Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Friday, October 9, 2009

Is conspiracy claim viable against employees (agents) of the same entity?

Can Multiple Agents of the Same Employer Be Held Liable for Conspiracy? In his petition against [Defendant, a grocery store], [Plaintiff, a customer] alleges that [Defendant], through actions of its employees, conspired to have him charged with theft. The elements of civil conspiracy include: (1) two or more persons; (2) an object to be accomplished; (3) a meeting of the minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as a proximate result. Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996); Firestone Steel Prods. Co. v. Barajas, 927 S.W.2d 608, 614 (Tex. 1996). Employees or agents of a principal acting within the course and scope of their employment or agency relationship cannot form a conspiracy together unless they are acting outside their capacity as an employee or agent or are acting for a personal purpose of their own. See Texas-Ohio Gas, Inc. v. Mecom, 28 S.W.3d 129, 138 (Tex. App.--Texarkana 2000, no pet.); Atlantic Richfield Co. v. Misty Prods. Inc., 820 S.W.2d 414, 421 (Tex. App.--Houston [14th Dist.] 1991, writ denied). SOURCE: 03-07-00149-CV (10/7/09) (Austin CoA)

Elements of Fraud by Misrepresentation Claim

ELEMENTS OF A FRAUD CLAIM BASED ON MISREPRESENTATION IN TEXAS A plaintiff must allege the following to state a cause of action for fraud based on misrepresentation: (1) a material representation was made; (2) it was false; (3) when the representation was made, the speaker knew it was false or the statement was made recklessly without any knowledge of its truth and as a positive assertion; (4) the speaker made the representation with the intent that it should be acted upon by the other party; (5) the other party acted in reliance on the representation; and (6) the party thereby suffered injury. DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990). SOURCE: 03-07-00149-CV (10/7/09) (Third Court of Appeals in Austin, TX)

Invasion of Privacy Tort(s) in Texas

WHICH INVASION-OF-PRIVACY CLAIMS ARE ACTIONABLE IN TEXAS? Invasion of privacy consists of four separate torts, each protecting a different privacy interest: (1) unreasonable intrusion upon the seclusion or private affairs of another; (2) unreasonable publicity given to an aspect of one's private life in which the public has no legitimate concern; (3) publicity that unreasonably places another in a false light before the public; and (4) unwarranted appropriation of one's name or likeness. See Billings v. Atkinson, 489 S.W.2d 858, 860 (Tex. 1973). The Texas Supreme Court has recognized the first and second types of invasion of privacy, indicated probable acceptance of the fourth, and expressly declined to recognize the third. See Cain v. Hearst Corp., 878 S.W.2d 577, 578 (Tex. 1994). SOURCE: 03-07-00149-CV (10/7/09) (Austin Court of Appeals)

False Imprisonment & Shopkeeper's Privilege

ELEMENTS OF CAUSE OF ACTION FOR FALSE IMPRISONMENT UNDER TEXAS LAW To prevail under a false imprisonment claim, a plaintiff must prove (1) willful detention, (2) without consent, and (3) without authority of law. Sears, Roebuck & Co. v. Castillo, 693 S.W.2d 374, 375 (Tex. 1985). Absence of adequate justification or authority of law is an essential element of a cause of action for false imprisonment. Randall's Food Mkts., Inc. v. Johnson, 891 S.W.2d 640, 644 (Tex. 1995). If the alleged detention was performed with authority of law, no false imprisonment occurs. Wal-Mart Stores v. Resendez, 962 S.W.2d 539, 540 (Tex. 1998). SHOP-KEEPER'S PRIVILEGE The "shopkeeper's privilege" expressly grants an employee the authority of law to detain a customer to investigate the ownership of property in a reasonable manner and for a reasonable period of time if the employee has a reasonable belief that the customer has stolen or is attempting to steal store merchandise. Tex. Civ. Prac. & Rem. Code Ann. § 124.001 (West 2005). [Plaintiff] has failed to state a viable cause of action for false imprisonment because the facts he has alleged demonstrate that the HEB employees had the authority to detain him under the shopkeeper's privilege. [Plaintiff] alleged that he was stopped by the store security officer as he was leaving the store with an unmarked bag whose contents set off the security alarm. [Plaintiff]stated in his deposition that when he first entered the store carrying the unmarked bag, he attempted to get Cruz's attention, but that Cruz did not notice or acknowledge him. Cruz did not, therefore, have any reason to know that Carr had brought the bag with him into the store. When the contents of [Plaintiff's] bag set off the security alarm as [Plaintiff] was leaving the store, Cruz and the other HEB employees had a reasonable basis for believing that [Plaitniff] was attempting to steal store merchandise. The shopkeeper's privilege does not require that the person detaining another confirm or refute the detainee's claims regarding the merchandise, nor does it prevent the suspected shoplifter from being held for a reasonable time in order to deliver him to the police. Resendez, 962 S.W.2d at 540; see also Tex. Civ. Prac. & Rem. Code Ann. § 124.001; Tex. Crim. Proc. Code Ann. art. 18.16 (granting to any person privilege to detain person suspected of theft and deliver them to peace officer). Because the detention was not without authority of law, Carr has not stated a legally arguable cause of action for false imprisonment, and the realistic chance of his ultimate success on this claim was slight. The trial court did not abuse its discretion by dismissing Carr's claim for false imprisonment. SOURCE: 03-07-00149-CV (10/7/09) (3rd Court of Appeals in Austin, TX)

Governmental Immunity: Waiver-by-Conduct Exception Rarely Viable

GOVERNMENT CONTRACTS AND SOVEREIGN IMMUNITY Governmental units do not waive their immunity from suit simply by contracting with a private party. Federal Sign v. Texas S. Univ., 951 S.W.2d 401, 408 (Tex. 1997). The supreme court's decision in Federal Sign, however, appeared to leave open the possibility that a governmental unit could waive its immunity from suit, absent legislative action, by conduct that amounted to something more than merely contracting with a private party. Id. at 408 n.1. Justice Baker, writing for a plurality of the supreme court in IT-Davy, seemed to foreclose the option altogether; however, five justices, writing in concurrence and dissent, suggested that there may be equitable circumstances that would justify it. See, e.g., 74 S.W.3d at 862 (Hecht, J., concurring) ("I cannot absolutely foreclose the possibility that the State may waive immunity in some circumstances other than by statute."). WHEN DOES A GOVERNMENTAL ENTITY WAIVE ITS IMMUNITY BY ITS CONDUCT (IF EVER)? While there is no supreme court decision approving of a specific waiver by conduct, at least one recent case from the First Court of Appeals provides guidance. See Texas S. Univ. v. State St. Bank & Trust Co., 212 S.W.3d 893 (Tex. App.--Houston [1st Dist.] 2007, pet. denied). In that case, Texas Southern University contracted with CMS Viron to lease heavy equipment to the University. Id. at 897. Attached to the Master Lease Agreement was an opinion letter from TSU's general counsel giving assurances to CMS that the contract was binding against the University and that CMS would be able to collect on a judgment against TSU, should the need arise. Id. at 898. After CMS delivered the equipment, TSU refused to honor its agreement, citing sovereign immunity. Id. The court held that TSU waived immunity by its conduct. Id. at 908. The court focused primarily on the fact that TSU gave false assurances of the validity and enforcability of the contract to "lure" CMS into the contract, then reneged on its agreement, and tried to hide behind the cloak of immunity. Id. CONDUCT WAS NOT EGREGIOUS ENOUGH TO EFFECT WAIVER In the present case, we have no such egregious conduct by the City. Smith does not allege that the City lured him into the deal with representations that the City would not be immune from suit should the need arise to sue. He does not contend that the City did anything other than what one would expect of any ordinary contracting party. While Smith may have been under the impression that the City would not be immune from suit, he does not allege that the City did anything to plant or foster the mistaken belief. Smith does not allege that the City provided him with a legal opinion on which to rely, nor does Smith claim that the City made any representations to him concerning immunity at all. Smith's potential misunderstanding of the law is not enough to justify an equitable waiver of immunity against the City. Likewise, Smith's reliance on the City's promise to build and maintain a river crossing is not sufficient. The existence of mutual promises is a necessary element of most contracts, and the supreme court has held that merely contracting with a private party, without more, is not enough to waive governmental immunity by conduct. See Fed. Sign, 951 S.W.2d 408. Nor is it even enough that the City accepted the benefits of the contract. See Texas A&M Univ. Sys. v. Koseoglu, 233 S.W.3d 835, 840 (Tex. 2007); IT-Davy, 74 S.W.3d at 860. SOURCE: 03-08-00784-CV (10/8/09) (Austin Court of Appeals)

GUARDIANSHIP - Purpose of Guardianship Proceeding, Competency Obviates Need for Guardian

WHAT IS THE PURPOSE OF A GUARDIANSHIP SUIT? The only purpose of a guardianship proceeding is to appoint a guardian with either full or limited authority over an incapacitated person. See Tex. Prob. Code Ann. § 602 (Vernon 2003). A guardianship is neither necessary nor appropriate when a person is found to be competent. If the probate judge had found Miller to be incapacitated, the appropriate course of action would have been to appoint a guardian with full or limited authority over him. See id. The probate judge did not. LEGAL COMPETENCY/INCOMPETENCY & GUARDIANSHIP A conclusion that no guardian is needed is a determination that the proposed ward has sufficient capacity to care for himself. Such a conclusion is, in effect, a finding that the person is competent, and it is an express denial of a request to form a guardianship. Although there is no order in the record using the express language “the application is denied” and there were apparently no further hearings or proceedings on the application, the February 15th order is final. There is no magic language required to render a judgment final. The probate judge's order states that after considering evidence, “it was neither necessary nor appropriate to appoint a guardian in this cause.” Thus, the order expressly disposes of the entire case. The language of the order does not, in any way, reserve the issue of guardianship for later determination. The language of an order can make it final, even though it should have been interlocutory, when, as here, the language expressly disposes of all claims and all parties. SOURCE: 05-08-00627-CV (10/7/09) (Dallas Court of Appeals)

Wednesday, October 7, 2009

What is conversion and how do you prove the claim in a Texas court?

