Court of Appeals of Texas, Austin.
BEDROCK GENERAL CONTRACTORS, INC., Appellant,
TEXAS WORKERS’ COMPENSATION INSURANCE FUND, Appellee.
March 8, 2001.
From the District Court of Travis County, 261st Judicial District, No. 97-08588; Mary Pearl Williams, Judge Presiding.
Before PATTERSON, JJ.
*1 Appellee Texas Workers’ Compensation Insurance Fund (“the Fund”) sued appellant Bedrock General Contractors, Inc. (“Bedrock General”) to recover premiums due under three workers’ compensation insurance policies issued by the Fund to Bedrock General in 1994, 1995, and 1996.1 The district court granted partial summary judgment in favor of the Fund and found Bedrock General liable for additional premiums claimed by the Fund under its insurance policies .2 Appellant now challenges the district court’s judgment. Because the Fund established its entitlement to summary judgment and appellant failed to raise a genuine issue of material fact, we affirm the district court’s judgment.
Jack Adcox and William Speer first met in the late 1980s during a business deal. At the time, Speer owned Wesco Construction, Inc., a business created to build subdivisions and perform construction work. In April 1990, Adcox and Speer formed Bedrock Materials, Inc. (“Bedrock Materials”) for the purpose of selling sand and calcium sulfate. Adcox primarily handled the sales and administrative duties in the office while Speer concentrated on overseeing work at job sites in the field.
Adcox and Speer agreed orally that while Speer would provide the initial capital to start Bedrock Materials, both men would share ownership of the corporation. Speer initially received all of the Bedrock Materials stock due to Adcox’s financial situation following a bankruptcy. Adcox and Speer agreed, however, that Adcox would receive one-half of the shares of Bedrock Materials stock once he developed the business into a profitable one.
The following year Adcox and Speer formed Equipment Express, Inc., which was in the business of hauling heavy equipment for hire. In addition to serving as vice president of Bedrock Materials and Wesco Construction, Adcox also acted as vice president for Equipment Express.
Sometime during 1991, Adcox concluded that he had upheld his part of the agreement with Speer and that he should receive one-half of the shares of Bedrock Materials stock. Adcox spoke with Speer on several occasions about dividing the stock of Bedrock Materials equally. Speer continued to agree that the men were co-owners of Bedrock Materials, but Adcox never received any shares of Bedrock Materials stock. According to Adcox, he did not receive compensation as agreed from Bedrock Materials because profits of Bedrock Materials were funneled to Wesco Construction as monies owed. Although Speer continued to assure Adcox that he was an equal owner of Bedrock Materials, the business relationship between the two men had begun to sour.
As the discord over the financial situation and ownership of Bedrock Materials continued, in 1994, Adcox decided to create his own general contracting business, appellant Bedrock General,3 to excavate, sell, and transport aggregate materials, including sand and calcium sulfate, for various commercial entities. The company also performed asphalt work. From 1994 to 1997, appellant subcontracted transportation work to Bedrock Materials and Equipment Express, excavation work to Bedrock Materials, and field work to Wesco Construction.
*2 Appellant shared office space with Bedrock Materials and Adcox continued to work for both companies until Bedrock Materials was sold in 1997. In lieu of paying rent for the office space, appellant paid a portion of Bedrock Materials’ payroll. When appellant was formed, employees of Bedrock Materials were offered the option of working for Adcox’s new business. On occasion, appellant’s employees would assist those of Bedrock Materials. Within the shared office space, the separate letterheads and phone lines for each company were used interchangeably.
Appellant contracted with the Fund to provide workers’ compensation coverage for its employees for the period from January 1994 to January 1997. After an audit, the Fund concluded that appellant and Bedrock Materials were operating as a single business enterprise and that appellant’s control of the employees of Bedrock Materials made the Fund liable for those employees while they were being controlled by appellant. The Fund demanded that appellant pay premiums to cover the risk associated with the additional employees. When appellant refused the demand, the Fund filed suit to recover the premiums owed.
