O.C.T.G., L.L.P and Sojourn Partners, L.L.C. v. Laguna Tubular Products Corporation and LTP Real Estate, LLC ( 2018 )

Affirmed in Part, Reversed and Remanded in Part, and Majority and
Dissenting Opinions filed May 31, 2018.
In The
Fourteenth Court of Appeals
NO. 14-16-00210-CV
O.C.T.G., L.L.P. AND SOJOURN PARTNERS, L.L.C., Appellants
V.
LAGUNA TUBULAR PRODUCTS CORPORATION AND LTP REAL
ESTATE, L.L.C., Appellees
On Appeal from the 190th District Court
Harris County, Texas
Trial Court Cause No. 2013-44749
MAJORITY OPINION
In this contract case involving a variety of claims and counterclaims between
two affiliated companies as plaintiffs/counterdefendants and two affiliated
companies as defendants/counterplaintiffs, we conclude that the evidence is legally
insufficient to support the total amount of damages found by the jury as to breach-
of-contract and breach-of-warranty claims by one plaintiff against one defendant.
We also conclude that the trial court’s award of actual damages to the other plaintiff
on its breach-of-contract claim against the other defendant was legally sufficient.
We affirm in part and reverse and remand in part.
I. FACTUAL AND PROCEDURAL BACKGROUND
Oil country tubular goods are metal pipes used by the oil and gas industry
“downhole.” Laguna Tubular Products Corporation provided heat-treatment and
hydro-testing services of tubular goods at its facility in Houston. These services are
sometimes called “processing.” O.C.T.G., L.L.P. provided services involving
threading and inspecting pipe—sometimes called “finishing.”
A. The Purchase Agreement and the Easement Agreement
Under the Purchase and Sale Agreement, Sojourn Partners, L.L.C., an
affiliated company of OCTG, sold 26.48 acres of land to LTP Real Estate, L.L.C.,
an affiliated company of Laguna. Sojourn agreed to construct a rainwater retention
pond on its remaining land for LTP’s use, and LTP agreed to help pay for the
construction. Under the Access Easement and Lease Agreement, LTP granted
Sojourn an exclusive easement and right to use part of a building known as the
Threading Area located on the land Sojourn had sold.
B. The Finishing Agreement
Laguna built and operated its finishing business on the land LTP bought from
Sojourn. Laguna and OCTG entered into a Tubular Finishing Services Agreement.
Under the Finishing Agreement, OCTG promised to provide finishing services,
including but not limited to threading, full-length ultrasonic testing, and
electromagnetic testing.
Under the Finishing Agreement, OCTG warranted that all of OCTG’s services
would conform to applicable American Petroleum Institute standards and that when
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there is no specific API standard, OCTG’s services would meet or exceed applicable
industry quality standards.
With exceptions not applicable to this case, the Finishing Agreement provides
that “[OCTG] shall be in default if [it] fails to perform any of its duties or covenants
hereunder, unless properly cured as set forth in Section 22.3.” The non-defaulting
party must give written notice of the acts, omissions, or failures constituting a default
and provide the non-performing party with thirty days in which to cure the default.
C. The Cimarex Complaint
Cimarex, an end-user of Laguna’s product, discovered numerous defects in
Laguna-processed pipe joints. According to Laguna, it learned that OCTG was not
using Level 2 inspectors, as required by API standards. In early 2013, a potential
customer wanted to assess OCTG’s methods for finishing and inspecting a Laguna
product that the customer planned to buy. The customer audited OCTG in the
presence of Laguna’s quality manager, Jose Luis Diaz. OCTG did not pass the audit.
Diaz concluded that OCTG’s inspection did not satisfy API standards. Laguna hired
a third-party inspector to do a reinspection, and on August 1, 2013, Laguna sent
OCTG notice of termination of the Finishing Agreement.
D. Filing of suit by Laguna and LTP
Laguna and LTP sued OCTG and Sojourn, seeking money damages and
removal of OCTG equipment from the Threading Area. The trial court granted
Laguna and LTP a temporary injunction requiring OCTG to remove its threading
machine from the Threading Area and enjoining it from conducting threading
services in that area. OCTG and Sojourn filed an interlocutory appeal, and this court
affirmed the temporary injunction. See O.C.T.G., L.L.P. v. Laguna Tubular Prods.,
Corp., No. 14-13-00981-CV, 2014 WL 3512863, at *2-5 (Tex. App.—Houston
3
[14th Dist.] Jul. 15, 2014, no pet.) (mem. op.).
E. Summary Judgment and Trial
The trial court granted partial summary judgment dismissing most of the
counterclaims. The remaining claims, which included Laguna’s claims, LTP’s
breach-of-contract claim, OCTG’s counterclaim for breach of contract, and LTP’s
claim for trespass to real property against OCTG, proceeded to a jury trial.
At the close of evidence, the trial court granted a directed verdict on several
claims. The jury then rendered a verdict finding, as relevant:
 OCTG failed to comply with the Finishing Agreement by failing
to provide inspection services in compliance with the API
Standards.
 OCTG’s failure to comply with an express warranty was the
proximate cause of damage to Laguna.
 The value of LTP’s land on which a rainwater detention area was
to be built (because Sojourn had not built the promised pond) is
$150,000.
 The sum of $1,562,127 would fairly and reasonably compensate
Laguna for its damages that resulted from OCTG’s failure to
comply with the Finishing Agreement.
 The sum of $1,562,127 would fairly and reasonably compensate
Laguna for its damages that resulted from OCTG’s breach of
warranty.
The parties agreed to try the attorney’s fees issues to the bench. The trial court
found that reasonable and necessary fees for Laguna’s contract claims against OCTG
and for LTP’s contract claim against Sojourn were $1,476,235.06 for prosecution of
the case in the trial court.
