Noah S. Bunker, Paul Carrell, Everett Brew Houston, Jr., W. Andrew Buchholz, Scott J. Leighty, Jad L. Davis, and Holly Clause v. Tracy D. Strandhagen

ACCEPTED

03-14-00510-CV

4519217

THIRD COURT OF APPEALS

AUSTIN, TEXAS

3/16/2015 4:59:06 PM

____________________________________________

JEFFREY D. KYLE

CLERK

No. 03-14-00510-CV

_____________________________________________

FILED IN

3rd COURT OF APPEALS

AUSTIN, TEXAS

IN THE COURT OF APPEALS 3/16/2015 4:59:06 PM

THIRD JUDICIAL DISTRICT OF TEXAS JEFFREY D. KYLE

AT AUSTIN Clerk

_______________________________________________

Noah S. Bunker, Paul Carrell, Everett Brew

Houston, Jr., W. Andrew Buchholz, Scott J.

Leighty, Jad L. Davis, and Holly Clause,

Appellants

v.

Tracy D. Strandhagen,

Appellee

FROM THE DISTRICT COURT OF TRAVIS COUNTY,

353RD JUDICIAL DISTRICT, CAUSE NO. D-1-GN-13-002811,

THE HONORABLE ORLINDA NARANJO PRESIDING

APPELLANTS’ REPLY BRIEF

Amanda G. Taylor

ataylor@textaxlaw.com

Texas Bar No. 24045921

MARTENS, TODD, LEONARD, TAYLOR & AHLRICH

301 Congress Avenue, Suite 1950

Austin, Texas 78701

Tele: (512) 542-9898

Fax: (512) 542-9899

ORAL ARGUMENT REQUESTED

TABLE OF CONTENTS

TABLE OF CONTENTS .................................................................................. i

INDEX OF AUTHORITIES .......................................................................... iii

REPLY ARGUMENT ..................................................................................... 1

I. Strandhagen Failed to Conclusively Establish Element

Two: “Unreasonable Forecast.” ........................................................ 2

A. General Rule: Proof of Actual Damages is

Required. ................................................................................ 3

1. It is undisputed that Strandhagen offered

no proof of actual damages............................................ 5

B. Narrow Exceptions: Two Types of Facial

Invalidity. ................................................................................ 5

1. Multiplier of actual damages: ........................................ 6

2. One size fits all: ............................................................. 8

a. Strandhagen failed to prove that this

is a facially invalid “one size fits all”

provision. ............................................................. 9

C. Conclusion on “Unreasonable Forecast.” ............................. 13

II. Additional Reply Arguments:..........................................................15

A. Arguments Made in the Physicians’ Motion for

New Trial Were Preserved for Review. ..................................15

B. The Physicians “Modification” Argument Was Not

an Affirmative Defense. ........................................................ 16

C. Strandhagen Cannot Use the Declaratory

Judgment Act to Create Jurisdiction. ................................... 18

i

PRAYER ...................................................................................................... 21

CERTIFICATE OF COMPLIANCE .............................................................. 22

CERTIFICATE OF SERVICE....................................................................... 23

ii

INDEX OF AUTHORITIES

CASES

Ayeni v. State,

440 S.W.3d 707 (Tex. App.—Austin 2013, no pet.) ............................15

Bethel v. Butler Drilling Co.,

635 S.W.2d 834 (Tex. Civ. App.—Houston [14th Dist.] 1982,

writ ref'd n.r.e.) .................................................................................... 8

CDS Enters., Inc. v. Myrad Real Estate, Inc.,

No. 14-97-00197-CV, 1999 WL 548226, (Tex. App.—Houston

[14th Dist.] 1999, no pet.) .................................................................... 4

Chan v. Montebello Dev. Co.,

No. 14-06-00936-CV, 2008 WL 2986379 (Tex. App.—Houston

[14th Dist.] 2008, pet. denied) ............................................................ 4

Charbonnet v. Shami,

No. 04-12-00711-CV, 2013 WL 2645720 (Tex. App.—San Antonio

2013, pet. denied) ...............................................................................15

Chenault v. Phillips,

914 S.W.2d 140 (Tex. 1996) ............................................................... 19

Community Dev. Serv., Inc. v. Replacement Parts Mfg., Inc.,

679 S.W.2d 721 (Tex. App.—Houston [1st Dist.] 1984,

no writ)........................................................................................... 8, 12

Devon Energy Prod. Co. v. KCS Res., LLC,

450 S.W.3d 203 (Tex. App.—Houston [14th Dist.] 2014,

pet. filed on other grounds) ............................................................... 18

Dunlap v. Gayle,

No. 13-12-00105-CV, 2013 WL 1500377 (Tex. App.—Corpus Christi

2013, no pet.) ....................................................................................... 7

iii

Eberts v. Businesspeople Personnel Servs., Inc.,

620 S.W.2d 861 (Tex. App.—Dallas 1981, no writ) ............................ 13

FPL Energy, LLC v. TXU Portfolio Mgmt. Co., LP,

426 S.W.3d 59 (Tex. 2014)................................................................... 6

Garden Ridge, L.P. v. Advance Int’l, Inc.,

403 S.W.3d 432(Tex. App.—Houston [14th Dist.] 2013,

pet. denied) ...................................................................................... 3, 4

GPA Holding, Inc. v. Baylor Health Care Sys.,

344 S.W.3d 467 (Tex. App.—Dallas 2011, pet. denied) ........................ 3

Healix Infusion Therapy, Inc. v. Bellos,

No. 11-02-00346-CV, 2003 WL 22411873

(Tex. App.—Eastland Oct. 23, 2003, no pet.) ...................................... 3

Hill v. Heritage Res., Inc.,

964 S.W.2d 89 (Tex. App.—El Paso 1997, pet. denied) ...................... 17

In re Dow Corning Corp.,

419 F.3d 543 (6th Cir. 2005).............................................................. 12

Khan v. Meknojiya,

No. 03-11-00580-CV, 2013 WL 3336874 (Tex. App.—Austin 2013,

no pet.) ................................................................................................. 7

Magill v. Watson,

409 S.W.3d 673 (Tex. App.—Houston [1st Dist.] 2013,

no pet.) ................................................................................................. 7

Mayfield v. Hicks,

575 S.W.2d 571 (Tex. App.—Dallas 1978, writ ref’d n.r.e.) .................. 8

iv

Murphy v. Cintas Corp.,

923 S.W.2d 663 (Tex. App.—Tyler 1996, writ denied) ........................ 9

Oetting v. Flake,

553 S.W.2d 793 (Tex. App.—Fort Worth 1977, no writ) ...................... 4

Phillips v. Phillips,

820 S.W.2d 785 (Tex. 1991) ......................................................... 3, 6, 7

R. Conrad Moore & Assoc., Inc. v. Lerma,

946 S.W.2d 90 (Tex. App.—El Paso 1997, writ denied) ..................... 12

Southern Union Co. v. CSG Sys., Inc.,

No. 03-04-00172-CV, 2005 WL 171349 (Tex. App.—Austin

Jan. 27, 2005, no pet.) ......................................................................... 3

SP Terrace, L.P. v. Meritage Homes of Texas, LLC,

334 S.W.3d 275 (Tex. App.—Houston [1st Dist.] 2010,

no pet.) ................................................................................................ 11

Stewart v. Basey,

245 S.W.2d 484 (Tex. 1952) ................................................................. 8

Taylor v. State Farm Lloyds, Inc.,

124 S.W.3d 665 (Tex. App.—Austin, 2003, pet. denied) ................... 19

Tex. Ass’n of Bus. v. Tex. Air Control Bd.,

852 S.W.2d 440 (Tex. 1993) .............................................................. 18

Triton 88, L.P. v. Star Elec., LLC,

411 S.W.3d 42 (Tex. App.—Houston [1st Dist.] 2013, no pet.) ............ 3

Urban Television Network Corp. v. Liquidity Solutions, L.P.,

277 S.W.3d 917 (Tex. App.—Dallas 2009, no pet.) ......................... 9, 11

v

Williams v. Colthurst,

253 S.W.3d 353 (Tex. App.—Eastland 2008, no pet.) ........................ 17

STATUTES & RULES

Tex. R. App. P. 9.4 ....................................................................................... 21

Tex. R. App. P. 9.5 ....................................................................................... 21

Tex. R. App. P. 33.1 ..................................................................................... 16

Tex. R. App. P. 43.3 ....................................................................................... 2

Tex. R. App. P. 43.4 ..................................................................................... 19

Tex. R. Civ. P. 139 ........................................................................................ 19

OTHER

RESTATEMENT (SECOND) OF CONTRACTS § 356 ............................................... 14

vi

REPLY ARGUMENT

In their Appellants’ Brief, the Physicians provided this Court several,

alternative grounds upon which to reverse the judgment. Namely, the final

summary judgment granting declaratory relief in favor of Strandhagen

should be reversed because: (1) Strandhagen was required to establish two

elements to prevail on her affirmative defense, and she conceded her

inability to establish the first element; (2) even if Strandhagen was required

to prove only one element, she failed to conclusively establish the second

element; (3) Strandhagen did not satisfy her summary-judgment burden of

proof regarding the Physicians’ third-party beneficiary status; and (4) the

trial court lacked jurisdiction over Strandhagen’s unripe declaratory

judgment claim, and it erred in denying the Physicians’ Plea to the

Jurisdiction on this basis.

Strandhagen offers no response to argument (3) in her Appellee’s

Brief. Based on the argument and authorities presented by the Physicians,

and Strandhagen’s abandonment of this issue, the Court should conclude

that Strandhagen’s prior argument regarding the Physicians’ third-party-

beneficiary status does not provide a ground upon which to affirm the

summary judgment.

1

Consequently, the summary judgment must either stand or fall based

on Strandhagen’s other ground for unenforceability of the liquidated

damages provision: her argument that it is a penalty. Although the

Physicians maintain their arguments (1) and (4), this Reply Brief focuses on

argument (2). Regardless of the scope of Strandhagen’s burden of proof

and regardless of the claim’s ripeness, the summary judgment should be

reversed because Strandhagen failed to conclusively prove the second

element of her defense (“unreasonable forecast”).

I. STRANDHAGEN FAILED TO CONCLUSIVELY ESTABLISH

ELEMENT TWO: “UNREASONABLE FORECAST.”

Strandhagen agrees with the Physicians that, as the party seeking to

invalidate the liquidated damages clause, she had the summary-judgment

burden to conclusively establish that the clause did not provide a

reasonable forecast of just compensation. Appellee’s Brief, p.9.

Strandhagen argues that she satisfied this burden by proving that the clause

was invalid “on its face,” and was therefore excused from the requirement

of proving actual damages in comparison to the liquidated damages

amount. Id., p.12-13. This Court should reject her argument because Texas

case law recognizes only two theories of “facial invalidity” as exceptions to

the general requirement of proving actual damages, and Strandhagen has

2

failed to conclusively demonstrate that this liquidated damages provision

satisfies either theory. Strandhagen offers nothing more than broad

assumptions without any supporting proof.

A. General Rule: Proof of Actual Damages is Required.

Strandhagen’s argument over-generalizes the law regarding facial

challenges to liquidated damages provisions. Without specifying the

reasons why certain provisions have been held facially invalid, Strandhagen

cites a string of cases for the implication that a facial challenge broadly

provides an alternative in every case to the requirement of proving actual

damages. See id., p.13-14. This is not an accurate assessment of Texas law.

Contrary to Strandhagen’s argument, Texas courts have invalidated

liquidated damage provisions based on only two types of facial challenges,

and have oft recognized the limitations of these theories. Infra, Reply

Argument I.B.

The general rule remains that a party is required to prove an

unreasonable disparity between the amount of actual damages and the

amount of liquidated damages to satisfy its burden of proof on the

“unreasonable forecast” element of penalty. Many cases recognize this

general standard. See Appellants’ Brief, p.23-25 (citing Phillips, Healix,

Triton, Southern Union, and GPA Holdings); see also, e.g., Garden Ridge,

3

L.P. v. Advance Int’l, Inc., 403 S.W.3d 432, 440 (Tex. App.—Houston [14th

Dist.] 2013, pet. denied) (“[T]o determine whether a term fixes

unreasonably large liquidated damages, it follows that courts would need to

consider what actual harm, if any, was caused by the breach and then

compare it to the stipulated amount of liquidated damages.”); Chan v.

Montebello Dev. Co., No. 14-06-00936-CV, 2008 WL 2986379, at *3-4

(Tex. App.—Houston [14th Dist.] 2008, pet. denied) (“[T]o meet this

burden [of proving unreasonable forecast], the party asserting the defense

is required to prove the amount of the other parties’ actual damages, if any,

to show that the liquidated damages are not an approximation of the

stipulated sum.”); CDS Enters., Inc. v. Myrad Real Estate, Inc., No. 14-97-

00197-CV, 1999 WL 548226, *2-3 (Tex. App.—Houston [14th Dist.] 1999,

no pet.) (“Texcon was required to prove the amount of Myrad’s actual

damages, if any, for establishing an absence of an approximation between

the actual loss and the stipulated sum. . . . Texcon did not meet its burden

in proving the liquidated damages clause was unenforceable because it

failed to prove the amount of Myrad’s actual damages.”); Oetting v. Flake,

553 S.W.2d 793, 795 (Tex. App.—Fort Worth 1977, no writ) (“The [party

seeking to invalidate the clause], by both allegation and proof, must raise

the issue and assume the burden of proving the amount of the actual

4

damages for the purpose of showing an absence of approximation between

the actual loss and the stipulated sum.”).

1. It is undisputed that Strandhagen offered no

proof of actual damages.

The record plainly demonstrates that Strandhagen offered no

evidence of the amount of any actual damages suffered by the Physicians.

Strandhagen does not contend otherwise. See Appellee’s Brief, p.14. Thus,

the only way to hold that Strandhagen satisfied her summary-judgment

burden of proof on the “unreasonable forecast” element would be to

conclude that she established, as a matter of law, that the liquidated

damages provision satisfies a “facial invalidity” exception to the general

requirement of proving actual damages. Strandhagen did not do so,

meaning the summary judgment must be reversed.

B. Narrow Exceptions: Two Types of Facial Invalidity.

The Texas Supreme Court has recognized two exceptions in which a

party may satisfy its burden of proving that a liquidated damages provision

is not a reasonable forecast of just compensation in the absence of proof of

actual damages. These two exceptions arise where the liquidated damages

provision is deemed unenforceable “on its face” or “as a matter of law”

either because: (1) the amount of liquidated damages is based on a

5

multiplier of actual damages or (2) the liquidated damages provision is

triggered by any breach of the contract without regard to the importance or

triviality of the breach. Strandhagen labels the latter a “one size fits all”

provision. The liquidated damages provision in the parties’ Operations

Agreement does not satisfy exception.

1. Multiplier of actual damages:

In Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex. 1991) the Court did

not hold, as Strandhagen suggests, that the second element (unreasonable

forecast) can be satisfied in every case with either a facial challenge or proof

of actual damages. See FPL Energy, LLC v. TXU Portfolio Mgmt. Co., LP,

426 S.W.3d 59, 72 (Tex. 2014) (“Phillips did not create a broad power to

retroactively invalidate liquidated damages provisions that appear

reasonable as written. Nor do we create such a power here.”) (rejecting

facial challenge to liquidated damages clause).

The Phillips court merely held a facial challenge was satisfactory in

that particular case because the liquidated damages amount was a

multiplier (10x) of the actual damages. 820 S.W.2d at 787. “The provision

cannot meet the second prong of the test because, instead of attempting to

forecast actual damages, it calls for them to be determined and then

multiplied.” Id. at 789; see also Magill v. Watson, 409 S.W.3d 673, 681

6

(Tex. App.—Houston [1st Dist.] 2013, no pet.) (reaching same conclusion

where liquidated damages provision multiplied actual damages by three).

Following Phillips, this Court and others courts have recognized that

the unique facial invalidity present there does not automatically relieve the

burden in all cases to prove an unreasonable disparity between the actual

damages and liquidated damages amounts. See e.g., Khan v. Meknojiya,

No. 03-11-00580-CV, 2013 WL 3336874, at *4 n.4 (Tex. App.—Austin 2013,

no pet.) (“Meknojiya’s reliance on Phillips in this case is misplaced” because

the provision “does not require a separate determination of damages or the

application of any multiplier to that amount. Thus, . . . unlike the court in

Phillips we could not conclude that it constitutes a penalty on its face.”);

Dunlap v. Gayle, No. 13-12-00105-CV, 2013 WL 1500377, *6 (Tex. App.—

Corpus Christi 2013, no pet.) (liquidated damages provision based on a

multiplier of earnest money rather than actual damages was not facially

invalid under Phillips).

