“the non- settling defendant may only claim a credit based on the damages for which all tortfeasors are jointly liable.”
How later courts described this case
- “the non- settling defendant may only claim a credit based on the damages for which all tortfeasors are jointly liable.”
- joint and several contractual liability under separate contracts requires promise of the same performance
- law reducing collectible amount of deficiency judgments to difference between actual 54 MHDocs 6062453_7 12690.2 property value and foreclosure price void as a substantial contractual impairment
- testimony based on percentage of attorney and paralegal time
Written by the judges who cited it.
The opinion
ACCEPTED
03-14-00738-CV
4853036
THIRD COURT OF APPEALS
AUSTIN, TEXAS
4/10/2015 5:50:17 PM
JEFFREY D. KYLE
CLERK
Oral Argument Requested
No. 3-14-00738-CV FILED IN
3rd COURT OF APPEALS
AUSTIN, TEXAS
In The Court of Appeals For The 4/10/2015 5:50:17 PM
Third District of Texas JEFFREY D. KYLE
Clerk
Elness, Swenson, Graham § From the 200th District Court
Architects, Inc. §
Appellants and Cross-Appellees, §
§
v. §
§
RLJII-C Austin Air, LP, §
RLJ II-C Austin Air Lessee, LP §
and RJL Lodging Fund II §
Acquisitions, LLC §
Appellees and Cross-Appellants. § Of Travis County, Texas
CROSS-APPELLANTS’ BRIEF
MUNSCH, HARDT, KOPF
& HARR, P.C.
Michael W. Huddleston Benton T. Wheatley
State Bar No. 10148415 State Bar No. 24015171
J. Stephen Gibson Tracy McCreight
State Bar No. 07866000 State Bar No. 24037064
3800 Ross Tower 401 Congress Avenue
500 North Akard Street Suite 3050
Dallas, Texas 75201 Austin, TX 78701
214-855-7500 telephone 512-391-6100 telephone
214-855-7584 facsimile 512-391-6149 facsimile
Email: mhuddleston@munsch.com Email: bwheatley@munsch.com
Email: sgibson@munsch.com Email: tmccreight@munsch.com
ATTORNEYS FOR APPELLEES,
CROSS-APPELLANTS
MHDocs 6062453_7 12690.2
IDENTITY OF PARTIES AND COUNSEL
The undersigned counsel of record, pursuant to Texas Rule of Appellate
Procedure 38.2, certifies that the following persons have an interest in the outcome
of this case:
Appellants, Cross-Appellees: Elness, Swenson, Graham Architects, Inc.
Appellants, Cross-Appellees’ Weston M. Davis
Counsel on Appeal: Gregory N. Ziegler
Matthew Mumm
Macdonald Devin, P.C.
1201 Elm Street
3800 Renaissance Tower
Dallas, TX 75270
Appellants, Cross-Appellees’ Weston M. Davis
Counsel at Trial: Gregory N. Ziegler
Matthew Mumm
Macdonald Devin, P.C.
1201 Elm Street
3800 Renaissance Tower
Dallas, TX 75270
Appellees, Cross-Appellants: RLJ II-C Austin Air, LP
RLJ II-C Austin Air Lessee, LP
RLJ Lodging Fund II Acquisitions, LLC
Appellees, Cross-Appellants Michael W. Huddleston
Counsel on Appeal: J. Stephen Gibson
Munsch Hardt Kopf & Harr, P.C.
3800 Ross Tower
500 North Akard Street
Dallas, Texas 75201
i
MHDocs 6062453_7 12690.2
Appellees, Cross-Appellants Benton T. Wheatley
Counsel at Trial: Tracy McCreight
Munsch Hardt Kopf & Harr, P.C.
401 Congress Avenue
Suite 3050
Austin, TX 78701
By: /s/ Michael W. Huddleston
Attorney for Appellees, Cross-
Appellants
ii
MHDocs 6062453_7 12690.2
STATEMENT CONCERNING ORAL ARGUMENT
Appellees and Cross-Appellants respectfully request oral argument in this
case. Appellees and Cross-Appellants respectfully submit that oral argument will
help the Court in evaluating the issues necessary to the resolution of this appeal.
iii
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TABLE OF CONTENTS
IDENTITY OF PARTIES AND COUNSEL .............................................................i
STATEMENT CONCERNING ORAL ARGUMENT ........................................... iii
TABLE OF CONTENTS ..........................................................................................iv
INDEX OF AUTHORITIES...................................................................................ixx
I. STATEMENT OF THE CASE ....................................................................... 1
II. ISSUES PRESENTED ....................................................................................4
III. STATEMENT OF FACTS .............................................................................. 6
A. Separate Contracts With Separate and Distinct Promised
Performances on the Project. ................................................................. 7
B. Separate and Distinct Acts and Omissions Breaching Separate and
Distinct Contractual Obligations. .......................................................... 9
C. Suit and Settlements By the Soils Engineer and the General
Contractor. ...........................................................................................11
D. The Trial Court Rules That the One Satisfaction Rule Applies.......... 12
E. Attorney’s Fees Allowed Only for Breach of Contract Claim Against
the Architect. .......................................................................................13
F. The Trial Court Renders Final Judgment. ...........................................13
IV. SUMMARY OF ARGUMENT .....................................................................14
A. The One Satisfaction Rule Does Not Apply. ......................................14
B. RLJ Entitled To Attorney’s Fees For the Presentation of the Breach of
Contract Claims Against the Architect, General Contractor, and Soils
Engineer Either If These Parties Shared a Joint and Several
Contractual Duty Or If the Damages Were “Indivisible.” .................. 15
V. ARGUMENT AND AUTHORITIES ...........................................................16
A. The One Satisfaction Rule Does Not Apply. ......................................17
iv
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1. This Case Involves Contractual, Not Tort, Liability. ............... 18
2. The One Satisfaction Rule Was Developed to Address
Settlements In Tort Cases With Less Than All Defendants After
the Legislature Authorized Joint and Several Liability. ........... 19
a. Generally There Was No Joint & Several
Tort Liability at Common Law. ......................................20
b. There Was No General Right of
Contribution at Common Law. .......................................20
c. Statute Allowed Collection of All Damages
From Any Defendant and Gave Defendant
the Right to Contribution from the Other
Tortfeasors, But Fails to Address Settlement
With Less Than All Tortfeasors. ....................................21
d. The One Satisfaction Rule Was Designed to
Address Joint and Several Liability In Tort
Cases Only. ....................................................................22
3. The One Satisfaction Rule Only Applies In Cases Involving
Joint Liability. ...........................................................................23
a. Unlike Tort Cases, Joint Liability in
Contract Cases Requires More Than
Common, Indivisible Damages. .....................................25
b. Without a Joint Contractual Obligation,
Settlement Credit Under the One
Satisfaction Rule Allowed the Architect to
Do Indirectly What It Could Not Do
Directly. ....................................................................31
c. This Court Has Rejected Application of the
One Satisfaction Rule to Contractual
Liability Without a Joint Contractual
Obligation. ....................................................................32
v
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d. Applying the One Satisfaction Rule Without
Joint Contractual Liability Obliterates the
Collateral Source Exception. ..........................................33
e. This Case Involved No Joint Contractual
Liability of the Architect and the Settling
Defendants. ....................................................................34
1) The Performance Could Not Be the
Same by Operation of Law: General
Contractors Legally Precluded From
Preparing Plans & Specifications. ........................34
2) The Performance of the Architect and
the Settling Defendants Was Not
Alleged To Be the Same.......................................35
3) The Architect Argued That Its Duty
Was Different From Those of the
Settling Defendants. .............................................38
4. The One Satisfaction Rule Does Not Apply Because the Jury’s
Verdict Did Not Award Damages for an “Indivisible” Injury.. 39
a. The Charge Submitted Apportioned
Damages. ....................................................................40
1) The Plain Language of the Question
Asked Determines What the Jury
Found. .........................................................41
2) The Plain Language of the Question
Limited Damages to Those Resulting
from the Architect’s “[F]ailure to
[C]omply [W]ith the Architectural
Contract.” .........................................................42
b. The Jury Was Asked To Apportion and in
Fact Apportioned Damages. ...........................................45
vi
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5. No Right to Application of One Satisfaction Rule or
Contribution Exists In Contract Cases In Light of Section
33.001. .......................................................................................48
6. Applying the One Satisfaction Rule in Contractual Liability
Cases Impairs Contract Obligations In Violation of Texas
Constitution Article I, §16. .......................................................53
a. Texas Public Policy Strongly Favors
Freedom of Contract. ......................................................53
b. The One Satisfaction Rule Impermissibly
Impairs Contractual Obligations.....................................54
c. Freedom of Contract Outweighs One
Satisfaction’s Questionable Objectives. .........................55
7. The Architect Is Procedurally Barred From Asserting the One
Satisfaction Rule. ......................................................................56
a. Waived by Failure to Specially Except. .........................56
b. Waived by Failure to Request Question or
Instruction. ....................................................................56
c. Waived By Failure to Plead as an
Affirmative Defense. ......................................................57
d. Barred By Laches. ..........................................................58
B. No Segregation of Attorney’s Fees Was Required. ............................59
1. There Is No Need to Segregate Fees For Claims Requiring
Proof of the Same Facts. ...........................................................60
2. If the One Satisfaction Rule Applies, It Requires Proof of
Breach of the Same Promised Performance and an Indivisible
Injury. ........................................................................................61
3. Alternatively, If Proof of Indivisible Injury Alone is Enough for
the Application of the One Satisfaction Rule, Segregation of
Fees Was Still Not Required. ....................................................61
vii
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VI. CONCLUSION AND PRAYER ...................................................................62
CERTIFICATE OF COMPLIANCE .......................................................................64
CERTIFICATE OF SERVICE ................................................................................65
APPENDIX IN SUPPORT OF CROSS-APPELLANTS’ BRIEF ..........................66
viii
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INDEX OF AUTHORITIES
Page(s)
CASES
Allan v. Nersesova,
307 S.W.3d 564 (Tex. App.—Dallas 2010, no pet.) ..........................................44
Amco Trust, Inc. v. Naylor,
159 Tex. 146, 317 S.W.2d 47 (1958) .................................................................32
AMX Enters., Inc. v. Bank One, N.A.,
196 S.W.3d 202 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) ............... 49
Austin Road Co. v. Pope,
147 Tex. 430, 216 S.W.2d 563 (1949) ...............................................................21
Bejjani v. TRC Servs., Inc.,
No. 14-08-00750-CV, 2009 WL 3856924 (Tex. App.—Houston [14th
Dist.] Nov. 19, 2009, no pet.) .............................................................................57
Bonniwell v. Beech Aircraft Corp.,
663 S.W.2d 816 (Tex.1984)................................................................................48
Bradshaw v. Baylor University,
126 Tex. 99, 84 S.W.2d 703 (1935) ...................................................................22
Brewer & Pritchard, P.C. v. AMKO Res. Int’l, LLC,
No. 14-13-00113-CV, 2014 WL 3512836 (Tex. App.—Houston [14th
Dist.] July 15, 2014, no pet.) (mem. op.) ............................................................57
Brewer v. Nationsbank of Texas, N.A.,
28 S.W.3d 801 (Tex. App.—Corpus Christi 2000, no writ) ..............................58
Brown v. Am. Transfer and Storage Co.,
601 S.W.2d 931 (Tex. 1980) ..............................................................................33
Buccaneer Homes of Alabama, Inc. v. Pelis,
43 S.W.3d 586 (Tex. App.—Houston [1st Dist.] 2001, no pet.) ........................37
Buckner Orphans Home v. Berry,
332 S.W.2d 771 (Tex. Civ. App.—Dallas 1960, writ ref’d n.r.e.) .....................26
ix
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Bullock v. Regular Veteran’s Ass’n of U.S.,
806 S.W.2d 311 (Tex. App.—Austin 1991, no writ) .........................................56
Byer Custom Builders v. Franks,
389 S.W.3d 880 (Tex. App.—Houston [14 Dist.] 2012, no pet. hist.) .........39, 43
C.H. v. Dep’t of Family & Protective Servs.,
No. 01-11-00385-CV, 2012 WL 586972 (Tex. App.—Houston [1st.