The trial court denied various post-verdict motions and rendered judgment on
the jury’s verdict awarding (1) Laguna recovery against OCTG in the amount of
4
$1,562,127 in actual damages, plus prejudgment interest, postjudgment interest, and
court costs, (2) LTP recovery against Sojourn for actual damages, plus prejudgment
interest, postjudgment interest, and court costs, and (3) Laguna and LTP recovery
against OCTG and Sojourn jointly and severally in the amount of $1,476,235.06 for
reasonable and necessary attorney’s fees in the trial court and other conditional
awards of appellate attorney’s fees in favor of Laguna and LTP and against OCTG
and Sojourn. The trial court also permanently enjoined OCTG and Sojourn from
reinstalling a threading machine in Laguna’s Threading Area and from conducting
threading services in that area. The trial court denied OCTG and Sojourn’s motion
for new trial.
II. SUFFICIENCY CHALLENGES
In their first issue, OCTG and Sojourn assert various sufficiency challenges
to the jury’s findings. When reviewing the legal sufficiency of the evidence, we
consider the evidence in the light most favorable to the challenged finding and
indulge every reasonable inference that would support it. City of Keller v. Wilson,
168 S.W.3d 802, 822 (Tex. 2005). We must credit favorable evidence if a reasonable
factfinder could and disregard contrary evidence unless a reasonable factfinder could
not. See id. at 827. We must determine whether the evidence at trial would enable
reasonable and fair-minded people to find the facts at issue. See id. The factfinder
is the only judge of witness credibility and the weight to give to testimony. See id.
at 819.
A. Breach
OCTG asserts that the trial evidence is legally and factually insufficient to
support the jury’s liability findings against OCTG on breach of the Finishing
Agreement and breach of express warranty. OCTG asserts that the only trial
evidence on these topics was conclusory testimony. Specifically, OCTG asserts that
5
the testimony of Eddie Anaya (Laguna’s CEO) and Jose Luis Diaz (Laguna’s quality
manager) was conclusory and therefore is not evidence that OCTG failed to comply
with the terms of the Finishing Agreement. The Finishing Agreement required
OCTG’s inspections to meet API standards, procedures, requirements, and
specifications.
Under the Finishing Agreement, OCTG was required to provide many types
of inspections. Diaz testified that one way OCTG inspected pipes was by processing
them through an electromagnetic-induction-inspection machine. If the machine
notices a suspected defect in the piping, the machine separates the pipe, and a “prove
up inspector” or “prove up operator” evaluates whether the pipe is in compliance or
out of compliance with the specification requirements.
Trial evidence showed that OCTG’s electromagnetic-induction-inspection
machine could not pass inspection. Diaz explained that for the inspection process to
work, the machine repeatedly must find defects that are a certain size. Diaz testified
that the machine was unable to detect notches consistently, which is a violation of
API specifications. According to Diaz, this created the risk that end users would
receive defective pieces of pipe that would not comply with API standards.
Diaz explained that in addition to not having a working electromagnetic-
induction-inspection machine, OCTG did not meet API requirements for inspecting
separated pipe and that the API specifies that an individual inspecting the pipe
separated by the machine must be certified as a Level 1, 2, or 3 inspector. The API
requires inspection companies to keep documentation of certification on hand. Diaz
testified that he was present when one of Laguna’s potential customers, Vallourec,
audited OCTG. Despite being given multiple opportunities, OCTG never was able
to produce certification of its prove-up inspectors or prove-up operators.
6
OCTG asserts that the evidence that OCTG failed the audits is not any
evidence that OCTG breached the Finishing Agreement because there is no evidence
that the issues present during the audits were present when OCTG was performing
work for Laguna. We disagree, as the evidence on this point went beyond the audits.
Diaz testified that he received an email from an end-user—Cimarex—stating
that Cimarex reviewed piping it received from Laguna and found a defective joint.
Diaz testified that Laguna sent a representative to look at the joint and that the
Laguna employee confirmed that the defective joint had been inspected and threaded
by OCTG. Diaz testified that OCTG should have inspected and rejected the piece
of pipe because it did not meet API specifications. The joint contained marks of
grinding, which is permissible under API specifications. But Diaz explained that
under the API specifications, if an operator grinds down the pipe, the pipe wall still
must be a certain thickness to prevent “blowup.” The joint sent to Cimarex had three
markings ground down to a thickness below the API minimum requirement. Laguna
confronted OCTG about this issue in an email. OCTG responded by explaining that
it could not pinpoint the root cause of the issue, but that OCTG experienced
significant turnover in its inspection department in August and September 2012.
Diaz testified that after receiving OCTG’s response, Laguna hired a company, JPF,
to reinspect all of the material sitting in Laguna’s yard. Diaz observed the
reinspection, which had a 3.6 percent rate of rejection for joints that OCTG had
approved, totaling 1,169 joints.
OCTG asserts Laguna did not present any evidence that OCTG used the
electromagnetic-induction-inspection machine after the audit showed the machine
was failing, but the evidence, taken as a whole, shows that OCTG was not meeting
API standards and that products inspected by OCTG did not meet those standards.
We conclude the evidence is legally sufficient to support the jury’s breach findings
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in favor of Laguna.1 See id. at 823; see also Nip v. Checkpoint Sys., Inc., 154 S.W.3d
767, 769–70 (Tex. App.—Houston [14th Dist.] 2004, no pet.).
B. Causation
OCTG next asserts that the trial evidence is legally and factually insufficient
to support the jury’s findings that Laguna’s damages were caused by OCTG’s failure
to comply with the Finishing Agreement and OCTG’s breach of warranty. OCTG
argues that the evidence does not support these causation findings for the same
reasons OCTG and Sojourn asserted the evidence does not support the jury’s breach
findings, an argument that we reject above.