The liquidated damages provision in this case does not rely on a

multiplier of actual damages. (CR.168). Thus, just as in Khan,

Strandhagen’s reliance on Phillips to establish a facial invalidity is

misplaced.

7

2. One size fits all:

The only other type of facial invalidity recognized by Texas courts

arises when a provision imposes the same amount of liquidated damages

for both substantial and trivial breaches. See, e.g., Stewart v. Basey, 245

S.W.2d 484, 487 (Tex. 1952) (in building lease agreement, clause providing

for liquidated damages of $150/month for each month of the remaining

term for any breach of the agreement, whether it be a failure to perform the

most important obligation or a minor covenant, was facially invalid);

Community Dev. Serv., Inc. v. Replacement Parts Mfg., Inc., 679 S.W.2d

721, 727 (Tex. App.—Houston [1st Dist.] 1984, no writ) (liquidated damages

clause was unenforceable because, even though it provided reasonable

damages for major breaches of the contract, it also allowed unreasonable

damages for trivial breaches); Bethel v. Butler Drilling Co., 635 S.W.2d

834, 837 (Tex. Civ. App.—Houston [14th Dist.] 1982, writ ref'd n.r.e.)

(liquidated damages provision was facially invalid where it “would apply

with equal force for such trivial breaches by appellee Butler as failing to pay

utilities, provide parking space or pay an additional hourly labor charge of

$10.00,” as well as to full termination of contract without cause); Mayfield

v. Hicks, 575 S.W.2d 571, 575 (Tex. App.—Dallas 1978, writ ref’d n.r.e.)

8

(provision was unenforceable because liquidated damages could be

imposed upon “even a minor default”).

a. Strandhagen failed to prove that this is a

facially invalid “one size fits all” provision.

Unlike all of the foregoing cases, the liquidated damages provision

here is triggered by only one form of breach, and it is a major one: a

physician’s early departure from the practice without just cause, as

specified in the contract. (CR.167-169); Appellants’ Brief, p.7, 26-27.

Hence, this provision is facially valid, as the court concluded in Urban

Television Network Corp. v. Liquidity Solutions, L.P., 277 S.W.3d 917, 919-

20 (Tex. App.—Dallas 2009, no pet.). There, the court disagreed “with

appellant’s assertion that the liquidated damages provision applied to any

breach of the agreement, no matter how trivial” because—as in this case—

the liquidated damages were recoverable for only “material” defaults

specified within the contract. 1

1 See also Appellants’ Brief, p.27-29 (discussing support provided by Murphy v.

Cintas Corp., 923 S.W.2d 663, 666 (Tex. App.—Tyler 1996, writ denied) and

RESTATEMENT (SECOND) OF CONTRACTS § 356, Liquidated Damages and Penalties (1981)).

Strandhagen’s attempt to distinguish these authorities fails. See Appellee’s Brief, p.14

n.10. Contrary to her argument, the Physicians do not cite Murphy and the

RESTATEMENT for the proposition that actual damages must be proven in all cases.

Rather, these authorities demonstrate why Strandhagen was required to prove actual

damages here because her facial challenge fails. Just as in Murphy, the timing of the

breach does not render the clause per se unreasonable, and just as in the RESTATEMENT,

the Court’s focus should be on the actual circumstances present here. Appellants’ Brief,

p.8.

9

In attempt to overcome the blatant distinction between this case and

the ones she relies upon, Strandhagen claims that the amount of damages

resulting from this one type of material breach (early departure) “would

obviously be greater the earlier Dr. Strandhagen stopped working at AAT.”

Appellee’s Brief, p.17. Strandhagen offered no proof to support this

allegedly “obvious” outcome.

Contrary to Strandhagen’s unsupported conclusion, there is no

“obvious” reason why the damages suffered would vary greatly depending

on when she or another physician left the practice. Following any

departure constituting a breach, the practice would be disrupted, suffer a

loss of goodwill, incur scheduling and short-staffing issues, and incur costs

and expenses related to finding a temporary and/or long-term replacement

for the departed physician—all of which would have a negative impact on

the group’s profit-making and bonus-earning capabilities. See Appellants’

Brief, p.4-7, 26-27. Whether the departure occurred in year 1 or year 5,

these negative impacts would be felt for some period of time before a

replacement physician could be located, trained, and incorporated into the

practice; the goodwill could be rebuilt; and the profitability could be

restored.

10

In the absence of any evidence offered by Strandhagen, there is no

way to know what amount of damages would be incurred for a breach at the

start of the term versus a breach at the end of the term, and certainly no

way to conclude that the damage amounts would be vastly different at

either time. Moreover, without any proof from Strandhagen, there is no

way to conclude that the liquidated amount of $500,000 would be greatly

disproportionate to the actual damages suffered for any such breach. This

was Strandhagen’s burden to prove, and she failed to prove it. The

summary judgment should be reversed.

Several cases demonstrate that unsupported conclusions like

Strandhagen’s are insufficient to carry the burden of proof on this type of

facial challenge. In SP Terrace, L.P. v. Meritage Homes of Texas, LLC, 334

S.W.3d 275, 287-88 (Tex. App.—Houston [1st Dist.] 2010, no pet.), the

court rejected SP Terrace’s facial challenge because it “adduced no

evidence” to establish that the amount of liquidated damages was

unreasonable either because the “breach was a trivial one” or because the

breach was of a far greater magnitude than would be justly compensated.

Id. (“We decline to remove a limitation of remedy provision absent any

evidence that the liquidated amount in the contract is unreasonably high or

low in light of the alleged breach.”); see also Urban Television, 277 S.W.3d

11

at 920 (“Appellant has not established that the liquidated damages

provision is unenforceable on its face or presented evidence raising a

genuine issue of material fact as to its enforceability.”); R. Conrad Moore &

Assoc., Inc. v. Lerma, 946 S.W.2d 90, 96 (Tex. App.—El Paso 1997, writ

denied) (where liquidated damage amount would be the amount of earnest

money regardless of time of breach, clause was not unreasonable on its

face; proof of actual damages was necessary to satisfy this element);

Community Dev., 679 S.W.2d at 727 (jury findings and evidence supported

claim that provision operated as penalty); In re Dow Corning Corp., 419

F.3d 543, 552 (6th Cir. 2005) (Dow satisfied its burden to prove

unreasonable forecast by presenting evidence that the parties never

discussed potential damages at the time of making the contract and “that

the clause was initially proposed as a penalty untied to any potential

damages”). Strandhagen offered absolutely no evidence in support of her

contention that the magnitude of the breach would be greater depending on

its timing. Without any proof, Strandhagen’s bare conclusion cannot be

accepted in satisfaction of her summary-judgment burden.

Strandhagen has not cited and the Physicians have not found a single

case rendering a liquidated damages provision akin to this one

unenforceable on the basis of a “one size fits all” facial challenge. The case

12

Strandhagen specifically relies on for this proposition is distinguishable.

See Appellee’s Brief, p.17 (citing Eberts v. Businesspeople Personnel Servs.,

Inc., 620 S.W.2d 861 (Tex. App.—Dallas 1981, no writ). In Eberts, the

provision was deemed unenforceable because it would impose the same

amount of liquidated damages regardless of whether the breach continued

for one day or two years. Id. at 864. Here, the liquidated damages are not

imposed upon variable lengths of a “continuing” breach. Instead, the

breach would occur at the moment of improper early departure, as

specified in the contract. As discussed above, the practice would suffer

disruption and financial hardship for some period of time following that

breach whether it occurred in year 1 or year 5. Strandhagen offered no

evidence to establish that the length of disruption or magnitude of hardship

would vary depending on the time of the breach. The liquidated damages

are intended to justly compensate for these negative financial effects,

whenever incurred.

C. Conclusion on “Unreasonable Forecast.”

To satisfy her summary-judgment burden of proof on the second

element of her penalty affirmative defense (“unreasonable forecast”),

Strandhagen would generally be required to prove actual damages and

13

demonstrate an unreasonable disparity between that amount and the

liquidated damages amount. Strandhagen admittedly failed to do so.

In the alternative, Strandhagen could satisfy her burden of proof by

demonstrating, as a matter of law, that this liquidated damages provision is

invalid on its face because it is a “one size fits all” provision. Strandhagen

failed to carry her burden of proof on this theory because (1) the liquidated

damages are triggered by only one form of material breach, early departure

from the practice under specified circumstances; and (2) Strandhagen

offered nothing beyond speculation to establish that a physician’s early

departure would constitute a breach of greater magnitude if it occurred

earlier than later in the physician’s term of employment. Consequently,

Strandhagen has failed to prove that the liquidated damages would be

equally imposed upon breaches of both important and trivial natures.

Strandhagen therefore failed to demonstrate any facial invalidity as a

matter of law.

Because Strandhagen has failed to satisfy her summary-judgment

burden of proof on the second element of her affirmative defense (and she

concedes her inability to prove the first element), the summary judgment

should be reversed.

14

II. ADDITIONAL REPLY ARGUMENTS:

A. Arguments Made in the Physicians’ Motion for New

Trial Were Preserved for Review.

Strandhagen argues that arguments made by the Physicians for the

first time in their Motion for New Trial were not preserved for review.

Appellee’s Brief, p.5, 7, 20. Although it may generally be true that an

argument raised for the first time in a motion for new trial is not preserved,

there is an exception applicable here.

“[T]he efficacy of a post-judgment motion to preserve a complaint for

appellate review depends upon whether the trial court affirmatively

considers the new grounds and proof as memorialized by a written order.”

Charbonnet v. Shami, No. 04-12-00711-CV, 2013 WL 2645720, *5 (Tex.

App.—San Antonio 2013, pet. denied). Where the court considers the new

grounds asserted in the post-judgment motion and signs a new order

affirming its prior ruling based upon the entire record—as opposed to

simply allowing the motion to be overruled by operation of law—the new

arguments are preserved for review. Id. at *5-6; see also Ayeni v. State,

440 S.W.3d 707, 709 (Tex. App.—Austin 2013, no pet.) (arguments and

evidence presented in motion for reconsideration of summary judgment

were preserved where order specified that court considered these

arguments and evidence). None of the cases cited by Strandhagen in

15

support of her waiver argument reflect that such circumstances were

present to satisfy this exception; thus, they are distinguishable from this

case. See Appellee’s Brief, p.21 n.18.

Strandhagen acknowledges that there was “full briefing and a

hearing” on the arguments raised in the Physicians’ Motion for New Trial.

Appellee’s Brief, p.6. Moreover, the Order Denying the Motion for New

Trial expressly states that the district court “considered the grounds

asserted in the Motion, the Response, the arguments of counsel, the

evidence filed, and the contents of the Court’s file” in making its

determination. (CR.271). Because it is apparent from the record that the

arguments raised by the Physicians in their Motion for New Trial were

considered on their merits and denied, these arguments were preserved for

review. See generally Tex. R. App. P. 33.1.

B. The Physicians “Modification” Argument Was Not an

Affirmative Defense.

The Physicians argued that the severability clause in Section 7(f) of

the Operations Agreement demonstrated a genuine issue of material fact

about the interpretation and enforceability of the liquidated damages

provision. (CR.223) (arguing that “a genuine issue of material fact remains

about what modified amount or calculation would be reasonable to enforce

16

in[stead of the $500,000 liquidated amount]” based on the severability

clause).

Contrary to Strandhagen’s argument, the Physicians’ argument did

not present the affirmative defense of “modification.” See, e.g., Williams v.

Colthurst, 253 S.W.3d 353, 359 (Tex. App.—Eastland 2008, no pet.)

(affirmative defense of modification is based on argument that parties had

a “meeting of the minds” to a new agreement “supported by consideration,”

such as an “accord and satisfaction”); Hill v. Heritage Res., Inc., 964

S.W.2d 89, 113 (Tex. App.—El Paso 1997, pet. denied) (“To conclude that

there was a valid modification, the jury had to favorably determine two

elements. The first is that the modification is based upon new

consideration. The second is that there existed the same degree of

mutuality and meeting of the minds as was present for the original

contract.”) (collecting cases; citations omitted).

The Physicians were in no way seeking to avoid the enforcement of

the parties’ contract by arguing that the parties had reached a new,

modified agreement supported by sufficient consideration, as would be the

case under the affirmative defense of modification. Instead, the Physicians

were simply arguing that Strandhagen failed to carry her traditional

summary-judgment burden because a genuine issue of material fact existed

17

within the four corners of the Operations Agreement, which was part of the

original summary-judgment record. Hence, there were no “elements” on

which the Physicians carried the burden of proof.

C. Strandhagen Cannot Use the Declaratory Judgment

Act to Create Jurisdiction.

Strandhagen argues that a live controversy sufficient to support

jurisdiction under the Declaratory Judgments Act (“DJA”) exists based on

the arguments presented by the Physicians to this Court regarding the

proper interpretation of the liquidated damages provision. Appellee’s Brief,

p.24, 26. To accept Strandhagen’s argument would turn the DJA on its

head.

The DJA cannot be used to create jurisdiction where a live

controversy does not already exist. See Tex. Ass’n of Bus. v. Tex. Air

Control Bd., 852 S.W.2d 440, 444 (Tex. 1993) (“[W]e have interpreted the

[DJA] to be merely a procedural device for deciding cases already within a

court’s jurisdiction rather than a legislative enlargement of a court’s power,

permitting the rendition of advisory opinions.”); Devon Energy Prod. Co. v.

KCS Res., LLC, 450 S.W.3d 203, 210, 212 (Tex. App.—Houston [14th Dist.]

2014, pet. filed on other grounds) (same; holding court lacked jurisdiction

over declaratory judgment claim because it was premised on the happening

of a future, hypothetical event—an underlying legal determination about

18

the parties’ intent); Taylor v. State Farm Lloyds, Inc., 124 S.W.3d 665,

668-69 (Tex. App.—Austin, 2003, pet. denied) (“[The DJA] does not confer

jurisdiction on a trial court but rather makes declaratory judgment

available as a remedy for a cause of action already within the court’s

jurisdiction.”) (citing Chenault v. Phillips, 914 S.W.2d 140, 141 (Tex. 1996)

(holding that mere request for declaratory judgment does not establish

jurisdiction)).

Here, there is no evidence that the Physicians had taken any action or

threatened or pursue a claim for breach of contract against Strandhagen.

At most, Strandhagen’s affidavit includes a conclusory and speculative

statement that she “learned . . . [the Physicians] and perhaps others are

seeking to pursue her for collection.” (CR.8, 12). In reality, the Physicians

never took any action to pursue a claim against her. If there was any

evidence that the Physicians had done so, Strandhagen surely would have

presented that evidence to the district court to demonstrate jurisdiction.

She now blames the Physicians for being unable to prove a negative.

Before any actual dispute or controversy ripened between

Strandhagen and the Physicians, Strandhagen filed this preemptive suit,

which the Physicians were then forced to answer and defend. At that time,

an active controversy existed between Strandhagen and her employer

19

(AAT) regarding whether or not she had been terminated for cause.

(CR.39, 80, 85-87, 91-93, 144). The Physicians were entitled to wait and

see how that issue developed and/or was resolved before deciding whether

to pursue a claim against Strandhagen because her early departure would

not be considered a breach of the Operations Agreement if it resulted from

AAT’s termination of her employment without cause. (CR.168). On this

basis, when Strandhagen filed suit against the Physicians, their

determination about whether or not to pursue a claim against Strandhagen

remained an open, theoretical issue. 2

The fact that the Physicians have defended the validity of their

contractual language does not demonstrate that a sufficiently ripe claim for

breach of contract existed at the time Strandhagen filed suit for purposes of

jurisdiction. The trial court erred in denying the Physicians’ Plea to the

Jurisdiction and in granting Strandhagen’s Motion for Summary Judgment

on this basis.

2 Strandhagen cites to page 8 of Appellants’ Brief as proof of that an allegedly ripe

controversy existed. Appellee’s Brief, p.26. She claims the Physicians “admit[ted]” that

her employment was terminated “under circumstances where they contend she ‘would

be liable for payment of liquidated damages.’” Id. Rather than “acknowledging” the

existence of a ripe controversy, the Physicians argument is presented in hypothetical

terms: “If [it] were true [that Strandhagen was terminated on the basis of

discrimination] it would provide [an] exception to her liability under the liquidated

damages provision. . . . [On the other hand, if the Company were correct that]

Strandhagen quit or was terminated with cause in September 2013 . . . [then she] would

be liable for payment of liquidated damages.” Appellants’ Brief, p.8.

20

PRAYER

Based on the foregoing, Appellants respectfully pray that this Court

sustain both of their issues on appeal and reverse the district court’s grant

of Strandhagen’s Motion for Summary Judgment, its partial denial of the

Physicians’ Plea to the Jurisdiction, and its denial of the Physicians’ Motion

for New Trial. If the jurisdictional ruling is reversed, then this Court should

render judgment in favor of the Physicians dismissing Strandhagen’s claim

in its entirety. Otherwise, this Court should remand to the district court for

further proceedings.

