JEM International, Inc. v. Warner Properties, L.P. ( 2018 )

In The
Court of Appeals
Seventh District of Texas at Amarillo
No. 07-17-00042-CV
JEM INTERNATIONAL, INC., APPELLANT
V.
WARNER PROPERTIES, L.P., APPELLEE
On Appeal from the 222nd District Court
Deaf Smith County, Texas
Trial Court No. CI-14E-079, Honorable Roland D. Saul, Presiding
September 24,2018
MEMORANDUM OPINION
Before CAMPBELL and PIRTLE and PARKER, JJ.
In this business damages case JEM International, Inc., appeals an adverse
judgment awarding appellee Warner Properties, L.P., damages and attorney’s fees and
ordering that JEM take nothing by its counterclaim. We will overrule each of JEM’s issues
on appeal and affirm the judgment of the trial court.
Background
Warner operates a seed company in Hereford, Texas. In 2012, it considered
automating its process of lifting bags filled with seed from conveyors and stacking them
on shipping pallets. JEM representative James Goudy visited the Warner facility late in
the year and represented that JEM could supply a robotic conveyor system capable of
meeting Warner’s requirements. Goudy specifically explained to Warner controller and
general manager Pete Scariati that a JEM robotic conveyor system would take sacks of
seed from a conveyor and stack them in eight to ten layers on a shipping pallet. Goudy
also stated the system would handle both fifty-pound bags and twenty-kilogram bags for
foreign shipment.
While at the Warner plant Goudy spent two hours in the warehouse where the
system was to be installed. His inspection allowed him to create a configuration for the
robotic system. JEM provided a quote for the system in November but due to Warner’s
year-end schedule the quote was not accepted.
In 2013, Warner again made inquiry of JEM; a revised quote was issued and an
agreement reached. The order price for the system was $266,500. Payment was due in
installments of forty percent down, forty percent prior to delivery, and twenty percent “net
30 days.” The October 23, 2013, “sales order” provided in part, “[o]ne week start up and
training (travel and expenses are extra) [sic] Includes: installation assistance, control
integration and recipe programing . . . [.]” Warner tendered a down payment of $106,620,
and the robotic-system parts were shipped during December 2013 and January 2014.
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Disagreements between the parties soon followed delivery of the parts. Broadly
stated, the evidence showed Warner expected JEM to uncrate, assemble, and make the
system operable while JEM viewed much of the responsibility for this process as
Warner’s. Warner expected the system to perform as represented.
When JEM personnel arrived in January 2014, additional time, the amount of which
was disputed, was spent uncrating and laying out the system. Warner asked to relocate
the system ten to twelve feet backward in the warehouse. There was testimony that a
JEM representative responded “not a problem” to the request. It was not disclosed that
the relocation would increase Warner’s cost and delay the installation time.
Once the system was uncrated, JEM disclosed that the robot could not operate in
temperatures below forty to forty-five degrees. The warehouse had no heating system.
By email, a JEM representative recommended Warner add a heating system or “simply
not operate it below 45˚F.” Alternatively, JEM offered to provide a quote for a “very
expensive” heat jacket for the robot. Warner purchased commercial heaters and had
them installed by an electrician. Besides wiring for the heaters Warner also had to pay
for additional electrical work for conveyor motors. Lighting in the warehouse also proved
insufficient, so Warner purchased additional lighting.
In trial testimony Goudy agreed the JEM sales invoice did not state the buyer was
responsible for uncrating, laying out, and installing robotic system conveyors. But
according to Goudy, the invoice’s language “installation assistance, control integration,
and recipe programing” applied to the robot only. Goudy acknowledged that, “in
hindsight,” the sales invoice should have been more clear.
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JEM was able to make the system operate but there was testimony, supported by
videos played for the jury, that it did not stack the pallets properly. The Warner robotics
consultant, Landon Friemel, testified a Warner employee told him the system did not
function without human intervention. After a brief time, the system ceased working
altogether. The problem was isolated to the system’s computer and operator
touchscreen. Attempts by JEM to replace these components separately proved fruitless
as, according to testimony, they corrupted each other when reinstalled separately.
Erik Link, Sr., a robotics expert retained by JEM to facilitate the Warner installation,
testified at trial. During early 2014, he twice came to Hereford to work on the Warner
project. Link believed the system was operable after his second visit. Thereafter the
computer and touchscreen failed and were sent to his place of business in Alabama. Link
testified he did not determine the cause of the failure. Without the computer and
touchscreen the robotic system was inoperable.
In February 2014, JEM submitted a $27,096.62 invoice to Warner for installation
labor and expenses. Warner disagreed that the full amount claimed was due and
asserted it would pay nothing more to JEM until the system worked as represented. JEM
responded that if Link were to return with a working touchscreen and computer Warner
would have to pay the installation invoice. It reduced the total demanded to $19,000. At
trial, Goudy agreed he could not dispute that the last time a JEM representative was at
the Warner plant the robotic system was not operable.