C. Limitation of liability provision
OCTG and Sojourn assert this court must set aside the damages found by the
jury in response to damage questions for Laguna’s breach-of-contract and breach-
of-warranty claims because, in the Finishing Agreement, the parties agreed that
OCTG would not be liable for damages resulting from its breach of the Finishing
Agreement. Instead, OCTG’s sole obligation would “be to furnish substitute
equivalent Services on substitute goods or, at [OCTG’s] election, to repay or credit
[Laguna] an amount equal to the price of the Services.”
Texas Rule of Civil Procedure 94 requires an affirmative pleading of certain
specified defenses and of “any other matter constituting avoidance or affirmative
defense.” Tex. R. Civ. P. 94. A contractual limitation-of-liability provision
constitutes an avoidance or affirmative defense that a party must plead affirmatively.
See id.; see also Tacon Mech. Contractors, Inc. v. Grant Sheet Metal, Inc., 889
S.W.2d 666, 671 (Tex. App.—Houston [14th Dist.] 1994, writ denied). A party
1
Because we decide below to reverse the trial court’s judgment as to Laguna’s breach-of-
warranty and breach-of-contract claims against OCTG and remand these claims to the trial court
for a new trial, we need not and do not address OCTG’s factual sufficiency challenge.
8
waives an avoidance or affirmative defense if the party fails to plead it and the issue
is not tried by consent. See Tacon Mech. Contractors, 889 S.W.2d at 671. OCTG
neither pleaded that its liability was limited under the Finishing Agreement, nor was
the limitation-of-liability issue tried by consent. Thus, OCTG has waived this issue.
See id.
D. Damages
OCTG asserts the trial evidence is legally and factually insufficient to support
the jury’s findings in response to the damages question for OCTG’s breach of the
Finishing Agreement and breach of express warranty. The jury found $1,562,127 in
damages for OCTG’s breach of contract and $1,562,127 in damages for OCTG’s
breach of warranty. OCTG and Sojourn argue that the evidence is legally and
factually insufficient to support the jury’s findings as to reasonable and necessary
expenses under the legal standard set forth in Dallas Railway and Terminal Co. v.
Gossett and its progeny. 294 S.W.2d 377, 382–83 (Tex. 1956); see also McGinty v.
Hennen, 372 S.W.3d 625, 627–28 (Tex. 2012).
1. Preservation
Before discussing this legal standard, we first consider whether OCTG
preserved these appellate complaints in the trial court. Laguna and LTP assert that
OCTG did not preserve error. In their motion for judgment notwithstanding the
verdict, OCTG and Sojourn asserted that the record contained no evidence to support
the jury’s finding of $1,562,127 in damages resulting from the breach of the
Finishing Agreement. OCTG and Sojourn did not assert a lack of evidence to
support the jury’s finding of $1,562,127 in damages resulting from OCTG’s breach
of warranty. But, in their motion for new trial, OCTG and Sojourn asserted legal
insufficiency of the evidence to support the jury’s damages findings in response to
both questions. The trial court denied the motion for new trial. Laguna and LTP
9
appear to argue that OCTG was required to assert specifically that the evidence is
legally insufficient as to the “reasonable and necessary” element of each question.
We conclude that the complaints in the motion for new trial preserved error as to the
legal-insufficiency arguments under OCTG’s sub-issue. See Arkoma Basin Expl.
Co. v. FMF Assocs., 249 S.W.3d 380, 387–88 (Tex. 2008).
2. The Gossett principle
The normal measure of damages in a breach-of-contract case is the expectancy
or benefit-of-the-bargain measure. Mays v. Pierce, 203 S.W.3d 564, 577 (Tex.
App.—Houston [14th Dist.] 2006, pet. denied). The purpose of this measure of
damages is to restore the injured party to the economic position it would have
occupied had the contract been performed. Clear Lake City Water Auth. v.
Friendswood Dev. Co., 344 S.W.3d 514, 523 (Tex. App.—Houston [14th Dist.]
2011, pet. denied); Mays, 203 S.W.3d at 577. Here, the jury was instructed to
consider only the following element of expectancy damages: “[t]he reasonable and
necessary expenses incurred in the past by Laguna to re-inspect tubular goods
previously inspected by [OCTG] and the reasonable and necessary expenses
incurred by Laguna to secure alternative inspection and threading services, including
transportation costs for a reasonable time following termination of the [Finishing
Agreement].”
The party seeking to recover the cost of completion in a breach of contract
case has the burden to prove that the damages sought are reasonable and necessary.2
Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 200-01 (Tex. 2004).
It is well settled that proof of amounts charged or paid does not raise an issue of
2
Because the jury was asked to determine only this element of damages, we limit our
analysis to the reasonable and necessary costs of completion. See Osterberg v. Peca, 12 S.W.3d
31, 55 (Tex. 2000) ((“[T]he court’s charge . . . measures the sufficiency of the evidence when the
opposing party fails to object to the charge.”).
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reasonableness. Gossett, 294 S.W.2d at 383. Thus, evidence of the amounts charged
or paid, by itself, is not legally sufficient evidence that these charges are reasonable
and necessary; instead, separate evidence must be offered that raises a fact issue
regarding the reasonableness and necessity of the expenses or costs in question. See
Mustang Pipeline Co., 134 S.W.3d at 200–01; Gossett, 294 S.W.2d at 382–83; O &
B Farms, Inc. v. Black, 300 S.W.3d 418, 422–23 (Tex. App.—Houston [14th Dist.]
2009, pet. denied). To have raised a fact issue as to reasonableness and necessity of
expenses, Laguna had to show more than simply “the nature of the injuries, the
character of and need for the services rendered, and the amounts charged therefor.”
