American Transfer and Storage Company v. Mary Malott

malott

IN THE COURT OF APPEALS, THIRD DISTRICT OF TEXAS,

AT AUSTIN

NO. 3-93-207-CV

AMERICAN TRANSFER AND STORAGE COMPANY,

APPELLANT

vs.

MARY MALOTT,

APPELLEE

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT

NO. 92-01439, HONORABLE JOSEPH H. HART, JUDGE PRESIDING

Mary Malott, appellee, sued American Transfer and Storage Company

("American"), appellant, on several legal theories, including violations of the Texas Deceptive

Trade Practices-Consumer Protection Act ("DTPA"), Tex. Bus. & Com. Code Ann. §§ 17.41 -.63

(West 1987 & Supp. 1994). In its verdict, the jury found that American had violated the DTPA,

but also found that Malott had agreed to limit American's liability. The trial court disregarded

the limitation-of-liability finding and rendered judgment for Malott. We will modify and affirm

the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In 1983 Malott, an artist, stored four pieces of mixed-media construction

artworktwo large pieces and two smaller piecesat American's warehouse facilities in Austin.

The art had been previously stored free of charge with a corporation owned in part by Malott's

accountant, John Fairey. Malott testified that she moved the artwork from the corporation to

American's warehouse in part because she desired a safer and more secure facility. According

to Malott and Fairey, American represented that its warehouse was suitable for her artwork, that

the art would be safe and secure, and that the art would be placed up high on racks and not moved

around.

When American picked up the artwork, Malott was required to sign an "Order for

Service" containing the following:

DECLARED VALUE AND INSURANCE LIABILITY

I hereby declare the value of this shipment to be not in excess of

sixty cents (60¢) per pound per article[.] This is to qualify for the

lowest rates established by the Texas Household Goods Tariff.

I declare that the actual cash value of this shipment to be

$ 20,000.00 ; and I request American to procure insurance protection

for me while this shipment is being transported and/or in storage on

this property at the rate of $ .15/100

I do not desire insurance on this shipment.

The $20,000 figure apparently was supplied by Malott. Neither of the boxes above was checked.

After the artwork had been stored, American sent monthly invoices to Malott's

accountant, Fairey. In addition to a "storage" charge of $20, each invoice included a "valuation"

charge of $30 that was used to purchase an insurance policy covering the stored items. Fairey,

on receipt of the first invoice, refused to pay the valuation charge. He informed American that

Malott did not want valuation insurance and that he would not pay for it. Fairey independently

obtained insurance on the artwork through another company, apparently for a lesser amount than

American's valuation charge. This insurance policy was kept in force for several years, after

which it was not renewed.

Approximately nine years after the items were stored with American, Fairey, on

Malott's behalf, asked to inspect the artwork. American could not locate the two larger pieces.

Fairey tendered a claim of approximately $30,000; American rejected Fairey's claim, and instead

offered $774.00, based on a valuation of sixty cents per pound.

Malott brought suit against American, asserting claims of conversion, breach of

contract, negligence, gross negligence, and violations of the DTPA. American counter-sued for

negligent misrepresentation and asserted defenses of statutory and contractual limitation of

damages, accord and satisfaction, novation, estoppel, waiver, quasi-estoppel, comparative

negligence, lack of consideration, and misrepresentation as an inducement to enter into and

continue the business relationship. A jury found that American was negligent and that it had

violated the DTPA, but also found that Malott had agreed to limit her damages to sixty cents per

pound. The trial court disregarded the jury's finding that Malott had limited her damages, finding

that such a limitation violated section 17.42 of the DTPA. Judgment was rendered for Malott for

$10,230.78 in actual damages, $1,054.13 prejudgment interest, $2,000 DTPA "additional"

damages, $40,366.00 in attorney's fees, and $3,577.16 in costs.

On appeal, American complains that the trial court erred in (1) disregarding the

limitation-of-liability finding; (2) refusing to submit several requested questions and instructions;

(3) using an improper measure of damages; (4) calculating prejudgment interest on an incorrect

accrual date; and (5) awarding attorney's fees.

DISCUSSION

1. Misrepresentation

In its second point of error, American asserts that the trial court erred in refusing

to submit its tendered jury questions regarding its counter-claim and defense of misrepresentation. (1)

American contends that when Fairey refused to pay the valuation charge, he effectively made "a

declaration and agreement that Malott's items were worth sixty cents ($.60) per pound."

American further asserts that "the actionable and false representation was that [Malott] was willing

to declare and ` agree ' to a stated value in exchange for the lowest available charges."

