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Court of Appeals of Texas, Texarkana.

LOAD TRAIL, LLC, Appellant

v.

Joseph JULIAN, Appellee

No. 06-19-00099-CV

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Date Submitted: October 14, 2020

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Date Decided: January 7, 2021

On Appeal from the 62nd District Court, Lamar County, Texas, Trial Court No. 86844

Attorneys & Firms

Jason A. Itkin, Houston, Jeffrey S. Levinger, Cory D. Itkin, Houston, Jacob Karam, Ryan MacLeod, Houston, for Appellee.

Charles T. Frazier Jr., Dallas, Roy W. Horton, Robert C. Turner, Darryl J. Silvera, Dallas, Kirsten M. Castaneda, Houston, for Appellant.

Before Morriss, C.J., Burgess and Stevens, JJ.

OPINION

Opinion by Justice Burgess

*1 Load Trail, LLC (Load Trail), appeals from the trial court’s judgment confirming an arbitration award in favor of Joseph Julian. In a single appellate issue, Load Trail argues that the arbitration award should be vacated because the arbitrator exhibited evident partiality. We affirm the judgment of the trial court.

I. Background

In May 2017, Julian became employed by Load Trail, a trailer manufacturer in Sumner, Texas. Julian’s job consisted of transporting parts from a rack to assembly line welders. Julian was injured approximately two months after he began working for Load Trail when, while lifting a toolbox, he was knocked to the ground by what he believed was a forklift. According to a witness, the forklift driver1 was transporting a metal wall. When the forklift driver attempted to move the wall up to the front of the forks, the wall fell off and struck Julian on the right side of his back shoulder, knocking him to the ground. The forklift driver helped Julian up, apologized, and the two went to the supervisor’s office to report the accident.

After reporting the accident, Julian left work for the day. Julian indicated that his legs and back hurt after the accident and described it as the worst pain he had ever experienced. Julian was ultimately diagnosed with herniated discs at L4-L5 and L5-S1, for which he underwent lumbar fusion surgery.2 Julian also suffered from neck pain following the accident. Julian testified that he could no longer play with his children and that, also suffered from neck pain following the accidentalthough he attempted to resume work on two different occasions, he was physically unable to do manual labor.

Following his injury, Julian sued Load Trail, a nonsubscriber to the Texas workers’ compensation system, alleging negligence, negligence per se, and gross negligence. He sought damages of over $1,000,000.00. Julian’s claims were ordered to mediation pursuant to Load Trail’s arbitration policy and procedures, a condition-of-employment arbitration policy governed by the Federal Arbitration Act (FAA). The arbitration was conducted for three days before the Honorable T. King Fifer. In his Final Award, which included a detailed outline of the evidence on which he relied, Fifer found Load Trail negligent in failing to provide a safe workplace and awarded Julian $930,000.00 in damages. Julian thereafter filed a motion to confirm the arbitration award in the trial court, while Load Trail moved to vacate the award. Following a hearing, the trial court entered an amended final judgment3 confirming the arbitrator’s Final Award. This appeal followed.

II. Standard of Review

*2 “The Federal Arbitration Act imposes significant limits on judicial review in order that arbitration will be ‘efficient and cost-effective’ for the parties.” Householder Grp. v. Caughran, 354 F. App’x 848, 850 (5th Cir. 2009) (per curiam) (quoting Positive Software Solutions, Inc. v. New Century Mortg. Corp., 476 F.3d 278, 280 (5th Cir. 2007) (en banc)). Although review of the confirmation of an arbitration award is de novo, our review of such an award, “[i]n light of the strong federal policy favoring arbitration, ... is extraordinarily narrow.” Rain CII Carbon, LLC v. ConocoPhillips Co., 674 F.3d 469, 472 (5th Cir. 2012) (quoting Brook v. Peak Int’l, Ltd., 294 F.3d 668, 672 (5th Cir. 2002)); see Xtria L.L.C. v. Int’l Ins. All., Inc., 286 S.W.3d 583, 591 (Tex. App.—Texarkana 2009, pet. denied). “Courts consistently emphasize the narrowness of judicial review of arbitration awards, describing it as ‘among the narrowest known to the law.’ ” Pfeifle v. Chemoil Corp., 73 F. App’x 720, 723 (5th Cir. 2003) (quoting ARW Expl. Corp. v. Aguirre, 45 F.3d 1455, 1462 (10th Cir. 1995)). The arbitrator’s decision must be given a high level of deference, and “[t]he court must resolve any doubts or uncertainties in favor of upholding the award.” Brabham v. A.G. Edwards & Sons Inc., 376 F.3d 377, 385 n.9 (5th Cir. 2004).

III. Analysis

Section 10(a) of the FAA authorizes a reviewing court to vacate an arbitration award:

(1) where the award was procured by corruption, fraud or undue means;

(2) where there was evident partiality or corruption in the arbitrators, or either of them;

(3) where the arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy; or of any other misbehavior by which the rights of any party have been prejudiced; or

(4) where the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made.

9 U.S.C.A. § 10(a).4 The party moving to vacate an arbitration award bears the burden of proof. Lummus Global Amazonas S.A. v. Aguaytia Energy del Peru S.R. Ltda., 256 F.Supp.2d 594, 604 (S.D. Tex. 2002).

Load Trail complains that the trial court erred in failing to vacate the award solely based on the arbitrator’s evident partiality. See 9 U.S.C.A. § 10(a)(2). More particularly, it complains that the arbitrator’s rulings and behavior during the arbitration proceeding displayed evident partiality amounting to actual bias and that bias was further evidenced in the arbitrator’s findings and Final Award. “To establish evident partiality based on actual bias, the party urging vacatur must produce specific facts from which ‘a reasonable person would have to conclude that the arbitrator was partial to one party.’ ” Caughran, 354 F. App’x at 852 (quoting Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 455 F.Supp.2d 545, 550 (N.D. Tex. 2006)). “This is an ‘onerous burden,’ because the urging party must demonstrate that the alleged partiality is ‘direct, definite, and capable of demonstration rather than remote, uncertain or speculative.’ ” Id. (quoting Weber, 455 F.Supp.2d at 550)).

In support of its claim, Load Trail argues that the arbitrator’s statements to Load Trail’s counsel during the arbitration proceeding demonstrated actual bias. The first such complaint regarding the arbitrator’s statements to counsel concern counsel’s objections to certain of Julian’s exhibits. The arbitrator stated:

*3 Here’s what I want you to do. We’re wasting time here.

If you have these exhibits and they’re out of Bates range, you all should have figured this out last night, that we got some problem. I don’t want to waste time going through exhibits when I know full well you got them.

After counsel stated, “I’m going to assert my objections,” the arbitrator responded, “I’m going to let you assert your objections, but I want you to hear me. We got a limited amount of time today; all right.” After counsel stated a somewhat lengthy objection to the first exhibit, the arbitrator stated, “We’re going to take a five-minute break, then I’m going to give you 10 minutes to put your objections on the record; all right. We will start at 9:00 o’clock. Understand me?” At that point, counsel indicated that he had his objections ready and could go through them then. The arbitrator overruled each objection. Load Trail also contends that the arbitrator demonstrated bias for admonishing counsel for objecting after a witness had responded to a question.

Load Trail further complains that the arbitrator demonstrated bias against its counsel when it “pressured him to settle with Julian.” In what Load Trail describes as a “startling, unmasked display of bias,” the arbitrator stated, prior to Julian’s testimony and before Load Trail put on any of its witnesses:

Here’s what I’m going to do. Here’s what I’d like you all to do. We’re going to go to lunch. But before we go to lunch, I want to see if you all can figure out how to resolve this case.

[Counsel for Appellee]: Yes, sir.

[Counsel for Appellee]: Yes, Your Honor.

Arbitrator: You hearing me, [counsel for Appellant]?

[Counsel for Appellant]: Yes, Your Honor.

Finally, Load Trail has scoured the record and has recited perhaps every instance during the three-day hearing in which the arbitrator overruled any objection it voiced. Load Trail claims that the totality of these circumstances would compel a reasonable person to conclude that the arbitrator was partial to Julian.5 Load Trail additionally complains that the arbitrator’s findings and award demonstrate evident partiality.6 It contends that, because no reasonable person could have found Julian’s testimony credible, “[o]nly partiality could have blinded the arbitrator to this conclusion.”

*4 Julian responds that Load Trail waived its evident partiality claim by failing to raise that complaint during the arbitration proceeding. “In judicial proceedings, the requirements for preserving complaints and for the record are set out, respectively, in Rules 33 and 34 of the Texas Rules of Appellate Procedure. Although these rules are not written for appeals from arbitration awards, their principles should govern such appeals.” Nafta Traders, Inc. v. Quinn, 339 S.W.3d 84, 101 n.80 (Tex. 2011). Indeed, a party can waive an otherwise valid objection by proceeding with the arbitration despite knowledge of facts giving rise to such an objection. Graham-Rutledge & Co. v. Nadia Corp., 281 S.W.3d 683, 688 (Tex. App.—Dallas 2009, no pet.). As a result, “[a] party who knows or who has reason to know of an arbitrator’s alleged bias but remains silent pending the outcome of the arbitration waives the right to complain.” Tex. Health Mgmt., LLC v. Healthspring Life & Health Ins. Co., No. 05-18-01036-CV, 2020 WL 3071729, at *4 (Tex. App.—Dallas June 10, 2020, no pet.) (mem. op.). When a party believes the arbitrator is biased, he “may not sit idly by during an arbitration procedure and then collaterally attack that procedure on grounds not raised before the arbitrator when the result turns out to be adverse.” Bossley v. Mariner Fin. Grp., Inc., 11 S.W.3d 349, 351–52 (Tex. App.—Houston [1st Dist.] 2000), aff’d, 79 S.W.3d 30 (Tex. 2002); see Dealer Computer Servs., Inc. v. Michael Motor Co., 485 F. App’x 724, 727 (5th Cir. 2012) (party seeking to vacate arbitration award based on evident partiality must object during arbitration; failure to do so results in waiver of right to object); Delta Mine Holding Co. v. AFC Coal Props., Inc., 280 F.3d 815, 821 (8th Cir. 2001) (“Even when a neutral arbitrator is challenged for evident partiality, the issue is deemed waived unless the objecting party raised it to the arbitration panel.”); Cook Indus., Inc. v. C. Itoh & Co. (Am.), 449 F.2d 106, 107–08 (2d Cir. 1971) (“Where a party has knowledge of facts possibly indicating bias or partiality on the part of an arbitrator he cannot remain silent and later object to the award of the arbitrators on that ground. His silence constitutes a waiver of the objection.”).

Yet, Load Trail, having become aware of what it deemed a “startling, unmasked display of bias” during the proceeding, failed to voice any objection to what it perceived to be the arbitrator’s actual bias. And, at the conclusion of the proceeding, the arbitrator asked the parties if “there [was] anything else for the purposes of [their] record that need[ed] to be offered or talked about before [they] dismiss[ed]?” Load Trail responded, “No, Your Honor.”

Load Trail claims, though, that waiver does not apply when a party does not know the basis for the evident-partiality challenge until after the arbitration. See Commonwealth Coatings Corp. v. Cont’l Cas. Co., 393 U.S. 145, 146 (1968) (noting that facts supporting claim were not known until after an award had been made). While that may be the case, the complaints Load Trail has offered in support of its actual bias claim that are based on the arbitrator’s conduct during the arbitration proceeding were certainly known to it before the proceeding was concluded. While acknowledging that its brief explained that “the arbitrator engaged in numerous acts demonstrating actual bias against Load Trail,” Load Trail nevertheless claims that waiver should not apply because it “remained hopeful that the arbitrator’s award would be fair and grounded in evidence and the law, as the parties’ agreement required.” And, because its actual bias claim was not based on a failure to disclose, but instead on the arbitrator’s own bias, Load Trail claims that “a pre-award actual-bias objection risked provoking the arbitrator and possibly eliminating any chance Load Trail had for a fair decision.” Load Trail therefore decided that, rather than potentially offending the arbitrator by objecting to perceived actual bias, it would not object. That choice resulted in waiver of Load Trail’s claims of actual bias that allegedly occurred during the arbitration proceeding. See Dealer Computer Servs., Inc., 485 F. App’x at 727.

Even assuming no waiver of its actual bias claims emanating from the proceeding, Load Trail failed to satisfy the onerous burden of establishing “specific facts from which ‘a reasonable person would have to conclude that the arbitrator was partial to one party.’ ” Caughran, 354 F. App’x at 852 (quoting Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 455 F.Supp.2d 545, 550 (N.D. Tex. 2006)).7

*5 Claims of perceived actual bias during the proceeding aside, Load Trail would have this Court vacate the Final Award based on alleged fallacies in the arbitrator’s findings of fact and award, claiming those alleged fallacies indicate bias.8 This Court is not permitted to “conduct a review of an arbitrator’s decision on the merits.” Caughran, 354 F. App’x at 851 (FAA does not include any ground on which to vacate award based on errors in interpretation or application of law or mistakes in factfinding); see Fontaine v. Sport City Toyota, 544 F. App’x 529 (5th Cir. 2013) (belief that the weight of evidence established arbitrator’s bias fails to satisfy “onerous burden” of demonstrating evident partiality); Bacon, 562 F.3d at 358 (there are no longer non-statutory grounds for vacating arbitration awards); Cooper, 832 F.3d at 546 (arbitration award “may not be set aside for a mere mistake of fact or law” (quoting Rain CII Carbon, L.L.C., 674 F.3d at 472)). As stated by the Supreme Court, “Courts are not authorized to review the arbitrator’s decision on the merits despite allegations that the decision rests on factual errors,” and the “fact that ‘a court is convinced [the arbitrator] committed serious error does not suffice to overturn his decision.’ ” Major League Baseball Players Ass’n v. Garvey, 532 U.S. 504, 509 (2001).

We, therefore, decline Load Trail’s invitation to do indirectly what we cannot do directly—conduct a merits review of the arbitrator’s decision. We overrule this point of error.

IV. Conclusion

We affirm the trial court’s judgment.

Footnotes

1

Julian did not know the name of the forklift driver involved in the accident. Load Trail disclosed the identities of the two forklift drivers working in Building A on the accident date at mediation but admitted that they did not interview either of them about the incident.

2

Julian’s employment was terminated for an unauthorized hospital visit, filing a false injury report, and unauthorized leave of work on July 28, 2017, following the July 25, 2017, accident. Julian testified that he had provided a written statement to Stanley Montalvo, Load Trail’s safety compliance manager, that indicated that he had been hit by a forklift. He further testified that Montalvo asked him to sign a blank witness statement, which Montalvo later filled out. The incident described in Montalvo’s report did not mention the forklift and stated that Julian was injured while lifting a toolbox. Julian never saw his written statement again after handing it to Montalvo.

3

The amended final judgment indicated that the trial court considered:

(1) Plaintiff’s Motion to Confirm Arbitration Award and Enter Judgment; (2) Defendant’s Original and Supplemental Response to Plaintiff’s Motion to Confirm Arbitration Award and Enter Judgment; (3) Defendant’s Original and Supplemental Motion to Vacate Arbitration Award; (4) Defendant’s Motion to Modify Judgment; (5) all exhibits to the foregoing filings; (6) the Court’s file—including the entire record from the Arbitration proceeding, which also includes the Arbitrator’s Findings of Fact and Conclusions of Law and Defendant’s Objections to Plaintiff’s Proposed Findings of Fact and Conclusions of Law, of which the court took judicial notice at the October 7, 2019, and December 2, 2019, hearings; and (7) argument of counsel.

4

Arbitration awards under the FAA may be vacated only for the reasons provided in Section 10. See Citigroup Global Mkts., Inc. v. Bacon, 562 F.3d 349, 358 (5th Cir. 2009).

5

There is no indication in the record that Julian or his attorneys knew the arbitrator or had any dealings with him before the arbitration, and Load Trail makes no such contention. Julian represents in his brief that neither he nor his counsel had a previous relationship with the arbitrator, a former Dallas County judge.

6

Load Trail claims that, in making findings that favored Julian, “the arbitrator often accepted as true testimony that was conclusively disproven by physical facts, was conclusory, or otherwise constituted ‘no evidence’ under the law.” In addition to complaints regarding the arbitrator’s detailed findings, Load Trail complains that the arbitrator did not include findings about “(1) the manner in which Load Trail supervised the phantom [forklift driver], (2) how that manner of supervision breached the duty of ordinary care, and (3) why that manner of supervision was a substantial factor in the collision and without which the collision would not have occurred.” Load Trail continues, “And there is no evidence to support a conclusion that a reasonably prudent employer should have anticipated the danger of a forklift collision from the unknown manner in which Load Trail supervised the phantom [forklift driver].” Load Trail also claims that the damage award included an award for physical pain and mental anguish and that the opinions of Julian’s medical experts were conclusory and based on incomplete or false information.

7

See Weber v. Merrill Lynch Pierce Fenner & Smith, Inc., 455 F.Supp.2d 545, 549 (N.D. Tex. 2006) (“Even repeated rulings against one party to the arbitration will not establish bias absent some evidence of improper motivation.”); Litkey v. United States, 510 U.S. 540, 555–56 (1994) (“A judge’s ordinary efforts at courtroom administration—even a stern and short-tempered judge’s ordinary efforts at courtroom administration—remain immune.”); Ballentine Books, Inc. v. Capital Distrib. Co., 302 F.2d 17, 18 (2nd Cir. 1962) (no evident partiality when arbitrator asked “whether there was any possibility of settlement” and stated, after he was informed that there was no such possibility, that “it was his tentative view that there should be an award for Ballentine”); United Forming, Inc. v. Faulkner USA, LP, 350 F. App’x 948, 950 (5th Cir. 2009) (no evident partiality when arbitrator suggested defenses and causes of action to one side).

8

See supra note 6. Load Trail specifically complains that (1) the arbitrator stopped short of finding that Julian backed into the path of the forklift driver, (2) the arbitrator omitted a finding that the forklift driver also was backing up when Julian backed into his path, (3) the arbitrator omitted a finding that the forklift was making a beeping noise when Julian backed into its path, (4) the arbitrator accepted testimony about Julian’s injury that does not rise to the level of competent evidence, (5) the arbitrator omitted findings that the forklift driver was unfit or incompetent and that Load Trail should have known it, (6) the arbitrator made no findings about what supervision Load Trail provided, or as a reasonably prudent employer should have provided, to the forklift driver, (7) the arbitrator made no findings to support a causal link between Load Trail’s supervision of the employee and Julian’s purported injuries from that employee’s alleged negligence, (8) the arbitrator made no findings that Julian experienced, or will experience, any mental anguish, (9) the arbitrator’s conclusions that the forklift driver and Load Trail were negligent are not supported by the arbitrator’s findings, (10) there is no evidence in the record from which to conclude that the forklift driver was negligent, (11) as highlighted by critical findings the arbitrator omitted, the arbitrator’s findings do not support a conclusion that Load Trail was negligent, and (12) the arbitrator accorded weight to testimony no reasonable person could find credible.

Court of Appeals of Texas, Texarkana.

DIPANKAR CHANDRA, Appellant

v.

LEONARDO DRS, INC., AND DRS NETWORK & IMAGING SERVICES, LLC, Appellees

No. 06-20-00056-CV

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Submitted: November 2, 2020

|

Decided: November 24, 2020

On Appeal from the 116th District Court

Dallas County, Texas

Trial Court No. DC-19-03484

Before Morriss, C.J., Burgess and Stevens, JJ.

Memorandum Opinion by Chief Justice Morriss

MEMORANDUM OPINION

Josh R. Morriss, III Chief Justice

*1 Dipankar Chandra acted pro se in his attempt to prosecute a toxic tort claim in Dallas County1 against his former employer, Leonardo DRS, Inc., and DRS Network & Imaging Services, Inc. (collectively DRS), alleging that his on-the-job, regular exposure to dangerous chemicals, including mercury telluride and cadmium telluride, caused his colon and prostate cancer and other resulting damages.2 The trial court, after granting DRS’s traditional and no-evidence motion for summary judgment, entered a take-nothing judgment against Chandra. Chandra appeals. Because we conclude that the trial court’s no-evidence summary judgment was proper, we affirm its judgment.

Factual and Procedural Background

DRS filed a motion for summary judgment containing both traditional and no-evidence elements. The traditional portion of its motion argued that Chandra’s claims were barred by the Texas Workers Compensation Act’s exclusive remedy provisions and that Chanda’s claims revolving around his 2006 colon-cancer diagnosis were barred by the statute of limitations. The no-evidence portion of the motion argued that Chandra had no proof of either specific or general causation between exposure to cadmium and mercury telluride and the development of his colon and prostate cancers.

Chandra’s response to DRS’s summary judgment motion attached his own affidavit stating that “[c]olon and prostate cancer are clearly tied to cadmium exposures in scientific literature,” that two co-workers had also been diagnosed with colon cancer, and that “scientific literature indicated that prostate cancer is a slow growth cancer which can develop over a ten year period after exposure to deadly chemicals.” Chandra also attached “studies [he] found online” that discussed links between such exposures and various cancers.3 DRS objected to Chandra’s affidavit, which it described as “simply a bald assertion of Plaintiff’s personal opinion” and as conclusory, lacking in personal knowledge, and containing hearsay. DRS also objected to the articles attached to Chandra’s affidavit because they were incomplete, were not properly authenticated, were not demonstrated to be reliable, and did not establish causation of Chandra’s damages. As a result, DRS asked the trial court to strike Chandra’s summary judgment evidence. The trial court sustained DRS’s objections to the affidavit and articles and struck them from consideration as summary judgment evidence. It then granted DRS’s traditional and no-evidence motion and entered a take-nothing judgment against Chandra.

