Court of Appeals of Texas, Corpus Christi-Edinburg.
GUADALUPE MARISCAL, Appellant,
MCCARTHY BUILDING COMPANIES, INC. AND THE BRANDT COMPANIES, LLC, Appellees.
March 25, 2021
On appeal from the 148th District Court of Nueces County, Texas.
Before Chief Justice Contreras and Justices Longoria and Tijerina
Memorandum Opinion by Justice Tijerina
JAIME TIJERINA Justice
Appellant Guadalupe Mariscal appeals the trial court’s grant of summary judgment in favor of appellees, McCarthy Building Companies, Inc. (McCarthy) and The Brandt Companies, LLC (Brandt). By six issues, Mariscal contends that (1) there is a conflict among the trial court’s rulings, (2) appellees’ summary judgment evidence is inadmissible, (3) “Evidence establishes that Appellees and Appellant’s employer were ‘Independent Contractors,’ ” (4) McCarthy is not entitled to the Texas Workers’ Compensation Act’s (the TWCA) exclusive remedy defense, TEX. LAB. CODE ANN. § 408.001(a), (5) “Appellees fall outside of [the Texas Labor Code] § 408.001,” and (6) the “[s]ubrogation [l]ien establishes [the] validity of Appellant’s third-party claims against Appellees.” We affirm.
McCarthy entered into a contract with Christus Health, the owner of Spohn Hospital—Shoreline in Corpus Christi, Texas, to work on a construction project. McCarthy subcontracted with Murray Drywall & Insulation of Texas, Inc. (Murray) and Brandt to work on the project. Murray subcontracted with Emerald Coast Cleaners (Emerald) to work on the project. On July 10, 2017, Mariscal, an Emerald employee, was injured while working on the project after he stepped in a hole that was covered with plywood. It is undisputed that Mariscal received workers’ compensation benefits due to his work-related injury.
On February 8, 2018, Mariscal sued McCarthy and Brandt for negligence, gross negligence, and negligence per se. According to Mariscal’s pleadings, Brandt employees made the hole while they were installing a drain, and they then covered the hole with a sheet of plywood. Mariscal stated that when he stepped on the plywood, he fell into the hole because the plywood was ineffective and caved when he stepped on it.
On June 28, 2019, appellees filed a traditional motion for summary judgment claiming that Mariscal could not file suit against them because (1) he had received workers’ compensation benefits and (2) appellees and Emerald were subscribers pursuant to an Owner Controlled Insurance Program (OCIP). See id. § 408.001 (providing that workers’ compensation is the exclusive remedy when the employer is a subscriber). Appellees attached evidence showing that Christus Health purchased an OCIP from the insurance broker/administrator Alliant Insurance Services, Inc. (Alliant) and that Christus Health contractually prohibited contractors and subcontractors from working on the project unless they had enrolled in the OCIP. Appellees attached summary judgment evidence showing that McCarthy, Brandt, and Emerald had enrolled in the OCIP and were covered by the workers’ compensation insurance policy purchased by Christus Health from Alliant. Appellees also provided summary judgment evidence showing that Mariscal received benefits from Alliant.
The record shows that on July 31, 2018, a visiting judge, the Honorable Jose Manuel Bañales, presided over a hearing on appellees’ motion and took the matter under advisement. Subsequently, another presiding judge, the Honorable David Stith, denied appellees’ motion. Appellees filed a petition for writ of mandamus in this Court “seeking to compel [Judge Bañales] to: (1) vacate its September 7, 2018 order denying their motion for summary judgment; (2) admit the affidavits attached to relators’ motion for summary judgment into evidence; and (3) render summary judgment in favor of relators [(appellees here)].” See In re McCarthy Bldg. Cos., Inc., No. 13-19-00065-CV, 2019 WL 961966, at *1 (Tex. App.—Corpus Christi–Edinburg Feb. 27, 2019, orig. proceeding) (mem. op.).
In our memorandum opinion addressing appellees’ petition for writ of mandamus, we noted that Judge Bañales “informed us that, although he presided over the hearing for summary judgment at issue in this original proceeding, he did not sign the September 7, 2018 order subject to review, and that order was instead signed by the Honorable David Stith, the Presiding Judge of the 319th District Court of Nueces County, Texas.” Id. This Court concluded that the matter was not “properly before us” and denied the petition for writ of mandamus without prejudice so that the new judge of the 148th District Court, the Honorable Carlos Valdez, could hold further proceedings on the matter within his sound discretion. Id.
Appellees filed a motion for reconsideration of their motion for summary judgment asserting the TWCA’s exclusive remedy defense and attaching and incorporating their originally filed traditional motion for summary judgment and summary judgment evidence. Mariscal filed a response objecting to appellees’ evidence and arguing that: (1) “the facts do not support multi-tier protection/statutory ‘exclusive remedy’ bar against [his] claims”; (2) “all of the construction contracts submitted and relied upon by [appellees] include[ ] a clear and unambiguous clause that each and all, whether general contractor, subcontractor, or sub-subcontractor were ‘independent contractors’ while performing their assigned work, and therefore do not receive the multi-tier protection” of the OCIP; (3) “the facts of this case [are] outside the holding by the Texas Supreme Court in HCBeck, Ltd. v. Rice, 284 S.W.3d 349 (Tex. 2009)”; and (4) he raised a question of fact.
The trial court granted appellees’ motions. This appeal followed.
In a traditional motion for summary judgment, the movant has the burden of showing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law. TEX. R. CIV. P. 166a(c); Nixon v. Mr. Prop. Mgmt. Co., 690 S.W.2d 546, 548 (Tex. 1985). If the movant’s motion and summary judgment proof facially establish a right to judgment as a matter of law, the burden shifts to the non-movant to raise a material fact issue sufficient to defeat summary judgment. Centeq Realty, Inc. v. Siegler, 899 S.W.2d 195, 197 (Tex. 1995). A defendant seeking a traditional motion for summary judgment must either conclusively disprove at least one element of each of the plaintiff’s causes of action or plead and conclusively establish each essential element of an affirmative defense. Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995) (per curiam). We review a summary judgment de novo to determine whether a party’s right to prevail is established as a matter of law. Dickey v. Club Corp. of Am., 12 S.W.3d 172, 175 (Tex. App.—Dallas 2000, pet. denied).
In our de novo review of a trial court’s summary judgment, we consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206 S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755–56 (Tex. 2007).
By his first issue, Mariscal contends that reversal is warranted in this case due to the discrepancy between Judge Stith’s and Judge Valdez’s decisions. Specifically, as we understand it, Mariscal argues that a question of fact has been shown because prior to Judge Valdez granting summary judgment, Judge Stith denied appellees’ motion for summary judgment. That is Mariscal argues that because reasonable minds differed in their opinion in this case, a question of fact has been shown to exist. Mariscal cites no authority, and we find none, supporting a conclusion that a question of fact exists, thereby precluding summary judgment, solely because two judges reach a different conclusion regarding whether to grant or deny a motion for summary judgment. We decline Mariscal’s invitation to make such a novel conclusion. Therefore, we overrule Mariscal’s first issue.
By his second issue, Mariscal contends that the trial court should have excluded all of appellees’ summary judgment evidence. Specifically, Mariscal argues as follows:
a) the Affidavits do not identify, or attach what “documents” were reviewed in preparation for each of the Affidavits; TEX. R. CIV. P. 166a(d); McConathy v. McConathy, 869 S.W.2d 341, 342 n.2 (Tex. 1994);
b) the Affidavits do not address how each of the Affiants has “personal knowledge” of the “regular practice” of the entities to “make” and “receive” the Affidavit statements which refer to “condition,” “opinion,” and “diagnosis” which none of the attached documents contain or specify inasmuch as none of the Affiants have medical credentials to attest under oath to such medical “facts” (with the exception of the DWC-73 medical form signed by a medical doctor of whom the Affiant has no personal knowledge, all the Affidavits exhibits are insurance forms and schedules or contract documents), and therefore, all of Defendants’ Affidavits are not “clear, positive, and direct, otherwise credible and free from contradictions and inconsistencies,” and which none of the Affiants have been proven competent to testify about; TEX. R. CIV. P. 166a(c); New York Times Inc. v. Isaacks, 146 S.W. 3d 144, 164 (Tex. 2004); Casso v. Brand, 776 S.W.2d 551, 558 (Tex. 1989);
c) the Affiants do not state how each of them have “personal knowledge” of any of the documents attached to their Affidavits, particularly when the Affiants are in locations shown by the Notary Stamp on each Affidavit that are separate and distinct from the Project site; TEX. R. CIV. P. 166a(f); TEX. R. EVID. 602; Kerlin v. Arias, 274 S.W.3d, 666, 668 (Tex. 2008); Ryland Grp., Inc. v. Hood, 924 S.W.2d 120, 122 (Tex. 1996);
d) the Appellees do not address how the attached “haystack” of policy documents and Certificates that are shown to be in effect during a timeframe outside the timeframe of the underlying incident in this cause—to-wit July 10, 2017—are relevant to the issues presented in their motion; TEX. R. EVID. 402; E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 556 (Tex. 1995);
e) the Appellees do not address how the attached “haystack” of policy documents and Certificates that have different and distinct policy identifiers from the one under which the Plaintiff received his benefits, are relevant to the issues presented in their motion and meet the “ultimate responsibility for obtaining alternate workers’ compensation in the event FMR [Owner] terminated the OCIP” test for the general contractor under TEX. LABOR CODE § 406.123; TEX. R. EVID. 402; E.I. du Pont de Nemours & Co. v. Robinson, 923 S.W.2d 549, 556 (Tex. 1995); HCBeck Ltd. v. Rice, 52 S.W.3d 349, 352-352 (Tex. 2009); and
f) in particular, the second Affidavit by Ms. Barlow, attached to the Appellants’/Defendants’ Reply on July 27, 2018 without the requisite leave of court under TEX. R. CIV. P. 166a(c), includes incomprehensible statements to include an explanation affirming that a Notice letter (attached to Plaintiff’s Response as Exhibit 3), addressed to Plaintiff’s counsel to assert a lien against Plaintiff’s counsel for negligence in inasmuch as the “accident [incident at issue in this case], occurred under circumstances creating liability against you for injuries sustained by reason of your negligence,” and further, the sworn statement that: Regarding my Exhibit 3 to Plaintiff’s counsel, my statements regarding a lien refer to a lien against Plaintiff. In making that statement, I had no expectancy that such lien would be satisfied from a third-party other than Plaintiff. is a clear indication that the second Affidavit by Ms. Barlow is not “clear, positive, and direct, otherwise credible and free from contradictions and inconsistencies,” inasmuch as it identifies the Plaintiff as a “third-party,” and seeks to subrogate workers’ compensation benefits directly from the Plaintiff, which are protected against such intended subrogation by the workers’ compensation carrier, sworn statements by Affiant which are misstates of fact and law, and are therefore, defective. TEX. LABOR CODE § 408.201; TEX. CON. art. XVI, § 28; Haynes v. Haynes, 178 S.W.3d. 350, 355 (Tex. App.—Houston [14th Dist.] 2005, pet denied).
Rule 38.1(i) requires a party to make “a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record” in its appellate brief. TEX. R. APP. P. 38.1(i). “To comply with Rule 38.1, appellants must provide such a discussion of the facts and the authorities relied upon to maintain the point at issue.” Lowry v. Tarbox, 537 S.W.3d 599, 619 (Tex. App.—San Antonio 2017, pet. denied) (citing Tesoro Petroleum Corp. v. Nabors Drilling USA, Inc., 106 S.W.3d 118, 128 (Tex. App.—Houston [1st Dist.] 2002, pet. denied)). “This is not done by merely uttering brief conclusory statements, unsupported by legal citations.” Id. “When appellants fail to discuss the evidence supporting their claim or apply the law to the facts, they present nothing for review.” Id. at 620 (citing Bolling v. Farmers Branch Indep. Sch. Dist., 315 S.W.3d 893, 895–96 (Tex. App.—Dallas 2010, no pet.)). An appellate issue is waived by failure to offer argument, provide appropriate record citations, or a substantive analysis. Id.
After setting out the above-stated list of alleged deficiencies in appellees’ summary judgment evidence, Mariscal sets out the procedural history of his objections in the trial court and then reiterates that he provided the trial court with objections that required it to exclude appellees’ evidence. However, other than the assertions listed above with the citations listed after each allegation, Mariscal has not presented any substantive legal argument applying the legal authorities cited to the facts of this case. See TEX. R. APP. P. 38.1(i). Mariscal merely recites the list of global and unsubstantiated allegations with general citation to authority, without explaining how that authority cited applies to the facts here. Thus, Mariscal has failed to provide any substantive analysis in such a manner as to demonstrate that the trial court committed reversible error when it did not exclude appellees’ summary judgment evidence. We are prohibited from making Mariscal’s argument for him, and we refuse to do so. We have no duty to ascertain how the law as set out in the authority cited by Mariscal applies to the facts in this case, and we are prohibited from researching the law and then fashioning a legal argument for him when he has failed to do so. See Canton-Carter v. Baylor Coll. of Med., 271 S.W.3d 928, 932 (Tex. App.—Houston [14th Dist.] 2008, no pet.); see also Atkinson v. Sunchase IV Homeowners Ass’n, Inc., No. 13-17-00691-CV, 2020 WL 2079093, at *2 (Tex. App.—Corpus Christi–Edinburg Apr. 30, 2020, no pet.) (mem. op.). Therefore, we overrule Mariscal’s second issue.
“The purpose of the [TWCA] is to provide employees with certainty that their medical bills and lost wages will be covered if they are injured.” HCBeck, Ltd., 284 S.W.3d at 350. An employee benefits from workers’ compensation insurance benefits “because it saves the time and litigation expense inherent in proving fault in a common law tort claim.” Id. “Recovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage ... against the employer or an ... employee of the employer.”1 TEX. LAB. CODE ANN. § 408.001(a); TIC Energy & Chem., Inc. v. Martin, 498 S.W.3d 68, 69 (Tex. 2016). Thus, if an employer subscribes to workers’ compensation insurance benefits, and is then sued by a covered employee, the employer may “assert the statutory exclusive remedy defense against the tort claims of its employees for job related injuries” and generally cannot be held liable in tort for those injuries HCBeck, Ltd., 284 S.W.3d at 350. A general contractor may invoke the exclusive remedy defense provided to a subscribing employer “if, pursuant to a written agreement, it ‘provides’ workers’ compensation insurance coverage to the subcontractor and its employees.”2 Id. (citing TEX. LAB. CODE ANN. §§ 406.123(a), 408.001(a)).
Owners, contractors, and subcontractors may agree to an OCIP, which “is designed to secure insurance, including workers’ compensation insurance, at a reasonable price for all workers at a job site or construction site.” TIC Energy & Chem., Inc., 498 S.W.3d at 70 n.7 (citing HCBeck, Ltd., 284 S.W.3d at 359–60 & n.6). OCIPs benefit the parties because they “allow the highest-tiered entity to ensure quality and uninterrupted coverage to the lowest-tiered employees.” Id. OCIPs save costs, secure better coverage, and have better safety programs. HCBeck, Ltd., 284 S.W.3d at 360 (citing and quoting Am. Protection Ins. v. Acadia Ins., 814 A.2d 989, 991 n.1 (Me. 2003)). Subcontractor’s employees who do not opt out of workers’ compensation coverage waive their right to sue a general contractor for their injuries when a general contractor is deemed the employer of a subcontractor’s employees and provides workers’ compensation insurance to them. Hunt Const. Grp., Inc. v. Konecny, 290 S.W.3d 238, 243 (Tex. App.—Houston [1st Dist.] 2008, pet. denied).
In other words, the general contractor enrolled in workers’ compensation insurance is immune from claims brought by a subcontractor’s employee and is entitled to the exclusive remedy defense. See TEX. LAB. CODE ANN. §§ 406.123 (“A general contractor and a subcontractor may enter into a written agreement under which the general contractor provides workers’ compensation insurance coverage to the subcontractor and the employees of the subcontractor.... An agreement under this section makes the general contractor the employer of the subcontractor and the subcontractor’s employees only for purposes of the workers’ compensation laws of this state.”), 408.001(a) (setting out the exclusive remedy defense). “A general workplace insurance plan that binds a general contractor to provide workers’ compensation insurance for its subcontractors and its subcontractors’ employees achieves the Legislature’s objective to ensure that the subcontractors’ employees receive the benefit of workers’ compensation insurance.” TIC Energy & Chem., Inc., 498 S.W.3d at 69.
By his third issue, Mariscal argues that under HCBeck in order for McCarthy to establish that it provided workers’ compensation insurance, it must have agreed that it was “ultimately responsible for obtaining workers’ compensation insurance in the event [Christus Health] terminate[d] the OCIP.” 284 S.W.3d at 351–52. Mariscal does not disagree that an agreement to provide workers’ compensation insurance existed pursuant to the OCIP; instead, he argues that McCarthy cannot invoke the exclusive remedy defense because it did not agree to provide worker’s compensation coverage in the event the OCIP was discontinued.
In TIC Energy & Chemical, Inc., the Texas Supreme Court discussed its holding in HCBeck as follows:
In HCBeck, Ltd. v. Rice, we explained that a “general contractor who has, pursuant to a written agreement, purchased a workers’ compensation insurance policy covering its subcontractors and its subcontractors’ employees ... becomes the statutory employer of its subcontractor’s employees, and is thus entitled to the benefits conferred on employers by the Act.” Furthermore, because a contractor can “ ‘provide[ ]’ workers’ compensation, even when it has not purchased the insurance directly, ... multiple tiers of subcontractors [thereby] qualify as statutory employers entitled to the exclusive-remedy defense.” “Such a scheme,” we observed, “seems consistent with the benefits offered by controlled insurance programs, which are designed to minimize the risk that the subcontractors’ employees will be left uncovered.” We further explained that a construction and application of section 406.123 that “favors blanket coverage to all workers on a site” accords with legislative intent and the “Legislature’s ‘decided bias’ for coverage.”
498 S.W.3d at 74.
In its analysis of the appellant’s argument that the general contractor did not provide coverage to its subcontractors and their employees, the HCBeck Court pointed out that the general contractor provided insurance because it agreed to do so, and the contract stated that the general contractor would pay for the insurance if there were a lapse in the OCIP. See HCBeck, Ltd., 284 S.W.3d at 360. The HCBeck Court emphasized that its primary concern was whether the general contractor did more than just require the lower tiered contractors to obtain workers’ compensation insurance and not whether one could imagine a scenario where the general contractor might fail to do so. Id. at 355–56; see also Cook v. White Const. Co., No. 03-10-00114-CV, 2011 WL 3371542, at *4 (Tex. App.—Austin Aug. 4, 2011, no pet.) (mem. op.). Thus, the HCBeck Court’s analysis of whether the general contractor provided workers’ compensation insurance to its subcontractors focused on whether a contingency plan was in place that prevented the subcontractors from going without workers’ compensation insurance if a lapse in the OCIP occurred. See 284 S.W.3d at 360. Only under that scenario could the general contractor claim that it “provided” the coverage pursuant to the TWCA and as the court defined the term “provide.” Id. In other words, to be entitled to the exclusive remedy defense, the general contractor must ensure that if a lapse in the OCIP occurs, the subcontractors are not able to opt out of coverage. See id.
We find the reasoning in Cook v. White Construction Co. persuasive. See 2011 WL 3371542, at *4. In that case, the court did not interpret HCBeck as standing for the proposition that a general contractor only “provides” workers’ compensation insurance if it promises to pay for replacement coverage in the event of a lapse in the OCIP. Id. Instead, the Cook court explained that the general contractor must ensure that the employees are covered by workers’ compensation insurance throughout the project, and it implied that the general contractor promising to pay for the replacement coverage if the owner discontinues the OCIP is not the only way to make that showing. Id.
In Cook, the appellant argued that in HCBeck, the owner’s “OCIP said [the general contractor] ‘shall’ obtain insurance for [appellant] if the OCIP lapsed, whereas” the OCIP in Cook said that the general contractor and subcontractors would be “expected to” provide insurance if the OCIP lapsed. See id. The appellant claimed using the term “will be expected to” was “precatory at best,” but it was not mandatory like the “shall” which was used in the OCIP in HCBeck. Id. The Cook court stated that in HCBeck the Texas Supreme Court “emphasized that its primary concern was whether [the general contractor] actually provided workers’ compensation insurance, not whether one could imagine a scenario where it might fail to.” Id. The Cook court rejected the appellant’s argument and determined the contract had indeed required the general contractor to provide workers’ compensation insurance if the OCIP lapsed. Id.
In Powell, this Court also interpreted HCBeck. Powell v. Valero Energy Corp., No. 13-18-00209-CV, 2019 WL 961958, at *3 (Tex. App.—Corpus Christi–Edinburg Feb. 28, 2019, pet. denied) (mem. op.). In Powell, VRT, the owner of the premises, hired Qualspec to work on a project, and it required Qualspec to enroll in an OCIP. Id. The appellant, Qualspec’s employee, was injured while working on the project, and he sued VRT for negligence. Id. The appellant maintained “that, because VRT could have required Qualspec to procure its own [workers’ compensation] coverage, VRT did not agree to ‘provide’ coverage.” Id.
We looked at the common meaning of the word “provide” to determine “whether VRT provided coverage by written agreement.” Id. (citing Halferty v. Flextronics Am., LLC, 545 S.W.3d 708, 713 (Tex. App.—Corpus Christi–Edinburg 2018, pet. denied)). We said that under the labor code “provide” means “to supply or make available.” Id. We noted that “a general contractor does not provide coverage simply by requiring its subcontractors to secure their own coverage.” Id. (citing Flextronics, 545 S.W.3d at 714). “Rather, the general contractor must do something more than pass the onus of obtaining coverage to the subcontractor” and “must assure coverage by putting ‘something in the pot.’ ” Id. We concluded that because “VRT required Qualspec to participate in its ROCIP on qualifying projects, and with respect to [the appellant], it provided workers’ compensation coverage through the ROCIP,” it had “done more than simply pass the onus of obtaining coverage to a subcontractor.” Id.
The appellant argued “that the Agreement allow[ed] VRT to choose if it provides coverage through the ROCIP, but the Agreement impose[d] no obligation for VRT to provide coverage.” Id. at *4. We acknowledged that the Agreement provided that coverage was not available for certain other services, but we concluded that “it is of no consequence that coverage might not have been made available for other services and ‘we look at what did happen, not what might happen.’ ” Id. (citing HCBeck, 284 S.W.3d at 359 n.4). We then pointed out that “VRT determined that Qualspec’s inspection services at the Refinery was qualifying ‘Work,’ and it required Qualspec to enroll in its ROCIP”; therefore, we concluded that the appellant “received compensation under the applicable policy for his injuries.” Id. We stated that “[e]xtending the exclusive remedy defense to VRT under such circumstances is consistent with the TWCA’s ‘decided bias’ for coverage.” Id.
Here, the summary-judgment record establishes that McCarthy, Brandt, Emerald, and all subcontractors were required to enroll in workers’ compensation insurance provided by the OCIP and that each of the entities complied by enrolling with the OCIP insurance provider, Alliant. See Funes v. Eldridge Elec. Co., 270 S.W.3d 666, 671–73 (Tex. App.—San Antonio 2008, no pet.) (concluding in the context of an OCIP that a general contractor that complies with the terms of the OCIP has provided workers’ compensation to its employees). In its contracts with its subcontractors, McCarthy required all the subcontractors to enroll in the OCIP, and it is undisputed that they did so. It is undisputed that the subcontractors, including Brandt and Emerald, had workers’ compensation insurance pursuant to the OCIP and at no time went without it. It is undisputed that the OCIP never lapsed, and as a result, Mariscal received his benefits from Alliant.
The contract between McCarthy and Brandt states, “All insurance requirements shall flow down to subcontractors and suppliers of any tier and any flow down of these requirements to such subcontractors and suppliers of any tier does not relieve Subcontractor of its obligation to provide the insurance outlined herein.” The contract between Brandt and Emerald incorporated the McCarthy/Brandt contract. The summary judgment evidence establishes that none of the subcontractors would have been allowed to work on the project without enrolling in the OCIP. The OCIP specifically stated, “Access to the project site will not be permitted until the enrollment [in the OCIP] is complete.”
Finally, Mariscal acknowledges that had the OCIP lapsed, the contract stated that “[t]he cost of the replacement coverage shall be at Owner’s expense.” Therefore, although the contract may not have specifically stated that McCarthy would be responsible for paying for the replacement insurance policies, the contract required Christus Health to do so, and therefore, McCarthy, Brandt, Emerald, and their employees were not at risk of losing coverage even if the OCIP lapsed. HCBeck, Ltd., 284 S.W.3d at 350; see also Powell, 2019 WL 961958, at *3.
An owner who procures the services of a contractor is considered a general contractor for purposes of the TWCA and is entitled to the exclusive remedy defense. See Entergy Gulf States, Inc. v. Summers, 282 S.W.3d 433, 438 (Tex. 2009) (op. on reh’g) (“[A] general contractor is a person who takes on the task of obtaining the performance of work. That definition does not exclude premises owners ....”). Here, it is undisputed that Christus Health and McCarthy signed a contract for McCarthy to perform work on the project. This evidence supports a conclusion that Christus Health is McCarthy’s employer for purposes of the TWCA. See id.; see also Lazo v. Exxon Mobil Corp., No. 14-06-00644-CV, 2009 WL 1311801, at *2 (Tex. App.—Houston [1st Dist.] May 7, 2009, no pet.) (mem. op.) (deeming a premises owner a statutory employer where the agreement stated that premises owner could provide OCIP coverage and it did so). Christus Health’s promise to purchase replacement insurance if a lapse in the OCIP occurred “indicates that the higher-tier contractor ha[d] the ultimate obligation to ensure that the employees of the lower-tier subcontractors [were] covered.” See HCBeck, Ltd., 284 S.W.3d at 353. The evidence thus establishes that a contract existed that provided workers’ compensation insurance even if the OCIP lapsed, and under pertinent authority, so long as an upper tier contractor does this, all lower tier contractors are covered. TIC Energy & Chem., Inc., 498 S.W.3d at 74.
Nonetheless, Mariscal argues that Christus Health’s promise to pay for replacement insurance if a lapse in the OCIP occurred proves that McCarthy did not have “ultimate responsibility” for workers’ compensation coverage on the project. However, in HCBeck, the Texas Supreme Court explained that § 406.123(a)’s exclusive remedy defense “does not require a general contractor to actually obtain the insurance, or even pay for it directly.” 284 S.W.3d at 353. The HCBeck Court held that although the general contractor in that case was not required to pay for the coverage that was provided to the subcontractor by the owner under the OCIP, the general contractor still “provided” the coverage to the subcontractors. Id. We conclude that the same reasoning applies here. Thus, although McCarthy was not required to pay for the replacement coverage had a lapse in the OCIP occurred, Christus Health would have supplied it, and Emerald would have been covered if a lapse in the OCIP occurred. This reasoning aligns with TIC Energy & Chem., Inc., which states that a contractor “ ‘provide[s]’ workers’ compensation, even when it has not purchased the insurance directly ... multiple tiers of subcontractors [thereby] qualify as statutory employers entitled to the exclusive-remedy defense.” 498 S.W.3d at 74.