Gossett, 294 S.W.2d at 383. Instead, some other “evidence showing that the charges
are reasonable” is required. McGinty, 372 S.W.3d at 627.
The Mustang Pipeline case illustrates this principle. In that case, Driver
Pipeline Company agreed to build Mustang a pipeline. Mustang Pipeline Co., 134
S.W.3d at 196. Unexpected weather prevented Driver from completing the task on
time, and it sought an extension. Id. Mustang then contracted with another company
to finish Driver’s portion of the pipeline and sued Driver for breach of contract. Id.
at 197. The jury found that Driver had breached the agreement and awarded
Mustang $2 million, its out of pocket cost of completion. Id. The trial court and
court of appeals, however, set aside that award. Id. at 197-98. The court of appeals
reasoned that Mustang did not establish that the $2 million it paid the new company
was a reasonable cost for the completion of the pipeline. Id. at 198. The Supreme
Court of Texas agreed. Id. at 201.
Mustang’s expert estimated the cost for the new company to complete the
contract but did not opine about “whether that contracted amount was a reasonable
cost to build a pipeline.” Id. The high court noted that evidence of out-of-pocket
costs alone “did not establish that the damages were reasonable and necessary.” Id.
Instead, the court found it “well settled that proof of the amounts charged or paid
11
does not raise an issue of reasonableness, and recovery of such expenses will be
denied in the absence of evidence showing that the charges are reasonable.” Id.
(quoting Gossett, 294 S.W.2d at 383). Because Mustang failed to produce evidence
on the reasonableness of its damages, the supreme court held that the trial court
correctly set aside the damage award. Id.
In the McGinty case, the jury awarded the plaintiff, Hennen, both remedial
and difference-in-value damages, and the trial court rendered judgment on the
amount of remedial damages. 372 S.W.3d at 627. Hennen’s expert provided the
only evidence offered on reasonable remedial damages. Id. He derived his estimated
costs of repair from an “Exactimate” program “that’s used widely in the insurance
industry.” Id. The program had a Houston price guide, which he used to compare
Houston prices to Corpus Christi prices and found them to be “within a percent or
two difference.” Id. The expert further testified that because not every price issued
by the program is right, “we have to cross-reference and double check all our
pricing.” Id. And, finally, the expert testified that “some of the other costs came
from subcontractors or historical data or jobs.” Id.
The Supreme Court of Texas concluded that Hennen’s evidence on
reasonableness was quite similar to what the court found insufficient in Mustang
Pipeline. Id. Estimated out-of-pocket expenses, like paid out-of-pocket expenses,
do not establish that the cost of repair was reasonable. Id. at 627–28. Some other
evidence is necessary. Id. at 628. Neither Hennen’s damages expert nor any other
witness testified that the estimated cost was reasonable. Id. Hennen argued that his
expert testified extensively about how he derived his pricing estimate, which Hennen
asserted is the same as reasonableness. Id. But, the high court concluded that
although the expert explained how the figure was derived, that testimony did not in
itself make the figure reasonable. Id.
The McGinty court stated that “[i]n some cases, the process will reveal factors
12
that were considered to ensure the reasonableness of the ultimate price.” Id. But,
the court concluded that the process in McGinty did not show such factors, and
therefore, the trial evidence did not raise a fact issue as to whether the estimated cost
of repair was reasonable. See id.
Today, we must apply the Gossett line of cases to determine whether the trial
evidence is legally sufficient to support the jury’s finding of damages based on the
reasonable and necessary expenses incurred by Laguna. In response to both damages
questions, the jury found the amount of damages incurred by Laguna to be
$1,562,127. Laguna sought damages based on three categories: (1) reinspection
costs, (2) transportation costs, and (3) amounts paid to Cimarex as reimbursement
for reinspection expenses that Cimarex had incurred. We presume without deciding
that the trial evidence is legally sufficient to support a finding that Laguna actually
paid the amounts it alleges to have incurred in each of these categories, and we
address whether the evidence is legally sufficient to show that the reinspection costs
and the reimbursements to Cimarex were reasonable and necessary expenses.
3. Reinspection costs
Laguna asserts that it paid $327,632 to have joints reinspected and that these
expenses were reasonable and necessary. Proof that Laguna incurred these
reinspection costs, by itself, is legally insufficient to show that the expenses were
reasonable and necessary. See McGinty, 372 S.W.3d at 627–28; Mustang Pipeline
Co., 134 S.W.3d at 200–01; Gossett, 294 S.W.2d at 382–83.
No trial witness explicitly testified that these reinspection expenses were
reasonable and necessary. However, William Rowland, Laguna’s Chief Operating
Officer, testified that after Cimarex’s discovery of a nonconforming joint, the audit
reports showing defective equipment and personnel issues, and an investigation
confirming the audit results, Laguna decided that the prudent course was to reinspect
every accessible joint, although many of the joints already were downhole.
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Moreover, Diaz, Laguna’s quality manager, testified that a single defective joint can
damage an entire well. Under the applicable standard of review, we conclude that
the trial evidence is legally sufficient to support a finding that the reinspection costs
were necessary. See City of Keller, 168 S.W.3d at 823; Nip, 154 S.W.3d at 769–70.
As to the reasonableness of those costs, Rowland testified that he selected the
reinspectors as follows:
We went through their [quality management systems]. We looked at
their abilities to inspect. Also, who had the ability to do it on-site. We
had 32,000 joints to inspect, so wanted to get it done on-site. And also
somebody that could do a reasonable price and on time because it was
going to take a little while to get this done.
After reviewing the trial evidence under the applicable standard of review, we
conclude that the trial evidence regarding the process by which Laguna selected the
reinspection contractors revealed factors that were considered to ensure the
reasonableness of amount paid for reinspection. See McGinty, 372 S.W.3d at 627–
28.