Cause of action for conversion in Texas Conversion is the unauthorized and wrongful assumption and exercise of dominion and control over the personal property of another to the exclusion of, or inconsistent with, the owner's rights. Waisath v. Lack's Stores, Inc., 474 S.W.2d 444, 447 (Tex. 1971); Khorshid, Inc. v. Christian, 257 S.W.3d 748, 758-59 (Tex. App.-Dallas 2008, no pet.). Proving Conversion Claim To establish a claim for conversion, a plaintiff must prove that: (1) the plaintiff owned or had possession of the property or entitlement to possession; (2) the defendant unlawfully and without authorization assumed and exercised control over the property to the exclusion of, or inconsistent with, the plaintiff's rights as an owner; (3) the plaintiff demanded return of the property; and (4) the defendant refused to return the property. Khorshid, Inc., 257 S.W.3d at 759. SOURCE: 05-08-00654-CV (10/6/09) (Dallas CoA) Conversion Claims under Texas Law: Elements to Prove To establish a claim for conversion, a plaintiff must show: (1) title; (2) right to possession; and (3) a demand for the return of the property unless the possessor's acts manifest a clear repudiation of the plaintiff's rights. Buffet Partners, L.P. v. Sheffield Square, L.L.C., 256 S.W.3d 920, 924 (Tex. App.--Dallas 2008, no pet.); El Paso Production Co. v. Valence Operating Co., 112 S.W.3d 616, 625 (Tex. App.--Houston [1st Dist.] 2003, pet. denied). SOURCE: 04-08-00171-CV (7/8/09) (San Antonio Court of Appeals) Related causes of action: Texas Theft Liability Act claim (statutory civil theft claim)

Tuesday, October 6, 2009

Meeting of the Minds Element of Civil Conspiracy Claim Not Established

Elements of a Civil Conspiracy Claim To recover on an action for civil conspiracy, the plaintiff must prove: (1) the defendant and another person acted together, (2) they acted to accomplish an object (an unlawful purpose or a lawful purpose by unlawful means), (3) they had a meeting of the minds on the object or course of action, (4) they committed one or more unlawful acts, and (5) the plaintiff suffered damages as the proximate result of the unlawful acts. Ins. Co. Of N. Am. v. Morris, 981 S.W.2d 667, 675 (Tex. 1998). Absence of Evidence on Meeting of the Minds on the object of the alleged conspracy warrants no-evidence summary judgment In his motion for summary judgment, [Defendant] argued there is no evidence supporting any of the elements of conspiracy. Appellant provided no evidence of conspiracy and merely alleged that "all" defendants conspired against him because he is not proficient in English and is a "simple" blue collar worker. One of the essential elements required to establish a civil conspiracy is a meeting of the minds on the object or course of action. Schlumberger Well Surveying Corp. v. Nortex Oil & Gas Corp., 435 S.W.2d 854, 857 (Tex. 1969). There is no evidence of a meeting of the minds between the defendants. Appellant points out no specific facts establishing any of the elements of conspiracy. Appellant did not attach any evidence of conspiracy to his response as required by rule 166a(i). See Tex. R. Civ. P. 166a(i). Specifically, appellant presented no evidence on the third element of conspiracy, a meeting of the minds. The trial court did not err in granting Manley's no-evidence motion for summary judgment. SOURCE: 14-07-01085-CV (10/6/09) (Fourteenth Court of Appeals-Houston)

Failure to produce evidence of false representation dooms fraud claim

Elements of Fraud Cause of Action

 To recover on an action for fraud, the plaintiff must prove: (1) a material representation was made, (2) the representation was false, (3) when the speaker made the representation, he knew it was false or made it recklessly without knowledge of the truth as a positive assertion, (4) the speaker made it with the intention that it should be acted upon by the party, (5) the party acted in reliance upon it, and (6) the party thereby suffered injury. Solutioneers Consulting, Ltd. v. Gulf Greyhound Partners, Ltd., 237 S.W.3d 379, 385 (Tex. App.-Houston [14th Dist.] 2007, no pet.).

Allegation of fraud was conclusory and did not raise issue of fact to avert summary judgment; no evidence of specific false representation produced.

 In his summary judgment motion, Manley argued there is no evidence to support any of the elements of fraud. Appellant alleges Manley engaged in fraud, conspiracy to defraud, and constructive fraud. He claims his signature on the final settlement agreement was procured by fraud because Manley did not explain the settlement agreement to him and he admittedly signed without reading the agreement. However, appellant fails to point to a specific false representation by Manley. Mere conclusory statements do not constitute effective summary judgment proof and need not be given the same presumptive force as allegations of fact. Abbott Laboratories, Inc. v. Segura, 907 S.W.2d 503, 508 (Tex. 1995). Moreover, appellant attached no evidence to his motion. See Tex. R. Civ. P. 166a(i) ("The court must grant the motion unless the respondent produces summary judgment evidence raising a genuine issue of material fact."). Appellant's allegations of fraud amount to conclusory accusations and he presents no evidence raising a genuine issue of material fact on any element of his fraud cause of action. See Segura, 907 S.W.2d at 508. Specifically, appellant did not point to a single specific misrepresentation upon which he bases his claim. The trial court did not err in granting summary judgment on this claim.
SOURCE: 14-07-01085-CV (10/6/09) (14th Court of Appeals - Houston)

Monday, October 5, 2009

Ambiguous vs. Unambiguous Contract: Implications for Summary Judgment, Admissibility of Extrinsic, Parol Evidence

WHEN IS A CONTRACT AMBIGUOUS / UNAMBIGUOUS? A contract is unambiguous if it can be given a definite legal meaning; if it is subject to two or more reasonable interpretations, it is ambiguous, creating a fact issue on the parties' intent. Webster, 128 S.W.3d at 229; Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). Lack of clarity, however, does not necessarily create an ambiguity, and neither does a mere disagreement between the parties. See Universal Health Servs., Inc. v. Renaissance Women's Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003) (adding that whether "a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered"); see also City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699, 722 (Tex. App.- Fort Worth 2008, pet. filed) (explaining that when "the meaning of a contract is unambiguous, a party's construction is immaterial"). Question of Law vs. Question of Fact When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). Conversely, the interpretation of an unambiguous contract is a matter of law to be determined by the trial court. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000). Effect of Contract Ambiguity (or Absence thereof) on Admissibility of Extrinsic Evidence / Parol Evidence In its second issue, Vineyard argues that the trial court erred by sustaining Univest's general objection to the purported parol evidence testimony of Collins and by excluding portions of Collins's affidavit because Collins's testimony met the admissibility requirements under the rules of evidence and common law. However, because we have concluded that the terms in the REA are not ambiguous, we must overrule Vineyard's evidentiary issues. See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006) (recognizing that if the agreement is not ambiguous, courts do not consider extrinsic evidence when interpreting the agreement). Accordingly, we overrule Vineyard's second issue. SOURCE: 02-08-00496-CV (10/1/09) (Fort Worth Court of Appeals)

Friday, October 2, 2009

Moving for SJ based on Limitations as Affirmative Defense to Negligence Claim


Summary judgment is appropriate when there is no genuine issue as to any material fact and judgment should be granted in favor of the movant as a matter of law. Diversicare Gen. Partner, Inc. v. Rubio, 185 S.W.3d 842, 846 (Tex. 2005) (citing KPMG Peat Marwick v. Harrison County Hous. Fin. Corp., 988 S.W.2d 746, 748 (Tex. 1999)).


Summary judgment may be granted on an affirmative defense. See Tex. R. Civ. P. 166a(c). A defendant moving for summary judgment on the affirmative defense of limitations has the burden to conclusively establish that defense. Diversicare, 185 S.W.3d at 846 (citing KPMG Peat Marwick, 988 S.W.2d at 748)); Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 220 (Tex. 2003).


A matter is conclusively established if ordinary minds cannot differ as to the conclusion to be drawn from the evidence. Triton Oil & Gas Corp. v. Marine Contractors & Supply, Inc., 644 S.W.2d 443, 446 (Tex. 1982). If the movant establishes that the statute of limitations bars the action, the nonmovant must then present summary judgment evidence raising a fact issue in avoidance of the statute of limitations. Kang v. Hyundai Corp., 992 S.W.2d 499, 501 (Tex. App.-Dallas 1999, no pet.); Palmer v. Enserch Corp., 728 S.W.2d 431, 435-36 (Tex. App.-Austin 1987, writ ref'd n.r.e.).


The statute of limitations expired before appellant filed suit against appellee. The limitations period for this cause of action was two years from the accrual of the cause. See Tex. Civ. Prac. & Rem. Code Ann. § 16.003(a) (Vernon Supp. 2008) (providing a two-year limitations period for personal injury claims).

Summary Judgment Based on the Statute of Limitations Was Proper Where Negligence Claim Based on Accident Accrued More Than 2 Years Prior to Date Amended Petition Named Additional Defendant (Movant) 

In his response to appellee's motion for summary judgment and on appeal, appellant admits the motor vehicle accident occurred on April 15, 2006 and the statute of limitations applicable to a negligence cause of action that arose from the accident expired April 16, 2008. The record confirms on February 27, 2008, appellant filed suit against Insurance Depot, Inc. and on July 22, 2008, appellant filed his amended petition including the negligence claim against the newly- named appellee. We conclude that appellee established its defense of limitations as a matter of law, and the summary judgment in favor of appellee was proper in this case.

SOURCE: 05-09-00183-CV (Dallas Court of Appeals) (10/1/09)

Settlement Agreement: Elements essential to enforceability

The enforceability of a settlement agreement is determined in the same manner as any other written contract. Anderton v. Schindler, 154 S.W.3d 928, 932 (Tex. App.-Dallas 2005, no pet.). Whether an agreement is legally enforceable or binding is a question of law. Texaco, Inc. v. Penzoil Co., 729 S.W.2d 768, 814 (Tex. App.-Houston [1st Dist.] 1987, writ ref'd n.r.e.).
In order for a court to enforce a contract, the parties must agree to the essential terms of the contract. T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). An agreement is unenforceable if it is so indefinite that a court cannot fix the legal obligations and liabilities of the parties. Moore v. Dilworth, 179 S.W.2d 940, 942 (Tex. 1944).


