Elness Swenson Graham Architects, Inc.// RLJ II-C Austin Air, LP RLJ II-C Austin Air Lessee, LP And RLJ Lodging Fund II Acquisitions, LLC v. RLJ II-C Austin Air, LP RLJ II-C Austin Air Lessee, LP And RLJ Lodging Fund II Acquisitions, LLC// Elness Swenson Graham Architects, Inc.

ACCEPTED

03-14-00738-CV

5659167

THIRD COURT OF APPEALS

AUSTIN, TEXAS

6/12/2015 2:22:49 PM

JEFFREY D. KYLE

CLERK

Oral Argument Requested

No. 3-14-00738-CV FILED IN

3rd COURT OF APPEALS

AUSTIN, TEXAS

In The Court of Appeals For The 6/15/2015 1:38:49 PM

Third District of Texas JEFFREY D. KYLE

Clerk

Elness, Swenson, Graham § From the 200th District Court

Architects, Inc., §

Appellant and Cross-Appellee, §

§

v. §

§

RLJII-C Austin Air, LP, §

RLJ II-C Austin Air Lessee, LP §

and RJL Lodging Fund II §

Acquisitions, LLC, §

Appellees and Cross-Appellants. § Of Travis County, Texas

APPELLEES’ AMENDED BRIEF

MUNSCH, HARDT, KOPF

& HARR, P.C.

Michael W. Huddleston Benton T. Wheatley

State Bar No: 10148415 State Bar No. 24015171

J. Stephen Gibson Tracy McCreight

State Bar No: 07866000 State Bar No. 24037064

3800 Ross Tower 401 Congress Avenue

500 North Akard Street Suite 3050

Dallas, Texas 75201 Austin, TX 78701

214-855-7500 telephone 512-391-6100 telephone

214-855-7584 facsimile 512-391-6149 facsimile

ATTORNEYS FOR APPELLEES,

CROSS-APPELLANTS

IDENTITY OF PARTIES AND COUNSEL

The undersigned counsel of record, pursuant to Texas Rule of Appellate

Procedure 38.2, certifies that the following persons have an interest in the outcome

of this case:

Appellant, Cross-Appellee: Elness, Swenson, Graham Architects, Inc.

Appellant’s, Cross-Appellee’s Weston M. Davis

Counsel on Appeal: Gregory N. Ziegler

Steven R. Baggett

Macdonald Devin, P.C.

1201 Elm Street

3800 Renaissance Tower

Dallas, TX 75270

Appellant, Cross-Appellee’s Weston M. Davis

Counsel at Trial: Gregory N. Ziegler

Matthew Mumm

Macdonald Devin, P.C.

1201 Elm Street

3800 Renaissance Tower

Dallas, TX 75270

Appellees, Cross-Appellants: RLJ II-C Austin Air, LP

RLJ II-C Austin Air Lessee, LP

RLJ Lodging Fund II Acquisitions, LLC

Appellees’, Cross-Appellants’ Michael W. Huddleston

Counsel on Appeal: J. Stephen Gibson

Munsch Hardt Kopf & Harr, P.C.

3800 Ross Tower

500 North Akard Street

Dallas, Texas 75201

i

Appellees’, Cross-Appellants’ Benton T. Wheatley

Counsel at Trial: Tracy McCreight

Munsch Hardt Kopf & Harr, P.C.

401 Congress Avenue

Suite 3050

Austin, TX 78701

By: /s/ Michael W. Huddleston

Attorney for Appellees, Cross-

Appellants

ii

STATEMENT CONCERNING ORAL ARGUMENT

Appellees and Cross-Appellants respectfully request oral argument in this

case. Appellees and Cross-Appellants respectfully submit that oral argument will

help the Court in evaluating the issues necessary to the resolution of this appeal.

iii

TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL .............................................................i

STATEMENT CONCERNING ORAL ARGUMENT ........................................... iii

TABLE OF CONTENTS ..........................................................................................iv

INDEX OF AUTHORITIES.................................................................................. viii

I. STATEMENT OF THE CASE ....................................................................... 1

II. ISSUES PRESENTED ....................................................................................3

III. STATEMENT OF FACTS ..............................................................................4

IV. SUMMARY OF ARGUMENT ....................................................................... 5

V. ARGUMENT AND AUTHORITIES ............................................................. 8

A. The Trial Court Correctly Awarded RLJ Its Attorney’s Fees............... 8

1. Chapter 38 Does Not Require a Judgment for Damages. ........... 8

a. The “Judgment” Requirement Was

Eliminated by the 1977 Amendment to

Chapter 38’s Predecessor.................................................. 9

b. The Texas Supreme Court and This Court

Have Rejected Any Such Requirement. ........................... 9

c. The Architect’s Cases Do Not Say

Otherwise. ....................................................................11

2. Chapter 38 Only Requires a Valid Claim Timely Presented and

Unpaid for Thirty Days. ............................................................12

a. The Architect Ignores Proper Statutory

Interpretation...................................................................12

b. The Architect Attempts to Add Words to

Chapter 38 By Misapplication of Cases. ........................13

3. Chapter 38 Only Requires a Valid Claim Timely Presented and

Unpaid for Thirty Days. ............................................................15

a. A “Valid Claim” Is Required..........................................15

1) “In [A]ddition [T]o” Does Not Imply

a “Valid Claim” Requires a Judgment

Awarding Damages. .............................................15

2) A Verdict Awarding Damages Is

Enough To Have a “Valid Claim.” ......................16

b. Chapter 38 Requires the Valid Claim to

Remain Unpaid 30 Days After Presentment. ................. 17

iv

4. RLJ Met All the Statutory Requirements for Recovering Its

Attorney’s Fees. ........................................................................21

a. RLJ Had a Valid Claim. .................................................21

b. The Just Amount Owing Was Not Timely

Tendered. ....................................................................22

5. The Trial Court’s Reasoning Agreed With the Legislature’s. .. 23

B. RLJ Was Assigned the Contract and the Cause of Action and Had

Standing to Sue....................................................................................24

1. RLJ Owned Both the Architectural Contract Rights and Causes

of Action of Action for Its Breach. ...........................................25

a. Ausaircourt Assigned the Contract to RLJ

Under the PSA and the Cause of Action By

Assignment of “Intangible Assets.” ...............................25

2. The Intangibles Assignment Transferred the Contract Cause of

Action. .......................................................................................26

a. “Intangible Assets” Included Contract

Cause of Action. .............................................................27

b. The Architect’s Argument Ignores Context

and the Residuary Clause’s Purpose...............................28

3. The Intangibles Assignment was “Express.” ............................31

4. The Supplemental Clarification May Be Considered and

Removes Any Doubt That RLJ Was Assigned the Architectural

Contract and the Cause of Action For Its Breach. ....................34

5. Alternatively, The PSA Transferred The Contract Cause of

Action When It Transferred the Contract. ................................36

6. The Architectural Contract Was Validly Assigned to RLJ. ..... 36

C. The Contract Was Admissible and Authenticated. .............................39

D. The Trial Court Did Not Err in Submitting the Contractual Liability

Issue Concerning Structural Engineering and The Architect’s

Complaints Have Not Been Preserved For Review. ...........................41

1. The Architect Waived Its Complaint By Failing to Specially

Except to the Omission of Vicarious or Respondeat Superior

Allegations. ...............................................................................41

2. The Architect Waived Its Complaint By Failing to File a

Verified Denial of Liability in the Capacity Sued. ...................43

v

3. The Architect Failed to Preserve Its Charge Complaint By

Objecting On Different Grounds Than Those Now Urged. ..... 44

4. Vicarious or Respondeat Superior Liability Is Not Required

When Responsibility Exists Under a Contract. ........................44

a. Ryan Decided Tort, Not Contractual, Duty

Under a Now-Rejected Liability Theory. .......................44

b. The Contract Defines Contractual Duties.......................45

5. The Architect Waived Any Complaint About the Duty

Submitted By Failing to Request Any Question, Definition or

Instruction. ................................................................................46

6. Ryan Only Addressed the Architect’s Direct, Not Vicarious,

Tort Liability. ............................................................................46

7. Architect’s Reasoning Permits It All the Contractual Benefits

Free of Burden and Risk. ..........................................................47

8. Illegality Is Not an Issue Due to The Architect’s Failure to

Plead It and Statutory Authorization for Architects Performing

Structural Engineering Services................................................48

a. Any Illegality Was Waived Because It Is

Not Apparent And The Architect Did Not

Affirmatively Plead It. ....................................................49

b. Seaview Hospital Does Not Say An

Architect Cannot Provide Structural

Engineering Services. .....................................................50

E. The Evidence of Diminution in Value Was Legally Sufficient. ......... 50

1. The Evidence Is Legally Sufficient If It Provides More Than a

Scintilla of Factual Support. .....................................................51

2. Hornsby’s Testimony Was Well-Founded Based on Well-

Accepted Standards and Methodologies. ..................................52

3. The Architect’s Complaints Are Meritless. ..............................54

a. The Evidence Supported the Answer to the

Question Asked, and the Architect Waived

Its Valuation Date Complaint. ........................................54

b. The Jury Was Provided With Actual

Performance Data. ..........................................................58

c. There Was Legally Sufficient Evidence to

Support the Jury’s Verdict and Any

Allocation of Damages. ..................................................60

vi

1) The Architect Erroneously Assumes

Jury Must Have Implicitly Found

Others Breached. ..................................................60

2) Evidence of Unsegregated Damages

Is Legally Sufficient Evidence of

Segregated Damages. ...........................................61

3) Testimony Segregating Damages Is

Not Required. .......................................................62

d. Comparable Sales Were a Vouchsafe, Not

the Basis for Valuations..................................................63

e. There Was No Recovery For “Stigma”

Damages and No Double Recovery. ..............................65

f. Lost Profits Were Not a Separate Element of

Recovery, But Were Only Used As

Necessary for the Texas Supreme Court’s

Approved Method of Valuing Property

Producing Income. ..........................................................66

VI. CONCLUSION AND PRAYER ...................................................................67

CERTIFICATE OF COMPLIANCE .......................................................................70

CERTIFICATE OF SERVICE ................................................................................71

APPENDIX ..............................................................................................................72

vii

INDEX OF AUTHORITIES

Page(s)

CASES

A.D. Willis Co. v. Metal Bldg. Components, Inc.,

No. 03-99-00574-CV, 2000 WL 1508500

(Tex. App.—Austin Oct. 12, 2000, pet. denied) .............................. 10, 12, 15-16

Adams v. Great American Lloyd’s Ins.,

891 S.W.2d 769 (Tex. App.—Austin 1995, no writ) .........................................27

Akin, Gump, Strauss, Hauer & Feld, L.L.P. v. E Court, Inc.,

No. 03-02-00714-CV, 2003 WL 21025030

(Tex. App.—Austin May 8, 2003, no pet.).........................................................27

Alaniz v. Jones & Neuse, Inc.,

907 S.W.2d 450 (Tex. 1995) ..............................................................................42

Am. Multi-Cinema, Inc. v. Hegar,

No. 03-14-00397-CV, 2015 WL 1967877

(Tex. App.—Austin Apr. 30, 2015, no pet. h.) ...................................................28

Associated Press v. Hicks Broad. Corp.,

No. C14-93-00066-CV, 1993 WL 495114

(Tex. App.—Houston [14th Dist.] Dec. 2, 1993, no writ) ........................... 40-41

Austin Hill Country Realty, Inc. v. Palisades Plaza, Inc.,

948 S.W.2d 293 (Tex. 1997) ..............................................................................10

Austin Road Co. v. Pope,

147 Tex. 430, 216 S.W.2d 563 (1949) ...............................................................20

Avanti Servs. Inc. v. Questor Drilling, Inc.,

No. 01-86-00741-CV, 1987 WL 8352

(Tex. App.—Houston [1st Dist.] Mar. 26, 1987, no writ) ..................................43

Baroid Equipment, Inc. v. Odeco Drilling, Inc.,

184 S.W.3d 1 (Tex. App.—Houston [1st Dist.] 2006, pet. denied) ...................35

Barraza v.Koliba,

933 S.W.2d 164 (Tex. App.—San Antonio 1996, writ denied) .........................54

viii

Barry v. Jackson,

309 S.W.3d 135 (Tex. App.—Austin 2010, no pet.) .................................... 56-58

Bechtel Corp. v. CITGO Products Pipeline Co.,

271 S.W.3d 898 (Tex. App.—Austin 2008, no pet.) ..........................................62

Beech Aircraft Corp. v. Jinkins,

739 S.W.2d 19 (Tex. 1987).................................................................................20

Berschauer/Phillips Const. Co. v. Seattle Sch. Dist. No. 1,

881 P.2d 986 (Wash. 1994) .......................................................................... 37-38

Binion v. Brinkley,

No. 2-09-121-CV, 2010 WL 396385

(Tex. App.—Houston [14th Dist.] Feb. 4, 2010) ...............................................62

Blizzard v. Nationwide Mut. Fire Ins. Co.,

756 S.W.2d 801 (Tex. App.—Dallas 1988, no writ) ....................................12, 20

BMC Software Belgium, N.V. v. Marchand,

83 S.W.3d 789 (Tex. 2002).................................................................................23

Boerschig v. Southwestern Holdings, Inc.,

322 S.W.3d 752 (Tex. App.—El Paso 2010, no pet.) ........................................30

Brooks v. Chevron USA Inc.,

No. 13-05-029-CV, 2006 WL 1431227

(Tex. App.—Corpus Christi May 25, 2006, pet. denied)(mem. op.) ........... 32-33

Browne v. King,

196 S.W. 884 (Tex. Civ. App. 1917) aff'd,

111 Tex. 330, 235 S.W. 522 (1921) ...................................................................27

Buccaneer Homes of Ala., Inc. v. Pelis,

43 S.W.3d 586 (Tex. App.—Houston [1st Dist.] 2001, no pet.) ........................20

Buckner Glass & Mirror Inc. v. T.A. Pritchard Co.,

697 S.W.2d 712 (Tex. App.—Corpus Christi 1985, no writ) ........................8, 22

Burroughs Wellcome Co. v. Crye,

907 S.W.2d 497 (Tex.1995)................................................................................51

ix

Butler v. Joseph's Wine Shop, Inc.,

633 S.W.2d 926

(Tex. App.—Houston [14th Dist.] 1982, writ ref'd n.r.e.)..................................43

C.W. 100 Louis Henna, Ltd. v. El Chico Rests. of Tex., L.P.,

295 S.W.3d 748 (Tex. App.—Austin 2009, no pet.) ..........................................21

C& H Nationwide, Inc. v. Thompson,

903 S.W.2d 315 (Tex. 1994) ..............................................................................23

CBI NA-CON, Inc. v. UOP Inc.,

961 S.W.2d 336

(Tex. App.—Houston [1st Dist.] 1997, pet. denied) ..........................................45

Cedar Point Apartments v. Cedar Point Inv. Corp.,

693 F.2d 748 (8th Cir.), cert. denied, 461 U.S. 914 (1983) ...............................38

Ceramic Tile Int’l Inc. v. Balusek,

137 S.W.3d 722 (Tex. App.—San Antonio 2004, no pet.) ................................32

City of Harlingen v. Sharboneau,

48 S.W.3d 177 (Tex. 2001).....................................................................52, 55, 66

City of Keller v. Wilson,

168 S.W.3d 802 (Tex.2005)..........................................................................51, 60

City of Rockwall v. Hughes,

246 S.W.3d 621 (Tex. 2008) ........................................................................ 13-14

Coffin v. Douglas,

61 Tex. 406 (1884)(available at 1884 WL 8785) ......................................... 29-30

Collin Cnty. v. Hixon Family P'ship, Ltd.,

365 S.W.3d 860 (Tex. App.—Dallas 2012, pet. denied)....................................64

Commercial Structures and Interiors, Inc. v. Liberty Educ. Ministries, Inc.,

192 S.W.3d 827 (Tex. 2006) ........................................................................26, 34

Cook v. Exxon Corp.,

145 S.W.3d 776 (Tex. App.—Texarkana 2004, no pet.)....................................32

D Design Holdings, L.P. v. MMP Corp.,

339 S.W.3d. 195 (Tex. App.—Dallas 2011, no pet.) .........................................36

x

De La Rosa v. Kaples,

812 S.W.2d 432 (Tex. App.—San Antonio 1991, writ denied) .........................16

Doctors Hosp. 1997, L.P. v. Sambuca Houston, L.P.,

154 S.W.3d 634

(Tex. App—Houston [14th Dist.] 2004, pet. abated) .........................................17

Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp.,

294 S.W.3d 164 (Tex. 2009) ..............................................................................27

Effel v. McGarry,

339 S.W.3d 789 (Tex. App.—Dallas 2011, pet. denied)....................................36

Ellis County State Bank v. Keever,

888 S.W.2d 790 (Tex. 1994) ..............................................................................23

331 S.W.3d at 420, 424-25 ......................................................................................31

Enriquez v. K & D Development & Construction, Inc.,

567 S.W.2d 40

(Tex. Civ. App.—El Paso 1978, writ ref'd n.r.e.) ................................................. 8

Exxon Corp. v. Emerald Oil & Gas Co., L.C.,

331 S.W.3d 419, 424-25 (Tex. 2010) ...........................................................31, 33

Exxon Corp. v. Pluff,

94 S.W.3d 22 (Tex. App.—Tyler 2002, pet. denied) ................................... 31-32

Farrar v. Hobby,

506 U.S. 103 (1992) ............................................................................................14

Fire Ins. Exchg. v. Sullivan,

192 S.W.3d 99

(Tex. App.—Houston [14th Dist.] 2006, pet. denied) ..................................12, 20