Standard of Review

*2 “When a party moves for a traditional summary judgment under rule 166a(c) and a no-evidence motion for summary judgment under rule 166a(i), we first review the trial court’s judgment under the standards of rule 166a(i).” Green v. McKay, 376 S.W.3d 891, 898–99 (Tex. App.—Dallas 2012, pet. denied) (citing Ford Motor Co. v. Ridgway, 135 S.W.3d 598, 600 (Tex. 2004)).

“We review a trial court’s decision to grant summary judgment de novo.” Hernandez v. Sun Crane & Hoist, Inc., 600 S.W.3d 485, 493 (Tex. App.—Dallas 2020, no pet.) (citing Tarr v. Timberwood Park Owners Ass’n, Inc., 556 S.W.3d 274, 278 (Tex. 2018)). “A defendant is entitled to summary judgment on a plaintiff’s claim if it conclusively negates at least one element of the cause of action.” Id. (citing Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002)). “A party seeking a no-evidence summary judgment must assert that no evidence exists as to one or more essential elements of the nonmovant’s claim on which the nonmovant would have the burden of proof at trial.” Id. (citing TEX. R. CIV. P. 166a(i)). “The burden then shifts to the nonmovant to raise a fact issue on the challenged elements.” Id.

“We review a no-evidence summary judgment under the same legal sufficiency standard used to review a directed verdict.” Id. (citing TEX. R. CIV. P. 166a(i); Flood v. Katz, 294 S.W.3d 756, 762 (Tex. App.—Dallas 2009, pet. denied)). “A no-evidence motion for summary judgment is improperly granted if the nonmovant presented more than a scintilla of probative evidence to raise a genuine issue of material fact on the challenged elements.” Id. (citing Ridgway, 135 S.W.3d at 600). “More than a scintilla of evidence exists if the evidence ‘rises to a level that would enable reasonable, fair-minded persons to differ in their conclusions.’ ” Id. (quoting Ridgway, 135 S.W.3d at 601). “[W]hen the evidence offered to prove a vital fact is so weak as to do no more than create a mere surmise or suspicion of its existence, the evidence is no more than a scintilla and, in legal effect, is no evidence.” Id. (quoting Ridgway, 135 S.W.3d at 601).

“In reviewing a summary judgment of either type, we consider the evidence ‘in the light most favorable to the nonmovant, indulging every reasonable inference and resolving any doubts against the motion.’ ” Id. (quoting Sudan v. Sudan, 199 S.W.3d 291, 292 (Tex. 2006)). “Where, as here, the trial court’s order granting summary judgment does not specify the grounds relied on, we must affirm if any of the summary judgment grounds are meritorious.” Id. (citing Cunningham v. Tarski, 365 S.W.3d 179, 186 (Tex. App.—Dallas 2012, pet. denied)).

The No-Evidence Summary Judgment Was Proper

“[T]oxic tort cases require proof of both ‘general’ and ‘specific’ causation.” Plunkett v. Connecticut Gen. Life Ins. Co., 285 S.W.3d 106, 120 (Tex. App.—Dallas 2009, pet. denied) (citing Merrell Dow Pharm., Inc. v. Havner, 953 S.W.2d 706, 714 (Tex. 1997); Mobil Oil Corp. v. Bailey, 187 S.W.3d 265, 270 (Tex. App.—Beaumont 2006, pet. denied); Frias v. Atl. Richfield Co., 104 S.W.3d 925, 928 (Tex. App.—Houston [14th Dist.] 2003, no pet.); Coastal Tankships, U.S.A., Inc. v. Anderson, 87 S.W.3d 591, 601–02 n.19 (Tex. App.—Houston [1st Dist.] 2002, pet. denied)). “General causation addresses whether a substance is ‘capable of causing a particular injury or condition in the general population,’ while specific causation addresses whether a substance ‘caused a particular individual’s injury.’ ” Id. at 120–21 (quoting Havner, 953 S.W.2d at 714); Neal v. Dow Agrosciences L.L.C., 74 S.W.3d 468, 472 (Tex. App.—Dallas 2002, no pet.) (citing Praytor v. Ford Motor Co., 97 S.W.3d 237, 244 (Tex. App.—Houston [14th Dist.] 2002, no pet.) (“With regard to whether a plaintiff’s injury was caused by exposure to a particular substance, a resident generally must prove both that the substance is capable of causing a particular injury or condition and that the substance in fact caused the plaintiff’s injury.”)). “Havner also requires the plaintiff to present some evidence excluding other plausible causes of the injury with reasonable certainty.” Chase v. Packing, No. 05-16-00620-CV, 2017 WL 2774449, at *1 (Tex. App.—Dallas June 27, 2017, no pet.) (mem. op.) (citing Havner, 953 S.W.2d at 720). As a result, “[e]xpert testimony is particularly necessary in toxic-tort and chemical-exposure cases, in which medically complex diseases and causal ambiguities compound the need for expert testimony.” Starr v. A.J. Struss & Co., No. 01-14-00702-CV, 2015 WL 4139028, at *6–7 (Tex. App.—Houston [1st Dist.] July 9, 2015, no pet.) (mem. op.) (citing Anderson, 87 S.W.3d at 602–04; Brookshire Bros., Inc. v. Smith, 176 S.W.3d 30, 36–38 (Tex. App.—Houston [1st Dist.] 2004, pet. denied) (holding expert testimony required to show causation of reactive airway dysfunction syndrome)).

*3 Chandra did not introduce any expert testimony, and the trial court struck his affidavit and the portions of articles that he attached as summary judgment evidence.4 “Under a summary-judgment review, we may not consider struck portions of the record because such evidence is not a part of the summary-judgment record.” Sauls v. Munir Bata, LLC, No. 02-14-00208-CV, 2015 WL 3905671, at *5 (Tex. App.—Fort Worth June 11, 2015, no pet.) (mem. op.) (citing Trudy’s Tex. Star, Inc. v. City of Austin, 307 S.W.3d 894, 898 n.2 (Tex. App.—Austin 2010, no pet.); Esty v. Beal Bank, S.S.B., 298 S.W.3d 280, 294 (Tex. App.—Dallas 2009, no pet.)); see Callahan v. Vitesse Aviation Servs., LLC, 397 S.W.3d 342, 347 (Tex. App.—Dallas 2013, no pet.). “[W]here evidence has been held to be inadmissible and that holding has not been challenged on appeal, this [C]ourt cannot consider the excluded evidence.” Beavers v. Aluminium Co. Of Am., No. 13-08-00214-CV, 2010 WL 881734, at *2 (Tex. App.—Corpus Christi Mar. 11, 2010, no pet.) (mem. op.) (quoting Taylor-Made Hose v. Wilkerson, 21 S.W.3d 484, 493 (Tex. App.—San Antonio 2000, pet. denied) (en banc) (op. on reh’g) (quoting Frazier v. Yu, 987 S.W.2d 607, 610 (Tex. App.—Fort Worth 1999, writ denied) (citing Inglish v. Prudential Ins. Co., 928 S.W.2d 702, 706 (Tex. App.—Houston [1st Dist.] 1996, writ denied) (op. on reh’g); Rhodes v. Interfirst Bank Fort Worth, N.A., 719 S.W.2d 263, 265 (Tex. App.— Fort Worth 1986, no writ); Talbott v. Hogg, 298 S.W.2d 883, 889 (Tex. App.—Amarillo 1957, writ dism’d)). “Where excluded evidence is not the subject of a point of error, ‘plaintiffs have waived any right to complain about the exclusion.’ ” Id. (quoting Rhodes, 719 S.W.2d at 265 (quoting Talbott, 298 S.W.2d at 889)).

Because Chandra does not argue that the trial court erred by striking the attachments to his summary judgment motion, he has “waived any right to complain about the exclusion,” and we cannot consider the struck attachments as summary judgment evidence. Id. Without the stricken attachments, Chandra had no summary judgment evidence and failed to produce more than a scintilla of evidence establishing that his damages were caused by a toxic tort by DRS.5 See id. Consequently, the trial court’s summary judgment was proper.

We affirm the trial court’s judgment.

Footnotes

1

Originally appealed to the Fifth Court of Appeals, this case was transferred to this Court by the Texas Supreme Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001. We follow the precedent of the Fifth Court of Appeals in deciding this case. See TEX. R. APP. P. 41.3.

2

Chandra’s employment with DRS was terminated in 2009.

3

The attached articles included these items: (1) the abstract portion of an article titled “Review Cadmium carcinogenesis” that was published in the “Mutation Research/Fundamental and Molecular Mechanisms of Mutagenesis,” which stated, “Cadmium exposure has also been linked to human prostate and renal cancer, although this linkage is weaker than for lung cancer”; (2) the first page of “Carcinogenic, teratogenic and mutagenic effects of cadmium” published in “Mutation Research/Reviews in Genetic Toxicology,” stating that cadmium “has been known as a toxic agent”; (3) the abstract of “Role of oxidative stress in cadmium toxicity and carcinogenesis” published in “Toxicology and Applied Pharmacology,” stating that cadmium “is a toxic metal, targeting the ... testes ... and causing ... tumors after prolonged exposures”; and (4) the abstract from “Current status of cadmium as an environmental health problem” published in “Toxicology and Applied Pharmacology,” stating that cadmium is a “toxic metal occurring in the environment naturally and as a pollutant emanating from industrial and agricultural sources” for which “recent data also suggest increased cancer risks ... in environmentally exposed populations.”

4

In any event, “[t]o raise a fact issue on causation and thus to survive legal sufficiency review, a claimant must do more than simply introduce into evidence epidemiological studies that show a substantially elevated risk.” Daniels v. Lyondell-Citgo Ref. Co., 99 S.W.3d 722, 728 (Tex. App.—Houston [1st Dist.] 2003, no pet.). As discussed by Daniels,

A claimant must show that he or she is similar to those in the studies. This would include proof that (1) the injured person was exposed to the same substance, (2) the exposure or dose levels were comparable to or greater than those in the studies, (3) the exposure occurred before the onset of injury, (4) the timing of the onset of injury was consistent with that experienced by those in the study, and (5) if there are other plausible causes of the injury or condition that could be negated, the plaintiff must offer evidence excluding those causes with reasonable certainty. Havner, 953 S.W.2d at 720.

Id.

5

Although Chandra’s pro se petition couched his toxic tort claim in terms of negligence, gross negligence, premises liability, and product liability, the gravamen of each complaint was that exposure to toxic chemicals caused Chandra’s colon and prostate cancers and other resulting damages including medical bills and pain and suffering.

Court of Appeals of Texas, Texarkana.

XL INSURANCE AMERICA, INC., Appellant

v.

Maurice COVINGTON, Appellees

No. 06-20-00048-CV

|

Date Submitted: September 30, 2020

|

Date Decided: October 1, 2020

On Appeal from the 15th District Court, Grayson County, Texas, Trial Court No. CV-18-1732

Attorneys and Law Firms

Michael T. O’Connor, Bruce K. Thomas, for Appellees Covington, Maurice.

Andrew Z. Schreck, for Appellant.

W. Todd Parker, for Appellees Hill, Brian.

Before Morriss, C.J., Burgess and Stevens, JJ.

MEMORANDUM OPINION

Memorandum Opinion by Justice Burgess

*1 XL Insurance America, Inc. (XL), has attempted to appeal from a June 2, 2020, order denying its amended petition in intervention, motion for apportionment, and motion for new trial. Appellee, Maurice Covington, has filed a motion to dismiss for want of jurisdiction, and XL has filed a response. Because this Court lacks jurisdiction over XL’s attempted appeal, we grant Covington’s motion and dismiss the appeal.1

On March 2, 2020, the trial court entered an order granting plaintiff’s motion for dismissal and for final judgment. On March 18, 2020, XL filed its original petition in intervention. As recited in the petition, Covington sued Mark Teague, as independent administrator of and on behalf of the Estate of Nicholas Edwards and his heirs-in-law, for injuries sustained in a January 5, 2018, automobile accident. At the time of the accident, XL was the workers’ compensation insurance carrier for Covington’s employer. XL alleged that it paid a total of $1,913,885.85 in medical benefits and $99,885.02 in indemnity benefits to Covington, or on his behalf, as of March 18, 2020, and that it was subrogated to the rights of Covington against the defendant for these sums. XL further alleged that Covington, through his counsel, represented that defendant had a $30,000.00 insurance policy limit and therefore requested XL to waive its subrogation rights; it did so in reliance on the stated policy limits. XL further alleged that the defendant’s insurance carrier violated a Stowers2 deadline and ultimately settled the case for an amount well in excess of the $30,000.00 insurance policy limit. As a result, XL sued in intervention to enforce its right of subrogation.

Also on March 18, 2020, XL filed (1) a motion for new trial in which it asked the trial court to vacate the March 2, 2020, final judgment and (2) a motion for apportionment in which it asked the trial court to conduct a hearing to determine how the settlement proceeds should be apportioned between it and any other parties claiming entitlement to those proceeds. On March 19, 2020, XL filed an amended petition in intervention. Following a hearing, the trial court determined that it lacked plenary jurisdiction to grant the intervenor’s petition and motions and therefore entered an order denying same on June 2, 2020. Covington contends that XL’s notice of appeal was untimely.

A trial court retains plenary power over its judgment for thirty days. TEX. R. CIV. P. 329b(g); Lane Bank Equip. Co. v. Smith So. Equip., Inc., 10 S.W.3d 308, 310 (Tex. 2000). “A motion to modify, correct, or reform a judgment ... extend[s] the trial court’s plenary power to change its judgment beyond the initial thirty-day period” for up to an additional seventy-five days. Id. at 309–10; see Malone v. Hampton, 182 S.W.3d 465, 468 (Tex. App.—Dallas 2006, no pet.). A non-party, however, “may not move for a new trial or file a post-judgment motion to extend the court’s plenary jurisdiction unless the non-party successfully intervenes.” Malone, 182 S.W.3d at 468 (citing State & Cty. Mut. Fire Ins. Co. v. Kelly, 915 S.W.2d 224, 227 (Tex. App.—Austin 1996, orig. proceeding)). “A non-party successfully intervenes if he files a plea in intervention prior to the entry of judgment and the court does not strike the plea on the motion of a party.” Id. (citing In re Barrett, 149 S.W.3d 275, 279 (Tex. App.—Tyler 2004, orig. proceeding)). However, “a plea in intervention comes too late if filed after judgment and may not be considered unless and until the judgment has been set aside.” First Alief Bank v. White, 682 S.W.2d 251, 252 (Tex. 1984) (orig. proceeding) (per curiam).

*2 The trial court signed the final judgment on March 2, 2020. Although no party to the judgment filed a motion for new trial or to correct, modify, or reform the judgment, XL filed, as an intervenor, a motion for new trial. Because XL did not file its petition in intervention prior to the entry of the judgment and the judgment was not set aside within thirty days from its entry, XL’s petition in intervention was not effective, and its motion for new trial did not extend the trial court’s plenary jurisdiction. See Malone, 182 S.W.3d at 469. As a result, XL’s notice of appeal was due to be filed within thirty days of the final judgment, or on or before April 1, 2020. XL filed its notice of appeal on July 1, 2020, well beyond the April 1 deadline.

Yet, XL’s notice of appeal indicates that it is not appealing from the final judgment. Instead, it indicates that its appeal is taken from the June 2, 2020, order denying its petition in intervention and its motions. But, because the trial court entered its final order in this case on March 2, 2020, it lost plenary power over that judgment on April 1, 2020. The June 2, 2020, order was therefore issued at a time when the trial court no longer had plenary power over its judgment. “Judicial action taken after the court’s jurisdiction over a cause has expired is a nullity.” State ex rel. Latty v. Owens, 907 S.W.2d 484, 486 (Tex. 1995) (per curiam). Consequently, the June 2 order did not trigger the appellate timetable. See TEX. R. APP. P. 26.1; Malone, 182 S.W.3d at 470 (“The very purpose of limiting a trial court’s plenary power over a proceeding is to foreclose the possibility of a suit continuing indefinitely even though a final judgment has been obtained.”).

XL filed a response to Covington’s motion to dismiss, indicating that it is unopposed to the motion. Because this Court does not have jurisdiction to consider XL’s appeal, this case is ripe for dismissal.

In light of the foregoing, we dismiss the appeal for want of jurisdiction.

Footnotes

1 Originally appealed to the Fifth Court of Appeals in Dallas, this case was transferred to this Court by the Texas Supreme Court pursuant to its docket equalization efforts. See TEX. GOV’T CODE ANN. § 73.001. We are unaware of any conflict between precedent of the Fifth Court of Appeals and that of this Court on any relevant issue. See TEX. R. APP. P. 41.3.
2 See G.A. Stowers Furniture Co. v. Am. Indem. Co., 15 S.W.2d 544 (Tex. Comm’n App. 1929, holding approved).

Court of Appeals of Texas, Texarkana.

REVERSE MORTGAGE FUNDING, LLC, Appellant

v.

Carla Nagle Blevins ROBERTSON, Appellee

No. 06-19-00063-CV

|

Date Submitted: November 18, 2019

|

Date Decided: January 3, 2020

|

Motion for Reconsideration Denied January 3, 2020

|

Date Vacated: March 5, 2020

*53 On Appeal from the 115th District Court, Marion County, Texas, Trial Court No. 1900039, Hon. Dean Fowler, Judge.

Attorneys & Firms

William K. Gleason, Attorney at Law, Jefferson, for Appellee.

Mark D. Cronenwett, Mackie Wolf Zientz & Mann, PC, Dallas, for Appellant.

Before Morriss, C.J., Burgess and Stevens, JJ.

OPINION

Opinion by Justice Burgess

The trial court entered a default judgment against Reverse Mortgage Funding, LLC (RMF), after it failed to timely answer a lawsuit filed against it by Carla Nagle Blevins Robertson. RMF filed a motion for new trial that was overruled by operation of law. RMF appeals. Because *54 we find that RMF failed to establish a prima facie meritorious defense to Robertson’s lawsuit, we affirm the trial court’s judgment.

I. Factual and Procedural Background

In 1995, Richard R. Nagle executed a will in which he left his “real property located at 1201 Pinehill Drive” in Jefferson to his wife, Katie Maurine Nagle, “to be used, occupied and enjoyed by her for and during her natural life.” According to the will, this property was to vest in Nagle’s daughters, Carla (Blevins) Robertson and Julie Hamm, on Katie’s death. In 2008, following Nagle’s death in 2005, Katie entered into a reverse mortgage loan agreement in the amount of $131,250.00 with the predecessor in interest to RMF,1 secured by a deed of trust on the real property and improvements located at 1201 Pine Hill Drive in Jefferson, Marion County, Texas (the Property).

In a suit to quiet title to the Property filed on March 19, 2019, Robertson alleged that Katie’s life estate in the Property terminated when she died in March 2019. Robertson claimed that because Katie only owned a life estate in the Property, she lacked authority to enter into the reverse mortgage loan agreement. When RMF did not timely answer the lawsuit, the trial court entered a default judgment in favor of Robertson finding that

Robertson is the owner in fee simple of the house and lot(s) located at 1201 Pinehill Drive ... by virtue of the testate passage of same from her father, Richard R. Nagle, to her and her now deceased sister in a will probated in Marion County, Texas[,] on November 14, 2005[,] and recorded in Volume J-3 Page 144 et seq in probate Cause Number P006038.

The trial court further determined that “Katie Maurine Nagle acquired no ownership interest in said property and only acquired a life estate in said property which terminated on her death” and that the deeds of trust dated November 12, 2008, “are void and shall be released since the ‘borrower’ in said documents was Katie Maurine Nagle who was not ‘lawfully seised’ of the property as covenanted in the deeds of trust.” On May 6, 2019, RMF filed a motion for new trial that was overruled by operation of law.2 See TEX. R. CIV. P. 329b(c).

II. Analysis

We review the trial court’s denial of a motion for new trial for an abuse of discretion. Action Powersports, Inc. v. 1STEL, Inc., 500 S.W.3d 632, 639 (Tex. App.—Texarkana 2016, no pet.) (citing Director, State Employees Workers’ Compensation Div. v. Evans, 889 S.W.2d 266, 268 (Tex. 1994)). Following the entry of a default judgment, the defaulting party is entitled to a new trial when

(1) the failure of the defendant to answer before judgment was not intentional, or the result of conscious indifference on his part, but was due to a mistake or an accident; provided (2) the motion for *55 a new trial sets up a meritorious defense; and (3) is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff.

Bank One, Tex., N.A. v. Moody, 830 S.W.2d 81, 82–83 (Tex. 1992) (citing Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939)). It is undisputed that RMF’s failure to answer was not intentional and that the granting of a motion for new trial would not have occasioned delay or otherwise worked an injury to Robertson. The dispositive question is whether RMF set up a meritorious defense.

To determine if RMF set up a meritorious defense, we look to the facts alleged in RMF’s motion and supporting affidavit, regardless of whether those facts are controverted. See Dir., State Employees Workers’ Comp. Div. v. Evans, 889 S.W.2d 266, 270 (Tex. 1994). “The motion must allege facts which in law would constitute a defense to the cause of action asserted by the plaintiff and must be supported by affidavits or other evidence proving prima facie that the defendant has such meritorious defense.” Estate of Pollack v. McMurrey, 858 S.W.2d 388, 392 (Tex. 1993) (quoting Ivy v. Carrell, 407 S.W.2d 212, 214 (Tex. 1966)). If proven, a meritorious defense would cause a different—although not necessarily opposite—result on retrial. Comanche Nation v. Fox, 128 S.W.3d 745, 751 (Tex. App.—Austin 2004, no pet.). The trial court is not permitted, however, to try the defensive issues in deciding whether to set aside the default judgment. Estate of Pollack, 858 S.W.2d at 392. The existence of a meritorious defense is thus a “legal question[ ] for which the no-contrary-evidence rule was established in Guar. Bank v. Thompson, 632 S.W.2d 338, 339 (Tex. 1982).” George v. Smith, No. 06-01-00019-CV, 2002 WL 91355, at *4 n.2 (Tex. App.—Texarkana Jan. 25, 2002, no pet.) (mem. op.).