 Our court has determined that essential terms for a settlement agreement are the amount of compensation and the liability to be released. Disney v. Gollan, 233 S.W.3d 591, 595 (Tex. App.-Dallas 2007, no pet.). See also Padilla v. LaFrance, 907 S.W.2d 454, 460-61 (Tex. 1995) (agreement was complete where terms included agreement to pay in exchange for settlement); CherCo Properties, Inc. v. Law, Snakard & Gambill, P.C., 985 S.W.2d 262, 266 (Tex. App.-Fort Worth 1999, no pet.) (holding a settlement agreement that includes the terms of payment, and a statement that the parties would execute releases, contained all material terms). When essential terms are open for future negotiation, there is not a binding contract. T.O. Stanley, 847 S.W.2d at 221.
SOURCE: 05-08-01042-CV (Dallas CoA) (9/29/09) (agreement lacked essential term because compensation under the agreement was not yet clear)

COMPARE & CONTRAST: Settlement & Release vs. Indemnity

A release and an indemnity agreement are different. An indemnity agreement is a promise by the indemnitor to safeguard or hold the indemnitee harmless against existing or future loss or liability, or both. MG Bldg. Materials, Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 63 (Tex. App.--San Antonio 2005, pet. denied); see Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex. 1993). An indemnity provision does not apply to claims between the parties to the agreement, but obligates the indemnitor to protect the indemnitee against claims brought by third parties. MG Bldg., 179 S.W.3d at 63. Thus, an indemnity agreement creates a potential cause of action in the indemnitee. Id.

A release, on the other hand, is an agreement by one party to surrender its own cause of action against the other party. Id. at 64; see Dresser Indus., 853 S.W.2d at 508. A release extinguishes any claim the releasor might have against the releasee without regard to the releasee's liability to third parties. MG Bldg., 179 S.W.3d at 64. A release is an affirmative defense and must be pled. Id.; see Tex. R. Civ. P. 94. Thus, typical release language is "release, discharge, relinquish," while typical indemnity language is "indemnify, save, protect, save/hold harmless." MG Bldg., 179 S.W.3d at 64.

 SOURCE: SAN ANTONIO COURT OF APPEALS - 04-08-00302-CV (9/15/09)

"Meeting of the minds" as an element of contract formation

A "meeting of the minds" is a phrase that nobody uses in ordinary discourse, or even in business correspondence. But that does not change the fact that the matter of "whether the minds met" can make or break a breach-of-contract claim when it ends up in court (or in arbitration, for that matter).  

 What does the "meeting of the minds" mean in the contracting context?

“Meeting of the minds” describes the mutual understanding and assent to the agreement regarding the subject matter and the essential terms of the contract. Weynand v. Weynand, 990 S.W.2d 843, 846 (Tex. App.—Dallas 1999, pet. denied). “The parties must agree to the same thing, in the same sense, at the same time.” Id.
The essential elements required, in writing, for the sale of real property are the price, the property description, and the seller’s signature. See Rus-Ann Dev., Inc. v. ECGC, Inc., 222 S.W.3d 921, 927 (Tex. App.—Tyler 2007, no pet.); Lynx Exploration & Prod. Co. v. 4-Sight Operating Co., 891 S.W.2d 785, 788 (Tex. App.—Texarkana 1995, writ denied).

Meeting of the Minds and enforceability of contracts

However, this does not mean that a contract containing these terms would remain enforceable if additional terms are incorporated into the agreement that are so indefinite that the court could not fix the legal obligation and liabilities of the parties. Lynx Exploration, 891 S.W.2d at 788.

Here, there is no dispute the Fines agreed to sell and the Pollards agreed to buy the real property that was the subject matter of the Commercial Contract. The parties agreed on all terms essential to that sale, including, but not limited to, the sales price, financing, payment of earnest money, inspection of the property, fees, and details regarding closing and possession of the property. We conclude Stephen did not conclusively establish that there was no meeting of the minds with regard to the contract.

Establishing and Disputing the Meeting of the Minds Element of a Contract Claim 

Whether the parties have come to a “meeting of the minds” is measured objectively according to what the parties said and did. Copeland v. Alsobrook, 3 S.W.3d 598, 604 (Tex. App.—San Antonio 1999, pet. denied). The parties’ subjective thoughts and beliefs do not control. Id. When the “meeting of the minds” element is contested, it is a question for the fact finder. Hallmark v. Hand, 885 S.W.2d 471, 476 (Tex. App.—El Paso 1994, writ denied).

SOURCE: 04-08-00745-CV (9/9/09) (San Antonio Court of Appeals)

Wednesday, September 30, 2009

Contract Ambiguity as a defensive claim

AMBIGUOUS CONTRACT ARGUMENT [Claim that contract sued on is ambiguous as a defense to enforcement of the contract as a matter of law without parol evidence] “Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). Only where a contract is ambiguous may a court consider the parties’ interpretation and “admit extraneous evidence to determine the true meaning of the instrument.” Nat’l Union Fire Ins. Co. of Pittsburgh, Penn. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (per curiam). When is a contract provision ambiguous, and when not? A contract is not ambiguous merely because the parties have conflicting interpretations of the contract. Columbia Gas, 940 S.W.2d at 589. A contract is ambiguous only when its meaning is uncertain or it is reasonably susceptible to more than one meaning. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Question of law vs. question of fact precluding summary judgment When a contract is not ambiguous, the construction of the written instrument is a question of law for the court that is reviewed de novo. MCI Telecommunications Corp. v. Texas Utilities Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999); Coker, 650 S.W.2d at 393. SOURCE: 04-08-00745-CV (9/9/09) (San Antonio Court of Appeals)

Mutual Mistake as a Contract Defense

AVOIDANCE OF CONTRACT BASED ON MUTUAL MISTAKE When parties to an agreement have contracted under a misconception or ignorance of a material fact, the agreement will be avoided under the doctrine of mutual mistake. Williams v. Glash, 789 S.W.2d 261, 264 (Tex. 1990). When can the affirmative defense of mutual mistake be invoked? To prove a mutual mistake, the evidence must show that both parties were acting under the same misunderstanding of the same material fact when the agreement was executed. Seymour v. American Engine & Grinding Co., 956 S.W.2d 49, 58 (Tex. App.—Houston [14th Dist.] 1996, writ denied). “The doctrine of mutual mistake must not routinely be available to avoid the results of an unhappy bargain.” Williams v. Glash, 789 S.W.2d 261, 265 (Tex. 1990). SOURCE: 04-08-00745-CV (9/9/09) (San Antonio Court of Appeals) (defense of mutual mistake not conclusively established)

Tuesday, September 29, 2009

No viable civil conspiracy claim in the absence of underlying tort

CIVIL CONSPIRACY To establish civil conspiracy, the appellant must show that the appellees had a meeting of the minds on an object or course of action, and that one of the members committed an unlawful, overt act in furtherance of the object or course of action. Tri v. J.T.T., 162 S.W.3d 552, 556 (Tex. 2005). FAILURE OF UNDERLYING CAUSE OF ACTION DOOMED CIVIL CONSPIRACY CLAIM But since conspiracy is a derivative tort, [Plaintiff] must show that the appellees were also liable for some underlying tort in order to prevail on this claim. See Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 864 (Tex. App.-Houston [14th Dist.] 2001, pet. denied) (citing Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 635 (Tex. 1997)). Because we have already affirmed the trial court's summary judgment as to both tortious interference and breach of fiduciary duty, [Plaintiff] is without a tort claim upon which to base a cause of civil conspiracy. Therefore we overrule [Plaintiff's] issue on the summary judgment against his conspiracy claim. SOURCE: 14-08-00093-CV (9/29/09) (Houston Court of Appeals - 14th Dist.)

The elements of tortious interference [not spelled tortuous]

PROVING A TORTIOUS INTERFERENCE CLAIM (interference with contract) A party alleging tortious interference must prove that a contract subject to interference exists; that the alleged act of interference was willful and intentional; that the willful and intentional act proximately caused damage; and that actual damage or loss occurred. Prudential Ins. Co. of Am. v. Fin. Review Servs., Inc., 29 S.W.3d 74, 77 (Tex. 2000); Four Bros. Boat Works, Inc. v. Tesoro Petroleum Cos., 217 S.W.3d 653, 668 (Tex. App.- Houston [14th Dist.] 2006, pet. denied). SOURCE: 14-08-00093-CV (9/29/09) (Fourteenth Court of Appeals in Houston)

UDJA claim: When is declaratory judgment appropriate?

CLAIM FOR DECLARATION(S) UNDER THE UNIFORM DECLARATORY JUDGMENTS ACT (UDJA) What is the Declaratory Judgment Act (DJA) and what purpose does it serve? The Texas Declaratory Judgment Act is a remedial statute the purpose of which is to afford relief from uncertainty and insecurity with respect to rights, status, and other legal relations. See Tex. Civ. Prac. & Rem. Code Ann. § 37.002(b) (Vernon 2008); Bonham State Bank v. Beadle, 907 S.W.2d 465, 467 (Tex.1995); WesternGeco, L.L.C. v. Input/Output, Inc., 246 S.W.3d 776, 781 (Tex. App.-Houston [14th Dist.] 2008, no pet.). [Courts] must construe and administer this statute liberally. See Tex. Civ. Prac. & Rem. Code Ann. § 37.002(b); Bonham State Bank, 907 S.W.2d at 467. A court of record, acting within its jurisdiction, has power to declare rights, status, and other legal relations whether or not further relief is or could be claimed. WesternGeco, L.L.C., 246 S.W.3d at 781. Limitations on Availability of Declaratory Relief A declaratory judgment is appropriate only if a justiciable controversy exists as to the rights and status of the parties and the controversy will be resolved by the declaration sought. Bonham State Bank, 907 S.W.2d at 467; WesternGeco, L.L.C., 246 S.W.3d at 781. For a justiciable controversy to exist, there must be a real and substantial controversy involving a genuine conflict of tangible interests and not merely a theoretical dispute. Bonham State Bank, 907 S.W.2d at 467; WesternGeco, L.L.C., 246 S.W.3d at 781. SOURCE: 14-08-00093-CV (9/29/09) (Fourteenth Court of Appeals in Houston)

Monday, September 28, 2009

Eviction Lingo: Forcible Detainer Action Explained

WHAT IS A FORCIBLE DETAINER ACTION? A forcible detainer action, which is a special proceeding governed by particular statutes and rules, "was created to provide a speedy, simple, and inexpensive means for resolving the question of the right to possession of premises." Rice v. Pinney, 51 S.W.3d 705, 709 (Tex. App.-Dallas 2001, no pet.); see Tex. Prop. Code Ann. §§ 24.001-24.011 (Vernon 2000 & Supp. 2008); Tex. R. Civ. P. 738-755. Generally, the "sole issue" in the suit is "who has the right to immediate possession of the premises." Rice, 51 S.W.3d at 709; see Tex. R. Civ. P. 746. "To prevail in a forcible detainer action, a plaintiff is not required to prove title, but is only required to show sufficient evidence of ownership to demonstrate a superior right to immediate possession." Rice, 51 S.W.3d at 709. The Texas Rules of Civil Procedure, however, specifically allow a claim for rent to be brought with a forcible detainer action. See Tex. R. Civ. P. 738; Carlson's Hill Country Beverage L.C. v. Westinghouse Road Joint Venture, 957 S.W.2d 951, 954 (Tex. App.-Austin 1997, no pet.). SOURCE: 09-08-00422-CV (8/27/09) (Beaumont Court of Appeals)