In its suit, the Fund asserted claims for breach of contract, negligent misrepresentation, and quantum meruit. The Fund moved for partial summary judgment solely on its breach of contract claim. See Tex.R.Civ.P. 166a(a). In its motion, the Fund argued that because no written agreement exists between appellant and Bedrock Materials evidencing their independence, appellant’s premiums for its workers’ compensation insurance policies should have been calculated according to a basis that included Bedrock Materials’ employees. The Fund further asserted that, because premiums for the policies were calculated on an inaccurate basis, appellant had not paid the Fund the full amount of premiums due in exchange for workers’ compensation coverage. The Fund contended that when appellant refused to pay premiums owed, it breached the terms of its contracts, namely, the insurance policies, with the Fund.
The district court granted the Fund’s motion. Appellant moved to sever the partial summary judgment order from the remainder of the case for purposes of appeal and the district court granted this motion. Appellant now appeals the summary judgment order in favor of the Fund.
§ 406.122(b). A subcontractor is defined as “a person who contracts with a general contractor to perform all or part of the work or services that the general contractor has undertaken to perform.” Id. § 406.121(5).
*3 Appellant is a general contractor who contracted work to Bedrock Materials. section 406.122(b) are satisfied, appellant’s workers’ compensation premium basis must include Bedrock Materials employees who performed work for appellant.
The Texas Workers’ Compensation Commission has created a form, which will constitute a written agreement as required by section 406 .122(b)(2) of the Code once executed properly by a general contractor and a subcontractor and filed4 with the agency. This form is entitled “Agreement Between General Contractor and Subcontractor to Establish Independent Relationship” and is also known as a TWCC-85 form. Use of this form is optional; parties are free to draft their own written agreements to evidence an independent relationship.
Specifically, the TWCC-85 form states that (i) section 406.121(2) of the Labor Code, which defines “independent contractor,” has been met; (ii) the subcontractor is operating as an independent contractor; (iii) the subcontractor assumes the responsibilities of an employer for the performance of work; and (iv) “the Subcontractor and the Subcontractor’s employees are not employees of the General Contractor for purposes of the Act.” The form also advises, “This agreement shall take effect no sooner than the date it is signed.” Thus, by its terms, the form does not take effect until it is signed by representatives of the general contractor and the subcontractor.
In its motion for summary judgment, the Fund argued that the evidence showed appellant and Bedrock Materials were not working as independent contractors and had not entered into a written agreement evidencing an independent relationship. The Fund concluded that appellant should be liable for premiums calculated to include Bedrock Materials’s payroll for employees while they worked under contracts with appellant.
In its response, appellant offered copies of two TWCC-85 forms as summary judgment proof that a written agreement existed between appellant and Bedrock Materials. The first TWCC-85 form is dated February 14, 1994; the second TWCC-85 form is dated February 2, 1996 and is identified as deposition exhibit 54.5 These forms were attached to the affidavit of appellant’s risk manager, Donald D. Cook. In his affidavit, Cook acknowledges that his responsibilities as risk manager for Bedrock General included preparing and filing appropriate forms with the Fund. The forms purport to bear the signatures of Adcox as signatory for appellant and Speer as signatory for Bedrock Materials, thereby constituting a written agreement evidencing their independent relationship. The narrow question before us is whether appellant presented the district court with sufficient, competent, summary judgment proof, either to call a material fact into question, thereby precluding the Fund’s entitlement to summary judgment.
Standard of Review
*4 A traditional motion for summary judgment is properly granted when the movant establishes that there are no genuine issues of material fact to be decided and that it is entitled to judgment as a matter of law. Natividad v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex.1994).
Once the movant establishes a right to summary judgment, the non-movant must expressly present any reasons avoiding the movant’s entitlement and must support the response with proof to establish a fact issue. Nixon, 690 S.W.2d at 548-49. Similarly, any doubts are resolved in favor of the non-movant. Id.
When the district court expressly states the grounds on which summary judgment was granted, we must consider the grounds on which the district court ruled. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996).7 In its summary judgment order, the district court concluded that appellant subcontracted work to Bedrock Materials but that no written agreement evidencing an independent relationship existed between the general contractor and subcontractor. The district court order then entered judgment in favor of the Fund for liability on its breach of contract claim “calculated on the additional payroll of employees of Bedrock Materials, Inc. who performed subcontracted work for Defendant Bedrock General Contractors, Inc. during the time period January 21, 1994 to January 21, 1997.”