Dist.] Feb. 23, 2012, pet. denied) (mem. op.) .....................................................41
City of Fort Worth v. Johnson,
388 S.W.2d 400 (Tex. 1964) ..............................................................................58
Coleman v. United Savings Ass’n of Texas,
846 S.W.2d 128 (Tex. App.—Fort Worth 1993, no writ) ..................................51
Columbia Rio Grande Healthcare, L.P. v. Hawley,
284 S.W.3d 851 (Tex. 2009) ..............................................................................42
Crown Life Ins. Co. v. Casteel,
22 S.W.3d 378 (Tex. 2000).....................................................................24, 39, 49
CTTI Priesmeyer, Inc. v. K&O Limited Partnership,
164 S.W.3d 675 (Tex. App.—Austin 2005, no pet.) ...................................passim
Dalworth Restoration, Inc. v. Rife-Marshall,
433 S.W.3d 773 (Tex. App.—Fort Worth 2014. pet. dism’d w.o.j.) ................. 58
Deal v. Madison,
576 S.W.2d.................................................................................................... 21-22
Dick’s Last Resort of West End, Inc. v. Market/Ross, Ltd.,
273 S.W.3d 905 (Tex. App.—Dallas 2008, pet. denied)....................................56
Duncan v. Cessna Aircraft Co.,
665 S.W.2d 414 (Tex. 1984) .......................................................................passim
El Paso Natural Gas Co. v. Berryman,
858 S.W.2d 362 (Tex. 1993) ..............................................................................50
Energy Reserves Group v. Kansas Power & Light,
459 U.S. 400 (1983) ............................................................................................54
x
MHDocs 6062453_7 12690.2
Export Worldwide, Ltd. v. Knight,
No. SA 05 CA 647 XR, 2007 WL 628746 (W.D. Tex. Feb. 27, 2007) ............. 27
Fairfield Insurance Co. v. Stephens Martin Paving, LP,
246 S.W.3d 653 (Tex. 2004) ..............................................................................53
First Title Co. of Waco v. Garrett,
860 S.W.2d 74 (Tex. 1993).................................................................................24
Fortenberry v. Cavanaugh,
No. 03-07-00310-CV, 2008 WL 4997568 (Tex. App.—Austin Nov. 26,
2008, pet. denied) (mem. op.) .............................................................................61
Galle, Inc. v. Pool,
262 S.W.3d 564 (Tex. App.—Austin 2008, pet. denied) ............................. 28-29
Gattegno v. The Parisian,
53 S.W.2d 1005 (Tex. Comm’n App. 1932, holding approved) ..................20, 22
GE Capital Commercial Inc. v. Worthington Nat’l Bank,
754 F.3d 297 (5th Cir. 2014) .......................................................................passim
Green v. Flournoy,
No. 03-10-00299-CV, 2011 WL 3435735 (Tex. App.—Austin Aug. 5,
2011, no pet.) (mem. op.)....................................................................................41
Gym-N-1 Playgrounds, Inc. v. Snider,
220 S.W.3d 905 (Tex. 2007) ..............................................................................53
Haygood v. DeEscabedo,
356 S.W.3d 390 (Tex. 2012) ..............................................................................33
Hoffmann v. Dandurand,
180 S.W.3d 340 (Tex. App.—Dallas 2005, no pet.) ..........................................50
Hudspeth v. Enter. Life Ins. Co.,
358 S.W.3d 373...................................................................................................49
Hunt v. Ellisor & Tanner,
739 S.W.2d 933 (Tex. App.—Dallas 1987, writ denied) ....................... 36-37, 43
Hunter v. Fort Worth Capital Corp.,
620 S.W.2d 547 (Tex. 1981) ..............................................................................51
xi
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In re Sewell,
413 B.R. 562 (Bankr. E.D. Tex. 2009) ...............................................................26
InvestIn.com v. Europa Int’l , Ltd.,
293 S.W.3d 819 (Tex. App.—Dallas 2009, pet. denied)....................................27
Jim Walters Homes v. Reed,
711 S.W.2d 617 (Tex. 1986) ..............................................................................18
K-Bar Servs., Inc. v. English,
No. 03-05-00076-CV, 2006 WL 903735 (Tex. App.—Austin Apr. 7,
2006, no pet.) ......................................................................................................27
Landers v. East Texas Salt Water Disposal Co.,
151 Tex. 251, 248 S.W.2d 731 (1952) ........................................................passim
Langever v. Miller,
124 Tex. 80, 76 S.W.2d 1025 (1934) .................................................................54
LJ Charter, LLC v. Air America Jet Charter, Inc.,
No. 14-08-00534-CV, 2009 WL 4794242 (Tex. App.—Houston [14th
Dist.] Dec. 15, 2009, pet. denied) ..................................................... 24, 26, 30-31
Mancorp, Inc. v. Culpepper,
802 S.W.2d 226 (Tex. 1990) ..............................................................................50
McCarty v. Wani Venture, A.S.,
251 S.W.3d 573 (Tex. App.—Houston [1st Dist.] 2007, pet. denied) ............... 57
McClellan v. Scardello Ford, Inc.,
619 S.W.2d 593 (Tex. Civ. App.—Amarillo 1981, no writ)..............................26
Med. Specialist Group, P.A. v. Radiology Assocs., L.L.P.,
171 S.W.3d 727 (Tex. App.—Corpus Christi 2005, pet. denied) ......................46
Medina v. Hart,
240 S.W.3d 16 (Tex. App.—Corpus Christi 2007, pet. denied) ........................38
Merit Drilling Co. v. Honish,
715 S.W.2d 87 (Tex. App.—Corpus Christi 1986, writ ref’d n.r.e.) ................. 48
Minn. Min. & Mfg. Co. v. Nishika,
953 S.W.2d 733 (Tex. 1997) ..............................................................................41
xii
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OAIC Commercial Assets, L.L.C. v. Stonegate Village, L.P.,
234 S.W.3d 726 (Tex. App.—Dallas 2007, pet. denied)....................................31
Osborne v. Jauregui,
252 S.W.3d 70 (Tex. App.—Austin 2008, pet. denied) ............................... 29-30
Osterberg v. Peca,
12 S.W.3d 31 (Tex. 2000)...................................................................................41
Oyster Creek Fin. Corp. v. Richwood Investments II, Inc.,
176 S.W.3d 307 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) ......... 49-50
Pagosa Oil & Gas, L.L.C. v. Marrs & Smith P’ship,
323 S.W.3d 203 (Tex. App.—El Paso 2010, pet. denied) ..................................57
Paschall v. Peevey,
813 S.W.2d 710 (Tex. App.—Austin 1991, writ denied)...................................49
Pilgrim’s Pride Corp. v. Smoak,
134 S.W.3d 880 (Tex. App.—Texarkana 2004, pet. denied) .............................46
Price Pfister, Inc. v. Moore & Kimmey, Inc.,
48 S.W.3d 341 (Tex. App.—Houston [14th Dist.] 2001, pet. denied) ............... 38
Reliant Energy Servs., Inc. v. Cotton Valley Compression, L.L.C.,
336 S.W.3d 764 (Tex. App.—Houston [1st Dist.] 2011, no pet.) ......................41
RenewData Corp. v. eMag Solutions, LLC,
No. 03–05–00509–CV, 2009 WL 1255583 (Tex. App.—Austin May 6,
2009, pet. denied)................................................................................................57
Robertson v. ADJ Partnership, Ltd.,
204 S.W.3d 484 (Tex. App.—Beaumont 2006, pet. denied) ................. 39, 43-44
Shoemake v. Fogel,
826 S.W.3d 933 (Tex. 1992) ..............................................................................24
Snyder v. Eanes Indep. Sch. Dist.,
860 S.W.2d 692 (Tex. App.—Austin 1993, writ denied)...................................35
Stewart Title Guar. Co. v. Aiello,
941 S.W.2d 68 (Tex. 1997)...........................................................................46, 60
xiii
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Stewart Title Guar. Co. v. Sterling,
822 S.W.2d 1 (Tex. 1992).................................................................24, 39, 58, 60
Sugar Land Props., Inc. v. Becnel,
26 S.W.3d 113 (Tex. App.—Houston [1st Dist.] 2000, no pet.) ........................57
Sun Oil Co. v. Robicheaux,
23 S.W.2d 713 (Tex. Comm. App. 1930).....................................................20, 22
Szczepanik v. First S. Trust Co.,
883 S.W.2d 648 (Tex. 1994) ..............................................................................41
Tesfa v. Stewart,
135 S.W.3d 272 (Tex. App.—Fort Worth 2004, pet. denied) ............................42
Tex. & Pac. Ry. v. Levi & Bro.,
59 Tex. 674 (1883)..............................................................................................33
THPD, Inc. v. Cont’l Imports, Inc.,
260 S.W.3d 593 (Tex. App.—Austin 2008, no pet.) ..........................................41
Tony Gullo Motors I, L.P. v. Chapa,
212 S.W.3d 299 (Tex. 2006) ........................................................................46, 60
Travelers Ins. Co. v. Joachim,
315 S.W.3d 860 (Tex. 2010) ..............................................................................31
Western Technologies, Inc. v. All-American Golf Center, Inc.,
139 P.3d 858 (Nev. 2006) ...................................................................................44
White Budd VanNess P’ship v. Major-Gladys Drive Joint Venture,
798 S.W.2d 805 (Tex. App.—Beaumont 1990), writ dism’d, 811 S.W.2d
541 (Tex. 1991), cert. denied, 502 U.S. 861 (1991).....................................23, 37
Wood Motor Co. v. Nebel,
150 Tex. 86, 238 S.W.2d 181 (1951) .................................................................54
Zidell v. Bird,
692 S.W.2d 550 (Tex. App.—Austin 1985, no writ) .........................................26
xiv
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STATUTES
TEX. OCCUP. CODE §1051.701 .................................................................................35
TEX. CIV. PRAC. & REM. CODE §§32.001.................................................................50
TEX. CIV. PRAC. & REM. CODE §33.0001 et seq. .....................................................48
TEX. CIV. PRAC. & REM. CODE §§33.002.................................................................29
TEX. CIV. PRAC. & REM. CODE §33.012.......................................................30, 50, 52
TEX. CIV. PRAC. & REM. CODE §33.013...................................................................30
Chapter 38 of the Texas Civil Practice and Remedies Code ...................................59
OTHER AUTHORITIES
Article 2212........................................................................................................ 21-23
Hodges, Contribution and Indemnity Among Tortfeasors, 26 Tex. L. Rev.
150, 151 n.11 (1947) ...........................................................................................21
House Bill 4 .............................................................................................................52
Senate Bill 890 .........................................................................................................52
TEX. R. CIV. P. 90 .....................................................................................................56
TEX. R. CIV. P. 94 ............................................................................................... 57-58
TEX. R. CIV. P. 278 ...................................................................................................56
Article I, §16 of the Texas Constitution ..................................................5, 14, 53, 56
Wigmore, Joint Tortfeasors and Severance of Damages: Making the
Innocent Party Suffer Without Redress, 17 Ill. L. Rev. 458, 459) (1922) .......... 21
Williston on Contracts, §§ 36:1 ...............................................................................26
xv
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I. STATEMENT OF THE CASE
This is a breach of contract case involving a local Courtyard by Marriott
Hotel (the “Project”), located on East Ben White Boulevard, near Bergstrom
International Airport. (CR187; App. A). 1 The foundation of the Project failed in
numerous respects and resulted in varied injuries to the property, resulting in
$7,536,624.00 of claimed past, present, and future damages. (7RR48; 9RR123-
124, 136; 7RR16-18, 26-39; 3RR133-136; PX-151, 16RR1-1145; 10RR29-31). As
the original owner’s successor in interest and assignee, RLJ II-C Austin Air, LP;
RLJ II-C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC
(“RLJ” collectively), 2 alleged that the general contractor, EBCO General
Contractor, Ltd. (the “General Contractor”), the geotechnical engineer, Terracon
Consultants, Inc. (the “Soils Engineer”), and the architect, Elness, Swenson,
Graham, Inc. (the “Architect”) failed to perform as specifically and individually
promised in three separate and independent contracts. (CR184-218; App. A).
After the trial court entered rulings on various pre-trial motions, the only
claims being prosecuted were for breach of contract against the Architect, the
General Contractor, and the Soils Engineer. (CR1057-62; 1063-64; 1083-84;
CR1708-1710). The Soils Engineer settled its contractual liability with RLJ before
1
The Clerk’s Record is cited as “CR”; First Supplemental Clerk’s Record as “1SCR”; Second
Supplemental Clerk’s Record as “2SCR”; Third Supplemental Clerk’s Record as “3SCR”.
2
White Lodging Services Corporation, Inc. “assigned the contracts and causes of action in this
lawsuit to the RLJ Plaintiffs in this case.” (CR1124; App. B.)
1
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trial. (CR1080-81; CR1710). The General Contractor settled during trial. (7RR105-
108; CR1710).3 Trial proceeded on RLJ’s breach of contract claim against the
Architect.
The jury found that the Architect “fail[ed] to comply with the Architectural
Contract regarding the structural engineering services required by the contract” in
answer to Question 2 (the “Structural Engineering Question”) (CR1126; App. B).
The jury then determined the amount that would reasonably compensate for
damages “that resulted from [the Architect’s] failure to comply with the
Architectural Contract” as found in the Structural Engineering Question. (CR1125-
27; App. B). The total amount of damages found by the jury was $700,000 for the
difference in value from the hotel as constructed and the value had the Architect
complied with the Architectural Contract, $70,000 for the cost of barrier
remediation resulting from the Architect’s failure to comply, and $15,000 for the
reasonable and necessary cost of repairs to the hotel due to the Architect’s failure
to comply. (Id.)
After trial, the Architect moved for credit under the “one satisfaction rule”
for sums the General Contractor and the Soils Engineer (“Settling Defendants”
collectively) paid in settlement of the contract claims against them. (CR1173-
1228). The trial court deemed the credit applicable because it concluded the
3
The Reporter’s Record is cited by “[Volume Number]RR.” Exhibits are cited to page or pages
of the Reporter’s Record on which they or the pertinent parts thereof appear.
2
MHDocs 6062453_7 12690.2
damages were indivisible, despite the fact the court submitted and the jury found
damages limited to those “that resulted from [the Architect’s] failure to comply
with the Architectural Contract . . . .” (CR1437-41; CR1127; App. B, C).
Moreover, the trial court concluded that the absence of contractual joint and
several liability did not render the one satisfaction rule inapplicable. (CR1437-41;
App. C).
Applying the one satisfaction rule, the Court ordered that RLJ recover the
from the Architect $516,650.96, which was the sum of the jury’s award of
$785,000 as actual damages resulting from the Architect’s breach of contract and
the attorney’s fee award of $901,650.96, less $1,170,000, which was the amount of
the settlements of the Settling Defendants. (CR1711; App. D).
The parties agreed to try the attorney’s fees to the court instead of the jury.
RLJ presented evidence of its reasonable and necessary attorney’s fees for
asserting the contractual claims against the Architect, the General Contractor, and
the Soils Engineer. (3SCR3-611; 2SCR1603-05). However, the trial court only
awarded fees for the contractual claim against the Architect and rendered judgment
according to its application of the one satisfaction rule and its segregation of
attorney’s fees. (CR1708-1712; App. D). The Architect timely filed its notice of
appeal (CR1907-13) and RLJ timely perfected its cross-appeal (1SCR3-4).
3
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II. ISSUES PRESENTED
A. Whether the trial court erred in applying the one satisfaction rule and thus
reducing the damages found to have resulted from the specific breach of the
Architectural Contract by the Architect by the amounts received in
settlement for damages resulting from the breach of the different contractual
duties owed by the Soils Engineer and the General Contractor (CR1173-79,
1437-41; 2SCR1578-97, 1637-1745) including but not limited to the
following sub-issues:
1. Whether, in addition to an indivisible injury, joint and several liability
is required for application of the one satisfaction rule, and, if so,
whether the liable and settling parties must have contracted for the
same performance to deem a contractual liability joint and several?
2. Whether the one satisfaction rule does not apply due to the absence of
an “indivisible injury” because: (a) the damages found by the jury
were specifically limited to those caused by the contractual breach of
the non-settling defendant; (b) the non-settling defendant in its closing
argument advised the jury that it should not include damages it
deemed attributable to the Settling Defendants; or (c) both?
3. Whether the one satisfaction rule does not apply unless the liability of
the non-settling defendant is based on a non-contractual theory?
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4. Whether application of the one satisfaction rule violates article I, §16
of the Texas Constitution guaranteeing freedom of contract by
depriving a party of the benefit of a contractual agreement with
another and applying those benefits to offset the liability of a third-
party?
5. Whether the Architect waived the right to seek application of the one
satisfaction rule by any one or more of the following: (a) failing to
specially except to a lack of settlement allocation; (b) failing to plead
the rule as an affirmative defense, (c) inviting the jury to exclude from
its damage finding damages caused by the Settling Defendants; or
(d)failing to object to a jury question that permitted the jury to only
find damages attributable to the Architect’s breach of contract?
B. Either if there was a joint and several contractual liability between the
Architect and the Settling Defendants or if the damages were awarded for an
indivisible injury, whether the trial court erred in refusing to award RLJ
reasonable and necessary attorney’s fees incurred in the presentation of the
breach of contract claims against the Architect, the General Contractor and
the Soils Engineer and in awarding those fees attributable only to the
presentation of the claim against the Architect? (3SCR3-611; 2SCR1603-05,
1600-01, 1711).
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III. STATEMENT OF FACTS
The record in this case does not support the application of the one
satisfaction offset against the damages found caused by the Architect. First, the
evidence shows separate contractual duties, not common or overlapping duties.
Thus, there is no basis for joint and several liability, a sine qua non for application
of the one satisfaction rule. Second, the jury, in answer to Question 3, determined
the damages caused by the Architect. The jury did not find an indivisible amount
of damages caused by the settling defendants and the Architect. Third, the
Architect invited the jury to reduce the damages finding based on damages caused
by the settling defendants. Indeed, the Architect did not raise the issue of one
satisfaction until after the trial, failing to plead it, specially except regarding it, and
failing to object to either the omission of a segregated damages question or to
Question 3, which focused on damages caused by the Architect only. Finally,
Question 3 and the record show that the jury reduced the amount of damages it
awarded resulting from the Architect’s breach to remove amounts caused by the
non-settling parties. Thus, the record shows that recovery of the full amount
awarded in answer to Question 3 did not present even the possibility of a double
recovery or more than one satisfaction.
Having suffered over $7 million in damages, receiving settlement funds of
$1,170,000 for the damages caused by the breaches by the General Contractor and
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Soils Engineer, plus the jury award of $785,000 for the damages caused by the
Architect, certainly would not amount to more than one satisfaction. Indeed,
despite three contracts for millions of dollars and separate and distinct promised
performances, RLJ received a building with serious deficiencies that have caused
loss and will continue to do so. Yet, RLJ is forced to accept the Architect
benefiting from the other’s breaches of contract to which it was not a party by
receiving two damage reductions or offsets: one by the limited damage inquiry in
the jury charge and a second from the application of the one satisfaction rule.