Rule 278 of the Texas Rules of Civil Procedure provides:

[t]he court shall submit the questions, instructions and definitions . . . which are

raised by the written pleadings and the evidence. . . . Failure to submit a question

shall not be deemed a ground for reversal of the judgment, unless its submission,

in substantially correct wording, has been requested in writing and tendered by the

party complaining of the judgment.

Tex. R. Civ. P. 278. American's counterclaim (and defense) of misrepresentation was not raised

by the evidence. Although Fairey testified that he had a discussion regarding insurance and

valuation with American, neither Fairey nor any other witness testified as to the specifics of the

discussion. There is no evidence that Fairey made any representations regarding the actual value

of the artwork; instead, the testimony shows that Fairey simply refused to pay for the insurance

American procured and refused to pay any additional "valuation" charge.

Further, there is no evidence that American was damaged by any misrepresentation

regarding valuation. American seems to claim that if Fairey had not "misrepresented" the value

of the artwork, it would not now be liable to Malott for the actual value of her art. Accordingly,

American's proposed question defined its damages as equal to the difference between the actual

market value of the artwork and the value as represented. The jury, however, found American

liable for violations of the DTPA and awarded damages on that basis. American's DTPA liability

was separate from and independent of the storage contract. (2) American's second point of error is

overruled.

2. Jury Charge

In its fourth, fifth, and sixth points of error, American asserts that the trial court

erred in refusing various instructions and alternative submissions of the DTPA questions. Point

of error six asserts that the trial court erred in overruling its objection to jury question one and

refusing American's alternative question one because there was no evidence to support the

submission of a violation of DTPA § 17.46(b)(21). (3)

In particular, American objected that

subsection (c) of the question, defining "[r]epresenting that services have been performed on

goods when services were not performed" as a "[f]alse, misleading, or deceptive act or practice,"

was not applicable under the facts of the case.

American argues that "[t]he only services acquired by [Malott] was the storage of

constructions in an allegedly safe, temperature sensitive, and rodent free facility," and thus Malott

"requested no services be performed ` on ' the items" and "[American] never represented that work

or services had been performed ` on ' the constructions when the work or services were not

performed." American asserts that DTPA § 17.46(b)(21) was enacted "to prevent unscrupulous

repair shops from taking advantage of . . . lack of consumer knowledge" and that the DTPA

"requires some services be performed ` on ', meaning `to' the goods." American argues that,

because services were neither requested nor performed "on" or "to" the artwork, it cannot be

liable under § 17.46(b)(21) of the DTPA. We disagree.

The DTPA is to be "liberally construed and applied to promote its underlying

purposes, which are to protect consumers against false, misleading, and deceptive business

practices." DTPA § 17.44. In construing the DTPA, we are not confined to the literal meaning

of the words used therein. Pennington v. Singleton , 606 S.W.2d 682, 686 (Tex. 1980); Woods

v. Littleton , 554 S.W.2d 662, 665 (Tex. 1977). The Legislature's intent rather than the strict

letter of the act will control. Pennington , 606 S.W.2d at 686 ; Woods , 554 S.W.2d at 665 .

We believe American's construction of section 17.46(b)(21) is unduly restrictive.

See Commercial Escrow Co. v. Rockport Rebel, Inc. , 778 S.W.2d 532, 536-38 (Tex.

App.Corpus Christi 1989, writ denied). Malott presented evidence that American was requested

to store the artwork, that American billed Malott for storage until May 1991, that the artwork had

not been seen since February 1987, and that American did not keep complete documentation on

the artwork and did not store the artwork on racks. We conclude that there was some evidence

to support the submission of question one to the jury. Accordingly, we overrule American's sixth

point of error. Because the jury's answer to question one will support the judgment, we need not

address American's fourth and fifth points of error, which challenge other jury questions relating

to different grounds of liability under the DTPA.

3. Limitation of Liability

In its first point of error, American asserts that the trial court erred in failing to

limit Malott's damages to sixty cents per pound. American contends that when Fairey refused to

pay the added "valuation" charge, he effectively altered the contract so that the declared value of

the goods, and American's maximum liability, was sixty cents per pound. American argues that

this limitation applied to all of Malott's causes of action, including DTPA laundry list and

unconscionability violations.

Section 7.204 of the Texas Business and Commerce Code provides that a

warehouseman is liable for damages to goods caused by his failure to use ordinary care. Tex.

Bus. & Com. Code Ann. § 7.204 (a) (West 1991). The warehouseman may limit his damages,

however,

by a term in the warehouse receipt or storage agreement limiting the amount of

liability in case of loss or damage, and setting forth a specific liability per article

or item, or value per unit of weight, beyond which the warehouseman shall not be

liable; . . . . No such limitation is effective with respect to the warehouseman's

liability for conversion to his own use.