Elements of Adverse Possession Claim

ADVERSE POSSESSION To support a claim for adverse possession, a claimant must prove: (1) actual possession of the disputed property; (2) under a claim of right; and (3) that is adverse or hostile to the claim of another person and that it was consistently and continuously so for the duration of the statutory period. Tex. Civ. Prac. & Rem. Code Ann. § 16.021 (Vernon 2002); Martin v. McDonnold, 247 S.W.3d 224, 235 (Tex. App.--El Paso 2006, no pet.); Cherokee Water Co. v. Freeman, 145 S.W.3d 809, 817 (Tex. App.--Texarkana 2004, pet. denied). The test for hostility is whether acts performed by the claimant on the land, and the use made of the land, were of such a nature and character as to reasonably notify the true owner of the land that a hostile claim was being asserted to the property. Martin, 247 S.W.3d at 235; Cherokee Water Co., 145 S.W.3d at 817. Possession must not only be actual, but also visible, continuous, notorious, distinct, hostile (i.e., adverse), and of such a character as to indicate unmistakably an assertion of a claim of exclusive ownership in the occupant. Martin, 247 S.W.3d at 235; Cherokee Water Co., 145 S.W.3d at 817. "Possession of land by adverse claimants who began their entry upon the disputed land with the permission of the record owner cannot establish adverse possession unless and until they give notice of the hostile nature of their possession. Wright v. Wallace, 700 S.W.2d 269, 271 (Tex. App.--Corpus Christi 1985, writ ref'd n.r.e.); see also Commander v. Winkler, 67 S.W.3d 265, 269 (Tex. App.--Tyler 2001, pet. denied). "Where the original use of the land in controversy is permissive, it is presumed that the continued use thereof is also permissive in the absence of notice to the true owner of the repudiation of such permissive use and the assertion of an adverse claim." Commander, 67 S.W.3d at 270. SOURCE: 04-08-00171-CV (7/8/09) (San Antonio Court of Appeals)

Trespass on Land: Elements of the Tort

WHAT IS TRESPASS TO REAL PROPERTY? Trespass to real property occurs when a person enters another's land without consent. Rankin v. FPL Energy, LLC, 266 S.W.3d 506, 509 n.4 (Tex. App.--Eastland 2008, pet. denied); Wilen v. Falkenstein, 191 S.W.3d 791, 797-98 (Tex. App.--Fort Worth 2006, pet. denied). SUING FOR DAMAGES FOR TRESPASS ON LAND To recover damages, a plaintiff must prove that: (1) the plaintiff owns or has a lawful right to possess real property; (2) the defendant entered the plaintiff's land and the entry was physical, intentional, and voluntary; and (3) the defendant's trespass caused injury to the plaintiff. Rankin, 266 S.W.3d at 509 n.4; Wilen, 191 S.W.3d at 798. SOURCE: 04-08-00171-CV (7/8/09) (San Antonio Court of Appeals)

Res Judicata: Purpose and Elements of this Affirmative Defense

WHAT IS RES JUDICATA AND WHAT PURPOSE DOES THE DOCTRINE SERVE? Res judicata, or claims preclusion, prevents the relitigation of a claim or cause of action that has been finally adjudicated, as well as related matters that, with the use of diligence, should have been litigated in the prior suit. Barr v. Resolution Trust Corp. ex rel. Sunbelt Fed. Sav., 837 S.W.2d 627, 628-29 (Tex. 1992). "The doctrine is intended to prevent causes of action from being split, thus curbing vexatious litigation and promoting judicial economy." Ingersoll-Rand Co. v. Valero Energy Corp., 997 S.W.2d 203, 207 (Tex. 1999) (citing Barr, 837 S.W.2d at 629). WHAT ESTABLISHES THE AFFIRMATIVE DEFENSE OF RES JUDICATA? The elements of res judicata are: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a second action based on the same claims that were raised or could have been raised in the first action. Igal v. Brightstar Info. Tech. Group, Inc., 250 S.W.3d 78, 86 (Tex. 2008); Amstadt v. U. S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). "The scope of res judicata is not limited to matters actually litigated; the judgment in the first suit precludes a second action by the parties and their privies not only on matters actually litigated, but also on causes of action or defenses which arise out of the same subject matter and which might have been litigated in the first suit." Barr, 837 S.W.2d at 630 (quoting Tex. Water Rights Comm'n v. Crow Iron Works, 582 S.W.2d 768, 771-72 (Tex. 1979) (emphasis added)). To determine what constitutes the subject matter of a suit, we analyze the factual matters that make up the gist of the complaint, without regard to the form of action; any cause of action which arises out of those same facts should, if practicable, be litigated in the same lawsuit. Barr, 837 S.W.2d at 630; Crow Iron Works, 582 S.W.2d at 772. SOURCE: 04-07-00727-CV (7/8/09) (San Antonio Court of Appeals)

Friday, September 25, 2009

Res judicata as affirmative defense and bar to re-litigation of claims

THE CONCEPT OF RES JUDICATA AND THE LEGAL EFFECT WHEN IT APPLIES "Res judicata precludes relitigation of claims that have been finally adjudicated, or that arise out of the same subject matter and that could have been litigated in the prior action." Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 652 (Tex. 1996). HOW TO ESTABLISH THE AFFIRMATIVE DEFENSE OF RES JUDICATA To prove res judicata, a party must establish: (1) a prior final judgment on the merits by a court of competent jurisdiction; (2) identity of parties or those in privity with them; and (3) a subsequent action based on the same claims as were raised or could have been raised in the first action. Id. PARTY STATUS OR IN PRIVITY WITH A PARTY IN THE PRIOR SUIT As a general rule, people are not bound by a judgment in a suit to which they were not parties. Id. Josephina does not contend that Jesus and Norma were parties to the prior divorce suit but rather that they were in privity with Juan and, therefore, are bound by the trial court's judgment in the prior suit. WHEN DOES PRIVITY APPLY? The Texas Supreme Court has said that people can be in privity in three ways: (1) by controlling the action even if they are not parties to it; (2) by having their interests represented by a party to the action; or (3) by acting as "successors in interest, deriving their claims through a party to the prior action." Id. at 653. PRIVITY DEFINED "Privity connotes those who are in law so connected with a party to a judgment as to have such an identity of interest that the party to the judgment represented the same legal right." Maxson v. Travis Co. Rent Account, 21 S.W.3d 311, 316 (Tex. App.--Austin 1999, pet. dism'd). SOURCE: 04-08-00394-CV (7/29/09) (San Antonio Court of Appeals)

Breach of Fiduciary Duty: The Damages Element

Establishing Breach of Fiduciary Duty

Generally, to recover for the breach of a fiduciary duty, a plaintiff must show: 1) the existence of a fiduciary duty, 2) a breach of the duty, 3) causation, and 4) damages. See Abetter Trucking Co. v. Arizpe, 113 S.W.3d 503, 508 (Tex. App.-Houston [1st Dist.] 2003, no pet.). When, however, the plaintiff seeks fee restitution or benefit disgorgement, he need not prove actual damages. Burrow v. Arce, 997 S.W.2d 229, 240 (Tex. 1999); Alavi v. MCI Worldcom Network Services, Inc., 2007 WL 274565, at *3 (Tex. App.-Beaumont, Feb. 1, 2007, pet. denied). Because Richard's claim for breach of fiduciary duty sought damages as his remedy, he was required to prove them. See Alavi, 2007 WL 274565, at *3; Lee v. Lee, 47 S.W.3d 767, 780-81 (Tex. App.-Houston [14th Dist.] 2001, pet. denied); Longaker v. Evans, 32 S.W.3d 725, 733 n.2 (Tex. App.-San Antonio 2000, pet. withdrawn).


Cynthia's no-evidence motion asserted there was no evidence that: 1) she owed a fiduciary duty to Richard, or 2) that damages resulted from the alleged breach. Richard's response contended that a DTA creates a fiduciary relationship by its "very nature," that such beneficiaries typically are unaware of delinquencies until foreclosure proceedings have begun, that beneficiaries often (as in his case) do not have adequate funds to bring the note current, and that the unavoidable foreclosure results in a "major hit" on the beneficiary's credit. Richard further argued that he did not have to prove damages to recover on his breach of fiduciary claim. On appeal, Richard maintains this Court should determine whether a DTA creates a fiduciary duty. We need not reach the issue concerning whether Cynthia owed Richard a duty. Even if we assumed that Cynthia owed Richard a fiduciary duty, which she disputes, Richard is required to have presented evidence raising a genuine fact issue on his damages. See Grant, 73 S.W.3d 215. Because Richard failed to present any evidence proving that he had been damaged, the trial court did not err in granting summary judgment to Cynthia on Richard's breach-of-fiduciary-duty claim. We overrule issue two. Having overruled both of Richard's issues, we affirm the trial court's judgment.

SOURCE: 07-08-08833 CV (7/16/09)

The Discovery Rule: When does it apply?


"The discovery rule has been applied in limited categories of cases to defer accrual of a cause of action until the plaintiff knew or, exercising reasonable diligence, should have known of the facts giving rise to a cause of action." HECI Exploration Co. v. Neel, 982 S.W.2d 881, 886 (Tex. 1998). The application of the discovery rule is generally limited to those cases where the nature of the injury is inherently undiscoverable and the evidence of the injury is objectively verifiable. Id. The applicability of the discovery rule is determined categorically, i.e., not based on whether the particular injury in the case at hand may not have been discovered but whether the injury is of a type that generally is discoverable by the exercise of reasonable diligence. Id.


