Powell Electrical Systems, Inc., F/K/A Powell Electrical Manufacturing Company v. Hewlett Packard Company

Opinion issued April 28, 2011

In The

Court of

Appeals

For The

First District

of Texas

————————————

NO. 01-09-00876-CV

———————————

Powell electrical systems, inc. f/k/a powell electRical manufacturing company , Appellant and Cross-Appellee

V.

Hewlett packard

company , Appellee

and Cross-Appellant

On Appeal from the 55th District Court

Harris County, Texas

Trial Court Case No. 2007-47002

O P I N I O N

Crossed wires caused an on-site electrical

transformer to blow, necessitating repairs and the use of a temporary

transformer while the blown transformer was out of commission. The

manufacturing plant owner sued its electrical services company for breach of

contract and breach of warranty. The trial court rendered judgment on the

jury’s verdict favoring the owner. On appeal, Powell Electrical Systems, Inc.

(“Powell”) asserts that (1) all of the damages awarded by the jury are contractually

barred consequential damages, (2) because the damages are barred, Hewlett

Packard Company (“HP”) is not entitled to attorney’s fees as a prevailing

party, and (3) the liability questions that the trial court submitted

erroneously conflate proper and improper theories of liability. In a cross-appeal,

HP argues that the jury’s damages and attorney’s fees findings impermissibly

reduce the awards to fifteen percent less than the amount conclusively

established by the evidence and that it is entitled to appellate attorney’s

fees.

We conclude that (1) most of the damages the jury awarded are direct

damages, but the damages relating to loss of use are consequential damages, (2)

the jury charge is proper, (3) HP did not establish the full amount of its

damages as a matter of law and thus is not entitled to an increased award, (4) the

jury’s take-nothing award for appellate attorney’s fees is not supported by

legally sufficient evidence, and (5) in light of our reduction of HP’s damages,

the jury’s award for attorney’s fees at trial must also be remanded. We therefore

reverse the trial court’s judgment with respect to the award of damages

pursuant to the jury findings on damage elements (d) and (e), relating to costs

for loss of use, and reform the judgment accordingly. We reverse the trial

court’s judgment with respect to the award of attorney’s fees at trial and on

appeal and remand those issues. We affirm the trial court’s judgment in all

other respects.

Background

HP owns a manufacturing facility in Houston with its own power substation.

The substation uses a two-transformer system to power the facility. Powell

designs, manufactures and installs electrical equipment. HP contracted with

Powell to perform breaker retrofitting services at the substation. This process

required Powell to remove breaker cables from the transformers’ breaker

cabinets and then reconnect them when the work was completed. Powell failed to

document how the breaker cables were placed before removing them and

unintentionally crossed certain breaker cables when it reconnected them. The

cross-phased breaker cables caused one of HP’s dual transformers, transformer

B, to fail. As a result, HP incurred costs to repair transformer B and to

obtain a temporary transformer for use while the repairs were made. HP brought

this suit against Powell to recover for these costs.

After a trial on the merits, the jury found in favor of HP on its breach

of contract and breach of express warranty claims against Powell, awarding HP

$926,585.98 in damages and $163,526.24 for attorney’s fees. The damages awarded

by the jury included the following elements:

(a)

fault testing and removal of

transformer B: $76,518.03;

(b)

disposal of oil from transformer

B: $17,067.80;

(c)

repair of transformer B:

$581,024.20;

(d)

cost of temporary transformer less

amount for which it was sold: $105,097.26;

(e)

installation and testing of

temporary transformer: $73,718.15; and

(f)

reinstallation of transformer B:

$73,160.54.

The jury’s findings on damages and attorney’s fees are approximately fifteen

percent less than the amount HP sought at trial, except that the jury refused

to award any fees for an appeal. HP asked the trial court to enter judgment on

the jury verdict in its favor but to award the full amount it sought. Powell

asked the trial court to disregard the jury findings, asserting that the

damages found are barred by the limitations of liability in the contract. The

trial court denied both parties’ motions and rendered judgment on the verdict,

reducing the total damages award to $876,810.61 to account for an offset and

awarding pre- and post-judgment interest.

Contractual

Limitation on Consequential Damages

Powell contends that the trial court erred in denying Powell’s motions to

disregard the jury finding on damages. Powell argues that the damages found by the jury are consequential

damages, which are barred under the terms of the parties’ contract. HP responds

that the damages are direct damages, rather than consequential damages. The

parties agree that their contract bars consequential damages but not direct

damages. [1]

A. Standard of Review

The dispute between the parties is whether the damages awarded in this

case constitute direct or consequential damages under Texas law. We review such

questions of law de novo. In re Humphreys ,

880 S.W.2d 402, 404 (Tex. 1994); Harris

Cnty. Appraisal Dist. v. Wilkinson , 317 S.W.3d 763, 766 (Tex. App.—Houston

[1st Dist.] 2010, pet. denied). Likewise the interpretation of unambiguous

contracts is a legal question that we review de novo. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co. , 995 S.W.2d 647 , 650–51

(Tex. 1999); Atlantic Lloyds Ins. Co. v.

Butler , 137 S.W.3d 199, 209 (Tex. App.—Houston [1st Dist.] 2004, pet.

denied).

B. Applicable Law on Damages

1. Direct Damages

Direct damages are those damages that flow naturally and necessarily from the breach. Arthur

Andersen & Co. v. Perry Equip. Corp. , 945 S.W.2d 812, 816 (Tex. 1997) (emphasis added). “Direct

damages compensate for the loss, damage, or injury that is conclusively

presumed to have been foreseen or contemplated by the party as a consequence of

his breach of contract or wrongful act.” Id. “By definition, if

particular damages are specifically accounted for in the contract, they are

direct, not consequential, in nature.” McKinney & Moore, Inc. v. City of

Longview , No. 14–08–00628–CV, 2009 WL 4577348 , *5 (Tex. App.—Houston [14th

Dist.] Dec. 8, 2009, pet. denied) (mem. op.) (citing Boyer, Inc. v. Trinity

River Auth. of Tex. , 279

S.W.3d 354, 358 (Tex. App.—Fort Worth 2008, pet. denied)); [2]

see also Tennessee Gas Pipeline Co. v. Technip USA Corp. , No. 01–06–00535–CV,

2008 WL 3876141 , at *8–9 (Tex. App.—Houston [1st Dist.] Aug. 21, 2008, pet.

denied) (mem. op.).