In its motion for new trial, RMF alleged: (1) “Defendant has meritorious defenses to Plaintiff’s claims because it is a bona fide mortgagee,” (2) “Even if Plaintiff’s allegations regarding Ms. Nagle’s interest in the Property [are true], which Defendant does not admit, Defendant is protected as a bona fide mortgagee,” (3) “Ms. Nagle signed a deed of trust for a reverse mortgage on November 12, 2008[,] in favor of James B. Nutter & Company,” (4) “The deed of trust lien was subsequently transferred to Defendant,” (5) “An Assignment of Mortgage/Deed of Trust dated March 1, 2018[,] was recorded in the official property records for Marion County, Texas[,] in Volume 976, Page 418,” (6) “Defendant had no actual knowledge of the probate records, nor did it have constructive notice,” and (7) “Defendant has a good faith defense to Plaintiff’s claims that it is a bona fide mortgagee and holds a valid, enforceable lien on the Property.”

“Under section 13.001 [of the Texas Property Code], a lender can be a bona fide mortgagee, if the lender takes a lien in good faith, for valuable consideration, and without actual or constructive notice of outstanding claims.” Noble Mortg. & Invs., LLC v. D & M Vision Invs., LLC, 340 S.W.3d 65, 76 (Tex. App.—Houston [1st Dist.] 2011, no pet.) (citing Houston First Am. Sav. v. Musick, 650 S.W.2d 764, 769 (Tex. 1983)). “A bona fide mortgagee is entitled to the same protections as a bona fide purchaser.”3 Id. (citing *56 Graves v. Guar. Bond State Bank, 161 S.W.2d 118, 120 (Tex. App.—Texarkana 1942, no writ)).

Noticeably absent from RMF’s factual allegations in its motion for new trial are any allegations supporting RMF’s claim that it did not have actual knowledge of Robertson’s claim to the Property. It is evident that RMF was unaware of Robertson’s ownership interest in the Property at the time the mortgage was executed and at the time it purchased the mortgage. If RMF had such knowledge, it would not have purchased the mortgage. Yet, “in legal parlance, actual knowledge embraces those things of which the one sought to be charged has express information, and likewise those things which a reasonably diligent inquiry and exercise of the means of information at hand would have disclosed.” Champlin Oil & Ref. Co. v. Chastain, 403 S.W.2d 376, 388 (Tex. 1965) (quoting Hexter v. Pratt, 10 S.W.2d 692, 693 (Tex. Comm’n App. 1928, judgm’t adopted) (“Where there is a duty of finding out and knowing, negligent ignorance has the same effect in law as actual knowledge.”)). RMF failed to allege any facts in its motion for new trial in support of its conclusory statement that it lacked actual knowledge of Robertson’s claim.

Likewise, RMF’s motion for new trial is devoid of factual allegations supporting its claim that it did not have constructive notice of Nagle’s will. See, e.g., Sw. Title Ins. Co. v. Woods, 449 S.W.2d 773, 774 (Tex. 1970) (holding that recorded instrument not in chain of title does not establish constructive notice); Hue Nguyen v. Chapa, 305 S.W.3d 316, 323 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (holding that unrecorded conveyance of interest in real property is void as to subsequent purchaser who purchases property for valuable consideration without notice).

To claim the status of a bona fide mortgagee, RMF was bound to support its conclusory statements that it had no actual or constructive notice of Robertson’s claim to the Property with verified allegations of fact. See Estate of Pollack, 858 S.W.2d at 392. Because no such allegations appear in RMF’s motion for new trial, it failed to establish a prima facie meritorious defense.

We, therefore, affirm the trial court’s judgment.

SUPPLEMENTAL MEMORANDUM OPINION

Ralph K. Burgess, Justice

On November 25, 2019, we issued an opinion affirming the trial court’s judgment in this matter. On December 10, 2019, Reverse Mortgage Funding, LLC (Reverse Mortgage), filed a motion for rehearing. While we ultimately overruled the motion for rehearing, on January 3, 2020, we withdrew our opinion dated November 25, 2019, and issued a new opinion further explaining our rationale for affirming the trial court’s judgment. On January 21, 2020, Reverse Mortgage filed a second motion for rehearing stemming from our January 3, 2020, opinion. We overruled Reverse Mortgage’s second motion for rehearing. Then on February 24, 2020, the parties filed a joint motion stating that they had reached a settlement of their disputes, asking that we withdraw our January 3, 2020, opinion, and seeking to have the appeal dismissed.

We grant that part of the parties’ joint motion seeking to dismiss the appeal. However, we deny the portion of the motion asking that we withdraw our January 3, 2020, opinion. See TEX. 8 R. APP. P. 42.1(c). “A settlement does not automatically *57 require the vacating of a court of appeals’ opinion—either by [the Supreme Court of Texas] or by the intermediate appellate court.” Houston Cable TV, Inc. v. Inwood W. Civic Ass’n, 860 S.W.2d 72, 73 (Tex. 1993) (per curiam). Because “courts are endowed with a public purpose,” “a private agreement between litigants should not operate to vacate a court’s writing on matters of public importance.” Id. We have determined that our January 3, 2020, opinion addresses matters of public importance; consequently, the opinion will not be withdrawn.

We vacate our January 3, 2020, judgment, dismiss the appeal, and, in keeping with the parties’ request, order that Reverse Mortgage bear the costs of this appeal.

Footnotes

1

The deed of trust was executed in favor of James B. Nutter & Company and was assigned to RMF on March 1, 2018. The initial deed of trust granted James B. Nutter & Co. a lien on the Property to secure payment of the note. Katie executed a second deed of trust, granting a lien on the Property to the Secretary of Housing and Urban Development to secure payment on the note. Both deeds were executed on November 12, 2008, and both were filed for record in the real property records of Marion County, Texas.

2

The trial court held a hearing on the motion for new trial on May 30, 2019. At the conclusion of the hearing, the trial court announced its intention to deny the motion for new trial, but it did not enter a written order.

3

Although status as a bona fide purchaser is an affirmative defense in a title dispute, “[t]o receive this special protection, one must acquire property in good faith, for value, and without notice of any third-party claim or interest.” Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001).

Court of Appeals of Texas, Texarkana.

REVERSE MORTGAGE FUNDING, LLC, Appellant

v.

Carla Nagle Blevins ROBERTSON, Appellee

No. 06-19-00063-CV

|

Date Submitted: November 18, 2019

|

Date Decided: January 3, 2020

|

Motion for Reconsideration Denied January 3, 2020

|

Date Vacated: March 5, 2020

On Appeal from the 115th District Court, Marion County, Texas, Trial Court No. 1900039

Attorneys & Firms

William K. Gleason, for Appellee.

Mark D. Cronenwett, Dallas, for Appellant.

Before Stevens, JJ.

OPINION

Opinion by Justice Burgess

*1 The trial court entered a default judgment against Reverse Mortgage Funding, LLC (RMF), after it failed to timely answer a lawsuit filed against it by Carla Nagle Blevins Robertson. RMF filed a motion for new trial that was overruled by operation of law. RMF appeals. Because we find that RMF failed to establish a prima facie meritorious defense to Robertson’s lawsuit, we affirm the trial court’s judgment.

I. Factual and Procedural Background

In 1995, Richard R. Nagle executed a will in which he left his “real property located at 1201 Pinehill Drive” in Jefferson to his wife, Katie Maurine Nagle, “to be used, occupied and enjoyed by her for and during her natural life.” According to the will, this property was to vest in Nagle’s daughters, Carla (Blevins) Robertson and Julie Hamm, on Katie’s death. In 2008, following Nagle’s death in 2005, Katie entered into a reverse mortgage loan agreement in the amount of $131,250.00 with the predecessor in interest to RMF,1 secured by a deed of trust on the real property and improvements located at 1201 Pine Hill Drive in Jefferson, Marion County, Texas (the Property).

In a suit to quiet title to the Property filed on March 19, 2019, Robertson alleged that Katie’s life estate in the Property terminated when she died in March 2019. Robertson claimed that because Katie only owned a life estate in the Property, she lacked authority to enter into the reverse mortgage loan agreement. When RMF did not timely answer the lawsuit, the trial court entered a default judgment in favor of Robertson finding that

Robertson is the owner in fee simple of the house and lot(s) located at 1201 Pinehill Drive ... by virtue of the testate passage of same from her father, Richard R. Nagle, to her and her now deceased sister in a will probated in Marion County, Texas[,] on November 14, 2005[,] and recorded in Volume J-3 Page 144 et seq in probate Cause Number P006038.

The trial court further determined that “Katie Maurine Nagle acquired no ownership interest in said property and only acquired a life estate in said property which terminated on her death” and that the deeds of trust dated November 12, 2008, “are void and shall be released since the ‘borrower’ in said documents was Katie Maurine Nagle who was not ‘lawfully seised’ of the property as covenanted in the deeds of trust.” On May 6, 2019, RMF filed a motion for new trial that was overruled by operation of law.2 See TEX. R. CIV. P. 329b(c).

II. Analysis

*2 We review the trial court’s denial of a motion for new trial for an abuse of discretion. Director, State Employees Workers’ Compensation Div. v. Evans, 889 S.W.2d 266, 268 (Tex. 1994)). Following the entry of a default judgment, the defaulting party is entitled to a new trial when

(1) the failure of the defendant to answer before judgment was not intentional, or the result of conscious indifference on his part, but was due to a mistake or an accident; provided (2) the motion for a new trial sets up a meritorious defense; and (3) is filed at a time when the granting thereof will occasion no delay or otherwise work an injury to the plaintiff.

Craddock v. Sunshine Bus Lines, 134 Tex. 388, 133 S.W.2d 124, 126 (1939)). It is undisputed that RMF’s failure to answer was not intentional and that the granting of a motion for new trial would not have occasioned delay or otherwise worked an injury to Robertson. The dispositive question is whether RMF set up a meritorious defense.

To determine if RMF set up a meritorious defense, we look to the facts alleged in RMF’s motion and supporting affidavit, regardless of whether those facts are controverted. See George v. Smith, No. 06-01-00019-CV, 2002 WL 91355, at *4 n.2 (Tex. App.—Texarkana Jan. 25, 2002, no pet.) (mem. op.).

In its motion for new trial, RMF alleged: (1) “Defendant has meritorious defenses to Plaintiff’s claims because it is a bona fide mortgagee,” (2) “Even if Plaintiff’s allegations regarding Ms. Nagle’s interest in the Property [are true], which Defendant does not admit, Defendant is protected as a bona fide mortgagee,” (3) “Ms. Nagle signed a deed of trust for a reverse mortgage on November 12, 2008[,] in favor of James B. Nutter & Company,” (4) “The deed of trust lien was subsequently transferred to Defendant,” (5) “An Assignment of Mortgage/Deed of Trust dated March 1, 2018[,] was recorded in the official property records for Marion County, Texas[,] in Volume 976, Page 418,” (6) “Defendant had no actual knowledge of the probate records, nor did it have constructive notice,” and (7) “Defendant has a good faith defense to Plaintiff’s claims that it is a bona fide mortgagee and holds a valid, enforceable lien on the Property.”

*3 “Under section 13.001 [of the Texas Property Code], a lender can be a bona fide mortgagee, if the lender takes a lien in good faith, for valuable consideration, and without actual or constructive notice of outstanding claims.” Graves v. Guar. Bond State Bank, 161 S.W.2d 118, 120 (Tex. App.—Texarkana 1942, no writ)).

Noticeably absent from RMF’s factual allegations in its motion for new trial are any allegations supporting RMF’s claim that it did not have actual knowledge of Robertson’s claim to the Property. It is evident that RMF was unaware of Robertson’s ownership interest in the Property at the time the mortgage was executed and at the time it purchased the mortgage. If RMF had such knowledge, it would not have purchased the mortgage. Yet, “in legal parlance, actual knowledge embraces those things of which the one sought to be charged has express information, and likewise those things which a reasonably diligent inquiry and exercise of the means of information at hand would have disclosed.” Hexter v. Pratt, 10 S.W.2d 692, 693 (Tex. Comm’n App. 1928, judgm’t adopted) (“Where there is a duty of finding out and knowing, negligent ignorance has the same effect in law as actual knowledge.”)). RMF failed to allege any facts in its motion for new trial in support of its conclusory statement that it lacked actual knowledge of Robertson’s claim.

Likewise, RMF’s motion for new trial is devoid of factual allegations supporting its claim that it did not have constructive notice of Nagle’s will. See, e.g., Hue Nguyen v. Chapa, 305 S.W.3d 316, 323 (Tex. App.—Houston [14th Dist.] 2009, pet. denied) (holding that unrecorded conveyance of interest in real property is void as to subsequent purchaser who purchases property for valuable consideration without notice).

To claim the status of a bona fide mortgagee, RMF was bound to support its conclusory statements that it had no actual or constructive notice of Robertson’s claim to the Property with verified allegations of fact. See Estate of Pollack, 858 S.W.2d at 392. Because no such allegations appear in RMF’s motion for new trial, it failed to establish a prima facie meritorious defense.

We, therefore, affirm the trial court’s judgment.

SUPPLEMENTAL MEMORANDUM OPINION

Ralph K. Burgess, Justice

On November 25, 2019, we issued an opinion affirming the trial court’s judgment in this matter. On December 10, 2019, Reverse Mortgage Funding, LLC (Reverse Mortgage), filed a motion for rehearing. While we ultimately overruled the motion for rehearing, on January 3, 2020, we withdrew our opinion dated November 25, 2019, and issued a new opinion further explaining our rationale for affirming the trial court’s judgment. On January 21, 2020, Reverse Mortgage filed a second motion for rehearing stemming from our January 3, 2020, opinion. We overruled Reverse Mortgage’s second motion for rehearing. Then on February 24, 2020, the parties filed a joint motion stating that they had reached a settlement of their disputes, asking that we withdraw our January 3, 2020, opinion, and seeking to have the appeal dismissed.

We grant that part of the parties’ joint motion seeking to dismiss the appeal. However, we deny the portion of the motion asking that we withdraw our January 3, 2020, opinion. See TEX. 8 Houston Cable TV, Inc. v. Inwood W. Civic Ass’n, 860 S.W.2d 72, 73 (Tex. 1993) (per curiam). Because “courts are endowed with a public purpose,” “a private agreement between litigants should not operate to vacate a court’s writing on matters of public importance.” Id. We have determined that our January 3, 2020, opinion addresses matters of public importance; consequently, the opinion will not be withdrawn.

We vacate our January 3, 2020, judgment, dismiss the appeal, and, in keeping with the parties’ request, order that Reverse Mortgage bear the costs of this appeal.

Footnotes

1

The deed of trust was executed in favor of James B. Nutter & Company and was assigned to RMF on March 1, 2018. The initial deed of trust granted James B. Nutter & Co. a lien on the Property to secure payment of the note. Katie executed a second deed of trust, granting a lien on the Property to the Secretary of Housing and Urban Development to secure payment on the note. Both deeds were executed on November 12, 2008, and both were filed for record in the real property records of Marion County, Texas.

2

The trial court held a hearing on the motion for new trial on May 30, 2019. At the conclusion of the hearing, the trial court announced its intention to deny the motion for new trial, but it did not enter a written order.

3

Although status as a bona fide purchaser is an affirmative defense in a title dispute, “[t]o receive this special protection, one must acquire property in good faith, for value, and without notice of any third-party claim or interest.” Madison v. Gordon, 39 S.W.3d 604, 606 (Tex. 2001).

Court of Appeals of Texas, Texarkana.

Charles Duncan MCMILLAN d/b/a Anthony Sign Company, Appellant

v.

Kelly Shane HEARNE, Appellee

No. 06-18-00040-CV

|

Date Submitted: May 8, 2019

|

Date Decided: July 22, 2019

*509 On Appeal from the 6th District Court, Lamar County, Texas, Trial Court No. 85944. Will Biard, Judge

Attorneys & Firms

Sarah L. Kaminar, The Moore Law Firm, LLP, 100 North Main St., Paris, TX 75460, for Appellant.

T. Dean Malone, Law Offices of Dean Malone PC, 900 Jackson St., Ste. 730, Dallas, TX 75202, for Appellee.

Before Stevens, JJ.

OPINION

Opinion by Justice Burgess

*510 On November 2, 2016, Kelly Shane Hearne filed a personal injury suit against his employer, Charles Duncan McMillan d/b/a Anthony Sign Company (McMillan), a nonsubscriber to the workers’ compensation system. See TEX. LAB. CODE ANN. § 406.033. Hearne alleged that on September 14, 2015, while he was at the top of a commercial extension ladder, he fell as a result of the ladder slipping after McMillan stopped supporting the ladder at the bottom. The jury found that McMillan was liable for Hearne’s injuries, and it awarded him past and future damages in the amount of $427,818.38.

McMillan appeals, maintaining that (1) the evidence was legally and factually insufficient to support the jury’s finding of negligence and (2) the trial court committed reversible error by failing to offset the jury’s award of past medical damages in the appropriate amount. Hearne cross-appealed, contending that (1) the trial court erred in failing to render judgment on the jury verdict for all the past damages awarded by the jury, (2) even if the trial court had authority to award an offset to McMillan, it erred in doing so because the offset violated the collateral source rule and McMillan failed to obtain findings on which he had the burden of proof, and (3) alternatively, the judgment should be modified to reflect an offset in past damages in the amount of $65,521.88.

For the reasons below, we affirm the trial court’s judgment, as modified.

I. Background

In September 2015, McMillan had been hired to restore the marquee sign of the Grand Theatre in Paris, Texas. At the time, Hearne had been working for McMillan for about twenty-five years. According to Hearne, per McMillan’s instructions, he had gone to the theatre in the company bucket truck where he tried, but failed, to reach the sign by using the bucket. In a subsequent effort to reach the sign, Hearne intended to access the roof from the inside of the theatre. To that end, Hearne contacted McMillan and asked him to bring the thirty-foot-long extension ladder that was kept on McMillan’s truck. McMillan complied with Hearne’s request and brought the ladder to the theatre.

Hearne testified that after McMillan arrived, he carried the “fly” or expansion portion of the ladder inside the theatre, while McMillan carried the bottom portion of the ladder. According to Hearne, the two of them began to position the fly portion of the ladder to access the theater attic. Hearne then climbed the ladder while McMillan held it at the bottom. When Hearne reached the attic, he realized his flashlight was not working. Hearne told McMillan that he needed to retrieve another flashlight or find some new batteries. Hearne testified that he believed McMillan would wait for him to descend the ladder.

Hearne began descending the ladder; however, when he looked down, he saw that McMillan had walked away from the ladder and was exiting the theatre. According to Hearne, the ladder almost immediately slipped, and Hearne fell to the *511 concrete floor. Hearne attempted to save himself by reaching around him, but because the attic floor was made of smooth plywood, there was nothing he could hold onto.

McMillan disputed Hearne’s version of events. McMillan testified that when he arrived at the theatre, he carried the extension ladder into the building and placed it on the floor near the area in which Hearne was standing. McMillan testified that he told Hearne “to hold on and that he was going to go retrieve a flashlight.” When asked where Hearne was located at the time he went to get the flashlight, McMillan stated, “Standing right where he had been, right between where I was standing and where the hatch was -- or where the -- area of the hatch.” According to McMillan, both Hearne and the extension ladder were standing on the floor when he walked out of the theatre.

McMillan explained that the truck was near the theatre door. He stated, “So I just walked around it, opened up the side bin, and was about to -- I think I picked up the flashlight, and then I heard [Hearne] screaming.” McMillan ran back inside the theatre where he saw Hearne “laying on the floor in pain.” McMillan stated that the ladder was on the ground in its extended position. Thus, McMillan maintained that he was not present when Hearne fell and that he never supported the ladder for Hearne.

Immediately following his fall, Hearne was airlifted to the Medical Center of Plano, where he received surgery on his hip. Two or three days later, he underwent surgery on his wrist, elbow, and shoulder. According to Hearne, three of his ribs and his collarbone were also broken. Although McMillan did not carry workers’ compensation insurance, he provided an Occupational Injury Benefit Plan (the Plan) that paid certain benefits, including medical expenses to, or on behalf of, Hearne. After the incident, Hearne sued McMillan for negligence. McMillan sought an offset against the damages paid to Hearne for benefits paid by the Plan. The jury found in favor of Hearne. The trial court found that McMillan was entitled to an offset in the amount of $91,911.02. It then entered judgment in favor of Hearne for the amounts awarded by the jury, less offset. This appeal followed.

II. The Evidence Was Sufficient to Support the Trial Court’s Judgment Regarding McMillan’s Liability to Hearne

A. Introduction

Hearne contends that McMillan was negligent when he, among other things, (1) failed to adequately help Hearne in the performance of his work, (2) failed to provide a safe place for McMillan to work when he provided him with an unsafe ladder, and (3) failed to inspect the ladder. In his first and second issues, McMillan contends that there was legally and factually insufficient evidence to support the jury’s finding of negligence.