We conclude that under the Gossett line of cases, the trial evidence is legally
sufficient to support a finding that the reinspection costs were reasonable and
necessary expenses, and thus the evidence is legally sufficient to support a finding
of at least $327,632 in damages for Laguna’s breach-of-contract and breach-of-
warranty claims. See id.
4. Cimarex costs
Laguna offered evidence at trial showing that it had reimbursed Cimarex
$276,850 for amounts Cimarex had paid to reinspect pipes. Proof that Laguna
incurred these expenses, by itself, is legally insufficient to show that the expenses
were reasonable and necessary. See id.; Mustang Pipeline Co., 134 S.W.3d at 200–
01; Gossett, 294 S.W.2d at 382–83. No trial witness testified that these reinspection
expenses were reasonable or that they were necessary. We presume for the sake of
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argument that these expenses were necessary.
Though Rowland testified as to how he chose contractors who performed
reinspection services for Laguna, no trial evidence showed how Cimarex chose
reinspection contractors. No witness testified that Cimarex chose contractors who
would charge a reasonable price.
After reviewing the trial evidence under the applicable standard of review, we
conclude that, as to the costs that Laguna reimbursed to Cimarex for reinspection
services, the trial evidence did not reveal factors that were considered to ensure the
reasonableness of the amount paid. See McGinty, 372 S.W.3d at 627–28. So,
applying the standard from the Gossett line of cases, we conclude that the trial
evidence is legally insufficient to support a finding that the Cimarex Costs were
reasonable expenses.3 See id.
5. Remand
Under the applicable standard of review, the trial evidence is legally
insufficient to support the full amount of the jury’s findings as to damages incurred
by Laguna. Although the trial evidence is legally insufficient to support a finding of
$1,562,127 in damages as to either question, the evidence is legally sufficient to
support a finding of a lesser amount of damages. In this context, the proper remedy
is to reverse and remand for a new trial. See Formosa Plastics Corp. USA v. Presidio
Eng’rs and Contrs., Inc., 960 S.W.2d 41, 51 (Tex. 1998) (holding that appellate
court can remand for new trial when no evidence supports damages awarded but
there is evidence of some damages). Because liability was contested and the
damages are unliquidated, we remand for a new trial on both liability and damages
as to Laguna’s breach-of-warranty and breach-of-contract claims against OCTG.
3
Because we have concluded that some of the damages amounts found by the jury were
legally sufficient and some were legally insufficient, we do not reach the third category of
damages, transportation costs, as the appellate remedy is unaffected.
15
See Tex. R. App. P. 44.1(b) (stating that appellate court may not order separate trial
solely on unliquidated damages if liability is contested); JLG Trucking, LLC v.
Garza, 466 S.W.3d 157, 165 n.8 (Tex. 2015); Johnston v. McKinney Am., Inc., 9
S.W.3d 271, 284 (Tex. App.—Houston [14th Dist.] 1999, pet. denied). Thus, we
sustain OCTG and Sojourn’s first issue to the extent OCTG and Sojourn assert that
the evidence is legally insufficient to support the jury’s findings of damages to
Laguna.4 We reverse the trial court’s judgment as to Laguna’s breach-of-warranty
and breach-of-contract claims against OCTG and remand these claims to the trial
court for a new trial.5
Having concluded that Laguna presented legally sufficient evidence of
damages and causation but legally insufficient evidence of the total amount of
damages found by the jury, we overrule in part and sustain in part OCTG and
Sojourn’s first issue.
III. SUMMARY JUDGMENT RULINGS AS TO COUNTERCLAIMS
In their eleventh issue, OCTG and Sojourn assert that the trial court erred in
granting Laguna and LTP’s combined no-evidence and traditional motion for
summary judgment as to OCTG and Sojourn’s counterclaims for breach of warranty,
negligent misrepresentation, fraud, and rescission.
In reviewing a no-evidence summary judgment, we ascertain whether the
4
Because we already have decided to reverse the trial court’s judgment as to Laguna’s
breach-of-warranty and breach-of-contract claims against OCTG and remand these claims for a
new trial, we need not address OCTG’s assertion that the evidence is factually insufficient to
support these findings.
5
We note as well that OCTG and Sojourn, in their motion for new trial, requested only a
new trial and did not request rendition of judgment. In this context, under Supreme Court of Texas
precedent, the only proper appellate remedy for legal insufficiency of the evidence is a reversal of
the judgment as to the two claims and a remand for a new trial. See Werner v. Colwell, 909 S.W.2d
866, 870, n.1 (Tex. 1995); Horrocks v. Tex. Dep’t of Transp., 852 S.W.2d 498, 499 (Tex.
1993) (per curiam).
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nonmovant presented summary-judgment evidence raising a genuine issue of fact as
to the essential elements attacked in the no-evidence motion. Johnson v. Brewer &
Pritchard, P.C., 73 S.W.3d 193, 206–08 (Tex. 2002). In a traditional motion for
summary judgment, if the movant’s motion and summary-judgment evidence
facially establish its right to judgment as a matter of law, the burden shifts to the
nonmovant to raise a genuine, material fact issue sufficient to defeat summary
judgment. See M.D. Anderson Hosp. & Tumor Inst. v. Willrich, 28 S.W.3d 22, 23
(Tex. 2000). In our de novo review of a trial court’s summary judgment, we consider
all the evidence in the light most favorable to the nonmovant, crediting evidence
favorable to the nonmovant if reasonable jurors could, and disregarding contrary
evidence unless reasonable jurors could not. Mack Trucks, Inc. v. Tamez, 206
S.W.3d 572, 582 (Tex. 2006). The evidence raises a genuine issue of fact if
reasonable and fair-minded jurors could differ in their conclusions in light of all of
the summary-judgment evidence. Goodyear Tire & Rubber Co. v. Mayes, 236
S.W.3d 754, 755 (Tex. 2007). When, as in this case, the order granting summary
judgment does not specify the grounds upon which the trial court relied, we must
affirm the summary judgment if any of the independent summary-judgment grounds
has merit. FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex.
