge identified findings 8
to 14 as evidence of Dudley Construction's intent to harass.

[4] In response to the motion to assess attorney's fees,
Dudley Construction filed Mark Dudley's affidavit detailing
his factual investigation that formed the basis of Dudley
Construction's claims.

[5] Dudley's affidavit details his thorough pre-suit
investigation and includes alleged admissions of
wrongdoing by all five Appellees, three of whom allegedly
admitted wrongdoing to Dudley. Dudley's affidavit contains
no evidence of an intent to harass.

---------
Page 506                                                        subsequent motions filed through White and Phenix, Baker
                                                                requested security and costs including attorney ad litem
26 S.W.3d 506 (Tex.App. —Tyler 2000)                            fees, contested the application as being groundless,
                                                                requested that the application be dismissed, and that
Olive OVERMAN, Appellant,                                       sanctions be imposed on Overman for initiating the
                                                                proceeding. In her Motion to Dismiss and for Sanctions
v.
                                                                filed April 29, 1999, Baker alleged that Overman was
                                                                disqualified because Baker, in accordance with Section 679
Grace Edna BAKER, Appellee.
                                                                of the Probate Code, had expressly designated Louise
No. 12-99-00362-CV.                                             Broussard ("Broussard"), to serve as guardian of her person
                                                                and estate and had also disqualified Overman. Baker
Court of Appeals of Texas, Twelfth District, Tyler              attached to her motion her Declaration Of Guardian In The
                                                                Event Of Later Incapacity Or Need Of Guardian, which was
June 28, 2000                                                   executed by Baker on December 28, 1998, and which
                                                                designated Broussard as her guardian and disqualified
Page 507                                                        Overman. Because of Baker's declaration of guardianship,
                                                                Overman, on May 7, 1999, filed her motion seeking to
[Copyrighted Material Omitted]
                                                                withdraw her application. However, Baker pursued her
                                                                motion for sanctions. After a hearing, the trial court granted
Page 508
                                                                Overman's motion to withdraw and dismiss her application
     Richard W. White, Henderson, for Ad Litem.                 but entered judgment that Baker recover from Overman, as
                                                                sanctions, her personal attorney's fees of $2,300.00 and the
     John F. Berry, Tyler, for Appellant.                       attorney ad litem fee of $2,651.71 which had been taxed as
                                                                costs.
     J.R. Phenix, Henderson, for Appellee.
                                                                      On appeal, Overman brings three points of error
   Panel consists of RAMEY, C.J., HADDEN, J., and               asserting: 1) that the trial court abused its discretion in
WORTHEN, J.                                                     awarding Rule 13 sanctions against Overman, 2) that the
                                                                trial court erred in awarding ad litem fees after Baker
     ROBY HADDEN, Justice.                                      obtained her own attorney, and 3) that the trial court erred
                                                                in awarding
      This is an appeal of a judgment which imposed Rule
13 [1] sanctions upon the applicant in a temporary              Page 509
guardianship proceeding. Because we hold that the trial
court abused its discretion in imposing sanctions, we will      the attorney's ad litem fees as costs of court against
reverse and render.                                             Overman, the applicant.

      On January 29, 1999, Olive Overman ("Overman"),                SANCTIONS UNDER RULE 13
filed an application to be appointed temporary guardian of
the person and estate of her 93 year old aunt, Grace Edna               We review a trial court's Rule 13 sanctions order
Baker ("Baker"). In her application, Overman alleged that       under an abuse of discretion standard. Tarrant County v.
Baker was incapacitated, that she suffered from dementia or     Chancey, 942 S.W.2d 151, 154 (Tex.App.--Fort Worth
senility, and was making decisions regarding her residence,     1997, no pet.); see also GTE Communications Sys. Corp. v.
care, and use of her funds to her detriment. She alleged that   Tanner, 856 S.W.2d 725, 730-32 (Tex.1993) (original
without a temporary guardian, Baker would face immediate        proceeding in which abuse of discretion standard for review
danger that her physical well being would be impaired and       of Rule 13 sanctions was applied). To determine whether
her estate wasted.                                              the trial court abused its discretion we examine whether it
                                                                acted without reference to any guiding rules or principles.
      In accordance with the mandate in Section 646(a) of       Stites v. Gillum, 872 S.W.2d 786, 788 (Tex.App.--Fort
the Texas Probate Code, the trial court immediately             Worth 1994, writ denied). We should, however, only
appointed Richard W. White ("White") as Baker's attorney        overturn a trial court's discretionary ruling when it is based
ad litem who filed an answer on behalf of Baker. In             on an erroneous view of the law or a clearly erroneous
addition, Baker filed an original answer through her private    assessment of the evidence. Stites, 872 S.W.2d at 788.
attorney, J.R. Phenix ("Phenix"). In her answers and
     Rule 13 of the Texas Rules of Civil Procedure                requires the immediate appointment of a guardian, the court
provides, in pertinent part, as follows:                          shall appoint a temporary guardian...." TEX. PROB.CODE
                                                                  ANN. § 875(a) (Vernon Supp.2000).
The signatures of attorneys or parties constitute a certificate
by them that they have read the pleading, motion, or other               We will now examine the facts and circumstances
paper; that to the best of their knowledge, information, and      existing at the time Overman
belief formed after reasonable inquiry the instrument is not
groundless and brought in bad faith or groundless and             Page 510
brought for the purpose of harassment.
                                                                  prepared and filed her application to be appointed
     ...                                                          temporary guardian over Baker. For over twenty five years
                                                                  Overman took care of Baker who was her aunt and who
Courts shall presume that pleadings, motions, and other           lived alone. Overman gave Baker the land next door to her
papers are filed in good faith. No sanctions under this rule      dwelling to build a house and live there. During this time
may be imposed except for good cause, the particulars of          she took her to the doctor, the hospital, grocery shopping, to
which must be stated in the sanction order. 'Groundless' for      the bank, on vacation and helped take care of her. Overman
purposes of this rule means no basis in law or fact and not       and Baker were apparently very close and Overman knew
warranted by good faith argument for the extension,               Baker well. Baker's physician, Dr. Sanford Ladage
modification, or reversal of existing law....                     ("Ladage"), testified that Overman seemed to always act
                                                                  with Baker's best interest in mind. In recent years, as Baker
     TEX.R.CIV.P. 13.                                             became older and could not drive, it was necessary for
                                                                  Overman to give her more attention and care and during
       Rule 13 is designed to check abuses in the pleading        these recent years required a minimum of a bi-monthly visit
process, i.e. to ensure that at the time the challenged           to her doctor and periodic hospitalizations. Overman, or
pleading was filed, the litigant's position was factually well    someone at Overman's request, brought Baker her mail so
grounded and legally tenable. Home Owners Funding Corp.           that she would not fall while going out to her mailbox and
v. Scheppler, 815 S.W.2d 884, 889 (Tex.App.--Corpus               back.
Christi 1991, no writ). A court may impose sanctions
against a party if it files a pleading that is groundless and           Overman began to notice changes in the personality of
either brought in bad faith or for the purpose of harassment.     Baker in the last half of 1998. She testified that Baker was
McCain v. NME Hospitals, Inc., 856 S.W.2d 751, 757                not as mentally alert as in prior years. She seemed to be
(Tex.App.--Dallas 1993, no writ). Rule 13 dictates that           very distant and began forgetting things. Baker accused
courts shall presume that pleadings are filed in good faith,      Overman of bugging her residence, of trying to kill or hurt
and therefore, the party moving for sanctions bears the           her and of being a thief and liar. At the same time, Baker
burden of overcoming this presumption. GTE, 856 S.W.2d            would accept favors from Overman, such as buying
at 731. The rule does not apply to the pursuit of an action       groceries and running errands. They were together as a
which is later determined to be groundless after pleadings        family on Christmas Day, which was Baker's birthday, in
were filed. Karagounis v. Property Company of America,            Overman's home in December 1998. Overman discussed
970 S.W.2d 761, 764 (Tex.App.--Amarillo 1998, pet.                Baker's inconsistency and actions with other family
denied). In deciding whether a pleading meets the two             members who confirmed that they noticed such changes as
pronged test of being both groundless and either brought in       well. Baker began to not recognize family members in
bad faith or for the purpose of harassment, a trial court must    family photos.
examine the facts and circumstances existing at the time the
pleading was filed. Tarrant County, 942 S.W.2d at 155;                  It appears that during 1998, Baker became acquainted
Home Owners Funding Corp. of America, 815 S.W.2d at               with a friend, Louise Broussard, and began to rely upon her
889.                                                              for counsel and advice to the exclusion of Overman. Baker
                                                                  began lying to Overman and covering up her plans,
      The purpose of a temporary guardianship of an               especially visits by Broussard. Overman discovered that
incapacitated person is to promote and protect the                Baker had made statements to others that she was going to
well-being of the person. TEX. PROB.CODE ANN. § 602               leave her residence and move to a location closer to
(Vernon Supp.2000); see also Valdes-Fuerte v. State, 892          Broussard. Baker also made significant changes to her
S.W.2d 103, 107 (Tex.App.--San Antonio 1994, no pet.).            banking arrangements, removed Overman from her bank
The Probate Code further provides that "if a court is             account and appointed Broussard as a signatory of and
presented with substantial evidence that a person may be ...      ultimate beneficiary under her account. Furthermore, Baker
a [n] incapacitated person, and the court has probable cause      instructed her postal carrier to no longer deliver mail to her
to believe that the person or person's estate, or both,           residence but instead deliver it to Broussard, who lived
several miles away. Baker withheld from Overman these            giver, especially if the communication between the two
changes in her habits and did not tell Overman of the mail       deteriorated. Although there was evidence that Baker
delivery change. Their relationship began to deteriorate.        enjoyed a certain competence for her age, there was
                                                                 substantial evidence that she was becoming incapacitated.
      Overman argues that these statements, along with           Thus, we conclude that Baker has failed to establish that
Baker's changes of habits, her withholding of these changes      there is no basis in law or fact for Overman's pleadings and
from Overman, Broussard's involvement in the changes of          has, therefore, failed to meet her burden under Rule 13.
Baker's behavior and lifestyle, and the persuasion and
control by Broussard over Baker justified filing the                   Baker asserts that Overman did not present a
application for temporary guardianship. Overman asserts          physician's certificate of incapacity with the application as
that she was justified in fearing that Baker was being           required by Section 687 and without such evidence, the
strongly influenced by Broussard, that this influence would      application is groundless. We do not agree. The Texas
lead to bad decisions in her living and financial                Probate Code contains a separate section covering the
arrangements which would have a disastrous effect on             appointment and procedure to be followed in temporary
Baker. Baker's physician, Ladage, agreed with Overman            guardianships. TEX. PROB.CODE ANN. § 875 (Vernon
that Baker had been making some bad decisions.                   Supp.2000). The requirements for the filing of an
                                                                 application for appointment of a temporary guardian as
      In her testimony, Baker agreed that she had built a        found in this section of the Probate Code do not expressly
home on property adjacent to her niece, Overman, and that        require a physician's certificate but simply require that a
Overman had helped take care of her for twenty five years.       court be presented with substantial evidence that a person
However, she testified that she began to experience              may be an incapacitated person. Furthermore, Section
problems with Overman in 1998 when she was ninety two            875(b) provides that a person for whom a temporary
years of age. Baker testified that Overman began to dictate      guardian has been appointed may not be presumed to be
things to her and tell her what to do. Baker also testified      incapacitated. TEX. PROB.CODE ANN. § 875(b) (Vernon
that Overman transferred $8,000.00 from Baker's account          Supp.2000). We conclude, therefore, that it was not
into her own account. Although the purpose of the transfer       necessary that Overman file a physician's certificate of
was disputed, it was eventually transferred back to Baker so     incapacity with her application. In as much as Baker has
that it was solely in her own name. Through her Sunday           failed to meet the first prong that the application was
School                                                           groundless, it will not be necessary for us to address the
                                                                 second prong of bad faith or harassment.
Page 511
                                                                        It is also required by Rule 13 that the trial court must
she had met a friend, Broussard. Baker testified that            state with particularity the good cause for finding that
Overman began to resent her relationship with Broussard          pleadings upon which sanctions are based are groundless
and testified to several conversations and a confrontation in    and frivolous and brought for purposes of harassment.
Baker's home which Baker observed as demonstrating               Gorman v. Gorman, 966 S.W.2d 858, 867-68
Overman's hostility toward Broussard and their friendship.       (Tex.App.--Houston [1st Dist.] 1998, pet. denied). In other
Baker testified to other conduct on the part of Overman          words, the court is required to properly predicate its award
which she interpreted as Overman's efforts to gain control       of sanctions against Overman under Rule 13 by stating the
of her, all of which caused their relationship to deteriorate.   specific acts or omissions on which the sanctions are based.
Baker presented evidence which she believed showed that          Jimenez v. Transwestern Property Co, 999 S.W.2d 125, 130
she was a competent person. However, the burden on Baker         (Tex.App.--Houston [14th Dist.] 1999, no pet.); Alexander
was to show that there was no basis in law or fact for filing    v. Alexander, 956 S.W.2d 712, 714 (Tex.App.--Houston
the application.                                                 [14th Dist.] 1997, pet. denied). The failure to state the
                                                                 particulars of good cause amounts to noncompliance with
      In assessing sanctions, the trial court acted under an
                                                                 the sanction rule and, therefore, is an abuse of discretion
erroneous assessment of the law and the evidence. From the
                                                                 rendering the order unenforceable. Thomas v. Thomas, 917
record before us, Baker did not succeed in establishing that
                                                                 S.W.2d 425, 432 (Tex.App.--Waco 1996, no writ).
there was no arguable basis for Overman's cause of action
as Rule 13 requires. The record speaks to the contrary.                 In the instant case, the trial court simply stated that
Overman had taken care of Baker for many years and had           the "application filed herein by Olive Overman was
established a close relationship as Baker's primary care
giver. Baker was 93 years old when Overman filed the             Page 512
application. Changes in Baker's behavior regarding
finances, mail delivery, living conditions and friendships, as   groundless," that "the application ... was brought in bad
described in the record would reasonably alarm the care          faith and for the purpose of harassment," that "good cause
exists for the imposition of sanctions against Olive             proposed ward the law and facts of the case, the proposed
Overman ...," that the application "was brought for an           ward's legal options regarding the disposition of the case
improper purpose and caused needless increase in the costs       and the grounds on which guardianship is sought. TEX.
of litigation" and that the allegations had no evidentiary       PROB.CODE ANN. § 647 (Vernon Supp.2000). The Code
support nor would likely have evidentiary support after a        further provides that the court shall order the payment of a
reasonable opportunity for further investigation or              fee set by the court as compensation to the attorney ad litem
discovery. Such general findings are insufficient to satisfy     to be taxed as costs. TEX. PROB.CODE ANN. § 665A
the particularity requirements of Rule 13. Tarrant County,       (Vernon Supp.2000). Thus, it appears that the trial court
942 S.W.2d at 155. The court must specify in its order the       was correct in appointing White and assessing White's fee
particular acts or omissions on which the sanctions are          as costs of the proceeding.
based. Accordingly, we also conclude that Baker has failed
to meet the Rule 13 requirement regarding the particulars of           Further, Section 669 of the Probate Code provides that
good cause. We hold that the trial court abused its              "in a guardianship matter, the costs of the proceeding, ...
discretion by imposing sanctions against Overman under           shall be paid out of the guardianship estate or if the estate is
Rule 13. Overman's first issue is sustained.                     insufficient to pay for the cost of the proceeding, the cost of
                                                                 the proceeding shall be paid out of the county treasurer and
     AD LITEM FEES                                               the judgment of the court shall be issued accordingly."
                                                                 TEX. PROB.CODE ANN. § 669 (Vernon Supp.2000). It is
       In issue number two, Overman asserts that the trial       not clear whether Section 669 is intended to apply to
court erroneously awarded the ad litem attorney's fees after
the proposed ward obtained her own attorney. It appears to       Page 513
be a reasonable argument that Baker did not need the
services of an attorney ad litem after she retained her          a temporary guardianship application which has been
private attorney. However, there is no evidence in the           successfully contested as in the instant case, but from the
record to support the conclusion that the attorney's fees        reading of Section 665A of the Code, the clear implication
assessed for the attorney ad litem were for services beyond      is that the attorney ad litem's fee which is assessed as costs
the date Baker retained her private attorney. Furthermore, if    is to be paid out of the proposed ward's assets unless the
the fees awarded included such later services, there is          court determines that the proposed ward is unable to pay for
nothing in the record which would enable the trial court or      such services in which case the county is to be responsible
this Court to determine what percentage of the fee was           for such costs.
incurred after Baker retained her private attorney. The
record does show that White was Baker's court appointed                Thus, we conclude that under the construction of the
attorney for 10 days and that during this time he spent          Probate Code cited above the court was correct in assessing
considerable time counseling with Baker, filed two motions,      the attorney ad litem fees as costs in the case, but was in
and obtained one order from the court. Overman's second          error in ordering such costs be paid by Overman. The costs
issue is overruled.                                              are to be paid by the proposed ward and if the ward is
                                                                 unable to pay only then is the county responsible. See E.
     ASSESSMENT OF COSTS                                         Simmons v. Harris County, 917 S.W.2d 376, 378
                                                                 (Tex.App.--Houston [14th Dist.] 1996, writ denied) (dicta).
       In her issue number three, Overman asserts that the       Overman's third issue is sustained.
trial court erroneously awarded the ad litem attorney's fees
as costs and then assessed the costs against Overman.                  CONCLUSION
Overman argues that there were two options available to the
court for assessment of the attorney ad litem fees; either the         Accordingly, the judgment of the trial court dated
fees are assessed against the proposed ward's estate or the      August 5, 1999, granting Overman's motion to withdraw
county in the case of insolvency. Overman argues that the        her application for appointment of temporary guardian of
trial court circumvented the clear provisions of the Texas       the person and estate of Baker and dismissing said
Probate Code in assessing the fees as costs and in ordering      application for appointment of temporary guardian is
that costs be paid by Overman.                                   affirmed. In all other respects the judgment of the trial court
                                                                 is reversed and rendered that Baker and White take nothing
      Section 646(a) of the Probate Code provides that in a      as against Overman and that the attorney ad litem fee in
proceeding for the appointment of a guardian, the court          favor of White be assessed against Baker.
shall appoint an attorney ad litem to represent the interests
of the proposed ward. TEX. PROB.CODE ANN. § 646(a)               ---------
(Vernon Supp.2000). It further provides that the attorney ad
                                                                 Notes:
litem shall interview the proposed ward, discuss with the
[1] All references to Rule 13 refer to the Texas Rules of
Civil Procedure Rule 13.

---------
Page 316                                                         affirm.

300 S.W.3d 316 (Tex.App.-Austin 2009)                            Page 319

FAIRFIELD FINANCIAL GROUP, INC., Appellant,                             The Synnotts purchased the house in Travis County
                                                                 in 1984. Fairfield obtained a judgment against Glenn
v.                                                               Synnott and filed an abstract of that judgment in 1992.
                                                                 Appellee asserted without contradiction that the judgment
Connie SYNNOTT, Individually and as Trustee of the               debt is owed solely by Glenn Synnott. In the fall of 1997,
Connie Synnott Revocable Living Trust, Appellee.                 Glenn Synnott moved out of the house to Hays County and
                                                                 filed for divorce. In late October 1997, his attorney drafted
No. 03-06-00429-CV.
                                                                 an Agreement Incident to Divorce that included the
                                                                 agreement that Glenn Synnott would convey his interest in
Court of Appeals of Texas, Third District, Austin.
                                                                 the house to appellee. Although the contents of the draft
August 5, 2009                                                   agreement evolved over the next few months, the agreement
                                                                 regarding the house never changed. In January 1998, Glenn
Page 317                                                         Synnott executed an Agreement Incident to Divorce, the
                                                                 court signed the decree, and then Glenn Synnott signed a
[Copyrighted Material Omitted]                                   special warranty deed conveying his interest in the property
                                                                 to appellee. By special warranty deed dated September 15,
Page 318                                                         1999, appellee conveyed the house to the Connie L. Synnott
                                                                 Revocable Trust. She lives in the house and claims it as her
     Stephen Sakonchick II, Stephen Sakonchick II, P.C.,
                                                                 homestead.
Austin, TX, for appellant.
                                                                       Appellee filed this suit seeking a declaration that
      Molly J. Mitchell, Akin & Almanza, Austin, TX, for
                                                                 Fairfield has no interest in the property through a lien or
appellee.
                                                                 otherwise. She also sought sanctions and attorneys' fees.
                                                                 The court declared that the property is " the homestead of
     Before Justices PURYEAR, WALDROP and
                                                                 Connie Synnott and ... not subject to the judgment lien
HENSON.
                                                                 asserted by [Fairfield] arising out of the judgment obtained
      OPINION                                                    by it in Cause No. 91-13310." The court awarded
                                                                 $15,915.82 for trial attorneys' fees, plus additional fees in
      G. ALAN WALDROP, Justice.                                  the event of appellate procedures.[1] It did not award
                                                                 sanctions.
       Fairfield Financial Group, Inc. appeals from a
judgment declaring that Connie Synnott's homestead is not               Fairfield asserts that the following portion of Glenn
subject to a judgment lien in connection with a separate         Synnott's affidavit should have been struck as improper
judgment rendered solely against Glenn Synnott, her              summary judgment evidence: " [A]t all times prior to
ex-husband. While married, the Synnotts bought the               January 21, 1998, I considered the property as my
property in question and designated it as their homestead.       homestead and continued to claim it as such, including with
Fairfield later obtained and abstracted a judgment against       the local taxing authorities." Fairfield contends that this was
Glenn Synnott, individually. Although Glenn Synnott              inadmissible as a statement from an interested witness that
conveyed his interest to appellee pursuant to their divorce      was no more than an opinion, expression of belief, and a
decree, Fairfield contends that his former ownership share       conclusion, citing Ryland Group, Inc. v. Hood, 924 S.W.2d
in the form of a community interest in the property remains      120, 122 (Tex.1996); Brownlee v. Brownlee, 665 S.W.2d
subject to Fairfield's judgment lien. Fairfield also contends    111, 112 (Tex.1984); and Harley-Davidson Motor Co. v.
that the trial court erred by denying its objection to the       Young, 720 S.W.2d 211, 216 (Tex.App.-Houston [14th
admissibility of Glenn Synnott's assertion in his affidavit      Dist.] 1986, no writ).
that he continued to claim the property as his homestead
during the pendency of the divorce action. Fairfield also              We review a trial court's rulings concerning the
asserts that the trial court erred by awarding attorneys' fees   admission of summary judgment evidence under an abuse
to appellee because this suit was essentially a suit to quiet    of discretion standard. Wolfe v. C.S.P.H., Inc., 24 S.W.3d
title rather than a true declaratory judgment action. We         641, 646 (Tex.App.-Dallas 2000, no pet.). Affidavits in
                                                                 support of summary judgment motions must be made on
personal knowledge, set forth such facts as would be              Builders, Inc. v. Chesson, 149 S.W.3d 796, 807
admissible in evidence, and show affirmatively that the           (Tex.App.-Austin 2004, pet. denied). Homestead rights
affiant is competent to testify to the matters stated. Tex.R.     have historically enjoyed great protection in our
Civ. P. 166a(f). The challenged statements by Glenn               jurisprudence. See id. (citing Mills v. Von Boskirk, 32 Tex.
Synnott are statements of fact, not mere belief or opinion.       360, 362 (1869)). The property code states that a homestead
In the challenged portion, he states that he considered the       is " exempt from seizure for the claims of creditors except
house his homestead and continued to claim it as such. He         for encumbrances properly fixed on homestead property."
does not assert in the affidavit that he was correct to           Tex. Prop.Code Ann. § 41.001(a) (West Supp.2008). The
consider the house his homestead or to claim it as such.          code then lists the types of encumbrances that may be "
Whether he actually considered it his homestead and               properly fixed" upon homestead property, including those
whether the underlying belief was well-founded and his            for mortgage financing for the property, taxes on the
actions proper and effective is a question for the courts. The    property, and improvements to the property. Id. §
trial court did not abuse its discretion by overruling this       41.001(b). The implication is that types of encumbrances
objection to this portion of his affidavit.                       not listed may not be " properly fixed" on homestead
                                                                  property. This interpretation is consistent with the holdings
       The core of Fairfield's appeal is its assertion that the   of other courts of appeals regarding the effect of the
summary judgment is erroneous because there is a genuine          homestead exemption on most liens and provides greater
issue of                                                          protection to the homestead. See Wilcox, 103 S.W.3d at
                                                                  473; Harvey, 46 S.W.3d at 285; Barrera, 2005 WL
Page 320                                                          1691037, at *6, 2005 Tex.App. LEXIS 5634, at *18-19. We
                                                                  join these courts of appeals in holding that, other than the
 material fact regarding whether Glenn Synnott abandoned
                                                                  types listed in property code section 41.001(b), judgment
the homestead, thereby allowing Fairfield's judgment lien to
                                                                  liens that have been properly abstracted nevertheless cannot
attach to his share of the community ownership of the
                                                                  attach to a homestead while that property remains a
house. To prevail, a summary-judgment movant must
                                                                  homestead. Under this rule, a judgment debtor may sell
demonstrate that there is no genuine issue of material fact
                                                                  property claimed as homestead and pass title free of any
and that it is entitled to judgment as a matter of law. Tex.R.
                                                                  judgment lien, and the purchaser may assert that title
Civ. P. 166a(c). We review the summary judgment de novo.
                                                                  against the judgment creditor. Harvey, 46 S.W.3d at 285. A
Joe v. Two Thirty Nine Joint Venture, 145 S.W.3d 150, 156
                                                                  judgment lien may attach to the judgment debtor's interest,
(Tex.2004). We take all evidence favorable to the
                                                                  however, if he abandons the property as his homestead
non-movant as true while deciding whether a disputed issue
                                                                  while he owns it and while there is a properly abstracted
of material fact exists that would preclude summary
                                                                  judgment lien against him. Id.
judgment, and we indulge every reasonable inference and
resolve any doubts in favor of the non-movant. Nixon v. Mr.       Page 321
Prop. Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex.1985).
                                                                         Fairfield contends that Glenn Synnott abandoned his
        Under Texas law, judgment liens that have been            homestead interest and that Fairfield's lien attached to his
properly abstracted cannot attach to a homestead while that       ownership interest in the home before he transferred his
property remains a homestead. Wilcox v. Marriott, 103             ownership interest to appellee. Fairfield contends that there
S.W.3d 469, 473 (Tex.App.-San Antonio 2003, pet.                  is at least a fact question regarding when Glenn Synnott
denied); see also Cadle Co. v. Harvey, 46 S.W.3d 282, 285         abandoned his homestead interest. Thus, Fairfield contends,
(Tex.App.-Fort Worth 2001, pet. denied); Barrera v. State,        the trial court erred by granting summary judgment that
No. 14-04-01030-CR, 2005 WL 1691037, at *6, 2005                  appellee owns the property free from Fairfield's liens based
Tex.App. LEXIS 5634, at *18-19 (Tex.App.-Houston [14th            on its judgment against Glenn Synnott.
Dist.] July 21, 2005, pet. ref'd). This statement of the law
differs from a previous interpretation by this Court. See                We conclude, however, that the timing and effect of
Exocet Inc. v. Cordes, 815 S.W.2d 350, 352                        Glenn Synnott's actions are irrelevant because the property
(Tex.App.-Austin 1991, no writ) (concluding that recording        remained at all relevant times protected by appellee's
and indexing of abstract of judgment perfected lien attached      undivided homestead interest in the property. Fairfield
to homestead, although homestead remained exempt from             argues, correctly, that one spouse may abandon his
foreclosure while homestead exemption remained in place).         homestead interest while his spouse retains her homestead
On reviewing the relevant statutory and case law, however,        interest. See Taylor v. Mosty Bros. Nursery, Inc., 777
we are compelled to revisit our previous interpretation.          S.W.2d 568, 569 (Tex.App.-San Antonio 1989, no writ);
Constitutional homestead rights protect citizens from losing      Julian     v.  Andrews,      491 S.W.2d 721,   727
their homes, and statutes relating to homestead rights are        (Tex.Civ.App.-Fort Worth 1973, writ ref'd n.r.e.); Sakowitz
liberally construed to protect the homestead. Kendall             Bros. v. McCord, 162 S.W.2d 437, 438-39
(Tex.Civ.App.-Galveston 1942, writ ref'd). The United            have exempt status if reinvested in a new homestead within
States Supreme Court wrote that the Texas constitution           the statutory time frame. See id. § 41.001. This suggests
gives:                                                           that a judgment lien does not attach to homestead property
                                                                 or its proceeds until it ceases being a homestead and the
each spouse in a marriage a separate and undivided               statutory time frame runs if it is sold. The court's judgment
possessory interest in the homestead, which is only lost by      forbidding the creditor from pursuing the proceeds for six
death or abandonment, and which may not be compromised           months and holding that the wife may invest all of the
either by the other spouse or by his or her heirs. It bears      proceeds in a new homestead within six months under
emphasis that the rights accorded by the homestead laws          section 41.001(c) also strongly implies that a homestead
vest independently in each spouse regardless of whether          exemption protected the entire property. Whether the
one spouse, or both, actually owns the fee interest in the       creditor could seek to seize her underinvested cash proceeds
homestead.                                                       after six months does not bear on whether a lien attached to
                                                                 the real property. After six months, the cash is a
United States v. Rodgers, 461 U.S. 677, 685, 103 S.Ct.           non-exempt personal asset subject to execution by creditors
2132, 76 L. Ed. 2d 236 (1983) (footnote omitted). Although a       of the cash's owner. We conclude that the court of appeals's
lien attaches to property when it loses its homestead            application in Taylor of homestead protections to the wife
character,[2] the Julian and Sakowitz courts held that the       and the entire proceeds from her sale of the property
property is wholly exempt from the attachment of liens           supports the view that
(other than those listed in property code section 41.001(b))
so long as the remaining spouse retains her homestead            Page 323
interest. Julian, 491 S.W.2d at 727; [3] Sakowitz, 162
S.W.2d at 438-39.[4] Therefore, because appellee                  the judgment lien against the husband did not attach to the
                                                                 homestead property.
Page 322
                                                                       Whether Glenn Synnott abandoned his homestead
 retained her homestead interest in the home, the trial court    interest before divesting his ownership interest, it is
did not err by granting summary judgment and declaring           undisputed that appellee had a homestead interest in the
that Fairfield's lien based on its judgment against Glenn        property. Her homestead interest protected the entire
Synnott has not attached to the property at issue.               property, and the judgment liens did not attach to any
                                                                 portion of the property. The trial court did not err by
      Fairfield relies heavily on the Taylor case for the        granting appellee's motion for summary judgment and
contrary proposition. 777 S.W.2d at 569. In that case, after     declaring that ownership of the property is unencumbered
a nursery obtained a judgment against a husband, the             by Fairfield's lien.
husband abandoned his interest in the homestead by
conveying it to his wife and leaving the state.[5] Id. While            Fairfield contends finally that the trial court erred by
not ordering a sale of the property, the trial court placed a    awarding attorneys' fees to appellee. Attorneys' fees are
constructive trust on that part of any sale proceeds             recoverable in declaratory judgment actions. See Tex. Civ.
represented by the husband's interest conveyed to his wife.      Prac. & Rem.Code Ann. § 37.009 (West 2008). This suit
Id. The court of appeals modified the trial court's order by     was filed and adjudicated as a declaratory judgment action.
invoking the property code's homestead protections and           Fairfield asserts that this suit is instead a suit to quiet title,
declaring that, if the owner sold the property, she would        to remove a cloud on title, or for trespass to try title in
have six months thereafter during which the proceeds would       which attorneys' fees are not recoverable, citing cases such
be exempt from execution by the nursery, and that she            as John G. & Marie Stella Kenedy Mem'l Found. v.
could reinvest the entire proceeds in a new homestead. Id. at    Dewhurst, 90 S.W.3d 268, 289 (Tex.2002), and Sani v.
570; see also Tex. Prop.Code Ann. § 41.001(c) (West              Powell, 153 S.W.3d 736 (Tex.App.-Dallas 2005, no pet.).
Supp.2008). Fairfield argues that this holding shows that        The Kenedy Foundation case is distinguishable because it
the proceeds would be subject to seizure thereafter, and that    found attorneys' fees inappropriate because the declaratory
the property therefore was encumbered by the lien.               relief requested was merely incidental to a dispute over title
                                                                 and those circumstances did not justify an award of
        We do not share Fairfield's interpretation of the        attorneys' fees against the State. Kenedy Foundation, 90
Taylor opinion. The court of appeals did not state that the      S.W.3d at 289. This Court has previously distinguished
creditor's lien attached to the property. Rather, the contrary   Sani and similar cases, concluding that attorneys' fees are
is indicated. By statute, the proceeds from the sale of          recoverable under the declaratory judgment act even when
homestead property retain their exempt status for six            the effect of a declaration is to quiet title. Florey v. Estate of
months after a homestead is sold or transferred. See Tex.        Linda McConnell, 212 S.W.3d 439, 449 (Tex.App.-Austin
Prop.Code Ann. § 41.001(c). The proceeds will continue to        2006, pet. denied). The central issue in Florey was whether
the homestead interest was abandoned, thereby allowing a             interest of those who held liens based on judgments against
judgment lien to attach. Id. at 442-43. The trial court              the husband. Id.
concluded that the homestead interest was in place when the
owner executed a promissory note for attorneys' fees                 [4] In Sakowitz, a wife's action in barring her husband from
secured by a deed of trust on the homestead property, that           their homestead as prelude to divorce deprived him of his
such a note and deed of trust were not among the                     homestead rights, but did not expose his share of the
encumbrances that can be properly affixed to homestead               property to liens based on the couple's personal debts.
property, and that the lien based on the deed of trust was           Sakowitz Bros. v. McCord, 162 S.W.2d 437, 438-39
invalid. Id. at 443. This Court affirmed that decision and           (Tex.Civ.App.-Galveston 1942, writ ref'd). While the
further concluded that, even though the judgment had an              divorce action was pending, two creditors took judgments
effect similar to that of a suit to quiet title, the use of the      against the couple, and the couple sold the homestead to
declaratory judgment act was permissible as was the                  A.H. McCord. Id. at 438. McCord sued to have the couple's
awarding of attorneys' fees based thereon. Id. at 448-49.            creditors' liens removed. Id. The court of appeals expressly
This Court opined that the " ban" on awards of attorneys'            rejected the proposition that the liens attached to the
fees in suits to quiet title might be limited to cases that were     husband's non-homestead half interest, holding instead that
essentially trespass to try title suits. In this suit, the central   the property retained its homestead character because the
question is whether the homestead had been abandoned                 wife continued to live on the property as her homestead. Id.
such that an encumbrance other than one of those listed in           at 438-39. The wife's undivided homestead interest
property code section 41.001(b) could properly be affixed            protected the entire property from forced sale for personal
on or attach to the property at issue. We conclude that this         debts. Id. (citing Crow v. First Nat'l Bank, 64 S.W.2d 377,
suit is substantially similar to Florey and, therefore, that         379-80 (Tex.Civ.App.-Waco 1933, writ ref'd) (widow's
attorneys' fees could properly be awarded in this suit.              homestead exemption was undivided and served to protect
Fairfield has not demonstrated error in the trial court's            all of a 300-acre tract, even though she could only spare
award of attorneys' fees.[6]                                         200 acres from personal creditors)). The court of appeals
                                                                     concluded that McCord held title to the property and that
      Affirmed.                                                      the creditors did not have an interest in the property. Id. at
                                                                     439.
---------
                                                                     [5] Although the court found that the husband abandoned
Notes:                                                               his homestead interest, the facts indicate not mere
                                                                     abandonment but divestment of all interest. Taylor v. Mosty
[1] Judge Stephen Yelenosky ruled on the merits of the               Bros. Nursery, Inc., 777 S.W.2d 568, 569 (Tex.App.-San
petition. Judge William E. Bender ruled on the attorneys'            Antonio 1989, no writ). The opinion states, " Sidney
fees issue.                                                          abandoned his interest in the homestead by conveying his
                                                                     interest to Mary by deed dated April 17, 1987 and by
[2] See Posey v. Commercial Nat'l Bank, 55 S.W.2d 515
                                                                     leaving the State of Texas." Absent a fraudulent
(Tex. Comm'n App.1932, judgm't adopted).
                                                                     conveyance that can be set aside-not mentioned as an issue
[3] In Julian, a husband abandoned his homestead interest            in the opinion-there is no ownership interest by the husband
in property while judgment liens were pending against him.           in the property to which the creditor's lien could properly
                               491 S.W.2d 721,    724       attach.
Julian     v.    Andrews,
(Tex.Civ.App.-Texarkana 1973, writ ref'd n.r.e.). His wife
                                                                     [6] Fairfield does not challenge the amount of fees awarded,
retained her interest in the property and filed for divorce. Id.
                                                                     but merely whether attorneys' fees are permitted by law to
While the divorce was pending, a third party foreclosed on
                                                                     be awarded in this suit.
a mechanic's and materialman's lien on the property. Id. The
mechanic's and materialman's lienholder then sold the                ---------
property, after which the property was subdivided and one
lot was sold to Eddie Julian. Id. at 724-25. At this point, the
ex-husband notified Julian that liens based on judgments
against him had attached to the property. Id. at 725.
Ultimately, the court concluded that the husband's
abandonment of the homestead had not allowed the
third-party judgment liens to attach to the property while
the wife still held her homestead interest. Id. at 727.
Accordingly, title passed from the wife to the foreclosing
lienholder and subsequent buyers unencumbered by the
Page 189                                                                 Otilia Patlan is a ninety-six-year-old woman who
                                                                  suffers from senile dementia.
350 S.W.3d 189 (Tex.App.-San Antonio 2011)
                                                                  Page 192
In the GUARDIANSHIP             OF Otilia PATLAN, an
incapacitated person.                                              Otilia and her husband, Jesus Patlan Sr., married in 1971,
                                                                  but had no children together. However, they each had
No. 04-10-00616-CV.                                               children from previous marriages. Appellant Mary Pena ("
                                                                  Mary" ), who was appointed Otilia's guardian on June 20,
Court of Appeals of Texas, Fourth District, San Antonio           2007, is Otilia's daughter.

May 11, 2011                                                             At the time of Otilia and Jesus Sr.'s marriage,
                                                                  Appellee Jesus Patlan Jr. (" Jesus Jr." ) was the youngest in
Page 190
                                                                  this blended family and considered Otilia to be his mother,
[Copyrighted Material Omitted]                                    not a step-mother. He lived with his parents until his
                                                                  mid-twenties, and as his parents grew older, he began
Page 191                                                          taking care of them and managing their affairs. He and his
                                                                  father even had a joint bank account set up so that Jesus Jr.
     Daniel O. Kustoff, Kustoff & Phipps, L.L.P., San             could pay his father's bills. When his father died in 2005, he
Antonio, TX, for Appellant.                                       took over the same role for his mother. Thus, Jesus Jr., who
                                                                  was an employee of Broadway National Bank, had a joint
     Clayton G. Mansker, Mark Stanton Smith, Heard &              account set up in his and his mother's names. Otilia signed
Smith, L.L.P., San Antonio, TX, for Appellee.                     all the necessary documents to set up the joint account. The
                                                                  funds from his father's pension, which now belonged to his
         Sitting: CATHERINE STONE, Chief Justice,                 mother as survivorship benefits, were deposited into that
KAREN ANGELINI, Justice, MARIALYN BARNARD,                        joint account. Also deposited were proceeds from his
Justice.                                                          father's life insurance policy under which Otilia was the
                                                                  beneficiary.
     OPINION
                                                                        In January 2007, Otilia's condition deteriorated to
      KAREN ANGELINI, Justice.
                                                                  such an extent that she had to be admitted to a hospital. She
                                                                  was later transferred to a nursing home for rehabilitation.
      Appellant Mary Pena, Otilia Patlan's guardian, appeals
                                                                  On June 20, 2007, her daughter Mary was appointed her
the trial court's granting of Appellee Jesus Patlan Jr.'s
                                                                  guardian. In looking at Otilia's personal affairs, Mary
no-evidence and traditional motion for summary judgment.
                                                                  became suspicious that Jesus Jr. was using Otilia's funds for
The main issue in this appeal is whether the time period a
                                                                  his own personal benefit, and not for Otilia's. Mary hired an
previous lawsuit is pending before being dismissed for want
                                                                  attorney who, on January 31, 2008, filed an original petition
of prosecution, when that lawsuit is between the same
                                                                  and application for a temporary restraining order. That same
parties and contains the same allegations, should be
                                                                  day, the trial court signed the temporary restraining order
considered in determining whether an adequate time for
                                                                  and set the cause for a temporary injunction hearing. In
discovery has passed in the subsequent suit pursuant to
                                                                  response Jesus Jr. filed an answer to the lawsuit.
Texas Rule of Civil Procedure 166a(i). Because we hold
such time can be considered in determining whether an
                                                                        At the temporary injunction hearing on March 4,
adequate time for discovery has passed under Rule 166a(i),
                                                                  2008, Jesus Jr. took the stand and testified. He testified that
we find the trial court did not abuse its discretion in denying
                                                                  the culture of his family was such that everyone helped
Mary Pena's motion to continue the summary judgment
                                                                  whoever needed the help. He testified that before his
hearing. Further, because Mary Pena did not produce
                                                                  father's death, his wife had lost her job, and his father had
sufficient evidence in response to the no-evidence motion
                                                                  been helping them through a tough period. After his father
for summary judgment, we hold the trial court did not err in
                                                                  died, he testified that his mother also wanted to help them.
granting the no-evidence motion for summary judgment.
                                                                  Jesus Jr. admitted that some of his mother's money was
Thus, we affirm the judgment of the trial court. [1]
                                                                  used for the benefit of his own family, but he claimed that
                                                                  these were gifts from his parents. He further testified his
     BACKGROUND
                                                                  mother knew he was taking money out of the joint account
and wanted him to do so because of his family's situation.        August 21, 2009, the cause was transferred to the probate
                                                                  court. On September 18, 2009, the trial court signed an
      According to Jesus Jr., he was not aware his mother         order allowing Mary to take the oral deposition of the
suffered from dementia. He testified that Mary, who               corporate representative of Broadway National Bank. The
worked for Otilia's treating doctor, took care of Otilia's        trial court also ordered that Mary was allowed to take the
medical care and that Mary never told him about Otilia's          oral deposition of Jesus Jr., but limited the scope of such
condition. He also testified that in 2007, at some point          deposition to the facts and circumstances surrounding the
before Mary was appointed Otilia's guardian, Adult                signature cards relating to the joint account made the basis
Protective Services got involved in Otilia's case, and the        of the suit. Mary's current attorneys took the deposition of a
case worker told him that he was not keeping a proper             representative from Broadway National Bank.[4] However,
accounting of Otilia's bank account. The caseworker told          they never deposed Jesus Jr.
him that he needed to be more " formal" and should not
commingle funds. Jesus Jr. also testified that Mary had                   On February 16, 2010, even though she had already
taken the approximate $6,000 left in Otilia's bank account        filed a petition against Jesus Jr., Mary filed another "
and that he had nothing left of Otilia's money.                   original" petition against Jesus Jr., alleging conversion,
                                                                  theft, fraud, constructive trust, and rescission. On March 12,
      Jesus Jr. further testified about the family home.          2010, Jesus Jr. filed an answer and a motion to dismiss for
According to Jesus Jr., his father had owned the family           want of prosecution. In his motion, Jesus Jr. emphasized
home before his marriage to Otilia and thus, the family           that there had been no action on the case for a year and a
                                                                  half, that Mary's second " original" petition contained the
Page 193                                                          same allegations as her first

 home was his father's separate property. And, because his        Page 194
father did not have a will, he and his four siblings now
owned the house as his father's heirs. He testified that Otilia    one, and that Mary had made no attempt to depose him. On
signed a deed transferring all her interest in the family         April 1, 2010, Mary responded to the motion to dismiss for
home to him. However, under Texas intestate laws, Otilia          want of prosecution, arguing that neither she nor her
had only a life-estate interest in the home and no longer         attorneys were aware of what discovery had been conducted
lived there, as she was living with Mary. Jesus Jr. also          or what pleadings were filed between January 2008 and
testified that in keeping with his family's " culture," one of    January 2009 because Mary's former attorney had failed to
his step-sisters (the youngest of Otilia's daughters) now         provide any of the documents. Mary's response also stated
lived in the family home with her son and paid only $250          that her current attorneys had been unaware of the previous
per month in rent, which was below the rental value of the        lawsuit and that " accident and mistake" had led to the filing
house in the open market. Finally, according to Jesus Jr., his    of the second " Original" Petition, which they admitted
parents would not want him to pay back the money he took          should have been titled " First Amended Petition." On April
because it was not part of their family culture to require        26, 2010, the trial court granted Jesus Jr.'s motion and
repayment. At the hearing, copies of the bank statements          dismissed Mary's case for want of prosecution without
from the joint bank account were not available. At the end        prejudice, specifically stating that " [a]ll litigation in this
of the injunction hearing, the trial court dissolved the TRO      cause filed on or prior to April 1, 2010, is dismissed without
and denied the temporary injunction.                              prejudice to refiling."

      A month later, on April 8, 2008, Jesus Jr.'s attorney              On April 5, 2010,[5] Mary filed another original
sent Mary's attorney copies of the bank statements related        petition, alleging common law fraud, statutory fraud, fraud
to Jesus Jr. and Otilia's joint bank account. Then, there was     by nondisclosure, and fraud in the inducement. In response,
no activity in the case for almost a year.                        Jesus Jr. filed an answer, which alleged the affirmative
                                                                  defense of limitations, and a motion for no-evidence and
      On March 4, 2009, Mary's current attorneys [2] filed        traditional summary judgment. On May 12, 2010, Mary
in probate court an " Application for Authority to Retain         filed a motion to continue the summary judgment hearing.
Counsel and to Enter into a Contingent Fee Contract." On          She later also filed a response to the summary judgment
May 8, 2009, the trial court granted the application. Then,       motion.[6] On May 20, 2010, the trial court denied Mary's
on July 15, 2009, Mary's current attorneys filed in district      motion for continuance. On July 22, 2010, the trial court
court, not probate court, a " Verified Petition to Take a         granted Jesus Jr.'s motion for no-evidence and traditional
Deposition Before Suit," requesting authority to take presuit     summary judgment. Mary now appeals.
depositions of Jesus Jr. and Broadway National Bank. [3]
On July 23, 2009, Jesus Jr. filed in the district court a              MOTION FOR CONTINUANCE
motion to transfer the case to the probate court, and on
       In her motion for continuance, Mary argued that the        unmeritorious claims and untenable defenses." Casso v.
trial court should continue the summary judgment hearing          Brand, 776 S.W.2d 551, 555 (Tex.1989) (quotation
because an adequate time for discovery had not yet passed.        omitted). Thus, under Texas Rule of Civil Procedure
She emphasized in her motion that the case had been on file       166a(i), a party may not move for a no-evidence summary
for only one month and that no discovery had been                 judgment until after an adequate time for discovery has
conducted in the case. Mary argued that since filing the          passed. TEX.R. CIV. P. 166a(i). Notably, Rule 166a(i) does
lawsuit on April 5, 2010, she had not had the opportunity to      not require that discovery must have been completed, but
depose Jesus Jr. or to send him discovery requests. Mary          rather that there was " adequate time." McInnis v. Mallia,
also argued that in order to respond to Jesus Jr.'s summary       261 S.W.3d 197, 200 (Tex.App.-Houston [14th Dist.] 2008,
judgment motion, she needed to " confer with and obtain           no pet.). The comment to rule 166a(i) provides that " [a]
affidavits from Plaintiff's expert, Julian R. Cantu, M.D.[7]      discovery period set by pretrial order should be adequate
and Mary Pena." [8]                                               opportunity for discovery unless there is a showing to the
                                                                  contrary, and ordinarily a motion under paragraph (i) [a
       On May 19, 2010, at the hearing on the motion for          no-evidence motion] would be permitted after the period
continuance, Mary's attorney argued that additional time          but not before." TEX.R. CIV. P. 166a(i) cmt. Unlike other
was needed to obtain testimony from Dr. Cantu about               notes and comments in the rules of civil procedure, this
whether Otilia was capable of transferring her interest in the    comment was specifically " intended to inform the
family home to Jesus Jr. at the time she signed the deed or       construction and application of the rule." TEX.R. CIV. P.
whether she was capable of consenting to Jesus Jr.                166a(i) cmt.
withdrawing money from their joint bank account. Mary's
attorney then stated that she had requested the bank                    Pointing to this language, Mary emphasizes she filed
documents regarding the joint account from Broadway               her lawsuit on April 5, 2010, and Jesus Jr. filed his
Bank, but had not yet                                             no-evidence motion for summary judgment soon thereafter
                                                                  on April 22, 2010. She argues that a time period of
Page 195                                                          seventeen days from when the lawsuit is filed does not
                                                                  constitute adequate time. However, in so arguing, Mary
 received anything.[9] The trial court did not rule at the        completely disregards the time period the previous lawsuit
hearing, but the next day signed an order denying Mary's          had been on file before it was dismissed for want of
motion to continue the summary judgment hearing.                  prosecution. Thus, the issue in this case is whether the time
                                                                  period a previous lawsuit is pending before being dismissed
       In her first issue on appeal, Mary argues that the trial
                                                                  for want of prosecution, when that lawsuit is between the
court abused its discretion in denying her motion to
                                                                  same parties and contains the same allegations, should be
continue the summary judgment hearing because an
                                                                  considered in determining whether an adequate time for
adequate time for discovery had not passed as required
                                                                  discovery has passed in the subsequent lawsuit. We
under Texas Rule of Civil Procedure 166a(i). When a party
contends that it has not had an adequate opportunity for          Page 196
discovery before a summary judgment hearing, it must file
either an affidavit explaining the need for further discovery      have found no case addressing this issue, and the parties
or a verified motion for continuance. Tenneco Inc. v. Enter.      have not directed us to such a case.
Prods. Co., 925 S.W.2d 640, 647 (Tex.1996). Here, Mary's
motion for continuance was verified by her attorney.                     Generally, in considering whether the trial court
                                                                  permitted an adequate time for discovery, we consider the
      We review the trial court's decision to grant or deny a     following factors: (1) the nature of the case, (2) the nature
motion for continuance for abuse of discretion. Villegas v.       of the evidence necessary to controvert the no-evidence
Carter, 711 S.W.2d 624, 626 (Tex.1986); see also Tenneco,         motion, (3) the length of time the case was active, (4) the
925 S.W.2d at 647. A trial court abuses its discretion only       amount of time the no-evidence motion was on file, (5)
when it acts in an unreasonable and arbitrary manner, or          whether the movant had requested stricter deadlines for
when it acts without reference to any guiding rules and           discovery, (6) the amount of discovery that already had
principles. Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223,        taken place, and (7) whether the discovery deadlines in
226 (Tex.1991). Thus, we may not reverse a trial court's          place were specific or vague. McInnis, 261 S.W.3d at 201.
ruling for an abuse of discretion merely because we may           We review a trial court's determination that there has been
disagree with that decision. Id.                                  an adequate time for discovery on a case-by-case basis,
                                                                  under an abuse-of-discretion standard. Id.
       The function of summary judgment is not the
deprivation of a party's right to a full hearing on the merits         1. The Nature of the Case and Evidence Needed to
of any real issue of fact, but rather to " eliminate patently
Defeat Motion                                                     Page 197

      This case is not of a nature that would seem to require      years to conduct discovery. And, at the time the trial court
extensive or complex discovery. See Rest. Teams Int'l, Inc.       granted Jesus Jr.'s no-evidence motion for summary
v. MG Sec. Corp., 95 S.W.3d 336, 340 (Tex.App.-Dallas             judgment, Mary had almost two-and-a-half years to conduct
2002, no pet.). None of Mary's claims would require more          discovery.
than minimal discovery to defeat a no-evidence motion for
summary judgment. See id. In fact, in her motion for                    Mary argues that most of the time her previous
continuance and at the hearing on the motion, all Mary            lawsuit was pending should not count because her previous
argued she needed to do to respond to the motion for              attorney was derelict in his duty to prosecute her case.
summary judgment was to take Jesus Jr.'s deposition, obtain       However, the actions of an attorney, as his client's agent,
an affidavit from Otilia's doctor about Otilia's medical          necessarily binds the client. See Gracey v. West, 422
condition, authenticate the bank records from the joint bank      S.W.2d 913, 916 (Tex.1968) (holding that attorney's
account, and authenticate the deed transferring Otilia's          negligence in failing to prosecute lawsuit was not ground
interest in the family home to Jesus Jr.                          for setting aside judgment dismissing cause for want of
                                                                  prosecution because " as long as the attorney-client
     2. The Length of Time the Case was Active                    relationship endures, with its corresponding legal effect of
                                                                  principal and agent, the acts of one must necessarily bind
       This factor, of course, depends on whether the time        the other as a general rule" ).[10] Therefore, the actions of
the previous case had been pending should be considered in        her previous attorney are not considered in looking at how
determining whether an adequate time for discovery had            long her case was active. And, Mary's case was active for
passed. Mary argues that the time the previous case had           an extended period of time.
been on file should not be considered, as the previous case
was dismissed without prejudice. However, whether a case                 3. The Length of Time the No-Evidence Motion was on
is dismissed with or without prejudice does not really go to      File
the issue of whether there has been an adequate time for
discovery. A dismissal with prejudice is a final                        Jesus Jr. filed the no-evidence motion for summary
determination on the merits and prevents a party from             judgment on April 22, 2010. The summary judgment
re-filing a case under the doctrines of res judicata or           hearing occurred on July 20, 2010. Thus, the no-evidence
collateral-estoppel. Mossler v. Shields, 818 S.W.2d 752,          motion for summary judgment was on file for almost ninety
754 (Tex.1991). Thus, the plaintiff can appeal the dismissal      days at the time of the summary judgment hearing. Further,
but cannot re-file the same lawsuit unless the dismissal is       we note that Rule 166a(i) does not mandate a minimum
reversed on appeal. See id. In contrast, a dismissal without      period of time a case must be pending before a motion may
prejudice is not a final determination on the merits. Thus, if    be filed, as long as there was adequate time for discovery.
the statute of limitations has not run, a case may be re-filed    Rest. Teams, 95 S.W.3d at 340; see TEX.R. CIV. P. 166a(i).
without appealing the order of dismissal. Webb v. Jorns,
488 S.W.2d 407, 409 (Tex.1972). Here, however, whether a                 4. Status of Discovery
party has had an adequate time for discovery is not related
                                                                        Mary argued in her motion for continuance that she
to the question of whether a case may be re-filed.
                                                                  needed time to depose Jesus Jr., retrieve bank records,
        Looking at the language of Rule 166a(i), the rule         prepare an affidavit from Otilia's treating doctor, and
states that " [a]fter an adequate time for discovery," a party    prepare her own affidavit. As noted above, because the time
may move for a no-evidence motion for summary                     period Mary's previous case was on file should be
judgment. TEX.R. CIV. P. 166a(i). The rule does not               considered in determining whether an adequate time for
explicitly state whether " adequate time" refers to only the      discovery had passed, Mary had more than sufficient time
instant suit or whether it can refer to a previous lawsuit,       to accomplish these tasks.
between the same parties and involving the same
                                                                        Looking at the above factors, we hold that the trial
allegations, that has been dismissed for want of prosecution.
                                                                  court did not abuse its discretion in denying Mary's motion
Instead, it refers only to " adequate time." And, in this case,
                                                                  for continuance.
Mary clearly had " adequate time" to conduct discovery.
Mary filed her original petition in her original lawsuit on
                                                                     NO-EVIDENCE             MOTION      FOR     SUMMARY
January 31, 2008. At the time Jesus Jr. moved to dismiss
                                                                  JUDGMENT
her original lawsuit for want of prosecution, she had over
two                                                                      Under Rule 166a(i), a party may move for a
                                                                  no-evidence summary judgment on the ground that there is
                                                                  no evidence of one or more essential elements of a claim or
defense on which an adverse party would have the burden           has not been induced to do anything." ).
of proof at trial. TEX.R. CIV. P. 166a(i). The trial court
must grant the motion unless the respondent produces                    In his no-evidence motion for summary judgment,
summary judgment evidence raising a genuine issue of              Jesus Jr. argued that Mary had no evidence that (1) he made
material fact. Id. The respondent is " not required to            any sort of material misrepresentation to Otilia; (2) any
marshal its proof; its response need only point out evidence      representation made by Jesus Jr. was false; (3) when any
that raises a fact issue on the challenged elements." TEX.R.      alleged misrepresentation was made, he knew it was false;
CIV. P. 166a(i) cmt. In reviewing a trial court's order           (4) he made any representation with the intent that Otilia act
granting a no-evidence summary                                    on it; (5) Otilia reasonably relied on a representation made
                                                                  by Jesus Jr.; and (6) Otilia entered into a binding agreement
Page 198                                                          based on the false misrepresentation. With respect to fraud
                                                                  by nondisclosure, Jesus Jr. argued in his no-evidence
 judgment, we consider the evidence in the light most             motion that Mary cannot show he concealed from or failed
favorable to the respondent and disregard all contrary            to disclose material facts to Otilia. He emphasizes in his
evidence and inferences. King Ranch, Inc. v. Chapman, 118         appellate brief that Otilia was aware of their financial
S.W.3d 742, 750-51 (Tex.2003). Thus, a no-evidence                arrangements and that she had signed signature cards and
summary judgment is improperly granted if the respondent          account designation documents at the bank.
brings forth more than a scintilla of probative evidence to
raise a genuine issue of material fact. Id. at 751; see TEX.R.           In her brief, Mary argues that she did present some
CIV. P. 166a(i). In determining if the respondent has             evidence that Jesus Jr. concealed or failed to disclose
brought forth more than a scintilla of evidence, we consider      certain facts to Otilia. She points to Jesus Jr.'s testimony
whether the evidence would enable reasonable and                  during the injunction hearing where he testified that he used
fair-minded jurors to differ in their conclusions. Hamilton v.    some of the money from the joint bank account for his
Wilson, 249 S.W.3d 425, 426 (Tex.2008).                           personal expenses because his wife was unemployed.
                                                                  However, Jesus Jr. also testified that his mother consented
      In her live petition, Mary brought the following            to these withdrawals. Mary argues that Jesus Jr. should have
claims against Jesus Jr.: common law fraud, fraud in the          known that Otilia was unable to approve such withdrawals
inducement, fraud by nondisclosure, and statutory fraud.          as she had been diagnosed with senile dementia. For this
She also requested the creation of a constructive trust based     proposition, Mary points to her own
on fraud. In his no-evidence motion for summary judgment,
Jesus Jr. argued that Mary had no-evidence to support             Page 199
specific elements of these claims.
                                                                   affidavit in which she affirms that " [i]n early 2002, Dr.
     1. Common Law Fraud, Fraud in the Inducement, and            Julian R. Cantu diagnosed Mrs. Patlan with senile
Fraud by Nondisclosure                                            dementia." [11] However, while this statement is evidence
                                                                  that Dr. Cantu diagnosed Otilia with senile dementia, it is
       To bring a claim for common law fraud, a plaintiff         not evidence that Jesus Jr. knew Otilia had been diagnosed
must show the following: (1) a material misrepresentation         with senile dementia. And, at the injunction hearing, Jesus
was made; (2) the representation was false; (3) when the          Jr. testified that he believed Otilia was capable of giving
representation was made, the speaker knew it was false or         consent and that he did not know she had been diagnosed
made it recklessly without any knowledge of the truth and         with dementia. According to Jesus Jr., although he
as a positive assertion; (4) the speaker made the                 sometimes took Otilia to doctor's appointments, the only
representation with the intent that the other party should act    thing he knew " at the time was that, you know, she was
upon it; (5) the party acted in reliance on the representation;   under medications as far as for blood pressure. Trying to
and (6) the party thereby suffered injury. In re FirstMerit       think RI ² she was taking a lot of medications but we were
Bank, N.A., 52 S.W.3d 749, 758 (Tex.2001) (orig.                  never told what everything was for. We were never told
proceeding). To bring a claim for fraud in the inducement, a      what the situation was." According to Jesus Jr., " Mary was
plaintiff must show the elements of fraud, see Balogh v.          the one [who] worked at the doctor's office, so she would
Ramos, 978 S.W.2d 696, 701 (Tex.App.-Corpus Christi               oversee whatever Dr. Cantu said. So we relied on her to fill
1998, pet. denied), and must show that she has been               us in on whatever situation was wrong with [Otilia]." When
fraudulently induced to enter into a binding agreement.           asked whether Mary had told him that Otilia had been
Haase v. Glazner, 62 S.W.3d 795, 798 (Tex.2001) ("                diagnosed with senile dementia, Jesus Jr. replied, " [S]he
Without a binding agreement, there is no detrimental              never told us." As evidence that Jesus Jr. knew his mother
reliance, and thus no fraudulent inducement claim. That is,       had senile dementia, Mary also points to Jesus Jr.'s
when a party has not incurred a contractual obligation, it        testimony at the injunction hearing that a case worker from
                                                                  Adult Protective Services told him that he needed to be "
more formal" with the joint bank account. However, Jesus          to Otilia, or benefited by not disclosing a third party's
Jr. testified that Adult Protective Services became involved      representation or promise was false. Similarly, he argued
with his mother's case right before Mary was appointed his        that Mary cannot show that any representation made by him
mother's guardian in 2007. This is not evidence that relates      was made for the purpose of inducing Otilia to enter into a
WRWKH WL
         PH  
             SH UL
                 RGDW
                      LVVXH²                                real estate contract. He also argued that Mary cannot show
                                                                  that Otilia relied on the false representation or promise by
       With respect to her claim for fraud by nondisclosure,      entering into the contract. And, Jesus Jr. argued that Mary
Mary also argues that Jesus Jr. had a fiduciary duty to           cannot show that Otilia reasonably relied on a
disclose material facts to Otilia and that by not disclosing      representation made by him, and that therefore there is no
all the money transactions made by him for his own                evidence that such reliance caused injury. As evidence,
personal use, he committed fraud. In support of this              Jesus Jr. attached the original warranty deed showing that
statement, Mary points to the copies of the bank records          the family home was his father's separate property. Thus,
from the joint account. However, while the bank records are       Jesus Jr. argued that in executing the deed to him, all Otilia
evidence that transactions occurred; they are not evidence        conveyed was a life estate interest, which she abandoned
that Jesus Jr. failed to disclose those transactions to Otilia.   when she moved out of the family home.
Jesus Jr. testified at the injunction hearing that Otilia knew
about the transactions. According to Jesus Jr., he was just             As evidence of the above elements, Mary once again
handling the family finances, like he had for his father, and     points to Jesus Jr.'s testimony at the temporary injunction
his mother knew about it. Mary, once again, points to Otilia      hearing and her own affidavit. The issue again is whether
having senile dementia, but as noted above, there is no           Jesus Jr. knew his mother was suffering from senile
evidence Jesus Jr. knew about her senile dementia.                dementia and was thus somehow taking advantage of her
Therefore, we hold that Mary did not bring forth more than        because he knew his mother was incapable of giving her
a scintilla of probative evidence to raise a genuine issue of     consent. However, as noted above, Mary failed to produce
material fact with respect to her claims for common law           any evidence that at the time these transactions occurred,
fraud, fraud in the inducement, and fraud by nondisclosure.       Jesus Jr. had any knowledge that his mother suffered from
                                                                  senile dementia.
     2. Statutory Fraud
                                                                        CONCLUSION
Page 200
                                                                        Because the trial court did not abuse its discretion in
       To bring a claim for statutory fraud, Mary must show       denying Mary's motion to continue the summary judgment
the following: (1) the transaction involved real estate; (2)      hearing and because Mary failed to bring forth more than a
Jesus Jr. made a false representation of a material fact or       scintilla of probative evidence to raise a genuine issue of
made a false promise to do an act to Otilia, or benefited by      material fact, we affirm the judgment of the trial court.
not disclosing that a third party's representation or promise
was false; (3) the false representation was made for the          ---------
purpose of inducing Otilia to enter into a contract; (4) Otilia
relied on the false representation or promise in entering into    Notes:
the contract; and (5) the reliance caused Otilia injury. See
TEX. BUS. & COM.CODE ANN. § 27.01 (West 2009)                     [1] Because we hold the trial court did not err in granting
(titled " Fraud in Real Estate and Stock Transactions" );         Jesus Patlan Jr.'s no-evidence motion for summary
Fletcher v. Edwards, 26 S.W.3d 66, 77 (Tex.App.-Waco              judgment, we need not reach the issue of whether the trial
2000, pet. denied) (" A plaintiff establishes a statutory         court should have granted the traditional motion for
fraudulent inducement claim under section 27.01 of the            summary judgment.
Business and Commerce Code by showing: a false
                                                                  [2] The record does not reflect why Mary's former attorney
representation of a material fact; made to induce a person to
                                                                  was no longer an attorney in this case.
enter a contract; and relied on by that person in entering the
contract." ). The statutory cause of action differs from the
                                                                  [3] The record does not reflect why Mary's current
common law only in that to recover actual damages, it does
                                                                  attorneys filed a petition in district court to take a " presuit"
not require proof that the defendant made a material false
                                                                  deposition of Jesus Jr. when Mary had already filed a
representation knowing it to be false or made it recklessly       lawsuit in probate court against Jesus Jr. At oral argument,
as a positive assertion without any knowledge of its truth.
                                                                  one of Mary's current attorneys admitted that she had been
Fletcher, 26 S.W.3d at 77.                                        aware of the previous lawsuit filed by Mary against Jesus
                                                                  Jr. in the probate court and the injunction hearing in that
     In his no-evidence motion, Jesus Jr. argued that Mary
                                                                  lawsuit. However, Mary's current attorney claimed to have
cannot prove that he made a false misrepresentation of fact
                                                                  been unaware of what specific documents had been filed or
exchanged in that lawsuit because Mary's previous attorney       120, 122 (Tex.1996); see also Selz v. Friendly Chevrolet,
had not given Mary his file.                                     Ltd., 152 S.W.3d 833, 837 (Tex.App.-Dallas 2005, no pet.)
                                                                 (holding affidavit that is nothing more than a sworn
[4] After taking the deposition, Mary's attorneys determined     statement of allegations in a pleading is conclusory and
that Otilia did not have a claim against the bank.               insufficient to create a fact issue); Old Republic Sur. Co. v.
                                                                 Bonham State Bank, 172 S.W.3d 210, 217
[5] A hearing was held on April 1st on the motion to             (Tex.App.-Texarkana 2005, no pet.) (explaining that "
dismiss, but there is no reporter's record of the hearing. At    statements of legal conclusions amount to little more than
the motion to continue the summary judgment hearing,             the witness choosing sides on the outcome of the case" and
Mary's attorney makes reference to the trial court               " affidavits containing conclusory statements unsupported
dismissing Mary's case on April 1st. Thus, it appears the        by facts are not competent summary judgment proof" ).
trial court orally granted Jesus Jr.'s motion to dismiss on
April 1st, but did not sign the order dismissing the case for    ---------
want of prosecution until April 26, 2010, at which point the
trial court was aware that Mary had filed a new petition on
April 5th.

[6] Although there is a reporter's record of the hearing on
the motion for continuance, there is no reporter's record of
the summary judgment hearing, which was held much later.

[7] Dr. Cantu was Otilia's treating doctor and Mary's
employer.

[8] Mary's attorneys did not indicate in Mary's motion for
continuance why they would need additional time to obtain
their client's affidavit.

[9] The hearing on the motion for continuance was held on
May 19, 2010. The record request to Broadway Bank was
filed in the district clerk's office on May 20, 2010. And, the
request indicates that it was sent to Broadway Bank on May
18th, the day before the hearing.

[10] We further note that although not briefed, Mary's
attorney raised the issue during oral argument that she was
prevented from fully deposing Jesus Jr. by the trial court's
presuit deposition order of September 18, 2009, which
limited the scope of any deposition of Jesus Jr. to the facts
and circumstances surrounding the signature cards relating
to the account made the basis of the suit. However, there is
nothing in the record to reflect that Mary was prevented
from fully taking Jesus Jr.'s deposition before the trial
court's order of September 18, 2009, nor is there any
indication that Mary ever went back to the trial court after
September 18, 2009, to request that the scope of Jesus Jr.'s
deposition be expanded.

[11] We note that Jesus Jr. filed written objections to
Mary's affidavit, arguing that it was based on hearsay and
speculation, and constituted improper expert testimony.
However, there is nothing in the record to reflect that Jesus
Jr. obtained a ruling on his objections. Nevertheless, we
note that Jesus Jr. did not need to object or obtain a ruling
on any conclusory statements contained in Mary's affidavit
because conclusory statements are insufficient to raise a
fact issue. See Ryland Group, Inc. v. Hood, 924 S.W.2d
Page 202                                                                In five issues on appeal, Universal Academy asserts
                                                                 (1) the trial court erred by denying its plea to the
362 S.W.3d 202 (Tex.App.-Dallas 2012)                            jurisdiction; (2) Universal Academy is a " local
                                                                 governmental entity" for purposes of the application of
LTTS CHARTER SCHOOL, INC. d/b/a Universal                        Texas Local Government Code sections 271.151 through
Academy, Appellant,                                              271.160, which provide for waiver of immunity from suit as
                                                                 to certain contract claims, see TEX. LOC. GOV'T CODE
v.
                                                                 ANN.. §§ 271.151-.160 (West 2005 & Supp.2011); (3)
                                                                 Universal Academy is a " governmental unit" for purposes
Jimmy PALASOTA d/b/a Palasota Property Company,
                                                                 of application of the Texas Tort Claims Act (" TTCA" ),
Appellee.
                                                                 which provides a limited waiver of immunity from suit on
No. 05-08-01039-CV.                                              tort claims, see TEX. CIV. PRAC. & REM.CODE ANN. §§
                                                                 101.001-.109 (West 2011 & Supp.2011); (4) Universal
Court of Appeals of Texas, Fifth District, Dallas                Academy is immune from suit on the breach of contract
                                                                 claims of appellee Jimmy Palasota d/b/a Palasota Property
February 28, 2012                                                Company (" Palasota" ); and (5) Universal Academy is
                                                                 immune from suit on Palasota's tort claims.[1]
Page 203
                                                                       We reverse the trial court's order denying Universal
[Copyrighted Material Omitted]                                   Academy's plea to the jurisdiction and render judgment
                                                                 granting the plea to the jurisdiction and dismissing
Page 204
                                                                 Palasota's claims.
     Thomas Anthony Fuller, The Fuller Law Group,
                                                                    I.  FACTUAL                 AND        PROCEDURAL
Arlington, TX, for Appellant.
                                                                 BACKGROUND
      Scott A. Scher, Law Offices of Scott A. Scher, P.C.,
                                                                        Palasota, a commercial real estate broker, filed this
Prosper, TX, Michael L. Jones, Henry & Jones, L.L.P.,
                                                                 lawsuit on September 29, 2005. In his live petition at the
Dallas, TX, for Appellee.
                                                                 time of the challenged order, Palasota alleged that in
                                                                 approximately April 2004, Universal Academy approached
      Before Justices RICHTER, LANG, and MURPHY.
                                                                 him regarding the possibility of having him " list" for sale
Page 205                                                         its campus located in Flower Mound, Texas (the " Property"
                                                                 ), which Universal Academy desired to sell. Palasota
      OPINION ON REMAND                                          asserted he and Universal Academy subsequently executed
                                                                 an exclusive listing agreement (the " Listing Agreement" ).
      LANG, Justice.                                             According to Palasota, under the terms of the Listing
                                                                 Agreement, Universal Academy agreed to provide him with
      In this interlocutory appeal, appellant LTTS Charter       an exclusive listing on the Property commencing on April
School, Inc. d/b/a Universal Academy (" Universal                26, 2004, and continuing through at least October 26, 2004.
Academy" ) appeals the trial court's denial of its plea to the   Palasota alleged that in exchange for his services under the
jurisdiction based on immunity from suit. On original            Listing Agreement, he was to receive a commission "
submission, this Court concluded it did not have jurisdiction    defined by the Listing Agreement" as " six percent of the
over the interlocutory appeal because Universal Academy,         first $1 million and three percent of all amounts over $1
which is an open-enrollment charter school, was not a "          million and up to $10 million." The commission was " due
governmental unit" for purposes of an interlocutory appeal       and payable at the closing of any sale of the Property."
under section 51.014(a)(8) of the Texas Civil Practice and       Further, Palasota asserted,
Remedies Code. See LTTS Charter Sch., Inc. v. Palasota,
293 S.W.3d 830 (Tex.App.-Dallas 2009), rev'd, 344 S.W.3d         Page 206
378 (Tex.2011); see also TEX. CIV. PRAC. & REM.CODE
ANN. § 51.014(a)(8) (West Supp.2011). The Texas                    the Listing Agreement provided for payment of the
Supreme Court reversed this Court's judgment and                 commission to him " [i]f said property is sold prior to the
remanded the case to this Court for further proceedings.         termination of this agreement, whether by [Palasota], by
LTTS Charter Sch., 344 S.W.3d at 378.                            [Universal Academy], or by any other person."
      Palasota stated that in late October 2004, he notified      missing an " essential term" required by the waiver
Universal Academy that he was expecting to receive offers         provision of section 271.152. Palasota asserted, inter alia,
for the acquisition of all or portions of the Property. At that   that (1) Universal Academy's argument respecting the
time, Palasota alleged, Universal Academy disclosed to him        missing term constituted a " statute of frauds claim" that
for the first time that it had sold the Property in August        was not
2004. Palasota alleged Universal Academy notified him that
it would not " honor the Listing Agreement" or pay him " a        Page 207
commission based upon the Sale." Palasota asserted "
causes of action" against Universal Academy for breach of          pleaded and " can't be pled" because " it's too late" ; (2)
contract, fraud, fraudulent concealment, statutory fraud, and     Universal Academy " can point to nothing that says that
imposition of constructive trust.[2]                              [the Listing Agreement] has to be submitted to, approved
                                                                  by, and/or ratified by the board of the school in order to be
       Universal Academy filed an answer and asserted             a properly executed contract" ; and (3) the transaction at
affirmative defenses that included immunity from suit and "       issue constituted a " sale."
[i]llegality as to some or all of the portions of the contract
upon which Plaintiff makes its claim." Additionally, in a               Following the trial court's denial of the plea to the
verified denial, Universal Academy denied that the Listing        jurisdiction, Universal Academy appealed to this Court
Agreement was signed by " a person authorized to sign such        pursuant to section 51.014(a)(8). See TEX. CIV. PRAC. &
a contract on behalf of Universal Academy."                       REM.CODE ANN. § 51.014(a)(8) (providing for appeal of
                                                                  an interlocutory order that " denies a plea to the jurisdiction
      Universal Academy filed a plea to the jurisdiction of       by a governmental unit as that term is defined in [the
the trial court asserting (1) it is immune from suit on           TTCA]" ). This Court dismissed Universal Academy's
Palasota's claims based on the doctrine of sovereign              interlocutory appeal, concluding Universal Academy was
immunity and (2) Palasota's claims do not fall within any         not a " governmental unit" as that term is defined in the
legislative waiver of sovereign immunity. Specifically,           TTCA. See id. § 101.001.
Universal Academy contended the TTCA limits tort claims
against charter schools to those involving the operation of a           The Texas Supreme Court granted Universal
motor vehicle, thus precluding Palasota's tort claims. With       Academy's petition for review. While this case was pending
respect to Palasota's contract claim, Universal Academy           in the supreme court, that court issued its opinion in LTTS
contended the waiver of immunity from suit in section             Charter School, Inc. v. C2 Construction, Inc., 342 S.W.3d
271.152 of the local government code does not apply in this       73 (Tex.2011) (" C2 Construction I " ). In that case, the
case because (1) the transaction pursuant to which Palasota       supreme court concluded Universal Academy was a "
seeks to recover a commission consisted of " Universal            governmental unit" under the TTCA and thus entitled to
Academy deeding the Property to its lender in lieu of             take an interlocutory appeal pursuant to section
foreclosure," which was not a " sale" of the Property, and        51.014(a)(8). Id. at 78. In light of its opinion in C2
thus the essential terms of the Listing Agreement do not          Construction I, the supreme court reversed this Court's
expose Universal Academy to any liability for paying a            judgment in this case and remanded this case to us for
commission to Palasota and (2) Universal Academy's board          consideration of the issues raised in the interlocutory
of directors never authorized the signatory of the Listing        appeal. LTTS Charter Sch., 344 S.W.3d at 378.
Agreement to sign that agreement, and thus the Listing
                                                                     II. DENIAL OF UNIVERSAL ACADEMY'S
Agreement was not properly executed by a party having
                                                                  PLEA TO THE JURISDICTION
authority to bind Universal Academy. Evidence attached to
the plea to the jurisdiction included, in relevant part, the
                                                                       A. Standard of Review and Applicable Law
Listing Agreement and a February 20, 2008 affidavit of
Janice Blackmon, Universal Academy's director of                         Whether a trial court has subject matter jurisdiction is
administrative services and a member of its board of              a matter of law that is reviewed de novo. See Tex. Dep't of
directors, whose signature appears on the Listing                 Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226, 228
Agreement.                                                        (Tex.2004); Tex. Natural Res. Conservation Comm'n v.
                                                                  IT-Davy, 74 S.W.3d 849, 855 (Tex.2002); Robinson v.
       Palasota filed no response to Universal Academy's
                                                                  Neeley, 192 S.W.3d 904, 907 (Tex.App.-Dallas 2006, no
plea to the jurisdiction. At the hearing on the plea to the
                                                                  pet.). A party may challenge the trial court's subject matter
jurisdiction, Universal Academy presented arguments
                                                                  jurisdiction by filing a plea to the jurisdiction. Miranda, 133
respecting the grounds asserted in its plea to the
                                                                  S.W.3d at 225-26. In deciding a plea to the jurisdiction, a
jurisdiction. Additionally, Universal Academy contended
                                                                  court may not weigh the claims' merits, but must consider
the Listing Agreement does not state the amount of the
                                                                  only the plaintiff's pleadings and the evidence pertinent to
commission Palasota was to be paid and is therefore
the jurisdictional inquiry. Cnty. of Cameron v. Brown, 80          Inc. v. Dallas Indep. Sch. Dist., 333 S.W.3d 636, 641-42
S.W.3d 549, 555 (Tex.2002).                                        (Tex.App.-Dallas 2009, no pet.). Like sovereign immunity,
                                                                   governmental immunity has two components: immunity
       " When we consider a trial court's order on a plea to       from liability, which bars enforcement of a judgment
the jurisdiction, we construe the pleadings in the plaintiff's     against a governmental entity, and immunity from suit,
favor and look to the pleader's intent." Id.; see also City of     which bars suit against the entity altogether. Tooke, 197
Elsa v. Gonzalez, 325 S.W.3d 622, 625 (Tex.2010); TEX.R.           S.W.3d at 332. Governmental immunity from suit deprives
CIV. P. 45 (" All pleadings shall be construed so as to do         a trial court of subject matter jurisdiction and is properly
substantial justice." ). " When a plaintiff fails to plead facts   asserted in a plea to the jurisdiction. See Miranda, 133
that establish jurisdiction, but the petition does not             S.W.3d at 225-26.
affirmatively demonstrate incurable defects in jurisdiction,
the issue is one of pleading sufficiency and the plaintiff                 " [E]ven if the State acknowledges liability on a
should be afforded the opportunity to amend." Brown, 80            claim, immunity from suit bars a remedy until the
S.W.3d at 555; accord Miranda, 133 S.W.3d at 226-27;               Legislature consents to suit." Learners Online, 333 S.W.3d
Clifton v. Walters, 308 S.W.3d 94, 98 (Tex.App.-Fort               at 642 (quoting Ben Bolt-Palito Blanco Consol. Indep. Sch.
Worth 2010, pet. denied); City of Austin v. Leggett, 257           Dist. v. Tex. Political Subdivisions Prop./Cas. Joint
S.W.3d 456, 461 (Tex.App.-Austin 2008, pet. denied). " On          Self-Ins. Fund, 212 S.W.3d 320, 324 (Tex.2006)). The
the other hand, if the pleadings affirmatively negate the          plaintiff bears the burden of pleading facts affirmatively
existence of jurisdiction, then a plea to the jurisdiction may     demonstrating waiver of immunity from suit and must also
be granted without allowing the plaintiff an opportunity to        raise a fact question on the jurisdictional facts if a
amend." Brown, 80 S.W.3d at 555; see Miranda, 133                  jurisdictional plea is supported with evidence. City of Irving
S.W.3d at 227; Leggett, 257 S.W.3d at 461.                         v. Seppy, 301 S.W.3d 435, 443 (Tex.App.-Dallas 2009, no
                                                                   pet.). As this Court recently concluded, open enrollment
       When a plea to the jurisdiction challenges the              charter schools enjoy governmental immunity from suit.
existence of jurisdictional                                        LTTS Charter Sch., Inc. v. C2 Constr., Inc., 358 S.W.3d
725, 735 (Tex.App.-Dallas 2011, no pet. h.) (" C2
Page 208                                                           Construction II " ).
 facts, the trial court must consider the relevant evidence             B. Analysis
submitted by the parties when necessary to resolve the
jurisdictional issue. See City of Waco v. Kirwan, 298                   1. Waiver of Immunity as to Palasota's Tort Claims
S.W.3d 618, 622 (Tex.2009); Miranda, 133 S.W.3d at 227;
Clifton, 308 S.W.3d at 98. This standard generally mirrors                 We begin with Universal Academy's third and fifth
that of a traditional summary judgment. See Miranda, 133           issues, which relate to Palasota's tort claims. In its third
S.W.3d at 228. We " take as true all evidence favorable to         issue, Universal Academy contends it is a " governmental
the nonmovant" and " indulge every reasonable inference            unit" for purposes of the TTCA, which provides only a
and resolve any doubts in the nonmovant's favor." Id. " If         limited waiver of immunity from suit on tort claims. In its
the evidence creates a fact question regarding the                 fifth issue, Universal Academy asserts it is immune from
jurisdictional issue, then the trial court cannot grant the plea   suit on Palasota's tort
to the jurisdiction, and the fact issue will be resolved by the
fact-finder." Id. at 227-28. " However, if the relevant            Page 209
evidence is undisputed or fails to raise a fact question on the
jurisdictional issue, the trial court rules on the plea to the      claims. According to Universal Academy, Palasota's tort
jurisdiction as a matter of law." Id. at 228.                      claims include his claims for fraud, fraudulent concealment,
                                                                   and statutory fraud, as well as any claims for punitive
        Under the common-law doctrine of sovereign                 damages, attorney's fees, and costs of court " resulting
immunity, the state cannot be sued without its consent. City       therefrom." Further, Universal Academy asserts that to the
of Houston v. Williams, 353 S.W.3d 128, 134 (Tex.2011)             extent Palasota's constructive trust claim is " tort-based,"
(citing Tooke v. City of Mexia, 197 S.W.3d 325, 331                the TTCA precludes waiver of immunity as to that claim as
(Tex.2006)); City of Galveston v. State, 217 S.W.3d 466,           well.
471 (Tex.2007). Governmental immunity operates like
sovereign immunity to afford similar protection to                       We address Universal Academy's third issue by
subdivisions of the state, including counties, cities, and         referring to C2 Construction I. In that case, the supreme
school districts.[3] Harris Cnty. v. Sykes, 136 S.W.3d 635,        court concluded " [a]n open-enrollment charter school
638 (Tex.2004) (citing Wichita Falls State Hosp. v. Taylor,        qualifies as a ' governmental unit' under the [TTCA]." C2
106 S.W.3d 692, 694 n. 3 (Tex.2003)); Learners Online,             Constr. I, 342 S.W.3d at 76. That conclusion is dispositive
of Universal Academy's third issue.                                     Under section 271.152 of chapter 271, " [a] local
                                                                  governmental entity that is authorized by statute or the
        Next, we address Universal Academy's fifth issue.         constitution to enter into a contract and that enters into a
The TTCA, which is contained in chapter 101 of the Texas          contract subject to this subchapter waives sovereign
Civil Practice and Remedies Code, provides, inter alia, a         immunity to suit for the purpose
limited waiver of immunity from suit and from liability for
certain suits against " governmental units." See TEX. CIV.        Page 210
PRAC. & REM.CODE ANN. §§ 101.021, 101.025.
However, the TTCA expressly excludes any " intentional              of adjudicating a claim for breach of contract." Id. §
tort." Id. § 101.057. Fraud is an " intentional tort" for which   271.152; Learners Online, 333 S.W.3d at 642. " Contract
the TTCA provides no waiver of immunity. See Seureau v.           subject to this subchapter" is defined as " a written contract
ExxonMobil        Corp.,     274 S.W.3d 206,     219    stating the essential terms of the agreement for providing
(Tex.App.-Houston [14th Dist.] 2008, no pet.) (" the              goods or services to the local governmental entity that is
Legislature has not waived immunity with respect to the           properly executed on behalf of the local governmental
intentional tort of fraud" ); Sanders v. City of Grapevine,       entity." TEX. LOCAL GOV'T CODE ANN. § 271.151(2);
218 S.W.3d 772, 779 (Tex.App.-Fort Worth 2007, pet.               Learners Online, 333 S.W.3d at 642. " Essential terms"
denied). Accordingly, we conclude governmental immunity           have been characterized as, inter alia, " ' the time of
from suit has not been waived as to Palasota's claims for         performance, the price to be paid, ... [and] the service to be
fraud, fraudulent concealment, and statutory fraud.               rendered.' " See Williams, 353 S.W.3d at 138-39 (quoting
                                                                  Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320
       In addition to his fraud claims, Palasota asserted a "     S.W.3d 829, 838 (Tex.2010)).
cause of action" for imposition of a constructive trust " as a
result of the fraud practiced by [Universal Academy] with               We concluded in C2 Construction II that an
respect to the commission due and owing on the Property."         open-enrollment charter school is a " local governmental
Imposition of a constructive trust is not a cause of action,      entity" for purposes of section 271.152. C2 Constr. II, 358
but rather an equitable remedy. See Garcia v. Garza, 311 S.W.3d at 742. That conclusion is dispositive of Universal
S.W.3d 28, 40 (Tex.App.-San Antonio 2010, pet. denied);           Academy's second issue.
In re Estate of Arrendell, 213 S.W.3d 496, 504
(Tex.App.-Texarkana 2006, no pet.); see also Bright v.                   As to its fourth issue, Universal Academy asserts the
Addison, 171 S.W.3d 588, 601 (Tex.App.-Dallas 2005, pet.          criteria for waiver pursuant to section 271.152 have not
denied) (constructive trust can be imposed when party             been satisfied and Palasota is therefore precluded from
commits fraud or breaches fiduciary relationship).                proceeding with his breach of contract action. Specifically,
Palasota's alleged entitlement to a constructive trust is based   Universal Academy asserts in part that " [t]he undisputed
on his fraud claims that we concluded above are barred by         evidence before the trial court conclusively showed that the
governmental immunity. Therefore, we conclude                     Listing Agreement did not contain an essential term to that
governmental immunity from suit has not been waived as to         FRQW UDFW² the amount and/or method of calculating the
Palasota's constructive trust " cause of action" allegedly        commission."
arising from fraud.
                                                                        The record shows Palasota asserted in his petition that
      We decide in favor of Universal Academy on its third        in exchange for his services under the Listing Agreement,
and fifth issues.                                                 he was to receive a commission " defined by the Listing
                                                                  Agreement" as " six percent of the first $1 million and three
     2. Waiver of Immunity as to Palasota's Breach of             percent of all amounts over $1 million and up to $10
Contract Claim                                                    million." However, Blackmon testified in relevant part in
                                                                  her February 20, 2008 affidavit
       Now, we address together Universal Academy's
second and fourth issues. In its second issue, Universal          I signed an Exclusive Listing Agreement with Palasota
Academy asserts it is a " local governmental entity" for          which purported to give him the exclusive right to sell the
purposes of the application of chapter 271, subchapter I, of      Flower Mound Campus for Universal Academy in
the Texas Local Government Code. See TEX. LOC. GOV'T              exchange for a commission based upon a percentage of the
CODE ANN.. §§ 271.151-.160 (titled " Adjudication of              sales price, to be paid at the closing of a sale (the " Listing
Claims Arising Under Written Contracts With Local                 Agreement" ). A true and correct copy of the Listing
Government Entities" ). In its fourth issue, Universal            Agreement is attached hereto as Exhibit " A-1."
Academy contends it is immune from suit on Palasota's
breach of contract claim.                                             Attached to Blackmon's affidavit as " Exhibit ' A-1' "
                                                                  is a one-page document titled " Exclusive Listing
Agreement." That document states in part that in the event          price to be paid" characterized as essential term). In light of
of a sale of the Property, Palasota will be paid " a                that conclusion, we do not reach Universal Academy's
commission in cash ... equal to the following percent of the        remaining arguments respecting Palasota's breach of
total sales (rental) price of the property computed as              contract claim.
follows: See attached Addendum. " (emphasis original).
                                                                          We decide in favor of Universal Academy on its
        Blackmon's affidavit and the one-page Listing               second and fourth issues. Additionally, based on our
Agreement were attached as exhibits to Universal                    conclusions above, we decide in favor of Universal
Academy's plea to the jurisdiction. The record shows                Academy on its first issue, in which it asserts the trial court
Palasota did not file a response to the plea to the                 erred by denying its plea to the jurisdiction.[4]
jurisdiction, offer controverting evidence as to whether an
addendum was part of the Listing Agreement, or object to                  III. CONCLUSION
Universal Academy's evidence. Rather, the undisputed
evidence before the trial court showed that the Listing                   We decide Universal Academy's five issues in its
Agreement consisted of a single page that did not contain an        favor. We reverse the trial court's order denying Universal
addendum, a " price to be paid," or any term stating the            Academy's plea to the jurisdiction and render judgment
amount or method of calculating the commission. See San             granting the plea to the jurisdiction and dismissing
Antonio Hous. Auth. Found., Inc. v. Smith, No.                      Palasota's claims.
04-10-00759-CV, 2011 WL 3627699, at *5 (Tex.App.-San
                                                                    ---------
Antonio Aug. 17, 2011, no pet.) (mem. op.) (affidavit
attached to plea to jurisdiction established jurisdictional fact
                                                                    Notes:
as matter of law and nonmovant therefore could not prevail
absent scintilla of controverting evidence); cf. Bass v. Bass,      [1] Palasota did not file a response to Universal Academy's
790 S.W.2d 113, 117-18 (Tex.App.-Fort Worth 1990, no                plea to the jurisdiction in the trial court and did not file a
writ) (uncontroverted facts in movant's summary judgment            brief before this Court when this case was initially
affidavit                                                           submitted on appeal. Following the supreme court's remand,
                                                                    Palasota filed a motion for leave to file a brief on the merits
Page 211                                                            in this Court pursuant to Texas Rule of Appellate Procedure
                                                                    38.6. See TEX.R.APP. P. 38.6. That motion was denied by
  are taken as true for purposes of appeal). Palasota
                                                                    this Court.
contended in the trial court that Universal Academy's
argument that the missing term precluded application of
                                                                    [2] Additionally, Palasota requested attorney's fees in
section 271.152's waiver provision constituted a " statute of       connection with his breach of contract and statutory fraud
frauds claim" that was not properly pleaded. However, the
                                                                    claims.
statute of frauds pertains to the enforceability of a contract.
See S & I Mgmt., Inc. v. Sungju Choi, 331 S.W.3d 849, 854           [3] To the extent Universal Academy uses the terms "
(Tex.App.-Dallas 2011, no pet.) (" Under the statute of             sovereign immunity" and " governmental immunity"
frauds, certain contracts are not enforceable unless they are       interchangeably, we construe the issues in this case to
in writing and signed by the person against whom                    address governmental immunity.
enforcement of the contract is sought." ); Lathem v. Kruse,
290 S.W.3d 922, 925 (Tex.App.-Dallas 2009, no pet.)                 [4] In light of our conclusions herein, we do not reach
(pursuant to statute of frauds in Real Estate License Act,          Universal Academy's arguments respecting Palasota's
agreement to pay real estate commission must be in writing          request for attorney's fees.
or it is not " enforceable" ). Palasota cited no authority to
the trial court, and we have found none, supporting the             ---------
proposition that a plaintiff's failure to satisfy the elements of
section 271.152's waiver provision must be pleaded by the
defendant. Cf. Seppy, 301 S.W.3d at 443 (plaintiff bears
burden of pleading facts affirmatively demonstrating waiver
of immunity from suit).