Examples of direct damages can be found in our decision in Tennessee Gas Pipeline . In that case, a pipeline owner,

Tennessee Gas Pipeline (“TGP”), sought to recover damages for Technip’s delayed

and defective construction work on a pipeline. Tennessee Gas Pipeline ,

2008 WL 3876141 , at *8. The parties’ contract precluded recovery of

consequential damages, and we reviewed the various categories of damages

awarded to determine which damages were consequential damages and which were

direct. Id. at *8–10. We concluded

that various “project delay costs”—including costs for labor, travel,

environmental contractors, inspectors, purchase and supply of additional

construction consumables, wastewater hauling, services and utilities—were

direct damages, because the contract contained a provision requiring TGP to

provide power during construction. Id. at

*8–9. On this basis, we concluded that Technip contemplated that its

construction delay would naturally and necessarily cause TGP’s power costs to

be extended over a longer period of time. Id. ;

see also McKinney & Moore, Inc. , 2009 WL 4577348 , at *5.

2. Consequential

Damages

“Consequential damages” are those which result naturally, but not necessarily , from the breach. Arthur

Andersen , 945 S.W.2d at 816 (emphasis added); see Stuart v. Bayless ,

964 S.W.2d 920, 921 (Tex. 1998). Consequential damages are recoverable

only if they are foreseeable and directly traceable to the wrongful act and

result from it. Stuart , 964 S.W.2d at

921 ; Basic Capital Mgmt., Inc. v. Dynex

Commercial, Inc. , No. 08–0244, --- S.W.3d ---, 2011 WL 1206376, at *5 (Tex.

Apr. 1, 2011) (quoting Stuart ).

Tennessee Gas Pipeline also provides ex amples of consequential damages. We held that TGP could not recover for the cost of renting a

backup generator after a power outage occurred, which TGP asserted would not

have been necessary but for Technip’s premature dismantling of the existing

backup generator before the new generator was fully operational. Tennessee

Gas Pipeline , 2008 WL 3876141 , at *9–10. We concluded that the power outage

and need for a backup generator could not be conclusively presumed to have been

foreseen by the parties as a consequence of Technip’s breach. Id. We also precluded as consequential

damages TGP’s alleged losses relating to (1) lost efficiency from the extended

use of the old compressor rather than the new compressor, (2) lost investment

returns on funds tied up during the delay, (3) costs incurred as a penalty

under TGP’s contract with the utility company for delayed commencement of

utilities use, and (4) lost profits on gas that TGP was unable to sell because

it had to be used for venting and to perform emergency shutdowns. Id. at 10–11.

C. Analysis

We conclude that some of the damages awarded to HP are

permitted direct damages and some are impermissible consequential damages.

1. Costs Relating

to Transformer B: Damage Elements (a), (b), (c) & (f)

Damages that flow “naturally and necessarily” from a breach

of the parties’ contract are those inherent in the nature of the breach of the

obligation between the parties, as compared to those damages that flow

“naturally but not necessarily” from the breach because they require the

existence of some other fact (known or unknown) beyond the relationship between

the parties. Cf. Tennessee Gas Pipeline ,

2008 WL 3876141 , at *9–10 (holding that cost for backup generator necessitated

by power outage were consequential damages of defendant’s premature dismantling

of old generator and costs for penalty under utility contract for delayed use

of utilities were consequential damages from construction delay because the

cost depended on terms of owner’s contract with third party utility company); Hoppenstein Props., Inc. v. McLennan Cnty.

Appraisal Dist. , --- S.W.3d ---, No. 10–09–00426–CV, 2010 WL 5419013, at *3

(Tex. App.—Waco Dec. 22, 2010, no pet.) (profits that plaintiff would have

realized under contract between parties are direct damages, while profits

plaintiff would have realized on other contracts are consequential damages); Cherokee

Cnty. Cogeneration Partners v. Dynegy Mktg. & Trade , 305 S.W.3d 309, 314 (Tex. App.

—Houston [14th Dist.] 2009, no pet.) (same).

Here, the damages to transformer B are inherent in the

nature of the breach of Powell’s contractual and warranty obligations to HP.

Powell’s re-energizing of transformer B while the B-side breakers were

cross-phased caused transformer B to fail, and the failure of transformer B

necessitated its testing, removal, oil disposal, repair and reinstallation. No

additional link in the causal chain was necessary to bring about the injury or

damages. The parties can be “conclusively presumed to have foreseen” that Powell’s

substandard performance would result in the failure of the transformer and that

failure of a transformer would require HP to incur costs associated with

repairing it. Cf. Arthur Andersen ,

945 S.W.2d at 816 .

We are not persuaded otherwise by

Powell’s argument that direct damages in this case should be limited to the

cost of uncrossing the wrongfully crossed cables or the difference between the

value of Powell’s actual services and the value of the services as promised by

Powell. As an initial matter, contrary to Powell’s narrow construction of the

contract, the subject of the

contract is Powell’s “Electrical Contractor work for [HP] related to the Willow

Substation 34.5KV Breaker Retrofit,” which the evidence shows necessarily

included temporarily unhooking the breaker cables from transformer B’s breaker

cabinet and then putting them back. This does not appear to have been disputed

at trial, and Powell’s own employee averred that “[t]he scope of the Powell/HP

contract included the unlanding and relanding of the feeder cables to the

circuit breakers.”