In its second issue on appeal,8 appellant contends that the district court erred by granting partial summary judgment because the evidence below raises issues of material fact. Specifically, appellant complains that fact issues exist as to whether a written agreement existed evidencing Bedrock Materials’ independence from appellant. The district court expressly found that appellant subcontracted work to Bedrock Materials and carried its employees on its payroll without the required written agreement. The issue, then, is whether appellant has raised a fact issue that Adcox for appellant and Speer for Bedrock Materials either signed such a written agreement or authorized someone to sign on their behalf.
We must initially determine whether the Fund has met its summary judgment burden. When moving for summary judgment, a plaintiff must present summary judgment proof that supports each element of its claim to demonstrate an entitlement to judgment. See Snyder v. Eanes Indep. Sch. Dist., 860 S.W.2d 692, 695 (Tex.App.-Austin 1993, writ denied). Here, the parties do not dispute the existence of the contracts at issue, the workers’ compensation insurance policies, or that the Fund provided coverage under the contracts.
*5 At the outset, we must determine what summary judgment evidence was properly before the district court. Because neither party obtained an express or implied ruling on its objections to the evidence and the district court did not refuse to rule, we will consider all of the evidence that was before the district court. See Tex.R.App.P. 33.1(a)(2). The summary judgment evidence consisted of various responses to discovery, deposition testimony, and affidavits of employees of the parties as well as the affidavit of appellant’s risk manager, Donald D. Cook. The exhibits to the depositions were not included in the record.
To demonstrate that summary judgment should be granted, a movant must offer admissible evidence. Tex.R.Civ.P. 166a(c).
The Fund presented summary judgment proof establishing that (i) appellant executed three contracts for workers’ compensation insurance with the Fund in 1994, 1995, and 1996; (ii) the Fund performed its duties under the contract; and (iii) appellant was a general contractor that subcontracted its work to, among others, Bedrock Materials. In support of its position that no written agreement existed between appellant and Bedrock Materials, the Fund offered summary judgment evidence, the deposition testimony of Adcox and Speer, to show that the signatures on the TWCC-85 form, marked as deposition exhibit 54, were not genuine and that Speer had not authorized anyone to sign the form on his behalf. Because the TWCC-85 form states that the agreement takes effect “no sooner than the date it is signed,” the Fund maintains that the form requires valid signatures of a general contractor and a subcontractor to be effective. In this case, the valid signatures needed to include those of Adcox and Speer or of any person authorized to sign the form.
During his deposition, Adcox specifically denied signing the TWCC-85 form at issue. Likewise, in his deposition, Speer testified unequivocally that he did not sign the TWCC-85 form at issue. In addition, Speer stated that he had not authorized anyone to sign this form on his behalf.
Challenging Speer’s deposition testimony, appellant cites us to portions of Speer’s deposition testimony that contain inconsistencies regarding whether he authorized other individuals to sign his name. This testimony, however, is limited to Speer recalling one instance when he gave an individual power of attorney to purchase a dump truck on his behalf and another when he authorized an employee to sign company payroll checks while he was on vacation. Speer also admitted to authorizing Adcox to sign payroll checks on several occasions. This evidence, however, does not controvert Speer’s testimony that he did not sign the TWCC-85 form at issue and that he did not authorize anyone else to sign this form on his behalf. We conclude that this evidence is sufficient to support summary judgment because it is “clear, positive and direct, otherwise credible and free from contradictions and inconsistencies, and could have been readily controverted.” Tex.R.Civ.P. 166a(c).
*6 Contending that it has raised a genuine issue of material fact, appellant refers us to an exhibit attached to its response to the Fund’s motion for summary judgment, the affidavit of Donald D. Cook. Summary judgment proof must be admissible under the rules of evidence. Rizkallah v. Conner, 952 S.W.2d 580, 587 (Tex.App.-Houston [1st Dist.] 1997, no pet.). But conclusory evidence is improper if it fails to explain the basis of the witness’s statements to link the conclusions to facts. Id.
Attached to Cook’s affidavit are six pages of records consisting of copies of transmittal letters, two TWCC-83 forms, and two TWCC-85 forms. A transmittal letter dated February 14, 1996, is identified as deposition exhibit 54 and appears to include TWCC-83 and -85 forms dated February 2, 1996.9 The forms purport to bear the signature of Adcox on behalf of appellant and Speer on behalf of Bedrock Materials.