A variation to the inherently undiscoverable element arises when applying the discovery rule to a fiduciary relationship. Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996); see also S.V. v. R.V. , 933 S.W.2d 1, 8 (Tex. 1996). In the fiduciary context, "a person to whom a fiduciary duty is owed is either unable to inquire into the fiduciary's actions or unaware of the need to do so." S V., 933 S.W.2d at 8. When a trustee breaches its duty to a beneficiary, the nature of the injury is considered inherently undiscoverable because of the fiduciary nature of the relationship. See id. However, the person owed a fiduciary relationship still must exercise reasonable diligence "when the fact of misconduct becomes [so] apparent it can no longer be ignored." (1) Id.; see also Computer Assocs. Int'l, 918 S.W.2d at 456; Slay v. Burnett Trust, 187 S.W.2d 377, 394 (Tex. 1945); G. Prop. Mgmt., Ltd. v. Multivest Fin. Servs. of Tex., Inc., 219 S.W.3d 37, 48-49 (Tex. App.--San Antonio 2006, no pet.).


Because Jones owed fiduciary responsibilities to Polk Mechanical, the inherently undiscoverable requirement for applying the discovery rule is satisfied. See S V., 933 S.W.2d at 8. Moreover, the injury in this case is objectively verifiable as it can be objectively established through bank records and cancelled checks. See HECI Exploration Co., 982 S.W.2d at 886. Accordingly, we hold the discovery rule applied to Polk Mechanical's claim against Jones, and Jones was required to conclusively negate its application to be entitled to summary judgment. See Pustejovsky, 35 S.W.3d at 646.


To conclusively negate the discovery rule, Jones was required to prove as a matter of law that there was no genuine issue of fact about when Polk Mechanical discovered or should have discovered the nature of the injury. See Potter, 137 S.W.3d at 704. Inquiries involving the discovery rule usually entail questions for the trier of fact because when a plaintiff knew or should have known of an injury is generally a fact question. Childs v. Haussecker, 974 S.W.2d 31, 44 (Tex. 1998); Cadle Co. v. Wilson, 136 S.W.3d 345, 352 (Tex. App.--Austin 2004, no pet.). However, if reasonable minds could not differ about the conclusion to be drawn from the facts in the record, the start of the limitations period may be determined as a matter of law. Childs, 974 S.W.2d at 44; Cadle Co., 136 S.W.3d at 352; Zacharie v. U.S. Nat. Resources, Inc., 94 S.W.3d 748, 753 (Tex. App.--San Antonio 2002, no pet.).

 SOURCE: 04-08-00509-CV (7/1/09) (San Antonio Court of Appeals)

Lawsuit involving a trust: Statute of Limitations and Accrual

Civil Actions involving Trusts: Statute of Limitations and the Discovery Rule

A suit involving a trust is governed by the four-year statute of limitations. Hicks v. Hoover, 422 S.W.2d 613, 614 (Tex. Civ. App.--Waco 1967, writ ref'd n.r.e.). The statute of limitations begins to run when the all assets have been distributed. See In re Estate of McGarr, 10 S.W.3d 373, 376 (Tex. App.--Corpus Christi 1999, pet. denied). The discovery rule, however, tolls the running of the statute of limitations until the plaintiff discovers or should have discovered the nature of the injury. Houston Endowment, Inc. v. Atlantic Richfield Co., 972 S.W.2d 156, 159 (Tex. App.--Houston [14th Dist.] 1998, no pet.). In order for the discovery rule to apply, the injury must be inherently undiscoverable and objectively verifiable. Id.


Wednesday, September 23, 2009

Successful Bill of Review entails retrial of claim(s) on which underlying judgment was based


“A bill of review is an independent equitable action brought by a party to a former action seeking to set aside a judgment, which is no longer appealable or subject to motion for new trial.” Baker v. Goldsmith, 582 S.W.2d 404, 406 (Tex. 1979). The judgment may be set aside “for sufficient cause.” Tex. R. Civ. P. 329b(f); Baker, 582 S.W.2d at 406. The complainant files a petition “to invoke the equitable powers of the court.” Baker, 582 S.W.2d at 408; In re K.M.S., 68 S.W.3d 61, 66 (Tex. App.—Dallas 2001), pet. denied, 91 S.W.3d 331 (Tex. 2002) (per curiam).


Generally, the bill of review complainant must prove “‘(1) a meritorious defense to the cause of action alleged to support the judgment, (2) which he was prevented from making by the fraud, accident or wrongful act of the opposite party, (3) unmixed with any fault or negligence of his own.’” Baker, 582 S.W.2d at 406–07 (quoting Alexander v. Hagedorn, 148 Tex. 565, 568–69, 226 S.W.2d 996, 998 (1950)).

If the complainant establishes prima facie proof of a meritorious defense, the court conducts a trial at which the merits of the underlying issue are effectively relitigated. Caldwell v. Barnes, 154 S.W.3d 93, 98 (Tex. 2004); Baker, 582 S.W.2d at 409. During the bill of review trial, “the parties . . . revert to their original status as plaintiff and defendant with the burden on the original plaintiff to prove his or her case.” Caldwell, 154 S.W.3d at 98; accord Baker, 582 S.W.2d at 407–08. The bill of review defendant—the original plaintiff—must prove, and may offer evidence to support, “his original cause of action.” Meece v. Moerbe, 631 S.W.2d 729, 729 (Tex. 1982) (citing Baker, 582 S.W.2d at 409). At the end of the proceeding, if the fact-finder decides the complainant (the original defendant) has proved his case to set aside the judgment, the trial court may vacate the prior judgment. See Baker, 582 S.W.2d at 409. And if the bill of review defendant (the plaintiff in the original proceeding) proves his original case, the trial court may “substitute a new judgment which properly adjudicates the entire controversy.” In re J.B.A., 127 S.W.3d 850, 851 (Tex. App.—Fort Worth 2004, no pet.); cf. Jordan v. Jordan, 907 S.W.2d 471, 472 (Tex. 1995) (per curiam) (citing Tesoro Petrol. v. Smith, 796 S.W.2d 705, 705 (Tex. 1990) (per curiam)).

SOURCE: 04-09-00040-CV (8/31/09) (San Antonio Court of Appeals)

EQUITABLE RELIEF: What is a Bill of Review in Texas Courts?

A Bill of Review is not exactly a substantive cause of action, but nevertheless a means by which a court may grant EQUITABLE RELIEF (setting aside a default judgment that is no longer appealable). The Bill of Review, and its elements, thus fit within the scope of this blawg. 

A bill of review is an independent equitable proceeding brought by a party to a former action who seeks to set aside a judgment that is no longer appealable or subject to a challenge by a motion for new trial. Caldwell v. Barnes, 154 S.W.3d 93, 96 (Tex. 2004) (per curiam).

To prevail, a bill of review plaintiff must prove: (1) a meritorious defense to the cause of action upon which the judgment is based, (2) which he or she was prevented from making by the fraud, accident, or wrongful act of the opposing party or official mistake, (3) unmixed with any fault or negligence on his or her own part. Caldwell, 154 S.W.3d at 96; Baker v. Goldsmith, 582 S.W.2d 404, 406-07 (Tex. 1979).
Additionally, bill of review relief is available only if a party has exercised due diligence in pursuing all adequate legal remedies. Wembley Inv. Co. v. Herrera, 11 S.W.3d 924, 927 (Tex. 1999). This due diligence requirement is distinct from the three bill of review elements and must be established before a complainant is entitled to seek bill of review relief. Narvaez, 127 S.W.3d at 321. “The inquiry traditionally used to determine whether a party has been diligent is whether the litigant and his counsel used such care as that which prudent and careful men would ordinarily use in their own cases of equal importance.” In the Interest of A.L.H.C., 49 S.W.3d 911, 916 (Tex. App.—Dallas 2001, pet. denied). 
SOURCE: 04-09-00198-CV (9/23/09) (San Antonio Court of Appeals) (trial court's order granting bill of review reversed because petitioner did not exercise available remedies, i.e., direct appeal).

Default on Installment Payment Plan: SoL and accrual of claim for breach of a contract that requires payments at regular intervals

A four-year statute of limitations applies to contract actions. Tex. Civ. Prac. & Rem. Code Ann. § 16.004 (Vernon 2002). A breach of contract claim accrues at the time of breach. Stine v. Stewart, 80 S.W.3d 586, 592 (Tex. 2002). When recovery is sought on an obligation payable in installments, the statute of limitations runs against each installment from the time it becomes due. Intermedics, Inc. v. Grady, 683 S.W.2d 842, 845 (Tex.App.-Houston [1st Dist.] 1984, writ ref'd n.r.e.). Thus, a suit for the breach of a contract requiring payment in periodic installments may include all payments due within the four-year statute of limitations period, even if the initial breach was beyond the limitations period. Recovery of any payment more than four years overdue is barred. Hollander v. Capon, 853 S.W.2d 723, 726-27 (Tex.App.-Houston [1st Dist.] 1993, writ denied).

RELATED TERMS: Retail Installment Contract, financing, closed-ended consumer loan requiring monthly payments in equal amounts, monthly payment-due dates, missing monthly loan repayment, payment schedule 

SOURCE: 05-08-00458-CV (9/18/09) (Dallas Court of Appeals)

Fraud Cause of Action under Texas Law


"The elements of fraud are a material misrepresentation, which was false, and which was either known to be false when made or was asserted without knowledge of the truth, which was intended to be acted upon, which was relied upon, and which caused injury." DeSantis v. Wackenhut Corp., 793 S.W.2d 670, 688 (Tex. 1990).
A promise to do an act in the future is actionable fraud when made with the intention, design and purpose of deceiving, and with no intention of performing the act. See Spoljaric v. Percival Tours, Inc., 708 S.W.2d 432, 434 (Tex. 1986).

SOURCE: 09-08-00296-CV (8/27/09)

The essential elements of his claim of fraud against the [defendants] were: (1) the [defendants] made a false representation to [plaintiff]; (2) the representation was material; (3) when the [defendants] made the representation, they knew the representation was false; (4) the [defendants] made the representation with the intent that [plaintiff] act on it; (5) [Plaintiff] relied on the representation; and (6) the representation caused [plaintiff] injury. Ernst & Young v. Pacific Mut. Life. Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001).