The contract expressly contemplates that testing and repair

costs may be incurred as a result of defective performance by Powell. [3]

See McKinney & Moore, Inc. , 2009 WL 4577348 , at *5 ( holding that expenses incurred under

construction contract were direct damages because they were contemplated in contract

provision that required defendant to reimburse plaintiff for damage occurring

during work on project and that were caused by negligence or fault of defendant

or its agents); Tennessee Gas Pipeline Co. , 2008 WL 3876141 , at *8–9

(holding costs of providing power during construction delay were direct damages

because contract provision specified that owner would provide electricity to

construction site). Powell asserts that these provisions refer to the

correction or repair of “Work,” which is defined in the contract as Powell’s

own work, and thus do not extend to damages to transformer B, which Powell

asserts is not the subject of its work. Powell’s narrow definition of its

services under the contract is not consistent with the evidence; moreover,

these provisions of the contract do not refer only to the defined, capitalized

term “Work,” but also refer to “damages to other work” and costs of repairing

“work damaged” by Powell’s poor performance. T he contract contains a provision requiring HP to provide power during

Powell’s work; this provision expressly states that Powell is responsible for

the proper use of the power HP supplies .

To support its contention that HP’s damages should be

limited, Powell relies on Reynolds Metals

Co. v. Westinghouse Electric Corp. , 758 F.2d 1073 (5th Cir. 1985). The

dispute in Reynolds arose out of a

contract between Westinghouse and Reynolds for the purchase and installation of

a transformer at Reynolds’s facility in Corpus Christi, Texas. Id. at 1074 . The transformer had a

design defect, which caused internal burning; additionally, Westinghouse

improperly installed the transformer’s system for the detection of ground

current. Id. The internal burning

caused the transformer to fail. Id.

at 1075 . The improperly installed detection system contributed to the problem

by not alerting Reynolds of the problem prior to the transformer’s failure. Id. At the time of trial, Reynolds had

two claims against Westinghouse: (1) breach of warranty, based on the defect in

the transformer and (2) breach of contract, based on the improper installation

of the ground current detection system. Id.

at 1076–77. The district court entered a directed verdict on the warranty

claims on the basis of the applicable statutes of limitations, and the jury

found in Reynolds’ favor on the breach of contract claim. Id. at 1078–79. The trial court entered judgment on the jury’s

award for the cost of repairing the transformer but excluded damages for lost

profits and the costs of transporting the transformer to and from Houston for

repairs as consequential damages, which were precluded under the parties’

contract. Id. at 1078–79. On appeal,

Westinghouse argued that the cost of repairs were also consequential damages

excluded under the contract. Id. at

1079 . The Fifth Circuit agreed, holding that the proper measure of damages in

that case was the difference in the value of what was promised under the

contract and what was actually delivered—the measure of damages that would

apply to a sale of goods under Chapter 2 of the Texas Business and Commerce

Code (the “UCC”). Id. at 1079–80

(citing Tex. Bus. & Com. Code Ann.

§ 2.714 (West 2009)).

Powell asserts that Reynolds

stands for the proposition that anything other than the difference in value

between what was bargained for and what was received constitutes consequential

damages. We disagree with that characterization of Reynolds . [4]

The application of the UCC measure of damages in Reynolds is understandable in light of the circumstances of the

case: as the Fifth Circuit noted, the primary cause of Reynolds’s damages was

the burning in the transformer (for which Reynolds could not recover due to

limitations); the improper installation (for which Reynolds could recover) contributed

to the damages only to the extent they could have been prevented by earlier

discovery. Id. at 1076–77 and n.6. The

design defect, for which Reynolds could not recover, was a causal link that

brought about Reynolds’s damages. Westinghouse’s improper installation of the

detection system was one step removed. See

Reynolds , 758 F.2d at 1076–77, 1080; Tennessee

Gas Pipeline , 2008 WL 3876141 at *9–10. No such intervening causal link is

present here.

The measure of damages used in Reynolds would not properly compensate HP under the circumstances

of this case, where Powell’s breach of the contract and its warranties were the

direct cause of HP’s damages. We hold that HP’s costs of repair to the unit

that Powell serviced and destroyed are direct damages resulting from Powell’s

breach.

2. Costs for

Relating to Temporary Transformer: Damage Elements (d) & (e)

Powell suggests that all of HP’s damages constitute “loss of

use” damages and are therefore consequential. While HP’s costs relating to the

repair of transformer B are not loss of use damages, HP’s decision to install a

temporary transformer and use it while transformer B was being repaired are

lost use damages. Like lost profits, lost use damages are frequently, but not

categorically, consequential in nature. See

Tennessee Gas Pipeline , 2008 WL 3876141 at *8, 10 (holding that provision barring

recovery of consequential damages did not necessarily bar all loss of use

damages but damages for loss of use of money were consequential). Here, we

conclude that HP’s costs relating to the temporary transformer are

consequential rather than direct damages.

HP’s power substation

is designed to run on a two-transformer system, but the evidence demonstrates

that it can run with only one transformer for some period of time and that the

ability to run on one transformer was a necessary part of Powell’s performance

of its work under the contract pursuant to the parties’ agreed procedures for

the work. We cannot conclude that Powell and HP may be “conclusively presumed

to have foreseen” that Powell’s breach would necessitate the use of a temporary

transformer. See Arthur Andersen ,

945 S.W.2d at 816 . We therefore conclude that HP’s costs in obtaining and

installing the temporary transformer are consequential damages.

We overrule Powell’s first issue with respect to

damage elements (a), (b), (c) and (f), and we sustain Powell’s first issue with

respect to damages elements (d) and (e).

Attorney’s fees Under

Section 38.001

Powell’s argument that HP cannot

recover attorney’s fees under Section 38.001 of the Civil Practices and

Remedies Code is predicated on Powell prevailing on its first issue in its

entirety, such that HP recovers no damages. Because we conclude HP is entitled to recover

some damages, we also conclude that attorney’s fees are authorized under

Section 38.001. [5] Tex. Civ. Prac. & Rem. Code Ann. §

38.001(8) (West 2008); see also Green

Int’l, Inc. v. Solis , 951 S.W.2d 384, 390 (Tex. 1997) (holding that a party

may recover attorney’s fees under Section 38.001 only if the party prevails on

a cause of action for which attorney’s fees are available and recovers

damages).

We overrule Powell’s second issue.

Jury

Charge

The trial court’s jury charge

contained broad form liability questions for breach of contract and breach of

warranty. [6]

Powell argues that these broad form questions impermissibly commingled valid

and invalid theories of liability. See

Crown Life Ins. Co. v. Casteel , 22 S.W.3d 378, 379, 389 (Tex. 2000).