Folgers Architects Ltd. v. Kerns,

612 N.W.2d 539 (Neb. App. 2000) ....................................................................37

Ford v. Robertson,

739 S.W.2d 3 (Tenn. Ct. App. 1987) ..................................................................37

Gallagher v. Southern Source Packaging, LLC,

564 F.Supp.2d 503 (E.D.N.C. 2008) ..................................................................38

xi

Geis v. Colina Del Rio, LP,

362 S.W.3d 100 (Tex. App.—San Antonio 2011, pet. denied)..........................49

Getzschman v. Miller Chem. Co.,

232 Neb. 885, 443 N.W.2d 260 (1989) ..............................................................45

Gips v. Red Robin Corp.,

366 S.W.2d 853

(Tex. Civ. App.—Houston 1963, writ ref’d n.r.e) ..............................................38

Grapevine Excavation, Inc. v. Maryland Lloyds,

35 S.W.3d 1 (Tex. 2000).....................................................................................13

Green Int’l, Inc. v. Solis,

951 S.W.2d 384 (Tex. 1997) .......................................................................passim

Green v. H. E. Butt Found.,

217 F.2d 553 (5th Cir. 1954) ..............................................................................28

Guirey, Srnka & Arnold, Architects v. Phoenix,

9 Ariz. App. 70, 449 P.2d 306 (1969) ................................................................45

Gulf Ins. Co. v. Cunningham,

A14-91-00799-CV, 1993 WL 136039

(Tex. App.—Houston [14th Dist.] Apr. 29, 1993, writ denied) .........................57

Gulf States Utilities Co. v. Low,

79 S.W.3d 561 (Tex. 2002).................................................................................59

Hagins v. E-Z Mart Stores, Inc.,

128 S.W.3d 383 (Tex. App.—Texarkana 2004, no pet.)....................................62

Halliburton, Inc. v. Admin. Review Bd.,

771 F.3d 254 (5th Cir. 2014) ..............................................................................30

Hamra v. Gulden,

898 S.W.2d 16 (Tex. App.—Dallas 1995, writ dism’d w.o.j.)...........................20

Haubold v. Medical Carbon Research Inst., LLC,

No. 03-11-00115-CV, 2014 WL 1018008

(Tex. App.—Austin Mar. 14, 2014, no pet.)(mem. op.) ........................ 11-12, 16

xii

Horton v. Robinson,

776 S.W.2d 260 (Tex. App.—El Paso 1989, no writ) ........................................43

Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch,

389 S.W.3d 583 (Tex. App.—Houston [14th Dist.] 2012),

rev'd on other grounds, 443 S.W.3d 820 (Tex. 2014) ........................................65

Houston Unlimited, Inc. Metal Processing v. Mel Acres Ranch,

443 S.W.3d 820 (Tex. 2014) ..............................................................................52

Hubacek v. Ennis State Bank,

159 Tex. 166, 317 S.W.2d 30 (1958) .................................................................34

Ian Martin, Inc. v. Greenspoint Bank,

01-87-00631-CV, 1988 WL 45423.....................................................................33

Imperial Lofts, Ltd. v. Imperial Woodworks, Inc.,

245 S.W.3d 1 (Tex. App.—Waco 2007, pet. denied).........................................20

In re Cooper,

242 B.R. 767 (Bankr. S.D. Ga. 1999) .................................................................38

In re First State Bancorporation,

498 B.R. 322 (Bankr. D.N.M. 2013) ..................................................................27

In re Fleckenstein,

589 S.W.2d 788 (Tex. Civ. App.—El Paso 1979, no writ) ................................28

In re Grotjohn,

No. 03-47055DML, 2005 WL 6441386

(Bankr. N.D. Tex. July 19, 2005) .......................................................................28

In re Malacara,

223 S.W.3d 600 (Tex. App.—Amarillo 2007, no pet.) ......................................28

In re Scott,

157 B.R. 297 (Bankr. W.D. Tex. 1993),

withdrawn per settlement, 162 B.R. 1004

(Bankr. W.D. Tex. Jan. 21, 1994) .......................................................................28

Intercontinental Group P’ship v. KB Home Lone Star, L.P.,

295 S.W.3d 650 (Tex. 2009) ........................................................................11, 14

xiii

Interstate Contracting Corp. v. City of Dallas,

135 S.W.3d 605 (Tex. 2004) ..............................................................................48

Jakab v. Gran Villa Townhouses Homeowners Ass'n, Inc.,

149 S.W.3d 863 (Tex. App.—Dallas 2004, no pet.) ..........................................14

Jones v. Kelley,

614 S.W.2d 95 (Tex.1981)...................................................................... 14, 16-17

Karol v. Presido Enterprises, Inc.,

622 S.W.2d 638 (Tex. App.—Austin 1981, no writ) .........................................22

Kelly v. Northwest Community Hospital,

66 Ill.App.3d 679, 23 Ill.Dec. 466, 384 N.E.2d 102 (1978)...............................45

Kennedy v. Lynd,

306 F.2d 222 (5th Cir. 1962) ..............................................................................30

Kleas v. Clark, Thomas & Winters, P.C.,

No. 03-12-00755-CV, 2013 WL 4516120

(Tex. App.—Austin Aug. 21, 2013, pet. denied) .........................................21, 12

La Tierra de Simmons Familia, Ltd. v. Main Event Entm't, LP,

No. 03-10-00503-CV, 2012 WL 753184

(Tex. App.—Austin Mar. 9, 2012, pet. denied)..................................................32

Lay v. Aetna Ins. Co.,

599 S.W.2d 683 (Tex. App.—Austin 1980, writ ref'd n.r.e.) .............................27

Lee v. City of Houston,

807 S.W.2d 290 (Tex. 1991) ................................................................................ 9

Leggett v. Brinson,

817 S.W.2d 154 (Tex. App.—El Paso 1991, no writ) ........................................43

Leland v. Brandal,

257 S.W.3d 204 (Tex. 2008) ..............................................................................13

Lewis v. Adams,

979 S.W.2d 831

(Tex. App.—Houston [14th Dist.] 1998, no pet)................................................34

xiv

Lippincott v. Whisenhunt,

58 Tex. Sup. Ct. J. 705, 2015 WL 1967025

(Tex. Apr. 27, 2015)(per curiam) .......................................................................12

Mack Trucks, Inc. v. Tamez,

206 S.W.3d 572 (Tex. 2006) ..............................................................................59

Mancorp, Inc. v. Culpepper,

802 S.W.2d 226 (Tex.1990)................................................................................51

Manges v. Mustang Oil Tool Co.,

658 S.W.2d 725

(Tex. App.—Corpus Christi 1983, writ ref'd n.r.e.) ...........................................17

Marange v. Marshall,

402 S.W.2d 236

(Tex. Civ. App.—Corpus Christi 1966, writ ref'd n.r.e.) ...................................47

Martini v. Tatum,

776 S.W.2d 666 (Tex. App.—Amarillo 1989, writ denied) ...............................16

MBM Fin. Corp. v. Woodlands Operating Co.,

292 S.W.3d 660 (Tex. 2009) ........................................................................11, 16

McGalliard v. Kuhlmann,

722 S.W.2d 694 (Tex.1986)................................................................................60

McGinty v. Hennen,

372 S.W.3d 625 (Tex. 2012) ........................................................................54, 56

McKinley v. Drozd,

685 S.W.2d 7 (Tex. 1985)............................................................................passim

Merrell Dow Pharm., Inc. v. Havner,

953 S.W.2d 706 (Tex. 1997) ..............................................................................57

Methodist Hosps. v. Corporate Communicators, Inc.,

806 S.W.2d 879 (Tex. App.-Dallas 1991, writ denied) ......................................40

Minn. Mining & Mfg. Co. v. Nishika Ltd.,

953 S.W.2d 733 (Tex. 1997) ........................................................................ 61-62

xv

Missouri-Kansas-Texas R. Co. v. City of Dallas,

623 S.W.2d 296 (Tex. 1981) ..............................................................................51

Montgomery Ward & Co. v. Scharrenbeck,

146 Tex. 153, 204 S.W.2d 508 (1947) ...............................................................42

Moundsview ISD v. Buetow & Assoc.,

253 N.W.2d 836 (Minn.1977) ............................................................................45

Mueller v. All-Temp Refrig., Inc.,

2014 Ohio 2718...................................................................................................32

Mustang Pipeline Co. v. Driver Pipeline Co.,

134 S.W.3d 195 (Tex. 2004) ..............................................................................11

Naylor v. Stiegler,

613 S.W.2d 546 (Tex. Civ. App.—Fort Worth 1981, no writ) ..........................57

O and B Farms, Inc. v. Black,

300 S.W.3d 418

(Tex. App.—Houston [14th Dist.] 2009, pet. denied) ........................................51

Office of Pub. Util. Counsel v. P.U.C.,

878 S.W.2d 598 (Tex. 1994) ..............................................................................40

Orix Credit Alliance, Inc. v. Omnibank, N.A.,

858 S.W.2d 586 (Tex. App. 1993)......................................................................33

Osborne v. Jauregui, Inc.,

252 S.W.3d 70 (Tex. App.—Austin 2008, pet. denied) ..............................passim

Osterberg v. Peca,

12 S.W.3d 31 (Tex. 2000)...................................................................................54

Owen v. CNA Insurance/Continental Cas. Co.,

167 N.J. 450, , 771 A.2d 1208 (N.J. Super. 2001) .............................................38

Owen v. Vibrasonic Exploration, Inc.,

694 S.W.2d 421

(Tex. App.—Houston [14th Dist.] 1985, writ ref’d n.r.e.) .................................33

Pagosa Oil & Gas LLC v. Marrs & Smith Ptnrs.,

323 S.W.3d 203 (Tex. App.—El Paso 2010, pet. denied) ..................................37

xvi

Park v. Escalera Ranch Owners' Ass'n, Inc.,

No. 03-12-00314-CV, 2015 WL 737424

(Tex. App.—Austin Feb. 13, 2015, no pet. h.) ...................................................49

Parkway Co. v. Woodruff,

901 S.W.2d 434 (Tex. 1995) ..............................................................................66

Peissel v. Peissel,

620 S.W.2d 796

(Tex. Civ. App.—Houston [14th Dist.] 1981, no writ) ......................................19

Perez v. Baker Packers,

694 S.W.2d 138

(Tex. App.—Houston [14th Dist.] 1985, writ ref'd n.r.e.)..................................10

Petsch v. Slator,

573 S.W.2d 849 (Tex. Civ. App.—Austin 1978, writ ref'd n.r.e.) .....................30

Phillips v. Estate of Poulin,

No. 03-05-00099-CV, 2007 WL 2980180

(Tex. App.—Austin Oct. 12, 2007, no pet.) .......................................................23

Phillips v. Phillips,

820 S.W.2d 785 (Tex.1991)................................................................................49

Pilgrim’s Pride Corp. v. Smoak,

134 S.W.3d 880 (Tex. App.—Texarkana 2004, pet. denied) .............................63

Playskool, Inc. v. Elsa Benson, Inc.,

147 Ill. App. 3d 292, 497 N.E.2d 1199 (1986) ...................................................47

Precision Homes, Inc. v. Cooper,

671 S.W.2d 924

(Tex. App.—Houston [14th Dist.] 1984, writ ref'd n.r.e.)............................ 65-66

Prize Energy Res., L.P. v. Cliff Hoskins, Inc.,

345 S.W.3d 537 (Tex. App.—San Antonio 2011, no pet.) ................................48

Provident Life & Acc. Ins. Co. v. Knott,

128 S.W.3d 211 (Tex. 2003) ..............................................................................34

xvii

Rasmusson v. LBC PetroUnited, Inc.,

124 S.W.3d 283

(Tex. App.—Houston [14th Dist.] 2003, pet. denied) ..................................14, 16

Reuben H. Donnelley Corp. v. McKinnon,

688 S.W.2d 612 (Tex. App.—Corpus Christi 1985, writ ref’d).........................38

Richey v. Stop N Go Markets of Tex.,

654 S.W.2d 430 (Tex.1983).......................................................................... 31-33

Rockwall Commons Assocs. Ltd. v. MRC Mortgage Grantor Trust I,

331 S.W.3d 500 (Tex. App.—El Paso 2010, no pet.) ........................................39

Rogers v. RAB Inv. Ltd.,

816 S.W.2d 543 (Tex. App.—Dallas 1991, no writ) ..........................................16

Rosell v. Central W. Motor Stages, Inc.,

89 S.W.3d 643 (Tex. App.—Dallas 2002, pet. denied)......................................63

Ross v. Ross,

20 Ala. 105 (1852) ..............................................................................................32

Ross v. St. Luke’s Episcopal Hosp.,

58 Tex. Sup. Ct. J. 766, 2015 WL 2009744 (Tex. May 1, 2015) .......................12

Rumbin v. Utica Mut. Ins. Co.,

254 Conn. 259, 757 A.2d 526 (Conn. 2000) ......................................................38

Ryan v. Morgan Spear Associates Inc.,

546 S.W.2d 678

(Tex. Civ. App.—Corpus Christi 1977, writ ref'd n.r.e.) ............................. 44-47

Sanders v. Worthington,

382 S.W.2d 910 (Tex.1964)................................................................................39

Seaview Hospital, Inc. v. Medicenters of Am., Inc.,

570 S.W.2d 35 (Tex. Civ. App.—Corpus Christi 1978, no writ)................. 49-50

Shoemake v. Fogel, Ltd.,

826 S.W.2d 933 (Tex.1992)................................................................................42

xviii

Simmons v. Bisland,

No. 03-08-00141-CV, 2009 WL 961522

(Tex. App.—Austin Apr. 9, 2009, pet. denied)(mem. op.) ................................63

Southwestern Bell Tel. Co. v. DeLanney,

809 S.W.2d 493 (Tex. 1991) ..............................................................................45

St. Anthony's Hosp. v. Whitfield,

946 S.W.2d 174 (Tex. App.—Amarillo 1997, writ denied) ...............................47

State Dep't of Highways & Pub. Transp. v. Payne,

838 S.W.2d 235 (Tex. 1992) ........................................................................44, 46

State Farm Fire and Casualty Co. v Gandy,

925 S.W.2d 696 (Tex. 1996) ..............................................................................36

State Farm Life Ins. Co. v. Beaston,

907 S.W.2d 430 (Tex. 1995) ........................................................................ 11-12

State v. Bristol Hotel Asset Co.,

293 S.W.3d 170 (Tex. 2009) ........................................................................27, 67

Stewart Title Guar. Co. v. Sterling,

822 S.W.2d 1 (Tex. 1991).............................................................................14, 62

Tex. Lottery Comm’n v. First State Bank of DeQueen,

325 S.W.3d 628 (Tex. 2010) ..............................................................................13

Tex. Pipe Line Co. v. Hunt,

149 Tex. 33, 228 S.W.2d 151 (Tex. 1950) .........................................................64

Texarkana Memorial Hospital, Inc. v. Murdock,

946 S.W.2d 936 (Tex. 1997) ..............................................................................62

Texas Alcoholic Beverage Comm'n v. Kings Four, Inc.,

583 S.W.2d 676 (Tex. Civ. App.—Austin 1979, no writ) ................................... 9

Thomas C. Cook, Inc. v. Rowhanian,

774 S.W.2d 679 (Tex. App.—El Paso 1989, writ denied) .................................39

THPD, Inc. v. Cont’l Imports, Inc.,

260 S.W.3d 593 (Tex. App.—Austin 2008, no pet.) ..........................................54

xix

Turner, Collie & Braden, Inc. v. Brookhollow, Inc.,

642 S.W.2d 160 (Tex. 1984) ..............................................................................57

Union Carbide Corp. v. Synatzske,

438 S.W.3d 39 (Tex. 2014).................................................................................13

University Mews Associates v. Jeanmarie,

122 Misc.2d 434, 471 N.Y.S.2d 457 (N.Y. Sup.Ct. 1983).................................38

Van Zandt v. Fort Worth Press,

359 S.W.2d 893 (Tex. 1962) ..............................................................................13

Vance v. My Apartment Steak House of San Antonio, Inc.,

677 S.W.2d 480 (Tex.1984)..........................................................................51, 56

Vanderburg v. Nocona Gen. Hosp.,

No. 7:02-CV-291-KA, 2008 WL 114846

(N.D. Tex. Jan. 10, 2008) ...................................................................................27

Vann v. Bowie Sewerage Co.,

127 Tex. 97, 90 S.W.2d 561 (1936) ...................................................................31

Vernooy Architects v. Smith,

346 S.W.3d 877 (Tex. App.—Austin 2011, pet. denied) ...................................45

Welch v. Monroe,

No. 10-03-00013-CV, 2004 WL 2474504

(Tex. App.—Waco Nov. 3, 2004, no pet.) .........................................................31

Westminster Falcon/Trinity L.L.P. v. Chong Shin,

No. 07-11-0033-CV, 2012 WL 5231851

(Tex. App.—Amarillo Oct. 23, 2012, no pet.) ...................................................56

Whirlpool Corp. v. Camacho,

298 S.W.3d 631 (Tex. 2009) ..............................................................................59

White v. Dennison,

752 S.W.2d 714 (Tex. App.—Dallas 1988, writ denied) ...................................47

xx

STATUTES

Act of April 25, 1977, ch. 76, §1, 1977 TEX. GEN. LAWS 153 .................................. 9

Act of May 17, 1971, ch. 225, §1, 1971 TEX. GEN. LAWS 1073 ............................... 9

Act of June 6, 1979, ch. 314, §1, 1979 TEX. GEN. LAWS 718 .................................17

TEX. OCCUP. CODE §1001.0031(d) ..........................................................................50

TEX. BUS. & COMM. CODE §9.110 ...........................................................................33

TEX. BUS. & COMM. CODE §17.50(d).......................................................................14

TEX. BUS. & COM. CODE ANN. § 2.210(b) (West 2011) ..........................................36

TEX. CIV. PRAC. & REM. CODE §§32.001, 32.002....................................................20

TEX. CIV. PRAC. & REM. CODE §33.002.................................................15, 17, 20, 23

TEX. CIV. PRAC. & REM. CODE §38.001.........................................................8, 15, 17

TEX. CIV. PRAC. & REM. CODE §38.005.............................................................13, 17

TEX. INS. CODE §541.152 .........................................................................................14

OTHER AUTHORITIES

Black's Law Dictionary (10th ed. 2014) ..................................................................27

Black’s Law Dictionary 117 (6th ed. 1990) ............................................................29

Charles R. “Skip” Watson, Jr., “The Court's Charge to the Jury,”

Advanced Civil Trial Course (State Bar of Texas 2003) ...................................55

TEX. R. CIV. P. 90 .....................................................................................................42

TEX. R. CIV. P. 93 ......................................................................................... 39-40, 43

TEX. R. CIV. P. 94 .....................................................................................................49

TEX. R. CIV. P. 274 ...................................................................................................55

TEX. R. CIV. P. 278 ...................................................................................................42

xxi

TEX. R. CIV. P. 279 .............................................................................................46, 54

TEX. R. EVID. 201(b) ................................................................................................40

TEX. R. EVID. 901(10) ..............................................................................................41

xxii

I. STATEMENT OF THE CASE

This is a breach of contract case arising out of severe foundation problems at

the Courtyard by Marriott Hotel, located on East Ben White Boulevard, near

Bergstrom International Airport (“Project”). (CR187) 1. RLJ II-C Austin Air, LP;

RLJ II-C Austin Air Lessee, LP; and RLJ Lodging Fund II Acquisitions, LLC

(“RLJ” collectively), sued, among others, the architect, general contractor and soils

engineer for breaching their separate contractual responsibilities related to the

Project’s construction. (CR184-218). RLJ asserted that claim as assignee of and

successor-in-interest to and assignee of the rights under the Architectural Contract

and the contract cause of action of White Lodging Services Corp. (“Owner”),

original owner of the Project. (CR1124;1063-64). The architect, Elness, Swenson,

Graham. Inc. (“Architect”), was the only remaining defendant when the case was

submitted to the jury. (CR1121-29). Due to settlements by other parties and the

trial court’s pre-trial rulings, breach of contract was the only liability theory against

the Architect. Id.