2000).
A. Breach-of-Warranty, Negligent-Representation, and Fraud Claims
In their no-evidence summary-judgment motion, Laguna and LTP contended,
among other grounds, that OCTG and Sojourn could present no evidence that they
suffered damages related to any breach of warranty or negligent misrepresentation.
Laguna and LTP further asserted that there was no evidence as to elements of OCTG
and Sojourn’s fraud claims that (1) Laguna and LTP made a false representation or
(2) Laguna and LTP made a representation knowing that it was false or that the
17
representation was made recklessly, as a positive assertion, without knowledge of its
truth.
In their response, the only evidence OCTG and Sojourn cited was their
answers to interrogatories. OCTG and Sojourn’s answers to interrogatories are not
competent summary-judgment evidence. See Morgan v. Anthony, 27 S.W.3d 928,
929 (Tex. 2000) (noting that generally, a party cannot rely on its own answer to an
interrogatory as summary-judgment evidence); Smitherman v. Bank of America,
N.A., No. 14-14-00550-CV, 2015 WL 1622180, at *3 (Tex. App.—Houston [14th
Dist.] Apr. 7, 2015, pet. denied) (mem. op.) (holding party’s answer to interrogatory
was not competent summary-judgment evidence).
OCTG and Sojourn did not adduce competent summary-judgment evidence
raising a fact issue as to whether OCTG and Sojourn suffered damages related to
any alleged breach of warranty or negligent representation by Laguna and LTP or
that Laguna and LTP made a false representation or a representation made knowing
it was false. The trial court did not err in granting Laguna and LTP’s summary-
judgment motion as to OCTG’s breach-of-warranty, negligent-misrepresentation,
and fraud claims.
B. Rescission
In their counterclaims, OCTG and Sojourn sought rescission as an equitable
remedy for the allegedly fraudulent conduct of Laguna and LTP. In their traditional
motion, Laguna and LTP sought summary judgment as to the rescission remedy,
arguing, among other grounds, that OCTG and Sojourn could not receive rescission
because their misrepresentation and fraud claims failed as a matter of law. OCTG
and Sojourn argued generally that Laguna and LTP’s unclean hands should preclude
them from arguing that Laguna and LTP would be unfairly prejudiced by rescission.
“A party seeking rescission and restitution must first establish a substantive right to
18
avoidance of the transaction in question.” Kennebrew v. Harris, 425 S.W.3d 588,
595 (Tex. App.—Houston [14th Dist.] 2014, pet. denied) (citing Restatement (Third)
of Restitution and Unjust Enrichment § 54 cmt. a.). We have concluded the trial
court did not err in granting summary judgment as to their misrepresentation and
fraud claims. Therefore, we further conclude the trial court did not err in granting
summary judgment as to the equitable remedy of rescission. See id.
We overrule OCTG and Sojourn’s eleventh issue.
IV. RETENTION POND LAND VALUE
Sojourn next asserts that the trial court erred in awarding LTP $150,000 based
on the jury’s finding as to the value of land on which a retention pond was to be
built. Under the Purchase Agreement, Sojourn agreed to provide, on its remaining
contiguous property, such rainwater detention areas as necessary to accommodate
the improvements to be constructed on LTP’s land. LTP agreed to reimburse
Sojourn for the cost of the required construction. It is undisputed that Sojourn
breached this obligation only a few months after the purchase.6 Trial testimony
showed that because Laguna’s worksite was required by law to have a pond, LTP
needed to build a pond on its own land.
The jury charge included the following question: “What is the value of
[LTP’s] land on which a rainwater detention area is to be built?” Sojourn objected
to the charge and requested that the court inquire about the “market value” or,
alternatively, the “fair-market value” of the land. The trial court overruled this
objection and refused the request. On appeal, Sojourn asserts that the trial court
erred in doing so and that we should review the sufficiency of the evidence under
6
It is also undisputed that on LTP’s behalf, Laguna paid Sojourn via OCTG $255,000 to
build the pond and that Sojourn kept the money. The trial court included that amount in the
judgment. That award is not challenged on appeal.
19
the requested jury question and hold that LTP offered no evidence of market value.
We conclude that, under the circumstances of this case, the trial court properly
overruled Sojourn’s objection and refused its tendered jury question. As mentioned,
the normal measure of damages for breach of contract is the benefit of the bargain,
which is intended to restore the injured party to the economic position it would have
been in had the contract been performed. Mays, 203 S.W.3d at 577. The objective
in awarding damages for a breach of contract is to provide just compensation for the
loss actually sustained by the complaining party. Tenn. Gas Pipeline Co. v. Technip
USA Corp., No. 01-06-00535-CV, 2008 WL 3876141, at *5 (Tex. App.—Houston
[1st Dist.] Aug. 21, 2008, pet. denied) (mem. op.) (citing Phillips v. Phillips, 820
S.W.2d 785, 788 (Tex. 1991)). Such damages are measured at the time of breach,
not the time of trial. Miga v. Jensen, 96 S.W.3d 207, 214 (Tex. 2002); see also
Elness Swenson Graham Architects, Inc. v. RLJ II-C Austin Air, LP, 520 S.W.3d
145, 161 (Tex. App.—Austin 2017, pet. filed) (collecting definitions of “benefit of
the bargain”).