Specifically, Powell argues that HP pursued multiple alleged breaches of the

contract and warranty but some of these theories of liability were not

supported by evidence on the element of causation. Powell asserts that it

preserved this issue for appeal by timely objecting to the form of the

questions and tendering substantially correct questions to the trial court. HP

responds that it had only a single theory of liability for breach of contract

and for breach of warranty, but that these theories were supported by multiple

factual bases. HP asserts that broad form submission was appropriate under

these circumstances.

A. Standard of Review

We review a challenge to the trial court’s jury charge under

an abuse of discretion standard. Tex. Dep’t of Hum. Servs. v. E.B. , 802

S.W.2d 647, 649 (Tex. 1990); Moss v. Waste Mgmt. of Tex., Inc. , 305

S.W.3d 76, 81 (Tex. App.—Houston [1st Dist.] 2009, pet. denied) (citing European

Crossroads’ Shopping Ctr., Ltd. v. Criswell , 910 S.W.2d 45, 54 (Tex. App.—Dallas 1995, writ denied). A

trial court abuses its discretion when it acts in an arbitrary or unreasonable

manner, or if it acts without reference to any guiding rules or principles. Tex.

Dep’t of Hum. Servs. , 802

S.W.2d at 649 ; Moss , 305 S.W.3d at

81 . A trial court has wide discretion in submitting instructions and jury

questions. Moss , 305 S.W.3d at 81

(citing Howell Crude Oil Co. v. Donna Ref. Partners, Ltd. , 928 S.W.2d 100, 110 (Tex.

App.—Houston [14th Dist.] 1996, writ denied).

If we determine that the jury charge was erroneous, we must

then consider whether the error requires reversal. See, e.g., Transcon. Ins. Co. v. Crump , 330 S.W.3d 211, 221 (Tex.

2010). Generally, charge error requires reversal of a judgment only where the

error was harmful in the sense that it probably caused rendition of an improper

verdict. Id. (quoting Columbia Rio Grande Healthcare, LP v. Hawley ,

284 S.W.3d 851, 856 (Tex. 2009)). In the context of a Casteel problem, however, the comingling of valid and invalid

theories of liability in a single jury question may make it impossible for the

court of appeals to determine whether the jury based its verdict on a properly

submitted theory or on an invalid theory that should not have been submitted. See Casteel , 22 S.W.3d at 388 (finding harmful error where trial court’s charge

contained broad-form liability question that submitted, along with valid

theories of liability, theories of liability under the Deceptive Trade

Practices Act (“DTPA”) that plaintiff could not assert because he was not a

consumer) . In that situation,

the error will be deemed harmful and the new trial is required. Id. at 388–89.

B. The Jury Charge

Was Not Erroneous

A trial court errs by submitting to the jury theories of

liability that are not legally viable — e.g., liability theories that have not

been pled, are not supported by the legally sufficient evidence, or are not

supported by operative law. See T ex. R. Civ. P. 277 (requiring that the

trial court submit issues that are raised by the pleadings and the evidence); Casteel , 22 S.W. 3d at 390 (stating that

Rule 277 implicitly mandates that the jury be able to base its verdict on

legally valid questions and instructions); see

also Romero v. KPH Consol., Inc. , 166 S.W.3d 212, 215 (“[B]road-form

submission cannot be used to put before the jury issues that have no basis in

the law or the evidence.”). Thus, although Rule 277 of the Texas Rules of Civil

Procedure requires the trial court to submit broad-form questions whenever

feasible, submission of broad-form liability question may be infeasible when

the trial court is uncertain about whether particular theories of liability

should be submitted. Tex. R. Civ. P.

277; Casteel , 22 S.W.3d at 390 . In

that circumstance, judicial economy may favor separate submission of liability

theories to prevent the need to re-try the cause of action if the trial court

reaches an incorrect decision with regard to which theories of liability should

be submitted to the jury. Casteel , 22

S.W. 3d at 390 .

1. Question

1: Breach of Contract

Powell argues that HP advanced eleven theories of contract

liability at trial, reciting the eleven breaches listed in HP’s petition.

Powell argues that some of these theories were valid and some were invalid.

Powell points to evidence in the record

of three alleged breaches other than the cross-phasing of the breakers: Powell’s failure to properly connect internal

CT wires, to keep its work site clean, and to live up to its contractual

obligations after transformer B failed.

HP responds that Powell’s argument inaccurately equates

“theories of liability” with factual allegations, when the term is properly

understood to relate to causes of action such as breach of contract or breach

of warranty. HP asserts that the two liability questions submitted only a

single theory of liability, each of which was supported by several factual

bases. HP points out that the Supreme Court of Texas has “limited [its]

holdings in Casteel and Harris County to submission of a

broad-form question incorporating multiple theories of liability or multiple

damage elements.” Bed, Bath & Beyond,

Inc. v. Urista , 211 S.W. 3d 753 , 756–57 (Tex. 2006) (citing Casteel , 22 S.W. 3d at 388 and Harris

County v. Smith , 96 S.W.3d

230, 233 (Tex. 2002), which applied Casteel

analysis to submission of an unsupported element of damages). HP also

asserts that, while there may have been evidence that Powell’s conduct breached

the contract in multiple ways, “HP’s whole theory of the case focused on one breach that resulted in the damages

to transformer B— i.e. cross-phasing

the breaker cables.” HP never contended that any other breach caused damages,

so there was no risk that the jury might find damages based on evidence of

other breaches.

We conclude that HP’s evidence relating to Powell’s failure

to properly connect CT wires, keep its work site clean, and provide assistance

after transformer B failed did not result in the submission of invalid theories

of liability. In reaching this conclusion, we look to the distinction

recognized by the Supreme Court of Texas in Columbia Rio Grande Healthcare,

L.P. v. Hawley , 284 S.W.3d 851, 864 (Tex. 2009) between the jury charge in

that case and the jury charge in Columbia Medical Center of Las Colinas v. Bush ex rel. Bush , 122

S.W.3d 835 (Tex. App.—Fort Worth 2003, pet. denied). The Hawley court found error in the jury charge; the Bush court found no error.