The jury found that the Architect failed to “comply with the Architectural

Contract regarding the structural engineering services required by the contract”

1

The Clerk’s Record is cited as “CR”; First Supplemental Clerk’s Record,“1SCR”; Second

Supplemental Clerk’s Record, “2SCR”; Third Supplemental Clerk’s Record, “3SCR”). The

Reporters Record is cited by “[Volume Number]RR” Exhibits are cited to page or pages of the

Reporter’s Record on which they or the pertinent parts thereof appear. “4SCR__” refers to the

supplemental clerk’s record that is being requested, but is not yet available. See n.14.

1

(“Structural Engineering Question”). (CR1126). The jury’s verdict assessed

$785,000 in damages for the breach. (CR1125-27).

After trial, the Architect moved for and the trial court allowed credit under

the one satisfaction rule for $1.17 million paid by the General Contractor and the

Soils Engineer (“Settling Defendants” collectively) in settlement of the contract

claims against them. (CR1173-79,1439,1710). The parties agreed to try the

attorney’s fees claimed under Chapter 38 of the Texas Civil Practice and Remedies

Code (“Chapter 38”2) to the court instead of the jury. (CR201,1710).

RLJ presented evidence of its reasonable and necessary attorney’s fees for

asserting the contractual claims against the Architect and the Settling Defendants.

(3SCR3-611;2SCR1603-1605). The trial court only awarded fees for the

contractual claim against the Architect. For that claim, it determined that RLJ was

entitled to recover from the Architect $901,650.96 as reasonable attorney’s fees.

(CR1711). The trial court rendered judgment for RLJ in the principal sum of

$516,650.96. (CR1711). It arrived at this amount by adding the amount of the

damages awarded in the jury verdict with the amount of the Chapter 38 attorney’s

fees award, then subtracting the amounts paid in settlement by the Settling

Defendants. (Id.). The judgment also awarded conditional appellate attorney’s fees,

2

References to “Chapter 38” also include the 1977 and later versions of its predecessor statute,

article 2226.

2

costs, and post-judgment interest. (Id.). The Architect timely filed its notice of

appeal (CR1907-1913) and RLJ timely perfected its cross-appeal (1SCR3-4).

II. ISSUES PRESENTED

A. Whether the trial court correctly allowed RLJ to recover its attorney’s fees

under Chapter 38 of the Texas Civil Practice & Remedies Code even if it

correctly applied the one satisfaction rule to offset the jury’s damage award?

B. Whether the trial court correctly determined that RLJ has standing to sue the

Architect under the assignments of rights from RLJ’s predecessors-in-

interest?

C. Whether the trial court’s determination may be further supported by

consideration of the supplemental clarification which the trial court

erroneously deemed parol evidence inappropriate for consideration?

(Appellees’ Reply Point).

D. Whether the trial court correctly ruled that the Architectural Contract was

not inadmissible hearsay and was sufficiently authenticated?

E. Whether the trial court erred in submitting the contractual liability issue

concerning structural engineering services and, in the unlikely event that it

did, whether the Architect failed to preserve the complaints it makes in this

appeal?

3

F. Whether the evidence was legally sufficient to support the damages for

diminution in value awarded by the jury?

III. STATEMENT OF FACTS

RLJ is not satisfied with the accuracy of Architect’s Statement of Facts and

includes the following as a brief statement of the facts relevant to Appellant’s

issues. The proceedings below are described in the Statement of the Case and as

necessary in the argument section of this brief. RLJ also refers the court to the

Statement of Facts in Cross-Appellant’s Brief at 6-13, and reserves to the argument

section further discussion of the facts relevant to those issues.

The Architect contracted with the Owner to design the Project. The

Architectural Contract obliged the Architect to provide architectural and structural

engineering services. (12RR39,47). Under a separate contract to which the Owner

was not a party, the Architect engaged “[o]ur Structural Engineering firm...Marlin

Bridges Associates, Inc.” (“Structural Engineer”) to design the foundation.

(12RR17-25,30,35,47,49;App.G).

Before the Project was complete, RLJ contracted to purchase the Project

from the Owner, along with numerous other hotels. (CR184-218;606-676;707-

709;App.J). Before RLJ closed the purchase of this hotel, the Project experienced

some cracking in the laundry room and around the pool area. (3RR122). RLJ was

advised that repair costs would be $50,000 (3RR187-88), and it received a credit of

4

the same amount3 and closed the purchase. (CR626-28). After closing, the Project

began to experience cracks in partition walls, shifting door frames, and other issues

evident of foundation movement. (3RR118;4RR78-79;7RR47). Investigation

revealed the foundation design was inappropriate for the soil conditions at this site.

(4RR111). This litigation ensued.

IV. SUMMARY OF ARGUMENT

None of the Architect’s complaints permit it to elude its liabilities for failing

to comply with the Architectural Contract’s concerning the provision of structural

engineering services.

Its attack on liability for RLJ’s attorney’s fees is invalid. As the verdict

established, it had a valid claim for a just amount owed that was presented and

unpaid for years, and which remained unpaid when this case was tried. Nothing in

Chapter 38 further requires the claimant to recover those damages in a judgment.

The Legislature eliminated that requirement when it amended the statute 38 years

ago. Neither it nor the Architect’s cited cases require the claimant to obtain a

judgment. The Texas Supreme Court has said so. This Court has said so.

The Architect’s argument relies on the general patina Chapter 38 acquired

during its history that does not address the issue here: whether RLJ satisfied

3

The Architect is incorrect to suggest this adjustment amount was for all of the Project’s

foundation problems that ultimately manifested themselves. (Appellant’s Brief 5-6). It was only

for the limited issues then known. (3RR187-88).

5

Chapter 38. The alpha and omega of that inquiry is the statute itself, not the

language of cases, other statutes, or general concepts about attorney’s fee recovery.

The trial court adhered to the precise language of the statute when it awarded

RLJ its attorney’s fees. Even if the one satisfaction rule applied so that credit for a

settlement during trial could preclude recovery of the jury’s damage award, the

trial court did not err in allowing RLJ to recover its attorney’s after application of

that credit.

RLJ also had standing to sue on the Architectural Contract by virtue of an

assignment of all intangible assets related to the Project. The Architect’s only

argument is that a cause of action is not an intangible asset. This court, other

jurisdictions, and even the dictionary on which the Architect bases its argument,

recognize that a cause of action is an asset that is intangible. A supplement to this

assignment made clear that it included all “causes of action” against the Architect.

The trial court erroneously ruled that it could consider the supplement, but it may

nevertheless support the trial court’s standing determination because it was not

parol evidence at all. Even if it were, the Architect was not a party to the contract

the supplement concerned and, therefore, could not invoke the parol evidence rule.

The Architect’s complaint that the Architectural Contract was inadmissible

hearsay is baseless. The contract was not offered to prove anything other than the

fact that it said what it said. Its complaint about improper authentication is equally

6

flawed. The Architect used the contract as an exhibit and proved that it was a

business record.

The Architect waived its complaint that RLJ should have been required to

prove its derivative liability for the Structural Engineer’s errors by failing to

specially except, file a verified plea that it was not liable in the capacity sued, and

failing to preserve its complaints at the charge conference. In any event, RLJ was

not obliged to establish vicarious liability because the Architect had direct,

contractual liability. Its only support to the contrary is a case that was long ago

superseded by the Texas Supreme Court.

The Architect finally challenges the sufficiency of the expert testimony to

support the jury’s diminution-in-value damage award. That testimony employed

accepted appraisal methodologies and standards. Indeed, the valuation method

used was the one the Texas Supreme Court has deemed appropriate. The valuation

date used was the date that was submitted in the court’s charge – an appropriate

date given what be considered. Criticism of the appraiser for allegedly failing to

provide actual performance data is baseless because the appraiser in fact provided

it. His testimony did not include “stigma” damages and did not include damages

for lost profits. The damages need not have been “segregated” to be legally

sufficient. Legally sufficient evidence supported the jury’s damage assessment.

7

V. ARGUMENT AND AUTHORITIES

A. The Trial Court Correctly Awarded RLJ Its Attorney’s Fees.

The Architect asserts the trial court erred in awarding RLJ Chapter 38

attorney’s fees. It argues Chapter 38 required RLJ to “recover damages” without

specifying what a “recovery” of damages is. (Appellant’s Brief 16,17). The jury

found $785,000 in damages.4 (CR1127;App.B). Apparently, the Architect contends

the jury’s damage award does not suffice and that Texas Civil Practice &

Remedies Code §38.001 (“§38.001”) requires a judgment awarding damages to

recover attorney’s fees. The Architect’s complaint is moot if this Court rules that

the one satisfaction rule is inapplicable. 5 (Cross-Appellants’ Brief 13-58).

1. Chapter 38 Does Not Require a Judgment for Damages.

The Architect’s argument is also wrong. Chapter 38 does not now require

and has not for nearly 40 years required a judgment awarding damages. McKinley

v. Drozd, 685 S.W.2d 7, 10-11 (Tex. 1985); Buckner Glass & Mirror Inc. v. T.A.

Pritchard Co., 697 S.W.2d 712, 714 (Tex. App.—Corpus Christi 1985, no writ);

Enriquez v. K & D Development & Construction, Inc., 567 S.W.2d 40, 42 (Tex.

Civ. App.—El Paso 1978, writ ref'd n.r.e.).

4

The Architect’s assertion that the jury “found” RLJ’s damages “greatly exaggerated”

(Appellant’s Brief 17) is incorrect. There was no such finding.

5

RLJ’s attorney’s fees arguments are presented subject to and without waiving its arguments that

the one satisfaction rule is inapplicable.

8

a. The “Judgment” Requirement Was Eliminated by

the 1977 Amendment to Chapter 38’s Predecessor.

In 1977, the Legislature amended the predecessor to Chapter 38 to eliminate

“finally obtain judgment” as a condition to recovering attorney’s fees. Compare

Act of May 17, 1971, ch. 225, §1, 1971 TEX. GEN. LAWS 1073 (former article

2226), with Act of April 25, 1977, ch. 76, §1, 1977 TEX. GEN. LAWS 153;

McKinley, 685 S.W.2d at 10-11 (explaining effect of amendment and court’s

failure to notice it). If the Legislature wishes to re-impose recovery of damages in

the judgment to recover attorney’s fees, it may do so. Judicial resurrection of this

requirement after Legislative elimination would impermissibly transgress the

constitutional separation of legislative authority from judicial power. See Lee v.

City of Houston, 807 S.W.2d 290, 293 (Tex. 1991); Texas Alcoholic Beverage

Comm'n v. Kings Four, Inc., 583 S.W.2d 676, 678 (Tex. Civ. App.—Austin 1979,

no writ).

b. The Texas Supreme Court and This Court Have

Rejected Any Such Requirement.

If “obtain[ing] judgment” were still necessary, the Texas Supreme Court

could not have allowed recovery of attorney’s fees in McKinley. There, the

claimant received a verdict for contract damages, but did not recover them in the

judgment because of an offsetting counterclaim. Nevertheless, the court awarded

9

attorney’s fees because the claimant met the statutory requirements without a

judgment for damages. 685 S.W.2d at 11.

This court also recognized, under circumstances very similar to those in this

case, that a party may recover Chapter 38 attorney’s fees without recovering

damages in the judgment. In A.D. Willis Co. v. Metal Bldg. Components, Inc., No.

03-99-00574-CV, 2000 WL 1508500 (Tex. App.—Austin Oct. 12, 2000, pet.

denied)(not designated for publication), the jury awarded damages for the

claimant’s breach of contract claim, but found a greater loss caused by the

claimant’s failure to mitigate. This Court ruled Chapter 38 attorney’s fees could

not be denied merely for want of damage recovery in the judgment. Id. at *5. Like

a settlement credit, failure to mitigate reduces recovery because it “tends to rebut

the measure of damages under the [plaintiff’s] claim of breach.” Austin Hill

Country Realty, Inc. v. Palisades Plaza, Inc., 948 S.W.2d 293, 300 (Tex. 1997).

This Court noted that the claimant had a “valid claim” for a “just amount” unpaid

on the thirtieth day following presentment. Because McKinley rejected a “net

recovery” requirement, this Court allowed attorney’s fees despite no judgment

awarding damages. 6 Id. at *6.

6

This reasoning is consistent with Perez v. Baker Packers, 694 S.W.2d 138, 143 (Tex. App.—

Houston [14th Dist.] 1985, writ ref'd n.r.e.), in which a claimant whose damages offset by

settlement credits was deemed the “successful party” entitled to recover rule 131 costs.

10

c. The Architect’s Cases Do Not Say Otherwise.

The Architect’s attack rests entirely on cases saying recovery of attorney’s

fees generally requires the claimant “(1) prevail on a cause of action for which

attorney’s fees are recoverable, and (2) recover damages,” Intercontinental Group

P’ship v. KB Home Lone Star, L.P., 295 S.W.3d 650, 653 (Tex. 2009)7; MBM Fin.

Corp. v. Woodlands Operating Co., 292 S.W.3d 660, 664, 666 (Tex. 2009)(no

proof); Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997); State Farm

Life Ins. Co. v. Beaston, 907 S.W.2d 430, 434, 437 (Tex. 1995); see also Mustang

Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 201 (Tex. 2004); Haubold v.

Medical Carbon Research Inst., LLC, No. 03-11-00115-CV, 2014 WL 1018008 at

*6, *7 (Tex. App.—Austin Mar. 14, 2014, no pet.)(mem. op.).

Closer examination of the facts in these cases reveals that “recovery” does

not require a judgment awarding damages. Instead, they hold that one cannot

recover attorney’s fees when there is no possibility of liability. In each, there was

no recovery because: (1) the jury found zero damages; (2) liability was not

established; or (3) no legally competent evidence supported awarding damages.

Intercontinental Group, 295 S.W.3d at 653, 655 (no finding); MBM Fin. Corp.,

292 S.W.3d at 664, 666 (Tex. 2009)(no proof); Mustang Pipeline Co., 134 S.W.3d

7

An example of the Architect’s superficial analysis is its assertion that this case “hold[s] that,

absent recovery of damages, attorney’s fees are not recoverable under Chapter 38.” (Appellant’s

Brief 15). The opinion, however, says Chapter 38 “is not controlling.” Intercontinental Group,

295 S.W.3d at 653.

11

at 201 (no proof); Solis, 951 S.W.2d at 390 (Tex. 1997)(no finding); Beaston, 907

S.W.2d at 434, 437 (no proof of damages under DTPA); Blizzard v. Nationwide

Mut. Fire Ins. Co., 756 S.W.2d 801, 806 (Tex. App.—Dallas 1988, no writ)(no

unpaid damages 8); Fire Ins. Exchg. v. Sullivan, 192 S.W.3d 99, 102, 110-11 (Tex.

App.—Houston [14th Dist.] 2006, pet. denied)(same 9); Haubold (claimant sought

no recoverable damages). None of them address a situation like McKinley or A.D.

Willis Co. in which the claim is valid but results no recovery under a judgment.

They do not, as the Architect suggests, require the recovery of damages by

judgment.

2. Chapter 38 Only Requires a Valid Claim Timely

Presented and Unpaid for Thirty Days.

The foregoing shows Chapter 38 does not require the recovery of damages

in a judgment. The inquiry may now focus on what Chapter 38 does require.

a. The Architect Ignores Proper Statutory

Interpretation.