LTP offered uncontradicted evidence that as a result of the breach, it would
be required to build a retention pond on two acres of the land it had purchased from
Sojourn. Had the contract been performed, LTP would have had the use of a
retention pond as well as the entire acreage it had purchased. To restore LTP to the
economic position it would have been in had Sojourn performed under the
agreement, LTP is entitled to recover the amount it had recently paid to purchase the
two acres it could no longer use.7 The trial court did not err in refusing to change
the measure of damages to the present market value of those acres.8
7
We do not address whether this question contained other defects because no other
objections were made.
8
OCTG and Sojourn also argue the trial testimony was legally insufficient because the
witnesses failed to testify as to the market value of the land. Given that present market value is
20
We recognize that fair market value at the time of trial is an appropriate
damage measure in many cases involving real estate, including condemnation cases
and cases alleging damage to the value of realty. But that is not this case. On the
facts of this particular breach-of-contract case, allowing LTP to recover what it had
paid for the two acres shortly before Sojourn’s breach prevented it from using that
land puts LTP in the same economic position as if the contract had been performed.
We therefore use the charge as given to analyze Sojourn’s argument that the
evidence is legally insufficient to support the jury’s value finding of $150,000.
Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). At trial, Eddie Anaya testified
that Laguna was under a county requirement to build a retention pond and that
Laguna will have to build the retention pond on its own on LTP’s property. Anaya
testified that it was his understanding that the retention pond would take two acres
of land to build. Anaya testified that he estimated each acre had a minimum value
of $75,000 and noted that that sum was the amount LTP paid per acre when it bought
the 26.48 acres from Sojourn in the Purchase Agreement. Anaya testified that LTP’s
minimum amount of damages would be $150,000 for the two acres needed to build
the retention pond.
William Rowland (LTP’s chief operating officer) testified that the county told
Laguna it was in violation of the requirement for it to have a retention pond.
Rowland testified Laguna had looked into alternatives to building a retention pond,
and the only option was for Laguna to give up part of its yard and build a pond on
LTP’s land. Rowland testified that he estimated the size of the pond would be about
two acres and that LTP paid $75,000 per acre when it bought the land.
Sojourn contends that the evidence that two acres was required to build the
not the proper measure of damages here, we conclude that this failure did not render the testimony
legally insufficient.
21
pond was conclusory. A conclusory statement is one that expresses a factual
inference without providing underlying facts to support that conclusion. Padilla v.
Metro. Transit Auth. of Harris Cty., 497 S.W.3d 78, 85 (Tex. App.—Houston [14th
Dist.] 2016, no pet.) In Padilla, we held that a statement that “for months at a time
all entrances and exits were blocked” was not conclusory because it was a statement
of fact for which Padilla provided background facts that explained the basis of his
factual statement—how he knew they were blocked. Id. at 86.
Here, Rowland testified that his role as chief operating officer of LTP is to
oversee most of its operations. When he started working for LTP in 2013, the pond
“still didn’t exist.” Rowland sent an e-mail to OCTG in which he stated “from what
I have been able to find out based on the [] Agreement, the [engineering cost
estimate] and the Plans, it looks like we are still missing the detention pond.” The
attached engineering cost estimate called for “design of assumed 200,000 sf
detention pond [4.5 acres].” After a meeting with OCTG, Rowland sent another e-
mail, stating:
If I understand you correctly, OCTG has substantially changed their
physical operations to the extent that Harris County required a new
engineering of the [pond]. You mentioned that the new engineering
making the pond bigger was complete. . . . Would you . . . forward
copies of the new engineering, Harris County permit application and
the information on the construction.
In a third e-mail to OCTG, Rowland referenced engineering drawings in his
possession. He also advised OCTG that “storm water and drainage was the business
I was in for 15 years.” Also, Rowland had discussions with Harris County officials
about the pond and what LTP needed to do to avoid being red-tagged until the pond
is built.
We conclude that Rowland’s knowledge of the engineering bid calling for a
200,000 square foot pond, background in the storm water and drainage business, and
22
negotiations with Harris County officials about their requirements for a pond provide
the basis for Rowland’s factual statement that two acres was required to build the
pond. See id.
OCTG and Sojourn further contend that Rowland and Anaya were not
qualified to testify as to the value of LTP’s land. But they did not testify as expert
witnesses; instead, they properly testified as representatives of the corporate
property owner under the property-owner rule. The property-owner rule establishes
that an owner is qualified to testify to the value of his property; nonetheless, such
testimony must meet the same requirements as any other opinion evidence. Natural
Gas Pipeline Co. of Am. v. Justiss, 397 S.W.3d 150, 156 (Tex. 2012); see also Tex.
R. Evid. 701. An owner may not simply state in a conclusory manner the owner’s
opinion as to the property’s value; the property owner must provide the factual basis
on which the opinion rests. Justiss, 397 S.W.3d at 157. This burden is not onerous,
particularly in light of the resources available today. Id. at 159. Evidence of price
paid and any other relevant factors may be offered to support the claim. Id.
Appellants alternatively seek a new trial, arguing that the trial court erred in
admitting the testimony of Anaya and Rowland because Anaya was not qualified to
testify and Rowland had not been designated to testify about fair market value.
Because we conclude that Rowland and Anaya properly testified under the property-
owner rule, we reject the alternative argument. We therefore overrule appellants’
eighth issue.
V. ATTORNEY’S FEES
In its judgment, the trial court awarded Laguna and LTP recovery against
OCTG and Sojourn jointly and severally in the amount of $1,476,235.06 for
reasonable and necessary attorney’s fees in the trial court and other conditional
awards of appellate attorney’s fees in favor of Laguna and LTP and against OCTG
23
and Sojourn. The award was not apportioned between Laguna’s claims and those of
LTP. In their ninth issue, OCTG and Sojourn assert that this court should reverse
these attorney’s fee awards if this court reverses the trial court’s judgment.