In Bush , the

medical center argued on appeal that the court improperly submitted invalid

theories of liability because some of the specific acts of negligence pled by the

plaintiff were not supported by evidence. Bush ,

122 S.W. 3d at 857 . The medical center asserted that the trial court erred by

refusing its proposed limiting instructions to the jury not to consider those

specific acts of negligence. Id. at

857–58. The court of appeals affirmed the trial court’s judgment, concluding

that the charge “properly submitted one theory of liability and

recovery—negligence—in a single broad-form question.” Id.

In Hawley , the

trial court submitted a broad-form jury question on negligence and included in

the charge an instruction that the defendant-hospital acted “through its

employees, agents, nurses and servants.” The trial court denied the hospital’s

request that the jury be instructed not to consider the acts of a particular

defendant-doctor, Dr. Valencia, in determining whether the hospital was

negligent because Dr. Valencia was an independent contractor for whose conduct

the hospital could not be held liable. Hawley , 284 S.W.3d at 862–63. The

supreme court held that the charge was erroneous because the instruction on

“employees, agents, nurses and servants” allowed the jury to improperly

determine that the hospital was negligent based only on the conduct of Dr.

Valencia. Id. at 864–65.

Comparing the issue presented in Hawley to the issue presented in Bush , the supreme court observed that in both cases, “negligence

was the only theory of liability submitted.”

Id. at 864 . The court

distinguished the two cases on the ground that the hospital in Hawley was complaining “because the

charge affirmatively told the jury that the hospital acted through its

employees, agents, nurses, and servants and allowed the jury to speculate

whether Dr. Valencia was an agent of the hospital”; it was not complaining of

“the failure to instruct the jury that it should not consider specific acts of

negligence.” Id. The court then

observed that, considering the question and the instruction together, the trial

court’s charge “submitted four negligence questions,” one for each set of

actors identified in the instruction. Id.

Here, Powell did not request an instruction that the jury

not consider its failure to properly connect CT wires, keep its work site

clean, and provide assistance after the transformer failed in determining

whether it breached the contract. Because “Question 1” submitted only a single

theory of liability and the trial court did not otherwise instruct the jury to

consider erroneous matters, we conclude that the trial court did not err by

submitting an invalid theory of liability in “Question 1.” Cf. Bush ,

122 S.W. 3d at 857–58; Bed, Bath & Beyond, Inc. , 211 S.W.3d at 757

(“When, as here, the broad-form questions submitted a single liability theory

(negligence) to the jury, Casteel's multiple-liability-theory analysis

does not apply.”); Mustafa v. Matrut , No. 01-08-00985-CV, 2010 WL

1492419 , at *4–5 (Tex. App.—Houston [1st Dist.] Apr. 15, 2010) (mem. op.), supplemented,

No. 01–08–00985–CV, 2010 WL 1839944 (Tex. App.—Houston [1st Dist.] May 6, 2010,

no pet.) (mem. op.) (holding that evidence of nonpayment of salary and writing

of bad checks did not result in submission of unpled theories of fraud

liability, where evidence supported pled fraud claim based on non-payment of

loan); Formosa Plastics Corp., USA v.

Kajima Int’l., Inc. , 216 S.W.3d 436, 455 (Tex. App.—Corpus Christi 2006,

pet. denied) (op. on rehearing en banc) (“ Casteel

applies to multiple theories of liability; by contrast, the instant

situation involves only one—fraud. . . . Casteel

does not require a granulated submission as to multiple acts under a single

theory of liability.”).

2. Question

2: Breach of Warranty

The breach of warranty question proposed by Powell submitted

breach of express warranty as a single jury finding, not segmented by

particular factual basis or theories, but it included an instruction restating

the express warranty provided under the parties’ contract. To the extent Powell

argues that the trial court erred in refusing to include its breach of warranty

instruction, Powell does not demonstrate how its proposed instruction would

have prevented the jury from considering any improperly submitted theory of

liability or why the instruction was otherwise necessary. Nor does Powell point

to any evidence in the record that might have caused the jury to find a breach

of warranty based on conduct and that would have been excluded under Powell’s

proposed instruction. We conclude the trial court was within its discretion in

declining to submit Powell’s proposed instruction. See Bush , 122 S.W. 3d at 857–58 (holding that trial court did not

err in refusing instruction that would have directed jurors not to consider

specific acts of negligence in determining medical center’s liability).

Cross-Appeal on Amount of

Damages and Fees Awarded

On cross-appeal, HP argues that the

jury impermissibly reduced the amount of damages and attorney’s fees by fifteen

percent, [7]

under a comparative fault theory. HP argues that it established the amount of

its damages and attorney’s fees as a matter of law, and the trial court should

have disregarded the juries’ answers on these issues and rendered judgment notwithstanding

the verdict for the full amounts proven. Powell responds that the jury awarded

less damages than HP claimed because HP failed to establish that all of its

damages resulted from Powell’s breach, and that the jury awarded less attorney’s

fees than HP claimed because HP failed to prove that all of the fees sought

were reasonable and necessary. We reverse and remand the issue of attorney’s

fees in light of our reduction of the damages award and because the jury’s

take-nothing award on appellate attorney’s fees is not supported by legally

sufficient evidence.

A. Standard of Review

Powell raises a legal sufficiency challenge to the jury’s

damage and attorneys’ fee findings. When a party attacks the legal sufficiency

of an adverse finding on an issue on which it has the burden of proof, the

party must demonstrate on appeal that the evidence establishes, as a matter of

law, all vital facts in support of the issue. Dow Chem. Co. v. Francis ,

46 S.W.3d 237, 241 (Tex. 2001) (addressing standard of review with respect to

jury finding of $0 in damages for retaliation claim) (citing Sterner v.

Marathon Oil Co. , 767

S.W.2d 686, 690 (Tex. 1989)). In conducting a legal sufficiency

review, we review the evidence presented below in the light most favorable to

the jury’s verdict, crediting favorable evidence if reasonable jurors could and

disregarding contrary evidence unless reasonable jurors could not. Del Lago Partners, Inc. v. Smith , 307

S.W.3d 762, 770 (Tex. 2010); City of Keller v. Wilson , 168 S.W.3d 802, 827 (Tex. 2005).