To hold to the contrary that McCarthy did not provide the insurance, would produce an unjust and unreasonable result. See Funes, 270 S.W.3d at 671. Here, Christus Health, the premises owner, has implemented an OCIP and contractually required its general contractor, McCarthy, to contractually require all subcontractors to enroll in the OCIP, and Christus Health agreed to purchase replacement coverage if a lapse in the OCIP occurred. To conclude that McCarthy did not “provide” the insurance would preclude protection of the general contractor, whom the Legislature clearly intended to protect under subsections 406.123(a) and (e). See id. at 672.
In that hypothetical, the general contractor would be required to procure a second compensation insurance program in order to qualify under the statute as an “employer” who “provides” insurance, and thereby obtain [TWCA’s] protection. This, however, makes little sense because of its redundancy—the premises owner has already established a program in which all, including the general contractor, are required to enroll, and under which all, including the general contractor, are intended to be protected. The resulting “double coverage” for, in effect, single protection is superfluous, and outside any reasonable intent of the Legislature.
Accordingly, under the applicable authority, we conclude that McCarthy did more than merely require that Emerald enroll in workers’ compensation insurance and therefore met the definition of “provide” as used in the TWCA. See HCBeck, 284 S.W.3d at 359 n.4 (explaining that the fact that the premises owner “was not contractually bound to continue the OCIP” did not preclude statutory employer status for general contractor because the general contractor promised to provide it); Etie v. Walsh & Albert Co., Ltd., 135 S.W.3d 764, 765 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (holding that a general contractor was a statutory employer where it exercised its option to provide workers’ compensation coverage); see also Cook, 2011 WL 3371542, at *4 (concluding that the general contractor was a statutory employer where the premises owner could have discontinued the OCIP coverage but did not). Therefore, the evidence establishes as a matter of law that McCarthy is deemed Brandt’s employer for purposes of the TWCA. See TEX. LAB. CODE ANN. § 406.123(e). Mariscal does not challenge the trial court’s conclusion that Brandt is Emerald’s deemed employer for purposes of the exclusive remedy defense. See TIC Energy & Chem., Inc., 498 S.W.3d at 70. Accordingly, appellees met their burden to show that they were entitled to invoke the exclusive remedy defense, and the burden shifted to Mariscal to show that a question of fact existed to defeat summary judgment. We overrule Mariscal’s third issue.
Mariscal by his fourth and fifth issues contends that Emerald, McCarthy, and Brandt were independent contractors and were therefore not entitled to assert TWCA’s exclusive remedy defense. Appellees cite § 406.123’s exception to § 406.122(b)’s general rule that subcontractors are generally independent contractors, arguing that under the exception, McCarthy was the deemed employer of its subcontractors and their employees and Brandt was the deemed employer of Emerald and its employees. Therefore, according to appellees, § 406.122(b) does not apply here.
“[T]he purposes of the [TWCA] are best served by deeming immune from suit all subcontractors and lower-tier subcontractors who are collectively covered by workers’ compensation insurance.” Hunt Const. Grp., Inc., 290 S.W.3d at 247. One of the Legislature’s “purposes in passing the [TWCA] was to ensure injured workers could obtain reimbursement for medical expenses related to workplace injuries without the time, money, and difficulty of a negligence lawsuit.” Id. (citing Lawrence v. CDB Servs., Inc., 44 S.W.3d 544, 555 (Tex. 2001) (Baker, J., dissenting)). In addition, the TWCA encourages “employers to participate in workers’ compensation by precluding nonsubscribing employers from relying on common-law defenses to negligence in defending against their employees’ personal-injury actions.” Id. (citing Kroger Co. v. Keng, 23 S.W.3d 347, 350 (Tex. 2000)).
In TIC Energy, the Texas Supreme Court held that § 406.122(b) is the general rule and that § 406.123 sets out a permissive exception. 498 S.W.3d at 71. Section 406.122(b) states,
A subcontractor and the subcontractor’s employees are not employees of the general contractor for purposes of this subtitle if the subcontractor: (1) is operating as an independent contractor; and (2) has entered into a written agreement with the general contractor that evidences a relationship in which the subcontractor assumes the responsibilities of an employer for the performance of work.
TEX. LAB. CODE ANN. § 406.122(b). Section 406.123, entitled “Election to Provide Coverage; Administrative Violation,” states that “[a] general contractor and a subcontractor may enter into a written agreement under which the general contractor provides workers’ compensation insurance coverage to the subcontractor and the employees of the subcontractor.” Id. § 406.123(a). Section 406.123 also states, “An agreement under this section makes the general contractor the employer of the subcontractor and the subcontractor’s employees only for purposes of the workers’ compensation laws of this state.” Id. § 406.123(e). Moreover, employees may have more than one employer within the meaning of the TWCA, and each employer may raise the exclusive remedy provision as a bar to the employee’s claims. See Wingfoot Enters. v. Alvarado, 111 S.W.3d 134, 143 (Tex. 2003); Etie, 135 S.W.3d at 768.
In general, under § 406.122(b), subcontractors and their employees are independent contractors, so long as the parties agree that workers’ compensation insurance will be provided pursuant to an OCIP; however, under § 406.123, all tiers of the contractors are not considered independent contractors for purposes of the TWCA. See TEX. LAB. CODE ANN. § 406.122(b), 123; HCBeck, Ltd., 284 S.W.3d at 353 (explaining that because the general contractor provided workers’ compensation to the subcontractors pursuant to an OCIP, the general contractor was entitled to the exclusive remedy defense as an employer). In that case, the general contractor is deemed the employer of the subcontractor and the subcontractor’s employees for purposes of the workers’ compensation laws of this state. See TEX. LAB. CODE ANN. § 406.123(e); HCBeck, Ltd., 284 S.W.3d at 353 (recognizing general contractor’s status as employer of subcontractors when general contractor pursuant to an OCIP agreed to provide workers’ compensation insurance to the subcontractors).
Here, we have already concluded that workers’ compensation insurance had been provided upstream and downstream. Therefore, we find “no reason why this shift in status from ‘independent contractor’ to ‘deemed employee,’ ” with its concomitant protections, should be denied to any tiers. See Etie, 135 S.W.3d at 767; see also Powell, 2019 WL 961958, at *3 (“The TWCA’s ‘deemed employer/employee relationship extends throughout all tiers of subcontractors.’ ”). A subcontractor retains its status as an independent contractor by choosing not to participate in workers’ compensation coverage. Etie, 135 S.W.3d at 768. However, here, McCarthy, Brandt, and Emerald all chose to participate and were in fact required to participate in the OCIP providing workers’ compensation insurance. Therefore, we conclude that the TWCA’s deemed employer/employee relationship extended throughout all tiers of the subcontractors under § 406.123 and that McCarthy, Brandt, and Emerald were not independent contractors for purposes of the TWCA. See TEX. LAB. CODE ANN. § 406.123; TIC Energy, 498 S.W.3d at 70; Etie, 135 S.W.3d at 768; see also Powell, 2019 WL 961958, at *3. We overrule Mariscal’s fourth and fifth issues.3
By his sixth issue, Mariscal contends that a subrogation lien establishes his third-party claims. Specifically, Mariscal complains of a letter from appellees’ attorney he alleges contains “statements [that] are a complete misrepresentation of the law made to the Court, under oath” and that the submission of those “statements, made under oath, is sanctionable.” Mariscal then repeats his claims, without substantive legal analysis, that appellees failed in their summary judgment burden pursuant to the caselaw. However, Mariscal does not state or explain how the letter would entitle him to reversal of the trial court’s summary judgment. Accordingly, we conclude that this issue is inadequately briefed. See TEX. R. APP. P. 38.1(i). We overrule Mariscal’s sixth issue.
We affirm the trial court’s judgment.
Delivered and filed on the 25th day of March, 2021.
An exception, not applicable here, applies to those claims involving the death of an employee caused by an employer’s intentional or grossly negligent conduct. TEX. LAB. CODE ANN. § 408.001.
A general contractor is “a person who undertakes to procure the performance of work or a service, either separately or through the use of subcontractors.” Id. § 406.121(1). A subcontractor is 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).
Mariscal recognizes that the exception applies when a general contractor has provided workers’ compensation insurance. However, he disagrees with our conclusion that McCarthy did so.
Court of Appeals of Texas, Corpus Christi-Edinburg.
UNITED SPECIALTY INSURANCE COMPANY, Appellant,
FARMERS INSURANCE EXCHANGE, Appellee.
UNITED SPECIALTY INSURANCE COMPANY, Appellant,
WASP CONSTRUCTION, LLC, Appellee.
NUMBER 13-19-00127-CV, NUMBER 13-19-00128-CV
October 29, 2020
On appeal from the 206th District Court of Hidalgo County, Texas.
Before Justices Benavides, Longoria, and Perkes
Memorandum Opinion by Justice Perkes
GREGORY T. PERKES Justice
*1 This is a consolidated appeal from cross-motions for summary judgment on defense and indemnity and cross-motions for summary judgment on breach of contract involving an insurance dispute. Appellant United Specialty Insurance Company (USIC), as the assignee and subrogee of Alonzo Cantu Construction, Inc. (Cantu), argues the trial court erred in granting appellees’ Farmers Insurance Exchange (FIE) and Wasp Construction, LLC (Wasp) motions of summary judgment because (1) Cantu is an additional insured under the FIE policy, and thus, FIE had a duty to defend and indemnify Cantu in the underlying suit; and (2) Wasp breached its subcontract with Cantu in its failure to defend or indemnify Cantu for claims asserted against Cantu in the underlying suit. We affirm.
On August 26, 2014, Cantu, a general contractor, accepted a written subcontracting bid from Wasp to perform a water and sewer improvement project. Wasp held a “business owners policy” under FIE and was covered through a workers compensation policy under Service Lloyds Insurance Company. Cantu carried a liability insurance policy under USIC. Wasp’s FIE policy included an “additional insured” provision, which allowed for the extension of limited additional insured coverage stating “[a]ny person or organization for whom you are performing operations is also an insured, if you and such person or organization have agreed in writing in a contract or agreement that such person or organization be included as an additional insured on your policy.” At the time Wasp began working on the excavation project, however, Cantu was not a named additional insured under Wasp’s FIE policy.
On August 30, 2014, Hector Guadalupe Mata Martinez, a Wasp employee, was installing underground pipes when he was crushed by collapsing dirt. The collapse resulted in severe injuries, rendering Martinez a paraplegic. On September 9, 2014, Martinez and associated plaintiffs, filed a petition against Wasp in trial cause number C-7318-14-H. The petition was later amended to include Cantu as a defendant.
On October 9, 2014, Wasp signed a subcontracting agreement with Cantu, which itself stipulates it was “made this 12th day of September, 2014”—two weeks after the accident. The parties, however, dispute the date the subcontracting agreement took effect. USIC argues the agreement “mistakenly reflected” an incorrect “made” date, and in any matter, the contents of the subcontract were agreed to orally on August 26, 2014. The subcontract included indemnification and insurance provisions, compelling Wasp to add Cantu as an additional insured under its FIE policy and defend and indemnify Cantu against any liability for bodily injuries occurring on its worksite.1
*2 On April 24, 2017, while the aforementioned underlying case was pending, USIC filed a petition for declaratory judgment against FIE, Cantu, and Wasp in the cause now before this Court, trial cause number C-1928-17-D. USIC, in part, claimed FIE was responsible for defending Cantu as an additional insured under Wasp’s insurance, as stipulated in the subcontract agreement.
Two months later, on June 19, 2017, Cantu filed a cross-claim against Wasp in cause number C-7318-14-H, claiming contractual indemnity, breach of contract, and contribution for Wasp’s “wrongful failure to defend and indemnify Cantu for the claims asserted against Cantu in the Underlying suit and for its failure to provide additional insured coverage under the [FIE] policy to Cantu.”
On September 14, 2017, after an initial Stowers demand letter went unanswered, see G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544, 546 (Tex. Comm’n App. 1929), counsel for Martinez sent Cantu and Wasp a subsequent demand letter in a “final attempt to settle ... for policy limits.”2 USIC’s counsel sent a letter to FIE’s counsel dated September 21, 2017, acknowledging that Cantu and Wasp were in receipt of the Stowers demand letter and proposing a settlement solution.3
On September 22, 2017, FIE, through its attorney, offered to “contribute its liability limits of one million dollars towards the settlement of all claims against Wasp and Cantu,” conditioned on certain terms with respect to resolving the insurers’ dispute:
(a) USIC’s agreement to resolve the coverage issues through litigation and to pay FIE one million dollars should the court determine that FIE has no coverage for the claims against Cantu and Wasp. If USIC prevails, then it pays nothing ... (b) the dismissal of Cantu and Wasp from all litigation, even if it means that USIC has to pay out of its excess policy to effectuate this.
USIC responded, accepting FIE’s terms, save one condition:
In response to your letter of earlier today, USIC is in agreement that it is in best interests of both [FIE] and USIC to provide [the mediator] with $2 million for use to settle the claim on behalf of both Cantu and Wasp. USIC agrees that the insurers can continue their dispute regarding payment of Farmer’s $1 million and the triggering of [FIE]’s policy and ordering of coverage in the context of a declaratory judgment suit.... USIC will agree that neither Cantu nor Wasp need to participate in the declaratory judgment action if they are successfully settled out of their exposure in the underlying tort matter.
USIC does not understand the other conditions set forth in your letter as they appear to expand the scope of coverage that is owed by USIC’s policies; therefore, USIC does not agree to them.
*3 FIE’s counsel replied as follows:
To confirm our call, the part you objected to was the last phrase of condition (b) which is that if the case cannot settle for 2 mill then USIC has to pay out of its excess, and we still get back our million if we win on coverage. This will only apply if the case does not settle at 2. You advise that for now you do not plan on offering any more than 2 mill so that contingency is not extant.
With that understanding, and our agreement that [a case] doesn’t apply, we have a deal.
USIC counsel responded, confirming, “Deal done at $2M for Cantu and Wasp. Eddie inking....” On the same day FIE and USIC confirmed agreement to payout a settlement in cause number C-7318-14-H on behalf of Wasp and Cantu, Cantu agreed to settle all cross-claims against Wasp and Cantu assigned its claims against Wasp to USIC. It is unclear whether the settlement of the cross-claims or the assignment occurred first.
Also on September 22, 2017, FIE filed its traditional motion for summary judgment in the cause before this Court, arguing, for reasons explored infra, that “it owes Wasp and Cantu neither defense nor indemnity under the policy of insurance it issued to Wasp, for either the principal claim of Martinez, the cross-claim of Cantu against Wasp, or the intervention of Service Lloyd4”.
Following continued communications between USIC, FIE, Wasp, and Cantu on October 30, 2017, USIC proposed a “counter proposed agreement.” The proposed agreement still required that FIE pay $1 million and USIC pay $1 million to settle the claims, but it removed the following provision included in the prior agreement:
All claims, cross claims, third party demands, counterclaims and/or interventions will be dismissed with prejudice, each party to bear their own costs. Plaintiffs, Wasp Construction, LLC, Alonzo Cantu Construction Company, Inc. forever release one another, their employees, agents, officers, directors, members, partners and shareholders of and from any liability that was asserted or could have been asserted in the underlying suit.
Then, on November 2, 2017, counsel for USIC sent out the following email to counsel for FIE, Wasp, Cantu, and Martinez:
Like [FIE], USIC is prepared to fund its $1M toward settlement of the claims of Plaintiffs and the workers comp carrier.
Unlike [FIE], USIC’s agreement to fund the settlement was not contingent upon entry of the rule 11 agreements proposed by [FIE]. [FIE] has unilaterally imposed this condition for funding. In addition, [FIE]’s proposal to tie funding of the tort suit to the declaratory judgment action is not acceptable to USIC. The terms proposed by [FIE] in the “all party” agreement are agreeable to USIC, subject to the minor edits shown in the attached (Workshare compare copy also attached for convenience to show edits). USIC has signed this agreement. The terms proposed by [FIE] as to the “insurer only” agreement are not acceptable to USIC, but USIC believes that the insurers’ dispute should not hold up funding of the underlying settlement and allowing that matter to proceed to resolution, except for resolution of issues presented by the contractual claims between Wasp and Cantu and its cross-claim that raises that issue.
*4 The record does not include any correspondence that followed.
On November 9, 2017, FIE filed an amended traditional motion for summary judgment to “compel specific performance of [a] settlement agreement, to dismiss various settled claims and parties, to specify the issues to be tried and relief to be awarded and for fees and costs in bringing this motion.”
On January 31, 2018, USIC amended its original petition to assert claims as assignee and abrogee of Cantu against Wasp for breach of contract in cause number C-1928-17-D. “[S]tanding in the shoes of Cantu, USIC seek[s] to have the Court reform the Subcontract Agreement to reflect the true agreement between WASP and Cantu,” asserted USIC. On February 1, 2018, USIC filed its “Combined Traditional Motion for Summary Judgment and Response to [FIE’s] Traditional Motion for Summary Judgment.” USIC principally argued Cantu is an additional insured under the FIE policy with respect to the underlying suit, and FIE had a duty to defend Cantu.
Meanwhile, on March 5, 2018, in cause number C-7318-14-H, after Martinez received his settlement and dismissed his claims against Wasp and Cantu, Wasp filed a motion to dismiss claims asserted against it by Cantu. A hearing was held on Wasp’s motion on March 29. Counsel for USIC was present and presented with the court with no objection as to why Wasp’s request for dismissal of claims should not be granted. The trial court thereby dismissed Cantu’s claims against Wasp with prejudice.
On July 31, 2018, Wasp moved for summary judgment in C-1928-17-D, arguing USIC’s claims, brought as an assignee on behalf of Cantu, are barred by res judicata, having already been dismissed with prejudice in the preceding cause number. In response, USIC filed a cross-motion for summary judgment against Wasp, arguing that the trial court in cause number C-7318-14-H “dismissed claims that no longer existed before her” because Cantu had previously assigned its claims against Wasp to USIC.
Following multiple hearings on the cross-motions for summary judgment, the trial court granted summary judgment in favor of FIE on August 25, 2018, and in favor of Wasp on February 25, 2019. This appeal followed.
Asserting the trial court erred when it granted FIE’s traditional motion for summary judgment and denied its motion for summary judgment, USIC argues the subcontract signed by Cantu and Wasp was a valid and enforceable contract in effect prior to the reported loss, requiring that FIE defend and indemnify Cantu as an additional insured under Wasp’s policy with FIE. Specifically, USIC contends the subcontract was in effect on the date of the accident because (1) an oral agreement was in place, (2) reformation applies, and (3) the written agreement merely formalized what had already been intended by both parties.
On appeal, we review de novo a trial court’s summary judgment ruling. See Lujan v. Navistar, Inc., 555 S.W.3d 79, 84 (Tex. 2018); Mann Frankfort Stein & Lipp Advisors, Inc. v. Fielding, 289 S.W.3d 844, 848 (Tex. 2009).
*5 When, as here, the parties file competing motions for summary judgment, each party bears the burden of establishing that it is entitled to judgment as a matter of law. Fort Worth Transp. Auth. v. Rodriguez, 547 S.W.3d 830, 837 (Tex. 2018) (citing City of Garland v. Dall. Morning News, 22 S.W.3d 351, 356 (Tex. 2000)). We review both parties’ summary judgment evidence and determine all questions presented and render the judgment that the trial court should have rendered. Id. “[A] defendant who conclusively negates at least one essential element of a cause of action or conclusively establishes all the elements of an affirmative defense is entitled to summary judgment.” KCM Fin. LLC v. Bradshaw, 457 S.W.3d 70, 79 (Tex. 2015).
We construe insurance policies using ordinary rules of contract interpretation. Tanner v. Nationwide Mut. Fire Ins. Co., 289 S.W.3d 828, 831 (Tex. 2009). “Accordingly, we give policy language its plain, ordinary meaning unless something else in the policy shows the parties intended a different, technical meaning.” Id.; see Nassar v. Liberty Mut. Fire Ins. Co., 508 S.W.3d 254, 258 (Tex. 2017) (“Unless the policy dictates otherwise, [courts] give words and phrases their ordinary and generally accepted meaning, reading them in context and in light of the rules of grammar and common usage.” (quoting RSUI Indem. Co. v. The Lynd Co., 466 S.W.3d 113, 118 (Tex. 2015))). Courts must “examine the entire agreement and seek to harmonize and give effect to all provisions so that none will be meaningless.” Nassar, 508 S.W.3d at 258.
If the parties offer differing constructions of the policy but only one is reasonable, then the policy is unambiguous, and we will adopt the reasonable interpretation. Id. (citing Grain Dealers Mut. Ins. Co. v. McKee, 943 S.W.2d 455, 459 (Tex. 1997)); see Liberty Surplus Ins. Corp. v. Exxon Mobil Corp., 483 S.W.3d 96, 100–01 (Tex. App.—Houston [14th Dist.] 2015, pet. denied). Alternatively, if we determine that both interpretations are reasonable, then the policy is ambiguous. Nassar, 508 S.W.3d at 258. The parties’ mere disagreement about the contract’s meaning does not create an ambiguity. See In re Deepwater Horizon, 470 S.W.3d 452, 464 (Tex. 2015). Whether a contract is ambiguous is a question of law. Id.
Here, on August 26, 2014, Wasp and Cantu executed a purchase agreement which did not include any insurance or indemnification language. Martinez was injured on August 30, 2014, and he filed suit on September 9, 2014. On October 9, 2014, Wasp and Cantu signed a subcontract requiring that Wasp add Cantu as an additional insured on its FIE policy. The contract contains language indicating it was “made” on September 12, 2014.
The parties agree that Cantu was ultimately never named in the FIE policy or expressly included as an additional insured in an endorsement or certificate of insurance, and no written agreement to include Cantu as an additional insured existed prior to the accident giving rise to the claim. See In re Deepwater Horizon, 470 S.W.3d at 464; see generally Transp. Intern. Pool, Inc. v. Cont’l Ins. Co., 166 S.W.3d 781, 786 (Tex. App.—Fort Worth 2005, no pet.) (explaining “[a]n additional insured is a party protected under a policy without being named in the policy”). USIC, however, argues that (1) Wasp and Cantu had an oral agreement entered prior to Martinez’s accident, which was eventually memorialized in written form; (2) the FIE policy only required written contract, which Wasp and Cantu have; (3) thus, Cantu is an additional insured, and FIE must act accordingly.
*6 FIE counters that its insurance policy, while providing for additional insured coverage, limits said coverage to those agreed upon in writing prior to a reported incident—i.e., “FIE policy requires that at the time of the loss that Wasp and Cantu ‘have agreed [note past tense] in writing’ to name Cantu.” FIE contends it is, therefore, irrelevant whether there was an oral agreement in place prior to the accident, as a post-loss written agreement would effectively nullify the import of the policy’s requirement that any liability coverage be in writing. We agree with FIE.
The FIE “additional insured” provision, in relevant part, provides as follows:
Any person or organization for whom you are performing operations is also an insured, if you and such person or organization have agreed in writing in a contract or agreement that such person or organization be included as an additional insured on your policy. Such person or organization is an additional insured only with respect to liability arising out of your ongoing operations performed for that insured. A person’s or organization’s status as an insured under this paragraph ends when your operations for that insured are completed or the contractor’s agreement is terminated.
(Emphasis added). The additional insured provision in this case unambiguously limits FIE’s obligations to only Wasp and those entities with whom Wasp directly contracts in writing for additional coverage.5 See JP Energy Mktg., LLC v. Commerce & Indus. Ins. Co., 412 P.3d 121, 125 (Okla. Civ. App. Div. 2017) (finding similar language unambiguous); Liberty Ins. Corp. v. Ferguson Steel Co., Inc., 812 N.E.2d 228, 229 (Ind. Ct. App. 2004) (same); see also Samsung Fire & Marine Ins. Co. Ltd. v. RLI Ins. Co., No. 655169/2016, 2018 WL 310322, at *5 (N.Y. Sup. Ct. Jan. 3, 2018) (same); Essex Ins. Co. v. Do It All Inv. Group, Inc., No. 1:11-CV-03120-JOF, 2012 WL 13009098, at *4–5 (N.D. Ga. Sept. 21, 2012) (same). FIE’s interpretation, asserting that the policy implicitly requires a written agreement executed before an event for coverage occurs, is one which has also been embraced by several sister state courts. See Cusumano v. Extell Rock, LLC, 86 A.D.3d 448, 628–29 (N.Y. A.D. 1 Dept. 2011) (holding “Hard Rock was not entitled to additional insured status” where insurance policy provided coverage to additional insureds when “you have agreed, in writing, in a contract or agreement that another person or organization be added as an additional insured,” and the construction agreement requiring additional insured coverage “was not signed at the time of the accident”); Cincinnati Ins. Co. v. Gateway Const. Co., Inc., 865 N.E.2d 395, 399 (Ill. 2007) (holding where there was “no written agreement at the time of the accident, no other documentation confirming additional insured coverage at the time of the accident,” and any written agreement stipulating to an additional insured coverage was not executed until after the accident, there was no coverage because the policy required that “All corporations, partnership[s] and or/[sic] affiliated individuals promised to be added as additional insured[s] under a written contract with the Named Insured.”); cf. LMIII Realty, LLC v. Gemini Ins. Co., 90 A.D.3d 1520, 1521 (N.Y.A.D. 4 Dept. 2011) (finding a written but unsigned purchase order, which included an additional insured endorsement, but was not signed until after a claim arose, was sufficient to obligate an insurer to add a third party as an additional insured to the policy); see also Essex Ins. Co., 2012 WL 13009098, at *4–5 (interpreting a policy stating, “as an additional insured, any person or organization to whom you are obligated by valid written contract to provide such coverage but only as respects negligent acts or omissions,” as requiring a “valid[,] written” contract before coverage of an event despite evidence that “the parties may have expressed their acceptance of certain material terms of the subcontractor agreement by their actions”). In the aforementioned cases, as here, the policies did not plainly dictate that written agreements for additional insureds be executed prior to the event requiring coverage. However, the courts nonetheless held the policies required the insured and prospective additional insured to have entered into a written contract prior to an incident in order for additional insured status to attach.
*7 In one particular case cited by FIE, an Indiana appellate court observed that though evidence established there was an oral agreement between an insured and potential additional insured, which was later reduced to writing, the court interpreted the insured’s policy provision6 as requiring “that the written agreement between the contracting parties ... exist prior to commencement of work.” Liberty Ins. Corp. v. Ferguson Steel Co., Inc., 812 N.E.2d 228, 230–31 (Ind. Ct. App. 2004). The court’s rationale was clear—a policy’s requirement of a written contract would be rendered meaningless if we determined that the writing could occur post-reportable loss or that an oral promise occurring prior to the loss could suffice to bind an insurer. See Cincinnati Ins. Co., 865 N.E.2d at 399; Liberty Ins. Corp., 812 N.E.2d at 230–31 (“Liberty cannot insure a party without knowledge of the name of the party, the period of coverage, or of its obligation to do so.”); see also Cerestar USA, Inc. v. Safway Steel Products, Inc., No. 3:02-CV-123 RM, 2005 WL 8170921, at *8 (N.D. Ind. Jan. 3, 2005) (providing that an insurer “has a right to protect itself against responsibility for informal verbal agreements between contractors by requiring that agreements be in writing, and a holding to the contrary would allow for the creation of coverage by reducing oral agreements to writing after loss has occurred, in effect making coverage retroactive despite the terms of the policy”) (internal quotations omitted); see generally In re Deepwater Horizon, 470 S.W.3d at 461 (analyzing an excess-insurance policy provision and determining that an “insurer’s obligation depended on what it contracted to do, not what the insured contracted with another person to do”); ATOFINA Petrochemicals, Inc. v. Cont’l Cas. Co., 185 S.W.3d 440, 443–44 (Tex. 2005) (holding an entity, Fina, was an additional insured at the time of the accident because there was nothing in the liability policy indicating that issuance of a certificate was a condition precedent to Fina’s becoming an additional insured, the certificate was requested prior to the accident but issued after, and “[n]othing in the record indicates that Fina and A & B attempted to manufacture coverage after the accident”).