      On this record, we conclude waiver pursuant to
section 271.152 is inapplicable. See TEX. LOCAL GOV'T
CODE ANN. § 271.151(2) (waiver under section 271.152
requires written contract stating " essential terms" of
agreement); see also Williams, 353 S.W.3d at 138-39 ("
Page 256                                                        distribution. Plaintiff asserted the conveyance to Street of
                                                                the properties for distribution unlawful, and that it was the
410 S.W.2d 256 (Tex.Civ.App. —Waco 1966)                        rightful successor to defendant association's properties.

GENERAL    ASSOCIATION                 OF       DAVIDIAN             Defendants General Association of Davidian Seventh
SEVENTH DAY ADVENTISTS,                                         Day Adventists and Tom Street answered, alleging that the
                                                                association was a religious denomination which was
INC., Appellants,                                               dissolved by resolution of its members on March 11, 1962;
                                                                that prior to dissolution it conveyed the assets of the
v.
                                                                association to Tom Street, Trustee, for sale and distribution
                                                                to named members; and prayed for declaratory judgment
  GENERAL ASSOCIATION                   OF      DAVIDIAN
                                                                confirming the dissolution of the association, and of the
SEVENTH DAY ADVENTISTS et
                                                                conveyance of the assets to the Trustee.
al., Appellees.
                                                                     The Davidian Seventh Day Adventist Association
No. 4533.                                                       (composed of some former members of the old association)
                                                                intervened, alleging that members of the old association had
Court of Civil Appeals of Texas, Waco                           contributed moneys to a fund called the 'Second Tithe'
                                                                which funds were represented to be for the purpose of
November 3, 1966                                                taking care of contributors in old age. Intervenors prayed
                                                                that they be declared owners of the assets of the defunct
     Rehearing Denied Nov. 23, 1966.                            association, and alternatively that such assets be impressed
                                                                with a trust in favor of persons who had contributed to such
Page 257
                                                                'Second Tithe.'
    Charles E. Wallace, Carl Anderson, Waco, for
                                                                    The General Association of Davidian Seventh Day
appellants.
                                                                Adventists was established about 1930 under the leadership
                                                                of a Brother Houteff. From a small beginning the
     David Kultgen, Waco, for appellees.
                                                                association grew to some 1000 members. The members
     OPINION                                                    paid a 'First Tithe' which was for the spread of the gospel;
                                                                and many members paid a 'Second Tithe' which was for the
     McDONALD, Chief Justice.                                   purpose of their being cared for in old age. Brother Houteff
                                                                died; Mrs. Houteff was appointed Vice President of the
     This is an appeal from a judgment impressing a trust on    association, and in early 1962 sent notices
assets and properties of the defunct General Association of
Davidian Seventh Day Adventists, in favor of all persons        Page 258
living on March 11, 1962, who had contributed to the
'Second Tithe' fund of such association. The judgment           calling a meeting of the association to be convened on
appointed Tom Street receiver of the properties; and            March 11, 1962. At the March 11, 1962 meeting,
required him to sell and liquidate the property subject to      dissolution of the association was voted by those present,
approval of the Court.                                          purporting to act for the association. The group who voted
                                                                the dissolution conveyed the properties and assets of the
     Plaintiff General Association of Seventh Day               association to Tom Street as Trustee for named members of
Adventists, Inc. brought this suit against the General          the association. Plaintiff filed this suit to set aside the trust,
Association of Seventh Day Adventists and Tom Street,           and to acquire the assets of the defunct association.
Trustee, to set aside a trust agreement conveying all assets
of the General Association of Davidian Seventh Day                  Trial was to a jury which found:
Adventists to Tom Street, Trustee, for sale and distribution
                                                                1, 2) The General Association of Seventh Day Adventists is
to named members; and for title and possession of such
                                                                a defunct church; which may not be revived in a reasonable
assets. Plaintiff alleged the General Association of Davidian
                                                                time.
Seventh Day Adventists was a defunct church; that on
March 11, 1962 a resolution was passed by a portion of its
                                                                3, 4) The General Association of Seventh Day Adventists,
membership dissolving the organization and appointing
                                                                Inc. is a church of like faith as the defunct group; and is a
Tom Street, Trustee, of all assets for sale and specified
successor organization of the defunct group.                    that plaintiffs and intervenors are not entitled to the funds;
                                                                that
5, 6) The Davidian Seventh Day Adventists Association is a
church of like faith as the defunct group; and is a successor   Page 259
organization of the defunct group.
                                                                the resolution transferring the properties to Tom Street,
7) The Executive Council of the old association had             Trustee, was ineffective to modify the rights of the parties;
authority to appoint Mrs. Houteff Vice President of the old     that such assets are impressed with a trust of which all
association.                                                    contributors who were living on March 11, 1962 are
                                                                beneficiaries; that defendant association being defunct, is
8) Notices of the Session of March 11, 1962 were not sent       no longer qualified to act as trustee; that it will not be
to all members entitled to receive them.                        revived within a reasonable time; that the appointment of a
                                                                Receiver is required to take care of those being cared for at
9) Proxy votes used in the March 11, 1962 session were not      the time the old association became defunct, and to pay
actually received.                                              bequeathment certificates.

10) Contributors to the Second Tithe were induced to make            The Court further decreed all persons living on March
such contributions by representations as to the purposes for    11, 1962 who had contributed to the 'Second Tithe'
which such Tithe was to be used.                                beneficiaries of the trust; required the Receiver to file
                                                                inventory of the properties; a list of 'Second Tithers' to the
11) Contributors relied on such representations.
                                                                best of his ability; to file bond and oath; and further ordered
12) Contributors to the 'Second Tithe' would not have           Receiver reimbursed for his expenses and compensated for
contributed if they had not relied on such representations.     his services.

13) The assets and property here involved were purchased            Plaintiff appeals on 15 points, contending:
with 'Second Tithe' funds.
                                                                1) There is no evidence, or insufficient evidence, to support
14) The defunct association represented it would hold the       the jury's finding (Issue 13) that the assets were purchased
assets in trust for the use and benefit of the contributors.    with 'Second Tithe' funds; and the undisputed evidence is
                                                                that the assets and properties were purchased from a
16) There was not a majority of the membership of the           common fund which included both 'First Tithe' and 'Second
defunct association either present or by proxy voting for the   Tithe' funds.
resolution on March 11, 1962.
                                                                2) The trial court erred in overruling its motion for
17, 20) Plaintiffs and Intervenors did not wait an              judgment appointing plaintiff Receiver to take charge of all
unreasonable length of time before bringing this suit, after    assets of the defunct association.
discovering the assets of the defunct association had been
transferred to Tom Street, Trustee.                             3) The trial court erred in failing to apply the doctrine of cy
                                                                pres.
19) It was not the understanding of the members of
Intervenor Association that a contributor had to remain a       4) The trial court erred in permitting the trust to fail for
member of the (defunct) association in order to participate     want of a trustee.
in benefits of the 'Second Tithe.'
                                                                5) There were no pleadings and no evidence to support the
22) A majority of those present in person at the meeting of     judgment .
March 11, 1962 voted for the resolution to dissolve.
                                                                6) The trial court erred in appointing a receiver not
23) A majority of those present in person or by proxy at the    qualified under Article 2294.
meeting of March 11, 1962 voted for the resolution to
                                                                7) The judgment is void because Article 4412a, V.A.T.S.
dissolve.
                                                                requires the Attorney General to be a party to suits
    The trial court entered judgment that the General           pertaining to a charitable trust.
Association of Davidian Seventh Day Adventists was
                                                                    Contention 1 complains of the jury's finding that the
owner of the properties involved; was a defunct church; that
                                                                properties here involved were purchased with 'Second Tithe'
such properties were acquired with funds contributed to the
                                                                funds; and asserts the evidence undisputed that such were
'Second Tithe'; that such funds were not for general church
                                                                purchased from a common fund which included 'First Tithe'
purposes but were for the caring for contributors in old age;
and 'Second Tithe' funds.                                          no evidence to support the judgment. Intervenor's pleadings
                                                                   and the evidence support the judgment. And where a trust
     'First Tithe' funds were funds which had been                 fails, the appointment of a Receiver to take charge of and
contributed for gospel work. 'Second Tithe' funds were             dispose of the trust corpus is proper. Bogert, Trusts &
funds which had been contributed by the members of the             Trustees, Secs. 14 and 861; O'Dell v. Grubstake Inv. Ass'n,
association for the purpose of the association caring for the      Tex.Civ.App., Er.Dis., 38 S.W.2d 151; Crawford v.
contributors in their old age. Plaintiffs concede in their brief   Crawford, Tex.Civ.App. (nwh), 163 S.W. 115; Hunt v. State,
that 'Second Tithe' funds were subject to a trust. While there     Tex.Civ.App. (nwh), 48 S.W.2d 466.
is evidence that the assets and properties here involved were
purchased with 'Second Tithe' funds, if such properties were            Plaintiff's 6th contention is that Article 2294 precludes
purchased with commingled 'First' and 'Second' Tithe funds,        the appointment of Tom Street as Receiver. Tom Street was
the cestui's right of recovery is not destroyed by reason of       not a party, an attorney in the case, or otherwise a person
the fact the Trustee commingled the trust property with its        interested in an action for the appointment of a receiver, as
own property. The entire commingled fund or property will          precluded by Article 2294.
be treated as subject to the trust. Eaton v. Husted, 141 Tex.
349, 172 S.W.2d 493. And if the Trustee invests the trust              Contention 7 complains that the judgment is void
fund or its proceeds in other property, the cestui que trust       because Article 4412a, V.A.T.S., requires the Attorney
may follow the fund into the new investment. Kennedy v.            General to be a party to suits pertaining to a charitable trust.
Baker, 59 Tex. 150. And where the Trustee mingles the              The 'Second Tithe' trust is not a charitable trust, and Article
trust money with his own, whenever he pays out * * * he is         4412a is inapplicable.
presumed to have paid out with his own money.
Continental Nat. Bank v. Weems, 69 Tex. 489, 6 S.W. 802.               Defendants, by counter-point, assert the trial court
                                                                   erred in not confirming title to the property in Tom Street as
     Under the authorities cited, the beneficiaries are            Trustee.
entitled to follow the trust funds into the assets and
properties here involved.                                              Plaintiff's points, (and defendants' counter-point) are
                                                                   overruled.
Page 260
                                                                       Affirmed.
     Plaintiff's 2nd contention is that the trial court erred in
not appointing it to take charge of all assets of the defunct
association under Articles 2293 et seq., Vernon's Ann
.Tex.St. These statutes concern the administration of
properties belonging to defunct churches. The property
which we are concerned with is property subject to a trust in
favor of 'Second Tithe' contributors; and Articles 2293 et
seq., V.A.T.S. are inapplicable.

    Plaintiff's 3rd contention is that the trial court erred in
not applying the cy pres doctrine. The cy pres doctrine
applies to a charitable trust, and has no application here.
This trust is not charitable. This is a trust, the assets of
which were to give old age protection to the contributors.

    Plaintiff's 4th contention is that the trial court erred in
permitting the trust to fail for want of a trustee. The trial
court did not permit the trust to fail for want of a trustee.
When the association became defunct and broke up, the
accomplishment of the trust became impossible. (Plaintiff
has only 6 members; intervenors but few more; some 8
groups claim to be successors to the old association). If the
purposes of a valid trust, as here, become impossible of
accomplishment, the trust will be terminated. Restatement
of Trusts, Sec. 335; Scott Trusts, Sec. 335.

    Plaintiff's 5th contention is there are no pleadings and
Page 450                                                        included additional unauthorized findings, and we remand
                                                                to the trial court to allow Smith to elect a remedy and for
415 S.W.3d 450 (Tex.App.-Houston [1 Dist.] 2013)                entry of a new judgment.

Charles R. SADEN, Appellant                                          I. Appellate jurisdiction

v.                                                                     After the jury's verdict but before the trial court
                                                                entered judgment, Saden informed the court that he had
Brian SMITH, Appellee.                                          filed for bankruptcy and that the automatic bankruptcy stay
                                                                applied to all further matters in the case. The bankruptcy
No. 01-11-00202-CV.
                                                                court converted Saden's bankruptcy from a reorganization
Court of Appeals of Texas, First District, Houston.             proceeding under Chapter 11 to a liquidation proceeding
                                                                under Chapter 7, and it appointed a bankruptcy trustee. The
September 26, 2013                                              bankruptcy court granted Smith's motion for relief from the
                                                                automatic stay to continue the state court litigation. The
Page 451                                                        order stated:

[Copyrighted Material Omitted]                                  [It is] ORDERED that the automatic stay pursuant to 11
                                                                U.S.C. § 362 is modified to permit the continuation of the
Page 452                                                        State Court Lawsuit, specifically the automatic stay is
                                                                modified to allow the state court to enter judgment as to
[Copyrighted Material Omitted]                                  liability and to award damages on of Movant's claims
                                                                against the Debtor and the Debtor's claims against the
Page 453
                                                                Movants and allow the parties to prosecute any appeals of
                                                                the final judgment, provided, however, the automatic stay
     Matthew Luke Hoeg, Andrews & Kurth, LLP
                                                                shall not be modified to allow enforcement of such
Houston, TX, for Appellee.
                                                                judgment against the Debtor or pursue any right to
      Alan Brandt Daughtry, Houston, TX, for Appellant.         collection against the Debtor that may arise out of the State
                                                                Court Lawsuit....
    Panel consists of Justices JENNINGS, BLAND, and
MASSENGALE.                                                     (Footnote omitted.)

     OPINION                                                           The trial court then rendered judgment on the jury's
                                                                verdict. On Smith's breach of contract claim, the trial court
      MICHAEL MASSENGALE, Justice.                              awarded $941,907, plus prejudgment interest and attorney's
                                                                fees. For Smith's breach of fiduciary duty claim the trial
      Charles R. Saden and Brian Smith were the sole            court awarded an additional $393,000 in actual damages
shareholders of POS Card Processing, Inc. Saden appeals         (plus prejudgment interest), as well as $941,907 (plus
from a judgment against him for breach of contract and          prejudgment interest) in equitable disgorgement of the
breach of fiduciary duty arising from actions taken in          profits " found by the jury to have been obtained
connection with his management of the company. Smith
moved to dismiss this appeal for want of jurisdiction, while    Page 454
Saden raised four appellate issues, alleging: (1) Smith
lacked standing to recover damages for injuries to the           by [Saden] as a result of his acts of fraud, defalcation and
corporation; (2) the trial court erred by not requiring Smith   embezzlement while acting and serving in a fiduciary
to elect a remedy; (3) the trial court erred in rendering       capacity with respect to [Smith]." Saden filed a motion for
judgment for breach of fiduciary duty because Saden owed        new trial, a motion for judgment notwithstanding the
Smith no fiduciary duty individually; and (4) the trial court   verdict, and a motion to modify, correct, or reform the
erred in rendering judgment on claims not submitted to the      judgment. Saden's motions were overruled by operation of
jury.                                                           law, and he timely filed a notice of appeal.

     We conclude that we have jurisdiction over this                  Smith filed a motion to dismiss the appeal for lack of
appeal. We reverse the trial court's judgment to the extent     appellate jurisdiction, arguing that the bankruptcy trustee
that it permitted duplicative recovery of damages and           had exclusive standing to pursue an appeal of the adverse
judgment, and because the trustee did not file a notice of       dischargeability by the Trustee. The underlying judgment
appeal, this court lacks appellate jurisdiction. In response,    against Mozer, even if final, is not prima facie
Saden pointed out that the bankruptcy court allowed the          non-dischargeable. Mozer has represented to this Court
appeal to proceed by its order that modified the automatic       that " additional facts would need to be established and that
stay to allow the trial court to enter judgment and              the debt would not be non-dischargeable even if the state
authorized " the parties to prosecute any appeals of the final   court judgement were to become final. " (Appellants'
judgment." Saden also noted that the bankruptcy court, in        Opposition to Shorten Briefing Schedule and Waive Oral
the course of declining to discharge the debt, has rejected      Argument, p. 2).
Smith's argument in a " Judgment of Non-Dischargeability,"
which provided:                                                  Page 455

For the reasons set forth on the record of February 10, 2011,     To be sure, sale of the Defensive Appellate Rights may be
Charles R. Saden's liability under the judgment of the 270th     unhelpful to her in defeating a non-dischargeability claim,
Judicial District Court of Harris County, Texas in Cause         but she is in no worse position than if she were permitted to
2009-00593 is excepted from discharge pursuant to 11             pursue the state court appeal and lost.
U.S.C. § 523.
                                                                 Id. (emphasis added).
If the state court's judgment is reversed or modified on
appeal, this Court will reconsider this judgment pursuant to     In this case, the opposite is alleged and the Court has
Rule 9024 of the Federal Rules of Bankruptcy Procedure.          already determined that the state court judgment bars
                                                                 further litigation over whether the claim is excepted from
      Finally, Saden argues that he has standing because a       discharge. Accordingly, to the extent that the automatic stay
state-court judgment cannot be collaterally attacked in the      bars Saden from pursuing his appeal for the purposes of
bankruptcy court, and the bankruptcy court in this case          challenging findings that adversely affect his discharge, the
relied on the state-court judgment against him, which            stay is modified.
recited the trial court's findings that he committed acts of
fraud, defalcation, and embezzlement, in holding that the $3     By modifying the stay, this Court expresses no view on
million judgment underlying this appeal is not                   whether the First Court of Appeals has jurisdiction over
dischargeable in bankruptcy. He argues that a conclusion         Saden's appeal.
that the Bankruptcy Code's automatic stay terminates his
                                                                          Subject-matter jurisdiction is essential to the
standing to challenge the otherwise unreviewable
                                                                 authority of a court to decide a case and is never presumed.
state-court judgment that is the basis of the
                                                                 Tex. Ass'n of Bus. v. Tex. Air Control Bd., 852 S.W.2d 440,
nondischargeability holding is " circular reasoning and
                                                                 443-44 (Tex.1993); see also Bland Indep. Sch. Dist. v. Blue,
would be a denial of constitutional rights of due process and
                                                                 34 S.W.3d 547, 553-54 (Tex.2000). Standing is a necessary
due course of law."
                                                                 component of subject-matter jurisdiction and cannot be
      Meanwhile, after Smith filed his motion to dismiss in      waived. Blue, 34 S.W.3d at 553-54. If a party lacks
this court, Saden filed in the bankruptcy court an               standing, the trial court does not have jurisdiction to hear
emergency motion to confirm his authority to appeal the          the case. Id. A party has standing only when he raises " an
state-court judgment. The bankruptcy court issued an order       actual, not merely a hypothetical or generalized grievance."
which provided:                                                  Brown v. Todd, 53 S.W.3d 297, 302 (Tex.2001); see also
                                                                 Texas Ass'n of Bus., 852 S.W.2d at 443 (explaining that
The Court cannot, should not and will not determine              concept of standing arises from separation of powers and
whether the First Court of Appeals has jurisdiction over         constitutional prohibition on the issuance of advisory
Saden's notice of appeal. That is a matter left solely to the    opinions).
Texas courts.
                                                                         The filing of a voluntary petition for bankruptcy
The principal case cited by Brian Smith in opposition to the     impacts the issues of standing and jurisdiction due to the
Debtor's motion is In re Mozer, 302 B.R. 892                     creation of the bankruptcy estate and the automatic stay.
(C.D.Cal.2003). Mozer indeed deals with a similar situation      When a debtor voluntarily files a petition for bankruptcy, an
as the present one-but with a major distinction. The state       " estate" is created, comprised of " all legal or equitable
court findings in Mozer were insufficient to establish an        interests of the debtor in property as of the commencement
exception to discharge:                                          of the case." 11 U.S.C. § 541 (2012). This includes causes
                                                                 of action or legal claims that belonged to the debtor before
However, sale of the Defensive Appellate Rights by her           the petition was filed. Douglas v. Delp, 987 S.W.2d 879,
Trustee is not literally nor is it tantamount to a waiver of     882 (Tex.1999); Hous. Pipeline Co. LP v. Bank of Am.,
N.A., 213 S.W.3d 418, 424-25 (Tex.App.-Houston [1st              necessary to preserve issues for appellate review under our
Dist.] 2006, no pet.); Kane v. Nat'l Union Fire Ins. Co., 535    procedural rules. See, e.g., TEX.R. CIV. P. 324(b). Saden's
F.3d 380, 385 (5th Cir.2008).                                    timely filed post-judgment motions extended the timeline
                                                                 for filing his notice of appeal, which was also timely filed.
      The filing of a bankruptcy petition further operates as    See TEX.R.APP. P. 26.1(a). Saden's timely filing of a
a stay of the " continuation ... of a judicial ... action or     notice of appeal invoked this court's jurisdiction. See
proceeding against the debtor that was ... commenced             TEX.R.APP. P. 25.1(b).
before the commencement of the [bankruptcy] case." 11
U.S.C. § 362(a)(1). " The automatic stay deprives state               We hold that Saden has standing, and we otherwise
courts of jurisdiction over the debtor and his property until    have jurisdiction over this appeal. Accordingly, we deny
the stay is lifted or modified." Hous. Pipeline Co., 213         Smith's motion to dismiss the appeal.
S.W.3d at 428-29 (internal quotations omitted). Thus a
judgment rendered in derogation of the automatic                      II. Saden's appeal on the merits
bankruptcy stay is void. York v. State, 373 S.W.3d 32,
38-40 (Tex.2012) (approving holding in Cont'l Casing                   Appellee Brian Smith is the owner of Cash Register
Corp. v. Samedan Oil Corp., 751 S.W.2d 499, 501                  Sales and Service of Houston, Inc., which does business as
(Tex.1988)).                                                     CRS, Texas. The company was founded by Smith's father
                                                                 more than 30 years ago to sell cash registers, and in more
       Smith moved to dismiss the appeal for want of             recent years it sold " point of sale systems" commonly used
jurisdiction based on Saden's alleged lack of standing to        in restaurants. Appellant Charles Saden worked as a
initiate an appeal after his bankruptcy filing, which vested     salesman for a company in the business of processing credit
exclusive standing in the trustee. In response, Saden argues     card payments. Saden called on CRS, Texas to solicit leads
that he has standing because of the bankruptcy court's           or referrals for customers in 1999, which is when he first
non-dischargeability determination and because of the order      met Smith. From 1999 to 2001, Saden and Smith worked
that modified the automatic bankruptcy stay. Thus, in            together on such deals, but in 2001 Saden resigned from his
determining our jurisdiction, we must ascertain whether (1)      job and approached Smith about forming a new credit card
Saden has standing to appeal the state-court judgment and        processing company.
(2) the assumption of jurisdiction would violate the
automatic stay.                                                        Smith agreed and contributed $10,000 to enable the
                                                                 newly formed company to pay for an affiliation with
Page 456                                                         National Processing, which would allow the company to
                                                                 enter the credit card processing market. Smith testified that
        While discharge in bankruptcy under Chapter 7            he did not mind being the only one to contribute money
extinguishes a debtor's personal liability for a debt, see       because he knew that Saden was unemployed.
Johnson v. Home State Bank, 501 U.S. 78, 82-83, 111 S. Ct.
2150, 115 L. Ed. 2d 66 (1991), a " debtor remains personally              Smith testified that they agreed that Saden would run
responsible for any debt not discharged in bankruptcy." In       the business. " His position would be the president and
re Cousins, 209 F.3d 38, 40 (1st Cir.2000). Here, the            everything from top to bottom. Obviously, if it's just Chuck
bankruptcy court's judgment ofQRQ        GLVFKD UJHDELOL
                                                         W\²     and I, I was president of CRS, Texas, and that was my
applying bankruptcy law to the state-courtM       XGJPH QW²     full-time job so Chuck's responsibility would be to run the
means that despite his bankruptcy filing Saden continues to      company and to make it grow." Smith said, " I was to be a
retain a pecuniary interest in the outcome of this case. He is   silent partner, I was not involved in working there
personally, actually aggrieved by the trial court's judgment,    day-to-day." But he also said that he brought expertise and
which affects the scope of the discharge of his liabilities in   experience in the point-of-sale business to the venture. In
bankruptcy. See Brown, 53 S.W.3d at 302. Accordingly we          particular, Smith's point-of-sale customers needed card
conclude that Saden maintains standing to maintain this          processing services, so he brought the potential to generate
appeal despite the pending bankruptcy proceeding.                business by referring customers to the new company. Smith
                                                                 said that Saden was bringing " [h]is experience and
      We also have subject-matter jurisdiction to decide the     knowledge in the credit and processing
appeal in light of the bankruptcy court's modification to the
automatic stay of bankruptcy to permit the parties to            Page 457
prosecute any appeals of the final judgment. Thus, our
assumption of jurisdiction in this case does not violate the      business. This is what he was experienced in so he was
stay. See Hous. Pipeline Co., 213 S.W.3d at 428-29; see          going to facilitate in helping to grow the POS Card
also York, 373 S.W.3d at 38-40. This modification                Processing business."
necessarily authorized the filing of postjudgment motions
                                                                      In 2001, Saden and Smith formed and became
co-owners in POS Card Processing, Inc. POS sold terminals        agreements together, not acting independently or separately
for card processing and facilitated processing agreements        from each other." However Saden repeatedly testified that
between merchants and banks. It generated revenue by             the parties varied their initial agreement by later verbal
receiving a fraction of the fees that the bank charged on        agreements, and that they did not operate the business in
each card transaction. POS initially received its share of the   accordance with the articles of incorporation and bylaws.
fees by check and later by direct deposit into a bank            He said, " Everything about this case is all about verbal
account.                                                         agreements...."

     Saden and Smith each owned a 50% share of POS,                      For example, Saden testified that he and Smith had a
and both were directors of the company. Smith testified:         verbal agreement that in the first year of POS's existence,
                                                                 Saden was entitled to all of the profits from the sale of card
From the onset it was a 50/50 deal. We were to be paid           processing terminals. But Smith testified that he never had a
equally, the board, me and him, it required us both to agree.    conversation with Saden about his keeping the equipment
                                                                 sales revenue for himself. Both Saden and his adult
....                                                             daughter, Charlyn, received salaries from POS. Saden
                                                                 testified that the board of directors " verbally agreed" to pay
I was half owner of the company, and the agreement was
                                                                 the salaries. But Smith
we would share equally in the revenues that POS Card
Processing generated.                                            Page 458
....                                                              said they only discussed Charlyn working on commission,
                                                                 not for a salary. Smith testified that he first learned during
We would be paid equally, we were 50 percent owners.
                                                                 the course of litigation that POS had been paying Saden and
       Saden was appointed president of POS and chairman         Charlyn salaries, which Smith called " exorbitant." Saden
of the board of directors, and Smith was appointed as            testified that Smith verbally agreed that POS would pay
secretary and treasurer. They agreed in writing that " until     Saden's expenses for attending a trade show. But Smith said
further action of the Directors, no Director of the              that he did not agree to that and that he expected Saden to
Corporation shall receive a salary in such capacity" and that    pay his own expenses to attend the show, just as he did.
the directors and officers were authorized to hire and
                                                                       POS had a bank account with Klein Bank, which later
supervise employees and independent contractors to
                                                                 became Amegy Bank. Initially, POS received its share of
accomplish the goals of the business. However, Smith
                                                                 card processing fees by direct deposit into this bank
testified that he understood that they would hire only
                                                                 account. While Smith testified that from 2001 to September
independent contractors. And the bylaws included the
                                                                 2008, CRS, Texas exclusively referred its customers to POS
following provision:
                                                                 for services, Saden testified that he had grown frustrated by
                                                                 Smith's lack of interest and participation in the business.
3.01 Powers.
                                                                 Saden testified that CRS, Texas was not referring business
The Directors shall act only as a board and an individual        and, therefore, he was generating the business on his own.
Director shall have no power as such. All corporate powers       So Saden began doing business separately as " Precision
of the corporation shall be exercised by or under the            Payment Company," engaging in exactly the same line of
authority of the Board of Directors and the business and         business as POS. Saden created a bank account at Klein
affairs of the corporation shall be controlled by the Board of   Bank in his own name for this purpose.
Directors subject to such limitations as are imposed by law,
the articles of incorporation or these Bylaws regarding                From that point on, Saden engaged in a course of
actions to be authorized or approved by the shareholders.        action that caused revenue from existing and new POS
The Board of Directors may by contract or otherwise give         clients to be deposited in his personal bank account at Klein
general, limited or special power and authority to agents of     Bank. At trial, Saden did not deny that he had engaged in
the corporation to transact any special business requiring       such actions. He conceded he created fraudulent checks
such authorization.                                              bearing the POS name and his personal checking account
                                                                 number. And he conceded that he diverted money that
      Saden agreed that, as directors, neither he nor Smith      should have gone to POS's bank account into his own
could unilaterally enter into a management contract. Rather,     account, falsified the POS records so it would appear that
the articles of incorporation, bylaws, and minutes of annual     lesser amounts were being deposited into the POS account
meetings indicated that they had to take such actions            from bank agents who processed the credit card
together as board of directors. Smith testified that the         transactions, and failed to inform Smith of or lied to him
arrangement required them " to discuss and ... to come to        about the amount of money that POS was earning. Saden
did not distribute POS revenue equally. For example, Saden         personal account. Smith also first learned in litigation that
testified that in 2002 he paid himself $63,000 and paid            Saden sold two separate POS account portfolios for far
Smith only $10,000.                                                more than he deposited into POS accounts or told Smith
                                                                   (one for $92,000 and the other for $286,000, but in each
      Saden said that, despite his conduct, Smith earned           case the amount actually received by POS was
more money than he would have under prior business                 approximately $53,000 to $54,000).
arrangements. He blamed Smith for not being aware of his
wrongful conduct. At trial, Saden was questioned about his               Around July 2008, after Smith had sought but not
" skimming off the top" of the POS accounts:                       received additional information about the management and
                                                                   finances of the business, he and Saden, who was also
Q. Did you think that's something that your business partner       unhappy with the arrangement, discussed ending the
would want to know?                                                business. They met again in September 2008, and Smith
                                                                   asked for an accounting. Saden provided some information,
A. If he wanted to participate and get to know things he           but he did not give Smith " source information" that would
could have spent a lot more time involved in the operation,        have shown which processor deposited which amounts at
including referring like kind businesses.                          which times. Smith said, " I think his attitude was like this
                                                                   is all you're going to get. I knew we weren't getting too
Q. So, your position is then hey, if he had gotten more
                                                                   terribly far with that information. I left with maybe ten
involved he would have caught this theft but shame on him
                                                                   pages of printout and that was it."
for not getting more involved?
                                                                         Smith ultimately sued Saden for, among other things,
A. He was secretary-treasurer and he certainly didn't have
                                                                   breach of contract and breach of fiduciary duty. Smith
an idea of what was going on in the corporation.
                                                                   alleged that he was bringing his claims both in his personal
....                                                               capacity and in a derivative capacity as a shareholder of
                                                                   POS. He alleged that Saden breached a fiduciary duty owed
Q. You're not telling the ladies and gentlemen of the jury         to him personally because POS was operated as a
that you told Mr. Smith you were skimming this money off           partnership, the articles of organization and by-laws of POS
the top, are you?                                                  vested control of the company in Saden and gave rise to a
                                                                   contractual fiduciary duty, and the circumstances
A. I didn't tell Mr. Smith I was skimming off of the account.      surrounding the creation and operation of POS gave rise to
                                                                   a confidential relationship between Saden and Smith. As to
Q. You didn't tell him, hey I'm getting 100 percent over           his personal breach of contract claim, Smith alleged that
here and I'm going to give 60 percent of that to POS, did          Saden breached his " contractual obligations, and Smith's
you?                                                               contractual rights, under the several agreements signed by
                                                                   the parties; including without limitation, the articles of
A. I can't remember that conversation.                             organization and the by-laws of POS."

 Q. Right. But so you would then decide, to use my                        The case was tried to a jury. At trial, both Saden and
example, if you got 50 or 60 in one particular month you           Smith testified, among other things, about their history of
would then write a check over to                                   working together, the formation and operation of POS, and
                                                                   their agreement as to sharing revenue. Smith also presented
Page 459
                                                                   the testimony of Bill Shields, an accountant who analyzed
                                                                   POS and Precision accounting records, including balance
 POS, put it in their bank account and say 25. Right?
                                                                   sheets, profit and loss statements, general ledgers, and tax
A. They got what they deserved.                                    records. The accounting spreadsheets that formed the basis
                                                                   for his testimony were admitted into evidence. Based on
       Smith testified that he " relied totally" on Saden with     information he received from Smith, Shields assumed that
respect to his expectations of revenue and growth of POS.          the parties' agreement required an equal division of
Early on, he did not review the company's books. He                revenues, and his analysis did not credit Saden for expenses
received monthly checks for what he believed was his               which were disputed by Smith. Shields testified that
portion of the revenue, but he discovered during the course        between 2002 and 2008, POS had actual revenue of $3.77
of litigation that Saden never followed the parties'               million, and in addition to that, $2.41 million was diverted
agreement that both directors would be paid equally. He            from POS to Precision. Shields explained his calculations
testified that he first learned during the litigation of many of   and the spreadsheets that were admitted into evidence at
Saden's actions, including his creation of Precision Payment       trial. He calculated the amount of money which in his
Company and that he had deposited POS money in his                 opinion was due to Smith, based on sharing the revenues
but not the disputed expenses, and including revenue           Answer in dollars and cents if any.
diverted to other entities that
                                                                    Saden objected to Question No. 1 on the grounds that
Page 460                                                       there was no evidence of reasonable and necessary
                                                               expenses and there was no definition of reasonable and
 should have accrued to POS. Based on his calculations,        necessary expenses. The trial court overruled both
Shields testified that Saden owed Smith $941,907. Shields      objections. Neither party objected to questions 2 or 4.
also testified that $941,907 " represents the excess portion
of the income that was either received by or directed to the          The relevant breach of fiduciary duty questions asked:
benefit of Saden." He said that $941,907 was " solely" what
Smith was entitled to receive.                                 QUESTION NO. 8

      Shields also testified about the expenses charged to     Did Charles Saden comply with his fiduciary duties to
POS. Although POS had gross income of $3.77 million, it        Brian Smith?
turned a total profit of only approximately $4,000 over the
relevant years. He explained that the money Saden had paid     Because a relationship of trust and confidence existed
to himself and family members, including personal living       between them, Charles Saden owed Brian Smith a fiduciary
expenses, accounted for the entire difference between the      duty. To prove he complied with his duty, Charles Saden
company's revenue and its profit.                              must show:

      Two causes of action against6D      GHQ² breach of      a. The transactions in question were fair and equitable to
contract and breach of fiduciary  GXW\² were submitted to     Brian Smith;
the jury. The breach of contract questions asked:
                                                               b. Charles Saden made reasonable use of the confidence
QUESTION NO. 1                                                 that Brian Smith placed in him;

Did Brian Smith and Charles Saden agree to equally split       c. Charles Saden acted in the utmost good faith and
the revenues, less reasonable and necessary expenses,          exercised the most scrupulous honesty toward Brian Smith;
derived from the business agreed to be conducted by POS?
                                                                d. Charles Saden placed the interests of Brian Smith before
In deciding whether the parties reached an agreement, you      his own, did not use the advantage of his position to gain
may consider what they said and did in light of the            any benefit for himself at the expense of Brian
surrounding circumstances, including any earlier course of
                                                               Page 461
dealing. You may not consider the parties' unexpressed
thoughts or intentions.                                         Smith, and did not place himself in any position where his
                                                               self-interest might conflict with his obligations as a
If your answer to Question No. 1 is " Yes," then answer the
                                                               fiduciary; and
following question. Otherwise, do not answer the following
question.                                                      e. Charles Saden fully and fairly disclosed all important
                                                               information to Brian Smith concerning the transactions.
QUESTION NO. 2
                                                               ....
Did Charles Saden fail to comply with the agreement?
                                                               If your answer to Question No. 8 is " No," then answer the
....
                                                               following question. Otherwise do not answer the following
QUESTION NO. 4                                                 question.

What sum of money, if any, if paid now in cash, would          QUESTION NO. 10
fairly and reasonably compensate Brian Smith for his
                                                               What sum of money, if any, if paid now in cash, would
damages, if any, that resulted from Charles Saden's failure
                                                               fairly and reasonably compensate Brian Smith for his
to comply with the agreement?
                                                               damages, if any, that were proximately caused by Charles
Lost profits that are a natural, probable, and foreseeable     Saden's failure to comply with his fiduciary duties to Brian
consequence of Chuck Saden's failure to comply with the        Smith?
agreement.
                                                               " Proximate cause" has two parts:
1. A proximate cause is a substantial factor that in a natural     Page 462
and continuous sequence brings about an event and without
which the event would not have occurred; and                        Defense counsel: And we would like to submit our
                                                                   proposed Question No.   ² actually, 8 should have been
2. A proximate cause is foreseeable. " Foreseeable" means          with regard to my last question. I apologize, Your Honor.
that a person using ordinary care would have reasonably
anticipated that his acts or failure to act would have caused      Court: Well, whatever.
the event or some similar event.
                                                                   Defense counsel: I'm guessing the last one should have been
There may be more than one proximate cause of an event.            with regard to this. And, I'll go ahead and on the same basis
                                                                   we object to Question No. 9, 10, 11, 12 again on the basis
Consider the following elements of damages, if any, and            there is no evidence of written formal fiduciary duty or
none other. You shall not award any sum of money on any            UHODWL
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element if you have otherwise, under some other element,
awarded a sum of money for the same loss. That is, do not          Court: Overruled, overruled, overruled, overruled.
compensate for the same loss twice, if any.
                                                                         The jury found that Smith and Saden had an
Lost profits that are a natural, probable, and foreseeable         agreement, which only Saden had breached. It also found
consequence of Chuck Saden's failure to comply with his            that Saden did not comply with his fiduciary duties. The
fiduciary duties to Brian Smith.                                   jury awarded damages in the following amounts: (1)
                                                                   $941,907 for breach of contract, (2) $393,093 for breach of
....                                                               fiduciary duty, and (3) $941,907 for Saden's profit from the
                                                                   conduct found to be a breach of his fiduciary duties. Smith
If your answer to Question No. 8 is " No," then answer the         moved for entry of judgment on the verdict, for a turnover,
following question. Otherwise, do not answer the following         and for permanent injunctive relief.
question.
                                                                         The trial court rendered judgment for (1) $941,907 for
QUESTION NO. 11                                                    breach of contract, plus attorney's fees of $465,173.27 (and
                                                                   contingent appellate attorney's fees in the aggregate amount
What was the amount of Charles Saden's profit from the             of $125,000) and prejudgment interest in the amount of
conduct, if any, that you have found to be a breach of             $91,255.35; (2) $393,093 for breach of fiduciary duty, plus
Charles Saden's fiduciary duties to Brian Smith?                   prejudgment interest in the amount of $38,090.24; and (3)
                                                                   $941,907 for equitable disgorgement of profits " found by
      Smith objected to the omission of separate questions
                                                                   the jury to have been obtained by [Saden] as a result of his
pertaining to his derivative claims for breach of fiduciary
                                                                   acts of fraud, defalcation and embezzlement while acting
duty, and he requested their inclusion. The trial court denied
                                                                   and serving in a fiduciary capacity with respect to [Smith],"
these requests. Saden made the following objections to
                                                                   plus prejudgment interest in the amount of $91,255.35. The
questions 8, 10, and 11:
                                                                   judgment also characterized the assets in possession of the
Defense counsel: Defendants also object to Question No. 8          receiver as having been " received or obtained as a result of
in the jury charge. The  H[LV W
                               HQF H
                                   ² first of all, defendants      Defendant, Charles R. Saden's acts of fraud, defalcation and
object to the inclusion of an informal fiduciary duty because      embezzlement while acting and serving in a fiduciary
there is no evidence of a confidential relationship that           capacity to Plaintiff, Brian Smith."
predates the POS transaction and for that reason we don't
                                                                         Saden raises four issues on appeal. In his first issue,
believe there should be an informal fiduciary duty question.
                                                                   Saden argues that Smith, in his individual capacity, lacked
Court: Overruled.                                                  standing to pursue the claims pleaded against Saden for
                                                                   damages related to POS. Second, Saden contends that Smith
Defense counsel: To the extent that it is included we do           should have been required to elect a remedy instead of
require-we object to the extent there is no language to            recovering duplicative damages for lost profits. Third,
support or there isn't a definition given to [the] jury that the   Saden challenges Smith's recovery for breach of fiduciary
relationship must have existed prior to and separate from          duty because no question on the existence of a duty was
the transaction giving rise to the alleged breach of fiduciary     submitted to the jury and because there was no preexisting
duty.                                                              special relationship sufficient to support a finding of an
                                                                   informal fiduciary duty. Finally, in his fourth issue Saden
Court: Overruled.                                                  asks this court to reform the judgment to eliminate language
                                                                   not supported by any jury finding, specifically the
judgment's reference       to    fraud,   defalcation,    and    circumstances of the relationship between Saden and Smith
embezzlement.                                                    prior to the formation of POS.

     A. Smith's standing                                               At the charge conference, Smith sought to include
                                                                 jury questions on his derivative claims and the court refused
       Smith's original petition included causes of action for   his requests. Saden does not challenge Smith's standing to
breach of contract and breach of fiduciary duty. Saden           bring a derivative claim, and the only apparent basis for the
challenges Smith's standing as a 50% shareholder of POS to       trial court's failure to separately submit questions on the
individually recover the company's lost profits pursuant to      derivative claims stems from the fact that POS was a
those claims. As noted above, standing is a component of         closely held corporation. See TEX. BUS. ORGS.CODE
subject matter jurisdiction, it cannot be waived, and it is      ANN. § 21.563(a) (West 2012). If justice requires, a court
never presumed. See Tex. Ass'n of Bus., 852 S.W.2d at            may treat a derivative proceeding brought by a shareholder
443-44; Blue, 34 S.W.3d at 553-54. Smith had standing to         of a closely held corporation as if it were a direct action
assert the causes of action submitted to the jury if he raised   brought by the shareholder for the shareholder's own
" an actual, not merely a hypothetical or generalized            benefit. Id. § 21.563(c)(1). Smith met these criteria and
grievance." Brown, 53 S.W.3d at 302.                             therefore the trial court was authorized to act as it did,
                                                                 treating his derivative claim as a direct claim.
      Saden relies on Wingate v. Hajdik, 795 S.W.2d 717
(Tex.1990), for the proposition that Smith cannot recover             We hold that Smith had standing to assert his claims,
personally                                                       whether individually or derivatively, and we overrule
                                                                 Saden's first issue.
Page 463
                                                                      B. Breach of fiduciary duty
 for damages incurred by a corporation of which he is a
shareholder. In that case, the Supreme Court of Texas held             Saden argues that Smith cannot recover for breach of
that " [a] corporate stockholder cannot recover damages          fiduciary duty because any duty was owed to the
personally for a wrong done solely to the corporation, even      corporation, no duty question was submitted to the jury, and
though he may be injured by that wrong." Wingate, 795            there was no pre-existing special relationship to support an
S.W.2d at 719. A shareholder may nevertheless recover            informal fiduciary duty.
damages " for wrongs done to him individually" when he
pleads and proves that the defendant has violated a duty that           We again note the special circumstances applicable to
he owed the shareholder, which arises from contract or           a closely held corporation. Smith pleaded his claims both in
otherwise. Id.                                                   his individual capacity and also derivatively on behalf of
                                                                 the closely held corporation. The evidence conclusively
      Saden filed special exceptions arguing that " the          established that POS was a closely held corporation and that
essence of Smith's allegations is to vindicate for wrongs        Smith was one of its two 50% shareholders. Accordingly,
allegedly done to POS, as opposed to wrongs directed at          the trial court was authorized to treat the derivative claims
Smith individually." The trial court denied the special          as individual claims. See id. Moreover, " a recovery in a
exceptions, and Smith later amended his petition,                direct or derivative proceeding by a shareholder may be
specifically pleading that he was alleging various causes of     paid directly to the plaintiff or to the corporation if
DF W
   LRQ² including breach of contract and breach of               necessary to protect the interests of creditors or other
fiduciary GXW\² as both individual and derivative claims.       shareholders of the corporation."
Specifically, Smith alleged a claim for a personal breach of
contract based on " contractual obligations, and Smith's         Page 464
contractual rights, under the several agreements signed by
the parties; including without limitation, the articles of       Id. § 21.563(c)(2); Swank v. Cunningham, 258 S.W.3d 647,
organization and the by-laws of POS." Smith also alleged         665 (Tex.App.-Eastland 2008, pet. denied). Saden devotes
that Saden breached a fiduciary duty owed to him                 his briefing on this issue to the lack of jury findings that a
personally because of the circumstances surrounding the          relationship of trust and confidence existed between Saden
creation and operation of POS which allegedly created a          and Smith before the formation of POS. In his brief, Saden
confidential relationship between them.                          argues about Smith's failure to secure jury findings that
                                                                 there was " a pre-existing special or fiduciary relationship."
     At trial, there was evidence that Smith and 
                                                 6DGH
                                                    Q²           He notes that the trial court denied his motion for directed
the sole directors, officers, and shareholders of the            verdict, in which he argued, " The evidence has shown they
FRUSRUDWL
        RQ² agreed to split the revenues from POS                had no relationship whatsoever before they met with regard
equally. There was also evidence of the factual                  to the POS venture." He also notes his objection to jury
question no. 8 on the basis that there was no evidence of " a     ground that evidence had been presented sufficient to
confidential relationship that predates the POS transaction."     disprove that the individuals were shareholders of the
                                                                  subject company, and the individuals failed to come
        Question No. 8 presupposed the existence of a             forward with evidence to raise a fact issue as to whether
fiduciary duty, and asked, " Did Charles Saden comply with        they owned stock
his fiduciary duties to Brian Smith?" There is no question
that as an officer of POS, Saden owed a fiduciary duty to         Page 465
the corporation as a matter of law. See, e.g., Int'l Bankers
Life Ins. Co. v. Holloway, 368 S.W.2d 567, 576 (Tex.1963).          in the company. Swank, 258 S.W.3d at 662-64. In an
Because POS was a close corporation and Smith was one of          alternative holding, the court suggested that even if the
its shareholders, the trial court was authorized to allow         individual claimants had been shareholders, the trial court
Smith to pursue his derivative claim on behalf of POS as if       acted within its discretion by declining to allow them to
it were his own. See TEX. BUS. ORGS.CODE ANN. §                   pursue derivative claims in their individual capacities and
21.563(c)(1) & (2). Smith does not contest that sufficient        for their own benefit because they only claimed to own
evidence supports the jury's answer to Question No. 8             40% of the company and the record reflected " substantial
regarding breach. Because Smith owed a fiduciary duty as a        and longstanding disputes" between them and the majority
matter of law, the trial court did not err in submitting this     shareholder, which would have required that any recovery
claim to the jury. The jury's finding of a breach of fiduciary    for the company would have to be paid to the company to
duty was supported by the evidence.                               protect the majority shareholder's interest. Id. at 664-66.
                                                                  The factual circumstances of Smith's pursuit of derivative
      In an attempt to avoid the application of section           claims on behalf of POS do not share the characteristics that
21.563(c), Saden primarily relies upon Guerra v. Guerra,          led the Swank court to observe, in dicta, that the trial judge
No. 04-10-00271-CV, 2011 WL 3715051 (Tex.App.-San                 would have acted in his discretion to refuse to authorize
Antonio Aug. 24, 2011, no pet.) (mem. op.), for the               individual shareholders to pursue derivative claims. See
proposition that Smith cannot use the provision to obtain an      TEX. BUS. ORGS.CODE ANN. § 21.563(c)(1).
individual recovery. In Guerra, a minority shareholder in a
family business asserted claims " on her own behalf ...                 Because Saden and Smith are the only shareholders of
based solely on her individual damages, not on any damage         POS, the injury suffered by the corporation is the injury
to the corporation." 2011 WL 3715051, at *5. In that              suffered by Smith as 50% shareholder to the extent it inured
circumstance, the court of appeals held that although             to the other 50% shareholder's benefit. Considering that
section 5.14 of the Business Corporation Act (the                 Smith was the only shareholder injured by Saden's wrongful
predecessor to section 21.563) allowed a derivative claim to      conduct (while Saden himself, as the only other
be " treated by a court as a direct action brought by the         shareholder, benefited from it), the recovery could be paid
shareholder for the shareholder's own benefit," the               to Smith directly to protect his interests.
provision nevertheless " does not allow a shareholder an
individual claim." Guerra, 2011 WL 3715051, at *5. That                 We therefore overrule the challenge to the liability
reasoning does not apply to this case, in which Smith             finding on the claim for breach of fiduciary duty.
actually has alleged and demonstrated injury to the
                                                                       C. Election of remedies
corporation, POS.
                                                                         Saden argues that the trial court erred in awarding
      The other two cases referenced by Saden in this
                                                                  Smith duplicative damages and that Smith was required to
regard are also distinguishable. In 2055 Inc. v. McTague,
                                                                  elect a remedy. Specifically Saden objects to the cumulative
No. 05-08-01057-CV, 2009 WL 2506342 (Tex.App.-Dallas
                                                                  award of three separate measures of profits as actual
Aug. 18, 2009, no pet.), the defendants attempted to use a
                                                                  damages for breach of contract, actual damages for breach
release signed by an individual to bar that individual's
                                                                  of fiduciary duty, and for equitable disgorgement as a
derivative claim asserted on behalf of a corporation of
                                                                  further remedy for breach of fiduciary duty. Saden raised
which she was a shareholder. The court of appeals declined
                                                                  this issue in a post-trial motion to modify, correct, or reform
to apply article 5.14 to treat the corporation's claims as ones
                                                                  the judgment, which the trial court denied. In this context,
" in reality" filed by the individual shareholder subject to a
                                                                  we review the trial court's judgment for abuse of discretion.
contractualU  H OH
                  DVH² a completely inapposite scenario.
                                                                  See Beaumont Bank, N.A. v. Buller, 806 S.W.2d 223, 226
2055 Inc., 2009 WL 2506342, at *8.
                                                                  (Tex.1991); Wagner v. Edlund, 229 S.W.3d 870, 879
        In Swank v. Cunningham, 258 S.W.3d 647                    (Tex.App.-Dallas 2007, pet. denied). A trial court abuses its
(Tex.App.-Eastland 2008, pet. denied), the court affirmed a       discretion if it acts without reference to guiding rules and
summary judgment against two individuals who purported            principles, or if it fails to follow such guiding rules and
to assert derivative claims on behalf of a corporation on the     principles. Columbia Rio Grande Healthcare, L.P. v.
Hawley, 284 S.W.3d 851, 856 (Tex.2009); Downer v.                 S.W.3d 150, 157 (Tex.2012) (" a business owner's
Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42                conclusory or speculative testimony of lost profits will not
(Tex.1985). " Another way of stating the test is whether the      support a judgment" ).
act was arbitrary or unreasonable." Downer, 701 S.W.2d at
242.                                                                     At trial, Smith testified about various acts of
                                                                  self-dealing that Saden committed, such as selling POS
       " A party is generally entitled to sue and to seek         accounts and keeping some of the money for himself in the
damages on alternative theories." Waite Hill Servs., Inc. v.      Precision account. There were many questions about the
World Class Metal Works, Inc., 959 S.W.2d 182, 184                sums of money generated as a result of POS business and
(Tex.1998); see also Madison v. Williamson, 241 S.W.3d            whether the money was deposited in the POS account or a
145, 158 (Tex.App.-Houston [1st Dist.] 2007, pet. denied).        Precision account, whether the money was split evenly, and
" If a plaintiff pleads alternate theories of liability, a        whether Saden used the money for his personal use. There
judgment awarding damages on each alternate theory may            were also questions about expenses and what or whether
be upheld if the theories depend on separate and distinct         POS expenses were paid by money kept in the Precision
injuries and if separate and distinct damages findings are        account. And Smith was asked about the nature of the
made as to each theory." Madison, 241 S.W.3d at 158               injury that he suffered as a result of the actions alleged in
(citing Birchfield v. Texarkana Mem'l Hosp., 747 S.W.2d           this lawsuit. Smith said, " I as a shareholder, owner of POS
361, 367 (Tex.1987)). A corollary to this principle is the        Card Processing was deprived of any income that I should
one-satisfaction rule: for one injury there can only be one       have received out of the profits that were earned by POS
recovery. See, e.g., Tony Gullo Motors I, L.P. v. Chapa, 212      Card Processing, so the company was damaged, and I was
S.W.3d 299, 303 (Tex.2006); see also Crown Life Ins. Co.          damaged." Smith testified that " the reduction of the value
v. Casteel, 22 S.W.3d 378, 390 (Tex.2000); Stewart Title          to POS" was " was the primary reason" he was " damaged
Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex.1991). When a         individually."
defendant's
                                                                         To prove his damages at trial, Smith presented the
Page 466                                                          testimony of Bill Shields, an accountant who analyzed the
                                                                  records of POS and Precision. Shields relied on certain
 acts result in a single injury, and the jury returns favorable   assumptions in determining the amount of money Saden
findings on more than one theory of liability, the plaintiff is   owed Smith. Basing his analysis on Smith's version of
entitled to judgment on the theory affording him the              events, he assumed that the men agreed to share the
greatest relief. See Birchfield, 747 S.W.2d at 367; Madison,      company's revenue equally but did not agree to all of the
241 S.W.3d at 158-59.                                             expenses incurred by Saden and charged to POS. Thus,
                                                                  Shields did not consider as reasonable and necessary
       In order to answer the question of whether an election     business expenses the money that Saden spent on salaries
of remedies was required in this case, it is therefore            for him and his relatives or the expenses that otherwise
necessary to carefully review the record to determine             personally benefited Saden (such as traveling and meals).
whether the claimant supported alternate theories of liability    Shields included as part of the revenue that should have
with evidence indicating separate and distinct injuries           accrued to POS under the agreement $2.41 million that was
resulting in separate and distinct damages. In this case, the     diverted from POS to Precision. He testified that based on
jury was asked to quantify " profits" in three different          his analysis, Saden owed Smith " solely" $941,907,
questions: in question no. 4 (breach of contract lost-profits     explaining that this amount " represents the excess portion
damages), in question no. 10 (breach of fiduciary duty            of the income
lost-profits damages), and in question no. 11 (equitable
disgorgement of profits). Questions 4 and 10 specifically         Page 467
instructed the jury to award only " lost profits," if any,
defined in each case as the " natural, probable, and               that was either received by or directed to the benefit of
foreseeable consequence" of Saden's failure to comply with        Saden."
his contractual or fiduciary duty. While " [r]ecovery for lost
profits does not require that the loss be susceptible of exact          As was the case in Madison v. Williamson, 241
calculation," the amount of lost profits " must be shown by       S.W.3d 145 (Tex.App.-Houston [1st Dist.] 2007, pet.
competent evidence with reasonable certainty." Holt               denied), Smith made no attempt in the trial court to
Atherton Indus., Inc. v. Heine, 835 S.W.2d 80, 84                 distinguish between the damages he suffered as a result of
(Tex.1992). " As a minimum, opinions or estimates of lost         Saden's breach of contract and his breach of fiduciary duty.
profits must be based on objective facts, figures, or data        Instead, Smith presented a unified damages model through
from which the amount of lost profits can be ascertained."        the testimony of Shields, who explained that he included
Id.; see also Natural Gas Pipeline Co. v. Justiss, 397            the elements of self-dealing that were apparent from the
accounting records in determining the distributions that         footnote in Smith's brief,[1] that category
Smith should have received from POS. There was no
attempt to segregate damages attributable to breach of the       Page 468
parties' agreement from any other damages that somehow
may have been attributable to separate disloyal acts in            also is incorporated into the Shields damages model.
breach of Smith's fiduciary duty. Moreover, the evidence at      Finally in this regard, Smith's reference to the " theft of
trial did not clearly show two separate injuries in this         $200,000 in certificates of deposit" is not further supported
regard. Rather, it showed generally that Saden diverted          or explained with any citation to the record, but it
revenue to himself and failed to evenly divide what revenue      apparently refers to a CD that Saden testified that he
was actually received by POS. The expert testimony               purchased from the Precision account with funds that were
indicated that Smith's share of the POS proceeds, which          obtained from the sale of POS accounts. The Shields
Shields calculated to be $941,907, was effectively the same      analysis includes $1,188,846 of distributions from Precision
as the profit Saden wrongfully obtained by breaching his         for the benefit of Saden, and while the record evidence does
fiduciary duty.                                                  not include detailed individual transactions supporting that
                                                                 figure, it does show total amounts of distributions broken
      In his appellate brief, Smith contends that the separate   down by year in amounts ranging from $65,061 in 2004 to
awards for breach of contract and breach of fiduciary duty       $397,995 in 2007. There is no evidence to suggest that
are supported by the record, arguing:                            Saden's purchase of a $200,000 certificate of deposit from
                                                                 Precision funds for his own benefit is not included in
The contract damages were limited to that portion of the         Shields's calculation of $1,188,846 of distributions to Saden
fifty percent (50%) of the business profits that were not        from Precision.
paid to Smith by Saden, whereas the fiduciary breach
damages were, inter alia, caused by Smith's [a] failure to             Second, the record reveals no competent evidence
secure the best price possible for the POS accounts that he      from which a fact finder could determine with reasonable
secretly sold; [b] failure to secure commission rates for POS    certainty the amount of lost profits separately attributable
equal to those he secured for himself; [c] sale of POS           only to breach of contract or only to breach of fiduciary
accounts and equipment;[d] theft of $200,000 in certificates     duty. See Holt Atherton, 835 S.W.2d at 84. The only
of deposit;[e] use of POS funds to pay personal living           element of damages listed in questions 4 and 10 was " lost
expenses for himself and his family; [f] theft of POS funds      profits." The charge instructed the jury to consider that
after the appointment of the Receiver; and [g] enriching         element of damages, " if any, and none other." Neither party
himself through a series of self-dealing transactions. The       objected to the lost-profits language in the charge, and
damages caused by Saden's breach of his fiduciary duty           neither party requested a different or additional measure of
were different from, and not part of, the contract damages       damages be submitted to the jury.
because they were of a nature that they did not cause an
unequal division of the profits from the business.                     The jury awarded the full measure of lost profits
                                                                 supported by the accountant's testimony as contract
     Appellant's Brief at 27-28 (footnotes omitted); see         damages: $941,907. It may have been possible to categorize
also Dissent at 7.                                               Saden's various bad acts between breaches of contract and
                                                                 other separate breaches of fiduciary duty, and then to
        We disagree. First, there is significant overlap         quantify lost profits or other damages attributable to each so
between this litany of Saden's misdeeds and the misconduct       as to identify separate injuries leading to separate amounts
documented and accounted for in the Shields damages              of damages. But as this case was presented, tried, and
model, which represented " the excess portion of the             charged to the jury, the actual evidence of injury and lost
income that was either received by or directed to the benefit    profits did not show separate and distinct injuries resulting
of Saden." For example, Shields's calculations expressly         in separate and distinct lost profits. See Madison, 241
accounted for acts of corporate waste, most significantly        S.W.3d at 158. Smith's damages model showed that he
including the " use of POS funds to pay personal living          suffered one injury: he was deprived of all the money he
expenses for himself and his family" in that his analysis did    was due from POS because of the various faithless actions
not treat those expenses as reasonable and necessary             taken in violation of the parties' agreement and Saden's
corporate expenses, but instead treated $1,379,369 of            fiduciary duties.
expenses paid by POS as " Distributions to/for the benefit
of C. Saden." Likewise, to the extent that Smith's reference     Page 469
to " enriching himself through a series of self-dealing
transactions" is also a reference to the payment of Saden's             To the extent Smith suggests that other lost profits
living expenses with POS funds, as strongly suggested by a       may have been attributable to other bad acts not addressed
                                                                 by the Shields analysis, his brief has pointed us to no such
evidence in the record, and our own review has found none.          duty. We overrule Saden's issue to the extent that he argues
Smith's brief points to no evidence of any      YDOXH ² much       that the one-satisfaction rule disallows an award of both
less a valuation that would satisfy Holt Atherton²                 actual damages and the equitable remedy of disgorgement
assigned to the lost profits attributable to Saden's " failure to   of profits. Ordinarily we would reform the judgment to
secure the best price possible for the POS accounts that he         effect an election of the remedy that affords the prevailing
secretly sold," " failure to secure commission rates for POS        party the greatest relief. See, e.g., Star Houston, Inc. v.
equal to those he secured for himself," " sale of POS               Shevack, 886 S.W.2d 414, 423 (Tex.App.-Houston [1st
accounts and equipment" (other than the purchase of the             Dist.] 1994), writ denied, 907 S.W.2d 452 (Tex.1995) (per
$200,000 certificate of deposit apparently included in              curiam). However, this case is complicated by the fact of
Shields's calculation of distributions from Precision to            Saden's bankruptcy and the
Saden), or " theft of POS funds after the appointment of the
Receiver." See Appellee's Brief at 28.                              Page 470

      In sum, Smith demonstrated his entitlement to a                bankruptcy court's order of non-dischargeability. Because
unified recovery for one broadly described injury with one          it is not readily apparent from the appellate record which
damages model sponsored by accountant Shields. See id.              theory of liability Smith would elect, we will remand to
Accordingly, Smith failed to justify separate awards for            permit Smith to make an election.
alternate theories of liability, as the theories as presented at
trial did not depend on separate and distinct injuries                   D. Findings of fraud, defalcation, embezzlement
resulting in separate and distinct damages. See Madison,
                                                                           In his fourth issue, Saden argues that the court erred
241 S.W.3d at 158. Under such circumstances, allowing the
                                                                    by including recovery and findings on issues that were not
recovery of actual damages for both breach of contract and
                                                                    submitted to the jury or conclusively established.
breach of fiduciary duty violates the one-satisfaction rule,
                                                                    Specifically, Saden objects to the inclusion of language
and is therefore error. See, e.g., Downer, 701 S.W.2d at
                                                                    stating that he committed " acts of fraud, defalcation and
241-42.
                                                                    embezzlement while acting and serving in a fiduciary
       We reach a different conclusion with respect to the          capacity." Saden also specifically objects to the following
award of equitable disgorgement of profits. Question no.            language on page 4 of the trial court's judgment:
11, the basis for the equitable forfeiture award, was
                                                                    The Court finds that all of the business and assets that are
predicated on the liability question for breach of fiduciary
                                                                    currently in the Receiver's possession, custody and control
duty, and it was phrased in terms of the " profit" Saden
                                                                    belong to POS, that any such assets that are currently in the
obtained by his tortious conduct. Nevertheless, equitable
                                                                    Receiver's possession, custody and control belong to POS,
forfeiture is distinguishable from an award of actual
                                                                    that any such assets received or obtained by, or in the name
damages, in that it serves a separate function of protecting
                                                                    of Defendants Charles R. Saden or Precision Payments
fiduciary relationships. ERI Consulting Eng'rs, Inc. v.
                                                                    Company were received or obtained as a result of
Swinnea, 318 S.W.3d 867, 874 (Tex.2010). Even if a
                                                                    Defendant, Charles R. Saden's acts of fraud, defalcation and
fiduciary does not obtain a benefit by violating his duty, he
                                                                    embezzlement while acting and serving in a fiduciary
still may be required to forfeit the right to compensation for
                                                                    capacity to Plaintiff, Brian Smith.
his work. Id. at 873 (citing Burrow v. Arce, 997 S.W.2d
229, 237 (Tex.1999)). Saden did not present any legal
                                                                          Saden's complaint appears to be two-fold, that: (1) the
challenge to the amount of the equitable disgorgement
                                                                    court erred by including in the judgment findings of " fraud,
award, so we express no opinion about the measure of the            defalcation, and embezzlement" that were not submitted to
equitable remedy awarded. Instead, Saden only challenges
                                                                    the jury and that Smith relied upon in the bankruptcy court
the award on the basis that it is duplicative of the other
                                                                    to argue for an order of non-dischargeability of the debt,
awards of damages, in violation of the one-satisfaction rule.
                                                                    and (2) the court erred by making a determination regarding
We hold that the one-satisfaction rule does not preclude the        the assets that were then in the Receiver's possession.
recovery of both actual damages and the equitable remedy
of disgorgement of profits, as these remedies are intended to              An issue must be submitted to the jury when it is (1)
address separate and distinct injuries. Cf. ERI Consulting,         raised by the pleadings and the evidence, (2) disputed, and
318 S.W.3d at 882 (remanding case for further proceedings           (3) properly requested. See Cianfichi v. White House Motor
on both equitable disgorgement and lost-profits awards).            Hotel, 921 S.W.2d 441, 443 (Tex.App.-Houston [1st Dist.]
                                                                    1996, writ denied); see also T.O. Stanley Boot Co., Inc. v.
       We sustain Saden's issue in part and hold that on the
                                                                    Bank of El Paso, 847 S.W.2d 218, 223 (Tex.1992). Texas
facts of this case, the trial court erred in rendering judgment
                                                                    Rule of Civil Procedure 279 provides, " Upon appeal all
that permitted duplicative recovery of actual lost-profit
                                                                    independent grounds of recovery or of defense not
damages for both breach of contract and breach of fiduciary
conclusively established under the evidence and no element        Fellers v. State, 138 Tex. Crim. 307, 308, 136 S.W.2d 217,
of which is submitted or requested are waived." TEX.R.            218 (Tex.Crim.App.1940); see TEX. PENAL CODE ANN.
CIV. P. 279.                                                      § 32.45 (West 2011) (misapplication of fiduciary property
                                                                  or property of financial institution).
         Common-law fraud includes both actual and
constructive fraud. Cotten v. Weatherford Bancshares, Inc.,              Smith did not raise in his pleadings the issues of
187 S.W.3d 687, 702 (Tex.App.-Fort Worth 2006, pet.               whether Saden committed acts of fraud, defalcation, and
denied). " A plaintiff seeking to prevail on claim of actual      embezzlement. Nor did he request a jury question on these
fraud must prove that (1) the defendant made a material           issues. Comparing the elements of fraud, defalcation, and
misrepresentation; (2) the defendant knew the                     embezzlement to the jury charge, we conclude that not all
representation was false or made the representation               of the elements of fraud, defalcation, and embezzlement
recklessly without any knowledge of its truth; (3) the            were submitted to the jury. Accordingly, we hold that the
defendant made the representation with the intent that the        trial court erred by including this language in the judgment,
other party would act on that representation or intended to       and we sustain this issue in part.
induce the party's reliance on the representation; and (4) the
plaintiff suffered an injury by actively and justifiably                Finally, we consider Saden's challenge regarding the
relying on that representation." Exxon Corp. v. Emerald Oil       portion of the judgment concerning the assets in the
& Gas Co., L.C., 348 S.W.3d 194, 217 (Tex.2011).                  receiver's possession. The court appointed a receiver in
However, constructive fraud is " the breach of some legal or      February 2009, and the receiver took possession of POS
equitable duty which, irrespective of moral guilt, the law        along with the entities Saden created and used to divert
declares fraudulent because of its tendency to deceive            POS revenues. Section 11.403 of the Business
others, to violate confidence, or to injure public interests."    Organizations Code provides: " The court appointing a
Archer v. Griffith, 390 S.W.2d 735, 740 (Tex.1964). "             receiver under this section has and shall retain exclusive
Evidence supporting a breach of fiduciary duty may, in            jurisdiction over the specific property placed in
appropriate circumstances, support a constructive-fraud           receivership. The court shall determine the rights of the
finding." Murphy v. Am. Rice, Inc., No. 01-03-01357-CV,           parties in the property or its proceeds." TEX. BUS.
2007 WL 766016, at *10 (Tex.App.-Houston [1st Dist.]              ORGS.CODE ANN. § 11.403(c) (West 2012). Here, the
Mar. 9, 2007, no pet.); accord                                    judgment noted that the trial court lacked authority to
                                                                  dispose of the property held by the receiver due to the
Page 471                                                          automatic bankruptcy stay and ordered the future delivery
                                                                  of the assets held by the receiver to the bankruptcy trustee.
Flanary v. Mills, 150 S.W.3d 785, 795 (Tex.App.-Austin
2004, pet. denied).                                                     Saden argues, without citation to authority, that " [t]he
                                                                  jury did not make any findings about POS assets, nor was it
      The Fifth Circuit has defined defalcation, as relevant      asked anything about Precision Payment Company or
to the context of a discharge in bankruptcy, as a " willful       Hohen-Saden, LLC. The jury was asked about damages, not
neglect of fiduciary duty," which need not be accompanied         these issues of ownership or entitlement, and to make any
by fraud or embezzlement. In re Schwager, 121 F.3d 177,           such award or finding here would also be a duplicative
184-85 (5th Cir.1997); see also Bullock v. BankChampaign,         recovery." But this particular aspect of the final judgment
N.A., __ U.S. __, __ - __, 133 S. Ct. 1754, 1758-59, 185           does not award a duplicative recovery: it defers
L.Ed.2d 922 (2013) (in the course of holding that "               determination of the ownership of the assets held by the
defalcation" as used in 11 U.S.C. § 523(a)(4) requires an         receiver to the bankruptcy court. We hold that the court did
intentional wrong, generally observing broad disagreement         not err in doing so.
among legal authorities about the meaning of " defalcation"
); Balusik v. Kollatschny, No. 01-99-01342-CV, 2002 WL                 Conclusion
1822360, at *4 (Tex.App.-Houston [1st Dist.] Aug. 2, 2002,
no pet.) (not designated for publication) (" Defalcation is               We reverse the trial court's judgment to the extent
also defined as ' [l]oosely, the failure to meet an obligation;   that it permitted duplicative recovery of damages for breach
a nonfraudulent default.' " ).                                    of contract

      Embezzlement requires proof that (1) the defendant          Page 472
was the agent of the person or corporation alleged to have
been harmed and was charged with the duty of receiving              and breach of fiduciary duty and included additional
money of his principal, (2) he received money belonging to        unauthorized findings that Saden committed acts of "
his principal in the course of his employment, and (3) that       fraud," " defalcation," and " embezzlement," and we remand
he embezzled, misapplied, or converted it to his own use.         to the trial court to allow Smith to elect a remedy and for
entry of a new judgment, which does not include language          judgment about Saden's acts of " fraud, defalcation, and
purporting to make findings based on fraud, defalcation, or       embezzlement."
embezzlement.
                                                                         However, in contrast to Saden's assertions and two of
      TERRY JENNINGS, Justice, dissenting.                        the majority's holdings, the record reveals that (1) the trial
                                                                  court carefully instructed the jury on two different measures
      Because the majority errs in concluding that the trial      of damages on two distinct claims for two distinct injuries,
court, in its judgment, " permitted duplicative recovery of       (2) Smith presented evidence that supports the jury's two
damages and included additional unauthorized findings," I         separate and distinct damages findings, (3) as noted by the
respectfully dissent.                                             majority, the trial court's equitable disgorgement of Saden's
                                                                  profit from his breach of fiduciary duty to Smith did not
      In this case, appellee, Brian Smith, sued appellant,        result in a " damages" award duplicative of the jury's
Charles Saden, for breach of contract and breach of
fiduciary duty, two separate and distinct causes of action for    Page 473
two separate and distinct injuries and remedies, arising out
of Saden's conduct in the operation of POS Card                    awards, and (4) the trial court, in concluding that Saden, in
Processing, Inc. (" POS" ), a closely held corporation in         breaching his fiduciary duties to Smith, committed fraud,
which Smith and Saden were the sole shareholders. As              defalcation, and embezzlement, did so in support of its
noted by the majority, both Smith and Saden each owned 50         equitable disgorgement of Saden's profits derived from
percent of the company, were both directors, and were to be       POS, not in regard to any separate claim upon which it
paid equally.                                                     thought Smith might be entitled to recover.

      In his third issue, Saden argues that the trial court's          Breach-of-Contract Damages
judgment should be " reformed to require election of one
remedy for lost profits" because " the jury was asked to find            In regard to Smith's breach-of-contract claim, the jury,
lost profits on multiple theories of liability" and Smith " did   in response to question one in the trial court's charge,
not distinguish his damages among any of these theories, all      expressly found that Smith and Saden " agree[d] to equally
of which had the same measure of damages. " (Emphasis             split the revenues, less reasonable and necessary expenses,
added.) Although Saden generally asserts that " Smith made        derived from the business agreed to be conducted by POS."
no attempt to distinguish damages from among any of [the]         (Emphasis added.) And the jury further found that Saden
theories of recovery," he does not challenge the legal or         failed to comply with the agreement to equally split with
factual sufficiency of the evidence supporting the jury's         Smith the revenues from POS.
specific damages findings. Rather, after quoting in his brief
questions four, ten, and eleven of the trial court's charge to          In question four, the trial court instructed the jury that
the jury, Saden makes his complaint that " the jury was           " [l]ost profits are a natural, probable, and foreseeable
asked to find the same lost profits measure of damages "          consequence of ... Saden's failure to comply with the
and " Smith was allowed to recover a judgment that                agreement. " (Emphasis added.) The trial court expressly
awarded all three of these overlapping recoveries for lost        asked the jury to measure the lost profits that flowed from
profits. " (Emphasis added.)                                      Saden's breach of contract. It then asked the jury, " What
                                                                  sum of money, if any, if paid now in cash, would fairly and
      In his fifth issue, Saden argues that the trial court's     reasonably compensate ... Smith for his damages, if any,
judgment must be " reformed to eliminate findings and             that resulted from ... Saden's failure to comply with the
recoveries for fraud, defalcation and embezzlement"               agreement ?" (Emphasis added.) And the jury answered, "
because these issues " were not submitted to the jury" and        $941,907."
recovery on them by Smith has been " waived by
omission." Again, Saden does not challenge the sufficiency              As noted by the majority, this answer is consistent
of the evidence supporting the trial court's conclusions that     with the testimony of Smith's expert, Bill Shields, an
he, in breaching his fiduciary duties owed to Smith,              accountant who reviewed the records of POS. Based on his
committed fraud, defalcation, and embezzlement.                   review of the records and the agreement of Smith and Saden
                                                                  to split the revenue of POS equally, Shields opined that
      The majority concludes that in this case " recovery of      Saden had withheld $941,907 from Smith. Accordingly, the
actual damages for both breach of contract and breach of          jury reasonably concluded that Saden, in violation of his
fiduciary duty violates the one-satisfaction rule," and it        agreement with Smith, withheld and failed to pay Smith
holds that the trial court erred in rendering judgment that "     $941,907, Smith's half of the revenues derived from POS.
permitted duplicative recovery" of damages. It further holds      From this answer, it necessarily follows that Saden's half of
that the trial court erred in including " language" in its        the revenues of POS also totaled $941,907.
      Breach-of-Fiduciary-Duty Damages                              consequence of ... Saden's failure to comply with his
                                                                    fiduciary duties " included revenue lost by POS due to
      In regard to Smith's claim against Saden for breach of        Smith's failure to secure the best price possible for POS
fiduciary duty, the trial court, in question seven of its           accounts that he secretly sold, failure to secure commission
charge, defined the term " relationship of trust and                rates for POS equal to those he secured for himself, sale of
confidence," and the jury found that " a relationship of trust      POS accounts and equipment, theft of $200,000 in
and confidence exist[ed] between" Smith and Saden. In               certificates of deposit, use of POS funds to pay personal
question eight, the trial court instructed the jury on              living expenses for himself and his family, theft of POS
fiduciary duties, and the jury found that Saden did not "           funds after the appointment of a receiver, and enriching
comply with his fiduciary duties to ... Smith."                     himself through a series of self-dealing transactions. Thus,
                                                                    there is ample evidence in the record from which the jury
      In question ten, the trial court instructed the jury that "   could have reasonably found that Saden, in breaching his
[l]ost profits are a natural, probable, and foreseeable             fiduciary duties to Smith, caused Smith damages of
consequence of ... Saden's failure to comply with his               $393,093 above and beyond his breach-of-contract damages
fiduciary duties to ... Smith." (Emphasis added.) Here, in          of $941,907.
contrast to question four, the trial court expressly asked the
jury to measure the lost profits that resulted from Saden's               Nevertheless, the majority conducts a sua sponte
breach of fiduciary duties, not those that resulted from his        analysis of the evidence and makes a different finding. In
breach of contract. It then asked the jury, " What sum of           support its finding, the majority relies in part on Holt
money, if any, if paid now in cash, would fairly and                Atherton Indus., Inc. v. Heine, 835 S.W.2d 80 (Tex.1992).
reasonably compensate ... Smith for his damages, if any,            In Holt, the Texas Supreme Court did explain that the
that resulted from ... Saden's failure to comply with his           amount of lost profits must be " shown by competent
fiduciary duties to ... Smith?" (Emphasis added.) And the           evidence with reasonable certainty" and " opinions or
jury answered, " $393,093" in stark contrast to its answer to       estimates of lost profits must be based on objective facts,
question four, which was " $941,907."                               figures or data from which the amount of lost profits can be
                                                                    ascertained." 835 S.W.2d at 84. However, the court further
      Again, Saden does not challenge the sufficiency of            explained that " [r]ecovery for lost profits does not require
the evidence supporting the jury's award of $393,093. He            that the loss be susceptible of exact calculation. " Id.
simply assumes that the measure of damages in question              (emphasis added). And Holt is readily distinguishable
four is the same as that in question ten. Based on this             because (1) Holt specifically argued there was " no
assumption, Saden further assumes that the lost profits             evidence supporting the trial court's award of damages for
awarded in answer to question ten are                               lost profits" and (2) the court held that a conclusory
                                                                    statement about lost income " is not the correct measure of
Page 474
                                                                    damages" and the testimony was " legally insufficient
                                                                    because it [did] not provide any indication" of how the lost
 duplicative of those awarded in answer to question four. Of
                                                                    profits were determined. Id. at 83-84.
course, the important difference in what lost profits the jury
was instructed to consider in answering questions four and
                                                                           Here the majority, as did the court in Holt, engages in
ten and the substantial difference in the jury's awards in
                                                                    a " fact intensive determination" in reaching its finding that
answer to both questions illustrates the fallacy of these
                                                                    Smith did not present reasonably certain evidence of lost
assumptions.
                                                                    profits on his breach-of-fiduciary-duty claim. See id.
      Regardless, the majority asserts, first, " there is a         However, as noted above, Saden has not made a
                                                                    no-evidence challenge in this appeal. Thus, the majority,
significant overlap between [Smith's] litany of Saden's
                                                                    based on its sua sponte review of the evidence, is reversing
misdeeds and the misconduct documented and accounted
                                                                    the trial court's judgment on unassigned error. More
for in the Shield's damages model," and, second, " the
record reveals no competent evidence from which a fact              important, Smith, as noted above, did present
                                                                    legally-sufficient evidence to support the jury's award of
finder could determine with reasonable certainty the amount
                                                                    $393,093 for his damages resulting from Saden's breach of
of lost profits separately attributable to breach of contract or
                                                                    fiduciary duties. See City of Keller v. Wilson, 168 S.W.3d
only to breach of fiduciary duty."
                                                                    802, 822 (Tex.2005) (" If the evidence at trial would enable
      However, as noted by Smith, he presented evidence             reasonable and fair-minded people to differ
that the lost profits that resulted from Saden's breach of
contract were different from those that resulted from               Page 475
Saden's breach of fiduciary duties. Smith asserts that the
                                                                    in their conclusions, then [the factfinder] must be allowed
lost profits that were " a natural, probable, and foreseeable
to do so." ).                                                     POS.

      Equitable Disgorgement                                            In question eighteen, which also concerned the issue
                                                                  of the appropriateness of equitable disgorgement and which
      It has long been the law in Texas that courts " may         was predicated on the jury's negative answer to question
fashion equitable remedies such as profit disgorgement and        eight, the trial court defined the terms " malice" and " clear
fee forfeiture to remedy a breach of fiduciary duty." ERI         and convincing." It defined malice as " a specific intent" by
Consulting Eng'rs, Inc. v. Swinnea, 318 S.W.3d 867, 873           Saden " to cause substantial injury or harm to" Smith. And
(Tex.2010). And the Texas Supreme Court has clearly               eleven jurors expressly found by clear and convincing
explained that " a fiduciary may be punished for breaching        evidence that " the harm caused by" Saden's breach of
his duty." Id. at 872 (emphasis added). Indeed, " [t]he main      fiduciary duty " resulted from malice."
purpose of forfeiture is not to compensate an injured
principal.... Rather, the central purpose ... is to protect              And, as noted above, the trial court, in its judgment,
relationships of trust by discouraging ... disloyalty." Id. at    did conclude that " Saden's profit" of $941,907 should be
872-73 (quoting Burrow v. Arce, 997 S.W.2d 229, 238               equitably disgorged from him " as a result of his acts of
(Tex.1999)).                                                      fraud, defalcation and embezzlement while acting and
                                                                  serving in a fiduciary capacity with respect to" Smith.
       A plaintiff need not even establish actual damages in      However, these conclusions were apparently made by the
order to receive the equitable remedy of disgorgement, and        trial court to further show that it considered
" even if a fiduciary does not obtain a benefit from a third
party by violating his duty, a fiduciary may be required to       Page 476
forfeit the right to compensation for the fiduciary's work."
Id. at 873 (citing Burrow, 997 S.W.2d at 237 (" [A] person         Saden's behavior so egregious that Saden should be "
who renders service to another in a relationship of trust may     punished" by being disgorged of his profit from his
be denied compensation for his service if he breaches that        wrongful acts. The trial court's conclusions did not at all, as
trust." )). However, the equitable remedy of forfeiture must      asserted by Saden, concern issues that should have been "
" fit the circumstances" presented. Burrow, 997 S.W.2d at         submitted to the jury" which Smith " waived by omission."
241. Here, though, Saden does not assert that the trial
court's equitable disgorgement did not fit the circumstances.           The bottom line is that the trial court's equitable
                                                                  disgorgement from Saden of " $941,907," which equals his
      Rather, Saden argues only that (1) the trial court's        half of the revenues derived from POS, is firmly supported
equitable disgorgement constituted a double recovery or "         by (1) the jury's finding that Saden profited in the amount
windfall" to Smith because it was based on lost profits and       of " $941,907" by breaching his fiduciary duties to Smith,
(2) the trial court's judgment must be " reformed to              (2) the jury's finding by clear and convincing evidence that
eliminate findings and recoveries for fraud, defalcation and      " the harm caused by" Saden's breach of fiduciary duty "
embezzlement" because these issues " were not submitted to        resulted from malice," and (3) the trial court's conclusion
the jury" and recovery on them by Smith has been " waived         that Saden obtained this profit from Smith " as a result of
by omission."                                                     his acts of fraud, defalcation and embezzlement while
                                                                  acting and serving in a fiduciary capacity with respect to"
      In question eleven, the trial court asked the jury, "       Smith. These findings and conclusion serve to show that the
What was the amount of ... Saden's profit from the conduct,       trial court's equitable disgorgement of Saden's
if any, that you have found to be a breach of ... Saden's         compensation " fit the circumstances." See Burrow, 997
fiduciary duties to ... Smith?" (Emphasis added.) And the         S.W.2d at 241.
jury answered " $941,907." Because this question
concerned the issue of the appropriateness of equitable                  Conclusion
disgorgement, i.e., whether it would " fit the
circumstances," a question of equity solely in the province              In its judgment, the trial court, in accord with the
of the trial court, the trial court, did not, as asserted by      jury's findings, awarded Smith $941,907 on his
Saden, instruct the jury to consider any lost profits as it did   breach-of-contract claim and $393,093 on his claim for
in answering question ten. Instead, the trial court               breach of fiduciary duty. And, concluding that Saden, in
specifically asked the jury to determine " Saden's profit"        breaching his fiduciary duties to Smith, had committed "
from his wrong doing, which equaled not only what he              acts of fraud, defalcation and embezzlement," the trial court
withheld from Smith, but also, necessarily, the profit to         further awarded Smith $941,907 " in equitable
which Saden himself was entitled as compensation under            disgorgement of the profits" obtained by Saden. In doing so,
their agreement to split equally the revenues derived from        the trial court did not permit a " duplicative recovery of
                                                                  damages" or " include[ ] additional unauthorized findings."
It simply awarded Smith separate and distinct damages for
his separate and distinct injuries, and it reasonably
concluded that based on Saden's egregious conduct, he
should further be disgorged of his half of the revenues
derived from POS.

      Accordingly, I would overrule Saden's third and fifth
issues and affirm the true and correct judgment of the trial
court.

---------

Notes:

[1] In Smith's appellee's brief, the reference to Saden "
enriching himself through a series of self-dealing
transactions" is followed by a footnote, which reads:

In fact, Shields, the accounting expert, allowed for
$1,600,000 in expenses in computing the contract damages,
even though many of those payments were to or for
self-dealing transactions for the benefit of Saden and his
family (e.g., meals, insurance and utilities including, gas,
water, electricity and other expenses). See PX 301.
Although those payments are not included in Smith's
contract damages, but they are tort damages in Smith's
breach of fiduciary duty claim, and they far exceed the
$393,093.00 found by the jury. Kinzbach Tool Co. v.
Corbett-Wallace Corp., 138 Tex. 565, 160 S.W.2d 509,
512-14 (1942). Appellee's Brief at 28 n. 42. Though the
source of the $1,600,000 figure is unexplained, to the extent
Smith argues that the Shields model did not include
payments " for the benefit of Saden and his family (e.g.,
meals, insurance and utilities including, gas, water,
electricity and other expenses)," he plainly misstates the
record. The examination and cross-examination of Shields
made quite clear that between POS and Precision, Shields
determined that Saden " paid himself through either salary,
commissions, benefits, personal expenses, home expense,
whatever it may be, $2,740,927." Of this amount, the only
expenses that Shields treated as legitimate business
expenses were commissions and director fees. The Shields
damages model accounts for payments made for the benefit
of Saden and his family, and it compensates Smith for his
injury to the extent the revenues of POS and Precision were
not evenly split between him and Saden as a result of such
payments.

---------
Page 234                                                          in every situation; it allows recovery of economic damages
                                                                 in tort, or not, according to its underlying principles.[4] The
435 S.W.3d 234 (Tex. 2014)                                       issue in this case is whether the rule permits a general
                                                                 contractor to recover the increased costs of performing its
57 Tex.Sup.Ct.J. 816                                             construction contract with the owner in a tort action against
                                                                 the project architect for negligent misrepresentations --
LAN/STV, A JOINT VENTURE OF LOCKWOOD,
                                                                 errors -- in the plans and specifications. We conclude that
ANDREWS & NEWMAN, INC. AND STV
                                                                 the economic loss rule does not allow recovery and
INCORPORATED, PETITIONER,
                                                                 accordingly reverse the judgment of the court of appeals[5]
                                                                 and render judgment for the architect.
v.