Appellants further pray that this Court tax all costs against

Strandhagen, both in this Court and below, and award the Appellants any

such other relief at law or equity to which they may be justly entitled. Tex.

R. App. P. 43.4; Tex. R. Civ. P. 139.

21

Respectfully submitted,

MARTENS, TODD, LEONARD, TAYLOR & AHLRICH

By: __/s/ Amanda G. Taylor____

Amanda Garrett Taylor

ataylor@textaxlaw.com

Texas Bar No. 24045921

301 Congress Avenue, Suite 1950

Austin, Texas 78701

Tele: (512) 542-9898

Fax: (512) 542-9899

ATTORNEY FOR APPELLANTS

CERTIFICATE OF COMPLIANCE

I certify that this Appellants’ Brief complies with the typeface

requirements of Tex. R. App. P. 9.4(e) because it has been prepared in a

conventional typeface no smaller than 14-point for text and 12-point for

footnotes. This document also complies with the word-count limitations of

Tex. R. App. P. 9.4(i) because, according to the word-count tool of the

computer program used to prepare this document, it contains 4,368

words, excluding any parts exempted by Tex. R. App. P. 9.4(i)(1).

/s/Amanda Taylor__________

Amanda Taylor

22

CERTIFICATE OF SERVICE

I certify that a true and correct copy of this Appellants’ Brief was filed

electronically and served on all counsel via e-mail in compliance with Tex.

R. App. P. 9.5(b) and L.R.3 on this 16th day of March, 2015.

Daniel Byrne

DByrne@FBHH.com

Lessie Fitzpatrick

LFitzpatrick@FBHH.com

FRITZ, BYRNE, HEAD & HARRISON, PLLC

98 San Jacinto Blvd, Suite 2000

Austin, TX 78701

Telephone: (512) 476-2020

/s/Amanda Taylor__________

Amanda Taylor

23

Ayeni v. State, 440 S.W.3d 707 (2013)

440 S.W.3d 707

Court of Appeals of Texas,

Austin.

Alhaji Isa Adegori AYENI, Appellant

v.

The STATE of Texas; The City of Houston, Texas; and

The Transit Authority of Houston, Texas, Appellees.

No. 03–11–00604–CV. | Feb. 20, 2013.

Synopsis

Background: Attorney General brought action on behalf of city and transit authority against

taxpayer to recover delinquent sales taxes, penalties, and interest. The District Court, Travis

County, Scott H. Jenkins, J., entered summary judgment against taxpayer. Taxpayer appealed.

Holdings: The Court of Appeals, Pemberton, J., held that:

[1] taxpayer's verified denial of Comptroller's certificate of delinquency did not rebut or join issue

with the certificate, such that its prima facie or presumptive validity under statute effectively

disappeared, and

[2] affidavit by taxpayer's bookkeeper was incompetent summary judgment evidence.

Affirmed.

Pemberton J., concurred and filed opinion.

Attorneys and Law Firms

*708 Tina Lin, Jorge Romero, Matthew G. Wylie, Matthew G. Wylie, P.C., Houston, TX, for

Appellant.

John C. Adams, Assistant Attorney General, Cristina M. Nahidi, Bankruptcy & Collections

Division, Austin, TX, for Appellees.

Before Justices PURYEAR, PEMBERTON and HENSON.

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Ayeni v. State, 440 S.W.3d 707 (2013)

MEMORANDUM OPINION

BOB PEMBERTON, Justice.

This is an appeal from a final summary judgment in a sales tax deficiency case. We will affirm

the judgment.

BACKGROUND

Appellant Ayeni operated a convenience store out of his residence in Houston, Texas. The

Comptroller conducted a sales-tax audit of Ayeni's business for the period covering January 1,

2004, through December 31, 2006. Ayeni acknowledges that he “did not keep a good record of his

business documents,” 1 and in the absence of such records, the Comptroller resorted to estimating

Ayeni's sales and tax liability from records of Ayeni's beer purchases obtained from certain of his

vendors and industry sales averages. 2 Through these calculations, the Comptroller determined

that Ayeni owed the appellee taxing authorities 3 approximately $48,000 in unpaid sales taxes for

the audit period, penalties, and interest.

After Ayeni failed to pay the determination, the Comptroller issued a certificate of tax delinquency

to the Attorney General's office for collection. The Attorney General subsequently sued Ayeni

on appellees' behalf to recover the delinquent sales taxes, penalties, and interest as set forth in

the Comptroller's certificate of deficiency, plus attorney's fees. Ayeni filed a general denial, later

amended to a verified denial. Appellees filed a traditional motion for summary judgment on all

of their claims, attaching as evidence the Comptroller's certificate and an affidavit from appellees'

counsel averring that they had incurred $7,500 in attorney's fees in the proceeding. Ayeni filed

a response to appellees' motion and a supplement, presenting affidavits *709 from himself and

his bookkeeper in which each disputed the accuracy of the Comptroller's tax calculations and

underlying estimates of Ayeni's beer sales. In further support, Ayeni attached numerous receipts

that purported to reflect actual beer purchases by Ayeni. Ayeni also presented an affidavit from

his counsel attempting to controvert appellees' attorney's fees affidavit.

Following a hearing, the district court granted partial summary judgment that Ayeni was liable

for the deficiency in the certified amount. However, it denied appellees' motion on their claim for

attorney's fees.

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Ayeni v. State, 440 S.W.3d 707 (2013)

Ayeni filed a motion to reconsider the partial summary judgment, attaching additional documents

from the Comptroller reflecting the Comptroller's methodology in estimating the sales taxes Ayeni

owed. Following a hearing, the district court denied the motion for reconsideration by written

order. To ensure “a clear appellate record,” the order further specified that the district court had

ultimately considered the entirety of the evidence and arguments Ayeni had filed in the case in

its summary-judgment ruling.

Subsequently, the district court signed a final judgment incorporating its earlier partial summary

judgment and awarding appellees $2,000 in attorney's fees. 4 It is from this final judgment that

Ayeni now appeals.

ANALYSIS

Ayeni seeks reversal of the district court's judgment in four issues that claim error in the summary-

judgment ruling. In his first two issues, Ayeni asserts that he presented summary-judgment

evidence of his tax liability that controverted the Comptroller's certificate and raised a fact issue

that precluded summary judgment for appellees. In his third issue, Ayeni insists that the district

court erred or abused its discretion by granting partial summary judgment when appellees had

instead sought a final summary judgment. In his fourth issue, Ayeni argues that the Comptroller's

certificate of delinquency could not support summary judgment in appellees' favor in the face of

Ayeni's verified denial.

Standard of review

The standards of review for summary judgments are well established. We review the summary-

judgment motion and response, if any, de novo to determine if the competent summary-judgment

evidence included with those pleadings shows that there is no genuine issue as to any material fact

and the movant is entitled to summary judgment as a matter of law. See Tex.R. Civ. P. 166a(c);

Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex.2005). We take as true all evidence

favorable to the non-movant, and we indulge every reasonable inference and resolve any doubts

in the non-movant's favor. See Valence, 164 S.W.3d at 661.

[1] Where, as here, the movant relies on the “traditional” summary-judgment standard, the

movant has the initial burden of demonstrating that there is no genuine issue of material fact and

that he or she is entitled to judgment as a matter of law. See M.D. Anderson Hosp. & Tumor Inst.

v. Willrich, 28 S.W.3d 22, 23 (Tex.2000) (per curiam). Assuming this burden is met, and only if

it is, the burden shifts to the non-movant to present evidence raising a genuine issue of material

fact as to the movant's claims. See id. If the non-movant's evidence raises a fact issue, summary

judgment is not appropriate. See id.

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Ayeni v. State, 440 S.W.3d 707 (2013)

*710 Verified denial

[2] We begin with Ayeni's fourth issue because it logically precedes the others—it amounts to

a challenge to whether appellees' summary-judgment proof was sufficient to meet their initial

burden of showing the absence of a genuine issue of material fact and entitlement to judgment

as a matter of law. See id. To meet their burden as to Ayeni's sales tax liability, appellees relied

solely on the Comptroller's certificate of delinquency. As Ayeni acknowledges, subsection (a) of

tax code section 111.013 makes the Comptroller's certificate—

... prima facie evidence of:

(1) the stated tax or amount of the tax, after all just and lawful offsets, payments, and credits

have been allowed;

(2) the stated amount of penalties and interest;

(3) the delinquency of the amounts; and

(4) the compliance of the comptroller with the applicable provisions of this code in computing

and determining the amount due.

Tex. Tax Code Ann. § 111.013(a) (West 2008). Consequently, it is well established that a

Comptroller's certificate of delinquency suffices to meet a taxing authority's initial summary-

judgment burden in a sales-tax deficiency suit, shifting the burden to the taxpayer to raise a fact

issue in order to avoid summary judgment. See N.S. Sportswear, Inc. v. State, 819 S.W.2d 230,

232 (Tex.App.-Austin 1991, no writ) (“If unrebutted, [Comptroller's certificates of deficiency] are

sufficient to establish, as a matter of law, the amount of tax the taxpayer owes.” (citing Baker v.

Bullock, 529 S.W.2d 279, 281 (Tex.Civ.App.-Austin 1975, writ ref'd n.r.e.))). But Ayeni argues

that his verified denial of appellee's claims served to rebut or join issue with the Comptroller's

certificate, such that its prima facie or presumptive validity effectively disappeared, returning

appellees to their status quo ante—and leaving appellees lacking in any summary-judgment proof

to meet their initial burden. We disagree that Ayeni's verified denial had this effect.

Ayeni emphasizes subsection (b) of tax code section 111.013, which states:

The defendant may not deny a claim for taxes, penalties, or interest unless the

defendant timely files a sworn written denial that specifically identifies the taxes,

penalties, and interest the defendant asserts are not due and the amounts of tax,

penalties, and interest that are not due.

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Ayeni v. State, 440 S.W.3d 707 (2013)

Tex. Tax Code Ann. § 111.013(b). Ayeni suggests that subsection (b), read together with

subsection (a)'s provisions describing the prima facie effect of the Comptroller's certificate, means

that the filing of a verified denial under subsection (b) rebuts or negates the prime facie effect

of a Comptroller's certificate under subsection (a), much like a verified denial in a suit on sworn

account. See Tex.R. Civ. P. 185; Rizk v. Financial Guardian Ins. Agency, Inc., 584 S.W.2d 860,

862 (Tex.1979) (“It is settled ... that a defendant's verified denial of the correctness of a plaintiff's

sworn account in the form required by Rule 185 destroys the evidentiary effect of the itemized

account attached to the petition and forces the plaintiff to put on proof of his claim.”). However,

unlike the rules governing suits on sworn accounts, nothing in section 111.013 says that subsection

(b)'s verified denial has any impact on the operation and effect of subsection (a)'s Comptroller's

certificate. Cf. Tex.R. Civ. P. 185 (providing affidavit on sworn account is “prima facie evidence

[of the account], unless the party resisting such claim shall file a written denial, under oath”). Nor

can Ayeni point to any Texas court that has said it does.

*711 Neither subsection (a) or (b) references the other, and we can only conclude that both

provisions must be given the effect the Legislature prescribes within each. Subsection (b) is in

the nature of a pleading requirement with which defendants in sales-tax deficiency cases must

comply in order to join issue with the taxing authority's petition; otherwise, the taxpayer loses by

default. See Noorani Gas & Convenience, Inc. v. State, No. 03–06–00463–CV, 2008 WL 1827605,

at *5 (Tex.App.-Austin Apr. 24, 2008, no pet) (mem. op.). In contrast, subsection (a) speaks to

the evidence on which the taxing authority may rely to meet its burden of proof if and when its

pleadings are placed at issue by a verified denial. And the Legislature in subsection (a) has made

Comptroller's certificates of deficiency prima facie evidence without preconditions. See Tex. Tax

Code Ann. § 111.013(a). Accordingly, Ayeni's verified denial does not affect the prima facie

evidentiary nature of the Comptroller's certificate of deficiency in this case. We overrule Ayeni's

fourth issue on appeal.

Controverting proof

Because appellees attached the Comptroller's certificate of deficiency to their summary-judgment

motion and it is sufficient to meet their initial summary-judgment burden, the burden shifted to

Ayeni to raise a question of fact as to the amount of taxes, penalties, and interest he owed for the

audit period at issue or as to the Comptroller's compliance with the applicable provisions of the tax

code in computing and determining the amount due. See id.; N.S. Sportswear, Inc., 819 S.W.2d at

232. Appellees have urged that Ayeni had to do more than present the legally sufficient contrary

evidence that is ordinarily required on summary judgment. In their view, Ayeni was required to

adduce conclusive contrary evidence—i.e., prove as a matter of law that he did not owe the amount

the Comptroller certified—in order to preclude summary judgment based on the certification. In

his second issue, Ayeni disputes appellees' view of his summary-judgment burden, urging that he

was required to present only summary-judgment evidence sufficient to raise a genuine issue of

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Ayeni v. State, 440 S.W.3d 707 (2013)

material fact regarding his tax liability, not conclusive evidence. In his first issue, Ayeni argues

that his summary-judgment proof is sufficient to raise a fact issue and even rises to the level of

conclusive contrary evidence.

We need not address Ayeni's second issue because we conclude that he has not presented

competent evidence sufficient to raise a fact issue even under the customary summary-judgment

burdens. In an attempt to raise a fact issue, Ayeni submitted his and his bookkeeper's affidavits,

sales-tax returns for 2005, 2006, 2007, 2008, 2009, and the first quarter of 2010, and various

receipts from beer vendors dated between 2004 and 2006. Ayeni's affidavit stated that he did not

owe the taxes, penalties, and interest claimed by the Comptroller because those amounts were

“based on incorrect taxable sale amounts.” He then averred that the correct taxable sale amounts

were set forth in the sales-tax returns attached to his summary-judgment response. Finally, Ayeni

stated in his affidavit that the Comptroller incorrectly estimated his beer sales for the audit period

and that his records showed that he made gross beer purchases of $8,827.11 in 2004, $5,681.99

in 2005, and $6,622.02 in 2006.

Similarly, Ayeni's bookkeeper testified in his affidavit that Ayeni did not owe the amounts

established by the Comptroller's certificate of deficiency because those amounts were based on

incorrect taxable sale amounts. The correct amount of taxes owed, the bookkeeper averred, were

set forth in the attached sales-tax returns and vendor receipts, which returns the bookkeeper *712

prepared in the regular course of Ayeni's business. Finally, Ayeni's bookkeeper reiterated Ayeni's

contentions regarding the gross purchases of beer made by Ayeni in 2004, 2005, and 2006.

[3] [4] The affidavit testimony that the Comptroller's amounts are incorrect and that Ayeni's

amounts are correct are bare conclusions unsupported by facts. These statements are thus

incompetent summary-judgment evidence. To be competent summary-judgment evidence, an

affidavit must contain specific factual bases, admissible in evidence, upon which its conclusions

are based. Brownlee v. Brownlee, 665 S.W.2d 111, 112 (Tex.1984); see Tex.R. Civ. P. 166a(f)

(affidavits “shall set forth such facts as would be admissible in evidence”). The same is true of

affidavit assertions that the Comptroller's estimates of his beer sales are incorrect: Although Ayeni

does offer that “his records showed” that he made gross beer purchases of $8,827.11 in 2004,

$5,681.99 in 2005, and $6,622.02 in 2006” and he includes some of those purchase receipts, he

does not assert that those were his total purchases of taxable items during that period or state with

any specificity how the Comptroller's numbers were incorrect. More important, Ayeni's affidavits

do not state what Ayeni's total sales amounts were for the period at issue, which amounts are,

by statute, the basis for determining sales tax owed. See Tex. Tax Code Ann. § 151.051 (West

2008) (imposing sales tax based on a percentage of sale price). To that extent, even if the affidavits

were competent summary-judgment evidence, they do not raise a question of fact as to the correct

amount of sales taxes owed. Accordingly, summary judgment in favor of the appellees was proper.

We overrule Ayeni's first issue.

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Ayeni v. State, 440 S.W.3d 707 (2013)

Partial summary judgment

[5] In his third issue, Ayeni contends that the district court had no authority to grant a partial

summary judgment because the Comptroller did not seek alternative or partial relief in its

summary-judgment motion. But rule 166a explicitly permits a trial court to grant a partial summary

judgment:

Case not Fully Adjudicated on Motion. If summary judgment is not rendered upon the whole

case or for all the relief asked and a trial is necessary, the judge may at the hearing examine the

pleadings and the evidence on file, interrogate counsel, ascertain what material fact issues exist

and make an order specifying the facts that are established as a matter of law, and directing such

further proceedings in the action as are just.