SOURCE: 07-08-0213-CV (9/11/09)

Proving a conversion claim in Texas (as to personal property)

HOW DO YOU ESTABLISH THE ELEMENTS OF TEXAS COMMON-LAW CONVERSION CLAIM? "To prove a claim for personal property-conversion, a plaintiff must show that: (1) the plaintiff owned or legally possessed the property or was entitled to its possession; (2) the defendant unlawfully and without authorization assumed and exercised dominion and control over the property to the exclusion of, or inconsistent with, the plaintiff's ownership rights; (3) the plaintiff demanded the property's return; and (4) the defendant refused to return it." Small v. Small, 216 S.W.3d 872, 877 (Tex. App.-Beaumont 2007, pet. denied). ). SOURCE: 09-08-00433-CV (8/27/09) (Beaumont Court of Appeals) RELATED CAUSE OF ACTION: STATUTORY CAUSES OF ACTION FOR CIVIL THEFT: TEXAS THEFT LIABILITY ACT

Monday, September 21, 2009

Illegal Contract Defense

ILLEGALITY AS AFFIRMATIVE DEFENSE TO BREACH-OF-CONTRACT CLAIM The validity of a contract is generally a question of law. Farah v. Mafrige & Kormanik, P.C., 927 S.W.2d 663, 678 (Tex. App.--Houston [1st Dist.] 1996, no writ). ILLEGAL CONTRACT DEFINED - VOID CONTRACTS An illegal contract is one in which the parties undertake what the law forbids. Franklin v. Jackson, 847 S.W.2d 306, 309 (Tex.App.--El Paso 1992, writ denied). A contract to do a thing which cannot be performed without a violation of the law is void. Id. Because the contract violates the law, it imposes no legal obligation on the parties. Miller v. Long-Bell Lumber Co., 148 Tex. 160, 222 S.W.2d 244, 246 (Tex. 1949); Franklin, 847 S.W.2d at 309. However, a contract which could have been performed in a legal manner will not be declared void simply because it may have been performed in an illegal manner. Franklin, 847 S.W.2d at 309, citing Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 148-49 (1947); Wade v. Jones, 526 S.W.2d 160, 162-63 (Tex.Civ.App.--Dallas 1975, no writ). PRESUMPTION OF LEGALITY - BURDEN OF PROOF TO SHOW ILLEGALITY The law presumes that contracts are legal, and the burden to prove illegality is on the party asserting it, in this case, Appellants. See Franklin, 847 S.W.2d at 310. Unless the face of the contract shows it is illegal, the party asserting illegality must present evidence demonstrating the illegality before a court may declare the contract void. See Lewis, 199 S.W.2d at 149; Franklin, 847 S.W.2d at 310. SOURCE: 08-07-00071-CV (7/29/09)

What is required to win a breach of contract case?

PROVING AND COLLECTING DAMAGES FOR BREACH OF CONTRACT To prevail on his breach of contract claim, [Plaintiff] was required to prove: (1) the existence of a valid contract; (2) performance or tendered performance by [Plaintiff]; (3) breach of contract by the [Defendants]; and (4) damages sustained as a result of the breach. Paragon General Contractors, Inc. v. Larco Const., Inc., 227 S.W.3d 876, 882 (Tex.App.–Dallas 2007, no pet.); Valero Marketing & Supply Co. v. Kalama Int’l, 51 S.W.3d 345, 351 (Tex.App.–Houston [14th Dist.] 2006, pet. denied). Conner’s response does not point to evidence of any of these elements. SOURCE: 07-08-0213-CV (9/11/09)

The Parol Evidence Rule: Not just a rule about admissibility of testimony, extraneous evidence

THE NATURE OF THE PAROL (NOT PAROLE) EVIDENCE RULE The parol evidence rule is a rule of substantive contract law, not evidence. Hubacek v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30, 31 (1958); DeClaire v. G & B McIntosh Family Limited Partnership, 260 S.W.3d 34, 45 (Tex.App.--Houston [1st Dist.] 2008, no pet. h.). STANDARD OF REVIEW ON APPEAL We review parol evidence questions de novo, as questions of law. DeClaire, 260 S.W.3d at 45. PAROL EVIDENCE AND INTERGRATION OR MERGER CLAUSE IN CONTRACT When the parties have concluded a valid, integrated agreement, the parol evidence rule precludes enforcement of a prior or contemporaneous inconsistent agreement. Edascio, L.L.C. v. NextiraOne L.L.C., 264 S.W.3d 786, 796 (Tex.App.--Houston [1st Dist.] 2008, pet. filed); ISG State Operations, Inc. v. National Heritage Insurance Company, 234 S.W.3d 711, 719 (Tex.App.--Eastland 2007, pet. denied). The execution of a written contract presumes that all prior negotiations and agreements relating to the transaction have been merged into the written contract. Edascio, 264 S.W.3d at 796; ISG State Operations, 234 S.W.3d at 719. Consequently, the agreement will be enforced as written and cannot be added to, varied, or contradicted by parol evidence. Edascio, 264 S.W.3d at 796; ISG State Operations, 234 S.W.3d at 719. The parol evidence rule is particularly applicable when the written contract contains a recital that it contains the entire agreement between the parties or a similarly-worded merger provision. Edascio, 264 S.W.3d at 796. Evidence that violates the rule is incompetent and without probative force, and cannot properly be given legal effect. Garner v. Fidelity Bank, N.A., 244 S.W.3d 855, 859 (Tex.App.--Dallas 2008, no pet.). Parol evidence may be admissible to show collateral, contemporaneous agreements that are consistent with the underlying agreement. Gary E. Patterson & Associates, P.C. v. Holub, 264 S.W.3d 180, 197 (Tex.App.--Houston [1st Dist.] 2008, pet. denied); DeClaire, 260 S.W.3d at 45. But this exception does not permit parol evidence that varies or contradicts either the express terms or the implied terms of the written agreement. Gary E. Patterson, 264 S.W.3d at 197; DeClaire, 260 S.W.3d at 45. A collateral agreement is one the parties might naturally make separately, i.e., one not ordinarily expected to be embodied in, or integrated with the written agreement and not so clearly connected with the principal transaction as to be part and parcel of it. Garner, 244 S.W.3d at 859. An agreement is integrated if the parties intended a writing to be a final and complete expression of agreed terms. Morgan Buildings and Spas, Inc. v. Humane Society of Southeast Texas, 249 S.W.3d 480, 486 (Tex.App.--Beaumont 2008, no pet.). The inclusion of a merger or integration clause does not conclusively establish that the written contract is fully integrated. Id. A fully integrated written agreement is a final and complete expression of all the terms agreed upon by the parties. Id. A partially integrated agreement is a final and complete expression of all the terms addressed in that written agreement, but is not a final and complete expression of all the terms the parties have agreed upon. Id. A court considers the surrounding circumstances in determining whether, and to what degree, an agreement is integrated. Id. SOURCE OF ALL SNIPPETS: 08-07-00071-CV (7/29/09)

Friday, September 18, 2009

The Discovery Rule as a limitations tolling tool for breach of fiduciary duty claim in Texas


The statute of limitations for a claim for breach of fiduciary duty is four years from the day the cause of action accrued. Tex. Civ. Prac. & Rem. Code Ann. § 16.004(a)(5) (Vernon 2002). The discovery rule defers the accrual of a cause of action until the plaintiff knows, or by exercising reasonable diligence, should know of the facts giving rise to the claim. Barker v. Eckman, 213 S.W.3d 306, 311-12 (Tex. 2006).
For the discovery rule to apply, the injury must be inherently undiscoverable and objectively verifiable. Id. at 312; Via Net v. TIG Ins. Co., 211 S.W.3d 310, 313 (Tex. 2006). Injuries that arise from a breach of fiduciary duty are generally considered inherently undiscoverable. S.V. v. R.V., 933 S.W.2d 1, 8 (Tex. 1996); Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 456 (Tex. 1996). However, once the fiduciary's misconduct becomes apparent, the claimant cannot ignore it, regardless of the fiduciary nature of the relationship. S.V., 933 S.W.2d at 8; see also Computer Assocs., 918 S.W.2d at 456.
SOURCE: 09-08-00398-CV (7/16/09) (Beaumont Court of Appeals)

Asserting Fraudulent Concealment to Counter Affirmative Defense of Limitations (SoL)

FRAUDULENT CONCEALMENT AS COUNTER-DEFENSE TO LIMITATIONS DEFENSE A defendant is entitled to summary judgment on the affirmative defense of limitations by conclusively proving all the elements of the defense as a matter of law. Pustejovsky v. Rapid-American Corp., 35 S.W.3d 643, 646 (Tex. 2000). This requires conclusively proving the date the cause of action accrued. See Rubio, 185 S.W.3d at 846. When a defendant conclusively establishes a limitations defense and the plaintiff resists summary judgment by asserting fraudulent concealment, the plaintiff has the burden to present evidence raising a fact issue with respect to its claim. Am. Petrofina, Inc. v. Allen, 887 S.W.2d 829, 830 (Tex. 1994). The elements of fraudulent concealment are 1) the existence of the underlying tort, 2) the defendant's knowledge of the tort, 3) the defendant's use of deception to conceal the tort, and 4) the plaintiff's reasonable reliance on the deception. Malone v. Sewell, 168 S.W.3d 243, 252 (Tex. App.-Fort Worth 2005, pet. denied). SOURCE: 09-08-00433-CV (8/27/09) (Beaumont Court of Appeals)

Thursday, September 17, 2009

Can a prevailing defendant recover attorney's fees in a breach-of-contract suit?

The trial court's decision to award attorney's fees and post-judgment interest is supported by the contract, which states:

If the services of an attorney are retained and/or if any action at law or in equity is brought to enforce or interpret the provisions of this Agreement or to collect any monies due hereunder, the prevailing party shall be entitled to reasonable attorney's fees together with interest thereon at the highest rate provided by law in addition to any other relief to which he may be entitled at law or in equity.


A "prevailing party" is a party who successfully prosecutes the action or successfully defends against it, prevailing on the main issue, even if not to the extent of its original contention. See Flagship Hotel, Ltd. v. City of Galveston, 117 S.W.3d 552, 564 (Tex. App.--Texarkana 2003, pet. denied); Dear v. City of Irving, 902 S.W.2d 731, 739 (Tex. App.--Austin 1995, writ denied).
Because ADC successfully defended against Hertzberg's suit by obtaining summary judgment on his claims, ADC is the prevailing party. See Robbins v. Capozzi, 100 S.W.3d 18, 27 (Tex. App.--Tyler 2002, no pet.). Thus, [Defendant] is entitled to "reasonable attorney's fees together with interest thereon" as provided by the contract. Accordingly, the trial court's decision to grant [Defendant's] requests for attorney's fees and post-judgment interest was not an abuse of discretion.