MARTIN K. EBY CONSTRUCTION                     COMPANY,               I
INC., RESPONDENT
                                                                        The Dallas Area Rapid Transportation Authority ("
No. 11-0810                                                      DART" ) contracted with LAN/STV to prepare plans,
                                                                 drawings, and specifications for the construction of a light
Supreme Court of Texas                                           rail transit line from Dallas's downtown West End to the
                                                                 American Airlines Center about a mile away. LAN/STV
June 20, 2014                                                    agreed to " be responsible for the professional quality,
                                                                 technical accuracy, and . . . coordination of all designs,
     Argued October 8, 2013                                      drawings, specifications, and other services furnished", and
                                                                 to be " liable to the Authority . . . for all damages to the
    ON PETITION FOR REVIEW FROM THE COURT                        Authority caused by [LAN/STV's] negligent performance
OF APPEALS FOR THE FIFTH DISTRICT OF TEXAS.                      of any of the services furnished" . DART incorporated
                                                                 LAN/STV's plans into a solicitation for competitive bids to
    For CCE, Inc., Amicus Curiae: Charles R. 'Skip'
                                                                 construct the project. Martin K. Eby Construction
Watson Jr., Locke Lord LLP, Austin, TX.
                                                                 Company, which had built two other DART light rail
                                                                 projects, one of which was designed by LAN/STV,
     For LAN/STV, a joint Venture of Lockwood,
                                                                 submitted the low bid on this project, just under $25
Andrews & Newnam Inc., Petitioner: Bradley Wayne
                                                                 million, and was awarded the contract. The contract
Snead, Henry S. Platts Jr., Thomas C. Wright, Wanda
                                                                 provided an administrative procedure for Eby to assert
McKee Fowler, Wright & Close LLP, Houston, TX.
                                                                 contract disputes with DART, including complaints about
      For Martin E. Eby Construction Company, Inc.,              design problems. Eby and LAN/STV had no contract with
Respondent: Daniel J. Davis, Davis Law Firm, Dallas, TX;         each other. Thus, LAN/STV was contractually responsible
Jeffery A. Ford, Ford Nassen & Baldwin PC, Dallas, TX;           to DART for the accuracy of the plans, as was DART to
Jeffrey S. Levinger, Levinger PC, Dallas, TX.                    Eby, but LAN/STV owed Eby no contractual obligation.[6]

      OPINION                                                           Days after beginning construction, Eby discovered
                                                                 that LAN/STV's plans were full of errors -- about bridge
     Nathan L. Hecht, Chief Justice                              structures, manhole and utility line locations, subsurface
                                                                 soil conditions, an existing retaining wall, and many other
Page 235                                                         aspects of the proposed construction. While Eby expected
                                                                 that, as on any project, 10% of the plans would be changed,
       In actions for unintentional torts, the common law has    it found that 80% of LAN/STV's drawings had to be
long restricted recovery of purely economic damages              changed. This disrupted Eby's construction schedule and
unaccompanied by injury to the plaintiff or his property[1]      required additional labor and materials. In all, Eby now
-- a doctrine we have referred to as the economic loss           calculates it lost nearly $14 million on the project.
rule.[2] The rule serves to provide a more definite limitation
on liability than foreseeability can and reflects a preference   Page 237
for allocating some economic risks by contract rather than
by law.[3] But the rule is not generally applicable                    Only seven months into what would turn out to be a
                                                                 25-month job, Eby sued DART for breach of contract in the
Page 236                                                         United States District Court.[7] The court dismissed the
                                                                 case because Eby had not exhausted its administrative
remedies against DART under their contract and Texas             negligent delay was the business of the owners and of
law.[8] Eby then invoked DART's contract dispute                 nobody else. . . . [The charterers'] loss arose only through
procedures, claiming $21 million. The hearing officer not        their contract with the owners . . . . [N]o authority need be
only rejected Eby's claim in its entirety, he concluded that     cited to show that, as a general rule, at least, a tort to the
DART was entitled to $2.4 million in liquidated damages          person or property of one man does not make the tort-feasor
from Eby. Eby filed an administrative appeal, but, before it     liable to another merely because the injured person was
was resolved, settled with DART for $4.7 million.                under a contract with that other unknown to the doer of the
                                                                 wrong. . . . The law does not spread its protection so
       Meanwhile, Eby filed this tort suit against LAN/STV,      far.[16]
asserting causes of action for negligence and negligent
misrepresentation. After Eby and DART settled, this case               Nearly sixty years later, Judge Higginbotham
proceeded to trial,[9] but only on Eby's claim that              observed in State of Louisiana v. M/V Testbank that "
LAN/STV negligently misrepresented the work to be done           Robins broke no new ground . . . . [T]he prevailing rule [in
in its error-ridden plans.[10] The jury agreed and assessed      the United States and England] denied a plaintiff recovery
Eby's damages for its losses on the project at $5 million, but   for economic loss if that loss resulted from physical damage
they also found that the damages were caused by Eby's and        to property in which he had no proprietary interest." [17]
DART's negligence as well, and apportioned responsibility        Judge Higginbotham cited Professor James's 1972 article,
45% to LAN/STV, 40% to DART, and 15% to Eby. The                 Limitations on Liability for Economic Loss Caused by
trial court concluded that Eby's $4.7 million settlement with    Negligence: A Pragmatic Appraisal :
DART should not be credited against the damages found by
the jury, but that LAN/STV should be liable only for its         Under the prevailing rule in America, a plaintiff may not
apportioned share of the damages. Accordingly, the trial         recover for his economic loss resulting from bodily harm to
court rendered judgment for Eby for $2.25 million plus           another or from physical damage to property in which he
interest.                                                        has no proprietary interest. Similarly, a plaintiff may not
                                                                 recover for economic loss caused by his reliance on a
      Both LAN/STV and Eby appealed, and following the           negligent misrepresentation that was not made directly to
court of appeals' affirmance,[11] both petitioned for review.    him or specifically on his behalf.[18]
We granted both petitions,[12] but as we view the case, we
need only address LAN/STV's argument that Eby's                         " The reasons for this difference in treatment of
recovery for negligent misrepresentation is barred by the        indirect economic loss and physical damage," Professor
economic loss rule.[13] We begin by surveying                    James continued, " do not derive from the theory or the
                                                                 logic of tort law" .[19] Economic loss may be no less real
Page 238                                                         than physical injury and just as foreseeable.

 the development of the rule in American law and its status      Page 239
in Texas. We then turn to its application in this case.
                                                                   In Robins, for example, the charterers' loss of business
     II                                                          from the dry dock's negligent delay in repairing the
                                                                 steamship was readily foreseeable, but so would have been
     A                                                           the charterers' clients' loss of business, and so on. Justice
                                                                 Holmes' abrupt curtailment of this rippling liability -- "
      The law has long limited the recovery of purely            [t]he law does not spread its protection so far" [20] -- could
economic damages in an action for negligence. An early           have been achieved by taking a more restrictive view of
example, oft-cited, is Justice Holmes's opinion in Robins        foreseeability. But, wrote Professor James,
Dry Dock & Repair Co. v. Flint,[14] a suit by the charterers
of a steamship against a dry dock for damages for loss of        judges who have been unwilling to accept narrow and
the use of the vessel from a delay in repairs due to the dry     unrealistic views of what is foreseeable -- or of what a jury
dock's negligence. The Supreme Court held that the               may find to be unforeseeable -- remain generally unwilling
charterers could not recover their economic damages from         to allow recovery for indirect economic loss. The
the dry dock, either as third-party beneficiaries of the         explanation for this reluctance, repeated in decisions over
contract between the owners and the dry dock,[15] or for         the years, is a pragmatic one: the physical consequences of
the dry dock's negligence. Justice Holmes explained:             negligence usually have been limited, but the indirect
                                                                 economic repercussions of negligence may be far wider,
Of course the contract of the [dry dock] with the owners         indeed virtually open-ended. As Cardozo put it in a passage
imposed no immediate obligation upon the [dry dock] to           often quoted, liability for these consequences would be "
third persons [the charterers] as we already have said, and      liability in an indeterminate amount for an indeterminate
whether the [dry dock] performed it promptly or with
time to an indeterminate class." [21]                             negligible from the victim's standpoint. For several reasons,
                                                                  however, courts impose tort liability for economic loss
      Liability for economic loss directly resulting from         more selectively than liability for other types of harms.
physical injury to the claimant or his property -- such as lost
wages or medical bills -- is limited by the scope of the          (1). Indeterminate and disproportionate liability . Economic
injury. Liability for a standalone economic loss is not.[22]      losses proliferate more easily than losses of other kinds.
                                                                  Physical forces that cause injury ordinarily spend
      Often, a more appropriate remedy for the victim is to       themselves in predictable ways; their exact courses may be
allocate the risk of loss by contract or to cover it through      hard to predict, but their lifespan and power to harm are
insurance.[23] In Judge Posner's view:                            limited. A badly driven car threatens physical harm only to
                                                                  others nearby. Economic harm is not self-limiting in this
This is simply generalizing to tort law the contract-law rule     way. A single negligent utterance can cause economic loss
of Hadley v. Baxendale . . . . The point in Hadley . . . was      to thousands of people who rely on it, those losses may
that the carrier could not estimate the loss that the customer    produce additional losses to those who were relying on the
would incur from a delay in the delivery of the repaired mill     first round of victims, and so on. Consequences of this sort
shaft to the customer, but the customer could estimate this       may be at least generally foreseeable to the person who
cost and, therefore, was in a better position to avoid the loss   commits the negligent act. Defendants in such cases thus
by taking appropriate precautions or by buying                    might face liabilities that are indeterminate and out of
insurance.[24]                                                    proportion to their culpability. Those liabilities may in turn
                                                                  create an exaggerated pressure to avoid an activity
      Thus, for example, " when a defective product
                                                                  altogether.
purchased in a commercial transaction malfunctions,
injuring only the product itself and causing purely               (2). Deference to contract . Risks of economic loss tend to
economic loss", protection from that kind of harm, the            be especially well suited to allocation by contract. First,
United States Supreme Court has held (in an admiralty             economic injuries caused by negligence often result from a
case), should be " left entirely to the law of contracts"         decision by the victim to rely on a defendant's words or acts
because " the parties may set the terms of their own              when entering some sort of transaction -- an investment in a
agreements." [25] Determining whether a provision                 company, the purchase of a house, and so forth. A potential
                                                                  plaintiff making such a decision has a full chance to
Page 240
                                                                  consider how to manage the risks involved, whether by
 for recovery of economic loss is better left to contract helps   inspecting the item or investment, obtaining
delineate between tort and contract claims. As one
                                                                  Page 241
commentator has explained:
                                                                   insurance against the risk of disappointment, or making a
If there is a convincing rationale for the economic loss rule,
                                                                  contract that assigns the risk of loss to someone else.
it is that the rule performs a critical boundary-line function,
                                                                  Second, money is a complete remedy for an economic
separating the law of torts from the law of contracts. More
                                                                  injury. Insurance benefits, indemnification by agreement, or
specifically, " [t]he underlying purpose of the economic
                                                                  other replacements of money payments are just as good as
loss rule is to preserve the distinction between contract and
                                                                  the money lost in a transaction that turns out badly. This
tort theories in circumstances where both theories could
                                                                  fungibility makes those other ways of managing risk --
apply." [26]
                                                                  insurance, indemnity, and the like -- more attractive than
      Since Professor James's seminal article, much has           they might be to a party facing a prospect of personal
been written on the development of the rule limiting              injury.
recovery of economic damages in tort actions.[27] From our
                                                                  Those same points often will make it hard for a court to
review of the cases and commentary on the subject, we
                                                                  know what allocation of responsibility for economic loss
think the principal rationales for the rule are
                                                                  would best serve the interests of the parties to a risky
well-summarized by Dean Farnsworth in the recently
                                                                  situation. A contract that settles responsibility for such a
approved Restatement (Third) of Torts: Liability for
                                                                  risk will therefore be preferable in most cases to a judicial
Economic Harm, which we quote at length:
                                                                  assignment of liability after harm is done. The contract will
 Economic injuries may be no less important than injuries of      better reflect the preferences of the parties and help prevent
other kinds; a pure but severe economic loss might well be        the need for speculation and litigation later. Contracts also
worse for a plaintiff than a more modest personal injury,         are governed by a body of commercial law that has been
and the difference between economic loss in itself and            developed to address economic loss, and thus will often be
economic loss resulting from property damage may be               better suited for that task than the law of torts. In short,
contracts to manage the risk of economic loss are more             Page 244
often possible, and more often desirable, than contracts to
manage risks of other types of injury. As a result, courts           cases are an exception. A client can recover purely
generally do not recognize tort liability for economic losses      economic losses from a negligent lawyer, regardless of
caused by the breach of a contract between the parties, and        whether the lawyer and client have a contract.[40] Lawyer
often restrict the role of tort law in other circumstances in      malpractice is actionable as negligence no doubt because
which protection by contract is available.[28]                     agreements regarding legal representation are not required
                                                                   in Texas, except for contingent fees,[41] and until relatively
       Thus, the Restatement concludes, while there is " no        recently have not been the norm. Also, the standards
general duty to avoid the unintentional infliction of              governing legal representation are deeply developed and
economic loss" ,[29] the duty may exist when the rationales        their application uniform and well-settled. These factors
just stated for limiting recovery are " weak or absent" [30]       also support negligence actions against other
-- cessante ratione legis cessat et ipsa lex .[31]                 professionals.[42]

     B                                                                   Although Texas courts have repeatedly invoked the
                                                                   economic loss rule to disallow recovery of purely economic
        The absence of a bright-line rule, and the failure to      losses in actions for negligent services not involving
analyze whether denying tort recovery for an economic loss         professionals, this Court, without citing the rule, has
in a particular kind of situation is justified by the rationales   allowed recovery of such losses in an action for negligent
for limiting recovery of such losses, has led to some              misrepresentation, the cause of action in the present case.
confusion. In a 1992 article, then-Professor Powers called         We first recognized the action, defined by section 552 of
Texas law on the subject " murky" .[32] One thing certain          the Restatement (Second) of Torts,[43] in Federal Land
was that the damage caused by a defective product to itself        Bank Association
cannot be recovered in an action for strict products
liability,[33] even if there is also personal                      Page 245

Page 242                                                             of Tyler v. Sloane, where we held that prospective
                                                                   borrowers could recover the costs they incurred (but not lost
 injury or injury to other property.[34] Recovery of such          profits) in relying on their lender's negligent
damages must be for breach of contract or warranty. It was         misrepresentation to them that their loan application would
also fairly clear that one party to a contract cannot recover      be approved.[44] Later, in McCamish, Martin, Brown &
from another party, in an action for negligence, an                Loeffler v. F.E. Appling Interests , we held that while a
economic loss to the subject of the contract.[35]                  non-client cannot recover against a lawyer for
                                                                   negligence,[45] a lawyer may be liable for negligent
Page 243                                                           misrepresentation to a non-client, but only in narrow
                                                                   circumstances, " when information is transferred by an
       The Restatement now concludes generally that " there
                                                                   attorney to a known party for a known purpose", liability is
is no liability in tort for economic loss caused by negligence
                                                                   not expressly limited or disclaimed but invited, and the
in the performance or negotiation of a contract between the
                                                                   claimant has " justifiably rel[ied] on a lawyer's
parties." [36] It was less clear twenty years ago, and still is
                                                                   representation of material fact", which cannot ordinarily
today, the extent to which Texas precludes recovery of
                                                                   occur in an adversarial context.[46] Most recently, in Grant
economic damages in a negligence suit between contractual
                                                                   Thornton LLP v. Prospect High Income Fund, Ltd., we held
strangers, notwithstanding the rule's genesis in such cases,
                                                                   that an accountant may be liable to a strictly limited group
like Robins . As Professor Powers observed, " [a]lthough
                                                                   of investors who justifiably rely on negligent
cases between contractual strangers are the paradigm of the
                                                                   misrepresentations in a corporate audit report.[47] But we
traditional 'economic loss' rule, no Texas case involving
                                                                   denied the claims in that case because the plaintiffs were
'strangers' expressly addresses the economic loss rule." [37]
                                                                   merely potential investors with no special relationship to
Professor Powers noted that this Court had suggested in
                                                                   the audited corporation, and given their knowledge of the
dicta that purely economic damages are recoverable in a
                                                                   corporation and the marketplace, their reliance was not
negligence action between contractual strangers but later
                                                                   justified.[48]
appeared to have rejected that possibility.[38]
                                                                         These cases should not be read to suggest that
      Since then, Texas courts of appeals have uniformly
                                                                   recovery of economic loss is broader for negligent
applied the economic loss rule to deny recovery of purely
                                                                   misrepresentation than for negligent performance of
economic losses in actions for negligent performance of
                                                                   services. We agree with the Restatement that " [t]he general
services.[39] Professional malpractice
theory of liability is the same" for both torts, which is that     performance of its obligations to its contractual partner, not
                                                                   as the breach of a duty in tort to other subcontractors on the
[a] plaintiff's reliance alone, even if foreseeable, is not a      same job, or to the owner of the project. This way of
sufficient basis for recovery; under either [tort] a defendant     describing the subcontractor's role is not inevitable in all
generally must act with the apparent purpose of providing a        cases. General rules are favored in this area of the law,
basis for the reliance. It may be useful to say that a             however, because their clarity allows parties to do business
defendant held liable under either [tort] must " invite            on a surer footing. In this setting, a rule of no liability is
reliance" by the plaintiff, so long as the expression is           made especially attractive by the number and intricacy of
understood to refer to the defendant's apparent purpose and        the contracts that define the responsibilities of
not to a temptation incidentally created by the defendant's        subcontractors on many construction projects. That web of
words or acts.[49]                                                 contracts would be disrupted by tort suits between
                                                                   subcontractors or suits brought against them by a project's
     And for both torts, whether and how to apply the              owner.[51]
economic loss rule " does not lend itself to easy answers or
broad pronouncements." [50] Rather, as we have already                    The issues are whether to treat the architect differently
observed, the application of the rule depends                      and whether to distinguish between an action for negligent
                                                                   performance of services and an action for negligent
Page 246                                                           misrepresentations. On the latter issue, we agree with the
                                                                   Restatement : " [b]oth [torts] are based on the [same] logic"
on an analysis of its rationales in a particular situation.
                                                                   and " [t]he general theory of liability is the same" .[52] The
                                                                   economic loss rule should not apply differently to these two
      III
                                                                   tort theories in the same situation.
      Eby argues that the economic rule should not apply in
                                                                        On the former issue, we diverge from the Restatement
this case when it did not bar recovery in our other negligent
misrepresentation cases, Sloane, McCamish, and Grant               . We agree that
Thornton . LAN/STV counters that to allow such recovery
                                                                    [t]he plans drawn by the architect are intended to serve as a
on construction projects, where relationships are contractual
                                                                   basis for reliance by the contractor who forms a bid on the
and certainty and predictability in risk allocation are crucial,
would be disruptive.                                               Page 247

      Construction projects operate by agreements among             basis of them and is then hired to carry them out. The
the participants. Typically, those agreements are vertical:        architect's plans are analogous to the audit report that an
the owner contracts with an architect and with a general           accountant supplies to a client for distribution to potential
contractor, the general contractor contracts with                  investors -- a standard case of liability [for negligent
subcontractors, a subcontractor may contract with a                misrepresentation].[53]
sub-subcontractor, and so on. The architect does not
contract with the general contractor, and the subcontractors              But we think the contractor's principal reliance must
do not contract with the architect, the owner, or each other.      be on the presentation of the plans by the owner, with
                                                                   whom the contractor is to reach an agreement, not the
      We think it beyond argument that one participant on a        architect, a contractual stranger. The contractor does not
construction project cannot recover from another -- setting        choose the architect, or instruct it, or pay it. Under
aside the architect for the moment -- for economic loss            McCamish, the contractor could not recover economic
caused by negligence. If the roofing subcontractor could           damages from the owner's lawyer's negligent drafting of the
recover from the foundation subcontractor damages for              construction contract. And while there is some analogy
extra costs incurred or business lost due to the latter's          between the architect's plans and an accountant's audit
negligent delay of construction, the risk of liability to          report, under Grant Thornton, the latter is not an invitation
everyone on the project would be magnified and                     to all investors to rely, but only those to whom it is more
indeterminate -- the same result Justice Holmes rejected in        specifically directed. Here, the architect's plans are no more
Robins . As the Restatement explains:                              an invitation to all potential bidders to rely.

 There is no liability in tort . . . when the owner of a                  The Restatement adds that if allowing recovery
construction project sues a subcontractor for negligence           against the architect in negligence " is not congenial to the
resulting in economic loss; nor is liability found when one        parties, they are free to change it in the contracts that link
subcontractor is sued by another because the negligence of         them." [54] But the parties are just as free to provide for
the first drives up the costs of the second. A subcontractor's     liability by contract that the law does not allow in tort. The
negligence in either case is viewed just as a failure in the
Restatement acknowledges this, noting that if the architect      contractors can take less compensation from the owner, so
is contractually liable to the owner for defects in the plans,   that the owner can in turn compensate the architect for the
and the owner in turn has the same liability to the              added risk.
contractor, the contractor is protected.[55] But the
Restatement concludes that while this assignment of risk by      The issue is who will buy business protection insurance. It
contract should be encouraged, it jeopardizes                    makes sense to let the parties bargain about this rather than
unsophisticated parties:                                         impose a " legal" solution. . . .

Forbidding tort claims between parties who are indirectly         There are two additional reasons to decline imposing a
linked by contract would put pressure on them to specify         general tort duty on architects and engineers. First,
their rights carefully in advance, thus sparing courts the       imposing the risk of economic loss on the architect requires
need to inquire into them later. But that incentive is most      the architect to pass the cost along to the owner. The owner
likely to be noticed by sophisticated parties negotiating        will then pass the cost along to the various contractors and
large projects, and for them the rule is unlikely to be of       subcontractors. Different contractors and subcontractors
great importance. They will negotiate allocations of risk        have different susceptibilities to economic loss, but the
that look similar in the end notwithstanding the rule of tort    owner has no way of distinguishing among the various
law in the background. Meanwhile, less sophisticated             contractors and subcontractors. Some contractors and
parties would stand a good chance of being tripped up by a       subcontractors will benefit greatly, some will not. Yet all
broad rule, as when they fail to provide for indemnification     will pay the price for this protection, not in proportion to
in some direction and inadvertently leave a party who has        their benefit from the protection, but roughly in proportion
                                                                 to the dollar value of their services. This will lead to a
Page 248                                                         cross-subsidization. Contractors and subcontractors who are
                                                                 not subject to losses from delays effectively " pay" for
been wronged with no remedy.[56]                                 protection that they do not need. In effect, they subsidize
                                                                 other contractors and subcontractors who are more
     We think it more probable that a contractor will            susceptible to this type of loss.
assume it must look to its agreement with the owner for
damages if the project is not as represented or for any other    This inequity could be remedied if the owner could
breach.                                                          determine which contractors and subcontractors benefit
                                                                 most and then charge them more by paying them less. But
      Though there remains the possibility that a contractor     this would require the owner to be in the business of
may not do so, we think the availability of contractual          evaluating contractors' susceptibility to economic loss,
remedies must preclude tort recovery in the situation            which would effectively put the owner in the insurance
generally because, as stated above, " clarity allows parties     evaluation      business.   Individual     contractors     and
to do business on a surer footing" .[57] " Where contracts       subcontractors are in a better position to evaluate their own
might readily have been used to allocate the risk of a loss,"    susceptibility to economic
the Restatement observes, " a duty to avoid the loss is
unlikely to be recognized in tort -- not because the             Page 249
economic loss rule applies, but simply because courts
prefer, in general, that economic losses be allocated by           loss and determine whether to buy insurance. Thus,
contract where feasible." [58] We see no reason not to           fairness and efficiency support leaving these losses on the
apply the economic loss rule to achieve this end.                contractors and subcontractors, who can decide for
                                                                 themselves whether and for how much to insure. I assume
      Analyzing the economics of the construction site,          this is part of the explanation why current contractual
Professor Powers proposed this result more than twenty           practice does not shift these obligations to the architect.
years ago, and we quote his analysis at length:
                                                                  Second, . . . contracts between owners and supervising
In fact, construction disputes . . . are good candidates for     architects can vary. Sometimes the supervising architect
precluding recovery under the " economic loss" rule,             might be hired for the benefit of the contractors and
because the parties are in a position to protect themselves      subcontractors. However, in most cases, the architect is
through bargaining. Though the parties do not necessarily        hired either as a neutral arbitrator or, most often, as the
have contracts with each other, they typically all have          agent of the owner. . . . If the architect is supposed to be
contracts with the owner, or subcontracts with someone           neutral or to operate as the agent of the owner, negligence
who does have a contract with the owner. If contractors          principles -- which would be decided by the jury after the
want to be protected, they can insist on that protection from    fact -- would create a chilling effect on the architect's
the owner who will get protection from the architect. The
neutrality or fiduciary duty to the owner.                        Restatement, T.D. 1" ). Sections 1 through 5 of this draft
                                                                  were approved by the membership of the American Law
This analysis suggests that each situation is different and       Institute at the 2012 Annual Meeting, subject to the
that courts should use contract principles[,] not tort            discussion at the Meeting and to editorial prerogative.
principles, to determine whether the architect has "              Proceedings at 89th Annual Meeting: American Law
contractual" obligations to the contractors and                   Institute, 89 A.L.I. Proc. 46-47 (2012). According to the
subcontractors.[59]                                               Institute: " Once it is approved by the membership at an
                                                                  Annual Meeting, a Tentative Draft or a Proposed Final
      Finally, the courts are fairly evenly divided over          Draft represents the most current statement of the American
whether to apply the economic loss rule in this                   Law Institute's position on the subject and may be cited in
situation.[60] We side with those who do.                         opinions or briefs . . . until the official text is published."
                                                                  Overview, Project Development , American Law Institute,
       DART was contractually responsible to Eby for
                                                                  http://www.ali.org/-index.cfm?fuseaction=projects.main
providing accurate plans for the job. Eby agreed to
                                                                  (last visited June 18, 2014). A second draft, Restatement
specified remedies for disputes, pursued those remedies
                                                                  (Third) of Torts: Liability for Economic Harm (Tentative
(when the federal court would not allow it to sue), and
                                                                  Draft No. 2, 2014) (" Restatement, T.D. 2" ), was approved
settled its claims for $4.7 million. Had DART chosen to do
                                                                  at the 2014 Annual Meeting. Proceedings at 91st Annual
so, it could have sued LAN/STV for breach of their contract
                                                                  Meeting: American Law Institute, 91 A.L.I. Proc. (2014);
to provide accurate plans. But Eby had no agreement with
                                                                  see also Actions Taken at the 91st Annual Meeting , ALI'S
LAN/STV and was not party to LAN/STV's agreement with
                                                                  91st                     Annual                       Meeting,
DART. Clearly, the economic loss rule barred Eby's
                                                                  http://2014annualmeeting.org/actions-taken/(last         visited
subcontractors from recovering
                                                                  June 18, 2014). Tentative Draft No. 2 covers the last three
                                                                  sections bearing on the unintentional infliction of economic
Page 250
                                                                  loss, sections 6 through 8, and seven sections on the law of
 their own delay damages in negligence claims against             fraudulent misrepresentation; as the Reporter notes, section
LAN/STV. We think Eby should not be treated differently.          6, on " Negligent Performance of Services", refers to and "
                                                                  is complementary to" section 5, on " Negligent
      ****                                                        Misrepresentation" . Restatement, T.D. 2, Reporter's
                                                                  Memorandum, at xvii.
      The reasons for the economic loss rule support its
application in this case to preclude a general contractor         [4] Sharyland, 354 S.W.3d at 415 ( " '[T]here is not one
from recovering delay damages from the owner's architect.         economic loss rule broadly applicable throughout the field
Accordingly, we reverse the judgment of the court of              of torts, but rather several more limited rules that govern
appeals and render judgment that Eby take nothing from            recovery of economic losses in selected areas of the law.'" )
LAN/STV.                                                          (quoting Vincent R. Johnson, The Boundary-Line Function
                                                                  of the Economic Loss Rule , 66 Wash. & Lee L. Rev. 523,
---------                                                         534-535 (2009)); see Restatement, T.D. 1, § 1 cmt. b ("
                                                                  [D]uties of care with respect to economic loss are not
Notes:                                                            general in character; they are recognized in specific
                                                                  circumstances according to the principles stated in
[1] See, e.g., Fleming James, Jr., Limitations on Liability for
                                                                  Comment c." ). Another scholar also thought there was no
Economic Loss Caused by Negligence: A Pragmatic
                                                                  single " economic loss rule" but instead a " constellation of
Appraisal, 25 Vand. L. Rev. 43, 43 (1972) ( " Under the
                                                                  somewhat similar doctrines that tend to limit liability" that
prevailing rule in America, a plaintiff may not recover for
                                                                  seemed to work in different ways in different contexts, for
his economic loss resulting from bodily harm to another or
                                                                  not necessarily identical reasons, " with exceptions where
from physical damage to property in which he has no
                                                                  the reasons for limiting liability were absent." Oscar S.
proprietary interest." ).
                                                                  Gray, Some Thoughts on " The Economic Loss Rule" and
                                                                  Apportionment, 48 Ariz. L. Rev. 897, 898 (2006) (" The
[2] See, e.g., Sharyland Water Supply Corp. v. City of Alton,
                                                                  core concept of this constellation, not quite a 'rule', seems to
354 S.W.3d 407, 415 (Tex. 2011) ( " [P]arties may be
                                                                  me to be an inhibition against liability in negligence for
barred from recovering in negligence or strict liability for
                                                                  economic harm not resulting from bodily injury to the
purely economic losses. This is often referred to as 'the
                                                                  claimant or physical damage to property in which the
economic loss rule.'" (citations omitted)).
                                                                  claimant has a proprietary interest." ) (footnotes omitted).
[3] See Restatement (Third) of Torts: Liability for
                                                                  [5]350 S.W.3d 675 (Tex.App.--Dallas 2011).
Economic Harm § 1 cmt. c (Tentative Draft No. 1, 2012) ("
[6]Eby does not contend that it was a third-party                DART. LAN/STV also argues that Eby's claim is barred by
beneficiary of the LAN/STV-DART contract.                        derivative immunity, that Eby's measure of damages is
                                                                 improper, and that Eby failed to prove all the elements of its
[7]Eby alleged:                                                  negligent misrepresentation claim.

In providing voluminous and detailed plans and                   [14]275 U.S. 303, 48 S. Ct. 134, 72 L. Ed. 290 (1927).
specifications for Eby's use in preparing a bid price for this
competitive bid project, DART was obliged to provide             [15] Id. at 307-308.
accurate and adequate information which could be
reasonably relied upon for developing a competitive bid          [16] Id. at 308-309 (citations omitted).
price. The information provided by DART, and upon which
Eby relied, was in fact materially inaccurate and inadequate     [17]752 F.2d 1019, 1022 (5th Cir. 1985) (en banc).
for performing the work resulting in extraordinary excess
                                                                 [18]25 Vand. L. Rev. 43, 43 (1972) (footnotes omitted).
costs for performance and denying Eby the ability to
perform the work in a productive and profitable fashion.         [19] Id. at 44. See also Oliver Wendell Holmes, the
                                                                 Common Law 1 (Boston, Little Brown & Co., 1881) (" The
***
                                                                 life of the law has not been logic: it has been experience.
DART's failure, through LAN/STV, to provide Eby with             The felt necessities of the time, the prevalent moral and
adequate and accurate plans and specifications upon which        political theories, intuitions of public policy, avowed or
to bid and perform this project, together with the lack of       unconscious, even the prejudices which judges share with
direction and cooperation in resolving the problems              their fellow-men, have had a good deal more to do than the
encountered due to these inadequacies and refusal to             syllogism in determining the rules by which men should be
compensate Eby for these inadequacies, constitutes a             governed." ).
material breach of contract . . . .
                                                                 [20] Robins, 275 U.S. at 309.
Eby also asserted a claim for misrepresentation, which was
                                                                 [21]James, supra note 18, at 45 (footnotes omitted)
determined on appeal to be " just a subset of its breach-of
                                                                 (quoting Ultramares Corp. v. Touche , 255 N.Y. 170, 174
contract claim." Martin K. Eby Constr. Co. v. Dallas Area
                                                                 N.E. 441, 444 (N.Y. 1931)).
Rapid Transit, 369 F.3d 464, 472 (5th Cir. 2004).
                                                                 [22] See William Powers, Jr. & Margaret Niver,
[8]The dismissal was affirmed on appeal. Id. at 465.
                                                                 Negligence, Breach of Contract, and the " Economic Loss"
[9]The trial court initially granted LAN/STV summary             Rule, 23 Tex. Tech L. Rev. 477, 481 (1992) (" One
judgment on its claim of derivative immunity under Tex.          rationale for precluding recovery of pure economic loss in
Transp. Code § 452.056(d), but the court of appeals              these cases is a fear that the purely economic consequences
reversed. Martin K. Eby Constr. Co. v. LAN/STV, 205              of a defendant's negligence are not limited by the normal
S.W.3d 16, 21 (Tex.App.--Dallas 2006, pet. denied).              tort limit on the scope of a negligent defendant's liability,
                                                                 foreseeability on a case-by-case basis." ).
[10]Eby alleged: " In the course of providing the referenced
plans, drawings and specifications, LAN/STV made                 [23] See id. at 481-482 (" Another rationale is that plaintiffs
representations, in a transaction for which it was               are in a better position than defendants to evaluate their
compensated, where those representations were false,             own susceptibility to pure economic loss and protect against
misleading and/or inaccurate and were made with the              the economic loss through first-party insurance." ).
knowledge that contractors such as Eby would rely upon
                                                                 [24]Richard A. Posner, Common-Law Economic Torts: An
them."
                                                                 Economic and Legal Analysis , 48 Ariz. L. Rev. 735, 739
[11]350 S.W.3d 675 (Tex.App.--Dallas 2011).                      (2006) (citing Hadley v. Baxendale, 9 Exch. 341, 156 Eng.
                                                                 Rep. 145 (1854)).
[12]56 Tex. S.Ct. J. 277, 2013 Tex. LEXIS 105 (Feb. 15,
2013).                                                           [25] East River S.S. Corp. v. Transamerica Delaval, Inc .,
                                                                 476 U.S. 858, 859, 872-873, 106 S. Ct. 2295, 90 L.Ed.2d
[13]LAN/STV and Eby each complain of the damage                  865 (1986).
award: LAN/STV contends that it is entitled to a credit for
Eby's $4.7 million settlement with DART, and Eby argues          [26]Vincent R. Johnson, The Boundary-Line Function of
that the damages found by the jury should not have been          the Economic Loss Rule, 66 Wash. & Lee L. Rev. 523, 546
reduced by the percentage of responsibility apportioned to       (2009) (footnotes omitted) (quoting Stewart I. Edelstein,
Beware the Economic Loss Rule, Trial, June 2006, at 42, 43        defeated an action for strict liability. . . . The reason that
(2006)).                                                          Nobility . . . held there was no strict liability case for the
                                                                  product itself was the absence of proof and findings that
[27] See, e.g., Symposium, Dan B. Dobbs Conference on             there was a defect that was unreasonably dangerous that
Economic Tort Law, 48 Ariz. L. Rev. 687 (2006); Anita             produced the accident." Id. at 314-315 (Pope, J.,
Bernstein, Keep It Simple: An Explanation of the Rule of No       dissenting). In a case decided the same day as Mid
Recovery for Pure Economic Loss , 48 Ariz. L. Rev. 773,           Continent, the Court reiterated its view of Nobility Homes,
778 (2006) (citing James, supra note 18, at 45-46); Mark P.       that when " only the product itself is damaged, such damage
Gergen, The Ambit of Negligence Liability for Pure                constitutes economic loss recoverable only as damages for
Economic Loss , 48 Ariz. L. Rev. 749, 764 (2006) (citing          breach of an implied warranty under the [UCC]." Signal Oil
James, supra note 18, at 44-45); see also Jim Wren,               & Gas Co. v. Universal Oil Prods ., 572 S.W.2d 320, 325
Applying the Economic Loss Rule in Texas , 64 Baylor L.           (Tex. 1978). We have since reaffirmed: " The economic
Rev. 204, 229 (2012) (citing James, supra note 18, at 45).        loss rule applies when losses from an occurrence arise from
                                                                  failure of a product and the damage or loss is limited to the
[28] See Restatement, T.D. 1, § 1 cmt. c.                         product itself." Equistar Chems., L.P. v. Dresser-Rand Co.,
                                                                  240 S.W.3d 864, 867 (Tex. 2007) (citations omitted) (the
[29] Id. § 1.
                                                                  Court, however, did not reach the court of appeals'
[30] Id. § 1 cmt. d.                                              application of the economic loss rule).

[31]" When the reason of the law ceases, the law itself also      [34]In Signal Oil, a defective reactor charge heater installed
ceases." Black's Law Dictionary App. A 1622 (7th ed.              in a refinery's isomax unit ruptured, causing an explosion
1999).                                                            and fire that damaged the heater itself as well as other
                                                                  property; the refinery company sued for property damage
[32]Powers, supra note 22, at 477. In fairness, Texas does        and economic loss based on, inter alia , strict liability and
not have a monopoly on the confusion. See Johnson, supra          implied warranty theories. 572 S.W.2d at 322-323. The
note 26, at 546 (" The confusing mass of precedent relating       Court remanded the breach-of-warranty claim for retrial,
to tort liability for economic loss has yet to be disentangled    but concluded that the strict liability claim failed for failure
and expressed with the clarity commonly found with                to obtain a matching causation finding. Id. at 324-329, 331.
respect to other tort law topics." ).                             In so doing, however, the Court noted that plaintiff, in
                                                                  alleging that the explosion and fire damaged not only the
[33]This rule was first stated in Nobility Homes of Texas,        reactor heater, but also the catalyst, refinery product, other
Inc. v. Shivers : " strict liability does not apply to economic   equipment in the unit, and other property in the area, "
losses." 557 S.W.2d 77, 80 (Tex. 1977). The plaintiff             properly alleged a cause of action in strict liability" -- the
suffered only economic damages -- the difference between          Court explained: " Where such collateral property damage
what he paid for a rickety mobile home and what it was            exists in addition to damage to the product itself, recovery
worth. Id. at 78. But his strict products liability claim also    for such damages are recoverable under Section 402A of
failed because the mobile home, though defective, was not         the Restatement (Second) of Torts as damage to property or
unreasonably dangerous. Id. at 79-80; see also McKisson v.        under the Texas Business and Commerce Code, Section
Sales Affiliates, Inc., 416 S.W.2d 787, 788-789 (Tex. 1967)       2.715, as consequential damages for a breach of an implied
(adopting the strict liability action defined in section 402A     warranty. To the extent that the product itself has become
of the Restatement (Second) of Torts, which provides for          part of the accident risk or the tort by causing collateral
damages caused by a defective product that is unreasonably        property damage, it is properly considered as part of the
dangerous). Less than a year after the Court issued its           property damages, rather than as economic loss." Id. at 325
unanimous opinion in Nobility Homes, the Court could not          (footnote omitted). This language, in context, recognizes
agree on what had been the basis for that decision. In Mid        only that collateral property damage may be recoverable,
Continent Aircraft Corp. v. Curry County Spraying Service,        and cannot be read as permitting recovery based on a
Inc., the Court held that the decision in Nobility Homes had      products liability theory for damages to a defective product
been based on the economic loss rule: " In transactions           itself if there is also personal injury or injury to other
between a commercial seller and commercial buyer, when            property. Cf. Equistar, 240 S.W.3d at 868 (noting, in
no physical injury has occurred to persons or other               holding that Dresser's no-evidence objections failed to
property, injury to the defective product itself is an            preserve a complaint about the jury charge, that " [e]ven if
economic loss governed by the Uniform Commercial                  there had been no evidence of a tort duty, there was still no
Code." 572 S.W.2d 308, 313 (Tex. 1978). Justice Pope, the         question that Dresser sold the compressor and impellers to
author of the Court's opinion in Nobility Homes, disagreed:       Equistar and that implied warranties of merchantability
" We did not hold that damages to the product itself              existed at some point as to both" ; the damages questions
existed in the suit independent of the tort issues). The          Consumers have other remedies for economic loss against
damage to the product is an economic loss recoverable in an       persons with whom they are not in privity. One of these
action for breach of contract or breach of warranty. See          remedies is a cause in negligence." 557 S.W.2d at 83.
Murray v. Ford Motor Co., 97 S.W.3d 888, 892                      Professor Powers discounted the statement because the
(Tex.App.--Dallas 2003, pet. denied) (stating that " [n]o         Court cited no authority, and because the defendant had not
Texas court has applied the Signal Oil & Gas Co. dicta [to        challenged its liability in negligence in this Court, hence the
permit recovery of damages to the product in a strict             statement was unnecessary for the judgment. Powers, supra
liability action when accompanied by other injury]" ).            note 22, at 486-487. In any event, Professor Powers
                                                                  concluded, Jim Walter Homes had " laid to rest" any
[35]This Court had held in Jim Walter Homes, Inc. v. Reed :       confusion, id. at 487, by stating that " [w]hen the injury is
" When the injury is only the economic loss to the subject        only the economic loss to the subject of a contract itself, the
of a contract itself, the action sounds in contract alone." 711   action sounds in contract alone", 711 S.W.2d at 618. In
S.W.2d 617, 618 (Tex. 1986). See also Sw. Bell Tel. Co. v.        Sharyland Water Supply Corp. v. City of Alton, we agreed,
DeLanney, 809 S.W.2d 493, 494 (Tex. 1991) (" When the             despite the fact that the parties in Jim Walter Homes were in
only loss or damage is to the subject matter of the contract,     privity. 354 S.W.3d 407, 416 n.10 (Tex. 2011).
the plaintiff's action is ordinarily on the contract." ). We
have repeatedly reaffirmed this rule. Wansey v. Hole , 379        [39] Equistar Chems., L.P. v. Dresser-Rand Co., 123
S.W.3d 246, 248 (Tex. 2012) (per curiam) (" [A] duty in           S.W.3d 584, 587 (Tex.App.--Houston [14th Dist.] 2003) ("
tort does not lie when the only injury claimed is one for         [a]ssuming the compressors themselves are the product, any
economic damages recoverable under a breach of contract           claim for damage to them had to be brought in a contract or
claim." ); 1/2 Price Checks Cashed v. United Auto. Ins. Co.,      warranty action . . ." ), overruled on other grounds , 240
344 S.W.3d 378, 387 (Tex. 2011) (" [U]nder the economic           S.W.3d 864, 867 n.2, 868 (Tex. 2007) (because the Court
loss rule, we have held that a claim sounds in contract when      held that Dresser failed to preserve any complaint that the
the only injury is economic loss to the subject of the            jury charge improperly allowed the jury to find both tort
contract itself." ); Med. City Dallas, Ltd. v. Carlisle Corp.,    and contract damages by a single answer, the Court "
251 S.W.3d 55, 61 (Tex. 2008) (" 'When the injury is only         express[ed] no opinion" on the court of appeals' discussion
the economic loss to the subject of a contract itself, the        and application of the economic loss rule); Murray v. Ford
action sounds in contract.'" (quoting Am. Nat'l Petroleum         Motor Co., 97 S.W.3d at 891 (recovery denied for fire
Co. v. Transcon. Gas Pipe Line Corp., 798 S.W.2d 274,             damage to negligently constructed vehicle) (" The economic
282 (Tex. 1990), and Jim Walter Homes , 711 S.W.2d at             loss rule applies to negligence claims as well as claims for
618)); Lamar Homes, Inc. v. Mid-Continent Cas. Co ., 242          strict liability." ); Trans-Gulf Corp. v. Performance Aircraft
S.W.3d 1, 12 (Tex. 2007) (" The economic-loss rule . . .          Servs., Inc., 82 S.W.3d 691, 695 (Tex.App.--Eastland 2002,
generally precludes recovery in tort for economic losses          no pet.) (recovery denied for negligent repairs to a plane) ("
resulting from the failure of a party to perform under a          Simply stated, a duty in tort does not lie under the economic
contract." ). These cases have effectively limited                loss rule when the only injury claimed is one for economic
Montgomery Ward & Co. v. Scharrenbeck , 146 Tex. 153,             damages." ); Coastal Conduit & Ditching, Inc. v. Noram
204 S.W.2d 508, 510 (Tex. 1947); see Formosa Plastics             Energy Corp., 29 S.W.3d 282, 286, 289-290
Corp. v. Presidio Eng'rs & Contractors, Inc ., 960 S.W.2d         (Tex.App.--Houston [14th Dist.] 2000, no pet.) (gas lines
41, 45 (Tex. 1998) (explaining and distinguishing, in a           operator not liable, for negligently marking and placing its
fraudulent inducement suit, DeLanney and Jim Walter               lines, to company excavating for electrical conduits in the
Homes ); DeLanney, 809 S.W.2d at 494-495 (in                      absence of a contractual relationship or a claim for personal
Scharrenbeck, the defendant agreed to repair a water heater;      injury or property damages); Hou-Tex, Inc. v. Landmark
in failing to repair the water heater properly, the defendant     Graphics, 26 S.W.3d 103, 107 (Tex.App.--Houston [14th
breached its contract, and, " [i]n burning down plaintiff's       Dist.] 2000, no pet.) (seismic survey software developer not
home, the defendant breached a common-law duty as well,           liable for negligence to a third-party oil and gas company
thereby providing a basis for plaintiff's recovery in tort" )     that suffered only economic loss of drilling a dry well);
(citing Jim Walter Homes ); Jim Walter Homes, 711 S.W.2d          Indelco, Inc. v. Hanson Indus. N. Am.-Grove Worldwide ,
at 618 (" The acts of a party may breach duties in tort or        967 S.W.2d 931, 932-933 (Tex.App.--Houston [14th Dist.]
contract alone or simultaneously in both." (citing                1998, pet. denied) (recovery denied for fire damage to
Scharrenbeck )).                                                  negligently designed crane); see also Hininger v. Case
                                                                  Corp., 23 F.3d 124, 127 (5th Cir. 1994) (recovery denied
[36] See Restatement, T.D. 1, § 3.                                for lost business due to negligently designed combine).

[37]Powers, supra note 22, at 482.                                [40] Belt v. Oppenheimer, Blend, Harrison & Tate, Inc.,
                                                                  192 S.W.3d 780, 783 (Tex. 2006) (" Legal malpractice
[38] Id. at 486-487. In Nobility Homes , the Court stated: "      claims sound in tort." ); Cosgrove v. Grimes , 774 S.W.2d
662, 664 (Tex. 1989) (" An attorney malpractice action in         [44]825 S.W.2d 439, 442-443 (Tex. 1991).
Texas is based on negligence." ); Willis v. Maverick , 760
S.W.2d 642, 644 (Tex. 1988) (" A cause of action for legal        [45] Barcelo v. Elliott, 923 S.W.2d 575 (Tex. 1996).
malpractice is in the nature of a tort . . . ." ).
                                                                  [46]991 S.W.2d 787, 794 (Tex. 1999).
[41]Tex. Discip. R. Of Prof'l Conduct 1.04(d).
                                                                  [47]314 S.W.3d 913, 920 (Tex. 2010).
[42] See, e.g., Murphy v. Campbell , 964 S.W.2d 265, 269
(Tex. 1997) (" A plaintiff may obtain full redress [for           [48] Id. at 921, 923-926.
accounting malpractice] in an action for negligence or
                                                                  [49] See Restatement, T.D. 1, § 5 cmt. a.
breach of contract." ); Tex. Civ. Prac. & Rem. Code §
150.001-.003 (governing negligence suits against " licensed       [50] Sharyland Water Supply Corp. v. City of Alton , 354
or registered professionals", defined to include " a licensed     S.W.3d 407, 419 (Tex. 2011).
architect, licensed professional engineer, registered
professional land surveyor, registered landscape architect,       [51]Restatement, T.D. 2, § 6 cmt. b (the comment adds: "
or any firm in which such licensed or registered                  Allowing a suit against the architect of a project by a party
professional practices, including but not limited to a            who made a bid in reliance on a defective plan does not
corporation, professional corporation, limited liability          create comparable problems." ).
corporation, partnership, limited liability partnership, sole
proprietorship, joint venture, or any other business entity",     [52]Restatement, T.D. 1, § 5 cmt. a.
id. § 150.001(1-a)).
                                                                  [53]Restatement, T.D. 2, § 6 cmt. b.
[43]Section 552, entitled " Information Negligently
Supplied for the Guidance of Others", states:                     [54] Id.

 " (1) One who, in the course of his business, profession or      [55]The Restatement posits the following situation in
employment, or in any other transaction in which he has a         illustration 8 to section 3, borrowed from illustration 9 to
pecuniary interest, supplies false information for the            section 552 of the Restatement (Second) :
guidance of others in their business transactions, is subject
to liability for pecuniary loss caused to them by their           City hires Engineer to test soil conditions at a site where it
justifiable reliance upon the information, if he fails to         plans to erect a large building. City explains that Engineer's
exercise reasonable care or competence in obtaining or            report will be distributed to prospective building contractors
communicating the information.                                    for use in estimating their costs. Engineer negligently
                                                                  submits an inaccurate report. Contractor wins the right to
" (2) Except as stated in Subsection (3), the liability stated    perform the construction, having relied on Engineer's report
in Subsection (1) is limited to loss suffered                     in preparing its bid. Engineer's errors cause Contractor to
                                                                  suffer losses in performing its contract with City. The
" (a) by the person or one of a limited group of persons for      contracts between Contractor and City, and between City
whose benefit and guidance he intends to supply the               and Engineer, do not preclude a claim by Contractor against
information or knows that the recipient intends to supply it;     Engineer [for negligent performance of services or
and                                                               negligent misrepresentation]. Engineer remains potentially
                                                                  liable to Contractor under either of those [torts].
" (b) through reliance upon it in a transaction that he intends
the information to influence or knows that the recipient so       Restatement, T.D. 1, § 3 cmt. f. But the Restatement adds:
intends or in a substantially similar transaction.
                                                                  Contractor could have insisted that City guarantee the
" (3) The liability of one who is under a public duty to give     soundness of Engineer's report, and City could have insisted
the information extends to loss suffered by any of the class      that Engineer indemnify City for claims brought against it
of persons for whose benefit the duty is created, in any of       by Contractor. In effect, those contracts would have
the transactions in which it is intended to protect them."        protected Contractor against the risk of errors by Engineer,
                                                                  and would have ensured that Engineer would bear the costs
Restatement (Second) of Torts § 552 (1977). Section 5 of          of its negligence.
the Restatement (Third) of Torts: Liability for Economic
Harm " repeats § 552 with small changes." Restatement,            Id.
T.D. 1, § 5 cmt. a.
                                                                  [56] Id. § 3, reporter's note to cmt. f.
[57]Restatement, T.D. 2, § 6 cmt. b.

[58]Restatement, T.D. 1, § 3 cmt. f.

[59]Powers, supra note 22, at 521 n.205 (citation omitted).

[60]The following cases apply the economic loss rule:
BRW, Inc. v. Dufficy & Sons, Inc., 99 P.3d 66 (Colo. 2004);
Hercules & Co., Ltd. v. Shama Restaurant Corp., 566 A.2d
31 (D.C. 1989); Fireman's Fund Ins. Co. v. SEC Donohue,
Inc., 176 Ill. 2d 160, 679 N.E.2d 1197, 223 Ill. Dec. 424
(1997); Terracon Consultants Western, Inc. v. Mandalay
Resort Grp., 125 Nev. 66, 206 P.3d 81 (Nev. 2009); Floor
Craft Floor Covering, Inc. v. Parma Cmty. Gen. Hosp.
Ass'n, 54 Ohio St. 3d 1, 560 N.E.2d 206 (Ohio 1990); SME
Indus., Inc. v. Thompson, Ventulett, Stainback and Assocs.,
Inc., 2001 UT 54, 28 P.3d 669 (Utah 2001); Blake Constr.
Co., Inc. v. Alley , 233 Va. 31, 353 S.E.2d 724, 3 Va. Law
Rep. 1868 (Va. 1987); Berschauer/Phillips Constr. Co. v.
Seattle Sch. Dist., 124 Wash. 2d 816, 881 P.2d 986 (Wash.
1994); Excel Constr., Inc. v. HKM Eng'g, Inc., 2010 WY
34, 228 P.3d 40 (Wyo. 2010).

The following do not: Sullivan v. Pulte Home Corp ., 232
Ariz. 344, 306 P.3d 1 (Ariz. 2013) (noting that Donnelly
Constr. Co. v. Oberg/Hunt/Gilleland , 139 Ariz. 184, 677
P.2d 1292 (Ariz. 1984), correctly implied that the economic
loss doctrine would not apply to negligence claims by a
plaintiff who has no contractual relationship with the
defendant (citation omitted)); A. R. Moyer, Inc. v. Graham,
285 So. 2d 397 (Fla. 1973) (though this case was limited to
its facts, the economic loss doctrine was thereafter limited
to products liability cases; see Tiara Condo. Ass'n v. Marsh
& McLennan Cos., 110 So. 3d 399 (Fla. 2013)); Craig v.
Everett M. Brooks Co., 351 Mass. 497, 222 N.E.2d 752
(Mass. 1967); Prichard Bros., Inc. v. Grady Co., 428
N.W.2d 391 (Minn. 1988); Bilt--Rite Contractors, Inc. v.
The Architectural Studio , 866 A.2d 270, 581 Pa. 454 (Pa.
2005); Forte Bros., Inc. v. Nat'l Amusement, Inc., 525 A.2d
1301 (R.I. 1987); Tommy L. Griffin Plumbing & Heating
Co. v. Jordan, Jones & Goulding, Inc., 320 S.C. 49, 463
S.E.2d 85 (S.C. 1995); Eastern Steel v. City of Salem, 209
W.Va. 392, 549 S.E.2d 266 (W. Va. 2001).

For a survey of case law both ways, see Marc Schneier,
Annotation, Tort Liability of Project Architect or Engineer
for Economic Damages Suffered by Contractor or
Subcontractor, 61 A.L.R. 6th 445 (2011).

---------
Page 220                                                  P.C., Austin, TX.

460 S.W.3d 220 (Tex.App.-Austin 2015)                           Before Chief Justice Rose, Justices Pemberton and
                                                          Field.
Tom Bennett and James B. Bonham Corp., Appellants
                                                          Page 228
v.
                                                               ON MOTION FOR REHEARING
Larry Wayne Grant, Appellee
                                                               Scott K. Field, Judge
No. 03-11-00669-CV
                                                               OPINION
Court of Appeals of Texas, Third District, Austin
                                                                We withdraw the opinion dated August 13, 2014, and
March 20, 2015                                            the supplemental opinion and judgment dated September
                                                          26, 2014, and substitute the following opinion and judgment
     Petition for review filed by, 07/06/2015             in their place. We deny the Appellants' motion for
                                                          rehearing.
Page 221
                                                                This suit arises from a now infamous feud between
[Copyrighted Material Omitted]
                                                          neighboring cattle ranchers in San Saba, the details of
Page 222                                                  which have been thoroughly relayed in prior opinions of
                                                          this Court and the Texas Supreme Court. See Bennett v.
[Copyrighted Material Omitted]                            Reynolds, 242 S.W.3d 866 (Tex.App.--Austin 2007), rev'd
                                                          & remanded in part by 315 S.W.3d 867 (Tex. 2010) (
Page 223                                                  Bennett I ). The feud between cattle ranchers Thomas O.
                                                          Bennett and Randy Reynolds has many turbulent twists and
[Copyrighted Material Omitted]                            turns, see id., but the gist of the dispute and subject of prior
                                                          appeals involved allegations that thirteen head of cattle
Page 224                                                  belonging to Reynolds had wandered onto Bennett's ranch,
                                                          and that instead of returning them in a neighborly fashion,
[Copyrighted Material Omitted]
                                                          Bennett ordered his ranch hand--Larry Grant--to round up
                                                          the cattle and sell them at auction. Grant testified that he
Page 225
                                                          raised concerns with Bennett that the cattle did not belong
[Copyrighted Material Omitted]                            to him, but Bennett ignored his concerns.[1] Worried that
                                                          he could be implicated in cattle theft, Grant purchased a
Page 226                                                  disposable camera and took several photos of the cattle
                                                          loaded on Bennett's trailer prior to the sale. Within two
[Copyrighted Material Omitted]                            months of the sale, Grant left his employment with Bennett
                                                          but kept the secret photos stashed away in a box in his
Page 227                                                  home where they were seemingly forgotten and left
                                                          undisturbed for almost a year. Reynolds, however,
    FROM THE DISTRICT COURT OF SAN SABA
                                                          eventually learned of the secret photos after a chance
COUNTY, 33RD JUDICIAL DISTRICT. NO. 8086,
                                                          encounter with Grant's brother-in-law and demanded that
HONORABLE GUILFORD L. JONES III, JUDGE
                                                          Grant turn the photos over to the authorities. What happens
PRESIDING.
                                                          next is hotly disputed and the subject of litigation between
                                                          Bennett and his former ranch hand, Grant, which gave rise
     Reformed and, as Reformed, Affirmed on Motion for
                                                          to this appeal.
Rehearing.
                                                                 After Reynolds attempted to obtain the photos, Grant
      For Appellee: Mr. Don Cruse, Law Office of Don
                                                          testified that he was distressed and began drinking beer and
Cruse, Austin, TX.
                                                          smoking marijuana to relieve tension. He then made a series
     For Appellant: Mr. D. Todd Smith, Smith Law Group,   of phone calls to Bennett and Bennett's friend and
                                                          employee, Don " Ex" Rogers. Grant testified that the
purpose of the calls was to inform Bennett of the pictures       otherwise uphold the trial court's judgment.
and give him an opportunity to " make it right" with
Reynolds. Bennett and Rogers' version, however, depicts               MALICIOUS PROSECUTION
Grant as calling to try and sell the photographs to Bennett.
Grant acknowledged he had some discussion with Rogers                 A. Background Facts
about selling the photos to Bennett but testified that they
                                                                        On the evening of October 4, 2001, telephone records
only " joked about it." It was no joke, however, when Grant
                                                                 confirm that Grant called and spoke with Bennett for
turned the photos over to law enforcement about a month
                                                                 thirteen minutes, but the topic of conversation that evening
after these conversations and triggered an extraordinary
                                                                 is hotly disputed by the parties. As previously discussed,
series of events. First, Bennett was indicted for cattle theft
                                                                 Grant testified that he called to inform Bennett about the
based in part on Grant's testimony and photos. Although
                                                                 pictures and to give him an opportunity to " make it right"
ultimately acquitted of the criminal charges, Bennett and his
                                                                 with Reynolds. Bennett, however, testified that Grant called
cattle company,
                                                                 to try and sell the photos to him for $5,000. What is
Page 229                                                         undisputed, however, is that Bennett waited nearly two
                                                                 years to report his allegations against Grant to the
 the James B. Bonham Corporation, were found liable for          authorities. Indeed, Bennett testified that it was not until
conversion in a civil suit brought by Reynolds resulting in a    after his criminal trial that he decided to report the incident
judgment of $5,327.11 in actual damages. The actual              to authorities and acknowledged at trial that his sole " goal"
damages, however, paled in comparison to the combined            in reporting the incident was to put " Grant in prison . . . for
exemplary damages of $1.25 million awarded amidst                what he's done to me." In furtherance of his goal, Bennett
allegations that Bennett had willfully sold his neighbor's       testified he met with law enforcement authorities in four
cattle to settle a score in a long-standing feud and then        separate counties in an attempt to get Grant indicted for
attempted to cover his actions by--among other                   attempted blackmail. After authorities in San Saba County,
allegations--threatening and bribing witnesses, tampering        Llano County, and Coleman County refused to prosecute
with the photographs Grant had taken to alter the images of      Grant, Bennett met with the district attorney in Navarro
the brands on the cattle to look like his own brand, and even
attempting to register his neighbor's brand as his own with      Page 230
the district clerk of San Saba County. Such allegations and
                                                                 County and requested he prosecute the case.
such a large exemplary damages award are extraordinary by
themselves,[2] but it is only half of the story and less than
                                                                        According to the district attorney's testimony, the
half of the total liability adjudged against Bennett and the
                                                                 following events then transpired. After his initial meeting
Bonham Corporation from these events.
                                                                 with Bennett, the district attorney believed that if an
                                                                 attempted blackmail had occurred, it was a federal offense
      The other half is the subject of this appeal--a $2.28
                                                                 and referred the matter to the federal authorities. Unhappy
million judgment awarded to Grant for a successful
                                                                 with this outcome, Bennett again approached the district
malicious prosecution claim brought against Bennett and
                                                                 attorney but this time with a new theory--requesting that
the Bonham Corporation. This claim arose from Bennett's
                                                                 Grant be prosecuted for attempted theft. The district
admitted, yet ultimately unsuccessful, campaign to have
                                                                 attorney informed Bennett he could not bring charges for
Grant imprisoned after he turned the photos over to
                                                                 misdemeanor attempted theft because it was barred by the
authorities. In this appeal, Bennett and the Bonham
                                                                 two-year statute of limitations. Undeterred, Bennett then
Corporation (collectively, Appellants) contest the judgment
                                                                 provided the district attorney with new information,
in Grant's malicious prosecution suit, contending: (1)
                                                                 alleging--for the first time--that Grant had attempted to
legally insufficient evidence supported the malicious
                                                                 extort money from him a second time within the limitations
prosecution claim; (2) legally and factually insufficient
                                                                 period. The district attorney testified that he was "
evidence supported the $10,703 awarded in compensatory
                                                                 skeptical" of this new evidence because it " appeared that
damages; (3) legally insufficient evidence supported the
                                                                 there was maybe some tailoring of the facts going on to fit
jury's findings allowing for the imposition of exemplary
                                                                 the statute." Indeed, in his sworn testimony in this case,
damages over the statutory cap; and (4) the total $2 million
                                                                 Bennett made no mention of a second attempted blackmail
exemplary damages award ($1 million against Bennett and
                                                                 by Grant. Rather, he unequivocally testified that all the
$1 million against the Bonham Corporation) violated due
                                                                 factual accusations against Grant occurred in a single
process. Individually, the Bonham Corporation raises
                                                                 evening on October 4, 2011. The district attorney further
several arguments challenging its liability in the suit, and
                                                                 testified that, based on his conversations with Bennett about
Bennett challenges a $269,644.50 sanction. We conclude
                                                                 the case, he formed the impression that Bennett's motive for
that the award of exemplary damages failed to comport with
                                                                 prosecuting Grant was to gain an advantage in civil
due process requirements and required remittitur, but
litigation arising from the case. Being " suspicious" of                Ultimately, Bennett was successful in his goal of
Bennett's new evidence, the district attorney decided to "        getting Grant indicted, as the special prosecutor presented
dig in his heels" and refused to prosecute.                       the case for a second time to the grand jury--more than four
                                                                  years after the phone call between Grant and Bennett
       Still undeterred, Bennett met with an attorney who         occurred--but this time obtained indictments for the felony
testified that he had represented the Bonham Corporation          offenses of tampering with a witness and attempted bribery.
for over twenty years and that Bennett directed him to            The special prosecutor testified that in deciding whether to
research and draft a legal brief advocating that Grant's          present the case to the grand jury, he interviewed both
alleged actions constituted a criminal offense that should be     Bennett and Rogers but exercised independent discretion in
prosecuted. The district attorney testified that it was this      ultimately determining whether there was sufficient
brief or another meeting with Bennett that finally was the "      evidence to prosecute the case. He testified further that he
catalyst" that prompted him to bring the case to the grand        relied on evidence other than Bennett's and Rogers'
jury. He further testified that it was " rare" for him to bring   statements in his decision to prosecute. When asked,
misdemeanor cases to the grand jury because he himself            however, whether Bennett's and Rogers' statements were "
had the authority to bring misdemeanor charges without            very material to [his] decision to proceed to the grand jury,"
grand jury involvement. But, in this case, he finally yielded     the special prosecutor acknowledged that the statements
to Bennett's demands because he did not want to appear "          were " definitely" very material to his decision. Further, he
draconian" in his refusal to bring charges. The district          acknowledged testifying during his deposition that he "
attorney may have been finally persuaded to present the           would not have presented" the case to the grand jury if he
case, but the grand jury was not as persuaded and refused to      had believed Bennett " was making untrue statements." He
indict Grant.                                                     also testified that if he believed there had been a " tailoring
                                                                  of the facts" by Bennett--as the Navarro County district
       Frustrated that the grand jury had not indicted Grant,     attorney believed--that it would have affected his decision
Bennett testified he again met with the same attorney who         to go to the grand jury.[5] Grant maintained throughout trial
this time advised him to get a special prosecutor appointed       that both men had lied to the authorities about the alleged
in Navarro County to bring the case before the grand jury a       blackmail.
second time. After the attorney explained to him the
procedure for appointing a special prosecutor, Bennett                  Further, some of the evidence Bennett presented to the
testified he had the attorney draft a petition alleging the       special prosecutor appears from the record to have differed
district attorney had a conflict of interest and accusing him     from the initial evidence presented to the district attorney.
of taking no action in the case.[3] The petition further          First, there is no evidence in the record that Bennett
sought the appointment of Robert Dunn--a local attorney           reported to the special prosecutor two incidents of alleged
and neighbor of Bennett's--as a special prosecutor for the        extortion occurring on different dates--as he had to the
case. Bennett, who resided and ran a cattle ranch in Navarro      district attorney. Rather, the special prosecutor testified
County, testified that he then led the effort to circulate and    only as to the alleged misconduct occurring during phone
obtain over 250 signatures from Navarro County residents          conversations on October 4, 2011, and the indictment
for the petition seeking the appointment of Dunn as special       alleged only one count--not two--of the charged offenses.
prosecutor for the case. Bennett testified that others helped     Second, Bennett added a new detail to his allegations,
with the                                                          contending for the first time that Grant had specifically
                                                                  asked him to pay $5,000 for the pictures. In a previous
Page 231                                                          written statement to the authorities, Bennett did not allege a
                                                                  specified amount in his extortion claims. The Navarro
 petition but that " it was mostly me . . . I think I done most
                                                                  County district attorney also did not recall Bennett telling
of it." The district attorney, who was now seeking
                                                                  him this detail, and it would have been material to how he
reelection in a hotly contested race, testified that he was
                                                                  presented the case to the grand jury because
unaware that Bennett was leading this campaign throughout
the county until Bennett showed up at his office for a final      Page 232
meeting. Bennett, with the signed petitions in hand, then
accused the district attorney of being partial and unfair          the amount of money at issue increased the degree of the
when he presented Grant's case to the grand jury and              offense.[6] See Tex. Penal Code § 31.03(e) (value of
demanded that Dunn be appointed special prosecutor in the         property involved in theft dictates classification of offense).
case. Feeling that Bennett's petition campaign " wasn't           Finally, the special prosecutor additionally testified that in
helping" his chances of reelection, the district attorney         deciding to prosecute the case, he relied--in part--on a
testified that he agreed to the appointment of Dunn as            transcript from Bennett purportedly transcribing
special prosecutor in the case.[4]                                secretly-taped " conversations" with Grant that
                                                                  substantiated Bennett's claim that Grant had sought $5,000
from him. If this transcript was also given to the district       Page 233
attorney, he made no reference to it in his testimony.
                                                                   balance society's interest in protecting private persons who
       Regarding the transcript, the special prosecutor           report criminal conduct with the individual citizen's interest
testified that initially Bennett presented him with a tape        in being protected against unjustifiable and oppressive
recording of " conversations" but that he was unable to           litigation of criminal charges. Browning-Ferris Indus. v.
understand it because it was " awful garbled." Bennett then       Lieck, 881 S.W.2d 288, 290-91 (Tex. 1994). In that regard,
gave him a transcript purportedly transcribing the tape. The      the Texas Supreme Court has instructed us that the balance
special prosecutor could not testify as to when the tape was      between these important interests is maintained by strictly
allegedly recorded, but it appears from his testimony that he     adhering to the defined elements of an action for malicious
believed the tape was a recording of the actual telephone         prosecution and that even a small departure from the exact
conversations reflected on Grant's telephone bill or              prerequisites for liability may threaten this delicate balance.
conversations related directly to those phone records. He         Id. But, " as with any other cause of action, if the elements
further testified that the taped conversations substantiated      of malicious prosecution are proved, liability is
Bennett's claim that Grant had specifically sought " $5,000"      established." Id. at 291. Those elements are: (1) the
for the pictures. This transcript, however, was destroyed         commencement of a criminal prosecution against the
when Grant's record was later expunged. Besides this              plaintiff; (2) causation of the action by the defendant; (3)
information, there is no additional information in the record     termination of the prosecution in the plaintiff's favor; (4) the
as to what was reflected in the transcript or the tape.           plaintiff's innocence; (5) the absence of probable cause for
Bennett himself testified at trial that he had secretly           the proceedings; (6) malice in filing the charges; and (7)
recorded a conversation with Grant and had presented this         damages. Richey v. Brookshire Grocery Co., 952 S.W.2d
tape to law enforcement, but this tape recorded only a single     515, 517 (Tex. 1997).
conversation between Grant and Bennett occurring almost a
year prior to Grant's alleged extortion. As such, there is no            Appellants do not dispute the jury's findings that there
mention on the tape of the photographs or a demand for            was no probable cause to prosecute Grant, that Grant was
$5,000. Indeed, when the special prosecutor was presented         innocent of the charges, and that Bennett acted with malice
with a transcript of the tape Bennett testified to presenting     in pursuing the charges. Rather, they argue only that there is
to other law enforcement, the special prosecutor testified        legally insufficient evidence that Bennett's conduct caused
that he had never seen it before, and it was " completely         the commencement of a criminal prosecution against Grant.
different" than the transcript Bennett had given him.             The causation element of malicious prosecution requires
                                                                  evidence that a defendant " initiated" or " procured" a
      Bennett's plan to imprison Grant seemed to finally be       criminal prosecution. Lieck, 881 S.W.2d at 292. A person
coming to fruition when the special prosecutor then took          initiates a criminal prosecution if he makes a formal charge
this evidence to a second grand jury and succeeded in             to law enforcement authorities. Id. Here, there is no
obtaining two felony indictments, and Grant surrendered           evidence in the record that Bennett filed any formal
himself to authorities. But Bennett's long and hard-fought        charges; Grant, therefore, relies on procurement. A person "
quest ended nine months later, when both of Grant's               procures" a criminal prosecution " if his actions are enough
indictments were quashed because the charges had been             to cause the prosecution, and but for his actions the
filed past the statute of limitations. Further, the trial court   prosecution would not have occurred." Id. Thus,
granted Grant's motion to have his arrest and indictments         procurement requires that a person's actions be both a "
expunged from his record as void. Upon expunction,                necessary and a sufficient cause of the criminal
Grant--who was already being sued by Bennett for                  prosecution." Id. Appellants argue there is no evidence
slander--added a counterclaim against Bennett and the             Bennett " procured" Grant's criminal prosecution because
Bonham Corporation for malicious criminal prosecution.[7]         the prosecutors involved acted with independent discretion,
Upon hearing the preceding evidence, the jury found that          and their exercise of discretion was a superceding,
Bennett and the Bonham Corporation had indeed                     intervening cause of the prosecution that destroyed his own
maliciously prosecuted Grant. They appeal, contending             liability in bringing about the charges. Appellants are
there is insufficient evidence of a malicious prosecution.        correct that generally a person cannot procure a criminal
Appellants' claim requires us to first expound upon the law       prosecution when the decision whether to prosecute is left
of malicious prosecution.                                         to the discretion of another because the independent
                                                                  exercise of discretion destroys the necessary causal link
     B. Malicious Prosecution                                     between the defendant and the prosecution. See id. There
                                                                  are, however, two important exceptions to this rule where a
      Malicious prosecution is an unusual tort in that it         defendant may still be liable for malicious prosecution
requires the court to                                             because his actions are such that it makes an intelligent
                                                                  exercise of discretion impossible: (1) when a defendant
provides information which he knows is false that causes a       procurement.
criminal prosecution, or (2) when a defendant's conduct was
the determining factor in the prosecutor's decision to                 Reviewing the evidence in the light most favorable to
prosecute. See id. at 292--94. We conclude there is legally      the jury's verdict, the Navarro County district attorney
sufficient evidence to support the jury's finding of causation   believed Bennett's claims were barred by limitations and
under both exceptions.                                           would never have brought this case before the grand jury
                                                                 but for Bennett changing his story to add an additional
    1. Legally sufficient evidence Bennett procured              claim of extortion occurring within the limitations period.
Grant's prosecutions by providing false information.             As Grant testified this was a false allegation, we will
                                                                 assume--for purposes of our analysis--that the allegation
        The first exception is when a defendant provides         was false, and there is more than sufficient evidence that the
information which he knows is false that causes a criminal       false allegation was the but-for cause of the prosecutor
prosecution. See id. at 293. For this exception, the plaintiff   presenting the case to the grand jury. Traditionally,
must prove both that the defendant knowingly furnished           however, the tort of malicious prosecution does not arise
false information to authorities, and that but for such          until process is issued, an indictment is returned,
                                                                 information filed, or the accused is arrested. See
Page 234                                                         Restatement (Second) of Torts § 654 (1977). Here, there is
                                                                 no evidence in the record that any of these events occurred
 false information, the prosecutor would not have decided to
                                                                 with regard to this first proceeding before the grand jury or
prosecute. King v. Graham, 126 S.W.3d 75, 76 (Tex. 2003).
                                                                 that Grant was aware of or suffered damages from this
The prosecutor's reliance on the false information makes an
                                                                 proceeding. Accordingly, the bulk of our analysis must
intelligent exercise of discretion impossible and establishes
                                                                 focus on the second presentment of the case to the grand
the causal link necessary to hold the defendant liable for
                                                                 jury by the special prosecutor, which ultimately resulted in
malicious prosecution. See id. at 78. But, if the decision to
                                                                 two indictments and Grant's arrest.
prosecute would have been made with or without the false
information, the defendant did not cause the prosecution by            Viewing the evidence regarding the second grand jury
supplying false information. A single prosecution may,           proceeding in the light most favorable to the verdict, we
however, be procured by more than one person. Lieck, 881         conclude there was more than a scintilla of evidence to
S.W.2d at 292.                                                   support the jury's finding that Bennett procured the
                                                                 prosecution. The special prosecutor acknowledged in his
      Appellants challenge only the legal sufficiency of the
                                                                 testimony that Bennett's statements were " definitely . . .
jury's finding that Bennett procured Grant's prosecution. A
                                                                 very material" to his decision to proceed to the grand jury.
party challenging the legal sufficiency of the evidence
                                                                 He further acknowledged
supporting an adverse finding on an issue for which the
opposing party bears the burden of proof will prevail if         Page 235
there is a complete absence of evidence of a vital fact or if
the evidence offered to prove a vital fact is no more than a       that if he had believed Bennett's statements were
scintilla. See Waste Mgmt. of Tex., Inc. v. Texas Disposal       untruthful, then he " would not have presented" the case to
Sys. Landfill, Inc., 434 S.W.3d 142, 2014 WL 1875637, at         the grand jury. Assuming Bennett's statements were false,
*8 (Tex. 2014); City of Keller v. Wilson, 168 S.W.3d 802,        the special prosecutor's testimony provides more than a
810 (Tex. 2005). More than a scintilla exists when the           scintilla of evidence that Bennett was a necessary and
evidence as a whole rises to a level enabling reasonable and     sufficient cause of the prosecution. Compare King, 126
fair-minded people to have different conclusions. Merrell        S.W.3d at 79 (holding insufficient evidence of causation
Dow Pharms., Inc. v. Havner , 953 S.W.2d 706, 711 (Tex.          where " [n]othing in the record shows that the false
1997). In conducting a legal-sufficiency review, we              information was material to the decision to prosecute" ).
consider the evidence in the light most favorable to the         Further, there was additional evidence that the special
judgment, crediting evidence that a reasonable fact finder       prosecutor relied on the transcript that Bennett had given
could have considered favorable and disregarding                 him allegedly transcribing secretly-taped conversations with
unfavorable evidence unless the reasonable fact finder           Grant. From the record, there was sufficient evidence for
could not. City of Keller , 168 S.W.3d at 807. We indulge        the jury to infer that Bennett had fabricated this evidence
every reasonable inference that supports the jury's findings.    and that it was a material cause of the prosecution, as the
Id. at 822. Therefore, we must uphold the jury's verdict         special prosecutor testified that the transcript substantiated
unless--after viewing the evidence in the light most             Bennett's claim that Grant had sought $5,000 from him.
favorable to the jury's verdict and disregarding contrary
evidence unless a reasonable jury could not--there is no                For legal sufficiency review, we consider the
more than a scintilla of evidence to support the finding of      evidence in the light most favorable to the judgment,
crediting evidence that a reasonable fact finder could have           Grant's prosecution by other improper conduct.
considered favorable and disregarding unfavorable evidence
unless a reasonable fact finder could not. See City of Keller,               The second exception in which a defendant may be
168 S.W.3d at 827. We note here the special prosecutor                liable for malicious prosecution is " when his conduct is the
testified that--in addition to the information provided by            determining factor in the prosecutor's decision to
Bennett--he also relied on Grant's sworn testimony from               prosecute." [10] See Lieck, 881 S.W.2d at 294. For this
Bennett's prior criminal trial for cattle theft. At that trial, the   exception to be applicable, it must " appear that [the
special prosecutor testified Grant purportedly admitted               defendant's] desire to have the proceedings initiated,
making a phone call to Rogers seeking money for the                   expressed by direction, request or pressure of any kind, was
pictures but alleged he was only " joking." [8] The special           the determining factor in the official's decision to
prosecutor testified that in his opinion Grant " tried to cover       commence the prosecution." Id. (quoting Restatement
himself" by alleging that it was a joke, and when asked               (Second) Torts § 653 (1977)). The Texas Supreme Court in
whether he would have prosecuted based solely on this                 1994 adopted this exception set out in the Restatement of
testimony, he responded: " I think so, because the fact is            Torts. See id. We note, however, that the parties have not
that he admitted making the calls." (emphasis added). When            cited to, and we have not found, any Texas case that has
a prosecutor relies on evidence independent of the false              determined what type of conduct would constitute "
information provided by the defendant, the defendant "                procurement" under this exception. See Michol O'Connor,
cannot be said to have caused the prosecution if the [false]          O'Connor's Texas Causes of Action, ch. 19-A, at 572 (2014)
information was immaterial to the decision to prosecute."             (" No Texas court has determined what type of conduct,
King, 126 S.W.3d at 78. The special prosecutor, however,              other than providing false information, would constitute
had previously acknowledged that Bennett's evidence was               procurement." ). After careful review of the record in this
definitely very material to his decision to prosecute and that        case, we conclude this is the rare case where the defendant
he would not have presented the case if he had thought                engaged in such an intentional and systematic abuse of the
Bennett was providing false information.[9]                           justice system that there was sufficient evidence his conduct
                                                                      was the determining factor in the prosecution.
      To the extent there is any conflict in the special
prosecutor's testimony as to the cause of the prosecution,                  As there are no examples under Texas case law, we
causation is generally a question of fact for the jury, see           will draw upon the Restatement itself for guidance. The
Rodriguez v. Moerbe, 963 S.W.2d 808, 818--19                          Restatement provides the following example as illustration
(Tex.App.--San Antonio 1998, pet. denied), and there is               of this exception:
more than a scintilla of evidence to support the jury's fact
finding                                                               A goes to B, a district attorney and informs him that C has
                                                                      committed a battery upon A. A is a political boss to whom
Page 236                                                              B owes his election. A demands that B prosecute C. The
                                                                      battery is one that has created no public disturbance and is
  that Bennett's false information was a necessary and                therefore an offense for which a public prosecutor would
sufficient cause of the prosecution. Further, the jury was            not ordinarily institute proceedings. In compliance
entitled to resolve any conflicts in the special prosecutor's
testimony and could choose to believe or disbelieve all or            Page 237
part of his testimony. See McGalliard v. Kuhlmann , 722
S.W.2d 694, 697 (Tex. 1986) (jury may " resolve                        with A's demand, B files an information against C. A has
inconsistencies in the testimony of any witness" ); see also          procured the institution of the proceeding.
City of Keller , 168 S.W.3d at 819 ( " Jurors are the sole
                                                                      Restatement (Second) Torts § 653 (1977). In the example,
judges of the credibility of the witnesses and the weight to
                                                                      the defendant procured the prosecution by exerting
give their testimony. . . . Reviewing courts cannot impose
                                                                      improper pressure on the district attorney to bring charges
their own opinions to the contrary." ). Consequently, we
                                                                      that ordinarily would not have been filed. Similarly, in this
conclude a reasonable jury could find that the false
                                                                      case, there is legally sufficient evidence in the record that
information provided by Bennett was a necessary and
                                                                      Grant would not have been prosecuted but for Bennett's
sufficient cause of Grant's prosecution and disregard any
                                                                      acknowledged and systematic campaign to improperly
contrary evidence. After reviewing the evidence under the
                                                                      influence the proceedings. First, the Navarro County district
appropriate standard, we conclude there is legally sufficient
                                                                      attorney testified emphatically that although he had the
evidence to support the jury's finding that Bennett procured
                                                                      authority to file an information charging Grant with
Grant's criminal prosecution by providing false information.
                                                                      misdemeanor attempted theft, he " dug in his heels" and
      2. Legally sufficient evidence Bennett procured                 steadfastly refused to press charges against Grant because
                                                                      of the statute of limitations and because he believed Bennett
had been tailoring the facts to create a chargeable offense.      evidence to support the jury's findings of corporate liability.
Only after immense pressure from Bennett and some
altering of the facts, did the district attorney finally yield    Page 238
and agree to bring the misdemeanor case before the grand
jury. He testified, however, that ordinarily he would not              A. Joinder
have presented this misdemeanor case to the grand jury but
                                                                        In its first individual issue, Bonham contends that it
only did so because of Bennett's unceasing demands. Like
                                                                  was improperly joined as a party to this suit. A trial court is
the example in the Restatement, this proceeding before the
                                                                  given a great deal of discretion in matters of joinder, and its
grand jury would never have occurred but for Bennett
                                                                  decision on such procedural issues will not be disturbed on
exerting such pressure on the district attorney that his desire
                                                                  appeal absent an abuse of discretion. Varme v. Gordon, 881
to have the proceeding commenced was the determining
                                                                  S.W.2d 877, 882 (Tex.App.--Houston [14th Dist.] 1994,
factor in the district attorney's decision to prosecute.
                                                                  writ denied). A trial court abuses its discretion when it has
      After the grand jury refused to indict,                     acted in an unreasonable or arbitrary manner, or when it
Bennett--undeterred in his goal of having Grant                   acts without reference to any guiding principle. Coburn v.
imprisoned--then organized and led an extraordinary               Moreland, 433 S.W.3d 809, 823 (Tex.App.--Austin 2014,
petition campaign to put in place a hand-picked special           no pet.). A trial court's decision on the matter of the joinder
prosecutor to indict Grant. At a time when the district           of an additional party is " generally based on practical
attorney was facing a heavily-contested election, Bennett         considerations with a view to fair, orderly and timely
then came to the district attorney's office with the petitions    prosecution and disposal of pending litigation." Fireman's
demanding the appointment of his special prosecutor to the        Fund Ins. Co. v. McDaniel, 327 S.W.2d 358, 373
case. Feeling Bennett's petition campaign " wasn't helping"       (Tex.Civ.App.--Beaumont 1959, no writ).
his chances of reelection, the district attorney again yielded
                                                                         Bonham's misjoinder claim necessitates a brief review
to Bennett's demands. Here, like the example in the
                                                                  of this case's procedural history. This suit was originally
Restatement, Grant's second prosecution was a proceeding
                                                                  initiated by Bennett--the plaintiff in this suit--filing an
that would have never occurred but for Bennett's exertion of
                                                                  original petition suing Grant for slander. In his original
untoward pressure on the district attorney. Undoubtedly,
                                                                  answer, Grant asserted a counterclaim against Bennett for
there is more than a scintilla of evidence that Bennett's
                                                                  intentional infliction of emotional distress. Later, in an
acknowledged and systematic campaign to improperly
                                                                  amended pleading, Grant added Bonham as an additional
influence judicial proceedings was the determining factor in
                                                                  counter-defendant to his intentional infliction of emotional
the prosecution.
                                                                  distress claim. Upon request of the trial court, Grant then
      Accordingly, we conclude there is legally sufficient        filed a motion seeking leave to include Bonham in the suit.
evidence that Bennett procured Grant's prosecution by             Grant's motion for leave sought to add Bonham as a party to
either providing false information to authorities or by           the suit on the grounds that Bonham was Bennett's alter
engaging in such a systematic and untoward campaign to            ego, and his claims of intentional infliction of emotional
influence judicial proceedings that his conduct was the           distress against both Bennett and Bonham " arose from the
determining factor in the prosecution.                            same transaction, occurrence, or series of transactions or
                                                                  occurrences . . . and the questions of law and fact in this
     CORPORATE LIABILITY                                          case are common to both [Bennett and Bonham]." After a
                                                                  hearing, the trial court granted the motion without stating
      Having found sufficient evidence of Bennett's liability     the grounds for the joinder and ordered Grant to serve
in this suit, we next address Bonham's liability. With regard     Bonham with process. After being served, Bonham
to Bonham, the jury made several alternate findings               answered as a party to the suit without further objection.
imputing corporate liability on Bonham for the malicious          Later, after Bonham had entered an appearance in the suit,
prosecution. First, under the malicious prosecution               Grant again amended his pleadings to add--after his
question, the jury found that both Bennett and                    indictments were expunged--an additional counterclaim
Bonham--through an agent--had maliciously prosecuted              against Bennett and Bonham for malicious prosecution.
Grant. Second, the jury found that Bennett was acting in his      Bonham answered the malicious prosecution claim without
capacity as a vice-principal of Bonham when he                    objection.
maliciously prosecuted Grant. Finally, the jury found that
Bonham was responsible for Bennett's conduct under a "                  On appeal, however, Bonham contends it was
reverse-piercing" theory of liability. In two individual          improperly joined in the lawsuit under Texas Rule of Civil
issues, Bonham contests its liability, arguing: (1) that it was   Procedure 38. See Tex. R. Civ. P. 38. Rule 38 provides that
improperly joined as a party to the suit and (2) there is no      a defendant may bring in a third party to a suit if that person
                                                                  is or may be liable to him or the plaintiff for all or part of
the plaintiff's claim against him. Id. A third-party action       given great discretion over joinder questions." ).
under Rule 38 is not an independent cause of action but is        Accordingly, we overrule Bonham's joinder arguments.[12]
derivative of the plaintiff's claim. Id.; see In re Seven-O
Corp., 289 S.W.3d 384, 390 (Tex.App.--Waco 2009, orig.                 B. Corporate Liability
proceeding [mand. denied]). Here, we agree with Bonham
that Grant's claim asserting an independent cause of action              In its second individual issue, Bonham contends there
against it for intentional infliction of emotional distress was   is no evidence to support the jury's finding of corporate
not a third-party claim as contemplated by Rule 38. Grant         liability. Corporations can act only through human agents,
did not assert--as Rule 38 requires--that Bonham was liable       and when " actions are taken by a vice-principal of a
for all or part of Bennett's slander claim against him.           corporation, those acts may be deemed to be the acts of the
Rather, Grant sought to join Bonham as an additional party        corporation itself." See GTE Sw., Inc. v. Bruce, 998 S.W.2d
to his counterclaim seeking affirmative relief for intentional    605, 618 (Tex. 1999); see also Qwest Int'l Commc'ns, Inc. v.
infliction of emotional distress.                                 AT& T Corp., 167 S.W.3d 324, 326 (Tex. 2005)
                                                                  (corporation is liable for exemplary damages if it acts with
     We cannot, however, conclude that Bonham has                 malice through the actions of a vice-principal). A
proven the trial court abused its discretion by allowing the      corporation, however, cannot be liable for damages " if the
joinder because our rules of civil procedure otherwise            vice-principal's misconduct occurred while he was acting in
permit the joinder of a non-party to a previously filed           a personal capacity unrelated to his authority as a corporate
counterclaim. Texas Rule of Civil Procedure 97                    vice-principal." Bennett I, 315 S.W.3d at 884. A
                                                                  vice-principal of a corporation is a person who " represents
Page 239                                                          the corporation in its corporate capacity, and includes
                                                                  persons who have authority to employ, direct,
 provides that additional persons--other than those made
parties to the original action--may be made parties to a          Page 240
counterclaim in accordance with the provisions of Rule 39
(" Joinder of Persons Needed for Just Adjudication" ) and          and discharge servants of the master, and those to whom a
Rule 40 (" Permissive Joinder of Parties" ). See Tex. R. Civ.     master has confided the management of the whole or a
P. 39, 40, 97(f); see also Tex. R. Civ. P. 37 (" Before a case    division of his business." Id. at 883.
is called to trial, additional parties necessary or proper
parties to the suit, may be brought in, either by the plaintiff         Regarding Bennett's relationship with Bonham, the
or the defendant upon such terms as the court may                 Texas Supreme Court in Bennett I concluded that Bennett
prescribe." ). Thus, non-parties must be joined as additional     was " indisputably a vice-principal of the Bonham
defendants to a counterclaim if in their absence complete         Corporation, he was most likely the only vice-principal and
relief cannot be afforded among the parties. See Tex. R.          the only person whose conduct and decisions could subject
Civ. P. 39, 97(f). In addition, the trial court has the           the corporation to exemplary damages." Id. at 884. In this
discretion to permit the joinder of additional defendants to a    case, similar evidence was presented that, although Bonham
counterclaim under the permissive joinder provisions of           was putatively owned by Bennett's daughters, the daughters
Rule 40. See Tex. R. Civ. P. 40 (" All persons may be             had no control over the corporation and received no profits,
joined in one action as defendants if there is asserted           and Bennett himself exclusively controlled and profited
against them jointly, severally, or in the alternative any        from Bonham. Bennett testified that he did not own a home
right to relief in respect of or arising out of the same          or a vehicle and did not have a bank account but lived
transaction, occurrence, or series of transactions or             rent-free in a home owned by Bonham, drove Bonham
occurrences and if any question of law or fact common to          vehicles, and " did whatever [he] wanted to with the
all of them will arise in the action" ), 97(f) (persons other     corporation bank account." On this record, Bonham
than those made parties to the original action may be made        concedes that Bennett was indisputably a vice-principal of
parties to a counterclaim in accordance with the provisions       Bonham. Instead, Bonham argues only that there is
of Rule 40).[11]                                                  insufficient evidence to support the jury's finding that
                                                                  Bennett was acting in his capacity as a vice-principal of
      Further, we note that once Bonham entered an                Bonham when he maliciously prosecuted Grant.
appearance in this suit, Grant was entitled to assert his
additional counterclaim against Bonham for malicious                    In its brief, Bonham attempts to distinguish this case
prosecution without further service of process. See Tex. R.       from Bennett I, in which the Texas Supreme Court found
Civ. P. 97(b), 124. Under these circumstances, we cannot          there was " ample evidence" that Bennett was acting in his
conclude--nor has Bonham proven--that the trial court             corporate capacity when he converted Reynolds' cattle
abused its discretion by permitting the joinder. See Varme,       using " corporate authority over corporate employees, on
881 S.W.2d at 883 (" We emphasize that the trial court is         corporate land, [and] using corporate equipment." Id. at
885. Bonham argues in its brief that in contrast to Bennett I,         DAMAGES
" the instant case does not involve the use of corporate
property or the exercise of corporate privileges to                     After finding Bennett and the Bonham Corporation
accomplish the underlying tort." We conclude, however,            maliciously prosecuted Grant, the jury found Grant was
that in this case there is, again, more than ample evidence to    entitled to the following damages: $5,000 in mental anguish
impart corporate liability on Bonham.                             damages; $60,000 in attorneys' fees incurred defending the
                                                                  malicious prosecution; $1 million in punitive damages
       Reviewing the record, Bennett's malicious prosecution      awarded against Bennett; and another $1 million in punitive
of Grant involved several courses of conduct that implicate       damages awarded against the Bonham Corporation. The
Bonham. First, Bennett contacted an attorney who had an           trial court's final judgment reduced the award of
ongoing attorney-client relationship with Bonham and              compensatory damages to $10,703 but awarded Grant, in
directed him to research whether Grant's alleged actions          accordance with the jury's verdict, $2 million in punitive
constituted a criminal offense. The attorney then drafted a       damages. Appellants challenge the entire award. We will
brief based on his legal research advocating that Grant be        begin by reviewing the compensatory damages awarded to
charged with attempted theft. The brief was sent to the           Grant, which are comprised of $5,000 for mental anguish
Navarro district attorney and described as a " catalyst" in       damages and $5,703 in attorneys' fees.
the district attorney's decision to bring the case before a
grand jury. This same attorney was also pivotal in later               A. Mental Anguish
advising Bennett to seek the appointment of a special
prosecutor to the case and then drafted the petition accusing           Appellants first contend there is no evidence to
the Navarro County district attorney of bias. The attorney        support the trial court's award of $5,000 in mental anguish
testified at trial that he had an ongoing attorney-client         damages. Although Grant was indicted and arrested as a
relationship with Bonham since 1982. When asked whether           result of their malicious prosecution, Appellants challenge
he had ever done any personal work for Bennett, the               the mental anguish damages contending there is insufficient
attorney answered: " I don't remember ever doing anything         evidence Grant suffered the " high degree of mental pain
for Mr. Bennett except a will one time."                          and distress necessary for compensable mental anguish." To
                                                                  support an award of mental anguish damages, there must be
       Bennett's malicious prosecution of Grant was further       both evidence of the existence of compensable mental
accomplished by traveling many miles in a Bonham vehicle          anguish damages and evidence to justify the amount
to meet with officials in four different counties to have         awarded. Hancock v. Variyam , 400 S.W.3d 59, 68 (Tex.
Grant prosecuted. Bennett testified at trial that he did not      2013). Mental anguish is only compensable if it causes a "
own a vehicle and acknowledged that he used Bonham                substantial disruption in daily routine" or " a high degree of
vehicles to accomplish this phase of the malicious                mental pain and distress." Id.; Parkway Co. v. Woodruff ,
prosecution. When asked whether he ever used Bonham's             901 S.W.2d 434, 444 (Tex. 1995).
vehicles for personal use, Bennett responded " I don't have
much personal business." Bennett's lack of personal                      Regarding Grant's mental anguish damages, Grant
business was further exemplified when he testified that he        testified that--long before his indictment--he " knew
directed a Bonham employee to type a transcript of his            Bennett would come after [him]" for turning his photos over
alleged secretly-taped conversation with Grant. He then           to the authorities. Fearful " for [his] life and [his] family,"
testified that he                                                 Grant testified he moved four times in an effort to keep his
                                                                  family safe from Bennett. Each time he would move,
Page 241                                                          however, Grant testified that Bennett would show up at
                                                                  depositions with his tape recorder and pencil in hand to
 presented this typed transcript to law enforcement in his        record Grant's new address. At one such deposition taken
attempts to prosecute Grant. The employee who typed the           prior to his indictment, Grant testified that he heard Bennett
transcript served as Bonham's corporate representative at         avow that " he would see me go to the penitentiary."
trial." [13]
                                                                  Page 242
      Viewing the foregoing evidence in the light most
favorable to the jury's verdict, we conclude there is more         He further testified that he was aware of other instances
than a scintilla of evidence to support the jury's finding that   when Bennett " had seen that people went to prison" and
Bennett was acting in his capacity as a vice-principal of         believed Bennett was " fully capable of seeing that [he]
Bonham when he maliciously prosecuted Grant.[14] We               went to prison." After hearing Bennett's testimony that it
overrule Bonham's individual issues on appeal.                    was his goal to put him in prison, Grant testified he was
                                                                  fearful to leave home and would lock himself in his house
                                                                  to protect his family. When Grant was finally indicted, his
lawyer informed him he had been charged with a felony and          could not have . . . allocated 95 percent of the fees incurred
was facing prison time. Grant and his mother then drove the        on both charges solely to attempted bribery." We disagree.
three and half hours from Coleman, Texas, where he lived,          Submitting to the jury an attorney's testimony concerning
to Corsicana, Texas, where he had been indicted. Grant             the percentage of hours relating to specific claims--even a
surrendered himself to the authorities in Corsicana and was        percentage a high as 95%--is sufficient to satisfy a party's
released that day on a surety bond posted by his mother. For       burden to segregate its attorneys' fees. See Tony Gullo
the next nine months, the charges remained pending against         Motors I, L.P. v. Chapa, 212 S.W.3d 299, 314 (Tex. 2006)
Grant. Grant testified that he worried how his family would
be taken care of if he went to prison and that he was afraid       Page 243
to leave his family alone. He further testified that as a result
of worrying about what Bennett was going to do, " I would           (" an opinion would have sufficed stating that, for example,
have bad headaches, weak stomach, couldn't eat, couldn't           95 percent of their drafting time would have been necessary
sleep." Grant additionally testified that the experience           even if there had been no [non-recoverable] claim" ).
affected his mental state as he went from being " a                Further, to the extent attorneys' fees " would have been
happy-go-lucky" person to feeling like a " completely              incurred on a recoverable claim alone, they are not
different person" who struggled with self-esteem and               disallowed simply because they do double service" with a
distanced himself from friends and family. Grant's sister          non-recoverable claim. See id. at 313. Grant's indictments
confirmed that she noticed a change in Grant's demeanor,           were based on the same facts and he asserted the same
testifying that her brother " just closed himself and              defense of limitations to both charges. His attorney testified
sequestered himself from everyone."                                that the legal work performed for both charges was
                                                                   essentially the same, as he drafted the same motions,
      Based on the foregoing, we conclude there is                 conducted the same discovery, and attended the same
sufficient evidence to support the jury's finding that Grant       hearings and meetings for both charges. As such, the
suffered the degree of mental pain and distress that will          attorney testified " that 95% of the work that was required
support an award of mental anguish damages and that the            on those two charges would've been necessary on just the
award of $5,000 was well within the range supported by the         attempted bribery charge itself alone. . . . I would have done
evidence.                                                          the same work on the attempted bribery charge even if there
                                                                   hadn't been the attempted tampering with a witness charge."
     B. Attorneys' Fees                                            As there was sufficient evidence that Grant would have
                                                                   incurred $5,703 in attorneys' fees on the bribery charge
       When a defendant has caused attorneys' fees to be           alone, we conclude there is sufficient evidence to support
incurred in defense of a criminal charge which was                 the damages award. Finding sufficient evidence to support
maliciously prosecuted, attorneys' fees in defending the           the award of actual damages, we overrule Appellants'
prior criminal charge are recoverable in the malicious             second issue on appeal.
prosecution suit as damages. See IBP, Inc. v. Klumpe , 101
S.W.3d 461, 478 (Tex.App.--Amarillo 2001, pet. denied).                 C. Exemplary Damages Cap
Here, Grant was charged with two felonies: attempted
bribery and tampering with a witness. In his pleadings and                The Texas Civil Practice and Remedies Code limits
at trial, however, Grant sued for malicious prosecution            the maximum amount of exemplary damages a trial court
based on the attempted bribery charge only. With regard to         can award. See Tex. Civ. Prac. & Rem. Code § 41.008(b).
recovering attorneys' fees for the malicious prosecution as        The cap, however, does not apply when a plaintiff seeks
damages, Grant's attorney testified at trial that Grant            recovery of exemplary damages based on certain felony
incurred $6,003.19 in attorneys' fees for defending against        criminal conduct enumerated under the statute, i.e.,
both charges, but that 95% of the work--or $5,703--would           cap-busting conduct. Id. § 41.008(c). One such felony
have been necessary for defending the attempted bribery            cap-busting exception--defined under Penal Code §
charge alone. The jury, however, found Grant incurred              32.46--is when a person, with the intent to defraud or harm
$60,000 in reasonable and necessary attorneys' fees                any person, by deception causes another to sign or execute
defending against the malicious prosecution. The trial court,      any document affecting the pecuniary interest of any person
in accordance with Grant's voluntary remittitur, reduced this      in the amount of $1,500 or more. Id. § 41.008(c)(11); see
amount to $5,703 to conform to the evidence at trial.              also Tex. Penal Code § 32.46. Here, the jury made a
Appellants nevertheless contend there is insufficient              cap-busting finding that the Appellants, with the intent to
evidence to support the amount of attorneys' fees awarded          harm Grant, caused another by deception to sign or execute
as damages.                                                        his criminal indictment for attempted bribery, and the
                                                                   indictment affected Grant's pecuniary interest in the amount
      Appellants do not challenge the reasonableness of the        of $1,500 or more. Appellants contend there is legally
fees. Rather, they argue only that a " reasonable fact-finder      insufficient evidence to support this finding because: (1) an
indictment is not a document affecting the pecuniary            under altered judgment).
interest of any person; and (2) there is no evidence Bennett
caused anyone to sign the indictment.                                  Viewing the evidence in the light most favorable to
                                                                the jury's finding, we conclude there is more than a scintilla
     1. Document Affecting Pecuniary Interest                   of evidence that Grant's pecuniary or financial interests
                                                                were affected by the indictment, which--on its
       Appellants first contend that indictments--as a matter   face--required him to find a means to post a $10,000 bond
of law--are not documents that affect a defendant's             or face immediate and indefinite imprisonment. He then
pecuniary interest, and therefore Grant cannot qualify for      was required to obtain legal counsel to quash the
the cap-busting exception. We are not persuaded by              indictment, incurring an additional $5,703 in attorneys' fees.
Appellants' argument. The term " pecuniary interest" is not     Further, if convicted of the offense of attempted bribery,
defined by the statute; therefore, courts have defined the      Grant faced further potential liability as the offense carried
term using its common meaning of having a " financial           a monetary penalty of up to $10,000. See Tex. Penal Code §
stake" in a matter. See Briones v. State, 76 S.W.3d 591, 595    § 12.34; 15.01; 36.02. Thus, we conclude there is legally
(Tex.App.--Corpus Christi 2002, no pet.); Goldstein v.          sufficient evidence Grant had a financial stake in the
State, 803 S.W.2d 777, 791 (Tex.App.--Dallas 1991, pet.         indictment, as the execution of the document caused him
ref'd). Therefore, the narrow question presented is whether     both immediate financial liability and potential financial
there is legally sufficient evidence of Grant having a          liability in the future.
financial stake in the grand jury's indictment.
                                                                     2. Causation
      Appellants contend that Grant had no financial stake
because indictments as a whole are excluded from the class            Appellants next contend that Bennett cannot be the
of documents that affect pecuniary interests because--unlike    legal cause of Grant's indictment because (1) the causal link
a " bank draft, a promissory                                    between Bennett's actions and the indictment is too
                                                                attenuated to satisfy causation requirements under the Penal
Page 244                                                        Code; and (2) it is impossible to prove causation because "
                                                                grand jury proceedings are secret, so there is no way of
 note, [or] a deed" --no monetary interest " flow[s] directly   knowing which evidence persuaded the grand jury to
from the document." The statute, however, does not require      indict." Criminal liability is predicated on but-for causation
the complainant to have a pecuniary interest in the             but also requires consideration of the foreseeability of the
document itself. See Lewis v. State , No. 05-09-00299-CR,       injurious consequences of the defendant's conduct. Williams
2010 WL 4400515, at *4 (Tex.App.--Dallas Nov. 8, 2010,          v. State , 235 S.W.3d 742, 764--65 (Tex.Crim.App. 2007).
pet. ref'd) (not designated for publication). Rather, it        Appellants, relying on the Texas Court of Criminal Appeals'
requires only that the execution of the document affect the     discussion of causation in Williams v. State, argue the chain
pecuniary interest of any person. See Tex. Penal Code §         of causation linking Bennett to the indictment is too
32.46. Further, a complainant is not required under the         attenuated to impose criminal responsibility. In Williams,
statute to prove actual pecuniary loss. See Smith v. State ,    the Court found that a mother who left her two daughters in
681 S.W.2d 71, 75--76 (Tex.App.--Houston [14th Dist.]           a room with a lit candle under another adult's supervision
1983), aff'd, 722 S.W.2d 408 (Tex.Crim.App. 1986)               was not criminally responsible for the children's burning
(offense complete when person causes another to execute         deaths because it was not reasonably foreseeable: (1) that
document with intent to defraud or harm; there is no            the other adult would forget to blow the candle out before
requirement to prove resulting harm). Therefore, when a         falling asleep; (2) that a sheet or clothing would then fall
person purposely uses deception to cause a court official to
execute a document, the executed document may affect            Page 245
pecuniary interests if it subjects a person to potential
financial liability. See Fisher v. State, 803 S.W.2d 828, 830    on the burning candle; and (3) that the other adult would
(Tex.App.--Dallas 1991, pet. ref'd) (securing issuance of       not be able to get children out of the house after the fire
citation through deception affected pecuniary interests as      started. Id. In this excerpt from their brief, Appellants argue
citation made defendant in suit potentially liable for          the following is the but-for causal chain linking Bennett to
monetary       damages);      Woodley       v.   State,   No.   Grant's indictment in this case:
08-00-00470-CR, 2003 WL 550298, at *6 (Tex.App.--El
Paso 2003, pet. ref'd) (mem. op.) (securing trial court's       o If Bennett had not asked for a special prosecutor, and
execution of agreed judgment that had been altered to add
new defendant and increase amount of award affected             o If Bennett had not given the prosecutor the facts he had
pecuniary interests as defendants faced potential liability     gathered, and