All statutory interpretation begins with the statute’s language. Ross v. St.

Luke’s Episcopal Hosp., 58 Tex. Sup. Ct. J. 766, 2015 WL 2009744 at *3 (Tex.

May 1, 2015); Lippincott v. Whisenhunt, 58 Tex. Sup. Ct. J. 705, 2015 WL

8

In both Beaston and Blizzard, there was no breach of contract at all. The insurers paid more

than the policy required. Neither claimant in those cases had a “valid claim.” See Kleas, 2013

WL 4516120, at *2.

9

In Sullivan, the insurer had also paid more than the damages later found so there was never a

“valid claim” for breach of the policy or a DTPA violation that would support recovery of

attorney’s fees.

12

1967025 at *1(Tex. Apr. 27, 2015)(per curiam). The goal is to ascertain the

Legislature’s intent from that language alone, Leland v. Brandal, 257 S.W.3d 204,

206 (Tex. 2008), by considering the all statutory language in context, not in

isolation. See Union Carbide Corp. v. Synatzske, 438 S.W.3d 39, 51 (Tex. 2014).

Under the guise of interpretation, Courts may not add to or remove words from an

unambiguous statute. City of Rockwall v. Hughes, 246 S.W.3d 621, 631 (Tex.

2008). Undefined, unambiguous words have their ordinary meaning. Tex. Lottery

Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628, 635 (Tex. 2010);

Leland, 257 S.W.3d at 206. Further, the Legislature has rejected narrow

construction of Chapter 38 and mandates instead that it “be liberally construed to

promote its underlying purposes.”10 TEX. CIV. PRAC. & REM. CODE §38.005. That

purpose is to discourage unnecessary litigation over just claims. McKinley, 685

S.W.2d at 10-11.

b. The Architect Attempts to Add Words to Chapter

38 By Misapplication of Cases.

The Architect’s argument ignores these well-settled rules and relies on case

language interpreting other attorney’s fees statutes or previous versions of Chapter

10

Article 2226 was also amended in 1979 to add claims for oral and written contracts and to

mandate liberal statutory construction to overturn the previous rule that it should be strictly

construed because recovery of attorney’s fees was contrary to common law. See, e.g., Van Zandt

v. Fort Worth Press, 359 S.W.2d 893, 995 (Tex. 1962). Without intending to change the statute's

meaning, in 1985 the Legislature codified the 1979 version of article 2226 into the Civil Practice

and Remedies Code. Grapevine Excavation, Inc. v. Maryland Lloyds, 35 S.W.3d 1, 7 (Tex.

2000).

13

38 with language different from Chapter 38. See V.A.1.c., supra. Nothing in

Chapter 38 says the claimant must either “prevail” or “recover damages.” To

“prevail” is only required for recovery of attorney’s fees under the DTPA and

Insurance Code, not Chapter 38. TEX. BUS. & COMM. CODE §17.50(d); TEX. INS.

CODE §541.152. Nevertheless, the Architect relies on cases interpreting these

dissimilar or outdated statutes to impermissibly superimpose requirements not

supported by Chapter 38’s language. Reading words into a statute impermissibly

usurps the legislative prerogative. See Hughes, 246 S.W.3d at 631. The Texas

Supreme Court has ruled that constructions of disparate language in other

attorney's fees statutes do not control what Chapter 38 means. McKinley, 685

S.W.2d at 9; Jakab v. Gran Villa Townhouses Homeowners Ass'n, Inc., 149

S.W.3d 863, 868 (Tex. App.—Dallas 2004, no pet.). 11

11

In Solis, without acknowledging its holding in McKinley, the court included “prevail” as part

of its two-part “test” for Chapter 38. 951 S.W.2d at 390. This led some courts to improperly look

to federal attorney’s fees statutes with a “prevail” requirement. E.g.,, Intercontinental Group,

295 S.W.3d at 654. Even under the federal standard, RLJ “prevailed” by procuring a settlement,

Farrar v. Hobby, 506 U.S. 103, 11-12 (1992); Intercontinental Group, 295 S.W.3d at 654, of its

claim for damages for which all defendants must have been jointly liable if the one satisfaction

rule applies. Stewart Title Guar. Co. v. Sterling, 822 S.W.2d 1, 7 (Tex. 1991). RLJ also

succeeded by establishing liability and receiving a damages verdict. Several Texas Chapter 38

cases permit attorney’s fees with no damage award if the claimant recovers “something of

value,” such as a decree for specific performance. Jones, 614 S.W.2d at 96, 100–01; Rasmusson

v. LBC PetroUnited, Inc., 124 S.W.3d 283, 287 (Tex. App.—Houston [14th Dist.] 2003, pet.

denied).

14

3. Chapter 38 Only Requires a Valid Claim Timely

Presented and Unpaid for Thirty Days.

Chapter 38 only requires (1) that the claimant be represented by an attorney;

(2) that the claim be for a specified type; (3) that the claim be “valid” and (4)

presented; and (5) that the just amount owing not be tendered within 30 days after

presentment. TEX. CIV. PRAC. & REM. CODE §§38.001-.002. If these conditions are

satisfied, the claimant may recover attorney’s fees. TEX. CIV. PRAC. & REM. CODE

§38.001. In the present case, the meaning of the statutory requirements for

representation of counsel, presentment, and type of claim are not at issue.

a. A “Valid Claim” Is Required.

Under §38.001, “[a] person may recover reasonable attorney’s fees … in

addition to the amount of a valid claim” for a “written contract.” TEX. CIV. PRAC.

& REM. CODE §38.001. Chapter 38 further informs that a “valid claim” is one with

a “just amount owed.” TEX. CIV. PRAC. & REM. CODE §38.002(2). As McKinley

and A. D. Willis illustrate, a “valid claim” authorizing Chapter 38 attorney’s fees

exists with a verdict of liability and resulting damages, even if award of those

damages is ultimately rendered in the judgment.

1) “In [A]ddition [T]o” Does Not Imply a

“Valid Claim” Requires a Judgment

Awarding Damages.

Yet, the Architect also cites cases suggesting that the phrase “in addition to

the amount of a valid claim” implies there must be some damage amount awarded

15

in the judgment to recover Chapter 38 attorney’s fees. (Appellant’s Brief 16). Its

reliance on Solis, 951 S.W.2d at 390, MBM Fin. Corp., 292 S.W.3d at 666, and

Haubold, 2014 WL 1018008 at *6, for this interpretation is misplaced. In all three,

there was no valid verdict awarding damages because the jury found no damages

or the damage finding was unsupported by competent evidence. Further,

suggesting that Chapter 38 requires either a verdict or judgment for monetary

damages ignores that Chapter 38 attorney’s fees may be recovered when only non-

monetary relief is obtained. See, e.g., Jones v. Kelley, 614 S.W.2d 95, 96, 100–01

(Tex.1981); Rasmusson v. LBC PetroUnited, Inc., 124 S.W.3d 283, 287 (Tex.

App.—Houston [14th Dist.] 2003, pet. denied); Martini v. Tatum, 776 S.W.2d 666,

668, 670 (Tex. App.—Amarillo 1989, writ denied)(contractual liability decided but

no judgment awarding monetary relief); De La Rosa v. Kaples, 812 S.W.2d 432,

433, 435 (Tex. App.—San Antonio 1991, writ denied)(same).

2) A Verdict Awarding Damages Is Enough To

Have a “Valid Claim.”

As McKinley and A. D. Willis amply demonstrate, recovery of damages in a

judgment is not necessary. If the existence of a “valid claim” included a

requirement that the claimant “recover” as the Architect’s cases suggest, it is

apparent that a verdict of liability and awarding damages is “recovery” enough to

have a valid claim. Rogers v. RAB Inv. Ltd., 816 S.W.2d 543, 551 (Tex. App.—

Dallas 1991, no writ), observed, “Without a jury finding of damages or a recovery

16

of damages, there can be no award of attorney’s fees” under §38.001. By negative

implication, Solis also suggests that a jury verdict is a “recovery” by treating a zero

damages verdict as a failure to “recover.”

b. Chapter 38 Requires the Valid Claim to Remain

Unpaid 30 Days After Presentment.

Chapter 38 also specifies when the valid claim must exist. “Payment for the

just amount owed must not have been tendered before the expiration of the 30th

day after the claim is presented.” TEX. CIV. PRAC. & REM. CODE §38.002(3). As

already discussed, the reason why the Legislature authorized the recovery of

attorney’s fees was to encourage pre-trial settlement of valid claims and thereby

avoid unnecessary litigation over just claims. McKinley, 685 S.W.2d at 10-11;

Jones v. Kelley, 614 S.W.2d 95, 100 (Tex. 1981); see also Doctors Hosp. 1997,

L.P. v. Sambuca Houston, L.P., 154 S.W.3d 634, 638 (Tex. App—Houston [14th

Dist.] 2004, pet. abated); Manges v. Mustang Oil Tool Co., 658 S.W.2d 725, 730

(Tex. App.—Corpus Christi 1983, writ ref'd n.r.e.). Permitting recovery of Chapter

38 attorney’s fees based on the validity of the claim before events trial instead of

after it commences is “more consistent” with (1) “legislative intent” to discourage

unnecessary litigation over just claims, and (2) the statutory liberal construction

mandate to “promote its underlying purpose.” McKinley, 685 at 10-11; TEX. CIV.

PRAC. & REM. CODE §38.005; Act of June 6, 1979, 66th Leg., R.S., ch. 314, §1,

1979 TEX. GEN. LAWS 718.

17

Of course, trial results affect whether there was ever a valid claim. A finding

of no liability or zero damages, or want of legally sufficient evidence of either

establishes no valid claim ever existed. See cases cited in V.A.1.c., supra.

However, allowing a claim’s validity to be undermined by credits for settlements

that occur during trial, which is the situation here, defeats Chapter 38’s purpose.

Settlements during trial do not avoid the unnecessary expense that Chapter 38 was

intended to avoid.

The distinction between pre-trial and during trial settlements was critical to

this Court’s analysis in Osborne v. Jauregui, Inc., 252 S.W.3d 70, 75-77 (Tex.

App.—Austin 2008, pet. denied). Unlike the present Chapter 38 breach-of-contract

case, Osborne involved recovery of attorney’s fees under the DTPA, under which

the issue was whether the plaintiff “prevailed” – something Chapter 38 does not

require. See V.A.2.a., supra. However, the analogy is instructive with respect to

when the validity of the claim is measured. In Osborne, the plaintiff settled before

trial commenced with all but one defendant for an amount greater than the

damages awarded by the jury against the remaining defendant. Osborne, 252

S.W.3d at 73. RLJ, on the other hand, reached the relevant settlement after trial

commenced.

This Court recognized in Osborne that “a net recovery is not necessary for a

plaintiff to be considered a prevailing party.” Osborne, 252 S.W.3d at 76. But it

18

concluded, reasonably enough, that a party does not “prevail” at trial when it

received before trial more than it recovered at trial for tort damages that all

defendants would have jointly and severally liable for under the contribution

statute. “It is one thing to allow attorney’s fees notwithstanding an opposing

party’s success on an offsetting claim. However it is another to allow attorney’s

fees on a claim that, although successful, was paid before trial.” Id. (Emphasis

added).

The logic of Osborne implicit in the concept of what it means to “prevail” is

explicit under Chapter 38 which specifically says attorney’s fees may be recovered

if the claim is valid and unpaid for more than thirty days after presentment. It

should be noted that some cases have suggest that fees are recoverable under

Chapter 38 if the presented claim is unpaid before trial commences. Peissel v.

Peissel, 620 S.W.2d 796, 800 (Tex. Civ. App.—Houston [14th Dist.] 1981, no

writ). Cases can neither add nor subtract from Chapter 38’s plain language that the

claim need only be valid thirty days after presentment. For reasons discussed

below, resolving that discrepancy is unnecessary here.

Chapter 38’s concern with whether a valid claim that existed before a trial

begins is the basis of the so-called “exception” to McKinley disallowing attorney’s

fees if the claimant’s contract damages are fully offset by a “credit” for sums the

defendant paid. In these cases, including Osborne, the “credit” was due to

19

payments madd worade before trial so that there was no “valid claim” for a “just

amount owing” remaining when trial commenced. Blizzard, 756 S.W.2d at 806 12;

Osborne, 252 S.W.3d at 74, 76-77; Imperial Lofts, Ltd. v. Imperial Woodworks,

Inc., 245 S.W.3d 1, 7 (Tex. App.—Waco 2007, pet. denied); Buccaneer Homes of

Ala., Inc. v. Pelis, 43 S.W.3d 586, 591 (Tex. App.—Houston [1st Dist.] 2001, no

pet.); Hamra v. Gulden, 898 S.W.2d 16, 19 (Tex. App.—Dallas 1995, writ dism’d

w.o.j.); Sullivan, 192 S.W.3d at 109-110.

Assume arguendo the one satisfaction rule applies to breach of contract

claims at all or that joint liability may be based on common injury alone. Under

either assumption, if a claim’s validity were determined by whether the claimant

received a damage award under a judgment, a defendant in multi-defendant cases

would resist reasonable settlements as long as possible in hopes other defendants

would settle and allow it to escape scot-free, despite its joint liability, if those

settlement sums exceed the damages caused. Settling defendants have no

contribution claim against the hold-out under either Chapter 32 or common law

because the settlors are not judgment debtors. 13 Beech Aircraft Corp. v. Jinkins,

739 S.W.2d 19, 22 (Tex. 1987)(Chapter 32); Austin Road Co. v. Pope, 147 Tex.

12

Blizzard is actually a no-breach, not a “credit,” case. See n.8, supra.

13

TEX. CIV. PRAC. & REM. CODE §§32.001, 32.002 (contribution allowed only in tort actions for

“a person against whom a judgment is rendered”); TEX. CIV. PRAC. & REM. CODE §33.002

(Chapter 33 only applies to tort actions); Beech Aircraft Corp. v. Jinkins, 739 S.W.2d 19, 22

(Tex. 1987)(settlor has no right to sue for contribution).

20

430, 216 S.W.2d 563, 564-65 (1949)(common law); see Cross-Appellants’ Brief

19-21,48-51. Thus, the Architect’s suggested interpretation of Chapter 38

discourages, rather than encourages, settlement of valid claims. For these reasons,

neither the Architect’s authorities nor Osborne support a rule barring recovery of

Chapter 38 attorney’s fees if the settlement exceeding the damage award occurs

during rather than before trial.

4. RLJ Met All the Statutory Requirements for Recovering

Its Attorney’s Fees.

RLJ met all of Chapter 38’s necessary conditions. It had a valid claim that

was unpaid more than thirty days after presentment and remained unpaid before

trial commenced.

a. RLJ Had a Valid Claim.

A “valid” breach of contract claim requires: (1) a valid contract; (2) that the

claimant performed or was excused from performing; (3) that the defendant

breached which (4) damaged the claimant. Kleas v. Clark, Thomas & Winters,

P.C., No. 03-12-00755-CV, 2013 WL 4516120, at *2 (Tex. App.—Austin Aug. 21,

2013, pet. denied); C.W. 100 Louis Henna, Ltd. v. El Chico Rests. of Tex., L.P.,

295 S.W.3d 748, 752 (Tex. App.—Austin 2009, no pet.). The jury’s verdict

removes all doubt that RLJ’s claim was valid. (CR1126-27).

21

b. The Just Amount Owing Was Not Timely

Tendered.

RLJ’s claim was first presented in August 2009, with further presentments

of its claim in August 2010 and by April 6, 2011 letter. (3SCR37-38,4SCR___ 14).

The Architect did not respond to these presentments. (3SCR38). Assume arguendo

that the jury’s verdict was – as the Architect contended– for “indivisible” damages

for which the Architect and the Settling Defendants were jointly liable, RLJ did not

– unlike the claimant in Osborne – settle for a total amount greater than the jury’s

damage award until during the 2014 trial, long after the claim was presented.

(CR1080-81,1174,1710;7RR105-108). In that hypothetical case, the jury’s finding

established that the “just amount owing” was $785,000 (CR1127) which was not

timely paid. Even if the one satisfaction rule applied, which it does not, that is all

that was necessary. “If a plaintiff meets the requirements of [the attorney’s fee

statute], [t]he [plaintiff] is entitled to attorney's fees. Karol v. Presido Enterprises,

Inc., 622 S.W.2d 638, 640 (Tex. App.—Austin 1981, no writ); see also Buckner

Glass & Mirror Inc. v. T.A. Pritchard Co., 697 S.W.2d 712, 714 (Tex. App.—

Corpus Christi 1985, no writ)(decided under post-1977 amendment to article

14

Exhibits 5 and 6 to Amended Attorney’s Fees Affidavit were included in RLJ’s request for the

accompanying motion to be included in the Clerk’s Record, but appear to have been omitted.

RLJ is requesting supplementation to include them.

22

2226). Thus, RLJ satisfied Chapter 38’s timing requirement regarding its valid

claim. TEX. CIV. PRAC. & REM. CODE §38.002(3).15

5. The Trial Court’s Reasoning Agreed With the

Legislature’s.

The Architect alleges that the trial court was “creat[ing] its own rule of law”

by ruling based on the settlement’s timing. (Appellant’s Brief 15). To the contrary,

the trial court here correctly distinguished settlements before trial from those that

occur during trial. (CR1439-41). The trial court was not legislating or improvising.

It simply analyzed the language of Chapter 38 more carefully than the Architect. 16

The Architect also attacks the trial court’s reasoning for treating attorney’s

fees as damages. This criticism assumes attorney’s fees cannot be recovered or

considered “part of the amount of the judgment” unless other damages are

recovered. (Appellant’s Brief 16). The Architect cites C& H Nationwide, Inc. v.