Tex.R. Civ. P. 166a(e). Here, the Comptroller sought summary judgment on two claims—

a claim seeking delinquent sales taxes owed and a claim for attorney's fees—but the district

court determined that the Comptroller met its summary-judgment burden only as to its claim

for sales taxes owed and not as to its claim for attorney's fees. Accordingly, under rule 166a,

it was appropriate for the district court to grant a partial summary judgment on the claim for

sales tax owed and deny the Comptroller's motion as to attorney's fees. See Pinnacle Anesthesia

Consultants, P.A. v. Fisher, 309 S.W.3d 93, 100 (Tex.App.-Dallas 2009, pet. denied) (“If a case

is not fully adjudicated on a motion for summary judgment, the trial court is authorized to render

partial summary judgment, making ‘an order specifying the facts that are established as a matter

of law, and directing such further proceedings in the action as are just’ ”) quoting Tex.R. Civ.

P. 166a(e))).

Ayeni also suggests that the district court improperly granted partial summary judgment on no-

evidence grounds. But there is nothing in the district court's order suggesting that the “partial”

aspect of the summary judgment was a reference to *713 the traditional versus no-evidence

standard, as opposed to the claims being addressed.

Accordingly, we overrule Ayeni's third issue on appeal.

CONCLUSION

We affirm the district court's judgment.

Justice HENSON Not Participating.

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Ayeni v. State, 440 S.W.3d 707 (2013)

Concurring Opinion by Justice PEMBERTON.

BOB PEMBERTON, Justice, concurring.

Although I join in the majority's opinion and judgment—I wrote them, after all—I write separately

to offer some additional observations about Ayeni's second issue. While it was ultimately

unnecessary for us to reach that issue here, it nonetheless warrants emphasis that Ayeni has

identified an aberration in this Court's past jurisprudence addressing the effect of Comptroller

certificates of deficiency and how a taxpayer can oppose a summary-judgment motion predicated

on one.

The notion that a taxpayer must present conclusive contrary evidence to rebut a Comptroller's

certificate of deficiency does not find explicit textual support in the current tax code. Subsection

(a) of section 111.013 states only that the Comptroller's certificate is “prima facie evidence” of

the taxes, penalties, and interest due, the delinquency of those amounts, and of the comptroller's

compliance with the tax code. See Tex. Tax Code Ann. § 111.013(a) (West 2008). “Prima facie” is

Latin for “first view,” 1 and “prima facie evidence” typically denotes evidence that is determinative

of a fact's or facts' existence, sometimes stated in terms of giving rise to a “presumption” of their

existence, unless and until some contrary evidence is presented. See Coward v. Gateway Nat'l

Bank of Beaumont, 525 S.W.2d 857, 859 (Tex.1975); Dodson v. Watson, 110 Tex. 355, 220 S.W.

771, 772 (1920) ( “Prima facie evidence is merely that which suffices for the proof of a particular

fact until contradicted and overcome by other evidence.”); Black's Law Dictionary 638–39 (9th

ed.2009) (defining “prima facie evidence” as “[e]vidence that will establish a fact or sustain a

judgment unless contrary evidence is produced”). 2 But nothing in section 111.013 purports to

require conclusive contrary evidence to rebut or join issue with a Comptroller's certificate. See

Tex. Tax Code Ann. § 111.013.

Appellees rely less on the tax code than on precedents of this Court, and I must concede they find

some support there. As best I can tell, these decisions trace back to a 1967 no-writ case involving a

trial on the merits of a tax-deficiency claim, Smith v. State, 418 S.W.2d 893 (Tex.Civ.App.-Austin

1967, no writ). Smith, in turn, purported to rely on the analysis in a 1942 Texas Supreme Court

opinion, Southland Life Insurance Co. v. Greenwade, 138 Tex. 450, 159 S.W.2d 854 (1942). 3

Southland Life addressed the nature and application *714 of the presumption of receipt afforded

a properly stamped, addressed, and mailed letter in the context of a suit by a life-insurance

beneficiary to recover policy proceeds. See id. at 858. The defendant insurance carrier asserted

that the decedent's life-insurance policy had lapsed prior to the insured's death due to the insured's

failure to make a premium payment that had come due. The case went to trial, at which the plaintiff

beneficiary presented detailed evidence that the decedent had properly stamped, addressed, and

mailed the premium payment to the insurance company prior to its final due date. This evidence

gave rise to the legal presumption that the insurance company had received the payment. See id.

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Ayeni v. State, 440 S.W.3d 707 (2013)

at 857 (“It is settled in this state, however, that when a letter properly addressed and with postage

prepaid is mailed, a presumption of fact (rebuttable of course) arises that it was duly received by

the addressee.”). In response, the insurance company presented evidence that it had not received

the premium payment. Id. The trial court rendered judgment in favor of the plaintiff beneficiary.

On appeal to the Waco Court of Civil Appeals, the insurance company asserted, among other

points, that the evidence did not support a finding that the premium payment had been timely

paid. See Southland Life Ins. Co. v. Greenwade, 143 S.W.2d 648, 650–51 (Tex.Civ.App.-Waco

1940), reversed by 159 S.W.2d at 858. Specifically, the insurance company argued that because it

had produced evidence that it had never actually received the premium, both the presumption of

receipt and the foundational evidence supporting that presumption—i.e., that the payment letter

had been properly stamped, addressed, and mailed to the company—“disappeared” such that the

trier of fact could no longer consider it; thus leaving the plaintiff without any proof of receipt. See

id. at 650. The Waco court overruled that issue, holding that even in the face of evidence of non-

receipt, the presumption of receipt “continued as evidence” that was sufficient to support the trial

court's judgment. See id. at 650.

On appeal, although ultimately affirming the trial court's judgment and holding that the evidence

was sufficient to support a finding that the premium check had been timely received, the supreme

court explicitly rejected the Waco court's view that a presumption like that of receipt could itself

be considered evidence. Instead, the supreme court held that a presumption is not evidence and

that it disappears once “substantial contrary evidence” is offered by the party against whom the

presumption operates. See Southland Life, 159 S.W.2d at 857 (citing Wigmore on Evidence, 2d

ed., § 2491); see also General Motors Corp. v. Saenz, 873 S.W.2d 353, 359 (Tex.1993) (“Once ...

evidence contradicting the presumption has been offered, the presumption disappears.”). But the

court then went on to clarify that the evidence that gave rise to the presumption could still be

considered and weighed by the fact-finder, vis-à-vis the carrier's contrary evidence, as evidence

that the premium payment had, in fact, been timely received. Southland Life, 159 S.W.2d at

857; see Saenz, 873 S.W.2d at 359. In other words, although the insurance company had offered

evidence that it had not timely received the payment, thus eliminating the presumption of receipt,

the trier of fact could still consider the facts underlying the presumption-i.e., that the defendant

stamped, addressed, and mailed the payment letter to the company-as themselves *715 evidence

that the insurance company received the payment. See Southland Life, 159 S.W.2d at 857. And,

relying on this evidence of payment, the supreme court went on to hold that the evidence was

sufficient to support the trial court's finding that the payment was timely received. See id.

The court in Southland Life then went on to observe that there might be circumstances where the

presumption's foundational facts could not be considered—i.e., would not support an affirmative

finding—by the trier of fact:

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Ayeni v. State, 440 S.W.3d 707 (2013)

We hold that an inference established prima facie (as in the present case) is

overcome, together with the evidentiary facts tending to establish it, only when

the evidence tending to support the contrary inference is conclusive, or so clear,

positive and disinterested that it would be unreasonable not to give effect to

it as conclusive.... [P]rima facie evidence and presumptions of fact disappear

when the true facts are conclusively shown by other evidence. ... In other words,

presumptions, when controverted by facts, disappear, as such, and cannot be

weighed as evidence against such facts.

Id. at 858 (internal citations omitted) (emphases in original). In other words, if the party against

whom the presumption of receipt operates presents evidence that conclusively negates receipt

of the mail, both the presumption of receipt and the probative value of any proof of underlying

facts could be said to “disappear” because the evidence, by definition, is legally insufficient to

support a finding of receipt. This amounts merely to an observation about the nature of conclusive

evidence that negates a fact's existence. See City of Keller v. Wilson, 168 S.W.3d 802, 810

(Tex.2005) (discussing conclusive contrary evidence and noting that “ ‘[n]o evidence points must,

and may only, be sustained when the record discloses [that] the evidence establishes conclusively

the opposite of the vital fact’ ” (quoting Robert W. Calvert, “No Evidence” and “Insufficient

Evidence” Points of Error, 38 Tex. L.Rev. 361 (1960)).

In Smith, this Court, citing Southland Life, described a taxpayer's burden in opposing the presumed

correctness of a Comptroller's certificate of deficiency at trial as follows:

With the prima facie presumption established that the State's claim for

admissions taxes 4 against [the owner of a business on the taxpayer's property]

was as shown in the Comptroller's certificate under Article 1.08 5 , appellant

[taxpayer] had the burden to overcome the inference with such evidence tending

to support the contrary as would be conclusive, or evidence so clear and positive

it would be unreasonable not to give effect to it as conclusive.

Smith, 418 S.W.2d at 896 (citing Southland Life, 159 S.W.2d at 858). This Court has continued to

describe the taxpayer's burden at trial in similar terms. 6 To the *716 extent such descriptions refer

to the concepts that a Comptroller's certificate, even if met with the taxpayer's contrary evidence,

may nonetheless be legally sufficient to support a fact finding of tax liability unless the taxpayer's

contrary evidence is conclusive, it is merely an application of the principles described in Southland

Life. In any event, Ayeni does not quarrel with the notion that he would be required, at least

practically speaking, to present conclusive contrary evidence in order to overcome the effect of a

Comptroller's certificate at trial on the merits. Otherwise, under the Southland Life analysis, the

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Ayeni v. State, 440 S.W.3d 707 (2013)

certificate would remain as legally sufficient evidence that could potentially support fact findings

against the taxpayer.

But it is quite another thing, Ayeni urges, to hold that a nonmovant must present conclusive

contrary evidence to preclude summary judgment based on a Comptroller's certificate, as appellees

argue here. I agree.

The notion that a taxpayer nonmovant must counter a Comptroller's certificate with conclusive

contrary evidence in order to preclude summary judgment traces back to a 2004 memorandum

opinion of this Court, Wimmer v. State, No. 03–03–00135–CV, 2004 WL 210629, at *3–4

(Tex.App.-Austin Feb. 5, 2004, pet. denied) (mem. op.). In Wimmer, we held that a taxpayer

“must conclusively establish that he owes no tax” to overcome a summary judgment predicated

on a Comptroller's certificate of deficiency. See id. at *3. For support, this Court cited Smith

and its progeny-again, cases that involved trials on the merits. See id. at *3–4 (citing Sundown

Farms, 89 S.W.3d 291, 293 (Tex.App.-Austin 2002, no pet.); Hylton v. State, 665 S.W.2d 571,

572 (Tex.App.-Austin 1984, no writ); Smith, 418 S.W.2d at 893). There was zero explanation

or analysis of whether or how those concepts should properly be applied in the vastly different

procedural context of summary judgment. See Wimmer, 2004 WL 210629 at *3–4. 7

Contrary to the holdings of Wimmer, and any progeny, their analytical cornerstone in Southland

Life would imply that the contrary evidence used to rebut the presumption, even if not conclusive,

would raise a fact issue that would have to be resolved by the fact finder and not by summary

judgment. See Southland Life, 159 S.W.2d at 857; see also Balawajder v. Texas Dep't of Criminal

Justice Inst. Div., 217 S.W.3d 20, 27 (Tex.App.-Houston [1st Dist.] 2006, pet. denied) (“In

the context of a summary judgment, the party against whom the presumption operates must

produce evidence sufficient ‘to neutralize the effect of the presumption’ for the case to proceed to

trial.” quoting Amaye v. Oravetz, 57 S.W.3d 581, 584 (Tex.App.-Houston [14th Dist.] 2001, pet.

denied)); First Nat'l Bank of Libby, Montana v. Rector, 710 S.W.2d 100, 103 (Tex.App.-Austin

1986, writ ref'd n.r.e.) (holding that where document created presumption of foreign judgment's

validity, the party against whom the presumption operates must “produce some evidence at least

raising an issue of material fact as to the validity” of the judgment to defeat summary judgment).

And Wimmer, and any subsequent cases that might have followed it, are at odds with the summary-

judgment burdens that the Texas Supreme Court has prescribed. Even if it is in some sense correct

to state that a taxpayer must overcome a Comptroller's *717 certificate with conclusive evidence

at trial on the merits, the supreme court has made it clear that nonmovants do not face higher

or different summary-judgment burdens based on the burdens of proof they may face at trial:

“The failure of one party in a hearing upon a motion for summary judgment to discharge the

burden which would rest on him at a trial on the merits is no ground for a summary judgment

in favor of the other party.” Tigner v. First Nat'l Bank of Angleton, 153 Tex. 69, 264 S.W.2d

85, 87 (1954). It has likewise made clear that a movant's summary-judgment burden does not

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Ayeni v. State, 440 S.W.3d 707 (2013)

depend on its burden of proof at trial: “The presumptions and burden of proof for an ordinary or

conventional trial are immaterial to the burden that a movant for summary judgment must bear.”

Missouri–Kan.–Tex.R.R. Co. v. City of Dallas, 623 S.W.2d 296, 298 (Tex.1981) (citing Tigner,

264 S.W.2d at 87). In fact, the supreme court held in Missouri–Kansas–Texas Railroad that the

taxing authority, which enjoyed a number of presumptions in its favor, including that its property

valuations were valid, must nevertheless “ ‘establish [its] entitlement to a summary judgment on

the issues expressly presented to the trial court by conclusively proving all essential elements of

[its] cause of action or defense as a matter of law.’ ” Id. (quoting City of Houston v. Clear Creek

Basin Auth., 589 S.W.2d 671, 678 (Tex.1979)). Thus, even if the taxpayer's burden of proof at

trial requires him to produce conclusive evidence to prevail on the merits, he must only produce

evidence sufficient to raise a question of fact as to the taxing authority's claim in order to avoid

summary judgment.

Nonetheless, because Ayeni has not presented competent contrary summary-judgment evidence

that would even meet the customary burden of a summary-judgment nonmovant, this is not the

case in which this Court should undertake to reexamine the suspect holdings of Wimmer and any

progeny en banc. 8 But that case will come along inevitably, so I leave this writing as a place

marker for that day. Alternatively, the Legislature could, of course, provide statutory clarification

that would obviate the need for any such reexamination.

Footnotes

1 Cf. Tex. Tax Code Ann. § 151.025 (West 2012) (requiring taxpayers to maintain certain records, including records of gross receipts,

purchases, sales tax received or collected on each sale); 34 Tex. Admin. Code § 3.281(b) (2012) (Comptroller of Public Accounts,

Records Required, Information Required) (2012) (same); see also Smith v. State, 418 S.W.2d 893, 895–96 (Tex.Civ.App.-Austin

1967, no writ) (holding that Comptroller may develop system to estimate taxes if taxpayer fails to keep required records).

2 See Tex. Tax Code Ann. § 111.008(a) (West 2008) (“If the comptroller is not satisfied with a tax report or the amount of the tax

required to be paid to the state by a person, the comptroller may compute and determine the amount of tax to be paid from information

contained in the report or from any other information available to the comptroller.”); 34 Tex. Admin. Code § 3.281(c) (allowing

Comptroller to, among other things, estimate tax liability based on any available information if taxpayer fails to keep required records);

Alon USA, LP v. State, 222 S.W.3d 19, 32 (Tex.App.-Austin 2005, pet. denied) (noting that comptroller is expressly authorized to

determine taxes on the basis of any information within comptroller's possession if taxpayer fails to keep proper records).

3 The State of Texas, the City of Houston, Texas, and the Transit Authority of Houston, Texas.

4 Although the Hon. Scott H. Jenkins signed the final judgment, the Hon. Tim Sulak made the summary-judgment rulings.

1 See Black's Law Dictionary 1310 (9th ed.2009); Webster's Third New Int'l Dictionary 1800 (2002).

2 See In re Allen, 366 S.W.3d 696, 706 (Tex.2012) (“We presume the Legislature is aware of relevant case law when it enacts or

modifies statutes.”) (citing Acker v. Texas Water Comm'n, 790 S.W.2d 299, 301 (Tex.1990)); HCBeck, Ltd. v. Rice, 284 S.W.3d

349, 363 (Tex.2009) (“We use definitions prescribed by the Legislature and any technical or particular meaning the words have

acquired ....” (citing Tex. Gov't Code Ann. § 311.011)).