                                                                o If the prosecutor had not brought the case to the grand
jury, and possibly,                                             found Bennett used deception to create a false impression
                                                                that was likely to affect the judgment of another: Bennett's
o If the prosecutor had not presented those facts, and,         statements that Grant had called trying to sell him
possibly,                                                       incriminating photos for $5,000 and a transcript from
                                                                Bennett--which the jury could have found was
o If the grand jury had not relied on those facts, and          fraudulent--purportedly transcribing a secretly-taped
                                                                conversation with Grant that substantiated Bennett's claim
o If the prosecutor had not recommended an indictment or
                                                                that Grant
the grand jury had not disregarded the prosecutor's
recommendation, and                                             Page 246
o If at least nine of the grand jurors had not voted to issue     had sought $5,000 for the photos. The record further
the indictment,                                                 reflects that Bennett testified at the grand jury proceeding
                                                                but that Grant was not present. In exact accordance with
o Then Grant never would have been indicted.
                                                                Bennett's evidence, the grand jury's indictment charges that
       Appellants then argue this causal chain is similar to    Grant " with the specific intent to commit the offense of
                                                                bribery, called [Bennett], with the purpose of soliciting a
Williams because it " is too disconnected from the putative
cause to support any finding" of causation. What Appellants     bribe of $5,000."
fail to account for, however, is that the Court in Williams
                                                                       Under the Penal Code, " a person is criminally
found that causal link insufficient because the events
                                                                responsible if the result would not have occurred but for his
leading to the children's deaths were " not reasonably
                                                                conduct, operating either alone or concurrently with another
foreseeable." Id. at 765 (emphasis added). The facts of this
                                                                cause, unless the concurrent cause was clearly sufficient to
case are much different. The evidence in this case reflects
                                                                produce the result and the conduct of the actor clearly
that Bennett set out on a course of conduct to have Grant
                                                                insufficient." Tex. Penal Code § 6.04. Here, Appellants do
indicted and was successful in that endeavor. Indeed,
                                                                not challenge the jury's finding that Bennett used deception
Appellants do not contest the jury's finding that Bennett
                                                                to indict Grant, and the allegations in the indictment
intended to harm Grant by causing the grand jury to sign his
                                                                identically mirror the evidence provided by Bennett. Under
indictment. It is reasonably foreseeable that if Bennett
                                                                this record, viewed in the light most favorable to the jury's
intended to put Grant in prison, then provided evidence that
                                                                finding of causation, there is more than a scintilla of
a reasonable juror could infer was fabricated or
                                                                evidence in the record that Bennett's conduct alone was
manipulated, and then led a campaign to have a special
                                                                sufficient to have caused the indictment and to incur
prosecutor appointed in the case--all of which is more than
                                                                criminal responsibility. See id. Having found sufficient
adequately supported by the record--the end result of these
                                                                evidence to support the jury's cap-busting finding, we
efforts would be Grant's indictment. It is abundantly
                                                                overrule Appellants' third issue on appeal.
apparent that Grant's indictment was the natural, probable
and foreseeable consequence of Bennett's actions.                    D. Constitutionality of Exemplary Damages
      Appellants next contend that " Grant could not have             Appellants lastly attack the award of exemplary
sustained his burden to prove causation because it is           damages, contending the dual $1 million exemplary
impossible to show that Bennett's conduct was necessary         damages awards against Bennett and the Bonham
for the indictment to issue [given that] grand jury             Corporation violate their federal substantive due process
proceedings are secret." First, as we have already discussed,   rights. While state law governs the amount properly
there was sufficient evidence that but for Bennett's            awarded as exemplary damages, that amount is also subject
aggressive and untoward efforts to improperly influence the     to an ultimate federal constitutional check for exorbitancy.
criminal justice system, the case would have never been put     Tony Gullo Motors I, 212 S.W.3d at 307. This is because
before the grand jury, not once, but twice. Further, Bennett    the Due Process Clause of the Fourteenth Amendment
does not dispute the jury's finding that he used deception to   prohibits a state from imposing a " grossly excessive"
cause the grand jury to execute the indictment. Deception is    punishment on a tortfeasor. BMW of N. Am., Inc. v. Gore ,
defined, as " creating or confirming by words or conduct a      517 U.S. 559, 562, 116 S. Ct. 1589, 134 L. Ed. 2d 809
false impression of law or fact that is likely to affect the    (1996). But punitive damages " may properly be imposed to
judgment of another in the transaction, and that the actor      further a State's legitimate interests in punishing unlawful
does not believe is true." Tex. Penal Code § § 31.01(1)(A),     conduct and deterring its repetition," and " States
32.46(d)(1). Here, the special prosecutor testified candidly    necessarily have considerable flexibility in determining the
that he had the following evidence from Bennett--at the         level of punitive damages that they will allow in different
time he presented the indictments--from which the jury          classes of cases and in any particular case." Id. at 568. "
Only when an award can be categorized as grossly                  3. The target of the conduct had financial vulnerability;
excessive in relation to these interests does it enter the zone
of arbitrariness that violates" due process. Id.                  4. The conduct involved repeated actions, not just an
                                                                  isolated incident; and
      In this case, the State has a legitimate interest in both
punishing individuals who purposely manipulate the legal          5. The harm resulted from intentional malice, trickery, or
system to imprison innocent persons and in deterring its          deceit, as opposed to mere accident.
repetition. We must therefore determine whether the
punitive damages award in this case was grossly excessive         State Farm Mut. Auto. Ins ., 538 U.S. at 419. One of these
in relation to these interests. See id. In determining whether    reprehensibility factors alone " may not be sufficient to
an award is excessive, the United States Supreme Court has        sustain a punitive damages award; and the absence of all of
identified three " guideposts" by which we must assess the        them renders any award suspect." Id.
constitutionality of the punitive damages award:
                                                                        a. Harm resulted from intentional malice, trickery or
1. the degree of reprehensibility of the defendant's              deceit.
misconduct;
                                                                        Appellants concede there is evidence that Grant's
2. the disparity between the actual or potential harm             indictment resulted from " intentional malice, trickery, or
suffered by the plaintiff and the punitive damages award;         deceit" but argue that none of the other factors weigh in
and                                                               favor of punitive damages. We certainly agree with
                                                                  Appellants that the fifth reprehensibility factor weighs in
3. the difference between the punitive damages awarded by         favor of punitive damages. The jury heard evidence that
the jury and the civil penalties authorized or imposed in         Bennett's goal was to put Grant in prison to settle a personal
comparable cases.                                                 vendetta and to influence pending civil litigation, and that
                                                                  he set out on a campaign of legal thuggery--including
State Farm Mut. Auto. Ins. Co. v. Campbell, 538 U.S. 408,         allegations of lying, tailoring evidence, and even outright
418, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003); see also             fabrication of evidence--to ensure that Grant was
Bennett I, 315 S.W.3d at 873. Whether a punitive damages          imprisoned. When Bennett could not win at this game, the
award passes constitutional muster under this standard is a       record reflects he decided to change the playing field by
question of law                                                   exerting political pressure on a district attorney to appoint
                                                                  his own hand-picked special prosecutor to the case.
Page 247
                                                                        Further, when considering exemplary damages, we
 that we review de novo. Bunton v. Bentley, 153 S.W.3d 50,        may examine Bennett's misconduct beyond the malicious
54 (Tex. 2004).                                                   prosecution itself when it " demonstrates the deliberateness
                                                                  and culpability" of his actions and bears " a nexus to the
     1. Reprehensibility of Bennett's Misconduct                  specific harm suffered" by Grant. Bennett I, 315 S.W.3d at
                                                                  875. Here, Bennett's efforts to manipulate the legal system
       The first guidepost, the degree of reprehensibility of
                                                                  to imprison Grant were part of a larger escapade designed to
the defendant's misconduct, focuses on the " enormity" of
                                                                  thwart justice and abuse the court system. We conclude the
the misconduct and is " the most important indicium of the
                                                                  following allegations of malfeasance may properly inform
reasonableness of a punitive damages award." BMW of N.
                                                                  the reprehensibility analysis, as they demonstrate the
Am., 517 U.S. at 575. Punitive damages are not
                                                                  deliberateness, culpability, and motive behind Bennett's
compensation for injury; rather, they operate as private
                                                                  actions and relate back to the underlying malicious
fines intended to punish the defendant and to deter future
                                                                  prosecution:
wrongdoing. Cooper Indus., Inc. v. Leatherman Tool Grp.,
Inc., 532 U.S.424, 432, 121 S. Ct. 1678, 149 L. Ed. 2d 674                 Urging Grant to Lie and Attempting to Bribe Him.
(2001). Exemplary damages should therefore reflect the "          Grant testified that, prior to turning his photos over to the
enormity of [the] offense." BMW of N. Am., 517 U.S. at            authorities, Bennett visited his home and urged him to lie
575. In evaluating the enormity of a person's misconduct,         about what he had seen. Grant's sister
we consider five nonexclusive factors--whether:
                                                                  Page 248
1. The harm inflicted was physical rather than economic;
                                                                   testified that Bennett then attempted to offer Grant a
2. The tortious conduct showed an indifference           to or    lucrative job under the guise of helping his family after a
reckless disregard for the health or safety of others;            car accident. She testified Bennett offered that if Grant "
                                                                  can come and help him for a couple of days, he had a job
that he can get $4,000 for . . . a couple of days of work."        Saba District and County Clerk testified that Bennett
When Grant had worked for Bennett the previous year, his           attempted to register Reynolds' brand as his own. Finally,
salary was $1,100 a month. At the time Bennett offered this        during the course of this trial, Bennett--outside the presence
money, Grant was posed to be the star witness testifying           of the jury and without permission from the trial
against Bennett in his criminal trial for cattle theft and in      court--altered an exhibit depicting a hand-drawn diagram of
Reynolds' civil suit.                                              Reynolds' brand. We conclude these cover-up efforts show
                                                                   culpability and
       Threatening Grant. When money was not enough to
persuade Grant, there was evidence at trial that Bennett then      Page 249
tried a new tactic to silence Grant. Grant's sister testified
that Bennett called her more than 15 times trying to obtain        deliberateness and sought to extend and exacerbate harm to
Grant's new contact information. Frustrated that Bennett           Grant by discrediting him as a witness and bolstering
would not stop calling, the sister provided Bennett with her       Bennett's claims in his civil lawsuits against Grant.[16]
husband's cell phone number and said it was Grant's
number. Bennett testified that he then asked Rogers to call              b. Harm inflicted was not merely an economic injury
the number. Shortly thereafter, Rogers called the number           and showed a reckless disregard for Grant's health and
and reached Grant's brother-in-law. Believing he was               safety.
speaking to Grant, Rogers then--according to the
                                                                          Regarding the first and second reprehensibility
brother-in-law--demanded that Grant turn over the pictures
                                                                   factors, Appellants argue Grant suffered a purely economic
and threatened " if he didn't get the pictures, that he had a
                                                                   injury and this is not a case involving physical harm
jake-leg lawyer that would obtain them" and " that he was
                                                                   warranting a greater award of exemplary damages, and that
going to take care of [Grant] one way or the other." The
                                                                   his actions do not show an indifference to or reckless
brother-in-law testified that he relayed these threats to
                                                                   disregard for Grant's health or safety. We disagree.
Grant.
                                                                   Malicious prosecution is not a purely economic injury;
        Litigation Against Grant. Being unsuccessful in            rather, the Restatement recognizes that a plaintiff may
silencing Grant, Bennett then filed this suit alleging Grant       recover for the physical harm caused by reason of his arrest.
had slandered him by saying that he had stolen Reynolds'           See Restatement (Second) of Torts § 671 (1977). Here,
cattle and sought $50,000 in damages. The jury found               Bennett did not intend to inflict a mere financial injury on
against Bennett on his slander claim, finding that Grant's         Grant; rather, he succeeded in having Grant's actual person
statement that Bennett had stolen from Reynolds was                seized, held in captivity, and stripped of personal liberties.
substantially true. In addition to this suit, Bennett filed--the   Appellants further contend that: " Bennett's mere desire that
day after Grant's criminal record was expunged--a second           Grant serve prison time does not equate to indifference or
civil lawsuit against Grant and others alleging they had           reckless disregard for Grant's health or safety. . . . At best,
conspired to have him indicted for cattle theft. Bennett           this factor is neutral and therefore carries no weight in the
sought $2 million dollars in compensatory damages, in              reprehensibility analysis." We are confident that if Bennett
addition to punitive damages, in that suit.[15]                    himself or any person were arrested and facing a prison
                                                                   sentence in Texas, he would not view his health and safety
       Pressuring Grant's Attorney to Resign . During the          neutrally affected. See also id. (maliciously prosecuted
course of this litigation, Bennett filed two grievances            plaintiff may recover for impairment to health sustained
against Grant's attorney that were dismissed as not alleging       from arrest).
professional misconduct. In addition to the grievances,
Bennett sued Grant's lawyer, contending he had conspired                c. Target of the conduct had financial vulnerability.
with Grant and others to have him indicted for cattle theft.
                                                                          Regarding the third reprehensibility factor, we note
The attorney testified that after he was sued by Bennett for
                                                                   that Bennett's actions were further reprehensible because
$2 million, he was " angry" and " scared" and decided to no
                                                                   Bennett was aware that Grant and his family were
longer represent Grant in this suit because " he couldn't do
                                                                   financially vulnerable. Grant testified he first met Bennett
as good a job as somebody that wasn't being sued
                                                                   because he was desperate for work, and Bennett agreed to
themselves."
                                                                   hire him as a hand. During the time Grant worked for
        Tampering With Evidence. At trial, there were              Bennett, the Bonham Corporation paid him a salary of
allegations that one of the photos Grant had taken depicted        $1,100 for a full month of work and allowed him to live in a
Reynolds' brand on the sold cattle. There were further             trailer on the property. A salary of $13,200 a year, even
allegations that Bennett had doctored this photo during his        when the housing allowance is considered, was hovering on
criminal trial to change the incriminating image of his            the federal poverty line.[17] Further, Grant's financial
neighbor's brand and conceal his theft. In addition, the San       situation worsened when his wife and baby were in a major
traffic accident shortly after Grant turned his photos over to   ratio . . . will satisfy due process" and that an " award of
the authorities. Grant and others testified that both his wife   more than four times the amount of compensatory damages
and baby were hospitalized after the accident, that his wife     might be close to the line of constitutional impropriety."
had been permanently injured, and that Grant had to take a       State Farm Mut. Auto. Ins., 538 U.S. at 425.
significant amount of time off from work to stay home and
care for her. The record reflects that Bennett was fully               Appellants contend that there is no meaningful
aware of the car accident and perhaps attempted to use the       distinction between this case and the large punitive damages
situation to take advantage of Grant's financial vulnerability   award the Texas Supreme Court overturned in Bennett I, in
by offering him an extremely lucrative job immediately           which the Court found that the ratio of $5,327.11 in actual
after the accident under the guise of helping Grant's family.    damages compared to the $250,000 in exemplary damages
Amidst this backdrop of financial vulnerability, Bennett         awarded against Bennett--a ratio of 47:1--and the $1 million
then began his quest to have Grant imprisoned and                exemplary damages awarded against Bonham--a ratio of
                                                                 188:1--violated due process. See Bennett I, 315 S.W.3d at
Page 250                                                         869. As the U.S. Supreme Court has recognized, however, "
                                                                 a jury imposing a punitive damages award must make a
 ultimately indicted. Further, Grant's indictment carried a      qualitative assessment based on a host of facts and
prison sentence of two to ten years' imprisonment. See Tex.      circumstances unique to the particular case before it.
Penal Code § § 12.34, 15.01, 36.02. Undoubtedly, Bennett's       Because no two cases are truly identical, meaningful
actions threatened to financially ruin Grant and his family.     comparisons of such awards

      In sum, we conclude four of the five reprehensibility      Page 251
factors are present in this case and weigh in favor of
punitive damages: (1) the harm to Grant resulted from             are difficult to make." TXO Prod., 509 U.S. at 458. While
intentional malice, trickery, or deceit; (2) Bennett's           this case and Bennett I share some nucleus of operative
malicious prosecution of Grant was not merely an economic        facts, the present case is distinguishable and therefore must
injury but resulted in a seizure of Grant's person and loss of   be examined on its own facts. In Bennett I, the jury found
physical liberties; (3) Bennett's tortious conduct showed an     Bennett converted thirteen of his neighbor's cattle and
indifference to and reckless disregard for Grant's health and    assessed actual damages at the market value of the cattle,
safety; (4) and his actions threatened to financially ruin       $5,327.11. Bennett I, 315 S.W.3d at 871. While the Court
Grant. Thus, all but one of the reprehensibility factors         found that Bennett's malfeasance in attempting to cover-up
weigh in favor of exemplary damages.[18]                         his initial conversion showed heightened reprehensibility, it
                                                                 concluded:
   2. Ratio Between Exemplary and Compensatory
Damages                                                          At heart, though, this is an economic-injury, actual-harm
                                                                 case seeking recovery for the conversion of thirteen head of
        The second and perhaps most commonly cited               cattle. Reynolds alleges a broader " criminal escapade" that
indicium of an excessive punitive damages award is the           aimed to ruin him, but the theoretical possibilities of greater
ratio between the punitive damages awarded and the actual        harm strike as marginally relevant at best in assessing
or potential harm inflicted on the plaintiff. See BMW of N.      exemplary damages, absent proof of the likelihood of such
Am., 517 U.S. at 580. In analyzing this ratio, " the proper      harms.
inquiry is 'whether there is a reasonable relationship
between the punitive damages award and the harm likely to        Id. at 877.
result from the defendant's conduct as well as the harm that
actually has occurred.'" Id. at 581 (quoting TXO Prod.                 In striking contrast, Bennett in this case did not
Corp. v. Alliance Res. Corp., 509 U.S. 443, 460, 113 S.Ct.       merely steal cattle; rather, he attempted to deprive a man of
2711, 125 L. Ed. 2d 366 (1993) (emphasis in original)).            two to ten years of his liberty. See Tex. Penal Code § §
Thus, we are to examine the difference between the punitive      12.34, 15.01, 36.02 (sentencing for offense of attempted
damages award and the harm actually suffered and the harm        bribery). While Appellants attempt to equate theft of cattle
" that would have ensued if the tortious plan had                to the theft of years from a man's life, there is no
succeeded." See id.; see also TXO Prod ., 509 U.S. at 460.       comparison between the two acts. This is reflected in the
While there is not " a mathematical bright line between the      reprehensibility analysis, in which we concluded that four
constitutionally     acceptable     and       constitutionally   of the five reprehensibility factors were present in this case.
unacceptable [award of exemplary damages] that would fit         In contrast, in Bennett I, the Texas Supreme Court found
every case," see Pacific Mut. Life Ins. Co. v. Haslip , 499      that Bennett inflicted a purely economic injury on his
U.S. 1, 18, 111 S. Ct. 1032, 113 L. Ed. 2d 1 (1991), we have        neighbor by stealing his cattle and therefore only one of the
been instructed that " few awards exceeding a single-digit       reprehensibility factors--the harm resulted from intentional
malice, trickery, or deceit--was present. See Bennett I, 315      a lump-sum payment of $800,000 for serving the maximum
S.W.3d at 877.                                                    ten-year sentence, plus potential lifetime annuity payments
                                                                  which could potentially push the final award to over $1
       Further, and perhaps most important for our                million.[20] Although there is no way to precisely put a
discussion, the Texas Supreme Court found that Bennett I          dollar value on the potential harm in this case, the State's
was an actual-harm case only--meaning that beyond the             restitution payments reflect the value the Legislature has
actual harm suffered by Reynolds from the theft of his            placed on a year of life lost to wrongful imprisonment and
cattle, there was only marginal evidence of any other             provide a guidepost for the potential damages in this case.
potential harm faced by Reynolds or anyone else as a result
of Bennett's conversion. Id. Therefore, in Bennett I,                   Based on this analysis, we conclude the potential
potential harm was not relevant in the Court's ratio analysis.    damages in this case can be prudently and rationally valued
See id. But in this case, the evidence of potential harm is not   at a minimum of $160,000. This is the minimum amount
marginal or speculative; rather, the record conclusively          Grant would have received from the State if he had been
shows that Grant would have been imprisoned for two to            wrongfully convicted of attempted bribery and served the
ten years if Bennett had succeeded in his illicit scheme. See     minimum sentence available. When combined with the
Tex. Penal Code § § 12.34, 15.01, 36.02. In analyzing the         actual damages, the total actual and potential damages for
exemplary damages ratio in a potential-harm case, the U.S.        this case would therefore be at least $170,703. Using these
Supreme Court has unequivocally instructed us that " [i]t is      figures, the ratio between the actual and potential harm
appropriate to consider the magnitude of the potential harm       compared to the dual $1 million exemplary damages awards
that the defendant's conduct would have caused to its             would be over 5:1 for both Bennett and Bonham. See BMW
intended victim if the wrongful plan had succeeded." TXO          of N. Am., 517 U.S. at 581 (" the proper inquiry is whether
Prod., 509 U.S. at 460 (emphasis in original) (holding            there is a reasonable relationship between the punitive
dramatic disparity between $19,000 compensatory damages           damages award and the harm likely to result from the
award compared to $10 million exemplary damages award             defendant's conduct as well as the harm that actually has
did not violate due process " in light of the [millions]          occurred" ). We note that--even with careful consideration
potentially at stake" if the defendant " had succeeded in its     of both the actual and potential damages in this case--this
illicit scheme" ). Thus, U.S. Supreme Court precedent             ratio likely exceeds constitutional limits. See State Farm
requires us to compare the exemplary damages awarded in           Mut. Auto. Ins., 538 U.S. at 425 (" award of more than four
this case to both " the harm that has actually occurred" and      times the amount of compensatory damages might be close
the potential harm that Grant would have sustained if             to the line of constitutional impropriety" ). As such, this
Bennett's " wrongful plan had succeeded." See id.; see also       guidepost weighs in favor of reducing the punitive damages
BMW of N. Am., 517 U.S. at 581 (" the proper inquiry is           award.
whether there is a reasonable relationship between the
punitive damages award and the harm likely to result from              3. Legislative Penalties for Similar Misconduct
the defendant's conduct as well as the harm that actually has
occurred" ).                                                             The final guidepost compares the exemplary damages
                                                                  with legislatively authorized civil penalties in comparable
Page 252                                                          cases. This factor fortifies the notion that legislatures make
                                                                  policy and are well positioned to define and deter undesired
       Appellants stress in their brief the disparity between     behavior. Bennett I, 315 S.W.3d at 880. Here, we note there
the dual $1 million punitive damages awarded in this case         is no comparable civil
compared to the $10,703 compensatory damages award.
That disparity lessens, however, when we consider the             Page 253
potential prison sentence faced by Grant. Although it is
difficult to place a monetary value on the loss a person           penalty for Bennett's conduct. We may, however, also look
experiences from losing years of his life to an erroneous         to criminal penalties that could be imposed, as " the
prison sentence, the State compensates persons who have           existence of a criminal penalty does have bearing on the
been wrongfully convicted to the tune of $80,000 for each         seriousness with which a State views the wrongful action."
year of wrongful imprisonment plus lifetime annuity               State Farm Mut. Auto. Ins., 538 U.S. at 428. When used to
payments. See Tex. Civ. Prac. & Rem. Code § § 103.052             determine the dollar amount of an exemplary damages
(Lump-Sum         Compensation),        103.053      (Annuity     award, though, the U.S. Supreme Court has cautioned us
Compensation). Thus, if Grant had been wrongfully                 that criminal penalties have " less utility" than civil
imprisoned for the minimum sentence of two years'                 penalties. See id.; see also Bennett I, 315 S.W.3d at 881. In
imprisonment, he would have been entitled at a bare               this case, we conclude criminal penalties have some
minimum to a lump-sum payment of $160,000.[19] And, on            relevance to our discussion, as they demonstrate that
the high end of the spectrum, he would have been entitled to      Bennett had fair notice that his conduct could subject him to
the following punishment:                                         justice system for personal gain.

o Tampering With or Fabricating Physical Evidence                       After careful analysis of these three guideposts, we
                                                                  conclude: (1) four of the five reprehensibility factors weigh
o 2 to 10 Year Prison Sentence                                    in favor of punitive damages; (2) potential harm is relevant
                                                                  in evaluating the ratio to exemplary damages, but that even
o $10,000 fine                                                    when we consider potential harm, the resulting ratio of 5:1
                                                                  likely exceeds constitutional boundaries; and (3) there are
o Aggravated Perjury Before Grand Jury
                                                                  no comparable civil sanctions, but Bennett was on notice
o 2 to 10 Year Prison Sentence                                    that the State had a significant interest in protecting the
                                                                  integrity of the criminal justice system and would
o $10,000 fine                                                    vigorously prosecute, fine, and imprison persons who
                                                                  engaged in such behavior.
o Execution of a Document by Deception
                                                                         Our remaining task is to determine--under the unique
o 180 days to 2 years in State Jail                               facts of this case and these guideposts--what amount of
                                                                  exemplary damages would pass constitutional muster. In
o $10,000 fine                                                    this regard, we have been instructed that an award " four
                                                                  times the amount of compensatory damages might be close
o Making a False Report to Peace Officer or Law                   to the line of constitutional impropriety" and that "
Enforcement Employee                                              [p]ushing exemplary damages to the absolute constitutional
                                                                  limit in a case like this leaves no room for greater
o Up to 180 Days in State Jail
                                                                  punishment in cases involving death, grievous physical
                                                                  injury, financial ruin, or actions that endanger a large
o $2,000 fineo $16,000 fine for committing offense eight
                                                                  segment of the public." Tony Gullo Motors I, 212 S.W.3d at
times[21]
                                                                  308--310. While we find Bennett's conduct abhorrent, we
      Thus, Bennett had fair notice of the seriousness with       recognize that his actions did not actually cause any of
which the State viewed his wrongful conduct, as his actions       these enumerated unfortunate circumstances. We do,
could subject him to up to $46,000 in monetary fines and          however, also recognize that the State has a significant
four to twenty-two years' incarceration.[22]                      interest in punishing and deterring this type of conduct and
                                                                  that Bennett's actions were particularly reprehensible.
      Appellants contend in their brief that we should--as        Weighing these competing concerns, we conclude that a
we did on remand from Bennett I --reduce the exemplary            ratio of 3:1 exemplary damages compared to the combined
damages award to the comparable criminal fines. In that           actual and potential damages passes constitutional muster.
case, we concluded that the criminal monetary sanction for        This results in an award of $512,109 against each defendant
cattle theft was comparable to the civil offense of               (three times the actual and potential damages of $170,703)
conversion and provided an objective basis for setting a          and reduces the total punitive damages award from $2
constitutionally permissible exemplary damages award.             million to $1,024,218 ($512,109 against Bonham and
Bennett v. Reynolds, No. 03-05-00034-CV, 2010 WL                  $512,109 against Bennett).[24] This award recognizes the
4670270, at *5 (Tex.App.--Austin Nov. 18, 2010, no pet.)          potential harm caused by Bennett and Bonham, their
(mem. op.) supplemented, 440 S.W.3d 660, 2011 WL                  reprehensibility, and the State's interest in punishing and
182876 (Tex.App.--Austin 2011, no pet.). In this case,            deterring, but also leaves room for greater punishment for
however, there simply is no criminal offense comparable to        cases with more egregious injuries.
the civil offense of malicious prosecution. While we can
examine specific criminal actions Bennett took in his                  SANCTIONS
ultimate effort to maliciously prosecute Grant, none of these
                                                                         In addition to the actual and exemplary damages at
offenses take into account that Bennett's ultimate goal was
                                                                  issue in this suit, Grant alleged Bennett's slander claim
to put Grant in prison.[23] We do, however, conclude that
                                                                  against him was frivolous and brought in bad faith for
under this record the applicable prison sentences and fines
                                                                  purposes of harassment and sought sanctions. See Tex. Civ.
put Bennett on notice that the State has a significant interest
                                                                  Prac. & Rem. Code § 10.001; Tex. R. Civ. P. 13. Bennett
in
                                                                  originally initiated this suit--as discussed previously--by
Page 254                                                          suing Grant for slander, alleging that Grant's statement that
                                                                  Bennett had stolen Reynolds' cattle was slanderous. The
 deterring this type of conduct and would prosecute and           jury found that Grant's statement was substantially true and
imprison those who attempt to manipulate the criminal             this finding has not been challenged on appeal. The trial
court granted the request for sanctions and ordered Bennett      filed this suit for improper purposes specifically prohibited
to pay Grant's attorneys' fees incurred defending the claim      by Chapter 10, we conclude the trial court could have relied
in the                                                           on Chapter 10 as the legal basis for the award. Further,
                                                                 Bennett has not challenged on appeal the trial court's
Page 255                                                         finding that he filed this suit against Grant for improper
                                                                 purposes. Generally, an appellant must attack all
  amount of $269,644.50, concluding that this amount             independent bases or grounds that fully support a
adequately punished Bennett and fairly compensated Grant         complained-of ruling or judgment. See Britton , 95 S.W.3d
for defending against the groundless claim. In his only          at 681. As Bennett has failed to attack this basis that
individual issue, Bennett contends the sanctions award was       supports the sanctions order, we cannot conclude the trial
an abuse of discretion.                                          court's imposition of sanctions was an abuse of discretion.

       We review the trial court's imposition of sanctions for         In addition, Rule 13 similarly authorizes a trial court
an abuse of discretion. See Low v. Henry, 221 S.W.3d 609,        to sanction a person, a represented party, or both for signing
614 (Tex. 2007). In reviewing the sanctions order, we            a pleading that is groundless and brought in bad faith or to
review the entire record to determine whether the trial court    harass. Tex. R. Civ. P. 13. Pleadings are presumed filed in
abused its discretion. American Flood Research, Inc. v.          good faith under Rule 13, and the burden is on the moving
Jones, 192 S.W.3d 581, 583 (Tex. 2006). An appellate court       party to demonstrate both that the
may reverse the trial court's ruling only if the trial court
acted without reference to any guiding rules and principles,     Page 256
such that its ruling was arbitrary or unreasonable. Low, 221
S.W.3d at 614. At the very least, this requires a showing         opposing party's filings: (1) are groundless; and (2) were
that the trial court based its order on an incorrect             filed either in bad faith or for the purpose of harassment. Id.
interpretation of the law or a clearly erroneous assessment      In determining whether sanctions are appropriate, the trial
of the evidence. Robson v. Gilbreath, 267 S.W.3d 401, 405        court must examine the facts available to the litigant and the
(Tex.App.--Austin 2008, pet. denied). The trial court does       circumstances existing when the litigant filed the pleading.
not abuse its discretion if it bases its sanctions on            Robson, 267 S.W.3d at 409. Further, under Rule 13, the
conflicting evidence and some evidence supports its              trial court is required to state in the order the particulars of
decision. Unifund CCR Partners v. Villa , 299 S.W.3d 92,         good cause justifying the sanctions. See Tex. R. Civ. P. 13.
97 (Tex. 2009).
                                                                        The trial court's order here concludes, consistent with
       Here, the trial court's order did not specify the legal   a violation of Rule 13, that Bennett's slander claim was "
basis for the sanctions, so we begin our review by               groundless," " part of a plan to harass and intimidate Grant,"
identifying all the potential legal bases for the order. See     and brought in " bad faith." [25] As such, we conclude that
Citibank, N.A. v. Estes, 385 S.W.3d 671, 675                     Rule 13 could have also been the legal basis for the trial
(Tex.App.--Houston [14th Dist.] 2012, no pet.). Chapter 10       court's award. Further, the sanctions order states the
of the Civil Practice and Remedies Code, in pertinent part,      particulars of good cause justifying sanctions under Rule
authorizes a court to sanction a person, a party who             13. First, there are numerous findings in the order that
represents the person, or both for signing a pleading that       Bennett brought this suit in bad faith and for purposes of
was brought for any improper purpose--including to harass,       harassment, including findings that: (1) Bennett had filed
cause unnecessary delay, or needlessly increase the cost of      this suit to punish Grant for testifying against him in
litigation. Tex. Civ. Prac. & Rem. Code § § 10.001, 10.004;      previous lawsuits; (2) Bennett had " doctored" or " altered"
see Mattox v. Grimes Cnty. Comm'rs Court , 305 S.W.3d            evidence to cover up his conversion of Reynolds' cattle and
375, 386 (Tex.App.--Houston [14th Dist.] 2010, pet.              give grounds to his baseless slander claim against Grant; (3)
denied) (" Sanctions under chapter 10 of the Civil Practice      and that Bennett's true purpose in the suit was not to recover
and Remedies Code are authorized if the evidence                 money damages from Grant--who lacked the financial
establishes that . . . a pleading or motion was brought for an   resources to pay an award--but to subvert a separate civil
improper purpose." ). Here, the trial court's order concludes    trial, Bennett I, and to harass Grant. Bennett does not
that Bennett filed his slander claim for at least two improper   challenge the legal sufficiency of any of these findings on
purposes--" to punish a witness who had testified against        appeal.
him in previous lawsuits" and " to subvert a separate trial, [
Bennett I ]." The trial court further concluded that Bennett's         With regard to groundlessness, Bennett pleaded that
refusal to nonsuit his slander claim, " substantially            he had instructed Grant not to sell any cattle that did not
increased the burden on this case on the defendant and on        belong to him, and therefore, Grant's allegation that he had
the court system" and " required in essence a re-trial of [      stolen the cattle was slander. The trial court, however,
Bennett I ]." As the trial court made findings that Bennett      found in its order that Bennett had converted Reynolds'
cattle and then engaged in a " design to cover up his              Page 258
conversion" that implied " willfulness and bad faith, not
inadvertence or an honest mistake." This finding states with             CONCLUSION
particularity the trial court's good cause for concluding the
slander claim was groundless--as the trial court found there             This is an unusual case. Malicious prosecution itself is
was no factual basis to support Bennett's pleadings that           an unusual tort, and it is exceptionally unique under Texas
Reynolds' cattle had been sold accidentally and there was          jurisprudence for a defendant to procure a prosecution by
no legal basis for his slander claim because substantial truth     both providing false information to authorities and by
is a complete defense to slander. See id. ( groundless means       engaging in such other improper activities that his conduct
no basis in law or fact and not warranted by good faith            became the determining factor in the decision to prosecute.
argument for change of existing law); see also Randall's           Looking to the exemplary damages award, this case is also
Food Mkts., Inc. v. Johnson , 891 S.W.2d 640, 646 (Tex.            unique because another exemplary damages award, in
1995) ( substantial truth of an alleged defamatory statement       Bennett I, has already been adjudicated by the Texas
is complete defense to slander action). Further, while             Supreme Court and found unconstitutional. The facts and
Bennett testified in support of his allegations, the trial court   circumstances of this case, however, are vastly different
does not abuse its discretion when there is conflicting            than those in Bennett I and justify the imposition of a larger
evidence that supports its decision, see Unifund CCR               exemplary damages award. This case differs from Bennett I
Partners, 299 S.W.3d at 97, and Bennett has not challenged         --and again is somewhat unique under Texas
the legal sufficiency of this finding on appeal. In addition,      jurisprudence--because it is a potential-harm case and all
the trial court finds in its order that Bennett's deceit in        but one of the five reprehensibility factors are present. As
covering up his wrongdoing by doctoring or altering                remitted, we are confident the exemplary damages award
evidence, " confirms the groundlessness of the slander             passes constitutional muster under current federal
claim" and was to " further his attempts to give grounds to        standards.[29] Accordingly, we reform the trial court's
his baseless harassment of Grant." As such, we cannot agree        judgment to award Grant $512,109 in exemplary damages
with Bennett's contention in his brief that the sanctions          against Bennett and $512,109 in exemplary damages
order " fails to state good cause for finding groundlessness       against Bonham. We affirm the trial court's judgment as
with the particularity Rule 13 requires."                          reformed.

Page 257                                                               Reformed and, as Reformed, Affirmed on Motion for
                                                                   Rehearing
  Rather, we conclude the sanctions order states with
particularity the reasons and circumstances justifying the         ---------
trial court's finding of good cause to issue sanctions under
                                                                   Notes:
Rule 13.[26]
                                                                   [1]The facts recited herein are taken from the record on
       Bennett further contends the award of sanctions
                                                                   appeal.
against him individually was an abuse of discretion because
his lawyer signed and filed his pleadings, and " a party           [2]Indeed, the Texas Supreme Court found the exemplary
should not be sanctioned for its attorney's conduct unless
                                                                   damages violated due process and remanded the case for
the party is implicated apart from having entrusted its legal
                                                                   remittitur. See Bennett I, 315 S.W.3d at 883.
representation to counsel." See Loeffler v. Lytle Indep. Sch.
Dist., 211 S.W.3d 331, 349--50 (Tex.App.--San Antonio              [3]The petition alleged the district attorney had a conflict of
2006, pet. denied). Again, we disagree. While Bennett's            interest in the case because he had previously worked for
attorneys filed and signed his pleadings, Bennett provided         the district attorney's office in Llano County.
the factual basis for the slander claim and authorized his
attorneys to file suit based on those allegations. Further, the    [4]Later that year, the district attorney lost his reelection.
trial court made several specific findings that sanctionable       Almost immediately after starting private practice, Bennett
conduct was attributable to Bennett himself[27] and that           came to the former district attorney's office and retained
Bennett had brought the slander suit as revenge for Grant          him as counsel for himself and the Bonham Corporation in
testifying against him in previous suits. As such, we cannot       two separate lawsuits.
conclude the trial court abused its discretion in finding that
Bennett was implicated in the sanctionable conduct.                [5]The Navarro County district attorney testified that he had
Concluding he has failed to prove on appeal that the trial         informed the special prosecutor of his belief that there had
court's award of sanctions was arbitrary or unreasonable, we       been some tailoring of the facts by Bennett. The special
overrule Bennett's sole individual issue on appeal.[28]            prosecutor denied this, testifying that " no one had told
[him]" of any manipulation of the facts by Bennett.               [12]Bonham hints in its brief that " Grant's claims against
                                                                  the Corporation were thinly veiled--yet ultimately
[6]Interestingly, the district attorney testified that the        successful--efforts to avoid limitations." The statute of
amount at issue increased the degree of the offense from a        limitations issue was not submitted in the jury charge, and
misdemeanor to a felony. The statute of limitations for           Bonham does not assert in an issue on appeal that the
felony theft is five years, rather than the two year statute of   evidence conclusively proves Grant's claims were barred by
limitations for misdemeanor theft. See Tex. Code Crim.            limitations. Nor does Bonham appeal any ruling it sought
Proc. arts. 12.01(4)(A), 12.02.                                   with sufficient specificity to make the trial court aware of
                                                                  its limitations complaint. We need not address the merits of
[7]The jury found against Bennett on his slander claim,           the limitations issue.
which Bennett does not appeal.
                                                                  [13]We also note that the Navarro County district attorney
[8]The transcript from Grant's sworn testimony is not in the      testified that he had formed the impression that Bennett was
record. Grant advanced the same theory of innocence at this       attempting to prosecute Grant in order to influence civil
trial. For purposes of the malicious prosecution claim, the       litigation arising from this case. The jury further heard
jury found Grant innocent of Bennett's allegations.               testimony that Grant was the " star witness" in the
                                                                  Reynolds' civil suit against both Bonham and Bennett,
[9]The special prosecutor also testified that he relied on
                                                                  which eventually resulted in a $1 million punitive damages
Rogers' statement that Grant had telephoned him and
                                                                  award against Bonham.
acknowledged attempting to sell the photos to Bennett. At
trial, Bennett testified that Rogers " was in on the efforts to   [14]The jury alternatively found that Bonham was liable for
get [Grant] charged." Rogers is described in the record as        Bennett's malicious prosecution of Grant based on agency
Bennett's best friend and an employee of the Bonham               and reverse-piercing theories. We do not address Bonham's
Corporation. At trial, Grant denied Rogers' accusations, and      challenges to these findings, as we have already concluded
the jury was free to disbelieve his testimony. The Texas          there was sufficient evidence to impart corporate liability
Supreme Court has instructed that " [j]ust as there may be        on Bonham as a vice-principal.
more than one proximate cause of an event, a single
prosecution may be procured by more than one person."             [15]Grant, Reynolds, and Miller obtained a favorable
Browning-Ferris Indus., Inc. v. Lieck, 881 S.W.2d 288, 292        summary judgment and sanctions against Bennett, Bonham,
(Tex. 1994). The fact that Rogers may also be liable for          and their attorney in that suit, which is currently pending on
procuring Grant's prosecution does not negate Bennett's           appeal before this Court in Bennett, Bonham & Paris v.
own liability.                                                    Reynolds, No. 03-12-00568.

[10]Appellants contend this is not a recognized exception         [16]An award of punitive damages for some of these
under Texas law. We disagree. In accordance with the              actions has already been awarded against Bennett in
Restatement of Torts, the Texas Supreme Court has stated          Bennett I. See Bennett I, 315 S.W.3d at 876. In that suit,
that a defendant may procure a prosecution " not only when        however, he was punished for how his actions affected
he gives information he knows is false to a prosecutor, but       Reynolds. In this suit, the award of punitive damages is to
also when his conduct is the determining factor in the            punish Bennett for how these actions affected Grant. See id.
prosecutor's decision to prosecute." Browning-Ferris Indus.,
Inc. v. Lieck, 881 S.W.2d 288, 294 (Tex. 1994) (citing            [17]Pursuant to federal poverty guidelines in 2001, a person
Restatement (Second) of Torts § 653 (1977)); see also             with two dependents was poverty-stricken if his annual
Turner v. Roadway Express, Inc., 911 S.W.2d 224, 226              income        was      less     than      $14,630.       See
(Tex.App.--Fort Worth 1995, writ denied) (recognizing             http://aspe.hhs.gov/poverty/01poverty.htm.
Texas Supreme Court's holding in Lieck that malicious
prosecution may occur when either a person gives false            [18]The remaining reprehensibility factor is whether the
information to authorities or when a person's conduct was         defendant's conduct involved repeated actions, not just an
determining factor in decision to prosecute).                     isolated incident. For purposes of the reprehensibility
                                                                  analysis, the Texas Supreme Court has found that this factor
[11]On rehearing, the Appellants contend they had no              refers to recidivism and not a course of conduct resulting in
notice that Grant was seeking to join Bonham under                a single injury. See Bennett I, 315 S.W.3d at 878 n.55.
permissive venue. Grant's motion for leave sought to add          Here, Grant alleges Bennett engaged in a course of conduct
Bonham as a party to his counterclaim and tracked the             resulting in a single injury--his indictment for attempted
language of the permissive joinder rule. See Tex. R. Civ. P.      bribery. There is no evidence in the record that Bennett had
40.                                                               engaged in other acts of malicious prosecution
demonstrating recidivism.                                        Grant never noticed any formal hearing on his request for
                                                                 sanctions." See Tex. R. Civ. P. 13 (sanctions may be
[19]Annuity payments would not begin until the first             imposed upon motion or upon court's own initiative, after
anniversary of this lump-sum payment and would be                notice and hearing); Tex. Civ. Prac. & Rem. Code §
awarded only if Grant was still living on that date. See Tex.    10.002--3 (same). The record, however, shows that
Civ. Prac. & Rem. Code § § 103.151(b), 103.154(b).               Bennett's counsel was served with notice of the sanctions
                                                                 hearing. Moreover, " the proper method to preserve
[20]The annuity payments are somewhat speculative as             [Bennett's] notice complaint was to bring the lack of
they are determined by the number of years a person              adequate notice to the attention of the trial court at the
survives after release from prison. See id. § 103.154(b).        hearing, object to the hearing going forward, and/or move
Unlike the lump-sum compensation, the annuity payments           for a continuance." See Low v. Henry, 221 S.W.3d 609, 618
do not transfer upon death to the person's estate. See id. § §   (Tex. 2007). Bennett additionally complains on rehearing
103.151(a), 103.154(b).                                          that " Grant never filed a formal motion for sanctions."
                                                                 Bennett failed to raise this issue at the trial court or in his
[21]Bennett acknowledged at trial that, in his efforts to
                                                                 appeal. Grant did plead for attorneys' fees based on
prosecute Grant, he spoke with at least eight different law
                                                                 Bennett's filing of a groundless claim, and the trial court
enforcement officials on separate occasions.
                                                                 had submitted a jury question asking whether Bennett's
[22] See Tex. Penal Code § § 32.46 (execution of document        slander claim was groundless and brought in bad faith or for
by deception), 38.03 (aggravated perjury), 37.09 (evidence       purposes of harassment. The jury answered affirmatively.
tampering), 37.08 (false report).                                Grant then moved the court to enter final judgment
                                                                 sanctioning Bennett for filing a groundless claim brought in
[23]In truth, for most cases the monetary criminal penalties     bad or for purposes of harassment. Prior to the court's
under the Texas Penal Code have little utility in                sanctions order, Bennett also filed a brief with the court
determining the dollar value of an exemplary damages             contending that he should not be sanctioned because his
award. See State Farm Mut. Auto. Ins. Co. v. Campbell, 538       claims were not groundless nor brought in bad faith or for
U.S. 408, 428, 123 S. Ct. 1513, 155 L. Ed. 2d 585 (2003).           purposes of harassment. Thus, on the record, Grant moved
The monetary penalty for all felonies in Texas, except for       the trial court to issue sanctions and Bennett plainly had
capital felony offenses which do not carry any monetary          notice of the grounds on which Grant was seeking sanctions
penalty, is a fine not to exceed $10,000. Tex. Penal Code §      and an opportunity to respond.
§ 12.31--.35. There is no variance in the amount of the fine
to account for the State's varied interests in preventing and    [27]The trial court's order provides many instances of
punishing various degrees of reprehensible felony conduct.       Bennett personally implicating himself, including one
                                                                 instance where he--outside the presence of the jury--altered
[24]When corporate liability is warranted based on the           a hand-drawn exhibit depicting Reynolds' brand. When
actions of a vice-principal, the Texas Supreme Court has         confronted about the alteration, Bennett claimed he was
affirmed the propriety of awarding exemplary damages             merely highlighting the exhibit so the jury could see it
against both the individual vice-principal and his employer.     better, and that it was okay because the Judge was in the
See Bennett I, 315 S.W.3d at 869 (affirming exemplary            courtroom when he made the alteration. The trial court
damages awarded against both individual who was                  notes in its order that " although the Judge was present in
corporate principal and corporation itself but remanding         the room, such alteration was not observed or sanctioned by
because awards were excessive under due process); see also       anyone, the Court included." In addition to the sanctions
Qualicare of E. Tex., Inc. v. Runnels, 863 S.W.2d 220, 224       expressly authorized by Rule 13 and Chapter 10, the trial
(Eastland 1993--no writ.) (award of exemplary damages            court has the inherent power to sanction such bad faith
against both employer and vice-principal " is proper and         conduct that occurs during the course of litigation. See
does not impose a double punishment" ).                          Public Util. Comm'n v. Cofer , 754 S.W.2d 121, 124 (Tex.
                                                                 1988); Eichelberger v. Eichelberger, 582 S.W.2d 395, 398
[25]The trial court also submitted this question to the jury,    (Tex. 1979).
which concluded that Bennett's suit was groundless and
brought in bad faith or for the purpose of harassment.           [28]We acknowledge that the amount of attorneys' fees
Bennett contends the trial court erred in submitting the         awarded as sanctions is significant. Chapter 10 and Rule 13,
sanctions issue to the jury because it was a question of law.    however, specify that attorneys' fees caused by improper
Regardless, the sanctions order indicates the trial court        conduct are an appropriate sanction. See Tex. Civ. Prac. &
made its own findings to support the sanctions order             Rem. Code § 10.004(c)(3); Tex. R. Civ. P. 13. Bennett has
separate from the jury's findings.                               not raised any challenge to the amount of the award on
                                                                 appeal. On rehearing, Bennett contends he is entitled to
[26]On rehearing, Bennett contends for the first time that "     remand to allow the trial court to reconsider the amount of
the award in light of the Texas Supreme Court's recent
opinion in Nath v. Texas Children's Hospital . See 446
S.W.3d 355, 372 (Tex. 2014) (holding that sanctions were
warranted but remand was necessary to determine whether,
by litigating for over four years before seeking sanctions,
the moving party bore some responsibility for the attorneys'
fees it incurred). In Nath, however, the sanctioned party
preserved error by challenging the excessiveness of the
attorneys' fees at the trial court and on appeal. See 446
S.W.3d at 361, 364. Here, Bennett did not raise the issue of
excessiveness at the trial court nor on appeal. Under these
circumstances, we cannot conclude he is entitled to remand
under Nath.

[29]In response to our opinion issued in this appeal on
August 13, 2014, Grant filed with the district court a
remittitur reducing his $2 million exemplary damages
award against Bennett and Bonham to an award of
$512,109 against each defendant. See Tex. R. App. P. 46.3.

---------
Page 887                                                         deceased's separate property. The court sustained the
                                                                 motion as to the real estate, the six community bank
600 S.W.2d 887 (Tex.Civ.App.—Houston [14 Dist.] 1980)            accounts, and the stock without objection from counsel for
                                                                 appellant. The court denied the motion as to the remaining
Georgia BATMANIS, Appellant,                                     bank accounts, and twelve special issues, prepared by
                                                                 counsel for appellee, were approved by the court for
v.
                                                                 submission to the jury. The special issues inquired (1)
                                                                 whether the funds in six certificates of deposit or
Elizabeth BATMANIS, Appellee.
                                                                 certificates of savings were on deposit prior to the marriage,
No. B2331.                                                       (2) whether the deceased had purchased certain certificates
                                                                 of savings during the marriage with checks drawn on his
Court of Civil Appeals of Texas, Fourteenth District,            checking account, and (3) whether the deceased had
Houston                                                          deposited certain dividends and rentals collected by him
                                                                 into his checking account. The jury answered each special
April 30, 1980                                                   issue in the negative. Counsel for appellant moved for
                                                                 judgment on the jury verdict while counsel for appellee
     Rehearing Denied May 21, 1980.                              moved for judgment notwithstanding the verdict. The
                                                                 judgment non obstante veredicto was entered on October 2,
Page 888
                                                                 1979.
     Don E. Kilpatrick, Houston, for appellant.
                                                                      The first point of error urged by Mrs. Batmanis
                                                                 contends that the trial court erred in sustaining appellee's
    Eugene J. Pitman, DeLange, Hudspeth, Pitman & Katz,
                                                                 motion for judgment non obstante veredicto because there
John J. Toomey, Houston, for appellee.
                                                                 existed evidence of probative force to support the jury's
     Before COULSON, SALAZAR and JUNELL, JJ.                     findings. The argument pertaining to this first point of error
                                                                 makes it clear that appellant's complaint is actually directed
     COULSON, Justice.                                           only to the following:

    The suit made the basis of this appeal was one to            Certificate of Savings, San Jacinto Savings Association,
determine the community interest of a widow, Georgia             No. 48-805692-1
Batmanis (appellant or Mrs. Batmanis), after she had filed
her election to take against the will of her deceased            Certificate of Savings, San Jacinto Savings Association,
husband, Paul Batmanis. Appellee, the respondent below, is       No. 48-002310
Dr. Elizabeth Batmanis, independent executrix of the estate
                                                                 Certificate of Savings, Houston First Savings, No. 254418
of Paul Batmanis and his daughter born of his first
marriage. Paul and Georgia Batmanis had each been
                                                                 Certificate of Deposit, Gibraltar Savings Association, No.
previously widowed prior to their marriage on October 25,
                                                                 7-861388
1973. After Mr. Batmanis's death on May 22, 1976, his
executrix prepared an inventory of his estate. Appellant and     Certificate of Savings, Benjamin Franklin Savings, No.
appellee could not agree as to which property held at            48-112813-1

Page 889                                                         Certificate of Deposit, American Savings & Loan
                                                                 Association, No. 48-021179-7
the time of Mr. Batmanis's death was separate and which
was community. This suit resulted.                                    If we are to affirm the trial court's granting of appellee's
                                                                 motion for judgment notwithstanding the verdict, we must
     Trial was to a jury. After both sides rested, counsel for
                                                                 determine that there was no evidence to sustain the jury's
appellee moved for a peremptory finding that all the real
                                                                 findings that the six certificates of deposit or savings were
estate involved in the estate was the separate property of the
                                                                 not on deposit prior to the marriage of appellant and the
deceased, that six of the bank accounts on the inventory
                                                                 deceased. In our review we must view all evidence in the
were community property, that the remaining bank accounts
                                                                 light most favorable to the jury findings and indulge every
were separate property of the deceased, and that certain
                                                                 reasonable inference from the evidence to support those
stock was community property since it was purchased after
                                                                 findings. All evidence and inferences not supporting the
the marriage and the remainder of the stock was the
jury verdict must be disregarded. Dodd v. Texas Farm             $19,272.33, (2) the funds were deposited in Mr. Batmanis's
Products Co., 576 S.W.2d 812 (Tex.1979).                         checking account, and (3) funds were withdrawn from that
                                                                 bank account and were used to purchase certain certificates
     After a thorough review of the evidence concerning the      of savings and to open certain passbook savings accounts.
six certificates in dispute, we find that, as a matter of law,   The total amount contained in these certificates, passbook
they are each directly traceable to certificates held by the     accounts and the checking account was $41,341.23. Since
deceased prior to the marriage and, therefore, were Mr.          appellant did not even attempt to distinguish which of this
Batmanis's separate property. Thus, there was no evidence        money came from the rents and dividends collected as
to support the jury's answers to Special Issues No. 1-6, and     constructive trustee and which came from other sources, the
the granting of judgment notwithstanding those answers           entire amount will be subject to the trust. Eaton v. Husted,
was proper. Appellant's first point of error is overruled.       141 Tex. 349, 172 S.W.2d 493 (1943). Where, as here, the
                                                                 trustee invests the trust money in other property, the
    Appellant's second point of error concerns the               beneficiaries of the trust may follow the fund into the new
overruling of her objections to page 1 of Respondent's           investment. General Ass'n of Davidian S.D.A. v. General
Exhibits Number 13 and 14 and the admission of                   Ass'n, Etc., 410 S.W.2d 256 (Tex.Civ.App. Waco 1966,
Respondent's Exhibits Number 13 and 14 into evidence.            writ ref'd n. r. e.). And where, as here, the trustee comingles
                                                                 trust money with his own and money is expended, it will be
     Page 1 of the complained of exhibits are handwritten
                                                                 presumed that his own money is expended first. 410 S.W.2d
summaries of the activity of two certificates of deposit,
                                                                 at 259. Thus, the trial court was correct in holding that the
alleged to be community property, which were manually
                                                                 $19,272.33 held in trust for the estate of Erato Batmanis
copied from a visual display on a computer terminal. In
                                                                 should be recovered from community property, and
each case, the summary is unnecessary to explain the
                                                                 appellant's third point of error is overruled.
remainder of the exhibit which contains signature cards
from the two certificates. The certificates are                       Finally, appellant urges error in the trial court's refusal
                                                                 to allow her interest on her one-half of the community
Page 890
                                                                 property withheld from her since the date of death of Paul
traceable without the summaries, and, thus, the possible         Batmanis. The trial court awarded appellant her one-half of
inadmissability of the summaries was not calculated to           the dividends collected on shares of stock owned by the
cause and did not cause the rendition of an improper             community. We find that appellant is also entitled to her
judgment. Any error in the overruling of the objection to the    proportionate share of the interest contracted for in the
admission of the summaries was, therefore, harmless.             certificates of savings and passbook account found to be
Tex.R.Civ.P. 434.                                                community property. In addition, if it be found that
                                                                 appellant's share of the community was wrongfully
     The objection made to the admission of Exhibits 13 and      withheld from her, she may be entitled to interest as
14 was that the proffered exhibits were copies and,              damages. McKinney v. Nunn, 82 Tex. 44, 17 S.W. 516
therefore, not the best evidence. It is clear from the record    (1891); Tex.Rev.Civ.Stat.Ann. art. 5069-1.01 (Vernon
that appellant's objection was in reference to the summaries,    1971).
page 1 of the exhibits. The accuracy of the reproduction of
the signature cards was never disputed. Inasmuch as we                It is clearly the law in Texas that interest is allowed as
have already found the admission of the summaries to have        damages for the failure to pay a sum due. Davidson v.
been harmless error, and the accuracy of the reproduction of     Clearman, 391 S.W.2d 48 (Tex.1965). Interest attaches
the remaining pages of the exhibits was never in dispute,        whenever it is ascertained that money was due at a
those      reproductions     were       admissable      under    particular time and was withheld. Hayek v. Western Steel
Tex.Rev.Civ.Stat.Ann. art. 3731c (Vernon Supp. 1980).            Company, 469 S.W.2d 206 (Tex.Civ.App. Corpus Christi
Appellant's second point of error is overruled.                  1971) aff'd, 478 S.W.2d 786 (Tex.1972). If an award is
                                                                 made to appellant for interest as damages, that interest
     Appellant's third point of error complains that the trial   should be at the rate of 6% from the date the amount
court incorrectly held that the sum of $19,272.33, held in       became due until the date of judgment. Southline
constructive trust for the estate of Erato Batmanis (the         Equipment Co. v. National Marine Service Incorporated,
deceased first wife of Paul Batmanis) by Paul Batmanis as        598 S.W.2d 340 (Tex.Civ.App. Houston (14 Dist.), 1980).
trustee, be satisfied from community property. The
undisputed evidence shows that (1) during the marriage of        Page 891
appellant and Paul Batmanis, Mr. Batmanis collected rents
                                                                     We remand to the trial court for further consideration
and dividends from real property and shares of stock owned
                                                                 the questions of (1) whether appellant's share of the
by the estate of Erato Batmanis in the amount of
                                                                 community was wrongfully withheld from her and (2) the
amount of contractual interest due appellant from the
certificates of savings and passbook account found to be
community property.

     The remainder of the judgment of the trial court is
affirmed.
Page 795                                                        Glazner alleges that in 1994, he and Haase entered into a
                                                                contract in which Haase agreed to allow Glazner to build an
62 S.W.3d 795 (Tex. 2001)                                       additional Whataburger in south Longview, in Haase's
                                                                franchise area. According to Glazner, Haase promised to
45 Tex.Sup.Ct.J. 141                                            help Glazner secure a franchise by guaranteeing the success
                                                                of Glazner's proposed new restaurant to Whataburger Inc.,
R.E. HAASE and PRH Investments, Inc., Petitioners,
                                                                the corporate franchisor. Glazner further claims that Haase
                                                                agreed to sell Glazner his restaurants when Haase decided
v.
                                                                to retire, and that Glazner agreed to sell Haase his proposed
Joseph K. GLAZNER, Respondent.                                  restaurant should he ever decide to sell "for some reason."
                                                                Glazner asserts that the consideration to Haase for this
No. 00-1076.                                                    agreement was to be two percent of the net sales from
                                                                Glazner's new restaurant. Glazner argues that the contract's
Supreme Court of Texas                                          terms appear in three letters to Whataburger either signed
                                                                by Haase or incorporated by reference in a letter that Haase
November 29, 2001                                               signed, along with a proposed cash-flow statement Glazner
                                                                prepared assuming a payment to Haase of two percent of
     Argued Oct. 19, 2001.
                                                                projected net sales.
      Rehearing Overruled Jan. 17, 2002.
                                                                      In May 1995, Glazner quit working for Haase. He
                                                                never obtained a Whataburger franchise. The record shows
Page 796
                                                                that Whataburger did not grant any new franchises during
     Bradley R. Echols, Gary Shaver, Boon, Shaver,              the time that Glazner worked for Haase. In November 1996,
Echols & Coleman, Longview, for Petitioner.                     Haase was granted a Whataburger franchise for a south
                                                                Longview location. He opened a restaurant there in June
     Kenneth L. Ross, Ross Hudgens & Associates,                1997.
Longview, John R. Mercy Carter & Elliott, Texarkana, for
Respondents.                                                          Glazner sued Haase, alleging breach of contract,
                                                                fraud, fraudulent inducement, and unjust enrichment.
     Justice ENOCH delivered the opinion of the Court.          Glazner named as defendants both Haase and PRH
                                                                Investments, Inc., a corporation that Haase and his wife
      This case requires us to decide whether a party can       formed, alleging that Haase and PRH were jointly and
maintain a claim based on either fraud or fraudulent            severally liable and that the corporate veil should be pierced
inducement when that claim is premised on a contract that
the Statute of Frauds makes unenforceable. We hold that a       Page 797
plaintiff cannot assert a fraudulent inducement claim in the
absence of a contract. We further hold that under the facts     because Haase had not observed appropriate corporate
of this case, to the extent that Glazner seeks to recover the   formalities. Haase moved for summary judgment on the
benefit-of-the-bargain damages related to a contract that is    following grounds: 1) the alleged contract is unenforceable
unenforceable under the Statute of Frauds, the Statute bars     because of the Statute of Frauds; [1] 2) the Statute of Frauds
the fraud claim, but that Glazner's fraud claim for             bars Glazner's fraud claims; 3) Glazner offered no evidence
out-of-pocket damages, if any, may survive the Statute of       of a valid contract; 4) there is no cause of action for unjust
Frauds. We therefore affirm the court of appeals' judgment      enrichment; and 5) Glazner offered no evidence to support
in part, reverse in part, and render judgment that Glazner      piercing the corporate veil. The trial court granted summary
take nothing on his fraudulent inducement claim and on his      judgment without specifying the grounds for its decision.
fraud     claim     to    the    extent   that    he    seeks
                                                                     Glazner appealed. The court of appeals upheld the
benefit-of-the-bargain damages.
                                                                summary judgment on all claims except those for fraud and
      Petitioner R.E. Haase owns the Whataburger franchise      fraudulent inducement. With respect to the breach of
rights for the City of Longview. In 1992, respondent Joseph     contract claim, the court of appeals noted that there was no
K. Glazner went to work for Haase as a manager trainee. By      dispute that the Statute of Frauds applied to the alleged
the end of 1992, Glazner had been promoted to supervisor        contract because it was both a promise to answer for
for Haase's five Longview Whataburger restaurants.              another's debt and an agreement that could not be
                                                                performed within one year. [2] The Court concluded that no
writing existed that satisfied the Statute. [3] Moreover, the     claim. That is, when a party has not incurred a contractual
court reasoned, the agreement did not satisfy the Statute of      obligation, it has not been induced to do anything. At least
Frauds because it was not final. [4] Rather, the letters          two courts of appeals have previously reached this
Glazner relied on showed ongoing negotiations, not a              conclusion. [13]
binding agreement. [5] Thus, the court of appeals affirmed
summary judgment on the breach of contract claim because                Here, the court of appeals concluded that the parties
there was no enforceable contract. Glazner does not               never reached a final agreement; rather, the letters that
challenge that ruling.                                            make up the alleged contract simply evidence ongoing
                                                                  negotiations. [14] Glazner does not challenge this
      The court of appeals further held that the Statute of       conclusion before us, and it is fatal to his fraudulent
Frauds does not bar Glazner's claims for fraud and                inducement claim. Thus, the court of appeals erred when it
fraudulent inducement because of this Court's opinion in          reversed the summary judgment on Glazner's fraudulent
Formosa Plastics Corporation USA v. Presidio Engineers            inducement claim.
and Contractors, Inc. [6] Citing Formosa Plastics, the court
reasoned that Glazner's fraud and fraudulent inducement                  We next consider Haase's argument that the court of
claims alleged a breach of legal duties completely                appeals erred in holding that the Statute of Frauds does not
independent of those under the alleged contract. [7] Thus,        bar Glazner's fraud claim because of Formosa Plastics.
the court of appeals determined that the trial court erred in     Haase relies on several opinions from the courts of appeals
granting summary judgment on those claims and remanded            holding that the Statute of Frauds bars a fraud claim when,
them to the trial court. [8]                                      as here, the plaintiff seeks to obtain the benefit of an
                                                                  otherwise unenforceable bargain. [15] Glazner counters that
       We granted Haase's petition for review. He asserts         Formosa Plastics reaffirmed that tort damages for fraud can
that the court of appeals erred by permitting Glazner to          be recovered even where the plaintiff suffers only economic
assert a fraudulent inducement claim when there is no             loss related to the contract's subject matter. [16] Again, we
contract, and by holding that the Statute of Frauds does not      agree with Haase.
bar Glazner's fraud claim because of Formosa Plastics.
When reviewing a summary judgment under Rule 166a(c),                    In Formosa Plastics, we concluded that Presidio could
we consider whether the successful movant in the trial court      bring a fraudulent inducement claim even though its
carried its burden to show that there is no genuine issue of      damages consisted only of economic losses related to the
material fact and that judgment should be granted as a            performance and subject matter of the parties' contract. [17]
matter of law. [9] We take all evidence favorable to the          Some of our language in that opinion suggests that there is
nonmovant as true, and we make all reasonable inferences          no distinction between a claim for fraud and one for
in the nonmovant's favor. [10]                                    fraudulent inducement. [18] Fraudulent inducement,
                                                                  however, is a particular species of fraud that arises only in
      We first consider Haase's contention that the court of      the context of a contract and requires the existence of a
appeals erred in concluding that Glazner may assert a             contract as part of its proof. That is, with a fraudulent
fraudulent inducement claim in the absence of a contract.         inducement claim, the elements of fraud must be
Haase argues that by                                              established

Page 798                                                          Page 799

its nature a fraudulent inducement claim presupposes that a       as they relate to an agreement between the parties. Formosa
party has been induced to enter a contract. When a party has      Plastics involved a fraudulent inducement claim based on
not been induced into a contract, he asserts, there is no         representations contained in the bid packet upon which
detrimental reliance and therefore no fraudulent inducement       Presidio based its contract offer, which resulted in a written
claim. We agree.                                                  contract between the parties. Thus, the case was correctly
                                                                  decided as to fraudulent inducement. Although economic
       As we observed in Formosa Plastics, "Texas law has         losses may be recoverable under either fraud or fraudulent
long imposed a duty to abstain from inducing another to           inducement, Formosa Plastics should not be construed to
enter into a contract through the use of fraudulent               say that fraud and fraudulent inducement are
misrepresentations." [11] Certainly there can be no breach        interchangeable with respect to the measure of damages that
of that duty when one is not induced into a contract. More        would be recoverable.
significantly, proof that a party relied to its detriment on an
alleged misrepresentation is an essential element of a fraud            Moreover, nothing in Formosa Plastics prevents the
claim. [12] Without a binding agreement, there is no              Statute of Frauds from precluding a fraud claim that seeks
detrimental reliance, and thus no fraudulent inducement           to recover the benefit of an unenforceable bargain. The
Statute simply was not an issue in that case--neither party     reliance. Consequently, under the circumstances presented
argued that the Statute of Frauds had anything to do with       here, Glazner's fraud claim may survive Haase's motion for
enforcing the parties' contract. As a result, in Formosa        summary judgment to the extent that he seeks to recover
Plastics we had no occasion to consider the Statute of          these kinds of out-of-pocket damages.
Frauds' effect on a fraud claim premised on an
unenforceable contract.                                                 Haase points out that the trial court granted his
                                                                special exceptions to Glazner's petition and ordered Glazner
      This Court did, however, consider that question in        to replead, specifically stating the maximum amount of
Nagle v. Nagle. [19] In that case, the plaintiff sued her       damages claimed, the factual basis underlying the alleged
former husband to enforce his oral promise to convey to her     material misrepresentations, and the factual and legal basis
his half-interest in their home. She alleged fraud and sought   underlying Haase's alleged common-law and statutory
specific performance or damages from his failure to             fraud. Glazner never did. Haase asserts that Glazner's
perform. The jury found for the plaintiff, and the court of     failure to replead is grounds for upholding the summary
appeals affirmed. This Court reversed, because enforcing an     judgment on both the fraud and fraudulent inducement
oral promise to convey land despite the Statute of Frauds       claims, citing our opinion in Friesenhahn v. Ryan. [24]
would render the statute meaningless. [20]                      While Haase is correct that summary judgment may be
                                                                granted when a party is ordered to replead and fails to, [25]
      , [9] That same reasoning holds true here. If in the      we again note that Haase did not move for summary
face of the Statute of Frauds we permit Glazner's fraud         judgment on this ground. We therefore cannot uphold the
claim to the extent he seeks to recover the benefit of the      summary judgment on that basis. [26]
unenforceable bargain, we deprive the Statute of any effect.
The Statute exists to prevent fraud and perjury in certain            In sum, we hold that a plaintiff cannot assert a
kinds of transactions by requiring agreements to be set out     fraudulent inducement claim when there is no contract. We
in a writing signed by the parties. [21] But that purpose is    further hold that under the facts of this case, to the extent
frustrated and the Statute easily circumvented if a party can   that Glazner seeks to recover the benefit-of-the-bargain
use a fraud claim essentially to enforce a contract the         damages related to a contract that is unenforceable under
Statute makes unenforceable. We therefore hold that the         the Statute of Frauds, the Statute bars the fraud claim, but
Statute of Frauds bars a fraud claim to the extent the          that Glazner's fraud claim for out-of-pocket damages, if
plaintiff seeks to recover as damages the benefit of a          any, may survive the Statute of Frauds. We therefore
bargain that cannot otherwise be enforced because it fails to   reverse the court of appeals' judgment insofar as it remands
comply with the Statute of Frauds.                              Glazner's fraudulent inducement claim and his fraud claim
                                                                for benefit-of-the-bargain damages, and render judgment
       But Glazner's fraud claim may not contravene the         that Glazner take nothing on those claims. We otherwise
Statute of Frauds to the extent that he seeks out-of-pocket     affirm the court of appeals' judgment.
damages incurred in relying upon Haase's alleged
misrepresentations. [22] With respect to such damages,          ---------
Glazner is not attempting to enforce the otherwise
unenforceable contract. Relying on Glazner's deposition         Notes:
testimony, Haase argues that Glazner's only alleged
damages are the lost profits from the franchise he never        [1] See TEX. BUS. & COM.CODE § 26.01.
secured. But Glazner's petition is not so limited. Rather,
                                                                [2] 61 S.W.3d 10, 14; see also TEX. BUS. & COM.CODE
Glazner's petition alleges that he made
                                                                §§ 26.01(b)(2), (b)(6).
Page 800
                                                                [3] 61 S.W.3d 10, 14.
"efforts concerning demographics, decor, potential profits,
                                                                [4] Id. at 15.
and location." And the summary judgment record reveals
that Glazner hired a surveyor and entered into an               [5] Id.
earnest-money contract for a site on which he proposed to
build his restaurant. These kinds of damages are not part of    [6] 960 S.W.2d 41 (Tex.1998).
the benefit of any alleged bargain between the parties.
                                                                [7] 61 S.W.3d at 15 (citing Formosa Plastics, 960 S.W.2d at
      Haase did not move for summary judgment on the            52).
grounds that there was no evidence of damages aside from
lost profits. [23] Nor did he move for summary judgment on      [8] Id. at 16.
the grounds that there was no evidence of reasonable
[9] KPMG Peat Marwick v. Harrison County Hous. Fin.           S.W.2d 337, 341 (Tex.1993).
Corp., 988 S.W.2d 746, 748 (Tex.1999).
                                                              ---------
[10] Id.

[11] 960 S.W.2d at 46.

[12] See Eagle Prop., Ltd. v. Scharbauer, 807 S.W.2d 714,
723 (Tex.1990).

[13] John Wood Group USA, Inc. v. ICO, Inc., 26 S.W.3d
12, 24 (Tex.App.--Houston [1st Dist.] 2000, pet. denied);
Coastal Corp. v. Atlantic Richfield Co., 852 S.W.2d 714,
720 (Tex.App.--Corpus Christi 1993, no writ).

[14] 61 S.W.3d at 15.

[15] Flameout Design & Fabrication, Inc. v. Pennzoil
Caspian Corp., 994 S.W.2d 830, 837 (Tex.App.--Houston
[1st Dist.] 1999, no pet.); Leach v. Conoco, Inc., 892
S.W.2d 954, 960 (Tex.App.--Houston [1st Dist.] 1995, writ
dism'd w.o.j.); Collins v. Allied Pharmacy Mgmt., Inc., 871
S.W.2d 929, 936 (Tex.App.--Houston [14th Dist.] 1994, no
writ); Webber v. M.W. Kellogg Co., 720 S.W.2d 124, 129
(Tex.App.--Houston [14th Dist.] 1986, writ ref'd n.r.e.).

[16] 960 S.W.2d at 47.

[17] Id.

[18] See, e.g., id. at 44, 46-47.

[19] 633 S.W.2d 796 (Tex.1982).

[20] Id. at 801; see also Wade v. State Nat'l Bank, 379
S.W.2d 717, 720 (Tex.Civ.App.--El Paso 1964, writ ref'd
n.r.e.).

[21] See RESTATEMENT (SECOND) OF CONTRACTS
§ 131 cmt. c (1981); 9 WILLISTON ON CONTRACTS §
21:1 (4th ed.1999); see also Hooks v. Bridgewater, 111
Tex. 122, 229 S.W. 1114, 1116 (1921).

[22] See Carr v. Christie, 970 S.W.2d 620, 625
(Tex.App.--Austin 1998, pet. denied); see also Collins v.
McCombs, 511 S.W.2d 745, 747 (Tex.Civ.App.--San
Antonio 1974, writ ref'd n.r.e.); General Corp. v. General
Motors Corp., 184 F. Supp. 231, 235 (D.Minn.1960); cf.
RESTATEMENT (SECOND) OF CONTRACTS § 139
(1981).

[23] See TEX.R. CIV. P. 166a(i).

[24] 960 S.W.2d 656, 658 (Tex.1998).

[25] Id.

[26] See McConnell v. Southside Indep. Sch. Dist., 858
Page 810                                                             The basis for the judgment of the probate court is the
                                                                advancement, by Maston, of $26,938.79 to himself and
660 S.W.2d 810 (Tex. 1983)                                      $10,668.78 to his sister Nancy. These advancements were
                                                                properly reflected in the final account filed on behalf of
Maston Nixon CUNNINGHAM, Petitioner,                            Maston as claims of the estate. No evidentiary hearing was
                                                                held to consider the propriety of the final account nor was
v.
                                                                Maston present to submit evidence in support thereof.
                                                                Rather, the probate court, upon the motion of Mr. Pearson,
PARKDALE BANK et al., Respondents.
                                                                rendered a personal judgment against Maston for the total
No. C-2024.                                                     sum of $37,607.57. This judgment was rendered in favor of
                                                                the successor administrator, Parkdale Bank, despite the fact
Supreme Court of Texas.                                         that Parkdale Bank filed no pleadings praying for such a
                                                                judgment and never assumed the status of a party plaintiff.
November 30, 1983
                                                                      In his motion for new trial and in the court of appeals,
Page 811                                                        Maston urged that the judgment of the probate court was
                                                                void or voidable because there were no pleadings seeking a
     Charles R. Cunningham, Corpus Christi, for petitioner.     judgment against him and because no citation was issued to
                                                                him personally. He also urged there was no basis in law for
    Head & Kendrick, Richard E. Fling, Corpus Christi, for
                                                                rendition of the judgment against him because he is entitled
respondents.
                                                                to more funds from the distribution of the estate than the
                                                                amount advanced to him. [1] Both lower courts found no
     BARROW, Justice.
                                                                merit in these contentions. The dissenting justice in the
     This is an appeal from a personal judgment rendered by     court of appeals concluded that the probate court exceeded
the Nueces County Court, sitting in probate, against Maston     its jurisdiction in summarily rendering a personal judgment
Nixon Cunningham (Maston), the resigned independent             because of the absence of pleadings, notice, opportunity for
administrator of the Estate of Nancy Nixon Cunningham.          hearing, and other procedural irregularities. We agree. [2]
The judgment of the probate court was based upon an
                                                                     The Texas Rules of Civil Procedure govern
alleged deficiency in the assets of the estate, which
                                                                proceedings in probate matters except in those instances in
deficiency resulted from two advancements made by
                                                                which a specific provision has been made to the contrary.
Maston to his sister and himself. The court of appeals, with
                                                                Tex.R.Civ.P. 2. In Texas, "[a] civil suit in the district or
one justice dissenting, affirmed. 650 S.W.2d 484. We hold
                                                                county court shall be commenced by a petition filed in the
that the probate court erred in rendering a personal
                                                                office of the clerk." Tex.R.Civ.P. 22. "The office of
judgment against Maston and, accordingly, reverse the
                                                                pleadings is to define the issues at trial," Murray v. O & A
judgments of the lower courts and
                                                                Express, Inc., 630 S.W.2d 633, 636 (Tex.1982) and to "give
Page 812                                                        the opposing party information sufficient to enable him to
                                                                prepare a defense." Roark v. Allen, 633 S.W.2d 804, 810
remand this proceeding to the probate court.                    (Tex.1982). Also, the judgment of the court must conform
                                                                to the pleadings of the parties. Tex.R.Civ.P. 301.
     Nancy Nixon Cunningham died testate on February 14,
1980, but both of the executors named in her will                    The probate court is vested with substantial potential
predeceased her. Her three children, who were her only          jurisdiction regarding "matters incident to an estate,"
heirs, agreed upon the appointment of her son, Maston, as       Tex.Prob.Code Ann. § 5(d) (1980). This jurisdiction is
independent administrator of the estate. See Tex.Prob.Code      activated and becomes actual jurisdiction over a party only
Ann. § 145(d) (1980). Paul Pearson, III, an attorney, was       after the filing of a petition the subject matter of which is
hired to assist in the administration and distribution of the   within the jurisdiction of the court. Hughes v. Atlantic
estate. Eventually, an application to resign and an order       Refining Co., 424
accepting same were filed on behalf of Maston. A detailed
account of the estate's claims and assets was prepared and      Page 813
filed also. After these documents were filed with the court,
                                                                S.W.2d 622, 625 (Tex.1968). Further, a judgment must be
notice was posted for the benefit of all interested parties.
                                                                supported by the pleadings and, if not so supported, it is
                                                                erroneous. City of Fort Worth v. Gause, 129 Tex. 25, 101
S.W.2d 221, 223 (1937). Thus, a party may not be granted           Roddey, 613 S.W.2d 360, 365 (Tex.Civ.App.--Waco 1981,
relief in the absence of pleadings to support that relief.         writ dism'd); see also City of Houston v. Fore, 412 S.W.2d
Stoner v. Thompson, 578 S.W.2d 679, 682 (Tex.1979);                35, 39 (Tex.1967); Martinez v. Texas State Bd. of Medical
Tex.R.Civ.P. 301.                                                  Examiners, 476 S.W.2d 400, 405 (Tex.Civ.App.--San
                                                                   Antonio 1972, writ ref'd n.r.e.), cert. denied, 409 U.S. 1020,
     In the instant case, we are unwilling to construe the         93 S. Ct. 463, 34 L. Ed. 2d 312 (1972). Similarly,
final account filed by Maston as being sufficient to               fundamental fairness dictates that a party must be given a
empower the probate court to render a judgment against             reasonable opportunity to be heard on the merits of his case;
Maston in his individual capacity. The final account fails to      such an opportunity must be granted at a meaningful time
set forth a plaintiff and defendant, states no cause of action,    and in a meaningful manner. See Read v. Gee, 551 S.W.2d
alleges no statutory basis upon which a personal judgment          496, 501 (Tex.Civ.App.--Fort Worth 1977), writ ref'd n.r.e.
may be based and, in fact, was prepared for Maston by Mr.          per curiam, 561 S.W.2d 777 (Tex.1977); accord Ex Parte
Pearson, who currently serves as counsel for Parkdale              Gordon, 584 S.W.2d 686, 688 (Tex.1979); cf. Brown v.
Bank. To hold that the mere filing of the exhibit and              McLennan County Children's Protective Svs., 627 S.W.2d
account is sufficient to support the judgment herein               390 (Tex.1982). Under this record, we conclude that
rendered would be untenable.                                       Maston did not have fair notice of the proposed action of
                                                                   the probate court so as to afford him the opportunity to be
     Equally as important as the absence of any pleadings to       present and to
invoke the jurisdiction of the trial court is the apparent
disregard by the court of rudimentary requirements of              Page 814
notice and the right to be heard. Pursuant to Maston's
request in his application for discharge, the trial court set a    explain or defend his actions at the hearing, before
hearing for May 25, 1981. The record is devoid of any              judgment against him was rendered. Cf. Clanton v. Clark,
evidence that a formal hearing was, in fact, held on that          639 S.W.2d 929 (Tex.1982).
date. The trial court's order adjudging Maston liable for the
deficiency was "entered" June 4, 1981. Maston disputes that             The probate court erred in rendering a personal
he was notified of the date on which the actual hearing was        judgment against Maston without pleadings, notice, and an
held, that he had notice of the court's intention to render        opportunity to be heard. The judgments of the lower courts
judgment against him, or that he had an opportunity to             are set aside and the proceedings remanded to the probate
object to such action.                                             court to conclude the administration of the estate.

     The Probate Code sets forth numerous provisions               ---------
governing the necessity and sufficiency of notice and
citation in probate matters. Tex.Prob.Code Ann. § 33               Notes:
(1980). We have been directed to no section of the Code
                                                                   [1] We find it difficult to understand the substitute
that authorizes the action of the trial court in this case. "The
                                                                   administrator's vigorous pursuit of this matter. The principal
general rule is that the legislature in its discretion may
                                                                   asset of the estate, to-wit, the residence of the deceased, has
prescribe what notice shall be given to a defendant in a suit,
                                                                   been sold, the debts paid, and administrator's attorney
subject to the condition that the notice prescribed must
                                                                   concedes that there are more than enough funds on hand to
conform to the requirement of due process of law. The
                                                                   satisfy these advancements. Furthermore, there has been no
requirement of due process of law is met if the notice
                                                                   controversy at any time in the proceedings among the heirs.
prescribed affords the party a fair opportunity to appear and
                                                                   The general purpose of independent administration is to free
defend his interests." Mexia Independent School Dist. v.
                                                                   the independent executor from "the often onerous and
City of Mexia, 134 Tex. 95, 133 S.W.2d 118, 121 (1939);
                                                                   expensive judicial supervision" and thereby "to effect the
Sgitcovich v. Sgitcovich, 150 Tex. 398, 241 S.W.2d 142,
                                                                   distribution of the estate with a minimum of cost and
146 (1951).
                                                                   delay." Corpus Christi Bank and Trust v. Alice National
     Those sections of the Code that specifically concern          Bank, 444 S.W.2d 632, 634 (Tex.1969).
personal representatives guilty of misapplication of estate
                                                                   [2] Both the majority and the dissent in the intermediate
property require that the guilty party be personally served
                                                                   court concluded that the probate court had jurisdiction,
before action may be taken against him. See Tex.Prob.Code
                                                                   under Tex.Prob.Code Ann. § 221 (1980), over a resigning
Ann. §§ 149C(a)(2), 222(b)(1) (1980). [3] This undoubtedly
                                                                   independent administrator. This is a question of jurisdiction
is based upon the postulate that procedural due process
                                                                   that we need not today decide.
"requires notice that is reasonably calculated to inform
parties of proceedings which may directly and adversely            [3] Parkdale Bank has now filed a suit in district court
affect their legally protected interests." City of Waco v.         seeking a personal judgment against Maston for
misapplication of these estate funds.