Thompson, 903 S.W.2d 315, 325-26 (Tex. 1994), and Ellis County State Bank v.

Keever, 888 S.W.2d 790, 797n.13 (Tex. 1994), without mentioning they construe

“amount of the judgment” in the pre-judgment interest statute, not Chapter 38.

Indeed, “amount of the judgment” appears nowhere in Chapter 38.

15

§38.002 also requires presentment and representation by counsel. It is undisputed that RLJ’s

claim was presented and it was represented by counsel. (3SCR31,37-38).

16

Unlimited by findings or conclusions, the judgment must be upheld under any theory

supported by evidence. BMC Software Belgium, N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex.

2002); Phillips v. Estate of Poulin, No. 03-05-00099-CV, 2007 WL 2980180, at *4 (Tex. App.—

Austin Oct. 12, 2007, no pet.). The very letter ruling the Architect criticizes states that it does not

limit the ruling’s bases and incorporates previous admonitions to that effect. (CR1057,1437).

23

Chapter 38 does not require recovery of damages under a judgment to

authorize attorney’s fees. Whether attorney’s fees are “damages” is beside the

point. It is still worth noting, however, the Legislature considered attorney’s fees as

“damages” when it eliminated the “finally obtain judgment” requirement in 1977.

The Committee Report for the 1977 amendment states, “Even in a lawsuit

involving a lot of money, the losing party in effect prevents the winner from

getting the full amount, because the winner must pay his attorney. Either way, it's

not right for a person to be deprived of his full damages from a wrongdoer.”

(emphasis added; available from the Texas Legislative Reference Library at

http://www.lrl.state.tx.us/scanned/hroBillAnalyses/65-0/HB452.pdf;App.K).

RLJ was entitled to attorney’s fees. It met all of Chapter 38’s requirements.

Nothing further required RLJ to recover a judgment for damages to recover its

attorney’s fees. The Architect cites no authority addressing the effect of post-trial

settlement credits. Authorities interpreting other statutes have no bearing on

Chapter 38. Even if they did, RLJ “prevailed.”

B. RLJ Was Assigned the Contract and the Cause of Action and

Had Standing to Sue.

On three separate occasions, the Architect has tried and failed to convince

two different trial judges that RLJ could not sue because it did not have the

necessary consensual assignment of rights under the Architectural Contract.

(CR220,1083-84). The outcome can be no different here.

24

1. RLJ Owned Both the Architectural Contract Rights and

Causes of Action of Action for Its Breach.

The Owner and the Architect were the original parties to the Architectural

Contract. (CR463;App.G). With the Architect’s consent, the Owner assigned to

South Ausaircourt, L.P. (“Ausaircourt”) “all of [the Owner’s] interest … in and to

that certain Standard Form Agreement Between Owner and Architect … date[d] …

January 1, 2005 ….” (CR578;App.L). There is no dispute that the Owner

effectively assigned its rights under the Architectural Contract to Ausaircourt.

(Appellant’s Brief 19). The Architect does not question that Ausaircourt owned the

contract cause of action against it. (Appellant’s Brief 21). The Architect’s first

challenge to the trial court’s summary judgment is limited to whether Ausaircourt

effectively and validly transferred the cause of action to RLJ. (Appellant’s Brief

19,28).

a. Ausaircourt Assigned the Contract to RLJ Under

the PSA and the Cause of Action By Assignment of

“Intangible Assets.”

After the Project was substantially completed, many properties, including

the Project, were contracted to be sold pursuant to a “New Hotels Purchase and

Sale Agreement” (“PSA”). (CR605-676). Under the PSA, the Owner sold

Ausaircourt “all contracts, agreements … and warranties covering the design,

development, construction, operations, maintenance and repair of the Property….”

(CR 613[“Assets” defined];615[“Contracts” defined]; 619[“Property” defined];

25

621[sales agreement]; App.J). At closing, Ausaircourt assigned RLJ “all of

[Ausaircourt]’s right, title and interest in and to all licenses, permits and all other

intangible assets relating to the [Project]….” (CR701; emphasis added; App.M).

(“Intangibles Assignment”).

RLJ has a clear chain of ownership from Ausaircourt through the PSA and

Intangibles Assignment of both the Architectural Contract and the cause of action.

Under the PSA’s authorization for supplemental documentation effecting the

transaction (CR656), a later “Supplemental Clarification of Assignment”

(“Supplemental”) specified the Intangibles Assignment “intended to assign”

Ausaircourt’s rights in the Architectural Contract “along with all intangibles,

including but not limited to causes of action or claims owned by [Ausaircourt]

against [the Architect].” (CR602-04; emphasis added; App.N).

2. The Intangibles Assignment Transferred the Contract

Cause of Action.

The plain language of the Intangibles Assignment conveyed the cause of

action to RLJ. Assignments are construed like any contract through rules of

construction to ascertain the parties’ intent expressed in the written assignment.

Commercial Structures and Interiors, Inc. v. Liberty Educ. Ministries, Inc., 192

S.W.3d 827, 832-33 (Tex. 2006). Terms are given “their plain and ordinary

meaning unless the instrument indicates the parties intended a different meaning.”

26

Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex.

2009).

a. “Intangible Assets” Included Contract Cause of

Action.

The plain, ordinary meaning of an “intangible asset” includes choses in

action or causes of action. An “intangible asset” is “[a]ny nonphysical asset or

resource that can be amortized or converted to cash, such as patents, goodwill, and

computer programs, or a right to something, such as services paid for in advance.”

Asset, Black's Law Dictionary (10th ed. 2014). A cause of action is “intangible”

because it is an incorporeal personal property right with no physical existence

except by a document without intrinsic value. Lay v. Aetna Ins. Co., 599 S.W.2d

683, 686 (Tex. App.—Austin 1980, writ ref'd n.r.e.); Browne v. King, 196 S.W.

884, 887 (Tex. Civ. App. 1917) aff'd, 111 Tex. 330, 235 S.W. 522 (1921). A cause

of action is an “asset” as the right to a judicial proceeding to recover money.

Vanderburg v. Nocona Gen. Hosp., No. 7:02-CV-291-KA, 2008 WL 114846, at *4

(N.D. Tex. Jan. 10, 2008); Adams v. Great American Lloyd’s Ins., 891 S.W.2d 769,

772 (Tex. App.—Austin 1995, no writ). A non-frivolous claim is an “asset,”

regardless of its ultimate success. In re First State Bancorporation, 498 B.R. 322,

329-30 (Bankr. D.N.M. 2013).

This Court agrees, calling a claim “an asset of the receivership estate.” Akin,

Gump, Strauss, Hauer & Feld, L.L.P. v. E Court, Inc., No. 03-02-00714-CV, 2003

27

WL 21025030 (Tex. App.—Austin May 8, 2003, no pet.)(emphasis added). It

explained in Am. Multi-Cinema, Inc. v. Hegar, No. 03-14-00397-CV, 2015 WL

1967877, at *5 (Tex. App.—Austin Apr. 30, 2015, no pet. h.), that “Intangible

property” includes “incorporeal property (as choses in action) often evidenced by

documents (as stocks, bonds, notes, judgments, franchises) having no intrinsic

value or by rights of action, easements, goodwill, trade secrets.” Accord, In re

Malacara, 223 S.W.3d 600, 602 (Tex. App.—Amarillo 2007, no pet.)(retirement

benefits); In re Fleckenstein, 589 S.W.2d 788, 789-90 (Tex. Civ. App.—El Paso

1979, no writ)(promissory note). Thus, “intangible asset” and “intangible property”

are commonly understood to include causes of action. Green v. H. E. Butt Found.,

217 F.2d 553, 554 (5th Cir. 1954)(constructive possession of a chose in action); In

re Grotjohn, No. 03-47055DML, 2005 WL 6441386, at *5 (Bankr. N.D. Tex. July

19, 2005)(“Intangible assets such as … causes of action”); In re Scott, 157 B.R.

297, 314 (Bankr. W.D. Tex. 1993), withdrawn per settlement, 162 B.R. 1004

(Bankr. W.D. Tex. Jan. 21, 1994)(party succeeded to “intangible assets like causes

of action”).

b. The Architect’s Argument Ignores Context and the

Residuary Clause’s Purpose.

The Architect’s declaration that there is “[n]o authority … causes of action

are included within ‘intangible assets’” is incorrect. (Appellant’s Brief 26). The

Architect’s only cited support, an old edition of Black’s Law Dictionary, defines

28

“asset” as “[p]roperty of all kinds, real and personal, tangible and intangible,

including … causes of action….” Black’s Law Dictionary 117 (6th ed.

1990)(emphasis added). Nevertheless, the Architect argues that omission of “cause

of action” from the examples of “intangible asset” means it is not one. Having

already described “cause of action” as an “asset,” the dictionary’s failure to repeat

it as an example of an “intangible asset” does not support the Architect’s

conclusion. Presumably, the dictionary reasonably assumed readers would

understand that a “cause of action” is intangible property and that example lists are

not exhaustive. The Architect points to the dictionary’s inclusion of “judgment” or

“claim” as examples of a “nominal asset” to suggest that they cannot be intangible

assets. Nothing indicates that “intangible” and “nominal” assets are mutually

exclusive. The parties did not incorporate any such distinction. The Architect may

not now urge interpreting the assignments as if they had.

The Architect’s narrow definition of “intangible asset” also ignores its

context. In construing assignments, the courts consider the surrounding

circumstances. Coffin v. Douglas, 61 Tex. 406, 409 (1884)(available at 1884 WL

8785). Here, the parties were closing the sale of the Project. They intended RLJ to

step into Ausaircourt’s shoes. The PSA required the transfer of all Ausaircourt’s

claims and causes of action concerning the Project. (CR692). The PSA provides

specifically that Ausaircourt must cooperate with RLJ to enforce “any rights under

29

the [A]rchitectural [Contract] … respecting the design … and construction of the

Hotel.” (CR643;App.J). Thus, RLJ “bargained for an assignment of the prior

owner’s possible causes of action … that occurred before [its] purchase.”

Boerschig v. Southwestern Holdings, Inc., 322 S.W.3d 752, 767 (Tex. App.—El

Paso 2010, no pet.).

Under the Intangibles Assignment, the transfer of “all other intangible

assets” (CR701;App.M; emphasis added) is a residue or “Mother Hubbard” clause

intended to convey any categorical item not otherwise assigned. This Court

recognizes such clauses clearly intend to dispose of all of one’s property. Petsch v.

Slator, 573 S.W.2d 849, 853 (Tex. Civ. App.—Austin 1978, writ ref'd n.r.e.). The

same is true here.

“The language used [in the Intangibles Assignment] is as broad as it well

could be.” Coffin, 61 Tex. at 409 (effect of assigning “all properties of all kinds

owned by us”). “All means all,” Halliburton, Inc. v. Admin. Review Bd., 771 F.3d

254, 266 (5th Cir. 2014); Kennedy v. Lynd, 306 F.2d 222, 230 (5th Cir. 1962), not

“all, but” or “all, except.” Ausaircourt could not express more definitively that it

conveyed all, and reserved no, intangible asset. The Architect’s narrow and self-

serving assignment interpretation cannot be reconciled with surrounding

circumstances, the parties’ manifest intent, controlling interpretive rules, or its own

dictionary’s definition of “asset.”

30

3. The Intangibles Assignment was “Express.”

Notwithstanding the explicit assignment of “all ... intangible assets”

(CR701;App.M), the Architect argues that something more “express” – by which

the Architect means “more particular” – was required. (Appellant’s Brief 22) This

argument relies on cases about whether wording in a real property deed also

effectively assigns an accrued cause of action for damage to the real estate

conveyed. The courts, quite logically, have said “no.” The cause of action is not a

right that “runs with the land.” Welch v. Monroe, No. 10-03-00013-CV, 2004 WL

2474504, at *2 (Tex. App.—Waco Nov. 3, 2004, no pet.); Exxon Corp. v. Pluff, 94

S.W.3d 22, 27 (Tex. App.—Tyler 2002, pet. denied). Once accrued, the claim is

the personal property of the owner at that time. Exxon Corp. v. Emerald Oil & Gas

Co., L.C., 331 S.W.3d 419, 424-25 (Tex. 2010); Vann v. Bowie Sewerage Co., 127

Tex. 97, 90 S.W.2d 561, 562 (1936)(permanent nuisance).

Not being a real property right, “mere transfer of the land by deed does not

transfer the [accrued] claim for damages.” Emerald Oil, 331 S.W.3d at 420, 424-

25; Vann, 90 S.W.2d at 563. Without a more specific reference, Emerald Oil, 331

S.W.3d at 424-25, the accrued cause of action is not conveyed by a general

warranty deed’s grant of the described real estate and all “rights and appurtenances

thereto.” Richey v. Stop N Go Markets of Tex., 654 S.W.2d 430, 431 (Tex.1983).

Assignment of the cause of action cannot be implied because a general warranty

31

deed contains no language manifesting an intention to convey personal property.

See Brooks v. Chevron USA Inc., No. 13-05-029-CV, 2006 WL 1431227, at *8

(Tex. App.—Corpus Christi May 25, 2006, pet. denied)(mem. op.); Pluff, 94

S.W.3d at 27; Cook v. Exxon Corp., 145 S.W.3d 776, 781 (Tex. App.—Texarkana

2004, no pet.); La Tierra de Simmons Familia, Ltd. v. Main Event Entm't, LP, No.

03-10-00503-CV, 2012 WL 753184 at * (Tex. App.—Austin Mar. 9, 2012, pet.

denied).

Unlike the parties in the Architect’s cases, RLJ need not rely on the real

property deed for its right to sue. It has express assignments of the seller’s personal

property and intangible property. Cf. Ceramic Tile Int’l Inc. v. Balusek, 137

S.W.3d 722, 724 (Tex. App.—San Antonio 2004, no pet.)(plaintiff’s claim for

damage to real property failed due because separate assignment not introduced).

Yet, the Architect relies on Richey to argue that more particularity is necessary for

the cause of action’s assignment to be “express.” “Express” is the opposite of

“implied.” Mueller v. All-Temp Refrig., Inc., 2014 Ohio 2718, ¶ 45; Ross v. Ross,

20 Ala. 105, 111 (1852). RLJ need not resort to implication because the

assignment to it was overtly expressed. Richey says nothing about particularity. It

only holds that a general warranty deed’s conveyance of described real property

“with all … rights and appurtenances” does not include personal property

32

consisting of an accrued land damage cause of action. 654 S.W.2d at 431-32; see

Emerald Oil, 331 S.W.3d at 425; Brooks, 2006 WL 1431227, at *8.

The Richey cases also do not suggest that a categorical description is

ineffective to describe everything within that category. General, categorical

descriptions are effective for that purpose. See, e.g., Owen v. Vibrasonic

Exploration, Inc., 694 S.W.2d 421, 424 (Tex. App.—Houston [14th Dist.] 1985,

writ ref’d n.r.e.)(“accounts receivable” … “including but not limited to those

shown” sufficient to describe unlisted account); Ian Martin, Inc. v. Greenspoint

Bank, 01-87-00631-CV, 1988 WL 45423 at *3 (Tex. App.—Houston [14th Dist.]

May 5, 01-87-00631-CV, 1988 WL 45423 (Tex. App. May 5, 1988)(same;

unpublished); Orix Credit Alliance, Inc. v. Omnibank, N.A., 858 S.W.2d 586 (Tex.

App. 1993)(“property of every kind and nature” satisfied TEX. BUS. & COMM.

CODE §9.110’s “reasonably identified” requirement for a lien on all tangible

property). The Architect cites, and research reveals, no authority invalidating a

cause of action’s assignment because it conveyed an encompassing class of

intangible rights without specifically mentioning “cause of action” or “chose in

action.” Merely because an accrued cause of action does not automatically pass

with a real property conveyance or the underlying contract’s assignment does not

justify a “magic words” test that ignores that assignments like any other contract

must be construed according to its language in light of surrounding circumstances.

33

Commercial Structures, 192 S.W.3d at 832-33. RLJ was validly assigned

Ausaircourt’s ownership of the cause of action against the Architect on the basis of

the Intangibles Assignments alone.17

4. The Supplemental Clarification May Be Considered and

Removes Any Doubt That RLJ Was Assigned the

Architectural Contract and the Cause of Action For Its

Breach.

The propriety of the trial court’s ruling RLJ had standing is confirmed by

considering the Supplemental’s statement the Intangibles Assignment was intended

to include the Architectural Contract and “causes of action or claims … against the

[Architect].” (CR603;App.N). The Architect suggests, however, the Supplemental

cannot be considered because the trial court sustained its extrinsic parol evidence

objection. (Appellant’s Brief 27).

The parol evidence rule is a substantive, not evidentiary, so this ruling can

be reconsidered de novo. Hubacek v. Ennis State Bank, 159 Tex. 166, 169, 317

S.W.2d 30, 31 (1958)(parol evidence substantive); Provident Life & Acc. Ins. Co.

v. Knott, 128 S.W.3d 211, 215 (Tex. 2003)(summary judgment reviewed de novo).

The parol evidence rule only precludes enforcement of inconsistent prior or

contemporaneous agreements if the parties have a fully integrated agreement.

Hubacek, 317 S.W.2d at 31; Lewis v. Adams, 979 S.W.2d 831, 836 (Tex. App.—

17

The Architect devotes considerable discussion to the trial court’s April 10, 2014 letter.

(Appellant’s Brief 22). The trial court did not limit the underpinnings for its ruling to the

reasoning in its letter. See n. 16, supra.

34

Houston [14th Dist.] 1998, no pet)(only excludes prior agreements). The

Supplemental was not parol evidence for at least four reasons.