Reasonable Attorney's Fees in Texas State Court: The Arthur Andersen Factors (not Anderson) per 1997 Texas Supreme Court Opinion


Regarding the amount of attorney's fees the trial court awarded, there are several factors a fact finder should consider in determining the reasonableness of a fee. (2) Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997). The factors include:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997).


We review a trial court's decision to either grant or deny attorney's fees under an abuse-of-discretion standard, and we review the amount of attorney's fees awarded under a legal-sufficiency standard. See Ridge Oil Co., Inc. v. Guinn Invs., Inc., 148 S.W.3d 143, 163 (Tex. 2004); Aaron Rents, Inc. v. Travis Cent. Appraisal Dist., 212 S.W.3d 665, 671 (Tex. App.--Austin 2006, no pet.).
A trial court abuses its discretion if it acts without reference to any guiding rules and principles. Downer v. Aquamarine Operators, Inc., 701 S.W.2d 238, 241-42 (Tex. 1985). To determine whether a trial court abused its discretion, we must determine whether the trial court's action was arbitrary or unreasonable. Id. at 242.

Because we review the amount of attorney's fees awarded under a legal-sufficiency review, we must view the evidence in a light that tends to support the disputed finding and disregard evidence and inferences to the contrary. Wal-Mart Stores, Inc. v. Canchola, 121 S.W.3d 735, 739 (Tex. 2003). If more than a scintilla of evidence supports the challenged finding, the legal-sufficiency challenge must fail. Id.

SOURCE: AUSTIN COURT OF APPEALS - 03-07-00072-CV - 9/11/09 


945 S.W.2d 812 (1997)

ARTHUR ANDERSEN & CO., Petitioner,

No. 95-0444.
Supreme Court of Texas.

Argued March 19, 1997.
Decided May 16, 1997.
813*813 Ben Taylor, Dallas, Thomas C. Godbold, Houston, for Petitioner.

Christopher B. Allen, Michael P. Cash, James W. Paulsen, Houston, for Respondent.

CORNYN, Justice.

We withdraw our opinion of January 10, 1997, and substitute the following in its place. The parties' motions for rehearing are overruled.

814*814 In this accounting malpractice case, Perry Equipment Corporation (PECO) sued the accounting firm of Arthur Andersen for a faulty audit, which PECO relied on to purchase another company, Maloney Pipeline Systems. The audit favorably reported Maloney's financial condition when, in fact, the company was suffering substantial losses. Fourteen months after the sale, Maloney filed for bankruptcy. PECO sued for violations of the Deceptive Trade Practice Act, fraud, negligence, negligent misrepresentation, gross negligence, and breach of implied warranty. Based on the jury's verdict, the trial court rendered judgment for PECO. The court of appeals affirmed. 898 S.W.2d 914.

We address three issues presented by Arthur Anderson's application for writ of error. First, Arthur Andersen challenges PECO's consumer status because Maloney, rather than PECO, actually paid for the audit. Second, Arthur Andersen claims that the trial court failed to instruct the jury on the correct measure of damages. Third, Arthur Andersen contests the attorney's fees award, arguing that the percentage of recovery method is not a proper measure of attorney's fees under the DTPA, and that even if such fees were recoverable, no evidence supports the award. For the reasons discussed below, we reverse the judgment of the court of appeals and remand this case to the trial court for further proceedings.


When PECO, a successful manufacturer of oil filters used in compressors for gas pipelines, decided to expand its business into the gas metering field, it looked into acquiring Maloney Pipeline Systems, one of three United States companies in the liquid metering market. In the mid-1980s, PECO began negotiating with Maloney's owner, Ramteck II. As a condition of the sale, PECO required an audit of Maloney's financial statements. Maloney retained Arthur Andersen to conduct the audit. Maloney eventually provided PECO financial statements audited by Arthur Andersen. The statements showed Maloney to be a profitable business. Relying upon this information, on August 23, 1985, PECO purchased the Maloney stock from Ramteck II, Inc. for $4,088,237.

Soon after the purchase, Maloney began to show signs of serious financial decline. For example, three months after the sale, Maloney ran out of cash and required a $400,000 advance from PECO to continue operating. PECO also attempted other emergency financial measures, but to no avail. Fourteen months after the sale, Maloney filed bankruptcy. PECO presented uncontradicted evidence at trial that the purchase price for Maloney was a total loss from which PECO realized no return and which PECO wrote off.

PECO's experts testified that Arthur Andersen's audit contained serious errors and otherwise failed to follow acceptable auditing procedures. One of the most significant errors, the evidence showed, was the failure to verify that contracts Maloney reported as complete were in fact complete or that Maloney's estimates of costs and percentage of completion for ongoing contracts were accurate. Maloney later incurred substantial losses on these contracts. One expert testified that the audit was one of the worst he had ever seen. Another expert, an auditing professor, stated that if a student submitted the work, he would have given the student a failing grade.

The jury found Arthur Andersen 51 percent at fault and PECO 49 percent at fault. The jury also found that Arthur Andersen had committed fraud, DTPA violations, and breach of warranty, but that it was not liable for negligent misrepresentation or gross negligence. The jury assessed damages of $5,449,468, including the $4,088,237 PECO paid for Maloney and $1,361,231 for other expenses incurred by PECO in its attempt to salvage the company. PECO elected to recover under the DTPA. The trial court credited Arthur Andersen with the two million dollars that Ramteck II had already paid PECO in settlement, and then awarded PECO a total of $9,297,601.20, including damages, prejudgment interest, DTPA additional damages, attorney's fees, and costs.

815*815 II

Arthur Andersen first contends that PECO is not a "consumer," a prerequisite to recovery under the DTPA. The DTPA defines a consumer as one "who seeks or acquires by purchase or lease, any goods or services." TEX. BUS. & COM.CODE § 17.45(4). In determining whether a plaintiff is a consumer, our focus is on the plaintiff's relationship to the transaction. Amstadt v. United States Brass Corp., 919 S.W.2d 644, 650 (Tex. 1996). As a condition of sale, PECO insisted that Maloney provide audited financial statements. Maloney hired Arthur Andersen for this specific purpose. PECO then relied on those statements in reaching its decision to purchase Maloney. Under these circumstances, we hold that PECO sought and acquired Arthur Andersen's services.

The next question is whether PECO sought and acquired these services by purchase or lease, inasmuch as it did not pay for the audit. Our decision in Kennedy v. Sale, 689 S.W.2d 890 (Tex.1985), controls this issue. There, we held that the DTPA does not require the consumer to be an actual purchaser or lessor of the goods or services, as long as the consumer is the beneficiary of those goods or services. Id.

The Texas Society of Certified Public Accountants, as amicus curiae, argues that a stock purchaser should not be considered a consumer simply because the corporation paid for an audit for the purchaser's benefit because virtually every external audit benefits third parties. Thus, any stock purchaser who reviews audited financial statements could bring a DTPA claim against the auditor.[1] Our holding is not so broad. In this case, the audit was rendered in connection with the sale of Maloney and was specifically required by PECO and intended to benefit PECO. Arthur Andersen was aware that PECO had required the audit and would rely on its accuracy and knew the specific purpose for which it was conducted. We accordingly hold that PECO is a consumer under the DTPA.

Arthur Andersen also urges us to reject PECO's consumer status based on the decision in Hand v. Dean Witter Reynolds Inc., 889 S.W.2d 483 (Tex.App.—Houston [14th Dist.] 1994, writ denied). In Hand, the plaintiff alleged that her stock broker failed to purchase certain commodity option contracts after she requested that he do so. Id. at 487-88. After deciding that a commodity option contract is a right, not a "good," under the DTPA, id. at 498, the court next considered whether the plaintiff was a consumer by virtue of her purchase of "services." The DTPA defines services as including "services furnished in connection with the sale or repair of goods." TEX. BUS. & COM.CODE § 17.45(2). The court reasoned that the omission of any reference in the definition to services in connection with the sale of something other than a good indicated that services furnished in connection with the sale of intangibles did not fall within the definition of services under the DTPA. Hand, 889 S.W.2d at 498. The court then concluded: "The key to the [consumer status] determination is whether the purchased goods or services are an objective of the transaction or merely incidental to it." Id. at 500.

We believe that Hand confirms, rather than defeats, PECO's consumer status. Arthur Andersen's audit was not merely incidental to the sale of Maloney to PECO; it was required by PECO and was central to PECO's decision to consummate the purchase. Determining Maloney's financial condition was PECO's primary objective in acquiring Arthur Andersen's services. We therefore reject Arthur Andersen's contention that Hand defeats PECO's status as a consumer under the DTPA.


Arthur Andersen next complains that the jury charge allowed the jury to award PECO the entire purchase price of Maloney, without instructing the jury to subtract the value of Maloney stock at the time of the sale.[2] Arthur 816*816 Andersen also contends that even if the court had properly instructed the jury, PECO failed to introduce any evidence that the stock was valueless at the time of sale, and thus failed to establish that it was entitled to the entire purchase price under either the "benefit-of-the-bargain" or the "out-of-pocket" measure of damages. PECO responds that in addition to direct damages, consequential damages are also recoverable under the DTPA. PECO thus argues that it is entitled to recover the purchase price as consequential damages.

Under the version of the DTPA in effect at the time PECO brought this action, a consumer could recover "the amount of actual damages" caused by the defendant's false, misleading, or deceptive conduct. Tex. BUS. & COM.CODE § 17.50(b)(1).[3] The amount of actual damages recoverable is "the total loss sustained as a result of the deceptive trade practice." Kish v. Van Note, 692 S.W.2d 463, 466 (Tex.1985)(citing Smith v. Baldwin, 611 S.W.2d 611, 617 (Tex.1980)).

Actual damages are those damages recoverable under common law. Brown v. American Transfer & Storage Co., 601 S.W.2d 931, 939 (Tex.), cert. denied, 449 U.S. 1015, 101 S.Ct. 575, 66 L.Ed.2d 474 (1980). At common law, actual damages are either "direct" or "consequential." Henry S. Miller Co. v. Bynum, 836 S.W.2d 160, 163 (Tex. 1992) (Phillips, C.J., concurring); see RESTATEMENT (SECOND) OF TORTS § 549 (1977) (outlining measure of damages for fraudulent misrepresentation). Direct damages are the necessary and usual result of the defendant's wrongful act; they flow naturally and necessarily from the wrong. See Southwind Aviation, Inc. v. Avendano, 776 S.W.2d 734, 736 (Tex.App.—Corpus Christi 1989, writ denied); Anderson Dev. Corp. v. Coastal States Crude Gathering Co., 543 S.W.2d 402, 405 (Tex.Civ.App.—Houston [14th Dist.] 1976, writ ref'd n.r.e.). Direct damages compensate the plaintiff for the loss that is conclusively presumed to have been foreseen by the defendant from his wrongful act. See Bynum, 836 S.W.2d at 163 (Phillips, C.J., concurring); Coastal States, 543 S.W.2d at 405; Anderson, Incidental and Consequential Damages, 7 J.L. & Com. 327, 328 (1987).