B. Standard of Review

In determining legal sufficiency, the appellate court examines “whether the evidence at trial would enable reasonable and fair-minded people to reach the verdict under review.” Id. The evidence is legally insufficient if

(1) the record discloses a complete absence of evidence of a vital fact; (2) the court is barred by rules of law or of evidence giving weight to the only evidence offered to prove a vital fact; (3) *512 the evidence offered to prove a vital fact is no more than a mere scintilla; or (4) the evidence establishes conclusively the opposite of a vital fact.

Jelinek v. Casas, 328 S.W.3d 526, 532 (Tex. 2010).

More than a scintilla of evidence exists when the evidence reaches a level enabling reasonable and fair-minded people to differ in their conclusions. Kindred v. Con/Chem, Inc., 650 S.W.2d 61, 63 (Tex. 1983)).

When reviewing a jury verdict for factual sufficiency of the evidence, we consider and weigh all the evidence and only set aside the verdict if “we determine that the credible evidence supporting the finding is so weak, or so contrary to the overwhelming weight of all the evidence, that the answer should be set aside and a new trial ordered.” Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986) (per curiam).

C. Applicable Law

To prove negligence, evidence must be produced to establish a duty, a breach of duty, and damages proximately caused by the breach. id.

D. Analysis

1. McMillan Owed a Duty of Care to Hearne, and He Breached that Duty

a. Applicable Law

An employer has a primary, continuing, and nondelegable duty to provide a safe place and safe conditions in which employees may work. Woodlawn Mfg., Inc. v. Robinson, 937 S.W.2d 544 (Tex. App.—Texarkana 1996, writ denied).

McMillan contends that the “simple tool doctrine” negated any duty he had to, among other things, furnish a safe ladder *513 or train Hearne on how to safely operate the ladder. The simple tool doctrine relieves an employer of the duty to inspect a tool if that tool is committed to the control and care of the employee and is of such character that the employee who handles it should be fully acquainted with its condition. Swearingen v. Bell, 307 S.W.2d 132 (Tex. Civ. App.—San Antonio 1957, no writ).

In Id. at 133.

b. Discussion

Pointing out that Hearne had been McMillan’s employee for more than twenty-years and that he was required to use ladders frequently in carrying out his tasks, McMillan maintains, “Having entrusted the ladder to Mr. Hearne’s use, as a common tool, [he] owed no duty to instruct Mr. Hearne on its use, warn him of its dangers, or conduct regular safety inspections of the ladder.” Hearne conceded that he used the ladder frequently and was aware the ladder had been modified.1 However, although Hearne had used the ladder on a frequent basis, the evidence in this case does not show that the ladder was committed to Hearne’s exclusive control or that Hearne was responsible for its care.

Moreover, the ladder was a modified, thirty-foot commercial extension ladder consisting of two separate pieces2 and not, as was the case in Robison, 457 S.W.3d at 186.

Because Hearne testified that McMillan stopped supporting the ladder as he was descending, Hearne’s testimony is some evidence establishing that McMillan breached his duty of care to Hearne. Although McMillan disputed Hearne’s testimony, the jury, as fact-finder, was free to reject McMillan’s version of events and accept Hearne’s. Accordingly, the evidence in this case was sufficient to establish that *514 McMillan breached his duty of care to Hearne and, therefore, was negligent.

2. McMillan’s Negligence Proximately Caused Hearne’s Injuries

a. Applicable Law

Proximate cause consists of both cause in fact and foreseeability, both of which must be shown to exist. Enloe v. Barfield, 422 S.W.2d 905, 908 (Tex. 1967)).

Cause in fact “requires proof that an act or omission was a substantial factor in bringing about injury which would not otherwise have occurred.” Clifton v. Wilson Indus., Inc., 589 S.W.2d 498, 500 (Tex. App.—Texarkana 1979, writ ref’d n.r.e.).

b. Analysis

McMillan maintains that Hearne was unsuccessful in proving that but for McMillan’s actions, Hearne would not have fallen. McMillan contends that the only testimony offered by Hearne as to the cause of his injuries was that of Hearne’s expert, Jason English, a safety engineer, and that his testimony was insufficient to prove causation.3 McMillan also maintains *515 that although the occurrence complained of—falling off a ladder—was within the general experience of the jury, the causal connection between Hearne’s falling off the ladder and any breach of duty by McMillan was not.

Establishing causation in this case required Hearne to bring forth sufficient facts so that the evidence, and its logical inferences, supported a reasonable probability that McMillan’s actions were a substantial factor in bringing about his injuries. See Lenger v. Physician’s Gen. Hosp., 455 S.W.2d 703, 706 (Tex. 1970).

Moreover, lay opinion is adequate to prove causation where general experience and common sense enable a layperson to determine, with reasonable probability, the causal relationship between the event and the condition. N. Assurance Co. of Am. v. Taylor, 540 S.W.2d 832 (Tex. Civ. App.—Texarkana 1976, writ ref’d n.r.e.).

Both at trial and on appeal, Hearne relies heavily on the allegations that (1) McMillan had a duty to continue supporting the ladder while he was on the ladder, (2) he breached that duty by abruptly letting go of it, and (3) his fall, and resulting injuries, occurred because of McMillan’s actions. Here, “causation was not a matter for experts alone and did not require a technical or scientific explanation; it was within the jury’s ability to determine on its own what caused the accident and resulting injuries.” See K-Mart Corp. v. Honeycutt, 24 S.W.3d 357, 361 (Tex. 2000)).4

Even so, English testified that in the event the ladder was used, it should have been held. He also stated in his report that McMillan’s failure to continue holding the ladder for Hearne and the unsafe condition of the ladder,5 together *516 with McMillan’s failure to establish and implement a ladder safety and inspection program, including training, created an unreasonably dangerous work environment that ultimately caused Hearne’s injuries. Regardless of whether the jury relied upon its “general experience and common sense” or whether it relied upon English’s testimony, or both, the evidence established, “with reasonable probability, the causal relationship between” McMillan’s act of letting go of the ladder and Hearne’s fall from the top of the ladder to the concrete floor. See Morgan, 675 S.W.2d at 733.

The other aspect of proximate cause—foreseeability—requires proof that the actor, as a person of ordinary intelligence, anticipated the danger that his negligent actions created for others. Nixon v. Mr. Property Mgmt. Co., 690 S.W.2d 546, 549 (Tex. 1985)).

McMillan argues that Hearne failed to prove foreseeability specifically. McMillan points to Hearne’s lengthy work history and his familiarity with the ladder. For example, McMillan contends that the evidence showed Hearne knew that the fly portion of the ladder had been modified and that it could not have been adjusted to accommodate the ground surface. Yet, Hearne voiced no safety concerns to him, but continued to use the ladder despite knowing that there was a safer alternative. McMillan maintains that if Hearne could not have foreseen the possibility of injury, then the jury could not have made a reasonable inference that McMillan could have foreseen the possibility of injury.6

Again, McMillan’s contention omits entirely Hearne’s allegation that McMillan was negligent because he abruptly stopped supporting the ladder while Hearne was at the top of it. Notably, at trial, McMillan was asked if he would ever permit someone to climb the ladder without another person at the bottom supporting it, to which he responded, “Not like that, not like what [Hearne] described.” McMillan also testified that had he known “Hearne was using the ladder like he claims he used it on this concrete surface with just the fly portion with those pieces of steel or metal on the ground,” he would not have allowed Hearne to do so. According to McMillan, had he known Hearne was using the ladder without someone supporting him, he would have terminated his employment.

In addition, McMillan explained how the ladder should have been supported in a “proper and safe way” in order to prevent the feet from slipping. “What I would do would be to put both of my feet on the ends of the ladder and then hold onto the side of the ladder.” McMillan said that in the event he was supporting the ladder for another person, he would never walk away *517 because “[t]oo many things could happen, and none of them would be good.”

Although McMillan asserted that he had not been supporting the ladder for Hearne and that he had not walked away from Hearne while he was on the ladder, McMillan’s explanation assumes that the failure to take such actions would be dangerous. Thus, McMillan’s testimony constitutes some evidence that such a failure would create a danger of injury to others. Therefore, McMillan’s own testimony establishes the foreseeability element of proximate cause.

It is true that the jury was presented with two versions of what occurred on the day of the incident, but, as the trier of fact, the jury was the sole judge of the credibility of the witnesses and the weight to be given to the evidence. Herbert v. Herbert, 754 S.W.2d 141, 144 (Tex. 1988). In this case, when the jury resolved the inconsistencies in the evidence, it chose to believe Hearne’s account rather than McMillan’s. The jury was well within its discretion to make that determination. Accordingly, we find there was legally and factually sufficient evidence to support the jury’s verdict. We overrule McMillan’s first and second points of error.

III. The Evidence Was Sufficient to Support the Trial Court’s Judgment Regarding Damages

A. Introduction and Standard of Review

The jury awarded Hearne $162,818.38 in past damages and $265,000.00 in future damages. Yet, in its final judgment, the trial court awarded Hearne $70,907.36 in past damages, finding that McMillan was entitled to a $91,911.02 offset. In making its determination, the trial court considered payments made to Hearne, or on his behalf, from the Plan which McMillan had procured in 2013 from the Life Insurance Company of North America.7 Both parties challenge the $91,911.02 offset contained in the trial court’s final judgment. Resolution of the parties’ points of error requires us to interpret TEX LAB. CODE ANN. § 406.033.

In interpreting a statute, our primary objective is to give effect to the Legislature’s intent. Id. The Texas Supreme Court then observed,

To discourage employers from [opting out of the workers’ compensation system], the Legislature included within the Act a penalty provision, similar to section 406.033, that precluded nonsubscribing employers from relying on the traditional common-law defenses—contributory negligence, assumption of the *518 risk, and fellow servant—in defending against their employees’ personal-injury actions.

Id. at 350.8

The Texas Supreme Court went on to hold that “[b]ecause we should liberally construe the Workers’ Compensation Act in favor of the injured worker, a strained or narrow construction of Section 406.033 in Hearne’s favor and avoid construing it in a manner that implies nonstatutory restrictions on his rights as an employee in a nonsubscriber case.

B. Hearne’s First Cross-Point of Error

In his first cross-point of error, Hearne contends that the trial court had no discretion to offset the jury’s award of past damages; instead, he argues that issue was for the jury to determine. We first note that “[t]he right of offset is an affirmative defense.” Tarrant Cty. Waste Disposal, Inc. v. Doss, 737 S.W.2d 607, 611 (Tex. App.—Fort Worth 1987, writ denied).

However, Hearne further argues that even though McMillan may have pled his offset defense, he waived that defense by failing to submit the question to the jury. Hearne cites to Haygood and misapplies the case here.

In Id. at 398.

Although the majority disagreed with the dissent’s suggestion that reductions in payments made to providers from the amounts charged should be submitted to the trial court post-verdict, the thrust of the case very clearly centered on the court’s holding that a plaintiff could not recover medical expenses that neither the plaintiff nor the insurance company actually paid and that he could not present such evidence to the jury because it would be irrelevant. Id. at 400.

Thus, Doss, 737 S.W.2d at 611. Accordingly, we find that the trial court was within its discretion in making a post-verdict determination of offset, and McMillan did not waive the issue on appeal.

*520 Hearne’s first cross-point of error is overruled.

C. Hearne’s Second Cross-Point of Error

Next, Hearne contends that because the Plan paid for Hearne’s past medical expenses and lost wages, the collateral source rule prevented the award of an offset of damages.11 “The theory behind the collateral source rule is that a wrongdoer should not have the benefit of insurance independently procured by the injured party, and to which the wrongdoer was not privy.”12 Taylor v. American Fabritech, Inc., the Houston Court of Appeals explained:

The collateral source rule is both a rule of evidence and damages. Generally, it precludes a tortfeasor from obtaining the benefit of, or even mentioning, payments to the injured party from sources other than the tortfeasor. In other words, the defendant is not entitled to present evidence of, or obtain an offset for, funds received by the plaintiff from a collateral source. When the defendant tortfeasor is the employer of the injured plaintiff, payments made under an employee benefit plan create a particular puzzle. Basically, if the benefit plan is a fringe benefit for the employee, it is considered a collateral source in regard to the employer, but if the benefit was purchased for the primary purpose of protecting the employer, then the plan is not a collateral source as against the employer. The reasoning is simple: if the plan was purchased for the benefit of the employer[,] then it should be entitled to an offset for payments from the plan to the injured employee.

Taylor v. Am. Fabritech, Inc., 132 S.W.3d 613, 626 (Tex. App.—Houston [14th Dist.] 2004, pet. denied) (citations omitted).

The appellate court in Id. at 627 (finding that payments made by employer’s insurance carrier pursuant to its accident policy covering occupational injuries did not constitute a collateral source and that nonsubscriber was entitled to offset).

In Id.

After explaining the purpose of the collateral source rule, the Eastland Court of Appeals stated, “However, when the wrongdoer ‘has provided for those damages, either by personal payment or insurance payment, the damage claim has been satisfied’; to permit the injured party in such circumstances to keep the insurance money and also collect from the wrongdoer ‘would be a double recovery not sanctioned by law.’ ” Id.

In this case, the Plan stated that it was established to provide benefits for covered employees. “The purpose of the Plan is to provide (i) certain medical benefits for Covered Employees who sustain an occupational injury; (ii) certain wage replacement benefits to Covered Employees who sustain an occupational injury; and (iii) [i]n some cases, certain death or dismemberment benefits.” In addition, Section six of the Plan, entitled “Exclusions,” stated, “No benefits shall be payable under the Plan for any of the following: (a) Losses or expenses that result from an activity outside the Covered Employee’s Scope of Employment.” (Emphasis added).

The Plan also contained a paragraph, entitled “NO COLLATERAL SOURCE,” which stated,

Benefit payments made under this Plan shall be considered to be made by the Employer of a Covered Employee and shall not be considered payment from a collateral source as that term is defined by rules, statutes, judicial decisions or directives. All payments under this Plan shall be offset against any judgment against the Company, its officers, directors, or agents which may be taken by a Covered Employee or Covered Employee’s beneficiaries, heirs, or assigns, resulting from an occupational injury or Death.

As was the case in Taylor, 132 S.W.3d 613.

Although there was little, if any, testimony as to its purpose, the Plan’s language clearly stated that coverage was solely available for occupational injuries and wage replacement in the event an employee suffered an injury on the job. It did not, however, cover such things as *522 medical expenses incurred by Hearne in the event of an illness13 or any activity outside his scope of his employment. Although the Plan clearly provided some benefits to Hearne, we find that the primary purpose of the Plan was to protect McMillan. Consequently, the collateral source rule is inapplicable, and McMillan was entitled to a post-verdict offset of the jury’s award of past damages.14

Hearne’s second cross-point of error is overruled.

*523 D. McMillan’s Third Point of Error and Hearne’s Third Cross-Point of Error

Having found that McMillan did not waive the offset issue and that the payments made by the Plan did not constitute a collateral source payment, the question remains: What amount, if any, was McMillan entitled to receive as an offset?

In his offer of proof, made outside of the jury’s presence, McMillan presented the testimony of Matt Reiter, a claims manager for Caprock Claims.15 Reiter testified that the Plan paid $155,118.64 for Hearne’s medical expenses, along with payments made to Anthony Sign Company in order to reimburse Hearne for his lost wages in the amount of $3,842.64. The evidence also shows that a portion of that sum included a $250.00 deductible paid by McMillan and additional payments made to Medical Pricing Strategies, LLC (MPS), in the amount of $89,596.76. Reiter explained that pursuant to a contract between MPS and Caprock, MPS would negotiate with Hearne’s medical providers in order to reduce the amount the medical provider would accept in satisfaction for the full amount owed. In exchange for its services, MPS charged a fee to Caprock in the form of a percentage of the amount of the savings it had obtained. Based on the total amount of payments made by the Plan, McMillan contends, in his third point of error, that he was entitled to a $155,118.64 offset in past damages, which would include the payments made to MPS in the amount of $89,596.76. We disagree and find that McMillan is not entitled to an offset for the fees paid to MPS by the Plan.

Under Section 4.1 of the Plan, entitled “Eligibility for Benefits,” it states, “A Covered Employee shall only be eligible for payment of benefits as described below, if the Covered Employee sustains an injury.” (Emphasis added). The Plan specifically includes medical expense benefits, weekly accident disability benefits, death benefits, and dismemberment benefits. The Plan does not, however, contain a provision stating that the Plan would pay the costs of a third party’s services for negotiating a reduction in an employee’s medical costs. Thus, the section of the Plan relating to any potential offset, which states, “All payments under this Plan shall be offset against any judgment,” is inapplicable to services such as those provided by MPS.16 (Emphasis added).

*524 In his third cross-point of error, Hearne contends that in the event we find an offset of damages is appropriate, it should be in the amount of $65,521.88. We agree. The uncontroverted evidence showed that the Plan paid $65,271.88 of Hearne’s medical expenses and past wages and that McMillan paid a $250.00 deductible. As a result of those payments, McMillan was entitled to a $65,521.88 offset in the jury’s past damages award of $162,818.38, resulting in a judgment in favor of Hearne for past damages in the amount of $97,296.50.

For these reasons, we overrule McMillan’s third point of error and sustain Hearne’s third cross-point of error.

IV. Conclusion

Accordingly, we modify the trial court’s judgment to reflect an award of past damages in the amount of $97,296.50. As modified, we affirm the judgment of the trial court.

Footnotes

1 There was evidence in the record showing that when the ladder came from the manufacturer, it had feet made of rubber. According to McMillan, at the time of Hearne’s fall, the feet were attached with “something that’s removable, like a bolt and a nut or a screw and a nut ... something like that.” McMillan concedes that the ladder had been modified.
2 Although he was not certain, McMillan approximated that the ladder weighed forty-five to fifty pounds; however, Hearne presented evidence that it weighed about seventy-five pounds.
3 McMillan emphasizes the Robinson, the court stated that there were many factors a trial court could consider in making the threshold determination of the admissibility of an expert’s opinion, including:

(1) the extent to which the theory has been or can be tested;

(2) the extent to which the technique relies upon the subjective interpretation of the expert[;]

(3) whether the theory has been subjected to peer review and/or publication;

(4) the technique’s potential rate of error;

(5) whether the underlying theory or technique has been generally accepted as valid by the relevant scientific community; and

(6) the non-judicial uses which have been made of the theory or technique.

Id. at 557 (citations omitted).

McMillan maintains that English did not conduct or cite any testing or authority to support his theories that the condition of the ladder caused the ladder to slip and Hearne to fall. McMillan contends that at the time English made his report, he had no information about the incident other than what he had been told by Hearne’s counsel. According to McMillan, English never visited the accident site or examined the ladder at issue; instead, he relied only on photographs.

In response, Hearne contends that the attack on the admission of English’s testimony is misplaced. According to Hearne, McMillan misstated the relevant legal standard by erroneously focusing on the Id. at 722. Thus, contrary to McMillan’s contention, and as we explain below, expert testimony is not always held to a scientific standard, and such testimony is not always necessary to prove causation in a negligence case.

4 Expert testimony is necessary when the alleged negligence is of such a nature as not to be within the experience of the layperson. Turbines, Inc. v. Dardis, 1 S.W.3d 726, 738 (Tex. App.—Amarillo 1999, pet. denied) (concluding negligence of aircraft turbine engine mechanic requires expert testimony because “performance of mechanical work on turbine aircraft engines is not within the experience of a layman”).
5 See supra note 2 (discussing ladder modifications). According to English, these modifications rendered the ladder unsafe for the use for which it was intended.
6 As noted, as a nonsubscriber, McMillan is not entitled to assert the defense of contributory negligence. Accordingly, we consider this argument only to the extent McMillan argues that Hearne’s inability to foresee the danger of using the ladder established that the danger was likewise unforeseeable to McMillan.
7 As we discuss below, the Plan provided benefits for covered employees who sustained certain accidental on-the-job injuries.
8 The Texas Supreme Court emphasized the importance of this principle by stating it affirmatively as well: “To encourage employers to obtain workers’ compensation insurance, Kroger, 23 S.W.3d at 349.
9 TEX. CIV. PRAC. & REM. CODE ANN. § 41.0105.
10 We further note that the Legislative intent behind the statute at issue in Haygood is inapposite to the present case.
11 In this case, McMillan’s employee benefit plan was funded by McMillan. We do not address whether an employer who does not fund the employee benefit plan has a right of offset in a nonsubscriber case.
12 In Tex. & Pac. Ry. Co. v. Levi & Bro., 59 Tex. 674 (1883)). It would be unfair to a plaintiff, after purchasing insurance for himself, to see the benefits of his own coverage reduce a defendant’s accountability for his negligent actions. Notably, those are not the circumstances in this case.
13 In addition to twenty-four other exclusions, the Plan specifically excludes “[a]ny losses or expenses incurred from sickness, disease, bodily or mental infirmity, bacterial or viral infection or medical or surgical treatment thereof.”
14 We agree with our sister courts in Teel that the collateral source rule does not apply in this instance. Typically, the collateral source rule applies when the defendant tortfeasor attempts to offset his liability to the plaintiff on the basis that the plaintiff already received compensation from his own insurance carrier. Because the plaintiff purchased the health insurance for his own benefit rather than for the tortfeasor’s benefit, the plaintiff’s health insurance is considered a collateral source. By contrast, in a nonsubscriber case, the defendant tortfeasor pays the plaintiff’s medical bills (by setting up an employee benefit plan), not the plaintiff’s insurer. Therefore, payment of benefits by or on behalf of a nonsubscribing employer are not a collateral source, but instead, are essentially advance payments by the nonsubscribing employer on the amount of common law damages it will ultimately owe to the employee. Thus, payments from an employee benefit plan in nonsubscriber cases are not subject to the collateral source rule.