HP’s issue will be sustained only if its position is conclusively established

by the evidence. Francis , 46 S.W. 3d

at 41 (citing Croucher

v. Croucher ,

660 S.W.2d 55, 58 (Tex. 1983).

B. HP

Did Not Conclusively Prove the Amount of Its Damages

HP

contends that the proper amount of its damages award is conclusively

established by the invoices it submitted. HP points to no other evidence as

establishing its right to damages in the amount claimed. The invoices may

establish that HP spent the amounts shown in the invoices relating to

transporting and repairing transformer B, but they do not establish HP’s right

to recover all of the amounts expended as a matter of law. As Powell notes,

there was evidence from which the jury could have concluded that Powell did not

proximately cause all of these costs. There is evidence in the record tending

to show that transformer B was fifteen years old, had experienced prior faults,

was not properly maintained, and had pre–existing damage or deterioration. There

is also evidence in the record that the useful life of a transformer like

transformer B is twenty to twenty-five years on average, as well as evidence

that the repairs and replacement of parts in transformer B may have left the

transformer a better condition than it had been before the failure.

The trier of fact is given broad discretion to award damages

within the range of evidence presented at trial. Duggan v. Marshall , 7 S.W.3d

888, 893 (Tex. App.—Houston [1st Dist.] 1999, no pet.) (citing City of

Houston v. Harris Cnty. Outdoor Adver. Ass’n , 879 S.W.2d 322, 334 (Tex. App.—Houston [14th Dist.] 1994, writ

denied); Potter v. GMP, L.L.C , 141 S.W.3d 698, 703 (Tex. App.—San Antonio

2004, pet. dism’d) (citing VingCard A.S.

v. Merrimac Hospitality Sys., Inc. , 59 S.W. 3d 847, 865 (Tex. App.—Fort

Worth 2001, pet. denied) and Duggan ,

7 S.W. 3d at 893 ). Evidence corresponding to the exact amount found by the

trier of fact is not essential. Gibson Plumbing Heating & Air

Conditioning, Inc. v. Coolbaugh Chiropractic , No. 07-05-0449-CV, 2007 WL

763806 , at *3 (Tex. App.—Amarillo Mar. 14, 2007, no pet.) (mem. op.) (affirming

jury award of amount less than total owed under bills in evidence) (citing Carrow

v. Bayliner Marine Corp., 781 S.W.2d 691, 695 (Tex. App.—Austin 1989, no

writ)); see also Reeder v. Wood Cnty. Energy LLC , 320

S.W. 3d 433, 448 (Tex. App.—Tyler 2010, pet. filed) (stating, in this context,

damages must be established with reasonable certainty, not mathematical

precision) (citing O & B Farms, Inc. v. Black , 300 S.W.3d

418, 422 (Tex. App.—Houston [14th Dist.] 2009, pet. filed)).

Here, the jury could reasonably

have concluded that approximately fifteen percent of the repairs to the

transformer was the result of pre-existing damage to the transformer or was

attributable to pre-existing deterioration in the value of the transformer. The jury also may have reasonably

concluded that not all of the costs expended by HP were necessary to put HP in

the position it would have been in but for Powell’s breach, based on the

evidence that the replacement of certain of transformer B’s parts resulted in

an improvement upon the pre-failure condition of the transformer. Cf. Mesquite Elks Lodge No. 2404 v. Shaikh ,

--- S.W. 3d ---, No. 05–08–01372–CV, 2010 WL 4142220, at *3 (Tex. App.—Dallas

Oct. 22, 2010, no pet.) (holding that evidence was not factually sufficient to

support award of all repair costs sought in breach of contract suit where there

was evidence that some repairs resulted in improvement rather than restoring

pre-breach condition); Neuman v. Spector

Wrecking & Salvage Co., Inc. , 490 S.W.2d 875, 878 (Tex. Civ.

App.—Beaumont 1973, no writ) (“Even when it is proper to assess the

damages as the cost of repairs, ‘(a)

plaintiff is not to be put in a better position by the recovery of damages for

the breach of contract than he would have been if there had been

performance.’”).

Thus, the range of evidence presented

to the jury could reasonably allow it to find some but not all of the repair

costs paid by HP were the proximate result of Powell’s breach. Because the

jury’s award falls within this range, “[w]e are not permitted to disregard the

jury’s damages award on the basis that the jury’s reasoning in arriving at its

figure is unclear.” Duggan , 7 S.W. 3d

at 893 ; see also Adams v. Petrade Int’l,

Inc. , 754 S.W.2d 696 , 709–10 (Tex. App.—Houston [1st Dist.] 1988, writ

denied) (“Neither are we permitted to disregard the jury’s answers to the

issues merely because the jury’s reasoning in arriving at its figure may be unclear

to us.”). We conclude that legally sufficient evidence supports the jury’s

award of damages. Cf. Duggan , 7 S.W.

3d at 893 (determining that jury award of $232,500 was supported by sufficient

evidence in light of conflicting damage estimates of $425,309, $15,000,

$236,000 and $165,356); Adams , 754

S.W.2d at 709 (noting that jury award was “substantially less than the amount

that the evidence shows [plaintiff] had already paid” but within range of

damages supported by evidence, and “in reviewing the adequacy of damages, we

may not substitute our judgment for that of the jury.”); Potter , 141 S.W. 3d at 703–04 (affirming jury award of $189,595 as

within the range of evidence in breach of contract case); Vela v. Wagner

& Brown, Ltd. , 203 S.W.3d 37, 50 (Tex. App.—San Antonio 2006, no pet.)

(jury was free to reject in part expert damage models of $13.9 million and $9.4

million and instead award $3 million in damages); Howell Crude Oil Co. v. Donna Ref. Partners, Ltd. , 928 S.W.2d 100,

108 (Tex. App.—Houston [14th Dist.] 1996, writ denied) (affirming jury award of

less than damages calculation presented where challenges were made to

reliability of calculation).