USIC urges us to consider extrinsic evidence, such as the deposition testimony of Wasp and Cantu employees, when interpreting the policy. Because the policy language is unambiguous, such consideration would be inappropriate.7 See Nassar, 508 S.W.3d at 258. Even if extrinsic evidence were necessary in order to determine the intent of the parties to the insurance contract, the deposition testimony refers only to what Cantu and Wasp intended regarding their respective obligations under the Cantu–Wasp contract. See Barrow-Shaver Res. Co. v. Carrizo Oil & Gas, Inc., 590 S.W.3d 471, 479 (Tex. 2019); In re Deepwater Horizon, 470 S.W.3d at 461. The deposition testimony has no relevance as to what Wasp and FIE intended for their respective obligations to be under the FIE insurance contract. See Westfield Ins. Co. v. FCL Builders, Inc., 948 N.E.2d 115, 120 (Ill. App. 1 Dist., 2011)) (finding the consideration of deposition evidence and terms of a separate contract involving the insured business and a potential additional insured inappropriate when an appellate court is reviewing what an insurer and insured intended under the insurance policy contract); U.S. Fid. & Guar. Co. v. Coastal Ref. & Mktg., Inc., 369 S.W.3d 559, 568 (Tex. App.—Houston [14th Dist.] 2012, no pet.) (observing, in the context of excess insurance coverage, that the appellate court’s analysis “does not depend on Coastal’s intent regarding the effect of its agreement with Weaver” in which Weaver agreed to provide primary coverage to Coastal, because “[n]one of the insurers were parties to the agreement between Weaver and Coastal”); see also Samsung Fire, 2018 WL 310322, at *5 (providing that the question of “coverage (including a given policy’s priority vis-à-vis other policies) is controlled by the insurance policy terms, not by the terms of the underlying trade contract”).
Thus, this Court finds that the language of the additional insured provision of the FIE policy can only engender one reasonable meaning. That is, in order for Cantu to become an additional insured, Wasp and Cantu must have agreed via a written contract or agreement—and the written form must have occurred prior to the reported loss—which it did not. We conclude that FIE has conclusively established through its summary judgment motion and attached evidence that it was entitled to judgment as a matter of law. Accordingly, we overrule USIC’s first issue on appeal and affirm the trial court’s granting of FIE’s motion for summary judgment.
*8 USIC, as the assignee and subrogee of Cantu, argues Wasp breached the subcontract with Cantu in its failure to defend or indemnify Cantu for claims asserted against Cantu in the underlying suit with Martinez. Wasp counters that USIC’s claim against it is barred by res judicata.
Res judicata is an affirmative defense. TEX. R. CIV. P. 94. A defendant moving for summary judgment on an affirmative defense such as res judicata must conclusively prove the elements of that defense. See Travelers Ins. Co. v. Joachim, 315 S.W.3d 860, 862 (Tex. 2010). Specifically, it requires proof of the following elements: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on the same claims as were raised or could have been raised in the first action. Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 653 (Tex. 1996) (providing that the doctrine’s purposes are to prevent a defendant from being “twice vexed for the same acts, and to achieve judicial economy by precluding those who have had a fair trial from relitigating claims”).
There “at least three ways” in which to show privity between two parties: “(1) they can control an action even if they are not parties to it; (2) their interests can be represented by a party to the action; or (3) they can be successors in interest, deriving their claims through a party to the prior action.” Id.; see Getty Oil Co. v. Insurance Co. of N. Am., 845 S.W.2d 794, 800 (Tex. 1992) (“There is no general definition of privity that can be automatically applied in all res judicata cases; the circumstances of each case must be examined.”); see also Friedman v. Rozzlle, No. 13-12-00779-CV, 2013 WL 6175318, at *6 (Tex. App.—Corpus Christi–Edinburg Nov. 21, 2013, pet. denied) (mem. op.). Essentially, privity exists “if the parties share an identity of interests in the basic legal right that is the subject of litigation,” and “[t]o determine whether a prior and later lawsuit involve the same basic subject matter, we focus on the factual basis of the complaint.” Amstadt, 919 S.W.2d at 653 (citing Barr v. Resolution Tr. Corp. ex rel. Sunbelt Fed. Sav., 837 S.W.2d 627, 630 (Tex. 1992); see Samuel v. Fed. Home Loan Mortg. Corp., 434 S.W.3d 230, 234 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (“The main concern is whether the cases share the same nucleus of operative facts.”).
Under the foregoing standards, we consider whether Wasp has conclusively established that res judicata bars USIC’s suit.
On March 29, 2018, the trial court in the underlying suit granted Wasp’s motion to dismiss Cantu’s claims against it with prejudice. With respect to the first element, a dismissal with prejudice constitutes a final determination on the merits for res judicata purposes. Harris Cty. v. Sykes, 136 S.W.3d 635, 640 (Tex. 2004); Better Bus. Bureau of Metro. Hous., Inc. v. John Moore Services, Inc., 500 S.W.3d 26, 40–41 (Tex. App.—Houston [1st Dist.] 2016, pet. denied). Moreover, to the third element, the subject of both the underlying case and the present case is FIE’s liability policy with Wasp and, more specifically, whether Wasp owed a duty under that policy to defend and indemnify Cantu. The only substantive difference between the two cases is that USIC, rather than Cantu, is asserting Cantu’s rights in the present case. See Samuel, 434 S.W.3d at 235–36; Truck Ins. Exch. v. Mid-Continent Cas. Co., 320 S.W.3d 613, 618–19 (Tex. App.—Austin 2010, no pet.). Thus, our discussion focuses on the second element of whether privity exists. See Amstadt, 919 S.W.2d at 630.
*9 USIC urges this Court to employ the analysis rendered by our sister court in Equitable Recovery, L.P. v. Heath Ins. Brokers of Tex., L.P. and find that the “dismissal order has no effect on USIC’s ... right to bring its claims against Wasp” because there is no privity between the parties. 235 S.W.3d 376, 387 (Tex. App.—Dallas 2007, pet. dism’d) (“A party who does not own a claim is unable to release it.”). We find this case to be distinguishable. In Equitable, the appeal turned on the “effect of a settlement of one of two sets of fraud-related claims involving two separate liability policies issued by the same insurer, [Caliber], to two different insureds,” 22 Texas Services, L.P. and 22 Keystone Services, L.P. (22 Texas) and Senior Living Properties, L.L.C. (SLP). Id. at 379. Caliber sued 22 Texas and SLP alleging fraudulent inducement. Id. 22 Texas and SLP “blam[ed]” their wholesale insurance brokers, Heath Insurance Brokers of Texas, L.P., Heath Insurance Brokers, Inc., Heath Holdings USA, Inc., and HIB GP, Inc. (Heath) and Clair Odell Insurance Agency, L.L.C. (Odell), respectively. Id. at 380.
While SLP’s suit was pending, it filed for bankruptcy, and Heath and Odell filed proofs of claim as creditors. Id. at 381. To resolve its pending state-court coverage disputes, SLP litigated them in a bankruptcy adversary proceeding; SLP sued Caliber (and others)8 for contract breach and declaratory relief, and Caliber counterclaimed. Id. Caliber and SLP ultimately settled all their policy-related disputes. Id. The Caliber–SLP settlement “narrowly specified the claims it was assigning to be related to the SLP–Policy only, a defined term, never mentioning the [22 Texas claims].” Id. At that time, the 22 Texas claims were owned by 22 Texas, not Caliber, because Caliber had earlier settled with 22 Texas and assigned its claims against Heath to 22 Texas. Id. at 381–82.
22 Texas eventually assigned the claims to Equitable, which then brought a suit as assignee to recover what Caliber paid 22 Texas in the settlement. Id. In the case before our sister court, Heath sought summary judgment on, in part, the affirmative defense of res judicata on Equitable claims, which the trial court granted. Id. at 379. The appellate court affirmed in part and reversed on Heath’s affirmative defense. Id.
Heath argued on appeal that the bankruptcy court’s dismissal of the Caliber-SLP claims “also extinguished Equitable [22 Texas claims] as a matter of law.” Id. at 380. The appellate court disagreed, finding that “the [22 Texas claims] were not owned by any party to any transaction that Heath argues extinguished the [22 Texas claims] when those transactions were executed or occurred.” Id. at 380. In fact, the party owning the claims were not involved in any capacity. Id. at 380–82.
These are materially different facts than those before this Court today. USIC’s involvement throughout the underlying litigation is of import here. See id. USIC—though not named in the underlying lawsuit—acknowledges that it (1) was involved in the settlement negotiations and (2) at minimum,9 was present when the trial court granted Wasp’s motion to dismiss claims brought by Cantu against it. A relevant portion of the reporter’s record from the underlying suit reads as follows:
THE COURT: C-7318-14-H; Hector Guadalupe vs. WASP, LLC. Let’s go.
MR. QUEZADA: Jesse Quezada here on behalf of the defendant, WASP Construction, Your Honor. I filed a Motion to Dismiss the claims against my client by Cantu Construction. There’s a Rule 11 that was entered into by Counsel for—I’m going to tender Exhibit Number 1. It’s a Rule 11 agreement as between the parties, it settled all the claims. Apparently, there’s litigation going on in Judge Rose Reyna’s court between the insurance company that funded the settlement in this case and apparently they’re taking the position that they’d rather wait on the dismissal of this case until other issues are resolved in Judge Rose Reyna’s court. Our position is we want the case dismissed.
*10 THE COURT: Okay. This had to do with which defendant?
MR. QUEZADA: Defendant Cantu Construction.
THE COURT: No, I understand, but who was objecting.
MRS. ELIZONDO: Cantu Construction. Liliana Elizondo on behalf of Alonzo Cantu Construction.
MRS. GREEN: And Mary Green, Your Honor on behalf of United Specialty, the insurer for Cantu.
MRS. ELIZONDO: Cantu Construction has assigned its claims to its carrier. The settlement was entered into. That Rule 11 was entered into at the same time that an agreement was made between the carriers for WASP and Cantu to also settle their claims or resolve them in a specific way. And that’s why Mrs. Green is here, so she can represent things to the Court about that, but since that is ongoing in the other court, we feel that any dismissal of these claims—
THE COURT: My case is done. I don’t understand why I should keep it on my books.
MRS. GREEN: Your Honor—
THE COURT: My case is settled.
MRS. GREEN: Yes, Your Honor.
THE COURT: Do you have any case law, anything that says I should keep it on the books?
MRS. GREEN: No, Your Honor.
THE COURT: Okay. We’re done. It’s dismissed.
THE COURT: The Court is also signing the Order Granting Defendant/Cross Defendant WASP Construction, LLC Motion to Dismiss with prejudice.
MR. QUEZADA: Thank you, Your Honor.
THE COURT: And I’ll ask you again, do you have anything to show me why I shouldn’t do that?
MRS. GREEN: No, Your Honor.
THE COURT: Okay. It’s signed. Thank you.
Several months prior, on the same day FIE and USIC confirmed agreement to payout a settlement in the underlying suit on behalf of Wasp and Cantu: (1) Cantu assigned its claims against Wasp to USIC, and (2) Cantu’s counsel executed a letter signed by counsel for Cantu, Wasp, and the plaintiffs, confirming the agreement reached—which included the settlement of its claims against Wasp:
[Plaintiffs] have agreed to settle all claims against [Cantu] [as] well as all claims against [Wasp], in the above referenced matter in exchange for two million dollars ($2,000,000.00). Further, this letter shall serve as confirmation that [Cantu] has agreed to settle all cross-claims against [Wasp] in the above reference matter.
The language used in Cantu’s email to Wasp would indicate that it had the authority to settle its claims, and USIC has not elucidated which occurred first—the assignment or Wasp’s agreement to settle claims—in either its brief or when questioned during oral argument. Although there was brief mention of the assignment at the dismissal hearing, the record does not indicate whether Cantu amended its pleadings in the underlying suit to reflect the assignment, and the order granting Wasp’s motion to dismiss with prejudice appears to have taken into consideration the pleadings on file in the court.
In any matter, exhibits before the trial court at bar demonstrate that USIC had “control [of the] action even if they [were] not parties to it,” had “interests ... represented by a party to the action,” and now “deriv[e] their claims through a party to the prior action.” Amstadt, 919 S.W.2d at 653. This is what is needed to prove privity, and USIC cannot now, where it previously exerted its presence, benefit from an unnamed party status in the underlying suit. See id.; see also Porterfield v. Cenlar FSB, No. 05-14-00663-CV, 2016 WL 1019359, at *6 (Tex. App.—Dallas Mar. 15, 2016, no pet.) (mem. op.); cf. Benson v. Wanda Petroleum Co., 468 S.W.2d 361, 364 (Tex. 1971) (holding no res judicata where “the plaintiff in the later suit was neither a party to the former action nor in privity with any party in the sense that his rights were derived from one who was a party; and the cause of action always had been that of the present plaintiff who had no voice in the conduct of the prior suit, with no right to examine witnesses or to take other action to protect his interests”); Equitable Recovery, 235 S.W.3d at 384–85; see generally C.I.R. v. Sunnen, 333 U.S. 591, 597 (1948) (“[Res judicata] rests upon considerations of economy of judicial time and public policy favoring the establishment of certainty in legal relations.”).
*11 For the foregoing reasons, we conclude that Wasp has conclusively established through its summary judgment motion and attached evidence that it was entitled to judgment as a matter of law on the basis of res judicata. Accordingly, we overrule USIC’s second issue and affirm the judgment of the trial court granting Wasp’s motion for summary judgment.
We affirm the trial court’s judgments.
Delivered and filed the 29th day of October, 2020.
Neither party challenges the meaning of the indemnification and insurance provision in the Wasp-Cantu contact, which states in applicable part:
To the fullest extent permitted by law, subcontractor shall fully protect, indemnify, and save and hold harmless the owner of premises and contractor from and against any and all claims, demands, damages, liens, liabilities, defects in subcontractor’s work, damage to the work of the subcontractor, damage to other property, personal injury to subcontractor’s employees or third parties, and/or causes of action of any nature whatsoever, including attorney[’]s fees, losses and expenses, arising in any manner, directly or indirectly, out of or in connection with the work or operations of subcontractor, anyone directly or indirectly employed or retained by subcontractor or the use of any products material or equipment furnished by subcontractor...
Prior to starting Work, the Subcontractor shall obtain, maintain[,] and pay for Workmen’s Compensation insurance for all of Subcontractor’s employees. Subcontractor shall also obtain, maintain[,] and pay for comprehensive general liability insurance and comprehensive automobile liability insurance protecting the Subcontractor and Contractor against claims for bodily injury or death, damage to property and products completed operations liability in connection with the Work or occurring upon, or about the Premises, with limits at least equal to or greater than those specified below:
Limits of Liability:
$2,000,000.00 General Aggregate
$2,000,000.00 Products-Comp/Ops Aggregate
$1,000,000.00 Personal and Advertising injury
$1,000,000.00 each occurrence or accident
Subcontractor also agrees that its comprehensive general liability insurance policies shall name and covers Contractor as an additional insured in connection with the Premises and Subcontractor’s Work for both ongoing and completed operations. Contractor’s additional insured status is not intended to be in any way tied to or limited by the Subcontractors obligations described under [the indemnification paragraph] of this Subcontractor Agreement. The comprehensive general liability insurance obtained by Subcontractor will be specifically endorsed to provide that Contractor’s coverage thereunder as an additional insured is primary to and non-contributory with any and all other insurance or self-insurance maintained by Contractor, irregardless of the “other insurance” provisions or related terms of such insurance or self-insurance.
Cantu had a primary and an excess policy with USIC, plaintiff in this case, totaling $3,000,000 in coverage. Wasp had a $1,000,000 liability policy with FIE.
USIC wrote, in part:
It is our intention, on behalf of USIC’s primary policy, to accept and tender $1 million to plaintiffs by Friday’s noon deadline.... Given this position, it is our client’s intent to make known that USIC is willing to dismiss with prejudice to refiling the declaratory judgment action in the event that [FIE] is willing to pay its full $1 million limit toward resolution of the tort case on behalf of [Cantu], and the breach of contract action and cross[-]claim filed by [Cantu] against [Wasp] will be dismissed with prejudice to refiling as well.
The workers compensation carrier, Service Lloyds Insurance Company intervened in the underlying injury case to recoup its payments.
As the parties note in their respective briefs, this issue of whether a pre-loss oral agreement can bind an insurer requiring a written agreement finds little to no guidance in Texas jurisprudence.
The policy provision was quoted as follows:
[A]ny person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy.
Liberty Ins. Corp. v. Ferguson Steel Co., Inc., 812 N.E.2d 228, 229 (Ind. Ct. App. 2004).
Having determined that the policy is unambiguous and requires that a written agreement be in place prior to a reported event, we need not consider a possible oral agreement in place prior to the event and whether Cantu is entitled to the reformation of said agreement.
22 Texas were not parties to the adversary or bankruptcy proceedings. Id.
USIC argues on appeal that its counsel did not “acquiesce[ ] to the entry of the dismissal order.”
Court of Appeals of Texas, Corpus Christi-Edinburg.
LA JOYA INDEPENDENT SCHOOL DISTRICT, Appellant,
Miguel VASQUEZ, Individually and Mayra Vasquez, Appellees.
Delivered and filed August 27, 2020
Attorneys & Firms
Edward L. Ciccone, Zachary Zapata, Weslaco, for Appellees.
Guillermo Tijerina Jr., Nicholas Denzer, Edinburg, for Appellant.
Before Chief Justice Contreras and Justices Benavides and Longoria
Memorandum Opinion by Chief Justice Contreras
*1 Appellant La Joya Independent School District (La Joya ISD) appeals a jury verdict in favor of appellees Miguel Vazquez, individually and Mayra Vazquez.1 By one issue, La Joya ISD argues the trial court erred when it allowed appellees to amend their pleading less than seven days before trial. We affirm.
On June 30, 2016, “Miguel Vasquez [sic] as next friend of Mayra Vasquez [sic],” brought suit against La Joya ISD for injuries Mayra suffered when the school bus she was in collided with another vehicle. The accident occurred on February 12, 2016. Miguel, Mayra’s father, asserted a claim for negligence against the school bus driver and for respondeat superior against La Joya ISD. Miguel’s petition sought recovery of, among other damages, “past, present, and future medical bills.” On December 9, 2016, Mayra turned eighteen years old.
After some resets, a trial on the merits was scheduled for February 11, 2019. On February 8, 2019, Miguel and Mayra filed a list of exhibits, including medical bills incurred when Mayra was a minor. La Joya ISD objected to the bills arguing that those expenses could only be recovered by Mayra’s parents. Miguel then filed a motion for leave to amend the petition to state that he was also bringing suit individually and to correct a spelling error in their last name; La Joya ISD opposed. The trial court held a hearing on the motion for leave and granted the motion.
The jury awarded Miguel $40,000 for Mayra’s medical expenses as a minor and $30,000 to Mayra for past and future damages. This appeal followed.
By its sole issue, La Joya ISD argues the trial court erred when it allowed the pleading amendment.
A. Standard of Review & Applicable Law
We review a trial court’s decision to allow amendments of pleadings under an abuse of discretion standard. Greenhalgh v. Serv. Lloyds Ins., 787 S.W.2d 938, 939 (Tex. 1990); Gunn v. Fuqua, 397 S.W.3d 358, 377 (Tex. App.—Dallas 2013, pet. denied); Garner v. Corpus Christi Nat’l Bank, 944 S.W.2d 469, 479 (Tex. App.—Corpus Christi–Edinburg 1997, pet denied). Generally, parties may freely amend their pleadings at least seven days before trial. TEX. R. CIV. P. 63; Sosa v. Cent. Power & Light, 909 S.W.2d 893, 895 (Tex. 1995) (per curiam). After the time for filing amended pleadings has passed, the trial court abuses its discretion in denying leave to file an amended pleading unless (1) the party opposing the amendment presents evidence of surprise or prejudice, or (2) the amendment asserts a new cause of action or defense, and thus is prejudicial on its face, and the opposing party objects to the amendment. Tony’s Barbeque & Steakhouse, Inc. v. Three Point Invs., Ltd., 527 S.W.3d 686, 692–93 (Tex. App.—Houston [1st Dist.] 2017, no pet.); see Greenhalgh, 787 S.W.2d at 939. “The burden of showing prejudice or surprise rests on the party resisting the amendment.” Greenhalgh, 787 S.W.2d at 939.
*2 La Joya argues that the error in the pleading was not a misnomer because Miguel was not a “party” to the lawsuit; rather, the party was Mayra. See In re Bridgestone Ams. Tire Operations, LLC, 459 S.W.3d 565, 573 (Tex. 2015) (orig. proceeding) (“In a suit by a ‘next friend,’ the real party plaintiff is the child and not the next friend.”); see also Gulf, C. & S.F. Ry. Co. v. Styron, 1 S.W. 161, 163 (Tex. 1886) (“When it appears with certainty ... that the action [by next friend] is based on the right of the minor; that the relief sought is such as the minor alone would be entitled to on the facts pleaded; and that this is sought for the use and benefit of the minor, then we are of the opinion that the minor is the real plaintiff, whatsoever may be the formula used.”).
There is a distinction between a misnomer regarding a party’s identity in a pleading and misidentification of a party in a pleading. See Enserch Corp. v. Parker, 794 S.W.2d 2, 4 (Tex. 1990). A misnomer occurs when the plaintiff misnames either himself or the correct defendant, but the correct parties are actually involved. In re Greater Hous. Orthopedics Specialists, Inc., 295 S.W.3d 323, 325 (Tex. 2012) (orig. proceeding) (per curiam); Diamond v. Eighth Ave. 92, L.C., 105 S.W.3d 691, 695 (Tex. App.—Fort Worth 2003, no pet.); see Enserch Corp., 794 S.W.2d at 4–5; Maher v. Herrman, 69 S.W.3d 332, 338 (Tex. App.—Fort Worth 2002, pet. denied). Misidentification occurs when two separate legal entities exist and the wrong legal entity is listed in the petition. See Chilkewitz v. Hyson, 22 S.W.3d 825, 828 (Tex. 1999) (op. on reh’g); Enserch Corp., 794 S.W.2d at 4–5. A misnomer tolls the statute of limitations and misidentification, generally, does not. See Enserch Corp., 794 S.W.2d at 4–5; Brinker Tex., L.P. v. Looney, 135 S.W.3d 280, 285 (Tex. App.—Fort Worth 2004, no pet.) (“In misidentification cases, the amended petition may still relate back to the original suit if the proper defendant had ‘notice of the suit and was not misled or disadvantaged by the mistake.’ ” (quoting Chilkewitz, 22 S.W.3d at 830)); Diamond, 105 S.W.3d at 691 (noting that misnomer relates back to the original petition if the correct parties are served “primarily because the party intended to be sued has been served and put on notice that it is the intended defendant”); see also Am. Bank, N.A. as Tr. Of Lisa Marie Buckley Tr. V. Moorehead Oil & Gas, Inc., No. 13-17-00641-CV, 2018 WL 6219635, at *4 (Tex. App.—Corpus Christi–Edinburg, Nov. 29, 2018, no pet.) (mem. op.) (concluding misidentification of the plaintiff barred applications of statute of limitations in appeal from summary judgment).
According to La Joya ISD, the statute of limitations barred Miguel’s claim for Mayra’s medical expenses incurred as a minor because the error was not a misnomer. See TEX. CIV. PRAC. & REM. CODE ANN. § 16.003(a) (providing two-year statute of limitations for personal injury claims); Sax v. Votteler, 648 S.W.2d 661, 663 (Tex. 1983) (“Historically, in Texas, the right to recover for medical costs incurred on behalf of the minor is a cause of action belonging to the parents, unless such costs are a liability as to the minor’s estate.”); see also Alexander v. Turtur & Assoc., Inc., 146 S.W.3d 113, 121 (Tex. 2004) (“Ordinarily, an amended pleading adding a new party does not relate back to the original pleading.”). We disagree.
“The primary purpose of a statute of limitations is to compel the exercise of a right within a reasonable time so that the opposite party has a fair opportunity to defend while witnesses are available and the evidence is fresh in their minds.” Cont’l S. Lines, Inc. v. Hilland, 528 S.W.2d 828, 829 (Tex. 1975). “[I]t would be a misapplication of the statute of limitations to hold that the plaintiff’s action was barred” if the plaintiff could show that the proper defendant “was cognizant of the facts, was not misled, or placed at a disadvantage in obtaining relevant evidence to defend the suit” despite the plaintiff’s initial misidentification or misnomer. See id. at 831; Diamond, 105 S.W.3d at 691.
*3 Here, it is undisputed that La Joya ISD was duly notified of the suit within the applicable limitations period, that the suit was brought by Mayra’s father on her behalf, and that the suit sought recovery of past medical expenses. Thus, the pleading amendment did not raise any new substantive issues, and the usual policy concern supporting enforcement of limitations—i.e., preventing prejudice to the defending party—is simply not present. See Hilland, 528 S.W.2d at 829; cf. In re Greater Houston Orthopedic Specialists, 295 S.W.3d at 326 (“In a case like this, in which the plaintiff misnames itself, the rationale for flexibility in the typical misnomer case ... applies with even greater force.”); Ealey v. Ins. Co. of N. Am., 660 S.W.2d 50, 52–53 (Tex. 1983) (concluding, in workers’ compensation case, that bringing suit in the name of the parent company instead of its subsidiary tolled the statute of limitations because the defendant was not misled or disadvantaged by the error and petition gave fair notice); Brinker Tex., 135 S.W.3d at 286 (“Filing an amended petition after the expiration of the period of limitations, changing the allegations as to the capacity in which a defendant was sued, does not commence a new suit for the purposes of applying a statute of limitations and thus relates back to the commencement of the suit.”); see also Am. Bank, N.A. as Tr. Of Lisa Marie Buckley Tr., 2018 WL 6219635 at *4 (concluding summary judgment on limitations was improper because plaintiff misidentified itself and defendant was “cognizant of the facts” and “not misled, or placed at a disadvantage in obtaining relevant evidence to defend the suit”).
Therefore, because La Joya ISD had notice from the beginning of Miguel’s intent to recover past medical expenses for Mayra, La Joya ISD failed to show any surprise or prejudice, and the amended pleading related back to the original petition for the purpose of limitations.2 See Greenhalgh, 787 S.W.2d at 939; Brinker Tex., 135 S.W.3d at 286. We conclude the trial court did not abuse its discretion when it allowed for the pleading amendment. See Greenhalgh, 787 S.W.2d at 939; Tony’s Barbeque and Steakhouse, 527 S.W.3d at 692; Chen, 227 S.W.3d at 420–21.
We overrule La Joya ISD’s sole issue.
The trial court’s judgment is affirmed.
We will refer to individuals by their first name. The notice of appeal, the judgment, and the briefs on appeal spell the last name of appellees as “Vasquez”; however, the record makes it clear that the correct spelling is “Vazquez.”