Of course, it is true—as Hearne points out—that workers’ compensation benefits are a collateral source. Hearne further argues that there is no reasonable distinction between workers’ compensation benefits and benefits paid by an employee benefit plan in nonsubscriber cases. Yet, in workers’ compensation cases, employees only receive—and employers only pay—statutory benefits; thus, an employee in a workers’ compensation case cannot recover common law damages in addition to the statutory benefits. See Kroger, 23 S.W.3d at 349–50 (“In exchange [for employees recovering without proving fault] employees receive[ ] a lower, but more certain, recovery than would have been possible under the common law.”). Accordingly, in a workers’ compensation case, there is nothing to offset the workers’ compensation benefits against, and there is no risk that an injured employee will obtain a double recovery. By contrast, in nonsubscriber cases, employees can recover common law damages which could substantially exceed the amount of benefits paid by an employee benefit plan. If an injured employee could recover medical expense benefits from his employee benefit plan and then recover common law damages for his medical expenses from his employer, the employee would receive a double recovery. Thus, the reasons for applying the collateral source rule to workers’ compensation benefits are not applicable in nonsubscriber cases.

In addition, if nonsubscribing employers were unable to offset benefits paid under an employee benefit plan against the common law damages they are required to pay to an injured employee, there would be no incentive for nonsubscribing employers to create employee benefit plans. Of course, it could be argued that such is the price an employer pays for being a nonsubscriber. But that scenario potentially harms employees more than employers. Namely, if a nonsubscribing employer does not have sufficient non-exempt assets to pay an injured employee’s common law damages, then an employee who obtains a judgment against that insolvent nonsubscribing employer would recover nothing. At least with an employee benefit plan, the employee’s recovery of a portion of his damages is guaranteed without sacrificing the right to recover all of his common law damages. If an employer has no right to offset, then an employee with an employee benefit plan would essentially be paying the damages to the employee twice. This would substantially discourage a nonsubscribing employer from adopting an employee benefit plan. Consequently, were we to interpret Section 406.033 as prohibiting nonsubscribing employers from offsetting benefits paid under an employee benefit plan, we would be giving an interpretation contrary to the interests of the injured employee.

15 Caprock Claims is the third-party administration company that issued the policy on behalf of Life Insurance Company of North America.
16 Moreover, the payments to MPS were not made for Hearne’s benefit, but for McMillan’s. As a nonsubscriber, McMillan was liable to Hearne for 100% of Hearne’s work-related medical expenses regardless of amount. Therefore, payments made to MPS to negotiate a reduction in Hearne’s medical expenses only benefitted McMillan. Thus, the amounts paid to MPS were not benefits paid to Hearne.

Furthermore, in a nonsubscriber case, an employee is entitled to recover common law damages, and the amount of the employee’s economic damages (including reasonable and necessary medical expenses) is commonly a factor in a jury’s evaluation of the employee’s noneconomic damages (pain and suffering, disfigurement, etc.). See Id.

Court of Appeals of Texas, Texarkana.

Melanie STEELE, Appellant

v.

MURPHY & BEANE, INC., and Viacom, Inc., Appellees

No. 06-19-00008-CV

|

Submitted: July 2, 2019

|

Decided: July 10, 2019

On Appeal from the 250th District Court, Travis County, Texas, Trial Court No. D-1-GN-18-005640. Dustin M. Howell, Judge

Attorneys & Firms

Brian Buster, Christopher Bean & Associates, 1301 S IH-35 N, Ste. 105, Austin, TX 78741, for Appellant.

Christopher C. White, Lewis, Brisbois, Bisgaard & Smith, LLP, 2100 Ross Ave., Ste. 2000, Dallas, TX 75201, for Appellees.

Before Stevens, JJ.

MEMORANDUM OPINION

Memorandum Opinion by Justice Stevens

*1 Viacom, Inc., hired Melanie Steele as an independent makeup artist to work on an Austin, Texas, set for a television series produced by Viacom in 2006 called Meet the Bulldogs.1 When the Viacom production team “cut the lights for filming purposes,” Steele fell down two flights of stairs and suffered severe injuries, including broken and cracked teeth, lacerations to the face and body, broken bones, a torn meniscus in each knee, ultimately leading to double knee replacement surgery.

After the accident, Steele received correspondence from Murphy & Beane, Inc., a third-party administrator from California, informing her of treatment plans and benefits. Their handling of Steele’s claim, including a dispute over the need for total knee replacement surgery, led to a lawsuit filed by Steele against both Murphy & Beane and Viacom for fraud, fraudulent inducement, gross negligence, and violations of the Texas Deceptive Trade Practices Act and Texas Insurance Code. Murphy & Beane and Viacom filed a plea to the jurisdiction which argued that the Texas Department of Insurance, Division of Workers’ Compensation (Division), had exclusive jurisdiction over Steele’s claims and that Steele failed to exhaust administrative remedies.

The trial court granted the plea to the jurisdiction and dismissed Steele’s claims, without prejudice, to allow her to exhaust administrative remedies. Steele appeals. Because we agree with the trial court’s conclusion that Steele did not exhaust administrative remedies with the Division, we affirm the trial court’s judgment.

I. Factual and Procedural Background

After the accident, Steele said a Viacom employee took her to the hospital so she could receive medical care under Viacom’s Self Insurance Group as a result of the injury she suffered while working in Texas in the course and scope of her employment with Viacom. Steele countersigned a Texas Workers Compensation Work Status Report.

According to Steele’s petition, Murphy & Beane’s agent informed her that she had a “complicated case because the injury happened in Texas but the company handling the claim was from California.” Steele asserted that the agent never told her that Murphy & Beane was seeking to transfer the claim from Texas to California, but that they did so by filing an Employer’s Report of Occupational Injury or Illness in California with the Department of Industrial Relations two months after her injury. Steele also complained that Murphy & Beane failed to inform her that the case should be handled under the Texas Workers’ Compensation System, failed to file the claim in Texas, and

misrepresented to [Steele] that (a) [Steele’s] accident occurred in California, that (b) [Steele] was an employee located primarily in California, that the claim was a California claim, and not a Texas claim, that (c) she could not seek treatment from doctors of her choosing, that (d) she would have to travel to California to receive a [panel qualified medical examination (QME) ], and that (e) Murphy & Beane could close her case for non-compliance.

*2 Steele claimed that when she travelled to California for the QME, following a threat to terminate coverage by Murphy & Beane, she was informed that no doctor was available to see her. Because she returned to Texas without receiving a QME, Steele complained that it was “difficult to receive medically necessary treatments without either having to undertake unnecessarily difficult and repeated negotiations with Murphy & Beane, or just having the requested treatments flat out denied.”

Steele also asserted that, acting on behalf of Viacom, Murphy & Beane continuously injured her by misrepresenting workers’ compensation coverage available to her, by applying the improper medical-treatment guidelines of California rather than Texas, not timely filing the injury notice in Texas, misrepresenting that the injury occurred in California, not properly registering the self-insured group or third-party administrator in Texas, claiming that Steele was a regular employee domiciled in California, not timely filing a notice of injury claim in California, actively obstructing Steele’s ability to receive medically necessary treatment in her home state, and misrepresenting to Steele that her coverage could be canceled by Murphy & Beane for not complying with requests to cease seeking treatment or for refusing to fly to California to receive a QME.

As a result of these actions, Steele sued in Travis County in 2016, but the Austin Court of Appeals issued a writ of mandamus compelling the trial court to dismiss Steele’s claims for lack of subject-matter jurisdiction because (1) the Division had exclusive jurisdiction over Steele’s claims and (2) she had not exhausted administrative remedies. In re Murphy & Beane, Inc., No. 03-16-00690-CV, 2017 WL 3897453, at *6 (Tex. App.—Austin Aug. 29, 2017, orig. proceeding).

After the dismissal, the Division conducted a benefits review conference that led to an agreement between Steele and the carrier that Steele’s recovery was barred by the Texas Workers’ Compensation Act (TWCA). Steele contended that this agreement constituted an exhaustion of her administrative remedies. As a result, in 2018, Steele filed another petition against Murphy & Beane and Viacom in Travis County district court raising, in large part, the same claims as before.

Murphy & Beane and Viacom filed a plea to the jurisdiction in response to the new lawsuit and argued that Steele again failed to exhaust administrative remedies by neglecting to raise the allegations in her petition at the benefits review conference. The trial court agreed and again dismissed Steele’s claims “until such time that [she] exhausts all remedies available with the [Division].”

II. Standard of Review

Whether a trial court has subject-matter jurisdiction is a matter of law that we review de novo. See In re Entergy Corp., 142 S.W.3d 316, 321–22 (Tex. 2004) (orig. proceeding)).

“The [Texas] Workers’ Compensation Act ‘provides the exclusive procedures and remedies for claims alleging that a workers’ compensation carrier has improperly investigated, handled, or settled a workers’ claim for benefits.’ ” In re Crawford & Co., 458 S.W.3d 920, 923–27 (Tex. 2015) (per curiam)). Instead, we address whether Steele has properly exhausted administrative remedies.

*3 In performing this review, an appellate court does not look to the merits of the case, but considers only the pleadings and evidence relevant to the jurisdictional inquiry. See McMillan v. Aycock, No. 03-18-00278-CV, 2019 WL 1461427, at *2 (Tex. App.—Austin Apr. 3, 2019, no pet.).

III. Steele Did Not Exhaust Administrative Remedies

“There are two general types of dispute resolution under the Texas Workers’ Compensation Act.” § 410.202 (Supp.)). “A claimant is not required to continue through every step; the provisions of the Act contemplate that disputes may be resolved at any level.” Id.

The second type of dispute resolution “involves disputes relating to medical necessity or preauthorization for particular treatments, which follows the procedures instituted under Chapter 413.” Cunningham, 291 S.W.3d at 477).

The TWCA also addresses and prohibits a carrier or its representative from making misrepresentations to an employee about the TWCA’s provisions and the reason for not paying benefits. PHI Air Med., LLC v. Tex. Mut. Ins. Co., 549 S.W.3d 804, 811 (Tex. App.—Austin 2018, pet. abated)).

*4 Steele alleged that the claims in her petition were resolved at the benefits review conference, “a nonadversarial, informal dispute resolution proceeding.” 410.030(b).

The Agreement only addressed issues of compensability. It referenced no dispute about the extent of injury, preauthorization, medical necessity, or administrative violations. The Agreement stated, “This agreement resolves only the issues in dispute as described below and is not a final resolution of all issues in this claim.”3 The effect of the agreed finding under Section 409.003 is discussed in Section 409.004, which states:

Failure to file a claim for compensation with the division as required under Section 409.003 relieves the employer and the employer’s insurance carrier of liability under this subtitle unless:

(1) good cause exists for failure to file a claim in a timely manner; or

(2) the employer or the employer’s insurance carrier does not contest the claim.

TEX. LABOR CODE ANN. § 409.004.4 The Agreement did not address good cause or any decision by Viacom or their carrier on refraining from a contest.

“An issue that was not raised ... or ... resolved at a benefit review conference may not be considered unless: (1) the parties consent; or (2) if the issue was not raised, the commissioner determines that good cause existed for not raising the issue at the conference.” Cunningham, 291 S.W.3d at 477).

Steele’s petition essentially claims that she was denied full benefits as a result of Murphy & Beane and Viacom’s misrepresentations about and mishandling of the claims process. Yet, the Agreement’s resolution on compensability does not resolve her other disputes which were not raised with the Division. This is because, even if she cannot recover TWCA benefits, “[i]t is the Division’s duty to ‘(1) regulate and administer the business of workers’ compensation in this state; and (2) ensure that [the Act] and other laws regarding workers’ compensation are executed.’ ” Id. at 923–24. Nothing in the appellate record shows that Steele has either exhausted administrative remedies under Chapter 413 or provided the Division with notice of administrative violations.

*5 The Austin Court of Appeals has already determined that Steele’s complaints needed to be raised with the Division. A review of the Agreement shows that they were not. The evidence presented by Murphy & Beane and Viacom was uncontested. Because there was no genuine issue of material fact about whether Steele exhausted administrative remedies, we find the trial court’s grant of the plea to the jurisdiction was proper.

IV. Conclusion

We affirm the trial court’s judgment.

Footnotes

1

Originally appealed to the Third Court of Appeals, this case was transferred to this Court by the Texas Supreme Court pursuant to its docket equalization efforts. See TEX. R. APP. P. 41.3.

2

Section 409.003 of the Texas Labor Code states:

An employee or a person acting on the employee’s behalf shall file with the division a claim for compensation for an injury not later than one year after the date on which:

(1) the injury occurred; or

(2) if the injury is an occupational disease, the employee knew or should have known that the disease was related to the employee’s employment.

TEX. LAB. CODE ANN. 409.003.

3

A copy of Steele’s actual claim or claims with the Division is not included in the appellate record.

4

While “[r]ecovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage ... against the employer ... for ... a work-related injury sustained by the employee,” a “determination under (d).

Court of Appeals of Texas, Texarkana.

Suenan GOBER, Appellant

v.

BULKLEY PROPERTIES, LLC, Appellee

No. 06-18-00039-CV

|

Date Submitted: December 10, 2018

|

Date Decided: December 28, 2018

*422 On Appeal from the 62nd District Court, Hopkins County, Texas, Trial Court No. CV43552, Hon. Will Biard, Judge.

Attorneys & Firms

Lawrence L. Beason, Attorney at Law, Mineola, TX, for Appellant.

Michael G. Lee, Erwin A. Cain, PC, Sulphur Springs, TX, for Appellee.

Before Burgess, JJ.

OPINION

Opinion by Justice Moseley

Suenan Gober, who had instituted a declaratory judgment action against Bulkley Properties, LLC, suffered the grant of a summary judgment against her and in favor of Bulkley. By her appeal, Suenan seeks to reverse that summary judgment. Because we find that the trial court erred in entering summary judgment without first having allowed Suenan the opportunity to amend her pleadings, we reverse the trial court’s judgment.

I. Background

The property which has generated the controversy in this case was owned by Imogene Gober and occupied by her, Suenan Gober (her daughter), and Day Gober (her granddaughter). Imogene died, and that residence in Sulphur Springs was sold to Bulkley during the probate of her estate. In her petition, Suenan alleged that after the sale, she negotiated with Bud McCleheny, who was the agent for Bulkley. According to Suenan’s original petition, following the sale, Suenan entered into negotiations with Bulkley through McCleheny. The petition alleges that Suenan would be able to lease the property and purchase it from Bulkley at a later date. According to Suenan, the parties agreed that she would deed one-half of her interest in another property (known as 0-Gilmer) as collateral to ensure her payment of lease payments for two years, with an agreement that she could acquire the residence and reacquire the 0-Gilmer property by paying Bulkley $100,000.00 by December 2016. When Suenan offered to pay Bulkley the agreed-on funds in November or December 2016, her payment was refused by Bulkley. Suenan alleges that Bulkley then made another offer. Under this proposal, Suenan was to pay *423 $100,000.00 as partial payment and Bulkley was to finance an unpaid balance. However, even though Bulkley had originated the offer through McCleheny, Bulkley refused to follow through on those terms.

In her petition, Suenan acknowledged that the agreement was not in writing, but alleged that there was a special relationship and trust that existed between her and Bulkley. She also alleged that Bulkley was unjustly enriched by refusing her payment and denying her the two properties and that she was entitled to equitable restitution and the equitable remedy of quantum meruit.1 She sought a declaratory judgment that she was entitled to pay Bulkley the consideration and to receive warranty deeds from Bulkley conveying to her both the residence and the 0-Gilmer property.

Bulkley filed special exceptions wherein it asserted that Suenan’s petition showed on its face that it was barred by the statute of frauds,2 since she admitted that the agreement was not in writing, and an answer asserting a general denial and the statute of frauds as an affirmative defense. On the same day, Bulkley filed a traditional motion for summary judgment. As grounds for its motion, Bulkley asserted that the allegations in Suenan’s petition showed that her claim regarding the agreement to convey real estate was barred by the statute of frauds and that she did not state a viable cause of action for recovery under quantum meruit.

In her response to the motion for summary judgment, Suenan challenged Bulkley’s use of its motion for summary judgment to challenge deficiencies in her pleadings that were curable by amendment and requested leave of court to amend her petition. She also asserted that Suenan’s affidavit (an unsigned copy of which was apparently attached to the response) established issues of material fact supporting her allegations that enforcement of the statute of frauds was waived.3 On the same date, Suenan filed her first amended petition in which she again requested a declaratory judgment and added claims for damages based on fraud, breach of contract, and promissory estoppel.

On the day of the summary judgment hearing,4 Bulkley filed objections to Suenan’s unsigned affidavit and the exhibits attached to it as summary judgment evidence. At the hearing, Suenan showed the trial court a copy of her signed affidavit5 and contended that it had been filed with her response. After the trial court pointed out that the filed affidavit was not signed, it sustained Bulkley’s objections and struck the affidavit. The trial court then entered its summary judgment that Suenan take nothing on her claims for declaratory relief and on her claims for unjust *424 enrichment, quantum meruit, and equitable restitution.6 It also severed those claims from her claims for damages based on fraud, breach of contract, and promissory estoppel.7 Suenan has appealed.

On appeal, Suenan asserts that the trial court (1) abused its discretion by refusing to allow her to file her signed affidavit and (2) erred in entering summary judgment based on the statute of frauds. Because we agree that the trial court erred in entering summary judgment, we will reverse the trial court’s judgment.

II. Standard of Review

The grant of a trial court’s summary judgment is subject to de novo review by appellate courts. Swilley v. Hughes, 488 S.W.2d 64, 67 (Tex. 1972) ).

III. Analysis

In support of her second issue, Suenan contends that this appeal is controlled by the legal principles set forth in Friesenhahn. We agree.

Bulkley’s motion for summary judgment was not supported by any evidence and relied solely on the allegations in Suenan’s pleadings that there was no written agreement in support of its contention that any cause of action asserted by Suenan was barred by the statute of frauds. The statute *425 of frauds provides that neither a lease of real estate for a term longer than one year nor a contract for the sale of real estate9 may be enforced unless it is in writing and signed by the defendant or his agent. (b)(4).

Absent some exception to the enforcement of the statute, the enforcement of the oral agreement alleged by Suenan would be barred. However, “Texas has long recognized that some situations exist wherein ‘the nonenforcement of the contract—or the enforcement of the statute—would, itself, plainly amount to a fraud.’ ” Hammonds v. Calhoun Distrib. Co., 584 S.W.2d 473, 475 (Tex. Civ. App.—Texarkana 1979, writ ref’d n.r.e.).

We must liberally construe a petition to contain any claims that may be reasonably inferred from the language used in the petition, even if an element of a claim is not specifically alleged. Id. Consequently, we find that the trial court erred in entering summary judgment in favor of Bulkley. We sustain Suenan’s second issue.10

For the reasons stated, we reverse the trial court’s judgment, and remand this cause for further proceedings.

Footnotes

1 Quantum meruit is an equitable remedy which does not arise out of a contract, but is independent of it. Generally, a party may recover under quantum meruit only when there is no express contract covering the services or materials furnished. This remedy is based upon the promise implied by law to pay for beneficial services rendered and knowingly accepted; it will be had when non-payment for the services rendered could result in an unjust enrichment to the party benefited by the work. Vortt Expl. Co. v. Chevron U.S.A., Inc. 787 S.W.2d 942 (Tex. 1990).
2 See (b)(4) (West 2015).
3 In the appellate record, no affidavit is attached to Suenan’s response. However, both the trial court and Bulkley acknowledge that although an affidavit was filed with the response, it was unsigned.
4 The trial court never ruled on Bulkley’s special exceptions.
5 The affidavit shown to the trial court was not made a part of the appellate record.
6 The trial court interpreted Suenan’s claims for unjust enrichment, equitable restitution, and quantum meruit as bases for her declaratory relief, and not as separate claims or remedies.
7 In its brief, Bulkley contends that Suenan consented to the entry of the summary judgment. We do not think a fair reading of the transcript of the hearing supports Bulkley’s contention. Further, Bulkley does not cite any appropriate legal authority in support of its contention. See 38.2(a)(1).
8 In Id. at 934.
9 As we construe her pleadings, Suenan has alleged an oral lease of real estate for two years, with an option to purchase.
10 Since this issue is dispositive of this appeal, we need not address Suenan’s first issue.

Court of Appeals of Texas, Texarkana.

BANTA OILFIELD SERVICES, INC., Appellant

v.

MEWBOURNE OIL COMPANY, Appellee

No. 06-17-00107-CV

|

Date Submitted: August 1, 2018

|

Date Decided: December 4, 2018

|

Rehearing Denied December 28, 2018

*697 On Appeal from the 114th District Court, Smith County, Texas, Trial Court No. 16-0719-C/B. Christi J. Kennedy, Judge

Attorneys & Firms

Joseph E. Byrne, Byrne, Cardenas & Aris LLP, Dallas, TX, for appellant.

Gregory D. Smith, Smith Legal PLLC, Tyler, TX, for Appellee.

Before Burgess, JJ.

OPINION

Opinion by Justice Moseley

In 2014, Mewbourne Oil Company (Mewbourne), a Tyler, Texas, based entity,1 was operating in the State of New Mexico, drilling for and producing oil and/or natural gas. Mewbourne decided to install a 300-gallon battery tank at a well site there and retained Banta Oilfield Services, Inc. (Banta) to assist in its installation. Mewbourne and Banta entered into a Master Services Agreement (MSA) drafted by Mewbourne, which they both concur governed their relationship.