---------
Page 163                                                         Mobile Hydraulic Company, Metro Ford Truck Sales and
                                                                 Allied Cypress Bank. Respondent alleged that Stanley
679 S.W.2d 163 (Tex.App. —Houston [14 Dist.] 1984)               Wielgosz was general manager of Tri-W Rentals, a division
                                                                 of the W.W. Williams Company, [1] from mid-1979 until
H. Anne WIELGOSZ, Administratrix of the Estate of                his death in mid-1981, and that during the time he was
Stanley F.                                                       employed as general manager he embezzled $176,214 from
                                                                 the Tri-W Rentals division.
Wielgosz, Jr., et al., Relators,
                                                                      In November 1982, Seaboard amended its petition to
v.
                                                                 include Relator as a defendant in her individual capacity,
                                                                 alleging that she conspired with her husband to take the
Honorable Richard W. MILLARD, Judge of the 152nd
                                                                 funds and "has continued to conceal the existence of such
District
                                                                 funds and to convert them to her own use and benefit."
Court of Harris County, et al., Respondents.                     Subsequent to this amendment, Relator filed a plea to the
                                                                 jurisdiction in both capacities, alleging that exclusive
No. A14-84-342CV.                                                jurisdiction over the parties was in Harris County Probate
                                                                 Court Number Two where the administration of Stanley
Court of Appeals of Texas, Fourteenth District, Houston          Wielgosz's estate was pending. The district court sustained
                                                                 Relator's plea and dismissed the suit against her, both
September 27, 1984                                               individually and as Administratrix. Respondent then filed
                                                                 an original petition in Probate Court Number Two against
Page 164
                                                                 Relator, but only in her individual capacity. The probate
                                                                 court sustained Relator's plea to the jurisdiction and
[Copyrighted Material Omitted]
                                                                 dismissed the suit, stating that the cause of action as alleged
Page 165                                                         by Respondent against Relator was not incident to, nor did
                                                                 it pertain to, the Estate of Stanley Wielgosz, Jr. On May 23,
     Philip M. Shafer, Houston, for relators.                    1983, Respondent filed a motion in the district court asking
                                                                 for reinstatement of its suit against Relator, individually. On
   John Michael Webb, Bruce R. Hardesty, Webb,                   June 21, 1983, the court set aside the dismissal and ordered
Zimmerman, Flaum & Suetlik, Houston, for respondents.            the reinstatement of Relator as a defendant, both
                                                                 individually and as Administratrix of her husband's estate.
    Before J. CURTISS BROWN, C.J., and DRAUGHN                   In June 1983, Respondent served Relator with a request for
and CANNON, JJ.                                                  production of documents to which Relator objected.
                                                                 Following a hearing on the matter, Judge Millard ordered
     OPINION
                                                                 production of the documents requested by Respondent.
                                                                 Relator now brings this
     J. CURTISS BROWN, Chief Justice.
                                                                 Page 166
     This is an original mandamus proceeding filed under
TEX.REV.CIV.STAT.ANN. art. 1824 (Vernon Supp.1984).
                                                                 mandamus action, complaining of Judge Millard's order.
Relator, H. Anne Wielgosz, in her individual capacity and
as Administratrix of the Estate of Stanley F. Wielgosz,               Relator first argues that the district court has no subject
Deceased, seeks the writ to require the Honorable Richard        matter jurisdiction over the cause against Relator as
W. Millard, Judge of the 152nd Judicial District Court of        Administratrix of her husband's estate or individually
Harris County, to vacate his discovery order of April 13,        because exclusive jurisdiction of this cause rests in the
1984. This order requires Relator to supply documents            probate court. We find it unnecessary to determine whether
regarding both the personal and professional financial           the district court would have had jurisdiction over Relator
affairs of Relator and her deceased husband, Stanley             in her capacity as Administratrix. After dismissal in the
Wielgosz, from 1978 to 1983.                                     probate court, Respondent filed its Motion for Rehearing,
                                                                 asking the district court to "rescind, revoke and set aside the
     We will summarize the facts of this case for clarity. In
                                                                 Order of Dismissal previously entered in this cause and that
May 1982, Respondent, Seaboard Surety Company, filed
                                                                 the cause of action of Plaintiff against H. Anne Wielgosz,
suit in the district court of Harris County against Relator as
                                                                 Individually be reinstated and enter its further order that H.
Administratrix of the Estate of Stanley Wielgosz, Jr.,
                                                                 Anne Wielgosz, Individually will, henceforth be treated as a
Defendant in this action ...." However, the trial court in          and § 5A (Vernon 1980).
reinstating the cause, ordered "H. Anne Wielgosz,
Administratrix of the Estate of Stanley F. Wielgosz, Jr. and             Relator further argues that even if the district court had
H. Anne Wielgosz, Individually ... reinstated as party              jurisdiction to hear the case, she cannot be compelled to
defendants in this cause of action ...."                            produce the documents demanded by Relator because to do
                                                                    so would violate her Fifth Amendment privilege against
     As a general rule, a trial court may not grant relief          self-incrimination. We disagree. The Fifth Amendment is
which is not supported by the pleadings, and a judgment not         not violated solely because certain
supported by the pleadings is improper. Hubbard v. Lagow,
576 S.W.2d 163 (Tex.Civ.App.--Austin 1979, writ ref'd               Page 167
n.r.e.); Crozier v. Horne Children Maintenance and
Educational Trust, 597 S.W.2d 418 (Tex.Civ.App.--San                documents, on their face, might be incriminating. The
Antonio 1980, writ ref'd n.r.e.); Harry Hines Medical               privilege protects a person only against being incriminated
Center, Ltd. v. Wilson, 656 S.W.2d 598 (Tex.App.--Dallas            by his own compelled testimonial communications. United
1983, no writ); TEX.R.CIV.P. 301. Since there were no               States v. Doe, 465 U.S. 605, 104 S. Ct. 1237, 79 L.Ed.2d
pleadings to support the reinstatement of Relator as                552 (1984); Fisher v. United States, 425 U.S. 391, 96 S.Ct.
Administratrix, the trial court was without authority to enter      1569, 48 L. Ed. 2d 39 (1976). However, this privilege is
such an order. In light of this circumstance, we do not find        limited to prohibiting the use of physical or moral
it necessary to further address an issue which calls into           compulsion exerted on the person asserting the privilege.
question this Court's jurisdiction. It is, therefore, left for us   Fisher, 425 U.S. at 397, 96 S.Ct. at 1574. If the ingredient
to determine whether the district court has jurisdiction over       of personal compulsion against the accused is lacking there
Relator, individually, in this cause of action. In its Second       is no such privilege. Couch v. United States, 409 U.S. 322,
Amended Original Petition, Respondent alleged the                   93 S. Ct. 611, 34 L. Ed. 2d 548 (1973). Therefore, documents
following:                                                          belonging to or prepared by others are not protected, even if
                                                                    they contain incriminating matters. Fisher, 425 U.S. at 408,
As such, Mrs. Wielgosz knowingly and wrongfully engaged 96 S. Ct. at 1579. Further, in United States v. Doe, 104 S.Ct.
in a conspiracy with her now deceased husband to defraud            at 1241-1242, the Supreme Court held that where the
and conceal from the Plaintiff sums rightfully belonging to         preparation of business records is voluntary, a demand for
it and has continued to conceal the existence of such funds         production of such documents does not compel oral
and to convert them to her own use and benefit. The                 testimony nor does it compel a party to "restate, repeat, or
Inventory and Appraisement filed by Mrs. Wielgosz as                affirm the truth of their contents." Id.
Administratrix fails to list Wielgosz' community interest in
said funds or their proceeds as property of the Wielgosz'                The documents sought by Respondent include: (1)
estate. It is alleged by Plaintiff that Mrs. Wielgosz does not      documents belonging to or about the deceased; (2)
consider the funds withdrawn from said account as                   documents prepared by others, such as bank records,
community property and accordingly, those funds must be             invoices, receipts; (3) business records (including corporate
considered by Mrs. Wielgosz as her separate property.               and partnership tax returns); and (4) Relator's individual tax
These funds have been converted to the personal benefit of          returns, personal financial statements, and records of
H. Anne Wielgosz by the said H. Anne Wielgosz. Plaintiff            household accounts. In view of the authorities cited above,
herein sues H. Anne Wielgosz for the return of the sums of          the first three categories of documents are clearly not
money wrongfully taken from W.W. Williams Co. by H.                 privileged, and Relator cannot refuse to produce them based
Anne Wielgosz and converted to her own benefit which                on a claim of self-incrimination.
amount is in excess of $176,000.00.
                                                                         We must now examine the fourth category set out
     Without addressing the merits of the case, we believe          above which relates to documents prepared personally (or
the allegations set out above are sufficient to establish           under her immediate supervision) by Relator. In Texas,
Respondent's right to maintain its cause of action against          income tax returns are subject to discovery to the extent of
Relator, individually, in district court, separate and apart        relevancy and materiality by the party seeking discovery
from any claims incident to or appertaining to the estate of        and as determined by the court. Maresca v. Marks, 362
her deceased husband. Despite the fact the administration of        S.W.2d 299 (Tex.1962); Crane v. Tunks, 160 Tex. 182, 328
the estate is currently pending in Probate Court Number             S.W.2d 434 (1959). However, it is the duty of the trial
Two of Harris County, we do not feel the matter before us           judge to personally examine the returns and to segregate the
is exclusively within the province of that court. See Pullen        relevant from the irrelevant portions of same before making
v. Swanson, 667 S.W.2d 359 (Tex.App.--Houston [14th                 such information available to the moving party. Maresca,
Dist.] 1984, writ ref'd n.r.e.); TEX.PROB.CODE ANN. § 5 362 S.W.2d at 300-301. The Court in Maresca stated:
     The assumption is implicit in the opinions of this court
that a trial judge will discriminate in ordering discovery
between information disclosed by income tax returns which
is relevant and material to the matters in controversy and
information which is not. The protection of privacy is of
fundamental--indeed,        of     constitutional--importance.
Subjecting federal income tax returns of our citizens to
discovery is sustainable only because the pursuit of justice
between litigants outweighs protection of their privacy. But
sacrifice of the latter should be kept to the minimum, and
this requires scrupulous limitation of discovery to
information furthering justice between the parties which, in
turn, can only be information of relevancy and materiality
to the matters in controversy. Id. at 301.

    We see no reason to exclude Relator's other personal
financial records, such as her financial statements and
records of household accounts from similar considerations.

     We therefore hold Judge Millard abused his discretion
in ordering Relator to produce her entire tax returns,
financial statements, and personal household records
without examining them and separating the relevant parts
from the irrelevant. As stated in Maresca, 362 S.W.2d at
301, it is not this court's function to supervise the trial judge
in exercising his discretion in his rulings on relevancy and
materiality. However, we should grant extraordinary relief
when no discretion has been exercised, as in the case before
us.

     We feel certain the trial judge will act in a manner
consistent with this opinion and that it will be unnecessary
for a writ of mandamus to issue at this time. However, in
the event he fails to do so, a writ will

Page 168

issue to insure compliance with this opinion.

---------

Notes:

[1] ... Seaboard Surety Company brought suit as the insurer
of the W.W. WILLIAMS COMPANY.

---------
Page 930                                                         which was subject to the trust, to their mother, Helen Pitts.
                                                                 Appellant (Jacqueline Pitts Moody, a daughter) refused to
708 S.W.2d 930 (Tex.App. —Corpus Christi 1986)                   convey her interest to her mother. Between December 1976
                                                                 and March 1977, Helen Pitts (as trustee, as executor, and as
Jacqueline MOODY, Appellant,                                     an individual) conveyed several pieces of real property
                                                                 which were part of the corpus of the trust to her son
v.
                                                                 William and his wife and her daughter Geraldine and her
                                                                 husband.
Helen Marion PITTS, et al., Appellees.
                                                                     The portions of Johnny T. Pitts' will relevant to this
No. 13-85-356-CV.
                                                                 appeal are as follows:
Court of Appeals of Texas, Thirteenth District, Corpus
                                                                      ARTICLE THREE
Chritsi
                                                                     All of the rest, residue and remainder of the property
April 17, 1986
                                                                 which I may own at the time of my death, real, personal and
Page 931                                                         mixed, tangible and intangible, ... I give, devise and
                                                                 bequeath to my Trustee, hereinafter named, IN TRUST
[Copyrighted Material Omitted]                                   NEVERTHELESS, for the following uses and purposes:

Page 932                                                         I. I direct my Trustee to hold, manage, control, invest and
                                                                 reinvest the same, to collect the income therefrom and to
     J.D. Sherlock, Jr., Austin, for appellant.                  pay the net income therefrom to my beloved wife, Helen, so
                                                                 long as she shall live, in monthly or other convenient
     Richard Davis, Harlingen, for appellees.                    installments.

     Before NYE, C.J. and KENNEDY and DORSEY, JJ.                II. I further direct that my Trustee may, in her discretion, at
                                                                 any time and from time to time, pay over to or apply for the
     OPINION
                                                                 benefit of my wife so much or all of the principal of the
                                                                 Trust as will, when coupled with the income of the Trust,
     NYE, Chief Justice.
                                                                 support her in her accustomed manner of living and pay her
     This case involves the construction of a will. Appellant,   medical, dental, hospital and nursing expenses of
Jacqueline Pitts Moody, is the daughter of the testator,         invalidism. Restoration of principal in case of such invasion
Johnny T. Pitts. She brought this action against appellees:      shall not be required as a condition of further distribution of
Helen Marion Pitts (her mother and the wife of testator),        income. In determining the amounts of principal to be so
William Terry Pitts (her brother) and his wife, and              disbursed, my Trustee shall take into consideration the other
Geraldine Pitts Floyd (her sister) and her husband. The          income resources, but not capital resources, of such
fourth child of Johnny and Helen Pitts is not a party to this    beneficiary.
action. Suit was brought to invalidate the testamentary trust
                                                                 III. Upon the death of my beloved wife, Helen, ... I then
created by the will, to declare void conveyances of certain
                                                                 give, devise and bequeath all of the rest, residue and
real estate, to impose a constructive trust on appellant's
                                                                 remainder of my Estate to my children, namely Geraldine
purported share of the transferred real estate, for an
                                                                 Pitts Floyd, ... Johnny T. Pitts, Jr. ... William Terry Pitts ...
accounting, and for the removal of the trustee. Appellant
                                                                 and Jacqueline Pitts Melton ... in equal shares, per stirpes;
appeals from a take-nothing judgment. We reform and, as
                                                                 ... (Emphasis in the original.)
reformed, affirm.
                                                                      ARTICLE FOUR
     Testator executed his will on July 23, 1973, and died
September 2, 1976. The will was probated on September
                                                                 I nominate, constitute and appoint my beloved wife, Helen
30, 1976. It made a direct bequest to Helen Pitts (his wife)
                                                                 Marion Pitts, as Independent Executrix and as Trustee,
and devised the remainder of his estate (particularly certain
                                                                 without bond, under this, my Last Will and Testament, and
real estate) to a trustee (Helen Pitts) in trust for the wife,
                                                                 I direct that no other action shall be had in the County Court
Helen Pitts, for life with the remainder to their four
                                                                 or other probate court in relation to the
children. On November 24, 1976, three of the children
conveyed their remainder interest in the real property,
Page 933                                                          4. To sell, exchange, assign, transfer, partition, or otherwise
                                                                  dispose of any property, real or personal, of which I may
settlement of my Estate than the probating and recording of       die seized or possessed, or which may at any time form part
this, my Will, and return of statutory Inventory,                 of my estate or the trust created hereby, at public or private
Appraisement and List of Claims of my Estate. In event of         sale, for such purposes and on such terms, including sales
the death, resignation, inability or refusal of my said           on credit, with or without security, in such manner and at
Executrix and Trustee to act in either capacity, I then           such prices as to my fiduciary appears advisable.
nominate, constitute and appoint my son, Johnny, and
daughter, Jacqueline, to act as Substitute Independent            ***
Co-Executors and as Successor Co-Trustees, as the case
may be, without bond, and grant such Successors all of the        ***
rights, powers and duties of the original fiduciary, without
any act of conveyance or transfer....                             28. Except as may be otherwise expressly provided in my
                                                                  Will, whenever my fiduciary is required or permitted to
***                                                               divide or distribute my estate or any trust created hereby, to
                                                                  make such division or distribution in money or in kind, or
***                                                               partly in money and partly in kind; to allot different kinds
                                                                  of property among the beneficiaries; and to determine the
ARTICLE FIVE                                                      relative value of the property so allotted, and, in the absence
                                                                  of a showing of bad faith, the valuation assigned by my
     No beneficiary of any Trust created hereunder shall          fiduciary of assets for the purpose of distribution in kind
have any right to anticipate, alienate, encumber or               shall be conclusive and binding upon all persons interested
hypothecate his or her interest in the principal or income of     in my estate. (Emphasis added.)
such Trust in any manner, nor shall the interest of any such
beneficiary be subject to the claim of his or her creditors, or        Appellant testified that she and the other members of
liable to attachment, garnishment, execution and other            the family had an understanding as to how the real property
process of law. Title to all such principal and income shall      should be divided among the children. According to
remain solely and exclusively in my Trustees until actually       appellant, her brother William was to get a one hundred and
distributed by my Trustees to such beneficiary under the          ninety-nine-acre tract. Geraldine was to get one hundred
terms of the instrument.                                          acres, and their other brother was to get the homesite
                                                                  (approximately 57 acres). Appellant was to get one hundred
     I direct that my Executors with respect to my Estate         and eighty acres, consisting of a one hundred and sixty-acre
and my Trustees with respect to any Trust herein created          block and a twenty-acre block with a two-story house, in
shall have, and they are each hereby invested with the            which her sister Geraldine was living at the time of their
administrative powers set forth in Annex A to this, my Will,      father's death.
which is attached hereto, ... which powers may be exercised
by my Executors and my Trustees at any time or from time               It was appellant's testimony that her mother initially
to time as they, in their sole discretion, deem advisable.        stated that appellant was to get the one hundred eighty
                                                                  acres, but
***
                                                                  Page 934
***
                                                                  then retracted because Geraldine wanted the twenty acre
ANNEX A                                                           portion and two-story house. Appellant felt this was unfair
                                                                  and refused to join her brothers and sister in conveying their
To the Last Will and Testament of
                                                                  remainder interests to their mother. On cross-examination,
    Johnny Thomas Pitts                                           appellant answered negatively when asked whether she
                                                                  would have objected had her mother conveyed the one
ADMINISTRATIVE POWERS GRANTED TO MY                               hundred eighty acres to her. Appellant answered
EXECUTOR AND TRUSTEE AND TO THE                                   affirmatively when asked if she understood that her father's
SUBSTITUTE   OR  SUBSTITUTES   AND THE                            will provided for an equal division of the property among
SUCCESSOR OR SUCCESSORS OF THEM:                                  the children and did not provide that certain children would
                                                                  receive certain portions of the property.
***
                                                                       In its judgment, the trial court ordered that (1) the trust
***                                                               under the will failed due to a merger of legal and equitable
                                                                  titles during the lifetime of Helen Pitts; (2) the will created
a life estate in Helen Pitts by which she was vested with all      Grigsby, 35 S.W. at 690.
the powers set forth in Exhibit A of the will; (3) Helen Pitts
correctly disposed of the assets of the estate; (4) the                 Although appellant has argued that a merger resulted, it
conveyances of the real property to William and Geraldine          was her refusal to convey her equitable interest in the
were valid; and (5) Jacqueline Moody retains a one-fourth          property to Helen Pitts that prevented a merger of the legal
remainder interest in the estate of her father as it exists at     and equitable titles and ensured the viability of the
the time of Helen Pitts' death. All other relief was denied,       testamentary trust. We hold that the legal and equitable
and all costs were adjudged against appellant.                     interests have not completely merged so as to defeat this
                                                                   trust. See First Church of Christ, Scientist v. Snowden, 276
      By their sole cross-point, appellees contend that the        S.W.2d 571, 574
trial court erred in holding there was a merger of the two
estates which resulted in the failure of the testamentary trust    Page 935
because there existed an outstanding equitable interest in
the remaindermen that, as a matter of law, prevented a             (Tex.Civ.App.--Beaumont 1955, writ ref'd n.r.e.).
merger of the estates. We agree with appellees and sustain
                                                                        Appellant brings eleven points of error to this court.
this cross-point.
                                                                   These points are inartfully drafted. We have attempted to
     It is a well-settled principle that where a greater estate    determine the substance of the complaints through the
and a lesser estate are united in the same person, the estates     statements, authority and arguments under each point. We
merge, and the lesser is absorbed by the greater. Olivas v.        have discretion in such instances to consider faulty points of
Zambrano, 543 S.W.2d 180, 182 (Tex.Civ.App.--El Paso               error. Cleaver v. Dresser Industries, 570 S.W.2d 479, 483
1976, no writ); Cole v. Grigsby, 35 S.W. 680, 690                  (Tex.Civ.App.--Tyler 1978, writ ref'd n.r.e.); TEX.R.CIV.P.
(Tex.Civ.App.1894), affirmed, 89 Tex. 223, 35 S.W. 792             422, See also Pool v. Ford Motor Co., --- S.W.2d ----, 29
(1896); 34 Tex.Jur.3d, Estates § 49 (1984). This rule is           TEX.SUP.CT.J. 301 (April 2, 1986). Essentially, appellant
applicable to trusts. TEX. PROPERTY CODE § 112.034                 complains of each of the trial court's rulings (with the
(Vernon 1984); see also RESTATEMENT (Second) OF                    exception of the ruling that the trust failed due to a merger),
TRUST § 99 (1959). Where one person has both the legal             and the trial court's refusal to impose a constructive trust on
title to the property and the entire beneficial interest, he       her share of the real property in her father's estate.
holds it free of trust. There is no separation of the legal and
                                                                        In her first five points of error, appellant complains of
beneficial interests, and there are no duties to assume or to
                                                                   the trial court's rulings that Helen Pitts acted correctly in
provide.
                                                                   disposing of certain real property of the estate. Appellant's
     It is also plain from the will that Helen Pitts is the life   interpretation of the will seems to be that Helen Pitts was
beneficiary under this trust, which is terminated at her death     devised a life estate free of a trust (because of a merger),
with the remaining corpus to be distributed to the                 but the life estate was subject to the spendthrift provision of
remaindermen (the four children). The children's future            the trust prohibiting the beneficiary from alienating any
interests under this will are vested remainders. Vested            trust assets. She specifically argues that Helen Pitts was not
remainders are fixed interests with a present right of future      devised a life estate with the power to invade the corpus of
enjoyment with only the right of possession postponed until        the trust.
the ending of a particular estate. Caples v. Ward, 107 Tex.
                                                                        This argument completely ignores the second
341, 179 S.W. 856, 857-58 (1915).
                                                                   paragraph of Article Five of the will in which the testator
     Thus, when the testamentary trust in this case became         vests the powers delineated in "Annex A" in the executor of
operative, there existed four persons with vested remainder        the estate and the trustee of the testamentary trust, each
interests in the residuary estate. Even after three of the         position to which he named his wife. In this particular
children conveyed their remainder interests to their mother,       instance, it matters little whether Helen Pitts acted as
a vested remainder still existed. At no time since the death       executor or trustee. She had the same powers under the will
of the testator has Helen Pitts owned the legal title and all      and comparable fiduciary duties to the remaindermen
of the equitable interest in all of the trust property. There      whether she acted as trustee or executor.
has been a vested remainderman to whom Helen Pitts has
                                                                        The primary objective in construing wills and trusts is
had a duty as trustee, and who can maintain an action
                                                                   to determine the intent of the maker. Corpus Christi
against her for her acts as trustee, as evidenced by the
                                                                   National Bank v. Gerdes, 551 S.W.2d 521, 523
instant litigation. See TEX. PROPERTY CODE ANN. §§
                                                                   (Tex.Civ.App.--Corpus Christi 1977, writ ref'd n.r.e.). The
113.151(b) and 111.004(7) (Vernon 1984). The general rule
                                                                   testator's intent must be ascertained from the four corners of
is that courts will not allow a merger to defeat a vested
                                                                   the will. Farah v. First National Bank of Fort Worth, 624
remainder. Olivas v. Zambiano, 543 S.W.2d at 182; Cole v.
S.W.2d 341, 345 (Tex.App.--Fort Worth 1981, writ ref'd                provide the life tenant funds for her support. At trial, Helen
n.r.e.). If possible, we are to construe a will in such a way         Pitts was asked if she gave the properties to her son and
as to give effect to every provision of the will. Gonzalez v.         daughter. She answered: "I sold them." She answered
Gonzalez, 457 S.W.2d 440, 443 (Tex.Civ.App.--Corpus                   affirmatively when asked if she received any monies for
Christi 1970, writ ref'd n.r.e.). If the language used by the         them. When asked where these monies had gone, she
maker of a will or trust is unambiguous, it is unnecessary to         answered: "That's what I live off of."
construe the instrument. Gerdes, 551 S.W.2d at 523. If the
trustee's powers are unambiguously conferred by the                        Helen Pitts also testified that she had recently made
instrument, neither the trustee nor the courts can add to or          improvements to her home. She added a garage and
take away from the powers so conferred.                               bedroom at an approximate cost of $30,000.00. She stated
                                                                      that the addition increased the number of bedrooms in her
     Article Five of the will provides that no beneficiary of         home from three to four. She was asked if it was her
the trust may alienate trust property or their interest therein,      accustomed manner to live in four bedrooms, and she
that title shall remain exclusively in the trustee, and that the      replied: "Well, I'm there by myself. I guess I can just go in
trustee shall have the power of sale (through "Annex A").             any of them I want." It was undisputed that Helen Pitts had
Helen Pitts conveyed the real property as trustee, as                 four children.
executor, and as an individual.
                                                                          We hold that the testator intended his wife to have the
     Based on the language used by the testator, there is no          power, as trustee, to convey the real property, and that she
question that he intended his wife to wear three different            has not exceeded the authorizations in the will by so doing.
hats in his testamentary scheme: executor, trustee, and life          Appellant's first through fifth points of error are overruled.
beneficiary. Clearly, his purpose was to provide for his
wife's support "in her accustomed manner of living and [to]                In her points of error six through ten, appellant
pay her medical, dental, hospital and nursing expenses and            complains of the trial court's ruling that appellant, if she
expenses of invalidism." He provided that she serve as                survives her mother, retains a one-fourth remainder interest
executor and trustee without bond and with no more than               in the estate of Johnny Pitts as it exists at the time of her
minimum court supervision. As trustee, she had broad                  mother's death. Her argument here seems to be that her
powers of sale and limited powers of invasion. We hold that           interest in the estate was a vested remainder and that it was
the conveyances by Helen Pitts, as trustee, did not violate           error for the trial court to require that she survive the life
the spendthrift or other provisions of the testamentary trust.        tenant (her mother, the trustee) in order for her interest to
                                                                      vest.
     The result is the same even if the authorization is
limited, and only may be for the "purpose of meeting her                   The point at issue is whether appellant's remainder is
expenses of life and to pay doctor or hospital bills incurred         completely indefeasible. The testator devised, after the
and necessary," as long as the invasion of principal was for          death of the life tenant, the remainder of his estate to his
the purposes provided for in the will and not done in bad             four children in equal shares, per stripes. If a remainderman
faith. Guest v. Bizzell, 271 S.W.2d 472, 476                          predeceases the life tenant, without issue of his body, the
(Tex.Civ.App.--Eastland 1954, writ ref'd). The person                 remainder interest would not pass to the remainderman's
challenging the exercise of the power                                 estate as contended by the appellant. See Power v.
                                                                      Landram, 464 S.W.2d 99, 101 (Tex.1970). The
Page 936                                                              remainderman's interest is defeasible in that sense.

to invade principal has the burden of showing it was                       Appellant's remainder interest is also defeasible
exercised in bad faith or went beyond that authorized. If a           because it is subject to the life estate of Helen Pitts and the
life tenant exercises the power of sale, the proceeds of that         powers of sale and invasion of the trustee. The power of
sale are still part of the estate. The principal still exists, only   sale does not prevent the remainder interest from vesting.
its form changes. Edds v. Mitchell, 143 Tex. 307, 184                 Caples v. Ward, 179 S.W. at 858. There is no uncertainty as
S.W.2d 823, 826 (1945). The proceeds of the sale which                to who will take, only as to the "quantity and value" of the
remain undisposed of at the time of the life tenant's death           principal left to be taken. Id.
pass to the remaindermen unless the will provides
otherwise.                                                                 It is true that a life tenant (and a trustee) has a fiduciary
                                                                      duty to the remaindermen not to destroy their remainders
      In the instant case, there is no evidence of how much           except as authorized by the terms of the will. Maxwell v.
income, if any, the real property produced before the sales.          Harrell, 183 S.W.2d 577, 579 (Tex.Civ.App.--Austin 1944,
It is entirely possible that the property did not produce any         ref'd w.m.). However, Helen Pitts, as trustee, was expressly
income. If so, its liquidation would be necessary in order to         empowered to sell the property and consume any principal
necessary to maintain her in her accustomed standard of
living. Appellant had the burden to bring forth evidence that
her mother exceeded her authority. This, she has failed to
do. Points of error six through ten are overruled.

     In her eleventh point of error, appellant complains of
the trial court's refusal to impose a constructive trust on her
one-fourth share of the specific real property conveyed.
Constructive fraud (necessitating a constructive trust) is
defined as a breach of a legal or equitable duty which,
regardless of moral guilt, the law considers

Page 937

fraudulent because of its tendency to deceive others, violate
confidence or injure public interests. Becknal v. Atwood,
518 S.W.2d 593, 598 (Tex.Civ.App.--Amarillo 1975, no
writ).

      The only evidence of any breach of fiduciary duty in
this case was the fact that Helen Pitts closed out the trust
account and commingled that money with her own funds. If
a trustee commingles trust funds with the trustee's own, the
entire commingled fund is subject to the trust. General
Association of Davidian Seventh Day Adventists, Inc. v.
General Association of Davidian Seventh Day Adventists,
410 S.W.2d 256, 259 (Tex.Civ.App.--Waco 1966, writ ref'd
n.r.e.). When a trustee has commingled funds and has
expended funds, the money expended is presumed to be the
trustee's own. Batmanis v. Batmanis, 600 S.W.2d 887, 890
(Tex.Civ.App.--Houston [14th Dist.] 1980, writ ref'd n.r.e.).
Thus, upon Helen Pitts' death, all commingled funds in her
bank account, along with any of the trust property not sold
or consumed, will be subject to an undivided remainder
interest among the children of the testator then surviving.
Appellant's interest does not attach to certain specific
property, only to the trust corpus, in whatever form, at the
life tenant's death. Point of error eleven is overruled.

     We reform the judgment of the trial court to hold: (1)
that the testamentary trust under the will of Johnny Thomas
Pitts did not fail due to a merger of the legal and equitable
estates during the lifetime of Helen Marion Pitts; (2) that,
under the will of Johnny Thomas Pitts, Helen Marion Pitts
was the executor of the estate, life beneficiary of the
testamentary trust, and the trustee of the trust, by which she
was vested with all the powers set forth in "Annex A" of his
will; and (3) that Jacqueline Moody, if she survives Helen
Marion Pitts, retains an undivided defeasible vested
remainder interest in the estate and testamentary trust of
Johnny Thomas Pitts as it may exist at the death of Helen
Marion Pitts. As reformed, the judgment of the trial court is
affirmed.
Page 617                                                        v. Smith, 145 Tex. 399, 198 S.W.2d 729 (1946).

711 S.W.2d 617 (Tex. 1986)                                           The contractual relationship of the parties may create
                                                                duties under both contract and tort law. Montgomery Ward
JIM WALTER HOMES, INC., Petitioner,                             & Co. v. Scharrenbeck, 146 Tex. 153, 204 S.W.2d 508
                                                                (1947). The acts of a party may breach duties in tort or
v.                                                              contract alone or simultaneously in both. The nature of the
                                                                injury most often determines which duty or duties are
Ray REED et ux., Respondents.
                                                                breached. When the injury is only the economic loss to the
                                                                subject of a contract itself, the action sounds in contract
No. C-4691.
                                                                alone. Mid-Continent Aircraft Corp. v. Curry County
Supreme Court of Texas.                                         Spraying Service, 572 S.W.2d 308, 312 (Tex.1978);
                                                                Nobility Homes of Texas, Inc. v. Shivers, 557 S.W.2d 77
May 14, 1986                                                    (Tex.1977). The Reeds' injury was that the house they were
                                                                promised and paid for was not the house they received. This
     Rehearing Denied July 16, 1986.                            can only be characterized as a breach of contract, and
                                                                breach of contract cannot support recovery of exemplary
     Mike Mills, Atlas & Hall, McAllen, for petitioner.         damages. Bellefonte Underwriters Insurance Co. v. Brown,
                                                                704 S.W.2d 742 (1986); Amoco Production Co. v.
     F.I. Gandy, Jr., Corpus Christi, for respondents.
                                                                Alexander, 622 S.W.2d 563 (Tex.1981).
     ROBERTSON, Justice.
                                                                     The jury found Jim Walter Homes, Inc. to have been
                                                                grossly negligent in its supervision of construction. Gross
     This case involves whether there is an independent tort
                                                                negligence is a mental state lower in culpability than
to support an award of exemplary damages.
                                                                intentional or willful acts. Luna v. North Star Dodge Sales,
    Ray Reed and his wife sued Jim Walter Homes, Inc.,          Inc., 667 S.W.2d 115 (Tex.1984). Gross negligence in the
seeking damages arising out of the sale and construction of     breach of contract will not entitle an injured party to
a house. The jury found that Jim Walter Homes, Inc.             exemplary damages because even an intentional breach will
breached the warranty of good workmanship in the contract       not. Amoco Production Co. v. Alexander, 622 S.W.2d 563,
and that it was grossly negligent in the supervision of the     571 (Tex.1981); City Products Corp. v. Berman, 610
construction of the house. Our concern is with the award of     S.W.2d 446, 450 (Tex.1980).
punitive or exemplary damages.
                                                                     To support an award of exemplary damages in this
      The jury found actual damages, additional damages as      case, the plaintiff must prove a distinct tortious injury with
provided under the Deceptive Trade Practices Act, Tex.Bus.      actual damages. Bellefonte Underwriters Insurance Co. v.
& Com.Code § 17.46 (Vernon Supp.1985), exemplary                Brown, supra; Luna v. North Star Dodge Sales, Inc., supra;
damages and attorney's fees. The trial court awarded actual     City Products Corp. v. Berman, supra. The only issue on
damages and attorney's fees, disallowed the additional          actual damages inquired as to the cost of repairing the home
DTPA damages, and remitted a portion of the exemplary           to the condition it was represented to be in at the time of
damages. The court of appeals modified the judgment of the      sale. Although the Reeds sought recovery for mental
trial court by awarding DTPA damages only and attorney's        anguish in their petition, no issue was submitted on those
fees. In addition the court ordered a remittitur reducing the   damages. There were no other injuries found by the jury
exemplary damages. 703 S.W.2d 701 at 708.                       other than loss of the benefit of the bargain. Therefore, we
                                                                reverse the court of appeals award of exemplary damages
     Although the principles of contract and tort causes of     and affirm the remainder of the judgment.
action are well settled, often it is difficult in practice to
determine the type of action that is brought. We must look
to the substance of the cause of

Page 618

action and not necessarily the manner in which it was
pleaded. International Printing Pressmen and Ass't Union
Page 361                                                         initially affirmed the judgment, 718 S.W.2d 313, but on
                                                                 rehearing, reversed and remanded for trial. 718 S.W.2d at
747 S.W.2d 361 (Tex. 1987)                                       345. We reverse the judgment of the court of appeals and
                                                                 render judgment for the Birchfields.
Phillip J. BIRCHFIELD et al., Petitioners,
                                                                      As a premature infant, Kellie was administered
v.                                                               approximately 400 hours of supplemental oxygen without
                                                                 adequate monitoring of arterial blood gases. This occurred
TEXARKANA MEMORIAL HOSPITAL d/b/a Wadley
                                                                 even though a 1971 report published by the American
Hospital et al., Respondents.
                                                                 Academy of Pediatrics cautioned the medical community
                                                                 about the danger of RLF in premature infants receiving
No. C-5895.
                                                                 supplemental oxygen, and advised practitioners to closely
Supreme Court of Texas.                                          monitor arterial blood gases of such infants. In the wake of
                                                                 the report Dr. Lowe predicted at a pediatrics section
October 28, 1987                                                 meeting, attended by a Wadley administrator, that the
                                                                 hospital was "going to have blind babies" unless it acquired
     Rehearing Denied April 20, 1988.                            the facilities to adequately monitor blood gases. However,
                                                                 during the period from 1971 through 1973 Wadley
Page 362                                                         expended approximately $200 per year for nursery
                                                                 improvements. Kellie was born in August of 1974.
[Copyrighted Material Omitted]
                                                                     The jury found the individual doctors negligent and
Page 363
                                                                 Wadley both negligent and grossly negligent in failing to
                                                                 properly treat Kellie. It also found that Wadley had violated
[Copyrighted Material Omitted]
                                                                 the D.T.P.A. by holding out to the Birchfields that the
Page 364                                                         hospital was adequately equipped to handle premature
                                                                 babies when it was not. The damage award was
    Frank L. Branson and Paul N. Gold, Law offices of
Frank L. Branson, P.C., Dallas, Prof. J. Hadley Edgar,           Page 365
Texas Tech University, Lubbock, for petitioners.
                                                                 $2,111,500 actual damages against all defendants, jointly
     Victor Hlavinka, Atchley, Russell, Waldrop &                and severally, plus $1,200,000 exemplary damages against
Hlavinka, John C. Hawkins, Jr., Texarkana, William A.            Wadley.
Eldredge, Jr., Friday, Eldredge and Clark, Little Rock, Ark.,
                                                                     The issues before us fall within five groups:
for respondents.
                                                                 evidentiary, cumulative error, trial court bias, errors in the
     WALLACE, Justice.                                           jury charge, and failure to award both exemplary and
                                                                 D.T.P.A. treble damages. We will discuss them in that
     Kellie Birchfield was born prematurely with a               order.
congenitally functionless right eye. Shortly after her release
from the hospital, she was diagnosed as having retrolental           EVIDENTIARY ISSUES
fibroplasia (RLF) in her left eye and is now totally blind.
                                                                 Reference to Other "Blind Babies" and Other RLF Cases.
Her parents, Phillip and Mary Jo Birchfield, individually
and as next friends of Kellie, sued Texarkana Memorial
                                                                      The court below held that evidence of other RLF cases
Hospital (Wadley) and her three treating physicians, Dr. Jon
                                                                 was inadmissable, and that repeated references to "other
Hall, Dr. Noel Cowan, and Dr. Betty Lowe. The petition
                                                                 blind babies" constituted harmful error. 718 S.W.2d at
alleged negligence on the part of all four defendants plus a
                                                                 341-45. We disagree. Evidence of a defendant's subjective
D.T.P.A. action against Wadley under the 1973 version of
                                                                 knowledge of the peril created by his conduct is admissible
the Act. Deceptive Trade Practices Act, ch. 143, 1973 TEX.
                                                                 to prove gross negligence. Williams v. Steves Industries,
GEN. LAWS at 322-43. The jury answered all issues
                                                                 Inc., 699 S.W.2d 570, 573 (Tex.1985). Dr. Lowe's
favorably to the Birchfields. The trial court rendered
                                                                 prediction of "blind babies," the lack of remedial action by
judgment for actual damages against all defendants and
                                                                 Wadley and the occurrence of other RLF cases were
exemplary damages against Wadley, but refused to render
                                                                 admissible to show Wadley's conscious indifference to the
judgment on the D.T.P.A. action. The court of appeals
peril its conduct created. Wadley did not request an              was cumulative of other similar evidence and therefore
instruction limiting the evidence to that purpose, therefore it   harmless.
waived any complaint to general admission of the evidence.
TEX.R.EVID. 105(a). This is some evidence of gross                Reference to Minutes of Hospital Section Meeting.
negligence and defeats Wadley's no evidence contention.
                                                                      In questioning Wadley's administrator, the Birchfields'
Reference to Settlement of Another RLF Case.                      counsel asked if

     Reference to settlement of another case is generally not     Page 366
admissible. TEX.R.EVID. 408. The Birchfields' expert
witness made three passing remarks to the settlement. No          the administrator had reviewed the minutes of the pediatrics
timely objections to these remarks were made by the               section in preparation for his testimony. Such records are
defendant and no timely request was made for instruction to       privileged from discovery. TEX.REV.CIV.STAT.ANN. art.
the jury to disregard these references. The Birchfields'          4447d(3) (Vernon 1976). In this single reference to the
counsel referred to the settlement during voir dire and upon      minutes, no mention was made of their contents. We hold
objection by defendant's counsel the court instructed the         that a mere reference to the existence of the minutes was at
jury to disregard the reference. Counsel again referred to        most harmless error.
the settlement during closing argument and no objection
                                                                  Evidence of Financial Condition of the Hospital.
was made nor instruction requested. During voir dire the
jury was closely questioned by defendant's counsel about               The Birchfields contended that Wadley was grossly
any bias arising from publicity about settlement of another       negligent in refusing to provide proper facilities to monitor
RLF case. In view of the careful voir dire, the volume of         blood gases of premature infants even though they had the
testimony, and the full development of the case, we hold          financial ability to do so. Evidence of the hospital's
that the error was not reasonably calculated to cause and         financial condition was admissible to show financial ability
probably did not cause the rendition of an improper               to provide proper facilities.
judgment. TEX.R.APP.P. 184(b); Standard Fire Insurance
Co. v. Reese, 584 S.W.2d 835, 839-40 (Tex.1979).                  Transcript of a Meeting Between Doctors and an Attorney.

Admissibility of an Expert's Opinion on a Mixed Question                The trial court admitted into evidence portions of the
of Law and Fact.                                                  transcript of a meeting attended by Dr. Hall, Dr. Lowe and
                                                                  other doctors with an attorney who had represented some of
     The Birchfields' expert witness testified on direct          them in a prior lawsuit. The transcript indicated that both
examination      that    Wadley's     conduct      constituted    doctors were aware of the inadequate facilities at Wadley
"negligence," "gross negligence," and "heedless and               and it contradicted statements made by the doctors at the
reckless conduct," and that certain acts were "proximate          trial. The transcript was admissible as admissions by the
causes" of Kellie's blindness. Contrary to the holding of the     doctors and its probative value outweighed the danger of
court of appeals, such testimony is admissible.                   undue       prejudice    and     confusion.    TEX.R.EVID.
TEX.R.EVID. 704. Fairness and efficiency dictate that an          801(e)(2)(A), (B) and 403. Also, no limiting instructions
expert may state an opinion on a mixed question of law and        were requested by Wadley, so it waived any objection that
fact as long as the opinion is confined to the relevant issues    the testimony was inadmissible to prove its liability.
and is based on proper legal concepts.
                                                                  CUMULATIVE ERROR AND TRIAL COURT BIAS
Testimony of Expert Based on Conversation with Another
Expert.                                                               The issues in this case were clearly defined, and all
                                                                  theories of all the parties were ably presented to the jury.
     Ordinarily an expert witness should not be permitted to      The record consisted of approximately 4,500 pages. The
recount a hearsay conversation with a third person, even if       few minor errors were insignificant when considered in the
that conversation forms part of the basis of his opinion.         context of the entire case. We hold that any error did not
TEX.R.EVID. 801, 802. However, in this instance Dr.               individually or in the aggregate constitute reversible error.
Eichenwald was invited to err by defendant's counsel telling
him to "go right ahead" and explain an apparent                       The court of appeals did not rule on several of the
inconsistency in his testimony. His explanation was based         defendants' points of error which assert failure of the trial
upon a conversation with another doctor. Also, Dr.                court to conduct the trial in a fair and impartial manner.
Ehrenkranz was permitted to testify as to a telephone             Those points are within our jurisdiction so we will rule on
conversation with another doctor concerning transfer              them rather than remand them to the court of appeals.
facilities at Wadley. This testimony was inadmissible but it      McKelvy v. Barber, 381 S.W.2d 59, 64 (Tex.1964). Our
review of the record reveals no discernible bias or any            F. As to charting ______
suggestion to the jury that the trial court desired a particular
result or that it favored the plaintiff.                                The defendants assert that the wording of these issues
                                                                   could be construed as indicating the trial court's opinion that
ALLEGED ERRORS IN THE COURT'S CHARGE                               one or more of the acts or omissions listed in subdivisions
                                                                   A-F was a proximate cause. We find the comments, if any,
The Locality Rule                                                  were at most incidental, and agree with the court of appeals'
                                                                   analysis and conclusion that the wording of these issues did
     The charge defined negligence of the hospital as "the         not likely lead to the rendition of an improper judgment.
doing of that which an ordinary prudent hospital ... in the        718 S.W.2d 330-32. In view of the record, we believe that
exercise of ordinary care would not have done under the            the jury fully understood that the issue of proximate cause
same or similar circumstances...." (Emphasis added.)               was entrusted to its decision.
Ordinary care was defined as "that degree of care that a
hospital of ordinary prudence ... would have exercised                 DAMAGES
under the same or similar circumstances." (Emphasis
added.) Negligence and ordinary care of the physicians             D.T.P.A. Damages
were similarly defined. These definitions closely parallel
those contained in the Texas Pattern Jury Charges. See, 3               The Birchfields challenge the rulings of both the trial
STATE BAR OF TEXAS, TEXAS PATTERN JURY                             court and the court of appeals concerning questions of
CHARGES, PJC 40.01, 40.02. The defendants attacked                 damages. At trial, the Birchfields secured jury findings that
these definitions because they failed to refer to hospitals        Wadley violated the Deceptive Trade Practices Act, that the
and physicians in "this or similar communities," and thus do       Birchfields were adversely affected by that violation, and
not reflect the "locality rule." The purpose of the locality       that Wadley was negligent and grossly negligent. The
rule is to prevent unrealistic comparisons between the             Birchfields argue that the courts below erred in failing to
standards of practice in communities where resources and           award both exemplary damages as found by the jury and
facilities might vastly differ. The definitions in the court's     treble damages under the D.T.P.A. We disagree. This
charge meet this concern, because the means available to           argument overlooks the fact that the jury found that
the defendant are part of the pertinent "circumstances." See,      Wadley's deceptive act or practice, as well as each
Hood v. Phillips, 554 S.W.2d 160, 165 (Tex.1977). We               defendants' acts of negligence, were the proximate or
hold that these definitions were proper, as did the court          producing cause of the same damages. See, Allstate Ins. Co.
below. 718 S.W.2d at 332.                                          v. Kelly, 680 S.W.2d 595, 606 (Tex.App.--Tyler 1984, writ
                                                                   ref'd N.R.E.) The Birchfields' special issues on damages
Purported Comments on the Weight of the Evidence                   merely requested the jury to fix a sum of money which
                                                                   would compensate Kellie and her parents, "for the damages
     The Birchfields' Issues one through four were intended        proximately resulting from the occurrence in question." In
to broadly submit                                                  the absence of separate and distinct findings of actual
                                                                   damages on both the acts of negligence and the deceptive
Page 367                                                           acts or practices, an award of exemplary damages and
                                                                   statutory treble damages would be necessarily predicated
the questions of negligence and proximate cause. See,
                                                                   upon the same findings of actual damages and would
TEX.R.CIV.P. 277. The wording of these issues is fully set
                                                                   amount to a double recovery of punitive damages. Id.
forth in the court of appeals' opinion. 718 S.W.2d at 329.
Issue No. 1 is demonstrative of the form of each of these               In the alternative, the Birchfields claim that they were
issues:                                                            entitled to elect whether to recover the exemplary damages
                                                                   as found by the jury or statutory treble damages. In light of
Do you find from a preponderance of the evidence that
                                                                   our holding that the Birchfields were not entitled to both
Wadley Hospital ... [was] negligent in the care and
                                                                   treble and exemplary damages, they were confronted with a
treatment of Kellie Lee Birchfield with respect to any of the
                                                                   situation where an election would be required. Kish v. Van
following which was a proximate cause of her blindness?
                                                                   Note, 692 S.W.2d 463, 466-67 (Tex.1985). The court of
Answer "yes" or "no" to each item.                                 appeals held that since the Birchfields, before entry of
                                                                   judgment, failed to unequivocably waive the findings on
A. As to adequate nursing services ______                          exemplary damages, they had waived their right to
                                                                   complain on appeal that the trial court erred in failing to
***                                                                award treble damages. 718 S.W.2d at 339. We find no
                                                                   support for that proposition. The judgment of the court
                                                                   should be "so framed as to give the party all the relief to
which he may be entitled." TEX.R.CIV.P. 301, (emphasis            Birchfield was not a consumer within the meaning of the
added). While a formal waiver by the Birchfields would            D.T.P.A. A plaintiff establishes her standing as a consumer
have been in order, it was not a prerequisite to the recovery     in terms of her relationship to a transaction, not by a
of all of the damages to which they were lawfully entitled.       contractual relationship with the defendant. Flenniken v.
Hargrove v. Trinity Universal Insurance Co., 152 Tex. 243,        Longview Bank & Trust Co., 661 S.W.2d 705, 707
256 S.W.2d 73, 75 (1953). We hold that where the                  (Tex.1983). Wadley sold its goods and services and Kellie
prevailing party fails to elect between alternative measures      Birchfield "acquired" them, regardless of the fact that she
of damages, the court should utilize the findings affording       obviously did not contract for them.
the greater recovery and render judgment accordingly.
                                                                       Finally, we reject Wadley's argument that there was no
     In light of its holding that the Birchfields had waived      finding of actual damages resulting from the deceptive act
their complaints as to the trial court's judgment, the court of   or practice. The jury found that both Kellie and her parents
appeals did                                                       had suffered damages "proximately resulting from the
                                                                  occurrence in question." Wadley argues that the term
Page 368                                                          "occurrence in question" was too vague, and did not limit
                                                                  the jury's attention to the amount of damages resulting from
not reach the question of whether the Birchfields were            the D.T.P.A. violation. Therefore, Wadley asserts that it
entitled to D.T.P.A. damages under the facts and the              would be inappropriate to simply equate the jury's general
applicable version of the Act. 718 S.W.2d at 339. By way          damage findings with the amount of actual damages caused
of cross-points, Wadley asserts that the Birchfields could        by its deceptive practice. We disagree. Wadley failed to
recover D.T.P.A. damages even if they hadn't waived their         complain that the damage issues did not specifically relate
right to do so by failing to elect. Wadley contends that the      to the Birchfields' grounds of recovery. Cf. Wilgus v. Bond,
jury findings do support such a recovery because (1) the          730 S.W.2d 670 (Tex.1987). The objection was thereby
D.T.P.A. does apply to health care providers; (2) the jury's      waived. TEX.R.CIV.P. 274.
verdict purportedly does provide an appropriate factual
basis for recovery under the D.T.P.A.; (3) Kellie Birchfield      Shock/Mental Anguish
was a "consumer" within the meaning of the act; and (4)
there was allegedly no finding of actual damages upon                  The jury awarded Kellie's parents $1,000 each for
which to predicate an award of treble damages. In the             mental anguish suffered "in the past," and also awarded the
interest of judicial economy, we will address those               same amount for shock and emotional trauma sustained
contentions. McKelvy v. Barber, supra.                            upon learning of her total and permanent blindness. The
                                                                  court of appeals set aside the latter award on the grounds
     According to Wadley, the Legislature never intended          that it constituted a double recovery for the same injury
that the D.T.P.A. should be applied to physicians and health      already compensated by the mental anguish award. 718
care providers. As evidence of such intent, Wadley points to      S.W.2d at 337. We agree. Mental anguish consists of the
the enactment of TEX. REV. CIV. STAT. art. 4590i, §               emotional response of the plaintiff caused by the tortfeasor's
12.01 (Vernon Supp.1987). However, Wadley concedes                conduct. See, Moore v. Lillebo, 722 S.W.2d 683, 687
that this statute did not become effective until 1977, long       (Tex.1986). On these facts, the "shock and emotional
after the incidents which gave rise to this suit. We find         trauma" constituted
nothing in the 1973 version of the Act which manifests a
legislative intent to exempt health care providers from           Page 369
liability. Accordingly, we find no basis for Wadley's claims
of immunity or exemption from D.T.P.A. liability.                 part of the past "mental anguish," and the trial court erred in
                                                                  rendering judgment for both shock and mental anguish.
     We also reject Wadley's contentions that the jury
findings were inadequate because they made no inquiry as              We reverse the judgment of the court of appeals and
to any affirmative deceptive act, practice or representation.     render judgment as follows:
Under the 1973 version of the Act, a "failure to disclose"
could be an adequate factual predicate for a D.T.P.A.                 Kellie Birchfield shall recover $2,077,500 from
violation, provided that the jury found that the failure to       Texarkana Memorial Hospital, Dr. Jon Hall, Dr. Noel
disclose was deceptive. Cobb v. Dunlap, 656 S.W.2d 550,           Cowan, and Dr. Betty Lowe, jointly and severally. In
552 (Tex.App.--Corpus Christi 1983, writ ref'd n.r.e.). In        addition, Kellie Birchfield shall recover $4,155,000 from
this case, the jury so found. The jury's verdict thus provides    Texarkana Memorial Hospital under the D.T.P.A. Phillip
an adequate basis for a recovery under the act.                   and Mary Jo Birchfield shall each recover $16,000 from
                                                                  Texarkana Memorial Hospital, Dr. Jon Hall, Dr. Noel
    Equally unpersuasive is Wadley's contention that Kellie       Cowan, and Dr. Betty Lowe, jointly and severally. In
addition, Phillip Birchfield and Mary Jo Birchfield shall
each recover $32,000 from Texarkana Memorial Hospital
under the D.T.P.A.
Page 170                                                          into an 18-wheeler. State Farm informed Kraehnke that it
                                                                  would not insure a "single-shot" 18-wheeler.
750 S.W.2d 170 (Tex. 1988)
                                                                      On May 27, 1982, Kraehnke telephoned Charles Tuttle,
SOUTHERN COUNTY MUTUAL                         INSURANCE          an agent with the uncontested authority to issue binding
COMPANY et al., Petitioners,                                      insurance, who worked for R.O. Williams Company,
                                                                  regarding the possibility of procuring insurance on his
v.                                                                18-wheeler. Tuttle then checked with the underwriters at
                                                                  R.O. Williams Company to see if an admitted insurance
 FIRST BANK AND TRUST OF GROVES, Texas,
                                                                  company in Texas would insure a single unit 18-wheeler.
Respondent.
                                                                  Tuttle learned that no Texas companies would write such
                                                                  coverage.
No. C-6628.
                                                                      Tuttle then contacted Norman Edwards at Colonial
Supreme Court of Texas.
                                                                  Surplus Underwriters Agency, a surplus lines agency which
May 11, 1988                                                      places coverage with insurance companies not licensed in
                                                                  Texas, to see if there was any surplus insurance available
     Rehearing Denied June 15, 1988.                              for Kraehnke's tractor. Edwards quoted a rate for the
                                                                  coverage and told Tuttle that the surplus lines carrier would
   Daniel D. Clayton, Howard Close, Orgain, Bell and              be Southern County Mutual.
Tucker, Gordon R. Pate and Joe Michael Dodson, Pate &
Dodson, Beaumont, for petitioners.                                     Tuttle called Kraehnke and told him the coverage price.
                                                                  Kraehnke agreed to the quoted price, inasmuch as his
   Frank Lamson, Provost, Umphrey, Swearingen &                   primary concern was the cost of the coverage as opposed to
Eddins, Port Arthur, for respondent.                              which company would provide the coverage. That same
                                                                  day, Kraehnke went to Tuttle's office to secure coverage
     ROBERTSON, Justice.                                          with Southern County Mutual. Tuttle gave Kraehnke a
                                                                  typed binder which provided coverage on the 18-wheeler
     This is a suit to recover on a temporary insurance
                                                                  from May 27, 1982, to June 27, 1982. The binder reflected
policy, commonly known as a binder of insurance. First
                                                                  (1) Kraehnke as the insured, (2) Southern County Mutual as
Bank and Trust of Groves, Texas, as a loss payee on an
                                                                  the insurer, (3) Colonial as the insurance agency, and (4)
insurance binder, sued Southern County Mutual Insurance
                                                                  the Bank as loss payee. In exchange for the binder,
Company, R.O. Williams, Jr., R.O. Williams, Jr., d/b/a
                                                                  Kraehnke gave Tuttle approximately $900, which was the
Colonial Surplus Underwriters Agency, R.O. Williams Co.,
                                                                  quoted first premium.
Inc., Norman Edwards, Norman Edwards d/b/a Colonial
Surplus Underwriters Agency, and Colonial Surplus                      Some two to three days later, Edwards telephoned
Underwriters Agency. The Bank sued on alternate theories:         Tuttle and told him that he had made a mistake in quoting
(1) that Southern County Mutual was liable pursuant to an         the price of the policy and that Southern County would not
insurance binder in effect on the date of loss, or, if Southern   write Kraehnke's coverage for the price Edwards had
County Mutual was not liable, (2) that R.O. Williams and          previously given Tuttle. However, Edwards informed Tuttle
the other five defendants were strictly liable for violations     that he could secure insurance at the quoted price through
of the Texas Insurance Code. Trial was to the jury which          Amherst Insurance Company. Tuttle, without notifying
answered all issues against the Bank. The court of appeals        Kraehnke, authorized a substitution of insurance companies
reversed and rendered against all of the defendants. 732          from Southern County Mutual to Amherst. Tuttle never
S.W.2d 69. We affirm in part and reverse in part.                 relayed this information to Kraehnke. In fact, sometime
                                                                  during the week before June 27, 1982, Kraehnke called
Page 171
                                                                  Tuttle inquiring about receiving his payment book and
                                                                  policy. During this conversation, Tuttle failed to mention
     In 1980, Melvin Kraehnke purchased a new White
                                                                  the substitution of carriers.
Auto Car tractor for use as a dump truck. Kraehnke had the
tractor insured with State Farm Insurance. The Bank, which
                                                                       On or about June 29, 1982, R.O. Williams Company
financed the purchase, obtained a security interest in any
                                                                  executed an extension binder which was in effect from June
insurance proceeds issued under Kraehnke's tractor
                                                                  27, 1982, until July 27, 1982. Due to a clerical error, the
coverage. In May of 1982, Kraehnke converted his tractor
                                                                  extension binder listed the insurance company as Southern
County Mutual instead of Amherst.                               of the loss. Further, the court of appeals found that R.O.
                                                                Williams, Jr. and the other defendants were strictly liable to
    On July 2, 1982, Kraehnke's 18-wheeler was totally          the Bank for violating various sections of the Texas
destroyed in a collision. Four days later, Kraehnke called      Insurance Code. In accordance with its holdings as to
R.O. Williams Company and provided information for the          liability, the court of appeals held that the Bank was to
proof of loss. It was at this time that the personnel at R.O.   recover $35,000 (the $36,000 market value of the tractor
Williams discovered the clerical error on the extension         less the $1,000 deductible in the binder) from Southern
binder. Thereafter, the proof of loss was sent to Amherst.      County Mutual and $35,000 from R.O. Williams, Jr. and
Kraehnke first learned that Amherst, and not Southern           the others. We affirm the court's judgment as to Southern
County Mutual, was his insurance company when an                County Mutual but reverse that portion of the judgment
Amherst adjuster telephoned him in order to prepare the         imposing liability against R.O. Williams, Jr. and the five
proof of loss. Amherst approved Kraehnke's claim and            other defendants for violations of the Insurance Code.
authorized payment.
                                                                     When Kraehnke left Tuttle's office on May 27, 1982,
    On September 24, 1982, the Insurance Commissioner           he had a valid insurance binder with Southern County
of Pennsylvania entered a Suspension Order against              Mutual. The only action which remained was for R.O.
Amherst which prohibited the payment of any claims by           Williams Company to forward Kraehnke a copy of his
Amherst without prior written consent of the Insurance          insurance policy. Therefore, any subsequent changes in
Commissioner. Thereafter, on November 10, 1982, the             insurance companies would have required approval either
Commonwealth Court of Pennsylvania issued an order              by Kraehnke or his authorized agent. As stated earlier, the
declaring Amherst Insurance Company insolvent. Amherst's        first time Kraehnke learned that Amherst was his new
charter was dissolved and                                       insurance company was when an Amherst adjuster
                                                                contacted him concerning his proof of loss. Obviously,
Page 172                                                        Kraehnke never authorized a substitution of insurance
                                                                companies. Therefore, the question then becomes whether
the Insurance Commissioner was appointed as liquidator.
                                                                Tuttle, as Kraehnke's agent, had the authority to order
     In November of 1984, the Bank filed suit against           Edwards to cancel the binder with Southern County Mutual
Southern County Mutual alleging that Southern County            and obtain coverage with Amherst. Southern County
Mutual was liable on the extension binder which was in          Mutual argues that Tuttle had such authority. We disagree.
effect on July 2, 1982, when Kraehnke's 18-wheeler was
                                                                     The crux of Southern County Mutual's argument is that
destroyed. In the alternative, if no Southern County Mutual
                                                                Tuttle, as Kraehnke's agent, had the authority to substitute
binder was found to be in effect on the date of loss, the
                                                                insurance companies. Thus, Southern County Mutual had
Bank alleged that R.O. Williams, Jr. and the five other
                                                                the burden of pleading and proving this agency relationship.
defendants were strictly liable for violating portions of the
                                                                Buchoz v. Klein, 143 Tex. 284, 286, 184 S.W.2d 271, 271
Texas Insurance Code pertaining to surplus lines coverage.
                                                                (1944). The Bank was entitled to fair and adequate notice
Southern County Mutual filed a cross-action against R.O.
                                                                that Southern County Mutual was going to rely upon an
Williams, Jr. and the others seeking "indemnity and
                                                                agency theory at trial. Murray v. O & A Express, Inc., 630
contribution" in the event that the jury found Southern
                                                                S.W.2d 633, 636 (Tex.1982); TEX.R.CIV.P. 45.
County Mutual was liable on the extension binder. The case
was submitted to the jury on twenty issues, each of which            Southern County Mutual failed to plead that Tuttle was
the jury answered against the Bank. The jury did, however,      acting as an agent for Kraehnke. In fact, Southern County
find that the difference in the tractor's market value before   Mutual first suggested that Tuttle was Kraehnke's agent in
and after the collision was $36,000. The trial judge            its Motion for Directed Verdict. Southern County Mutual
overruled the Bank's Motion for Judgment Notwithstanding        thus failed to carry its burden on its theory that Tuttle had
the Verdict, and on March 5, 1986, signed the final             the authority to substitute insurance companies without first
judgment ordering that the Bank take nothing in its suit        obtaining Kraehnke's authorization to do so.
against Southern County Mutual, R.O. Williams, Jr. and the
other five defendants.                                              In addition to this procedural misstep, this court's
                                                                holding in Shaller v. Commercial Standard Fire Ins. Co.,
    On appeal, the court of appeals, with one justice           158
dissenting, reversed the judgment of the trial court and
rendered judgment against all defendants. 732 S.W.2d at 81.     Page 173
The court found that as a matter of law, the extension
binder, listing Southern County Mutual as the insurance         Tex. 143, 309 S.W.2d 59 (1958), also leads to the
company, was "legally in full force and effect" on the date     conclusion, on the merits, that Tuttle had not attained the
status of Kraehnke's agent with the authority to cancel the       how R.O. Williams, Jr. and the others were strictly liable to
binder with Southern County Mutual and bind Kraehnke              the Bank for violating certain provisions of the Insurance
with Amherst. In Shaller, one of the issues presented was         Code. Not only did this unnecessary finding of strict
whether an insurance recording agent, who was employed            liability go further than any relief the Bank requested, it
solely to procure insurance, could act as the insured's agent     also resulted in an erroneous double recovery for the Bank.
for the purpose of accepting cancellation of an insurance
policy. In holding that such an agency relationship did not           In rendering judgment, the court of appeals stated that
exist, we stated that
                                                                  we adjudge and order that the Bank recover, firstly,
it is settled law that one who authorizes another to procure      $35,000. plus interest from date of judgment, from R.O.
insurance for him does not thereby constitute such person         Williams, Jr., R.O.W., Inc., and Norman Edwards, jointly
his agent to receive notice of cancellation or for the purpose    and severally; secondly, that the Bank recover the same
of agreeing to a proposed cancellation of the policy.             amount from Southern County Mutual Insurance Company;
                                                                  also, jointly and severally against the Appellees.
    Id. at 150, 309 S.W.2d at 64.
732 S.W.2d at 81. This language, which exemplifies
     In the case before us, Kraehnke contacted Tuttle for the     the entire court of appeals opinion, is ambiguous and
sole purpose of acquiring insurance on his 18-wheeler. Such       reasonably subject to differing interpretations. Indeed, one
a limited solicitation by Kraehnke cannot serve as the basis      such interpretation is that the court has authorized the Bank
for establishing a broad agency relationship between              to recover a total of $70,000--$35,000 from Southern
Kraehnke and Tuttle. See Alliance Ins. Co. v. Continental         County Mutual and $35,000 from the other defendants.
Gin Co., 285 S.W. 257, 258 (Tex.Comm'n App.1926,
judgmt adopted) (holding that insurance agent, authorized             The Bank's pleadings set forth alternative grounds of
only to acquire insurance on property, did not have               recovery. The court of appeals, however, rendered a
authority, as insured's agent, to accept cancellation of policy   judgment based upon both grounds of recovery pleaded.
and substitution of carriers).                                    Not only does this judgment grant an impermissible double
                                                                  recovery to
    We therefore conclude that, as a matter of law, a valid
Southern County Mutual Insurance binder was in effect on          Page 174
July 2, 1982. Accordingly, we affirm that portion of the
court of appeals judgment that (1) Kraehnke had a valid           the Bank, it fails to conform to the Bank's pleadings.
binder with Southern County Mutual and (2) Southern               Cunningham v. Parkdale Bank, 660 S.W.2d 810, 812
County Mutual was liable to the Bank, as loss payee on            (Tex.1983); TEX.R.CIV.P. 301. We therefore reverse that
Kraehnke's policy, for $35,000.                                   portion of the court of appeals judgment which finds the
                                                                  other defendants strictly liable and grants the Bank recovery
     In both its pleadings and court of appeals brief, the        against these individuals. The resulting judgment will
Bank sought relief on two alternative theories. First, the        correctly reflect Southern County Mutual's liability to the
Bank claimed that Southern County Mutual was liable               Bank.
because a valid Southern County Mutual binder was in
force on the date of the accident. Alternatively, if no binder        Finally, Southern County Mutual alleges that the court
was in effect, the Bank claimed that R.O. Williams, Jr. and       of appeals erred in rendering judgment against all
the other defendants were strictly liable because they had        defendants because such a judgment foreclosed its
violated selected provisions of the Insurance Code. By            cross-action for contribution and indemnity against R.O.
framing its grounds of recovery in this manner, the Bank          Williams, Jr. and the others. We disagree.
was, in effect, stating that the existence of a Southern
                                                                       Southern County Mutual's cross-action is in the nature
County Mutual binder precluded any imposition of strict
                                                                  of an independent ground of recovery. Therefore, by failing
liability under the Insurance Code. For if Southern County
                                                                  to submit any issues on its cross-action, Southern County
Mutual was liable to the Bank, this meant that R.O.
                                                                  Mutual has waived this ground of recovery. TEX.R.CIV.P.
Williams, Jr. and the other defendants had satisfied the
                                                                  279.
Insurance Code requirements that govern the placement of
surplus line insurance companies in Texas.                            In conclusion, we affirm that portion of the court of
                                                                  appeals judgment stating that a valid Southern County
     The court of appeals, however, did not view the
                                                                  Mutual binder was in effect at the time of Kraehnke's loss.
situation in this manner. After establishing Southern County
                                                                  Further, we reverse that portion of the court of appeals
Mutual's liability under its binder with Kraehnke, the court
                                                                  judgment which granted the Bank an erroneous double
nevertheless immersed itself into a lengthy discussion of
recovery against these individuals.
Page 127                                                         experienced additional problems with the pickup. During
                                                                 this time, Walters' Credit Union notified him that the truck
754 S.W.2d 127 (Tex. 1988)                                       was a 1981 model, not a 1982 model, and that it would not
                                                                 finance the truck. Walters then demanded that Bankston
W.O. BANKSTON NISSAN, INC., Petitioner,                          take back the pickup and return his 280-ZX. He was
                                                                 informed that the 280-ZX had been sold and was offered the
v.
                                                                 difference between the $7,700 agreed value and the loan
                                                                 balance Bankston had paid. Walters refused and filed suit.
Kelly Joe WALTERS, Respondent.
                                                                      The jury found that Bankston represented that the
No. C-6531.
                                                                 pickup was a 1982 model; that the misrepresentation was a
Supreme Court of Texas.                                          producing cause of actual damages; that the actual damages
                                                                 included loss of the 280-ZX; and that the 280-ZX had a fair
May 11, 1988                                                     market value of $9,800 on the date of the sale. No other
                                                                 damage issues were submitted. Bankston objected to the
     Rehearing Denied July 13, 1988.                             submission of the above issues, asserting that the issues did
                                                                 not present a proper measure of damages.
    Nathan K. Griffin, Thomas, Neilon & Griffin, P.C.,
Dallas, for petitioner.                                               The dispositive issue in this case is the correct measure
                                                                 of damages. In a DTPA case, the plaintiff is entitled to
    Tom S. McCorkle, McCorkle & Westerburg, P.C., for            actual damages. TEX.BUS. & COMM.CODE §
respondent.                                                      17.50(b)(1). This court has defined actual damages as those
                                                                 recoverable at common law. Farrell v. Hunt, 714 S.W.2d
     WALLACE, Justice.
                                                                 298, 300 (Tex.1986); Brown v. American Transfer &
                                                                 Storage Co., 601 S.W.2d 931, 939 (Tex.1980). Under
     This is a Deceptive Trade Practices Act case arising out
                                                                 common law, there are two measures of damages for
of the purchase of a pickup truck by Kelly Joe Walters from
                                                                 misrepresentation: (1) the "out of pocket" measure, which is
W.O. Bankston Nissan, Inc. The trial court entered
                                                                 the "difference between the value of that which was parted
judgment n.o.v. that Walters take nothing. The court of
                                                                 with and the value of that which was received"; and (2) the
appeals, in an unpublished opinion, reversed the trial court's
                                                                 "benefit of the bargain" measure, which is the difference
judgment and rendered judgment on the jury verdict. We
                                                                 between the value as represented and the value actually
reverse the judgment of the court of appeals and affirm the
                                                                 received. The DTPA permits a plaintiff to recover either the
judgment of the trial court.
                                                                 "out of pocket" or the "benefit of the bargain" damages,
     Walters contacted his friend Buddy Wood, who was a          whichever is greater. Leyendecker & Associates, Inc. v.
salesman for Bankston, to discuss trading in his 280-ZX for      Wechter, 683 S.W.2d 369, 373 (Tex.1984); Sobel v.
a pickup truck. Walters test drove the pickup in question        Jenkins, 477 S.W.2d 863 (Tex.1972); Chrysler Corp. v.
and agreed to purchase it. He and Wood agreed upon a             Schuenemann,          618 S.W.2d 799,       805
trade-in value of $7,700 for the 280-ZX. Wood prepared a         (Tex.Civ.App.--Houston [1st Dist.] 1981, writ ref'd n.r.e.);
Workup Sheet which showed the pickup to be a 1982                Smith     v.    Kinslow,      598 S.W.2d 910,    912
model. He also prepared an Odometer Statement and a              (Tex.Civ.App.--Dallas 1980, no writ); Jack Criswell
Warranty Sheet, both of which showed the pickup to be a          Lincoln-Mercury, Inc. v. Haith, 590 S.W.2d 616
1981 model. Walters took possession of the pickup and            (Tex.Civ.App.--Houston [1st Dist.] 1979, writ ref'd n.r.e.).
Bankston took possession                                         See, Vista Chevrolet, Inc. v. Lewis, 709 S.W.2d 176
                                                                 (Tex.1986).
Page 128
                                                                       Walters' burden of proof in this case was to show either
of the 280-ZX and sold it for $7,700, the value agreed upon      the difference between the fair market value of the pickup
by Wood and Walters. Bankston then paid off the $5,832.01        as delivered and the value of the truck as it was represented;
balance owed by Walters on the 280-ZX.                           or the difference in value between that with which he parted
                                                                 and that which he received. He did neither. Walters had the
     Several days later, Walters experienced mechanical          burden of requesting jury issues on the proper measure of
difficulty with the pickup and returned it to Bankston, who      damages. Having failed to do so, his cause of action must
repaired the problem at no cost. Walters subsequently            fail.
     The judgment of the court of appeals is reversed and
the judgment of the trial court is affirmed.

    ROBERTSON, J., not sitting.

   MAUZY,        Justice,   concurring    on   Motion     For
Rehearing.

     I concur in the result reached by the majority. I would
however like to add that in cases brought under the
Deceptive Trade Practices-Consumer Protection Act,
Tex.Bus. & Com.Code Ann. § 17.41 et seq. (Vernon 1987),
damages are recoverable "to compensate for the actual loss
sustained as a result of the defendant's conduct." Kish v.
Van Note, 692 S.W.2d 463, 466 (Tex.1985). I would further
note that under the facts of this case, either an "out of
pocket" or "benefit of the bargain" measure of damages was
appropriate. Nevertheless, as this court held in Kish, the
"out of pocket" and "benefit of the bargain" rules are not the
exclusive means of measuring damages in a DTPA action.
692 S.W.2d at 466. The allowable measure of damages may
appropriately include related and necessary expenses that
are incurred after the deceptive act or practice has become
apparent,

Page 129

and the measure of damages under either the "out of
pocket" or "benefit of the bargain" theory should in no way
be read as exclusive.

    Chief Justice Phillips joins in this Concurring Opinion
on Rehearing.
Page 348                                                        us on certified questions from the Fifth Circuit. This is a
                                                                very limited procedural device; we answer only the
787 S.W.2d 348 (Tex. 1990)                                      questions certified and nothing more. See Tex.R.App.P.
                                                                114. Thus, the whole case is not before this court as it
Alfred MORENO et al., Appellants,                               would be in an ordinary appeal.

v.                                                                   The essential facts of this case have been certified to
                                                                this court. On January 21, 1981, Alfred Moreno, Jr., the
STERLING DRUG, INC., Appellees.
                                                                infant son of Alfred and Emma Moreno, died of Reye's
                                                                syndrome. On September 19, 1981, Shawna Rae Sloan, the
No. C-7744.
                                                                infant daughter of James and Camilla Sloan, died of Reye's
Supreme Court of Texas.                                         syndrome. In the days preceding their deaths,

March 28, 1990                                                  Page 350

     Rehearing Overruled May 9, 1990.                           the infants had been administered doses of Bayer Children's
                                                                Aspirin, manufactured by Sterling Drug, Inc. Sometime
Page 349                                                        after the deaths of the infants the parents were informed that
                                                                in some instances the use of aspirin factored into Reye's
     Les Mendelsohn, Randall C. Jackson, Jr., San Antonio,      syndrome deaths. On October 22, 1985, the parents filed
for appellants.                                                 separate wrongful death suits against Sterling Drug in state
                                                                district court. Sterling Drug removed the actions to the
    P. Michael Jung, Mark Donheiser, Dallas, for                United States District Court for the Western District of
appellees.                                                      Texas.

     OPINION                                                         Following removal, Sterling Drug moved for summary
                                                                judgment in both suits, claiming that the actions were
     SPEARS, Justice.
                                                                barred by the Texas Wrongful Death Statute of Limitations,
                                                                TEX.CIV.PRAC.           &      REM.CODE          ANN.       §
     This case is before us upon certified questions from the
                                                                16.003(b)(Vernon 1986). The federal district court
United States Court of Appeals for the Fifth Circuit.
                                                                dismissed the suits, citing the recent Fifth Circuit decision
Pursuant to TEX. CONST. art. V § 3-c, we have
                                                                of Tennimon v. Bell Helicopter Textron, Inc., 823 F.2d 68
jurisdiction to answer the following certified questions:
                                                                (5th Cir.1987), wherein that court held the discovery rule
    1. Does the "discovery rule" apply to the Texas Statute     does not apply to section 16.003(b). The cases were
of Limitations, TEX.CIV.PRAC. & REM.CODE §                      consolidated on appeal, and Moreno and Sloan (collectively
16.003(b), in an action brought pursuant to the Texas           "Moreno") moved for certification of the legal questions to
Wrongful Death and Survival Statutes, TEX.CIV.PRAC. &           this court. A panel of the Fifth Circuit denied the motion to
REM CODE § 71.001 et seq. and § 71.021, respectively?           certify and affirmed in an unpublished opinion on the basis
                                                                of Tennimon. On rehearing and after en banc
     2. If the discovery rule does not apply to the Texas       reconsideration of the certification question, the Fifth
Statute of Limitations in wrongful death and survival           Circuit granted the motion to certify.
actions, does that statute of limitations as applied to the
plaintiffs herein, violate the open courts provision of the          The first question is whether the "discovery rule"
Constitution of the State of Texas, TEX. CONST. art. I §        applies to the statute of limitations for actions based on
13?                                                             injuries resulting in death. The relevant limitations statute,
                                                                section 16.003, TEX.CIV.PRAC. & REM.CODE ANN.,
     For the reasons stated in this opinion, we answer that     provides as follows:
the discovery rule does not apply to the wrongful death
statute of limitations found in section 16.003(b), and, that    (a) A person must bring suit for ... personal injury ... not
section 16.003(b) as applied to the plaintiffs in this case     later than two years after the cause of action accrued.
does not violate article I, section 13 of the Texas
                                                                (b) A person must bring suit not later than two years after
Constitution.
                                                                the day the cause of action accrues in an action for injury
     For clarity, we emphasize that these issues are before     resulting in death. The cause of action accrues on the death
of the injured person.                                           to compel the exercise of a right of action within a
                                                                 reasonable time so that the opposing party has a fair
     The only courts to construe section 16.003(b) have          opportunity to defend while witnesses are available. Willis
found it clear and unambiguous in prescribing an absolute        v. Maverick, 760 S.W.2d 642, 644 (Tex.1988). Section
two-year limitation period for bringing a wrongful death         16.003 embodies a legislative determination of what a
case. Tennimon v. Bell Helicopter Textron, Inc., 823 F.2d        "reasonable time" is for bringing both an action for injuries
68, 73 (5th Cir.1987); Stiles v. Union Carbide Corp., 520        not resulting in death (subpart a), and one for injuries
F.Supp. 865, 867 (S.D.Tex.1981). Those decisions, along          resulting in death (subpart b). Under both subparts (a) and
with a literal reading of section 16.003(b), would suggest       (b), an action must be brought within two years of the date
that Moreno's wrongful death action is barred because it         the cause of action "accrues." Only subpart (b), however,
was brought after the two-year limitations period had            goes on to specify that a cause of action "accrues" at a
expired. Moreno, however, argues that the "discovery" rule       certain time--the date of death. When the legislature
should apply to section 16.003(b), because he neither knew       employs the term "accrues" without an accompanying
nor could have known the cause of his injury within the          definition, the courts must determine when that cause of
two-year limitation period. Specifically, he asserts that his    action accrues and thus when the statute of limitations
suit was timely brought because it was filed within two          commences to run. Indeed, on three previous occasions this
years of the discovery of the link between aspirin and           court has adopted and relied upon the following language
Reye's syndrome.                                                 from Fernandi v. Strully, 35 N.J. 434, 173 A.2d 277, 285
                                                                 (1961):
     Moreno offers a number of arguments for why this
court should disregard the plain language of section             [T]he question when a cause of action accrues is a judicial
16.003(b) and apply the discovery rule to the limitations        one, and to determine it in any particular case is to establish
period for wrongful death actions. First, he points out that     a general rule of law for a class of cases, which rule must be
this court has applied the discovery rule in determining the     founded on reason and justice.... In the absence of
limitations period under the statutory predecessor to section    legislative definition and specification, the ... courts have
16.003(a), which governs actions for personal injury not         often been called upon to delineate the statute; they have
resulting in death. Citing Ex parte Pruitt, 551 S.W.2d 706,      consciously sought to apply it with due regard to the
709 (Tex.1977) for the proposition that statutes should be       underlying statutory policy of repose, without, however,
read as a whole and construed to give purpose and meaning        permitting unnecessary individual injustices.
to every part, Moreno argues that the underlying purpose of
section 16.003 is to authorize application of the discovery          Willis, 760 S.W.2d at 644; Robinson v. Weaver, 550
rule to subparts (a) and (b). Second, Moreno contends that       S.W.2d 18, 20 (Tex.1977); Gaddis v. Smith, 417 S.W.2d
the second sentence of section 16.003(b) only fixes the          577, 580-81 (Tex.1967).
earliest time the cause of action may accrue and was
intended to "save" the cause of action from being barred              For purposes of the application of limitation statutes, a
when more than two years elapse between injury and death.        cause of action can generally be said to accrue when the
See DeHarn v. Mexican Nat'l Ry. Co., 86 Tex. 68, 23 S.W.         wrongful act effects an injury, regardless of when the
381 (1893). Moreno argues that this court should set the         plaintiff learned of such injury. Robinson, 550 S.W.2d at
latest date of accrual beyond death (i.e. at discovery of        19. The discovery rule represents an exception to this
cause of action) because the purpose of section 16.003(b) is     general rule of accrual. Id. The discovery rule is a judicially
to expand the time in which a wrongful death action can be       constructed test which is used to determine when a
brought. Finally, Moreno maintains that if subparts (a) and      plaintiff's cause of action accrued. Weaver v. Witt, 561
(b) are not interpreted consistently it will result in the       S.W.2d 792, 794 (Tex.1977). When applied, the rule
absurdity of allowing a defendant to be exonerated for           operates to toll the running of the period of limitations until
conduct which                                                    the time that the plaintiff discovers, or through the exercise
                                                                 of reasonable care and diligence should discover, the nature
Page 351                                                         of his injury. Id. at 793-94. This court has applied the
                                                                 discovery rule to medical malpractice cases in which the
kills but held liable for conduct which merely maims. See        plaintiff did not, and could not, know of the injury at the
Hanebuth v. Bell Helicopter International, 694 P.2d 143,         time it occurred. See Gaddis v. Smith, 417 S.W.2d 577, 580
147 (Alaska 1984). Moreno argues that this court should          (Tex.1967) (negligence action against physician for leaving
avoid this absurdity by construing subpart (b) to allow          sponge in patient's body accrues when patient learns of, or
application of the discovery rule.                               in exercise of reasonable care and diligence, should have
                                                                 learned of presence of sponge); Hays v. Hall, 488 S.W.2d
    We begin our analysis by observing that the primary          412 (Tex.1972) (action for negligent performance of
purpose of section 16.003, as with all limitation statutes, is   vasectomy accrues when plaintiff discovers or should have
discovered that he remains fertile). Similarly, this court has   purpose was not to extend the beginning of the running of
applied the discovery rule in a limited number of other          the statute beyond the date of death. Nothing in the wording
cases when the injured party did not, and could not, know        of Article 3202 or our discussion in DeHarn indicates such
of his injury at the time it occurred. See e.g., Bayouth v.      a purpose. Moreover, to engraft such a purpose on to
Lion Oil Co., 671 S.W.2d 867 (Tex.1984); Kelley v. Rinkle,       section 16.003(b) would be to ignore our oft-repeated
532 S.W.2d 947 (Tex.1976); Quinn v. Press, 135 Tex. 60,          pronouncement that the "purpose" of all limitation statutes
140 S.W.2d 438 (1940). In each of these cases, this court        is to compel the exercise of a right of action within a
applied the discovery rule to a statute of limitations which     reasonable time so that the opposing party has a fair
left the phrase "accrual" undefined. By contrast, section        opportunity to defend while witnesses are available. See
16.003(b) specifically defines "accrual" as the date of death.   e.g., Willis, 760 S.W.2d at 644; Robinson, 550 S.W.2d at
The question here is whether the discovery rule should be        20; Price v. Estate of Anderson, 522 S.W.2d 690, 692
applied to a limitations statute which has clearly and           (Tex.1975); see also United States v. Kubrick, 444 U.S.
unequivocally prescribed that a cause of action accrues          111, 117, 100 S. Ct. 352, 356, 62 L. Ed. 2d 259 (1979)
upon the occurrence of a specified event. For a number of        ("[s]tatutes of limitation ... afford plaintiffs what the
reasons, we                                                      legislature deems a reasonable time to present their claims
                                                                 [and] ... protect defendants and courts from having to deal
Page 352                                                         with cases in which the search for truth may be seriously

hold that it should not. [1]                                     Page 353

Plain Meaning of Section 16.003(b).                              impaired by loss of evidence, memory, or disappearance of
                                                                 witnesses.").
     Moreno's argument that the discovery rule should be
applied to section 16.003(b) as a matter of statutory            The Discovery Rule.
construction ignores the plain language of the statute.
Where language in a statute is unambiguous, this court must           Notwithstanding the plain language of section
seek the intent of the legislature as found in the plain and     16.003(b), Moreno argues that the discovery rule should be
common meaning of the words and terms used.                      applied to the statute because our past decisions have
RepublicBank Dallas, N.A. v. Interkal, Inc., 691 S.W.2d          applied the rule to section 16.003(a) involving injuries and,
605, 607 (Tex.1985); Cail v. Service Motors, Inc., 660           in the interest of consistency, section 16.003(b) should be
S.W.2d 814, 815 (Tex.1983). Section 16.003(b) specifically       similarly construed. This argument, however, misconceives
provides that in a wrongful death action "a person must          both the function of the discovery rule and the power of this
bring suit not later than two years after the day the cause of   court to craft exceptions to legislative enactments.
action accrues" and goes on to fix "accrual" at the injured
person's death. The express language of the statute,                  As we have said, the discovery rule is a judicially
therefore, evidences the legislative intent to fix the only      conceived exception to statutes of limitation to be used by
date of accrual, and not merely the earliest, as Moreno          courts to determine when a cause of action accrues. This
contends. [2]                                                    court has only applied the rule to "accrual" limitation
                                                                 statutes--i.e. statutes which have failed to define when a
    Moreno's reliance on our decision in DeHarn is also          cause of action accrues. Because these statutes did not
misguided. In DeHarn, this court interpreted the accrual         specify a time of "accrual," this court did not violate a
language in TEX.REV.CIV.STAT. art. 3202 (1879), which            specific legislative directive when it interpreted them to
was the statutory predecessor to section 16.003(b). The          allow for application of the discovery rule. Section
opinion describes the reason for Article 3202 as follows:        16.003(b), however, prescribes an absolute limitations
                                                                 period by expressly specifying that "accrual" is the date of
Since no action could be brought by the relatives of the         death. Since section 16.003(b) specifies death as the accrual
injured person until death had ensued, and since a great deal    date for wrongful death actions, there is no need for this
of time might elapse between the injury and the death, it        court to employ the discovery rule--the legislature has
was reasonable that the time of death should be taken as the     completed the task. [3] Furthermore, when faced with other
point from which limitation should begin to run.                 absolute statutes of limitations in which the legislature has
                                                                 specifically defined the date or event which triggers accrual,
     DeHarn, 23 S.W. at 381-82. Moreno construes this            this court has enforced the literal terms of the statute and
single passage as evidencing a legislative purpose to extend     refused to engraft a discovery rule. See e.g., Safeway
the beginning of the running of the statute beyond the date      Stores, Inc. v. Certainteed Corp., 710 S.W.2d 544, 546-48
of death. But Article 3202 was meant solely to prevent the       (Tex.1986); Morrison v. Chan, 699 S.W.2d 205, 208
potential anomaly of limitations running before death. Its
(Tex.1985).                                                      one event as the date upon which the action accrues. By
                                                                 specifying that date, the legislature has foreclosed judicial
Other Jurisdictions.                                             application of the discovery rule. If we concluded
                                                                 otherwise, we would be disregarding the plain meaning of
     The overwhelming majority of states construing              section 16.003(b), distorting the clear function of the
absolute statutes with similar or identical language to that     discovery rule, frustrating
found in section 16.003(b) have held that the discovery rule
does not apply. [4] These courts offer several rationales for    Page 355
refusing to apply the discovery rule, including: (1) that the
rule applies only to accrual statutes but not absolute           the legitimate purposes of limitation statutes, and ignoring
statutes, see, e.g., Presslaff, 403 A.2d at 940; White, 693      the well-reasoned opinions of most other jurisdictions.
P.2d at 692; (2) that the fact of death itself is an event
which should trigger any and all relevant inquiry, see, e.g.,    "Open Courts".
DeCosse, 319 N.W.2d at 51; (3) that there is a substantial
state interest in promoting the prompt settlement of the             Article I, section 13 of the Texas Constitution provides:
affairs of the deceased, see, e.g., Cadieux, 593 F.2d at 145;
                                                                 All courts shall be open, and every person for an injury
Pastierik, 526 A.2d at 323; and (4) that the clear language
                                                                 done him, and his lands, goods, person or reputation, shall
of the statute cannot be judicially rewritten under the "guise
                                                                 have remedy by due course of law.
of statutory construction," see, e.g., Trimper, 501 A.2d at
449; Morano, 420 N.Y.S.2d at 95. In many of these                     This provision, known as the "open courts" provision,
decisions, the factors suggested                                 is premised upon the rationale that the legislature has no
                                                                 power to make a remedy by due course of law contingent
Page 354
                                                                 upon an impossible condition. Morrison, 699 S.W.2d at
by Moreno--"fairness of result" and "legislative                 207; Nelson v. Krusen, 678 S.W.2d 918, 921 (Tex.1984). In
purpose"--were, in fact, considered and weighed by the           order to establish an "open courts" violation, a litigant must
court.                                                           satisfy a two-part test: first, he must show that he has a
                                                                 well-recognized common-law cause of action that is being
     The only case cited by Moreno that directly supports        restricted; and second, he must show that the restriction is
his position is Hanebuth v. Bell Helicopter International,       unreasonable or arbitrary when balanced against the
694 P.2d 143 (Alaska 1984). In Hanebuth, the majority            purpose and basis of the statute. Lucas v. United States, 757
applied the discovery rule to an absolute limitations statute    S.W.2d 687, 690 (Tex.1988); Sax v. Votteler, 648 S.W.2d
on the basis that failure to do so would result in injustice     661, 666 (Tex.1983).
and would make it more profitable for a tortfeasor to kill
rather than scratch a plaintiff. Id. at 146-47. However, as           Moreno contends that if section 16.003(b) does not
the dissent in Hanebuth points out, the majority reached its     provide for application of the discovery rule, it is
decision only after it ignored its own recent and controlling    unconstitutional because he neither discovered, nor could
precedent, the plain language of the statute, and the vast       have discovered through the exercise of reasonable
majority of decisions to the contrary from other                 diligence, his cause of action within the two-year
jurisdictions. Id. at 147 (Moore, J., dissenting). We decline    limitations period. In other words, Moreno contends that
to follow Hanebuth for these reasons, and because the            section 16.003(b) is unconstitutional because it makes his
decision both relies on distinguishable cases [5] and fails to   remedy contingent on an impossible condition, namely, the
recognize the distinction between personal injury and death      discovery of the connection between aspirin and Reye's
actions. [6]                                                     syndrome within two years after his child's death. Moreno
                                                                 argues that the "open courts" provision applies because
Summary.                                                         Texas recognizes a common-law right to assert a wrongful
                                                                 death action. See Moragne v. States Marine Lines, Inc., 398
     The language used in section 16.003(b) reflects a clear     U.S. 375, 90 S. Ct. 1772, 26 L. Ed. 2d 339 (1970).
legislative intent to adopt an absolute two-year limitations     Alternatively, Moreno argues that wrongful death should be
period for wrongful death actions. The legislature could         accorded common-law status for purposes of review under
have either left "accrual" undefined in section 16.003(b) or     the "open courts" provision because a death action
could have stated that the cause of action accrues "on the       incorporates common-law elements and because there is no
death of the injured person or upon discovery of the cause       fundamental distinction between a common-law action for
of death "; either route would have allowed the discovery        non-fatal personal injuries and a statutory action for
rule to be applied to section 16.003(b). Instead, the statute    wrongful death. See Vassallo v. Nederl-Amerik Stoomy
unambiguously specifies one event--death--and only that          Maats Holland, 162 Tex. 52, 344 S.W.2d 421, 423 (1961).
Finally, Moreno contends that section 16.003(b) is               action owe their existence to statutes changing this
unreasonable and arbitrary because it denies him a remedy        common-law rule. TEX.CIV.PRAC. & REM.CODE ANN.
that would have been available to him had his child lived        § 71.002; Duhart, 610 S.W.2d at 742 n. 2; Marmon, 430
instead of died.                                                 S.W.2d at 182. [7] Moreno relies on Moragne v. States
                                                                 Marine Lines, Inc., 398 U.S. 375, 90 S. Ct. 1772, 26 L.Ed.2d
Common-law Requirement.                                          339 (1970) to support his argument that the common law
                                                                 recognized an action for wrongful death. In Moragne,
     We first consider the question of whether Moreno is         however, while the majority recognized a common-law
asserting a common-law cause of action. See Waites v.            action for wrongful death in maritime law, it readily
Sondock, 561 S.W.2d 772, 774 (Tex.1977); Lebohm v. City          acknowledged that no such action existed at common law.
of Galveston, 154 Tex. 192, 275 S.W.2d 951, 954-55 398 U.S. at 382, 384, 90 S. Ct. at 1778, 1779. Similarly,
(1955); Hanks v. City of Port Arthur, 121 Tex. 202, 48           Moreno's argument that a wrongful death action is really a
S.W.2d 944 (1932). In Hanks, this court applied the "open        common-law action because it incorporates common-law
courts" provision to a municipal ordinance which required        elements ignores the fact that it is the Wrongful Death Act
notice to a municipality of a defective condition prior to the   itself which incorporates and sets forth the "elements" of
filing of suit. Essential to this court's holding in that        the cause of action. TEX.CIV.PRAC. & REM.CODE §
case--that the ordinance violated the "open courts"              71.002(b)(1986). The fact that common-law elements are
provision--was a determination that the cause of action at       required is the result of an express statutory provision and
issue, municipal liability, was common law rather than           does not change the fact that the underlying right to bring
statutory. Implicit in the opinion was a recognition of the      the action is statutory. [8]
distinction between a court's power to apply "open courts"
protection to common-law causes of action on the one hand,       Summary.
and statutorily created actions on the other. A common-law
cause of action exists without a legislative enactment. As           Our most recent open courts             decisions   have
such, article I, section 13 of the Texas Constitution            consistently required that the cause
mandates that the courts be open to pursuing such claims.
The legislature is not entitled to restrict or abrogate a        Page 357
common-law cause of action without a reasonable basis and
without providing an adequate substitute. If, however, a         of action restricted be one that is well defined in the
cause of action was not recognized at common law, but was        common law. Lucas v. U.S., 757 S.W.2d 687, 690
itself created by the legislature, any legislative abrogation    (Tex.1988); Nelson v. Krusen, 678 S.W.2d 918, 922
of the cause of action would not be a true abrogation of a       (Tex.1984). Moreno's constitutional attack on section
constitutional right. Rather, the legislature would simply not   16.003(b) is not premised upon restriction of a common-law
have granted as extensive a right as it might have. See          cause of action, and, therefore, necessarily fails the first
Castillo v. Hidalgo County Water Dist. 1, 771 S.W.2d 633,        prong of the open courts test. See Castillo v. Hidalgo
636 (Tex.App.--Corpus Christi 1989, no writ) ("Open              County Water Dist. 1, 771 S.W.2d 633, 636
Courts" provision does not apply to wrongful                     (Tex.App.--Corpus Christi 1989, no writ) (wrongful death
                                                                 action did not exist at common law, and it is only by virtue
Page 356                                                         of statutory authority that such suits can be maintained;
                                                                 therefore, "open courts" provision simply does not apply).
death action, which is a statutory cause of action "that
expands the rights of an individual beyond those granted by           Finally, and notwithstanding the dissent's argument to
the common law"); see also Stout v. Grand Prairie Indep.         the contrary, we believe today's decision is entirely
School Dist., 733 S.W.2d 290, 295 (Tex.App.--Dallas 1987,        reconcilable with our decision in Nelson, 678 S.W.2d at
writ ref'd n.r.e.); Tarrant County Hosp. Dist. v. Ray, 712       918. First, Nelson involved limitations on a malpractice
S.W.2d 271, 273 (Tex.App.--Fort Worth 1986, writ ref'd           action--a well-established common law cause of action.
n.r.e.).                                                         See, e.g., Sax v. Votteler, 648 S.W.2d 661, 664-666; Texas
                                                                 & P. Ry. Co. v. Morin, 66 Tex. 225, 18 S.W. 503 (1886).
    This court has repeatedly said there was no recognized       Second, because the injury complained of in Nelson did not
common-law cause of action for wrongful death. See Witty,        manifest itself until after limitations had run, the Nelsons
727 S.W.2d at 505-06; Duhart v. State, 610 S.W.2d 740,           had no reason to know of their injury, and thus their ability
742 n. 2 (Tex.1980); Marmon v. Mustang Aviation, Inc.,           to bring suit, until after limitations had expired. In the
430 S.W.2d 182, 186 (Tex.1968); Elliott v. City of               instant case, the injury--i.e. death--was immediately known.
Brownwood, 106 Tex. 292, 166 S.W. 1129 (1914);                   Even in those Texas cases which have applied the discovery
Galveston, Harrisburg and San Antonio R.R. Co. v. Le             rule the courts have held that limitations begin to run when
Gierse, 51 Tex. 189, 199 (1879). Wrongful death causes of        the fact of injury is known. See, e.g., Rascoe v. Anabtawi,
730 S.W.2d 460, 463 (Tex.App.--Beaumont 1987, no writ)            Gaddis v. Smith, 417 S.W.2d 577, 580, 581 (Tex.1967).
(injury evident and limitations commenced on day plaintiff
died); Love v. Zales Corp., 689 S.W.2d 282, 285 678 S.W.2d at 923 (emphasis supplied). Yet today's
(Tex.App.--Eastland 1985, writ ref'd n.r.e.) (discovery rule      decision reaches such an equally shocking and unjust result.
does not apply in wrongful death cases to toll running of         The limited facts of this case, certified to this court by the
limitations until plaintiff discovers that he has a cause of      Fifth Circuit, are no less compelling than those in Nelson.
action); cf. Coody v. A.H. Robins Co., 696 S.W.2d 154, 156        The Morenos and the Sloans both had infant children who
(Tex.App.--San Antonio 1985, no writ) ("The discovery             died of Reye's Syndrome after being administered doses of
rule speaks only of discovery of the injury [and] does not        Bayer's Childrens Chewable Aspirin, manufactured by
operate to toll the running of the limitations period until       Sterling Drug, Inc. After the death of the infants, the parents
such time as plaintiff discovers all of the elements of a         were informed that the use of aspirin sometimes contributed
cause of action."); Otis v. Scientific Atlanta, Inc., 612         to Reye's Syndrome. The only real difference between this
S.W.2d 665, 666 (Tex.Civ.App.--Dallas 1981, writ ref'd            case and Nelson is that here the injured parties had the bad
n.r.e.) (limitations run from date injury is discovered, not      luck to die. [1]
from date of discovery of responsible party). [9]
                                                                  Page 359
     For the reasons stated, our answer to the first certified
question is that the discovery rule does not apply to             The court's opinion thus provides a perverse incentive for a
TEX.CIV.PRAC. & REM.CODE § 16.003(b). In response                 tortfeasor to kill rather than merely maim.
to the second certified question, we answer that §
                                                                       The asserted rationale to support this untenable result is
16.003(b), as interpreted, is not inconsistent with and
                                                                  two-fold. First, the court examines the "plain meaning" of
violative of Article I, section 13 of the Texas Constitution.
                                                                  the "unambiguous" limitations statute and concludes that
[10]
                                                                  the legislature has intentionally foreclosed application of
    DOGGETT, J., joined by RAY and MAUZY, JJ.,                    the discovery rule. This approach directly conflicts with the
dissenting.                                                       instruction given to us in the Code Construction Act that
                                                                  "whether or not the statute is considered ambiguous on its
Page 358                                                          face," we must consider both the object sought to be
                                                                  obtained and the consequences of a particular construction.
    DOGGETT, Justice, dissenting.                                 Tex. Gov't Code Ann. § 311.023 (Vernon 1988) (emphasis
                                                                  supplied). [2] We are further mandated that in construing
     Tortfeasors take heart. Today this court grants you          this enactment "a just and reasonable result is intended." Id.
absolution--provided, of course, that you inflict only mortal     § 311.021; see also Witty v. American General Capital
wounds. Treating our century-old statute of limitations for       Distributors, Inc., 727 S.W.2d 503, 504 (Tex.1987) (the
wrongful death like some Strasbourg goose, the court's            Texas "wrongful death statute is remedial in nature and
opinion crams it full of fictional legislative intent, and then   must be liberally construed ..."). [3] As conceded in Nelson,
ties to it the baggage of ancient English common law which        what the court has achieved in foreclosing the discovery
a number of American courts, including the United States          rule is the converse--a totally unjust and unreasonable
Supreme Court, have rejected as totally lacking in logical or     result. The parents are permanently denied an opportunity
historical justification. In this process, the opinion            to have their claims for the infants' deaths considered on the
conveniently ignores or superficially distinguishes opinions      merits. The court twists the statute to achieve an artificial,
from this court. Because I cannot join in this broad grant of     but complete bar to these families recovering by requiring
a license to kill, I dissent.                                     that they bring a cause of action before they could
                                                                  reasonably have discovered its existence.
    Today's decision is irreconcilable with Nelson v.
Krusen, 678 S.W.2d 918 (Tex.1984), in which this court                 Any careful analysis of the legislative intent and
held unconstitutional a similar "absolute" statute of             history of Section 16.003(b) contradicts the court's
limitations. Justice Spears, writing for the majority,            conclusion. An action for wrongful death has been tied to
condemned that statute in no uncertain terms, stating:            the date of death since the first passage of a death act in
                                                                  Texas and has survived in virtually identical form to this
The limitation period of [the medical malpractice statute], if    date. [4] Given this background, the legislature cannot be
applied as written, would require the Nelsons to do the           charged with the intent to abolish the discovery rule in
impossible--to sue before they had any reason to know they        wrongful death actions.
should sue. Such a result is rightly described as "shocking"
and is so absurd and so unjust that it ought not to be            Page 360
possible. Hays v. Hall, 488 S.W.2d 412, 414 (Tex.1972);
It was not until 1967 that this court recognized the               discovered through the exercise of reasonable care and
application of the discovery rule in an action for personal        diligence the facts establishing the elements of his cause of
injuries. Gaddis v. Smith, 417 S.W.2d 577 (Tex.1967).              action.
While the 1879 Texas Legislature no doubt had its strong
points, it cannot be said that it was sufficiently foresighted 760 S.W.2d at 646 (emphasis supplied). [7] Knowledge
to have as its objective the abolition of a doctrine that did      of Petitioners' causes of action was not complete upon
not exist in either name or substance until almost a century       discovery of the injury (i.e., death) as the opinion suggests;
later. [5]
                                                                   Page 361
    This court examined the applicable legislative purpose
many years ago in De Harn v. Mexican National Ry., 86              the element of the causative link between the use of aspirin
Tex. 68, 70, 23 S.W. 381, 381-82 (1893):                           and Reye's Syndrome was equally critical. [8]