3 Southland Life Insurance Co. v. Greenwade, 138 Tex. 450, 159 S.W.2d 854 (1942), was decided by the Texas Commission of

Appeals. However, because the opinion was adopted by the Texas Supreme Court and, thus, has the full authority of a Texas Supreme

Court decision, it was effectively decided by the Texas Supreme Court. See National Bank of Commerce v. Williams, 125 Tex. 619,

84 S.W.2d 691, 692 (1935); see also Cadle Co. v. Butler, 951 S.W.2d 901, 911 (Tex.App.-Corpus Christi 1997, no pet.) (noting that

Commission opinions adopted by the Texas Supreme Court are given the same force, weight, and effect as supreme court opinions).

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Ayeni v. State, 440 S.W.3d 707 (2013)

4 “Admissions taxes” are taxes paid “on fees for admission to all places of amusement.” See Smith v. State, 418 S.W.2d 893, 895

(Tex.Civ.App.-Austin 1967, no writ).

5 Predecessor statute to section 111.013 of the Texas Tax Code.

6 Accord Sundown Farms, Inc. v. State, 89 S.W.3d 291, 293 (Tex.App.-Austin 2002, no pet.); Penny v. State, No. 03–97–00399–CV,

1998 WL 394173, at *2 (Tex.App.-Austin July 16, 1998, no pet.) (mem. op.); State v. Glass, 723 S.W.2d 325, 327 (Tex.App.-Austin

1987, writ ref'd n.r.e.); Hylton v. State, 665 S.W.2d 571, 572 (Tex.App.-Austin 1984, no writ); Nu–Way Oil Co. v. Bullock, 546 S.W.2d

336, 339 (Tex.Civ.App.-Austin 1976, no writ); Baker v. Bullock, 529 S.W.2d 279, 281 (Tex.Civ.App.-Austin 1975, writ ref'd n.r.e.);

State v. Gifford–Hill & Co., 428 S.W.2d 451, 457 (Tex.Civ.App.-Austin 1968) rev'd on other grounds by 442 S.W.2d 320 (Tex.1969).

7 See also Kawaja v. State, No. 03–05–00491–CV, 2006 WL 1559343 (Tex.App.-Austin June 8, 2006, no pet.) (mem.op.) (also

applying, without analysis, conclusive-evidence notion to summary-judgment proceeding) (citing Glass, 723 S.W.2d at 327; Hylton,

665 S.W.2d at 572).

8 We may not overrule a prior panel opinion of this court absent an intervening change in the law by the Legislature or a higher court

or by decision of this court sitting en banc. See Tex.R.App. P. 41.2 (providing that en banc consideration is appropriate to secure or

maintain uniformity of appellate court decisions); In re Smith, 366 S.W.3d 282, 289 (Tex.App.-Dallas 2012, no pet.); Nowzaradan

v. Ryans, 347 S.W.3d 734, 739 (Tex.App.-Houston [14th Dist.] 2011, no pet.).

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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Ayeni v. State, 440 S.W.3d 707

History (4)

Direct History (2)

1. State v. Ayeni

2011 WL 9864681 , Tex.Dist. , Sep. 07, 2011

Judgment Affirmed by

2. Ayeni v. State

440 S.W.3d 707 , Tex.App.-Austin , Feb. 20, 2013

Related References (2)

3. State v. Ayeni

2011 WL 9864678 , Tex.Dist. , June 08, 2011

Reconsideration Denied by

4. State v. Ayeni

2011 WL 9864683 , Tex.Dist. , Sep. 07, 2011

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

635 S.W.2d 834

Court of Appeals of Texas, Houston (14th Dist.).

William J. BETHEL, Jr. dba Ra-Comm Electronics, Appellant,

v.

BUTLER DRILLING COMPANY, Appellee.

No. A2546. | May 27, 1982.

Action was brought for breach of contract. The District Court, Harris County, William W.

Kilgarlin, J., entered judgment on jury verdict in favor of plaintiff, but failed to award prejudgment

interest, and both parties appealed. The Court of Appeals, Price, J., held that: (1) alleged liquidated

damage provision of contract was actually penalty and unenforceable; (2) jury award of $12,000

attorney fees was authorized and supported by evidence; (3) prejudgment interest should have

been awarded plaintiff; (4) sufficient evidence supported jury's finding that successor corporation

ratified contract and such finding was not against great weight and preponderance of evidence; (5)

evidence supported jury finding that president of company had authority to sign contract on behalf

of company and such finding was not against great weight and preponderance of evidence; (6)

plaintiff was not judicially estopped from claiming unlawful termination by reason of testimony

given in another lawsuit; (7) evidence did not establish conversion or specific amounts claimed

by defendant; and (8) evidence did not exclusively establish as matter of law or by great weight

and preponderance of evidence that defendant was terminated for good cause due to alleged

insubordination and misconduct.

Judgment reformed and as reformed affirmed.

Attorneys and Law Firms

*836 Murry B. Cohen, Wm. B. (Ben) Adair, Brynes, Myers, Adair, Campbell & Sinex, Houston,

for appellant.

Harold Lloyd, Michael L. O'Brien, Houston, for appellee.

Before J. CURTISS BROWN, C. J., and JUNELL and PRICE, JJ.

Opinion

PRICE, Justice.

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

This is a breach of contract case. The principal issue on appeal is whether a provision in the written

contract in question should be construed as a liquidated damage provision or whether it is a penalty

provision which may not be enforced by appellant as liquidated damages. Other points of error

asserted by appellant William J. Bethel, Jr. d/b/a Ra-Comm Electronics relating to attorney's fees

and pre-judgment interest and cross points by appellee Butler Drilling Corporation are discussed

below. We reform the judgment of the trial court to provide for pre-judgment interest from October

1, 1977, on the sum of $10,189.72, and otherwise affirm the judgment of the trial court.

The appellant was originally engaged by Butler Drilling Company to perform certain motor vehicle

radio maintenance and repair duties for appellee. From 1967 to 1974 appellant operated under

an oral month to month agreement. By contract dated August 28, 1974, appellant and Butler

Drilling Company entered into a written contract to perform such motor vehicle radio repairs and

maintenance on a twenty-four hour on-call basis. The services provided for under the contract were

exclusive as to appellee but non-exclusive as to appellant. The contract was signed by appellant

William J. Bethel, Jr., and for Butler Drilling Company was signed by its president, Duncan Butler,

with a notary acknowledgment also dated August 28, 1974. On October 1, 1974, Butler Drilling

Company sold its assets to Mitchell Energy Corporation and Butler Drilling Corporation became

the successor corporation. Duncan Butler also served as president of the successor corporation. The

contract provided that employment of appellant would continue for a period of three consecutive

years beginning September 1, 1974, and ending August 31, 1977. Appellant would be paid in

specified semi-monthly installments with the amount of such payments to increase yearly in

specified sums. Additional labor performed by appellant would be billed and paid for at an hourly

rate of $10 per hour. Appellee agreed to provide either a vehicle or travel reimbursement to

appellant as well as shop space, utilities and parking facilities. Appellee further agreed to furnish

all repair and replacement parts; appellant was to purchase these parts and bill appellee monthly

for them at cost plus fifteen percent. The contract contained the following *837 provisions which

relate to the liquidated damages claimed by appellant in this appeal:

“Because the services to be performed by Ra-Comm are personal services, the

death of William J. Bethel, Jr., or such bad health or accident as shall render him

unable to fully perform said services, shall be grounds to relieve both parties

from any further obligations concerning the contract. In the event that Butler

breaches the contract and fails to perform for any reasons other than those set

out above, then it shall pay as liquidated damages to Ra-Comm the balance of

the monthly installment payments set out above.”

It was undisputed the contract was terminated by appellee on October 24, 1975, but there was a

dispute as to whether such termination was with or without good cause. The jury found in answer

to special issues that Butler Drilling Corporation assumed and ratified appellant's contract with

Butler Drilling Company, that appellant was an independent contractor from October 1, 1974 to

October 24, 1975, that appellant was terminated, that Butler Drilling Corporation did not have

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

good cause to terminate appellant, that Duncan Butler was authorized by Butler Drilling Company

to enter into the contract, that $14,500 would reasonably and fairly compensate appellant for the

termination of the contract, that Butler Drilling Corporation did not convert any of appellant's

personal property on or about October 24, 1975, that appellant did not furnish Butler Drilling

Corporation any equipment for which he was not paid, that reasonable attorney's fee for appellant's

attorneys was $12,000, and that appellant did not convert assets of Butler Drilling Corporation to

his own use. The court on appellee's Motion disregarded the jury finding that appellant did not

convert any of appellee's assets and rendered final judgment in favor of appellant for $10,189.72

by taking the jury's damage answer of $14,500.00 and subtracting the conversion offset admitted

by appellant in the amount of $4,310.28.

The court also awarded $12,000.00 in attorney's fees on the jury finding, and denied appellant's

Motion for Judgment on attorney's fees of $16,500.00. The court further refused appellant's Motion

for Judgment for liquidated damages of $41,825.00 and pre-judgment interest on the liquidated

sum. From this final judgment appellant appeals.

Appellant's seven points of error are that the trial court erred in denying appellant's Motion for

Judgment for liquidated damages provided by the contract and that there was no evidence and

insufficient evidence to prove the liquidated damage clause was a penalty; that the trial court erred

in denying appellant's Motion for Judgment for $16,500.00 attorney's fees and that there was no

evidence and insufficient evidence to support the jury finding of $12,000.00 attorney's fees; and

that the trial court erred in not awarding pre-judgment interest from January 1, 1976.

[1] [2] [3] [4] [5] With respect to appellant's first three points of error, we construe the

language employed in the contract in question to be a penalty, as a matter of law as pleaded by

the appellee in its trial pleading, and as construed by the trial court, rather than a valid liquidated

damage provision as contended by appellant. The liquidated damage provision is not triggered

solely by contract termination and nonpayment of monthly rentals by Butler. The liquidated

damage provision was not carefully drawn and as it was written, it applied equally to any breach of

any provision of the contract by appellee irrespective of the importance or triviality of such breach.

The liquidated damage provision of the contract in question, as written, would apply with equal

force for such trivial breaches by appellee Butler as failing to pay utilities, provide parking space

or pay an additional hourly labor charge of $10.00. Under the liquidated damage clause as written,

appellant would be entitled to the full amount of monthly payments for the full term of the contract

irrespective of the nature of the breach or appellant's actual loss or damage. Because the contract

provides the same reparation *838 for the breach of a trivial or comparatively unimportant

stipulation as for the breach of the most important one or of the whole contract, we hold that the

parties have not adhered to the rule of just compensation and that the provision is a penalty. The

leading case on the subject is Stewart v. Basey, 150 Tex. 666, 668, 245 S.W.2d 484 (Tex.1952),

which involved a building lease providing for monthly rentals of $325.00 per month. Prior to the

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

completion of the lease term, the lessee vacated the building and failed to pay the monthly rentals

as provided in the written contract. The lease contract of the parties included a liquidated damage

provision that provided “(t)he failure of Lessee to make said payment or payments or the breach

of this contract otherwise by him shall render him liable to Lessors, as agreed liquidated damages,

the sum of One Hundred Fifty ($150) Dollars per month for each and every month of the unexpired

term...” (Emphasis added.) Stewart v. Basey, supra at 485. In holding that such stipulated damage

provision would be treated as a penalty the Texas Supreme Court pointed out that the liquidated

damage provision was not carefully drawn and was not limited to the breach of any one particular

covenant, but rather provided for the same reparation for the breach of a trivial or comparatively

unimportant stipulation as for the breach of the most important one of the contract. Therefore, the

Supreme Court reasoned, the provision did not adhere to the rule of just compensation. The court

then reversed and remanded the case to determine the amount of actual damages to which lessor

was entitled for the breach. The court emphasized that damages to be enforceable as liquidated

damages must be uncertain and the stipulation must be reasonable. The right of competent parties

to make their own bargains is not unlimited. The universal rule for measuring damages for the

breach of a contract is just compensation for the loss or damage actually sustained. A party has no

right to have a court enforce a stipulation which violates the principle underlying the rule. Again,

the Supreme Court in Stewart v. Basey, supra, at 486, stated:

“The true theory is well expressed in Williston on Contracts, Revised Edition, Sec. 779, p.

2192, in this language: ‘But as has been seen, the chief, almost the only, means of determining

whether the parties in good faith endeavored to assess the damages is afforded by the amount

of damages stipulated for, and the nature of the breach upon which the stipulation was agreed

to become operative...’ ”

Finally, the Supreme Court quoted from the comments from Restatement of Contracts, Sec. 339,

subsection (1) as follows:

“b. Contracts are frequently made in which performance of very different

degrees of importance and value are promised and one large sum of money

is made payable as damages for any breach whatever. Since such a contract

promises the same reparation for the breach of a trivial or comparatively

unimportant stipulation as for the breach of the most important one or of

the whole contract, it is obvious the parties have not adhered to the rule of

just compensation. In this matter neither the intention of the parties nor their

expression of intention is the governing consideration. The payment promised

may be a penalty, though described expressly as liquidated damages, and vice

versa.”

Appellant here urges that the liquidated damage provision in the contract in question should be

enforced in this case because of the contract termination by appellee without good cause and

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

his nonpayment of monthly rentals, but that it should not be enforced for trivial breaches of the

contract. We recognize it is a stringent case on the facts from appellant's viewpoint, but we do not

believe that we are empowered to pick and choose which breaches are enforceable by liquidated

damages since the provision plainly states it is applicable to all breaches of the contract and the

Supreme Court in Stewart v. Basey has so directly spoken. Further, if there is any doubt on the

question under the language of the instrument, that doubt must be resolved against appellant who

prepared the instrument. *839 American Lease Plan v. Ben-Kro Corporation, 508 S.W.2d 937,

942 (Tex.Civ.App.-Houston (1st Dist.) 1974, writ ref'd n.r.e.). Another similar case in point is

Krenek v. Wang Laboratories, Inc., 583 S.W.2d 454 (Tex.Civ.App.-Waco 1979, no writ) where

the lessor brought action against lessee for failure to make monthly payments under an equipment

lease and sought to recover liquidated damages as provided in the contract. The Waco Court, in

reversing the trial court, followed Stewart v. Basey, supra, and held the provision was a penalty

because it could be triggered by a breach of lesser covenants in the lease and not just by a breach of

a major covenant such as nonpayment of rentals. Still another case in point is Servisco v. Tramco,

Inc., 568 S.W.2d 434 (Tex.Civ.App.-Texarkana 1978, writ ref'd n.r.e.) which relied on Stewart

v. Basey, supra, and distinguished a case relied upon by appellant in the instant case, Oetting v.

Flake Uniform and Linen Service, 553 S.W.2d 793 (Tex.Civ.App.-Fort Worth 1977, no writ).

Appellant relies principally on Oetting v. Flake Uniform & Linen Service, supra. That case is

distinguishable from the instant case because as the Fort Worth Court specifically pointed out at

page 796 of the opinion, the liquidated damage provision in that case could be triggered only by

the failure of the customer to pay the monthly service charge and the termination of the contract

by the supplier because of nonpayment by the customer. The Fort Worth Court pointed out that

the liquidated damage clause as written could not be triggered by any lesser breaches, but could

only be triggered by the most major breach of all, nonpayment. Appellant also cites Johnson

Engineers, Inc. v. Tri-Water Supply Corporation, 582 S.W.2d 555 (Tex.Civ.App.-Texarkana

1979, no writ) and R.M. Robinson v. Granite Equipment Leasing Corporation, 553 S.W.2d 633

(Tex.Civ.App.-Houston (1st Dist.) 1977, writ ref'd n.r.e.). In Johnson Engineers Inc., v. Tri-Water

Supply Corporation, supra, which was a suit for payment under a construction contract, liquidated

damages were pled as an offset to cover the period of delay beyond the agreed completion date

of the contract. There was no defensive pleading that the liquidated damage provision was a

penalty, as was done in the instant case, and there was no evidence of actual damages to show

any disproportionate amount of actual damages to stipulated damages. More importantly, the

liquidated damage clause did not apply to major and trivial covenants under the contract, but

applied only to the payment of $100.00 per day for each day of delay by the appellant after

the allotted construction time under the contract. R.M. Robinson v. Granite Equipment Leasing

Corporation, supra, was a nonjury trial for liquidated damages by reason of defendant-lessee's

default of monthly payments under a personal property lease. The liquidated damage provision

requiring payment of all unaccrued rentals was triggered only by the defendant-lessee's default in

timely payment of such monthly rentals, and not by any breach of any minor or trivial covenant

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

in the lease. Further, there was no defensive pleading that it was a penalty and such defense was

waived. Appellant's first three points of error are overruled.