Mewbourne also contracted with Steve Kent Trucking NM, LLC (Kent Trucking) to be a contractor at the well site in New Mexico. It also entered into an agreement with C&M Services, LLC (C&M) wherein C&M would provide services at the site. An individual named Daniel Vargas worked for Kent Trucking and/or C&M Services as either a direct employee, an agent, or a contractor. Vargas was injured at the New Mexico site when a chain slipped off a tank that was being moved by a Banta-owned-and-operated pole truck. Vargas’ wife brought suit against Banta in New Mexico for Vargas’ personal injuries.2 *698 Banta sent a demand letter to Mewbourne seeking defense and indemnity from Mewbourne.3 Mewbourne refused Banta’s demand, informing Banta that Mewbourne was only a pass-through for defense and indemnification and that Banta should demand a defense and indemnity from Kent Trucking.4

Banta brought suit against Mewbourne seeking a judicial declaration that: (1) Texas substantive law applied to the interpretation of the MSA; (2) Mewbourne breached the agreement; (3) Mewbourne was obligated to defend and indemnify Banta in regard to Vargas’ personal injury lawsuit; and (4) Mewbourne was responsible to Banta for court costs and attorney fees. In response, Mewbourne argued that New Mexico law applied and that (under it and the MSA) Banta would be responsible for its own actions. Although the parties agreed that their respective liability would be governed by the terms of the MSA, they disagreed as to the interpretation of the contract. In doing so, they disagreed as to whether Texas law applied to the controversy or whether it would be governed by New Mexico law. After the parties filed cross-motions for summary judgment, the trial court denied Banta’s motion and entered judgment in favor of Mewbourne, finding that New Mexico law applied to the parties’ MSA and that Banta was estopped from arguing otherwise.

On appeal, Banta maintains (1) that Mewbourne’s grounds for summary judgment were its affirmative defenses of judicial estoppel and quasi-estoppel, neither of which apply to the facts of this case, and (2) that Banta proved as a matter of law its own entitlement to summary judgment. For the reasons below, we reverse the trial court’s order granting summary judgment in favor of Mewbourne, render judgment for Banta on its motion for summary judgment, and remand this case to the trial court for further determination.

*699 I. Pleadings at Trial Court

As previously stated, Banta sued Mewbourne in the 114th Judicial District Court of Smith County for breach of contract. It also sought a declaratory judgment regarding the enforceability of the asserted defense and indemnity obligations.5 In addition, Banta requested an award of attorney fees. Banta’s position rested in large part on a provision in the MSA that stated (1) that any suit shall be brought exclusively in the state or federal courts located in Tyler, Smith County, Texas, and (2) that “[a]ll disputes, controversies, or claims arising out of or relating to this Agreement ... shall be governed and controlled by the substantive laws of the State of Texas, excluding any conflict of law or choice of law principles.”

Shortly after filing suit, Banta moved for summary judgment on the enforceability of the indemnity provision under Texas law.6 Mewbourne also moved for summary judgment, arguing that New Mexico law applied and that the principles of judicial estoppel and quasi-estoppel were applicable based on Banta’s indemnity agreement in a case that involved a different contract, work site, and parties.7 See Pina v. Gruy Petroleum Mgmt. Co., 139 N.M. 619, 136 P.3d 1029 (N.M. Ct. App. 2016).

Banta subsequently filed an amended motion for summary judgment wherein it asserted the same arguments contained in its original motion, but also offered additional proof to demonstrate the application of the indemnity agreement as it applied to Vargas’ claim. Mewbourne filed an amended response to Banta’s amended motion for summary judgment. In its amended response, Mewbourne continued to argue the applicability of the principles of judicial *700 estoppel and quasi-estoppel, but also added a choice-of-law analysis under the Restatement (Second) of Conflict of Laws and argued that the indemnity agreement was invalid under Texas law as applied to gross negligence and willful misconduct.

After the trial court held two hearings on the parties’ cross-motions for summary judgment, it entered judgment in favor of Mewbourne and denied Banta’s motions for summary judgment. Banta appealed, maintaining that the trial court erred in granting Mewbourne’s motion for summary judgment and in failing to grant its motion for summary judgment. Banta also contends that it affirmatively demonstrated entitlement to summary judgment on Mewbourne’s indemnity obligation. Banta asks this Court to reverse the trial court’s judgment in favor of Mewbourne, reverse the trial court’s denial of Banta’s summary judgment motion, render judgment in favor of Banta on the enforceability of the indemnity provision against Mewbourne and Mewbourne’s breach thereof, and remand for a determination on the issues of damages and attorney fees.8

II. Standard of Review

Appellate courts review de novo the grant or denial of a motion for summary judgment. Nash v. Beckett, 365 S.W.3d 131, 136 (Tex. App.—Texarkana 2012, pet. denied).

III. Discussion

A. Mewbourne’s Motion for Summary Judgment

In Mewbourne’s motion for summary judgment and its supplement to its motion for summary judgment, Mewbourne argued that the application of judicial estoppel and quasi-estoppel prevented Banta from using “a Texas choice-of-law provision in the Banta/[Mewbourne] MSA to obtain indemnity when, in the past, Banta has used the [NMOAIS] to void indemnity obligations and to thwart a similar choice-of-law provision.”9 The trial *701 court found merit in Mewbourne’s argument and granted judgment in its favor. Therefore, in order for this Court to affirm the trial court’s judgment in favor of Mewbourne, we must initially address Mewbourne’s contention that the principles of judicial estoppel and quasi-estoppel are applicable to this case. See McConnell v. Southside Indep. Sch. Dist., 858 S.W.2d 337, 339 (Tex. 1993) (finding an appellate court cannot affirm summary judgment on a basis not stated in a party’s motion for summary judgment).

1. Judicial Estoppel

“Judicial estoppel precludes a party who successfully maintains a position in one proceeding from afterwards adopting a clearly inconsistent position in another proceeding to obtain an unfair advantage.” Pleasant Glade Assembly of God, 264 S.W.3d at 7).

In order for the doctrine of judicial estoppel to apply, a party must show the following: “(1) the opposing party made a sworn, inconsistent statement[10] in a prior judicial proceeding; (2) the opposing party making the statement gained some advantage by it; (3) the statement was not made inadvertently or because of mistake, fraud, or duress; and (4) the statement was deliberate, clear, and unequivocal.” In re Estate of Huff, 15 S.W.3d 301, 309 (Tex. App.—Texarkana 2000, no pet.) ). Thus, in order for the trial court to grant summary judgment in favor of Mewbourne based on its judicial estoppel theory, Mewbourne must have presented sufficient summary judgment evidence in support of these four factors.

Maintaining that Banta is estopped from arguing that Texas law applies to the indemnity issues in this case, Mewbourne relies on Id.

In addition, Article 10 of the MSC provided that

[t]o the fullest extent permitted by law, [Banta] shall indemnify, defend and hold harmless GRUY ... from and against all claims, damages, losses, liens, causes of action, suits, judgments, fines and expenses, including, but not limited to reasonable attorneys’ fees (collectively referred to and defined as “Liabilities”), of any person or entity arising out of, caused by or resulting directly or indirectly from the performance of the work under this Contract, ... regardless of whether the Liabilities are caused in part by the negligence of any Indemnitee.

Id.

Banta intervened in the wrongful death action, seeking a declaratory judgment invalidating the indemnity provision in Article 10 as violative of Section 56-7-2 of the NMOAIS (which was enacted in 1971), and it also filed a motion for summary judgment11 based on that section.12 Id. at 1033. The amended version stated,

A. An agreement, covenant or promise, foreign or domestic, contained in ... an agreement pertaining to a well for oil ... within New Mexico, that purports to indemnify the indemnitee against loss or liability for damages arising from the circumstances specified in Paragraph (1) ... of this subsection is against public policy and is void:

(1) the sole or concurrent negligence of the indemnitee....

Pina, 136 P.3d at 1031. Gruy appealed.

The New Mexico Court of Appeals affirmed the district court’s summary judgment in favor of Banta. Is doing so, it examined conflict-of-laws principles, “observ[ing] that New Mexico courts may decline to enforce a choice-of-law provision in a contract incorporating foreign law if application of foreign law would offend New Mexico public policy.” Section 56-7-2, the appellate court stated,

The Legislature’s decision to expressly subordinate freedom of contract to well site safety is a persuasive indicator that the Legislature believed promoting safety at well sites to be an especially important public policy. The Legislature, which we presume was familiar with the strong public policy favoring freedom of contract, nevertheless, chose to elevate the public policy favoring safety at well sites over the public policies underlying freedom of contract.

Id. at 1033.

Relying on Banta’s position in Pina, Banta argued that the choice-of-law provision was void and unenforceable since the accident and lawsuit were in New Mexico and (2) that it received affirmative relief based on its argument. Mewbourne contends that the only time Banta makes any distinction in the two cases is when Banta sues in Texas to obtain a defense and indemnity, as opposed to Banta owing a defense and indemnity under similar contract terms and similar facts.

Notably, Mewbourne contends that it was not required to show that Banta made a prior sworn inconsistent statement. In support of its position, Mewbourne relies on the Fifth Court of Appeals’ opinion in Id. at 820.

The Dallas Court of Appeals’ reasoning has little, if any, application to this case. Judicial estoppel seeks to prevent a party from “abus[ing] the judicial process by obtaining one recovery based first on affirming a certain state of facts, and then another recovery based on denying the same state of facts.Webb, the appellate court made clear that an exception to the general rules of judicial estoppel would apply under a very particular set of circumstances, that is, where contrary statements have been made by a party’s attorney relating to distinctly different factual assertions made in two separate proceedings in the same case and involving the same parties. That is simply not the case here.15

Mewbourne also relies on Id.

After the September Will was admitted to probate in Louisiana, certified copies of the will and the order admitting it to probate were filed of record in the office of the County Clerk of Gregg County, Texas. Id. at 314. After a jury trial, the trial court entered judgment in favor of Wife. Linam appealed.

In the Id. at 316. In finding that Wife was “very definitely estopped to contest the will under Texas law,” we stated,

Any person who secures the entry of a judgment fully cognizant of all antecedent facts, is estopped to assert any right contrary to such judgment even though the determination made by the prior judgment may not be right. A person is estopped from taking an adverse position in a subsequent suit involving the same matters to a position previously taken in the same matters by pleadings or otherwise. [Wife] having successfully maintained [her] first position in the State of Louisiana, with full cognizance of the contention made in this case, [she] cannot now be permitted to take a position inconsistent therewith.

Id. (citations omitted).

Despite Mewbourne’s contention, Pina may be similar to the facts of this case, the two cases clearly do not involve the same “matters.” Among other things, Mewbourne was not a party to the contract between Banta and Gruy, it had no rights or obligations under the Pina-Gruy contract, and it was not involved in the litigation between the parties who did have rights and obligations under the contract, i.e., Pina and Gruy.

Regardless, this Court has previously made clear that a prior, sworn, inconsistent statement is required in order to establish judicial estoppel. Pina litigation, which litigation did not involve Mewbourne in any way.

In sum, the evidence does not show that Banta made a prior, sworn, inconsistent statement in the Pina litigation, and in fact, Mewbourne concedes this point by arguing that proof of a sworn statement is not necessary to support a finding of judicial estoppel. We recognize that there are very narrow exceptions to this rule; however, the facts of this case do not support such an exception.18 For these reasons, we find that judicial estoppel does not apply in this case.

2. Quasi-Estoppel

The affirmative defense of quasi-estoppel precludes another party from asserting, to another’s disadvantage, a right inconsistent with a position he or she has previously taken. Roark v. Stallworth Oil & Gas, Inc., 813 S.W.2d 492, 494 (Tex. 1991) ).

Banta maintains that quasi-estoppel requires mutuality of parties and unconscionability, neither of which Mewbourne could show. Quasi-estoppel “may not be asserted by or against a ‘stranger’ to the transaction that gave rise to the estoppel.” Pina litigation and a stranger to the transaction that was made the basis of that lawsuit. For that reason alone, Mewbourne’s quasi-estoppel argument is without merit.

In our review, we may address only those grounds expressly presented in Mewbourne’s motion for summary judgment and its supplement to that motion. See McConnell, 858 S.W.2d at 341. Because we find that neither judicial estoppel nor quasi-estoppel are applicable under the *707 facts of this case, we reverse the trial court’s order granting summary judgment in favor of Mewbourne.

B. Banta’s Motion for Summary Judgment

Banta contends that the trial court wrongly denied its motion for summary judgment, which sought enforcement and determination of Mewbourne’s liability for breach of its defense and indemnity obligations. Banta asks this Court to reverse and render judgment in its favor, declaring the defense and indemnity obligations enforceable and finding Mewbourne liable for its breach of contractual obligation.

1. The MSA’s Choice-of-Law Provision

Paragraph 11 of the MSA states:

All disputes, controversies, or claims arising out of or relating to this Agreement, including the validity, construction, enforcement, or interpretation of this Agreement, shall be governed and controlled by the substantive laws of the State of Texas, excluding any conflict of law or choice-of-law principles. In the absence of a mandatory venue prescribed by state or federal law, any suit or proceeding hereunder shall be exclusively in the state or federal courts located in Tyler, Smith County, Texas. Each Party hereby consents to the personal jurisdiction of said state and federal courts and waives any objection that such courts are an inconvenient forum.

(Emphasis added). Banta contends that according to this paragraph, the parties clearly intended Texas substantive law to apply to the interpretation of the MSA. While this issue appears to be one of first impression in Texas, Banta maintains that Texas’ contract-construction principles require the same result.

In support of its position, Banta contends that the exclusion is phrased broadly in terms precluding the application of “any conflict of law or choice of law principles.”19 Further, Banta states that under relevant contract-construction principles, this exclusion must have some meaning and that the only meaning that makes sense of the entire agreement is one that precludes the choice-of-law analysis that Mewbourne contends is necessary. According to Banta, “Because Texas is—and always will be—the forum and because the forum’s conflicts laws apply by default, the parties necessarily intended to preclude any choice-of-law analysis that would point away from applying Texas substantive law to their contractual disputes—even if the exclusion of choice-of-law principles were limited to those of Texas.”

Maintaining that the parties did not intend for Texas law to apply in relation to any potential indemnification issues, Mewbourne contends that when a declarative contract provision is followed by “excluding,” the general rule is that the *708 parties intended to narrow the primary provision by carving out an exception. Thus, according to Mewbourne, the exclusionary language in the MSA means that conflict of law and choice-of-law principles are omitted from and not subject to the parties’ attempt to fix the applicable law.20 Mewbourne also contends that Banta ignores the phrase “substantive laws.” Thus, before the comma, the choice-of-law proviso addresses the substantive laws, while after the comma, the exclusion addresses the procedural choice-of-law principles.

Taken together, the intention is that the parties intend to be governed by Texas substantive laws insofar as they are permitted to make this selection. And in those instances when choice-of-law principles are available to override the parties’ choice of substantive law, the parties have chosen to allow for application of the forum state’s choice-of-law principles.

This Court disagrees.

When interpretation of a contract is in issue, a court must first determine whether the provisions in question are ambiguous. State Farm Fire & Cas. Co. v. Reed, 873 S.W.2d 698, 699 (Tex. 1993).

In maintaining that New Mexico law applies to any indemnity issues, Mewbourne points to the language contained in paragraph 5F of the MSA, which states,

The indemnities provided in this Article shall be limited to the extent necessary for compliance with laws or regulations applicable to the performance of Work hereunder, and to the extent any such laws or regulations are in variance with the indemnities provided in this Agreement, such indemnity shall be deemed to be amended so as to comply with such laws or regulations.

Mewbourne contends that the exclusionary language contained in paragraph 11, along with language contained in paragraph 5F, clearly shows that the parties intended for New Mexico law to apply to indemnity issues since the work performed took place in New Mexico.21

*709 If we were to adopt Mewbourne’s position, we would be compelled to consider paragraph 5E alone, while at the same time ignore the remaining provisions of the parties’ MSA. It is well settled that no single provision taken alone is given controlling effect; rather, each provision must be considered in the context of the instrument as a whole. Moayedi v. Interstate 35/Chisam Rd., L.P., 438 S.W.3d 1, 7 (Tex. 2014). Here, Mewbourne discounts the language contained in paragraph 5E, which states:

In the event this Agreement is subject to the indemnity limitations in Chapter 127 of the Texas Civil Practice and Remedies Code (or any successor statute), and so long as such limitations are in force, each Party covenants and agrees to support the mutual indemnity obligations contained in Sections 5.B and 5.C, by carrying insurance of the types and in the amounts not less than those specified in Article 4 and Exhibit A of this Agreement, for the benefit of the other Party.

(Emphasis added). The language of paragraph 5E clearly demonstrates that the parties intended Texas law to apply, even in regard to indemnity issues. Had the parties intended for New Mexico law to apply, they could have easily included that language in the MSA. Had the parties intended to apply New Mexico law to indemnity issues, the MSA could have stated that the agreement shall be governed and controlled by the substantive laws of the State of Texas, excluding any conflict of law or choice-of-law principles, which principles shall be controlled by New Mexico law.22 In addition, the forum selection clause in the MSA contained a venue provision that clearly stated any potential litigation would take place in Texas; more specifically, Tyler, located in Smith County, Texas.

The Texas Supreme Court has held that courts are required to consider the entire writing, harmonizing and giving effect to all contract provisions so that none will be rendered meaningless. See id. at 4. Stated differently, even if the language of the parties’ MSA was in conflict, this Court is required to choose an interpretation that harmonizes all of the provisions contained in the agreement. When we review the parties’ MSA in its totality, we find that the language contained in their agreement showed the parties’ intent that there be no choice-of-law analysis and that Texas law apply regarding any issue arising out of the parties’ agreement, including indemnity issues.

2. Enforceability of the Choice-of-Law Provision

However, while courts generally honor contracting parties’ bargained-for and expressed choice of which state’s laws governs the performance of a contract, the contracting parties’ freedom to choose what state’s law applies is not unlimited. *710 Id. at 680.

In order to determine the enforceability of a choice-of-law provision, we apply principles from the Restatement (Second) of Conflict of Laws. Id. at 677–81. Section 187(2) of the Restatement reads as follows:

(2) The law of the state chosen by the parties to govern their contractual rights and duties will be applied, even if the particular issue is one which the parties could not have resolved by an explicit provision in their agreement directed to that issue, unless either

(a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or

(b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue and which, under the rule of § 188, would be the state of the applicable law in the absence of an effective choice of law by the parties.

In re J.D. Edwards World Sols. Co., 87 S.W.3d 546, 549 (Tex. 2002) (per curiam) (orig. proceeding) (finding Colorado had a substantial relationship to parties and their transaction because one party’s office was located in Colorado). We, therefore, conclude that under these circumstances, Texas has a substantial relationship to the parties and the transaction, and Section 187(2)(a) of the Restatement does not preclude the application of Texas law in this case.

Next, we determine, pursuant to TEX. R. APP. P. 47.1.25

Whether there is a state with a more significant relationship to the parties and the transaction at issue than the one contractually specified by the parties is determined pursuant to five factors that are set out in Section 188(2) of the Restatement. DeSantis, 793 S.W.2d at 678.

We find that Texas has the most significant relationship to the parties and the transaction in regard to the first, second, and fifth factors. Mewbourne, the drafter of the agreement, is domiciled in Texas and conducts business in Texas. Its business office is located in Texas. Further, Banta maintains, and Mewbourne does not dispute, that Mewbourne drafted the MSA in Texas and signed the agreement in Texas. We recognize that Banta is a New Mexico company and that it signed the agreement in New Mexico. Despite those facts, we find, among other reasons, that because Mewbourne drafted the agreement in Texas, Texas, and not New Mexico, has a more significant relationship to the substantive issue before us.

In regard to the third and fourth factors, we find that Texas has a more significant relationship to the parties and the transaction than does New Mexico. Notably, Vargas’ accident occurred while he was performing work in New Mexico; however, the parties’ agreement is silent as to where any of the work was to be performed. The MSA did not state that New Mexico would be the place of performance. In fact, there is no mention of New Mexico in the entire agreement. More importantly, however, the issue in this case involves the enforceability of the indemnity provision in the MSA, and not the work that had been performed in New Mexico pursuant to that agreement. “What is determinative is which state has the most significant relationship with respect to the indemnity issue,” and not the location of the work.26 Chesapeake Operating, *712 Inc. v. Nabors Drilling USA, Inc., 94 S.W.3d 163, 173 (Tex. App.—Houston [14th Dist.] 2002, no pet.). The past performance of the work is not at issue here. The only dispute remaining is wholly related to the performance of the MSA’s indemnity provision, a dispute that has been litigated entirely in Texas.

Further, the MSA was written in a manner showing the parties anticipated and intended that the provisions of the agreement would control regardless of the location of the work being performed. In fact, the parties agreed in paragraph 5E that the provisions of Chapter 127 of the Texas Civil Practice and Remedies Code, entitled “Indemnity Provisions in Certain Mineral Agreements,” would apply. See Chesapeake, 94 S.W.3d at 177.

In addition, Section 6 of the Restatement sets out several non-exclusive factors that may be considered in determining the applicable law. Section 6 factors are:

(a) the needs of the interstate and international systems,

(b) the relevant policies of the forum.

(c) the relevant policies of other interested states and the relative interests of those states in determination of the particular issue,

(d) the protection of justified expectations,

(e) the basic policies underlying the particular field of law,

(f) certainty, predictability and uniformity of result, and

(g) ease in the determination and application of the law applied.

Id.