Although Cook testified extensively by deposition, in his affidavit he acknowledged only that he had been responsible for preparing and filing “appropriate forms” with the Fund. In addition to exhibit 54, an unmarked TWCC-85 form dated February 14, 1994 is attached to Cook’s affidavit. The affidavit makes no mention of the signatures in question, averring only that the documents were “prepared by or under his direction.”
This testimony, then, does not establish who signed the TWCC-85 forms, nor does it establish that any unknown person who might have signed the forms was authorized by Adcox, Speer, or any other authorized person. We reject any legal or factual conclusions that either of these attached TWCC-85 forms constitutes valid written agreements because there is no supporting basis in fact. Earle, 998 S.W.2d at 890. Also, no facts are presented in this affidavit to permit us to reasonably infer the validity of either TWCC-85 form or to raise a doubt about the asserted invalidity of exhibit 54.
Appellant also asserts that the 1994 TWCC-85 form and exhibit 54 attached to Cook’s affidavit are evidence alone that a written agreement existed between appellant and Bedrock Materials. The record, however, is devoid of any specific reference to the 1994 TWCC-85 form much less evidence that, as required by its terms, the 1994 TWCC-85 form was signed by the representatives of appellant and Bedrock Materials or by someone authorized by these representatives. We believe the only possible written agreement in the record about which a fact issue could be raised is exhibit 54.
*7 Appellant further argues that an issue of material fact exists regarding whether Speer authorized someone to sign exhibit 54 on his behalf. Appellant first points to Adcox’s deposition testimony, asserting that Speer authorized him to sign checks, insurance forms, and other documents on behalf of both appellant and Bedrock Materials. Adcox testified that while he did not sign exhibit 54, he authorized other employees to sign various documents, including TWCC documents, on his behalf. In contrast, Speer testified that he did not sign exhibit 54 or authorize anyone to sign the form on his behalf. Appellant contends that because Adcox testified that he and Speer both authorized others to sign their names on unspecified documents that a fact issue exists as to whether they signed the TWCC-85 form at issue. We disagree.
Adcox did not testify that he or Speer authorized anyone to sign exhibit 54. Adcox does not assert that he had personal knowledge that Speer authorized anyone to sign this exhibit nor does he claim to recognize the handwriting on the form. Rather, Adcox asserts in a conclusory manner that Speer authorized others to sign his name. Conclusory statements devoid of the requisite facts are insufficient to raise fact issues on summary judgment. Ryland Group, Inc., 924 S.W.2d at 122. Because Adcox’s testimony does not address the specific document at issue here, we must conclude that his testimony lacks a sufficient factual basis to raise a genuine issue of material fact.
Appellant also offers the testimony of Kathy Holmes, one of appellant’s employees who had previously worked for Bedrock Materials. During her deposition, Holmes was shown a TWCC-85 form designated as exhibit 23, which is not identified or otherwise included in the record, as well as exhibit 54. Holmes was unable to identify the signature on the exhibit as that of Speer. She also did not testify that she had personal knowledge of Speer authorizing someone to sign the form.
Appellant’s contention that a fact question exists turns on the deposition testimony of Donald Cook. Consistent with Adcox’s testimony, Cook stated in his deposition that on occasion Adcox and Speer had authorized him to sign their signatures. But Cook could not identify the signatures on deposition exhibits 23 and 54. Cook further testified that the signatures on exhibit 23 “could be General Contractors, an individual representing them and an individual representing Bedrock Materials.” When asked whether the signature on exhibit 23 was his, Cook testified that he was unable to identify it. He also testified that it was “possible” that he had signed exhibit 23 and later that it was “possible” that Adcox and Speer had signed the document on behalf of the two companies. At best, Cook’s testimony is internally inconsistent. Similarly, when presented with exhibit 54, Cook could not identify the signatures as his own. Cook also did not testify that he had personal knowledge of Speer authorizing someone to sign the form.
*8 When, as here, the moving party presents competent summary judgment evidence establishing its entitlement to summary judgment, and the non-movant’s sole response is to assert its hypothesis of the facts or other possible theories of the facts without an underlying factual basis from which one could draw logical conclusions, we must conclude that appellant has failed to raise a fact issue. The evidence does not show that any known person signed the documents at issue or that either Adcox or Speer authorized anyone to sign these particular documents.