Tex. Bus. & Com. Code Ann. § 7.204 (b). In other words, warehousemen may, in certain

circumstances, contractually limit their liability.

The DTPA provides as a general rule that any waiver by a consumer of its

provisions is contrary to public policy and unenforceable. DTPA § 17.42(a). There are,

however, exceptions to this rule. A waiver will be enforced where the defendant pleads and

proves that the consumer is not in a significantly disparate bargaining position, the consumer is

represented by legal counsel in seeking or acquiring the services, and the consumer waives the

claims by an express provision in a written contract signed by both the consumer and the

consumer's legal counsel. DTPA § 17.42(a). A limitation of liability may also be valid for a

breach of warranty claim brought under the DTPA. Southwestern Bell Tel. Co. v. FDP Corp. ,

811 S.W.2d 572, 573 (Tex. 1991) (holding that a limitation clause "was part of the warranty upon

which the buyer's claim is based and it therefore limits his recovery" under the DTPA for breach

of warranty).

These exceptions do not apply in this case. First, American does not contend that

it met the statutory criteria for waiver. Second, Malott's DTPA claim was not solely for breach

of warranty; instead, Malott obtained jury findings that American violated several DTPA "laundry

list" provisions as well as the DTPA unconscionability provisions. A contractual limitation of

liability clause that does not meet the DTPA's waiver requirements does not waive a consumer's

right to sue or limit the damages he may receive for specific "laundry list" or unconscionability

violations. First Title Co. of Waco v. Garrett , 860 S.W.2d 74, 77-78 (Tex. 1993); FDP Corp. ,

811 S.W.2d at 576 .

American argues that section 7.204 of the Texas Business and Commerce Code is

a statutory limitation of damages and preempts section 7.42 of the DTPA. We do not agree.

Damages in a DTPA action may be statutorily limited where a tariff, with specific rate structures

and limitations of liability, has been set by a regulatory agency. See Southwestern Bell Tel. Co.

v. Vollmer , 805 S.W.2d 825, 830 (Tex. App.Corpus Christi 1991, writ denied). Unlike a

statutory limitation of damages, section 7.204 authorizes a warehouseman to contractually limit

his liability for damages, but does not automatically impose such a limitation. Moreover, section

7.204 does not conflict with the DTPA. Section 7.204 authorizes a warehouseman to limit his

liability for damages for failure to use ordinary care. It does not authorize a warehouseman to

limit his liability for damages for misrepresentations or unconscionable conduct. International

Nickel Co. v. Trammel Crow Distrib. Corp. , 803 F.2d 150, 155-56 (5th Cir. 1986).

American also argues that a limitation of damages is the same type of defense as

mitigation of damages and therefore should be a good defense against a DTPA claim. We

disagree. Mitigation of damages refers to the duty of an injured party to exercise reasonable care

to minimize his losses. See Walker v. Salt Flat Water Co. , 96 S.W.2d 231, 232 (Tex. 1936). It

is a factor in calculating the "actual damages" a party has suffered. Pinson v. Red Arrow Freight

Lines, Inc. , 801 S.W.2d 14, 15 (Tex. App.Austin 1990, no writ). A limitation of damages,

unlike mitigation, is a cap on the amount of actual damages a party may recover. The DTPA

explicitly forbids limitations on liability except in certain circumstances not applicable here.

DTPA § 17.42; FDP Corp. , 811 S.W.2d at 576 .

Finally, American argues that its contractual limitation of damages should be

enforced for public policy reasons. American argues that the moving and storage business is

unique in that the consumer is able to control the value to be placed on the goods in order to

obtain a lower price for storage or moving services. American urges that if the limitation of

damages clause does not cover DTPA "laundry list" and unconscionability actions, "then moving

and storage services will quickly become unaffordable to a large segment of the population."

American also argues that invalidating the limitation for DTPA damages would result in no

available limitation "because every case of loss or damage in Texas will state some type of prima

facie DTPA claim." Thus, American concludes that not enforcing the limitation would allow

consumers to "defraud" the industry and that consumers would never be bound by their own

agreements.

We reject these policy arguments. The DTPA was enacted "to protect consumers

against false, misleading, and deceptive business practices." DTPA § 17.44. We believe this

policy to be controlling here. American's first point of error is overruled.