At the hearing on Miguel’s motion for leave, La Joya ISD argued that it was prejudiced because it did not know that it would have to defend Miguel’s claim for medical expenses. La Joya ISD does not make this argument on appeal. Nevertheless, as noted, the petition—which was filed before Mayra turned eighteen—stated that Miguel, as next friend of Mayra, sought to recover “past, present, and future medical bills.” Thus, La Joya was aware from the inception of the lawsuit that the medical expenses in dispute were being sought.
Court of Appeals of Texas, Corpus Christi-Edinburg.
IN RE A/C TECHNICAL SERVICES, LLC
Delivered and filed July 9, 2020
Attorneys & Firms
Catherine Tobin, Corpus Christi, Alexander Hilliard, John Duff, Marion Reilly, Rudy Gonzales, Corpus Christi, Jessica Pritchett, Joseph F. Manak, Houston, for Real party in interest Faircloth, Sherry Lynn, Faircloth, Robert.
Darryl J. Silvera, Dallas, Jace Powell, Tamara Rodriguez, Edinburg, Glenn D. Romero, McAllen, for Relator.
Before Chief Justice Contreras and Justices Benavides and Longoria
Memorandum Opinion by Justice Benavides1
*1 Relator A/C Technical Services, LLC filed a petition for writ of mandamus in the above referenced cause on July 7, 2020. Relator contends that the Texas Department of Insurance, Division of Workers’ Compensation, has exclusive jurisdiction to address certain issues currently pending before the trial court. Through this original proceeding, relator seeks to compel the trial court to vacate its April 1, 2020 order denying relator’s plea to the jurisdiction and motion to dismiss.
Mandamus is an “extraordinary” remedy. In re Sw. Bell Tel. Co., L.P., 235 S.W.3d 619, 623 (Tex. 2007) (orig. proceeding); see In re Team Rocket, L.P., 256 S.W.3d 257, 259 (Tex. 2008) (orig. proceeding). In order to obtain mandamus relief, the relator must show that the trial court clearly abused its discretion and that the relator has no adequate remedy by appeal. In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 135–36 (Tex. 2004) (orig. proceeding); see In re McAllen Med. Ctr., Inc., 275 S.W.3d 458, 462 (Tex. 2008) (orig. proceeding). Mandamus may be appropriate to correct a trial court’s denial of a plea to the jurisdiction based on an agency’s exclusive jurisdiction. See, e.g., In re Crawford & Co., 458 S.W.3d 920, 928 (Tex. 2015) (orig. proceeding) (per curiam); In re Entergy Corp., 142 S.W.3d 316, 321 (Tex. 2004) (orig. proceeding); In re Liberty Mut. Fire Ins. Co., 295 S.W.3d 327, 328–29 (Tex. 2009) (orig. proceeding) (per curiam).
The Court, having examined and fully considered the petition for writ of mandamus and the applicable law, is of the opinion that the relator has not met its burden to obtain relief. Accordingly, we DENY the petition for writ of mandamus.
See Tex. R. App. P. 52.8(d) (“When denying relief, the court may hand down an opinion but is not required to do so,” but “[w]hen granting relief, the court must hand down an opinion as in any other case”); id. R. 47.4 (distinguishing opinions and memorandum opinions).
Court of Appeals of Texas, Corpus Christi-Edinburg.
INTERNATIONAL PAPER COMPANY, Appellant,
SIGNATURE INDUSTRIAL SERVICES, LLC and Jeffry M. Ogden, Appellees.
Delivered and filed April 30, 2020
On appeal from the 60th District Court of Jefferson County, Texas.
Before Chief Justice Perkes
Memorandum Opinion by Justice Benavides
*1 By eleven issues, appellant International Paper Company (IP) challenges the jury’s verdict awarding damages to appellees Signature Industrial Services, LLC (Signature) and Jeffry Ogden. IP’s first five issues challenge Signature’s claims and allege: (1-3) Signature failed to present legally sufficient evidence for its breach-of-contract, fraud, and promissory estoppel claims; (4) legally insufficient evidence supports Signature’s consequential damages award; and (5) a new trial should be granted because the jury awarded excessive actual damages to Signature. IP’s next three issues relate to Ogden’s claims and allege: (6) judgment should be rendered for IP on Ogden’s breach-of-contract claim because Ogden was neither a party to nor a third-party beneficiary to the contract between Signature and IP; (7) the evidence is legally or factually insufficient to support Ogden’s fraud claim; and (8) Ogden’s claim for mental anguish damages is not supported by legally sufficient evidence or in the alternative, a new trial should be granted on mental anguish damages because the award was excessive. In its ninth issue, IP asserts that a new trial is warranted in relation to both Signature and Ogden’s claims because the trial court erred in excluding the testimony of IP’s key expert. Issues ten and eleven relate to IP’s counterclaims and allege that: (10) judgment should be rendered in favor of IP and against Signature for IP’s costs incurred defending against Ogden’s claims; and (11) Signature should indemnify IP in the event that any portion of the judgment in favor of Ogden, and against IP, survives. We affirm in part and reverse and render in part.
The claims in this dispute involve a contract between Signature and IP to build a slaker for IP’s Orange, Texas paper mill in March 2014. IP asked Signature to assemble and install a new slaker, a large vessel that recycles certain chemicals used in the papermaking process, during the annual outage shutdown of the mill. IP initially approached Signature and other companies and asked them to bid on the slaker project; however, Signature was the only company who executed a bid due to the state of IP’s bid package. The initial bid package lacked drawings and necessary documents, although seven addendums were later issued by IP. It was debated at trial if the addendums provided enough detail for Signature to make a complete bid. Nonetheless, Signature made a bid in the amount of $775,464.30 for the slaker project. It was also agreed that work that was not contained in the bid package could be paid through field charge orders (FCOs) that were mutually agreed to in writing and approved prior to work commencing.
Signature began work on the slaker project in February 2014 and work was completed around early May 2014. The project was fraught with delays, which Signature attributed to IP. Soon after commencing the project, IP approved and paid FCOs submitted by Signature. During the course of the slaker project, IP representatives told Signature’s representatives that instead of submitting each FCO for approval prior to executing the work, verbal approval would be sufficient and Signature could just submit one large FCO upon completion of the project. The modification to the FCO procedure and what was required for payment is the crux of the lawsuit.
*2 Signature submitted multiple FCOs as the project wrapped up, and IP refused to pay the invoices submitted because the amounts far exceeded what IP had expected. IP claimed that Signature’s FCOs lacked the appropriate backup documentation needed to justify the amounts invoiced. After the project was completed in May 2014, IP and Signature held two meetings between their representatives to try to resolve the unpaid invoices. Neither meeting was successful and in August 2014, Signature filed this suit alleging fraud, breach of contract, and promissory estoppel. Signature claimed it had seventeen unpaid invoices that IP refused to pay: ten relating to the slaker contract and seven related to other non-slaker projects.
Ogden, Signature’s president, intervened in the lawsuit and alleged personal claims of fraud and breach of contract against IP based on the slaker contract. Ogden alleged he suffered actual damages because Signature was penalized for failing to pay its employees’ withheld payroll taxes2 to the Internal Revenue Service (IRS). According to Ogden, Signature used its employee trust funds to operate its business due to IP’s non-payment of invoices. Ogden alleged he became personally liable for those amounts and the IRS penalties on Signature. He also requested damages for mental anguish and damage to his credit reputation.
A. Signature’s Case-in-Chief
1. Claude Wilhelm
Claude Wilhelm, Signature’s senior vice president, was Signature’s first witness at trial. Wilhelm testified that he had worked and developed relationships at the Orange mill before IP bought it and that Signature had worked many projects for IP at the mill, both before and during the slaker project. Wilhelm explained that the other partners in Signature wanted to turn down the slaker project initially because the bid documents were “inadequate.” He identified the different players involved in the slaker project: Steve Clayton, who was Signature’s project manager; Eddie Edwards, IP’s project manager; Ray Langley, IP’s construction manager; Greg Bennett, IP’s subsequent construction manager; Spencer Shawhan, IP’s engineering manager and Edwards’s supervisor; and Blake Spurlock, Signature’s subsequent project manager.
Wilhelm explained that the bid for $775,464.30 was for the “knowns” on the slaker project and that Edwards had stated that changes required from the bid could be handled with FCOs. Wilhelm stated that the bid did not include piping, another source of contention between the parties. Signature was wary of submitting a bid initially because as Wilhelm said, “everything was off,” from labor to material, due to the vagueness of the documents submitted in the bid package. However, IP was on a tight timeline to get the project done during the shutdown and asked Signature to start before the contract was officially signed. There were issues from the outset3 : the slaker was not clean as promised when Signature arrived and the cleaning caused delays, the drawings had engineering defects that had to be fixed, and a green liquor4 caustic liquid spill had occurred during the project and needed to be cleaned up before work could continue.
*3 According to Wilhelm, midway through the project, IP told Signature that the FCOs were coming in “too fast,” so Signature could just “capture it on a big field change order at the end.” Wilhelm stated there were e-mails documenting the change in procedure but Signature did not get the change modified in a contract. Additionally, there were constant changes in personnel. Wilhelm talked about a phone call he received following the green liquor spill stating that Clayton was now not allowed at the plant. When he arrived at the plant to determine what was happening, Signature’s documents regarding job details and records were missing from the trailer it had on IP’s property. Wilhelm confronted Shawhan and Bennett about the missing files, but neither claimed to know anything about the documents. Wilhelm explained that Signature was forced to recreate the missing documents in order to support the outstanding invoices. Wilhelm tried to explain how Signature developed the invoices and if certain invoices appeared to have labor that was duplicated, it was not billed twice.
Signature’s counsel questioned Wilhelm about specific invoices, and he stated that one of the later invoices included a penalty of $350,000, including interest, because there was no cash flow coming into Signature and it had liens and payroll taxes that were becoming delinquent. He stated that the actual labor costs were $783,756, but that did not include other items from the contract such as rental equipment, materials, third-party labor, and company-owned equipment. When everything was included, Wilhelm told the jury that Signature was owed closer to $2.4 million dollars. He stated that Signature continued working because it relied on IP’s representation it could submit one final FCO invoice and it would be paid. Wilhelm admitted Signature struggled to recreate the backup documentation because of its missing documents and the fact that IP’s gate log system was not accurate.5 He explained to the jury that some of the invoices grouped types of workers and billed for the group, instead of by each individual worker, and that is why some invoices showed large amounts of hours. However, Wilhelm did agree that, prior to the change in procedure on submission of FCOs, Signature did not have any issues getting the invoices paid. Wilhelm told the jury that Signature lost work with Valero due to the vendor liens and financial issues that occurred because of the nonpayment on the slaker project. Wilhelm also told the jury about the proposed sale of Signature to Primoris. In May 2014, Primoris made an offer of $42 million to buy Signature. At the end of 2013, however, Signature was “upside down,” meaning it was spending more than it was earning. Signature ultimately turned down Primoris’s offer.
On Ogden’s cross-examination, Wilhelm testified that Ogden is a personal signer and the active individual on the bank agreements Signature had, because he backed everything on a personal level. Wilhelm agreed that the other owners of Signature assigned Ogden their rights to sue for personal damages as it related to this contract with IP. Wilhelm explained that if he received information from IP, he would have told Ogden the same information, including the e-mail chain that acknowledged the changes to the FCO submission procedure.
IP’s cross-examination of Wilhelm centered around the disputed invoices. Wilhelm would not agree with IP that the invoices contained errors, even though in his earlier deposition, he admitted the invoices contained different mark-up percentages than were agreed to in the slaker contract. He told IP that he believed the invoices should have been paid in full even if overbilling was included, suggesting that IP could “short pay”6 what was overbilled. Wilhelm argued that although some of the drawings included piping, Edwards knew Signature’s bid would not include piping and accepted that. Wilhelm stated he was asking the jury to award money based off of the field time sheets that documented the daily work, and he believed the unpaid amount owed according to those time sheets was $1.1 million dollars. He explained that, during the meeting in July 2014 between IP and Signature, Shawhan offered to pay around $200,000 to $300,000 of the $1.1 million owed, but Signature refused to accept that amount. Wilhelm admitted that after Signature filed its lawsuit, he went back through and billed for any unbilled time. Although he earlier testified that the disputed invoices reflected $1.1 million in owed funds, after the lawsuit was filed, Wilhelm revised that figure and estimated that Signature was owed $2.4 million.7 He also said that the tax implications were between $5 million to $6 million and discussed losing the sale of Signature to Primoris for $42 million.
2. Eddie Edwards
*4 Edwards testified that he worked for Ford, Bacon, and Davis (FBD), an engineering firm that has a standing contract with IP in Orange and worked on projects for IP on an “as-needed” basis. Edwards explained that he was considered an IP representative, used IP’s e-mail server, and reported directly to Shawhan, and that FBD was the contracting firm.
His position meant he had total responsibility for getting the slaker project prepared and constructed. Edwards stated when he first got involved in the project, there was no engineering package, and only enough information to generate a basic estimate. Towards the end of 2013, as the project manager, he was not getting the engineering drawings and details from FBD that he needed to put the project together. Edwards advised IP that he was unsure if they should do the slaker project during the shutdown because of the lack of documents he wanted, but his expressed sentiment was considered unacceptable by IP, who wanted to continue with the project. IP wanted the slaker replaced because it was ineffective, in poor condition, and hampering production at the mill.
Edwards took the bid package to multiple contractors, but the others could not do the project. He went back to Signature after the others turned the slaker project down and asked if there was any way it could do the project. Edwards agreed that the plans he presented were preliminary and more for “information only” and did not believe that Signature’s bid of $775,000 included piping. Signature’s bid was for the “knowns” and when drawings changed and were more accurate, then an FCO would be done. Edwards explained that the $775,000 bid was a Time & Materials (T & M) “not to exceed” contract, which meant that the company is paid for the work up to a maximum of $775,000, but any work over the bid amount for “knowns” would not be paid by IP.
Edwards stated he had great faith in Signature as a company, that they did quality work and had excellent craftspeople, and he was satisfied with the work Justin Hall, Signature’s construction coordinator, did on the FCOs. When Edwards walked into the Orange mill on the date of the scheduled shutdown, the slaker was still in operation. The slaker was not shut down for another two days, and then Signature needed to clean it in order to begin the project. Edwards agreed that things at the jobsite were chaotic but felt they were under control. He pushed for FBD to provide “better” drawings, helped draw up the FCOs, assisted in getting them approved by IP’s managers, but conceded that sometimes he had issues getting the FCOs signed. Edwards testified that the FCOs started “building up” because there were multiple issues that needed to be fixed, until Shawhan finally told him to “just get the work done and we’ll worry about it later.” Edwards notified the Signature people of the change to the FCO procedure by e-mail.
During the project, Shawhan terminated Langley due to a supposed “safety issue” and assigned Bennett to replace him. Edwards received an e-mail from Bennett saying the FCOs would “go forward on verbal approval,” explaining that any procedure change should have gone through him, as he was higher on the “chain of command.” When Edwards spoke to Shawhan regarding the change in procedure, Shawhan supported Bennett, and Edwards felt his job authority had been “reduced to zero.” Later in the project, Edwards had pre-planned days he had requested off to visit his child, but Shawhan told him that since the project was behind, if he took the days off, he should not return to the mill.
*5 On cross-examination, Edwards thought that based on the bid package, he would have expected $100,000 to $200,000 worth of changes, but it was a particularly challenging project. Edwards explained that he dealt with the first four FCOs and asked Hall for clarification if it was needed. He also said that when Signature was told to hold the FCOs until the end, Edwards never told Signature that they would not need to “prove” their charges with the appropriate backup documentation; he would have expected the same quality of proof he received in the beginning.
3. Ray Langley
Langley worked for IP and was asked to come on as a construction manager for the shutdown but was later given the slaker project. He stated that he felt IP’s bid package for the slaker project was “middle of the road”: enough to determine the basics, but not enough to put finishing touches on the bid or determine the final dollar amount. He agreed that Signature was being asked to bid the “knowns” with a good deal of “unknowns” to come. Langley and Edwards contacted Signature, asking them to bid on the project and “bail them out” because no one else had bid on the project. Langley thought the project was poorly planned, but Troy Waddell, the production manager over the pulp mill area, which includes the slaker, said he would accept nothing less than being finished on schedule.
Langley told the jury that the team on the slaker project was Edwards, Clayton, and himself. He thought highly of Edwards, stating he was one of the best he had worked with. Langley said Clayton was extremely safety-minded, held multiple weekly safety meetings, and was a perfectionist in his bookkeeping and data. Langley did not feel that Shawhan and Bennett were a “part” of the team; instead he felt they were problematic for the project. He explained that e-mails were a big part of the communication method and, although Edwards copied Shawhan on almost every e-mail so that he would know what was going on, Shawhan rarely responded to e-mails and frequently said he did not know information even when he was copied on the e-mails.
Langley testified that he was fired because he supposedly allowed a load to be lifted over some men who were working, which is a safety violation. He stated that the normal procedure was to shut down the area and move people away so that the load could be lifted safely. He also said that, generally, when a dangerous situation occurred, IP would conduct a “safety stand-down,” where it held a meeting to explain the problem and how to prevent the issue from happening, as well as require a report to be filled out, even if the situation was a “near-miss.” Langley told the jury that no documents regarding this “safety” violation were found, and he believed the incident was “made up.” He stated Shawhan simply told him that “things weren’t working out” and let him go. Langley relayed that there were multiple times during the project where Signature would be asked to perform work that was authorized by Edwards and himself, but Shawhan would refuse to approve the FCOs and pay for the work. Langley disagreed with Shawhan because Langley stated that he had asked Signature to perform the work in question. Once Shawhan terminated him, when he returned to collect his belongings in his office, his computer and field journal were gone.
Langley also stated that Bennett had a bad opinion of Signature, stating that they would bid low and then want to do FCOs on everything; Langley disagreed. In his experience, he felt that Signature only requested FCOs on things that “needed to be done.” He stated that he never heard anyone else at IP express a bad opinion of Signature.
*6 On cross-examination, Langley agreed that although Shawhan complained about the FCOs and said he would not approve them, he would eventually change his mind and sign his approval on the FCOs. He also stated that Shawhan was a good engineer but not a good “people person.” Langley explained that the FCOs that he turned in for payment were properly documented, but he does not know about the FCOs and invoices that were submitted after he was terminated. He testified that he left the project before Edwards and Clayton did.
4. Greg Bennett
Bennett testified that Shawhan asked him to come work on the slaker project. When he arrived in the area, he noticed some unsafe work conditions were present. Bennett said he was not present when the green liquor spill occurred but looked into IP’s “lockout/tagout” procedures the next day, and he determined that IP’s operations had “messed up” the procedure. Bennett agreed that it was IP’s operations’ responsibility to prevent incidents like the green liquor spill from occurring. He stated that when he came onto the project, he started correcting safety issues, but had never been involved in a slaker installation before. Bennett also said he did not talk to Langley, did not know how far along in the job Signature was, and had just heard the project was over the completion deadline.
Bennett asked Shawhan for assistance in the project, and Shawhan sent four additional men to help him. Bennett conceded that he did not know as much as the men who were actually working on the project. Although he stated there were times he felt that there were “too many” Signature workers on site, he was not aware of anyone being sent home because they were unnecessary. Bennett explained that on T & M not to exceed contracts, it was up to the contractors to manage the manpower and not go over the bid amount.
5. Steve Clayton
Clayton testified that he was asked by Signature to go to IP and handle projects at the Orange mill. Clayton stated he was assigned to supervise around thirty projects at IP when he was there. Clayton explained that Edwards, Langley, and himself were a team and he was involved in the decision to bid for the slaker project. Clayton did have initial reservations about the slaker project, but Edwards assured him everything would be taken care of, and Clayton had no doubt they could get the project completed in the appropriate timeframe. Signature bid the “knowns,” but knew there would be costs and changes outside of the initial bid. Clayton said he was getting “big revisions” before the contract was ever signed and he did not have the drawings to fabricate the pipes when the project started.
Clayton arrived to the job on February 21, 2014, to do some work in advance of the shutdown but caught some design defects on the drawings that neither the IP safety people or engineers had noticed. This caused a delay because the drawings had to be redesigned to address the safety issues and IP’s approval took “awhile.” Clayton stated “everyone knew” there was more to the project than the initial bid. He also explained that, when the project was slated to start, Signature had to spend two days cleaning out the slaker because it was not ready to be replaced.
Clayton continued to describe the delays Signature faced on the project. He stated that not a week went by where Signature was not stopped for “some sort of delay.” Clayton and Edwards agreed that a 19% overrun on the bid price was a low number considering all of the issues that occurred. Edwards had told him not to fabricate any pipe until they received isometric drawings from FBD, and having to wait delayed the rest of the project because it delayed the background work. He explained that he had to “rush” work, materials, or equipment, which caused it to be more expensive. He did agree with Bennett that due to the downtime, he sometimes had workers “just standing around,” but IP would not allow him to send them home. Clayton explained to the jury that even though an FCO does not affect the T & M contract, he still tried to keep IP happy and manage Signature’s money well by asking to send workers home if they were not needed at a particular time.
*7 Clayton testified that when Bennett came on to the project, he changed the protocol and told Signature to not stop and wait for updated drawings and he stated that all the FCOs would be on verbal approval. Clayton disagreed that they should proceed without the drawings and opined the job “went out of control” after Bennett made the changes to the FCO procedure. Clayton also explained that Signature had paperwork of every job they received in the office and kept records of employee clock-ins separately because they did not trust the gate system IP used.
Clayton talked about his experience working with Bennett and said it was “terrible.” He had previous safety concerns regarding the green liquor area, had showed Bennett that the lines were not properly locked out, and asked him not to turn them on. Shortly after their conversation, the green liquor line was turned on and almost severely burned Signature workers. Clayton said there was no investigation by IP into how the green liquor spill occurred, but Signature was told to clean up the spill the following day, although they were never given a material data safety sheet which explained how to handle the product. Clayton explained that the green liquor had also ended up in the slaker, so he refused to put his workers back in the slaker, and it caused issues with Bennett and Shawhan. It was later determined that there were seven places on the green liquor line that were not properly locked and tagged; Clayton stated that Bennett did not “have a clue.” Shawhan got a variance to work on the slaker again; Clayton was not allowed back on the job site and banned from the mill.
Clayton stated that he received multiple e-mails regarding the quality of the work, how good progress had been on the slaker project, and how well he had handled the project from Edwards. He never believed that Signature would not get paid for its work. Clayton told the jury that he attended the meeting in July with Wilhelm and Ogden. They were asked to bring books so they could go over and close out the bill. He stated the meeting lasted less than an hour, IP never looked at Signature’s books, and Shawhan stated he had a number in mind, which was around $200,000. Toni Hanson, IP’s senior source buyer, told Signature they would talk through things and get the bills “ironed out,” but it never happened. Clayton also filed a lawsuit against IP.
On cross, Clayton said the contract terms were not met on the job because IP directed them to “do things differently.” Edwards told him that Signature did not need to provide a detailed description of labor and what had been done in order to get paid. Clayton disagreed with Edwards’s previous testimony in which Edwards stated he never told Signature not to provide a detailed description of the labor. Clayton agreed that if the bills and invoices looked incorrect, the parties should sit down and talk about them. He also stated that some of the invoices did not match up, but IP should have called and discussed the mistakes, instead of not saying anything at all. He explained there were multiple billings for piping because the piping kept changing; it was not a double-billing issue but he would have to look at the drawings to understand it.
6. Anitra Collins and Roman Gallo
Collins is the mill manager at the Orange mill, and Gallo is her boss. Collins testified that she relied on IP managers at the mill, especially on projects where she does not have direct knowledge and control. She stated that she did not have direct control of the slaker project. Collins explained that the annual outage at the plant is normally for nine days in the spring. The slaker project was considered an “end-of-life” project and the unit needed to be replaced. She said there were two slakers in Orange and if one went down, it limited their production.
*8 Collins talked about the payment process at IP. She stated they generally would issue a purchase order (PO) to a contractor to perform work for a certain amount, which would describe the work they were allowed to perform. If there were any changes, either in scope or amount, IP had to approve in the form of an FCO before the contractor could complete the work. The contractor was required to document and justify the change and have it approved by all the necessary people before any work was started. She said the burden to get change orders approved is on the contractor, and they were trained when they came to IP not to do any additional work until it was approved. Collins explained that even if Shawhan, Bennett, or Edwards told a contractor to do work without a PO or FCO, it was the contractor’s responsibility to make sure it had an approved PO to complete the work it was doing. She did state that Edwards could have told a contractor to do additional work without an FCO as long as there were still funds available on the original PO. If a contractor is asked to do work outside of the PO without the appropriate approval, then the contractor is supposed to refuse to complete the work. Collins said there should not have been communication from a project manager that said to “get work done, we’ll make it up with an FCO later.” She reiterated that it was Signature’s responsibility to refuse to do the work without an approved FCO.
Gallo was the vice president responsible for all aspects of the overall operations of the mill. He stated that FBD was in charge of the engineering on the slaker project and that a typical outage takes seven to fourteen days. Gallo did not know why the engineering drawings were not complete and was not aware of any specific issues with the project. He agreed that the green liquor spill was not Signature’s fault, that policy and procedure were not followed, and the cleanup was not in the original scope of work. Gallo also said that if a contractor goes onto the premises and does work, they should get paid even if they did not have an FCO approved in advance.
Gallo stated that, based on his understanding of the situation, FCOs were not submitted prior to work being done and the parties were negotiating and working things out, but negotiations had not been completed. He understood there had been a review of the project after it was completed, and it was determined to be over budget and delayed in time. He said the review determined that FBD and the leadership of Signature were inadequate, and it was not a craftsmanship issue. Gallo agreed that if it was IP’s leadership that caused additional expenses due to their decisions, then IP is responsible for those expenses; proper documentation should have been put together to show IP was accountable. He said he could understand how Signature might rely upon an e-mail stating it could proceed on verbal approval of the FCOs. Although he agreed that IP’s standard practices were not adhered to, Gallo stated that Signature could have refused to do the work outside the scope of the contract. He did also say that in “this specific case, the choices that Signature made at that point in time can be understood.”
7. Michael Moreno and Chris Wolohan
Moreno and Wolohan testified regarding the attempted sale of Signature to Primoris. Moreno, Signature’s corporate representative, stated that Primoris showed interest starting in early 2014. Moreno explained that the original plan with Signature was to try and build up the business and then sell it within three to five years. The sale would have been a cash purchase to acquire the entire enterprise. He stated the sale process begins with him, then gets handed to both parties’ operational and technical team, and then to lawyers who would finalize the deal. Moreno said Signature received the first letter of intent from Primoris dated May 19, 2014. However, Moreno stated that Signature’s lost income from the contract with IP prevented Primoris from justifying the acquisition to its shareholders and caused it to decline to follow through with the purchase. Moreno told the jury that the loss of $3 million had a domino effect on Signature: it lacked working capital, the loss created tax issues, and other customers became wary about dealing with Signature due to its financial situation and cancelled pre-awarded work they had scheduled. He explained the payroll tax issues “morphed into something greater” as time went on. However, even with the issues, Primoris issued a second letter of intent to Signature on September 2, 2014, as talks had continued through the summer. Moreno stated that Signature turned down the September letter of intent because there was not enough “up-front” money, and it had concerns about the contingent payment portion that would have occurred after closing.8 Moreno also conceded that Primoris wanted the IRS lien resolved to a “satisfactory level” before closing and that the previous issues had gotten to the point where Primoris would move forward and close.