No one whom Speer may have authorized to sign on his behalf is claiming to have signed a TWCC-85 form with that authority. At most, Adcox testified that Speer likely authorized someone to sign similar forms but this testimony fails to address the documents attached to the Cook affidavit. This testimony also does not address a universe of documents for which Speer had previously authorized the use of his signature. Moreover, Cook’s deposition testimony, even if taken as true, is contradictory. See Tex.R.Civ.P. 166a(c). We conclude that appellant has not raised a fact issue concerning the existence of a written agreement between appellant and Bedrock Materials that evidenced an independent relationship.10 Accordingly, we overrule issue two.
In its third issue, appellant argues that the Fund must accept an “authorized” signature as well as a signature of a company’s owner or officer on a TWCC-85 form. The Fund has not contended that it would refuse to accept the signature of an authorized individual. We overrule issue three.
By its fourth issue, appellant claims that it cannot be held liable for past premiums “absent an injury and a valid independent contractor agreement” and that the Code does not permit the Fund to impose a penalty in the form of retroactive premiums. Because appellant did not present these arguments to the district court, we decline to address them on appeal. See Tex.R.Civ.P. 166a(c). Issue four is overruled.
Having examined the summary judgment record and finding no controverting proof of the summary judgment evidence provided by the Fund, we conclude that the Fund has established its entitlement to partial summary judgment and that appellant has failed to raise any genuine issue of material fact. Therefore, we further conclude that the trial court properly granted partial summary judgment on the breach of contract claim in favor of the Fund.
Because we conclude that the Fund demonstrated that it was entitled to judgment as a matter of law and that appellant failed to establish that a genuine issue of material fact existed, we affirm the district court’s judgment.
The Fund also sued Bedrock Materials, Inc., Wesco Construction, Inc., and Equipment Express, Inc. This appeal arises from a partial summary judgment that the Fund obtained against Bedrock General.
We have jurisdiction over this interlocutory order, which the district court severed for purposes of appeal. See Pan Am. Petroleum Corp. v. Texas Pac. Coal & Oil Co., 159 Tex. 550, 324 S.W.2d 200, 200-01 (Tex.1959).
Due to the similarity of the names involved, we will further reference Bedrock General as “appellant” to avoid confusion.
The form instructs the hiring contractor to file the original TWCC-85 form with the Texas Workers’ Compensation Commission and its workers compensation insurance carrier within ten days of the date of execution.
These documents are not clearly identified in the record. Although two separate TWCC-85 forms are identified in deposition testimony, labeled as deposition exhibits 23 and 54, during one of the depositions the Fund’s counsel noted that both exhibits were actually the same document. The exhibits at issue are not further described in the record. While appellant offers two separate TWCC-85 forms as summary judgment evidence, only one, marked as deposition exhibit 54, is addressed by testimony in the record.
The burden of proof, however, does not shift to the non-movant. City of Houston v. Clear Creek Basin Auth., 589 S.W.2d 671, 678 (Tex.1979) (“Summary judgments must stand on their own merits”).
But a reviewing court is not limited by a recitation of grounds in a judgment. Cincinnati Life Ins. Co. v. Cates, 927 S.W.2d 623, 625 (Tex.1996). In the interest of justice, our review may consider other possible grounds for a judgment if the movant has presented these issues to the district court and has preserved them. Id. In this case, a review beyond the district court’s judgment is not warranted because the parties have confined their briefing to the ground set forth in the court’s judgment.
Appellant contends in its first issue that the Fund is not entitled to summary judgment because it failed to present any evidence of damages, an essential element of a breach of contract claim. Tex.R.Civ.P. 166a(a), here, the parties have stipulated that if the summary judgment were upheld on appeal, the additional unpaid premiums would be $165,000. We overrule appellant’s first issue.
At one point in Speer’s deposition, the parties indicate that Exhibit 54 is a duplicate or the “same as” Exhibit 23. Although the record is not clear, we will assume that Exhibit 54 is an exhibit containing three pages and consisting of a transmittal letter, a TWCC-83 form, and a TWCC-85 form.
Appellant also claims that a fact issue exists with respect to whether Bedrock Materials operated as an independent contractor. Because we conclude that a written agreement did not exist, we need not reach this argument. See Tex.Labor Code Ann. § 406.122(b) (West 1996) (requiring proof that a subcontractor operate as an independent contractor and that the subcontractor has entered into a written agreement with the general contractor).
Citing to Tex.R.Civ.P. 166a(c).