4. Damages

In its third point of error, American asserts that the trial court allowed Malott a

double recovery. The trial court's judgment awarded Malott $10,230.78 as actual damages,

consisting of $7,000 as the fair market value of her lost artwork and $3,230.78 as Malott's out-of-pocket cost of warehousing the artwork. (4)

American asserts that the market value of the artwork

and the cost of warehousing are mutually exclusive measures of actual damages and that Malott

must elect between them.

The DTPA permits a plaintiff to recover as actual damages the greater of "out of

pocket" damages or "benefit of the bargain" damages. Leyendecker & Assocs., Inc. v. Wechter ,

683 S.W.2d 369, 373 (Tex. 1984). Out-of-pocket damages represent "the difference between the

value of that which [the plaintiff] has parted with, and the value of that which [the plaintiff] has

received." Id . (quoting George v. Hesse , 93 S.W. 107 (Tex. 1906)). The benefit-of-the- bargain

measure "allows the plaintiff to recover the difference between the value as represented and the

actual value received." Leyendecker , 683 S.W.2d at 373 (citing Johnson v. Willis , 596 S.W.2d

256, 262 (Tex. Civ. App.Waco), writ ref'd n.r.e. per curiam , 603 S.W.2d 828 (Tex. 1980)).

American characterizes the award of the cost of warehousing as "restitution," and

argues that recovery may not be had for both restitution and actual damages. LSR Joint Venture

No. 2 v. Callewart , 837 S.W.2d 693, 702 (Tex. App.Dallas 1992, writ denied); Kargar v.

Sorrentino , 788 S.W.2d 189, 191 (Tex. App.Houston [14th Dist.] 1990, no writ); David

McDavid Pontiac, Inc. v. Nix , 681 S.W.2d 831, 835 (Tex. App.Dallas 1984, writ ref'd n.r.e.).

We disagree with American's characterization of the award for cost of warehousing.

Malott is entitled to recover the difference between the value of what she parted

with and the value of what she received. Malott "parted" with her artwork and a monthly storage

fee. Malott's artwork was not returned to her and American provided storage services that were

not as represented. Therefore, Malott was entitled to the fair market value of her artwork and the

difference between the storage fee she paid and the value of the storage services she received.

American argues that, because two of the pieces of artwork were returned, Malott

received storage services equal to the amount she paid. Apparently, the minimum charges for

storage were such that the cost of warehousing would have been the same for storage of the two

returned pieces. American thus asserts that Malott is not entitled to any of the cost of

warehousing. We do not agree. Fairey testified that Malott would not have stored any items with

American but for the fact that the two lost pieces would not fit in her art storage room in her

house. We overrule American's third point of error.

5. Prejudgment Interest

In its seventh point of error, American asserts that the trial court miscalculated the

prejudgment interest by using an erroneous accrual date. Texas law provides that

[j]udgments in . . . property damage cases must include prejudgment interest. . . .

[P]rejudgment interest accrues on the amount of the judgment during the period

beginning on the 180th day after the date the defendant receives written notice of

a claim or on the day the suit is filed, whichever occurs first, and ending on the

day preceding the date judgment is rendered.

Tex. Rev. Civ. Stat. Ann. art. 5069-1.05(6)(a) (West Supp. 1994). American introduced into

evidence a written claim form prepared by Fairey and dated May 10, 1991. Fairey testified that

American sent him the claim form and that he filled it out. However, Fairey never testified that

he sent the claim form to American. Similarly, a subsequent letter from American to Malott

acknowledges receipt of the claim form, but does not show when the form was received.

American's letter is dated several months after the date on the claim form.

Malott introduced a DTPA demand letter sent to American dated June 25, 1991.

A "green card" return receipt was attached, showing that American received the letter on June 26,

1991. The letter, like the claim form, gives American notice of Malott's claims.

After trial, Malott filed a supplemental motion for judgment, to which she attached

a copy of the return receipt "green card" relating to the mailing of the May 10, 1991, claim form.

This document, however, was not admitted into evidence at trial; therefore, it is not properly a

part of the appellate record and may not be considered. Accordingly, we believe that the trial

court erred in using the May 10 claim form to calculate prejudgment interest, because there is no

evidence showing when American received the form. We conclude that prejudgment interest

should accrue on December 23, 1991, the 180th day after American received Malott's DTPA

demand letter on June 26, 1991. Accordingly, we modify the judgment to award Malott

prejudgment interest on her actual damages of $10,230.78 less American's settlement offer of

$774.00, (5) from December 23, 1991, to December 28, 1992, the day before the judgment was

signed.

6. Attorney's Fees

In its eighth point of error, American asserts that the trial court erred in awarding

attorney's fees, because there is no evidence to support an award of paraprofessional time.