*9 Wolohan was the head of corporate development for Primoris. He explained to the jury that Primoris is one of the largest construction companies in the country. The first letter of intent Primoris issued on May 19, 2014 proposed an “asset purchase.” He stated that the total consideration of the purchase was $42 million, with the initial cash at closing being $32 million plus an additional $10 million in contingency payments spread out through the next few years. Wolohan said there was a second letter of intent issued on May 23, 2014 but sent by e-mail in June 2014. The second letter included the same consideration but changed the net tangible assets at closing from $17.5 million to $15 million. The September letter of intent was still for $42 million total, but at closing, Signature would have received $27 million, and $15 million would be a contingency or added-value consideration to be paid the following April based on various conditions. Signature did not accept any of these offers. Wolohan explained there were additional letters of intent issued in 2016: one for $10.5 million, and a second for $10.45 million.
Wolohan stated that Primoris took its letters of intent seriously, and it set what it felt were “realistic earn-out targets.” If Primoris issued a letter of intent, there was an expectation and hope to close the transaction. He explained that when he evaluated Signature, Primoris was impressed with its ability to win work, and that was one of the reasons Primoris pursued Signature.
Wolohan testified that the letters of intent were non-binding on both parties. He also agreed with IP that, based on Signature’s initial book sheets, Wolohan found it to be a “stressed company” from late 2013 to early 2014, and he had concerns about Signature’s financial projections for the future being accurate or attainable. Wolohan agreed that the dispute between Signature and IP was a concern of Primoris’s in this deal, but that not remitting payroll taxes to the IRS was also a cause for concern. He stated that Signature’s substantial bank debt would need to be paid at closing or require releases before the deal would have been completed. Wolohan also explained that the changed cash closing amount was due to risk allocation with Signature.
8. Jeff Ogden
Ogden testified Signature consisted of five owners. He explained that a business like Signature’s is relationship-based—the company develops and fosters relationships by doing good work for clients and it relies on word-of-mouth referrals and good experiences. Ogden stated that, in his other business ventures, there were several times they fell behind on payroll taxes because it is sometimes necessary to decide who to pay first: the workers or the IRS. Ogden said he always paid his workers and vendors first. He testified that Signature’s 2013 payroll taxes were paid in full by early 2014, before work on the slaker began.
Ogden felt that $775,000 would not have completed the slaker project and even at the outset, there were major modifications that Signature was making. He said Signature completed the first two phases of the project without IP having to hire another contractor but he did not consider the project complete because IP did not allow Signature to hydrotest the slaker—even though it was an industry standard to have the contractor run the test. Ogden estimated that Signature’s workers spent 16,300 to 17,000 man-hours on the project. He stated that the personnel changes took a toll on the project: Shawhan took over Edwards’s job, Bennett took over for Langley (and IP had to bring in five other people to perform Langley’s job), and Clayton was replaced by Signature’s employee Blake Spurlock, whom Ogden felt did not have the right type of experience for the project.
Ogden discussed the meetings between Signature and IP. He stated that the questions IP sent to them before the meetings were “ridiculous and impossible to answer.” Shawhan went through the disputed invoices during the meeting and said he would not pay for any downtime because they should have managed their workers better. Ogden said Shawhan offered Signature $200,000 to pay the disputed invoices, but Ogden stated that $200,000 would just cover the piping materials they ordered. There was contentious dialogue between Hanson, Clayton, and Wilhelm during the meeting, with the latter two leaving before the conclusion. Ogden told the jury that Hanson said she could not pay him without Shawhan’s signature on the forms. Ogden went into the meeting prepared to discuss all the figures and brought who he considered to be the people he needed. Ogden felt that the questions IP posed could have been answered if both sides had been actually willing to sit down and look at the information, but it did not happen.
*10 Ogden also discussed the sale to Primoris. He stated that Signature’s financials deteriorated from the upward trajectory it originally had shown when Primoris made its initial $42 million offer. Signature would not have been able to meet the projections because “word” was out that it was having financial issues, and the “targets” Primoris set for Signature to meet were unattainable. Ogden agreed that if he could “go back in time,” he would have accepted Primoris’s initial offer but he would not have had to consider less beneficial offers had IP paid the invoices.
On cross-examination, Ogden was presented with a 2013 audit showing Signature had current assets of $11,986,151, liabilities of $15,656,725, and $6 million in revolving debt to CommunityBank. Ogden stated “that’s how you run a business” when discussing the debt. The 2013 tax liabilities were paid off in January or February 2014, and the late first-quarter payroll taxes were for non-slaker projects that were also being disputed. Besides the tax issues, Signature was affected by a “catastrophic” event that occurred at an Exxon plant, and although Signature was exonerated from fault, there was a period of lost jobs and revenue for Signature following the event.9 IP also asked Ogden about an incident where Hanson asked Signature not to invoice the FCOs until they were able to resolve the issues, but Wilhelm submitted the invoices anyway because it showed as revenue and could be used to borrow money from the bank.
Ogden also clarified that the audit showed the wrong information. He stated that Signature’s total assets were $23,584,869, its total liabilities were $20,262,427, and its members’ capital was $3,322,442, which left them with $3.2 million on the “right” side.
9. Spencer Shawhan
Shawhan testified that he was the project engineer as well as the acting engineering manager at the Orange plant. Edwards was his project manager on the slaker project and put together the team to develop the project. Shawhan explained that there are three types of drawings used in the bid process: preliminary, bid, and construction. He recalled that the engineering drawings were not ready when Edwards wanted to solicit bids, but he does not recall Edwards telling him they should wait on the slaker. IP’s total budget for the slaker was $3.4 million, but he does not consider the project finished because he cannot figure out what IP owes Signature to this date. Shawhan felt they could build the slaker for $775,000 and that there were enough details in the bid and addendums to put together an appropriate estimate. He did not think more detailed drawings were required and was unaware that Edwards had requested them.
Shawhan stated that he normally does not see the invoices or backup documentation but has in this case due to the litigation. Normally, the documents go to an auditing group that reviews them and will directly contact the vendor if there is an issue. It is the auditing group who decides who gets paid, not him. He said he did see the FCOs and backups Signature submitted, and he and Hanson tried to question several things but “never had an opportunity to.”
Shawhan explained that the Signature contract allowed for extra work to be done on a T & M basis and that standard procedure required extra work to be approved in advance. The first FCOs that Signature submitted were approved, contained the proper documents, and Signature was paid. Shawhan agreed Bennett gave the instruction to move forward absent drawings and to continue the project on verbal approval only. Shawhan stated that neither he nor Bennett has the authority to give that order or make changes to the contract, but he did not do anything to correct the order even though it was a violation of IP’s policy. He also agreed that there were issues with the project that Signature was not responsible for, such as the green liquor spill, and he recommended paying the entire invoice involved. Shawhan testified that he intended to pay Signature for the work it performed and thinks it should be paid for that work. However, he also testified that Signature could not be paid because negotiations ended, and the lawsuit was filed.
*11 Shawhan explained that Langley was fired because he allowed a safety violation to occur. But Shawhan acknowledged that he did not do anything to stop the safety violation, even though he saw it, and he did not know if there was a safety stand-down meeting regarding the incident. He also conceded that Langley was the only person running the slaker project, but when Bennett replaced him, they had to bring in more people to help on the project.
Regarding the hydrotest, Shawhan said the slaker was tested the first time it was filled up with green liquor and did not leak; although the industry standard is to test it with water first. He also wrote a memo to Collins regarding the project, but he did not tell her that he approved the FCOs verbally, that he had witnessed safety violations, or that Bennett violated company policy by authorizing a final, large FCO. He blamed everyone but Bennett and himself. Shawhan tried to create his own Powerpoint presentation to understand Signature’s invoices but said it was “difficult” to do “without having the benefit of getting to talk to them.” He also told the jury that he and Hanson did not realize the piping was not in the original bid request and nothing in the proposal indicated it was not part of the amount.
On cross-examination, Shawhan agreed that Signature did good work on the slaker. He felt IP prepared a “good bid package” that was sufficient to put together a good estimate. Shawhan stated that, even though Signature was told it could proceed with verbal authorization, everything still needed proper backup documentation, and the auditing department determines if an FCO is paid or not. He explained he preferred the prior approval of FCOs to avoid the situation they were in currently. He said there was never a plan or scheme with Edwards to not pay Signature. Shawhan was surprised by some of the disputed invoices items, such as piping, that had been included on previous paid invoices, but was also showing up in some of the later disputed invoices.
He said in April 2014, when Signature requested $2.1 million but offered to settle for $1.7 million, the disputed invoices had not even been submitted to IP. While he agrees that Signature is owed more than what was in the original bid, he disputes the amount Signature demands. He could not recall Ogden telling him anything about “killing” the sale of Signature during the July meeting.
10. Don Coker
Coker was Signature’s expert on company valuation. Coker said there are certain categories that you can add up to determine the number for damages. He used the following: the Primoris letter of intent, owner equity and assets, and IRS penalties and liabilities.10 He explained that he used the amount Primoris offered Signature because he considered it a bona fide offer. Coker stated that a bona fide offer from a knowledgeable buyer is what to consider in determining the value of a company and therefore, this was his estimate of what Signature was worth as a company. He also believed the unpaid bill to Signature was very critical because it could not pay its expenses, so that is how it ended up with a negative net worth. He explained the following regarding owner equity
• previous to 2016:
• March 2016:
He said that when a customer or lender perceives a company to be in financial distress, it can lead to the loss of business, which can make the situation worse. He felt the damage to Signature was traceable to IP’s action and lack of payment. He agreed with Ogden that some of a business’s catastrophic events can trickle down to the owners of a company.
*12 In order to determine Signature’s damages, Coker took the following figures:
• Primoris offer:
• Owners’ equity loss:
• IRS penalties:
• Total sum:
On cross-examination, Coker admitted he had taken a one-week business course from Harvard University on valuation, but his degree was in political science. He agreed there were multiple $42 million offers from Primoris to Signature with different conditions attached. He also said that Signature would have made around $11.1 million from the sale with all the debt gone and assets transferred to Primoris. However, the June letter of intent based a substantial amount of the $32 million in cash on earnout, which is based on future expected value and business that Signature would get from its customers. He explained he determined Signature’s pro forma revenue (i.e., his estimate of what Signature would be worth at that time) by comparing its March 2016 balance sheet to a December 2013 balance sheet, but he did not analyze any of the invoices to determine if Signature was owed $2.4 million by IP in 2014. IP argued the disputed invoices amounted to $1,000,085, while Coker said the $2.4 million amount considered the slaker and “other jobs.” He believed Signature was considered a “stressed company” in late 2013, because it had not been paid for another IP project called the “bale conveyer” project.11 Coker did not think the Exxon event in 2013 was a “significant factor” in Signature’s financial situation.
Coker repeatedly referenced other projects between Signature and IP, but not the slaker project. When questioned about the taxes, IP showed through documentation that Signature was behind $2.168 million at the end of 2013, and was also behind during the first quarter of 2014, prior to the slaker project being completed. Coker stated that the Primoris offer would be the “minimal value for the company.” He testified that he did not do a market value analysis of Signature, but just looked at existing financial statements.
B. Ogden’s Case-in-Chief
1. John Ulzheimer
Ulzheimer was an expert witness hired to do an impact analysis on what kind of damages Ogden suffered and the impact on his credit reputation. He explained his assignment was to provide an inventory of the severely derogatory information on Ogden’s credit reports due to the failed business relationship. He presumed the information was present because of the actions of IP, and he was asked to determine what his credit score would have been without these derogatory marks. He told the jury he decided to do an impact analysis due to the lack of any other major derogatory entries to the credit report.
Ulzheimer stated that Ogden had $9,000 of credit card debt on a defaulted American Express credit card, a tax lien, and a hard inquiry into his credit in January 2017, which would have affected his credit score. The tax lien is the IRS tax lien Ogden acquired from Signature. He believed that getting rid of the tax lien and American Express card settlement would boost Ogden’s credit score close to seventy points. However, the lien payments were also coming from Signature, not Ogden personally.
2. Jeff Ogden
*13 Ogden testified again, this time relating to his personal cause of action against IP. He said he personally guaranteed all of Signature’s liabilities and that everything he owns is collateralized in Signature. He told the jury that he is signed on as the managing member and president of Signature, the grantor on the business, and as an individual at the bank.
Ogden stated that he is not delinquent on his personal taxes, but due to him being the trustee and managing member of Signature, the IRS penalized him for Signature’s delinquencies on payroll taxes. The 2014 payroll taxes Signature owed were:
He stated that once the workers were paid, he begged IP to pay him. At the July meeting, Ogden told IP they were ruining Signature by not paying and he was losing the sale to Primoris, but Shawhan still did not want to pay him. Due to lack of payment, Signature now pays the IRS $7,000 a month to cover the tax lien. Ogden explained that he took a “massive” paycut and cut expenses in order to make it work. He also told the jury that he defaulted on Signature’s bank debt and if the payments are not made on that, the bank and IRS can come after his personal items.
Ogden testified that, even though he would have received a tax refund as an owner of Signature in 2014, because they were operating at a loss, the IRS took his overpayment and applied it to the lien amount and would continue to do so until the lien was paid in full. He said due to the situation, he has had additional lawsuits filed against both Signature and him personally, it had destroyed friendships and relationships, and he was “barely” keeping Signature’s doors open. Ogden explained that he relied on IP to pay Signature, and that was why he put his name “on the line” with the IRS.
Ogden told the jury that when Signature first started, it used his personal American Express card for business expenses because there was a larger line of credit available. But when financial issues started and it became delinquent, American Express wrote off $111,483 in debt and closed the account.
Ogden also explained the assignment from Signature. He stated that all the other partners in Signature assigned him the right to sue for personal damages under the IP contract. The other owners in Signature could file bankruptcy and walk away from the company, but Ogden said he could not because he was personally liable for Signature’s debts. Ogden also was not aware of anything in the corporate documents that said the other owners in Signature could not assign their rights to him to sue.
Ogden testified that he felt that Shawhan was not truthful with Signature and if Ogden had known that submitting one big final FCO was a violation of IP’s policy, then he would have “done things differently” and not put his company “at stake.” He explained that he personally relied on the information relayed to him and contained in the e-mails.
The credit reputation damage he suffered was due to the tax lien and American Express debt. Ogden had his credit checked in January 2017 in an attempt to purchase a truck. However, he said that once the credit was checked, the interest rate would have been higher than the principal, so he did not end up purchasing the vehicle. Ogden stated that there is no doubt in his mind that the damage to his credit reputation is a result of IP not paying Signature.
*14 Ogden also explained his mental and emotional stress. He said he does not sleep much, his phone rings constantly, and he is overwhelmed. He stated his family relationship has suffered, and he is like a “zombie.” He suffered from embarrassment and does not leave his house much. His family attempted to help by getting him an emotional support dog. He felt that IP should be “ashamed of themselves,” that his business was “gone,” his name is “gone in the industry,” and he has nothing to “fall back on.” Ogden cannot contribute any other cause to Signature failing other than IP not paying the invoices.
C. IP’s Case-in-Chief
1. Toni Hanson
As the senior sourcing buyer for IP, Hanson was involved in the commercial and contract side of the slaker project. Edwards got her involved in the project in June 2013 and she focused on purchasing the equipment needed. Hanson said that $3.4 million was the total appropriation for the project, which would cover engineering costs, Edwards’s salary, other contract employees they needed to hire (not including Signature), installation, equipment, and a contingency fund for unexpected costs.
In January 2014, Edwards was concerned with the bid package because the scope of work had not been completed and it needed another revision, but the necessary drawings were not available. Hanson explained that IP does not normally send out bid packages that are incomplete; occasionally it happens, but drawings have to be complete and sent to the bidder before the final bid comes in. Edwards assured her that would happen in this situation and sent the bid package to five bidders. He sent out addendums to the original bid package afterwards that included drawings and “other documents.” Hanson stated that only Signature submitted a bid and there was substantial work going on with other companies in the area at the same time, as well as demands from the oil field.
Hanson stated that Signature never told IP that it was having financial difficulties; otherwise, IP’s finance department would have looked into Signature closely. Hanson also testified that Signature did not tell IP it was attempting to sell the company during that time frame, which would have been a “huge red flag for awarding business.” Hanson said that she included a sample contract in the bid package so Signature could see the terms they would be agreeing to in the contract. Signature made a few changes to the terms of the bid contract and was awarded the work on February 21, 2014, when she sent it a draft contract. Hanson explained that she has the authority to award work without an issued PO as a purchasing agent, but not everyone has the authority to do so.
Article ten of the contract refers to lien releases which Signature was required to execute before receiving final payment. She asked Wilhelm for the releases twice via e-mail. Hanson also explained that the contract contained an indemnity clause that required Signature to comply with federal law relating to its employees’ taxes. Hanson did not believe that Signature agreed to indemnify IP for liability from Ogden’s lawsuit.
At the April 2014 meeting, IP gave Shawhan six additional FCOs. Hanson said that if FCOs come in after work is completed, then IP requires the vendor to provide complete documentation. That is considered an industry standard, not just something unique to IP. However, even without the formal FCO process, the contractor should have let the project manager know the costs. The project manager is required to have “intimate knowledge” of how the work is progressing, what work still remained, and how much cost should remain. Hanson stated that Edwards had already authorized an additional $275,000 and IP thought the April meeting would involve another $300,000 to “wrap” up the remainder of the outstanding costs. Signature’s invoices asked for over $1 million in addition to previously approved amounts. Hanson said there was no “scheme” involved to “string” Signature along and not pay them. Hanson requested backup documentation to support the FCOs presented because Signature had just presented a one-page document on their letterhead with a brief description and no backup documentation. It was Hanson’s job to investigate the charges and verify they were accurate. She agreed that Signature did send her documents, but she said it did not identify which documents went with each FCO and IP could not “make heads or tails out of it.” Hanson stated that IP had never had a vendor who was not able to prove up their charges properly.
*15 She was willing to pay Signature if they could prove up the charges, so Hanson wrote out questions for Signature to direct them to the information required for each FCO; she also wanted to verify it was not the same amounts IP had already paid for. However, Hanson said she did not get answers to most of her questions. As an example, Hanson explained that half of the labor cost in the original $775,000 bid was for pipe fitters and the original bid had $60,000 of pipe included. However, one of the FCOs requested $529,000 and stated it was for “all piping fabrication and steel installation not included in the original bid,” so she wanted clarification on the difference. Hanson agreed that Signature sent her more concise information, but Signature never told her they could not provide certain backup because its documents were stolen. She also stated that some of the backup Signature did provide raised concerns about the way it was billing IP—for example, trucks being billed hourly instead of daily or within the original scope of work, and one person billed forty hours in one day.
Hanson testified that at the July meeting, both sides tried to sit down and understand the charges, but Signature could not explain “why documents were where they were.” She agreed that Shawhan said IP could justify $200,000 to $300,000 but would need help to justify the rest. Wilhelm responded by saying that he wanted “one hundred percent or nothing” or he would sue. Hanson did not remember any of the Signature representatives stating that IP was “destroying their business” or “harming a sale.” She disagreed that she told Signature that she would pay them, but Shawhan “wouldn’t let” her. Hanson stated she was not convinced all the charges Signature claimed were valid.
Hanson also talked about the bid process. She stated that the approval of the FCOs was necessary so IP could keep track of what is going on with a project, but also so it can plan the budget and make sure there is sufficient money to pay the FCOs. Hanson said it is the vendor’s job to present the documentation in a concise way in order for IP to understand. She contacted Shawhan regarding questions she had on the project and expected him to know what went on. She also stated that she did not contact Edwards because he was no longer employed by IP. Hanson agreed that she finally got more detailed documentation, but the work was not paid because by then, Signature had filed its lawsuit. Hanson disclosed that IP made a payment of $550,021 into the registry of the court prior to trial.
On July 22, 2014, Hanson sent an e-mail to Ogden in which she attached the payment history for outstanding POs on the slaker project, a list of outstanding invoices, and several notices of liens and lawsuits that had been filed. She wanted to understand why Signature claimed the invoices had not been paid, when IP had paid Signature $1,018,487.63, and she needed to have all outstanding invoices paid and lien waivers from each of the vendors. Hanson stated that she never refused to pay Signature if it provided the appropriate backup, and she had expected Signature to walk her through the explanations of the FCOs at the meeting but it never happened.
2. Justin Hall
Hall was the construction coordinator for Signature at the Orange mill. He was involved in the scheduling, planning, and estimating for projects, and in having the time sheets signed by the clients. Hall stated he was involved in estimating the slaker job and could only “bid the knowns.” He was in charge of the time sheets (containing labor hours and costs) IP would sign, as well as change orders and any turnover packages that came out of the project. Hall also acted as the “go-between” for Hanson and Signature.
Hall explained that there were two other employees that had a similar job and the three of them handled the forty-four projects Signature was working on at the mill. He stated that they used a trailer that IP had given them as their office, and Clayton’s office was located in the same trailer. He believed that Blake Riley, with Signature, was the main person tracking the slaker project. According to Hall, a Signature foreman would keep track of the men and their hours worked while in the field and then he would turn that sheet into a timekeeper after every shift. The timekeeper would input the sheet into payroll, compare it against the gate log, and prepare the timesheet. Clayton would approve the timesheet and it would then be taken to the project manager for approval. Hall stated that a timesheet is different from a payroll sheet, and the payroll sheet would be attached to the invoice submitted to IP as backup. Signature also used the payroll sheet to determine the workers’ pay.
*16 Hall testified that Edwards wanted Signature to “hold all change orders until the end of the project and submit them at the end of the project” to reduce the amount of change orders he received daily. Hall was not aware that multiple change orders were submitted after the project ended. He was later tasked with reconstructing the backup documents for the disputed invoices.
On cross-examination, Hall stated that the backup documentation was kept in a file cabinet or bookshelf in the trailer. He said that, when he and his colleagues came in one morning, all the documentation had been taken and someone had reported seeing a person from IP in the trailer area. Signature ended up without several binders of information which contained information from all forty-four jobs at the Orange mill. Hall explained that they had no backup data for any of the jobs, so they had to reconstruct everything.
3. Ron Michalk
Michalk was Signature’s controller and chief financial officer during the Primoris sale negotiations. His job was to provide the information that Primoris requested of Signature. He explained that negotiations were confidential in 2014.
Michalk talked about how Signature was supposed to make weekly deposits for its payroll taxes. However, as the financial situation deteriorated, Signature began using the money to pay vendors and finance the company, just “try[ing] to stay alive.” Michalk agreed that in December 2013, Signature was “cash-strapped” and struggling to meet its financial obligations. He said that in 2014, Signature lost $6.8 million, used its payroll money for operations, and the owners ran personal expenses through the company, with Ogden and Wilhelm doing so the most.
Michalk stated that Signature’s financial situation improved in 2015 because it completed some good turnaround projects.
4. Barry Loder
Loder worked as a consultant for Signature, to help with strategic consulting and teaching Signature how to build and grow the business. He created a Powerpoint presentation for discussions with Primoris. He felt that three things impeded Signature’s ability to prosper: insufficient working capital, slow-pay accounts receivable, and inadequate financing. Primoris could have come in and provided the working capital to grow the business and achieve the projections he had helped develop with the management. He felt Primoris’s first offer was good and he personally would have advised Signature to take it. Loder also thought the September 2014 offer from Primoris was “still a relatively good offer.”
5. Richard Domercq
Domercq was the valuation consultant hired by IP to evaluate Coker’s report, Signature’s financial status, and compare the invoices. He found there were seven “disputed” invoices that totaled $1,085,000. Domercq felt that $535,000 was overbilled and the maximum valid charges contained in the invoices totaled $550,000. He came to that determination by looking for duplicate billing or expenditures that were not within the scope of the contract.
Domercq stated that Signature provided IP with a weekly labor and cost approval form of its own making that was sorted by “craft” or type of work, instead of by individual employee. The form grouped a “bunch of people” together and billed them as a group, instead of showing a daily detail for each individual worker. Domercq and his team created a spreadsheet listing every employee, taking information from the hours tracking form. He found that Signature had billed 23,000 hours for the slaker project, of which 13,506 were disputed. The cost report from Signature showed 15,783 hours, Domercq’s analysis showed 16,244 hours, and Signature billed almost 23,000. He attributed the differences to overbilling. He felt that Signature had overbilled $635,000, but he admitted there was some labor that was not billed so he gave Signature a credit for that in the amount of $141,000. Domercq stated that he relied on the master payroll in developing his analysis and found that the $550,000 was supported by Signature’s backup. He also said that IP paid liens that totaled $95,840, so if the jury considered that as an offset, Signature was still owed $454,000.
*17 Domercq also reviewed Coker’s report. He stated that Coker did not do an independent verification of the information Signature gave him, but instead made assumptions contrary to the facts. Domercq testified that the biggest assumption Coker made was that, when the slaker project was completed, IP owed Signature $2.4 million and refused to pay. He said Coker also assumed one could measure the value of the company by stockholders’ equity and did not look at the other factors that could have affected the financial condition. In his professional opinion, Domercq did not feel it was reasonable to conclude that a $500,000 to $1 million invoice dispute would be a substantial factor in bringing about the decline of the stockholders’ equity.
6. Bryan Byrd (Bill of Exception)
Byrd’s testimony was excluded by the trial court, who found it to be cumulative to other witnesses. Byrd explained his experience was in T & M contracts and backup documentation. He said there was enough detail found in the bid package and seven addendums to construct a detailed bid on piping for the project. He also felt one needed training in construction to be able to interpret the drawings and understand Signature’s bid. He stated that based on the cost for labor in the bid, piping would have been included in those numbers.
In speaking about specific disputed FCOs, Byrd found the backup to not have enough detail or description to support them. He felt the information was not adequately detailed, there were too many questions regarding the scope of work changes that were asserted, and there were too many documents that showed that Signature was responsible for the extra work to support the scope of the FCOs.
The jury found for Signature and Ogden on all the questions submitted to it. For breach of contract, promissory estoppel, and fraud, the jury awarded $2,442,515.28 in actual damages and $56,284,633 in consequential damages. Regarding Ogden, on breach of contract, the jury awarded $2.8 million in actual damages, $111,000 for past credit reputation damage, and $1.3 million for future credit reputation damage. On his fraud claim, the jury awarded Ogden $13 million for past mental anguish damages and $50 million for future mental anguish damages.
E. Indemnity Claims, Post-Trial Motions, and Judgment
Following the trial, the parties agreed to have IP’s indemnity claims heard by the trial court. IP had filed a motion to enforce the indemnity provision in Article 8.6 of the slaker contract,12 claiming that Signature should indemnify it for its attorney’s fees, costs, and expert fees used to defend against Ogden’s claims. At a hearing held on July 24, 2017, IP stated Signature’s duty to indemnify was based on the slaker contract and Signature’s failure to pay the payroll taxes to the IRS opened IP up to liability. IP also argued Signature had not filed an answer to its counterclaim for indemnity and had thus waived any affirmative defenses. The trial court granted Signature leave to file an answer on the same day as the hearing. Later, the trial court denied IP’s motion to enforce indemnity.