First, assuming arguendo that intent was not, as the Architect contends,

expressed with sufficient particularity, the Supplemental was consistent with the

intent to convey causes of action as a subset of the “intangible assets” expressly

conveyed. All the Supplemental did was provide more particularity; it did not alter

and was not inconsistent with the intent originally expressed. Second, the

Supplemental was not parol evidence because it did not antedate the PSA or the

Intangibles Assignment. Third, the assignment was not fully integrated. Indeed, the

PSA authorized the execution of any necessary additional instruments and

permitted its modification in writing. (CR654,656;App.J).

Finally and ironically, the Architect has no standing to assert the parol

evidence rule. The Architect is a stranger to both the Intangibles Assignment and

the PSA. The parol evidence rule does not apply to a dispute between a contracting

party and a contractual stranger. Baroid Equipment, Inc. v. Odeco Drilling, Inc.,

184 S.W.3d 1, 13 (Tex. App.—Houston [1st Dist.] 2006, pet. denied). The

Supplemental was appropriate for consideration despite the trial court’s erroneous

“evidentiary” ruling and fully supports its decision that RLJ had standing through

the Intangibles Assignment.

35

5. Alternatively, The PSA Transferred The Contract Cause

of Action When It Transferred the Contract.

If more than the Intangibles Assignment were required to transfer the cause

of action, it is found in the PSA. It transferred all of Ausaircourt’s “right, title and

interest” to “the Assets,” which included “all contracts, agreements … and

warranties covering the design, development, construction, operations,

maintenance and repair of the Property….” (CR613,615,619;App.J). This clearly

intended and effectuated an assignment of the Architectural Contract rights. The

PSA’s assignment of all “right, title, and interest” in that contract includes the

cause of action for its breach. See D Design Holdings, L.P. v. MMP Corp., 339

S.W.3d. 195, 202-203 (Tex. App.—Dallas 2011, no pet.)(pre-suit assignment of

“all of right, title, and interest” left no cause for the assignor to assert); see also

Effel v. McGarry, 339 S.W.3d 789, 792 (Tex. App.—Dallas 2011, pet. denied) (all

interests in assigned judgment, “including the underlying claim,” was assigned).

6. The Architectural Contract Was Validly Assigned to

RLJ.

The Architect next argues that the Architectural Contract’s Anti-Assignment

Clauses invalidated the transfer of rights under that contract. Notably, the

Architect does not assert these clauses affected assignment of the cause of action. 18

18

The Architect’s consent was unnecessary to assign the cause of action. Causes of action are

freely alienable, subject to exceptions inapplicable here. State Farm Fire and Casualty Co. v

Gandy, 925 S.W.2d 696, 707 (Tex. 1996); see TEX. BUS. & COM. CODE ANN. § 2.210(b) (West

2011)(contract actions). Anti-assignment clauses do not prevent assignments of causes of action.

36

Assignment of the cause of action was conclusively established under either the

Intangibles Assignment or the PSA which makes irrelevant the Architect’s

arguments about the Architectural Contract’s assignment. Nevertheless, the

Architect’s challenge to the contract assignment is refuted here.

First, the Architect inaccurately asserts that RLJ admitted “alleg[ing] only an

assigned cause of action … rather than assignment of the [Architectural] Contract

itself.” (Appellant’s Brief 18,n.9). Yet the cited portion of RLJ’s pleading states

“Ausaircourt assigned the Project, the contracts, … intangibles … and causes of

action to [an] RLJ [entity].… and then assigned its rights … under the Project

contracts to … RLJ.” (CR222,329). This is no admission RLJ was not assigned the

contract, but simply acknowledges the PSA and Intangibles Assignments were

separate instruments.

Additionally, even if contract assignment had been proscribed by the anti-

assignment clause, Ausaircourt’s transfer of the Architectural Contract to RLJ

remained effective. “[T]he obligor a right to damages for breach of the terms

forbidding assignment but [its breach] does not render the assignment ineffective.”

Pagosa Oil & Gas LLC v. Marrs & Smith Ptnrs., 323 S.W.3d 203, 212 (Tex. App.—El Paso

2010, pet. denied); see also Restatement (Second) of Contract §§322(1), (2)(a). Other

jurisdictions agree that the AIA anti-assignment clause does not require consent to assign a cause

of action. See e.g. Berschauer/Phillips Const. Co. v. Seattle Sch. Dist. No. 1, 881 P.2d 986

(Wash. 1994); Ford v. Robertson, 739 S.W.2d 3, 5 (Tenn. Ct. App. 1987)(post-performance

assignment of cause of action); Folgers Architects Ltd. v. Kerns, 612 N.W.2d 539, 548 (Neb.

App. 2000)(same).

37

Restatement (Second) of Contract §322(2)(b); see Reuben H. Donnelley Corp. v.

McKinnon, 688 S.W.2d 612, 615 (Tex. App.—Corpus Christi 1985, writ ref’d);

Gips v. Red Robin Corp., 366 S.W.2d 853, 857 (Tex. Civ. App.—Houston 1963,

writ ref’d n.r.e); accord, Cedar Point Apartments v. Cedar Point Inv. Corp., 693

F.2d 748, 753, 754 (8th Cir.), cert. denied, 461 U.S. 914 (1983); Rumbin v. Utica

Mut. Ins. Co., 254 Conn. 259, 757 A.2d 526, 528, 530, 535-537, 541 (Conn. 2000);

University Mews Associates v. Jeanmarie, 122 Misc.2d 434, 471 N.Y.S.2d 457,

461 (N.Y. Sup.Ct. 1983).

Some jurisdictions hold that if the assignor has fully performed, as is the

case here, the anti-assignment is unenforceable absent significant resulting harm.

In re Cooper, 242 B.R. 767, 771 (Bankr. S.D. Ga. 1999); Gallagher v. Southern

Source Packaging, LLC, 564 F.Supp.2d 503, 506-508, 514, 515 (E.D.N.C.

2008)(assigment not barred if payment only performance due); Owen v. CNA

Insurance/Continental Cas. Co., 167 N.J. 450, , 771 A.2d 1208, 1213-14, 1218

(N.J. Super. 2001)(no material increase in risk or burden). In Berschauer/Phillips

Const. Co. v. Seattle Sch. Dist. No. 1, 881 P.2d 986 (Wash. 1994), the court

observed that “[t]he primary purpose of clauses prohibiting the assignment of

contract rights without … permission is to protect him [or her] in selecting the

persons with whom he [or she] deals.” 811 P.2d at 830 (citing Portland Elec. &

Plumbing Co. v. Vancouver, 627 P.2d 1350 (1981)). Thus, the anti-assignment

38

clause, if enforceable at all, did not invalidate the PSA’s assignment of the

Architectural Contract.

C. The Contract Was Admissible and Authenticated.

The Architect next complains the trial court abused its discretion by

admitting the Architectural Contract in evidence because the contract was (1)

inadmissible hearsay and (2) not properly authenticated. (Appellant’s Brief 31-32).

Both complaints are meritless. A contract has legal effect independent of the truth

of any statements therein. Rockwall Commons Assocs. Ltd. v. MRC Mortgage

Grantor Trust I, 331 S.W.3d 500, 511 (Tex. App.—El Paso 2010, no pet.).

Statements that constitute offer, acceptance or terms of a contract—

so-called “operative facts”—are not hearsay[. M]erely making of such

statements are in themselves relevant and thus evidence that such

statements were made is not barred by the hearsay rule.

Thomas C. Cook, Inc. v. Rowhanian, 774 S.W.2d 679, 685 (Tex. App.—El Paso

1989, writ denied); see also Sanders v. Worthington, 382 S.W.2d 910, 915–16

(Tex.1964). The Architect is simply wrong when, without supporting authority, it

asserts otherwise. The trial court correctly overruled the Architect’s hearsay

objection. (4RR8-9).

The Architect’s complaint about authentication fares no better. Texas Rule

of Civil Procedure 93(7) requires a verified denial to contest the execution of any

written instrument on which any pleading is wholly or partially founded. RLJ

alleged the Architect “contracted for” and “breached the Architectural Contract”

39

(CR189,192), making the Architectural Contract the bedrock for RLJ’s pleading.

The Architect having not made a sworn denial (CR33-34,47-48), Rule 93(7)

mandated its “receipt in evidence as fully proved.” TEX. R. CIV. P. 93(7); see also

Associated Press v. Hicks Broad. Corp., No. C14-93-00066-CV, 1993 WL 495114,

at *2 (Tex. App.—Houston [14th Dist.] Dec. 2, 1993, no writ)(unpublished);

Methodist Hosps. v. Corporate Communicators, Inc., 806 S.W.2d 879, 882 (Tex.

App.-Dallas 1991, writ denied).

The Architect could hardly deny the authenticity of the Architectural

Contract. It defended on the provisions in, and founded its declaratory relief

request based on, the Architectural Contract. (CR53,55;App.O). It attached the

same contract bearing the same date stamp and its Bates numbers to its live answer

and counterclaim. (Compare CR59-79;App.O with 12RR26-46;App.G). The

Architect supported its summary judgment motions with the Architectural Contract

(CR90-91,100-120,262-63,265,278-300), calling it an “undisputed fact” that the

Architect “performed its services on the Project under” that instrument. (CR91). Its

counsel represented during trial that “Plaintiffs' Exhibit 15 … is a copy of the

ESG/White Lodging contract for this project.” (5RR134). The trial court could and

presumably did take judicial notice of this instrument filed in its records. See TEX.

R. EVID. 201(b); Office of Pub. Util. Counsel v. P.U.C., 878 S.W.2d 598, 600 (Tex.

40

1994). On that basis alone, the contract was sufficiently authenticated. Associated

Press, 1993 WL 495114, at *3.

The same contract was also proved a business record by the Architect’s vice-

president. (CR178,316). Such proof also authenticated the contract. TEX. R. EVID.

901(10). For all these reasons, the trial court correctly overruled the hearsay and

authentication objections.

D. The Trial Court Did Not Err in Submitting the Contractual

Liability Issue Concerning Structural Engineering and The

Architect’s Complaints Have Not Been Preserved For Review.

The Architect complains of the jury submission of its liability for “fail[ure]

to comply with the Architectural Contract regarding the structural engineering

services” (CR1126) “because RLJ did not plead or prove any theory of respondeat

superior or vicarious liability against [it] for the [Structural Engineer’s] services.”

(Appellant’s Brief 33). Though the Architect agreed its “services would ‘include’

structural engineering services” (12RR39,47-50;App.G), it now argues that without

pleading and proof of vicarious or respondeat superior liability, it has no

responsibility for the Structural Engineer’s work. (Appellant’s Brief 33).

1. The Architect Waived Its Complaint By Failing to

Specially Except to the Omission of Vicarious or

Respondeat Superior Allegations.

Vicarious or respondeat superior liability is, as explained below,

unnecessary. The Architect assumed in the Architectural Contract direct

41

responsibility to the Owner to provide structural engineering services.

(12RR39,47-50;App.G) RLJ did not need to rely on any warranty concerning

structural engineering because reasonable performance is implied in every

contractual undertaking. Montgomery Ward & Co. v. Scharrenbeck, 146 Tex. 153,

204 S.W.2d 508, 510 (1947). Even if such derivative liability theories had been

necessary, the Architect cannot predicate its current complaint on its non-specific

“no evidence” charge objection. The trial court is only required to submit the

“questions, instructions and definitions … raised by the pleadings and the

evidence.” TEX. R. CIV. P. 278(emphasis added). A party is only required to prove

what it pleads. See Alaniz v. Jones & Neuse, Inc., 907 S.W.2d 450, 452 (Tex.

1995)(no questions permitted regarding unpleaded issues). Unalleged facts

essential to liability need not be proved unless the opponent specially excepts to

the omission. TEX. R. CIV. P. 90; Shoemake v. Fogel, Ltd., 826 S.W.2d 933, 937

(Tex.1992). RLJ alleged the Architect “agreed to … provide … structural

engineering design … for the Project” (CR44) and “breached the Architectural

Contract by … failing to produce design plans free from defects.” (CR47). The

Architect never specially excepted to failure to allege vicarious or respondeat

superior liability. Therefore, RLJ was not required to prove either theory.

42

2. The Architect Waived Its Complaint By Failing to File a

Verified Denial of Liability in the Capacity Sued.

The Architect also now denies direct contractual liability, asserting instead

that it is only vicariously liable for its Structural Engineer. The Architect alleged

generally it did nothing that harmed RLJ, and any of RLJ’s damages were caused

by “others for whose conduct [the Architect is] not legally responsible.” (CR48

¶¶D.1, 2;App.O). This is a contest to liability in the capacity sued, which the

Architect was required, but failed, to plead by verified denial. TEX. R. CIV. P.

93(2). Leggett v. Brinson, 817 S.W.2d 154, 158 (Tex. App.—El Paso 1991, no

writ)(defendant sued individually for DTPA violations waived defense that he was

only acting as agent for another without a verified denial); Avanti Servs. Inc. v.

Questor Drilling, Inc., No. 01-86-00741-CV, 1987 WL 8352, at *2 (Tex. App.—

Houston [1st Dist.] Mar. 26, 1987, no writ)(unpublished; same for corporate

contract signatory sued for direct contract liability with no verified plea that it only

signed as agent for another). The Architect’s general, unverified denial of causing

any of RLJ’s damages does not preserve its current complaint about its liability for

the Structural Engineer’s defective design. See Butler v. Joseph's Wine Shop, Inc.,

633 S.W.2d 926, 929-30 (Tex. App.—Houston [14th Dist.] 1982, writ ref'd

n.r.e.)(unverified denial of action in individual capacity waived capacity defense).

Without a sworn denial, the Architect waived its complaint. See Horton v.

Robinson, 776 S.W.2d 260, 266–267 (Tex. App.—El Paso 1989, no writ).

43

3. The Architect Failed to Preserve Its Charge Complaint

By Objecting On Different Grounds Than Those Now

Urged.

At the charge conference, the Architect’s only objection to the structural

engineering liability question was “there is no evidence to support [liability for]…

failure to comply with the [A]rchitectural [C]ontract regarding structural

engineering services.” (9RR152). This objects to whether there was probative

evidence the Architect failed to comply. The Architect’s complaint now concerns

evidence supporting the Architect’s responsibility for the Structural Engineer’s

failure to comply. Objection on one ground preserves no error on another. State

Dep't of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 242 (Tex. 1992).

The Architect waived its objection to the submission of the structural engineering

liability question for this additional reason.

4. Vicarious or Respondeat Superior Liability Is Not

Required When Responsibility Exists Under a Contract.

The substance of the Architect’s argument is also meritless. The Architect

relies on Ryan v. Morgan Spear Associates Inc., 546 S.W.2d 678, 681–82 (Tex.

Civ. App.—Corpus Christi 1977, writ ref'd n.r.e.), for its vicarious/respondeat

superior liability argument. That reliance is misplaced.

a. Ryan Decided Tort, Not Contractual, Duty Under

a Now-Rejected Liability Theory.

The Architect acknowledges the Ryan plaintiff contended the liability

inquiry should have been based on whether the architect “breached its contractual

44

duty to prepare plans and specifications free from defect.” (Appellant’s Brief

35;emphasis added). It fails to mention, however, that the Ryan court never

reached contractual duty question by ruling “liability … can only be sustained on

proof that [the architect] was negligent….” 19 Id. at 682 (emphasis added). For 24

years since Southwestern Bell Tel. Co. v. DeLanney, 809 S.W.2d 493, 494–95

(Tex. 1991), damages to the contract’s subject must be recovered in contract, not

tort, actions. CBI NA-CON, Inc. v. UOP Inc., 961 S.W.2d 336, 340 (Tex. App.—

Houston [1st Dist.] 1997, pet. denied). Ryan antedated DeLanney and only

addresses the architect’s tort duty. It does not resolve the situation here: whether

contractual liability may be imposed for breach of a duty the architect’s agreement

to provide structural engineering services. (CR68,72-73).

b. The Contract Defines Contractual Duties.

As this Court recognized in Black + Vernooy Architects v. Smith, 346

S.W.3d 877, 882 (Tex. App.—Austin 2011, pet. denied), an architect’s duties are

contractually defined. Accord Guirey, Srnka & Arnold, Architects v. Phoenix, 9

Ariz. App. 70, 449 P.2d 306 (1969); Moundsview ISD v. Buetow & Assoc., 253

N.W.2d 836 (Minn.1977); Getzschman v. Miller Chem. Co., 232 Neb. 885, 898-99,

443 N.W.2d 260, 270 (1989); Kelly v. Northwest Community Hospital, 66

19

After obtaining summary judgment that RLJ could not recover in negligence pursuant to the

doctrine of equitable subrogation (CR1708), the Architect now seeks liability insulation under

law only applicable to liability for negligence.

45

Ill.App.3d 679, 23 Ill.Dec. 466, 384 N.E.2d 102 (1978). Here, the Architect had a

direct duty to provide structural engineering services by contracting to do so. Proof

of vicarious or respondeat superior liability was superfluous.

5. The Architect Waived Any Complaint About the Duty

Submitted By Failing to Request Any Question,

Definition or Instruction.

Nevertheless, the Architect suggests under Ryan it should not be liable for

“failure to comply with the Architectural Contract regarding the structural

engineering services required” because it neither “guarantee[d]” quality nor

promised “a perfect plan or satisfactory result.” (Appellant’s Brief 33, 34). Even if

Ryan had so constricted the Architect’s contractual duty, the Architect’s complaint

is that the jury question incorrectly stated the liability standard. But the Architect

requested no question proposing any liability standard. (CR1119-20). Its own

proposed bulk charge, on which it obtained no ruling, included no such liability

standard. (CR1108). It requested no definition or instruction submitting such a

standard. (CR1119-20). The Architect’s complaint was waived through these

failures. TEX. R. CIV. P. 279; Payne, 838 S.W.2d at 242.