C. HP Did Not

Conclusively Prove the Amount of Its Attorney’s fees, But Established Its Right

to Some Attorney’s fees

The jury awarded attorney’s fees of

$163,526.24 for preparation and trial and $0 for an appeal to the court of

appeals. HP argues that the trial court should have disregarded these findings

and awarded $192,383.81 for preparation and trial and $50,000 for an appeal to

the court of appeals because HP’s evidence conclusively proved these amounts as

its reasonable and necessary attorney’s fees through the submission of bills

and attorney testimony. Powell responds that it disputed the amount of fees

requested by HP, that HP’s fee segregation evidence was “incredible on its

face,” that HP’s own counsel admitted that the requested fees included amounts

that would result in a double recovery if court costs were separately awarded,

and that the reasonableness and necessity of the fees is a question of fact

within the purview of the jury.

An award of attorney’s fees must be

supported by evidence that the fees were both reasonable and necessary. See

Stewart Title Guar. Co. v. Sterling ,

822 S.W.2d 1, 10 (Tex. 1991), modified on other grounds by Tony Gullo Motors

I, L.P. v. Chapa , 212

S.W.3d 299 , 313–14 (Tex. 2006); Crounse v. State Farm Mut. Auto. Ins. Co. ,

--- S.W. 3d ---, No. 01–09–00183–CV, 2010 WL 5186822, at *3 (Tex. App.—Houston

[1st Dist.] Dec. 23, 2010, no pet.). “Generally, the determination of

reasonable attorney’s fees is a question of fact and the testimony of an

interested witness, such as a party to the suit, though not contradicted, does

no more than raise a fact issue to be determined by the jury.” Garcia v.

Gomez , 319 S.W.3d 638, 642 (Tex. 2010) (quoting Smith v. Patrick W.Y.

Tam Trust , 296 S.W.3d 545,

547 (Tex. 2009), which in turn quotes Ragsdale v. Progressive Voters League,

801 S.W.2d 880, 882 (Tex. 1990)) (internal quotation marks omitted). Thus,

where the issue is raised by the evidence, it is within the province of the

jury to determine the reasonable value of an attorney’s services. See Crounse , --- S.W. 3d at ---, 2010 WL

5186822, at *3 (citing Ragsdale ,

801 S.W.2d at 881–82); Great Am. Reserve Ins. Co. v. Britton , 406 S.W.2d 901, 907 (Tex. 1966); Tesoro

Petroleum Corp. v. Coastal Ref. & Mktg., Inc. , 754 S.W.2d 764, 767 (Tex. App.—Houston [1st Dist.] 1988, writ

denied)); Gunter v. Bailey , 808

S.W.2d 163, 166 (Tex. App.—El Paso 1991, no writ). Expert testimony regarding attorney’s

fees is not conclusive and the trier of fact is not bound by such testimony. Gunter , 808 S.W.2d at 166 ; Matthiessen v. Schaefer , 897 S.W.2d 825,

826 (Tex. App.—San Antonio 1994), rev’d

on other grounds, 915 S.W.2d 479 (Tex. 1995). The trier of fact can

consider the amount in controversy, the time and effort required, and the

expertise of counsel in arriving at a reasonable amount of attorney’s fees. Gunter , 808 S.W.2d at 166 ; Matthiessen , 897 S.W.2d at 826 .

1. Attorney’s

Fees for Preparation and Trial

Here, HP’s bills and attorney testimony establish the amount

HP paid its attorneys but do not conclusively establish that this amount was

reasonable and necessary. See Garcia , 319 S.W.3d at 642 (rejecting

plaintiff’s argument that his attorney’s testimony concerning reasonable attorney’s

fees conclusively established amount of fees and holding that such testimony

was some, but not conclusive, evidence of a reasonable fee). It is within the

jury’s discretion to determine that the reasonable value of the attorneys’

services employed by HP was less than the amount billed by the attorneys. See id. Likewise, because the jury

awarded HP less than the full damages it requested, the jury may have determined

that this outcome warranted a lesser fee than that requested by HP. See Smith , 296 S.W. 3d at 548–49

(holding that court of appeals erred by rendering judgment for full amount of attorney’s

fees sought after reversing $0 fee award because jury awarded less in damages

than amount sought and therefore uncontroverted attorney testimony on amount of

attorney’s fees did not establish amount of reasonable and necessary fees as a

matter of law); see also Gunter , 808

S.W.2d at 166 ; Matthiessen , 897 S.W.2d

at 826 . There was also evidence before the jury from which the jury reasonably

could have concluded that the attorney’s fees sought by HP should be reduced to

preclude double recovery of the same costs as both attorney’s fees and court

costs. [8]

HP thus did not establish the amount of its reasonable and necessary attorney’s

fees as a matter of law and is not entitled to rendition in that amount. See Smith , 296 S.W. 3d at 548 .

Because we have meaningfully reduced the amount of HP’s

damages on appeal, we must reverse the attorney’s fees award and remand for a determination

of attorney’s fees. See Barker v. Eckman ,

213 S.W.3d 306, 314 (Tex. 2006) (holding that appellate court should reverse

and remand issue of attorney’s fees where damages are reduced on appeal in a

manner that could affect the determination of reasonable and necessary attorney’s

fees); Young v. Qualls , 223 S.W.3d 312 , 314–15 (Tex. 2007)

(same).

2. Attorney’s

fees for Appeal

For the same reasons, we conclude that HP has not

established that the amount of such reasonable and necessary attorney’s fees on

appeal is $50,000 as a matter of law. Because the jury determined that the

amount HP was entitled to recover on its claims was less than that calculated

by HP, the jury could also reasonably have determined that the value assigned

by HP’s counsel to its services, at trial and on appeal, was too high in light

of the results obtained. See Smith ,

296 S.W. 3d at 548 . However, while the jury is free to determine that a lesser

fee is reasonable, it is not free to determine that no fee should be awarded

where there is evidence showing that some amount of attorney’s fees were

reasonable and necessary and no evidence showing that the services rendered had

no value. Smith , 296 S.W. 3d at 548

(“Although it could have rationally concluded that, in light of the amount

involved and the results obtained, a reasonable fee award was less than the

full amount sought, no evidence supported the jury’s refusal to award any

attorney’s fees[.]”); Midland W. Bldg.