A. Separate Contracts With Separate and Distinct
Promised Performances on the Project.
The contracts with the Architect, the General Contractor, and the Soils
Engineer did not promise the same performance.
• The Soils Engineer agreed to assess site conditions and recommend
specific foundation design parameters based on the same. (PX-3;
12RR6-11; 3RR161; App. E).
• The General Contractor agreed to build the structure designed by the
Architect with the assistance of its Structural Engineer, and comply
with the plans and specifications of the Project. (PX-48; 12RR569-75;
App. F).
• The Architect, with the assistance of its Structural Engineer, agreed to
prepare an appropriate foundation plan. (PX-15; 12RR30, 35, 47, 49;
App. G).
The Architectural Contract (PX-15; 12RR26-77; App. G) provided, among
other things, that the Architect’s design services “include normal structural,
7
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mechanical and electrical engineering” (12RR39) along with “[s]tructural
[e]ngineering design, document preparation and coordination” through “[o]ur
Structural Engineering firm...Marlin Bridges Associates, Inc.” (12RR47). In
conjunction with its retained Structural Engineer (PX-15; 12RR28), the Architect
promised to provide a foundation design for the Project. (PX-15; 12RR30, 35, 47,
49; PX-13; 12RR17-25).
The original owner White Lodging Services Corporation, Inc. contracted for
the services of the Soils Engineer to provide “geotechnical services” including
evaluating soil conditions and providing recommendations which would address
“[f]oundation design and construction.” (PX-3; 12RR6-11; App. E). This
information was to be supplied to the Architect and its Structural Engineer in
connection with the Project’s foundation design. (PX-15; 12RR48; App. G).
The original owner also separately contracted with the General Contractor to
build the Project according to the Architect’s plans and specifications. (PX-48;
12RR569-75; App. F). The General Contractor agreed “that materials and
equipment furnished will be of good quality[,]…that the work will be free from
defect…and will conform to the requirements” (PX-48; 12RR616; App. F) of the
Architect’s plans and specifications. (PX-48; 12RR610-11).
After the construction was completed, the Project was found to have cracks
in the slab and grade, shifting door frames, cracks in partition walls, cracks in the
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swimming pool, and perimeter drainage problems. (3RR118; 4RR78-79; 7RR47).
Investigation revealed that the Project suffered from geotechnical engineering
deficiencies, foundation design defects, and construction defects (DX-147;
17RR514; 7RR49-62), in breach of the separate contractual duties undertaken by
the Architect, the General Contractor, and the Soils Engineer.
B. Separate and Distinct Acts and Omissions Breaching
Separate and Distinct Contractual Obligations.
The Soils Engineer allegedly breached its contract by, among other things,
failing to account for the amount of necessary site excavation. This breach resulted
in soil expansion greater than the estimate in the Soils Engineer’s report. (CR192-
93, 197-98, 200-01, 209-12). The Soils Engineer miscalculated the potential
vertical rise (PVR) of the soil and failed to recommend that enough of the soil be
dug out and replaced with special engineered soil that did not have the expansive
properties of the native soil, called “select fill.” (DX-147; 17RR510).
The Architect breached its contract by failing to provide a foundation design
that was adequate for the site. Specifically, the Architect’s Structural Engineer
improperly designed the foundation and other structures by, among other things,
failing to account for the limitations and recommendations in the Soils Engineer’s
report, including designing a foundation insufficiently robust for the conditions
reported by the Soils Engineer. (4RR122-124; 4RR150-151). The Architect’s
Structural Engineer further failed to follow the Soil Engineer’s recommendations
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concerning the appropriate type of foundation design. (4RR122-124; 4RR150-
151).
The General Contractor was alleged to have failed to build according to the
plans and specifications supplied and provide a building free from defects, contrary
to its promised contractual performance. (CR188-89). Richard Reeves, a
construction manager expert, testified concerning the General Contractor’s specific
construction omissions and defects, meaning that certain construction failed to
comply with the plans and specifications provided by the Architect. (7RR49-62).
These included:
• A missing foundation grade beam (7RR53-54),
• Reinforcement of the concrete slab with welded wire mesh
lacking polypropylene fibers (7RR58),
• Unconnected and improperly constructed drains (7RR49-51,
55-58, 60-62),
• Improperly constructed “clean-out” access points to drains,
sewer lines and vents that were covered with flooring and
drywall (7RR51-53, 56-57), and
• Concrete overpours that improperly encased pipes in concrete.
(7RR58-60).
Under Question 3 in the charge, the jury was asked to determine the amount of
damages caused by the Architect, and thus it was allowed and indeed encouraged
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to reduce its damages award based on breaches of contract by the Settling
Defendants. (CR1127; App. B).
C. Suit and Settlements By the Soils Engineer and the General Contractor.
As the original owner’s successor in interest and assignee, RLJ sued, among
others, the Architect, the Soils Engineer, and the General Contractor for damages
to the Project resulting from various breaches of contract that caused foundation
and drainage problems. (CR188-218; App. A). Through pre-trial summary
judgments and non-suits, the suit was confined as matter of law to RLJ’s contract
claims against the General Contractor, the Soils Engineer and the Architect.
(CR1708, 1710; 2SCR42; App. D). Before trial, and after the trial court restricted
the case to contract claims, the Soils Engineer settled the contract claim against it
for $70,000. (CR1080-81; CR1710; App. D). During trial, RLJ settled its contract
claims against the General Contractor for $1.1 million. (7RR105-08; CR1710,
1226; App. D). As noted, the evidence showed that the damages to the Project
from all contractual breaches of the Architect and Settling Defendants was at least
$7,536,224. (7RR48; 9RR123-124, 136; 7RR16-18, 26-39; 3RR133-136; PX-151,
16RR1-1145; 10RR29-31). During closing arguments, RLJ argued that only
$6,029,299 in damages was attributable to the Architect, the rest being attributable
to the Settling Defendants and other responsible parties. (10RR29-31). The
Architect similarly argued that the portion of RLJ’s damages attributable to the
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Architect was “zero,” because the fault was attributable to other parties. (10RR54-
56).
RLJ’s contract claims against the Architect were then submitted to the jury.
(CR1121-29; App. B). The jury found that the Architect breached its contract “by
failing to comply … regarding the structural engineering services required.”
(CR1126; App. B). Finding that the Architect breached the Architectural Contract
in response to the Structural Engineering Question, the jury awarded $785,000 in
damages that resulted from the Architect’s breach. (CR1125, 1127; App. B).
D. The Trial Court Rules That the One Satisfaction Rule Applies.
Four days later, the Architect claimed for the first time a credit for the
General Contractor’s and Soils Engineer’s settlements under the one satisfaction
rule. (CR1173-79). After entertaining RLJ’s response (2SCR1578-97), the trial
court ruled that the one satisfaction rule applied solely because it deemed the
claims against the Architect, the General Contractor, and the Soils Engineer all to
be for one “indivisible injury.” (CR1439). It presumed the General Contractor’s
and Soils Engineer’s settlements were payment for the same injury for which the
jury awarded damages against the Architect. (CR1438). The trial court further
reasoned “RLJ needed to identify that category of [divisible] damages [against the
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General Contractor] and state the amount apportioned to it.” 4 (CR1438). RLJ
sought reconsideration of the trial court’s letter ruling via a Motion for Judgment
(2SCR1606-1636) and a Motion for Reconsideration (2SCR1637-1745). The trial
court denied both motions. (CR1905; 2SCR2102).
E. Attorney’s Fees Allowed Only for Breach of Contract Claim
Against the Architect.
Per stipulation, RLJ submitted its attorney’s fees claim for resolution by the
court. The trial court’s letter ruling suggested that RLJ was entitled to recover fees
for presenting the contractual claims against the Architect, the General Contractor
and the Soils Engineer. (CR1400; App. C). RLJ filed an amended application for
those attorney’s fees in the amount of $1,388,019. (3SCR3-611; 2SCR1603-05).
The trial court, however, ultimately decided to award attorney’s fees only for the
breach of contract case against the Architect. (CR1711; App. D).
F. The Trial Court Renders Final Judgment.
The trial court rendered judgment for RLJ in the principal sum of
$551,650.96, being the difference between the sum of the damage and attorney’s
fees award against the Architect, less the sum of the settlements from the Settling
Defendants. (CR1711; App. D).
4
The trial court was not clear whether this identification needed to be contained in the settlement
agreements themselves or be presented in the evidence to the jury. (CR1438). RLJ was not given
the opportunity to segregate or apportion damages to satisfy the trial court’s reasoning before the
case was submitted to the jury.
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IV. SUMMARY OF ARGUMENT
A. The One Satisfaction Rule Does Not Apply.
The one satisfaction rule applies if, and only if, the liability of judgment
debtor and settling defendants is joint and several. Indivisible injury alone is only
sufficient to establish joint and several tort, not contractual, liability. If the one
satisfaction rule applies at all, it applies in this case only if there is joint and several
contractual liability. To have such liability, the Architect and the Settling
Defendants must each have breached a promise to provide the same performance.
Here, the promised performances were not the same, so the one satisfaction rule
does not apply. Even if “indivisible” damages alone somehow is assumed
arguendo to have created joint and several contractual liability, the jury’s damages
finding was limited to the damages resulting from the Architect’s failure to
comply. (CR1127; App. B).
Further, RLJ would urge that the one satisfaction rule simply should not
apply in contract cases such as this. The one satisfaction rule was judicially created
to address a problem created by a statute that only applied to tort liability.
Applying it in contract cases deprives the injured party of the benefit of its
settlement agreement and transfers that benefit to the wrongdoer in violation of the
freedom of contract guaranteed by Texas Constitution article I, section 16.
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In any event, the Architect waived application of the one satisfaction rule. It
failed to plead this affirmative defense, was guilty of laches in waiting until after
the verdict to assert it, failed to object to the failure of the damages question to
segregate damages as it contends should have been done, and argued for the
apportionment of damages in its closing argument.
For all these reasons, as more fully articulated below, the trial court’s
decision to credit RLJ’s settlement with the General Contractor and Soils Engineer
to the damages the jury assessed against the Architect was erroneous. Accordingly,
the judgment must be modified to restore the damages awarded to RLJ by the jury
for the Architect’s breach of contract.
B. RLJ Entitled To Attorney’s Fees For the Presentation of the Breach of
Contract Claims Against the Architect, General Contractor, and Soils
Engineer Either If These Parties Shared a Joint and Several
Contractual Duty Or If the Damages Were “Indivisible.”
If multiple defendants breached the same contractual duty, RLJ was entitled
to recover attorney’s fees for the presentation against all those defendants because
the preparation and proof would have been necessary for the case against any one
of them. RLJ maintains that the Architect and the Settling Defendants here did not
breach contractual undertakings to perform the same duties and, therefore, there
was no joint and several contractual liability among the Architect and the Settling
Defendants. However, if this Court holds otherwise, then it necessarily follows that
RLJ is entitled to recover its attorney’s fees for cases against the Architect, the
15
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General Contractor and the Soils Engineer because the same preparation and proof
would have been necessary for the case against any one of them. If so, there was
no need to limit the recoverable attorney’s fees only to those attributable to the
breach of contract case against the Architect.
The same is also true if the trial court correctly ruled that the damages for
the Architect’s breach were indivisible from those allegedly caused by the Settling
Defendants. Again, RLJ maintains that the damages here were necessarily
segregated by the nature of the damages question and under the arguments of the
parties to the jury and presents this contention only if this Court determines that the
one satisfaction rule applies.
V. ARGUMENT AND AUTHORITIES
The one satisfaction rule is intended under appropriate circumstances to
prevent a plaintiff from receiving a double recovery. It was never been intended to
be used to reduce damages found to have been caused by the remaining defendant
by the amount of settlements entered with settling defendants. As applied in this
case, the one satisfaction rule does not achieve the purpose of defeating a double
recovery absent joint and several liability and indivisible damages. In fact, as
applied, the rule violates Texas public policy encouraging settlement and the
freedom to contract. The application here provides a strong disincentive to partial
settlements, particularly in construction contract cases. In any event, the rule was
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not timely and appropriately raised by the Architect through timely pleading,
exceptions, objections to the charge, and indeed the Architect invited the jury to do
its own reduction in answering the damages question prior to applying the one
satisfaction rule.
A. The One Satisfaction Rule Does Not Apply.
The decision to apply the one satisfaction rule was erroneous for many
reasons. First, the rule requires at a minimum joint and several liability of the
defendants. Here, the Architect was tried only on a breach of contract theory. Joint
and several liability is limited to tort law. There was no evidence here of a joint
and common contractual duty among the settling defendants and the Architect.
Second, the damages reduced by the trial court here were not so-called common or
indivisible damages. Instead, the jury found only “damages that resulted from [the
Architect’s] failure to comply with the Architectural Contract . . . .” Finally, the
record does not in any way support the notion that RLJ would be getting a double
recovery absent application of the one satisfaction rule. The damages sought and as
to which evidence was presented involved a claim of over $7 million. The jury was
permitted and invited by counsel for the Architect to reduce its damage finding as
to damages caused by others based on the fact the Court’s charge required that the
damages had to have resulted from the Architect’s breach of contract. The jury is
presumed to have read the charge and followed it. Thus, this is not a case of a
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double recovery; instead, with application of the settlements relating to separate
contractual duties under the one satisfaction rule, it is the Architect who is unfairly
receiving a double reduction.
1. This Case Involves Contractual, Not Tort, Liability.
Because of pre-trial rulings and non-suits, the only claims pending before
trial were RLJ’s contract claims against the General Contractor, the Soils Engineer
and the Architect. (CR1708,1710; 2SCR42; App. D). Before trial, RLJ settled with
the Soils Engineer for $70,000. (CR1080-81; CR1710; App. D). During trial, RLJ
settled with the General Contractor for $1.1 million. (7RR105-08l; CR1226, 1710;
App. D). Only RLJ’s contract claims against the Architect were submitted to the
jury.
Not only was the Architect’s liability purely contractual, the damages sought
were only recoverable in contract. (CR1127; App. B). The alleged harm was
economic loss to the subject of the contract itself – i.e., the Project. “When the
injury is only the economic loss to the subject of a contract itself, the action sounds
in contract alone.” Jim Walters Homes v. Reed, 711 S.W.2d 617, 617-18 (Tex.
1986).
After trial, the Architect asserted for the first time it was entitled to credit
under the one satisfaction rule for the Settling Defendants’ settlements. (CR1173-
1179). The trial court agreed (CR1710; 1437-41; App. C, D), conflating the tort
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joint and several liability with contract. According to the trial court, “Each party is
liable for its own [contractual] breach which by itself results in indivisible
damages[, j]ust as with tortfeasors who breach different common law duties that
each proximately cause an indivisible damage.” (CR1439; App. C; emphasis
added).
2. The One Satisfaction Rule Was Developed to Address Settlements
In Tort Cases With Less Than All Defendants After the
Legislature Authorized Joint and Several Liability.
More than sixty years ago, the Texas Supreme Court deemed the risk of a
double recovery no justification for depriving a plaintiff of a favorable settlement.
[O]ur courts seem to have embraced the philosophy … that it is better
that the injured party lose all of his damages than that any of several
wrongdoers should pay more of the damages than he individually and
separately caused. If such has been the law, from the standpoint of
justice it should not have been ….
Landers v. East Texas Salt Water Disposal Co., 151 Tex. 251, 248 S.W.2d 731,
734 (1952) (emphasis added). Fully understanding when the one satisfaction rule
should and should not apply requires an appreciation of its history and why it was
created in the first place.