6. Ryan Only Addressed the Architect’s Direct, Not

Vicarious, Tort Liability.

The Architect also asserts that Ryan means a contract party may later

delegate its promised performance to one it unilaterally characterizes an

independent contractor and thereby elude liability without proof of respondeat

46

superior. Respondeat superior, however, is only applicable to torts. It is based on

the theory the employer is liable for the employee’s negligence though the

employer itself beached no duty. St. Anthony's Hosp. v. Whitfield, 946 S.W.2d 174,

178 (Tex. App.—Amarillo 1997, writ denied); White v. Dennison, 752 S.W.2d

714, 716 (Tex. App.—Dallas 1988, writ denied); Marange v. Marshall, 402

S.W.2d 236, 241–42 (Tex. Civ. App.—Corpus Christi 1966, writ ref'd n.r.e.). It is

unnecessary when the employer breaches a direct duty it contractually assumed.

See V.D.4.b., supra.

Because the Ryan plaintiff failed to request a charge question whether the

engineer was the architect’s agent, 546 S.W.2d at 682, the only issue before the

court was whether sufficient evidence supported the architect’s direct tort liability.

Id. at 681. The Architect’s suggestion that Ryan defines a contractual standard is

incorrect. Even in negligence, an architect is not relieved of responsibility simply

by hiring a consultant to discharge its professional responsibilities. Playskool, Inc.

v. Elsa Benson, Inc., 147 Ill. App. 3d 292, 299, 497 N.E.2d 1199, 1204 (1986).

7. Architect’s Reasoning Permits It All the Contractual

Benefits Free of Burden and Risk.

The Architect further uses Ryan to suggest that it is not contractually liable

for the Structural Engineer’s shortcomings because the contract between the

Architect and Structural Engineer provided the latter was an independent

contractor. (Appellant’s Brief 33). The Owner was not a party to that agreement.

47

Its rights are unaffected by such a contract. See Prize Energy Res., L.P. v. Cliff

Hoskins, Inc., 345 S.W.3d 537, 554 (Tex. App.—San Antonio 2011, no pet.). The

lack of privity between construction subcontractors and owners is why it was

necessary to devise the “pass-through” fiction based on the general contractor’s

privity with the owner to permit subcontractors to sue owners for breaches.

Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 615 (Tex. 2004).

The Architect in this case was, however, a party to the contract under which

it agreed to perform structural engineering services. It was free to contract with the

Structural Engineer for indemnity or other protections. No matter how it chose to

arrange the Structural Engineer’s performance, the Architect was contractually

answerable to the Owner and its assigns for the breach. The Architect’s vicarious-

only argument overlooks the same principle the Architect espouses concerning the

assignment: there is no privity; ergo, no contractual liability. If the remedy against

the Architect were limited to derivative liability, the Architect would be free to

contract for services completely free of liability for another’s failure to provide the

promised performance.

8. Illegality Is Not an Issue Due to The Architect’s Failure

to Plead It and Statutory Authorization for Architects

Performing Structural Engineering Services.

The Architect also argues that it cannot be liable for failings of its Structural

Engineer because it “literally cannot agree to provide structural engineering

48

services.” (Appellant’s Brief 36). It quotes Seaview Hospital, Inc. v. Medicenters

of Am., Inc., 570 S.W.2d 35, 39 (Tex. Civ. App.—Corpus Christi 1978, no writ),

for the proposition that “a contract for engineering services to be performed by a

person who is prohibited from practicing engineering in Texas is void and

unenforceable.” (Appellant’s Brief 36).

a. Any Illegality Was Waived Because It Is Not

Apparent And The Architect Did Not

Affirmatively Plead It.

Unenforceability due to alleged illegality is an affirmative defense that is

waived if not pleaded unless pleaded facts conclusively establish illegality. TEX. R.

CIV. P. 94; Phillips v. Phillips, 820 S.W.2d 785, 789 (Tex.1991); Park v. Escalera

Ranch Owners' Ass'n, Inc., No. 03-12-00314-CV, 2015 WL 737424, at *16 (Tex.

App.—Austin Feb. 13, 2015, no pet. h.). Even if it were a valid defense here,

nothing pleaded showed the Architect was not licensed to or could not lawfully

provide engineering services. Failure to plead illegality waived any such defense.

There was no illegality defense to waive, however. Even if the contract

violated architecture regulations, the Architect could not assert it. Public policy

would not prevent contract enforcement against the Architect because of the need

to discourage Architect’s from regulatory violations. Geis v. Colina Del Rio, LP,

362 S.W.3d 100, 110 (Tex. App.—San Antonio 2011, pet. denied). Further, there

is no illegality. The Architect is authorized to prepare “engineering plans and

49

specifications for … the depiction of the building systems, including structural,

mechanical, electrical, and plumbing systems….” TEX. OCCUP. CODE

§1001.0031(d)(emphasis added).

b. Seaview Hospital Does Not Say An Architect

Cannot Provide Structural Engineering Services.

Finally, the Architect’s citation of and quotation ignores that Seaview

Hospital does not discuss the dividing line between architecture and engineering. It

involved a contract under which a general contractor agreed to provide, not

perform, those services under a turnkey contract. 570 S.W.2d at 38-39. The

contractor in fact arranged for those services through licensed professionals. It was

the owner-defendant, not the architect, asserting illegality. Seaview Hospital held

the contract should be interpreted to be enforceable; i.e., that the general contractor

only agreed to arrange for others to provide such services.

The Architect’s complaint cannot be sustained. The trial court did not

reversibly err in submitting a jury question concerning the Architect’s failure to

perform structural engineering services.

E. The Evidence of Diminution in Value Was Legally Sufficient.

The Architect’s last complaint is “[t]he evidence at trial was legally

insufficient to support the jury’s $700,000 award of market value damages.”

(Appellant’s Brief 36). This attack is limited to supporting evidence for the jury’s

50

finding of Project value difference “determined as of August 31, 2010.” (CR

1127;App.B). The jury’s verdict, however, is fully supported.

1. The Evidence Is Legally Sufficient If It Provides More

Than a Scintilla of Factual Support.

A finding is unsupported by legally sufficient evidence only if there is a

complete absence of probative evidence; such evidence is not enough to cause

reasonable, fair-minded people to differ; or its opposite is conclusively established.

City of Keller v. Wilson, 168 S.W.3d 802, 810 (Tex.2005); Burroughs Wellcome

Co. v. Crye, 907 S.W.2d 497, 499 (Tex.1995). A reviewing court may only

consider evidence supporting the verdict, viewing that evidence and inferences

therefrom in the light most favorable to the verdict. Mancorp, Inc. v. Culpepper,

802 S.W.2d 226, 227 (Tex.1990). Even if an expert’s valuation lacks supportive

market data, the opinion is more than a scintilla and sufficient to present a disputed

fact issue. Alleged data deficiency goes to persuasive, not probative, value. See

Missouri-Kansas-Texas R. Co. v. City of Dallas, 623 S.W.2d 296, 299 (Tex. 1981).

Damages are not denied for want of exactitude “[i]f an injured party has produced

the best evidence available… afford[ing] a reasonable basis for determining [the]

loss.” Vance v. My Apartment Steak House of San Antonio, Inc., 677 S.W.2d 480,

484 (Tex.1984); O and B Farms, Inc. v. Black, 300 S.W.3d 418, 422 (Tex. App.—

Houston [14th Dist.] 2009, pet. denied)(evidence sufficient despite loss of

documents necessary for precise calculation). Whatever the Architect’s quibbles

51

about the appraiser’s supporting data, his opinion is not facially conclusory. It has

probative value. See Houston Unlimited, Inc. Metal Processing v. Mel Acres

Ranch, 443 S.W.3d 820, 838 (Tex. 2014).

2. Hornsby’s Testimony Was Well-Founded Based on Well-

Accepted Standards and Methodologies.

Real estate appraiser Paul Hornsby appropriately valued the Project on the

date the charge specified – August 31, 2010 (“Valuation Date”) – using the income

approach under two different scenarios. “[T]he income approach … is appropriate

when the property would, in the open market, be priced according to the income

that it already generates.” City of Harlingen v. Sharboneau, 48 S.W.3d 177, 183

(Tex. 2001). This is how a buyer would value the Project. (7RR128). Hornsby’s

methodology complied with the Uniform Standards of Professional Appraisal

Practice (“USPAP”). (7RR116, 122-23).

Hornsby appraised thousands of Austin-area properties over 34 years

(7RR114), including over 100 hotels. (7RR115). Hornsby performed two August

31, 2010 valuations: one for the Project’s actual impaired condition after the

remediation had been implemented; another had its condition not been impaired.

(7RR116,122-23,175-177). As USPAP requires, Hornsby considered three

customary valuation methods: cost, comparable sales, and income. (7RR121-22).

Hornsby looked primarily to the income approach, with comparable sales as a

vouchsafe only. There was insufficient sales data for comparable sales to be

52

independently reliable. (7RR142-43). Unless a hotel is brand new, the cost method

is inappropriate. (7RR128).

To determine the Project’s income-based value on the appraisal date were it

undamaged (“undamaged value”), Hornsby considered average daily room rate,

average occupancy rate, typical expenses, and capitalization rate from published

data for five other similar nearby hotels and the Project’s actual performance data

through the Valuation Date. (7RR130-34). With necessary adjustments, Hornsby

estimated that the undamaged Project would have a $100.00 average daily rate and

70% average occupancy. (7RR134-40). He concluded that the income-based

undamaged value of the Project was $13,650,000. (7RR141-42,44). Hornsby

checked that valuation against comparable sales. (7RR142-44).

Hornsby then used income to value the Project “as-is” as of the appraisal

date, assuming all feasible repairs were complete and recognizing their future

effectiveness was uncertain (“damaged value”). (7RR144-45). Hornsby adjusted

for faster-declining room rates, no-growth occupancy rates, increased operating

expenses for the Project as-is compared to undamaged hotels. (7RR145-47). He

also adjusted the capitalization rate up from that for undamaged hotels because of

the higher return rate necessary to induce a buyer to take on the additional known

foundation risks with the Project. (7RR147-48). He concluded that the income-

based damaged value of the Project was $7,220,000. (7RR148). He could not test

53

this against comparable sales because there were no area sales of hotels in a similar

state. (7RR145). Hornsby’s diminution-in-value testimony was more than

sufficient to support the jury’s verdict.

3. The Architect’s Complaints Are Meritless.

a. The Evidence Supported the Answer to the

Question Asked, and the Architect Waived Its

Valuation Date Complaint.

Without challenging any evidentiary ruling, the Architect asserts Hornsby’s

testimony could not support the verdict “because his valuations were determined as

of the wrong date.” The Architect ignores the charge specifically instructed

damages should be determined “as of August 31, 2010” – the date of Hornsby’s

valuations.20 (CR1127). The evidence need only support the answer to the question

asked. Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000); see THPD, Inc. v. Cont’l

Imports, Inc., 260 S.W.3d 593, 608 (Tex. App.—Austin 2008, no pet.). It did.

If the Architect wanted an instruction with a different date, it needed to

tender such an instruction. TEX. R. CIV. P. 279. It did not. (CR1119). Neither did

it object to the question because of the date. (9RR153). Its objection was to

“legal[ly] and factually insufficient evidence to support the damages question

tendered, and we incorporate the motion for directed verdict arguments.” (Id.;

20

In McGinty v. Hennen, 372 S.W.3d 625, 628 (Tex. 2012), and Barraza v.Koliba, 933 S.W.2d

164, 169 (Tex. App.—San Antonio 1996, writ denied), do not apply here. There, the testimony

and charge involved different valuation dates; here, the testimony and charge involved the same

valuation dates.

54

emphasis added). The objection to the “question tendered” was invalid because

Hornsby’s testimony supported the “question tendered” in the charge.

The attempted incorporation of “directed verdict arguments” added nothing.

Rule 274 is explicit that “[n]o objection to one part of the charge may be adopted

and applied to any other part… by reference only” because “all participants… are

entitled to know with certainty the that all objections have been made at the

designated point….” Charles R. “Skip” Watson, Jr., “The Court's Charge to the

Jury,” Advanced Civil Trial Course 7–28 (State Bar of Texas 2003). Because this

goal is thwarted by incorporating charge objections by reference, objections to

defects in instructions that incorporate arguments in previous motions must also be

deemed waived because they are not “specifically included in the objections.” TEX.

R. CIV. P. 274.

In addition, the Valuation Date submitted was appropriate in light of the

acknowledged superiority of the “income approach” when the market values

properties like the Project according to its income. (7RR128-29). Sharboneau, 48

S.W.3d at 183. By the Valuation Date, the Project’s operations had stabilized and

provided a more reliable income model, much of the possible repair work was

complete, and the ramifications of the Project’s problems were more fully known.

(7RR120,124-25). That date permitted appraisal by analysis, not speculation. An

55

earlier date would have yielded inaccurate results because of uncertainty over the

full consequences of the Project’s problems. (7RR125-26).

This carefully tailored approach is precisely what cases involving breaches

of design or construction contracts call for because measure of damages is

governed by each case’s peculiar facts. Vance, 677 S.W.2d at 482. “What is a

reasonable time is a question of fact, varied by the circumstances of each case.”

Barry v. Jackson, 309 S.W.3d 135, 141 (Tex. App.—Austin 2010, no pet.)21. Yet,

the Architect offers and research revealed no authority that the Valuation Date is

improper for breach of a design contract for an income-producing property. The

Architect ignores the Vance directive and would superimpose a one-size-fits-all

solution by resort to a rigid-date approach used in real estate sales contract

breaches.

A date-of-sale valuation is appropriate for the breach of a real estate sales

contract because damages are based on a single value fixed at a definite time.

Barry 309 S.W.3d at 140; accord Westminster Falcon/Trinity L.L.P. v. Chong

Shin, No. 07-11-0033-CV, 2012 WL 5231851, at *2 (Tex. App.—Amarillo Oct.

23, 2012, no pet.). Damages for the breach of a contract concerning a newly-built

building, on the other hand, is based on a difference in two separate values: “the

21

The Architect overlooks that Barry involved lay, not expert, opinion and that there was no

testimony relating the post-sale valuation to market conditions on the date of sale. Id. at 140.

This is the problem also addressed in McGinty, see n. 20, supra., but is not present here.

56

value of the building as constructed and its value had it been constructed in

accordance with the contract.” Turner, Collie & Braden, Inc. v. Brookhollow, Inc.,

642 S.W.2d 160, 164 (Tex. 1984); Gulf Ins. Co. v. Cunningham, A14-91-00799-

CV, 1993 WL 136039, at *3 (Tex. App.—Houston [14th Dist.] Apr. 29, 1993, writ

denied).

Unlike breach of a sales contract, the consequences of contractual deviations

in construction frequently do not become manifest until after the breach occurrs.

That was certainly true here because the damage to the Project resulting from the

structural design deficiencies were dynamic, not static, and continued to worsen as

time passed. (7RR117,126,144-45;4RR78-79). Thus, a rigid date-of-breach

approach would often underestimate the value received in contractual breaches

involving new construction.

Further, given the delay involved for latent defects to appear, assessing the

hypothetical undamaged value must be postponed so that both it and damaged

value are assessed under the same market conditions to avoid concerns about

rapidly-fluctuating market conditions expressed in Barry and Naylor v. Stiegler,

613 S.W.2d 546, 547 (Tex. Civ. App.—Fort Worth 1981, no writ). Otherwise, the

comparison ceases to be reliable for accurately measuring diminution. Unreliable

data is not a permissible basis for expert opinion. Merrell Dow Pharm., Inc. v.

Havner, 953 S.W.2d 706, 714 (Tex. 1997).

57

In addition, the Architect’s reliance on this Court’s observation in Barry

about the effect of the passage of time on the real estate market concerned

valuation based on sales, not income. 309 S.W.3d at 141. Thus, worries about lay

testimony that did not attempt to relate a later sale to the valuation date are absent

here. The valuation method here was different. The testimony was presented by an

expert who related his data to the Valuation Date. Hornsby eschewed the

Architect’s unreliable approach and used the charge’s Valuation Date to determine

both the damaged and undamaged value as precisely as circumstances permitted –

i.e., after the issues had manifested and the remediation work was complete, even

though the Project could not be fully repaired. (7RR123-25,176-77).

b. The Jury Was Provided With Actual Performance

Data.

Having argued that the Valuation Date in the charge was too late, the

Architect also argues that it was not late enough. It contends Hornsby’s diminished

value opinion was undermined because it was based on predicted data as of the

valuation date instead of actual performance data that only became available until

after the court’s charge’s specified valuation date. In fact, Hornsby testified about

the diminution in value based on both the actual, post-valuation performance data

and the projections based on the data available on the valuation date. (7RR149-53.)

Hornsby informed the jury that based on actual performance, the Project’s

diminution in value was $4.3 million (7RR152); based on the data available as of

58

the valuation date, its diminution in value was $6.4 million. (7RR153). Thus, even

if the Architect were right about the proper underpinnings for calculating value

diminution, the Architect’s legal sufficiency attack on this basis is meritless

because the jury was given a valuation based on the actual performance data. Its

diminution finding as caused by the Architect’s breach was within the range of

diminution damages the evidence supports. See Gulf States Utilities Co. v. Low, 79

S.W.3d 561, 566 (Tex. 2002).

Nonetheless, the Architect is wrong about using data unavailable on the

Valuation Date. USPAP standards disallow consideration of information the

hypothetical buyer and seller not then know. (7RR149,152). Hornsby’s use of only

pre-valuation data was the correct methodology and his analysis was reliable. That

is all that was required. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 581 (Tex.