Warner paid nothing on the JEM invoice and Link did not return. Nor did Warner
make the second and third installment payments of the purchase price. There was
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testimony that while JEM personnel attempted to make the system work Scariati had a
check for the remaining balance on his desk and was prepared to tender it to JEM as
soon as the system worked as represented.
Instead of paying the installation invoice to obtain Link’s return, Warner hired
Friemel to make the system operable. Friemel testified in some detail of the problems he
encountered and the corrective steps he took. He purchased and installed a larger
touchscreen and a new computer. He also re-programed the robot. The system was not
delivered with operating manuals. And Friemel discovered Warner was not licensed by
the manufacturer. Warner paid the licensing fee and received new software and updated
manuals. After about a year, Friemel was able to make the system operate. Warner paid
Friemel a flat fee of $20,000 which included parts and labor. He estimated his time spent
on the project was 133 hours.
Warner sued JEM in May 2014 for breach of contract. Its live pleading at trial
alleged theories of breach of contract and warranty and violations of the Texas Deceptive
Trade Practices—Consumer Protection Act (DTPA).1 JEM filed a counterclaim alleging
breach of contract by Warner for not fully paying for the system or alternatively recovery
in quantum meruit.
The parties presented evidence of their claimed damages at trial. The damages
Warner sought totaled $185,893.07. Among the categories, were $37,746.30 for the cost
to complete installation of the system. This total included Friemel’s $20,000 fee.
Evidence of $146,227.50 for labor costs to Warner because the system was inoperable
1 TEX. BUS. & COM. CODE ANN. §§ 17.41-.63 (West 2011 & Supp. 2017).
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was presented. Evidence of labor costs for installation of the system totaled $5,625.
Finally, Warner sought its out-of-pocket cost of $2,945.64 for installing a seed-bag label
printer. On its counterclaim, JEM sought recovery of $203,664. This amount consisted
chiefly of the remaining balance due on the sale contract and invoices for installation labor
and expenses.
The trial court’s charge2 submitted liability questions concerning breach of implied
warranty, breach of express warranty, and violation of the DTPA,3 leading to a single
conditionally submitted damage question. Contract damages were conditionally
submitted separately. The jury answered “yes” to each of Warner’s liability theories and
“no” to those of JEM. It found total damages for Warner of $108,451.43 consisting of
$24,879.79 costs to complete the system installation; $2,946.64 to complete the printer
installation; $5,625 for installing the robotic system; and $75,000 for labor costs incurred
while the system was inoperable. It awarded Warner attorney’s fees, including conditional
awards for appeal and petition for review, totaling $120,460.
Based on the jury’s verdict, Warner moved for judgment. JEM filed a response
opposing Warner’s motion and requesting a new trial. According to the motion for new
trial, after the jury was discharged JEM contacted some of its members and learned of
2 JEM made no objection to the charge.
3 The DTPA liability question inquired whether “JEM engage[d] in any false,
misleading, or deceptive act or practice that Warner relied on to its detriment and that
was a producing cause of damages to Warner.” The court defined “false, misleading, or
deceptive practice” as: “Representing that goods or services are of a particular standard,
quality or grade when they are of another; or Representing that an agreement confers or
involves rights, remedies, or obligations which it does not have or involve.” See TEX. BUS.
& COMM. CODE ANN. § 17.46(b)(7),(12) (West Supp. 2017).
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what it called a jury “clerical mistake” resulting in an improper verdict. It argued “the jury’s
unanimous intent was to award damages to JEM on its breach of contract claim against
Warner for the amount owed to JEM for the equipment, excluding the computer and
touchscreen for the robot, and excluding labor and travel expenses sought by JEM.” This
meant, JEM further contended, the jury should have answered “yes,” rather than “no” to
a question inquiring if Warner breached the contract and should also have answered with
an amount of money to a related, conditionally submitted, damage question. JEM
accordingly sought a new trial under rule 3204 because, taking the jury’s “clerical error”
into account, the damages awarded Warner were manifestly too large and those awarded
JEM were manifestly too small. The trial court held a hearing on JEM’s motion and heard
the testimony of ten jurors. It denied the motion. Warner elected to recover under the
DTPA and the trial court signed a judgment awarding Warner the damages and attorney’s
fees found by the jury and costs.