[6] [7] Appellant contends by his next three points of error that the trial court erred in denying

appellant's Motion for Judgment for attorney's fees in the amount of $16,500 and allowing only

$12,000 attorney's fees on the jury finding, because there was no evidence or insufficient evidence

to support such finding. Appellant's trial attorney testified that he was familiar with fees charged

for services similar to those rendered in this case and that “it is my opinion that ... a proper legal fee

and reasonable fee for the same or similar circumstances in Harris County would be approximately

$16,500.” There was no cross-examination of the witness nor was there any contradictory attorney

fee expert opinion evidence produced by appellee. The jury found $12,000 would be a reasonable

attorney's fee. Appellant recognizes the unbroken long line of case authority holding that the

amount of attorney's fees is a fact issue even when no contradictory evidence is offered. Further,

the trier of fact may determine the credibility of the witness *840 and accept or reject his expert

opinion testimony in whole or in part. However, appellant urges such authority was changed

by the June 6, 1979, amendment to Tex.Rev.Civ.Stat.Ann. art. 2226 (Vernon Supp.1981) which

provided:

“... The usual and customary fees in such cases shall be presumed to be reasonable, but such

presumption may be rebutted by competent evidence...” (Emphasis added).

The amendment further provides the act is to be liberally construed to promote its underlying

purposes. In addition, it is remedial in nature and is intended to apply to all pending and future

actions regardless of the time of institution or of the accrual of any cause of action asserted.

Thus, the 1979 amendment applies to the instant case. Appellant contends the presumption found

in Article 2226, as amended, mandates and makes conclusive an award of attorney's fees in the

amount testified to by appellant's counsel in the absence of contradictory evidence. No cases have

been cited to us by the parties nor have we found any construing the effect or meaning of this

presumption since the 1979 amendments. Appellee cites two cases, Law Offices of James R.

Bass, Inc. v. Bryan, 609 S.W.2d 652 (Tex.Civ.App.-San Antonio 1980, no writ), and Graves v.

Sommerfeld, 618 S.W.2d 952 (Tex.Civ.App.-Waco 1981, no writ). Both of these cases hold the

issue of amount of attorney's fees is a fact issue, but neither case discusses the 1979 amendment,

and it is not shown from the opinions whether the cases were tried before or after the effective

date of the 1979 amendments. See also: Neal v. Neal, 606 S.W.2d 729 (Tex.Civ.App.-Beaumont

1980, no writ) to the same effect.

A look at the legislative history relating to the presumptions on attorney's fees under Article 2226 is

helpful. In 1971, the 62nd Legislature amended Article 2226 to provide the then current State Bar

Minimum Fee Schedule shall be prima facie evidence of reasonable attorney's fees, and in nonjury

cases the court may take judicial knowledge of the minimum fee schedule and of the contents of the

case file in determining the amount of attorneys fees without hearing further evidence. The cases

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

following that amendment uniformly held that the bar fee schedule was not conclusive even in the

absence of contradictory proof but was only prima facie evidence of reasonable attorney's fees.

Aztec Pipe and Supply Company Inc. v. Sundance Oil Company, 568 S.W.2d 401 (Tex.Civ.App.

Houston (1st Dist.) 1978, writ ref'd n.r.e.). Also, opinion testimony as to the value of services

was held not conclusive, and in jury cases if reliance was not made on the bar fee schedule, there

had to be evidence of the reasonableness of attorney's fees to support such an award. Dorsey

v. Aguirre, 552 S.W.2d 576 (Tex.Civ.App.-Waco 1977, writ ref'd n.r.e.). In summary judgment

cases, the courts also uniformly held there could be no summary judgment as to the amount of

reasonable attorney's fees because the uncontradicted opinion of an expert was only an opinion,

thereby raising only a fact issue on the amount. McFadden v. Bresler Malls Inc., 526 S.W.2d 258

(Tex.Civ.App.-Austin 1975, no writ), appeal after remand, 548 S.W.2d 789 (Tex.Civ.App.-Austin

1975, no writ); Coward v. Gateway National Bank of Beaumont, 525 S.W.2d 857 (Tex.1975).

Effective January 1, 1978, however, Tex.R.Civ.P. 166-A was amended to provide that a Summary

Judgment may be based on uncontroverted testimonial evidence of an expert witness as to subject

matter concerning which the trier of fact must be guided solely by the opinion testimony of

experts-if the evidence is clear, positive and direct, otherwise credible and free from contradictions

and inconsistencies and could have been easily controverted. Thus, it became possible to obtain

a Summary Judgment on the issue of reasonable attorney's fees on the basis of uncontradicted

Summary Judgment evidence. Bado Equipment Co., Inc. v. Ryder Truck Lines Inc., d/b/a Ranger

Division, 612 S.W.2d 81, 83 (Tex.Civ.App.-Houston (14th Dist.) 1981, writ ref'd n.r.e.).

Effective August 29, 1977, the 65th Legislature deleted the provision in Art. 2226 *841 which

had provided that the State Bar Minimum Fee Schedule shall be prima facie evidence of reasonable

attorney's fees and that the court in a nonjury case may take judicial knowledge of the schedule

and the contents of the case file in determining the amount of reasonable attorney's fees without

further evidence. That deletion was prompted by the United States Supreme Court decision in

Goldfarb v. Virginia State Bar, 421 U.S. 773, 95 S.Ct. 2004, 44 L.Ed.2d 572 (1975). Thereafter,

in every case positive proof by opinion testimony of reasonableness was required to support the

award of attorney's fees in a jury or nonjury trial. In the absence of testimony that such fees were

reasonable, no such attorney's fees were recoverable. Brown v. De La Garza Service Center, Inc.,

576 S.W.2d 134 (Tex.Civ.App.-Waco 1978, no writ).

Finally, the 66th Legislature, effective June 6, 1979, amended the current Article 2226 to provide

that usual and customary fees in such cases shall be presumed to be reasonable, and also added that

in a jury or nonjury case if the issue of attorney's fees is submitted to the court for determination,

the court may in its discretion take judicial knowledge of the usual and customary fees in such

matters and of the contents of the case file without receiving further evidence. This raises the

question of whether the reasonableness of such an unrebutted presumption of usual and customary

fees under the 1979 amendment should be treated differently than the 1971 prima facie evidence

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

provision of reasonableness under the State Bar Minimum Fee Schedule in a trial on the merits.

Should it be treated as a true presumption which entitles one to an instructed verdict in the absence

of evidence to the contrary? Farley v. M M Cattle Company, 529 S.W.2d 751, 756 (Tex.1975);

Sudduth v. Commonwealth County Mutual Ins. Co., 454 S.W.2d 196, 198 (Tex.1970).

[8] [9] [10] We hold that Article 2226, as amended, does not render conclusive and mandatory

the award of a specific sum of attorney's fees based on uncontradicted expert opinion evidence

of reasonableness or uncontradicted evidence of “usual and customary fees.” We believe the

effect of the statute is to presumptively provide the element of “reasonableness” of attorney's fees

where there is uncontradicted testimony of what “the usual and customary fees” are and that such

evidence will support an award up to that amount, but that such evidence is not conclusive and

mandatory. Where the issue of attorney's fees is determined by the court, whether it is a jury

or nonjury case, the court is authorized to take judicial notice of what the usual and customary

fees are in such matters and of the contents of the case file without hearing further evidence. We

do not believe this means, or that it was intended, that, the court, having taken judicial notice

of “usual and customary fees,” is mandated to award that specific amount in every instance.

Rather, we think the court is authorized to make an award up to that amount. Neither do we

believe the statute mandates the award of a specific sum in a jury or nonjury case where there is

unrebutted direct testimony of “the usual and customary fees,” or of unrebutted opinion testimony

of “reasonable attorneys fees” whether or not they are the usual and customary fees. Under the

current provisions of Tex.R.Civ.P. 166-A, the court may render summary judgment on attorney's

fees if the affidavit or other summary judgment evidence meets the clear, positive, direct and

uncontradicted requirements of that rule. On the other hand, as stated above, we do not believe

Tex.Rev.Civ.Stat.Ann. art. 2226 (Vernon Supp.1981) makes conclusive or mandatory in a trial

on the merits the award of a specific sum based on uncontradicted evidence of “the usual and

customary fees.” This holding and interpretation will reconcile the range of possible attorney's fee

awards in cases where there is uncontradicted evidence of “the usual and customary fees,” with the

cases where there may be no evidence of “usual and customary fees” but there is uncontradicted

opinion evidence of “reasonableness” of attorney's fees. Also, this view of the meaning and

application of Art. 2226 would apply equally to a default judgment situation where there is always

*842 uncontradicted oral testimony or uncontradicted affidavit proof on attorney's fees. We do

not believe Art. 2226 was intended to render conclusive or mandate a specific award of attorney's

fees in default judgment situations.

[11] If the Legislature had intended uncontradicted opinion evidence on reasonableness of

attorney's fees or uncontradicted evidence of “usual and customary” fees to be conclusive and

mandate the award of a specific sum, it could easily have so stated. In the absence of such a clear

statement, we do not believe the Legislature so intended. The previous amendments all appear

to relate to the question of supplying the element of “reasonableness” and of prima facie proof,

and we believe this is also the thrust of the June 6, 1979, amendment. We hold Article 2226, as

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

amended, and the state of the evidence does not mandate the award of $16,500.00 attorney's fees

in the instant case and that the jury answer of $12,000.00 was authorized and supported by the

evidence.

Additionally, in the case at bar, the opinion of appellant's trial attorney on attorney's fees was not

couched in terms of “the usual and customary fees” which is the language used in Article 2226 to

invoke the presumption of reasonableness. Further, the attorney's opinion testimony of the amount

was not clear, direct and positive. The appellant's trial attorney opined that a reasonable fee for

these services would be “approximately $16,500.00.” The uncontradicted evidence did not indicate

what “the usual and customary fees” were, but rather supplied the element of “reasonableness”

and stated a reasonable fee would be approximately $16,500.00. Appellant's points of error four,

five and six are overruled.

[12] [13] [14] [15] Appellant's seventh point of error contends the trial court erred in denying

6% pre-judgment interest from January 1, 1976, under the provisions of Tex.Rev.Civ.Stat.Ann.

art. 5069-1.03 (Vernon Supp.1981). That statute provides:

“When no specified rate of interest is agreed upon by the parties, interest at the

rate of six percent per annum shall be allowed on all accounts and contracts

ascertaining the sum payable, commencing on the thirtieth (30th) day from and

after the time when the sum is due and payable.”

Where pre-judgment interest is sought on the basis of a written contract fitting the description of

Article 5069-1.03 an award of this statutory interest, or interest eo nomine as it is known, may

be supported by a prayer for general relief. See e.g., The Republic National Bank of Dallas v.

Northwest National Bank of Fort Worth, 578 S.W.2d 109 (Tex.1978) (allowing pre-judgment

interest on a letter of credit), and Miner-Dederick Construction Corporation v. Mid-County

Rental Service, Inc., 603 S.W.2d 193 (Tex.1980) (allowing pre-judgment interest on construction

contracts). It is distinguished from a situation where pre-judgment interest is sought at common

law as an element of damages, in which case the plaintiff must have a pleading to support pre-

judgment interest. Black Lake Pipe Line Company v. Union Construction Company, Inc., 538

S.W.2d 80 (Tex.1976) (quantum meruit under a construction contracts); Pickett v. J. J. Willis

Trucking Company, 624 S.W.2d 664 (Tex.Civ.App.-Houston (14th Dist.) 1981, writ ref'd n.r.e.);

Zuider Zee Oyster Bar, Inc. v. Martin, 503 S.W.2d 292 (Tex.Civ.App.-Fort Worth 1973, writ ref'd

n.r.e.); City of Galveston v. Russo, 508 S.W.2d 882 (Tex.Civ.App.-Houston (14th Dist.) 1974,

writ ref'd n.r.e.). In either case, pre-judgment interest is recoverable as a matter of right where an

ascertainable sum of money is determined to have been due and payable at a date certain prior

to judgment. The Republic National Bank of Dallas v. Northwest National Bank of Fort Worth,

supra; Black Lake Pipe Line Company v. Union Construction Company, Inc., supra. Pre-judgment

interest is that interest calculated on a sum payable to the plaintiff from the time of his loss or injury

to date of judgment. The Republic National Bank of Dallas v. Northwest National Bank of Fort

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

Worth, supra. Appellant did not have a specific pleading for pre-judgment interest in the instant

case, but he *843 had a general prayer for relief which is sufficient for the award of pre-judgment

interest under Art. 5069-1.03. The Republic National Bank of Dallas v. Northwest National Bank

of Fort Worth, supra, at 116.

[16] In the instant case, the suit was for recovery of damages based on the breach of a written

contract. The amount of appellant's damages cannot be ascertained on the basis of the liquidated

damage clause because it has been construed as a penalty provision. However, the contract in

question ended August 31, 1977, and the actual damages were found by the jury and were

ascertained in the damage issue as a definite sum as of September 1, 1977, less the conversion

offset admitted by appellant. We hold that appellant was entitled to recover 6% pre-judgment

interest under Article 5069-1.03 on the sum of $10,189.72 from October 1, 1977, pursuant to the

thirty day provision of that statute to date of judgment on June 9, 1980.

[17] Appellee asserts ten cross-points of error. In his first two cross-points, he argues the evidence

conclusively showed as a matter of law that Butler Drilling Corporation did not assume or ratify

the contract, or that the jury finding to special issue number one was so against the great weight and

preponderance of the evidence as to be manifestly unjust. The contract in question indicates it was

signed and notarized on August 24, 1974, during which period of time negotiations were being had

for purchase of the assets of Butler Drilling Company. It was signed by Duncan Butler, President

of Butler Drilling Company, who also was president of the successor corporation, Butler Drilling

Corporation. There was evidence the contract in question was listed as an asset of Butler Drilling

Company when the assets were sold and the successor corporation Butler Drilling Corporation

acquired them. The attorney for the purchaser discussed the contract with Mr. McClain, Vice-

President of Butler Drilling Company, who also later became vice-president of the successor

corporation, and the attorney testified Mr. McClain told him the contract was oral. Butler Drilling

Corporation abided by and operated under the contract for a year from October 1, 1974, to October

24, 1975, when it terminated the contract. In addition, a letter from Mr. McClain was in evidence

which referred to the written contract while he was acting as vice-president of Butler Drilling

Corporation. Appellant contends that Duncan Butler actually signed the contract sometime after

August 24, 1974, and that Butler Drilling Corporation thought the contract was an oral month to

month arrangement rather than a written contract. While the evidence is conflicting, we find there

was sufficient evidence to support the jury answer to special issue number one and said answer

was not against the great weight and preponderance of evidence. Appellee's first and second cross-

points are overruled.

[18] In its cross-points three and four, appellee contends the evidence conclusively showed as a

matter of law that Duncan Butler did not have authority to sign the contract on behalf of Butler

Drilling Company, or that the jury answer to special issue number five to such effect was so

against the great weight and preponderance of the evidence as to be manifestly unjust. Appellee

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

contends there is no authority shown because the charter, by-laws and corporate minutes do not

reflect the granting of any authority and the contract in question is not a matter in the ordinary

and usual course of company business indicating inherent apparent authority. The special issue

included both actual and apparent authority. The only Board of Directors for the company was Joe

K. Butler, chairman of the Board; Duncan Butler, President; and Lee McClain, Vice-President.

Joe K. Butler testified that he instructed Duncan Butler and Lee McClain to negotiate a contract

with appellant. The by-laws of the corporation provide the President has the power to employ and

discharge all employees and agents for the company. Both Butler Drilling Company and Butler

Drilling Corporation operated and acted under the contract for more than a year, which provided

for maintenance of the company's radio equipment, an activity *844 in the every day operation

of the company. This was the same activity which had been carried on by appellant for Butler

Drilling Company on a month to month oral basis for nine to ten years prior to the date of the

written contract. Appellee's cross-points three and four are overruled.

[19] [20] [21] In its fifth and sixth cross-points, appellee says the evidence conclusively shows

as a matter of law appellant is judicially estopped from claiming unlawful termination by reason of

testimony given in another lawsuit where he stated he quit, or that the answer by the jury to special

issue number three that plaintiff was terminated is so against the great weight and preponderance

of the evidence as to be manifestly unjust because of this prior testimony of plaintiff. While

appellant appeared to make conflicting statements as to whether he quit or was terminated, he later

explained the discrepancy. He said he was confused and thought he was being asked about the

other corporation, not Butler Drilling Corp., and equivocated on the earlier testimony that he quit.