2006). The jury gets to resolve the weight to be given his opinion. See id.

Hornsby’s analysis is not unreliable under Whirlpool Corp. v. Camacho, 298

S.W.3d 631, 640 (Tex. 2009), because his opinion based on pre-valuation data did

not disregard relevant facts as the experts in Whirlpool did.

Again, the Architect is complaining that a different date should have been

asked without preserving that objection to the charge. For any and all of these

reasons, this aspect of the Architect’s legal insufficiency argument is specious.

59

c. There Was Legally Sufficient Evidence to Support

the Jury’s Verdict and Any Allocation of Damages.

The Architect apparently argues Hornsby’s opinion cannot support the jury’s

verdict because it was not limited to diminution caused by the Architect alone.

This argument is flawed in several of its premises.

1) The Architect Erroneously Assumes Jury

Must Have Implicitly Found Others

Breached.

It erroneously assumes the jury must have found other’s breaches caused

diminution damages. Such assumption violates the obligation to review evidence in

the most favorable light, ignoring all contrary evidence and inferences. City of

Keller v. Wilson, 168 S.W.3d 802, 810 (Tex. 2005). The jury is entitled to

disbelieve any or all of expert or lay testimony. See McGalliard v. Kuhlmann, 722

S.W.2d 694, 697 (Tex.1986). It could have believed the Architect’s breach of its

structural design obligation alone caused all the diminution in value.

There evidence supported that conclusion. An expert testified that

inadequate foundation design caused foundation movement because it focused on

load distribution, not resisting movement from soil expansion. (4RR87,90-92,111-

12). The Soils Engineer correctly evaluated the Project site’s soil plasticity.

(4RR114-117,119-122). The Architect was the center of the design team ultimately

responsible to see that the foundation design followed the Soils Engineer’s

recommendations. (5RR165-67,176,216-18,222-23).

60

The foundation design utilized was not the one the Soils Engineer

recommended (4RR122-23,185), and was not adequate for the Project site.

(5RR57-58,96,217-18). The design was inappropriate because it did not properly

address resistance to movement from soil expansion. (4RR87-88,128-29). The

General Contractor was required to build the type of foundation specified, which it

did. (3RR159,157-58). This evidence supported any determination the Architect’s

failure to provide proper structural engineering alone would have caused value-

diminishing Project damage in the amount the jury found. The Architect’s

segregation complaint is academic.

2) Evidence of Unsegregated Damages Is

Legally Sufficient Evidence of Segregated

Damages.

Complaint about the legal insufficiency of the supporting damages evidence

is procedurally and substantively invalid. Procedurally, the architect did not make

clear that its objection was to lack of evidence of segregation or allocation. It only

generally objected that there was legally insufficient evidence. See V.F.3.a., supra.;

cf. Minn. Mining & Mfg. Co. v. Nishika Ltd., 953 S.W.2d 733, 738 (Tex.

1997)(“objection pointed out distinctly the nature of 3M's complaint about the

damage question's form” sufficient).

Substantively, the legally insufficient evidence objection being asserted on

appeal could not be sustained even had it been sufficiently particular. The Texas

61

Supreme Court resolved this issue against the Architect in Nishika. 953 S.W.2d at

978-79. There, four plaintiffs sued for breach of warranty and recovered lump-sum

damages. On appeal, two plaintiffs were disqualified from warranty protection.

The court rejected defendant’s argument for a take-nothing judgment because

damages evidence was not segregated for the remaining plaintiffs. It held that

unsegregated damages evidence was legally sufficient evidence of segregated

damages. Accord, Stewart Title Guaranty Co. v. Sterling, 822 S.W.2d 1, 11 (Tex.

1991)(attorney’s fees not limited to permissible claims); Texarkana Memorial

Hospital, Inc. v. Murdock, 946 S.W.2d 936, 840-41 (Tex. 1997)(damages not

segregated by liable defendant).

3) Testimony Segregating Damages Is Not

Required.

The Architect is in effect challenging the jury’s ability to apportion

responsibility without expert guidance. The percentage responsibility cases,

however, confirm that such allocations are routinely entrusted to juries without

specific allocation testimony, and that courts will not substitute their judgment for

the jury’s concerning that allocation. Bechtel Corp. v. CITGO Products Pipeline

Co., 271 S.W.3d 898, 920 (Tex. App.—Austin 2008, no pet.); accord, Binion v.

Brinkley, No. 2-09-121-CV, 2010 WL 396385, at *2 (Tex. App.—Houston [14th

Dist.] Feb. 4, 2010); Hagins v. E-Z Mart Stores, Inc., 128 S.W.3d 383, 392 (Tex.

62

App.—Texarkana 2004, no pet.); Rosell v. Central W. Motor Stages, Inc., 89

S.W.3d 643, 659–60 (Tex. App.—Dallas 2002, pet. denied).

The jury may decide causation whenever general experience and common

sense enable a layperson to fairly determine that relationship between event and

result. Pilgrim’s Pride Corp. v. Smoak, 134 S.W.3d 880, 894 (Tex. App.—

Texarkana 2004, pet. denied). When not subject to precise mathematical

calculation, it is the peculiar province of the jury to determine the issue. Simmons

v. Bisland, No. 03-08-00141-CV, 2009 WL 961522, at *8 (Tex. App.—Austin

Apr. 9, 2009, pet. denied)(mem. op.). Allocation of damages caused among

multiple breaches is not subject to precise calculation.

d. Comparable Sales Were a Vouchsafe, Not the

Basis for Valuations.

The Architect confuses things again with its “comparable sales” method

argument. (Appellant’s Brief 46). Hornsby did not calculate diminution in value

based on comparable sales. (7RR128). He calculated income-based valuations for

the “damaged” and hypothetical “undamaged” Project on the Valuation Date

(7RR128-142), only using comparable sales to “test” his income-based valuations.

(7RR142-43). Even if Hornsby had partially relied on comparable sales, it would

not invalidate his opinion.

[I]f the opinion should be shown to be based exclusively upon

considerations of incompetent factors, it would have to be

disregarded, ‘but, all opinion being at best something of a speculation,

63

it does not cease to have probative force when impropriety attaches

only to some, rather than all, of its underlying reasons. The question

of market value is thus peculiarly one for the fact finding body....’”

Tex. Pipe Line Co. v. Hunt, 149 Tex. 33, 228 S.W.2d 151, 156 (Tex. 1950).

Comparable sales were not the sole basis for or only methodology underlying the

valuations. Their incidental, confirmatory role did not rob Hornsby’s valuations of

probative value.

Even when an expert’s valuation is based on comparable sales, the trial court

has broad discretion whether “a sale is sufficiently similar to be admissible as a

circumstance influencing an expert witness in arriving at his opinion of value.” Id.

(quoting Tex. Elec. Serv. Co. v. Graves, 488 S.W.2d 135, 139 (Tex. Civ. App.—El

Paso 1972, writ ref'd n.r.e.). The Architect has shown no such abuse. Comparable

sales are generally admissible unless “reasonable minds cannot differ that the

evidence of the other sale lacks probative force because of its dissimilarity….”

Collin Cnty. v. Hixon Family P'ship, Ltd., 365 S.W.3d 860, 868 (Tex. App.—

Dallas 2012, pet. denied) (quoting Bridges v. Trinity River Auth., 570 S.W.2d 50,

56 (Tex. Civ. App.—Tyler 1978, writ ref'd n.r.e.)). Here, Hornsby followed

USPAP in utilizing sales comparisons (7RR143) and provided an explanation as to

the appropriateness of the comparisons. (7RR142-145).

64

e. There Was No Recovery For “Stigma” Damages

and No Double Recovery.

The Architect also reasons there was no evidence the Project was incapable

of repair, so any diminution valuation necessarily included “stigma” damages.

Again, the Architect’s premise is flawed. “Stigma” or “fear” damages are those for

reductions in property value due to the lingering perception or fear of a harmful

condition after it has been repaired or eliminated. Houston Unlimited, Inc. Metal

Processing v. Mel Acres Ranch, 389 S.W.3d 583, 594 (Tex. App.—Houston [14th

Dist.] 2012), rev'd on other grounds, 443 S.W.3d 820 (Tex. 2014). The damage

here is concrete reality, not anguished perception.

The factual flaw is that there was probative evidence that the foundation

could not be repaired. (4RR93,96-97). Thus, the question of diminution in value

attributable solely to market risk/uncertainty intolerance for a non-existent

condition never arises. The foundation could not be strengthened or altered to

avoid ongoing movement. (4RR90-92,96-97). The best that could be accomplished

was to control soil expansion and resulting movement by limiting moisture

infiltration. (4RR90-97). The foundation problems would continue. The efficacy of

the repairs was uncertain. (Id.). Thus, market uncertainty was over an existing, not

imagined, condition likely to cause future damage or deterioration. (Id.;7RR117,

124,176-77). On that is required for value diminution. Precision Homes, Inc. v.

65

Cooper, 671 S.W.2d 924, 930 (Tex. App.—Houston [14th Dist.] 1984, writ ref'd

n.r.e.).

There is no double recovery when the jury awarded pre-Valuation Date

repair costs of repair for repairs plus Valuation Date value diminution. The latter

takes into account future repair costs. (7RR123-24,177-78). That is how Hornsby

calculated the damaged value. (Id.). Indeed, there is no duplication in comparing

post-repair value to the hypothetical undamaged value on the same Valuation Date.

See Parkway Co. v. Woodruff, 901 S.W.2d 434, 441 (Tex. 1995). The charge’s

damage question avoided any possibility of double recovery by limiting repair

costs to those incurred on or before the Valuation Date (CR1127;App.B), which

were not factored in to Hornsby’s valuation. Those that might have been incurred

after the valuation date were included in the diminished value as of the Valuation

Date. There was no double recovery and no recovery for “stigma” damages.

f. Lost Profits Were Not a Separate Element of

Recovery, But Were Only Used As Necessary for

the Texas Supreme Court’s Approved Method of

Valuing Property Producing Income.

Hornsby’s income-based Project valuation utilized the method the Texas

Supreme Court approved for income-producing property. Sharboneau, 48 S.W.3d

at 183. “[E]stimating … future income and applying a capitalization rate … allows

the appraiser to arrive at a present value.” Id. The income method consists of

“estimating the net operating income stream of a property and applying a

66

capitalization rate to determine the property’s present value.” State v. Bristol Hotel

Asset Co., 293 S.W.3d 170, 171 (Tex. 2009).

Estimating future income necessarily includes modeling based on historical

performance, consultation with published figures available to appraisal

professionals and estimates of future occupancy and room rates. (7RR129-30).

Hornsby used these resources to arrive at an overall valuation of the Hotel itself.

This is not a “lost profits” model and RLJ did not obtain damages for “lost profits,”

despite the Architect’s claims. None of the Architect’s evidentiary insufficiency

arguments are meritorious.

VI. CONCLUSION AND PRAYER

For the foregoing reasons, and the reasons presented in RLJ’s Cross-

Appellants’ Brief, RLJ asks the Court to:

1) Reverse the trial court’s the judgment applying the one satisfaction rule

and delete the credit for the amount of the Settling Defendants’

settlements;

2) In the alternative, if and only if the one satisfaction rule applies, reverse

the trial court’s judgment concerning the award of attorney’s fees and

either reform it to award RLJ unsegregated fees for prosecution of all

contract claims against the Architect and the Settling Defendants, or

remand the case to the trial court solely for a determination of reasonable

67

and necessary attorney’s fees for the prosecution of all contract claims

against the Architect and the Settling Defendants;

3) Grant any one or more of 1) – 2) above subject to the conditions

prescribed; and/or

4) Otherwise affirm or modify the trial court’s judgment in favor of RLJ as

set forth herein and in RLJ’s Cross-Appellants’ Brief.

RLJ further requests such other relief to which it is justly entitled, provided

such relief requested does not include a retrial on the merits of its claims against

the Architect.

Respectfully submitted,

MUNSCH HARDT KOPF & HARR PC

/s/Michael W. Huddleston

Michael W. Huddleston

State Bar No. 10148415

J. Stephen Gibson

State Bar No. 07866000

3800 Ross Tower

500 North Akard Street

Dallas, TX 75201

(214) 855-7500 Main Tel.

(214) 855-7584 Main Fax

mhuddleston@munsch.com

sgibson@munsch.com

68

Benton T. Wheatley

State Bar No. 24015171

Tracy McCreight

State Bar No. 24037064

Munsch Hardt Kopf & Harr, P.C.

401 Congress Avenue, Suite 3050

Austin, TX 78701

(512) 391-6100 Main Tel.

(512) 391-6149 Main Fax

bwheatley@munsch.com

tmccreight@munsch.com

Attorneys For Appellees and

Cross- Appellants.

69

CERTIFICATE OF COMPLIANCE

I hereby certify that this Appellees’ Brief was prepared using Microsoft

Word 2010, which indicated that the total word count (exclusive of those items

listed in Tex. R. App. P. 9.4(i)(1)) is 14,965 words.

/s/ Michael W. Huddleston

Michael W. Huddleston

70

CERTIFICATE OF SERVICE

I certify that I served a true and correct copy of the foregoing document

upon counsel listed below on this 12th day of June, 2015 by e-file:

Weston M. Davis

Gregory N. Ziegler

Steven R. Baggett

Macdonald Devin, P.C.

1201 Elm Street

3800 Renaissance Tower

Dallas, TX 75270

/s/ Michael W. Huddleston

Michael W. Huddleston

71

APPENDIX

TAB DESCRIPTION OF DOCUMENT CR/RR

Appendix documents under Tabs A-I can be located in the Appendix to

Cross-Appellants’ Brief and are not re-attached to Appellees’ Brief.

A Plaintiffs’ Seventh Amended Original CR184-218

Petition 2SCR39-73 (duplicate)

B Charge of the Court CR1121-29

2SCR1563-71 (duplicate)

C June 13, 2014 Letter from Hon. Judge CR1437-41

Yelenosky 2SCR1598-1602 (duplicate)

D Final Judgment CR1708-12

CR1905-09 (duplicate)

E Contract with Soils Engineer 12RR6-11

F Contract with General Contractor 12RR567-651

G Contract with Architect 12RR26-128

H Architect’s Second Amended Answer CR46-79

2SCR5-38 (duplicate)

I Report of SB 890 (2005) n/a

TAB DESCRIPTION OF DOCUMENT CR/RR

Appendix documents under Tabs J-O are attached hereto.

J Purchase and Sale Agreement (PSA) CR606-676

K Legislative Committee Report for n/a

1977 Amendment to Article 2226

L Assignment of Contract CR578

72

M Intangibles Assignment CR701-05

N Supplemental Clarification of CR602-604

Assignment

O Elness, Swenson Graham Architects, CR 46-79;44-45

Inc.’s Second Amended Answer and

Original Counterclaim for

Declaratory Judgment

73

APPENDIX J

NEW HOTELS PURCIIASE AND SALE AGREEMENT

BY AND BETWEEN

WBITECO INDUS'J'lUES, JNC.

and each of me parties named on Sdledple A hereto

(Sellen)

IU..J LODGING FUND U ACQUlSlTlONS, LlC

(Purchaser)

ond join-ed by

WHITE LODGING SERVICES CORPORATION,

as Manager and agent fN Sellers

(Wh~ Lodgiug)

Qo!ed: March 16.2006

Exhibit f

Witness _-_--~'-_.,A:_-~C/_.._,_~,.,?J::L:.o....t'""'":P~:-=

Date S. . '2.~--- /7/

Melissa Parkhill, CSR

-

RLJ Austin Courtyard 018307

Exhibit 6

606

------------------ -----------------

TABLE OF CONTENTS

SECTION 1. DEFINITIONS

SECTION 2. PURCHASE-SALE

2.1 Purehut-Sale

21 ~

2.3 Al~e Price

2.4 ~

SECTION 3. DILIGENCE; INSPECTIONS

3.1 1nsoeW9n Perjosl.

3.2 Title md Syryey Maners

3.3 Struc!ural a.nd Enyjroruncp.!!lt R.epons

3.4 TakiQ¥ !!!'!? Cawl!lrY

SltcrJON 4.. CLOSING CONDITIONS

4 .l {:!oaing Docwnent:s

4.2 Allocable Price

4.3 Materials

4.4 ('ondjtion of APP!i!:qbh; P!'!ID!:!lY

4.5 :Q1bg

4.6 faj!!.!le ofCom.litions

SECfiON 5. TERMINATION OF AGREEMENT

' '

--

RLJ Austin Courtyard 018308

607

SECTION Ci. REPRESENTATIONS AND WARRA.N11.ES OF SELLlm

6.1 Swus ofSeller

6.2 AuthQrilx sz!~lle[

6.3 Existing Agreements

6.4 Tax Returns

6.5 No Yioladoqs of Agreements

6.6 Litigation

6.1 ConcleomatiQn

6.8 N!2l A Emti!Ul Pmru!

6.9 Construc:tiQ!l ~OOllJC:t!

6.10 Eferdo~ Su!2~a!X~

6.1 J [ntentiQ!!!Il~ Qmi~

6.12 Inten!.iooall! Qmitted

6.13 ~

6.14 No Pmffi:rs

6.15 ti2 Yi21Aii2m

6.16 Seoome Im! ~m:el

6.17 lntentiQD!Ul Omitted

6.18 Groundf.mes

6.19 Llbor and ERISA

6.20 b!2..C.ammi!mmti

6.21 Res!atemem orSs:llc;r Re~I2!Kw @f!d Wammties

6.22 SllQ'ival of Seller Rmn;sentatiQDS

-ii-

--

RU Austin Courtyard 018309

This text is long and has been trimmed here. Open the source document for the complete record.