*18 The trial court entered its judgment on December 14, 2017, awarding Signature $58,174,672 in actual and consequential damages minus offset amounts,13 as well as prejudgment and additional interest. Ogden was awarded $67,211,000 in actual and consequential damages, as well as prejudgment and additional interest. Both parties were awarded attorney’s fees in varying amounts.
On January 12, 2018, IP filed a motion for judgment notwithstanding the verdict and a motion for new trial, which were overruled by operation of law. This appeal followed.
II. SUFFICIENCY OF THE EVIDENCE RELATED TO SIGNATURE’S CLAIMS
By its first three issues, IP alleges that Signature failed to present legally sufficient evidence for (1) its breach of contract, (2) fraud, and (3) promissory estoppel claims.
A. Standard of Review
A legal sufficiency challenge will be sustained when the record shows: (1) the complete absence of a vital fact; (2) the court is barred by rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a scintilla; or (4) the evidence conclusively establishes the opposite of a vital fact. Id. at 820–21.
A party who challenges the legal sufficiency of the evidence to support an issue upon which he did not have the burden of proof at trial must demonstrate on appeal that there is no evidence to support the adverse finding. Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983)).
When a party attacks the legal sufficiency of an adverse finding on an issue on which that party has the burden of proof at trial, the complaining party must demonstrate on appeal that the evidence establishes, as a matter of law, all vital facts in support of the issue. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam). We review a matter of law challenge by first examining the record for evidence that supports the adverse finding, while ignoring all evidence to the contrary. Id. If we do not find evidence to support the finding, we will then examine the entire record to determine if the contrary proposition is established as a matter of law. Id. “The point of error should be sustained only if the contrary proposition is conclusively established.” Id.
*19 The fact finder is the sole judge of the witnesses’ credibility and may choose to believe one witness over another. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 407 (Tex. 1998)).
B. Breach of Contract
By its first issue, IP argues that the evidence is legally insufficient to support the jury’s verdict as to breach of contract. To prevail on a breach of contract claim, a plaintiff must prove: (1) the existence of a valid contract; (2) performance or tendered performance by the plaintiff; (3) breach of the contract by the defendant; and (4) damages to the plaintiff resulting from that breach. First Nat’l Bank of Edinburg v. Cameron County, 159 S.W.3d 109, 112 (Tex. App.—Corpus Christi–Edinburg 2004, pet. denied).
1. Jury Questions
The jury was asked to consider the following questions related to breach of contract:
Question No. 1(a)
Did Signature and IP agree that Signature would provide labor, material, and services in exchange for payment from IP?
In deciding whether the parties reached an agreement, you may consider what they said and did in light of the surrounding circumstances, including any earlier course of dealing. You may not consider the parties’ unexpressed thoughts or intentions.
Answer “Yes” or “No” with respect to each of the following:
(1) Slaker Project
(2) Non-Slaker Project
Question No. 1(b)
Did IP fail to comply with such agreements?
Answer “Yes” or “No” with respect to each of the following:
(1) Slaker Project
(2) Non-Slaker Project
2. Condition Precedent or Covenant
IP argues that it was not required to pay the disputed invoices because Signature provided insufficient backup documentation to support the invoices. IP states that the backup documentation was a condition precedent to its requirement to pay, and because that condition was not met by Signature, IP was not obligated to pay.
A “condition precedent is an event that must happen or be performed before a right can accrue to enforce an obligation.” Solar Application Eng’g, Inc., 327 S.W.3d at 108. Breach of a covenant may give rise to a cause of action for damages but it does not affect the enforceability of the remaining provisions of the contract unless the breach is material or is a total breach. Id.
In order to determine whether a condition precedent exists, the intention of the parties must be ascertained; and that can be done only by looking at the entire contract. Id. at 948. When “no conditional language is used and another reasonable interpretation of the contract is possible, ‘the terms will be construed as a covenant in order to prevent a forfeiture.’ ” Id.
*20 Here, Article 4 of the contract stated:
CONTRACTOR [Signature] shall send to COMPANY [IP] on the 15 and 30 day of each month a detailed statement of all reimbursable costs incurred and actually paid by CONTRACTOR during the preceding period, together with original payrolls for labor, checked and approved by persons satisfactory to COMPANY, and all receipted bills, paid original invoices or other documents requested by COMPANY. Within thirty (30) days from the receipt of the statement, COMPANY agrees to pay CONTRACTOR the amount of the statement.
Prior to final acceptance of the Project, CONTRACTOR shall deliver to COMPANY a statement, together with satisfactory evidence, that all payrolls, material bills[,] and other indebtedness incurred by CONTRACTOR and all subcontractors in the performance of this AGREEMENT have been paid[,] and CONTRACTOR agrees to hold COMPANY harmless on account thereof. COMPANY may at any time withhold payment of all or any part of the Contract Price to such extent as may be necessary to protect itself from loss on account of:
(a) defective work not remedied;
(b) claims filed by third parties or reasonable evidence indicating the probable filing of such claims;
(c) failure of CONTRACTOR to make payments due to subcontractors or suppliers of material or labor;
(d) a reasonable doubt that the Project can be completed for the balance then unpaid under this AGREEMENT;
(e) an existing breach of the AGREEMENT by CONTRACTOR; or
(f) damage to another person, firm or entity caused by acts or omissions of CONTRACTOR.
When the ground or grounds for withholding payment are removed to the satisfaction of the COMPANY, CONTRACTOR’S right to payments [sic] as herein provided shall thereupon be reinstated.
Signature argues in its brief that none of the requisite terms are contained in the IP slaker contract to change this requirement into a condition precedent. We agree.
The slaker contract required documentation to be approved by “persons satisfactory” to IP and once the statement was received, it would be paid within thirty days. There is no specific language that says IP was only required to pay when it agreed the documentation was complete or anything to that effect. The jury rejected IP’s contention that it did not have to pay the invoices because there was not sufficient documentation presented. Since there was no conditional language found within the contract and there were multiple interpretations of how the contract could be read, we construe the language as a covenant. See id. Because we agree that the documentation requirement was not a condition precedent to IP’s requirement to pay, we move to the breach of contract argument.
Under the elements required for a breach of contract, the evidence showed there was a valid contract between IP and Signature, that Signature performed the job requested under the contract, and Signature was damaged due to the non-payment that resulted. See First Nat’l Bank of Edinburg, 159 S.W.3d at 112. IP admitted during trial that Signature was owed money for the slaker project; however, the amount owed was in contention.
*21 IP is required to show that there was no evidence to support the adverse finding it is challenging. See Pena, 548 S.W.3d at 90. However, the evidence presented showed that Signature performed its principal obligation: to construct and install a new slaker. The parties agreed that the initial FCOs were submitted with approved documentation and were paid by IP with little issue. It was after IP’s representatives made changes to how the invoices were to be submitted that issues arose. The jury heard testimony from multiple witnesses stating that FCOs were approved verbally, submitted with documentation, and then never paid.
The jury was entitled to disbelieve IP’s witnesses who claimed the documentation was insufficient and therefore, it was not required to pay the disputed invoices. See Pena, 548 S.W.3d at 90.
IP raises multiple additional sub-issues regarding the breach of contract claim—for example, it argues Signature failed to prove the disputed amounts of the invoices, the invoices were not accurate, and the invoices were in excess of what IP’s expert, Domercq, testified was owed—but those points were all fact issues that were within the domain of the jury to consider. The jury determined which facts and witnesses to believe or disbelieve, and we defer to its findings. See TEX. R. APP. P. 38.1.
There was more than a “scintilla of evidence” presented at trial to support the jury’s findings, in response to questions 1(a) and 1(b) of the jury charge, that IP breached the slaker contract. See City of Keller, 168 S.W.3d at 810. We overrule IP’s first issue.
By its second issue, IP alleges the evidence is legally insufficient to support the jury’s verdict for fraud. The jury charge contained the following question and instructions regarding fraud:
Did IP commit fraud against Signature?
Fraud occurs when:
(1) A party makes a material misrepresentation, and
(2) The misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion, and
(3) The misrepresentation is made with the intention that it should be acted on by the other party, and
(4) The other party justifiably relies on the misrepresentation and thereby suffers injury.
“Misrepresentation” means a promise of future performance made with an intent, at the time the promise was made, not to perform as promised.
To hold [IP] liable for fraud, you must find that a single employee of [IP] committed all elements of fraud while acting within the scope of his employment.
A promise of future performance constitutes an actionable misrepresentation if the promise was made with no intention of performing at the time it was made. Formosa Plastics Corp. USA v. Presidio Eng’rs & Contractors, Inc., 960 S.W.2d 41, 48 (Tex. 1998) (op. on reh’g). The mere failure to perform a contract is not evidence of fraud. Id. At trial, Signature had to present evidence that IP made representations with the intent to deceive and with no intention of performing as represented. See id. Additionally, the evidence presented must be relevant to IP’s intent at the time the representation was made. See id. As noted supra, the jury agreed with Signature and found IP committed fraud.
*22 In our review of this finding, “all of the record evidence must be considered in a light most favorable to the party in whose favor the verdict has been rendered, and every reasonable inference deducible from the evidence is to be indulged in that party’s favor.” Id. Anything more than a scintilla of evidence is legally sufficient to support the finding. Id.
Signature alleged that IP changed the procedure for the submissions of the FCOs in order to induce Signature to continue the work to meet the timetable IP wanted. Although there was evidence to support some of the required elements of fraud, Signature did not prove all the elements needed. See First Nat’l Bank of Edinburg, 159 S.W.3d at 112. There was no evidence presented that, when IP informed Signature that it had changed the procedures used to submit the FCOs, it also had no intention of performing. Prior to Signature being told to alter the procedure used, IP had regularly made payments relating to prior invoices submitted under the slaker contract. There was no evidence that, when Bennett changed the procedure used, it was so IP could avoid paying the invoices or not perform on the contract.
Additionally, in order to support the fraud finding, Signature was required to present evidence that all the elements of fraud as defined in the jury charge could be attributed to one employee of IP. See 422 S.W.3d 638 (Tex. 2013). Signature was unable to satisfy this requirement. Evidence was presented that Edwards and Bennett were the main IP representatives that made modifications, both orally and through e-mail, to the FCO submission procedure. At trial, Signature presented evidence that Shawhan refused to pay the disputed FCO invoices. However, Shawhan was not the IP representative who made the changes to the FCO submission procedure that Signature detrimentally relied on; it was Edwards and Bennett. Therefore, Signature failed to present proof that only one employee committed the fraud as required by the jury charge. The evidence is legally insufficient to support the jury’s finding that IP committed fraud against Signature. We sustain IP’s second issue.
D. Promissory Estoppel
By its third issue, IP challenges the jury’s finding regarding promissory estoppel. IP argues that Signature’s promissory estoppel claim is based on IP’s performance under the slaker contract, and it states that Signature cannot recover under a promissory estoppel theory because there was a valid, enforceable contact between the parties. We agree with IP.
“Promissory estoppel operates to enforce an otherwise unenforceable promise; ‘[i]t cannot replace an enforceable contract.’ ” Doctors Hosp. 1997, L.P. v. Sambuca Hous., L.P., 154 S.W.3d 634, 637 (Tex. App.—Houston [14th Dist.] 2004, pet. abated).
Here, the jury awarded damages in favor of Signature under both a theory of breach of contract and promissory estoppel. We have already held the evidence was sufficient to support the breach of contract finding. Therefore, because there was a valid contract in place between the parties, Signature cannot recover under a theory of promissory estoppel. See id. We sustain IP’s third issue.
III. SIGNATURE’S DAMAGES AWARDS
*23 By its fourth and fifth issues, IP challenges the damages awarded to Signature. By its fourth issue, IP claims there is legally insufficient evidence to support the award of consequential damages based on testimony of Signature’s expert. By its fifth issue, IP argues that a new trial should be granted because the jury awarded excessive actual and consequential damages to Signature based on the evidence presented.
A. Standard of Review
The standard of review for legal insufficiency is addressed in Section II(A). The standard of review for excessive damages is the factual sufficiency of the evidence. See, e.g., Id. at 407. The court of appeals is not a fact finder and may not pass upon the witnesses’ credibility or substitute its judgment for that of the jury, even if the evidence would clearly support a different result. Id.
If the court of appeals determines that the evidence supports a jury’s verdict, it is not required to detail all of the evidence supporting the judgment when it affirms the trial court’s judgment for actual damages. Id. On the other hand, when reversing a trial court’s judgment for factual insufficiency, the court of appeals must detail all the evidence relevant to the issue and clearly state why the jury’s finding is factually insufficient or so against the great weight and preponderance of the evidence that it is manifestly unjust. Id. The court of appeals must explain how the contrary evidence greatly outweighs the evidence supporting the verdict. Id.
B. Jury Question
Relating to the breach of contract claim, question number 1(c) of the jury charge stated the following regarding damages:
What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Signature for its damages, if any, that resulted from IP’s failure to comply?
Answer separately in dollars and cents for damages, if any.
(1) The difference, if any, between the payment Signature received from IP for its work and the payment Signature would have received from IP if IP had complied with the agreements.
(2) Damages to Signature’s company value, if any, that were a natural and probable consequence of such failure to comply, and that were foreseeable to Signature and IP when the agreements were made.
C. Actual Damages
To recover damages for breach of contract, a plaintiff must show that he suffered a pecuniary loss as a result of the breach. AZZ, 462 S.W.3d at 289.
*24 Although the amount owed under the disputed invoices was a hotly contested issue throughout trial, the jury sided with Signature and awarded the $2.4 million Signature claimed it was owed. Signature introduced thousands of pages of documents into evidence for the jury to review and determine the proper amount of money Signature was owed. Although IP argues that Signature admitted it was owed less than $2.4 million and the slaker project invoices do not add up to $2.4 million, the jury also was allowed to consider non-slaker projects as part of the breach of contract questions.
We have considered and weighed all of the evidence, not just that evidence which supports the verdict. City of Keller, 168 S.W.3d at 820–21. Therefore, we overrule IP’s fifth issue as it relates to the award of actual damages.
D. Consequential Damages
IP’s challenge to the consequential damages relates to Question 1(c)(2)’s answer. Consequential damages result from the defendant’s wrongful acts. AZZ, 462 S.W.3d at 289.
Coker testified that he determined the amount suggested as damages by totaling three figures: (1) $42 million, representing the Primoris offer; (2) $12,431,501, representing the owners’ equity loss; and (3) $1,853,132, representing the IRS penalties Signature incurred. The jury’s consequential damages award equaled the amount Coker recommended: $56,284,633. IP argues that Coker’s testimony was not probative because he “assumed” certain facts; Signature, as a company, was not able to recover company value14 and there was no evidence of foreseeability to support the damages award.
“When an expert opinion is admitted into evidence without objection, ‘it may be considered probative evidence even if the basis for the opinion is unreliable.’ ” Hous. Unlimited, 443 S.W.3d at 829.
*25 Coker explained during his testimony that he came to his determination that Signature was worth $42 million based on the Primoris offer. He testified that a “bona fide offer” is what one “should consider the value of the company” to be because the offer was from a “knowledgeable buyer.” However, in order to award consequential damages based on the Primoris offer, the jury was required to find that the offer was “foreseeable” at the time the agreement was made. Moreno testified that Signature and Primoris began discussions in early 2014 and the first letter of intent was issued in May 2014, after the slaker project was completed. Moreno also said he did not have a conversation with IP about the possible acquisition and was not aware that anyone else from Signature told IP either. Michalk testified that negotiations between Signature and Primoris were confidential in 2014. There was no evidence presented that IP had any knowledge of the attempted sale of Signature at the time the agreement was made. Therefore, the $42 million in consequential damages resulting from the failure of the Primoris transaction is not supported by legally sufficient evidence. See City of Keller, 168 S.W.3d at 810.
Coker also testified that, although IP does not have to pay the IRS taxes for Signature, he felt it was responsible for the interest—he explained that Signature was unable to pay the taxes when they were due because IP had not paid the disputed invoices. However, the evidence showed that Signature was behind on its payroll taxes as early as 2013 and no slaker contract invoice had become due at that point. Coker testified that he used figures from documents Signature provided to him, instead of determining the figures himself. Ogden also testified that even though Signature had been behind on payroll taxes in 2013, it had “caught up” on the delinquent payroll taxes as of 2014 before the slaker project began. Still, there was no evidence that IP would have “foreseen” that Signature would use the money it withheld for payroll taxes to pay its other financial requirements. Therefore, the jury’s award of $1,853,132 in IRS penalties was not supported by legally sufficient evidence. See id.
Coker also explained how he determined the owners’ equity shares which the jury included in its damages award. Coker stated that if one takes the actual net worth of a company and subtracts its liabilities, the remainder equals the owners’ equity. Coker testified that he determined the owners’ equity numbers by comparing a December 31, 2013 balance sheet with the March 11, 2016 pro forma closing sheet.15 IP countered with its expert, Domercq, who felt that that Coker’s determinations regarding the disputed invoices and owners’ equity numbers were incorrect. Domercq explained that Coker did not consider any other factors that could have contributed to Signature’s financial condition other than the disputed unpaid invoices.
However, the jury could have also considered other testimony to arrive at its award for the owners’ equity numbers. Wilhelm testified that Signature lost work, including projects with Valero, due to the situation that arose between Signature and IP, which called into question Signature’s financial status. See Hoppenstein Props., Inc. v. McLennan Cnty. Apprisal Dist., 341 S.W.3d 16, 21 (Tex. App.—Waco 2010, no pet.) (providing that profits that plaintiff would have realized under contract between parties are direct damages, while profits plaintiff would have realized on other contracts are consequential damages). Ogden testified that Signature’s reputation suffered in the industry because Signature’s finances deteriorated, and it was unable to pay vendors and subcontractors due to the unpaid invoices. Additionally, there was testimony presented that Signature had struggled financially in 2013 due to a previous accident that occurred on a job with Exxon, which reduced its work during the investigation. Ogden explained that Signature lost about five months of jobs and revenue until it was exonerated in the Exxon accident. Testimony spoke of how “word” spreads in the industry, and Signature’s business was impacted by the accident according to Signature’s witnesses.
*26 Coker stated that he did not perform any independent market value analysis of Signature—instead, he relied on Primoris’s market value analysis done in April or May 2014, and he looked at existing financial statements and the pro forma closing sheet to determine the equity amounts. Nevertheless, there was more than a scintilla of evidence to support his determination that the owners lost $12.4 million in equity based on the evidence presented by Coker and other witnesses. See Stuart, 964 S.W.2d at 921. The jury could have inferred that IP knew that the delay in paying invoices or refusing to pay invoices would cause Signature to struggle financially and IP would have been able to foresee the results that came about. See id.
Moreover, Coker explained how he determined the owners’ equity amounts of $3 million and $-9 million and the jury also heard additional testimony about Signature’s financial status throughout the time period in question. Because it was foreseeable that not paying invoices to a company who had struggled financially in the year before would cause major financial issues, the $12,431,501 consequential damages award was supported by sufficient evidence. See id.
Therefore, we overrule that part of IP’s fourth issue regarding the owners’ equity damages and sustain the remainder of the issue.
IV. SUFFICIENCY OF THE EVIDENCE RELATED TO OGDEN’S CLAIMS
By issues six and seven, IP challenges the sufficiency of the evidence to support Ogden’s claims.
A. Standard of Review
We follow the same standard of review as laid out in Section 2A relating to Signature’s breach of contract claims.
B. Assignment of Rights and Breach of Contract
The benefits and burdens of a contract belong solely to the contracting parties, and no person can sue upon a contract unless he is a party to it or in privity with it. Brown v. Mesa Distribs., Inc., 414 S.W.3d 279, 284 (Tex. App.—Houston [1st Dist.] 2013, no pet.).
An assignment is a manifestation by the owner of a right of his intention to transfer such right to the assignee. Mobil Oil Corp. v. Tex. Commerce Bank-Airline, 813 S.W.2d 607, 609 (Tex. App.—Houston [1st Dist.] 1991, no writ). Any right to performance by the assignor is extinguished. See id.
In order to establish standing to maintain a breach of contract action, a plaintiff must either show it had third-party-beneficiary status or privity with a party to the contract. Id. at 284–85.
Whether a third party may sue to enforce the parties’ agreement depends not on whether the third party will benefit or on whether the parties knew that the third party would benefit, but on whether the contracting parties “intended to secure a benefit to [a] third party” and “entered into the contract directly for the third party’s benefit.” Stine v. Stewart, 80 S.W.3d 586, 589 (Tex. 2002) (per curiam)).
*27 To determine whether the contracting parties intended to directly benefit a third party and entered into the contract for that purpose, courts must look solely to the contract’s language, construed as a whole. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011)).
The contract between Signature and IP stated:
Article 23. LIMITATIONS ON ASSIGNMENT AND SUBCONTRACTORS:
CONTRACTOR [Signature] shall not assign the AGREEMENT, its rights or obligations, without the prior written consent of COMPANY [IP], no[r] shall CONTRACTOR assign any money due or to become due without the prior written consent of COMPANY. Nothing in the AGREEMENT shall create any contractual relation between any subcontractors and COMPANY, and CONTRACTOR agrees that it is fully responsible to COMPANY for the acts and omissions of subcontractors.
The contract is unambiguous that Signature did not have the right to assign its claims to Ogden without IP’s approval. However, even if Signature did have the unrestricted right to assign its claims under the contract, it would lose its right to sue for breach of contract upon assignment. See Mobil Oil Corp, 813 S.W.2d at 609. Signature did not argue it gave up its rights under the contract to allow Ogden to sue; instead, it and Ogden both sued under the same argument. Ogden based his breach of contract claims on Signature’s breach of contract claims. But both entities cannot be entitled to pursue a breach of contract claim against IP. See id. Signature also had no claim to pursue for Ogden’s personal damages, so that would be a claim it would be unable to assign. At best, Signature could have assigned Ogden its claims for breach of contract, but based on the allegations argued in the lawsuit, it did not.
Although Ogden argued that IP did not preserve the issue because there was no jury question regarding Ogden’s breach of contract claims and the jury was allowed to decide if Signature assigned the right to sue for Ogden’s personal damages, the evidence is legally insufficient to support Question 4(a). It is apparent that Signature did not intend to assign its rights to Ogden, as it continued to pursue its own breach of contract allegation against IP. See id. We sustain IP’s sixth issue.
Since we hold that Signature did not properly assign its breach of contract rights to Ogden, the damages awarded to Ogden under Question 4(c) related to breach of contract must be reversed.
Ogden’s fraud claim is also linked to Signature’s claims, and we have decided that Signature’s fraud claims were supported by legally insufficient evidence. The jury charge contained the same elements for fraud as in Signature’s claims but additionally included the following:
A party commits fraud indirectly when it makes false representations to a third party with the intent that it be repeated to deceive the injured party or makes a false representation with information that would lead a reasonable man to conclude that there is an especial likelihood that it would reach the injured party and would influence the injured party’s conduct.
There was no evidence presented that IP made any statements knowing affirmatively that Ogden would individually rely on them. We previously found that the evidence was insufficient to support a fraud finding because Signature did not prove that a “single employee” committed all the elements of fraud within the scope of his employment. Here, there was no evidence presented that any single IP employee made misrepresentations to Signature intending for Ogden to act on them. See Dynegy, Inc., 345 S.W.3d at 531. We sustain IP’s seventh issue.
*28 Since we hold that Ogden’s fraud claim is supported by legally insufficient evidence, the damages awarded to Ogden under Question 5(b) related to fraud must be reversed. Ogden was also awarded mental anguish damages due to the finding of fraud, which must also be reversed. We sustain IP’s eighth issue.
V. IP’S EXPERT WITNESS TESTIMONY
By its ninth issue, IP alleges that the trial court abused its discretion when it excluded testimony from IP’s expert, Byrd, on the ground that his testimony was cumulative. We assume, but do not decide, that the trial court erred by excluding Byrd’s testimony. We proceed to evaluate whether the error is reversible. See TEX. R. APP. P. 44.1(a) (“No judgment may be reversed on appeal on the ground that the trial court made an error of law unless the court of appeals concludes that the error complained of: (1) probably caused the rendition of an improper judgment; or (2) probably prevented the appellant from properly presenting the case to the court of appeals.”).
A judgment may not be reversed unless the error “can be said to have contributed in a substantial way to bring about the adverse judgment.” Standard Fire Ins. v. Reese, 584 S.W.2d 835 (Tex. 1979)).
The role excluded evidence plays in the context of trial is important, and the supreme court has provided guidelines to assist trial courts in applying the reversible error standard. See Cent. Expressway Sign Assocs., 302 S.W.3d at 870. Exclusion is likely harmless if the evidence was cumulative or if the rest of the evidence was so one-sided that the error likely made no difference in the judgment. Id. By contrast, exclusion of the evidence is likely harmful if it was “crucial to a key issue.” Id.
Thus, in determining whether the exclusion of evidence was harmful, we must review the entire record and we apply the same standard—whether the erroneous exclusion of evidence probably caused the rendition of an improper judgment—even when the excluded evidence related to a key issue. Gunn v. McCoy, 554 S.W.3d 645, 668 (Tex. 2018).
IP argues that Byrd’s testimony was crucial because it rebutted Signature’s evidence presented about piping drawings. However, multiple witnesses testified about the drawings prior to Byrd. Although piping was an issue discussed in terms of whether it was included in Signature’s original bid, we conclude that excluding Byrd’s more technical testimony did not cause the rendition of an improper judgment. See id.
Piping, its inclusion or lack thereof in the original bid, and its costs in the disputed invoices was one of many expenses IP challenged. The jury accepted the full amount of the disputed invoices that Signature claimed. Therefore, it is unlikely that Byrd’s testimony would have swayed the jury in such a manner that the judgment would be different. See id. Additionally, multiple witnesses testified about the piping, drawings, re-drawings, and issues regarding mistakes throughout the weeks-long trial. We find it unlikely that Byrd’s testimony would have changed the outcome of the jury’s decision and we overrule IP’s ninth issue.
*29 By its tenth issue, IP argues the trial court committed reversible error by refusing to enforce Signature’s duty to indemnify.
The slaker contract contained an indemnity provision that stated: “In the event the liability of the CONTRACTOR [Signature] shall arise by the reason of the sole negligence of COMPANY [IP], then and only then, the CONTRACTOR shall not be liable under the provisions of this paragraph.” The claims raised during trial solely related to what Signature and Ogden claimed was IP’s negligence.
Here, within the four corners of the contract, the language specifically stated that Signature would not be liable under the indemnification section if liability arose by reason of “the sole negligence of” IP. The lawsuit arose because IP did not pay the disputed invoices, and that disagreement is what gave rise to Ogden’s claims against IP. Because Ogden’s damages were due to the actions of IP, Signature was not required to indemnify IP for the costs it incurred defending against Ogden. We overrule IP’s tenth issue.16
In summary, we overrule IP’s issue regarding Signature’s breach of contract claim and its challenge to the breach of contract actual damages. We affirm the trial court’s judgment as to actual damages.
We sustain IP’s issues related to Signature’s fraud and promissory estoppel claims. We reverse the trial court’s judgment as to fraud and promissory estoppel claims and render judgment that Signature take nothing by way of those claims.
We further hold there is legally insufficient evidence to support the consequential damages award of $42 million for the lost sale opportunity and $1,853,132 million in IRS penalties. We reverse and render judgment that Signature take nothing by way of its request for damages arising from the loss of the Primoris sale and IRS penalties. Additionally, we affirm the consequential damages relating to the owners’ lost equity in the amount of 12,431.501.