One of the requirements for application of the doctrine of judicial estoppel is that the statement

must be deliberate, clear and unequivocal. American Savings and Loan Association of Houston

v. Musick, 531 S.W.2d 581, 589 (Tex.1975). The elements related to judicial estoppel are not

shown conclusively or by the overwhelming weight and preponderance of the evidence, and we

believe the question went to the weight of the evidence. Further, no one contended appellant quit

at the instant trial. Both parties to the instant trial agreed appellant was terminated by appellee. The

contested issue was whether the termination was with or without good cause. Appellee's cross-

points five and six are overruled.

[22] Appellee's cross-points seven and eight assert that as a matter of law appellant converted

property of the value of $6420.28, rather than the $4300.00 awarded by the court, and that by

the great weight and preponderance of evidence, the jury should have answered $6420.28 to the

conversion issue in special issue number thirteen. One of the items of conversion was a General

Electric base station radio for which appellee had paid appellant but had never received. Appellant

admitted by pleading and evidence this conversion of payment and this was the item which the trial

court offset against the damages awarded appellant when the court disregarded the jury answer

to special issue number thirteen. The other items contended by appellant to establish conversion

as a matter of law or by the overwhelming weight and preponderance of the evidence relate to

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Bethel v. Butler Drilling Co., 635 S.W.2d 834 (1982)

evidence of appellee's padding of an expense account of $100.00 per month for approximately

ten (10) months and the removal of two A.C. and D.C. test stands by appellant valued at $600.00

each. The burden of proof on the issue was on appellee and from a review of the evidence we

do not believe conversion or the specific amounts claimed were established as a matter of law or

by an overwhelming weight and preponderance of the evidence. We overrule appellee's seventh

and eighth cross-points.

[23] Appellee's final two cross-points of error assert the evidence conclusively established as a

matter of law appellant was terminated for good cause and that special issue number four should

not have been submitted to the jury, or else the jury's answer thereto should have been disregarded.

Further, appellee contends that the jury finding to special issue number four was so against the

great weight and preponderance of evidence as to be manifestly unjust. The evidence was in

conflict on the question but in our view it does not show as a matter of law or by the great weight

and preponderance of the evidence that appellant was terminated for good cause due to alleged

insubordination and misconduct. Appellee's cross-points nine and ten are overruled.

The judgment of the trial court is reformed to provide for six percent prejudgment interest on the

sum of $10,189.72 from October 1, 1977, to date of judgment on June 9, 1980 with post judgment

interest as provided by law. The judgment of the trial court is otherwise affirmed.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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Bethel v. Butler Drilling Co., 635 S.W.2d 834

History (1)

Direct History (1)

1. Bethel v. Butler Drilling Co.

635 S.W.2d 834 , Tex.App.-Hous. (14 Dist.) , May 27, 1982 , writ refused n.r.e. ( Sep

15, 1982 )

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CDS Enterprises, Inc. v. Myrad Real Estate, Inc., Not Reported in S.W.2d (1999)

1999 WL 548226

1999 WL 548226

Only the Westlaw citation is currently available.

NOTICE: NOT DESIGNATED FOR PUBLICATION. UNDER TX R RAP RULE

47.7, UNPUBLISHED OPINIONS HAVE NO PRECEDENTIAL VALUE BUT

MAY BE CITED WITH THE NOTATION “(not designated for publication).”

Court of Appeals of Texas, Houston (14th Dist.).

CDS ENTERPRISES, INC. d/b/a Texcon, Appellant,

v.

MYRAD REAL ESTATE, INC. and Fountainhead Development Corp., Inc., Appellees.

No. 14-97-00197-CV. | July 29, 1999.

On Appeal from the 361st District Court, Brazos County, Texas; Trial Court Cause No.

42,016-361.

Before Justices ANDERSON, EDELMAN, and SEARS. *

OPINION

ROSS A. SEARS, Justice.

*1 CDS Enterprises, Inc. d/b/a Texcon (Texcon) appeals judgment in favor of Myrad Real Estate,

Inc. (Myrad) and Fountainhead Development Corp., Inc. (Fountainhead). Texcon brings eleven

points of error, while Myrad brings four cross-points. We affirm in part as modified and reverse

and render in part.

I. Background

Myrad and Fountainhead are residential real estate developers. Fountainhead is a wholly owned

subsidiary of Myrad. Texcon is a construction contractor. On June 23, 1994, Myrad entered into

a written contract with Texcon for the construction of roadway, drainage, sewer, and waterline

improvements to the Cat Hollow subdivision in College Station, Texas (the Cat Hollow contract).

On October 6, 1994, Fountainhead entered into a written contract with Texcon for the construction

of similar improvements to the Cypress Meadow subdivision and the Hidden Hollow subdivision,

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

CDS Enterprises, Inc. v. Myrad Real Estate, Inc., Not Reported in S.W.2d (1999)

1999 WL 548226

and for improvements to Rock Prairie Road, also located in College Station (the Springbrook

contract).

Texcon claimed it entered into several oral agreements with Myrad and Fountainhead for

additional work outside the written contracts and was never paid for this work. Consequently,

Texcon filed three mechanic's and materialman's liens on Cat Hollow, Cypress Meadow, and

Hidden Hollow.

Subsequently, Myrad and Fountainhead sued Texcon, each asserting a claim for breach of contract

and seeking actual and liquidated damages for the untimely completion of the Cat Hollow and

Springbrook contracts. Furthermore, Myrad and Fountainhead each sought a declaratory judgment

that Texcon's liens were invalid and unenforceable because they were not filed timely. Myrad

also brought a claim for fraud, alleging Texcon falsely represented on April 19, 1995, that it was

accepting payment in full and had no outstanding claims for work performed before such date.

Texcon filed a counterclaim, alleging breach of contract for Myrad and Fountainhead's failure

to pay for additional work performed pursuant to oral agreements. Texcon also brought a claim

for fraud, alleging several misrepresentations, including: (1) Myrad and Fountainhead wanted an

informal working relationship in which they could request that work be performed by Texcon on

an as needed basis and Texcon would be compensated for such work; and (2) Texcon would not

be subject to any penalties as a result of any delays or interference caused by Myrad, Fountainhead

or their other contractors. Texcon also sought (1) a declaratory judgment that its liens were valid,

and (2) the foreclosure of its liens and the sale of the properties.

At trial, the jury found: (1) Texcon did not breach the Springbrook contract; (2) Texcon breached

the Cat Hollow contract and awarded Myrad $10,000.00 for the cost of obtaining a bond to secure

Texcon's lien claims, but did not award any damages for lost profits or lost business opportunity;

(3) Myrad or Fountainhead breached an oral or written agreement with Texcon and awarded

Texcon $75,000.00; (4) Texcon did not commit fraud against Myrad or Fountainhead; (5) Myrad

and Fountainhead did not commit fraud against Texcon; and (6) Myrad or Fountainhead acted with

intent to harm, or with conscious indifference to the rights of Texcon, but did not award exemplary

damages. The jury awarded attorney's fees to Texcon in the amount of $83,000.00 for trial and

additional amounts for appeal to the court of appeals and the Texas Supreme Court.

*2 The jury was further asked to determine the start and completion dates for Texcon's work under

the contracts. The jury found: (1) the beginning date for Cat Hollow was July 5, 1994, and the

completion date was January 30, 1995; (2) the beginning date on Hidden Hollow was December

21, 1994, and the completion date was April 14, 1995; and (3) the beginning date for Cypress

Meadow was October 6, 1994, and the completion date was February 12, 1995.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

CDS Enterprises, Inc. v. Myrad Real Estate, Inc., Not Reported in S.W.2d (1999)

1999 WL 548226

Myrad and Fountainhead filed a motion for partial judgment on the verdict, motion for attorney's

fees, motion for liquidated damages, and motion for partial judgment notwithstanding the verdict.

Granting all of Myrad and Fountainhead's motions, the trial court entered judgment that (1) Myrad

recover liquidated damages in the amount of $29,500.00, plus prejudgment interest, and actual

damages in the amount of $10,000.00, plus prejudment interest on the Cat Hollow contract; (2)

Fountainhead recover liquidated damages in the amount of $65,000.00, plus prejudgment interest

on the Springbrook contract; (3) Myrad and Fountainhead recover attorney's fees in the amount of

$100,000.00 for services rendered through the rendition of judgment, plus additional amounts for

appeal; and (4) Texcon's liens were invalid and unenforceable. The court further entered judgment

on the jury's award of $75,000.00 for breach of contract and attorney's fees to Texcon.

II. Cat Hollow

A. Liquidated Damages

In its first point of error, Texcon claims the trial court erred in awarding liquidated damages to

Myrad under the Cat Hollow contract. Texcon first argues the liquidated damages clause is an

unenforceable penalty. A liquidated damages clause is the measure of recovery in the event of a

breach of the contract. See Newsom v. State, 922 S.W.2d 274, 281 (Tex.App.-Austin 1996, writ

denied); Baker v. International Record Syndicate, Inc., 812 S.W.2d 53, 55 (Tex.App.-Dallas 1991,

no writ). Whether a liquidated damages provision is enforceable is determined by a two-prong

test: (1) the harm caused by the breach must be incapable or difficult of estimation, and (2) the

amount of liquidated damages called for is a reasonable forecast of just compensation. See Phillips

v. Phillips, 820 S.W.2d 785, 788 (Tex.1991). Whether a contractual provision is an enforceable

liquidated damages provision or an unenforceable penalty is a question of law. See id.Factual

issues, however, must sometimes be resolved before a legal conclusion can be determined. See id.

The party asserting that the liquidated damages clause is an unenforceable penalty bears the burden

of proving it is a penalty. See R. Conrad Moore & Assocs., Inc. v. Lerma, 946 S.W.2d 90, 95

(Tex.App.-El Paso 1997, writ denied); Commercial Union Ins. Co. v. La Villa Indep. Sch. Dist.,

779 S.W.2d 102, 106 (Tex.App.-Corpus Christi 1989, no writ). To satisfy its burden, Texcon was

required to prove the amount of Myrad's actual damages, if any, for establishing an absence of

an approximation between the actual loss and the stipulated sum. See Johnson Eng'rs, Inc. v. Tri-

Water Supply Corp., 582 S.W.2d 555, 557 (Tex.Civ.App.-Texarkana 1979, no writ); Robinson v.

Granite Equip. Leasing Corp., 553 S.W.2d 633, 637 (Tex.Civ.App.-Houston [1st Dist.] 1977, writ

ref'd n.r.e.). If the liquidated damages are shown to be disproportionate to the actual damages, the

liquidated damages provision must be declared a penalty and recovery is limited to actual damages

proven.Commercial Union Ins. Co., 779 S.W.2d at 107.

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CDS Enterprises, Inc. v. Myrad Real Estate, Inc., Not Reported in S.W.2d (1999)

1999 WL 548226

*3 The liquidated damages clause in the Cat Hollow contract states in pertinent part:

If the CONTRACTOR should neglect, fail, or refuse to complete work within the time herein

specified, or any proper extension thereof granted by the OWNER'S REPRESENTATIVE,

then the CONTRACTOR does hereby agree as part of consideration for the awarding of this

contract, that OWNER may withhold permanently from CONTRACTOR'S total compensation

the sum of Five Hundred and no/100 Dollars ($500.00) for each and every calendar day that the

CONTRACTOR shall be in default after the time stipulated for completing the work, not as a

penalty, but as liquidated damages for the breach of [the] contract.

***

The amount is fixed and agreed upon by and between the CONTRACTOR and the OWNER

because of the impractability and extreme difficulty in fixing and ascertaining actual damages.

The OWNER would, in such an even [sic], sustain, and the amount is agreed to be damages the

OWNER would sustain and shall be retained by [the] OWNER from current periodic estimates

for payment or from final payment.

Texcon claims Myrad's damages were not uncertain or difficult to estimate because Myrad

presented evidence regarding the amount of its damages. Dan Bensimon, one of Myrad's owners,

testified that Myrad lost $52,000.00 from the inability to use and sell the Cat Hollow lots during

Texcon's delayed performance. Another court of appeals has rejected a similar argument. See

Murphy v. Cintas Corp., 923 S.W.2d 663, 666 (Tex.App.-Tyler 1996, writ denied). In Murphy,

the court observed that even if actual damages could have been calculated at the time of trial,

such testimony was long after the execution of the contract. See id.The uncertainty or difficulty

in determining damages must have existed at the time the contract was executed. See id.;Oetting

v. Flake Uniform & Linen Serv. Inc., 553 S.W.2d 793, 796 (Tex.Civ.App.-Fort Worth 1977, no

writ). Similarly, Bensimon's testimony regarding Myrad's damages was two years after the parties

entered into the Cat Hollow contract.

Moreover, Texcon did not meet its burden in proving the liquidated damages clause was

unenforceable because it failed to prove the amount of Myrad's actual damages. See Murphy, 923

S.W.2d at 666; Johnson Eng'rs, Inc., 582 S.W.2d at 557; Robinson, 553 S.W.2d at 637. To satisfy

its burden, Texcon would have had to offer evidence of Myrad's actual damages. Texcon failed

to introduce such evidence. 1

*4 Texcon also asserts there is no reasonable relation between the jury's award of $0 for lost

profits and lost business opportunities and the trial court's award of $29,500.00 for liquidated

damages. The jury found Texcon breached the Cat Hollow contract, but awarded no damages for

lost profits and lost business opportunities. The contract provided Texcon had 150 days in which

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to complete its work. The jury found Texcon began construction under the Cat Hollow contract

on July 5, 1994, and completed performance on January 30, 1995, which was 59 days late. Myrad

moved for judgment N.O.V. on its' liquidated damages. The trial court granted Myrad's motion

and entered a finding of fact that Texcon completed its work 59 days late. The trial court further

entered conclusions of law that Myrad's damages were uncertain and difficult or impossible to

calculate, and that $500.00 per day liquidated damages was reasonable. Therefore, we find the

trial court's award of liquidated damages in the amount of $29,500.00 is proper.

Next, Texcon argues Myrad waived the liquidated damages clause by releasing the retainage. See

Anderson Dev. Corp. v. Coastal States Crude Gathering Co., 543 S.W.2d 402, 405 (Tex.Civ.App.-

Houston [14th Dist.] 1976, writ ref'd n.r.e.). Waiver is an affirmative defense which may be

asserted against a party who intentionally relinquishes a known right or engages in intentional

conduct which is inconsistent with the claimed right. See Tenneco, Inc. v. Enterprise Prods. Co.,

925 S.W.2d 640, 643 (Tex.1996). In determining whether waiver has occurred, the court must

examine the acts, words, or conduct of the parties and it must be unequivocally manifested that it is

the intent to no longer assert the right. See Robinson v. Robinson, 961 S.W.2d 292, 299 (Tex.App.-

Houston [1st Dist.] 1997, no writ.).

Debbie Keating, the engineer on Cat Hollow, reviewed Texcon's invoices for approval for

payment. When she received the “Invoice for Balance Due” from Texcon in April 1995, she called

O.E. “Buster” Smith, president of Texcon, to determine if it was, in fact, the last invoice because

it showed retainage was due. After speaking to Smith, she recommended paying the retainage,

but not all the items on the invoice. If this had not been the last invoice, Keating would not have

recommended paying the retainage.

After paying the retainage, Myrad received several invoices on April 28, 1995, in the amount

of $59,000 for work performed months earlier, which Texcon asserts was extra-contractual done

pursuant to oral agreements. Keating did not believe these invoices were valid because they were

for delay or idle time, which were expressly not payable under the contract, and for backfilling,

which was incidental to work and not a separate item under the contract.

Bensimon testified that Texcon was to submit its bills on or before the 25th of each month for work

done in the preceding month. This procedure included bills for any additional work not covered

by the written contract. Myrad could have no way of knowing Texcon would submit additional

invoices for work done months before. Under these circumstances, it cannot be said Myrad waived

its right to seek liquidated damages. Texcon's first point of error is overruled.

B. Delay in Performance

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*5 In its second point of error, Texcon claims the trial court erred in awarding liquidated damages

to Myrad under the Cat Hollow contract because any delay in performance was excused by the

untimely performance of another contractor hired by Myrad. In its third point of error, Texcon

claims the evidence is legally and factually insufficient to support the jury's finding that Texcon

breached the Cat Hollow contract.

A contractor is excused from performance when the owner fails to provide the required means

to complete the contract. See Sage Street Assocs. v. Northdale Constr. Co., 809 S.W.2d 775, 777

(Tex.App.-Houston [14th Dist.] 1991), aff'd in part and remanded in part on other grounds,863

S.W.2d 438 (1993). Excuse for nonperformance is an affirmative defense upon which Texcon had

the burden of proof. SeeTEX.R.CIV.P. 94.

Because Texcon bore the burden of proof at trial that its untimely performance was excused, it must

demonstrate on appeal that the evidence conclusively established all vital facts in support of the

issue. See Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex.1989). For a no evidence point

of error, we examine the record for all evidence that supports the jury's finding, while ignoring

all evidence to the contrary. See id.If there is no evidence to support the jury's finding, we then

examine the entire record to determine if the contrary proposition is established as a matter of

law. See id.