The reason of the provision is obvious. Since no cause of               Rather than following the great weight of our own
action could be brought by the relatives of the injured            precedent, the court instead relies on two cases in which the
person until death had ensued, and since a great length of         court refused to apply the discovery rule. Yet in those cases,
time might elapse between the injury and the death, it is          unlike here, the legislature had taken more than ample steps
reasonable that the time of the death should be taken as the       to bar application of the rule. In the first of these two cases
point from which limitation should begin to run.                   construing the "absolute" statute of limitations applicable to
                                                                   health care liability claims, this court had before it abundant
     The court completely misapplies this case. The                materials reflecting the legislative intent underlying the
question is not whether De Harn deals with the issue of the        Medical Liability and Insurance Improvement Act.
application of the discovery rule--as stated above, it could       Morrison v. Chan, 699 S.W.2d 205, 208 (Tex.1985). At the
not. The issue is rather to determine the general legislative      time that limitation provision was passed, the discovery rule
intent in setting the date of death as the commencement            was well known to the Texas Legislature. A key legislative
point for the running of limitations. As De Harn states in         objective was to: "reduce excessive frequency and severity
unmistakable terms, that purpose was solely to protect the         of health care liability claims." Tex.Rev.Civ.Stat.Ann. art.
beneficiaries of one who lingered after receiving a lethal         4590i, §§ 1.02(a)(5) and 1.02(b)(1) (Vernon Supp.1989).
injury; the statute is designed to preserve, not to destroy, a     As evidenced by De Harn, supra, the objective in defining
cause of action. The result reached by today's opinion             the accrual date for wrongful death as the date of death was
stands in clear contradiction of this legislative objective.       to expand and not to contract the cause of action. Unlike the
                                                                   statute applicable to actions for wrongful death, the health
    As evidenced by previous decisions of this court,              care liability limitation provision makes no reference to an
labelling a statute of limitations "absolute" does not, as the     "accrual" of a cause of action and disclaims the effect of
opinion asserts, make it impenetrable to tolling principles.       other laws that would toll the time period for bringing suits,
For example, in Borderlon v. Peck, 661 S.W.2d 907                  including for minority and other disabilities. The limitations
(Tex.1983), we tolled an "absolute" statute of limitations on      statute for wrongful death is markedly different in this
the basis of the common-law doctrine of fraudulent                 regard; that statute is subject to tolling for minority and
concealment. That doctrine has been held applicable by this        other disabilities. Tex.Civ.Prac. & Rem.Code Ann. § 16.001
court to toll the statute of limitations in actions for wrongful   (Vernon 1986 & Supp.1990).
death. Texas & P. Ry. v. Gay, 86 Tex. 571, 576, 26 S.W.
599, 614 (Tex.1894). [6]                                                The other cited case, Safeway Stores, Inc. v.
                                                                   Certainteed Corp., 710 S.W.2d 544 (Tex.1986), is even
     As a review of the cases cited by the court evidences,        more persuasive authority to construe the statute before us
tolling of limitations to permit discovery is the rule rather      to permit application of the discovery rule. The issue
than the exception. See, e.g., Willis v. Maverick, 760             presented in that case was whether the statute of limitations
S.W.2d 642 (Tex.1988) (discovery rule applicable in legal          for breach of warranty ran from the date of the breach or
malpractice action); Weaver v. Witt, 561 S.W.2d 792                that of discovery. The statute sets the date of accrual and
(Tex.1977) (medical malpractice); Kelley v. Rinkle, 532            explicitly disclaims the applicability of the discovery rule,
S.W.2d 947 (Tex.1976) (action for libel of credit                  providing that a "cause of action accrues when the breach
reputation). These cases are not limited, as the court's           occurs, regardless of the aggrieved party's lack of
opinion concludes, to tolling limitations until the fact of the    knowledge of the breach." Tex.Bus. & Comm.Code Ann. §
injury is known. In Willis, we held that:                          2.725 (Vernon 1968) (emphasis supplied). Thus, in
                                                                   adopting Section 2.725, the legislature determined that
[T]he statute of limitations for legal malpractice does not        more was needed to bar the discovery rule than just
begin to run until the claimant discovers or should have           referring to the date of accrual; that rule needed to be
expressly disclaimed. This statute demonstrates an                The cause of action accrues on the death of the injured
appropriate way to preclude application of the discovery          person.
rule. The court ignores the fact that the legislature is quite
capable of expressly disclaiming the discovery rule but has            Tex.Civ.Prac. & Rem.Code Ann. § 16.003(b) (1986).
not done so in the context of wrongful death.                     In today's opinion, the court determines from the "plain
                                                                  language" of this minimal statute that the legislature
     To support its improbable position the court resorts to      intended to bar the yet-to-be-judicially-created discovery
case law from other jurisdictions which have little               rule even though this statute permits tolling under
comparability to the Texas statute. Most if not all of these      exceptions not just grounded in statute, such as for minors,
cases appear to involve a limitations provision contained         but also those judicially-created, such as for fraudulent
within the wrongful death statute itself and not one, like        concealment. I cannot concur in such a complete
ours, that is part of a general limitations statute. The courts   manipulation of legislative intent.
thus viewed the limitations as a condition upon the right,
not merely the remedy, subject to strict construction in               The second asserted basis for the decision today is its
derogation of the common law. No such interpretation is           refusal to extend constitutional protection to a cause of
applicable in this state. Because the Texas statutes              action for wrongful death which it conveniently
concerning wrongful death and limitations are separate, the       pigeonholes as "wholly statutory." Because it is claimed
latter is procedural rather than a substantive qualification or   that the "open courts" provision of article I, section 13 of
condition restricting the right to bring an action for death.     the Texas Constitution protects only common-law causes of
Franco v. Allstate Ins. Co., 505 S.W.2d 789, 792-93               action, the court concludes that it is powerless to review a
(Tex.1974).                                                       restriction on the exercise of a statutory wrongful death
                                                                  action. This conclusion is based on two flawed assumptions.
     An approach far superior to that taken by today's
opinion is contained in Hanebuth v. Bell Helicopter                    First, the distinction between common law and
International, 694 P.2d 143, 144 (Alaska 1984). In                statutory causes of action for purposes of review under the
considering                                                       "open courts" provision is more honored in the breach than
                                                                  the observance. LeCroy v. Hanlon, 713 S.W.2d 335
Page 362                                                          (Tex.1986), authored by Justice Spears, is a prime example.
                                                                  There this court struck as unconstitutional under the "open
a requirement that a wrongful death action be "commenced          courts" provision a filing fee that went to state general
within two years after the death," that court's considerations    revenues. The effect of the fee with respect to the individual
tracked the same concerns delineated under Texas law.             plaintiff in that case was to bar his filing of suit under the
Echoing Nelson, the Alaskan court applied the discovery           Texas Deceptive Trade Practices Act and the Texas
rule to comport with principles of "fundamental fairness," to     Insurance Code, i.e., wholly statutory causes of action. 713
be "consistent with the purposes of the act," and to avoid        S.W.2d at 336. For reasons indiscernible, the court in
"unjust and absurd results." 694 P.2d at 146. The court said      LeCroy was not troubled by today's controlling distinction
it was "profoundly unfair to deprive a litigant of his right to   between common law and statutory causes of action. Yet
bring a lawsuit before he has any reasonable opportunity to       the failure to apply the discovery rule so as to prohibit
do so." Id. at 147. Further, "a tortfeasor whose conduct has      completely a family's exercise of its legal rights closes the
been so grievous as to cause death would be exonerated,           door to the Texas courts far more permanently than
while another tortfeasor, guilty of the same conduct except       charging the extra forty dollar filing fee rejected in LeCroy.
for the fortuity that it merely caused injury, would be held      The constitutional guarantee that "[a]ll courts shall be open"
responsible." Id. [9] The reasoning of today's opinion in         to "every person" is a hollow one to families like the
rejecting Hanebuth is insightful. One who is only maimed,         Morenos and the Sloans.
we are told at note 5, may be "in need of time to recover
before beginning an investigation." Why shouldn't parents             Second, this injustice cannot simply be defined away
whose child has been wrongfully taken from them be in             by claiming a wrongful death action is "wholly statutory."
need of time to recover and discover as well? Solely              While a
because an insensitive court refuses Texas families that
right.                                                            Page 363

    The statute before us for interpretation contains only        wrongful death action may have once been considered a
two sentences:                                                    creature of statute, it has evolved into a complex
                                                                  hybrid--part constitutional, part statutory and part
A person must bring suit not later than two years after the       judicially-developed common law. An early decision of this
day the cause of action accrues for injury resulting in death.    court recognized the multi-faceted nature of a wrongful
death action. While noting the statutory nature of the action,   S.W.2d 409, 410 (1934), the issue presented was whether
this court nonetheless stated:                                   the plaintiffs in a death action covered by the worker's
                                                                 compensation statute were first required to present a claim
In our own state, this right of action is wisely recognized by   for exemplary damages to the Industrial Accident Board
the organic law, supplemented by guarded legislative             prior to recovery in court. This court stated:
provisions enacted for the purposes of securing to the
beneficiaries just compensation in a case meriting it....        We agree with the Court of Civil Appeals that the district
                                                                 court had original jurisdiction, without the presentation of
    Nelson v. Galveston, H. & S.A. Ry., 78 Tex. 621, 624,        the claim for exemplary damages to the Industrial Accident
14 S.W. 1021, 1022 (1890) (emphasis supplied). [10]              Board. The cause of action here asserted is one given by the
                                                                 Constitution, and the Legislature was without power to add
      Even the most cursory examination of the history of the    to or take from the conditions under which, by virtue of the
Texas Wrongful Death Act reveals its tripartite nature. As       Constitution, it could be maintained, nor did it attempt to do
first adopted in Texas in 1860, the statute was a mere four      so.
paragraphs in length, setting out the beneficiaries, the
potential defendants (basically providers of public 70 S.W.2d at 410. A similar unconditional analysis was
transport) and the basis of the cause of action (negligence or   employed in Hanks v. City of Port Arthur, 121 Tex. 202, 48
carelessness), permitting the recovery of damages and            S.W.2d 944 (1932), a case cited with frequency in today's
requiring suit to be brought within one year after death.        opinion. Port Arthur's attempt to preclude liability through
Law of February 2, 1860, ch. 35, 1860 Tex.Gen.Laws 32.           its municipal charter by requiring it be notified of a
While the statute has been amended several times over the        defective condition prior to the occurrence of an injury was
last 129 years, primarily to expand the class of potential       held unconstitutional under both the "open courts"
defendants and to permit recovery of exemplary damages, it       provision, article I, section 13 of the Texas Constitution,
remains a "bare bones" enactment. Over that lengthy time         and article I, section 17, guaranteeing just compensation for
period, many interstices of the statute have been left to the    a taking of property for public use. 121 Tex. at 206, 48
courts to fill, relying on common-law concepts. [11] In fact,    S.W.2d at 945. In examining the question of whether the
writing for the court in Sanchez v. Schindler, 651 S.W.2d        charter could condition the constitutional right to bring suit
249, 252 (Tex.1983), Justice Spears indicated a strong           for compensation, this court stated:
preference for this judicial development of the wrongful
death statute. Because of the symbiotic relationship                 The Constitution admits of no such limitation.
between the common law and statute, an action for
wrongful death merits review under the "open courts"             When a city violates the Constitution to the damage or
provision of article I, section 13 of the Texas Constitution.    injury of a complaining party, a constitutional cause of
Labelling this action "statutory" rather than engaging in        action arises, and the Legislature is powerless to make
thoughtful analysis provides a convenient escape                 provision for a notice of the type here involved. The
mechanism from the Houdini-defying task of reconciling           Constitution, sec. 17, art. 1, having fixed the method by
this opinion with Nelson v. Krusen.                              which a city may take or damage private property without
                                                                 liability for tort, the constitutional method is exclusive, and
     A cause of action for wrongful death is also in part        the Legislature is without power to prescribe any other
constitutionally given. As initially adopted, the Texas          method to accomplish the same purpose.
Wrongful Death Act made no provision for exemplary
damages. To correct this omission, the Texas Constitution 121 Tex. at 208, 48 S.W.2d at 946 (emphasis supplied).
of 1869 included a provision permitting recovery of              The court is content to ignore this well-entrenched principle
exemplary damages for "homicide, through wilful act, or          of constitutional law. [12]
omission." Tex.Const. art. XVI, § 26, interp. commentary
(Vernon 1955). The provision was amended in 1879 to                   An exercise in somnambulism, today's opinion merely
expand the grounds for recovery to include "gross neglect."      sleepwalks through the law, reciting the rule that there was
Id.; see also Demarest, The History of Punitive Damages in       no cause of action for death at common law but not
Texas, 28 S.Tex.L.J. 535, 540 (1987).                            engaging in conscious thought. Of the five cases cited as
                                                                 authority for the proposition that there was no action for
    This constitutional right may not be legislatively           death at common law, not one of them engages in any
abolished or restricted. In Morton Salt Co. v. Wells, 123        in-depth analysis. Only two reference the rule's origin as
Tex. 151, 70                                                     dictum in Lord Ellenborough's decision in Baker v. Bolton
                                                                 in England in 1808. Marmon v. Mustang Aviation, Inc., 430
Page 364 S.W.2d 182, 184 n. 4 (Tex.1968); Galveston, H. & S.A. Ry.
                                                                 v. Le Gierse, 51 Tex. 189, 198-99 (1879). One commentator
has described the rule as "a magical intoned incantation            common law prohibition and soundly rejected them all. The
recited by rote," followed by courts without analysis of the        first, deemed the "sole substantial basis," is the
validity of its historical origins or current applicability. S.     felony-merger doctrine:
Speiser, Recovery for Wrongful Death 2d §§ 1:1 and 1:5
(1975). That criticism accurately describes today's opinion         According to this doctrine, the common law did not allow
and the precedent it cites.                                         civil recovery for an act that constituted both a tort and a
                                                                    felony. The tort was treated as less important than the
      A hard look at this common-law prohibition reveals            offense against the Crown, and was merged into, or
that it lacks any rational basis and should not be blindly          pre-empted by, the felony. The doctrine found practical
followed by this court. The Baker v. Bolton case was a nisi         justification in the fact that the punishment for the felony
prius case (i.e., a case tried in the local court before a single   was the death of the felon and the forfeiture of his property
judge rather than en banc in the superior court at                  to the Crown; thus, after the crime had been punished,
Westminster) without authority or supporting reasoning for          nothing remained of the felon or his property on which to
its statement that the common law barred redress for a fatal        base a civil action.
injury. Moragne v. States Marine Lines, Inc., 398 U.S. 375,
382-83, 90 S. Ct. 1772, 1778-79, 26 L.Ed.2d                          Page 366

Page 365                                                                 Moragne, 398 U.S. at 381, 90 S.Ct. at 1778 (citations
                                                                    omitted); see also Le Gierse, 51 Tex. at 198-99. The
339 (1970). [13] Contrary to the importance it later                Moragne opinion rejected the applicability of this historical
achieved, the decision in Baker v. Bolton went unnoticed by         justification in the United States, noting that American law
the English courts until 1873. [14] See Malone, The                 never recognized forfeiture of property as felony
Genesis of Wrongful Death, 17 Stan.L.Rev. 1043, 1059                punishment. Moragne, 398 U.S. at 384, 90 S.Ct. at 1779.
(1965). In fact, the first court anywhere to treat it as            Texas law is in accord; the early laws of the Republic of
precedent was an American one, Carey v. Berkshire R.R.,             Texas do not appear to recognize forfeiture, and this
55 Mass. (1 Cush.) 475, 48 Am.Dec. 616 (1848), some 40              sanction was expressly barred by the Texas Constitution of
years after Baker v. Bolton was decided. [15] During that           1876. Tex. Const. art. I, § 21.
interval, there was no reported opinion denying a wrongful
death claim in this country, while several early decisions               The second basis for the rule reviewed in Moragne is
expressly recognized such a common-law action. Malone,              the asserted difficulty of computing damages because of a
The Genesis of Wrongful Death, supra, at 1066-67; Crofs v.          "repugnance ... to setting a price upon human life."
Guthery, 2 Root 90, 1 Am.Dec. 61 (Conn.1794); Ford v.               Moragne, 398 U.S. at 385, 90 S.Ct. at 1779 (citations
Monroe, 20 Wend. 210 (N.Y.Sup.Ct.1838); James v.                    omitted). Recognizing that damages are regularly
Christy, 18 Mo. 162 (1853).                                         determined in statutory wrongful death actions and such
                                                                    calculation poses no greater difficulty than awarding
     This historical timeline suggests that the English             damages for nonfatal injuries, the Court found this basis of
common-law prohibition was never truly part of the                  the rule unpersuasive. The third basis is the ancient
common law of Texas. In 1840, the Congress of the                   common-law rule that a personal cause of action did not
Republic of Texas enacted a law which adopted the                   survive the death of its possessor. The Court noted that rule
common law of England to the extent consistent with the             applies only to the victim's personal claims and has no
Constitution and laws of this state. This law has been              bearing on whether a dependent should be permitted
interpreted by this court to mean the common law of                 recovery for the injury he suffers because of the victim's
England as "declared by the courts of the different states of       death. Id. at 385, 90 S. Ct. at 1779. The Court then
the United States." Grigsby v. Reib, 105 Tex. 597, 600, 153         concluded that:
S.W. 1124, 1125 (1913) (emphasis supplied). As discussed
above, in 1840 the American courts recognized a                     The American courts never made the inquiry whether this
common-law action for wrongful death.                               particular English rule, bitterly criticized in England, "was
                                                                    applicable to their situation," and it is difficult to imagine
    Building on virtually universal commentary critical of          on what basis they might have concluded that it was.
the English common-law rule barring actions for wrongful
death [16] and the questionable historical basis for the rule's         Id. at 386, 90 S.Ct. at 1780. [17]
adoption, the United States Supreme Court in the landmark
Moragne decision recognized a common law action for                      The Moragne decision noted the prevalence of statutes
wrongful death in maritime cases. Writing for the                   permitting recovery for wrongful death, adopted in all fifty
unanimous court, Justice Harlan engaged in a scholarly              states and by numerous federal statutes, and concluded:
examination of the three asserted justifications of the
                                                                        These numerous and broadly applicable statutes, taken
as a whole, make it clear that there is no present public        this case; nor has the Fifth Circuit requested that we address
policy against allowing recovery for wrongful death. The         this issue. The doctrine of fraudulent concealment provides
statutes evidence a wide rejection by the legislatures of        that where a defendant is under a duty to make disclosure
whatever justifications may have once existed for a general      but fraudulently conceals the existence of a cause of action
refusal to allow such recovery.... The policy thus               from the party to whom it belongs, the defendant is
established has become itself a part of our law, to be given     estopped from relying on the defense of limitations until the
its appropriate weight not only in matters of statutory          party learns of the right of action or should have learned
construction but also those of decisional law.                   thereof through the exercise of reasonable diligence.
                                                                 Borderlon v. Peck, 661 S.W.2d 907, 908 (Tex.1983).
398 U.S. at 390-91, 90 S.Ct. at 1782. [18] Although         Because the question of the doctrine's applicability in the
this analysis in Moragne was employed in an opinion by           present case is not properly before us, we express no
Justice Spears to justify extending comparative causation to     opinion on the issue.
a products liability action, Duncan v. Cessna Aircraft Co.,
665 S.W.2d 414, 427 (Tex.1984), today Moragne is                 [2] A number of other states construing absolute statutes
curiously limited to its facts.                                  with similar or identical language to that found in section
                                                                 16.003(b) have held that the clear language of the statute
     The facts of the case before us differ vastly from the      precluded application of the discovery rule. See, e.g.,
stagecoach and railway accidents for which, over a century       Trimper v. Porter-Hayden, 305 Md. 31, 501 A.2d 446, 449
ago, the scope of the wrongful death statute was originally      (1985) (clear language of statute could not be rewritten
envisioned. We are in an age of more insidious, less             under the "guise of statutory construction"); Presslaff v.
obvious causes of death, many of which are simply not            Robins, 168 N.J.Super. 543, 403 A.2d 939, 941
discoverable within the two-year limitations period. Thus,       (App.Div.1979) ("The court may not strain on policy
not simply the occasional family, but an entire class of         grounds to manufacture a signification of the statutory
families will be deprived of their claims by the court's         language to achieve a result obviously not intended by the
decision. This deprivation cannot be justified on the            legislature and in direct conflict with the unequivocal
traditional ground that these victims "slept on their rights,"   proscription in [the statute]."); Morano v. St. Francis
because they could not have been aware of the basis of their     Hospital, 100 Misc. 2d 621, 420 N.Y.S.2d 92, 95
cause of action until after their claims were barred. The        (N.Y.Sup.Ct.1979) ("The language leaves no room for
opinion thus defies the very purpose of the discovery            judicial construction and there are no statutory spaces to be
rule--to prevent legislation from merely affording "a            filled."); Cadieux v. International Tel. & Tel. Corp., 593
delusive remedy." Urie v. Thompson, 337 U.S. 163, 169, 69 F.2d 142, 144 (1st Cir.1979) (applying Rhode Island law)
S.Ct. 1018, 1024, 93 L. Ed. 1282 (1949).                          ("date of death" cannot be construed to mean "date of
                                                                 discovery of the cause of death").
Page 367
                                                                 [3] This is the exact position taken by the court in Stiles v.
     The court's opinion can rightly be recorded as one of       Union Carbide Corp., 520 F. Supp. 865, 867 (S.D.Tex.1981)
the most anti-family decisions in recent memory. It says to      ("When the legislature has clearly and unequivocally
a wife who has lost a husband, to a child who has lost its       prescribed that a cause of action accrues on the occurrence
parents, to the parents whose lives have been torn apart by      of a specified event," the courts have neither the necessity
the death of a child, your rights are denied; the merits of      nor the authority to invoke the discovery rule.). A good
your claim against a hidden killer will never be considered      argument can be made that the legislature has adopted this
by a Texas judge and jury. [19]                                  interpretation by recodifying the statute in 1985 without
                                                                 adding any substantive changes. See Cunningham v.
     The goose is fattened and the table set, compliments of
                                                                 Cunningham, 120 Tex. 491, 40 S.W.2d 46, 51 (1931)
today's opinion. Pull up a chair, tortfeasors, and dine on
                                                                 ("Nothing is better settled than that the legislature must be
pate de foie gras. You have been absolved from the
                                                                 regarded as intending statutes, when repeatedly re-enacted,
infliction of lethal wounds, at least in the forum of the
                                                                 ... to be given that interpretation which has been settled by
Texas courts. I dissent.
                                                                 the courts.").
     RAY and MAUZY, JJ., join in this dissent.
                                                                 [4] See, e.g., With v. General Electric Co., 653 P.2d 764
---------                                                        (Colo.App.1982); Farmers Bank & Trust Co. of Bardstown
                                                                 v. Rice, 674 S.W.2d 510, 512 (Ky.1984); Trimper v.
Notes:                                                           Porter-Hayden, 305 Md. 31, 501 A.2d 446, 449 (1985);
                                                                 Szlinis v. Moulded Fiber Glass Cos., 80 Mich.App. 55, 263
[1] Moreno has not argued that the doctrine of fraudulent        N.W.2d 282 (1977); DeCosse v. Armstrong Cork Co., 319
concealment operates to toll the running of limitations in       N.W.2d 45 (Minn.1982); Morano v. St. Francis Hospital,
100 Misc. 2d 621, 420 N.Y.S.2d 92, 95 (N.Y.Sup.Ct.1979);           Moreover, the dissent's argument that the Morenos were
Cadieux v. Inter. Tel. & Tel. Corp., 593 F.2d 142, 144 (1st       unaware of their ability to assert a cause of action is
Cir.1979) (applying Rhode Island law); Presslaff v. Robins,       undermined by the fact that the Morenos, after receiving
168 N.J.Super. 543, 403 A.2d 939, 942 (App.Div.1979);             presumptive certificates of death describing Reye's
Anthony v. Koppers, 436 A.2d 181, 183 (1981); Pastierik v.        syndrome as the cause of death, hired a "medical expert"
Duquesne Light Co., 514 Pa. 517, 526 A.2d 323 (1987);             who reviewed the file and determined that no medical
White v. Johns-Manville Corp., 103 Wash.2d 344, 693 P.2d          malpractice had occurred. Faced with similar facts, the
687, 692 (1985); see also W. Keeton, D. Dobbs, R. Keeton          United States Supreme Court denied relief to a tardy
& D. Owen, Prosser and Keeton on the Law of Torts § 127,          plaintiff under the Federal Torts Claim Act, stating:
at 957 (5th ed. 1984) (noting that majority rule is that
limitations in wrongful death actions begin to run on date of     If [the plaintiff] fails to bring suit because he is
death and that courts have rejected applying discovery rule       incompetently or mistakenly told that he does not have a
to wrongful death actions).                                       case, we discern no sound reason for visiting the
                                                                  consequences of such error on the defendant by delaying
[5] The few cases relied on by the Hanebuth majority are          the accrual of the claim until the plaintiff is otherwise
distinguishable. See Hanebuth, 694 P.2d at 147. In                informed or himself determines to bring suit, even though
Frederick v. Calbio Pharmaceuticals, 89 Cal. App. 3d 49, 152        more than two years have passed from the plaintiff's
Cal.Rptr. 292 (1979), the court was interpreting an               discovery of the relevant facts about injury.
"accrual" statute and not an "absolute" statute like §
16.003(b). In Myers v. McDonald, 635 P.2d 84 (Utah                United States v. Kubrick, 444 U.S. 111, 100 S. Ct. 352, 62
1981), the plaintiff did not become aware of the decedent's       L.Ed.2d 259 (1979).
death until 3 years after it had occurred, whereas in the
present case death was known immediately. Indeed, the             [7] The common-law not only "denied a tort recovery for
Myers court expressly distinguished its decision from other       injury once the tort victim had died, it also refused to
decisions holding that limitations begin to run when the fact     recognize any new and independent cause of action in the
of death is known even if its cause is not. The decision in       victim's dependents or heirs for their own loss at his death."
Shaughnessy v. Spray, 55 Or.App. 42, 637 P.2d 182 (1981)          W. Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and
provides no support because that case was interpreting a          Keeton on the Law of Torts § 127, at 945 (5th ed. 1984).
statute which required an action to be commenced within 3         (citations omitted). This rule denying a common-law right
years after the occurrence "of the injury causing the death,"     to assert a wrongful death action was confirmed in Baker v.
rather than within 2 years after "death." Finally, it is not so   Bolton, 1 Camp. 493, 170 Eng. Reprint 1033 (1808). In
clear that the discovery rule applies to the Illinois absolute    response to Baker, the English Parliament, in 1846, enacted
statute; the Hanebuth majority omitted cases which have           "an Act for Compensating the Families of Persons Killed by
held that it does not, see Greenock v. Rush Presbyterian St.      Accident," otherwise known as Lord Campbell's Act. 9 &
Luke's Med. Center, 65 Ill.App.3d 266, 22 Ill. Dec. 1, 3, 382      10 Vict., ch. 93 § 2 (1846). See Witty v. American General
N.E.2d 321, 323 (1978), and the Illinois Supreme Court has        Distrib., Inc., 727 S.W.2d 503, 504 (Tex.1987) ("Prior the
not yet resolved the conflict.                                    passage of Lord Campbell's Act, there was no statutory or
                                                                  common-law cause of action for wrongful death.") This
[6] The Hanebuth decision concludes that it is "absurd" and       statute served as the pattern for Texas' first wrongful death
arbitrary to only allow application of the discovery rule in      statute, enacted in 1860. Tex.Gen.Laws 32; March v.
personal injury cases, and not in wrongful death actions.         Walker, 48 Tex. 372, 375 (1877); Sanchez v. Schindler, 651
Yet, application of the discovery rule in personal injury         S.W.2d 249, 251 (Tex.1983).
cases is reasonable because the live plaintiff may either be
unaware of an injury at the time of its occurrence, or in         [8] The dissent attempts to establish that Texas recognizes a
need of time to recover before beginning an investigation.        common law action for wrongful death despite the fact that
Neither of these considerations, however, are present in          every reported Texas decision considering the issue has
wrongful death actions because survivors are put on               held otherwise. For support, the dissent cites commentary
immediate notice by the event of death that an investigation      and cases from other jurisdictions which argue that a
into the cause of action must occur to preserve the claim.        wrongful death action should be recognized in the common
This definitive notice is what differentiates wrongful death      law, and not that it was. The dissent also argues that Texas,
and survival actions from personal injury actions. By             in 1840, implicitly adopted two cases from other
disallowing application of the discovery rule to § 16.003(b),     jurisdictions which recognized the common-law right to
our opinion recognizes this distinction and effectuates the       assert a wrongful death action. See Crofs v. Guthery, 2 Root
state interest in the prompt settlement of a decedent's           90, 1 Am.Dec. 61 (Conn.1794); Ford v. Monroe, 20 Wend.
affairs. See Pastierik v. Duquesne Light Co., 514 Pa. 517,        210 (N.Y.Sup.Ct.1838). Crofs was decided fourteen years
526 A.2d 323 (1987); Cadieux, 593 F.2d at 144-45.                 prior to Baker v. Bolton and "could not withstand the
greater weight" of the latter decision, Green, The Texas        Tex.Const.Ann. art. 16, § 26 (Vernon 1955). The dissent
Death Act, 26 Tex.L.Rev. 133, 136 n. 9 (1947), and Ford         suggests that § 16.003(b) unduly restricts this constitutional
apparently recognized the action without comment. Neither       right to exemplary damages by placing an "impossible
Crofs nor Ford, however, was mentioned in Carey v.              condition" upon the assertion of the underlying statutory
Berkshire R.R., 55 Mass. (1 Cush.) 475, 48 Am.Dec. 616          wrongful death action, and, therefore, it is unconstitutional,
(1848), where a leading American jurisdiction, the Supreme      or, at the very least, subject to an "open courts" challenge.
Judicial Court of Massachusetts, confirmed the rule set out     This argument fails for two separate reasons.
in Baker v. Bolton (and universally accepted law ever
since) that no action existed at common law for wrongful        First, as parents of a deceased child, the Morenos have no
death. See W. Malone, The Genesis of Wrongful Death, 17         constitutional right to recover exemplary damages under
Stanford L.Rev. 1043, 1066-68 (1965). Finally, the dissent's    art. 16, § 26. See Hofer v. Lavender, 679 S.W.2d 470, 475
argument does not answer the question of why the Texas          (Tex.1984) (Supreme Court has consistently held that class
Legislature would find it necessary to pass a wrongful death    of beneficiaries listed in art. 16, § 26 does not include
act in 1860 if there already was in existence a Texas           parents of deceased child). Indeed, even if this court (or the
common-law right to assert such an action. The dissent's        legislature) wanted to broaden the class of persons entitled
approach would suggest that the 1860 act was superfluous.       to recover exemplary damages to include parents of
On the contrary, the 1860 act was designed to fulfill the       deceased children, we would be without authority to do so.
same purpose as Lord Campbell's act: "... to fill the gap in    Id.; see also Scoggins v. Southwestern Electric Service Co.,
the common law which had been created by the failure of         434 S.W.2d 376 (Tex.Civ.App.--Tyler 1968, writ ref'd
the courts ... to provide a remedy for injuries resulting in    n.r.e.) (holding that provision in Wrongful Death Act that
death." Green, The Texas Death Act, 26 Tex.L.R. 133, 136        allowed parents to recover exemplary damages was invalid
(1947).                                                         under art. 16, § 26, since legislature could not enlarge on
                                                                exemplary damages).
[9] The dissent proposes not only that the discovery rule
should apply to § 16.003(b), but also that the rule should      Second, the question of whether § 16.003(b) would operate
operate to toll limitations until a plaintiff discovers a       in other cases to unduly restrict the constitutional right to
specific cause of action against a specific defendant. More     exemplary damages is not properly before this court
specifically, the dissent proposes that courts allow wrongful   because the second certified question only asks whether §
death claims to be maintained whenever new scientific           16.003(b) "as applied to the plaintiffs herein violate[s] the
evidence links a particular disease with exposure to a          open courts provision...." Since it cannot be shown that
particular substance, even though the death had occurred        16.003(b) violates Moreno's rights under art. 16, § 26, the
years, or even decades, earlier. This approach, however,        statute's application to other plaintiffs in other cases is,
would effectively "expand ... to infinity the time period       according to the terms of the certified question, irrelevant.
during which wrongful death actions could be brought."          Moreover, this court has repeatedly reaffirmed the rule that
Pastierik, 526 A.2d at 325. No cause of action would ever       if a plaintiff cannot prove the unconstitutionality of a
accrue until the plaintiff learned or should have learned of    limitations statute as applied to him, the statute will not be
that specific cause of action, and no case would be             struck down merely because it might operate in an
concluded until every potential cause of action was             unconstitutional manner in another case. See Morrison v.
discovered. This approach is also questionable from a           Chan, 699 S.W.2d 205, 207 (Tex.1985); Nelson v. Krusen,
public policy standpoint. It is hardly in the public interest   678 S.W.2d 918, 923 (Tex.1984).
"to encourage, literally, the unearthing of wrongful death
causes of action long after death has occurred because there    [1] Relying upon facts taken from the summary judgment
is some suspicion that death was caused by a wrongful act."     record of the federal district court, rather than those
DeCosse, 319 N.W.2d at 52.                                      certified by the Fifth Circuit, the court asserts at footnote 6
                                                                that even if the discovery rule were applied, the Petitioners'
[10] Art. 16, § 26 of the Texas Constitution provides as        wrongful death actions would still be barred by limitations.
follows:                                                        If that analysis were correct, the proper disposition of this
                                                                case would be to return the certified questions to the Fifth
Every person, corporation, or company, that may commit a        Circuit unanswered. Further, the court ignores an affidavit
homicide, through wilful act, or omission, or gross neglect,    stating that, although the ability to bring suit for medical
shall be responsible, in exemplary damages, to the              malpractice against the doctors and the hospitals treating the
surviving husband, widow, heirs of his or her body, or such     infant children was investigated and found wanting, no
of them as there may be, without regard to any criminal         investigation of the possibility of a link between the use of
proceeding that may or may not be had in relation to the        aspirin and Reye's Syndrome (which would serve as a basis
homicide.                                                       of a products liability action) was made at that time.
                                                                Moreno Record 284-85; Sloan Record 62-63. The facts of
this case are not similar to those in United States v.           that interpretation. While the legislature may indeed adopt a
Kubrick, 444 U.S. 111, 100 S. Ct. 352, 62 L. Ed. 2d 259             judicial interpretation by reenacting a statute, see Robinson
(1979), as the opinion states. In Kubrick, the Court held that   v. Central Texas MHMR Center, 780 S.W.2d 169, 170-71
the statute of limitations began to run when the plaintiff had   (Tex.1989), that interpretation must be by a court of last
knowledge of the injury and its causative link to use of a       resort. See Texas Employer's Ins. Ass'n v. Lightfoot, 139
particular drug.                                                 Tex. 304, 162 S.W.2d 929 (1942). Cunningham v.
                                                                 Cunningham, 120 Tex. 491, 40 S.W.2d 46, 51 (1931), cited
[2] The opinion cites RepublicBank Dallas, N.A. v.               in the opinion refers to an "interpretation which has been
Interkal, Inc., 691 S.W.2d 605, 607 (Tex.1985), for the          settled by the courts." The fact that this question has been
proposition that rules of statutory construction may not be      certified to this court by the Fifth Circuit indicates that there
applied when a statute is unambiguous. That case stands in       is no well-settled interpretation by the Texas courts.
clear conflict with the dictates of the Code Construction
Act, quoted above. Interkal, however, involved                   [5] This situation is fundamentally different from that
interpretation of a statute and not a code provision to which    presented to the court today in Dow Chemical Co. v.
the Code Construction Act is applicable. 691 S.W.2d at 607       Alfaro, 786 S.W.2d 674 (Tex.1990). Unlike the discovery
n. 1. Nor did the court in Cail v. Service Motors, Inc., 660     rule, the concept underlying the doctrine of forum non
S.W.2d 814 (Tex.1983), consider the effect of the Code           conveniens was in existence and being applied on the date
Construction Act.                                                the statute was enacted. That this old concept later acquired
                                                                 a new label--"forum non conveniens"--did not affect the
[3] Further, "[t]his court has always endeavored to interpret    original legislative action in abolishing it.
the laws of Texas to avoid inequity." Sanchez v. Schindler,
651 S.W.2d 249, 252 (Tex.1983) (opinion construing               [6] The court miscomprehends this argument. The question
Wrongful Death Act by Spears, J.).                               is not whether the doctrine of fraudulent concealment
                                                                 applies to the facts of this case. Rather, the question is
[4] That act provided: "The action shall be brought within       whether statutes of limitations labelled "absolute" are
one year after the death of the deceased." Law of February       subject to common-law tolling principles such as the
2, 1860, ch. 35, § 3, 1860 Tex.Gen.Laws 33. The limitations      doctrine of fraudulent concealment and the discovery rule.
provision was subsequently moved from the wrongful death         Our decisions in Borderlon and Gay indicate that they are.
act to be included as part of a general limitations statute.
Tex.Rev.Civ.Stat.Ann. art. 3202 (Vernon 1879) provided:          [7] See also Gaddis v. Smith, 417 S.W.2d 577, 581
"There shall be commenced and prosecuted within one year         (Tex.1967) (discovery of the "wrongful act" triggers
after the cause of action shall have accrued ...: 4. Actions     limitations); Neagle v. Nelson, 685 S.W.2d 11, 12
for injuries done to the person of another where death           (Tex.1985) (discovery of the "wrong"). The cases cited in
ensued from such injuries; and the cause of action shall be      the court's opinion addressed factual situations where the
considered as having accrued at the death of the party           plaintiff was aware of both the injury and its cause. See,
injured." See also Tex.Rev.Civ.Stat.Ann. art. 3353 (same         e.g., Coody v. A.H. Robins Co., 696 S.W.2d 154, 156
language). The time for bringing an action for death was         (Tex.App.--San Antonio 1985, no writ) (stating that
later expanded to two years. Law of March 4, 1897, ch. 14,       plaintiff learned of injury and its cause simultaneously);
§ 1, 1897 Tex.Gen.Laws 12. Other than replacing the plural       Otis v. Scientific Atlanta, Inc., 612 S.W.2d 665, 666
"injuries" with the singular "injury," the accrual language      (Tex.Civ.App.--Dallas 1981, writ ref'd n.r.e.) (plaintiffs do
was unchanged. The statute was amended in 1979 to delete         not assert that they did not know the cause of their injury).
the two-year limitations period for actions for debts and
accounts, but the limitations provision for a wrongful death     [8] In Willis, we concluded that "any burden placed upon
action was not changed. Act of June 13, 1979, ch. 716, § 1,      an attorney by application of the discovery rule is less
1979        Tex.Gen.Laws         1768-69;      see       also    onerous than the injustice of denying relief to unknowing
Tex.Rev.Civ.Stat.Ann. art. 5526 (Vernon 1958) (repealed          victims." 760 S.W.2d at 646. Yet the injury worked in that
1985). The statute was repealed and codified, with no            case was much less severe than the deaths that occurred
substantive change intended, as part of the Texas Civil          here allegedly due to distributing a dangerous
Practice and Remedies Code. Act of June 16, 1985, ch. 959,       pharmaceutical product to the Texas public. Surely the
§§ 1 (new provision), 9 (repealer), and 10 (no substantive       burden placed upon the drug manufacturer is equally less
change intended).                                                onerous than the injustice of denying relief to unknowing
                                                                 families, like the Morenos and the Sloans, whose children
The court asserts that this reenactment and codification after   have died.
the decision of Stiles v. Union Carbide Corp., 520 F. Supp.
865 (S.D.Tex.1981), refusing to apply the discovery rule in      [9] A similar result has been reached as to an Illinois statute
a wrongful death action, worked a legislative adoption of        requiring that actions be commenced within two years after
death. See Eisenmann v. Cantor Brothers, Inc., 567 F.Supp.        [13] One commentator has pointed out that Baker v. Bolton
1347 (N.D.Ill.1983) (to deny application of discovery rule        was not extensively argued, that the reported opinion is
would produce absurd result); Matter of Johns-Manville            very brief and that the controversial rule was "laid down
Asbestosis Cases, 511 F. Supp. 1235 (N.D.Ill.1981); Fure v.        without either sustaining reasoning or supporting
Sherman Hospital, 64 Ill.App.3d 259, 21 Ill. Dec. 50, 380          authority." S. Speiser, Recovery for Wrongful Death 2d §
N.E.2d 1376 (1978); Praznik v. Sport Aero, Inc., 42               1:2 (1975); see also Smedley, Wrongful Death--Bases of
Ill.App.3d 330, 355 N.E.2d 686 (1976).                            the Common Law Rule, 13 Vand.L.Rev. 605 (1960)
                                                                  (concluding the case was wrongly decided as well as
[10] A number of our sister states have recognized this           overbroad). Even Dean Prosser has condemned the trial
hybridization to permit application of common-law                 judge in Baker v. Bolton, stating that Lord Ellenborough's
principles in a wrongful death action. See, e.g.,                 "forte was never common sense." W. Prosser, Law of Torts
Summerfield v. Superior Court, 144 Ariz. 467, 698 P.2d            § 127 (4th ed. 1971).
712, 718 (1985) (en banc) (the wrongful death "statute and
precedent have combined to produce a cause of action with         [14] This rule never even made it as far as Scotland; that
common law attributes"); Hanebuth v. Bell Helicopter Int'l,       country recognized a common-law action for wrongful
694 P.2d 143, 146 (Alaska 1984) (wrongful death statute           death. Moragne, supra, 398 U.S. at 398 n. 13, 90 S.Ct. at
treated like other common law tort actions, finding               1786 n. 13.
discovery rule applies to "absolute" statute of limitations);
O'Grady v. Brown, 654 S.W.2d 904, 908, 911 (Mo.1983)              [15] The Carey case was subsequently overruled by the
(en banc) (wrongful death statute "mends the fabric of the        Massachusetts Supreme Court in Gaudette v. Webb, 362
common law" and incorporates common law principles);              Mass. 60, 284 N.E.2d 222, 229 (1972).
Haakanson v. Wakefield Seafoods, Inc., 600 P.2d 1087,
1091-92 (Alaska 1979) (no legislative intent to treat             [16] The common-law prohibition against maintaining an
wrongful death action different from other common law tort        action for wrongful death has been universally denounced
actions, thus limitations statute tolled for minors); Gaudette    by commentators as having no logical or historical basis
v. Webb, 362 Mass. 60, 284 N.E.2d 222, 229-30 (1972)              and as unfairly differentiating between wrongful conduct
(declaring existence of common-law wrongful death action          resulting in mere injury and that resulting in death. See,
and tolling limitations provision for minors). See also           e.g., F. Pollock, Law of Torts 55 (Landon ed. 1951)
Restatement (Second) of Torts § 925 comment k (1979)              (terming     rule    "barbarous");     Smedley,     Wrongful
(noting trend to "allow ameliorating common-law principles        Death--Bases of the Common Law Rules, 13 Vand.L.Rev.
to apply" to wrongful death actions).                             605 (1960) (rule has outlived its usefulness); Holdsworth,
                                                                  The Origin Of the Rule in Baker v. Bolton, 12 Law Q.Rev.
[11] See, e.g., Clifton v. Southern Pacific Transp. Co., 709      431, 437 (1916) (rule cannot be justified on precedential or
S.W.2d 636, 640 (Tex.1986) (gross negligence standard of          technical grounds); F. Tiffany, Death by Wrongful Act § 12
Burk Royalty applied to wrongful death action); Yowell v.         (2d ed. 1913) ("[n]o satisfactory reason for the rule has ever
Piper Aircraft Corp., 703 S.W.2d 630, 632-33 (Tex.1986)           been suggested"); P. Keeton, Prosser and Keeton on Torts §
(loss of inheritance damages recoverable in wrongful death        125 (5th ed. 1984) (criticizing rule on basis that "it was
action); Sanchez v. Schindler, 651 S.W.2d 249, 252-54             cheaper to kill a person than to injure him").
(Tex.1983) (damages for loss of society and mental anguish
recoverable). See generally Tex.Civ.Prac. & Rem.Code              [17] The compelling logic of Moragne has given rise to
Ann. §§ 71.001-011 (Vernon 1986 and 1989 Supp.)                   state court cases that recognize in some manner a common
(extensive annotations).                                          law action for wrongful death. See, e.g., Haakanson v.
                                                                  Wakefield Seafoods, Inc., 600 P.2d 1087, 1092, n. 11
[12] The majority dismisses the problem of a conflict with        (Alaska 1979); Gaudette v. Webb, 362 Mass. 60, 284
the constitutional right to exemplary damages in a wrongful       N.E.2d 222, 229 (1972); see also Restatement (Second) of
death action on the grounds that no such damages are              Torts § 925 comment k (1979).
allowed to a parent for the death of a child. A similar
argument in Hanks was found unpersuasive:                         [18] Accord Pound, Comments on Recent Important
                                                                  Admiralty Cases, 13 NACCA L.J. 188-89 (1954) ("[t]oday
It is true that in the case before us the question of taking      we should be thinking of the death statutes as part of the
property in violation of the Constitution is not in issue, but    general law"); Panama Railroad Co. v. Rock, 266 U.S. 209,
the validity of the charter section may be raised, and, if void   216, 45 S. Ct. 58, 60, 69 L. Ed. 250 (1924) (Holmes, J.,
for any reason, it cannot be enforced in this case.               dissenting) (pervasive legislation indicates no public policy
                                                                  bar to common-law cause of action for wrongful death).
121 Tex. at 208-09, 48 S.W.2d at 947.
                                                                  [19] We have not been asked by the Fifth Circuit to answer
in this case the question of whether the statute of limitations
for wrongful death, interpreted to bar application of the
discovery rule, conflicts with our state constitutional due
process provision, article I, section 19 of the Texas
Constitution. This court in Nelson v. Krusen, while
recognizing that the due process and "open courts"
provision are not coterminous, specifically left that question
unanswered. Nelson, 678 S.W.2d at 921. Another
unexplored question is whether the legislative distinction
between the quick and the dead passes muster under article
I, section 3 of the Texas Constitution, our state guarantee of
equal protection, or the federal equivalent, U.S. Const.
amend. XIV, § 1.

---------
Page 313                                                          new trial and reinstated the judgment, less the remittitur.
                                                                  The trial court's final award to the husband against the
795 S.W.2d 313 (Tex.App. —Houston [1 Dist.] 1990)                 Stevensons was $965,300 in actual and exemplary damages.
                                                                  The Stevensons appeal from that judgment.
Donald and Rosie STEVENSON, Appellants,
                                                                  I. Deposition testimony
v.
                                                                       In their first point of error, the Stevensons claim the
Ivan KOUTZAROV, Appellee.                                         trial court erred in admitting the deposition testimony of
                                                                  three witnesses offered by the husband. The Stevensons
No. 01-89-00207-CV.
                                                                  objected to the depositions because they were not parties
                                                                  when the husband took the depositions. The Stevensons
Court of Appeals of Texas, First District, Houston
                                                                  argue they were denied their right to cross-examine the
August 23, 1990                                                   witnesses.

Page 314                                                               The Stevensons rely on Tex.R.Civ.P. 207(1)(a), which
                                                                  states in part:
[Copyrighted Material Omitted]
                                                                       At the trial ... a deposition taken in the same
Page 315                                                          proceeding, insofar as admissible under the Texas Rules of
                                                                  Civil Evidence, may be used by any person for any purpose
   Jo Ann Storey, Jacqueline Taylor, Norman Riedmuller,           against any party who was present or represented at the
Houston, for appellants.                                          taking of the deposition or who had reasonable notice
                                                                  thereof.
    Lynne Little St. Leger, John F. Nichols, Lynn S.
Kuriger, Houston, for appellee.                                       (Emphasis added.) The Stevensons cite Heldt Bros.
                                                                  Trucks      v.   Silva,      464 S.W.2d 931,     937
     ON MOTION FOR REHEARING                                      (Tex.Civ.App.--Corpus Christi 1971, no writ), Elizondo v.
                                                                  Tavarez, 596 S.W.2d 667, 670 (Tex.Civ.App.--Corpus
     O'CONNOR, Justice.
                                                                  Christi 1980, writ ref'd n.r.e.), and Couch v. Mallory, 638
S.W.2d 179, 181 (Tex.App.--Corpus Christi 1982, writ
     This suit, which arises out of a divorce action, is a suit
                                                                  dism'd), to support their interpretation of rule 207, that the
for damages by a husband against his wife's friends. We
                                                                  depositions were inadmissible against them.
reverse and remand. On motions for rehearing, we grant
appellants' motion for rehearing on point of error nine, deny
                                                                       In Heldt, a corporate defendant complained on appeal
the remainder of appellants' motion, deny appellee's motion,
                                                                  that the trial court permitted plaintiff to use depositions that
withdraw our earlier opinion, and substitute the following:
                                                                  were taken before it was joined as a party. 464 S.W.2d at
                                                                  937. The Corpus Christi Court of Appeals held that there
     Ivan Koutzarov (the husband) filed for divorce against
                                                                  was no privity between the two defendants. Further, to
Maria Arnaldina Koutzarov (the wife). In an amended
                                                                  admit the deposition into evidence would be highly
petition, the husband named Donald and Rosie Stevenson as
                                                                  prejudicial to the corporate defendant because it did not
third-party defendants. The divorce was tried to the court.
                                                                  have an opportunity to cross-examine the witness. Id. The
The case against the Stevensons was tried to a jury, which
                                                                  Heldt court said the corporate defendant should have been
awarded the husband $2,712,500 in actual and exemplary
                                                                  afforded an opportunity to cross-examine the witnesses. Id.
damages. The final judgment in the case incorporated both
the jury's verdict against the Stevensons and
                                                                       In Elizondo, plaintiff sued a doctor in April, and in
                                                                  September, took the deposition of a nurse. 596 S.W.2d at
Page 316
                                                                  670. Nine days after taking the deposition, plaintiff added
the court's findings and conclusions in the divorce action.       the hospital as a party. At trial, four years later, plaintiff
                                                                  offered the nurse's deposition. Id. at 669. When the hospital
      The Stevensons filed a motion for new trial and for a       objected, the trial court excluded the nurse's deposition
remittitur. After the trial court granted the motion for new      against the hospital. On appeal, the Corpus Christi court
trial, the husband volunteered a remittitur, which the trial      affirmed and said that plaintiff had the obligation to re-take
court accepted. The trial court then set aside the order for a    the deposition after it joined the hospital as a party to the
suit. Id. at 671. See also Couch, 638 S.W.2d at 181 (where,      were filed with the trial court on August 1, 1985. The
without details, the court restated the rule that a deposition   Stevensons were joined in January 1986, and the case was
taken before a party is joined is inadmissible against that      tried in September 1988.
party). [1]
                                                                      The husband argues that the Stevensons had
     The Texarkana Court of Appeals' application of the rule     constructive notice of the court's file because, with due
is consistent with the Corpus Christi court's interpretation.    diligence, the Stevensons could have learned of the
In Safeco Ins. Co. v. Gipson, 619 S.W.2d 275, 278                depositions on file. We do not need to reach the
(Tex.Civ.App.--Texarkana 1981, writ dism'd w.o.j.), after        constructive notice issue because the Stevensons had actual
filing suit against Ms. Phillips and her employer, a church,     notice that the depositions were on file about three months
plaintiff deposed Ms. Phillips. About a year later, plaintiff    before trial. On their attorney's billing records, he indicated
dismissed the church and added Safeco, the insurance             that his office researched the "use of deposition testimony
carrier for the                                                  before the Stevensons were parties." Also, the husband in
                                                                 his deposition on September 16, 1986, told the Stevensons
Page 317                                                         that Singer's deposition had been taken and that Connors
                                                                 was also a person with knowledge of relevant facts.
church, as a defendant. At a venue hearing, plaintiff
introduced Ms. Phillips' deposition without objection from            The Stevensons argue that they had no reason to
Safeco. On appeal, the court rejected Safeco's argument that     redepose these witnesses because the witnesses only
the deposition was hearsay because the attorney for Safeco       testified as to "confrontations, harassment, threats and
was present at Ms. Phillips' depositions, as the attorney for    surveillances." The Stevensons assert that this testimony
the church, and there was a contractual relationship between     was not relevant to any issue in the case before the
the church and its insurance carrier.                            additional causes of action were added, 10 days before trial.

     Applying the principles of these cases, we note that the        Applying rule 207(1)(c) and the cases discussed above,
husband did not re-depose the witnesses after the                we hold the Stevensons did not have an interest sufficiently
Stevensons were joined as parties to the suit; the Stevensons    similar to the wife to impose a burden on them to depose
did not have a contractual relationship with either the          the witnesses. Thus, the trial court erred in permitting the
husband or the wife; and, the Stevensons' attorney was not       husband to use the depositions.
present when the witnesses were deposed. Thus, the
Stevensons did not have an opportunity to cross-examine              We sustain point of error one.
the deponents.
                                                                 II. The rebutting witness
    The husband urges that the depositions were admissible
pursuant to Tex.R.Civ.P. 207(1)(c), which provides:                   In point of error two, the Stevensons contend the trial
                                                                 court abused its discretion when it refused to let their
If one becomes a party after the deposition is taken and has     witness, Mary Jo Spangler, testify. When the Stevensons
an interest similar to that of any party described in a. or b.   offered Spangler as a witness, the trial court ruled she could
above, the deposition is admissible against him only if he       not testify because she was not listed as a witness in
has had a reasonable opportunity, after becoming a party, to     response to discovery requests. When Spangler was offered
redepose the deponent, and has failed to exercise that           as a rebuttal witness, the court again refused to allow her to
opportunity.                                                     testify. On appeal, the Stevensons contend they offered her
                                                                 testimony to rebut the deposition testimony of the three
     (Emphasis added.) Section (1)(c) of rule 207 was added      witnesses.
in 1988, after the decisions in the above cited cases. Rule
207 now extends the admissibility of depositions to any          Page 318
party with a similar interest. The rule now charges the late
parties to redepose the witness if they have a reasonable            When a party offers a witness it did not list in its
opportunity.                                                     answers to discovery requests, the trial court should
                                                                 automatically exclude the witness. Morrow v. H.E.B., Inc.,
    The husband claims the second amended petition put           714 S.W.2d 297 (Tex.1986). It is immaterial that the
the Stevensons on notice as early as January 1986 that his       witness' testimony is offered as rebuttal. Ramos v.
claims against them were similar to his claims against the       Champlin Petroleum Co., 750 S.W.2d 873, 876-77
wife. In that pleading, the husband alleged collusion,           (Tex.App.--Corpus Christi 1988, writ denied); Walsh v.
conspiracy, and secreting funds. The husband argues that         Mullane, 725 S.W.2d 263, 264-65 (Tex.App.--Houston [1st
the Stevensons had a reasonable opportunity to redepose the      Dist.] 1986, writ ref'd n.r.e.). To escape the automatic
deponents, which they did not exercise. The depositions          sanction, the party who wants to call the unidentified
witness must show good cause why the witness was not             III. Statute of limitation
listed. Gutierrez v. Dallas Indep. School Dist., 729 S.W.2d
691, 694 (Tex.1987). The fact that a party has little or no           In point of error three, the Stevensons argue that the
use at trial for a witness' testimony will not ordinarily        trial court erred in denying their motion for judgment
excuse his failure to name the witness as a source of            notwithstanding the verdict (j.n.o.v.) and in rendering
relevant facts because the party seeking discovery may have      judgment for the husband because the causes of action for
an important use for such testimony. Walsh, 725 S.W.2d at        invasion of privacy, intentional infliction of emotional
265.                                                             distress, and conspiracy to invade privacy and inflict
                                                                 emotional distress contained in the third and fourth
     To prove good cause, the Stevensons argued to the trial     amended petitions were barred by the statute of limitations.
court that they did not name Spangler as a witness because       The Stevensons assert that these claims are all governed by
they did not know they would need Spangler until the             the two-year statute of limitations.
husband amended his pleadings, 10 days before trial. The
Stevensons also contend they could not anticipate that the           Texas Civil Practice & Remedies Code Annotated §
trial court would admit the depositions of the witnesses         16.003(a) (Vernon 1986) provides:
taken when they were not parties to the suit. For these
reasons, the Stevensons claim they did not know they             A person must bring suit for ... personal injury ... not later
needed Spangler's testimony until trial.                         than two years after the day the cause of action accrues.

     The burden was on the Stevensons to show a good                 Civil conspiracy is governed by the two-year statute of
cause for not listing Spangler as a witness. Yeldell v.          limitations. Cathey v. First City Bank of Aransas Pass, 758
Holiday Hills Retirement & Nursing Center, Inc., 701 S.W.2d 818, 821-22 (Tex.App.--Corpus
S.W.2d 243, 246-47 (Tex.1985). We hold that the
                                                                 Page 319
Stevensons proved good cause when they said they did not
list Spangler because they had no idea they needed her until     Christi 1988, writ denied). Invasion of privacy is governed
the trial court refused to strike the late amendments and        also by the two-year statute of limitations. See Covington v.
permitted the husband to use the three depositions.                                       743 S.W.2d 345,    347-48
                                                                 Houston       Post,
                                                                 (Tex.App.--Houston [14th Dist.] 1987, no writ) (held the
     We hold that, once the trial court permitted the husband
                                                                 two-year statute applicable to placing a person in a false
to use the depositions of the three witnesses, the trial court
                                                                 light); Wood v. Hustler Magazine, Inc., 736 F.2d 1084,
abused its discretion when it refused to permit the
                                                                 1087 (5th Cir.1984), cert. denied, 469 U.S. 1107, 105 S.Ct.
Stevensons to call Spangler.
                                                                 783, 83 L. Ed. 2d 777 (1985) (applied the two-year statute of
     To show the trial court abused its discretion by            limitations to public disclosure of private facts).
rejecting Spangler as a witness, the Stevensons must
                                                                      No Texas court has decided the statute of limitations
convince us that the trial court's decision was arbitrary and
                                                                 for intentional infliction of emotional distress. Generally, a
unreasonable. Simon v. York Crane & Rigging Co., 739
                                                                 tort-based cause is subject to the two-year statute. Church v.
S.W.2d 793, 795 (Tex.1987).
                                                                 Ortho Diagnostic Sys., Inc., 694 S.W.2d 552, 555-56
     To obtain reversal of a judgment based on error in the      (Tex.App.--Corpus Christi 1985, writ ref'd n.r.e.). Thus, the
exclusion of testimony, an appellant must show that the trial    tort of intentional infliction of emotional distress should be
court's ruling was in error, and that the error was calculated   governed by the two-year statute of limitations.
to cause, and probably did cause, rendition of an improper
                                                                     The Stevensons complain that the causes of action
judgment. TEX.R.APP.P. 81(b)(1); see Texaco, Inc. v.
                                                                 added in the third and fourth amended petitions filed on
Pennzoil, Co., 729 S.W.2d 768, 837 (Tex.App.--Houston
                                                                 August 26 and 28, 1988 were barred by limitations. The
[1st Dist.] 1987, writ ref'd n.r.e.). Unless an appellant can
                                                                 husband argues that the two amendments related back to the
show that the whole case turns on the evidence the court
                                                                 second amended petition, and therefore, the new claims
admitted or excluded, it is difficult to prove the ruling on
                                                                 were not barred by limitations. Texas Civil Practice &
the evidence resulted in reversible error. Id.
                                                                 Remedies Code Annotated § 16.068 (Vernon 1986)
    We hold that Spangler's testimony was material to rebut      provides:
the testimony of the three deposition witnesses. The
                                                                      If a filed pleading relates to a cause of action ... that is
exclusion of her testimony, therefore, was reversible error
                                                                 not subject to a plea of limitations when the pleading is
under TEX.R.APP.P. 81(b)(1).
                                                                 filed, a subsequent amendment ... that changes the facts or
    We sustain point of error two.                               grounds of liability or defense is not subject to a plea of
                                                                 limitations unless the amendment ... is wholly based on a
new, distinct, or different transaction or occurrence.             Page 320

     The supreme court found that the purpose of § 16.068          of conspiracy to invade, invasion of privacy, conspiracy to
was to limit the application of the statutes of limitations to     inflict, and intentional infliction of emotional distress
amended pleadings. The test is as follows: if the amended          because these claims were barred by the statute of
pleading does not allege a wholly new, distinct, or different      limitations.
transaction, then it relates back to the original filing, and is
not subject to a limitations defense. Ex parte Goad, 690                We sustain point of error three. Because our holding is
S.W.2d 894, 896 (Tex.1985). Even if the amended petition           law of the case, we reverse and render judgment in favor of
contains new causes of action, the new causes are not              the Stevensons on the claims barred by limitations.
barred by the statute of limitations unless they arise from a
wholly different transaction. Providence Hosp. v. Truly, 611       IV. The trial amendment
S.W.2d 127, 133-34 (Tex.Civ.App.--Waco 1980, writ
                                                                         In point of error four, the Stevensons assert that the
dism'd).
                                                                   trial court abused its discretion in denying their motion for
     The husband's third and fourth amended petitions              leave to file a trial amendment because the husband did not
alleged new causes of action. The question is whether these        show the amendment would prejudice him. The husband
new causes of action were based on new, distinct, and              objected to the inclusion of special issues 11A and 12A in
different transactions. The transaction referred to in the         the court's charge to the jury, which related to the accrual of
husband's second amended petition was "using their own             the causes of action. In response, the Stevensons asked to
personal banks and bank accounts to launder and hide               amend their pleadings to include a statute of limitations as
money." In the husband's fourth amended petition, the              an affirmative defense. Although the trial court denied their
transactions were "physical surveillance," "harassing              trial amendment, it submitted the special issues 11A and
telephone communications," and "harassing physical                 12A.
encroachments." The conspiracy to invade, invasion of
                                                                        Because their requested questions were submitted to the
privacy, conspiracy to inflict, and intentional infliction of
                                                                   jury, the Stevensons have no cause for complaint. The
emotional distress causes of action did not arise out of the
                                                                   objective of the trial amendment was accomplished without
same transactions between the Stevensons and the wife as
                                                                   the amendment. Thus, any error the trial court may have
did the causes of action in the second amended petition,
                                                                   committed was harmless.
which joined the Stevensons as parties. Thus, these new
causes of action do not relate back to the second amended              We overrule point of error four.
petition. Each new cause of action alleged in the third and
fourth petition must satisfy the two-year statute of               V. The Stevensons' motion to strike amended pleadings
limitations.
                                                                         In point of error five, the Stevensons contend that the
     The jury's answers to the limitations issues establish        trial court abused its discretion in denying their motion to
that all of the conduct comprising these new claims                strike the husband's third and fourth amended petitions,
occurred before August 26, 1986. The husband's claims of           filed 10 and eight days, respectively, before trial. The
conspiracy to invade, invasion of privacy, conspiracy to           husband responds that the Stevensons did not preserve this
inflict, and intentional infliction of emotional distress,         error because they did not file a motion for continuance.
raised for the first time in his third amended petition on
August 26, 1988, therefore, are all barred by the statute of            The Stevensons were brought into the divorce action by
limitations.                                                       the husband's second amended petition, filed in January
                                                                   1986. In that petition, the husband asked for damages for
     The husband argues that the new claims were a mere            the money the Stevensons helped his wife secret and
amplification of his claim for mental anguish in the second        launder. From the five sentences of allegations directed at
amended petition. The mental anguish alleged in the second         the Stevensons, the Stevensons estimated the husband
petition was not cited as a transaction or occurrence, but as      sought $30,000 dollars in damages.
an element of damage--the "result" of the Stevensons'
alleged conduct of conspiring to secret funds and defraud               After being joined in the suit, the Stevensons deposed
the community estate.                                              the husband. At the husband's deposition, he was asked
                                                                   what kind of claims he intended to pursue against the
     The trial court erred in denying the Stevensons' motion       Stevensons. The husband's counsel interrupted his client to
for j.n.o.v. and in rendering judgment for the husband on          say that the only claims against the Stevensons would be
the claims
                                                                   [B]asically money matters, nothing else. I think we have
claimed conspiracy to defraud kind of stuff. If you are             need to obtain leave of court. Surprise is the only issue.
talking about assault or some kind of tortious claim other
than what's already in [the pleadings], I am not anticipating            We will not disturb a trial court's ruling on refusal to
that.                                                               strike the late amended pleadings, unless the complaining
                                                                    party shows that the court abused its discretion. Hardin v.
    Relying on that description of the suit, the Stevensons         Hardin, 597 S.W.2d 347, 349-50 (Tex.1980). Some courts
did not pursue liability or damage issues relating to tortious      require the party opposing the late amendment to claim
claims not in the pleadings.                                        surprise and move for a continuance. See, e.g., Louisiana &
                                                                    Arkansas Ry. v. Blakely, 773 S.W.2d 595, 597
     Two and a half years after joining the Stevensons, and         (Tex.App.--Texarkana 1989, writ denied); Howard v.
just 10 and eight days before trial the husband filed two           Phillips, 728 S.W.2d 448, 450-51 (Tex.App.--Fort Worth
amended petitions. On Friday, August 26, 1988, at 7:59              1987, no writ).
p.m., 10 days before trial, the husband filed his third
amended petition. In that petition, the husband added causes             The husband contends the Stevensons were required to
of action for conversion, invasion of privacy, intentional          file a motion for continuance to preserve the error. The
infliction of emotional distress, and conspiracy to do these        Stevensons contend they were not required to file a motion
acts. In that petition, the husband expanded the earlier five       for continuance, and cite Hajdik v. Wingate, 753 S.W.2d
sentences of allegations to 22 pages, and increased the             199, 202-204 (Tex.App.--Houston [1st Dist.] 1988), aff'd,
estimated $30,000 damage claim to $2.7 million.                     795 S.W.2d 717 (Tex.1990). In Hajdik, we held a trial court
                                                                    abused its discretion when it permitted appellee to amend
     On Sunday, August 28, 1988, at 8:24 a.m., the husband          pleadings on the eve of trial, raising a totally new cause of
filed the fourth amended petition, adding a cause of action         action. In defense of the trial court, appellee argued that
for a lost job opportunity. In that petition, the husband           appellant should have filed a motion for continuance to
expanded the earlier 22 pages of allegations to 25 pages,           preserve error on appeal. Id. at 203. We held a motion for
and increased the damage claim from $2.7 million to $16.5           continuance was only one factor to consider.
million.
                                                                         The factors we held important in Hajdik were: (1) the
     The Stevensons, who received notice of the                     amended petition was filed two years after the suit was
amendments on August 29, seven days before trial, filed a           filed; (2) the amendment was made on the eve of trial; (3)
motion to strike the late pleadings. The trial court refused.       the amendment introduced a totally new cause of action; (4)
The Stevensons contend that the late pleadings changed the          the late cause of action was not based on recently
entire tenor of the suit and the new causes of action required      discovered matters; and (5) the complaining party alleged
different discovery than that already undertaken.                   surprise and that he was not prepared to try the new cause
                                                                    of action. Hajdik, 753 S.W.2d at 204.
Page 321
                                                                         The factors present in this case are: (1) the amended
    The rule that controls the right to amend is rule 63 of         petitions were filed more than two years after the
the Texas Rules of Civil Procedure, which provides:                 Stevensons were added to the suit; (2) the amendments
                                                                    were made 10 and eight days before trial (the Stevensons
Parties may amend their pleadings ... at such time as not to
                                                                    received them seven days before trial); (3) the amendments
operate as a surprise to the opposite party; provided, that
                                                                    introduced five totally new causes of action, increasing
any amendment offered for filing within seven days of the
                                                                    liability from an estimated $30,000 to over $16.5 million;
date of trial ... shall be filed only after leave of the judge is
                                                                    (4) the late causes of action were not based on recently
obtained, which leave shall be granted by the judge unless
                                                                    discovered matters; and (5) the Stevensons alleged surprise
there is a showing that such amendment will operate as a
                                                                    and that they were not prepared to try the new cause of
surprise of the opposite party.
                                                                    action.
    (Emphasis added.)
                                                                         A significant similarity between this case and Hajdik is
     There is not, under rule 63, an unlimited right to amend       the short period between filing the amendment and trial: In
pleadings. A party has a right to amend pleadings eight days        Hajdik, the plaintiff amended his pleadings within five days
or more before trial if the amendment does not "operate as a        before trial. [2] Here, the husband filed the first of the
surprise to the opposite party." Tex.R.Civ.P. 63. If a party        amended pleadings on a Friday evening, after the
files pleadings seven days or less before trial, the pleadings      courthouse had closed, and filed the last of the amended
must not operate as a surprise and the party must obtain            pleadings on a Sunday morning. The Stevensons did not
leave of court. Id. Here, the husband filed his last amended        receive notice of the pleadings until seven days before trial.
pleading eight days before trial. Thus, the husband did not
    We hold that, because the two amendments were a             S.W.2d 240, 242 (Tex.1988).
wholesale revision of the husband's suit against the
Stevensons, the trial court abused its discretion when it           A. Fraud
denied the motion to strike late pleadings. Accordingly, we
sustain point of error five.                                         In point of error six, the Stevensons contend the trial
                                                                court erred in denying their motions for instructed verdict
Page 322                                                        and for j.n.o.v. because there is no evidence of fraud or
                                                                conspiracy to defraud, because the Stevensons made no
VI. The double recovery                                         misrepresentations of material fact to the husband on which
                                                                he relied.
     In point of error eight, the Stevensons argue that the
trial court erred in denying their motion for j.n.o.v. and           The Stevensons sought reimbursement from the
motion for new trial, and in rendering a damage judgment        husband for expenditures for medical bills, furniture, and
for defrauding the community estate and for converting          cash advances on credit cards made for the wife. Although
community property because such an award is a double            the copies of the documents were noted as "for Nalda," the
recovery.                                                       wife, the hospital bill was incurred by Rosie Stevenson.
                                                                Some of the furniture, purchased with community funds,
     Double recoveries are not permitted. Southern County       was delivered to the Stevensons' home. Although the
Mut. Ins. Co. v. First Bank and Trust of Groves, 750            Stevensons claimed they advanced $9,300 of $12,100 from
S.W.2d 170, 173-74 (Tex.1988). When the prevailing party        credit card advances to the wife, $10,600 of that was
fails to elect between alternative measures of damages, the     deposited back into the Stevensons' personal account within
court should utilize the findings affording the prevailing      hours or days of the withdrawal.
party the greater recovery and render judgment accordingly.
Birchfield v. Texarkana Memorial Hosp., 747 S.W.2d 361,             We find there is more than a scintilla of evidence to
367 (Tex.1987).                                                 support the finding, and we overrule point of error six.

     In American Baler Co. v. SRS Sys., Inc., 748 S.W.2d            B. Conversion of community property
243, 246 (Tex.App.--Houston [1st Dist.] 1988, writ denied),
we held that when the trial court errs in not requiring             In point of error seven, the Stevensons contend the trial
plaintiff to elect between damages on alternative causes of     court erred in denying their motions for instructed verdict
action, the court of appeals will make the election for him.    and for j.n.o.v. because there is no evidence of conversion
In such a case, the court will choose the cause of action for   or conspiracy to convert, because the husband expressly or
which the jury made the highest award. Id.                      implicitly consented to or ratified the taking.

     If the claims of defrauding the community estate and           Although Rosie Stevenson was aware of the temporary
converting community property amounted to a double              orders forbidding the sale or other disposal of community
recovery, the trial court should have granted judgment to       property, the Stevensons helped the wife sell a 1977
the husband only for the greater recovery, not for both.        Cadillac. The buyer testified that he bought the car from
Because the entire case will be retried, we need not decide     Rosie Stevenson, and gave her a cashier's check payable to
this issue.                                                     Rosie Stevenson. Donald Stevenson paid Noff North
                                                                American movers to move some of the
VII. The sufficiency of the evidence
                                                                Page 323
     Because we already have sustained points of error that
require us to remand, we do not need to address any factual     Koutzarovs' property to Canada. The husband deposited
sufficiency points that, if sustained, merely compel retrial.   money in a Canadian bank account in the name of Natasha
We, therefore, need not address the factual sufficiency         Gomez da Costa (the wife's child) for tax purposes. The
challenges in points of error 6, 7, 9, 10, 11, and 12.          wife withdrew two checks totaling about $30,000 from the
                                                                account, and with Rosie Stevenson's help, deposited the
    We must, however, address the points which, if              money in the Stevenson's bank account.
granted, would compel a rendition of judgment for the
Stevensons. Thus, we will consider the challenges to the            We find there is more than a scintilla of evidence to
legal sufficiency of the evidence.                              support the finding and we overrule point of error seven.

    When we review the record, if we find there is more             C. Conversion of separate property
than a scintilla of evidence to support a finding, we must
overrule the point of error. Sherman v. First Nat'l Bank, 760       In point of error nine, the Stevensons assert that the
trial court erred in denying their motion for j.n.o.v. and       [1] There are two other cases from the Corpus Christi Court
motion for new trial because there is no evidence of             of Appeals that are relevant. In Morehouse v. Brink, 647
conversion and conspiracy to convert the husband's separate      S.W.2d 712, 715 (Tex.App.--Corpus Christi 1982, no writ),
property.                                                        plaintiff orally deposed a witness before joining defendant
                                                                 Morehouse. After Morehouse was joined, plaintiff
     The jury identified certain silver flatware and jewelry     re-deposed the witness by written questions. Morehouse
as the husband's separate property. The husband kept his         had notice of the deposition by written questions, but did
separate property in a safety deposit box. During the week       not propound questions. The court of appeals held that
of June 25, 1984, the wife removed the jewelry from the          Morehouse waived his right to cross-examine the witness
safety deposit box.                                              and his objection to the oral deposition. In Academy
                                                                 Welding       v.   Carnes,      535 S.W.2d 917,     920
     The husband admits that the only evidence that              (Tex.Civ.App.--Corpus Christi 1976, no writ), plaintiff
supports the jury's finding that the Stevensons conspired to     deposed a witness before adding Academy Welding as a
convert his separate property is circumstantial. In his brief,   defendant. At a venue hearing, the trial court permitted the
the husband claims that he talked to Mrs. Stevenson about        use of the deposition. On appeal, the court reversed, holding
the settlement during the week of June 25, the same week         that plaintiff was required to re-take the deposition of the
the jewelry was removed. The husband claims that the             witness if it wanted to use it.
Stevensons' "involvement" with his former wife during the
week of June 25 is some evidence that they conspired to          [2] The exact date of filing the amended petition in Hajdik
convert his separate property. We disagree.                      is disputed.

    We find there is no evidence to support the finding and      [3] Justice Warren participated upon original submission,
we sustain point of error nine.                                  but not on rehearing. Justice Warren died August 13, 1990.

     D. Damages                                                  ---------

    In point of error 10, the Stevensons argue that the trial
court erred in denying their motion for j.n.o.v. because there
is no evidence to support the judgment for $70,100 in
damages for conversion and conspiracy to convert the
husband's separate property. In point of error 11, the
Stevensons argue that the trial court erred in denying their
motion for j.n.o.v. because there is no evidence to support
judgment for $75,000 in damages for conspiracy to defraud
and conspiracy to convert community assets. Both points
may well have merit. We need not address them, however,
because the entire case will be retried.

VIII. Summary

    We reverse and render judgment as to point of error
three, holding that the causes of action for invasion of
privacy, intentional infliction of emotional distress, and
conspiracy to invade privacy and inflict emotional distress
were barred by the statute of limitations. We reverse and
render judgment as to point of error nine, holding that there
is no evidence to support the finding that the Stevensons
converted or conspired to convert the husband's separate
property. We reverse the remainder of the judgment and
remand the cause for a new trial.

     DUGGAN, J., also participating. [3]

---------

Notes:
Page 493                                                         promised, DeLanney sued Bell, alleging negligence and
                                                                 violation of the Texas Deceptive Practices--Consumer
809 S.W.2d 493 (Tex. 1991)                                       Protection

SOUTHWESTERN BELL TELEPHONE COMPANY,                             Page 494
Petitioner,
                                                                 Act ("DTPA"), TEX.BUS. & COM.CODE §§ 17.41-17.63.
v.                                                               Bell answered and urged by special exception that
                                                                 DeLanney's petition failed to state a cause of action for
Eugene C. DeLANNEY, Respondent.                                  negligence. No ruling was made on this special exception,
                                                                 and DeLanney proceeded to trial on both claims.
No. C-8282.
                                                                      After DeLanney rested his case in chief, Bell moved for
Supreme Court of Texas.
                                                                 a directed verdict on both theories of liability. The trial
                                                                 court granted Bell's motion as to the DTPA claim, but
March 6, 1991
                                                                 denied it as to negligence. The remaining issues were
     Rehearing Overruled June 19, 1991.                          submitted to a jury.

    Andrew J. Mytelka, John A. Buckley, Jr., Galveston,               The jury found that Bell was negligent in omitting
Richard Billeaud, Houston, for petitioner.                       DeLanney's advertisement from the Yellow Pages and that
                                                                 such negligence was a proximate cause of damages to
     Anthony P. Griffin, Galveston, for respondent.              DeLanney. The jury assessed these damages at $109,000
                                                                 for lost profits in the past and $40,000 for lost profits in the
     OPINION                                                     future. After ordering a partial remittitur which reduced
                                                                 future lost profits to $21,480, the trial court rendered
     PHILLIPS, Chief Justice.                                    judgment for DeLanney. Bell appealed.

     We consider whether a cause of action for negligence is     Breach of Contract or Negligence
stated by an allegation that a telephone company
negligently failed to perform its contract to publish a              The court of appeals, with one justice concurring and
Yellow Pages advertisement. The court of appeals held that       one justice dissenting, affirmed. A majority of the court
the company's failure to perform its contract was a basis for    held that Bell's cancellation of DeLanney's Yellow Pages
recovery in tort as well as contract, and that the clause        advertisement was correctly submitted as a negligence
limiting the telephone company's liability could not apply to    claim. The dissenting justice argued that because DeLanney
limit tort damages. 762 S.W.2d 772. We reverse the               sought damages for breach of a duty created under the
judgment of the court of appeals and render judgment in          contract, rather than a duty imposed by law, the claim
favor of Bell.                                                   sounded only in contract. We agree with the dissent.

Facts                                                                 The majority below relied on Montgomery Ward & Co.
                                                                 v. Scharrenbeck, 146 Tex. 153, 157, 204 S.W.2d 508, 510
    Eugene DeLanney advertised his real estate business in       (1947), where we quoted from 38 AM.JUR. Negligence §
the Galveston Yellow Pages for several years. For the            20 (1941) as follows:
1980-1981 directory, he again contracted with Bell for a
Yellow Pages advertisement. At this time DeLanney had            Accompanying every contract is a common-law duty to
two business phones, a rotary line and a single line. Prior to   perform with care, skill, reasonable expedience and
publication of the 1980-1981 directory, DeLanney's wife          faithfulness the thing agreed to be done, and a negligent
asked Bell to cancel the single line and add a third number      failure to observe any of these conditions is a tort, as well as
to their existing rotary line. The Yellow Pages                  a breach of the contract.
advertisement was billed to DeLanney's single line. When
that line was canceled, DeLanney's Yellow Pages                      In Scharrenbeck, the defendant agreed to repair a water
advertisement was automatically deleted from the directory       heater in plaintiff's home. A short time after repair, the
due to Bell's internal procedures.                               heater ignited the roof, destroying the house and its
                                                                 contents. Although the contract obligated the defendant to
     When the advertisement was not published as                 put the water heater back in good working order, the law
also implied a duty to the defendant to act with reasonable        breach of contract. Because the jury was asked only
skill and diligence in making the repairs so as not to injure a    questions as to liability resulting from Bell's negligence,
person or property by his performance. In failing to repair        DeLanney waived any claim for breach of contract. Ramos
the water heater properly, the defendant breached its              v. Frito-Lay, Inc., 784 S.W.2d 667, 668 (Tex.1990) (the
contract. In burning down plaintiff's home, the defendant          plaintiff has the "burden to obtain affirmative answers to
breached a common-law duty as well, thereby providing a            jury questions as to the necessary elements of his cause of
basis for plaintiff's recovery in tort.                            action") (citing TEX.R.CIV.P. 279).

     The principle recognized in Scharrenbeck has also been             DeLanney did obtain an affirmative answer to the
recognized by commentators in this area. As one prominent          question whether there was a disparity in bargaining power
authority has explained: "Tort obligations are in general          between the parties in negotiating the Yellow Pages
obligations that are imposed by law--apart from and                agreement. The court of appeals correctly determined that
independent of promises made and therefore apart from the          disparity in bargaining power is irrelevant in a negligence
manifested intention of the parties--to avoid injury to            suit. Perhaps the issue was submitted because DeLanney
others." W. KEETON, D. DOBBS, R. KEETON & D.                       pled that Bell's conduct was unconscionable under the
OWEN, PROSSER AND KEETON ON THE LAW OF                             DTPA. Because of his failure to comply with the notice
TORTS § 92 at 655 (5th Ed.1984) [hereinafter "PROSSER              requirements of the DTPA, however, DeLanney's entire
AND KEETON"]. If the defendant's conduct--such as                  cause of action under the DTPA, including any claim of
negligently burning down a house--would give rise to               unconscionability, was dismissed by a directed verdict. For
liability independent of the fact that a contract exists           this reason, and because DeLanney submitted no contract
between the parties, the plaintiff's claim may also sound in       issues, the jury finding concerning disparity of bargaining
tort. Conversely, if the defendant's conduct--such as failing      power is of no effect.
to publish an advertisement--would give rise to liability
only because it breaches the parties' agreement, the                   For the foregoing reasons, the judgment of the court of
plaintiff's claim ordinarily sounds only in contract. [1]          appeals is reversed, and judgment is rendered that
                                                                   DeLanney take nothing.
     In determining whether the plaintiff may recover on a
tort theory, it is also instructive to examine the nature of the       GONZALEZ and DOGGETT, JJ., concur.
plaintiff's loss. When the only loss or damage is to the
subject matter of the contract, the plaintiff's action is              MAUZY, J., dissents.
ordinarily on the contract. See PROSSER AND KEETON
                                                                       GONZALEZ, Justice, concurring.
at 656; 1 J. EDGAR, JR. & J. SALES, TEXAS TORTS
AND REMEDIES § 1.03[b] at 1-36 (1990). We applied this                  I agree with the court that Bell's failure to publish the
analysis in Jim Walter Homes,                                      advertisement was not a tort and that it sounded solely in
                                                                   contract. I also agree that DeLanney failed to discharge his
Page 495
                                                                   burden to obtain affirmative findings to jury questions on
Inc. v. Reed, 711 S.W.2d 617, 618 (Tex.1986), where we             the contract. However, I do not fault the court of appeals for
wrote:                                                             its confusion. We have muddled the law of "contorts" and
                                                                   an all encompassing bright line demarcation of what
The acts of a party may breach duties in tort or contract          constitutes a tort distinct from breach of contract has proven
alone or simultaneously in both. The nature of the injury          to be elusive. See generally W. PROSSER & W. KEETON,
most often determines which duty or duties are breached.           THE LAW OF TORTS § 1 (5th ed. 1984); see also
When the injury is only the economic loss to the subject of        American Nat'l Petro. Co. v. Transcontinental Gas Pipe
a contract itself the action sounds in contract alone.             Line Corp., 798 S.W.2d 274, 280 (1990) (Gonzalez, J.,
                                                                   dissenting).
    Bell's duty to publish DeLanney's advertisement arose
solely from the contract. DeLanney's damages, lost profits,             DeLanney and the court of appeals rely heavily on the
were only for the economic loss caused by Bell's failure to        statement in Montgomery Ward & Co. v. Scharrenbeck, 146
perform. Although DeLanney pleaded his action as one in            Tex. 153, 157, 204 S.W.2d 508, 510 (1947), that:
negligence, he clearly sought to recover the benefit of his
bargain with Bell. We hold that Bell's failure to publish the      Accompanying every contract is a common-law duty to
advertisement was not a tort. [2] Under our analysis in            perform with care, skill, reasonable expedience and
Reed, DeLanney's claim was solely in contract.                     faithfulness the thing agreed to be done, and a negligent
                                                                   failure to observe any of these conditions
    DeLanney, however, did not request jury questions on
Page 496                                                        his telephone service. In this manner, the court endeavored
                                                                to connect the omission of the Yellow Pages advertisement
is a tort, as well as a breach of the contract.                 to Bell's duty of public service.