We also sustain IP’s issues related to Ogden’s claims for breach of contract and fraud. We reverse the portion of the trial court’s judgment awarding damages to Ogden under those causes of action, and we render a take-nothing judgment on behalf of IP.
This case is before this Court on transfer from the Ninth Court of Appeals in Beaumont pursuant to a docket equalization order issued by the Supreme Court of Texas. See TEX. GOV’T CODE ANN. § 73.001.
Payroll taxes are withholdings from an employee’s paycheck that are held in a trust account for the United States government and paid to the IRS. Signature had used its employees’ withheld payroll taxes for the business’s operating costs and was penalized by the IRS for doing so by the time of trial.
Wilhelm explained that the “knowns” bid included 6,100 man-hours of labor, but it took over 16,000 man-hours to get the slaker project completed due to all the delays and changes that occurred.
Based on a general description at trial, the green liquor is a highly caustic liquid used in the papermaking process that could seriously burn and injure a person if they come into contact with it.
Throughout the trial, IP argued that it used the gate logs to keep track of the workers’ time and to verify the invoices.
“Short pay” is a concept the parties described where a company would pay an agreed upon portion of the disputed bill and try to negotiate the remaining amount before paying it.
However, during his testimony, Wilhelm stated that Signature was owed $2.1 million, but got paid $1.1 million by IP (two payments of $775,000 and $225,000).
The May letter of intent had different closing conditions and contingent payment numbers. Moreno described the September letter of intent as having conditions that turned the deal into an “asset purchase with a contingent payment based on future income that the company could generate.” If Signature did not meet the required numbers, then Primoris would not pay the additional amounts.
Although Ogden testified that he did not believe the event at Exxon “caused problems” with Signature’s financials, he did state that it lost “five months” of jobs and revenue until Signature was exonerated by Exxon’s investigation as to liability for the accident.
Coker explained that the IRS liabilities comprised penalties only and did not include any actual tax because that would have been owed regardless of IP’s actions.
Coker disagreed that the bale conveyer project also happened in 2014. He stated that IP “slow-paid” Signature for the project.
Article 8.6 of the slaker contract stated:
6. Indemnity. The CONTRACTOR [Signature] assumes the defense and the entire responsibility and liability for any and all damage or injury of any kind or nature whatsoever (including resulting death) to all persons, whether employed by the CONTRACTOR or otherwise, including but not limited to (a) employees and agents of subcontractors of CONTRACTOR or COMPANY [IP], or (b) any other third party, and to all property (other than the work itself as set out in paragraph 7 below) caused by, resulting from, arising out of, or occurring in connection with the performance by CONTRACTOR, or any subcontractor or agent of CONTRACTOR, of this AGREEMENT. In the event the liability of the CONTRACTOR shall arise by reason of the sole negligence of COMPANY, then and only then, the CONTRACTOR shall not be liable under the provisions of this paragraph. If any person makes a claim for any such damage or injury (including death resulting therefrom) as hereinabove described, the CONTRACTOR agrees to indemnify and save harmless the COMPANY, its agents, servants and employees from and against any and all loss, damage, injury or expense including reasonable attorney’s fees that the COMPANY may sustain as a result of any such claims, and the CONTRACTOR agrees to assume, on behalf of the COMPANY, the defense of any action at law or in equity, which may be brought against the COMPANY upon such claim and to pay on behalf of the COMPANY upon its demand, the amount of any judgment that may be entered against the COMPANY in any such action. In any suit or claim by COMPANY, CONTRACTOR hereby expressly waives any immunity from suit which might otherwise be conferred by the Workers’ Compensation laws of any jurisdiction and which would preclude enforcement of the indemnification clause of the AGREEMENT by COMPANY, and CONTRACTOR further agrees to pay any reasonable attorney’s fees as are incurred by the COMPANY in securing compliance with the provisions of this indemnification.
The trial court reduced the jury’s verdict by $550,021 representing the amount IP had deposited into the registry of the court before trial, and an additional settlement of $2,500 representing an earlier settlement with another early party to this case.
The case IP references in its brief for this argument relates to “lost profits” and market value in a land condemnation case, State v. Luby’s Fuddruckers Restaurants, LLC, 531 S.W.3d 810 (Tex. App.—Corpus Christi–Edinburg 2017, pet. ref’d). We do not find the analysis on point for this case.
Testimony showed that Coker identified the pro forma balance sheet as an indication of “what you think it’s going to be.” IP asked if it was an “estimated or projected balance sheet” and not an actual number, to which Coker responded in the affirmative.
IP’s eleventh issue is relevant only if any of Ogden’s claims survived our review. Because we sustained IP’s issues as to all of Ogden’s claims, this issue is now moot and we do not address it. See TEX. R. APP. P. 47.1.
Court of Appeals of Texas, Corpus Christi-Edinburg.
David BARRETT, Appellant,
BERRY CONTRACTING, L.P., Elite Piping & Civil, Ltd., and Govind Development, LLC., Appellees.
Delivered and filed October 3, 2019
On appeal from the County Court at Law No. 1 of Nueces County, Texas, Robert J. Vargas, County Judge
Attorneys & Firms
Thomas C. Hall, Thomas C. Hall, PC, San Antonio, TX, for Appellant.
Brian C. Miller, Royston Rayzor Vickery & Williams L.L.P., Corpus Christi, TX, for Appellees.
Before Chief Justice Longoria
Memorandum Opinion by Justice Longoria
*1 After sustaining injuries while working at a refinery, appellant David Barrett sued appellees Berry Contracting, LP (Berry), Elite Piping & Civil, Ltd. (Elite), and Govind Development, LLC (Govind). The trial court granted Berry’s and Elite’s separate motions for summary judgment. The trial court also granted Govind’s motion to dismiss Barrett’s claims against it. By two issues, Barrett asserts that the trial court erred by (1) granting summary judgment in favor of Berry and Elite, and (2) granting Govind’s motion to dismiss. We affirm.
The underlying facts are undisputed. Barrett was an employee of Valero. On January 5, 2016, while he was working on Valero’s premises, the ground collapsed, causing him to sink three to four feet into “superheated soil.” Barrett sustained severe burn injuries to both of his legs.
On July 6, 2016, Barrett filed suit against BHP Engineering & Contracting, L.P. (BHP) and Berry. Barrett did not include an engineer’s certificate of merit with the petition. See TEX. CIV. PRAC. & REM. CODE ANN. § 150.002 (listing the requirements for certificates of merit and when they must be filed).
On August 23, 2016, Barrett filed an amended petition, which omitted BHP as a defendant but added Govind in its place. Again, Barrett filed no certificate of merit. See id. On February 1, 2017, Barrett filed a second amended petition, this time omitting Govind and leaving Berry as the only named defendant.
On December 27, 2017, Barrett filed his third amended petition, which reasserted his claims against Govind and added Elite as a new defendant. Even though Barrett did not include a certificate of merit, he acknowledged the applicable statute and referenced id. § 150.002(c). On January 28, 2018, Barrett filed an affidavit from Wesley Goodwin, a professional engineer, and offered it as his certificate of merit.
On March 27, 2018, Elite filed a motion for summary judgment. According to Elite, it was a subcontractor of Valero, the general contractor. Elite asserted that Valero provided Elite and Barrett with workers’ compensation insurance. Thus, as a subcontractor and deemed employee of Valero, Elite argued that it was “entitled to the exclusive remedy defense against the claims of Barrett.” See TEX. LAB. CODE ANN. § 408.001(a) (explaining the exclusive remedy defense available to subcontractors in certain scenarios). On May 1, 2018, the trial court granted Elite’s motion for summary judgment.
On June 4, 2018, Govind filed a motion to dismiss Barrett’s claims against it. Govind asserted that Barrett violated the statute by failing to file a certificate of merit with the first petition that named Govind as a defendant. See TEX. CIV. PRAC. & REM. CODE ANN. § 150.002. Govind alternatively claimed that the statute required dismissal because the affidavit by Goodwin was untimely and defective. See id. Barrett filed a response to Govind’s motion, arguing that “it was not possible to obtain a Certificate of Merit before the running of the statute of limitations.”
*2 On June 15, 2018, Berry filed a motion for summary judgment that was almost identical to Elite’s motion for summary judgment. Berry argued that it was a deemed employee of Valero because Berry had a written contract with Valero to provide Berry with workers’ compensation insurance. Therefore, similar to Elite, Berry asserted that it was entitled to the exclusive remedy defense. See TEX. LAB. CODE ANN. § 406.123(e). On August 15, 2018, the trial court held a hearing and granted Berry’s motion for summary judgment.
On September 11, 2018, the trial court granted Govind’s motion to dismiss. On October 11, 2018, the trial court signed an amended order, specifying that Barrett’s claims against Govind were dismissed without prejudice. This appeal ensued.
II. “PROVIDE” COVERAGE
In his first issue, Barrett argues that the trial court erred by granting summary judgment in favor of Berry and Elite because the contracts do not meet the requirements of id. § 406.123(a).
A. Standard of Review and Applicable Law
We review a traditional summary judgment de novo. See Lujan v. Navistar Fin. Corp., 433 S.W.3d 699, 704 (Tex. App.—Houston [1st Dist.] 2014, no pet.) (“When a defendant moves for traditional summary judgment, he must either: (1) disprove at least one essential element of the plaintiff’s cause of action; or (2) plead and conclusively establish each essential element of his affirmative defense, thereby defeating the plaintiff’s cause of action.”).
In the context of summary judgments, “[i]ssues not expressly presented to the trial court by written motion, answer or other response shall not be considered on appeal as grounds for reversal.” TEX. R. APP. P. 33.1.
The “[r]ecovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage ... against the employer or an agent or employee of the employer for ... a work-related injury sustained by the employee.” TEX. LAB. CODE ANN. § 406.123(a) (emphasis added).
*3 “[T]o seek the exclusive remedy defense, Becon Const. Co. v. Alonso, 444 S.W.3d 824, 834 (Tex. App.—Beaumont 2014, pet. denied).
Barrett argues on appeal that the written contracts between Valero and Elite and Berry did not obligate Valero to continue to provide coverage if the rolling owner controlled insurance program (ROCIP) was discontinued after the work began. Thus, Barrett claims that Valero did not “provide” workers’ compensation insurance coverage to Elite and Berry, which means Berry and Elite were not entitled to the exclusive remedy defense. See TEX. LAB. CODE ANN. § 406.123(a). However, this does not correspond with the arguments raised by Barrett in response to Elite’s and Berry’s motions for summary judgment at the trial court level.
In response to Berry’s motion for summary judgment, Barrett argued that, based on the terms of the written contract, Berry was an independent contractor as opposed to a deemed employee, meaning Berry was not entitled to the protection of the exclusive remedy defense. Because Barrett’s argument that Valero did not “provide” Berry coverage has been made for the first time on appeal, this issue is waived. See Wells Fargo Bank, 458 S.W.3d at 916.
Likewise, in response to Elite’s motion for summary judgment, Barrett raised four arguments: (1) Elite did not establish that the written contract to provide coverage was in force and effect at the time the incident occurred; (2) Elite did not establish that the written contract covered the specific time and location of the injury; (3) there was a genuine issue of material fact as to whether Valero qualified as a general contractor; and (4) the written contract described Elite as an independent contractor, which precluded Elite from claiming deemed employee status. Barrett addresses none of these issues on appeal and instead argues that Valero did not “provide” coverage to Elite because “the contracts provide that in the event that Valero does not elect to furnish workers’ compensation insurance, that Berry and Elite agree to furnish the insurance at their expense, as opposed to Valero’s.” Because Barrett’s appellate issue was not properly raised in the summary judgment proceedings at the trial court level, this issue is waived. See Wells Fargo Bank, 458 S.W.3d at 916.
Even assuming that Barrett properly preserved this appellate issue, we have recently held that to “provide” in the context of the Texas Workers’ Compensation Act means “to supply or make available.” Becon, 444 S.W.3d at 834. Therefore, the trial court did not err in granting summary judgment in favor of Elite and Berry. We overrule Barret’s first issue.
III. CERTIFICATE OF MERIT
*4 In his second issue, Barrett argues that the trial court erred in granting Govind’s motion to dismiss.
A. Standard of Review and Applicable Law
“We review a trial court’s ruling on a motion to dismiss a case for failure to comply with Barron, Stark & Swift Consulting Eng’rs, LP v. First Baptist Church, Vidor, 551 S.W.3d 320, 322 (Tex. App.—Beaumont 2018, no pet.). An abuse of discretion occurs when the trial court acts arbitrarily or unreasonably, without reference to guiding rules and principles. See id.
In claims against certain licensed or registered professionals, such as a licensed professional engineer and the firm she or he represents, the plaintiff is generally supposed to file a certificate of merit “with the complaint” against said defendant. See Sharp Eng’g v. Luis, 321 S.W.3d 748, 752 (Tex. App.—Houston [14th Dist.] 2010, no pet.).
The contemporaneous filing requirement has an exception that is only available if the plaintiff “both files within ten days of the end of the limitations period and alleges that the late filing prevented the preparation of a certificate of merit.” Crosstex, 430 S.W.3d at 395.
Barrett’s first amended petition was the first petition to name Govind as a defendant. This petition was filed about sixteen months before the end of the limitations period, meaning Barrett was still subject to the contemporaneous filing requirement. See TEX. CIV. PRAC. & REM. CODE ANN. § 150.002(e).
*5 Therefore, the trial court did not abuse its discretion in granting Govind’s motion to dismiss. We overrule Barrett’s second issue.
We affirm the judgment of the trial court.
Court of Appeals of Texas, Corpus Christi-Edinburg.
Rebecca GALLARDO, Appellant,
INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, Appellee.
Delivered and filed June 20, 2019
On appeal from the 117th District Court of Nueces County, Texas, Sandra Watts, District Judge.
Attorneys & Firms
Rebecca Gallardo, Corpus Christi, TX, pro se.
Vaughan Waters, Thornton, Biechlin, Reynolds & Guerra, L.C., San Antonio, TX, for Appellee.
Before Chief Justice Rodriguez1
Memorandum Opinion by Justice Rodriguez
*1 Pro se appellant Rebecca Gallardo appeals the trial court’s summary judgment in favor of appellee Insurance Company of the State of Pennsylvania (ICSOP). By four issues, which we address as three, Gallardo contends that the trial court improperly granted ICSOP’s combined motion for no-evidence and traditional summary judgment.2 We affirm.
On June 2, 2008, Gallardo sustained an on-the-job injury for which she sought workers’ compensation benefits. ICSOP was the workers’ compensation insurance carrier available through Gallardo’s employer. The Texas Department of Insurance, Division of Worker’s Compensation (Division), concluded that Gallardo was not entitled to receive the workers’ compensation benefits she sought. In February 2011, Gallardo filed suit in County Court at Law Number One of Nueces County, Texas for judicial review of the Division’s decision that she was not entitled to first, second, third, or fourth-quarter supplemental income benefits (SIBs). Pursuant to a Rule 11 agreement, the parties settled Gallardo’s suit, agreeing that she was entitled to first through third-quarter SIBs.
On April 12, 2012, the trial court, in a separate cause, signed a final judgment in accordance with the settlement agreement providing that Gallardo was entitled to SIBs for the first, second, and third quarters. However, the agreement, as adopted by the final judgment, provided that Gallardo was not entitled to SIBs for the fourth, fifth, sixth, seventh, and eighth quarters. ICSOP paid the first, second, and third-quarter SIBs to Gallardo. The parties executed a proposed “DWC-24 Form” and submitted it to the Division for review on May 10, 2012, which the Division denied on May 15, 2012.
In July 2012, ICSOP filed suit against Gallardo in the Court at Law Number Two of Nueces County, Texas for conversion, fraud-in-the inducement, and breach of the settlement agreement, claiming that Gallardo refused to cooperate in executing a new DWC-24 Form for submission to the Division. ICSOP also sought specific performance of the settlement agreement. Gallardo filed an answer and plea to the jurisdiction, a counter-claim, and a motion for sanctions. ICSOP filed a motion for traditional and no-evidence summary judgment requesting specific performance of the settlement agreement or the return of the settlement funds. The trial court granted summary judgment and ordered specific performance of the settlement agreement. The trial court concluded that Gallardo (1) was entitled to SIBs for the first, second, and third quarters; (2) was not entitled to SIBs for the fourth, fifth, sixth, seventh, and eighth quarters; (3) could not recover attorney fees in excess of $12,500; and (4) “shall cooperate with ICSOP in order to ensure that all necessary paperwork, including [the DWC-24 Form] covering the fifth, sixth, seventh, and eighth quarters, is timely submitted and approved” by the Division.
*2 In our Court, Gallardo appealed the trial court’s summary judgment in appellate cause number 13-14-00132-CV, and she filed a petition for writ of mandamus or prohibition in appellate cause number 13-14-00203-CV. See In re Gallardo, 2015 WL 730920, at *1. Regarding whether Gallardo was entitled to the fifth through eighth-quarter SIBs, we concluded the trial court lacked jurisdiction because Gallardo had not exhausted her administrative remedies regarding her entitlement to those quarters and the Division had not approved a benefit dispute agreement (BDA) as to those quarters. See id. at *10. We conditionally granted mandamus relief directing the trial court to strike those portions of its order stating that Gallardo was not entitled to the fifth through eighth-quarter SIBs. Id. at 12. We denied all other relief requested by Gallardo. See id.
Thus, in sum, we affirmed the trial court’s summary judgment in favor of ICSOP; we concluded that the trial court had jurisdiction to order Gallardo to cooperate and present another DWC-24 Form; and we concluded that the trial court lacked jurisdiction to determine Gallardo’s eligibility to the fifth through eighth-quarter SIBs because she had not exhausted her administrative remedies. See 381 S.W.3d 430, 441 (Tex. 2012)).
Prior to our decisions, on August 9, 2013, Gallardo filed suit in this cause claiming that the Division improperly found she is not entitled to lifetime income benefits (LIBs) beginning on the date of her injury and SIBs for the fifth through eighth quarters. Gallardo stated that she “had exhausted her administrative remedies and now [sought] judicial review pertaining to her SIBs claims.” ICSOP filed a general denial.
On March 31, 2017, ICSOP filed a motion for no-evidence and traditional summary judgment arguing, among other things, that Gallardo “failed to timely exhaust her administrative remedies for quarters 8–10, thereby depriving the Court of jurisdiction over same.” The trial court granted ICSOP’s motion, and this appeal followed.
By her first and second issues, Gallardo contends the trial court improperly granted summary judgment regarding her claim for SIBs because (1) the trial court lacked jurisdiction, and (2) there had not been an adequate time for discovery.
Gallardo argues that the law of the case doctrine applies here because this Court in its previous mandamus proceeding already determined that the trial court in that cause lacked jurisdiction to determine her entitlement to SIBs for the fourth through eighth quarters. TEX. R. APP. P. 47.1.
*3 In In re Gallardo, we determined that the trial court lacked jurisdiction to address whether Gallardo was entitled to SIBs for the fourth through eighth quarters.3 GuideOne Ins. Co. v. Cupps, 207 S.W.3d 900, 902, 908 (Tex. App.—Fort Worth 2006, pet. denied).
On appeal and in the trial court, Gallardo admits that she failed to exhaust her administrative remedies, and we are unable to reconcile her arguments. First, she wants us to reverse the trial court’s summary judgment which granted the dismissal of her SIBs claim; yet, she concedes and requests that we find that the trial court lacked jurisdiction over her SIBs claims. Accordingly, considering that Gallardo concedes she has not exhausted her administrative remedies and that the trial court lacked jurisdiction over her claims, the proper disposition is to dismiss her suit regarding the SIBs for lack of jurisdiction. See Tara Partners, Ltd. v. CenterPoint Energy Res. Corp., 371 S.W.3d 441, 444 (Tex. App.—Houston [1st Dist.] 2012, no pet.) (explaining that “[w]hether an agency has exclusive jurisdiction is a question of law we review de novo” and affirming the trial court’s judgment dismissing the plaintiff’s claims because the plaintiff had not exhausted its administrative remedies). We overrule Gallardo’s first issue.
By her second issue, Gallardo contends the trial court improperly granted ICSOP’s motion for no-evidence summary judgment regarding the contested SIBs because the parties did not engage in any discovery in the judicial review proceedings below.5 However, as stated above, Gallardo concedes that the trial court lacked jurisdiction over her SIBs claims. Therefore, it properly dismissed those claims, and whether there was a proper time for discovery is not dispositive.6 We overrule Gallardo’s second issue.
*4 By her third issue, Gallardo contends that the trial court improperly granted summary judgment regarding her LIBs claim. ICSOP responds that summary judgment was proper because Gallardo failed to provide more than a scintilla of evidence that she suffered an injury to the spine that resulted in permanent and complete paralysis of both arms, both legs, or one arm and one leg and that “she has ‘total or substantial’ loss of use, let alone loss of some function.”
A. Standard of Review and Applicable Law
A party may move for summary judgment on the ground that no evidence exists of one or more essential elements of a claim on which the adverse party bears the burden of proof at trial. Timpte Inds., Inc., 286 S.W.3d at 310.
The Texas Workers’ Compensation Act (Act) authorizes the award of LIBs to employees who lose certain body parts or suffer certain injuries in work-related accidents. TEX. LAB. CODE ANN. § 408.161(a)(1)(5).
ICSOP filed a motion for no-evidence summary judgment claiming there was no evidence that Gallardo suffered an “Viasana v. Ward County, 296 S.W.3d 652, 655 (Tex. App.—El Paso 2009, no pet.) (explaining that the plaintiff’s failure to respond to a motion for no-evidence summary judgment required the trial court to grant it). We overrule Gallardo’s third issue.
*5 We affirm the trial court’s judgment.
Retired Thirteenth Court of Appeals Justice Nelda Rodriguez, assigned to this Court by the Chief Justice of the Supreme Court of Texas pursuant to the government code. See TEX. GOV’T CODE ANN. § 74.003.
Gallardo’s brief is multifarious and provides little or no legal analysis of the facts sufficient for us to properly construe many of her arguments.
We review and evaluate pro se pleadings with liberality and patience, but otherwise apply the same standards applicable to pleadings drafted by lawyers. The Texas Rules of Appellate Procedure require an appellant’s brief to contain “a clear and concise argument for the contentions made, with appropriate citations to authorities and to the record.” It is not the proper role of this Court to create arguments for an appellant—we will not do the job of the advocate.
4,310 in U.S. Currency v. State, 133 S.W.3d 828, 829 (Tex. App.—Dallas 2004, no pet.).
We note that in her live pleading, Gallardo did not seek fourth-quarter SIBs.
We note that ICSOP moved for summary judgment in part on the basis that Gallardo had not exhausted her administrative remedies, and the trial court stated that its “traditional and no evidence motion for summary judgment is hereby in all respects granted ....”
Rule 166a(i) provides a party may move for no-evidence summary judgment after an adequate time for discovery has passed. Specialty Retailers, Inc. v. Fuqua, 29 S.W.3d 140, 145 (Tex. App.—Houston [14th Dist.] 2000, pet. denied)).
Nonetheless, we note that nothing in the record indicates that, in the trial court, Gallardo filed an affidavit explaining her need for further discovery or a verified motion for continuance as required to preserve this issue. See 4,310 in U.S. Currency, 133 S.W.3d at 829.
Court of Appeals of Texas, Corpus Christi-Edinburg.
CITY OF CORPUS CHRISTI, Appellant,
Marie MULLER and Dean Muller, Appellees.
Delivered and filed June 6, 2019
On appeal from the County Court at Law No. 4 of Nueces County, Texas.
Attorneys & Firms
Patrick L. Beam, for Appellees.
Mark DeKoch, Renatto Garcia, for City of Corpus Christi.
Before Chief Justice Longoria
Memorandum Opinion by Chief Justice Contreras
*1 Appellant, the City of Corpus Christi (the City), appeals the trial court’s denial of its plea to the jurisdiction. Appellees Marie Muller and Dean Muller filed suit against the City after Marie suffered injuries when she stepped into a pothole in the City Hall parking lot. By one issue, the City argues that the trial court erred when it denied its plea. We affirm.
Marie was employed by the City through a temporary staffing agency, and she worked at City Hall in Corpus Christi, Texas. Around 8:00 a.m. on or about October 13, 2015, Marie parked in the City Hall parking lot and began to walk towards City Hall to report for work. During her walk through the parking lot, Marie stepped into a pot hole, fell, and suffered injuries. She brought suit against the City under a premises liability theory pursuant to the Texas Tort Claims Act (TTCA), and her husband, Dean, brought a claim for loss of consortium.
The City filed a plea to the jurisdiction arguing that the City was Marie’s employer and that, because Marie’s injury occurred in the course and scope of her employment, Marie’s remedy was limited solely to the benefits under the workers’ compensation insurance offered by the City. The City’s plea, however, did not address how Marie’s injuries occurred within the course and scope of her employment. More specifically, the City never alleged in its plea or introduced any evidence in support thereof that it implicitly or directly intended, authorized, or instructed Marie to use the parking lot as her access route to work. Appellees filed a response to the City’s plea and argued that Marie’s injuries did not occur in the course and scope of her employment, and, therefore, Marie was not subject to the exclusive remedy of workers’ compensation insurance. After a hearing, the trial court denied the City’s plea. This interlocutory appeal followed. See TEX. CIV. PRAC. & REM. CODE ANN. § 51.014(a)(8) (allowing immediate appeal of an interlocutory order denying a plea to the jurisdiction by a governmental unit).
A. Standard of Review
A plea to the jurisdiction is a dilatory plea that seeks to dismiss a cause for lack of subject-matter jurisdiction. Blue, 34 S.W.3d at 555.
B. Applicable Law
*2 Governmental immunity defeats subject-matter jurisdiction in suits against subdivisions of the State, such as the City, unless that immunity has been clearly and unambiguously waived by the legislature. See Durhart v. State, 610 S.W.2d 740, 743 (Tex. 1980) (noting that, in adopting the TTCA and providing workers’ compensation coverage for state employees, the state retains its immunity and provides its employees an alternate remedy through workers compensation insurance).
Under the TWCA, an injury is compensable and subject to the exclusive remedy bar if it “arises out of and in the course and scope of employment ....” Tex. Workers’ Comp. Ins. Fund v. Rodriguez, 953 S.W.2d 765, 768 (Tex. App.— Corpus Christi–Edinburg 1997, pet. denied) (“Course and scope of employment is not limited to the exact moment when the employee reports for work, the moment when the employee’s labors are completed, or to the place where work is done.”).
Here, the parties dispute whether Marie was in the course and scope of her employment when she suffered her injuries. If she was within the course and scope of her employment, then the exclusive remedy bar of the TWCA applies, and the City’s immunity has not been waived. See City of Bellaire, 400 S.W.3d at 924
The general rule in Texas is that travel to and from work is not considered to be within the course and scope of the employee’s employment. Rodriguez, 645 S.W.2d at 539.
*3 The cases considering the application of the [access] doctrine support the general propositions that an employee is deemed to be in the course of his employment within a reasonable margin of time necessary for passing to and from the place of his [or her] work both before and after his [or her] actual hours of service; that an injury received within that period is ordinarily held to have been sustained in the course of employment if it occurs at a place intended by the employer for use by the employee in passing to and from the actual place of service, on premises owned or controlled by the employer, or so closely related to the employer’s premises as to be fairly treated as part thereof ....
Behnken, 246 S.W. at 74.