Because we are reversing the trial court’s judgment as to Laguna’s breach-of-
warranty and breach-of-contract claims against OCTG and remanding these claims
to the trial court for a new trial and because the attorney’s fees awarded to Laguna
were based on the successful prosecution of these two claims, we also reverse and
remand all awards of attorney’s fees to Laguna. See Tex. Civ. Prac. & Rem. Code
§ 38.001(8); see also Parkway Dental Assocs., P.A. v. Ho & Huang Props., L.P.,
391 S.W.3d 596, 612 (Tex. App.—Houston [14th Dist.] 2012, no pet.). And,
although we affirm LTP’s claim for damages as to the retention pond, we cannot
affirm any attorney’s fees award in favor of LTP because it was not segregated from
the attorney’s fee award in favor of Laguna. Thus, we reverse and remand that award
as well. See Kinsel v. Lindsey, 526 S.W.3d 411, 428 (Tex. 2017) (reversing and
remanding award of unsegregated attorney’s fees for reconsideration). We
accordingly sustain appellants’ ninth issue.
VI. PERMANENT INJUNCTION
In their twelfth issue, OCTG and Sojourn assert that this court should dissolve
the trial court’s permanent injunction restraining OCTG and Sojourn from
reinstalling a threading machine in Laguna’s Threading Area and from conducting
threading services in that area. OCTG and Sojourn argued in their pleadings that
Laguna and LTP wrongfully and forcibly removed OCTG and Sojourn from the
Threading Area on LTP’s land, including by use of a court order, and that Laguna
and LTP had caused Sojourn to incur damages as a result.
Laguna and LTP respond that the issue is moot because LTP sold the land on
which the Threading Area is located to a third party in 2016. Because OCTG alleged
24
damages from actions by Laguna and LTP before the 2016 sale, we conclude the
issue is not moot.
OCTG and Sojourn argue that the permanent injunction should be dissolved
because (1) Laguna and LTP sought injunctive relief on the ground that OCTG’s
failure to remove its equipment from LTP’s property constituted a trespass; (2) the
jury found against LTP on its trespass claim; and (3) Laguna and LTP have not
appealed and thus have not challenged the trial court’s take-nothing judgment on
LTP’s trespass claim. But, in their live pleading, Laguna and LTP sought injunctive
relief based not only on the trespass claim but also to enforce LTP’s alleged property
rights and to avoid irreparable harm. See Tex. Civ. Prac. & Rem. Code § 65.011(5);
see also 1717 Bissonnet, LLC v. Loughhead, 500 S.W.3d 488, 507 (Tex. App.—
Houston [14th Dist.] 2016, no pet.). Thus, LTP’s failure to recover on its trespass
claim did not preclude the trial court from granting the permanent injunction. We
overrule issue twelve and affirm the trial court’s permanent injunction.
VII. JURY CHARGE
In their tenth issue, OCTG and Sojourn assert that the trial court erred in
refusing to submit to the jury a question asking whether LTP granted Sojourn either
an easement or an irrevocable license to the Threading Area. OCTG and Sojourn
argue that the question was essential to the defense of Laguna and LTP’s trespass
claim and request for injunctive relief.
A trial court reversibly errs when it denies a party proper submission of a valid
theory of recovery or a vital defensive issue raised by the pleadings and evidence.
Exxon Corp. v. Perez, 842 S.W.2d 629, 631 (Tex. 1992). However, here, OCTG
and Sojourn were permitted to argue and present evidence of their defense to the
trespass claim, including their argument that LTP granted Sojourn either an
easement or license to the Threading Area. The jury was instructed that trespass is
25
an unauthorized entry upon the land of another. The trial judge properly submitted
the controlling question to the jury. She was not required, and in fact should not
have, submitted different shades of the same question. Mayes v. Stewart, 11 S.W.3d
440, 455 (Tex. App.—Houston [14th Dist.] 2000, pet. denied); see also Tex. R. Civ.
P. 278. OCTG and Sojourn, therefore, have failed to establish any error in the trial
court’s refusal to submit their requested question. Issue ten is overruled.
VIII. CONCLUSION
The trial evidence is legally insufficient to support the jury’s damages findings
for breach of contract and breach of warranty against OCTG. Although the trial
evidence is legally insufficient to support a finding of $1,562,127 in damages as to
either finding, the evidence is legally sufficient to support findings of a lesser amount
of damages. Because liability was contested and the damages are unliquidated, we
reverse the trial court’s judgment as to Laguna’s breach-of-warranty and breach-of-
contract claims against OCTG and remand these claims to the trial court for a new
trial on liability and damages. Because we are reversing the trial court’s judgment
as to these claims and because the attorney’s fees awarded to Laguna were based on
the successful prosecution of these claims, we also reverse all awards of attorney’s
fees to Laguna. Moreover, because the attorney’s fees award to LTP was not
segregated from the attorney’s fee award in favor of Laguna, we reverse and remand
that award as well. We affirm the remainder of the trial court’s judgment.9
Because we reverse the trial court’s judgment as to Laguna’s breach-of-
warranty and breach-of-contract claims against OCTG and remand these claims to
9
OCTG and Sojourn have filed a “Motion to Strike Matters Outside the Record,” and we
have taken that motion with the case. OCTG and Sojourn complain that certain documents
attached to Laguna and LTP’s brief are not in our appellate record. In adjudicating this appeal, we
have not relied on any documents that are not in our appellate record. We deny the motion to
strike.
26
the trial court for a new trial, we need not and do not address issues two through
seven.
/s/ Martha Hill Jamison
Justice
Panel consists of Chief Justice Frost and Justices Jamison and Busby (Frost, C.J.,
dissenting).
27