Here, the enforcement of the MSA in accord with its terms satisfies the relevant policies of the chosen forum (that is Texas). See Chesapeake, 94 S.W.3d at 177. Here, if New Mexico law were applied to the indemnity issue, as Mewbourne maintains, it would have relieved Mewbourne of the defense and indemnity it agreed to provide Banta. Certainly, Banta had a justified expectation that Mewbourne would comply with the terms of an agreement that Mewbourne negotiated, drafted, and signed (all in Texas). *713 Moreover, Mewbourne and Banta purchased insurance in order to comply with Texas law. Had the parties expected New Mexico law to apply, there would have been no reason to include such a requirement in their agreement.28

When we consider the Restatement’s factors, along with the quality and quantity of each of the parties’ contacts to Texas and New Mexico, we find that Texas has the “most significant relationship to the transaction and the parties.” See 188(1). As such, we must enforce the parties’ choice of Texas law. For these reasons, we hold that Texas law governs the enforceability of the MSA’s indemnity provision.

3. Enforceability of MSA under Texas Law

In order for this Court to grant its requested relief, Banta was required, pursuant to the laws of Texas, to present sufficient competent summary judgment evidence to show that Mewbourne’s defense and indemnity obligations were enforceable pursuant to the terms of the MSA.

a. Coverage of Vargas’ Claim

Mewbourne maintains that the provisions of the MSA did not cover Vargas’ personal injury claim because Vargas was not Mewbourne’s employee. Paragraph 5C of the MSA states that Mewbourne, as “Company Group,” would release, indemnify, defend, and hold Banta, as “Contractor Group,” harmless against any and all claims resulting from, among other things, personal injury.29 In paragraph 5.A.3, Company Group is defined as:

(i) Company, its parent, subsidiary and affiliated or related companies, (ii) its and their working interest owners, co-lessees, co-owners, partners, joint operators, and joint venturers, if any, and their respective parent, subsidiary and affiliated or related companies, (iii) Company’s other contractors of any tier, and (iv) the officers, directors, employees, agents, consultants, and invitees of any and all of the foregoing.

The summary judgment evidence shows that on February 17, 2015, Mewbourne contracted with Kent Trucking to be a contractor at the New Mexico site. Further, in the plethora of summary judgment evidence provided to the Court, we find a letter written and sent by Mewbourne’s counsel to Kent Trucking, which letter had been written following Vargas’ accident. In it, Mewbourne’s counsel explained, “At the time of the incident Daniel Vargas was employed by C&M Services LLC who either shares the same ownership as [Steve Kent Trucking] or was a subcontractor of [Steve Kent Trucking].” There is even stronger evidence of this relationship in *714 Mewbourne’s responses to Vargas’ interrogatories, where Mewbourne ratified that Vargas was either employed by or was a contractor for Kent Trucking when the injury occurred.

Based on the summary judgment evidence, we find that Banta demonstrated that Vargas was at the very least a “contractor[ ] of any tier,” or Mewbourne’s invitee, and that Vargas had asserted a claim against Mewbourne for the injury he incurred while working at the New Mexico site. As such, the MSA covers Mewbourne’s indemnity and defense obligations to Banta as it relates to the Vargas lawsuit.

b. Fair Notice Requirements

Banta seeks indemnity from Mewbourne for the consequences of its own negligence. Indemnity agreements used to exculpate a party from the consequences of its own negligence involve an extraordinary shifting of risk. See Fisk Elec. Co. v. Constructors & Assoc., Inc., 888 S.W.2d 813, 815 (Tex. 1994) ).

Banta points out that the Texas Supreme Court (along with several appellate courts) has held that the express-negligence doctrine is satisfied when “regardless” language is included as part of the parties’ indemnity provision. Id. at 8.

Here, paragraph 5D of the parties’ MSA states,

OR THE NEGLIGENCE OF ANY PERSON OR PARTY, INCLUDING THE INDEMNIFIED PARTY OR PARTIES, WHETHER SUCH FORM OF NEGLIGENCE BE SOLE, JOINT AND/OR CONCURRENT, ACTIVE OR PASSIVE, OR ANY OTHER THEORY OF LEGAL LIABILITY.[31]

The plain language of the MSA shows that the parties intended for Mewbourne to indemnify Banta, “without regard to the causes thereof,” and that it contracted to do so even in the event the claim was a result of Banta’s own negligence. Further, the MSA consisted of seven pages of single-spaced language, with the majority of its contents written in lower-case letters. The language contained in paragraphs 5C and 5D, however, consist entirely of capital letters, along with bold type-face. In general, “[l]anguage that appears in contrasting type or in capitals satisfies the conspicuousness requirement.” Royston, Rayzor, Vickery, & Williams, LLP v. Lopez, 467 S.W.3d 494 (Tex. 2015). We, therefore, find that the indemnity provision of the MSA satisfies the express negligence doctrine and the conspicuousness requirement; thus, Mewbourne had fair notice that it agreed to indemnify Banta, even for Banta’s own negligence.32

Despite this language, Mewbourne maintains that the MSA included no requirement that it indemnify Banta on *716 claims relating to punitive damages or gross negligence. We disagree. The MSA contains a list of claims that would be covered by the indemnity provision: latent or patent conditions, ultrahazardous activity, strict liability, tort, breach of contract, breach of duty, or breach of safety requirements or regulations. Moreover, the provision clearly includes language extending its duties to Mewbourne, that is, “including without limitations” and “without regard to the causes of action thereof.” It is plain that Mewbourne drafted this agreement. As the drafter of the agreement, Mewbourne cannot now maintain that it intended anything other than to indemnify Banta in relation to any cause of action, including gross negligence claims and punitive damages claims.

IV. Conclusion

Based on the foregoing, we find that Texas law applies to the terms of the parties’ MSA; that under Texas law, Mewbourne had the obligation to defend and indemnify Banta against Vargas’ claims; that it breached its contractual obligation to Banta by refusing to do so; and that Banta is entitled to recover damages and its attorney fees.

We, therefore, reverse the trial court’s summary judgment in favor of Mewbourne, reverse the trial court’s denial of Banta’s motion for summary judgment and render judgment in favor of Banta on the enforceability of the indemnity provision against Mewbourne and Mewbourne’s breach thereof; and remand to the trial court for a determination of damages and attorney fees.

Footnotes

1

Originally appealed to the Twelfth Court of Appeals in Tyler, this case was transferred to the Sixth Court of Appeals by the Texas Supreme Court pursuant to its docket equalization efforts. See TEX. R. APP. P. 41.3.

2

Vargas’ pleadings alleged that while lifting a 500-gallon tank “[d]uring [an] improvised procedure,” the tank shifted and fell, causing a nearby riser to break loose and fall towards both the Banta and C&M crews. Vargas pushed a Banta crew member out of the way of a falling riser, and in the process, he “suffered serious, debilitating and life-threatening personal injuries.” Vargas alleged negligence and sought compensatory and punitive damages, as well as damages for loss of consortium and loss of services. Vargas claimed Banta was vicariously liable for his damages by virtue of the negligent conduct of its employees.

3

In its letter, Banta referenced paragraph 5C of the MSA, which stated,

[MEWBOURNE OIL COMPANY] SHALL RELEASE, INDEMNIFY, DEFEND, AND HOLD CONTRACTOR GROUP [BANTA OILFIELD SERVICES, INC.] HARMLESS FROM AND AGAINST ANY AND ALL CLAIMS ARISING OUT OF OR RELATED TO (I) PERSONAL OR BODILY INJURY, ILLNESS, SICKNESS, DISEASE, OR DEATH OF ANY MEMBER OF THE COMPANY GROUP [VARGAS], AND (II) LOSS, DAMAGE OR DESTRUCTION OF REAL OR PERSONAL PROPERTY (WHETHER OWNED OR LEASED) OR ANY MEMBER OF COMPANY GROUP.

4

Banta points out that the MSA contained no pass-through language and, in fact, contained language to the contrary in section 5D:

THE ASSUMPTIONS OF LIABILITY, RELEASES, AND INDEMNITIES SET FORTH IN THIS ARTICLE 5 SHALL APPLY TO ANY CLAIMS WITHOUT REGARD TO THE CAUSES THEREOF, INCLUDING, WITHOUT LIMITATION, PRE-EXISTING CONDITIONS, WHETHER SUCH CONDITIONS BE PATENT OR LATENT, ULTRAHAZARDOUS ACTIVITY, STRICT LIABILITY, TORT, BREACH OF CONTRACT, BREACH OF DUTY (STATUTORY OR OTHERWISE), BREACH OF ANY SAFETY REQUIREMENT OR REGULATION, OR THE NEGLIGENCE OF ANY PERSON OR PARTY, INCLUDING THE INDEMNIFIED PARTY OR PARTIES, WHETHER SUCH FORM OF NEGLIGENCE BE SOLE, JOINT AND/OR CONCURRENT, ACTIVE OR PASSIVE, OR ANY OTHER THEORY OF LEGAL LIABILITY.

5

Banta sought a judicial declaration regarding the interpretation of the MSA pursuant to Section 37.001 of the Texas Civil Practice and Remedies Code. Specifically, Banta sought an order declaring that

A. Texas substantive law applied to the interpretation of the MSA;

B. Mewbourne was in breach of the MSA;

C. Mewbourne had an obligation to defend and to indemnify Banta in the Vargas lawsuit; and

D. Mewbourne owed Banta the costs of court and attorney fees.

6

Specifically, Banta argued that summary judgment should be granted in its favor and against Mewbourne on the following issues:

(1) Mewbourne had an obligation under the Master Service Agreement to defend and to indemnify Banta in the pending Vargas lawsuit;

(2) Mewbourne was in breach of the MSA;

(3) Texas substantive law applied to the interpretation of the MSA; and

(4) Banta was entitled to recover its attorney fees as a result of Mewbourne’s breach of the MSA.

Mewbourne responded to Banta’s summary judgment motion, arguing that Banta was attempting to use a Texas choice-of-law provision to obtain indemnity when, in the past, it had used the New Mexico Oilfield Anti-Indemnity Statute (NMOAIS) to void indemnity obligations and to “thwart” a similar choice-of-law provision. According to Mewbourne, Banta is estopped from taking a contrary position in this case.

7

Mewbourne filed a supplement to its motion for summary judgment, continuing to argue that Banta was attempting to use a Texas choice-of-law provision in the underlying litigation in order to obtain indemnity when, in the past, it had used the NMOAIS to void indemnity obligations.

In addition, Mewbourne filed a third-party petition against Kent Trucking. Banta contends that Mewbourne’s claim against Kent Trucking rested on identical indemnity language contained in a MSA between Mewbourne and Kent Trucking. In Mewbourne’s petition, it claimed that Kent Trucking was obligated to (1) indemnify Banta as a result of Vargas’ claim, or (2) was obligated to indemnify Mewbourne as a result of Banta’s claim. The trial court denied Mewbourne’s motion for summary judgment against Kent Trucking. It also dismissed Mewbourne’s claims against Kent Trucking on September 25, 2017.

8

In the alternative, Banta asks this Court to remand its claims in whole or in part for further trial court proceedings, along with an award of appellate court costs.

9

In its supplement to its original motion for summary judgment, Mewbourne presented analogous estoppel arguments. Moreover, Mewbourne asserted a very similar position in its response to Banta’s motion for summary judgment. In addition, Mewbourne filed an amended response to Banta’s motion, continuing to assert its estoppel arguments, but also adding a choice-of-law analysis under the Restatement (Second) Conflict of Laws and an argument that the indemnity agreement was invalid under Texas law to indemnify for gross negligence or willful misconduct.

In its appellate brief, Mewbourne presents arguments beyond the estoppel arguments contained in its motion for summary judgment. “[T]he Texas Supreme Court has held that summary judgment cannot be granted except on the grounds expressly presented in [a party’s] motion.” Johnson v. Brewer & Pritchard, P.C., 73 S.W.3d 193, 204 (Tex. 2002).

10

In order to qualify as a sworn statement under Texas law, the statement must have been made in verified pleadings, an affidavit, or a deposition during the course of sworn testimony. 566 S.W.2d 900 (Tex. 1978) (per curiam).

11

Gruy also filed a motion for summary judgment.

12

Originally, Section 56-7-2 stated as follows:

A. Any agreement, covenant or promise contained in, collateral to or affecting any agreement pertaining to any well for oil, gas or water ... which purports to indemnify the indemnitee against loss or liability for damages, for:

(1) death or bodily injury to persons; or

(2) injury to property; or

(3) any other loss, damage or expense arising under either Paragraph (1) or (2) or both; or

(4) any combination of these, arising from the sole or concurrent negligence of the indemnitee or the agents or employees of the indemnitee ... is against public policy and is void and unenforceable. This provision shall not affect the validity of any insurance contract or any benefit conferred by the Workmen’s Compensation Act....

Pina, 136 P.3d at 1031.

13

Webb’s employment with the police department was terminated due to an arrest and charge of assault on a family member. After entering a plea of nolo contendere, Webb was subsequently sentenced to deferred adjudication community supervision, which he successfully completed. Webb, 211 S.W.3d at 811. Because Webb completed community supervision, he was not convicted of the charged offense.

14

The city first stated that Webb’s employment with the police department was based on his conviction for family violence assault. The statement was obviously not sworn. Later in the proceedings, the city changed its position regarding the basis for Webb’s termination. Id. at 820.

15

Our sister court explained,

Stated differently, if a party prevails in one action after asserting the truth of one version of the facts, he cannot attempt to prevail in a later proceeding by asserting those same facts are not true. Indeed, pursuant to this doctrine, a fact admitted by a prevailing party in a judicial proceeding is established as a matter of law; the admitting party may not in a second proceeding dispute the admission or introduce evidence contrary to it.

Bailey-Mason v. Mason, 334 S.W.3d 39, 43 (Tex. App.—Dallas 2008, pet. denied) (emphasis added).

16

Louisiana was Jones’ place of domicile at the time of his death. Jones, 301 S.W.3d at 311.

17

As we stated previously in In re Estate of Loveless:

There is a line of Texas cases holding that, if a party takes an affirmative position in a proceeding and is successful in having the court adopt its position, that party may be judicially estopped from later taking an inconsistent position in that or in any other proceeding, even though the previous position does not consist of a sworn declaration. Andrews v. Diamond, Rash, Leslie & Smith, 959 S.W.2d 646, 649–50 (Tex. App.—El Paso 1997, writ denied).

These cases all involve judicial estoppel invoked by defendants against plaintiffs who failed to list causes of action as potential assets in previous bankruptcy actions. The courts in those cases applied Fifth Circuit precedent rather than Texas law in order to “promote the goal of uniformity and predictability in bankruptcy proceedings.” Andrews, 959 S.W.2d at 649 n.1.

Id.

18

There is no evidence in the record to indicate that Mewbourne was involved in the Pina litigation.

19

Banta cites to several non-Texas courts that have limited language to narrow the scope of this exclusion to, for example, the conflicts of law of one particular state. See 874 F.3d 1136 (10th Cir. 2017).

20

Mewbourne states that its position is consistent with the last antecedent doctrine concerning the use of commas. In support of its contention, Mewbourne cites 82 C.J.S. Statutes § 333 (1999) ).

Here, when reading the MSA in its totality, we are of the opinion that the parties’ MSA contained a “contrary intention.”

21

Contrary to Mewbourne’s contention, paragraph 5F can have no effect until after the “applicable” state laws and regulations have been determined. In other words, paragraph 5F does not dictate what state’s law applies; instead, only after that determination has been made, does paragraph 5F have any meaning or relevance.

22

Mewbourne states that paragraph 5E added a “flexibility” to the contract, harmonizing its expressed general desire for the application of Texas law with the specific requirements of local law, but without the necessity of redrafting the entire MSA anytime work is to be done in a state that prohibits indemnification for well-site negligence. Mewbourne’s contention is not based on a reading of all of the provisions contained in the MSA; rather, Mewbourne speculates, in its favor, as to what the agreement meant based on a single provision in the MSA.

23

In Id.

24

RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188(1) (AM. LAW INST. 1971).

25

TEX. R. APP. P. 47.1.

26

Banta sought defense and indemnity from Mewbourne with respect to the Vargas lawsuit by sending a letter to Mewbourne’s office in Tyler, Texas. The insurance company that drafted and sent the demand letter on Banta’s behalf was located in Houston, Texas.

27

Exhibit A is attached to the parties’ MSA and states, in part, “During the term of this Agreement, unless otherwise prohibited by law, each Party shall, at each Party’s sole expense, carry with solvent and reputable insurance carriers, insurance of the types and in the minimum amounts....” The document set out the minimum dollar amount of insurance the parties were required to carry for commercial (or comprehensive) general liability insurance, workers’ compensation insurance, employer’s liability insurance, automobile liability insurance, pollution insurance, and excess (or umbrella) liability insurance.

28

Mewbourne maintains that if Texas law were applied to the facts of this case, such application would be in violation of New Mexico’s public policy against the use of indemnity provisions imposing indemnity obligations for an indemnitee’s own negligence. Unlike New Mexico, Texas does not prohibit such an indemnity agreement if “the parties agree in writing that the indemnity obligation will be supported by liability insurance coverage to be furnished by the indemnitor....” TEX. CIV. PRAC. & REM. CODE ANN. § 127.005(a) (West 2011). We are unwilling to find, nor is it necessary to do so, that the enforcement of an indemnity agreement indemnifying the indemnitee against its own negligence supported by insurance directly contravenes New Mexico’s public policy of assuring the safety of its oilfield workers. Even assuming it does, when we rely on Texas’ public policy favoring freedom of contract, along with the numerous other factors favoring the use of Texas law, this factor, alone, is not determinative.

29

See infra note 3 (referring to paragraph 5C).

30

See infra note 3 (referring to paragraph 5C).

31

In Texas, oilfield indemnity clauses are generally void. Ken Petroleum Corp. v. Questor Drilling Corp., 24 S.W.3d 344, 346 (Tex. 2000). In this case, paragraph 5E states,

In the event this Agreement is subject to the indemnity limitations in Chapter 127 of the Texas Civil Practice and Remedies Code (or any successor statute), and so long as such limitations are in force, each Party covenants and agrees to support the mutual indemnity obligations in Section 5.B and 5.C, by carrying insurance of the types and in the amounts not less than those specified in Article 4 and Exhibit A of this Agreement, for the benefit of the other Party.

Attached to the parties’ agreement is Exhibit A, which sets out in detail the parties’ obligations regarding the types and minimum amounts of insurance the parties were required to procure. Thus, by the terms of the contract, both companies were required to maintain a sufficient amount of liability insurance.

32

In Cate v. Dover Corp., 790 S.W.2d 559, 561).

The summary judgment evidence in this case shows that Mewbourne had actual knowledge of the indemnity provision.

Court of Appeals of Texas, Texarkana.

William Bradley LENTZ, Beverly Lentz, Jason Lentz, M.D., and Rebecca Vanlandingham, Appellants

v.

MEWBOURNE OIL COMPANY and Mewbourne Holdings, Inc., Appellees

No. 06-18-00008-CV

|

Date Submitted: September 4, 2018

|

Date Decided: October 29, 2018

On Appeal from the County Court at Law No. 3, Smith County, Texas, Trial Court No. 67732-B, Hon. Floyd T. Getz, Judge

Attorneys & Firms

J. Carl Cecere, Levinger PC, 1700 Pacific Ave, Ste 2390, Dallas, TX 75201, for Appellant.

Reagan L. Butts, Mewboume Oil Company, 3620 Old Bullard Rd., Tyler, TX 75701-8644, for Appellee.

Before Burgess, JJ.

MEMORANDUM OPINION

Memorandum Opinion by Justice Moseley

*1 After sustaining severe and disabling injuries while working on a well owned by Mewbourne Oil Company (MOC) in Upton County,1 William Bradley Lentz2 filed a personal injury lawsuit against MOC and Mewbourne Holdings, Inc. (Mewbourne Holdings). MOC and Mewbourne Holdings filed traditional and no-evidence motions for summary judgment, alleging their entitlement to the exclusive remedy provision of the Texas Workers’ Compensation Act (TWCA). See TEX. LABOR CODE ANN. § 408.001(a) (West 2015). The trial court agreed and granted summary judgment. Lentz appeals the trial court’s summary judgment only in favor of MOC. Because MOC conclusively established that it subscribed to workers’ compensation insurance, that Lentz was an employee, and that he suffered a work-related injury, we affirm the trial court’s judgment.

I. Background

At the time of Lentz’ injury in July 2015, MOC was a family-owned, independent oil and gas exploration and production company headquartered in Tyler. Lentz testified that he began working for MOC as a pumper in West Texas in October 2008 and was later promoted to production foreman. In 2015, Lentz was the production foreman for approximately 120 MOC wells. Lentz testified that his boss at MOC was Barrett Smith, a senior production engineer, and that Smith was his boss for the eight years he worked for MOC.

In July 2015, Lentz was working on the McElroy Ranch, where MOC operated several wells. Most of those wells were experiencing issues with paraffin buildup. MOC was working on one well in particular3 and was utilizing a new procedure called a vapor treatment to clear paraffin from the well. When the treatment appeared to be working at the wellhead, Smith wondered aloud if it was likewise working at the tank battery. At that point, Lentz got in his truck and drove to the tank battery. As Lentz was in the process of attempting to check the connecting valve at the tank battery, it blew off and “there was fire everywhere.” Lentz testified that he did not remember anything after he arrived at the emergency room until December of that year.4

Thereafter, Lentz sued MOC, Mewbourne Holdings, and others5 for their negligence in causing the explosion and his resulting injuries. MOC and Mewbourne Holdings affirmatively pled entitlement to the protection of the TWCA’s exclusive remedy provision. See TEX. LABOR CODE ANN. § 408.001(a). They further claimed that because Lentz had been paid worker’s compensation benefits from MOC’s workers’ compensation carrier, they were entitled to summary judgment on their affirmative defense of quasi-estoppel. Based on these affirmative defenses, MOC and Mewbourne Holdings filed traditional and no-evidence motions for summary judgment, in which they alleged that both MOC and Mewbourne Holdings were Lentz’ employers and that Lentz’ claims against them were barred under the exclusivity provision of the TWCA. See id. The trial court granted summary judgment in favor of MOC and Mewbourne Holdings.