LLC v. First Serv. Air Conditioning Contractors, Inc. , 300 S.W.3d 738, 739

(Tex. 2009) (“While the jury could have rationally concluded that a reasonable

and necessary fee was less than the amount sought, an award of no fees was

improper in the absence of evidence affirmatively showing that no attorney’s

services were needed or that any services provided were of no value.”).

Because HP did not prove the amount of its attorney’s fees on

appeal as a matter of law, but the jury’s award of no attorney’s fees for

appeal is not supported by legally sufficient evidence, we remand the issue of

HP’s appellate attorney’s fees for new trial. [9]

See Smith , 296 S.W. 3d at 548–49

(reversing and remanding for new trial

on attorney’s fees where party failed to establish amount of attorney’s fees as

a matter of law but jury award of $0 was not supported by legally sufficient

evidence); Midland W. Bldg. LLC , 300

S.W. 3d at 739 (same).

Conclusion

We reverse the trial court’s judgment with respect to the award of

damages pursuant to the jury findings on damage elements (d) and (e) and reform

the judgment to award damages in the amount of $697,995.20 (the previous award

of $876,810.61 minus $105,097.26 and $73,718.15) plus pre- and post-judgment

interest at the rates stated in the judgment. We reverse the trial court’s

judgment with respect to the award of attorney’s fees and remand for new trial

on the amount of HP’s reasonable and necessary attorney’s fees at trial and on

appeal. We affirm the trial court’s judgment in all other respects.

Jane

Bland

Justice

Panel consists of Chief Justice Radack and Justices

Alcala and Bland.

[1] The “Warranty” provisions of the contract

provide:

IN NO EVENT WILL

EITHER PARTY BE RESPONSIBLE TO THE OTHER FOR ANY INCIDENTAL OR CONSEQUENTIAL

DAMAGES ARISING OUT OF THIS WARRANTY. . . .

The

“Indemnification and Remedies” provisions of the contract provide:

NEITHER PARTY SHALL

BE LIABLE FOR ANY CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, LOST

PROFITS AND UNLIQUIDATED INVENTORY), INDIRECT, SPECIAL OR PUNITIVE DAMAGES EVEN

IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES . . . .

[2] In

McKinney , t he

Fourteenth Court of Appeals held that extra

expenses incurred under a construction contract were direct damages because

they were contemplated in a contract provision that required the defendant to

reimburse the plaintiff for damage occurring during work on project that were

caused by negligence or fault of defendant or its agents. McKinney & Moore, Inc. v. City of Longview , No. 14–08–006280CV,

2009 WL 4577348 , at *5–6 (Tex. App.—Houston [14th Dist.] Dec. 8, 2009, pet.

denied).

[3] Pursuant

to its warranty, Powell promises in the contract to “pay for damages to other

work” resulting from a breach of its warranty. Additionally, the contract contains provisions specifically

identifying for which costs HP will reimburse Powell and for which costs it

will not. Under these provisions HP must reimburse Powell for:

h. Fees for laboratory testing required by

the Contract Documents, (if applicable), except those related to defective or

nonconforming Work.

. . .

k. Costs of repairing or correcting work

damaged or non-conforming Work executed by [Powell], Subcontractors or

Suppliers, provided such damage or non-conforming Work was not caused by the

negligence or failure to fulfill a specific responsibility of [Powell.]

HP will not reimburse Powell for:

f. Costs due to the negligence or failure

to fulfill specific responsibility of [Powell], Subcontractors and suppliers or

anyone directly or indirectly employed by any of them or for whose acts any of

them may be liable.

[4]

We

note that Texas law

distinguishes between consequential damages at common law and consequential

damages under the UCC, which governs contracts for the sale of goods. Wolf Hollow I, L.P. v. El Paso Mktg., L.P. , 329 S.W.3d 628 , 637–38 (Tex.

App.—Houston [14th Dist.] 2010, no pet.); Wade

& Sons, Inc. v. Am. Standard, Inc. , 127 S.W.3d 814 , 823–24 (Tex.

App.—San Antonio 2003, pet. denied).

[5]

As discussed below, we reverse

and remand the jury’s award of attorney’s fees on other grounds.

[6] Question

1 asked, “Did Powell fail to comply with the Contract?” The jury answered, “Yes.” Question 2 asked, “Did Powell fail to comply

with an express warranty?” The jury

answered, “Yes.”

[7] The

fifteen percent reduction does not apply to the jury award for attorney’s fees

on appeal, which was $0.

[8]

This

case is distinguishable from Ragsdale v.

Progressive Voters League , 801 S.W.2d 880, 882 (Tex. 1990) (per curiam),

relied on by HP, because there are circumstances tending to support a lesser

attorneys’ fee award. As the Ragsdale court

acknowledged, even where the evidence of attorney’s fees incurred is

uncontradicted, the trier of fact may find some of the claimed fees to be

unreasonable or unnecessary. Ragsdale ,

801 S.W.2d at 882 .

[9] HP

requested only that the Court reverse and render in its appellant’s brief, but

requested remand on the limited issue of attorney’s fees in its reply brief. At

trial, HP preserved its right to request remand through a motion for new trial

on this issue. Under these circumstances, we conclude that Rule 43.3 authorizes

this Court to remand the issue of appellate attorney’s fees for new trial. Tex. R. App. P. 43.3 (“When reversing a

trial court judgment, the court must render the judgment that the trial court

should have rendered, except when: (a) a remand is necessary for further

proceedings or (b) the interests of justice require a remand for another

trial.”); see also Majeed v. Hussain , No. 03-08-00679-CV, 2010 WL 4137472

(Tex. App.—Austin Oct. 22, 2010) (mem. op.) reconsideration en banc denied,

No. 03-08-00679-CV, 2010 WL 5575954 (Tex. App.—Austin Dec. 22, 2010, no pet.); Jay

Petroleum, L.L.C. v. EOG Res., Inc. , No. 01-08-00541-CV, 2009 WL 1270251

(Tex. App.—Houston [1st Dist.] May 7, 2009, pet. denied).