The one satisfaction rule was developed to correct a statutorily-created
anomaly. In the early Twentieth Century, the Legislature attempted to alleviate the
harshness of the common law prohibition of contribution claims by creating a
contribution cause of action against other tortfeasors when a defendant was held
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liable for more than its per capita share of liability. But the statute did not address
what happened if the plaintiff settled with one of the other defendants. The courts
responded by creating the one satisfaction rule. If a defendant is subject to liability
through joint and several liability for more than the damages he or she caused, a
settlement by that defendant involves something that overlaps with a remaining
non-settling joint and several defendant, thus allowing consideration of double
recovery issues. Therefore, outside the context of joint and several tort liability,
there is no other recognized justification for imposing the one satisfaction rule.
a. Generally There Was No Joint & Several
Tort Liability at Common Law.
At common law, a tort suit could not be asserted against multiple defendants
for damages to which each defendant contributed unless the defendants acted
according to a common plan or scheme. Sun Oil Co. v. Robicheaux, 23 S.W.2d
713, 715 (Tex. Comm. App. 1930) (judgment adopted). Otherwise, there could be
no joint tort liability. Instead, the plaintiff had to sue each defendant separately and
establish that particular part of the injury that particular defendant caused. Id.
b. There Was No General Right of Contribution
at Common Law.
Also, defendants were not permitted a right of contribution generally under
Texas common law. Gattegno v. The Parisian, 53 S.W.2d 1005, 1007 (Tex.
Comm’n App. 1932, holding approved). It was “against the policy of the law to
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adjust equities between wrongdoers, or to allow a [liable] person to found an action
on his own wrong.” Austin Road Co. v. Pope, 147 Tex. 430, 216 S.W.2d 563, 564-
65 (1949).
c. Statute Allowed Collection of All Damages From Any
Defendant and Gave Defendant the Right to
Contribution from the Other Tortfeasors, But Fails to
Address Settlement With Less Than All Tortfeasors.
The Legislature passed article 2212 (now Texas Civil Practice & Remedies
Code chapter 32) to change these two perceived deficiencies. First, article 2212
allowed a tort defendant to be liable for all damages even if the common result of
multiple actors’ independent torts. A plaintiff no longer bore the “intolerable
burden” of proving particular damages attributable to a particular tort defendant in
common injury cases. Hodges, Contribution and Indemnity Among Tortfeasors, 26
Tex. L. Rev. 150, 151 n.11 (1947); Wigmore, Joint Tortfeasors and Severance of
Damages: Making the Innocent Party Suffer Without Redress, 17 Ill. L. Rev. 458,
459 (1922). Instead, the plaintiff could recover all tort damages from a single
defendant. Deal v. Madison, 576 S.W.2d at 414.
Article 2212 also created a right of action so that the defendant who was
held liable for the total common damages and, thereby, paid more than its per
capita 5 share of the total tort liability could sue to collect the excess payment from
5
At the time, liability was established by judgment and statutorily allocated equally among joint
tortfeasors so the amount of potential contribution liability was fixed. Accordingly, there was no
need to plead the one satisfaction rule. The rules concerning contribution are today vastly
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the other jointly liable defendants. Id.; Hodges, 26 Tex. L. Rev. at 151 n.11. Article
2212, however, made no provision for cases in which fewer than all tortfeasors
settled. Deal, 576 S.W.2d at 414. (Tex. Civ. App.—Dallas 1978, writ ref’d n.r.e.).
To address a situation unique to tort claims involving defendants jointly and
severally liable for common injuries from independent torts, the courts created the
one satisfaction rule. Under it, a plaintiff who settled with less than all tortfeasors
for more than the settlors’ share of damages could not recover from the non-
settling tortfeasors more than the difference between total damages and the sum of
all settlements. Hodges, 26 Texas L. Rev. at 171-72; see Gattegno, 53 S.W.2d at
1007; Bradshaw v. Baylor University, 126 Tex. 99, 84 S.W.2d 703, 705 (1935).
d. The One Satisfaction Rule Was Designed to Address
Joint and Several Liability In Tort Cases Only.
After the one satisfaction rule was adopted, the Texas Supreme Court
abolished the common-law rule in Robicheaux, 23 S.W.2d at 715, that prevented
joining multiple defendants in a single suit to impose joint and several liability for
independent torts. In Landers v. East Texas Salt Water Disposal Co., the court
ruled that when
tortious acts of two or more wrongdoers join to produce an indivisible
injury, that is, an injury which from its nature cannot be apportioned
with reasonable certainty to the individual wrongdoers, all of the
wrongdoers will be held jointly and severally liable for the entire
different, but cases continue, we would respectfully submit, to incorrectly recite that it is
unnecessary to plead the one satisfaction rule though the reason why no longer exists.
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damages and the injured party may proceed to judgment against any
one separately or against all in one suit. If fewer than the whole
number of wrongdoers are joined as defendants to plaintiff’s suit,
those joined may by proper cross action under the governing rules
bring in those omitted.
248 S.W.2d at 734 (emphasis added). Landers abolished Robicheaux’s concerted
action requirement for establishing joint and several tort liability. Under Landers,
indivisible injury alone was enough in tort cases to establish joint and several
liability. A party had to be jointly and severally liable for the entire damages, not
just its share. Thus, when that party settled, they theoretically could have settled
for more than just their individual liability for just the damages they caused.
Accordingly, in that setting, the plaintiff had the opportunity to ultimately settle
with multiple defendants for an amount greater than the plaintiff’s overall injury.
3. The One Satisfaction Rule Only Applies
In Cases Involving Joint Liability.
The one satisfaction rule’s historical development demonstrates it was
intended to address a problem unique to settlements with less than all jointly and
severally liable defendants in tort cases – the only cases to which article 2212
applied. Even assuming for the sake of argument that the one satisfaction rule
applies in a contract case, which RLJ disputes, the one satisfaction rule does not
apply unless the liability of the liable defendant and the settling defendant is joint
and several. GE Capital Commercial Inc. v. Worthington Nat’l Bank, 754 F.3d
297, 306 (5th Cir. 2014); Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 390 (Tex.
23
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2000); First Title Co. of Waco v. Garrett, 860 S.W.2d 74, 78 (Tex. 1993); Stewart
Title Guar. Co. v. Sterling, 822 S.W.2d 1, 8 (Tex. 1992); CTTI Priesmeyer, Inc. v.
K&O Limited Partnership, 164 S.W.3d 675, 684 (Tex. App.—Austin 2005, no
pet.); LJ Charter, LLC v. Air America Jet Charter, Inc., No. 14-08-00534-CV,
2009 WL 4794242 at *9 (Tex. App.—Houston [14th Dist.] Dec. 15, 2009, pet.
denied). Joint and several liability is essential, Garrett, 860 S.W.2d at 79; Sterling,
822 S.W.2d at 8, because the contribution right is derivative of the plaintiff’s right
to recover from the contribution defendant. Shoemake v. Fogel, 826 S.W.3d 933,
935 (Tex. 1992). A non-settling defendant may successfully urge the one
satisfaction rule only to reduce damages for which all the defendants are jointly
liable. Casteel, 22 S.W.3d at 391; Garrett, 860 S.W.2d at 78. In other words, if the
plaintiff could not impose joint and several liability, it would have no right to sue
for damages other than those caused by a particular defendant. Accordingly, a non-
settling defendant would have no right to seek an offset or credit from a settling
defendant since the plaintiff had no right to do so against the settling defendant or
the non-settling defendant.
Just last summer, the Fifth Circuit was persuaded by Garrett, Sterling, and
this Court’s reasoning in CTTI that joint and several liability was essential to the
application of the one satisfaction rule. GE Capital, 754 F.3d at 306. The suit arose
when a predecessor’s employee fraudulently induced wire transfers to a bank that
24
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accepted them in bad faith in violation of a Texas statute. GE Capital sued the
predecessor for contractual remedies under the purchase and sale agreement and
sued the bank for statutory tort. Id. at 300. GE Capital settled its contractual claims
with the predecessor, but successfully tried the statutory tort claim against the
bank. Id. at 301. The bank asserted the one satisfaction rule applied and GE Capital
should recover nothing because its contract damages were for the same loss settled
by the bank. Id. at 303.
The Fifth Circuit held there was no legal duty shared by the settling and
liable defendants and, therefore, the one satisfaction rule did not apply. Id. at 306-
07, 309. A common factual origin for the damages claimed against the settling and
liable defendants was not enough.
[The settling defendant’s] alleged contractual breach and the TUFTA
action against [the liable defendant] may share common underlying
facts – the three fraudulent transfers …. But such factual commonality
does not suffice … to render [the settling defendant] a joint tortfeasor
for one-satisfaction rule purposes.
Id. at 309 (emphasis added). The Fifth Circuit agreed with CTTI’s analysis that the
one satisfaction rule did not apply in any case where the duty allegedly breached
by the liable and settling defendants was not the same. Id. at 306-07.
a. Unlike Tort Cases, Joint Liability in Contract Cases
Requires More Than Common, Indivisible Damages.
Tort duties are universal; contractual duties are not. Landers implicitly
recognized the joint duty requirement would necessarily be satisfied in tort cases
so that joint and several tort liability need only focus on existence of a common,
25
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indivisible injury. 248 S.W.2d at 734. For purposes of tort liability, “the law
imposes on all persons a duty to act as a reasonably prudent person would act
under same or similar circumstances, considering any reasonably foreseeable risks
or probability of injury to others.” Zidell v. Bird, 692 S.W.2d 550, 553 (Tex.
App.—Austin 1985, no writ).
Undertakings in a contract, however, are binding only on the contracting
parties and their privies. McClellan v. Scardello Ford, Inc., 619 S.W.2d 593, 597
(Tex. Civ. App.—Amarillo 1981, no writ); Buckner Orphans Home v. Berry, 332
S.W.2d 771, 776 (Tex. Civ. App.—Dallas 1960, writ ref’d n.r.e.). Thus, joint and
several contractual liability requires more than indivisible injury. It also requires
that the parties separately promise the same performance,6 whether under the
same or separate contracts. 12 Richard A. Lord, Williston on Contracts, §§ 36:1; In
re Sewell, 413 B.R. 562, 568 n.5 (Bankr. E.D. Tex. 2009); CTTI, 164 S.W.3d at
679, 684 (joint and several contractual liability under separate contracts requires
promise of the same performance); LJ Charter, 2009 WL 4794242 at *9. But not
all undertakings for the same performance are necessarily joint.
Under the common law doctrine of joint, joint and several, and several
obligations in a contract, the question is whether multiple promisors
of the same performance have promised as a unit (jointly), or have
6
Whether the performance promised by the both parties must be exactly the same for the liability
to be joint is not an issue that need be resolved here. As will be discussed in greater detail below,
the Architect’s deficient performance concerned obligations that were not and could not lawfully
have been undertaken by others.
26
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promised the same performance separately (severally), or both as a
unit and separately (jointly and severally).… The problem does not
arise, however, unless the promises relate to the same performance.
InvestIn.com v. Europa Int’l , Ltd., 293 S.W.3d 819, 828 (Tex. App.—Dallas 2009,
pet. denied); accord K-Bar Servs., Inc. v. English, No. 03-05-00076-CV, 2006 WL
903735 at *3 (Tex. App.—Austin Apr. 7, 2006, no pet.).
In other words, to be jointly liable under contract, the parties must
effectively promise the same performance. Export Worldwide, Ltd. v. Knight, No.
SA 05 CA 647 XR, 2007 WL 628746 (W.D. Tex. Feb. 27, 2007) (joint promises);
InvestIN.com Corp., 293 S.W.3d at 829; English, 2006 WL 903735 at *3.
The Texas Supreme Court has not yet decided whether joint and several
liability is necessary for application of the one satisfaction rule to a contractual
liability. GE Capital, 754 F.3d at 305. This and other courts, however, have
concluded that it does not apply unless both the liable and settling defendants’
alleged liability arises out of the breach of a common contractual duty.
Like this case, CTTI involved a contract suit by an owner against the
architect and general contractor for a new building’s foundation defects. 164
S.W.3d at 679. The CTTI architect’s contract required design and “supervisory
services.” 164 S.W.3d at 685. A separate contract required CTTI, the general
contractor, to build according to the architect’s plans and specifications. 164
27
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S.W.3d at 678. Before trial, the owner settled with several parties involved in the
building’s construction and settled with the architect during trial. Id.
After the jury returned its verdict, the general contractor sought to have its
contractual liability reduced by the other defendants’ settlement payments. Id. at
680. After carefully reviewing Texas Supreme Court authorities, this Court held
the one satisfaction rule inapplicable unless the liable and settling defendants
breached the same contractual duty. Id. at 685. It concluded the architect’s and
general contractor’s promised performances differed so that the one satisfaction
rule did not apply. Id.
Necessity of a joint liability is also illustrated by this Court’s decision in
Galle, Inc. v. Pool, 262 S.W.3d 564, 574 (Tex. App.—Austin 2008, pet. denied).
Galle involved a suit by an insured homeowner against his insurer and a mold
remediator, alleging contractual and tort liabilities against both. Id. at 568, 570.
The homeowner settled all claims against the insurer before trial. Id. at 569. Post-
verdict, the homeowner elected to recover in tort against the remediator. Id. at 570.
The remediator claimed a credit for the insurer’s settlement because the damages
allegedly caused by the insurer and the remediator were indivisible. Implicitly
recognizing indivisible injury alone is sufficient for the joint and several tort
liability under Landers, this Court held the one satisfaction rule applied. It further
ruled that the entire amount of the insurer’s settlement must be credited against the
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tort damages because the plaintiff did not segregate the settlement between
“separate and joint damages” or between the tort and contractual liability theories.
Id. at 574.
Osborne v. Jauregui, 252 S.W.3d 70, 74 (Tex. App.—Austin 2008, pet.
denied), presented the obverse situation to Galle. In Osborne, it was the liable
defendant, not the settling defendant, who allegedly had a contractual liability in
addition to joint tort and DTPA liability with the settling defendants. See also GE
Capital, 754 F.3d at 307 n.9. The Osborne jury found no liability for breach of
contract, only for negligence and breaches of implied warranties actionable under
the DTPA. 252 S.W.3d at 74. Because the case involved alleged DTPA claims,
unlike the verdict in Galle, the jury determined the percentage responsibility of the
liable and settling defendants. Id.; see TEX. CIV. PRAC. & REM. CODE §§33.002
(proportionate responsibility applicable to “any action brought under the DTPA”);
33.012 (under 2005 version, defendant had option of percentage reduction or dollar
credit for settlement). The jury also decided the total amount of the plaintiff’s
damages attributable to both the liable and settling defendant in an amount less
than the amount paid by the settling defendants. The liable defendant elected the
dollar-for-dollar credit which more than offset the total amount of damages
awarded by the jury. The plaintiff apparently elected to recover under the DTPA
because the issue before the court was whether attorney’s fees could be recovered
29
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when the total amount of settlement exceeded the amount of the total damages
awarded by the jury for the injuries caused by both the liable and settling
defendants. Id. at 75-76.
Thus, Osborne is a straightforward application of Civil Practice and
Remedies Code chapter 33 to a case to which it explicitly applies: a DTPA/tort
claim for which the liable and settling defendants were jointly liable involving an
injury this Court deemed indivisible. The joint and several liability in that case
was created by statute, not common law. TEX. CIV. PRAC. & REM. CODE §33.013,
and the amount of damages awarded in that case were for the amount of damages
caused by all responsible persons. TEX. CIV. PRAC. & REM. CODE §33.012.
The distinctions between Osborne and this case are manifold. Here, there
was no joint and several tort liability. Indeed, there was no joint and several
liability of any description. See V.A.3.e., infra. Further, the damages awarded in
Osborne were those found to have been caused by both the liable and settling
defendants. Here, the damages awarded were explicitly limited to those caused by
the Architect. See V.A.4., infra. Nevertheless, this Court’s decision in Osborne
confirms that the application of either a common law or statutory credit for
settlement hinges on joint and several liability.