     Despite this broad language, not every breach of                The gravamen of DeLanney's complaint, however, was
contract accompanied by negligence creates a cause of           not with his telephone service, which was changed
action in tort. In International Printing Pressman &            according to request and apparently to his satisfaction.
Assistants' Union v. Smith, 145 Tex. 399, 198 S.W.2d 729,       Rather, his complaint was with Bell's failure to publish his
735 (1946), we acknowledged that no single concise rule         advertisement as promised, and this was a matter of private
will define the rights of parties in every situation. We        contract. A-ABC Appliance, Inc. v. Southwestern Bell Tel.
nonetheless wrote:                                              Co., 670 S.W.2d 733, 735 (Tex.App.--Austin 1984, writ
                                                                ref'd n.r.e.). Although Bell is a regulated public utility, all of
[G]enerally speaking, "actions in contract and in tort are to   its functions are not in the realm of public service. The
be distinguished in that an action in contract is for the       "printing, distribution, or sale of advertising in telephone
breach of a duty arising out of a contract either express or    directories" is not a public service function.
implied, while an action in tort is for a breach of duty        TEX.REV.CIV.STAT.ANN. art. 1446c, § 3(s) (Vernon
imposed by law...." "[I]f the action is not maintainable        Supp.1991).
without pleading and proving the contract, where the gist of
the action is the breach of the contract, either by             Limitation of Liability
malfeasance or nonfeasance, it is, in substance an action on
the contract, whatever may be the form of the pleading."            The connection drawn by the court of appeals between
(citations omitted).                                            the Yellow Pages advertisement and DeLanney's telephone
                                                                service also affected the court's view regarding the validity
     Id., 198 S.W.2d at 735. I believe that this formulation    of a limitation of liability clause contained in the contract
comes closer than Scharrenbeck to stating a general rule to     between Bell and DeLanney. This clause provided:
distinguish contract from tort and that the broad language in
Scharrenbeck must be read in light of the particular            The applicant agrees that the telephone company shall not
circumstances of that case. The opinion in Scharrenbeck is      be liable for errors in or omissions of the directory
correct in its observation that a contract may be the           advertising beyond the amount paid for the directory
occasion that brings the parties together, but it is the        advertising omitted in which error occurs for the issue life
relationship or situation of the parties that gives rise to a   of the directory involved.
duty in law, the breach of which is a tort. See Greater
Houston Transp. Co. v. Phillips, 801 S.W.2d 523                     DeLanney argued that the clause was unenforceable
(Tex.1990). Had Montgomery Ward repaired the water              and, in the context of DeLanney's
heater gratuitously, it would have owed Scharrenbeck a
duty not to create a dangerous condition. See Colonial Sav.     Page 497
Ass'n v. Taylor, 544 S.W.2d 116, 119 (Tex.1976); Fox v.
                                                                negligence claim, the court of appeals agreed. 762 S.W.2d
Dallas Hotel Co., 111 Tex. 461, 240 S.W. 517, 520 (1922);
                                                                at 776.
RESTATEMENT (SECOND) OF TORTS § 323 (1965).
Thus the duty to not create a dangerous condition existed           In an apparent attempt to resolve conflicting decisions,
independent of any contractual relationship.                    the court of appeals suggested that the clause might be
                                                                enforced to limit a claim for breach of contract, see Wade v.
     In summary, when a party must prove the contents of
                                                                Southwestern Bell Tel. Co., 352 S.W.2d 460
its contract and must rely on the duties created therein, the
                                                                (Tex.Civ.App.--Austin 1961, no writ), but could not be
action is "in substance an action on the contract, even
                                                                applied to limit liability for negligence. See Reuben H.
though it is denominated an action for negligent
                                                                Donnelley Corp. v. McKinnon, 688 S.W.2d 612
performance of the contract." Bernard Johnson, Inc. v.
                                                                (Tex.App.--Corpus Christi 1985, writ ref'd n.r.e.); see also
Continental Constructors, Inc., 630 S.W.2d 365, 368
                                                                Helms v. Southwestern Bell Tel. Co., 794 F.2d 188 (5th
(Tex.App.--Austin 1982, writ ref'd n.r.e.) (emphasis in
                                                                Cir.1986). The conflict between Wade and McKinnon
original).
                                                                mirrors a larger split of authority regarding the validity of
Bell's Duty                                                     such limitation of liability clauses. See Annotation,
                                                                Liability of Telephone Company for Mistakes in or
    The majority in the court of appeals also suggested that    Omissions From its Directory, 47 A.L.R. 4th 882 (1986).
negligence was a proper theory because Bell carelessly
deleted DeLanney's advertisement while making changes to            McKinnon follows a minority line of cases which
                                                                refuse to enforce such provisions. See Morgan v. South
Cent. Bell Tel. Co., 466 So. 2d 107 (Ala.1985); Allen v.           more favorable terms rendered the limitation of liability
Michigan Bell Tel. Co., 61 Mich.App. 62, 232 N.W.2d 302           clause unenforceable. In support of this argument, he relies
(1975); Rozeboom v. Northwestern Bell Tel. Co., 358               on a jury finding that a disparity in bargaining power
N.W.2d 241 (S.D.1984); Discount Fabric House, Inc. v.             existed between himself and Bell when the contract was
Wisconsin Tel. Co., 117 Wis. 2d 587, 345 N.W.2d 417                made. [1]
(1984). The unifying theme of these decisions is that
directory advertising is a unique advertising medium              Page 498
inextricably linked to the telephone company's public
service function. Thus on the premise of Bell's status as a            Bell responds that the validity of the clause limiting
public utility monopoly, these courts have rejected the           liability was not a question of fact for the jury, but one of
limitation of liability as contrary to the public interest or     law for the court. I agree. [2] This is clearly the case under
unconscionable.                                                   the Uniform Commercial Code. TEX.BUS. & COM.CODE
                                                                  § 2.302 comments 1 & 3 (Tex.UCC) (Vernon 1968); G.
     A larger number of jurisdictions, however, have upheld       WALLACH, THE LAW OF SALES UNDER THE
similar liability limitation clauses for directories. In Helms    UNIFORM COMMERCIAL CODE p 5.04 at 5-5 (1981);
v. Southwestern Bell Telephone Co., the Fifth Circuit lists       see also RESTATEMENT (SECOND) OF CONTRACTS §
decisions from twenty-six states which have upheld similar        208, comment f (1979). Although the UCC does not
clauses. Helms, 794 F.2d at 192 n. 9; see generally               expressly apply to service transactions, such as the sale of
Annotation, Liability of Telephone Company for Mistakes           advertising in the Yellow Pages, the provision pertaining to
in or Omissions From its Directory, 47 A.L.R. 4th 882.            unconscionability "has been applied to numerous
These decisions have generally recognized Yellow Pages            transactions outside the coverage of Article 2 of the Code."
advertising to be a matter of private contract, rather than a     J. CALAMARI & J. PERILLO, THE LAW OF
public service function. The majority view is compatible          CONTRACTS § 9-39 at 420 (3d Ed.1987); see also J.
with Texas law, which also excludes the sale of advertising       WHITE        &    R.    SUMMERS,          THE      UNIFORM
in directories from Bell's public service function.               COMMERCIAL CODE § 4-32 at 200 (3d ed. 1989).
TEX.REV.CIV.STAT.ANN. art. 1446c, § 3(s); see also
A-ABC Appliance, 670 S.W.2d at 735. I therefore believe                I also agree with Bell that bargaining disparity alone
that the majority view presents the sounder approach.             does not establish unconscionability. Comments to the UCC
                                                                  indicate that the principle of unconscionability is "not of
Unconscionability                                                 disturbance of allocation of risks because of superior
                                                                  bargaining power." TEX.BUS. & COM.CODE ANN. §
     Even though the Yellow Pages is a matter of private          2.302 comment 1. A comment to the Restatement provides
contract, DeLanney may still recover the full value of the        that a "bargain is not unconscionable merely because the
consequential damages caused by Bell's breach of contract         parties to it are unequal in bargaining position, nor even
if the clause limiting Bell's liability is unenforceable          because the inequality results in an allocation of risks to the
because a court may deny enforcement of an                        weaker party." RESTATEMENT (SECOND) OF
unconscionable clause or contract. See Tri-Continental            CONTRACTS § 208 comment d. The Code and
Leasing Corp. v. Burns, 710 S.W.2d 604, 609                       Restatement thus agree that a disparity in bargaining power,
(Tex.App.--Houston [1st Dist.] 1985, writ ref'd n.r.e.)           while relevant, is not the litmus test for unconscionability.
(Levy, J., dissenting); see also Universal C.I.T. Credit          See Wade v. Austin, 524 S.W.2d 79, 85-86
Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 159-60             (Tex.Civ.App.--Texarkana 1975, no writ). Something more
(1951); RESTATEMENT (SECOND) OF CONTRACTS §                       must be shown.
208 (1979); TEX.BUS. & COM.CODE ANN. § 2.302
(Tex.UCC) (Vernon 1968). We must consider then whether                 How much more is a difficult question, however,
the clause limiting Bell's liability for errors or omissions to   because the term unconscionable has no precise legal
the cost of the Yellow Pages advertising is unconscionable        definition. Courts and commentators have struggled with its
under the circumstances of this case.                             meaning. In Wade v. Austin, the court wrote that a
                                                                  determination of unconscionability must be made from "the
     DeLanney argues that it is. Because he had no                entire atmosphere in which the agreement was made." Id. at
meaningful choice and no bargaining power in the                  86. One authority has written that unconscionability cannot
transaction, he contends that his contract with Bell was one      be defined because "(i)t is not a concept, but a
of adhesion. Yellow Pages was the only commercial                 determination to be made in light of a variety of factors not
telephone directory in DeLanney's market area at the time.        unifiable into a formula." 1 J. WHITE & R. SUMMERS,
The only way to buy space in this directory was on Bell's         UNIFORM COMMERCIAL CODE § 4-3 at 203 (3d ed.
terms dictated through a non-negotiable, standardized             1988) (emphasis in original). The UCC [3] and Restatement
contract. DeLanney concludes that his inability to negotiate      [4] recognize the doctrine of unconscionability, but provide
only a rough outline of its meaning.                            Realtors, yard signs, radio and television. After weighing all
                                                                of the above, I am not convinced that the clause limiting
    Although many factors are relevant and no single            Bell's liability for errors or omissions to the cost of the
formula exists, [5] proof of a claim                            Yellow Pages advertising is unconscionable.

Page 499                                                            For the foregoing reasons, I concur with the judgment.

of unconscionability begins with two broad questions: (1)           DOGGETT, Justice, concurring.
How did the parties arrive at the terms in controversy; and
(2) Are there legitimate commercial reasons which justify           I concur in the court's judgment but write separately
the inclusion of these terms? Mallor, Unconscionability in      because it should, and could, be based solely upon our
Contracts Between Merchants, 40 Sw.L.J. 1065, 1072              holding in Jim Walter Homes, Inc. v. Reed, 711 S.W.2d
(1986); 1 J. WHITE & R. SUMMERS, UNIFORM                        617, 618 (Tex.1986). Today's brief writing concerning the
COMMERCIAL CODE, § 4-3, 4-4 (3d ed. 1988); J.                   nature of torts and contracts unnecessarily adds more
CALAMARI & J. PERILLO, THE LAW OF                               confusion than clarity.
CONTRACTS, § 9-40 (3d.1987); R. HILLMAN, J.
MCDONNELL & S. NICKLES, COMMON LAW AND                          Page 500
EQUITY UNDER THE UNIFORM COMMERCIAL
CODE p 6.02[b-d] (1985); Williams v. Walker-Thomas                   The court does recognize that in some as yet
Furniture Co., 350 F.2d 445 (DC Cir.1965). The first            unspecified instances a tort action may lie between
question, often described as the procedural aspect of           contracting parties. It appropriately observes that a tort
unconscionability, [6] is concerned with assent and focuses     action may arise based upon a number of relationships that
on the facts surrounding the bargaining process. Mallor,        could be created by contract. Although the court offers only
Unconscionability in Contracts Between Merchants, 40            one example of a contractual relationship creating duties the
Sw.L.J. 1065, 1072 (1986). The second question, often           breach of which gives rise to actions both in tort and
described as the substantive aspect of unconscionability, is    contract, at 497 n. 1 (the relationship between a professional
concerned with the fairness of the resulting agreement. Id.     and client), our developing jurisprudence recognizes others.
                                                                See, e.g., Viles v. Security Nat'l Ins. Co., 788 S.W.2d 566,
    DeLanney concentrates on the procedural aspect,             567 (Tex.1990) (relationship between insured and insurer).
emphasizing the absence of any meaningful choice in the         In addition, the court correctly recognizes that the breach of
bargain. Bell, on the other hand, contends that the provision   certain common-law duties creates liability in tort; the
was nevertheless fair and reasonable under the existing         existence of a contract does not alter those duties.
commercial circumstances.
                                                                     It is thus incumbent upon the trial courts not to begin
     Bell submits that its contract merely sought to            and end their inquiry with the contract but to examine the
reallocate the commercial risk inherent in its business in a    circumstances surrounding the parties' relationship,
reasonable manner. This risk existed because the directory      including any duties imposed by law, in determining
was to run for one year and mistakes could not be corrected     whether a tort action may be maintained.
during this period. Bell contends that the enormous benefit
derived from Yellow Pages advertising by some subscribers           MAUZY, Justice, dissenting.
when compared to the relatively modest amount charged by
                                                                    I respectfully dissent. The contractual relationship
Bell, coupled with Bell's inability to mitigate damages,
                                                                creates duties not only under contract law, but under tort
created a business risk it needed to reallocate. This it
                                                                law as well. A contract may create the state of things which
attempted to do by limiting its liability.
                                                                furnishes the occasion for the tort. Montgomery Ward &
     Bell further submits that the clause limiting liability    Co. v. Scharrenbeck, 146 Tex. 153, 157, 204 S.W.2d 508,
was not one-sided or grossly unfair because it benefitted       510 (1947).
both parties. It benefitted the subscriber by keeping Yellow
                                                                     Every contract is accompanied by a duty to perform
Pages rates low in relation to other types of advertising and
                                                                that contract with care, skill, reasonable expedience and
in relation to the return expected by the subscriber. It
                                                                faithfulness. The negligent failure to observe any of the
benefitted Bell by shielding it from a risk of potential
                                                                conditions imposed by this duty constitutes a tort. Id. In
liability which was out of proportion to the consideration
                                                                determining whether the action is one in contract or tort or
charged by Bell. Although it would not negotiate, Bell
                                                                both, the court must look to the substance of the cause of
argues that DeLanney had other suitable advertising
                                                                the action, and not necessarily the manner in which it was
alternatives such as newspapers, magazines, direct mail,
                                                                pleaded. Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617,
phone solicitation, the Multiple Listing Service, Board of
                                                                617-18 (Tex.1986) (citing International Printing Pressman
and Ass't Union v. Smith, 145 Tex. 399, 198 S.W.2d 729           has never adopted the old forms of action; thus, "it makes
(1946)). When the injury involves failure to perform a           no difference in what shape a plaintiff presents his cause of
contract and the only loss is that economic loss that is the     action, the courts will look to the substance of it, and not be
substance of the contract itself, the action sounds only in      controlled by the mere form in which it is set forth." Rector
contract and not in tort. Jim Walter Homes, 711 S.W.2d at        v. Orange Rice Mill Co., 100 Tex. 591, 102 S.W. 402, 403
618.                                                             (1907). The option to proceed in contract or tort is available
                                                                 not to diminish the plaintiff's rights, but rather to afford the
     This case involves more than the mere failure to            plaintiff a suitable remedy. See Briggs v. Rodriguez, 236
perform or negligent performance of the Yellow Pages             S.W.2d 510, 514-15 (Tex.Civ.App.--San Antonio 1951,
contract. The action of Bell that gave rise to DeLanney's        writ ref'd n.r.e.).
tort cause of action was the negligent performance of its
contract to provide telephone service to DeLanney, not the            "In jurisdictions where the old forms of action have
negligent performance of its contract to provide the Yellow      been totally abolished, there should be nothing left of the
Pages advertisement. DeLanney had two contracts with             whole doctrine excepting a few historical echoes." Corbin,
Bell. For several years he had contracted with Bell for          Waiver of Tort and Suit in Assumpsit, 19 Yale L.J. 221,
Yellow Pages advertisements, and he had already                  246 (1910). The echo heard from the majority today is out
contracted with Bell for a 1980-81 Yellow Pages listing          of tune with modern jurisprudence, and wrongly deprives
prior to the incident the subject of this lawsuit. In addition   DeLanney of an adequate remedy at law.
to the Yellow Pages advertisement contract, DeLanney had
a separate contract with Bell for telephone service. Prior to         This case was correctly tried in the trial court. The
the publication of the 1980-81 telephone directory,              jury's verdict formed the basis of the trial court's judgment,
DeLanney contracted to alter his telephone service by            which the court of appeals rightly affirmed. I would affirm
canceling his single line and adding a third number to his       the judgment of the court of appeals.
two-number rotary line. When the alteration of the
telephone service was requested, the separate contract for       ---------
the Yellow Pages advertisement was not modified or even
                                                                 Notes:
mentioned by either party. Cancellation of the single
telephone line, pursuant to the telephone service contract,      [1] Of course, some contracts involve special relationships
resulted in the cancellation of the Yellow Pages                 that may give rise to duties enforceable as torts, such as
advertisement because the advertisement was billed to that       professional malpractice.
number. The Yellow Pages advertisement itself was not
even contemplated within the telephone service contract. It      [2] Prosser and Keeton suggest seven generalizations as
was the negligent performance of the telephone service           helpful in distinguishing between tort and contract liability.
contract that the jury found was the proximate cause of          Those which are useful to this case include: (1) obligations
DeLanney's damages. [1] Southwestern Bell breached its           imposed by law are tort obligations; (2) misfeasance or
                                                                 negligent affirmative conduct in the performance of a
Page 501                                                         promise generally subjects an actor to tort liability as well
                                                                 as contract liability for physical harm to persons and
duty to perform the telephone service contract with care,
                                                                 tangible things; (3) recovery of intangible economic losses
skill and faithfulness. The negligent performance of the
                                                                 is normally determined by contract law; and (4) there is no
telephone service contract caused damages to DeLanney
                                                                 tort liability for nonfeasance, i.e., for failing to do what one
that were unrelated to the subject of the telephone service
                                                                 has promised to do in the absence of a duty to act apart
contract. If Bell had not negligently performed the
                                                                 from the promise made. PROSSER AND KEETON at
telephone service contract, DeLanney's advertisement
                                                                 656-57.
would have been published as it had been in the past.
                                                                 [1] The following question was submitted to the jury over
     To confine DeLanney to recovery in contract, when his
                                                                 Bell's objections:
damages clearly extend beyond the contract itself, is to step
back into the days of the common-law forms of action.            Do you find from a preponderance of the evidence that
Originally, forms of action were rigidly prescribed, and a       there was a disparity of bargaining power between the
plaintiff had no cause of action unless he could fit his claim   plaintiff and the defendant in negotiating the contract for
"into the form of some existing and recognized writ." W.         Yellow Page advertising.
Keeton, D. Dobbs, R. Keeton & D. Owen, Prosser and
Keeton on the Law of Torts § 6 at 28 (5th ed. 1984); see         Instruction: A disparity of bargaining power exists when
Nelson v. Krusen, 678 S.W.2d 918, 932 (Tex.1984)                 one party has no real choice in accepting an agreement
(Kilgarlin, J., concurring and dissenting). Texas, though,
limiting the liability of the other party.                      Tel. Co., 219 Kan. 755, 549 P.2d 903, 906-07 (1976).

The jury found there was a disparity of bargaining power.       [6] As a framework for decision commentators and courts
                                                                have generally followed the analysis proposed by Professor
[2] Here we are concerned with unconscionability under the      Arthur Leff. Leff, Unconscionability and the Code--The
common law as distinguished from unconscionability under        Emperor's New Clause, 115 U.Pa.L.Rev. 485, 487 (1967).
the DTPA. The DTPA defines "unconscionable action or            Professor Leff labelled the different types of
course of action" and, unlike the common law, makes it an       unconscionability as "substantive" and "procedural,"
issue of fact for the jury. Tex.Bus. & Com.Code Ann. §          distinguishing the content of the contract from the process
17.45(5); see also Chastain v. Koonce, 700 S.W.2d 579,          by which the allegedly offensive terms found their way into
582 (Tex.1985).                                                 the agreement.

[3] The comment to UCC section 2.302 provides:                  [1] In its answers to the special issues, the jury specifically
                                                                found Bell to be negligent.
The basic test is whether, in light of the general commercial
background and the commercial needs of the particular           Issue (1)(a) Whether Bell was negligent in failing to inform
trade or case, the clauses involved are so one-sided as to be   DeLanney that the installation of a rotary system would
unconscionable under the circumstances existing at the time     cancel the Yellow Pages listing.
of the making of the contract.... The principal is one of the
prevention of oppression and unfair surprise ... and not of     Issue (1)(b) Whether Bell was negligent in failing to
disturbance of allocation of risks because of superior          adequately train and inform its employees that an order to
bargaining power.                                               cancel one of the telephone numbers would cancel the
                                                                Yellow Pages advertisement; and
Tex.Bus. & Com.Code Ann. § 2.302 comment 1.
                                                                Issue (1)(c) Whether Bell was negligent in failing to
[4] A comment to section 208 of the Restatement provides:       recognize that the automatic cancellation of the Yellow
                                                                Pages advertisement would occur when the billing
The determination that a contract or term is or is not          procedure was changed.
unconscionable is made in the light of its setting, purpose
and effect. Relevant factors include weaknesses in the          The jury further found that each of these acts of negligence
contracting process like those involved in more specific        proximately caused DeLanney's injuries.
rules as to contractual capacity, fraud, and other
invalidating causes; the policy also overlaps with rules        ---------
which render particular bargains or terms unenforceable on
grounds of public policy.

RESTATEMENT (SECOND) OF CONTRACTS § 208
comment a (1979).

[5] The Supreme Court of Kansas has identified ten factors
as useful aids in determining unconscionability questions.
They are: (1) the use of printed form contracts drawn by the
party in the strongest economic position, which establish
industry-wide standards offered on a take it or leave it
basis; (2) excessive price; (3) a denial of basic rights and
remedies to a consumer buyer; (4) the inclusion of penalty
clauses; (5) the circumstances surrounding the execution of
the contract, including commercial setting; (6) the hiding of
disadvantageous clauses in a mass of fine print or in
inconspicuous places; (7) phrasing clauses in language that
is incomprehensible to a layman or that diverts his attention
from the problems they raise; (8) an overall imbalance in
the obligations and rights imposed by the bargain; (9)
exploitation of the underprivileged, unsophisticated,
uneducated, and the illiterate; and (10) inequality of
bargaining or economic power. Wille v. Southwestern Bell
Page 913                                                        other parties also joined in the litigation.

811 S.W.2d 913 (Tex. 1991)                                          On July 3, 1988, the district court issued a docket
                                                                control order pursuant to Rule 166
TRANSAMERICAN                    NATURAL               GAS
CORPORATION, Relator,                                           Page 915

v.                                                              of the Texas Rules of Civil Procedure, which set a
                                                                discovery cutoff date of April 3, 1989. The order allowed
Hon. William R. POWELL, Judge of the 80th District              discovery to be conducted beyond that date only upon
Court of                                                        agreement of the parties.

Harris County, Texas, Respondent.                                   On March 7, 1989, Toma noticed the deposition of
                                                                TransAmerican's president, K. Craig Shephard, to take
No. C-9294.                                                     place March 16. Two days later TransAmerican's counsel,
                                                                who at that time was one of the attorneys in its legal
Supreme Court of Texas.
                                                                department, telephoned Toma's counsel to inform him that
                                                                Shephard could not be available on March 16 because of a
June 19, 1991
                                                                previously scheduled deposition in another case. When
Page 914                                                        counsel could not agree on another date for Shephard's
                                                                deposition, TransAmerican filed a motion for protection to
    James Kronzer, Don Henderson, Robert V. Holland, Jr.,       quash the deposition notice and postpone the deposition.
John C. Nabors, Karen Zuckerman, Bill Jones, Kenneth E.         The motion stated that it would be submitted to the trial
McKay and Joe H. Reynolds, Houston, for relator.                court for ruling on March 17. [1] However, the trial court
                                                                did not rule on the motion on that date.
    Michael C. Feehan, Beverly Arleen Sandifer, G. Byron
Sims, Daniel J. Kasprzak, Jonathan C.S. Cox, Ann Ryan                Beginning April 3, the deadline set by the district court
Robertson and Donald F. Hawbaker, Houston, for                  for completion of discovery, the parties' smoldering
respondent.                                                     discovery problem started to flare. On that date, counsel for
                                                                TransAmerican and Toma agreed that Shephard would be
     OPINION                                                    deposed after April 10 on a date to be agreed upon. Despite
                                                                this understanding, counsel again failed to agree upon a
     HECHT, Justice.                                            date, and on April 19 Toma noticed Shephard's deposition
                                                                for May 2 without TransAmerican's consent. On April 20,
     In this original mandamus proceeding, TransAmerican
                                                                upon receipt of this second deposition notice,
Natural Gas Corporation seeks to compel the Hon. William
                                                                TransAmerican's counsel wrote a letter to Toma's counsel
R. Powell, Judge of the 80th District Court, to set aside his
                                                                informing him that Shephard would not be available May 2
orders imposing sanctions for discovery abuse. The district
                                                                because, as before, he already had a deposition in another
court struck TransAmerican's pleadings, dismissed its
                                                                matter scheduled for that day. Toma's counsel replied by
action against Toma Steel Supply, Inc., and granted Toma
                                                                letter that he would not agree to reschedule the deposition.
an interlocutory default judgment on its counterclaim
                                                                On April 27, TransAmerican reset the date for submission
against TransAmerican, reserving for trial only the amount
                                                                of its motion for protection to the trial court for ruling to
of damages due Toma. We conditionally grant the writ of
                                                                May 12. By this time, of course, the motion was moot, and
mandamus.
                                                                it is not apparent why TransAmerican continued to seek a
                                                                ruling. TransAmerican did not move the trial court to
     I
                                                                postpone the May 2 deposition.
     The underlying case is a complex, multi-party action
                                                                     Also on April 27, Shephard's other deposition
arising out of Toma's sale of allegedly defective pipe casing
                                                                scheduled for May 2 was cancelled, leaving him available
to TransAmerican. TransAmerican withheld payment for
                                                                to be deposed by Toma. However, TransAmerican's counsel
the casing, apparently some $2.3 million, and sued Toma in
                                                                did not advise Toma's counsel that Shephard's schedule had
April 1987 for damages allegedly caused by its use. Toma
                                                                changed so that he could be deposed on May 2 after all, nor
counterclaimed for $52 million damages resulting from
                                                                did Shephard appear on May 2 as noticed. TransAmerican
TransAmerican's refusal to pay for the casing. Numerous
                                                                ascribes its failure to produce Shephard for deposition to
miscommunication concerning his schedule changes                  with proper discovery requests or to obey an order to
between attorneys in its legal department. Toma alleges that      provide or permit discovery, ... the court in which the action
Shephard's failure to appear was purposeful and part of           is pending may, after notice and hearing, make such orders
TransAmerican's intentional obstruction of the discovery          in regard to the failure as are just, and among others the
process.                                                          following:

     On May 8, Toma filed a response to TransAmerican's           .....
March 14 motion for protective order, even though it
acknowledged that that motion was moot. Toma included in              (5) An order striking out pleadings or parts thereof, ...
its response, however, a motion for sanctions against             or dismissing with or without prejudice the action or
TransAmerican based on Shephard's failure to appear at the        proceedings or any part thereof, or rendering a judgment by
May 2 deposition. In return, TransAmerican filed its own          default against the disobedient party....
sanctions motion on May 11, urging that Toma's motion for
sanctions was itself an abuse of the discovery process.               At the time of the district court's rulings, paragraph 3 of
Toma's and TransAmerican's motions for sanctions both             Rule 215 stated in part:
stated that they would be submitted to the court for ruling
                                                                       If the court finds a party is abusing the discovery
on May 12, the date set for submission of TransAmerican's
                                                                  process in seeking, making or resisting discovery ..., then
original motion for protection.
                                                                  the court in which the action is pending may impose any
     On May 12, without hearing oral argument, [2] the            sanction authorized by paragraphs (1), (2), (3), (4), (5), and
district court signed an order                                    (8) of paragraph 2b of this rule. Such order of sanction shall
                                                                  be subject to review on appeal from the final judgment. [4]
Page 916
                                                                  Page 917
granting Toma's motion for sanctions and striking
TransAmerican's pleadings in their entirety. TransAmerican            Both paragraphs leave the choice of sanctions to the
moved for reconsideration, which the district court denied        sound discretion of the trial court. Bodnow Corp. v. City of
after hearing argument of counsel but refusing to hear any        Hondo, 721 S.W.2d 839, 840 (Tex.1986). However,
evidence. Based upon his May 12 order striking                    paragraph 2(b) explicitly requires that any sanctions
TransAmerican's pleadings, the district court issued an           imposed be "just". By referring to paragraph 2(b),
order on October 6 dismissing TransAmerican's action with         paragraph 3 incorporates the same requirement. Thus,
prejudice, rendering an interlocutory default judgment            whether the district court imposed sanctions under
against TransAmerican and in favor of Toma on its                 paragraph 2(b) or paragraph 3, we consider whether those
counterclaim, and setting the case for trial solely on the        sanctions were just. [5] See Bodnow, 721 S.W.2d at 840.
issue of the damages to be awarded Toma.
                                                                       In our view, whether an imposition of sanctions is just
     TransAmerican sought mandamus relief from the court          is measured by two standards. First, a direct relationship
of appeals to compel the district court to set aside his May      must exist between the offensive conduct and the sanction
12 and October 6 orders. A divided court of appeals denied        imposed. This means that a just sanction must be directed
TransAmerican leave to file its petition for writ of              against the abuse and toward remedying the prejudice
mandamus in an unpublished per curiam opinion. [3]                caused the innocent party. It also means that the sanction
TransAmerican then moved for leave to file its petition in        should be visited upon the offender. The trial court must at
this Court. We granted the motion in order to review the          least attempt to determine whether the offensive conduct is
propriety of the discovery sanctions imposed by the district      attributable to counsel only, or to the party only, or to both.
court.                                                            This we recognize will not be an easy matter in many
                                                                  instances. On the one hand, a lawyer cannot shield his client
    II                                                            from sanctions; a party must bear some responsibility for its
                                                                  counsel's discovery abuses when it is or should be aware of
     The sanctions imposed by the district court are among        counsel's conduct and the violation of discovery rules. On
those authorized for various discovery abuses under Rule          the other hand, a party should not be punished for counsel's
215 of the Texas Rules of Civil Procedure. The district           conduct in which it is not implicated apart from having
court did not specify what provision of Rule 215 it relied        entrusted to counsel its legal representation. The point is,
upon. The portions of the rule applicable to the                  the sanctions the trial court imposes must relate directly to
circumstances here are paragraphs 2(b)(5) and 3. Paragraph        the abuse found.
2(b)(5) provides in part:
                                                                      Second, just sanctions must not be excessive. The
    If a party or an officer ... of a party ... fails to comply   punishment should fit the crime. A sanction imposed for
discovery abuse should be no more severe than necessary to       [7]
satisfy its legitimate purposes. It follows that courts must
consider the availability of less stringent sanctions and             In the present case, it is not clear whether
whether such lesser sanctions would fully promote                TransAmerican or its counsel or both should be faulted for
compliance.                                                      Shephard's failure to attend his deposition. Moreover, there
                                                                 is nothing in the record to indicate that the district court
    These standards set the bounds of permissible sanctions      considered imposition of lesser sanctions or that such
under Rule 215 within which the trial court is to exercise       sanctions would not have been effective. If anything, the
sound discretion. [6] The imposition of very severe              record strongly suggests that lesser sanctions should have
sanctions is limited, not only by these standards, but by        been utilized and perhaps would have been effective. The
constitutional due process. The sanctions the district court     district court could have ordered Shephard's deposition for a
imposed against TransAmerican are the most devastating           specific date and punished any failure to comply with that
                                                                 order by contempt or another sanction. He also could have
Page 918                                                         taxed the costs of the deposition against TransAmerican and
                                                                 awarded Toma attorney fees. The range of sanctions
a trial court can assess against a party. When a trial court     available to the district court under Rule 215 is quite broad.
strikes a party's pleadings and dismisses its action or          The district court dismissed TransAmerican's claims against
renders a default judgment against it for abuse of the           Toma and rendered default judgment for Toma on its
discovery process, the court adjudicates the party's claims      counterclaim solely because, as the record before us
without regard to their merits but based instead upon the        establishes, TransAmerican's president failed to present
parties' conduct of discovery. "[T]here are constitutional       himself for his deposition. [8] Nothing in the
limitations upon the power of courts, even in aid of their
own valid processes, to dismiss an action without affording      Page 919
a party the opportunity for a hearing on the merits of his
cause." Societe Internationale v. Rogers, 357 U.S. 197,          record before us even approaches justification for so severe
209-10, 78 S. Ct. 1087, 1094, 2 L. Ed. 2d 1255 (1958), citing       a sanction. [9]
Hammond Packing Co. v. Arkansas, 212 U.S. 322, 350-51,
29 S. Ct. 370, 379-80, 53 L. Ed. 530 (1909), and Hovey v.               We recognize that we affirmed a similar sanction in
Elliott, 167 U.S. 409, 17 S. Ct. 841, 42 L. Ed. 215 (1897);        Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238,
accord Insurance Corp. of Ireland, Ltd. v. Compagnie des         241-42 (Tex.1985), cert. denied, 476 U.S. 1159, 106 S.Ct.
Bauxites de Guinee, 456 U.S. 694, 705-06, 102 S. Ct. 2099,        2279, 90 L. Ed. 2d 721 (1986). In that case the trial court
2105-06, 72 L. Ed. 2d 492 (1982). Discovery sanctions              struck defendant's answer and rendered a default judgment
cannot be used to adjudicate the merits of a party's claims or   against it based upon the failure of defendant and his
defenses unless a party's hindrance of the discovery process     employees to appear for their depositions on three separate
justifies a presumption that its claims or defenses lack         occasions without explanation. Even assuming that Downer
merit. Insurance Corp. of Ireland, 456 U.S. 694, 705-06,         was correctly decided, the instant case does not show the
102 S. Ct. 2099, 2105-06; Rogers, 357 U.S. at 209-10, 78          same pattern of abuse present in Downer. Furthermore,
S.Ct. at 1094; Hammond Packing, 212 U.S. at 350-51, 29           Downer 's approval of the sanction of default judgment was
S.Ct. at 379-80. However, if a party refuses to produce          specifically based upon the facts of that case, and the
material evidence, despite the imposition of lesser              holding in that case is limited to those facts. Rendition of
sanctions, the court may presume that an asserted claim or       default judgment as a discovery sanction ought to be the
defense lacks merit and dispose of it. Insurance Corp. of        exception rather than the rule.
Ireland, 456 U.S. at 705-06, 102 S.Ct. at 2105-06. Although
punishment and deterrence are legitimate purposes for                 There are cases, of course, when striking pleadings,
sanctions, National Hockey League v. Metropolitan Hockey         dismissal, rendition of default and other such extreme
Club, Inc., 427 U.S. 639, 96 S. Ct. 2778, 49 L. Ed. 2d 747          sanctions are not only just but necessary. See National
(1976) (per curiam); Bodnow Corp. v. City of Hondo, 721          Hockey League, 427 U.S. at 642, 96 S.Ct. at 2780. In this
S.W.2d at 840 they do not justify trial by sanctions,            case, however, the record before us establishes that the
Hammond Packing, 212 U.S. at 350-51, 29 S.Ct. at 379-80;         severe sanctions the district court imposed against
Hovey, 167 U.S. at 413-14, 17 S.Ct. at 843. Sanctions            TransAmerican were manifestly unjust in violation of Rule
which are so severe as to preclude presentation of the merits    215.
of the case should not be assessed absent a party's flagrant
                                                                       III
bad faith or counsel's callous disregard for the
responsibilities of discovery under the rules. See National          We next consider whether TransAmerican has an
Hockey League, 427 U.S. at 642-643, 96 S.Ct. at 2780-81.         adequate remedy by appeal. If it does, then the writ of
mandamus must be denied. State v. Walker, 679 S.W.2d                    GONZALEZ, Justice concurring.
484, 485 (Tex.1984). Rule 215, paragraph 3 states that
orders imposing discovery sanctions "shall be subject to                  I concur with the court's opinion and judgment. The
review on appeal from the final judgment." Today we have            sanction in this case was clearly out of proportion to the
held in Braden v. Downey, 811 S.W.2d 922 (1991), that               offense committed by relator and the opinion appropriately
sanctions should not be imposed in such a way that                  disposes of the present controversy. However, neither our
effective appellate review is thwarted. Whenever a trial            rules nor the court have set guidelines for imposing
court imposes sanctions which have the effect of                    sanctions. They envision a large degree of discretion vested
adjudicating a dispute, whether by striking pleadings,              in the trial court and innovation should not be discouraged
dismissing an action or rendering a default judgment, but           in attempting to fashion an appropriate sanction. However,
which do not result in rendition of an appealable judgment,         trial judges should not be trigger happy. They should first
then the eventual remedy by appeal is inadequate.                   issue orders compelling discovery. In all but the most
Specifically, in this case TransAmerican does not have an           egregious circumstances, other lesser sanctions should be
adequate remedy by appeal because it must suffer a trial            tried first before imposing the ultimate sanction of the
limited to the damages claimed by Toma. The entire                  "death penalty" (dismissal of pleadings). Cases should be
conduct of the litigation is skewed by the removal of the           won or lost on their merits, not on discovery or sanctions
merits of TransAmerican's position from consideration and           gamesmanship. Thus I write separately to offer additional
the risk that the trial court's sanctions will not be set aside     guidance to the bench and bar.
on appeal. Resolution of matters in dispute between the
parties will be influenced, if not dictated, by the trial court's        In assessing sanctions under Rule 215 of the Texas
determination of the conduct of the parties during                  Rules of Civil Procedure, the punishment must fit the crime.
discovery. Some award of damages on Toma's counterclaim             Furthermore, a sanction should be a function of both the
is likely, leaving TransAmerican with an appeal, not on             facts presented and the purpose of the rule the court is
whether it should have been liable for those damages, but           enforcing. G. JOSEPH, SANCTIONS: THE FEDERAL
on whether it should have been sanctioned for discovery             LAW OF LITIGATION ABUSE § 16 (1989). If this is not
abuse. This is not an effective appeal.                             clear from the record, the trial court is more apt to be
                                                                    second guessed by the appellate courts.
Page 920
                                                                        The Litigation Section of the American Bar Association
     We therefore hold that when a trial court imposes              promulgated the following standards and guidelines to be
discovery sanctions which have the effect of precluding a           considered when determining whether to assess sanctions
decision on the merits of a party's claims--such as by              under Federal Rule 11:
striking pleadings, dismissing an action, or rendering
default judgment--a party's remedy by eventual appeal is                a. the good faith or bad faith of the offender;
inadequate,    unless   the    sanctions    are   imposed
                                                                         b. the degree of willfulness, vindictiveness, negligence,
simultaneously with the rendition of a final, appealable
                                                                    or frivolousness involved in the offense;
judgment. If such an order of sanctions is not immediately
appealable, the party may seek review of the order by                   c. the knowledge, experience, and expertise of the
petition for writ of mandamus. Although not every such              offender;
case will warrant issuance of the extraordinary writ, this
case does. TransAmerican's remedy by appeal from a final                 d. any prior history of sanctionable conduct on the part
judgment eventually to be rendered in Toma's favor is               of the offender;
inadequate.
                                                                        e. the reasonableness and necessity of the out-of-pocket
***                                                                 expenses incurred by the offended person as a result of the
                                                                    misconduct;
     Accordingly, we hold that TransAmerican is entitled to
the mandamus relief it seeks. We are confident that Judge                f. the nature and extent of prejudice, apart from
Powell will vacate his orders of May 12 and October 6,              out-of-pocket expenses, suffered by the offended person as
after which he may conduct further proceedings consistent           a result of the misconduct;
with this opinion. Our writ of mandamus will issue only in
the event he fails promptly to comply.                                   g. the relative culpability of client and counsel, and the
                                                                    impact on their privileged relationship of an inquiry into
    Concurring opinions by GONZALEZ and MAUZY, JJ.                  that area;

                                                                        h. the risk of chilling the specific type of litigation
involved;                                                            (7) An order precluding the litigation of certain issues;

     i. the impact of the sanction on the offender, including        (8) An order precluding the litigation of certain claims
the offender's ability to pay a monetary sanction;               or defenses;

    j. the impact of the sanction on the offended party,             (9) Dismissal of the action or entry of a
including the offended person's need for compensation;
                                                                 Page 922
Page 921
                                                                 default judgment. [5]
    k. the relative magnitude of sanction necessary to
achieve the goal or goals of the sanction;                           ABA Standards and Guidelines, 121 F.R.D. at 124.

    l. burdens on the court system attributable to the                Sanctions are tools to be used by a court to right a
misconduct, including consumption of judicial time and           wrong committed by a litigant. Any given sanction should
incurrence of juror fees and other court costs;                  be designed to accomplish that end. Sanctions can be
                                                                 compensatory, punitive or deterrent in nature. See G.
    m. the degree to which the offended person attempted         JOSEPH, SANCTIONS: THE FEDERAL LAW OF
to mitigate any prejudice suffered by him or her;                LITIGATION ABUSE § 16 (1989). The court should assess
                                                                 the type of sanction most likely to prevent a recurrence of
    n. the degree to which the offended person's own             the offending conduct. The court should also consider the
behavior caused the expenses for which recovery is               relative culpability of the counsel and client when selecting
sought.... [1]                                                   the appropriate sanction. See, e.g., Westmoreland v. CBS,
                                                                 Inc., 770 F.2d 1168, 1178-79 (D.C.Cir.1985).
     American Bar Association, Standards and Guidelines
for Practice Under Rule 11 of the Federal Rules of Civil              The foregoing guidelines are simply suggestions to
Procedure, reprinted in 121 F.R.D. 101 (1988).                   guide a trial court in its struggle to make the punishment fit
                                                                 the crime.
     I recognize that Federal Rule 11 is not comparable to
Rule 215 of Texas Rules of Civil Procedure and that                  MAUZY, Justice, concurring.
Federal Rule 11 does not specify the types of sanctions that
may be imposed. However, we do not have to re-invent the              I concur in the Court's judgment, but write separately to
wheel. In my opinion, the ABA guidelines developed for           outline the guidelines which I feel are necessary to explain
determining when to assess sanctions under Federal Rule 11       the parameters of our decision today. Whether or not a
are instructive whenever sanctions are imposed or denied         sanction is appropriate must be determined by the particular
under Texas Rule 215.                                            facts of the individual case. In order to determine the
                                                                 appropriate sanctions in each case, the trial court should
     As the court notes, the range of sanctions available to a   engage in a three-part inquiry. First, the trial court must
trial court under Rule 215 is quite broad. Some of these         resolve the question of whether the offending conduct
sanctions include:                                               actually constitutes an abuse of the discovery process.
                                                                 Second, the court must determine who is actually
    (1) A reprimand of the offender; [2]                         responsible for the offensive conduct and the extent of their
                                                                 culpability. Third, the court must determine what sanctions
    (2) Mandatory continuing legal education;
                                                                 would be appropriate under the circumstances. The trial
    (3) A fine; [3]                                              court should impose sanctions only upon those who actually
                                                                 abuse the discovery process and only in a manner consistent
    (4) An award of reasonable expenses, including               with the goals of deterring such conduct and correcting the
reasonable attorney's fees, incurred as a result of the          resulting injustice. Courts must strike a careful balance in
misconduct;                                                      imposing sanctions. On one hand, the trial court should
                                                                 make clear that abuse of the discovery process is
    (5) Reference of the matter to the appropriate attorney      reprehensible and completely contrary to the orderly
disciplinary or grievance authority; [4]                         administration of justice. On the other hand, the trial court
                                                                 must avoid rulings that would serve to chill vigorous
    (6) An order precluding the introduction of certain          advocacy. In making its determination as to what sanctions
evidence;                                                        would be appropriate in a particular case, the court should
                                                                 also consider the offending behavior in terms of the duty
                                                                 owed the court system. Attorneys, as officers of the court,
should be held to a higher standard than others. Parties,         case as relief from sanctions. Street v. Second Court of
however, should only be sanctioned for conduct in which           Appeals, 715 S.W.2d 638, 639-640 (Tex.1986).
they are actually implicated. For example, a party which, by
virtue of contract, incapacity or incompetency, or the very       The motion for leave is overruled.
nature of the lawsuit, has only limited control of his
attorney and the course of litigation, should not be                  PER CURIAM
sanctioned for actions over which it had no control. Courts
                                                                  Motion for leave to file petition for writ of mandamus
should strive to curb abuses of the judicial process by
                                                                  overruled June 16, 1989, and Opinion filed June 29, 1989.
litigants and their attorneys, and should impose sanctions
upon those who abuse the process in order to deter such           Panel consists of Chief Justice J. Curtiss Brown and
misconduct. However, trial judges have an obligation, when        Justices Junell and Draughn.
imposing sanctions, to ensure that the punishment must fit
the crime and is imposed only upon the actual offender or         Do Not Publish. TEX.R.APP.P. 90.
offenders.
                                                                  Justice Draughn would grant.
---------
                                                                  [4] Rule 215, paragraph 3 was amended, effective
Notes:                                                            September 1, 1990, to require that sanctions be imposed
                                                                  only after notice and hearing and only as "appropriate".
[1] The local rules governing civil cases in Harris County        (Similar amendments were made at the same time in Rule
provide: "Motions shall state a date of submission which          13, TEX.R.CIV.P.) However, the requirement that sanctions
shall be at least 10 days from filing, except on leave of         be appropriate was implicit in the rule before the
court. The motion will be submitted to the court for ruling       amendment. Koslow's v. Mackie, 796 S.W.2d 700, 703 n. 1
on that date or later." Rule 3.3.2, Local Rules of the Civil      (Tex.1990). In the context of Rule 215, "appropriate" and
Trial Division of the Harris County District Courts (1987).       "just" are equivalent standards.
The March 17 submission date stated in TransAmerican's
motion was only three days from the date of filing of the         [5] TransAmerican contends that Toma's notice to take
motion and the day after the deposition was scheduled.            Shephard's deposition on May 2 was not a "proper"
                                                                  discovery request under Rule 215, paragraph 2(b) because it
[2] Rule 3.3.4 of the Local Rules of the Civil Trial Division     issued after the discovery cutoff date set by Judge Powell.
of the Harris County District Courts (1987) allows any            Toma responds that its request was proper because
party to request oral argument on a motion if the party           TransAmerican agreed that Shephard could be deposed
"views it as necessary." Neither TransAmerican nor Toma           after the cutoff, as permitted by the district court's
appears to have requested oral argument on any of their           scheduling order. TransAmerican answers even if there
motions before May 12.                                            were a binding agreement to depose Shephard after the
                                                                  cutoff, no date was ever agreed to.
[3] Because of its brevity, we reproduce the court of
appeals' opinion below rather than order it published as we       TransAmerican also contends that the hearing required by
would ordinarily do when granting relief:                         Rule 215, paragraph 2(b) is an oral hearing, not merely a
                                                                  submission of the issue on written motion and response, and
      OPINION
                                                                  that it was denied such a hearing before the imposition of
Relator asks us to order respondent to withdraw his order         sanctions. Further, TransAmerican argues that the notice
imposing sanctions. This is a breach of contract case             required by Rule 215, paragraph 2(b) is at least ten days'
involving the failure of defective casing on gas wells.           notice, and that Toma's motion for sanctions was filed only
Relator filed suit against Toma Steel Supply, Inc. Toma           four days before the district court ruled on it. Toma
filed a counterclaim against relator. Toma filed numerous         responds that TransAmerican did not request an oral
third party claims against suppliers. Those suppliers have        hearing, that an oral hearing was not necessary and is not
filed cross actions against Toma.                                 required by the rule, and that in any event, TransAmerican
                                                                  received an oral hearing on its motion to reconsider, thus
On May 12, 1989, respondent granted Toma's motion for             satisfying any requirement of the rule. Toma also argues
sanctions against relator, striking relator's pleadings for the   that Rule 215, paragraph 2(b), requires only reasonable
failure of its president, K. Craig Shephard, to appear for a      notice, and that four days' notice to TransAmerican in this
May 2, 1989, deposition. Relator argues respondent's action       case was reasonable because TransAmerican was able to
constitutes an abuse of discretion.                               respond fully to the motion before the district court ruled.

A writ of mandamus is not properly granted in an ordinary         Our resolution of the matter before us does not require that
we address these arguments, and we express no view on any          helpful for appellate review of sanctions, especially when
of them.                                                           severe, to have the benefit of the trial court's findings
                                                                   concerning the conduct which it considered to merit
[6] JUSTICE GONZALEZ' concurring opinion sets out                  sanctions, and we commend this practice to our trial courts.
guidelines for assessing sanctions which have been                 See Thomas v. Capital Security Services, Inc., 836 F.2d
identified in the context of applying Rule 11, FED.R.CIV.P.        866, 882-883 (5th Cir.1988). Precisely to what extent
Post, at 920-922. Our analysis of this case does not require       findings should be required before sanctions can be
us to consider whether those factors or others are                 imposed, however, we leave for further deliberation in the
appropriate considerations in imposing sanctions. However,         process of amending the rules of procedure.
we do subscribe to the principle, inherent in the effort to
state guidelines, that the trial court's discretion in assessing   [1] The omitted guidelines are specifically tailored to
sanctions must be guided by a reasoned analysis of the             address the concerns of Federal Rule of Civil Procedure 11
purposes sanctions serve and the means of accomplishing            and therefore are not appropriate for inclusion in this
those purposes.                                                    general discussion of sanctions.

[7] National Hockey League cites Rogers but not Hammond            [2] Although this is typically the least serious sanction
Packing, and does not refer to the rule of the latter that         available, some courts have attempted to use the reprimand
discovery sanctions cannot be used to dispose of the merits        as a method of embarrassing the lawyer who has committed
of a claim or defense unless the offending party's                 the offense. For example the court could require the
withholding of evidence warrants a presumption that its            reprimanded lawyer to provide a certified copy of the
claim or defense is without merit. Nevertheless, the conduct       reprimand order to the members of his law firm. See
sanctioned in National Hockey League was so egregious              Huettig & Schromm, Inc. v. Landscape Contractors
that it clearly would have justified the same ultimate             Council, 582 F. Supp. 1519, 1522-23 (N.D.Cal.1984), aff'd,
sanctions under Hammond Packing. The Hammond                       790 F.2d 1421 (9th Cir.1986).
Packing rule is not in doubt. That it has not been abandoned
is further demonstrated in Insurance Corp. of Ireland, which       [3] If a monetary fee is imposed, other factors should be
came after National Hockey League and reasserted the rule          considered by the trial court, including:
of Hammond Packing.
                                                                   (1) The time and labor involved;
[8] Toma's motion for sanctions was based solely upon
Shephard's failure to attend his deposition. As Toma itself        (2) The novelty and difficulty of the questions involved;
stated in its response to TransAmerican's motion to refile its
                                                                   (3) The skill requisite to perform the legal service properly;
pleadings after they were struck: "[O]n May 12, 1989, the
Court granted [Toma's] Motion for Sanctions against                (4) The customary fee;
[TransAmerican] for TransAmerican's refusal to agree to a
date certain for Mr. Craig Shephard's deposition and for the       (5) Whether the fee is fixed or contingent;
failure of its President, Mr. Craig Shephard, to appear for a
properly noticed deposition on May 2, 1989, and struck             (6) Time limitations imposed by the client or the
TransAmerican's        pleadings     in   their     entirety."     circumstances;
Notwithstanding this rather clear statement in the trial court,
during this mandamus proceeding Toma has suggested that            (7) The amount involved and the results obtained;
the district court properly sanctioned TransAmerican
because it had abused the discovery process on other               (8) The experience, reputation and ability of the attorneys;
occasions. TransAmerican disputes Toma's assertions.               and
While the district court would have been entitled to
                                                                   (9) Awards in similar cases;
consider a pattern of discovery abuse in imposing sanctions,
the record does not reveal the existence of any such pattern,
                                                                   ABA Standards and Guidelines, 121 F.R.D. at 125-26.
Toma did not complain of one, and the district court does
not appear to have found one.                                      The authority of a trial judge to assess a monetary fine as a
                                                                   sanction for abuse of the discovery process was disputed in
[9] The district court made no findings to support the
                                                                   Owens-Corning Fiberglas Corp. v. Caldwell, 807 S.W.2d
sanctions imposed. Rule 215 does not require a trial court to
                                                                   413, 415 (Tex.App.--Houston [1st Dist.] 1991, orig.
make findings before imposing discovery sanctions, and we
                                                                   proceeding). The court of appeals held that the trial court
do not add such a requirement here. We note only that we
                                                                   had no such authority under rule 215(3). However, in
do not have the benefit of any explanation by the district
                                                                   Braden v. Downey, 811 S.W.2d 922 (Tex.1991, orig.
court for the severity of its ruling. It would obviously be
                                                                   proceeding), we held that the trial judge did have such
authority. A few days ago, the United States Supreme Court
held that federal courts had inherent power to impose
monetary sanctions on a litigant for bad-faith conduct.
Chambers v. Nasco, Inc., 501 U.S. 32, 111 S. Ct. 2123, 115
L. Ed. 2d 27 (1991).

[4] Sanctionable conduct may not necessarily be an ethical
violation, however. See Golden Eagle Distrib. Corp. v.
Burroughs Corp., 801 F.2d 1531, 1538-39 (9th Cir.1986).

[5] These remedies are essentially equivalent in degree
depending on whether the plaintiff or the defendant is the
offending party.

---------
Page 87                                                           denied Cox's claim of partnership, and claimed that Cox
                                                                  was only hired to work by the day and that he was paid
827 S.W.2d 87 (Tex.App. —Corpus Christi 1992)                     accordingly.

Richard D. LANFEAR, Relator,                                           Shortly after receiving these responses from Eads, Cox
                                                                  sued Lanfear in the same action. Lanfear answered with a
v.                                                                general denial, asserted the defense of statute of frauds, and
                                                                  filed a counterclaim alleging that the suit was malicious.
 Honorable Robert BLACKMON, Presiding Judge of
                                                                  Cox sent his first set of interrogatories and admissions to
the 117th
                                                                  Lanfear on March 12, 1991, which included requests for
                                                                  production of documents.
District Court of Nueces County, Texas, Respondent.
                                                                       After Lanfear responded incompletely to the
No. 13-92-038-CV.
                                                                  interrogatories, Cox informed him by letter that five of the
Court of Appeals of Texas, Thirteenth District, Corpus            answers were incomplete and evasive, and that three of the
Chritsi                                                           responses to the requests for production were inadequate.
                                                                  Lanfear then supplemented his answers to the
March 19, 1992                                                    interrogatories, expanding his answers somewhat. In his
                                                                  response to one interrogatory, he stated that he never sold,
Page 88                                                           transferred, assigned, conveyed or made a gift of any
                                                                  leasehold, overriding royalty or other similar interest in the
    Michael B. Schmidt, Paul Dodson, White, Huseman,              Malo Sueno area. He also designated himself as an expert
Pletcher & Powers, Corpus Christi, for intervenor.                witness.

   M.W. Meredith, Jr., Robert J. Sigler, Clay E. Coalson,              Cox addressed a second set of interrogatories to
Meredith, Donnell & Abernethy, Corpus Christi, for relator.       Lanfear, restating some of the earlier questions that had not
                                                                  been answered, and requesting information concerning the
     Before DORSEY, KENNEDY and SEERDEN, JJ.
                                                                  counterclaim, his net worth, credentials and long distance
                                                                  telephone bills. Lanfear objected to many of these inquiries,
     OPINION
                                                                  and answered some in part.
     DORSEY, Justice.
                                                                       Cox then filed a motion to compel answers to
     Richard Lanfear, Relator, seeks a writ of mandamus,          interrogatories claiming Lanfear's answers were still
complaining of two orders by the Honorable Robert                 incomplete. The trial court heard the motion on two
Blackmon, presiding judge of the 117th district court. Both       separate days which were more than thirty days apart.
orders were sanctions in response to perceived discovery          Lanfear was the only witness to testify at these hearings.
abuses and perjury. The first struck certain defenses and a       The judge indicated at the end of the first part of the hearing
counterclaim, and awarded attorney's fees. The second had         that he was troubled by some of Lanfear's responses.
the effect of a default judgment and imposed a constructive
                                                                       After the first part of the hearing and before the second,
trust in favor of the plaintiff, as well as awarding attorney
                                                                  Lanfear again supplemented his answers, responding in part
fees. We conditionally grant the writ.
                                                                  that he obtained a critical geological log between July and
     Welton Cox, the real party in interest, filed suit against   August, 1989. He also responded concerning his salary and
Lyn Eads seeking an interest in the Malo Sueno oil and gas        arrangement with Tri-C Resources, an associated oil
prospect that Cox claimed they developed together. Cox            company involved in the sale or development of the Malo
pleaded that Eads agreed that they would be 50-50 partners        Sueno prospect. He again stated that he had not sold,
in the prospect                                                   transferred, assigned or conveyed any leasehold, overriding
                                                                  royalty or other similar interest in the Malo Sueno area.
Page 89
                                                                       The trial court found that Lanfear intentionally filed
in exchange for Cox performing land work and obtaining a          evasive and incomplete answers to Cox's interrogatories and
farmout. Eads' answers to interrogatories disclosed that          requests for production. It ordered the material requested by
Eads worked on the project with Richard Lanfear and that          Cox produced, and directed that certain enumerated
Lanfear and Eads were equal partners in the deal. Eads            interrogatories be answered. The court ordered relator to
pay $1,500 in attorney's fees, and struck all of Lanfear's           complained of by relator, we will limit our review to legal
defensive pleadings other than his general denial. Lanfear's         issues, and will assume as correct those factual conclusions
counterclaim was also struck, and a protective order was             found by the court below to support the relief it granted.
granted Lanfear to protect the confidentiality of his maps           The issue is whether the factual conclusions found by Judge
and data.                                                            Blackmon authorize the sanctions imposed by him under
                                                                     the circumstances. In this instance, we will not analyze the
     After the sanctions were imposed, Lanfear filed a third         court's findings that Lanfear answered untruthfully under
supplemental response to the interrogatories. In it he               oath in the second order, or that he intentionally filed
acknowledged that he signed a power of attorney in favor of          incomplete or evasive answers in the first order imposing
Tri-C Resources. This statement appeared to contradict his           sanctions. Rather, we will review whether those findings
previous testimony, given during the second phase of the             support the sanctions imposed.
first sanctions hearing, that he had not transferred or
assigned any interest in the Malo Sueno prospect. As a                    In Transamerican Natural Gas Corp. v. Powell, [3] the
result of this statement, Cox filed a motion for sanctions           Supreme Court set forth in detail the rules to be followed in
pursuant to Rule 215, asserting Lanfear's perjury as a reason        determining if sanctions were properly imposed for
for sanctions.                                                       discovery abuse. First, a direct relationship must exist
                                                                     between the offensive conduct and the sanction imposed. Id.
     A hearing on this motion was held on October 22,                at 917. In this regard, the trial court should attempt to
1991. In its order, the judge found that Lanfear answered            determine if the offensive conduct is attributable to the
untruthfully, under oath and during a prior hearing, about           attorney, the party or both. Second, the sanctions must fit
the sale of his interest in the Malo Sueno Area for $835,000         the crime; they must not be excessive. Id. at 917. Sanctions
through an agent. The court held such conduct to constitute          which are so severe that they preclude presentation on the
flagrant bad faith in the exercise of Lanfear's discovery            merits should not be assessed absent a party's bad faith or
responsibilities, and an abuse of discovery under                    counsel's flagrant disregard for the responsibilities of
Tex.R.Civ.P. 215. The trial court granted the motion for             discovery under the rules. Discovery sanctions should not
sanctions, entering an order which had the effect of entering        be used to adjudicate the merits of a claim or defense unless
a default against relator. Lanfear was required to pay               a party's obstruction of the discovery process justifies the
$10,000.00 in attorney's fees, and the court ordered a               presumption that the claim or defense lacks merit. Id. at
                                                                     918.
Page 90
                                                                          The first sanctions struck Lanfear's counterclaim and
constructive trust on the amount of money relator was paid           affirmative defense, and charged him with $1500 of Cox's
for his involvement with the Malo Sueno project.                     attorney's fees. Lanfear was punished because he
                                                                     intentionally filed incomplete or evasive answers when
     Relator Lanfear seeks a writ of mandamus compelling
                                                                     responding to interrogatories. The order prevented Lanfear
Judge Blackmon to withdraw his two orders imposing
                                                                     from presenting his counterclaim and his affirmative
sanctions. Mandamus will issue to compel the performance
                                                                     defense of statute of frauds, thereby adjudicating those
of a ministerial act or duty [1], or to correct a clear abuse of
                                                                     matters without a hearing on their merits. Transamerican
discretion [2]. A trial court clearly abuses its discretion "if it
                                                                     instructs that in order to strike pleadings, the party's
reaches a decision so arbitrary and unreasonable as to
                                                                     obstruction of the discovery process must be so blatant that
amount to a clear and prejudicial error of law." Johnson v.
                                                                     it justifies the presumption that the claim or defense lacks
Fourth Court of Appeals, 700 S.W.2d 916, 917 (Tex.1985).
                                                                     merit. Transamerican, 811 S.W.2d at 918. Nothing in the
     Factual issues decided by the trial court, or other issues      record indicates that the trial court made any attempt to
in which the judge has discretion, will not be disturbed             determine whether the client or the lawyer was the one at
unless the evidence is such that the court could have                fault. No previous orders compelling discovery or relating
reached only the contrary decision. Johnson, 700 S.W.2d at           to discovery had been entered. That the answers were
918. However, a trial court's decisions on matters of law are        incomplete or intentionally evasive is not
not afforded the same deference as its factual conclusions.
                                                                     Page 91
A "clear failure by the trial court to analyze or apply the law
correctly will constitute an abuse of discretion, and may            such an obstruction of discovery to justify the conclusion
result in appellate reversal by extraordinary writ." Walker v.       that the claim or defense lacked merit without more. The
Packer, 827 S.W.2d 833, 840 (Tex.1992), citing Joachim,              "crime" did not justify the punishment. The trial court
815 S.W.2d at 240.                                                   abused its discretion by striking Lanfear's pleadings in its
                                                                     first sanction order.
    In reviewing the propriety of the two sanction orders
     Cox argues that complaints concerning the first               22, 1991 and October 24, 1991. Mandamus will issue only
sanction order have been waived by the relator. We agree           if the trial court fails to comply.
with regard to the payment of attorney's fees and the
striking of his counterclaim. In relator's motion, entitled "...   ---------
Motion for Rehearing of Plaintiff's Motion to Compel and
for Sanctions," relator specifically stated that he accepted       Notes:
the rendition of $1,500 in attorney's fees and does not
                                                                   [1] See Wortham v. Walker, 133 Tex. 255, 128 S.W.2d
contest the striking of his counterclaim. Relator has waived
                                                                   1138, 1150 (1939).
his complaint on those issues.
                                                                   [2] See Joachim v. Chambers, 815 S.W.2d 234, 237
     However, in that same motion, relator prayed that the
                                                                   (Tex.1991).
trial court modify the order striking relator's statute of
frauds defense. This issue has not been waived.                    [3] 811 S.W.2d 913 (Tex.1991).
Accordingly, the first sanction order is modified, omitting
as a sanction the striking of Lanfear's affirmative defenses.      [4] The order here does not purport to be a final judgment.
                                                                   No language exists indicating that the trial court intended it
     Relator also argues that the trial court abused its           as such. In fact, the court indicated that it was imposing the
discretion by imposing the second sanctions order, which           trust but was waiting to require the payment of the money
entered a default judgment against him and imposed a               until additional matters could be addressed.
constructive trust on the monies he received from his
involvement with the Malo Sueno project. The trial court's         ---------
order recites that the sanctions were imposed because
relator answered untruthfully in a prior hearing before the
trial court concerning the sale of his interest in the Malo
Sueno area. The court found that conduct to be in flagrant
bad faith in the exercise of his responsibility for discovery,
an abuse of discovery under Rule 215, and a violation of his
oath as a witness. The actions of relator in this case are not
to be condoned. However, a trial court may not effectively
adjudicate the merits of a case based on testimony of a party
during a sanctions hearing because he was later impeached
on testimony given at that hearing. The witness' credibility
should be tested when the case is tried. Otherwise, a trial
court could at any time interrupt a trial proceeding if it
believed a witness was being untruthful, and simply enter a
default against the party procuring that witness for that
reason. The statement of relator, whether perjurious or not,
does not go to the heart of the controversy here. It did not
justify the conclusion that relator's claim lacked merit so
that he should be precluded from his day in court.

     We do not believe the action of the trial court was
justified; the Transamerican factors were not met. There
was no showing that lesser sanctions would not have been
effective. A "death penalty" sanction is not proper
punishment for what was perceived by the court to be
perjured testimony.

     Mandamus is proper in this instance because the
actions of the trial court in this case had the effect of
adjudicating relator's case, but did not result in the rendition
of an appealable judgment. [4] Transamerican, 811 S.W.2d
at 919.

    We conditionally grant the writ of mandamus. We
presume that the trial court will rescind its orders of August
Page 844                                                          wrongful death suit against Chrysler and the estate of the
                                                                  driver, alleging, among other things, that the Dodge
841 S.W.2d 844 (Tex. 1992)                                        Diplomat was defective because it was not crashworthy.

CHRYSLER CORPORATION, Relator,                                        The parties acknowledge that the standards for
                                                                  appellate review of discovery sanctions announced in
v.                                                                Transamerican Natural Gas Corp. v. Powell and Braden v.
                                                                  Downey control this proceeding, including a party's right to
  The Honorable          Robert     BLACKMON,          Judge,
                                                                  mandamus relief if a violation of those standards is
Respondent.
                                                                  demonstrated. [2] We consider, then, whether the record
                                                                  demonstrates a violation of those standards.
No. D-1637.
                                                                  I.
Supreme Court of Texas.
                                                                       This record painfully illustrates the problems of
October 14, 1992
                                                                  modern discovery practice and the attendant expenses and
     Rehearing Overruled Dec. 31, 1992.                           difficulties of judicial administration, at all levels,
                                                                  especially in complex litigation. From April 10, 1989, when
Page 845                                                          the Garcias served Chrysler with their first request for
                                                                  discovery, until August 8, 1991, when the trial court
    Ronald B. Brin, Richard W. Crews, Jr., Corpus Christi,        granted a default judgment against Chrysler on liability, the
Richard A. Salomon, Chicago, Ill., Richard Josephson,             Garcias served five discovery requests on Chrysler.
Dallas, Travis J. Sales, Houston, Joe R. Greenhill and Bob        Chrysler served five responses, including objections to
E. Shannon, Austin, for relator.                                  those requests. The Garcias filed three Motions to Compel
                                                                  Discovery and for Sanctions, and the parties participated in
    David L. Perry, Mikal C. Watts, Corpus Christi,               seven hearings on discovery disputes before three district
Franklin S. Spears, San Antonio, Charles B. Lord, C.L.            judges. By the time the Sanctions Order was signed,
Ray, Austin and Elaine Stone, Corpus Christi, for                 Chrysler claims to have produced more than 80,000
respondent.                                                       documents, made 100,000 more available for inspection,
                                                                  and to have spent more than $250,000 in the process. [3]
     OPINION
                                                                  The parties have filed with this court twelve volumes of
                                                                  exhibits, including motions, responses, transcripts of
     CORNYN, Justice.
                                                                  hearings, correspondence, and affidavits, which they ask us
     In this product liability suit, Chrysler Corporation seeks   to consider in assessing the propriety of the Sanctions
a Writ of Mandamus directing the Honorable Robert                 Order.
Blackmon, Judge of the 117th District Court, Nueces
                                                                       The record reflects that the Garcias first served
County, Texas, to vacate his Order Regarding Plaintiffs'
                                                                  Chrysler with three discovery requests, including requests
Amended Motion for Sanctions Against Chrysler for
                                                                  for admission, requests for production, and interrogatories,
Discovery Abuse (Sanctions Order) by which he struck
Chrysler's pleadings and rendered a default judgment
                                                                  Page 846
against Chrysler on all issues of liability for both
compensatory and punitive damages. [1] Chrysler claims            to which Chrysler responded with answers and objections,
that the trial court's Sanctions Order violates the standards     leading to a hearing on the Motion to Compel Discovery on
for the imposition of "death penalty" discovery sanctions,        April 12, 1990. Admirably, the parties settled "probably 70
those that terminate the presentation of the merits of a          per cent" of their differences before the hearing, and
party's claims, that we recently adopted in Transamerican         submitted only the remaining issues for the court's
Natural Gas Corp. v. Powell, 811 S.W.2d 913 (Tex.1991,            determination. Ultimately, the parties submitted an Agreed
orig. proceeding) and Braden v. Downey, 811 S.W.2d 922            Order On Motion to Compel Discovery to the trial court,
(Tex.1991, orig. proceeding).                                     which it signed on June 13, 1990, resolving all their
                                                                  differences on the Garcias' first, second, and third requests
    Ambrocio Garcia Jr. was killed on July 26, 1986, when
                                                                  for discovery. The Agreed Order granted no sanctions.
a drunk driver drove across the median and hit Garcia's
Dodge Diplomat head-on. Garcia's family filed this                     On the same day that the trial court signed the parties'
Agreed Order, the Garcias served Chrysler with Plaintiffs'      retained, but even then, not in the ordinary course of
Second Motion to Compel Discovery, Motion for                   business.
Sanctions, and Motion for Entry of Order. The court
convened a hearing on the Garcias' Second Motion to                 Following a hearing that lasted approximately eight
Compel on August 30, 1990. The "hearing," as it turned out,     hours and consumed 196 pages of the record, the trial court
consisted of an announcement of counsels' agreement that        signed an Order in which he denied Plaintiffs' Motion for
Chrysler would identify a specific discovery request to         Default Judgment, Plaintiffs' Motion to Strike Chrysler's
which it claimed the documents it had produced were             Pleadings, and
responsive; in return, the Garcias would then provide
Chrysler with a list of contended deficiencies in Chrysler's    Page 847
production efforts. To this point, the tenor of the parties'
                                                                Plaintiffs' Motion for Monetary Sanctions. The trial court
relationship appears to have been accurately characterized
                                                                did, however, order Chrysler to produce by April 1, 1991:
by one of the Garcias' lawyers when he stated to the trial
                                                                (1) the crash test files and results, (2) unedited,
court that "some of our trouble may be more [of a]
                                                                computerized records of its entire crash-test index for all
communication problem as opposed to an actual production
                                                                M-body type vehicles, and (3) affidavits detailing Chrysler's
problem."
                                                                explanation for all requested documents that it claims were
     However, discovery proceedings grew contentious in         destroyed pursuant to its document retention policy. In the
early 1991. On January 4, 1991, the Garcias filed Plaintiffs'   event that Chrysler failed to timely comply with his Order,
Third Motion to Compel Discovery and Motion for                 Judge Dunham conditionally ordered a monetary sanction
Sanctions in which they complained of Chrysler's alleged        of $7,500 for each day it failed to do so.
failure to adequately respond to nineteen requests for
                                                                    Thereafter, the Garcias served Chrysler with their
production in Plaintiffs' Second Request for Discovery and
                                                                fourth discovery request. Chrysler's 28-page response raised
three interrogatories contained in Plaintiffs' Third Request
                                                                objections to the request on both general and specific
for Discovery. In its written response, Chrysler alleged that
                                                                grounds, including the objection that some portions of the
the Garcias had not pointed out gaps in Chrysler's responses
                                                                fourth request, containing 105 separate items for
as agreed but instead had responded with a Motion for
                                                                production, duplicated previous requests.
Sanctions. This resulted in Chrysler's accusation that
opposing counsel was trying to set up a sanctions "tort." See         On March 29, 1991, Chrysler filed a Response to the
William Kilgarlin, Sanction for Discovery Abuse: Is the         trial court's Order, asserting that it was in compliance with
Cure Worse than the Disease?, 54 TEX.BAR J. 659 (1991);         that Order, and requesting a hearing on April 10, 1991, so
Charles Herring, The Rise of the "Sanctions Tort", Texas        that its compliance could be certified to avoid assessment of
Lawyer, Jan. 28, 1991, at 22-23.                                the $7,500 daily sanction conditionally ordered by Judge
                                                                Dunham. [7] The hearing of April 10th, however, primarily
     The hearing on Plaintiffs' Third Motion to Compel and
                                                                involved Chrysler's objections to the Garcias' fourth request
Motion for Sanctions was held on February 15, 1991. The
                                                                for discovery and spanned two days and 188 pages of the
Garcias accused Chrysler of failing to comply with the
                                                                record. The anticipated hearing on Chrysler's Response to
Agreed Order, complaining primarily of Chrysler's failure
                                                                the trial court's Order was deferred until April 26, 1991, to
to produce certain M-body crash tests, [4] a crash test index
                                                                be heard with Plaintiffs' Motion for Sanctions.
"that we know about that they haven't given us," [5] an
organizational chart, and information about Chrysler's               At the hearing on the Garcias' Motion for Sanctions on
document retention policies. [6] The sanctions requested        April 26, 1991, the primary concerns were crash test reports
included the striking of Chrysler's pleadings. The Garcias'     and Chrysler's electronic crash-test database. Counsel for
counsel argued: "[W]hat is needed is punishment and it          the Garcias acknowledged that Chrysler did "provide a lot
needs to be rather harsh, it needs to be harsh enough to get    of stuff to us on April 1st" but stated that he had acquired
people's attention...." A harsh punishment would be             from other sources [8] indices that referred to 245 M-body
appropriate, claimed the Garcias' counsel, because of           crash tests and that he had only received 191 crash test
Chrysler's lying and bad faith.                                 reports. In response, Chrysler claimed that crash test reports
                                                                were destroyed pursuant to its document retention policy.
     In response, Chrysler contended that it had produced
                                                                But this could not be true, the Garcias' attorney retorted,
everything that it was able to produce. For example, it
                                                                because "some of the allegedly missing reports had been
contended that it had produced "some 100 crash test files"
                                                                produced to other plaintiffs in other lawsuits during the
but that others, dating back more than six model years, had
                                                                same time that we've been trying to get them in this case
been destroyed pursuant to its document retention policy.
                                                                and, therefore, clearly have not been destroyed."
Chrysler claimed that only if a crash test had been produced
in other litigation and maintained in a case file would it be
     Chrysler's attorney told Judge Blackmon that two other      opinion that striking Chrysler's pleadings was too severe.
district judges had "already heard these issues." He pointed
out that this lawsuit concerned a frontal impact to an                Chrysler responded that if sanctions were to be
M-body style vehicle--not side and rear-end impacts--and         assessed, sanctions providing for an award of expenses,
that the previous court ordered production was so limited.       including reasonable attorneys fees, or an award of
He also asserted that the difference between the lists of        discovery expenses or court costs, would be appropriate.
crash tests produced in other cases and those produced here      See TEX.R.CIV.P. 215(2)(b)(8) & (2). On the other hand,
was explained by Chrysler's document retention policy.           the Garcias recommended that the trial court prohibit
Finally, he claimed that Chrysler had no way to locate all of    Chrysler from calling any expert witness whose opinion
the crash tests produced at other times in other lawsuits and    was based on documents that had not been produced or that
should be required to produce only those maintained by           a fine of $292,500 be assessed ($7,500 per day for 39 days)
Chrysler in the ordinary course of its business.                 for alleged non-compliance with Judge Dunham's Order.

    Ultimately, the trial court overruled all of Chrysler's            Finally, on August 8, 1991, Judge Blackmon
objections and set the date for Chrysler's compliance with       announced his ruling on Plaintiffs' Request for Sanctions.
the Garcias' fourth discovery request for May 31, 1991.          He proceeded to grant the Garcias' request to strike
                                                                 Chrysler's pleadings and ordered that the case proceed to
   On April 16, 1991, the Garcias filed an Amended               trial on damages alone because, as he said, he could think of
Motion for Sanctions. [9] Chrysler                               no way to "quote divide the baby unquote." The trial court
                                                                 further ordered that Chrysler could not call expert witnesses
Page 848                                                         regarding any aspect of liability at the trial on damages.
                                                                 Chrysler alleges that the Garcias' attorneys prepared the
filed a 21-page response specifically denying each of the        written Sanctions Order, which was signed that same day,
Garcias' contentions and asserting that the plaintiffs had       without extending Chrysler's counsel an opportunity to
themselves been guilty of discovery abuse related to             review it or to lodge any objection to it before it was signed.
Chrysler's discovery requests.
                                                                 II.
     The final hearing on sanctions began on April 26, 1991,
and occupies 129 pages of the record. [10] The Garcias'               The legitimate purposes of discovery sanctions are
complaints at that time related to Chrysler's alleged failure    threefold: 1) to secure compliance with discovery rules; 2)
to produce crash tests, a crash test index, an organizational    to deter other litigants from similar misconduct; and 3) to
chart, and certain seatbelt-related documents, and its alleged   punish violators. Bodnow Corp. v. City of Hondo, 721
failure to disclose all other lawsuits involving similar         S.W.2d 839, 840 (Tex.1986). However, discovery sanctions
claims. Chrysler's attorney reiterated to the trial court his    must also be "just." TEX.R.CIV.P. 215(2)(b);
explanation for the discrepancy between references to crash      Transamerican Natural Gas Corp., 811 S.W.2d at 917. Two
tests in other lawsuits obtained by the Garcias' counsel and     factors mark the bounds of the trial court's discretion in
Chrysler's production in this suit:                              order for sanctions to be just: first, a direct relationship
                                                                 between the offensive conduct and the sanction imposed
What we are finding here and what I'm afraid will continue       must exist; and second, the sanction imposed must not be
to happen throughout this entire case is that in some            excessive. In other words, "the punishment should fit the
engineer's file somewhere at Chrysler Corporation or             crime." Id.
somewhere else, somebody back
                                                                      A permissible sanction should, therefore, be no more
Page 849                                                         severe than required to satisfy legitimate purposes. This
                                                                 means that a court must consider relatively less stringent
then may have copied a piece of a crash test, maybe a page,
                                                                 sanctions first to determine whether lesser sanctions will
may have made some notes about a crash test, may have
                                                                 fully promote compliance, deterrence, and discourage
actually--may have written a preliminary memo about a
                                                                 further abuse. Id.; Braden, 811 S.W.2d at 929.
crash test that was ongoing that has the same number as one
of those crash tests that is on our list of being shredded.           So, although punishment, deterrence, and securing
                                                                 compliance with our discovery rules continue to be valid
     The trial court ultimately took the Motion for Sanctions
                                                                 reasons to impose sanctions, these considerations alone
under advisement. On May 10, 1991, the judge wrote to
                                                                 cannot justify a trial by sanction. Sanctions that by their
counsel expressing his opinion that discovery abuse had
                                                                 severity, prevent a decision on the merits of a case cannot
occurred and requesting their suggestions for appropriate
                                                                 be justified "absent a party's flagrant bad faith or counsel's
alternative sanctions. Judge Blackmon then expressed his
                                                                 callous disregard for the responsibilities of discovery under
the rules." Transamerican at 918 (citation omitted). Even            Third, no lesser sanction was first imposed. Although
then, lesser sanctions must first be tested to determine        potentially exposed to a substantial daily fine, such fine was
whether they are adequate to secure compliance, deterrence,     never imposed because there was no judicial determination
and punishment of the offender. See id.                         that Chrysler failed to meet Judge Dunham's deadline for
                                                                production of the items specified in his Order. Thus, we do
III.                                                            not consider the conditional fine to be, as the Garcias argue,
                                                                an imposition of a required lesser sanction.
     We now measure the Sanctions Order by these
standards. We conclude, for reasons that follow, that the            Fourth, and perhaps most significantly, death penalty
trial court's actions failed to meet the Transamerican and      sanctions should not be used to deny a trial on the merits
Braden standards in four ways.                                  unless the court finds that the sanctioned party's conduct
                                                                "justifies a presumption that its claims or defenses lack
    First, there is no direct relationship between the          merit" and that "it would be unjust to permit the party to
offensive conduct and the sanction imposed. As we stated in     present the substance of that position [which is the subject
Transamerican, the sanction must be directed against the        of the withheld discovery] before the court."
abuse and toward remedying the prejudice caused an              Transamerican, 811 S.W.2d at 918; Braden, 811 S.W.2d at
innocent party. We do not doubt that a failure to produce       929. This record contains no evidence to justify such a
documents can prejudice a party's efforts to assert or          presumption. In fact, the record conclusively refutes any
                                                                such suggestion. [12] Nor do we find any evidence in the
Page 850
                                                                record of flagrant bad faith or counsel's callous disregard
defend a claim. But here, there has simply been no showing      for the obligations of discovery.
that the Garcias are unable to prepare for trial without the
                                                                IV.
additional crash-test reports they seek. Furthermore, the
record fails to demonstrate Chrysler's ability to produce the        In Braden, we held that in the event the trial court
missing crash-test reports. There is no evidence in the         chooses to impose a substantial monetary sanction, unless
record that the missing tests exist or are within Chrysler's    the court defers payment until entry of final judgment, it
possession, custody, or control, either actual or               should make express written findings, after a prompt
constructive. A party cannot be penalized for failure to        hearing, articulating the reasons why the award does not
produce documents under such circumstances. See                 impede a resolution of the case on the merits. Braden, 811
TEX.R.CIV.P. 166b(2)(b).                                        S.W.2d at 929 (citing Thomas v. Capital Security Serv.,
                                                                Inc., 836 F.2d 866 (5th Cir.1988)). We also noted the
     The Garcias also contend that Chrysler failed to
                                                                helpfulness of such findings that give the trial court's
disclose all similar lawsuits, pointing to the omission of a
                                                                reasons for imposing severe discovery sanctions in
single lawsuit. Chrysler explains that this omission occurred
                                                                Transamerican, 811
because the case was classified on its computer as an "air
bag" case, rather than a "seatbelt" case. Once Chrysler was     Page 851
advised that the Garcias considered their request to include
this type of suit, it made an additional search and disclosed   S.W.2d at 919 n. 9. Since then, courts of appeals have
ten air bag suits in advance of the April 1st deadline. The     reviewed trial court findings regarding death penalty
Garcias have made no showing as to how they have been           sanctions in at least two distinct ways. See e.g. Hartford
hindered in their preparation for trial by this omission.       Accident & Ind. Co. v. Abascal, 831 S.W.2d 559, 560
                                                                (Tex.App.--San Antonio 1992, orig. proceeding); United
    It seems obvious that the Garcias would be prejudiced       States Fid. & Guar. Co. v. Rossa, 830 S.W.2d 668, 672
by the expenditure of attorneys' fees and expenses in           (Tex.App.--Waco 1992, writ denied). This case also
pursuing motions to compel discovery and sanctions.             presents the question of what deference, if any, an appellate
However, reimbursement of those expenses would appear to        court must give such findings. [13]
be better calculated to remedy such prejudice than would
death penalty sanctions.                                        Page 852

     Second, striking Chrysler's pleadings and rendering a           At least one court of appeals has gone so far as to order
default judgment on liability is more severe than necessary     the trial court to make findings of fact and conclusions of
to satisfy the legitimate purposes of sanctions for discovery   law in support of its sanctions order under the
abuse. Judge Blackmon himself conceded as much in his           Transamerican standard. Hartford Accident & Ind. Co. v.
letter to counsel of May 10, 1991, requesting alternative       Abascal, 831 S.W.2d 559, 560 (Tex.App.--San Antonio
sanction proposals. [11]                                        1992, orig. proceeding). In reviewing the trial court's order
for sanctions in Abascal, the court held that the legal            the trial court made extensive findings, only two appear
presumptions in favor of a judgment following a nonjury            pertinent to the Transamerican standards: whether
trial likewise applied to its review of the order for sanctions    Chrysler's discovery abuse justifies the presumption that its
on mandamus, and that if any evidence supported the trial          defenses to the suit lack merit; and, whether the conditional
court's findings of fact, they were binding on the reviewing       monetary sanctions order of March 8, 1991 can be fairly
court. Id. at 561. Another court of appeals has varied this        characterized as a lesser sanction. We have reviewed the
approach, holding that findings in the discovery context           entire record
should not be treated like findings of fact made pursuant to
Rule 296, which apply to appellate review of nonjury trials        Page 853
on the merits. Rossa v. United States Fidelity & Guar. Co.,
830 S.W.2d 668, 672 (Tex.App.--Waco 1992, writ denied).            and conclude that it contains no evidence that would justify
                                                                   the presumption of lack of merit of Chrysler's defense; [14]
     In Transamerican, we noted merely that trial court            further, we conclude that the conditional monetary
findings would be "helpful" in assisting an appellate court        sanctions order is not the type of lesser sanction required
in determining "that the trial court exercised its discretion in   before the imposition of death penalty sanctions, which we
a reasonable and principled fashion." 811 S.W.2d at 919 n.         contemplated in Transamerican. We, therefore, hold that the
9. We did not mention Rule 296. Further, it is apparent that       trial court abused its discretion by ordering death penalty
the standard of review articulated by the court of appeals in      sanctions under the circumstances of this case. While trial
Abascal is not, in fact an "abuse of discretion" standard that     court findings in a death penalty sanctions case can be
we most recently restated in Walker v. Packer, 827 S.W.2d          helpful in demonstrating how the court's discretion was
833, 839-40 (Tex.1992), and which we apply here, but a             guided by a reasoned analysis of the purposes sanctions
legal and factual sufficiency standard of review applicable        serve and the means of accomplishing those purposes,
to appeals of nonjury trials. W. Wendell Hall,                     especially in complex cases where the record is
STANDARDS OF APPELLATE REVIEW IN CIVIL                             voluminous, such findings must be pertinent to the
APPEALS, 21 ST. MARY'S L.J. 865, 919-20 (1990).                    Transamerican standards and supported by the record.
Accordingly, we reject the approach used by the court of           Findings specifically tied to an appropriate legal standard
appeals in Abascal as incorrect and approve the approach of        are the only type of findings that can be truly beneficial to
the court of appeals in Rossa as the correct approach.             appellate review. [15]

     Written findings that support the decision to impose          ***
such sanctions have at least three salutary effects: 1) such
findings aid appellate review, demonstrating that the trial             For the reasons we have explained, we trust that the
court's discretion was guided by a reasoned analysis of the        trial court will vacate its Sanctions Order of August 8,
purposes sanctions serve and the means of accomplishing            1991. The clerk is instructed to issue the Writ of Mandamus
those purposes according to the Transamerican and Braden           to compel such action only in the event the trial court
standards; (2) such findings help assure the litigants, as well    declines to voluntarily do so.
as the judge, that the decision was the product of thoughtful
                                                                        GONZALEZ, MAUZY, DOGGETT and GAMMAGE,
judicial deliberation; and (3) the articulation of the court's
                                                                   JJ., note their dissent.
analysis enhances the likely deterrent effect of the sanctions
order. See Thomas v. Capital Sec. Servs., Inc., 836 F.2d           ---------
866, 883 (5th Cir.1988) (citation omitted). But we do not
wish to unnecessarily burden our trial courts by requiring         Notes:
them to make written findings in all cases in which death
penalty sanctions are imposed. First, the benefit of the trial     [1] A trial on damages was scheduled for approximately
court's explanation in the record of why it believes death         three months later.
penalty sanctions are justified may be sufficient to guide the
appellate court. Second, written findings are not needed in        [2] In Transamerican Natural Gas Corp. we held that
the vast majority of relatively uncomplicated cases or even
more complex cases involving only a few issues pertinent to        when a trial court imposes discovery sanctions which have
the propriety of death penalty sanctions. We doubt that            the effect of precluding a decision on the merits of a party's
findings in such cases would meaningfully assist appellate         claims--such as by striking pleadings, dismissing an action,
review.                                                            or rendering default judgment--a party's remedy by appeal
                                                                   is inadequate, unless the sanctions are imposed
    There are even instances when extensive findings in            simultaneously with the rendition of a final appealable
support of a sanctions order cannot be considered helpful to       judgment.
appellate review. This suit falls into that category. Although
Id. at 920.                                                      previously been destroyed when they had not been
                                                                 destroyed;
[3] At oral argument, Chrysler's attorney claimed that
Chrysler had, by that time, produced 100,000 documents           (6) Making false statements regarding discovery responses
and spent in excess of $300,000 responding to the Garcias'       to the effect that it does not maintain a master crash test
discovery requests.                                              index, when it does maintain such an index;

[4] At oral argument Chrysler's attorney claimed to have         (7) Making false statements through counsel to the Court
produced "approximately 250 or [sic] 300" crash tests in         that its master crash test index does not reflect whether
this case.                                                       crash tests reports have been destroyed, when the electronic
                                                                 crash test index which Chrysler maintains does contain such
[5] The Garcias' attorney at oral argument claimed that          information;
Chrysler had withheld 63 major frontal M-body crash tests.
                                                                 (8) Failure to disclose 14 similar lawsuits responsive to
[6] Pursuant to its document-retention policy, Chrysler          Interrogatories Nos. 26 and 27;
claims to have periodically destroyed certain of the
requested documents in the ordinary course of its business.      (9) Failure to provide names and addresses of Plaintiffs'
                                                                 counsel and other identifying information regarding similar
[7] On the day before the hearing on April 10th, the             lawsuits in response to Interrogatories Nos. 26 and 27,
Garcias' counsel transmitted by facsimile a Motion for           notwithstanding Judge Dunham's Order of February 15,
Sanctions based on alleged misrepresentations made to the        1991;
trial court at the hearing of February 15, 1991, but the
hearing on this Motion was postponed until April 26, 1991.       (10) Failure to produce underlying data for compliance
                                                                 reports relevant to FMVSS 203, 204, and 207, contrary to
[8] For example, he acquired a crash-test master index for       the agreed production order;
the years 1962 to 1978 from a 1978 deposition taken in
another case. Another time, the Garcias' attorney called         (11) A continuing failure to produce Chrysler's document
Chrysler a "liar" when it claimed that certain crash tests       retention policies pursuant to which responsive documents
were destroyed, based on the affidavit of a Chicago area         "may" have been destroyed, and frivolously objecting to
paralegal who claims Chrysler produced those tests recently      requests for their production;
in a case handled by her firm. Chrysler's attorneys later took
her deposition to discover that the crash test reports in her    (12) Falsely stating to the Court that it had produced
file consisted of one page from each of three destroyed test     Chrysler's document retention policies, when it had not;
reports and involved a non-M-body type vehicle, which was
the subject of the paralegal's firm's case.                      (13) Additional failure to produce all M-body crash tests
                                                                 after being specifically ordered to do so by Judge Dunham's
[9] The Garcias' Second Amended Motion for Sanctions             order of February 15, 1991;
Against Chrysler for Discovery Abuse is really their fourth
such motion. It alleges:                                         (14) Massive failure to produce relevant and critical
                                                                 documents regarding Chrysler's testing of M-body seat belts
I.                                                               and steering columns.