In reviewing a challenge that the jury's adverse finding is against the great weight and

preponderance of the evidence, we must examine the entire record, considering both the evidence

in favor of, and contrary to, the challenged finding. See Cain v. Bain, 709 S.W.2d 175, 176

(Tex.1986) (per curiam). We must uphold the jury's finding unless it so against the great and weight

and preponderance of the evidence as to be manifestly unjust or wrong. See Pool v. Ford Motor

Co., 715 S.W.2d 629, 635 (Tex.1986). The jury as trier of fact is the sole judge of the credibility

of the witnesses and the weight to be given to their testimony. See Times Herald Printing Co. v.

A.H. Belo Corp., 820 S.W.2d 206, 213 (Tex.App.-Houston [14th Dist.] 1991, no writ). Because

the appellate court is not the fact finder, it may not substitute its own judgment for that of the trier

of fact, even if a different answer could be reached on the evidence. See Maritime Overseas Corp.

v. Ellis, 971 S.W.2d 402, 407 (Tex.), cert. denied,525 U.S. 1017, 119 S.Ct. 541, 142 L.Ed.2d 450

(1998). The amount of evidence necessary to affirm a judgment is far less than that necessary to

reverse a judgment. See Peter v. Ogden Ground Servs., Inc., 915 S.W.2d 648, 650 (Tex.App.-

Houston [14th Dist.] 1996, no writ).

*6 Myrad argues Texcon, by its failure to submit a separate jury question on excuse rather than an

instruction, waived any finding that its breach of the Cat Hollow contract was excused. We note,

however, that in broad form submission, an affirmative defense may be submitted as an instruction

where the burden of proof is properly placed. Cropper v. Caterpillar Tractor Co., 754 S.W.2d 646,

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651 (Tex.1988); Edwards Transp., Inc. v. Circle S Transp., Inc., 856 S.W.2d 783, 788 (Tex.App.-

Amarillo 1993, no writ). The question submitted to the jury asked:

Did Texcon breach the Cat Hollow contract and proximately cause damage to

Myrad or Fountainhead?

Several instructions on excuse were submitted to the jury:

Failure to comply by a party is excused if compliance is waived by the other party.

A waiver is an intentional surrender of a known right or intentional conduct inconsistent with

claiming the right.

Failure to comply by a party is excused if all the following circumstances occurred:

1. the acting party:

a. By words or conduct made a false representation or concealed material facts,

b. With knowledge of the facts or with knowledge or information that would lead a reasonable

person to discover the facts, and

c. With the intention that the other party would rely on the false representation or concealment

in acting or deciding not to act; and

2. the excused party:

a. Did not know and had no means of knowing the real facts and

b. Relied to its detriment on the false representation or concealment of material facts.

Failure to comply, if any, by a party is excused by the other party's previous failure, if any, to

comply with a material obligation of the same agreement.

Here, because the burden of proof was properly placed, Texcon did not waive this defense. In any

event, we find that Texcon's challenge to the sufficiency of evidence that its delayed performance

was not excused must fail.

As previously noted, the contract provided Texcon had 150 days to complete its work. The jury

found Texcon began construction under the Cat Hollow contract on July 5, 1994, and completed

performance on January 30, 1995, when Texcon signed the completion certificate, or 209 days. In

accordance with the jury's finding, Texcon's timely completion of the Cat Hollow contract should

have occurred by December 1, 1994.

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The road work for Cat Hollow involved the laying of (1) the subgrade, (2) the curbs and gutters,

(3) the base, and (4) the asphalt. Myrad contracted with Texcon for the subgrade, base, and asphalt,

but not the curbs and gutters. South Construction was to provide that work. In subgrading, the

entire road bed is graded, and then lime is laid down to stabilize the surface. The curb and gutter

work cannot begin until the lime stabilization is complete.

*7 On October 3, 1994, Texcon submitted a construction schedule to Myrad, under which

Texcon would complete the subgrade by October 17, 1994. Texcon allowed eleven to sixteen

days for South Construction to put in approximately 5000 linear feet of curbs and gutters. Texcon

claims South Construction was to begin work on the curbs and gutters on October 17, 1994,

completing such work by November 1, 1994. Myrad does not dispute that it should have taken

South Construction eleven to sixteen days to complete its work. Myrad asserts Texcon completed

the subgrade late. Therefore, South Construction started the curb and gutter work late. Myrad also

maintains that South Construction timely completed its work once it was able to start work.

At trial and at deposition, Smith gave conflicting testimony regarding when Texcon had completed

the subgrade. At trial, Smith testified that Texcon completed the subgrade on October 25, 1994. In

his deposition testimony, which was read at trial, Smith stated that Texcon completed the subgrade

on November 5, 1994. Therefore, South Construction, by either date, could not have started its

work on October 17, 1994.

Bensimon testified, based on concrete delivery tickets, the curb and gutter work started on

November 7 or 8, 1994. This is consistent with Smith's testimony that Texcon completed the

subgrade on November 5. Myrad further presented evidence that Texcon was laying the base in

December. David Dobbs, the city inspector, testified that his log entry for December 9, 1994,

shows that Texcon was laying the base on two of the four streets in Cat Hollow, which indicated to

him that South Construction had finished the curbs and gutters on those two streets. Furthermore,

Dobbs testified that his log entry for December 13 1994, states that Texcon was “laying base

throughout entire job.”

The final stage of street construction, which is laying the base, involves hauling in the rock which

makes the base, spreading it, blading it with a grader, watering it, compacting it, and finally having

it tested for compaction. Dobbs testified that his log entries for the compaction testing showed that

testing was occurring on all four streets on December 21, 1994, but he did not have any test dates

after that. Therefore, according to Myrad, the base was completed as of December 21, 1994.

Texcon disputes Myrad's claim that it had completed the base as of December 21, 1994. With

respect to compaction testing, Dobbs further stated he felt sure there was other testing after

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December 21, 1994, even though he was not able to find such entries after that date. The

compaction testing results were not entered into evidence.

Texcon further points to testimony that the quality of South Constructions's work was poor and

had to be redone through out the subdivision. Dobbs testified that he believed this curb and gutter

project was the first such project for Larry Schultz of South Construction. Smith testified that

South Construction tried to use a machine to pour the concrete, but its crew did not know how

to use the machine and spent considerable time practicing with it. Moreover, Dobbs testified he

found the curb and gutter work to be of poor quality and not acceptable to the standards for the

City of College Station. Dobbs stated that those unacceptable sections of curb and gutter had to

be taken out and redone, taking additional time.

*8 Dobbs' log entry for December 13, 1994, shows, in addition to “Texcon-laying base through

out entire job,” that South Construction needed to remove and replace two sections of the curb.

Dobbs' log entry for January 3, 1995, states “Mike South-told him to tear out curb in culdesac [sic]

on Lynx and put it back to grade!”Dobbs's log book contains several entries showing that Texcon

was doing backfilling work on the curbs in late December 1994, and backfilling the sidewalks

through most of January 1995.

The jury, as the sole judge of the credibility of the witnesses and the weight to be given to their

testimony, was entitled to discount the testimony of any witness. See Skrepnek v. Shearson Lehman

Bros., Inc., 889 S.W.2d 578, 579 (Tex.App.-Houston [14th Dist.] 1994, no writ). Because we are

not the fact finder, we may not substitute our own judgment for that of the jury, even if we were

to draw a different conclusion on the evidence. See Maritime Overseas Corp., 971 S.W.2d at 407.

Therefore, we cannot say the jury's finding is against the great weight and preponderance of the

evidence. Texcon's second and third points of error are overruled.

C. Bond

In its fourth point of error, Texcon challenges the legal and factual sufficiency of the evidence in

support of the jury's finding that Myrad's cost of obtaining a “bond” was $10,000.00. 2 The question

submitted to the jury asked for “[t]he reasonable and necessary cost of obtaining a bond.”Texcon

first asserts the only evidence Myrad presented concerned a letter of credit, not a bond. In the

alternative, Texcon argues there is no evidence or insufficient evidence for an award greater than

$5,000.00.

*9 Bensimon testified that to convey clear title to the Cat Hollow lots, Myrad had to obtain

a “nonstatutory bond.” To this end, Myrad executed an “Indemnity Agreement with Letter of

Credit to Protect Against Defects in Title,” under which Myrad indemnified University Title

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Company against all adverse claims, including Texcon's liens. Commercial National Bank issued a

$119,000.00 letter of credit to the title company to secure Myrad's obligation under the Indemnity

Agreement.

Texcon argues Myrad's letter of credit is not a suretyship bond because it is not a negotiable

instrument. SeeTEX.BUS. & COM.CODE ANN. § 3.104(a); Heritage Housing Corp. v. Ferguson,

651 S.W.2d 272, 273 (Tex.App.-Dallas 1983, no writ). 3 No definition of “bond” was provided in

the jury charge which would limit the type of instrument for which Myrad could recover damages.

Here, the letter of credit served the same purpose as a “bond,” that is, to indemnify Myrad against

Texcon's liens. Accordingly, the evidence is legally and factually sufficient to support a finding

that Myrad had obtained a “bond.”

In the alternative, Texcon contends there is no evidence or factually insufficient evidence that

Myrad expended more than $5,000.00 to obtain the letter of credit. Bensimon testified that the total

expense of the letter of credit was $5,000.00, “not including having to put up cash collateral for

the letter of credit.”A review of the record reflects no evidence of the amount of damages Myrad

sustained from the of loss of the use of the cash it had put up as collateral for the letter of credit.

Therefore, we find the evidence legally insufficient to support the jury's award of $10,000.00 for

the cost of obtaining a bond. Texcon's fourth point of error is sustained and the award for obtaining

a bond is reduced to $5,000.00.

III. Springbrook Contract

*10 In its fifth point of error, Texcon asserts the trial court erred in awarding liquidated damages

to Fountainhead under the Springbrook contract. At trial, Fountainhead claimed Texcon breached

the Springbrook contract by failing to complete timely all improvements to Hidden Hollow. 4 The

jury found that Texcon did not breach the Springbrook contract and, consequently, awarded no

damages. In a summary judgment hearing prior to trial, the court found that Texcon commenced

work on the Springbrook contract, which included Cypress Meadow and Hidden Hollow, on

October 6, 1994, and completed work on April 14, 1995. In a separate question regarding Texcon's

beginning and completion dates, the jury found Texcon began construction on Hidden Hollow on

December 21, 1994, and completed construction on April 14, 1995, 114 days later.

Fountainhead filed a motion for partial judgment notwithstanding the verdict, asking that the

trial court enter judgment against Texcon for breach of the Springbrook contract and to enforce

the liquidated damages provision for 130 days in accordance with the court's previous summary

judgment finding. Granting the motion, the trial court awarded $65,000.00 in liquidated damages

to Fountainhead. Subsequently, the trial court entered findings of fact and conclusions of law to

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the effect that Fountainhead's damages were uncertain and difficult or impossible to calculate, and

$500.00 per day liquidated damages are reasonable.

At trial, Texcon argued its breach, if any, was excused by Bensimon “pulling” its crews of the

Hidden Hollow project to work on the Cypress Meadow subdivision. 5 Therefore, we shall address

the propriety of the trial court's granting Fountainhead's motion for partial JNOV. 6

*11 A motion for JNOV is based upon the same grounds that have or could have been urged in

a motion for directed verdict. SeeTEX.R.CIV.P. 301. A JNOV may be upheld only if there is no

evidence to support the jury's findings. See Mancorp., Inc. v. Culpepper, 802 S.W.2d 226, 227

(Tex.1990). In considering a “no evidence” point, we review the record in the light most favorable

to the jury's findings, considering only the evidence and inferences supporting the finding and

rejecting evidence and inferences to the contrary. See Navarette v. Temple Indep. Sch. Dist., 706

S.W.2d 308, 309 (Tex.1986). If more than a scintilla of evidence supports the jury's finding, the

verdict must be upheld, and the JNOV reversed. See Culpepper, 802 S.W.2d at 228; Navarette,

706 S.W.2d at 310.

Smith, and Texcon's project manager Gary Arnold, testified that once Texcon started work on

Hidden Hollow, Fountainhead sent Texcon's crews to work on Cypress Meadow. Dobbs testified

that he witnessed Texcon workmen being pulled from the Hidden Hollow worksite. Considering

only the evidence supporting the jury's finding of no breach, and rejecting all evidence to the

contrary, we find there is more than a scintilla of evidence to support the jury's finding that Texcon

did not breach the Springbrook contract on the basis that any delay by Texcon was caused by

Fountainhead. Therefore, the trial court erred in granting Fountainhead's motion for JNOV and

awarding Fountainhead liquidated damages on its own finding of breach. Accordingly, Texcon's

fifth point of error is sustained.

IV. Special Exceptions

In its seventh point of error, Texcon contends the trial court erred in refusing to give Texcon an

opportunity to amend its pleadings after sustaining a special exception on a claim for constructive

fraud. When the trial court sustains special exceptions, the pleader must be given, as a matter of

right, an opportunity to replead. Friesenhahn v. Ryan, 960 S.W.2d 656, 658 (Tex.1998). Only

after the special exceptions are sustained and the party has been given an opportunity to amend its

pleadings may a claim be dismissed for failure to state a cause of action. See Centennial Ins. Co. v.

Commerical Union Ins. Cos., 803 S.W.2d 479, 483 (Tex.App.-Houston [14th Dist.] 1991, no writ).

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On the first day of trial, after hearing arguments from the parties, the court granted Myrad and

Fountainhead's special exception to Texcon's claim for constructive fraud. 7 Afterwards, Texcon

stated to the court, “Your Honor, we should be entitled to replead as to that particular issue

then.”Texcon failed to obtain a ruling from the trial court.

*12 Myrad and Fountainhead argue Texcon waived this complaint for review for failure to request

an opportunity to amend and failure to obtain a ruling. Once special exceptions have been granted,

the party against whom the special exceptions have been sustained has the burden to seek leave

to amend its pleadings. See Fuentes v. McFadden, 825 S.W.2d 772, 779 (Tex.App.-El Paso 1992,

no writ). Before a party can complain on appeal that it was denied the opportunity to amend after

special exceptions have been sustained, it must show that an opportunity was requested and denied.

See Inglish v. Prudential Ins. Co. of Am., 928 S.W.2d 702, 705 (Tex.App.-Houston [1st Dist.]

1996, writ denied) (citing TEX.R.APP.P. 52(a) (current rule TEX.R.APP.P. 33.1)). Where a party

is denied the right to amend and such fact is not reflected in the record, a motion for new trial

will preserve such error. See id.

Although Texcon requested an opportunity to amend its counterclaim, it did not obtain a ruling

on its request. Texcon claims it has preserved error in its motion for new trial. Our review of the

motion for new trial finds that Texcon has not preserved error on its complaint that it was denied an

opportunity to amend its counterclaim with respect to constructive fraud. Texcon's seventh point

of error is overruled.

V. Validity of the Liens

In its eighth point of error, Texcon complains the trial court erred in declaring its liens invalid and

unenforceable. The jury awarded Texcon $75,000.00 on its breach of contract claim. The jury,

however, did not determine the amount of any indebtedness for each tract. In its conclusions of

law filed post-judgment, the trial court stated the liens “are not capable of enforcement and must

be invalidated because any indebtedness for work performed on any specific, separate tract of land

for which a lien was claimed was not established and Texcon thus waived its right to enforcement

by foreclosure of a lien, if any.”Texcon argues the trial court could have apportioned the damages

among the three liens and credited each lien with a pro-rata reduction. 8

To be entitled to foreclose on a mechanic's and materialman's lien, the claimant must prove the

property on which he wants to foreclose is the improvement itself or the parcel of land connected

with the improvements. See Houston Elec. Distrib. Co. v. MBB Enters., 703 S.W.2d 206, 207-08

(Tex.App.-Houston [14th Dist.] 1985, no writ). In Centex Materials, Inc. v. Dalton, the court

reasoned:

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*13 In order to establish a constitutional lien on Lot 7, appellant had the burden

of proving the value of the concrete supplied to that lot so that the court would

be able to order a foreclosure for the specific amount due and owing on that

particular lot. In our view appellant failed to discharge its burden of proving the

value of the concrete attributable to Lot 7 as distinguished from Lot 5.

574 S.W.2d 621, 624 (Tex.Civ.App.-Tyler 1978, no writ).Morris v. Chauce A. Beane & Co.

involved multiple plaintiffs and four contracts on three separate oil field leases. 635 S.W.2d

658, 660 (Tex.App.-Fort Worth 1982, no writ). Although the jury in Morris found damages for

each indebtedness as to each plaintiff, th

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