Four years after CTTI, the Houston Fourteenth Court of Appeals also refused
to apply the one satisfaction rule absent a shared contractual duty. In LJ Charter,
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No. 14-08-00534-CV, 2009 WL 4794242 at **8-9 (Tex. App.—Houston [14th
Dist.] Dec. 15, 2009, pet. denied), the plaintiff received a judgment against the
liable defendant for damages for breach of contract, breach of fiduciary duty and
fraud. Id. at *6 n.12. The plaintiff previously settled claims for the alleged breach
of two contracts by two other parties. The liable defendant was not a party to either
of the contracts that were the basis of the settled claims. Id. at 9. The court refused
the liable defendant’s request for credit under the one satisfaction rule because the
liable defendant was not a party to, and could not have been liable under, those
contracts. Id. When there was no joint liability, the one satisfaction rule did not
apply.
b. Without a Joint Contractual Obligation, Settlement Credit
Under the One Satisfaction Rule Allowed the Architect to
Do Indirectly What It Could Not Do Directly.
CTTI correctly observed if an indivisible injury alone created a joint and
several liability between contract and tort defendants, applying the one satisfaction
rule would permit “hold[ing] a person not a party to a contract liable for the breach
of that contract.” Id. at 685. Such result is legally impermissible because
contractual privity is necessary for standing to sue. OAIC Commercial Assets,
L.L.C. v. Stonegate Village, L.P., 234 S.W.3d 726, 738 (Tex. App.—Dallas 2007,
pet. denied). Standing to sue is essential to subject-matter jurisdiction. Travelers
Ins. Co. v. Joachim, 315 S.W.3d 860, 865 (Tex. 2010). No privity of contract exists
31
MHDocs 6062453_7 12690.2
between persons not parties to the same contract without promises of the same
performance. See Amco Trust, Inc. v. Naylor, 159 Tex. 146, 150, 317 S.W.2d 47,
50 (1958).
Under these circumstances, a contractually liable defendant who shared no
contractual obligation would have no standing to recover from the settling
defendant. The liable defendant is a stranger to the contract between the plaintiff
and the settling defendant. If credit under the one satisfaction rule were permitted
absent a shared performance obligation, the liable defendant could achieve
indirectly what could not have been achieved directly; a stranger without privity
could in effect wrest a credit based on settlement of that contractual obligation.
Regardless of whether the injury was “indivisible,” the one satisfaction rule could
not apply without a common promise to perform the same contractual duty. Id. at
684.
c. This Court Has Rejected Application of the
One Satisfaction Rule to Contractual Liability
Without a Joint Contractual Obligation.
The trial court in this case applied the one satisfaction rule solely on the
basis of perceived “indivisible” damages. (CR1438-39). In CTTI, this Court:
acknowledge[d] that there are cases in which the courts have applied
the one satisfaction rule and granted settlement credits or required an
election of remedies where there are co-existing tort and contract
claims. . . .In those cases, the courts have focused on the indivisible
nature of the injury to the plaintiffs, and have not discussed the
requirement of joint liability. We find that focus to be misplaced and
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MHDocs 6062453_7 12690.2
decline to follow those decisions.… If we were to hold that, due to the
indivisible nature of the resulting injury, breach of contract defendants
and tort defendants are jointly and severally liable for all damages, we
would be forced to hold a person not a party to a contract liable for
the breach of that contract.
(164 S.W.3d at 684-85; emphasis added). The same rationale applies when the
liable and settling defendants’ liability rests on distinct contractual obligations
under different contracts. Therefore, the trial court erred in applying the one
satisfaction credit based solely on perceived “indivisible” damages.
d. Applying the One Satisfaction Rule Without
Joint Contractual Liability Obliterates the
Collateral Source Exception.
The collateral source rule is an exception to the one satisfaction rule. Brown
v. Am. Transfer and Storage Co., 601 S.W.2d 931, 936 (Tex. 1980). If indivisible
injury alone were enough for applying the one satisfaction rule, this exception
would be meaningless. Under the collateral source rule, a wrongdoer cannot reduce
its liability because of benefits the plaintiff independently procures from another to
which the wrongdoer was not privy. Haygood v. DeEscabedo, 356 S.W.3d 390,
395 (Tex. 2012); Tex. & Pac. Ry. v. Levi & Bro., 59 Tex. 674 (1883). Typically,
the collateral source is an insurer’s contractual obligation to pay for all or part of
same damages sought from the defendant. Brown v. Am. Transfer & Storage Co.,
601 S.W.2d 931, 934 (Tex. 1980). If an indivisible injury or the “same damages”
alone triggered the one satisfaction rule, such insurance benefits would serve to
33
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reduce the liable defendant’s liability and prevent a double recovery. Thus, the
existence of the collateral source exception belies the notion that indivisible injury
alone is sufficient for application of the one satisfaction rule. For this additional
reason, a joint and several liability is essential for application of the one
satisfaction rule to contractual liabilities.
e. This Case Involved No Joint Contractual Liability
of the Architect and the Settling Defendants.
Because joint and several contractual liability is essential, the question here
narrows to whether the Architect’s contractual liability was joint with that of the
Settling Defendants; i.e., was the liability imposed on the Architect for the same
contractual promise or promises also made by each Settling Defendant. As
acknowledged in CTTI, the contractual obligations of an architect are distinct from
those of a general contractor. 164 S.W.3d at 685. Only the Architect’s contractual
liability was submitted to the jury. (CR1125-26, 1708-10). There could be no
common promised performance between the Architect and the Settling Defendants.
1) The Performance Could Not Be the Same by
Operation of Law: General Contractors Legally
Precluded From Preparing Plans & Specifications.
Neither the Soils Engineer nor the General Contractor in this case were a
registered architect and were not retained to perform architectural duties. (PX-15;
12RR26-77; PX-48; 12RR569-75; App. F, G). As a matter of Texas law, the
obligations of an architect cannot be undertaken by one who is not a registered
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architect. TEX. OCCUP. CODE §1051.701. This statute is part of the contracts as if
written in explicitly because the parties are conclusively presumed to know and
contract with reference to existing law. Snyder v. Eanes Indep. Sch. Dist., 860
S.W.2d 692, 697 (Tex. App.—Austin 1993, writ denied). By operation of law,
therefore, the Architect’s duties were not and could not be the same as those of the
Settling Defendants.
2) The Performance of the Architect and the Settling
Defendants Was Not Alleged To Be the Same.
According to the live portions of the petition on which the case was tried, the
General Contractor “agreed to construct the Project free from defects” (2SCR44;
App. A), but failed to do so. It was alleged the General Contractor did not comply
with the Project’s plans and specifications and contract documents, the promise to
build free from defects, and the duty perform in a good and workmanlike manner.
(2SCR43-44, 47; App. A).
RLJ alleged that the Soils Engineer 7 was retained by the owner to “conduct a
geotechnical engineering study,” provide “geotechnical engineering services,” and
“materials testing and construction inspection services.” (2SCR45; App. A). RLJ
alleged that the Soils Engineer breached these undertakings by failing to properly
estimate the potential of the soil at the site for swelling and underestimating the
7
Terracon, a settling defendant, was the successor-in-interest to HBC, a party to the
Geotechnical Study Contract. (CR186; App. A).
35
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amount of soil that needed to be replaced to control soil expansion. (2SCR66-67;
App. A).
The allegations against the Architect, on the other hand, were that it agreed
to “provide overall architectural, civil, and structural engineering design, document
preparation, and coordination for the Project.” (2SCR44; App. A). RLJ alleged the
Architect “breached the Architectural Contract by deviating from the applicable
standard of care, failing to produce design plans free from defects, and failing to
properly administer the construction of the Project.” (2SCR47; App. A).
The legal injury sustained when an architect breaches its contractual
obligation to provide appropriate building plans and supervisory services is
separate from that sustained when a general contractor fails to build in accordance
with those plans and specifications. Hunt v. Ellisor & Tanner, 739 S.W.2d 933,
936, 938 (Tex. App.—Dallas 1987, writ denied). “The [architect’s] obligation was
non-construction; the general contractor’s obligation was construction.” Hunt, 739
S.W.2d at 938.
Because of the lack of a joint or common contractual undertaking, the court
in Hunt ruled:
[W]hen the situation is pure contract, the special issues should not
include comparative causation [under the Uniform Comparative
Fault Act]…[because] if the acts of others (whether wrongful or not)
are contributing factors, those others are not thereby joined with the
defendant as having committed the breach of the contract.
36
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(Emphasis added; quoting 5 A. Corbin, Corbin on Contracts §§ 999 n.21 & 999 -
1,000 (1964)). The court in White Budd VanNess P’ship v. Major-Gladys Drive
Joint Venture, 798 S.W.2d 805, 819 (Tex. App.—Beaumont 1990), writ dism’d,
811 S.W.2d 541 (Tex. 1991), cert. denied, 502 U.S. 861 (1991), followed Hunt’s
reasoning to conclude that want of joint liability prevented submission of
comparative fault to reduce the architect’s contractual liability. Under Hunt and
White Budd, the architect’s liability arose from the architect’s unique contractual
obligations, not a promise to perform the same duty as the general contractor. Just
as there can be no comparative submission of a general contractor’s fault, the one
satisfaction rule cannot be invoked to reduce the Architect’s liability with the
General Contractor’s settlement.
The same is true for the Architect’s particular failings concerning the
foundation design detailed in the certificate of merit. (2SCR60-61; App. A). The
duty breached is the same if the evidence supporting the various causes of action is
the same. Buccaneer Homes of Alabama, Inc. v. Pelis, 43 S.W.3d 586, 590 (Tex.
App.—Houston [1st Dist.] 2001, no pet.). It is not the same if different evidence
would be required to prove the breach. These included failing to follow the various
recommendations and reports of the Soils Engineer. (2SCR61; App. A). Here, the
promised performances of the Architect could not have been the same because the
evidence necessary to prove the Architect’s breach differed from that which would
37
MHDocs 6062453_7 12690.2
have been necessary to prove the alleged breaches of the Soils Engineer and the
General Contractor. Thus, the claims settled were for breaches of differing and
separate contractual duties from those of the Architect, both as a matter of fact and
by operation of law.
3) The Architect Argued That Its Duty Was
Different From Those of the Settling Defendants.
The Architect emphasized to the jury in closing arguments that the duties of
the Architect and the other participants were different. The Architect urged the jury
that it should not be found liable because the breaches of duties undertaken by
others, not the Architect, caused the damage. The Architect argued it was not
serving as an engineer or a general contractor. (10RR33-34). It essentially denied
any common duty, arguing it could not second-guess the Soils Engineer’s
predictions about the potential vertical rise or provisions groundwater drainage at
the Project. (10RR34-37). According to the Architect, the foundation design was
“doomed from the start” due to the Soils Engineer’s faulty performance. (10RR39).
Such clear, deliberate and unequivocal assertions during closing arguments are
judicial admissions foreclosing application of the one satisfaction rule. See Price
Pfister, Inc. v. Moore & Kimmey, Inc., 48 S.W.3d 341, 349 (Tex. App.—Houston
[14th Dist.] 2001, pet. denied); see also Medina v. Hart, 240 S.W.3d 16, 23 (Tex.
App.—Corpus Christi 2007, pet. denied).
38
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In summary, the Architect and Settling Defendants did not promise the same
performance. Therefore, the one satisfaction rule does not apply because the
contractual liability of the Architect and the Settling Defendants was not joint.
4. The One Satisfaction Rule Does Not Apply Because the Jury’s
Verdict Did Not Award Damages for an “Indivisible” Injury.
The one satisfaction rule also requires an indivisible injury common to the
wrongdoing of the liable and settling defendants. Sterling, 822 S.W.2d at 7;
Landers, 248 S.W.2d at 734. The one satisfaction rule is inapplicable in this case
also because the damages were not for an “indivisible” injury as the trial court
supposed. (2SCR1599-1600; App. C). “Under the one satisfaction rule, the non-
settling defendant may only claim a credit based on the damages for which all
tortfeasors are jointly liable.” Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 391
(Tex. 2000). Where the jury charge limits its inquiry to damages caused by the
non-settling defendant, there is no basis for application of the one satisfaction rule.
Robertson v. ADJ Partnership, Ltd., 204 S.W.3d 484, 485 (Tex. App.—Beaumont
2006, pet. denied); accord Byer Custom Builders v. Franks, 389 S.W.3d 880, 881
(Tex. App.—Houston [14 Dist.] 2012, no pet. hist.) (holding that because the
finder of fact, an arbitrator, “did not award any damages against the non-settling
defendant for any of the alleged damage he plaintiffs claimed was caused by the
alleged settling defendant, there could be no violation of the one-satisfaction rule if
39
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the [plaintiffs] received compensation on those claims from [the settling
defendant].”).
The jury was not asked to and did not assess damages to the Project as a
whole. Rather it was asked to assess only those damages for the Architect’s
particular breach.
What sum of money, if any, if paid now in cash, would fairly and
reasonably compensate [RLJ] for its damages, if any, that resulted
from [the Architect’s] failure to comply with the Architectural
Contract that you found in answer to Question[] 2 [concerning the
required structural engineering services]?
(CR1127; App. B; emphasis added). The trial court acknowledged the narrow
focus of this question in its letter ruling.
The damage question in the Charge asked for damages “due to [the
Architect’s] failure to comply.” The question had to ask specifically
about damages resulting from [the Architect’s] failure to inquire about
cause-in-fact.
(2SCR1599; App. B; emphasis in original). Nevertheless, the trial court concluded
specification of the particular party and contractual breach did “not mean, without
more, that the damages found were divisible and attributable only to [the
Architect].” (2SCR1599; App. B).
a. The Charge Submitted Apportioned Damages.
The trial court’s analysis is irreconcilable with the principle that, without a
sufficient charge objection to the question’s form, the effect of the answer is
measured by the question actually asked, not the question that ought to have been
40
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asked. See THPD, Inc. v. Cont’l Imports, Inc., 260 S.W.3d 593, 608 (Tex. App.—
Austin 2008, no pet.); see also Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000).
The Architect did not object to the damages question’s form, and never objected
that the question was improperly limited to those damages caused by the
Architect’s breach of its own contract. The Architect only complained there was no
legally and factually sufficient evidence to support a damage award. 8 (9RR140,
143-44, 153).
1) The Plain Language of the Question Asked
Determines What the Jury Found.
Absent objection, whether the damages were necessarily attributable to the
Architect alone is governed by the plain meaning of the language in the question.
See Reliant Energy Servs., Inc. v. Cotton Valley Compression, L.L.C., 336 S.W.3d
764, 788 (Tex. App.—Houston [1st Dist.] 2011, no pet.). This presumption applies
whenever the charge does not include a different definition. C.H. v. Dep’t of
Family & Protective Servs., No. 01-11-00385-CV, 2012 WL 586972, at *6 (Tex.
App.—Houston [1st. Dist.] Feb. 23, 2012, pet. denied) (mem. op.). When the
8
This objection did not assert there was no evidence of allocation or segregation. (9RR153). If it
had, the objection was meritless. Unsegregated damages evidence is legally sufficient evidence
of segregated damages. Minn. Min. & Mfg. Co. v. Nishika, 953 S.W.2d 733, 739 (Tex. 1997).
The factual insufficiency objection preserved nothing. Green v. Flournoy, No. 03-10-00299-CV,
2011 WL 3435735, at *4 (Tex. App.—Austin Aug. 5, 2011, no pet.) (mem. op.). Such
complaints must be presented in a new trial motion. The court is required to submit charge
questions on any issue if legally sufficient evidence supported an affirmative answer, Szczepanik
v. First S. Trust Co., 883 S.W.2d 648, 649 (Tex. 1994), even if the evidence was factually
insufficient. The Architect filed no new trial motion.