Defendant Chrysler has engaged in a pattern and practice of      II.
discovery abuse in this case which includes:
                                                                 Chrysler's conduct in this case constitutes a continuing
(1) A long history of needless and obstreperous delay;           pattern of discovery abuse which required the imposition of
                                                                 sanctions pursuant to the provisions of Rule 215,
(2) Needless delay in making discovery required by the           Tex.R.Civ.P. Indeed, some of Chrysler's conduct violates
Agreed Order of June 13, 1990;                                   Judge Dunham's Order of February 15, 1991, which
                                                                 specifically provided that failure to comply with the Order
(3) Leading opposing counsel to believe that discovery           would result in sanctions of $7,500.00 per day pending full
required by the Agreed Order of June 13, 1990 was                compliance.
completed when, in fact, it had not been completed;
                                                                 [10] By May 31st, Chrysler had produced 11,000 additional
(4) False statements that it had produced all crash tests        documents but asked for and received a 60-day extension at
which it was ordered to produce, when it had not;                a hearing on June 21, 1991 as well as a limitation on the
                                                                 scope of the Garcias' fourth request for discovery. At the
(5) Failure to produce crash tests which it claimed had
June 21, 1991 hearing, Judge Blackmon stated:                      1. The Court finds that Chrysler has engaged in a
                                                                   long-standing, continual, repeated and wilful abuse of the
[I]'ll tell you something that's worrying me about the case,       discovery process including, but not limited to, failure to
and it does worry me, and one of the reasons I haven't ruled       comply with this Court's discovery orders entered on the
on sanctions per se that I still have on my desk is we             13th day of June, 1990, the 8th day of March, 1991, and the
probably have already spent five or six days, we should            11th day of April, 1991; said discovery abuse includes, but
have been trying this lawsuit. And we've had five or six           is not limited to, the following conduct:
days in pretrial things. Plaintiff is obviously trying to
posture the case so he can win the case in pretrial and does       a. REGARDING THE DISCOVERY ORDER ENTERED
not have to try the lawsuit.                                       HEREIN ON JUNE 13, 1990, the Court finds:

I am not in a position to say that lawyers are lying when          1. Chrysler failed to produce in a reasonably timely manner
they make representation in this Court in open court about         numerous significant documents ordered produced by such
what their clients can do or not do. I believe those               Order;
representations are made in all good faith. * * * [I]'m just
not convinced that the lawyers here have done bad things           2. Chrysler made false and misleading representations to the
and consequently, I'm not convinced that the Defendant             Court and to opposing counsel indicating that it had made
here has done evil in--in regard to the discovery. * * * I still   full production of documents and was in full compliance
don't know what I'm going to do with the sanctions, I just         with said Order, when it was not;
haven't made up my mind. One of you suggested some
attorneys' fees and letting these fellas travel up somewhere.      3. Chrysler made false representations to the Court that it
I thought that probably was the most reasonable suggestion.        did not maintain a Master Vehicle Crash Test Index, when
The problem is I'm going to have to have a hearing on              it, in fact, did;
attorneys fees, and I really don't want to do that. I would
                                                                   4. Chrysler failed to truthfully respond to discovery, and
like to resolve that matter because I want to get the case to
                                                                   responded to discovery in a misleading and incomplete
trial and try it.
                                                                   manner so as to conceal information detrimental to its case;
Between April 26, 1991 to June 21, 1991, Chrysler                  and
compiled documents responsive to the Garcias' fourth
                                                                   5. Chrysler's unreasonable delay (more than 10 months) and
discovery request. During this period, the Garcias' counsel
                                                                   its continual failure to produce documents it was required to
served on Chrysler two additional requests for discovery.
                                                                   produce under said Order, constitute gross violations of the
[11] See supra p. 13.                                              Agreed Order;

[12] In Chrysler's Request for Admission No. 6 to the              b. REGARDING THE DISCOVERY ORDER ENTERED
Garcias, it asks them to "Admit that Oscar Garcia was              HEREIN ON MARCH 8, 1991, the Court finds:
negligent and that such negligence was a proximate cause
                                                                   1. Chrysler failed to timely and reasonably produce
of the accident on July 26, 1986 between he and Ambrocio
                                                                   important documents ordered produced by such Order;
Garcia," to which the Garcias responded, "Admitted."
                                                                   2. Chrysler represented to this Court and to opposing
In other words, the Garcias admitted that Chrysler was not
                                                                   counsel that it had made full production of documents and
the sole cause of the accident, but under Judge Blackmon's
                                                                   was in full compliance with said Order, when it was not;
sanctions order, Chrysler could contest only the amount of
                                                                   and
actual and punitive damages assessed, not liability,
causation, or Oscar Garcia's comparative responsibility for        3. Chrysler produced incomplete and redacted portions of
the death of Ambrocio Garcia. If it had been allowed to try        documents in direct violation of such Order, and has failed
the issue of liability, Chrysler would not have been jointly       to rectify such violation after being informed of the same;
and severally liable for Ambrocio Garcia's death if a jury
assigned 80 per cent or more of the responsibility for Mr.         c. REGARDING THE DISCOVERY ORDER ENTERED
Garcia's death to the drunk driver. See TEX.CIV.PRAC. &            HEREIN ON APRIL 11, 1991, the Court finds:
REM.CODE § 33.013(b)(1).
                                                                   1. Chrysler has failed to comply with the Orders of this
[13] Judge Blackmon's Sanctions Order includes the                 Court regarding Request for Production No. 1 of Plaintiffs'
following findings:                                                Fourth Discovery to Defendant Chrysler, as it has, to this
                                                                   date, failed, refused and neglected to produce the
     FINDINGS OF FACT                                              information necessary for Plaintiffs to decipher and
interpret the information contained within the computerized       applicable law;
data base produced pursuant to this Court's orders; and
                                                                  7. Although the Court fully recognizes the severity of the
2. Such failure, neglect and refusal to produce the materials     sanctions ordered herein, Chrysler's longstanding and
referenced in the preceding paragraph continued to this date      flagrant discovery conduct in this case can only be
despite letters from counsel for Plaintiffs requesting certain    described as a wilful failure to comply with its
information which had been ordered to be produced by this         responsibilities of discovery under our state's Rules of Civil
Court's orders;                                                   Procedure and orders of this Court. Such a callous disregard
                                                                  for its responsibilities therein will not be tolerated by this
2. The Court finds that Chrysler, by and through its              Court;
Houston counsel, has made repeated false and misleading
statements to the Court and to opposing counsel regarding         8. Chrysler's lengthy and continuous obstruction of
the status of discovery in this litigation, both in writing and   Plaintiffs' discovery efforts clearly justifies the presumption
in open court;                                                    held by this Court that Chrysler believes its defenses to
                                                                  Plaintiffs' allegations lack merit.
3. The Court finds that the imposition of monetary
sanctions as included in the Court's Order of March 8, 1991,      [14] See supra at n. 12.
was ineffective in causing Chrysler to alter its pattern of
misconduct; the Court finds that Chrysler has continued to        [15] As we have previously stated, the court has appointed
engage in a continuing pattern of misconduct including            various task forces to study and recommend any needed
discovery abuse and violations of this Court's orders             revisions in the Rules of Civil Procedure, including the
following this Court's Order for monetary sanctions;              rules relating to sanctions. See Alvarado v. Farah Mfg. Co.,
                                                                  Inc., 830 S.W.2d 911 (Tex.1992). We anticipate that the
4. The Court finds that Chrysler is being represented herein      task forces' recommendations will include proposals
by Corpus Christi counsel, Houston counsel and                    relating to trial court findings in death penalty sanctions
Washington, D.C. "National" counsel; the Court finds from         cases.
the evidence that Chrysler itself, as well as its counsel, are
fully aware of Chrysler's obligations and that the offensive      ---------
conduct herein is attributable, in large part to Chrysler
itself. The Court finds that the offensive conduct is not
attributable in any part to Corpus Christi counsel. The Court
finds that Chrysler itself, by and through its Discovery
Manager Jeffery Podorsek and its National Counsel David
Kikel, has been actively involved in the conduct at issue;

5. The Court has considered for almost three and one-half
months the availability of less stringent sanctions and
whether less stringent sanctions would fully promote
compliance by Chrysler with this Court's discovery order;
the Court had initially declined to strike Chrysler's
pleadings and has been seeking to determine less stringent
sanctions which could be expected to obtain proper
compliance by Chrysler with this Court's orders and with
the discovery rules; the Court notes that substantial
monetary sanctions previously imposed herein on Chrysler
had not successfully promoted full compliance with this
Court's orders and that the pattern of misconduct has
continued; the Court, reluctantly, finds that no sanction less
stringent than those ordered herein will secure compliance
with the Court's orders and applicable rules;

6. The Court finds that the discovery sought is directly,
materially and substantially related to the major issues of
the case; Chrysler's refusal to comply with the discovery
rules and orders of this Court prevent Plaintiffs from
preparing their case for trial and preclude a fair trial under
Page 725                                                          cable, which was several feet long, had been made by
                                                                  unwinding the 18"' flexible sheath that protected the cord of
856 S.W.2d 725 (Tex. 1993)                                        electric wires connecting a telephone handset to the body of
                                                                  a pay telephone mounted on the wall outside the grocery
GTE      COMMUNICATIONS                           SYSTEMS         store. Police investigating Duran's death obtained
CORPORATION, Relator,                                             information that a young man, the grandson of the
                                                                  proprietor of the grocery store, had stretched the cable
v.
                                                                  across the sidewalk as a prank. Before the young man could
                                                                  be
The Honorable Martha TANNER, Judge, Respondent.

No. D-3089.                                                       Page 727

                                                                  arrested and charged with murder, he committed suicide.
Supreme Court of Texas.
                                                                       Duran's estate and survivors, along with Ramirez and
June 30, 1993
                                                                  his next friends, filed suit claiming that the telephone was
Page 726                                                          unreasonably dangerous as designed, manufactured and
                                                                  distributed, because the metal sheath covering the telephone
    Ruth Greenfield Malinas, J. Michael Ezzell, Thomas H.         handset cord could easily be disassembled and stretched
Crofts, Jr., San Antonio, for relator.                            into a cable. In their original petition, plaintiffs alleged that
                                                                  defendant ATS Pay Phone Supply, Inc., had manufactured
    Rene R. Barrientos, Pat Maloney, Sr., Timothy Patton,         the telephone, and did not name GTE Communication
San Antonio, for respondent.                                      Systems Corporation as a defendant. Subsequently,
                                                                  plaintiffs amended their petition to add GCSC as a
     OPINION                                                      defendant, alleging that it was the manufacturer of the
                                                                  telephone. In answer to plaintiffs' allegations, GCSC denied
     HECHT, Justice.
                                                                  that it had designed, manufactured, marketed, sold or
                                                                  distributed the sheathed cord.
     In this original mandamus proceeding, relator GTE
Communication Systems Corporation, a defendant in
                                                                       After some discovery had been conducted, GCSC
pending litigation, seeks review of sanctions imposed
                                                                  moved for summary judgment on several grounds,
against it by the respondent district court. The district court
                                                                  including: that it had not designed, manufactured, or
concluded that four of GCSC's amended answers, its motion
                                                                  marketed the sheathed cord that caused Duran's injuries;
for summary judgment, and two affidavits in support of the
                                                                  that the sheath was not defective; that if the sheath was
motion were groundless and filed in bad faith, in violation
                                                                  unreasonably dangerous, it was solely because it had been
of Rule 13, TEX.R.CIV.P. The district court also concluded
                                                                  altered; that the alteration of the sheathed cord which led to
that GCSC failed to produce a certain document in response
                                                                  plaintiffs' injuries was unforeseeable; and that the criminal
to a discovery request, in violation of Rule 215,
                                                                  conduct involved in stretching the cable across the sidewalk
TEX.R.CIV.P. As sanctions, the district court struck
                                                                  was a new, independent, superseding or intervening cause
GCSC's pleadings and ordered it to pay plaintiffs $150,000
                                                                  of plaintiffs' injuries. The first of these grounds was
in attorney fees. We granted leave to file application for
                                                                  supported by the affidavits of Robert Zimmerman, a
writ of mandamus to review these rulings. For reasons that
                                                                  long-time employee of GCSC, and Oscar Jiminez, an
follow, we conditionally grant the writ.
                                                                  employee of General Cable Company, a manufacturer of
                                                                  telephone handset cables. Zimmerman's affidavit stated that
     I
                                                                  in manufacturing telephone handsets GCSC had used only
    The litigation pending in the district court arises out of    sheathed cords made by General Cable, and that if the
the following circumstances. Rene Duran and Jesse                 sheath that injured Duran was not General Cable's, then the
Ramirez, Jr. were riding bicycles along the sidewalk outside      handset was not GCSC's. Jiminez' affidavit stated that he
a grocery store when Duran struck a sharp-edged metal             had examined the remnants of the sheath that injured Duran
cable which had been stretched across the sidewalk at the         and found six distinct differences between those remnants
level of his neck. Duran was nearly decapitated by the cable      and sheaths manufactured by General Cable. Thus, Jiminez
and died of his injuries. At the shock of this accident,          concluded that General Cable had not designed, assembled
Ramirez fell from his bicycle and sustained injuries. The         or distributed the cord involved in the accident.
     In response to GCSC's motion for summary judgment,          GCSC was aware of the memo and had failed to produce it,
plaintiffs asserted that the identity of the manufacturer of     plaintiffs offered as their only evidence the testimony of
the cord had not been established but was much in dispute.       Charles James, president of ATS, the corporation plaintiffs
Plaintiffs argued that even if GCSC had not made the cord,       once alleged was the manufacturer of the sheath. James
it had certainly made the telephone, and that the telephone      stated that, based upon his experience in the pay telephone
was defective because the cord was part of it. The trial court   industry, it was "totally inconceivable" that GCSC did not
denied summary judgment without indicating a specific            have the memo, and GCSC could compel its production
reason.                                                          from GTFL because the two corporations were affiliated.
                                                                 The district court "credited" James' testimony and
     Several months later, plaintiffs filed a motion for         "discredited" GCSC's evidence that it was unaware of the
sanctions requesting that the district court strike GCSC's       memo and that it had no control over GTFL to compel that
pleadings and award plaintiffs $150,000 in attorney fees.        entity to produce the memo. James also admitted, however,
This motion complained that GCSC's assertions that it was        that he had never worked for GCSC or GTFL and did not
not involved in making and distributing the sheathed cord        actually know whether GCSC had ever been in possession
which injured the plaintiffs had been interposed in bad faith    of the GTFL memo.
and with knowledge that the assertions were false. The
motion also complained that GCSC had failed to produce                A second reason the district court gave for imposing
unspecified documents (actually, as it later developed, a        sanctions was that GCSC had acted in bad faith in asserting
single document) which showed that it knew of the dangers        in its summary judgment motion that, as a matter of law,
inherent in the cord and could have foreseen the type of         plaintiffs' accident was unforeseeable. The court assumed
accident in which plaintiffs were injured. The motion            that GCSC knew of the GTFL memo when it filed its
requested sanctions for discovery abuse and under Rule 13,       motion for summary judgment, and therefore knew of the
TEX.R.CIV.P. After an evidentiary hearing the district           problems with the sheathed cord. Possessed of this
court granted plaintiffs' motion without indicating the          knowledge, the court reasoned, GCSC's assertion that
reasons for its ruling.                                          plaintiffs' accident was unforeseeable as a matter of law was
                                                                 groundless and could only have been made in bad faith.
     GCSC petitioned the court of appeals for a writ of          Based upon this analysis, the district court concluded that
mandamus directing the district court to vacate its order.       GCSC's summary judgment motion violated Rule 13.
The appeals court conditionally granted its writ, holding
that the order did not state "the particulars" of good cause          The district court also concluded, as its third reason for
warranting the imposition of sanctions, as required by Rule      sanctions, that GCSC's amended answers, motion for
13. GTE Communication Systems Corp. v. Curry, 819                summary judgment and supporting affidavits in which it
S.W.2d 652, 653 (Tex.App.--San Antonio 1991, orig.               denied that it had manufactured the sheathed cord were
proc.). Immediately after the court of appeals issued its        groundless and brought in bad faith, in violation of Rule 13.
opinion, the district court vacated its original order and,      The court based this conclusion upon the testimony of two
without notice to GCSC, signed a new order prepared by           experts, one of whom was James. Plaintiffs first developed
plaintiffs, setting out in 24 paragraphs three reasons for       this testimony after GCSC's motion for summary judgment
sanctioning GCSC by dismissing its pleadings and                 was denied and offered it at the hearing on the motion for
assessing $150,000 attorney fees against it.                     sanctions. Both witnesses testified that they had concluded
                                                                 from examining the sheath that GCSC had manufactured it.
Page 728                                                         At the hearing, GCSC introduced the affidavits that it had
                                                                 filed in support of its motion for summary judgment, in
     One reason the district court gave for imposing             addition to other evidence that it had not manufactured the
sanctions was that GCSC had abused the discovery process         sheath.
by failing to produce a certain memorandum prepared by
employees of a corporation, GTE of Florida, Inc., for                 GCSC again sought a writ of mandamus from the court
circulation to several departments within that corporation.      of appeals, but this time the court denied leave to file the
GTFL, as it is referred to, and GCSC are separate                petition. GCSC then moved for leave to file its petition in
corporations. It is unclear from the record before us how or     this Court, which we granted. 36 TEX.SUP.CT.J. 686
even whether they are related. The relevant portion of the       (April 3, 1993).
memorandum states: "Presently GTFL is using over 5,000
handsets per year for maintenance change out because the             II
armored handset cord has been uncoiled by an excessive
pull by the end user. Several of these handset failures have         We first consider whether the district court abused its
resulted in litigation against GTFL." Plaintiffs obtained this   discretion in sanctioning GCSC for abuse of the discovery
memo from another party in the litigation. To show that          process under Rule 215, TEX.R.CIV.P. To answer this
question we must answer two others: did the district court        compel its production. Plaintiffs adduced no evidence
properly find that GCSC had "possession, custody or               regarding the corporate relationship between GTFL and
control" of the GTFL memo within the meaning of Rule              GCSC, or any right of the latter to control the former. In
166b(2)(b), TEX.R.CIV.P., such that GCSC should have              fact, the only testimony regarding control was James'
produced it; and if so, were the sanctions imposed for the        speculation regarding the ability of GCSC's parent to
failure to produce the memo just. We conclude that both           control its subsidiaries, assuming both GCSC and GTFL
these questions must be answered negatively.                      were subsidiaries of the same parent. There is no evidence
                                                                  that GCSC ever actually did exercise control of any type
     Rule 166b(2)(b), TEX.R.CIV.P., provides in pertinent         over GTFL.
part:
                                                                      As a rule, the district court's resolution of a factual
A person is not required to produce a document or tangible        issue is entitled to deference in a mandamus proceeding and
thing unless it is                                                should not be set aside unless it is clear from the record that
                                                                  only one decision could have been reached. Walker v.
Page 729                                                          Packer, 827 S.W.2d 833, 839-40 (Tex.1992). Here, it is
                                                                  quite clear that from the record before it the district court
within the person's possession, custody or control.
                                                                  could not have found that GCSC had possession, custody or
Possession, custody or control includes constructive
                                                                  control over the GTFL memo within the meaning of Rule
possession such that the person need not have actual
                                                                  166b(2)(b) such that GCSC should have produced it.
physical possession. As long as the person has a superior
right to compel the production from a third party (including            Furthermore, even if GCSC had failed to produce the
an agency, authority or representative), the person has           GTFL memo, the district court's sanction of striking
possession, custody or control.                                   GCSC's pleadings would not have been just, as required by
                                                                  Rule 215, TEX.R.CIV.P. "[J]ust sanctions must not be
    The phrase, "possession, custody or control", within the
                                                                  excessive.... [C]ourts must consider the availability of less
meaning of this rule, includes not only actual physical
                                                                  stringent sanctions and whether such lesser sanctions would
possession, but constructive possession, and the right to
                                                                  fully promote compliance." TransAmerican Natural Gas
obtain possession from a third party, such as an agent or
                                                                  Corporation v. Powell, 811 S.W.2d 913, 917 (Tex.1991).
representative. The right to obtain possession is a legal right
                                                                  The record must reflect that the court considered the
based upon the relationship between the party from whom a
                                                                  availability of lesser sanctions. Otis Elevator Co. v.
document is sought and the person who has actual
                                                                  Parmelee, 850 S.W.2d 179, 181 (Tex.1993). Case
possession of it. For example, in State v. Lowry, 802
                                                                  determinative sanctions may be imposed in the first instance
S.W.2d 669, 673-674 (Tex.1991), we held that a request for
                                                                  only in exceptional cases when they are clearly justified and
production directed to the Attorney General required
                                                                  it is fully apparent that no lesser sanctions would promote
production of documents held by all divisions of that office.
                                                                  compliance with the rules. Here, the order which the district
    A party seeking sanctions has the burden of                   court signed stated that lesser sanctions would have been
establishing his right to relief. Thus, when a motion for         ineffective, but the court did not explain why, and the
sanctions asserts that a respondent to a discovery request        record does not indicate why. We give no deference to such
has failed to produce a document within its possession,           unsupported conclusions. Chrysler Corp. v. Blackmon, 841
custody or control, the movant has the burden to prove the        S.W.2d 844, 853 (Tex.1992). We fail to see why any
assertion. In this case, plaintiffs failed to meet that burden.   number

     The only evidence plaintiffs offered to show that GCSC       Page 730
had actual possession of the memo was the testimony of
                                                                  of lesser sanctions, from fines to contempt, would not have
Charles James that it was "totally inconceivable" to him that
                                                                  promoted compliance with discovery, if there had been
GCSC did not have the memo. James admitted, however,
                                                                  abuse here.
that he had never worked for GCSC and had no personal
knowledge of whether GCSC had ever had the GTFL                        The sanctions imposed by the district court precluded
memo. The memo has not been located in GCSC's files, no           GCSC from presenting the merits of its position at trial.
GCSC employee has acknowledged ever seeing it, and there          Before a court may deprive a party of its right to present the
is no circumstantial evidence that would indicate that GCSC       merits of its case because of discovery abuse, it must
ever had the memo. Under these circumstances, James'              determine that "a party's hindrance of the discovery process
testimony is no more than mere surmise.                           justifies a presumption that its claims or defenses lack
                                                                  merit." TransAmerican, 811 S.W.2d at 918. No such
    Likewise, there is no evidence that GCSC had
                                                                  presumption is warranted here. We have concluded that
constructive possession of the document or a right to
GCSC did not fail to comply with discovery. Even in the          district court relied, unless the papers are "groundless" as
district court's view, GCSC only failure was to produce a        defined by the rule. Plaintiffs contend, and the district court
single document which states that "several ... handset           concluded, that GCSC's amended answers and summary
failures have resulted in litigation" without any indication     judgment motion are groundless because there is no basis in
of the nature of such litigation or whether personal injuries    fact for GCSC's denial that it was involved in the
had occurred. Even if GCSC had failed to comply with             manufacture or distribution of the sheathed cord which
discovery, there is nothing in the record to justify striking    caused plaintiffs' injuries. Plaintiffs make two arguments in
GCSC's pleadings as a consequence.                               support of their contention.

     Accordingly, we conclude that the district court clearly        Plaintiffs' first argument is that the evidence establishes
abused its discretion in sanctioning GCSC for an abuse of        as a matter of law that GCSC manufactured the sheathed
the discovery process under Rule 215.                            cord, and that GCSC's denial of this fact was therefore
                                                                 groundless. The evidence in the record before us
    III                                                          demonstrates that the identity of the manufacturer of the
                                                                 cord is vigorously disputed, and certainly not established as
    We next consider whether the district court abused its       a matter of law. GCSC's effort
discretion in imposing sanctions under Rule 13,
TEX.R.CIV.P. Rule 13 states in pertinent part:                   Page 731

     The signatures of attorneys or parties constitute a         to establish that it was not the manufacturer of the cord was
certificate by them that they have read the pleading, motion,    not groundless.
or other paper; that to the best of their knowledge,
information, and belief formed after reasonable inquiry the           Plaintiffs' second argument is that because, at the very
instrument is not groundless and brought in bad faith or         least, a fact question existed regarding GCSC's involvement
groundless and brought for the purpose of harassment.... If a    in the manufacture and distribution of the sheathed cord,
pleading, motion or other paper is signed in violation of this   GCSC's assertion in its motion for summary judgment that
rule, the court, upon motion or upon its own initiative, after   no such fact question existed was groundless. In other
notice and hearing, shall impose an appropriate sanction         words, plaintiffs argue that a party who knows that material
available under Rule 215-2b, upon the person who signed it,      facts are in dispute may be sanctioned for moving for
a represented party, or both.                                    summary judgment. While we do not disagree that the filing
                                                                 of a motion for summary judgment may give rise to
    Courts shall presume that pleadings, motions, and other      sanctions under Rule 13, just as the filing of any other
papers are filed in good faith. No sanctions under this rule     pleading or motion, this is not such a case. At the time
may be imposed except for good cause, the particulars of         GCSC filed its motion, the only evidence adduced by the
which must be stated in the sanction order. "Groundless" for     parties indicated that GCSC had not made or distributed the
purposes of this rule means no basis in law or fact and not      sheathed cord. Indeed, plaintiffs themselves originally
warranted by good faith argument for the extension,              pleaded that ATS manufactured the cord, not GCSC. By
modification, or reversal of existing law.                       their own admission, plaintiffs did not develop any
                                                                 evidence to contradict GCSC's assertions until after GCSC's
     The district court sanctioned GCSC for filing amended       motion was denied. Even if GCSC was not entitled to
answers, a motion for summary judgment and the                   summary judgment, it cannot be said that its motion had no
supporting affidavits of Zimmerman and Jiminez, which            basis in law or fact.
deny that GCSC was involved in making or distributing the
sheathed cord which caused plaintiffs' injuries. By its               Thus, the district court clearly abused its discretion in
express language, Rule 13 applies only to pleadings,             determining that GCSC's assertions were groundless. To
motions and other papers signed by attorneys. Since the          impose sanctions under Rule 13, the district court was also
Zimmerman and Jiminez affidavits were not signed by              required to find that GCSC's assertions were made in bad
GCSC's attorneys, it was a clear abuse of discretion for the     faith or for the purpose of harassment. Since plaintiffs do
district court to base an imposition of sanctions under Rule     not contend, and the district court did not find, that GCSC's
13 on them. The issues, then, are whether the district court     assertions were harassing, a finding of bad faith was a
abused its discretion GCSC's in concluding that GCSC's           prerequisite to sanctions. Rule 13 prescribes that courts
amended answers and motion for summary judgment are              presume that papers are filed in good faith. Thus, the burden
sanctionable, and in striking GCSC's pleadings.                  is on the party moving for sanctions to overcome this
                                                                 presumption. Plaintiffs failed to carry this burden. The only
     Such papers cannot serve as a basis for sanctions under     basis the district court gave for finding that GCSC had
that portion of Rule 13 quoted above, and on which the           acted in bad faith was that GCSC had ignored or concealed
evidence that it had been involved in making and                 TransAmerican, 811 S.W.2d at 920; Chrysler, 841 S.W.2d
distributing the sheathed cord that injured the plaintiffs. As   at 845 n. 2. For the same reasons expressed in those cases,
we have seen, however, there is no proof that GCSC, before       GCSC has no adequate remedy by appeal in this case, and
it moved for summary judgment, was aware of any                  we exercise our discretion to issue the extraordinary writ.
evidence that it was involved in the manufacture or
distribution of the sheathed cord.                                    We have held that an assessment of attorney fees which
                                                                 is not to be paid until final judgment is rendered may be
     Furthermore, a motion for summary judgment asserting        adequately challenged by appeal. Braden v. Downey, 811
that no genuine issue of material fact exists is not proved      S.W.2d 922 (Tex.1991). Here, however, where we have
groundless or in bad faith merely by the filing of a response    concluded in considering case determinative sanctions that
which raises an issue of fact, even if the response was or       the district court clearly abused its discretion in awarding
could have been anticipated by the movant. Nor is denial of      any sanctions at all, there remains no basis for the award of
a motion for summary judgment alone grounds for                  attorney fees.
sanctions. Rule 13 does not permit sanctions for every
pleading or motion that requests relief which is denied. In          Accordingly, we conclude that GCSC is entitled to
this case, the district court abused its discretion in finding   have the district court's sanction order set aside.
that GCSC had acted in bad faith.
                                                                 ******
     The district court also sanctioned GCSC for asserting in
its motion for summary judgment that it did not know of               We therefore direct the district court to vacate its orders
any defects in the sheathed cord and could not have              of November 14, 1991, and June 12, 1992, assessing
foreseen an accident like plaintiffs', when it was aware of      sanctions and attorney fees. We assume the district court
the GTFL memo. Since we have determined that there is no         will promptly comply. The writ of mandamus will issue
evidence that GCSC was aware of the GTFL memo when it            only if it does not.
filed its motion for summary judgment, and plaintiffs have
                                                                     DOGGETT and SPECTOR, JJ., not sitting.
offered no other evidence of GCSC's knowledge of any
defects in the cord, we conclude that such assertions were
not groundless or made in bad faith.

     Even if GCSC's assertions in its amended answers and
motion for summary judgment had been sanctionable, they
would not have warranted striking GCSC's pleadings. Rule
13 requires that sanctions imposed be "appropriate", which
is the equivalent of "just" under Rule 215. TransAmerican,
811 S.W.2d at 916-17 n. 4. Neither standard allows
imposition of excessive sanctions. Moreover, while the due
process concerns under the two rules are not completely
congruent, case determinative sanctions may not be
imposed under either rule unless the violation warrants
adjudication of the merits. Even if GCSC had violated Rule
13, there is nothing in the record to suggest that the
violation could not have been fully redressed far short of
striking GCSC's pleadings.

Page 732

    Thus, we hold that the district court clearly abused its
discretion in imposing sanctions under Rule 13.

    IV

    Finally, we consider whether GCSC has an adequate
remedy by appeal. We have previously held that appeal
from the imposition of case determinative, or "death
penalty", sanctions is inadequate, unless the sanctions are
imposed simultaneously with a final, appealable judgment.
Page 577                                                           Darcey testified in his deposition that Bailey had mild
                                                                   asbestosis with no evidence of impairment.
92 S.W.3d 577 (Tex.App. —Austin 2002)
                                                                          The case was reset for trial in late 1999 and again in
NORFOLK         SOUTHERN         RAILWAY         COMPANY,          October 2001. In the summer of 2001, Bailey had another
Appellant,                                                         pulmonary test, which showed that the asbestosis had
                                                                   progressed to "mild impairment." Bailey produced this
v.                                                                 pulmonary test to Norfolk Southern in early August 2001,
                                                                   approximately two months before trial. The week before
James Allen BAILEY, Appellee.
                                                                   trial began, Dr. Darcey gave a second deposition in which
                                                                   he revised Bailey's diagnosis to asbestosis with mild
No. 03-02-00097-CV.
                                                                   impairment.
Court of Appeals of Texas, Third District, Austin
                                                                         At a hearing before trial, Norfolk Southern moved to
October 24, 2002                                                   strike Dr. Darcey's testimony about his revised diagnosis on
                                                                   the ground that Bailey failed to timely supplement his
Page 578                                                           discovery responses to reflect the change in Dr. Darcey's
                                                                   opinion. The district court denied the motion to strike the
[Copyrighted Material Omitted]                                     testimony with the caveat that "if we were dotting all our i's
                                                                   and crossing our t's, this should have been taken care of in
Page 579                                                           supplementing opinions and mental impressions." The
                                                                   district court concluded that Norfolk Southern would have
      Leo D. Figueroa, Jackson Walker, LLP, San Antonio,
                                                                   the opportunity on cross-examination to point out any
for appellant.
                                                                   discrepancies in Dr. Darcey's testimony.
     Carla M. Burke, Brent M. Rosenthal, Baron & Budd,
                                                                         Norfolk Southern also sought to exclude any evidence
PC, Dallas, for appellee.
                                                                   about Bailey's fear of cancer. As part of its motion in
                                                                   limine, Norfolk Southern requested no mention be made
    Before Chief Justice              ABOUSSIE,        Justices
                                                                   that "Plaintiff or any lay witnesses have been told anything
PATTERSON and PURYEAR.
                                                                   by any expert witness or witnesses concerning any matter."
     JAN P. PATTERSON, Justice.                                    At the pretrial hearing, Norfolk Southern specified that it
                                                                   did not want Bailey or any other witness to testify about
      In this personal injury action by appellee James Allen       what expert witnesses told Bailey concerning his potential
Bailey against appellant Norfolk Southern Railway                  for contracting cancer. The district court granted the motion
Company, we address whether certain evidentiary rulings            in limine with the modification that Bailey could testify
by the district court led to the rendition of an improper          about what Dr. Darcey, his treating physician, had told him,
judgment. In two issues, Norfolk Southern contends that the        but not about what other experts may have said. Norfolk
district court erred in denying its motion to strike part of the   Southern
testimony of an expert witness and in failing to exclude
evidence of Bailey's fear of contracting cancer. [1] Having        Page 580
concluded that the district court acted within its discretion
                                                                   also challenged the reliability of portions of Dr. Darcey's
in the evidentiary rulings at issue and, in any event, that the
                                                                   second deposition, specifically concerning people with
rulings did not lead to the rendition of an improper
                                                                   asbestosis having an increased risk of cancer. The district
judgment, we affirm the judgment of the district court.
                                                                   court overruled Norfolk Southern's objection to this
   FACTUAL                   AND             PROCEDURAL            deposition testimony. The case proceeded to trial.
BACKGROUND
                                                                         The jury returned a verdict in favor of Bailey. It found
      Bailey is a seventy-four-year-old man who was                that Bailey had sustained an asbestos-related disease and
exposed to asbestos while working for Norfolk Southern in          that Norfolk Southern caused the disease. The jury then
the 1940s and 1950s. In 1997, Dr. Dennis Darcey diagnosed          awarded Bailey a total of $500,000 in damages ($25,000 for
Bailey with asbestosis with no evidence of impairment,             past pain, suffering, and mental anguish; $315,000 for
based on a pulmonary test performed around the same time.          future pain, suffering, and mental anguish; $10,000 for past
In July 1998, shortly before the original trial setting, Dr.       physical impairment; and $150,000 for future physical
impairment). The district court rendered a final judgment                 When a party fails to supplement a discovery
for $428,910.03 in compensatory damages, plus                      response in a timely manner, the evidence may be excluded.
post-judgment interest, after an offset for settlements.           Tex.R. Civ. P. 193.6(a); see also Alvarado v. Farah Mfg.
Norfolk Southern filed a motion for new trial and motion           Co., 830 S.W.2d 911, 914 (Tex.1992)
for remittitur, which the district court denied. Norfolk
Southern appeals from the final judgment of the district           Page 581
court.
                                                                          . The remedy is mandatory and automatic unless the
     ANALYSIS                                                      court finds that there was good cause for the failure to
                                                                   amend or supplement, or the failure will not unfairly
      In two issues, Norfolk Southern contends that the            surprise or prejudice the other party. Tex.R. Civ. P.
district court erred in evidentiary rulings by (i) failing to      193.6(a); Morrow v. H.E.B., Inc., 714 S.W.2d 297, 297-98
strike portions of the testimony of Dr. Darcey because             (Tex.1986). The burden of establishing good cause or lack
Bailey did not timely supplement his discovery responses to        of unfair surprise is on the party seeking to introduce the
include Dr. Darcey's revised diagnosis and (ii) failing to         evidence. Tex.R. Civ. P. 193.6(b). The trial court has
exclude evidence of Bailey's fear of cancer on the ground          discretion to determine whether the offering party has met
that fear of cancer is not recoverable under the Federal           its burden of showing good cause. Aluminum Co. of Am. v.
Employers' Liability Act ("FELA") if there is no evidence          Bullock, 870 S.W.2d 2, 3 (Tex.1994). The record must
of injury related to fear of the disease.                          support a finding of good cause or lack of unfair surprise.
                                                                   Tex.R. Civ. P. 193.6(b).
       We apply an abuse of discretion standard to the
question of whether a district court erred in an evidentiary              In some instances, the change in an expert's opinion
ruling. City of Brownsville v. Alvarado, 897 S.W.2d 750,           does not require supplementation. For example, an expert
753 (Tex.1995). We may reverse a district court under this         may refine calculations or perfect a report up until the time
standard only when we find that "the court acted in an             of trial. Exxon Corp. v. West Tex. Gathering Co., 868
unreasonable or arbitrary manner," Beaumont Bank, N.A. v.          S.W.2d 299, 304 (Tex.1993). An expert also may change an
Buller, 806 S.W.2d 223, 226 (Tex.1991), or "without regard         opinion without supplementation if the opinion is an
for any guiding rules or principles." Owens-Corning                "expansion of an already disclosed subject." Navistar Int'l
Fiberglas Corp. v. Malone, 972 S.W.2d 35, 43 (Tex.1998)            Transp. Corp. v. Crim Truck & Tractor Co., 883 S.W.2d
(quoting Alvarado, 897 S.W.2d at 754).                             687, 691 (Tex.App.-Texarkana 1994, writ denied).
                                                                   However, a party may not present a material alteration of an
       When seeking to reverse a judgment based on an              expert's opinion at trial that would constitute a surprise
improper evidentiary ruling, a complaining party "need not         attack. See West Tex. Gathering, 868 S.W.2d at 305. The
prove that but for the error a different judgment would            purpose of requiring timely disclosure of a material change
necessarily have been rendered, but only that the error            in an expert's opinion is to give the other party an
probably resulted in an improper judgment." Alvarado, 897          opportunity to prepare a rebuttal. See id. at 304.
S.W.2d at 753; accord Malone, 972 S.W.2d at 43. To
prevail, the party must demonstrate that "the judgment turns             Bailey's counsel acknowledged at oral argument that
on the particular evidence excluded or admitted." Alvarado,        he should have supplemented the discovery responses with
897 S.W.2d at 753-54. We review the entire record to               Dr. Darcey's revised diagnosis. We agree. It would have
determine whether a party has met this burden. Id. at 754. If      been the better practice for Bailey to timely supplement his
any legitimate basis exists to support a district court's          discovery responses; nevertheless, the record supports the
evidentiary ruling, then we must uphold the court's                district court's ruling to admit the revised diagnosis.
decision. Malone, 972 S.W.2d at 43; State Bar v. Evans,
774 S.W.2d 656, 658 n. 5 (Tex.1989) (citing McCormick on                 First, the record shows that Norfolk Southern was not
Evidence § 52, at 131 (3d ed.1984)).                               unfairly surprised by the revised diagnosis. Norfolk
                                                                   Southern received a copy of the later pulmonary test in
        In its first issue, Norfolk Southern argues that the       early August 2001, almost two months before trial. It was
district court erred in denying its motion to strike part of the   logical that Dr. Darcey would base his trial testimony on the
testimony of Dr. Darcey. In its motion to strike, Norfolk          newer pulmonary test, given that the earlier pulmonary test
Southern sought to exclude Dr. Darcey's revised diagnosis,         figured prominently in his original diagnosis. Because
changed from "asbestosis with no impairment" to                    asbestosis is a progressive disease, see, e.g., Robinson v.
"asbestosis with mild impairment," because Bailey did not          Global Marine Drilling Co., 101 F.3d 35, 36 (5th
timely supplement his discovery responses to reflect the           Cir.1996); Pustejovsky v. Rapid-American Corp., 35
revised diagnosis.                                                 S.W.3d 643, 646 (Tex.2000), it should have been no
                                                                   surprise to Norfolk Southern that Bailey's condition might
worsen between the original diagnosis in early 1997 and the    Fibreboard Corp. v. Pool, 813 S.W.2d 658, 675 n. 2
trial over four years later in October 2001. The results of    (Tex.App.-Texarkana 1991, writ denied), cert. denied, 508
the later pulmonary test were admitted into evidence           U.S. 909, 113 S. Ct. 2339, 124 L. Ed. 2d 250 (1993). The
without objection. Additionally, Norfolk Southern had the      Texas Supreme Court has not decided whether fear of
opportunity to point out discrepancies in Dr. Darcey's         cancer is a compensable element of damage for a person
testimony on cross-examination, which was a factor in the      who manifests symptoms of an asbestos-related disease. See
district court's ruling.                                       Pustejovsky, 35 S.W.3d at 650; Temple-Inland, 993 S.W.2d
                                                               at 94. Under the current state of the law, then, because
       Second, although we find no cases directly on point     Bailey already manifests symptoms of an asbestos-related
about admitting a change in testimony based on the             disease, the district court did not act outside of the bounds
progression of asbestosis, Dr. Darcey's revised diagnosis      of its discretion in admitting the fear-of-cancer evidence.
falls somewhere between a refinement in calculations, see      We need not reach this issue, however, because it has not
West Tex. Gathering, 868 S.W.2d at 304, and an expansion       been preserved for our review.
of an already disclosed subject, see Navistar, 883 S.W.2d at
691, both of which are admissible without the need for               Norfolk Southern argues that it sought to prevent the
supplementation. We therefore conclude that the district       presentation of fear-of-cancer evidence through a motion to
court acted within the bounds of its discretion when it        exclude, but the record reflects that the district court ruled
denied Norfolk Southern's motion to strike Dr. Darcey's        on Norfolk Southern's motion in limine. The record
testimony about his revised diagnosis. Even if the district    contains two instances of Norfolk Southern's efforts to
court admitted Dr. Darcey's testimony in error, Norfolk        exclude evidence of fear of cancer. First, at the beginning of
Southern has failed to show how the admission of Dr.           the pretrial hearing, counsel for Norfolk Southern said that
Darcey's revised diagnosis led to the rendition                fear of cancer "is something we want to keep from the
                                                               jury." He explained that "this is something that is going to
Page 582                                                       come up in the motion in limine and with respect to the
                                                               experts." The district court did not rule on the issue at that
of an improper judgment, especially in light of other          time. Second, Norfolk Southern's motion in limine included
evidence in the record reflecting Bailey's medical             a request that no mention be made that "Plaintiff or any lay
impairment. We overrule Norfolk Southern's first issue.        witnesses have been told anything by any expert witness or
                                                               witnesses concerning any matter" without first approaching
       In its second issue, Norfolk Southern argues that the
                                                               the bench. Norfolk Southern specified at the pretrial hearing
district court erred in denying its motion to exclude
                                                               on the motion in limine that it did not want Bailey or any
evidence about Bailey's fear of getting cancer. Norfolk
                                                               other witness to testify about what experts told Bailey
Southern urges that this evidence should have been
                                                               concerning the possibility of contracting cancer. The district
excluded because fear of getting cancer is not compensable
                                                               court ruled that Bailey could testify about what his treating
under the FELA when there is no physical manifestation of
                                                               doctor, Dr. Darcey, told him but not about what other expert
injury related to the fear of cancer.
                                                               witnesses may have told him concerning the possibility of
         Under the FELA, a person who has no                   contracting cancer.
asbestos-related disease cannot recover for fear of a
                                                               Page 583
possible future disease. See Metro-North Commuter R.R.
Co. v. Buckley, 521 U.S. 424, 427, 117 S. Ct. 2113, 138              [2] The record on appeal contains no motion to
L.Ed.2d 560 (1997). Texas applies this rule to all asbestos    exclude cancer evidence, nor any order overruling such a
cases, not just those involving the FELA. See                  motion.
Temple-Inland Forest Prods. Corp. v. Carter, 993 S.W.2d
88, 94 (Tex.1999). Texas does, however, generally                     It is well established that denial of a motion in limine
"authorize [ ] recovery of mental anguish damages in           is not a final ruling on admission of evidence; a party must
virtually all personal injury cases" that include              object at trial when the testimony is offered to preserve
manifestation of a physical injury. Krishnan v. Sepulveda,     error. Hartford Accident & Indem. Co. v. McCardell, 369
916 S.W.2d 478, 481 (Tex.1995). Specifically concerning        S.W.2d 331, 335 (Tex.1963); see also Tex.R.App. P.
asbestos-related diseases, the United States Court of          33.1(a)(1). A ruling on a pretrial motion to exclude
Appeals for the Fifth Circuit and our sister court in          evidence, however, can be a ruling on the admission of
Texarkana have determined that a person who already            evidence. Huckaby v. A.G. Perry & Son, Inc., 20 S.W.3d
manifests symptoms of an asbestos-related disease may          194, 203-204 (Tex.App.-Texarkana 2000, pet. denied).
recover for fear of contracting another asbestos-related       What occurred here was a ruling on a motion in limine, not
disease. See Gideon v. Johns-Manville Sales Corp., 761         a final ruling on the evidence. McCardell, 369 S.W.2d at
F.2d 1129, 1138 (5th Cir.1985) (applying Texas law);           335. To preserve error after the ruling on its motion in
limine, Norfolk Southern needed to object at trial to the        922 (Tex.App.-Beaumont 1999, pet. denied). "The failure to
admissibility of fear-of-cancer evidence and obtain a ruling.    address an element of damages results in waiver of the
Id.; see also Tex.R.App. P. 33.1(a).                             sufficiency challenge." Price, 931 S.W.2d at 688. By failing
                                                                 to challenge each element of the damages award, Norfolk
       As Norfolk Southern points out in its brief, the record   Southern has failed to preserve error. We therefore overrule
is replete with references to Bailey's fear of cancer and the    Norfolk Southern's second issue.
possibility that he may contract cancer. What is missing
from the record are Norfolk Southern's objections to most              CONCLUSION
of this evidence. Norfolk Southern objected once during
Bailey's testimony and received a limiting instruction that            The district court acted within the bounds of its
the jury consider Bailey's testimony about the possibility of    discretion in the evidentiary rulings that Norfolk Southern
contracting cancer only for Bailey's state of mind, not for      disputes. Furthermore, the rulings at issue did not lead to
the truth that he might contract cancer. Norfolk Southern        the rendition of an improper judgment in this case. Having
failed to object, however, to many subsequent references to      overruled Norfolk Southern's issues, we affirm the
fear of cancer. "The general rule is that error in the           judgment of the district court.
admission of testimony is deemed harmless if the objecting
party subsequently permits the same or similar evidence to       ---------
be introduced without objection." See Richardson v. Green,
                                                                 Notes:
677 S.W.2d 497, 501 (Tex.1984). Therefore, any error in
the admission of fear-of-cancer evidence was harmless
                                                                 [1] At oral argument, Norfolk Southern withdrew a third
because Norfolk Southern failed to object to subsequent
                                                                 evidentiary issue from consideration on appeal.
references. See id. More importantly, Norfolk Southern has
failed to show how the admission of fear-of-cancer               [2] Norfolk Southern argues that it also sought to exclude
evidence led to the rendition of an improper judgment.           fear-of-cancer evidence through objections to portions of
                                                                 Dr. Darcey's second deposition. The record shows,
       Norfolk Southern also failed to preserve error with a
                                                                 however, that it objected to Dr. Darcey testifying about an
sufficient challenge to the jury's broad-form damages            increased risk of cancer, not about a fear of cancer. The
findings. At the charge conference, Norfolk Southern did
                                                                 district court overruled Norfolk Southern's objection.
not object to the submission of damages questions in broad
form. The jury awarded damages for pain, suffering, and          ---------
mental anguish that Bailey sustained in the past, and pain,
suffering, and mental anguish that Bailey would in all
probability sustain in the future. The record substantially
supports the jury's damages award, even setting aside the
fear-of-cancer evidence. Experts for both Bailey and
Norfolk Southern testified that asbestosis is a progressive
disease, and Bailey's asbestosis worsened between 1997 and
2001. The jury could have based its award for future
damages on the possibility that Bailey's asbestosis would
further worsen.

        When a damages issue is submitted in broad form, it
is difficult to determine the amount that the jury awarded
for each element of damages. See Haryanto v. Saeed, 860
S.W.2d 913, 921 (Tex.App.-Houston [14th Dist.] 1993, writ
denied); Greater Houston Transp. Co. v. Zrubeck, 850
S.W.2d 579, 589 (Tex.App.-Corpus Christi 1993, writ
denied). Consequently, to successfully challenge a
multi-element damage award on appeal, an appellant

Page 584

must address all of the elements and show that the evidence
is insufficient to support the entire damage award. See Price
v. Short, 931 S.W.2d 677, 688 (Tex.App.-Dallas 1996, no
writ); accord Brookshire Bros. v. Lewis, 997 S.W.2d 908,
Page 761                                                     set for trial on March 24, 1997. Karagounis appeared in
                                                             court pro se on that date, announced that he was not ready
970 S.W.2d 761 (Tex.App. —Amarillo 1998)                     to proceed because he lacked an attorney, and requested a
                                                             continuance. [2] Continuance was denied. Nevertheless,
Vasilios KARAGOUNIS, Appellant,                              trial was postponed until the next day. Karagounis failed to
                                                             appear when the case was called for trial on the 25th of
v.
                                                             March. However, the court proceeded to hear PCA's request
                                                             for sanctions under Rule 13 of the Texas Rules of Civil
PROPERTY COMPANY OF AMERICA, Appellee.
                                                             Procedure. The request had been included in its amended
No. 07-97-0287-CV.                                           answer filed several weeks earlier. Sanctions were sought
                                                             because Karagounis' suit was allegedly groundless and
Court of Appeals of Texas, Seventh District, Amarillo        initiated in bad faith. After hearing evidence presented by
                                                             PCA's legal counsel, the trial court entered the
June 23, 1998                                                aforementioned final judgment.

Page 762                                                          Karagounis then timely moved for a new trial,
                                                             contending that he had discovered new evidence and that
    Law Offices of Charles Nicholson (Charles Nicholson),    PCA "had not file [sic] a Counterclaim on February 28th
San Antonio, for appellant.                                  [sic] 1997, as required by TRCP 47, [sic] and 97." When
                                                             that relief was denied him by written order, he again moved
   Davis & Wilkerson, P.C. (Kelly A. McDonald), San
                                                             the court to "reconsider new trial." Though colored in a
Antonio, for appellee.
                                                             different shade, the grounds alleged therein again involved
                                                             newly discovered evidence and the impropriety of the court
     Before BOYD, C.J., and QUINN and REAVIS, JJ.
                                                             awarding sanctions. That motion too was denied by written
     ON MOTION FOR REHEARING                                 order.

     QUINN, Justice.                                         Issue One--The Applicability of Rule 13

      Vasilios Karagounis ("Karagounis") has moved for            Under this issue, Karagounis posits that sanctions could
rehearing. We deny the motion, withdraw our original         not be awarded under Rule 13 of the Texas Rules of Civil
opinion dated May 1, 1998, and substitute the following in   Procedure because chapter 10 of the Texas Civil Practice
its stead.                                                   and Remedies Code supplanted the rule. Both deal with the
                                                             levy of sanctions against litigants who file groundless
Page 763                                                     pleadings in bad faith. Furthermore, the legislation enacting
                                                             chapter 10 dictates that the provisions of the chapter take
     Karagounis appeals from a final judgment declaring      effect on September 1, 1995, and that they apply "only to a
that he take nothing against Property Company of America     pleading or motion in a suit commenced on or after that
("PCA") and sanctioning Karagounis for initiating in bad     date." TEX. CIV. PRAC. & REM.CODE ANN. § 10.001
faith and pursuing a groundless suit. Though encompassed     historical note (Vernon Supp.1998) [Act of May 18, 1995,
within two points, he actually presents four issues for      74th Leg., R.S., ch. 137, § 1, 1995 Tex. Gen. Laws 977,
review. The first concerns whether Texas Rule of Civil       978]. A pleading or motion "in a suit commenced before the
Procedure 13 applied to the proceeding, the second,          effective date ... is governed by the law applicable to the
whether sanctions could issue when a party simply lacked     pleading or motion immediately before the effective date ...
sufficient evidence to support its claim, [1] the third,     and that law is continued in effect for that purpose." Id.
whether he was afforded proper notice of the sanctions       Since the action from which this appeal arose was initiated
hearing, and fourth, whether the Texas Rules of Civil        after September 1, 1995, concludes Karagounis, Rule 13
Procedure prevented the trial court from entering a          had no application. We disagree.
judgment on the merits. We affirm in part and reverse in
part.                                                             Section 10.006 of the Texas Civil Practice and
                                                             Remedies Code states that "[n]otwithstanding Section
Background                                                   22.004, Government Code, the supreme court may not
                                                             amend or adopt rules in conflict with this chapter." From
   Karagounis initiated a suit against PCA and others for    this we glean the legislature's intent. It did not purport to
damages sustained in a fire at his apartment. The case was   supercede the supreme court's authority to enact rules of
court concerning sanctions. Nor did it purport to negate any      what Rule 13 regulates is the signing and filing of
rules of court which may also regulate the topic of               groundless pleadings in bad faith or for purposes of
sanctions. Rather, it prohibited the court from enacting rules    harassment, not the pursuit of an action later determined to
which conflict with chapter 10. In other                          be groundless after pleadings were filed. As much is
                                                                  revealed in the rule itself when it declares that "[i]f a
Page 764                                                          pleading, motion or other paper is signed in violation of this
                                                                  rule, the court ... shall impose an appropriate sanction...."
words, as long as the court's rules do not conflict with the      TEX.R. CIV. P. 13 (emphasis added). It says nothing about
provisions of the chapter, they can enjoy force and effect.       levying sanctions if one pursues an action or pleading
[3] If the legislature intended anything more, it could have      thought legitimate when filed but subsequently found
so said. Consequently, we overrule this contention. [4]           baseless. As a result, the circumstances pivotal to the
                                                                  determination of whether sanctions should issue are those in
Issue Two--Sanctions Because a Party Lacks Evidence to
                                                                  existence at the time the pleading in question was signed
Prove a Claim
                                                                  and filed. Monroe v. Grider, 884 S.W.2d at 817; Campos v.
     Under this issue, Karagounis' argument is twofold.           Ysleta Gen. Hosp., Inc., 879 S.W.2d 67, 71 (Tex.App.--El
Initially, he asserts that sanctions could not issue simply       Paso 1994, writ denied); McCain v. NME Hosps., Inc., 856
because he failed to present sufficient evidence to support       S.W.2d at 757; Home Owners Funding Corp. v. Scheppler,
his claim. Then, he suggests that in denying PCA's motion 815 S.W.2d at 889.
for summary judgment, the trial court implicitly found that
                                                                       Next, since it is presumed that counsel acted in good
his allegations were supported by some evidence. We
                                                                  faith, TEX.R. CIV. P. 13, the burden lies with the movant to
sustain the argument in part.
                                                                  prove the criteria prerequisite to recovering sanctions. GTE
Standard of Review                                                Communications Sys. Corp. v. Tanner, 856 S.W.2d 725,
                                                                  729 (Tex.1993); Campos v.
     In addressing a request for sanctions under Rule 13 of
the Texas Rules of Civil Procedure, the trial court exercises     Page 765
its considered discretion. Monroe v. Grider, 884 S.W.2d
                                                                  Ysleta Gen. Hosp., Inc., 879 S.W.2d at 71. That is, it must
811, 816 (Tex.App.--Dallas 1994, writ denied). Given this,
                                                                  establish not only the frivolity of its opponent's claim but
we cannot interfere with the decision reached unless we
                                                                  also the improper motives underlying the decision to file the
conclude that the trial court's discretion was abused. Id. At
                                                                  suit, motion, or document. This in turn makes it imperative
the very least, this requires a showing that the court acted
                                                                  for the trial court to convene and conduct an evidentiary
arbitrarily or unreasonably, such as when it bases its order
                                                                  hearing. Bisby v. Dow Chemical Co., 931 S.W.2d 18, 21
on an incorrect interpretation of the law or a clearly
                                                                  (Tex.App.--Houston [1st Dist.] 1996, no writ); McCain v.
erroneous assessment of the evidence. Id. So too can
                                                                  NME Hosp., Inc., 856 S.W.2d at 757-58; see TEX.R. CIV.
discretion be abused if the procedural mechanisms in place
                                                                  P. 13 (stating that the court must provide the litigants
to guide the court's determination are ignored. For instance,
                                                                  "notice and hearing"). "Without hearing evidence on the
if the rule of law requires the court to conduct a hearing and
                                                                  circumstances surrounding the filing of the pleading and the
receive evidence before it can make a decision and the court
                                                                  signer's credibility and motives, the trial court ha[s] no
does neither, then the court fails to do those things
                                                                  evidence to determine that the appellants or their attorneys
necessary to enable it to soundly exercise its discretion. The
                                                                  filed the pleading in bad faith or to harass." McCain v. NME
result is an abuse of discretion.
                                                                  Hosps., Inc., 856 S.W.2d at 757-58; accord Bisby v. Dow
      Texas Rule of Civil Procedure 13 dictates that in           Chemical Co., 931 S.W.2d at 21 (stating the same).
signing a pleading, motion, or other paper, counsel certifies     Similarly, it is equally imperative that notice of the
that he read the document and that the allegations contained      foregoing hearing be afforded the parties. TEX.R. CIV. P.
in it are, to the best of his knowledge, neither 1) groundless    13. If one or the other is denied to the litigant against whom
and brought in bad faith or 2) groundless and brought for         sanctions are sought, then it can hardly be said that the
the purposes of harassment. Monroe v. Grider, 884 S.W.2d          litigant received due process before being punished.
at 817; McCain v. NME Hosps., Inc., 856 S.W.2d 751, 757
                                                                  Application of the Standard
(Tex.App.--Dallas 1993, no writ). This rule serves to "check
abuses in the pleading process, i.e. to insure that at the time       As to the contention that sanctions were inappropriate
the challenged pleading was filed the litigant's position was     because the court denied PCA's motion for summary
factually well grounded and legally tenable." Home Owners         judgment, we disagree. [5] Simply put, nothing of record
Funding Corp. v. Scheppler, 815 S.W.2d 884, 889                   indicates that the court ever granted or denied the motion.
(Tex.App.--Corpus Christi 1991, no writ). In other words,         Given this, we can hardly conclude that the court denied
summary judgment, which in turn, prevents us from                 not be awarded given the court's failure to provide him
inferring that the court implicitly determined that some          sufficient prior notice of the hearing. In reviewing this
evidence existed to buttress Karagounis' claim.                   ground, we found that he filed a motion for new trial and to
                                                                  reconsider the order denying new trial. Yet, in neither did
     As to the contention that sanctions could not issue          he raise the assertion now before us. Nor was it presented to
simply because he failed to present sufficient evidence to        the trial court via any other means. Such was required to
support his claim, we interpret it as questioning the legal       preserve it for appeal. [8] TEX.R.APP. P. 33.1(a)(1).
basis upon which the court acted. As revealed by                  Consequently, it has been waived. See HBA East, Ltd. v.
testimonial evidence at the sanctions hearing, PCA's              JEA Boxing Co., 796 S.W.2d 534, 538-39
counsel provided Karagounis' counsel with evidence which          (Tex.App.--Houston [1st Dist.] 1990, writ denied), cert.
allegedly established that the suit was baseless. Yet,            denied, 501 U.S. 1218, 111 S. Ct. 2828, 115 L. Ed. 2d 998
Karagounis continued to proceed with the action, rather           (1991) (holding that the appellant waived his claim that he
than dismiss it. To "continue to maintain this suit after the     was denied prior notice of the hearing on a motion for
date that we got this information and fully disclosed it to the   default judgment because the issue was not first presented
Plaintiff's lawyer, fully produced all documents necessary        to the trial court).
to prove it to the Plaintiff through his Attorney," said PCA's
counsel, was to act in a manner warranting sanctions.             Issue Four--Judgment Adjudicating the Merits
(emphasis added). The court agreed as evinced by its
finding "that Plaintiff's continued assertions against                 Under this issue, Karagounis posits that the judgment is
Defendant after February 27, 1997 are groundless and              defective since the trial court could not rule upon the merits
brought in bad faith or for the purpose of harassment."           of the case. That is, according to Karagounis, when a party
(emphasis added). [6] See TEX.R. CIV. P. 13 (obligating           fails to appear for trial, Texas Rule of Civil Procedure 165a
the court to state the particular basis upon which sanctions      restricts the trial court to dismissing the suit as opposed to
were issued); TEX. CIV. PRAC. & REM.CODE ANN. §                   addressing its merits. See Tewell v. Tewell, 599 S.W.2d
10.005 (requiring the court to describe the conduct which         351, 354 (Tex.Civ.App.--Corpus Christi 1980, writ ref'd
warranted sanctions).                                             n.r.e.) (stating that dismissal, as opposed to an adjudication
                                                                  on the merits, is the appropriate relief vis-a-vis a suit that
     As can be seen from PCA's argument and the court's           has not been diligently prosecuted). Moreover, in ordering
declaration, Karagounis was not sanctioned for signing and        that he take nothing against PCA after he failed to appear
filing a frivolous suit, but for continuing his suit once PCA     for trial, Karagounis argues that the court purportedly
provided him with evidence which allegedly rebutted his           adjudicated the merits of his claim, which it could not. We
contentions. Yet, Rule 13, by its very words, only                overrule the point for several reasons.
encompasses the initiation of a frivolous action for
improper motive not the continuation of a suit after it is             First, we need not consider the issue for Karagounis did
shown to be baseless. Thus, sanctions could not be levied         not include it within his motion for new trial or for
under Rule 13. And, in doing so, the trial court abused its       reconsideration or otherwise present it first to the trial court.
discretion by misinterpreting Rule 13. Finally, given that        That was a prerequisite. TEX.R.APP. P. 33.1(a)(1); Smith v.
sanctions were assessed to punish conduct outside the scope       Babcock & Wilcox Constr. Co., 915 S.W.2d 22, 26
of the rule, we must also conclude that the trial court's error   (Tex.App.--Austin 1994, no writ); McCain v. NME Hosps.,
was harmful.                                                      Inc., 856 S.W.2d at 755; Andrews v. ABJ Adjusters, Inc.,
                                                                  800 S.W.2d 567, 568-69 (Tex.App.--Houston [14th Dist.]
    This is not to say that we condone a litigant's conscious     1990, writ denied). Consequently, the matter has been
decision to further prosecute a claim or defense if same is       waived.
shown to be groundless prior to trial. Such conduct is as
                                                                       Second, even if it were not waived, we find no error.
Page 766                                                          This is so because Karagounis' argument is premised on the
                                                                  mistaken belief that the court entered judgment against him
reprehensible as knowingly filing a frivolous lawsuit in the      simply because he failed to appear. He ignores the fact that
first place. But we cannot read into rules or laws that which,    the court had before it, when the cause came to trial, what it
by their own terms, is not there. Nevertheless, we would          considered to be a counterclaim for sanctions. See New
invite the appropriate governing bodies to adopt rules            York Underwriters Ins. Co. v. State Farm Mut. Auto. Ins.
addressing situations like those discussed today. [7]             Co., 856 S.W.2d 194, 205 (Tex.App.--Dallas 1993, no writ)
                                                                  (recognizing that a counterclaim for relief under Rule 13
Issue Three--Failure to Notice Sanctions Hearing                  was an appropriate way to obtain sanctions). As previously
                                                                  mentioned, PCA requested such relief since it believed that
    Under this issue, Karagounis posits that sanctions could
                                                                  the suit was groundless and initiated in bad faith or for
purposes of harassment.                                         coincide with any date on which Karagounis signed and
                                                                filed a pleading or motion. Rather, it was the date on which
    Another fact ignored by Karagounis is that the court        PCA forwarded Karagounis' information which it thought
concluded that his suit was "frivolous"                         conclusively disproved his cause of action. By that time, the
                                                                suit had been pending for some seventeen months.
Page 767
                                                                [7] Rule 11 of the Federal Rules of Civil Procedure
and "groundless." More importantly, logic dictates that         addresses this issue:
before the court could have so concluded, it had to have
adjudicated his claims. And, having adjudicated them for        (b) Representations to Court. By presenting to the court
purposes of awarding sanctions, the court did not err in        (whether by signing, filing, submitting, or later advocating )
entering a judgment on the merits rejecting the claims. [9]     a pleading, written motion, or other paper, an attorney or
In sum, the court did not act upon Texas Rule of Civil          unrepresented party is certifying that ...
Procedure 165a. Indeed, the latter was never mentioned by
anyone below. It simply adjudicated Karagounis' claims,         (1) it is not being presented for any improper purpose, such
found them wanting, and entered judgment on that finding.       as to harass or to cause unnecessary delay or needless
                                                                increase in the cost of litigation;
     Accordingly, we reverse that portion of the judgment
levying sanctions upon Karagounis and remand that issue         (2) the claims, defenses, and other legal contentions therein
for further proceedings. In all other respects, however, the    are warranted by existing law or by a nonfrivolous
judgment is affirmed.                                           argument for the extension, modification, or reversal of
                                                                existing law or the establishment of a new law....
---------
                                                                FED.R.CIV.P. 11 (italics added)
Notes:
                                                                [8] Additionally, we note that our reversal of the sanctions
[1] We note that Karagounis' statement and argument of this     moots the issue of notice.
particular issue is highly abbreviated and obtuse. However,
we construe his points of error liberally and consider both     [9] Our conclusion that the trial court erred in awarding
the points and related arguments in interpreting them. See      sanctions does not affect its finding that the suit was
Anderson v. Gilbert, 897 S.W.2d 783, 784-85 (Tex.1995)          groundless. Again, we found error because the court could
(holding that a party's arguments, and not just the wording     not sanction Karagounis for continuing to prosecute a
of a point of error, should be considered).                     groundless suit. Whether or not the claims were groundless
                                                                went unaddressed. Nor did Karagounis question the legal or
[2] Karagounis released his counsel, with approval of the       factual sufficiency of the evidence underlying the
court, shortly before the date on which he was to appear at     determination that his claims were frivolous.
trial.
                                                                ---------
[3] Since Karagounis does not argue that Rule 13 and
section 10, et seq., of the Civil Practice and Remedies Code
conflict, we need not address whether the latter pre-empted
the former on that basis.

[4] A motion or counterclaim requesting sanctions for a
groundless filing after September 1, 1995 may utilize both
Rule 13 and section 10.001. In Alexander v. Alexander,
sanctions were requested due to violations of both Rule 13
and section 10.001 for a groundless filing that took place on
July 26, 1996. 956 S.W.2d 712 (Tex.App.--Houston [14th
Dist.] 1997, pet. denied).

[5] PCA moved for summary judgment on the grounds that
it owed no legal duty to Karagounis. Owing no duty to
Karagounis, it was argued, PCA could not be held
responsible for any injury Karagounis suffered.

[6] The February 27th date referred to by the court did not
Page 836                                                   entities and companies that generate waste sent to the
                                                           disposal facility. During the discovery process, the trial
999 S.W.2d 836 (Tex.App. —Tyler 1999)                      court dismissed Appellants' claims for failure to comply
                                                           with a court order. Appellants assert that the trial court
MARTI WILLIAMS, INDIVIDUALLY AND AS NEXT                   erred in entering the order and in dismissing their claims.
FRIEND OF                                                  We reverse the trial court's orders of dismissal and remand
                                                           the case to the trial court for further proceedings
  MICHAEL WILLIAMS AND LINDA SMILEY,
INDIVIDUALLY                                                    Appellants filed this lawsuit in October of 1993,
                                                           alleging that they suffered personal injuries and property
 AND AS NEXT FRIEND OF COURTNEY SMITH,
                                                           damage as a result of continuing exposure to toxic
APPELLANTS
                                                           emissions released from the Facility. Both sides served
                                                           interrogatories and requests for production on the other in
v.
                                                           mid-1995. Unhappy with Appellants' responses, some of the
 AKZO NOBEL CHEMICALS, INC., F/K/A AKZO                    Appellees filed a motion to compel and for sanctions.
CHEMICALS, INC., ET AL., APPELLEES                         However, before the scheduled hearing, the parties came to
                                                           an agreement and no ruling was obtained on the motion.
No. 12-97-00295-CV                                         Because Appellees felt that Appellants did not comply with
                                                           that agreement, they filed another motion to compel and for
Court of Appeals of Texas, Twelfth District, Tyler         sanctions. The result was an agreed order entered March 16,
                                                           1996, which ordered Appellants to further respond to
June 30, 1999                                              discovery within a specified period. The order did not
                                                           mention sanctions.
   APPEAL FROM THE 241ST JUDICIAL DISTRICT
COURT OF SMITH COUNTY, TEXAS. Hon. Diane                        The parties continued to spar with discovery requests
DeVasto, Judge.                                            and objections for several months. In November 1996 many
                                                           Appellees filed a motion for entry of a case management
Page 837
                                                           order ("CMO"). The stated purpose of the order was to
                                                           narrow the issues, streamline discovery, and weed out
[Copyrighted Material Omitted]
                                                           meritless claims. The movants also sought to obtain
Page 838                                                   consistent treatment concerning all "companion cases."[3]
                                                           Movants asked the court to order Appellants to provide
[Copyrighted Material Omitted]                             affidavits from experts specifying the illness or condition
                                                           attributable to exposure to substances from the Facility,
Page 839                                                   naming the substances, stating when and how the exposure
                                                           occurred, naming which Appellee is responsible, and
     Robert W. Buchholz, Dallas, for appellants.           explaining the basis of the expert's opinion. Movants also
                                                           asked for a stay of discovery. They did not ask for
    Jeffrey M. Tillotson, Dallas, James M. Garner, New
                                                           sanctions.
Orleans, Gregory D. Smith, Tyler, F. Walter Conrad,
Houston, Don David Martinson, Phillip S. Brown, Diana C        A hearing was held on the motion on December 20,
Dutton, Dallas, Robert G Newman, San Antonio, Ms. Sally    1996, at which the court heard arguments from both sides.
A. Longroy, Dale Gene Markland, William Stephen Boyd,      Movants explained that they wanted an order requiring
Dallas, for appellees.                                     Appellants to produce affidavits supporting the basic
                                                           elements of their case
   Panel consisted of Chief Justice Ramey, Jr. , Justice
Worthen, and Justice Hadden.                               Page 841

Page 840                                                   so that Movants could defend against specific allegations.
                                                           After Appellants have provided that information, Movants
     TOM B. RAMEY, Jr. Chief Justice.
                                                           asserted, the case should proceed in accordance with the
                                                           court's normal scheduling order. Appellants argued against
    Appellants[1], brought suit against Appellees[2], a
                                                           entry of the CMO, stating that the appropriate course for
hazardous waste disposal facility and numerous related
                                                           Movants was to file special exceptions. While they have
obtained some documents from some Appellees, Appellants            claims against those defendants. The court invited motions
argued, those documents are general and incomplete.                to dismiss for its consideration and delayed ruling on
Appellants asserted that they could not provide the                Appellants' pending motion. The court, however, explicitly
affidavits requested by Movants, with the level of                 stated that the discovery stay was still in effect.
specificity requested, without doing further discovery. The
trial court stated on the record that "at this time I'm going to       Thereafter, Appellees moved the court to dismiss
enter the case management order as requested by the                Appellants' claims for failure to comply with the CMO. The
Defendants." The court also announced a stay of discovery.         court signed motions to dismiss the claims against most
The specific terms of the order were not dictated into the         defendants on May 12, 13, 15, and 21, 1997. Pursuant to
record. The court also stated that it would review the             Appellees' request to enter an amended order, the trial court
affidavits when presented and would consider amendments            entered amended orders of dismissal on September
to the order at that time.
                                                                   Page 842
     A written CMO was signed on January 15, 1997. That
order required Appellants to present, on or before sixty days      9 and 12, 1997, dismissing Appellants' claims against fifty
after the date of the order, affidavits from experts describing    defendants. The amended orders more completely explain
the injury or condition suffered by each plaintiff that was        the grounds for dismissal against those fifty defendants. The
caused by exposure to materials from the Facility,                 orders state that those dismissals were justified under Texas
identifying the substance that caused the injury, the manner,      Rules of Civil Procedure 13, 166, and 215, and the court's
date, time, duration, and dosage of each incident of               inherent power.
exposure and the source of each substance. The order also
                                                                        Initially, we consider an issue raised by Appellants in
required the affidavits to include a description of the
                                                                   their supplemental brief concerning whether the trial court
scientific and medical bases for the expert's opinions. Also
                                                                   had jurisdiction to enter the amended orders. They assert
included was the decree "that any plaintiff that fails to
                                                                   that, because they filed motions for new trial concerning all
comply with this order shall have his or her claims
                                                                   of the May dismissal orders, the trial court's plenary
dismissed." Finally, the order stayed all discovery as to all
                                                                   jurisdiction ended, at the latest, seventy-five days after May
parties until thirty days after the submission of the
                                                                   21, on August 4, 1997. Therefore, they argue, the court did
affidavits.
                                                                   not have jurisdiction when it signed the September orders.
     On March 3, 1997, Appellants filed a motion to
                                                                        A trial court has plenary jurisdiction over its judgment
reconsider the CMO. They claimed that the documents they
                                                                   until it becomes final. Fruehauf Corp. v. Carrillo, 848
have are incomplete and not specific. They asserted that
                                                                   S.W.2d 83, 84 (Tex. 1993) (per curiam). The trial court also
certain Appellees can supply them with the information
                                                                   retains continuing control over interlocutory orders and has
they need to comply with the CMO. Therefore, they
                                                                   the power to set those orders aside any time before a final
requested that the discovery stay be lifted and they be
                                                                   judgment is entered. Id. To be final a judgment must
allowed additional time to obtain the required affidavits.
                                                                   dispose of all issues and parties in a case. North East Indep.
Alternatively, if the stay was to remain in place, they
                                                                   Sch. Dist. v. Aldridge, 400 S.W.2d 893, 895 (Tex. 1966).
requested an additional thirty days to obtain the affidavits.
                                                                   Any action taken by the trial court after the expiration of its
    A hearing was held on the motion to reconsider on              plenary jurisdiction is a nullity. See Jackson v. Van Winkle,
April 4, 1997. Appellants argued that they need documents          660 S.W.2d 807, 808 (Tex. 1983).
from Appellees showing what was shipped, what specific
                                                                        Here, the trial court signed dismissal orders in May
materials were in the waste stream, their concentrations,
                                                                   disposing of most defendants. However, those orders did
when they were shipped, where they were shipped and
                                                                   not dispose of all defendants. Defendants Eagle-Picher
confirmation that they were received. Appellants claimed
                                                                   Industries and Atrium Doors and Windows were not
they could not provide affidavits in the absence of this
                                                                   included in those orders. Eagle-Picher Industries was
information. Appellees asserted that the Facility had made
                                                                   non-suited by order dated September 2, 1997, and Atrium
available for review by Appellants over 200,000 documents
                                                                   Doors and Windows was non-suited on November 3, 1997.
and Appellants had reviewed and copied a large number of
                                                                   Therefore, the May dismissal orders were interlocutory and
these documents. Further, some defendants had notified
                                                                   not final. See Aldridge, 400 S.W.2d at 895. Accordingly,
Appellants that documents were available for their review
                                                                   the trial court had jurisdiction to enter the September orders.
but Appellants never made arrangements to review those
                                                                   See Carrillo, 848 S.W.2d at 84. We overrule Appellants'
documents. Finally, Appellees pointed out that Appellants
                                                                   supplemental issue.
actually reviewed documents produced by other defendants
and made some copies of those documents. Even so,                      We address now Appellants' second issue, which is
Appellants did not provide affidavits concerning their
dispositive of the case. In their second issue, Appellants         obstruction of the discovery process justifies the
contend that the trial court erred in dismissing their claims      presumption that the claim lacks merit. TransAmerican, 811
because death penalty sanctions were not proper. We agree.         S.W.2d at 918. Even then, lesser sanctions should be tested
The trial court's orders rely on rules of civil procedure 13,      first to determine if they are adequate to secure compliance,
166, and 215 and the court's inherent power as justification       deterrence, and punishment of the offender. Hamill v. Level,
for the dismissals. We conclude that the dismissals cannot         917 S.W.2d 15, 16 n.1 (Tex. 1996) (per curiam); Chrysler
be upheld under any of these grounds.                              Corp., 841 S.W.2d at 849; Humphreys v. Meadows, 938
S.W.2d 750, 752 (Tex. App. - Fort Worth 1996, writ
     In order to assist in the disposition of the case, rule 166   denied). In exceptional situations, determinative sanctions
permits trial courts to hold pretrial conferences and to enter     may be imposed in the first instance when they are clearly
orders establishing the agreements of the parties as to any        justified and no lesser sanctions will promote compliance.
of the matters considered which controls the subsequent            GTE Communications Sys. Corp. v. Tanner, 856 S.W.2d
course of the case up to trial. TEX. R. CIV. P. 166. The trial     725, 729 (Tex. 1993) (orig. proceeding).
court has power, implicit under rule 166, to sanction for
failing to obey the court's pretrial orders. Koslow's v.                The trial court has inherent power to sanction to the
Mackie, 796 S.W.2d 700, 703 (Tex. 1990). Rule 215                  extent necessary to deter, alleviate, and counteract bad faith
authorizes a trial court to impose sanctions for violations of     abuse of the judicial process. Metzger v. Sebek, 892 S.W.2d
discovery orders or for abuse of the discovery process.            20, 51 (Tex. App. - Houston [1st Dist.] 1994, writ denied),
TEX. R. CIV. P. 215.                                               cert. denied, 516 U.S. 868, 133 L. Ed. 2d 124, 116 S. Ct. 186
                                                                   (1995); Shook v. Gilmore & Tatge Mfg Co., 851 S.W.2d
     Imposing an available sanction for a violation of rules       887, 891 (Tex. App.-Waco 1993, writ denied); Kutch v. Del
166 or 215 is left to the sound discretion of the trial court.     Mar College, 831 S.W.2d 506, 509 (Tex. App. - Corpus
TransAmerican Nat. Gas Corp. v. Powell, 811 S.W.2d 913,            Christi 1992, no writ). For inherent power to apply, there
917 (Tex. 1991) (orig. proceeding); Koslow's, 796 S.W.2d           must be some evidence and factual findings that the conduct
at 704. An appellate court will set aside the decision only        complained of significantly interfered with the court's
on a showing of a clear abuse of discretion. The test for          administration of its core functions: hearing evidence,
abuse of discretion is whether the trial court acted without       deciding issues of fact raised by the pleadings, deciding
reference to any guiding rules and principles, or whether          questions of law, entering final judgment, and enforcing
under all the circumstances of the particular case the trial       that judgment. Shook, 851 S.W.2d at 891; Kutch, 831
court's action was arbitrary or unreasonable.                      S.W.2d at 510. However, the rights of litigants may not be
                                                                   infringed by this power. Shook, 851 S.W.2d at 891.
Page 843                                                           Therefore, a sanction imposed pursuant to the court's
                                                                   inherent power must be just and appropriate. Id. The
Koslow's, 796 S.W.2d at 704. The circumstances of the case
                                                                   appellate court applies the test set out in TransAmerican to
include the reasons offered and proved or established as a
                                                                   determine whether sanctions imposed under the trial court's
matter of law on the record. Id.
                                                                   inherent power were proper or an abuse of discretion.
     If the sanctions imposed are not just, a trial court          Shook, 851 S.W.2d at 892; Kutch, 831 S.W.2d at 512.
abuses its discretion. TransAmerican, 811 S.W.2d at 917.
                                                                         Initially, we consider the first prong of the
To determine whether sanctions are just we apply a
                                                                   TransAmerican test, whether there is a direct relationship
two-prong test. The first prong requires that a direct
                                                                   between the offensive conduct and the sanction imposed. At
relationship exist between the offensive conduct and the
                                                                   the April 4 hearing, the court heard argument by counsel for
sanction imposed. Id. Under this prong, the trial court
                                                                   each side. No evidence was presented. The trial court made
should attempt to determine if the offensive conduct is
                                                                   no attempt to determine if the offensive conduct is
attributable to the attorney, the party, or both. Id. The
                                                                   attributable to the parties, the attorneys, or both. Therefore,
second prong requires that the sanctions must be no more
                                                                   the trial court could make no determination as to whether
severe than necessary to satisfy its legitimate purposes. Id.
                                                                   there was a direct relationship between the failure to
     A death penalty sanction is any sanction that                 comply with the CMO and the death penalty sanction. The
adjudicates a claim and precludes the presentation of the          first prong of the TransAmerican test has not been met.
merits of the case. Chrysler Corp. v. Blackmon, 841 S.W.2d
                                                                   Page 844
844, 845 (Tex. 1992). Such sanctions should not be
assessed absent a party's flagrant bad faith or counsel's              We turn now to the second prong which requires that
callous disregard for the responsibilities of discovery under      the sanctions be no more severe than necessary. As
the rules. Id. at 849. Discovery sanctions should not be used      explained above, the Supreme Court requires a trial court to
to adjudicate the merits of a claim unless a party's               attempt to obtain compliance with its orders by first
ordering sanctions that are not case determinative. Hamill,        and if it is fully apparent that no lesser sanctions would
917 S.W.2d at 16 n.1; Chrysler Corp., 841 S.W.2d at 849.           promote compliance with the rules. See Tanner, 856 S.W.2d
The trial court was authorized to assess any of several lesser     at 729. Both amended dismissal orders contain the
sanctions. Rule 215 provides a partial list including              following: "Lesser sanctions would not promote compliance
disallowing further discovery, charging discovery expenses         and discourage further abuse. If the threat of "death
to the disobedient party, ordering that certain designated         penalty" sanctions was not enough to promote compliance
facts shall be taken as established, refusing to allow the         with the Court's CMO, lesser sanctions would not promote
disobedient party to support or oppose designated claims or        compliance either." We are unpersuaded by the Court's
defenses, or prohibiting him from introducing designated           circular logic. Noncompliance in the face of a threat of
matters in evidence, or holding the disobedient party in           death penalty sanctions
contempt. TEX. R. CIV. P. 215.2(b). Additionally, the trial
court may require a party to pay attorney's fees or order          Page 845
other monetary sanctions such as heavy fines. See Bosnich
v. National Cellulose Corp., 676 S.W.2d 446, 447-48 (Tex.          cannot justify the failure to impose lesser sanctions in the
App. - Houston [1st Dist.] 1984, no writ).                         first instance. There is nothing in the record to indicate that
                                                                   some lesser sanction would not have been effective to
     No written orders relating to discovery or compelling         promote compliance. See 856 S.W.2d at 729-30.
discovery had been entered prior to entry of the CMO. The
trial judge did not impose any lesser sanctions prior to                The sanctions imposed by the trial court precluded
dismissing Appellants' claims. Even assuming that the              Appellants from presenting the merits of their case. Before
CMO should be characterized as an order to compel, entry           a court may deprive a party of its right to present the merits
of an order to compel cannot be construed as a lesser              of its case because of discovery abuse, it must determine
sanction under rule 215. Westfall Family Farms v. King             that a party's hindrance of the discovery process justifies a
Ranch, 852 S.W.2d 587, 592 (Tex. App. - Dallas 1993, writ          presumption that its claims lack merit. TransAmerican, 811
denied). Although the dismissal orders recite that the trial       S.W.2d at 918. No such presumption is warranted here.
court considered lesser sanctions, this does not satisfy the       Appellants did not refuse to provide discovery. That their
requirement that the trial court first impose lesser sanctions     original answers were incomplete or even intentionally
before entering death penalty sanctions. See Hamill, 917           evasive is not such an obstruction of discovery to justify the
S.W.2d at 16 n.1; Chrysler Corp., 841 S.W.2d at 849.               conclusion that their claims lacked merit without more.
Although the CMO included a warning that noncompliance             Lanfear v. Blackmon, 827 S.W.2d 87, 90-91 (Tex. Civ. -
would result in dismissal, neither a threat to sanction,           Corpus Christi 1992, orig. proceeding). Appellants did not,
without more, nor the intent to sanction, is a sanction. See       at any time, refuse to comply with the CMO. They asserted
TEX. R. CIV. P. 215(2)(b); Chrysler Corp., 841 S.W.2d at           that they were unable to comply without more information
850; GTE Mobilnet of South Tex. Ltd. Partnership v.                and more time. Over fifty defendants were involved. The
Telecell Cellular, Inc., 955 S.W.2d 286, 298 (Tex. App. -          information Appellants had to sift through was voluminous
Houston [1st Dist.] 1997, writ denied) (on reh'g). The CMO         and of a technical nature. Given these facts, we do not
is not a sanction. It is an order and a threat. Thus, the trial    conclude that this was such flagrant bad faith or callous
court did not impose any lesser sanctions before dismissing        disregard to preclude a trial on the merits. See Perez v.
Appellants' claims in compliance with the general rule.            Murff, 972 S.W.2d 78, 83 (Tex. App. - Texarkana 1998,
                                                                   writ denied). Appellants' failure to comply with the CMO
     Appellees direct our attention to Andras v. Memorial          does not justify the presumption that their claims lack merit.
Hospital System, 888 S.W.2d 567 (Tex. App. - Houston [1st          See Hamill, 917 S.W.2d at 16. Accordingly, death penalty
Dist.] 1994, writ denied), to which the trial court cited in its   sanctions are not justified. See Tanner, 856 S.W.2d at 730.
dismissal orders. In Andras, the First District Court of
Appeals held that an order to compel coupled with a threat              The trial court imposed no lesser sanctions as required
to dismiss for noncompliance is a lesser sanction within the       by TransAmerican. It has not been shown that lesser
meaning of Chrysler Corporation. Andras, 888 S.W.2d at             sanctions would have been totally ineffective. See Tanner,
573. Because we conclude that the Supreme Court requires 856 S.W.2d at 729. The record does not support a
that a lesser sanction actually be assessed to further test        presumption that Appellants' claims lack merit thereby
compliance before imposition of the death penalty, we              justifying a death penalty sanction. See 856 S.W.2d at 730.
decline to follow the Andras court in that respect.                We conclude, therefore, that the trial court's imposition of
                                                                   death penalty sanctions was not "just" under the standards
    Finally, we consider whether this case presents an             set out in TransAmerican. Accordingly, the trial court
exceptional situation where determinative sanctions should         abused its discretion in entering the dismissal orders
be imposed in the first instance. Case determinative               pursuant to rules of civil procedure 166 and 215 and the
sanctions would be appropriate here only if clearly justified
court's inherent power.                                         does not support the imposition of the ordered sanctions.

     Rule 13 authorizes the imposition of sanctions against          Further, rule 13 requires that the sanctions assessed be
an attorney, a represented party, or both, who files            appropriate. Tanner, 856 S.W.2d at 731. Rule 13's
pleadings, motions, or other papers that are both groundless    "appropriate" standard is equivalent to rule 215's "just"
and brought in bad faith or to harass. TEX. R. Civ. P. 13.      standard. Id. Thus, to determine whether sanctions imposed
The court may impose any appropriate sanction available         for violating rule 13 are appropriate, we employ the same
under rule 215(2)(b). Id. "Groundless" means without basis      test used to determine whether sanctions imposed by rule
in law or fact and not warranted by good faith argument for     215 are just. Metzger, 892 S.W.2d at 53. As explained
the extension, modification, or reversal of existing law. Id.   above, the sanction employed by the trial court was more
Before a trial court may impose sanctions under rule 13, it     severe than authorized and not just. While this Court does
must hold an evidentiary hearing. Id. We set aside the trial    not condone filing a lawsuit without first investigating to
court's decision to impose rule 13 sanctions upon a showing     determine if the plaintiff has a viable case, unless a case
of abuse of discretion. Monroe v. Grider, 884 S.W.2d 811,       meets the requirements of Tanner's exception, it should not
816 (Tex. App. - Dallas 1994, writ denied).                     be finally concluded without first imposing lesser sanctions
                                                                to obtain compliance with court orders. Accordingly, the
     When determining whether rule 13 sanctions are             trial court abused its discretion in dismissing Appellants'
proper, the trial court must examine the circumstances          claims pursuant to rule 13.
existing when the litigant filed the pleadings. Id. at 817.
Courts should presume parties and their counsel file all            We conclude that the trial court was not justified in
papers in good faith and the party seeking sanctions must       imposing death penalty sanctions under rules of civil
overcome that presumption. Tanner, 856 S.W.2d at 731.           procedure 13, 166, or 215, or under the trial court's inherent
Further, the trial court can presume that a plaintiff has       power. Accordingly, we sustain Appellants' second issue.
investigated his case prior to filing. McAllister v. Samuels,   Our disposition of Appellants' second issue makes it
857 S.W.2d 768, 773 (Tex. App. - Houston [14th Dist.]           unnecessary for us to consider Appellants' remaining issues.
1993, no writ). The party seeking sanctions has the burden      TEX. R. APP. P. 47.1.
of showing his right to relief. Tanner, 856 S.W.2d at 731.
Motions and arguments of counsel are not evidence.                  We reverse the trial court's orders of dismissal and
McCain v.                                                       remand this cause to the trial court for further proceedings
                                                                consistent with this opinion.
Page 846
                                                                ---------
NME Hosps., Inc., 856 S.W.2d 751, 757 (Tex. App. -
Dallas 1993, no writ).                                          Notes:

     The dismissal orders stated that the April 4, 1997         [1]. Marti Williams, individually and as next friend of
hearing was an evidentiary hearing held under rule 13 and       Michael Williams, and Linda Smiley, individually and as
Appellants had the opportunity to submit any evidence.          next friend of Courtney Smiley.
Further, according to the dismissal orders, Appellants' lack
of compliance with the CMO and the excuses offered by           [2].    American     Ecology  Environmental   Services
Appellants at the April 4 hearing, demonstrated that            Corporation, formerly known as Gibraltar Chemical
Appellants' claims and their pleadings were groundless and      Resources, Inc. ("the Facility"), American Ecology
brought in bad faith or to harass. The reporter's record of     Corporation, American Ecology Management Corporation,
the hearing confirms that no evidence was presented.            Mobley Environmental Services, Inc., Mobley Company,
Without hearing evidence on the circumstances surrounding       Inc., David Mobley, James Mobley, Thomas Mobley,
the filing of the pleading and the signer's credibility and     Numetco, SSI Mobley, Dixie Chemical Company, Texas
motives, the trial court had no evidence to determine that      Utilities Electric Company, Arco Chemical Company,
the Appellants or their attorneys filed the pleading in bad     Houston Lighting & Power Company, Lyondell
faith or to harass. Further, as evidenced by the language in    Petrochemical Company, Motorola, Inc., Philllips 66
the dismissal orders, the trial court improperly placed the     Company,         Safety-Kleen    Corporation,       The
burden on Appellants to prove good faith. The trial court       Sherwin-Williams Company, Texaco, Inc., American
must presume good faith and Appellees had the burden to         Airlines, AnaLab Corporation, Aptus, Inc., Aviall, Inc.,
prove bad faith or that the claim was brought to harass.        Akzo Nobel Chemicals, Inc., Chemical Leaman Tank
Tanner, 856 S.W.2d at 731. Appellees did not meet their         Lines, Inc., Cedar Chemical Corporation, Chromium
burden to prove an element of rule 13. Therefore, the record    Corporation, Devoe & Raynolds, Company, Helena
                                                                Chemical Company, Hitachi, Semiconductor of America,
Inc., Hoechst Celenese Corporation, Intercontinental
Manufacturing Company, International Business Machines,
Inc., Laidlaw Environmental Serves (TES), Inc., The
Lubrizol Corporation, McDonnell Douglas Corporation,
Mobil Oil Corporation, Mobil Chemical Corporation,
Phelps Dodge Refining Corporation, Pure Solve, Inc.,
Rho-Chem, Inc., Sandoz Agro, Inc., Solvent Service
Company, Inc., Texas Instruments Incorporated, Texas
Electric Cooperatives, Inc., The Valspar Corporation,
United States Pollution Control, Inc., and Zoecon
Corporation.

[3] At the time, there were also other similar cases pending
in other courts involving the same defendants and attorneys,
but different plaintiffs.

---------
                                                                                                ACCEPTED
                                                                                            03-15-00409-CV
                                                                                                    8022650
                                                                                 THIRD COURT OF APPEALS
                                                                                            AUSTIN, TEXAS
                                                                                      11/30/2015 6:35:13 PM
                                                                                          JEFFREY D. KYLE
                                                                                                     CLERK

                                No. 03-15-00409-CV                        FILED IN
                                                                   3rd COURT OF APPEALS
                                                                        AUSTIN, TEXAS
                                                                   11/30/2015 6:35:13 PM
                                                                       JEFFREY D. KYLE
                                                                            Clerk
                            In the Third Court of Appeals
                                    Austin, Texas

                                  SUSAN ENGLAND
                                     Appellant
                                           v.
           JANICE KOLBE, AS GUARDIAN OF THE ESTATE OF EDNA MOON
                                  Appellee

                      APPEAL FROM CAUSE NO. 12-0361
            207 JUDICIAL DISTRICT COURT OF HAYS COUNTY, TEXAS
               TH

                       HON. GARY STEEL, PRESIDING

     AMENDED CERTIFICATION REGARDING LENGTH OF BRIEF

TO THE HONORABLE THIRD COURT OF APPEALS:

      Susan England (now Susan Lee), the Appellant, files this Amended

Certification Regarding the Length of Appellant’s Brief based on the following:

      1.     On this day, Counsel for Appellant, Susan England (Lee), filed an

incorrect certificate regarding the length of Appellant’s brief. Counsel for Appellant

notifies the Court that the certification as to the length of Appellant’s Brief that was

                             Amended Certification – Page 1
filed with that brief is incorrect. The correct certification is as follows:

      Counsel for Appellant hereby certifies that the length of the Appellant’s

      Brief filed today as indicated by the word processing system used to

      generate it, excluding appendices, is not 7,439 words, but is 14,252 words.

      While not required, this word count includes the caption, table of

      contents, index of authorities, statement of the case and issues presented,

      signature block, this certificate, and the certificate of service.

I apologize for any confusion this may have caused.

                                  Respectfully submitted,

                                  Law Office of David Junkin
                                  15401 RR12, Suite 105
                                  P.O. Box 2910
                                  Wimberley, TX 78676
                                  512/847-8600
                                  512/847-8604 (fax)
                                  david@junkinlawoffice.com

                                  ________________________________________
                                  David Junkin
                                  State Bar No. 11058020
                                  Attorney for Appellant, Susan Lee

                             Amended Certification – Page 2
                        CERTIFICATE OF SERVICE

     I hereby certify that a true and correct copy of this pleading was served on
November 30, 2015, in the manner indicated below and on the following person(s):

      VIA FACSIMILE AND/OR ESERVE

            Jonathan Hull
            c/o Reagan Burris, LLC
            401 Main Plaza, Suite 200
            New Braunfels, TX 78130

                                         ________________________________
                                                    David Junkin

                           Amended Certification – Page 3