Consequential damages, on the other hand, result naturally, but not necessarily, from the defendant's wrongful acts. Haynes & Boone v. Bowser Bouldin, Ltd., 896 S.W.2d 179, 182 (Tex.1995); Moore v. Anderson, 30 Tex. 224, 230 (1867). Under the common law, consequential damages need not be the usual result of the wrong, but must be foreseeable, see Mead v. Johnson Group, Inc., 615 S.W.2d 685, 687 (Tex.1981), and must be directly traceable to the wrongful act and result from it. Airborne Freight Corp., Inc. v. C.R. Lee Enters., Inc., 847 S.W.2d 289, 295 (Tex.App.—El Paso 1992, writ denied); El Paso Dev. Co. v. Ravel, 339 S.W.2d 360, 363 (Tex.Civ.App.—El Paso 1960, writ ref'd n.r.e.). Of course, foreseeability is not an element of producing cause under the DTPA. See Haynes & Boone, 896 S.W.2d at 182; Prudential Ins. v. Jefferson Assocs., 896 S.W.2d 156, 161 (Tex.1995). Still, if damages are too remote, too uncertain, or purely conjectural, they cannot be recovered. See White v. Southwestern Bell Tel. Co., Inc., 651 S.W.2d 260, 262 (Tex.1983); see also Bynum, 836 S.W.2d at 164 (Phillips, C.J., concurring).

817*817 Under Texas common law, direct damages for misrepresentation are measured in two ways. W.O. Bankston Nissan, Inc. v. Walters, 754 S.W.2d 127, 128 (Tex.1988); Leyendecker & Assocs., Inc. v. Wechter, 683 S.W.2d 369, 373 (Tex.1984). Out-of-pocket damages measure the difference between the value the buyer has paid and the value of what he has received; benefit-of-the-bargain damages measure the difference between the value as represented and the value received. Leyendecker, 683 S.W.2d at 373. Under the DTPA, a plaintiff may recover under the damage theory that provides the greater recovery. Id. Both measures of damages are determined at the time of sale. See id. at 373 (out-of-pocket damages are measured at the time of sale); see also Bullion, An Understanding of Damages Recoverable Under the DTPA, 20 ST. MARY'S L.J. 667, 670-72 (1989).

In this case, the jury was not asked to find direct damages at the time of the sale as well as consequential damages attributable to Arthur Anderson's misrepresentations. Rather, the jury was simply asked to consider the purchase price as part of the overall damages. PECO did present evidence that the purchase price was eventually a total loss. There was also evidence that Maloney was losing money at the time of the sale and continued to do so until it declared bankruptcy. What PECO did not establish, however, was how much of its loss occurred at the time of the sale and how much was attributable to subsequent events for which Arthur Anderson should bear legal responsibility. If subsequent losses were caused by Arthur Andersen's wrongful conduct and were not simply part of the risk a buyer of the business would have assumed, they may be part of PECO's consequential damages.

Subsequent losses, however, are recoverable only if the misrepresentation is a producing cause of the loss. See Haynes & Boone, 896 S.W.2d at 182. Without this limitation, an investor could shift the entire risk of an investment to a defendant who made a misrepresentation, even if the loss were unrelated to the misrepresentation. The basis of a misrepresentation claim is that the defendant's false statement induced the plaintiff to assume a risk he would not have taken had the truth been known. But to allow the plaintiff to transfer the entire risk of loss associated with his investment, even risks that the plaintiff accepted knowingly or losses that occurred through no fault of the defendant, would unfairly transform the defendant into an insurer of the plaintiff's entire investment.

Because the charge failed to instruct the jury on the proper measure of direct damages, the submission was reversible error. But, because we find some evidence that Arthur Andersen's misrepresentation was a producing cause of PECO's loss, we remand this case for a new trial. See Spencer v. Eagle Star Ins. Co., 876 S.W.2d 154, 157 (Tex.1994) (holding that remand is proper when defective liability question is submitted); Jackson v. Fontaine's Clinics, Inc., 499 S.W.2d 87, 90 (Tex.1973) (remanding for new trial when defective damages question submitted); Moulton v. Alamo Ambulance Serv., Inc., 414 S.W.2d 444, 449-50 (Tex.1967) (affirming remand for new trial when defective damages question submitted).

We emphasize that a plaintiff's recovery of damages is limited not only by his own evidence, but also by the defendant's evidence of the plaintiff's failure to reasonably mitigate losses or evidence of intervening causes. See Dubow v. Dragon, 746 S.W.2d 857, 860 (Tex.App.—Dallas 1988, no writ); EDGAR & SALES, TEXAS TORTS & REMEDIES § 43.04[1][b]; Tschoepe et al., Aspects of Defending A Texas Deceptive Trade Practices-Consumer Protection Act Claim, 20 St. Mary's L.J. 527, 561 (1989). If a plaintiff's losses are attributable to his own mistakes or factors outside either of the parties' control, the defendant may be entitled to an appropriate limiting instruction to the jury.


Because we are remanding this case for a new trial, we turn now to Arthur Andersen's complaint that the trial court improperly awarded PECO attorney's fees calculated as a percentage of recovery.[4]

818*818 Attorney contingency fee contracts serve two main purposes. First, they allow plaintiffs who cannot afford to pay a lawyer up-front to pay the lawyer out of any recovery. See See, An Alternative to the Contingent Fee, 1984 UTAH L.REV. 485, 490 n. 14. Second, such contracts, because they offer the potential of a greater fee than might be earned under an hourly billing method, compensate the attorney for the risk that the attorney will receive no fee whatsoever if the case is lost. Id. The lawyer in effect lends the value of his services, which is secured by a share in the client's potential recovery. POSNER, ECONOMIC ANALYSIS OF LAW § 21.9 (4th ed.1992). Under some contingency fee contracts, the attorney also agrees to advance the out-of-pocket costs of the litigation. In such cases, the attorney not only risks loss of the fee, but also risks loss of actual expenditures.

Arthur Andersen complains that an award of contingency fees under a fee-shifting statute like the DTPA forces defendants to pay fees unrelated to the amount of work performed. While this is not always true, shifting these fees to the defendant presents two problems.

First, a contingent fee award based solely on evidence of a percentage fee agreement between a lawyer and client may be determined without regard to many of the factors that should be considered when determining reasonableness. The DTPA allows recovery of "reasonable and necessary attorneys' fees." TEX. BUS. & COM.CODE § 17.50(d). Factors that a factfinder should consider when determining the reasonableness of a fee include:

(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly;
(2) the likelihood ... that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
TEX. DISCIPLINARY R. PROF. CONDUCT 1.04, reprinted in TEX. GOV'T CODE, tit. 2, subtit. G app. (STATE BAR RULES, art. X, § 9); see also Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 881 (Tex.1990); cf. General Motors Corp. v. Bloyed, 916 S.W.2d 949, 960-961 (Tex.1996) (discussing the relative strengths and weaknesses of the contingent fee and lodestar methods of awarding attorneys fees in the context of a court-approved class action settlement). While we do not doubt that many plaintiffs must contract for a contingent fee to secure the services of a lawyer, we do not believe that the DTPA authorizes the shifting of the plaintiff's entire contingent fee to the defendant without consideration of the factors required by the Rules of Professional Conduct. A contingent fee may indeed be a reasonable fee from the standpoint of the parties to the contract. But, we cannot agree that the mere fact that a party and a lawyer have agreed to a contingent fee means that the fee arrangement is in and of itself reasonable for purposes of shifting that fee to the defendant.

A party's contingent fee agreement should be considered by the factfinder, see Tex. Disciplinary R. Prof. Conduct 1.04(b)(8), and is therefore admissible in evidence, but that agreement cannot alone support an award of attorney's fees under Texas Business and Commerce Code section 17.50(d). See Brister, Proof of Attorney's Fees in Texas, 24 St. Mary's L.J. 313, 324 (1993). In other words, the plaintiff cannot simply ask the jury to award a percentage of 819*819 the recovery as a fee because without evidence of the factors identified in Disciplinary Rule 1.04, the jury has no meaningful way to determine if the fees were in fact reasonable and necessary.

Second, because the jury is not informed what the total amount of the judgment will be, the jury can only speculate about whether a percentage of that unknown recovery will represent a reasonable and necessary fee in that particular case. Rather than leave this question to speculation, the jury must decide the question of attorney's fees specifically in light of the work performed in the very case for which the fee is sought.

In light of these concerns, we hold that to recover attorney's fees under the DTPA, the plaintiff must prove that the amount of fees was both reasonably incurred and necessary to the prosecution of the case at bar, and must ask the jury to award the fees in a specific dollar amount, not as a percentage of the judgment.

For the foregoing reasons, we reverse the judgment of the court of appeals and remand this cause to the trial court for further proceedings consistent with this opinion.

[1] After PECO brought this action, the Legislature amended the DTPA to preclude consumers from suing under the DTPA for professional negligence or for claims arising from transactions involving consideration of more than $500,000. TEX. BUS. & COM.CODE § 17.49(c) & (g).

[2] The charge asked the jury:

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate PECO for its losses which resulted from such conduct?

Do not increase or reduce the amount in one answer because of your answer to any other question about damages.



Consider the elements of damages listed below and none other. Consider each element separately. Do not include damages for one element in any other element. Do not include interest on any amount of damages you find.


a. Purchase price of MPSI [Maloney] _____________

b. Costs and expenses incurred by PECO as a result of its purchase and ownership of MPSI [listing 13 categories of costs and expenses]

[3] In 1995, the Legislature amended § 17.50(b)(1) to permit recovery of "economic damages" and, if the defendant acted knowingly, "damages for mental anguish," instead of "actual damages." Act of May 17, 1995, 74th Leg., R.S., ch. 414, 1995 Tex.Gen. Laws 2992.

[4] The jury charge requested the jury to calculate attorney's fees three ways: in dollars and cents, as a percentage of PECO's recovery, and as a combination of dollars and cents and percentage of recovery.