41
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question limits the subject of the jury’s consideration, the court must presume
compliance unless the record shows otherwise. See Columbia Rio Grande
Healthcare, L.P. v. Hawley, 284 S.W.3d 851, 861-62 (Tex. 2009).
Under circumstances similar to those here, in Tesfa v. Stewart, 135 S.W.3d
272, 273 (Tex. App.—Fort Worth 2004, pet. denied), the court held that this
presumption applied to discharge a segregation requirement when the question
asked the amount of damages “for injuries prior to [plaintiff’s] death, if any, that
reasonably resulted from” the doctor’s negligence. The case was one for medical
malpractice case during treatment of auto accident injuries. The doctor did not
object to the form of the question but nonetheless asserted the charge did not
segregate damages caused in the auto collision from those caused by the alleged
malpractice. Id. at 274. Finding nothing to rebut the presumption of compliance,
the court held the jury’s damages finding was “limited in accordance with the trial
court’s express instruction” and determined damages “for injuries attributable to
Dr. Tesfa’s negligence alone.” Id. at 279.
2) The Plain Language of the Question Limited Damages
to Those Resulting from the Architect’s “[F]ailure to
[C]omply [W]ith the Architectural Contract.”
Concerning the effect of the damages finding, this case is indistinguishable
from Tesfa. The damages question here clearly limited its inquiry to the Architect’s
“failure to comply with the Architectural Contract ….” (CR1127; App. B).
42
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Similarly, in Hunt, 739 S.W.2d at 940, an owner sued an architect for design
deficiencies and various contractors for construction defects in a parking deck. All
but the Architect settled before trial. Id. at 935. The Architect claimed credit under
the one satisfaction rule. The damages question was:
What sum of money, if any, if paid now in cash will fully compensate
[the owner] for any permanent diminution in market value of [the
shopping center and office complex] which was caused by the acts or
omissions of the defendant(s), despite the completion of all reasonable
repair procedures?
(Id.; emphasis in original). The Architect urged that the question permitted a
double recovery because it included damages for the settled claims. Id. at 940. The
court denied the credit because
the jury compensated [the owner] only for the separate wrong … by
[the Architect’s] breach of []its duties …. [T]he consideration received
under the prior settlement compensated [the owner] for acts and
omissions of others…. [The Architect] was not a party to the
settlement agreement. Therefore, the present case presents the
situation where each wrongdoer pays separately for its own acts or
omissions.
(Id.; emphasis added).
Similarly, in Robertson v. ADJ Partnership, Ltd., 204 S.W.3d at 485, the
court held that where the jury charge limits its inquiry to damages caused by the
non-settling defendant, there is no basis for application of the one satisfaction rule.
The same conclusion was reached in Byer Custom Builders v. Franks, 389 S.W.3d
at 881. In that case, the finder of fact, an arbitrator, “did not award any damages
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against the [non-settling defendant] for any of the alleged damage the [plaintiffs]
claimed was caused by [the alleged settling defendant], there could be no violation
of the one-satisfaction rule if the [plaintiffs] received compensation on those
claims from [the settling defendant].”
Like the damages questions in Tesfa, Hunt and Robertson, the plain
language of the damage question here removed any possibility the damages
included those for breaches of a different contract or party. For this reason alone,
there could have been no finding of damages common to those caused by the
Settling Defendants.
Contrast these decisions with Allan v. Nersesova, 307 S.W.3d 564, 574 (Tex.
App.—Dallas 2010, no pet.), penned by CTTI’s author. In Nersesova,
the jury charge contained a single damages question for damages
“resulting from the occurrences in question.” The jury did not make
separate damages findings for the negligence and breach-of-contract
claims. [Plaintiff]’s injuries, as found by the jury, included the
damage to her unit and personal property and the additional living
expenses she incurred. [Plaintiff] alleged these injuries were caused
by both the settling defendants and appellees. Nothing in the
settlement agreement shows the settlement amount was for anything
other than the damages found by the jury. If appellees were not given
credit for the settlement, [the Plaintiff] would receive a double
recovery for her injuries.
Id. (emphasis added); accord Western Technologies, Inc. v. All-American Golf
Center, Inc., 139 P.3d 858, 862 (Nev. 2006) (charge did not limit damages to those
caused by a particular party’s breaches; presumed the jury awarded all damages
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sustained from all parties’ breaches). A verdict that allocates damages eliminates
any risk of double recovery. See Duncan v. Cessna Aircraft Co., 665 S.W.2d 414,
431 (Tex. 1984). The damage question here itself allocated damages; a “double
recovery” was impossible.
b. The Jury Was Asked To Apportion and
in Fact Apportioned Damages.
The Architect, not RLJ, is getting the double dip here. The Architect invited
the jury in closing argument for, and in fact received, a damages reduction in the
jury verdict before obtaining another by raising the one satisfaction rule for the
first time post-verdict. 9 Counsel for both parties urged the jury in closing
arguments to adjust its damages award. RLJ suggested without objection that the
jury could and should make a 20% reduction for the damages attributable to the
Settling Defendants. (10RR29). In light of the evidence, the jury clearly limited the
damages to those caused by the Architect. The Architect went further, suggesting
the jury “in Question 3 … answer zero” if it believed “there’s no causal
connection” between the Architect’s breaches and RLJ’s damages. (10RR54). The
Architect devoted much of its argument faulting Terracon for the too-light
9
RLJ’s evidence supported damages in excess of $7 million. (7RR48; 9RR123-124, 136;
7RR16-18, 26-39; 3RR133-136; PX-151, 16RR1-1145; 10RR29-31). Had the architect pleaded
the one satisfaction rule or asserted it before submission to the jury, RLJ could have elected to
submit damages based on the total amount of all damages and risk the application of one
satisfaction rule. It did not have this option, however, because the architect first asserted that it
was entitled to settlement credit under the one satisfaction rule long after the jury returned its
verdict.
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foundation design and urging the reasonableness of its blind reliance on Terracon’s
work. (10RR36-39, 44-48, 50-51). The jury clearly understood from both the
charge and closing arguments it should limit damages to those specifically caused
by the Architect’s breach.10
The jury usually may decide causation when general experience and
common sense enable a layperson to fairly determine that relationship between
event and result. Pilgrim’s Pride Corp. v. Smoak, 134 S.W.3d 880, 894 (Tex.
App.—Texarkana 2004, pet. denied). The damages awarded were significantly
reduced from the total costs of repair and residual diminution in value. RLJ
provided evidence and sought over $7 million in total damages. (7RR48; 9RR123-
124, 136; 7RR16-18, 26-39; 3RR133-136; PX-151, 16RR1-1145; 10RR29-31).
The jury awarded much less.
Indeed, the trial court commented on this reduction: “The source of RLJ’s
disappointment regarding damages is the jury verdict….” (2SCR1600; App. C).
The jury clearly used its skill and common sense to apportion damages. The jury
was asked to determine the amount that would fairly “compensate” RLJ for
10
There can be no complaint that the jury’s apportionment was not sufficiently precise.
Segregation by “rough percentage” is sufficient. Chapa, 212 S.W.3d at 314 n. 83; see, e.g.,
Stewart Title Guar. Co. v. Aiello, 941 S.W.2d 68, 73 (Tex. 1997) (testimony based on percentage
of attorney and paralegal time); Med. Specialist Group, P.A. v. Radiology Assocs., L.L.P., 171
S.W.3d 727, 738 (Tex. App.—Corpus Christi 2005, pet. denied) (fee segregation based
percentage time attribution).
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damages caused by the Architect. Applying a further reduction does not assure one
satisfaction; instead, it assures less than one satisfaction.
For all these reasons, the damages question required apportionment and the
jury’s verdict reflects the apportionment the charge required.
The jury was also asked to apportion damages by both parties. Based on the
evidence and the trial court’s own observation, the jury must have responded to the
instructions of the Court and the party’s requests to do so. “[T]he reasoning of the
one recovery rule no longer applies” if the jury is “allow[ed] allocation of liability
between the parties, even when the injury is indivisible.” Duncan, 665 S.W.2d at
431 (emphasis added). The one satisfaction rule is not an insuperable barrier to
plaintiff benefitting from a favorable settlement.
[T]he one recovery rule does not prevent … adopting a system that
reduces the plaintiff’s recovery and the non-settling defendants’
liability by the percentage of causation assigned to any tortfeasor with
whom plaintiff has settled. [Such reductions] leave defendants
unaffected by settlements in which they do not participate.... Allowing
plaintiffs to keep the excess from a good settlements may violate the
one recovery rule, but no one is harmed [if the jury allocates the
damages].
Id. at 432 (emphasis added). The same is no less true here. The charge permitted
and the parties invited and the jury’s answer provided the necessary damage
allocation. Therefore, “the reasoning of the one recovery rule no longer applies”
and its application here cannot be justified. See Duncan, 665 S.W.2d at 431.
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5. No Right to Application of One Satisfaction Rule
or Contribution Exists In Contract Cases In
Light of Section 33.001.
RLJ acknowledges that there are some cases suggesting that tort liability
does not necessarily have to be present in order for the one satisfaction rule to
apply. As we have demonstrated above, even assuming the rule could be applied in
a breach of contract case, the rule is inapplicable in the present case because there
is no basis for joint and several contractual liability and because the damages found
were those resulting from the breach of contract by the Architect. RLJ would
further show that the cases suggesting tort liability is not necessarily required are
distinguishable in light of a complete analysis of the authority relied upon to make
that suggestion. Moreover, the history and subsequent adoption of TEX. CIV. PRAC.
& REM. CODE §33.0001 et seq., strongly suggests that the rule was applicable only
in tort and was in any event abolished by the statutory scheme adopted in section
33.001.
The Texas Supreme Court refused to permit the one satisfaction rule to
prevent its adoption of a pure comparative causation scheme or requiring an
injured person to prove the precise damages caused by a particular defendant.
Landers, 248 S.W.2d at 734; Duncan, 665 S.W.2d at 431-32. By statute,
contribution is allowed only among joint tortfeasors. Bonniwell v. Beech Aircraft
Corp., 663 S.W.2d 816, 818 (Tex.1984); see also Merit Drilling Co. v. Honish,
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715 S.W.2d 87, 89 (Tex. App.—Corpus Christi 1986, writ ref’d n.r.e.) (suggesting
one satisfaction rule survived Duncan only to the extent necessary under former
article 2212a, now TEX. CIV. PRAC. & REM. CODE ch. 32).
As explained, the one satisfaction rule was created to address a problem
unique to tort cases created by article 2212. GE Capital, 754 F.3d at 305; see V.
B., supra. Indeed, the Texas Supreme Court has only applied the one satisfaction
rule to joint tort liability. Id. at 306; Casteel, 22 S.W. 3d at 391-392 (“the non-
settling defendant may only claim a credit based on the damages for which all
tortfeasors are jointly liable.”). This Court has suggested on more than one
occasion that the credit is only available in tort cases. CTTI, 164 S.W.3d at 684;
Paschall v. Peevey, 813 S.W.2d 710, 712 (Tex. App.—Austin 1991, writ denied)
(“The non-settling tortfeasor may only claim a credit based on the damages for
which all tortfeasors are jointly liable.”).
RLJ is aware there are cases stating “the absence of tort liability does not
preclude the application of the one satisfaction rule.” See, e.g., Hudspeth v. Enter.
Life Ins. Co., 358 S.W.3d 373, 383 (Tex. App.—Houston [1st Dist. 2011, no pet.);
AMX Enters., Inc. v. Bank One, N.A., 196 S.W.3d 202, 206 (Tex. App.—Houston
[1st Dist.] 2006, pet. denied). Insofar as research reveals, this proposition first
appeared in Oyster Creek Fin. Corp. v. Richwood Investments II, Inc., 176 S.W.3d
307, 327 (Tex. App.—Houston [1st Dist.] 2004, pet. denied). The only support
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Oyster Creek cited, however, was the per curiam opinion in El Paso Natural Gas
Co. v. Berryman, 858 S.W.2d 362, 364 (Tex. 1993). However, Berryman involved
whether an alleged alter ego could be liable for a judgment against a corporate
entity after the corporation’s settlement extinguished the judgment. Id. at 326. The
alter ego doctrine applies when there is such unity between two entities that they
are, in law, are one and the same. See Mancorp, Inc. v. Culpepper, 802 S.W.2d
226, 228 (Tex. 1990); Hoffmann v. Dandurand, 180 S.W.3d 340, 347 (Tex. App.—
Dallas 2005, no pet.). Berryman did not involve any question of joint liability
between two different parties, but rather whether there was any liability remaining
against what was, in legal effect, the same party. Thus, Berryman did not involve
an application of the one satisfaction rule at all and cannot support its application
in non-tort cases.
This conclusion is further confirmed by the legislative history of section
33.012 of the Texas Civil Practice and Remedies Code. Chapters 32 and 33 codify
not only contribution rights, but also the common-law one satisfaction doctrine. In
doing so, the Legislature explicitly limited the application of the one satisfaction
rule generally to tort and DTPA cases. TEX. CIV. PRAC. & REM. CODE §§32.001
(“applies only to tort actions;” 33.002 applies to any cause of action based on tort
or any action under the DTPA).
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It follows from the plain language of the statute that when the Legislature
generally limited contribution and settlement credits to tort cases, it precluded
other common-law contribution and settlement credits in other cases. When the
Legislature expressly provides for an exclusive remedy, it pre-empts the common
law. Coleman v. United Savings Ass’n of Texas, 846 S.W.2d 128, 132 (Tex.
App.—Fort Worth 1993, no writ).
For example, when the Legislature abolished the common law equitable trust
fund theory for pre-dissolution claims to protect corporate directors, officers and
shareholders, the Texas Supreme Court ruled that the statute preclude further
application of the previous common law doctrine. Hunter v. Fort Worth Capital
Corp., 620 S.W.2d 547, 551 (Tex. 1981). Part of the court’s reasoning was that
application of the doctrine outside the restrictions imposed by the statute would
render the statute meaningless and impermissibly presume the Legislature intended
to do something that was effectively useless. Id.
The same is no less true here. Chapters 32 and 33 and their rules for
settlement credits are explicitly limited to tort and DTPA claims. If the Legislature
had intended to include other claims, it could have easily done so. By not including
breach of contract actions, it must be presumed that the Legislature intended to
limit application of the one satisfaction rule to the cases and methods specified in
the statute.
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Legislative history confirms this intent. In 2005, the Legislature enacted
Senate Bill 890 to amend section 33.0012 to restore the dollar-for-dollar credit.
This credit was eliminated in 2003 when the Legislature enacted “tort reform” by
adopting House Bill 4. Senate Bill 890 was accompanied by a statement of intent
from the author and sponsor stating,
Since the 1930s, Texas has recognized that an injured party is entitled
to recover only once for an injury. (Bradshaw v. Baylor, 126 Tex. 99,
101; 84 S.W.2d 703, 704 (1935)). The “one-satisfaction” rule was
codified by the Legislature in Chapter 33, Civil Practice and
Remedies Code, in 1987…. The settlement credit scheme created by
H.B. 4 eliminates the one-satisfaction rule that has been part of
Texas law for more than 70 years, except in medical liability cases.
Senate Committee on State Affairs, Bill Analysis, Tex. S.B. 890, 79th Leg. R.S.
(2005) and Senate Committee on State Affairs, Bill Analysis, Tex. C.S.S.B. 890,
79th Leg. R.S.(2005) (emphasis added); available at Capitol Research Services.,
The Legislative History of Tex. S.B. 890, 79th Leg., R.S. (2005), Regarding
Settlement Credit 20, 82, 89 (App. I).