Here, appellees contend that the City failed to introduce any evidence that the City intended or authorized Marie to park in the City Hall parking lot and that the parking lot is open to the general public. We agree. The City presented no evidence along with its plea indicating that the City implicitly or directly intended, authorized, or instructed Marie to use the City Hall parking lot as her access route to work. See Behnken, 246 S.W. at 74.
Furthermore, whether an injury was received by an employee under circumstances constituting the scope and course of his or her employment “is usually a question of fact governed and controlled by the particular facts of each case.” Dickson, 880 S.W.2d at 787 (concluding that employee was in the scope of employment as a matter of law in workers’ compensation case when “driveway on which accident occurred was located entirely on the employer’s premises and provided the only means of ingress and egress.”).
After reviewing the pleadings, the City’s plea to the jurisdiction, and the evidence submitted therewith, we conclude that the City failed to show that the trial court lacked subject-matter jurisdiction. See Kelty, 391 S.W.2d at 560, 564–65.
We overrule the City’s sole issue.
We affirm the trial court’s order.
Court of Appeals of Texas, Corpus Christi-Edinburg.
Guadalupe GUERRA Jr., Appellant,
ACE AMERICAN INSURANCE COMPANY as Successor of INA of Texas, Appellee.
Delivered and filed June 6, 2019
On appeal from the 319th District Court of Nueces County, Texas.
Attorneys & Firms
Michael J. Donovan, for ACE American Insurance Company as Successor of INA of Texas
Guadalupe Guerra Jr., pro se
Before Chief Justice Perkes
Memorandum Opinion by Chief Justice Contreras
*1 Appellant Guadalupe Guerra Jr., pro se, appeals the trial court’s judgment setting aside a workers’ compensation award pursuant to a suit filed by appellee, ACE American Insurance Company as successor of INA of Texas (ACE). By three issues, Guerra contends the trial court erred by (1) realigning the parties at trial, (2) issuing an erroneous jury charge, and (3) “allowing opposing counsel to make materially false statements to the jury.” We affirm.
Guerra was injured in 1990 while working for Reynolds Metals Company, which had workers’ compensation insurance through ACE’s predecessor. Attorneys for Guerra and ACE’s predecessor entered into an “Agreed Final Judgment” on April 19, 1996, providing for a lump sum payment of $ 50,000 to Guerra in exchange for his release of any claims regarding past medical expenses arising from the workplace injury. The “Agreed Final Judgment” also stated:
With regard to future medical expenses, [ACE] agrees to pay all reasonable and necessary medical expenses incurred as a result of treatment by Dr. Gilbert Meadows of San Antonio, Texas, only.
1. It is specifically agreed that [ACE] shall not be responsible for any medical treatment incurred in the future by any doctor or health care provider, other than Dr. Gilbert Meadows, unless said expenses were incurred during or as a result of surgery by Dr. Gilbert Meadows.
2. It is agreed, moreover, that [ACE] shall not be responsible for any expenses incurred by any other medical doctor, chiropractor, therapist, or health care provider except as a result of surgery as noted ... above.
An addendum to the “Agreed Final Judgment” stated:
The term “treatment” means lifetime medical and surgical care. Surgical care shall include all hospital, medical, therapeutic, and pharmaceutical treatment ordered by Dr. Gilbert Meadows, or his surgical assistants under the direction of Dr. Meadows, in order to allow a full recovery from the effects of surgery.
Later in 1996, Guerra underwent spinal fusion surgery performed by Dr. Meadows in San Antonio. Dr. Meadows continued to provide treatment until 2003, when he advised Guerra that he was no longer accepting workers’ compensation patients. Subsequently, Guerra received treatment from Abimael Perez, M.D., a physician located in Corpus Christi. ACE and its predecessors continued to cover that treatment until January 2013, when Dr. Perez also stopped accepting workers’ compensation patients.
At issue in this case is Guerra’s request in 2015 to be reimbursed a total of $ 4,062.75 for: (1) treatment by Misty Durbin, a chiropractor; (2) an orthopedic bed; (3) orthopedic shoes and socks; and (4) travel expenses. ACE refused the request, so Guerra filed a claim for compensation with the Texas Department of Insurance, Division of Workers’ Compensation (the Division). On July 21, 2015, the Division issued a final award granting Guerra all of the benefits he requested. ACE then filed the instant suit in district court seeking judicial review of the award.
*2 In December of 2015, ACE filed a motion for no-evidence summary judgment arguing that “[t]here is no evidence of any attempt, much less a successful one, to set aside” the 1996 agreed judgment. The trial court denied the motion but granted permission to appeal under ACE Am. Ins. Co. v. Guerra, No. 13-16-00628-CV, 2017 WL 929485, at *2 (Tex. App.—Corpus Christi–Edinburg Mar. 9, 2017, no pet.) (mem. op.) (concluding that the case “does not meet the strict jurisdictional requirements” for permissive appeals provided by statute and rule).
On July 21, 2017, ACE filed a “Motion to Re-Align the Parties” arguing that “[p]ursuant to Article 8307, Section 5, Vernon’s Annotated Civil Statutes, [Guerra] has the burden of proof as he is the party claiming compensation.” The trial court granted the motion on September 12, 2017, and rendered an order stating that Guerra shall be designated as the plaintiff, ACE shall be designated as the defendant, and Guerra “as the claimant of compensation shall have the burden of proof as required by law.”
A jury trial took place later that day. Guerra, appearing pro se, was the only testifying witness. He explained how he was injured in 1990:
While at work I was assaulted by a co-worker who, I guess, they call it the sucker punch. I never saw it coming. Pulled the chair from underneath me and my back slammed against the—the—the foundation which is concrete slab and the metal control panel against my head and my neck.
Guerra stated that, under the 1996 agreed judgment, he received “lifetime medical plus up to $ 50,000 for back pay wages.” He testified that, after his surgery, a psychiatrist diagnosed him with Viagra, among other medications. When Dr. Meadows stopped seeing him, Dr. Perez continued the treatment and medications. According to Guerra, Durbin, as a chiropractor, could not prescribe medications but did prescribe orthopedic supplies. Guerra stated that ACE is now “trying to say that they no longer need ... to be responsible in taking care of me based on whatever.” He further stated: “[A]s far as I know lifetime healthcare and Dr. Gilbert Meadows are not a package deal so I’m still entitled to lifetime healthcare with or without Dr. Gilbert Meadows and that’s what I’m fighting for right now.”
On cross-examination, Guerra acknowledged that he had a “nerve conduction study test” in 2006 which showed no abnormalities. He further conceded that, in 2001, he sent a letter requesting that ACE’s predecessor provide him with a cell phone. The letter explained that “[o]ne of the needs[ ] of a disabled person is being able to communicate in case of an emergency.” Guerra agreed with ACE’s counsel that, in 2011, he appeared at an informal workers’ compensation conference wearing “foam rubber Crocs.” He further admitted that he was involved in a motor vehicle accident in 2000, and that he suffered two slip-and-fall accidents at Whataburger and Walmart in 2006 and 2011, respectively.
In closing, Guerra claimed that he was entitled to new orthopedic socks and shoes every six months “according to the workers’ comp law.” He explained: “I understand that Dr. Gilbert Meadows was supposed to be my primary doctor, but I didn’t know anything about that or understood exactly what the contract was saying; only that the lifetime healthcare was there for me when I need healthcare.”
*3 The jury charge asked one question: “Is [ACE] under the Agreed Judgment between the parties dated April 19, 1996, responsible for the medical bills incurred by [Guerra] in 2015 in the amount of $ 4,062.75?” The charge instructed the jury as follows: “A ‘yes’ answer must be based on a preponderance of the evidence unless you are told otherwise.... If you do not find that a preponderance of the evidence supports a ‘no’ answer, then answer ‘yes.’ ” The jury answered “No.” The trial court then rendered judgment that “[Guerra] take nothing as payment for medical treatment against [ACE].” This appeal followed.
A. Realignment of Parties
By his first issue on appeal, Guerra contends the trial court erred by granting ACE’s motion to realign the parties. The trial court has broad discretion in ordering the alignment of parties, and its actions will not be disturbed on appeal except for the abuse of that discretion. TEX. R. APP. P. 44.1(a) (“No judgment may be reversed on appeal on the ground that the trial court made an error of law unless the court of appeals concludes that the error complained of: (1) probably caused the rendition of an improper judgment; or (2) probably prevented the appellant from properly presenting the case to the court of appeals.”).
Guerra cites TEX. LAB. CODE ANN. § 410.303 (“The party appealing the decision on an issue described in Section 410.301(a) has the burden of proof by a preponderance of the evidence.”); see also id. § 410.301(a) (“Judicial review of a final decision of the [Division] regarding compensability or eligibility for or the amount of income or death benefits shall be conducted as provided by this subchapter.”).
In response, ACE argues that, because Guerra’s injury occurred prior to January 1, 1991, the current version of the TWCA does not apply to this case. Instead, ACE contends that the earlier version of the workers’ compensation law, Title 130 of the Texas Revised Civil Statutes, applies. And ACE argues that, under the old law, “in a scenario where the carrier filed a trial de novo appeal” of an award by the Industrial Accident Board (the Board), the Division’s predecessor, “it was required that the injured worker to [sic] file a counter-claim and pursue his burden to prove that the requested medical treatment was reasonable, necessary, and related to his compensable injury.” See Associated Indem. Corp. v. Peel, 157 S.W.2d 416, 417–18 (Tex. App.—San Antonio 1941, writ dism’d) (“When the insurance carrier appealed to the District Court from the award made by the Board on the principal claim, such appeal had the effect of depriving the Board of all jurisdiction of the principal as well as incidental claims, and of transferring to the District Court appellee’s claim and all other matters which could have been adjudicated by the Board, whether affirmatively disposed of therein or not.... Appellee’s remedy in such case was to exercise his privilege to assert his claim by way of cross-action in appellant’s appeal in the District Court.”).1
*4 We agree with ACE. The current version of the TWCA was enacted in 1989, and the implementing legislation provided that the Division “shall process claims for injuries occurring before January 1, 1991, in accordance with the law in effect on the date that the injury occurred, and the former law is continued in effect for this purpose.” Act of Dec. 11, 1989, 71st Leg., 2d C.S., ch. 1, § 17.18, 1989 Tex. Gen. Laws 122, 122; see Martinez v. Second Injury Fund of Tex., 789 S.W.2d 267, 276 (Tex. 1990).
In any event, even if the trial court erred in granting the motion to realign, that error would not be reversible because no probable prejudice has been shown.2 See TEX. R. APP. P. 44.1(a).
Guerra’s first issue is overruled.
B. Jury Charge
Guerra argues by his second issue that the jury charge contained error. He argues that “[h]ad the Court not erred it would have placed the burden of proof on the true appealing party, the insurance party.” He contends that “this case had nothing to do with the Agreed Final Judgment” and that, “[i]n 2015, the question for the jury would have been one regarding treatment or items prescribed by either Dr. Abimael Perez or Dr. Misty Durbin.” He further argues that the trial court should have reviewed the Division’s award under a substantial evidence standard. See TEX. GOV’T CODE ANN. § 2001.174 (describing substantial evidence review).
Guerra does not cite authority regarding jury charge error. See TEX. R. APP. P. 38.1(i). Regardless, all aspects of this multifarious issue are dependent on Guerra’s contention that the current version of the TWCA applies, which we have already rejected. Accordingly, we overrule Guerra’s second issue.
C. “Materially False Statements”
By his third issue, Guerra contends that ACE’s counsel “made statements to the jury that were deliberately false.”3 Specifically, he contends that “opposing counsel falsely claimed that only medical services ordered by Dr. Gilbert Meadows were compensable.” He notes that, even though the 1996 agreed judgment “restricted medical services to those prescribed by Dr. Meadows,” it “did not consider that at some future date, Dr. Meadows might no longer be able or willing to continue” serving as his treating physician.
*5 Guerra appears to complain of ACE’s counsel’s opening statement at trial, which began as follows:
Ladies and gentlemen of the jury, Mr. Guerra got hurt back in 1990 at work in an argument with a co-employee and ended up with the co-employee, I think, kicking the chair out that he was sitting in so [sic] jarring to his low back. He ended up never going back to work and eventually having a one level fusion done at L4-5 level in November of 1996.
He was represented by an attorney throughout the process and they settled the case with the insurance carrier about half a year before he had the surgery in April of 1996 and he got a lump sum amount. You’ll see the whole agreed judgment, $ 50,000, back in 1996 and lifetime medical, but the parties agreed that [ ] the lifetime medical had to be performed or at the direction of the surgeon which was Dr. Meadows out of San Antonio.
He’s the one that eventually did his surgery after the agreed judgment had already been signed but both parties knew that’s where he might be heading, so when they settled the case his attorney wanted to make sure he was taken care of if he had the surgery. There’s language in the judgment that talks about treatment by Dr. Meadows or at his direction by his surgical assistants to have the surgery and recover from the surgery.
It specifically says that it’s not—the future medical is limited to Dr. Meadows and not to chiropractic or physical therapists. The insurance company did not want a chiropractor running the show, so to speak, for lifetime medical on this claim; the parties agreed with Dr. Meadows.
Guerra did not object to these remarks at trial. “Error as to improper jury argument must ordinarily be preserved by a timely objection which is overruled.” Id. at 681.
We are not persuaded that the comments at issue were improper, much less incurably so. As Guerra notes and as set forth above, the 1996 judgment did not explicitly contemplate that Dr. Meadows might someday withdraw from serving as his treating physician. However, it did state that ACE would be responsible for any expenses “incurred during or as a result of surgery” by Dr. Meadows. In any event, the entire 1996 judgment was entered into evidence and was available to the jury. Guerra does not dispute the validity of the 1996 judgment; nor does he argue that the evidence before the jury, which included the 1996 judgment, was insufficient to support the verdict. Under these circumstances, we conclude counsel’s remarks regarding the terms of the 1996 agreed judgment were not incurably prejudicial. Accordingly, Guerra waived the issue by failing to object. See TEX. R. APP. P. 33.1(a). We overrule Guerra’s third issue.
*6 The trial court’s judgment is affirmed.
Though the parties obviously differ on which version of the TWCA is applicable, neither has cited any authority—in the trial court or in this Court—to support their respective positions. ACE cited the old law and caselaw applying it, but it did not cite any authority establishing that the old version, rather than the current version, applies in this case.
In his brief, Guerra does not address whether the claimed error is reversible.
In his argument as to his second issue, Guerra asserts that the trial judge “seemed to be out of it in terms of knowledge regarding the correct way to try a case of this type” and that ACE’s trial counsel “must have known that his special issue had nothing to do with the matter being litigated” but “[n]onetheless, he submitted it and the Court accepted it.” In his third issue, he argues ACE’s counsel “deliberately tried to confuse the jurors.” Though Guerra is a pro se litigant and is therefore not subject to the Texas Disciplinary Rules of Professional Conduct, we note that “ad hominem attacks on courts, opposing parties, or opposing counsel are ineffective and inappropriate, whether made by attorneys or pro se litigants.” Gleason v. Isbell, 145 S.W.3d 354, 358 (Tex. App.—Houston [14th Dist.] 2004, no pet.) (Frost, J., concurring and dissenting).
Court of Appeals of Texas, Corpus Christi-Edinburg.
Audrey NICKERSON, Appellant,
Unique Employment, LLC, Unique Employment Services, Unique Employment I, Ltd, d/b/a Unique Employment Services, Appellees.
Delivered and filed May 9, 2019
On appeal from the County Court at Law No. 2 of Nueces County, Texas. Hon. Lisa Gonzales, County Judge.
Attorneys & Firms
Stephen Carrigan, Carrigan & Anderson, PLLC, 101 Shoreline Blvd., Ste. 420, Corpus Christi, TX 78401, for Appellant.
Brian C. Miller, Royston, Rayzor, Vickery & Williams, LLP, Frost Bank Plaza, Suite 1300, 802 N. Carancahua St., Corpus Christi, TX 78401, for Appellee.
Before Chief Justice Hinojosa
Memorandum Opinion by Justice Hinojosa
*1 Appellant Audrey Nickerson sued appellees Julio Pineda and Unique Employment I, Ltd., d/b/a Unique Employment Services (Unique) for negligence. Appellees filed a plea to the jurisdiction, which the trial court granted. By four issues, which we treat as three, Nickerson argues that: the trial court erred in granting appellees’ plea to the jurisdiction with respect to (1) Pineda and (2) Unique; and (3) the trial court abused its discretion by denying Nickerson’s motions to compel discovery. We affirm in part and reverse and remand in part.
Nickerson, a City of Corpus Christi (City) employee, alleges that Pineda struck Nickerson “in the back with a John Deere tractor front loader bucket” while both were working on a City project. Pineda was a temporary worker supplied by Unique to the City through a temporary staffing service agreement. Nickerson sued both Pineda and Unique for negligence.
Appellees filed a joint plea to the jurisdiction1 arguing that Pineda was an employee of the City at the time of the accident because the City controlled the details of Pineda’s work. As such, appellees maintained that Pineda was personally immune from suit by operation of the election-of-remedies provision in the Texas Tort Claims Act (TTCA). See TEX. CIV. PRAC. & REM. CODE ANN. § 101.106 (West, Westlaw through 2017 1st C.S.). Appellees further argued that Unique could not be liable under the theory of respondeat superior without a valid cause of action against Pineda. Appellees attached the following evidence to their plea to the jurisdiction: (1) the declaration of Unique’s Executive Vice President, Rebecca Bradford; (2) the “Temporary Staffing Service Agreement” between Unique and the City; and (3) excerpts from Pineda’s deposition testimony.
Nickerson filed a response, arguing generally that Pineda was not an employee of the City because the City did not control the details of Pineda’s work. Nickerson supported her response with the following evidence: (1) appellees’ responses to written discovery; (2) the deposition testimony of Nickerson, Reynaldo Garcia, Joe Ramirez, and Severiano Salas; and (3) the affidavit testimony of Nickerson, Garcia, Ramirez, and Salas.
Appellees filed an objection to the affidavits of Nickerson, Garcia, and Ramirez, arguing that they were conclusory and that Nickerson and Ramirez’s affidavits were “sham” affidavits.
Nickerson later filed motions to compel: the deposition of a City employee and Unique’s corporate representative; and responses to requests for production and interrogatories.
B. Evidentiary Record
The evidentiary record establishes the following uncontroverted facts concerning Pineda’s employment relationship to the City and Unique. The City awarded Unique a contract to provide temporary staffing services. Unique’s duties under the contract included administering payroll and benefits for temporary workers. Pineda applied to Unique for an assignment with the City, and he was later interviewed by a City employee. Pineda accepted an offer from the City to work in the City’s Water Department. Once Pineda was hired, the City determined his schedule, pay rate, and job responsibilities. Pineda wore a City uniform, used City equipment, and reported directly to a City supervisor. The City paid Pineda’s wages to Unique based upon the hours of work performed, and Unique issued Pineda’s paycheck.
*2 The City required Pineda to follow its policies and procedures, and it was responsible for training, performance evaluations, and discipline. During his tenure, the City promoted Pineda from laborer to driver to heavy equipment operator. On the day of the accident involving Nickerson, Pineda was operating a City-owned backhoe for a City work project.
C. Trial Court’s Ruling
After holding a hearing, the trial court granted appellees’ objections to the affidavits of Nickerson, Garcia, and Ramirez and struck the affidavits from the record. By separate order, the trial court granted appellees’ plea to the jurisdiction. The trial court did not rule on Nickerson’s motions to compel various discovery. This appeal followed.2
II. PLEA TO THE JURISDICTION
A. Standard of Review
A plea to the jurisdiction is a dilatory plea; its purpose is “to defeat a cause of action without regard to whether the claims asserted have merit.” Tex. Dep’t of Parks & Wildlife v. Miranda, 133 S.W.3d 217, 226 (Tex. 2004). Subject matter jurisdiction is a question of law; therefore, when the determinative facts are undisputed, we review the trial court’s ruling on a plea to the jurisdiction de novo. Id.
The plaintiff has the initial burden to plead facts affirmatively showing that the trial court has jurisdiction. Garcia, 372 S.W.3d at 635.
*3 We first focus on the propriety of the trial court’s ruling as it pertains to Pineda. By what we treat as her first issue, Nickerson argues that appellees failed to establish that Pineda was an employee of the City. Appellees respond that “a temporary worker under a city’s control is a city’s employee” for purposes of the TTCA’s election-of-remedies provision.
1. Applicable Law
“In certain circumstances, the TTCA waives the immunity that would otherwise bar suit against a governmental unit and an employee sued in his official capacity.” section 101.106(f) provides:
If a suit is filed against an employee of a governmental unit based on conduct within the general scope of that employee’s employment and if it could have been brought under this chapter against the governmental unit, the suit is considered to be against the employee in the employee’s official capacity only. On the employee’s motion, the suit against the employee shall be dismissed unless the plaintiff files amended pleadings dismissing the employee and naming the governmental unit as defendant on or before the 30th day after the date the motion is filed.
Anderson v. Bessman, 365 S.W.3d 119, 124 (Tex. App.—Houston [1st Dist.] 2011, no pet.).
Nickerson’s issue challenges only the “employee” requirement. The TTCA defines “employee” as:
a person, including an officer or agent, who is in the paid service of a governmental unit by competent authority, but does not include an independent contractor, an agent or employee of an independent contractor, or a person who performs tasks the details of which the governmental unit does not have the legal right to control.
Klein v. Hernandez, 315 S.W.3d 1, 7–8 (Tex. 2010) (holding that a resident physician working at a public hospital under an agreement with his private medical school was to be treated as a state employee for claims arising from his work at the public hospital).
*4 Parties claiming to be employees of a governmental entity and seeking the application of immunity under the TTCA bear the initial burden of proving they are employees of a governmental unit. See Tex. A & M Univ. v. Bishop, 156 S.W.3d 580, 585 (Tex. 2005).
2. Employee Analysis
a. Paid service
The “paid service” element does not require that a governmental entity pay an employee directly. Rather, the payment of wages through a staffing agency can constitute “paid service.” See City of Bellaire v. Johnson, 400 S.W.3d 922, 924 (Tex. 2013) (holding as a matter of law that a temporary worker provided by staffing agency was in the paid service of the city where he was paid by the city through the staffing agency on the basis of the hours worked for the city). Unique contracted with the City to provide payroll administration for temporary workers and issued Pineda’s paycheck. However, the City determined Pineda’s payrate and paid Unique based on the number of hours Pineda worked for the City. Because the City was responsible for Pineda’s wages and he was paid on the basis of the hours he worked for the City, we conclude that Pineda was in the City’s paid service as contemplated by the TTCA.
Next, we look to whether the governmental unit has the right to control the progress, details, and methods of operation of the work. See Bishop, 156 S.W.3d at 584–85.
Each of the above factors indicate that the City controlled Pineda’s work. Pineda reported daily to the City, which furnished his equipment and uniform. The contours of Pineda’s responsibilities were defined by the City. Pineda was employed in the City’s Water Department beginning in 2012 and continuing through his deposition testimony in July of 2016. Finally, Pineda was paid by the City, albeit indirectly, based on the number of hours he worked for the City.
Despite the uncontroverted evidence that the City controlled the progress, details, and methods of operation of Pineda’s work, Nickerson argues that the contract between the parties establishes Pineda’s status as an independent contractor. The pertinent provision provides: “[Unique] will perform the services hereunder as an independent contractor and will furnish such services in its own manner and method, and under no circumstances or conditions may any agent, servant or employee of [Unique] be considered an employee of the City.” However, contractual designations of control are not determinative but are merely a factor in our analysis. See Bellaire, 400 S.W.3d at 924 (concluding that the evidence established as a matter of law that a worker provided by a temporary staffing agency to the city was an employee of the city under the Texas Workers’ Compensation Act).
*5 The jurisdictional record establishes that Pineda was in the paid service and under the control of the City. Therefore, Pineda was a government employee under the TTCA, and he was entitled to dismissal under the Act’s election-of-remedies provision. We conclude that the trial court did not err in granting appellee’s plea to the jurisdiction as it pertains to Pineda.3 See Garcia, 372 S.W.3d at 635.
We overrule Nickerson’s first issue.
By what we treat as her second issue, Nickerson argues that Unique, as a private independent contractor, cannot benefit from Pineda’s immunity protection. Appellees respond that Unique cannot be vicariously liable for Pineda who is a borrowed employee of the City.
We agree with Nickerson that Unique derives no immunity protection from Pineda. Appellees cite no authority, nor have we found any, which extends an individual employee’s protection under section 101.106 affords it no protection.4
In its plea to the jurisdiction, Unique relied solely on Pineda’s status as the borrowed employee of the City. The borrowed-employee doctrine is an affirmative defense that is concerned with vicarious liability and apportionment of responsibility for employees who have more than one master. In re D.K.M., 242 S.W.3d 863, 865 (Tex. App.—Austin 2007, no pet.).
*6 Because Unique did not assert any grounds challenging the trial court’s subject-matter jurisdiction, we conclude that the trial court erred in granting appellees’ plea to the jurisdiction as it pertains to Unique. See Miranda, 133 S.W.3d at 226.
We sustain Nickerson’s second issue.
III. MOTION TO COMPEL
By her third issue, Nickerson argues that the trial court abused its discretion by denying her motions to compel discovery. However, there is no indication in the record that the trial court ruled on Nickerson’s motions or that Nickerson objected to the trial court’s refusal to rule on her motions. If a party is not satisfied with an opposing party’s discovery objections or responses to discovery inquiries, that party may move the trial court to compel discovery. See U. Lawrence Boze’ & Assocs., P.C. v. Harris Cty. Appraisal Dist., 368 S.W.3d 17, 32 (Tex. App.—Houston [1st Dist.] 2011, no pet.).
We conclude Nickerson failed to preserve this issue for appellate review. We overrule Nickerson’s third issue.
We affirm that portion of the trial court’s order granting appellees’ plea to the jurisdiction as it pertains to Pineda. We reverse that portion of the trial court’s order granting appellees’ plea to the jurisdiction as it pertains to Unique and remand the cause to the trial court for further proceedings consistent with this memorandum opinion.
Appellees also filed a traditional and no-evidence motion for summary judgment. Only the trial court’s order granting appellees’ plea to the jurisdiction is at issue in this appeal.
Appellees argue that we lack jurisdiction to review the trial court’s judgment because Nickerson’s notice of appeal identifies only the order denying her motion for new trial. See rule 25.1(d)(2) on this basis). With these principles in mind, we conclude that Nickerson’s timely notice of appeal was a bona fide attempt to invoke the appellate court’s jurisdiction. We therefore proceed to review the merits of the appeal.
Nickerson argues in the alternative that she is entitled to bring a claim against Pineda under the Texas Workers’ Compensation Act, which allows injured employees to sue third parties while also claiming workers’ compensation benefits. See TEX. LAB. CODE ANN. § 417.001 (West, Westlaw through 2017 1st C.S.). We agree that Nickerson is not precluded from claiming workers’ compensation benefits from her employer while pursuing a third-party claim for damages. Her ability to do so, however, is necessarily constrained by any protections or defenses available to the third party, including those protections available to government employees under the TTCA’s election-of-remedies provision.
Unique did not argue in the trial court, and does not argue on appeal, that it derives immunity protection from the City.
As noted, appellees filed a motion for summary judgment. However, the record clearly establishes that the trial court ruled only on appellees’ plea to the jurisdiction.