Malott's attorney testified that $32,866 was a reasonable and necessary attorney's fee through the

trial of this case. Law-firm billing records, including details of billed and unbilled time spent on

the case and expenses incurred in the case, were introduced into evidence. Included in the billing

records were references to a paralegal's time spent on the case. American contends that "given

the evidence it is impossible to determine what was actually billed or written off." Since the

paralegal's time appears in the billing records, and because the proof needed to recover the fees

for the paralegal's time apparently was not made, American contends that the entire award of

attorney's fees must be denied. We do not agree.

The record does not reflect that any award of fees for paralegal time was awarded.

Malott's attorney testified to an amount of reasonable attorney's fees. The charge asked the jury

what amount was reasonable for the necessary services of Malott's attorneys in the case. The

judgment awards attorney's fees. We will not deny Malott's attorney's fees because the record

also contains evidence of other fees and expenses incurred by Malott. American's eighth point

of error is overruled.

CONCLUSION

We modify the judgment to award Malott prejudgment interest on her actual

damages of $10,230.78 less American's settlement offer of $774.00, from December 23, 1991,

to December 28, 1992, the day before the judgment was signed. As modified, the judgment of

the trial court is affirmed.

J. Woodfin Jones, Justice

Before Justices Powers, Jones and Kidd

Modified and, as Modified, Affirmed

Filed: March 9, 1994

Do Not Publish

1. American tendered the following questions:

Did Mary Malott make a negligent misrepresentation on which

American Transfer and Storage Company justifiably relied?

In answering this question, you are instructed as follows:

Negligent misrepresentation occurs when:

a. A party makes a representation in the course of business or in

a transaction in which he or his principal has a pecuniary

interest;

b. The representation supplies false information for the guidance

of others in their business; and

c. The party making the representation did not exercise

reasonable care or competence in obtaining or communicating

the information.

Answer "Yes" or "No".

Answer:__________

What sum of money, if any, if paid now in cash, would fairly and

reasonably compensate American Transfer and Storage Company for

damages, if any, that were proximately caused by the negligent

misrepresentation?

In answering this question, you are instructed as follows:

Consider the following elements of damages, if any, and none other.

The difference, if any, between the actual market value of Plaintiff's

missing items and the value as represented by Plaintiff to obtain the services

of American Transfer and Storage Company.

Do not add any amount for interest on past damages, if any.

Answer an amount in dollars and cents, if any:

Answer: $____________

2. Moreover, even if an insurance policy covering the artwork had been in force, either

through payment of the "valuation charge" or purchased independently, any proceeds

from such a policy would not have relieved American of liability. See Brown v. American

Transfer & Storage Co. , 601 S.W.2d 931, 934-36 (Tex. 1980).

3. The following was submitted to the jury as Question No. 1:

Did American Transfer and Storage Company engage in any false,

misleading, or deceptive act or practice that was a producing cause of

damages to Mary Malott?

In answering this question, you are instructed as follows:

"False, misleading, or deceptive act or practice" means, but is not

limited to, any of the following:

(a) Representing that services are or will be of a particular

standard, quality, or grade if they were of another, or

(b) Representing that services had or would have

characteristics, uses, or benefits that they did not have,

or

(c) Representing that services have been performed on

goods when services were not performed, or

(d) Failing to disclose information about services that was

known at the time of the transaction with the intention

to induce Mary Malott into a transaction.

Answer "Yes" or "No".

__________

4. The following question was submitted to the jury as Question No. 8:

What sum of money, if any, if paid now in cash, would fairly and

reasonably compensate Mary Malott for her damages, if any that resulted

from the conduct of American Transfer and Storage Company inquired

about in Questions No. 1, 2, 3, 4 or 6?

In answering this question, you are instructed as follows:

Consider the following elements of damages, if any, and none other.

Consider each element separately. Do not include damages for one element

in any other element. Do not include interest on any amount of damages

you find.

"Market Value" means the amount that would be paid in cash by a

willing buyer who desires to buy, but is not required to buy, to a willing

seller who desires to sell, but is under no necessity of selling.

Answer in dollars and cents, if any:

Cost of Warehousing: $3,230.78

Market Value of each piece of art in Travis County, Texas on April 19,

1991:

Death Shrine: $3,000

Wedding Shrine: $4,000

5. Tex. Rev. Civ. Stat. Ann. art. 5069-1.05(6)(c) (West Supp. 1994) provides:

If judgment for a claimant is more than the amount of the settlement offer

by the defendant, prejudgment interest does not include prejudgment

interest on the amount of the settlement offer for the period during which

the offer may be accepted.