The Legislature’s declaration that the 2003 tort reform bill “eliminate[d]”
the common-law one satisfaction rule confirms that, except as permitted by statute,
the common-law one satisfaction rule had otherwise been “eliminate[d]” when
House Bill 4 was passed. Its continued application by the courts outside the scope
of chapters 32 and 33 is legally erroneous. The error is understandable because the
courts were likely unaware of the not-readily-available declaration of Legislative
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intent in the legislative history of the statute. Thus, they naturally continued to
resort to case law antedating H.B.4 without fully appreciating the historical reason
why the one satisfaction rule was developed or fully realizing that chapters 32 and
33 of the Civil Practice and Remedies Code supplanted the common-law one
satisfaction rule after September 1, 2003. It is, nonetheless, erroneous to apply the
one satisfaction rule outside the statutory parameters of chapters 32 and 33.
6. Applying the One Satisfaction Rule in Contractual
Liability Cases Impairs Contract Obligations In
Violation of Texas Constitution Article I, §16.
Applying the one satisfaction rule outside tort cases where it is ostensibly still
necessary threatens to impair contractual obligations in violation of article I, §16 of
the Texas Constitution.
a. Texas Public Policy Strongly Favors Freedom of Contract.
The Texas Supreme Court has “long recognized Texas’ strong public policy
in favor of preserving the freedom of contract.” Fairfield Insurance Co. v.
Stephens Martin Paving, LP, 246 S.W.3d 653, 664 (Tex. 2004). This
constitutionally guaranteed contractual freedom strongly favors the parties’ right to
“bargain for mutually agreeable terms and [to] allocate risks as they see fit.” Gym-
N-1 Playgrounds, Inc. v. Snider, 220 S.W.3d 905, 912 (Tex. 2007). It outweighs
court-created general policies, such as that prohibiting insuring punitive damages.
Fairfield Insurance Co., 246 S.W.3d at 664.
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[I]f there is one thing which more than another public policy requires
it is that [persons] of full age and competent understanding shall have
the utmost liberty of contracting, and that their contracts when entered
into freely and voluntarily shall be held sacred and shall be enforced
by Courts of justice. Therefore, you have this paramount public policy
to consider – that you are not lightly to interfere with this freedom of
contract.
Wood Motor Co. v. Nebel, 150 Tex. 86, 238 S.W.2d 181, 185 (1951) (quoting
Printing & Numerical Registering Co. v. Sampson, LR 19 Eq 462, 465, 1874 WL
16322 (1875)). This freedom outweighs application in contract cases of a judicial
doctrine to remedy a conundrum unique to tort actions.
b. The One Satisfaction Rule Impermissibly Impairs
Contractual Obligations.
Whether a law violates the freedom of contract depends on three-part test:
(1) it must not substantially impair a contractual relationship; (2) it “must have a
significant and legitimate purpose behind the regulation, such as the remedying of
a broad and general social or economic problem”; and (3) it must be reasonable
and appropriate for its intended purpose. Energy Reserves Group v. Kansas Power
& Light, 459 U.S. 400, 410, 411-13 (1983).
The one satisfaction rule cannot satisfy the first test because it substantially
impairs a contractual relationship. It effectively takes from the injured party the
benefit of its settlement with another defendant to reduce the wrongdoer’s liability.
See, e.g., Langever v. Miller, 124 Tex. 80, 76 S.W.2d 1025, 1028 (1934) (law
reducing collectible amount of deficiency judgments to difference between actual
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property value and foreclosure price void as a substantial contractual impairment).
In contract cases, the one satisfaction rule’s reduction of damages by credit for
another’s settlement substantially and unconstitutionally impairs contractual
freedom. It also creates, as applied here, a disincentive to settle, which is contrary
to the strong Texas public policy in favor of settlements.
c. Freedom of Contract Outweighs One Satisfaction’s
Questionable Objectives.
The Texas Supreme Court has refused to accept that preventing recovery of
more than the jury’s damage assessment is a more important than preventing a
wrongdoer from escaping its full liability. Landers, 248 S.W.2d at 734. It justified
overruling Bradshaw’s one satisfaction rule the extent it conflicted with its creation
of a purely comparative negligence system because the one satisfaction rule
unfairly allowed the non-settling defendant to unfairly “benefit from a generous
settlement in which they refused to participate” for this reason. Duncan, 665
S.W.2d at 431. It recognized that settlement consideration includes benefits other
than relief from paying damages. Id. “There is no conceptual inconsistency in
allowing a plaintiff to recover more from a settlement or partial settlement than he
could receive as damages.” Id. “Plaintiffs will benefit from good settlements and
bear the risk of bad ones, just as they do in single-tortfeasor cases. Allowing
plaintiffs to keep the excess from a good settlements may violate the one recovery
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rule, but no one is harmed” when the jury apportions liability. Allowing plaintiffs
to keep the excess from a good settlement is not overpayment of damages.
The one satisfaction rule has a questionable objective based on questionable
reasoning. It ought to be and is trumped by the freedom of contract guarantee in
Texas Constitution article I, §16.
7. The Architect Is Procedurally Barred From Asserting the
One Satisfaction Rule.
a. Waived by Failure to Specially Except.
The Architect’s post-verdict motion urging credit under the one satisfaction
rule for the first time asserted “Plaintiff’s damages resulted from ‘the breaches of
contract’ Plaintiffs alleged were committed by [all remaining defendants]” and that
RLJ failed to allocate those damages. (CR1174). Complaint about the damages
allegations was waived by failure to urge them in writing before charge
submission. TEX. R. CIV. P. 90; Bullock v. Regular Veteran’s Ass’n of U.S., 806
S.W.2d 311, 314 (Tex. App.—Austin 1991, no writ).
b. Waived by Failure to Request Question or Instruction.
Neither did the Architect object to the charge on this ground. Failure to
object to the charge’s failure to segregate failure to request an instruction requiring
allocation waives complaint about failure to segregate. TEX. R. CIV. P. 278 (failure
to request properly worded question); see Dick’s Last Resort of West End, Inc. v.
Market/Ross, Ltd., 273 S.W.3d 905, 919 (Tex. App.—Dallas 2008, pet. denied);
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McCarty v. Wani Venture, A.S., 251 S.W.3d 573, 585 (Tex. App.—Houston [1st
Dist.] 2007, pet. denied) (failure to request instruction).
c. Waived By Failure to Plead as an Affirmative Defense.
A party must affirmatively plead “accord and satisfaction, arbitration and
award, … discharge in bankruptcy, … payment, release … and any other matter
constituting an avoidance or affirmative defense.” TEX. R. CIV. P. 94. Each of these
involves prior payment or other discharge that is waived if not pleaded. Bejjani v.
TRC Servs., Inc., No. 14-08-00750-CV, 2009 WL 3856924, at *5 (Tex. App.—
Houston [14th Dist.] Nov. 19, 2009, no pet.) (right to offset); Sugar Land Props.,
Inc. v. Becnel, 26 S.W.3d 113, 121 (Tex. App.—Houston [1st Dist.] 2000, no pet.)
(payment of medical expenses). Settlement credit under the one satisfaction rule,
though not specifically named, is an “other matter constituting an avoidance or
affirmative defense” that must be pleaded. This Court specifically acknowledged
that the one satisfaction rule is in the nature of an affirmative defense. RenewData
Corp. v. eMag Solutions, LLC, No. 03–05–00509–CV, 2009 WL 1255583, at *1 n.
1 (Tex. App.—Austin May 6, 2009, pet. denied) (mem. op.; unasserted one
satisfaction rule could not be considered as alternative summary judgment ground);
accord Pagosa Oil & Gas, L.L.C. v. Marrs & Smith P’ship, 323 S.W.3d 203, 217
(Tex. App.—El Paso 2010, pet. denied); Brewer & Pritchard, P.C. v. AMKO Res.
Int’l, LLC, No. 14-13-00113-CV, 2014 WL 3512836, at *1 (Tex. App.—Houston
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[14th Dist.] July 15, 2014, no pet.) (mem. op.). Cases holding otherwise are
irreconcilable with rule 94 because the opponent must be notified of the need to
prove damages allocation plus the elements of the asserted claims. See Dalworth
Restoration, Inc. v. Rife-Marshall, 433 S.W.3d 773, 783-84 (Tex. App.—Fort
Worth 2014. pet. dism’d w.o.j.). The Architect did not plead this affirmative
defense (CR46-79; App. H) and RLJ was given no notice or opportunity to present
evidence meeting any allocation requirement before the jury was discharged.
d. Barred By Laches.
The post-verdict assertion of the one settlement rule is also precluded by
laches. The one satisfaction rule developed as an equitable principle, Sterling, 822
S.W.2d at 6, subject to equitable defenses. See Brewer v. Nationsbank of Texas,
N.A., 28 S.W.3d 801 (Tex. App.—Corpus Christi 2000, no writ), and is subject to
equitable defense for unreasonable delay and another’s good faith detrimental
change in position. See City of Fort Worth v. Johnson, 388 S.W.2d 400, 403 (Tex.
1964). By the Architect’s failure to raise the one satisfaction rule prior to verdict,
RLJ had no reason whatsoever to anticipate any need to adduce any evidence
segregating damages. Similarly, the Architect waived any argument on the one
satisfaction rule by specifically asking the jury to apportion damages and award
only those damages caused by the Architect. (10RR54-56).
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For any one or all of the foregoing reasons, the one satisfaction rule did not
and could not apply to reduce the Architect’s liability to RLJ. The trial court erred
in concluding otherwise. Accordingly, the judgment must be reformed to restore
recovery for the damages awarded by the jury together with interest.
B. No Segregation of Attorney’s Fees Was Required.
RLJ sought its reasonable and necessary attorney’s fees under chapter 38 of
the Texas Civil Practice and Remedies Code. (CR201; App. A). The parties agreed
to submit the attorney’s fees claim to the court rather than the jury. After the jury’s
verdict, RLJ moved for its attorney’s fees and submitted its proof by affidavit and
supporting documents showing RLJ expended a total of $1,388,019 in reasonable
and necessary attorney’s fees to prosecute the breach of contract claims against the
Architect, Soils Engineer, and the General Contractor. (3SCR3-611; 2SCR1603-
05).
However, the trial court determined for purposes of attorney’s fees it was
necessary to segregate those expended on RLJ’s claim against the Architect from
those on its claims against the Settling Defendants. (CR1711; App. D). The trial
court awarded attorney’s fees attributable to the prosecution of the breach of
contract claim against the Architect only, even though it considered the damages
“indivisible.” (CR1711; 2SCR1600; App. C, D). Accordingly, of the $1,388,019 in
attorney’s fees for presenting all its contract claims, the trial court allowed RLJ
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only $901,650.96 as fees attributable to the contract claim against the Architect
only. (CR1711; App. D). RLJ timely moved conditionally to modify the judgment
so that, if the one satisfaction rule applied, it could recover its unsegregated
attorney’s fees for breach of contract claims against the Architect and the Settling
Defendants. (CR1747-48). The trial court denied this motion. (CR1905).
RLJ continues to maintain that the one satisfaction rule does not apply. If
and only if this Court decides otherwise, RLJ was not obliged to segregate its
attorney’s fees for the breach of contract claims against the Architect from those
for the breach of contract claims against the Settling Defendants.
1. There Is No Need to Segregate Fees For
Claims Requiring Proof of the Same Facts.
Generally, reasonable and necessary attorney’s fees requires proof of the
fees incurred for suit on a claim for which such fees are recoverable. Sterling, 822
S.W.2d at 10. If the causes of action depend upon the same facts or circumstances,
they may be “intertwined to the point of being inseparable.” Id. Attorney’s fees
should be allowed for inseparable claims even if some issues also relate to matters
for which attorney’s fees are not recoverable, Aiello, 941 S.W.2d at 73; Sterling,
822 S.W.2d at 11, provided the underlying services advance both. Chapa, 212
S.W.3d at 314.
Whether fees can be segregated is a mixed question of law and fact. Tony
Gullo Motors I, L.P. v. Chapa, 212 S.W.3d 299, 303 (Tex. 2006). For example,
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when an attorney testified that the issue common to all claims was the right of
control over a corporation, this Court deemed the recoverable and unrecoverable
claims so interrelated that it was unnecessary to segregate fees. Fortenberry v.
Cavanaugh, No. 03-07-00310-CV, 2008 WL 4997568, at *12 (Tex. App.—Austin
Nov. 26, 2008, pet. denied) (mem. op.).
2. If the One Satisfaction Rule Applies, It Requires
Proof of Breach of the Same Promised Performance
and an Indivisible Injury.
The one satisfaction rule may apply in contract case only if there was a joint
and several contractual liability, which in turn requires a promise of the same
performance by the settling and liable defendants, see V.A.3., supra., and an
indivisible injury. See V.A.4., supra. If the Architect and Settling Defendants
breached a promise for the same performance causing an indivisible injury, then
the activities of RLJ’s attorneys to prove the Settling Defendants’ liability would
have necessarily also served as proof of the Architect’s liability. If the one
satisfaction rule applies at all, no segregation could have been required.
3. Alternatively, If Proof of Indivisible Injury Alone is
Enough for the Application of the One Satisfaction
Rule, Segregation of Fees Was Still Not Required.
Regardless of whether the one satisfaction rule otherwise applies, if the trial
court correctly determined that there was an indivisible injury or damages in this
case for purposes of the one-satisfaction analysis, then segregation of fees was not
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required. The Architect, General Contractor and Soils Engineer undertook different
duties. (CR192-93, 197-98, 200-01, 205-18). For these breaches to coalesce in an
“indivisible” injury would necessarily require RLJ to have proved each breach to
establish the full scope of its damages.
“Where the tortious acts of two or more wrongdoers join to produce an
indivisible injury, … all of the wrongdoers will be held jointly and severally liable
for the entire damages ….”. Landers, 248 S.W.2d at 734 (1952). If the one
satisfaction rule applies at all and if only an indivisible injury is required, as the
trial court reasoned, the breaches of the Settling Defendants were sufficiently
conjoined with those of the Architect, then proof of the harm resulting from the
breaches of the Settling Defendants were also essential and no segregation was
required.
VI. CONCLUSION AND PRAYER
For the foregoing reasons, RLJ asks the Court to:
1) reverse the trial court’s judgment applying the one satisfaction rule and
delete the credit for the amount of the Settling Defendants’ settlements;
2) if and only if the one satisfaction rule applies, reverse the trial court’s
judgment concerning the award of attorney’s fees and either reform it to award
RLJ unsegregated fees or remand the case to the trial court solely for a
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determination of reasonable and necessary attorney’s fees for the prosecution of all
contract claims against the Architect, and the Settling Defendants; and
3) any one or more of 1) – 2) above subject to the conditions prescribed. RLJ
further requests such other relief to which they are justly entitled, provided such
relief requested does not include a retrial on the merits of its claims against the
Architect.
Respectfully submitted,
MUNSCH HARDT KOPF & HARR PC
/s/ Michael W. Huddleston
Michael W. Huddleston
State Bar No. 10148415
J. Stephen Gibson
State Bar No. 07866000
3800 Ross Tower
500 North Akard Street
Dallas, TX 75201
(214) 855-7500 Main Tel.
(214) 855-7584 Main Fax
mhuddleston@munsch.com
sgibson@munsch.com
Attorneys For Appellees and Cross-
Appellants
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CERTIFICATE OF COMPLIANCE
I hereby certify that this Brief of Cross-Appellants was prepared using
Microsoft Word 2010, which indicated that the total word count (exclusive of those
items listed in Tex. R. App. P. 9.4(i)(1)) is 13,844 words.