*2 On appeal, Lentz claims that the trial court erred in granting summary judgment in favor of MOC, because he was not an employee of that entity.6 He, therefore, claims that MOC was not entitled to the protection of the TWCA’s exclusive remedy provision. Lentz affirmatively claims that he was employed solely by Mewbourne Holdings. Finally, Lentz claims that his acceptance of worker’s compensation benefits does not estop him from denying that MOC was his employer.

II. MOC Proved its Entitlement to Summary Judgment as a Matter of Law

A. Summary Judgment Standard of Review

We review an order granting a traditional motion for summary judgment de novo. Merriman v. XTO Energy, Inc., 407 S.W.3d 244, 248 (Tex. 2013).

To be entitled to traditional summary judgment, a movant must establish that there is no genuine issue of material fact so that the movant is entitled to judgment as a matter of law. Lampasas v. Spring Ctr., Inc., 988 S.W.2d 428, 433 (Tex. App.—Houston [14th Dist.] 1999, no pet.) ).

B. Analysis

Under the TWCA, “[r]ecovery of workers’ compensation benefits is the exclusive remedy of an employee covered by workers’ compensation insurance coverage or a legal beneficiary against the employer or an agent or employee of the employer for the death of or a work-related injury sustained by the employee.” Phillips v. Am. Elastomer Prods., L.L.C., 316 S.W.3d 181, 186 (Tex. App.—Houston [14th Dist.] 2010, pet. denied).

*3 On appeal, Lentz claims that MOC failed to prove as a matter of law its entitlement to the TWCA’s exclusive remedy provision. To prevail on its affirmative defense, MOC was required to plead and prove that (1) Lentz was its employee at the time of the work-related injury and (2) MOC had workers’ compensation insurance that covered claims asserted by Lentz. See Warnke v. Nabors Drilling USA, L.P., 358 S.W.3d 338, 343 (Tex. App.—Houston [1st Dist.] 2011, no pet.). On appeal, Lentz challenges only his status as an employee of MOC.

The TWCA defines “employer” as “a person who makes a contract of hire, employs one or more employees, and has workers’ compensation insurance coverage.” Garza, 161 S.W.3d at 477. We review the summary judgment evidence with these concepts in mind.

(1) Summary Judgment Evidence

MOC supported its motion for summary judgment with evidence of its claim that it employed Lentz at the time of his injury. This evidence included Lentz’ own deposition testimony that he worked for MOC for eight years and that Smith, a senior production engineer, was his boss. Lentz testified that in 2015, he was working as a production foreman in Midland and was responsible for approximately 120 MOC wells. In sworn responses to interrogatories, Lentz identified MOC in Midland as his employer on the accident date.

Smith testified that he began his employment with MOC in 2007. He was not familiar with Mewbourne Holdings and stated, “[W]e all work for Mewbourne Oil Company.” Lyn Whetstone, vice president of operations for MOC, testified that he oversees the drilling, completion, production, and marketing aspects of MOC. As such, Whetstone stated that approximately 250 to 300 employees report to him or to different levels under him. Whetsone testified that he reported to Ken Waits, the president and chief executive officer of MOC, and that Lentz was an employee of MOC. Whetstone did not believe that Mewbourne Holdings had any employees.

Shawn Ray, a human resources representative for MOC, testified that he was employed by MOC and has never worked for Mewbourne Holdings. Ray was involved in helping Lentz file his worker’s compensation claim and testified that Lentz was employed by MOC. Although Mewbourne Holdings is listed as the named insured on the worker’s compensation policy, Ray does not believe that Mewbourne Holdings has any employees. He testified, conversely, that MOC has approximately 420 employees. Ray stated that Smith managed MOC’s West Texas Midland office and that Lentz was a production foreman for MOC with supervisory authority over other MOC employees.

*4 D. Drew Greene, the general manager of administration for MOC, testified by affidavit that “MOC is a wholly owned indirect subsidiary of Mewbourne Holdings. Mewbourne Holdings is a privately-owned [sic], Texas corporation. Mewbourne Holdings serves as the parent company for a number of directly or indirectly wholly owned subsidiaries, including MOC.” Green further testified, “At the time he was injured on July 23, 2015, Mr. Lentz was an employee of MOC. Mr. Lentz started working as a pumper for MOC in West Texas in October 2008. He was later promoted to production foreman. Mr. Lentz was never an employee of Mewbourne Holdings.”

Greene further testified in his deposition that “Mewbourne Holdings is a passive holding company. They have no control over any of the activities [of MOC].” According to Greene, Mewbourne Holdings has no employees other than its officers and directors. Greene testified that Lentz was an employee of MOC as a production foreman and that MOC paid the workers’ compensation insurance premiums to Starr Indemnity & Liability Company—MOC’s workers’ compensation insurance carrier—because it was the only entity with a payroll and it was the only employer. Green explained that the Employer’s Wage Statement submitted to Starr Indemnity incorrectly listed Mewbourne Holdings, Inc., as Lentz’ employer. Greene testified that MOC’s payroll clerk who submitted the wage statement was responsible for that error. In October 2017, Green submitted an amended Employer’s Wage Statement to Starr Indemnity, correcting the mistake by listing MOC as Lentz’ employer.

Waits, the president and chief executive officer of MOC and the president and chief executive officer of Mewbourne Holdings, testified that he is “generally aware that MOC and Mewbourne Holdings have a workers’ compensation insurance policy” and that “Mr. Lentz has received benefits under the workers’ compensation policy as an employee of MOC.” Waits further testified that at the time of the accident, “district safety in that area was the responsibility of the MOC West Texas Operations Manager, Barrett Smith.”

In his affidavit attached to MOC and Mewbourne Holdings’ motion for summary judgment, Les Lappe, the assistant vice president of Starr Indemnity & Liability Company, testified that the workers’ compensation and employer’s liability insurance policy listed Mewbourne Holdings, Inc., as the named insured. However, the policy’s “Named Insured Schedule” identifies additional entities included for coverage. The Named Insured Schedule confirms that MOC is a named insured under the policy. According to Lappe, “Mewbourne Holdings, Inc. is a subscriber and insured under the Policy without regard to whether it has any employees. Further, the number of employees of Mewbourne Holdings, Inc., if any, does not impact the validity of the Policy as to Mewbourne Oil Company.” Lappe further testified that following Lentz’ injury on July 23, 2015, he submitted a claim under the policy, and as of July 2017, Lentz had received benefits under the policy totaling $3,999,231.13.

In addition to the foregoing evidence, MOC submitted documentary evidence in support of its summary judgment motion. That evidence included Lentz’ October 17, 2008, application for employment, which listed “Mewbourne Oil Company” on the top of the application. The application contained questions regarding relatives employed by MOC and the source of Lentz’ referral to MOC. The applicant’s certification indicates that Lentz authorized MOC to investigate all statements contained in the application. Lentz also agreed, by his signature on the employment application, to abide by MOC rules and regulations and acknowledged that he understood that MOC reserved “the right to change wages, hours and working conditions as deemed necessary.” Lentz’ W-2 Wage and Tax Statement for the years 2014, 2015, and 2016 all list the employer’s name, address, and zip code as “Mewbourne Oil Company, 3901 S. Broadway Ave., Tyler, TX 75701-8716.” Lentz’ personnel file was labeled “Mewbourne Oil Company Personnel Jacket,” and that file included Lentz’ employment record with MOC. Lentz signed a written acknowledgment of receipt of MOC’s drug and alcohol policy. Additionally, the employee authorization agreement for direct deposit of Lentz’ paycheck listed his employer as MOC, as did Lentz’ written acknowledgment of having been provided a copy of the rules governing use of his assigned company vehicle and his enrollment form for the MOC 401(k) plan.

*5 Additional summary judgment evidence indicates that following the accident, the Occupational Safety and Health Review Commission entered into a settlement agreement with MOC. An order approving the settlement agreement was issued in the case against MOC.8 The settlement agreement was signed by Frank D. Davis, attorney for respondent Mewbourne Oil Company, Inc.

The summary judgment evidence also includes a March 2016 letter from MOC to Lentz outlining additional payments to Lentz to maintain his post-accident salary at 100 percent of his pre-accident salary, its agreement to pay the premiums for the eighteen-month COBRA coverage period, and for extended medical insurance benefits for Lentz and his wife. The letter was signed “Sincerely, Mewbourne Oil Company, Gilbert R. Hearn, Human Resources.” MOC issued a separation report for Lentz on July 23, 2016, based on Lentz’ long-term disability. The form was signed as “approved” by Greene. The employer statement portion of Lentz’ disability claim form identified the employer as MOC. On July 29, 2016, MOC sent Lentz a letter of employment separation, explaining Lentz’ “separation of full time employment from Mewbourne Oil Company” and corresponding benefits. The letter bore the same signature as the earlier March letter.

Despite this evidence, Lentz contends that Mewbourne Holdings was his sole employer. In support of that contention, Lentz submitted summary judgment evidence which included his affidavit. In that affidavit, Lentz testified that he had “no knowledge of whether [he] was employed by [MOC] other than what other people have told [him], what appears on [his] direct deposit statements, and [his] IRS Form W-2. [He has] always assumed [he] was employed by [MOC] .... But [he has] no way of knowing whether any other company might have claimed [him] as an employee.” Lentz further stated that his workers’ compensation benefits’ checks list Mewbourne Holdings as the insured.

Beyond his affidavit, Lentz primarily relies on documents issued either by Starr Indemnity or some other third party in support of his claim that Mewbourne Holdings was his sole employer. For example, Lentz relies on Workers’ Compensation and Employers’ Liability Policy Number 1000001218 issued by Starr Indemnity, which lists Mewbourne Holdings, Inc., 3901 S. Broadway, Tyler, Texas, as the named insured. MOC, however, is listed as an additional named insured on the policy, together with additional companies, partnerships, and trusts.9

In addition to the Starr Indemnity policy, Lentz relies on The Starr Companies Loss Control Site Survey Evaluation, which states, under the operational overview section, “Mewbourne Holdings, DBA: Mewbourne Oil Company is an oil and gas service company that has been in operation for approximately 50 years .... There are a total of 400 employees .... A specific breakdown by title, location and other information was not available.” The account name is listed as Mewbourne Holdings. Additionally, a Starr Indemnity audit of its workers’ compensation payroll performed by a third-party auditor identified Mewbourne Holdings, Inc., as the name of the insured. The auditor’s “Description of Operations” states that the “insured owns several other corporations, trusts, and LLC’s[;] these companies do not have any employees.” Starr Indemnity’s consolidated premium audit invoice also listed Mewbourne Holdings, Inc., as the insured. Further, the Texas Department of Insurance Workers’ Compensation Division sent its “Notice To Employer” to “Mewbourne Holdings Inc” on December 1, 2015. Finally, Lentz relies on a wage statement submitted to Starr Indemnity listing Mewbourne Holdings as his employer.10

2. Lentz Was Employed by MOC on the Accident Date and Was Subject to its Control

*6 “For the purpose of workers’ compensation law, the employer-employee relationship may be created only by a contract.” 401.012(a). The summary judgment evidence established not only that Lentz was employed by MOC on the accident date, but also that MOC had the right to control Lentz on that date. See Producers Chem. Co. v. McKay, 336 S.W.2d 220, 226 (Tex. 1963).

MOC produced the following evidence to establish that it employed Lentz on the accident date and that Lentz was subject to its control: (1) Lentz’ employment application was to MOC, in which he agreed to “conform to all existing and future Company rules and regulations” and “underst[oo]d that [MOC] reserves the right to change wages, hours and working conditions as deemed necessary”; (2) MOC’s personnel file on Lentz was marked “Mewbourne Oil Company”; Lentz’ sworn response to interrogatories that he worked for MOC; (4) Lentz’ deposition testimony that at the time of the accident, he was a production foreman for “Mewbourne Oil” and was “assigned to all the wells that [MOC] had in the West Texas Area”; (5) Lentz’ deposition testimony that Smith was his boss at MOC and that Smith was at the wellsite on the accident date; (6) the accident occurred on an MOC well; (7) Lentz’ deposition testimony that he was checking on the tank battery at the time of the accident in response to Smith’s question regarding what was happening there; (8) MOC paid Lentz’ salary; (9) MOC provided Lentz with a company vehicle; (10) MOC provided Lentz with a 401(k) plan; (11) Lentz signed a written acknowledgement of MOC’s drug and alcohol policies; (12) following the accident, MOC continued to pay Lentz additional payments to keep his salary at 100 percent of his pre-accident salary; (13) MOC’s provision of COBRA coverage to Lentz following the accident; and (14) MOC’s letters to Lentz in March and July 2016, the latter of which advised Lentz of his separation of employment from MOC. The summary judgment evidence also established that MOC was a named insured on the Starr Indemnity policy, that MOC paid the premiums on the policy, and that MOC employed 420 people.

Because the foregoing evidence conclusively established that MOC was Lentz’ employer on the accident date and that Lentz was subject to its control, the burden shifted to Lentz to raise a material fact issue precluding summary judgment. See Walker, 924 S.W.2d at 377.

Lentz attempted to carry this burden by claiming that (1) “The Mewbourne companies’ arrangement categorizing all workers as employees of Mewbourne Holdings is a relevant factor in determining the identity of Lentz’[ ] statutory employer,” (2) Mewbourne Holdings had the right to control Lentz and direct his activities at the time of the accident, and (3) the fact that MOC administered some of the formalities of Lentz’ employment on Mewbourne Holdings’ behalf does not conclusively establish MOC was his employer. Lentz’ arguments and supporting evidence fall short of creating a genuine issue of material fact.

3. No Evidence of a Written or Implied Contract Between MOC and Mewbourne Holdings

*7 Lentz claims that an “arrangement” between Mewbourne Holdings and MOC indicates that he was solely employed by Mewbourne Holdings because the evidence shows that “all workers in the Mewbourne family are employees of Mewbourne Holdings, and MOC has no employees of its own.” Lentz therefore claims that any conflict between the “arrangement” between Mewbourne Holdings and MOC versus the facts on the ground is a genuine issue of fact that should be left to the jury.

In support of his claim that the record includes evidence of such an arrangement, and thereby raises a genuine issue of material fact precluding summary judgment, Lentz relies on Phillips, 316 S.W.3d at 187.

It is undisputed that there is no written contract between Mewbourne Holdings and MOC delineating the right of control over Lentz. Moreover, the summary judgment evidence on which Lentz relies does not establish an implied contract over the right of control. See Arsenault v. Orthopedics Specialist of Texarkana, No. 06-07-00022-CV, 2007 WL 3353730, at *3 (Tex. App.—Texarkana Nov. 14, 2007, no pet.) (mem. op.) (“Lowrance’s conclusory allegations—that Young and OST are alter egos, a single business enterprise, ‘d/b/a’ as each other, or ‘of’ the other—in his petition, amended petition, and affidavit do not suffice.”).

*8 Likewise, the Starr Indemnity policy listing Mewbourne Holdings as the named insured, payroll audits performed by a third-party auditor in connection with obtaining workers’ compensation insurance identifying the insured as Mewbourne Holdings, and Lentz’ affidavit indicating that he did not know if Mewbourne Holdings claimed him as an employee do not support the existence of an implied contract between Mewbourne Holdings and MOC regarding the right of employee control. The summary judgment evidence established that MOC was a named insured under the policy and that it paid its own premiums. As Lappe explained in his deposition, Starr Indemnity placed the name of the first-listed insured in the forms requiring an employer name so that it did not have to list multiple insureds in every form. Lappe testified that this designation “did not suggest any legal ownership or control by Mewbourne Holdings as to any of those other locations.”

The third-party audit report, created by York Premium Audit Services, does not advance Lentz’ argument. York created a document that contains payroll data. On the first page, a column entitled “Insured Information” lists Mewbourne Holdings. The remainder of the document likewise refers to Mewbourne Holdings as the insured. The second page of the audit states,

Mewbourne Holdings, Inc.[,] has several locations throught [sic] Texas, Oklahoma, and New Mexico. There are not any operations in any other states. The main offices are located at 3901 S. Broadway, Tyler, TX 75701. There were no changes in ownership or entity type during the audit period. Insured owns several other corporations, trusts, and LLC’s. These companies do not have any employees.

There is no evidence the third-party auditor had any personal knowledge about Mewbourne Holdings or MOC’s corporate structure. Moreover, the audit report is silent about MOC. Conversely, the summary judgment evidence from MOC’s general manager of administration specifically addressed the relationship between Mewbourne Holdings and MOC. Greene testified that Mewbourne Holdings did not have employees and was merely a passive holding company12 with no control over any of MOC’s activities. Mewbourne Holdings is a parent company for several directly or indirectly wholly owned subsidiaries, including MOC.

None of the evidence on which Lentz relies is sufficient to raise a genuine issue of material fact regarding MOC’s employment of Lentz on the accident date.13 See Rayon, 121 S.W.3d at 11 (“A material fact issue is ‘genuine’ only if the evidence is such that a reasonable jury could find the fact in favor of the nonmoving party.”).

III. Conclusion

The summary judgment evidence conclusively established that on the date of the incident, MOC was Lentz’ employer and had the right to control Lentz. It is undisputed that MOC subscribed to a workers’ compensation policy issued by Starr Indemnity and that Lentz received workers’ compensation benefits under the policy. MOC was therefore entitled to summary judgment based on the exclusive remedy defense under the TWCA.14

We affirm the trial court’s judgment.

Footnotes

1

Originally appealed to the Twelfth Court of Appeals in Tyler, this case was transferred to this Court by the Texas Supreme Court. See TEX. R. APP. P. 41.3.

2

Other named plaintiffs, and appellants in this Court, include Beverly Lentz, Jason Lentz, M.D., and Rebecca Vanlandingham.

3

Lentz explained that paraffin is a bi-product of hydrocarbons and that it will sometimes build up inside the well and turn into a hard substance. If it is not managed, the paraffin can damage downhole equipment and flowlines.

4

Lentz received second- and third-degree burns over seventy percent of his body and is now blind in both eyes.

5

Lentz also sued Panther Completion Services, LLC, Jeremy Williamson, Marceaux Energy Services, LLC, Sandy Marceaux, Green Mountain Services, LLC, Brenntag Southwest, Inc., Corportivo Quimico Global, Jonathan Jurado, Cactus Equipment Rental, LLC, Roydston V. House, Arron Mangum, Organic Solvent Steam Treatment, and Nova Training, Inc. d/b/a Nova Safety & Environmental. Following the trial court’s grant of summary judgment, Lentz’ claims against MOC and Mewbourne Holdings were severed from Lentz’ remaining claims.

6

Lentz conceded in his summary judgment response that Mewbourne Holdings was his employer for purposes of the TWCA. In their response to the summary judgment motion in the trial court, the plaintiffs indicated that they no longer intended to pursue their claims against Mewbourne Holdings and, therefore, would not address the traditional and no-evidence challenges to their claims against Mewbourne Holdings. Additionally, the no-evidence motion for summary judgment concerned only Mewbourne Holdings. Because that claim is not at issue in this appeal, we apply the relevant standard of review for a traditional motion for summary judgment.

7

The TWCA further defines “employee” to include

(1) an employee employed in the usual course and scope of the employer’s business who is directed by the employer temporarily to perform services outside the usual course and scope of the employer’s business;

(2) a person, other than an independent contractor or the employee of an independent contractor, who is engaged in construction, remodeling, or repair work for the employer at the premises of the employer; and

(3) a person who is a trainee under the Texans Work program established under Chapter 308.

TEX. LAB. CODE ANN. § 401.012(b)(1)–(3) (West 2015).

8

The case was styled, Thomas E. Perez, Secretary of Labor, United States Department of Labor, Complainant v. Mewbourne Oil Co. and its Successors, OSHRC Docket Number 16-0455, relative to inspection number 1079925.

9

MOC’s address on the policy is the same as the one listed for Mewbourne Holdings in Tyler. The only address listed for a Midland location on the policy’s additional location schedule is one for Mewbourne Holdings.

10

Green testified that this wage statement incorrectly listed Mewbourne Holdings, Inc., as Lentz’ employer and that the error has since been corrected.

11

A witness from Starr Indemnity testified that the purpose of the evaluation was to ensure that proper safety protocols and procedures were in place.

12

A “holding company” is “[a] company formed to control other companies ... confining its role to owning stock and supervising management. It does not participate in making day-to-day business decisions in those companies.” Holding Company, BLACK’S LAW DICTIONARY (10th ed. 2014).

13

Because the sole issue before this Court is whether Lentz was employed by MOC on the accident date such that it is entitled to rely on the TWCA’s exclusive remedy provision, we need not reach the issue of whether Lentz was likewise employed by Mewbourne Holdings. See Port Elevator-Brownsville v. Casados, L.L.C., 358 S.W.3d 238, 242 (Tex. 2012) (“An employee may have more than one employer within the meaning of the TWCA.”).

14

Having concluded that MOC is entitled to summary judgment on its affirmative defense, we need not address MOC’s quasi-estoppel argument.

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