/s/ Michael W. Huddleston
64
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CERTIFICATE OF SERVICE
I certify that I served a true and correct copy of the foregoing document
upon counsel listed below on this 10th day of April, 2015 by e-file:
Weston M. Davis
Gregory N. Ziegler
Matthew Mumm
Macdonald Devin, P.C.
1201 Elm Street
3800 Renaissance Tower
Dallas, TX 75270
/s/ Michael W. Huddleston
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APPENDIX IN SUPPORT OF CROSS-APPELLANTS’ BRIEF
TAB DESCRIPTION OF DOCUMENT CR/RR
A Plaintiffs’ Seventh Amended Original CR184-218
Petition 2SCR39-73 (duplicate)
B Charge of the Court CR1121-29
2SCR1563-71 (duplicate)
C June 13, 2014 Letter from Hon. Judge CR1437-41
Yelenosky 2SCR1598-1602 (duplicate)
D Final Judgment CR1708-12
CR1905-09 (duplicate)
E Contract with Soils Engineer PX-3; 12RR6-11
F Contract with General Contractor PX-48; 12RR567-651
G Contract with Architect PX-15; 12RR26-128
H Architect’s Second Amended Answer CR46-79
2SCR5-38 (duplicate)
I Report of SB 890 (2005) n/a
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APPENDIX A
2/18/2014 9:33:34 AM
Amalia Rodriguez-Mendoza
District Clerk
Travis County
CAUSE NO. D-1-GN-10-002325 D-1-GN-1 0-002325
RLJ II-C AUSTIN AIR, LP; RLJ II-C AUSTIN § IN THE DISTRICT COURT OF
AIR LESSEE, LP; and RLJ LODGING FUND §
II ACQUISITIONS, LLC, §
§
Plaintiffs, §
§
vs. §
§
EBCO GENERAL CONTRACTOR, LTD; §
EBCO/WARRIOR MANAGEMENT LLC; §
ELNESS, SWENSON, GRAHAM § TRAVIS COUNTY, TEXAS
ARCHITECTS, INC.; MARK SWENSON, §
Individually; TERRACON CONSULTANTS, §
INC.; TODD E. SWOBODA, P.E., §
Individually; and ALCADIO CHAPA, JR. §
formerly D/B/A JR'S CONCRETE §
CONSTRUCTION, §
§
Defendants and Third-Party Defendants. § 200TH JUDICIAL DISTRICT
PLAINTIFFS' SEVENTH AMENDED ORIGINAL PETITION
TO THE HONORABLE JUDGE OF THIS COURT:
Plaintiffs RLJ II-C Austin Air, LP; RLJ II-C Austin Air Lessee, LP; and RLJ Lodging
Fund II Acquisitions, LLC (collectively, "Plaintiffs" or "RLJ") file their Seventh Amended
Original Petition, and make allegations and complaints against EBCO General Contractor, Ltd.;
EBCO Advanced Building Systems, Ltd.; EBCO/Warrior Management LLC; Elness, Swenson,
Graham Architects, Inc.; Mark G. Swenson, individually; Terracon Consultants, Inc.; Todd E.
Swoboda, P.E., individually; MBA Structural Engineers, Inc.; DaVinci Pools, LLC; Bridgeview
Plumbing, Inc.; and Champion Site Prep, L.P. (collectively, "Defendants") as follows:
I. DISCOVERY CONTROL PLAN
1. Discovery is intended to be conducted pursuant to Rule 190.4, Texas Rules of
Civil Procedure.
Plaintiffs' Seventh Amended Original Petition Page 1
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II. PARTIES
2. Plaintiff RLJ II-C Austin Air, LP ("RLJ Austin") is a Delaware limited
partnership authorized to do business in Texas, and is the current fee owner of the "Project" as
defined in paragraph 14 of this Petition. Plaintiff RLJ II -C Austin Air Lessee, LP ("RLJ Austin
Lessee") is a Delaware limited partnership authorized to do business in Texas, and is the current
leasehold owner of the Project. Plaintiff RLJ Lodging Fund II Acquisitions, LLC ("RLJ
Lodging") is a Delaware limited liability company which entered into a contract to purchase the
Project, and assigned the fee ownership rights and obligations of that purchase contract to RLJ
Austin, which now owns the Project and leases it to RLJ Austin Lessee.
3. Defendant EBCO General Contractor, Ltd. is a limited partnership authorized to
do business in Texas. Defendant EBCO Advanced Building Systems, Ltd. is a predecessor
limited partnership previously authorized to do business in Texas. Defendant EBCO/Warrior
Management, LLC is the general partner of EBCO General Contractor, Ltd. These defendants
will hereafter collectively be referred to as "EBCO." EBCO has been served with process and
answered herein.
4. Defendant Elness, Swenson, Graham Architects, Inc. ("ESG") is a foreign for-
profit corporation authorized to do business in Texas. This court has long-arm jurisdiction over
ESG because the actions brought against it in this suit arise from ESG's business in this state.
See Texas Civil Practice & Remedies Code Ann. § 17.042(1) and (2). ESG has been served with
process and answered herein.
5. Defendant Mark G. Swenson ("Swenson") is a nonresident individual. This court
has long-arm jurisdiction over Swenson because the actions brought against him in this suit arose
from or are connected with his purposeful acts committed in Texas. These purposeful acts are
described more fully below but mainly entail signing and sealing plans and specifications for the
Plaintiffs' Seventh Amended Original Petition Page 2
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construction of the Project m Austin, Texas. Swenson has been served with process and
answered herein.
6. Defendant Terracon Consultants, Inc. ("Terracon") is a foreign for-profit
corporation authorized to do business in Texas. Terracon has been served with process and
answered herein. On information and belief, Plaintiffs allege that Terracon, Inc. purchased the
stock of HBC Engineers, Inc. ("HBC") in 1998 and merged HBC with Terracon, Inc. in 2001.
On further information and belief, Terracon, Inc. merged with Terracon in 2004.
7. Defendant Todd E. Swoboda, P.E. is a Texas resident and has been served with
process and answered herein.
8. Defendant MBA Structural Engineers, Inc. f/k/a Marlin, Bridges & Associates,
Inc. ("MBA") is a foreign for-profit corporation authorized to do business in Texas. This court
has long-arm jurisdiction over MBA because the actions brought against it in this suit arose from
or are connected with the purposeful acts MBA committed in Texas. These acts are described
more fully below but mainly entail contracting to provide structural plans and specifications for
the construction of the Project in Austin, Texas. MBA has been served with process and
answered herein.
9. Defendant DaVinci Pools, LLC ("DaVinci") is a Texas limited liability company
which is a party to this action. DaVinci has been served with process and has answered herein.
10. Defendant Bridgeview Plumbing, Inc. ("Bridgeview") is a Texas corporation
which is a party to this action. DaVinci has been served with process and has answered herein.
11. Defendant Champion Site Prep, L.P ("Champion") is a Texas limited partnership
which is a party to this action. Champion has been served with process and has answered herein.
Plaintiffs' Seventh Amended Original Petition Page 3
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III. VENUE AND JURISDICTION
12. Venue is proper in Travis County, Texas under Texas Civil Practice & Remedies
Code Ann. §§ 15.002(a)(1), 15.005, 15.011, 15.035 and 15.092 (a) & (b), which require that this
suit be brought in the county where the Project (as defined below) is located.
13. Defendants ESG, Swenson, EBCO, Terracon, Swoboda, MBA, DaVinci,
Bridgeview, and Champion are either residents of Texas or purposely availed themselves to the
jurisdiction of Texas by entering into contracts involving real property and improvements to real
property in Texas and/or by signing and sealing plans, specifications, or other reports for real
property or constructing improvements to real property in Texas that is the subject of this
lawsuit. Furthermore, assumption of jurisdiction by Texas would not offend traditional notions
of fair play and substantial justice. Finally, RLJ's damages are within the jurisdictional limits of
this court and do not exceed $10,000,000.00.
IV. FACTS
14. This action arises from construction of the Courtyard Austin Airport Hotel located
at 7809 East Ben White Boulevard in Austin, Texas (the "Project").
15. As set forth below, Plaintiffs assert the following:
a. Breach of contract against EBCO, ESG, Swenson, Terracon, and
Swoboda;
b. Suit for declaratory relief against Terracon;
c. Breach of warranty against EBCO;
d. Equitable subrogation against EBCO, ESG, Swenson, MBA, Terracon,
Swoboda, DaVinci, Bridgeview, and Champion, including a direct
equitable subrogation claim, and equitable subrogation claims for breach
of contract, negligence, negligent undertaking, and negligent
misrepresentation that were directly assigned, or assigned as a matter of
law, to RLJ; and
Plaintiffs' Seventh Amended Original Petition Page 4
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e. A tort/negligence claim against EBCO for breach of a fiduciary duty
arising from EBCO's failure to construct the Project in a manner
consistent with the owner's interests and with the contract documents,
which are the source of the fiduciary duty.
16. Except for MBA, DaVinci, Bridgeview, and Champion, Defendants all entered
into valid and enforceable contracts with the Project's developer, White Lodging Services Corp.
("White"), to perform the services listed below.
17. White, as developer, delivered and assigned the Project, the contracts, fiduciary
duties, intangibles and all of the warranties, representations, and causes of action related thereto,
to a White affiliate, South Ausaircourt, L.P., as owner ("Ausaircourt"). Ausaircourt then
assigned the Project, the contracts, fiduciary duties, intangibles, and all of the warranties,
representations, and causes of action related thereto, to RLJ Lodging, which purchased the
Project, and then assigned its rights and obligations under the Project contracts to RLJ Austin.
18. EBCO was the general contractor and/or construction manager on the Project.
EBCO performed work on the Project, and also retained subcontractors who performed work on
the Project. EBCO and its subcontractors failed to construct the Project free from defects,
including, but not limited to, the following:
(a) Failed to construct the Project foundation free from defect or in compliance
with the Project plans and specifications, including missing beams and improper
placement of wire reinforcing mesh. Plaintiffs allege that the damage from this
negligent work began to occur during construction and continues to this day.
Plaintiffs also allege that not only was the foundation itself damaged, but this
negligent work caused significant damage to other component parts of the
Project;
(b) Failed to provide "select fill" soils which complied with the Project
specifications. Plaintiffs allege that the damage from this negligent work began
to occur during construction and continues to this day. Plaintiffs also allege that
this negligent work caused significant damage to other component parts of the
Project;
(c) Failed to construct the pool and its drains free from defect. Plaintiffs allege
that the damage from this negligent work began to occur during construction and
Plaintiffs' Seventh Amended Original Petition Page 5
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continues to this day. Plaintiffs also allege that not only was the pool itself
damaged but this negligent work caused significant damage to other component
parts of the Project;
(d) Failed to construct the under-slab plumbing free from defect. Plaintiffs
allege that the damages from this negligent work began to occur during
construction and continues to this day. Plaintiffs also allege that this negligent
work caused damage to other component parts of the Project; and
(e) Failed to construct the Project site work in a manner consistent with the
Project plans and specifications. Plaintiffs allege that the damages from this
negligent work began to occur during construction and continues to this day.
Plaintiffs also allege that not only was the site work itself damaged but this
negligent work caused significant damage to other component parts of the
Project.
19. The terms of the contract between EBCO and White (the "General Contract")
created a "fiduciary relationship of trust and confidence." Pursuant to the General Contract,
EBCO agreed to construct the Project free from defects in a "manner consistent with the interests
of the Owner." EBCO failed to construct the Project free from defects and in a manner
consistent with the interests of the owner, thereby breaching its fiduciary duty, which is a tort in
Texas. See Douglas v. Aztec Pet. Corp., 695 S.W.2d 312, 318 (Tex. App.-Tyler 1985, no writ).
20. ESG contracted for architectural services with White (the "Architectural
Contract"), and Swenson signed and sealed the architectural plans and drawings for the Project.
Under the Architectural Contract, ESG agreed to, among other things, provide overall
architectural, civil, and structural engineering design, document preparation, and coordination for
the Project. This work was to be performed expeditiously and consistent with professional skill
and care. Because Texas does not allow corporations to sign or seal architectural plans or
specifications, Swenson could not have been acting as an agent of ESG when he signed and
sealed the architectural plans and drawings, as an agent can only act to the extent of the
Plaintiffs' Seventh Amended Original Petition Page 6
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principal's legal authority. Therefore, ESG constructively assigned portions of the Architectural
Contract to Swenson, without first obtaining written consent from White.
21. ESG consented to the assignment of the Architectural Contract between White
and Ausaircourt, in writing. This assignment provided Ausaircourt with all of the interests
referenced above, but none of the obligations.
22. Pursuant to a written contract dated October 30, 2000 (the "Geotechnical Study
Contract"), HBC was retained to conduct a geotechnical engineering study (the "Geotechnical
Engineering Study"). Swoboda signed, sealed, and submitted the Geotechnical Engineering
Study to White on November 21, 2000. Because Texas does not allow corporations to sign or
seal architectural plans or specifications, Swoboda could not have been acting as an agent of
HBC when he signed and sealed the Geotechnical Engineering Study, as an agent can only act to
the extent of the principal's legal authority. Therefore, HBC constructively assigned portions of
the Geotechnical Engineering Study contract to Swoboda, without first obtaining written consent
from White.
23. The Geotechnical Study Contract was completed sometime in late 2000 or early
2001, when White made final payment to HBC for these services.
24. Pursuant to an oral agreement or undertaking, which was separate and distinct
from the Geotechnical Study Contract, Terracon provided geotechnical engineering services to
White and its affiliates during construction of the Project in 2005 and after the Project's
completion. No written contract for such services between Terracon and any White affiliate
exists.
25. Terracon entered into a written contract to provide materials testing and
construction inspection services for the Project in 2005 (the "Materials Testing Contract").
Plaintiffs' Seventh Amended Original Petition Page 7
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26. MBA performed the structural engineering for the Project and Andrew Marlin
signed and sealed the structural plans MBA provided to ESG.
27. DaVinci constructed the Project pool pursuant to a subcontract between it and
EBCO.
28. Bridgeview constructed the Project plumbing system pursuant to a subcontract
between it and EBCO.
29. Champion provided site preparation services, labor, and materials pursuant to a
subcontract between it and EBCO.
30. On March 16, 2006, PlaintiffRLJ Lodging entered into the "New Hotels Purchase
and Sale Agreement" (the "New Hotels PSA") between Whiteco Industries, Inc., numerous
sellers identified on Exhibit A of the PSA, and White. This PSA was one of two PSA's executed
concerning the purchase of the Project and 99 other similar projects. One PSA concerned
projects that were already constructed, and the New Hotels PSA concerned projects, like the
Project, that were in various stages of construction.
31. Pursuant to the New Hotels PSA, Plaintiff RLJ Lodging was legally obligated to
take possession of the Project on or about December 20, 2007, a few months after it was
completed.
32. Plaintiffs noticed property damage, including foundation movement, a cracked
swimming pool, cracks in the slab and grade, shifting door frames, cracks in partition walls, and
drainage issues on the perimeter of the building in the Project.
33. EBCO, ESG, Swenson, Terracon, Swoboda, MBA, DaVinci, Bridgeview, and
Champion provided services, labor, or materials that were defective, or deviated from the
Plaintiffs' Seventh Amended Original Petition Page 8
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applicable standards of care, and that either caused, or contributed to cause, damages to the
Project and RLJ.
34. These defective and damaging serv1ces, labor or materials all had certain
characteristics which prevented Plaintiffs from immediately discovering the damage, and it was
not until verifiable issues with the Project were physically made manifest that Plaintiffs knew of
or should have known of the damages to the Project. As such, the Disc
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