Analysis
Through its issues one, two, and four JEM challenges the sufficiency of the
evidence supporting: JEM’s commission of a false, misleading, or deceptive act or
practice; Warner’s detrimental reliance on a misrepresentation; and producing causation.5
4 See TEX. R. CIV. P. 320.
5 A consumer seeking to recover under the DTPA’s “laundry list” of false,
misleading, or deceptive acts or practices” must plead and prove its detrimental reliance
on the defendant’s deceptive conduct was a producing cause of its damage. TEX. BUS. &
COMM. CODE ANN. §§ 17.45(4) (West Supp. 2017), 17.46(b) (West Supp. 2017),
17.50(a)(1) (West 2011).
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Warner asserts these evidentiary sufficiency challenges were not preserved in the trial
court.
Preservation of error for appellate review requires that a party timely object in the
trial court. TEX. R. APP. P. 33.1(a). A proper objection must be specific enough that the
trial court can understand the precise nature of the error alleged and the objection must
be made at such a point in the proceedings that the trial court is able to cure the error
alleged. Lake v. Premier Transp., 246 S.W.3d 167, 174 (Tex. App.—Tyler 2007, no pet.).
And any complaint made on appeal must comport with the objection made before the trial
court. Knapp v. Wilson N. Jones Mem’l Hosp., 281 S.W.3d 163, 170 (Tex. App.—Dallas
2009, no pet.).
Complaints of legal and factual insufficiency of the evidence in a case tried by jury
must be preserved in the trial court. See Daniels v. Empty Eye, Inc., 368 S.W.3d 743,
748-49 (Tex. App.—Houston [14th Dist.] 2012, pet. denied). A complaint that the
evidence was legally insufficient is preserved by: (1) a motion for directed verdict, (2) a
motion for judgment notwithstanding the verdict, (3) an objection to the submission of the
issue to the jury, (4) a motion to disregard the jury’s answer to a vital fact issue, or (5) a
motion for new trial. Cecil v. Smith, 804 S.W.2d 509, 510-11 (Tex. 1991). A legal
sufficiency challenge preserved only by a motion for new trial does not entitle the
appellant to rendition of judgment. In re C.L., No. 07-14-00180-CV, 2014 Tex. App. LEXIS
11104, at *11-12 (Tex. App.—Amarillo Oct. 7, 2014, no pet.) (mem. op.). A challenge of
the factual sufficiency of the evidence must be raised by a motion for new trial. Cecil, 804
S.W.2d at 510; TEX. R. CIV. P. 324(b)(2).
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A party challenging the legal sufficiency of an adverse finding on which it did not
have the burden of proof at trial must demonstrate no evidence supports the finding. Lone
Star Engine Installation Ctr., Inc. v. Gonzales, No. 05-14-01616-CV, 2016 Tex. App.
LEXIS 5006, at *15 (Tex. App.—Dallas May 11, 2016, pet. denied) (mem. op.) (citing
Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983)). In determining the legal
sufficiency of the evidence, we consider the evidence in the light most favorable to the
finding and indulge every reasonable inference that supports it. Scott’s Marina at Lake
Grapevine, Ltd. v. Brown, 365 S.W.3d 146, 151 (Tex. App.—Amarillo 2012, pet. denied)
(citing City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex. 2005)). We credit favorable
evidence if a reasonable jury could and disregard contrary evidence unless a reasonable
jury could not. City of Keller, 168 S.W.3d at 827. If the evidence would permit reasonable
and fair-minded people to reach the finding under review, the legal sufficiency challenge
fails. Id.
When a party challenges the factual sufficiency of the evidence, we consider all of
the evidence and will set aside the finding only if the evidence supporting the finding is
so weak or so against the overwhelming weight of the evidence that the finding is clearly
wrong and unjust. Scott’s Marina, 365 S.W.3d at 151 (citing Cain v. Bain, 709 S.W.2d
175, 176 (Tex. 1986)). In conducting our review, we are mindful that the jury is the sole
judge of the credibility of the witnesses and the weight to be given their testimony. City
of Keller, 168 S.W.3d at 819.
We agree with Warner that JEM did not preserve its legal or factual sufficiency
challenge of the DTPA elements included in issues one, two, and four. Despite JEM’s
argument in its reply brief, we are unable to read its motion for new trial, where it
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complained that damages were manifestly too large for Warner and manifestly too small
for JEM because of the jury’s “clerical” error, as bringing to the trial court’s attention a
challenge to the sufficiency of the evidence supporting jury findings on the ultimate fact
issues challenged by issues one, two, and four. Moreover, we have carefully reviewed
the entire evidentiary record according to the above standards and find sufficient evidence
permitted the jury to implicitly find in favor of Warner on the elements JEM challenges by
those issues. JEM’s first, second, and fourth issues are overruled.
By its third issue JEM argues no evidence supports its DTPA liability because
Warner’s only evidence of deceptive acts or practices depends on alleged duties and
damages arising under the parties’ agreement. The gist of JEM’s assertion is that
Warner’s liability claim under the DTPA exists only because the wrongful conduct alleged
is for breach of the parties’ agreement and the injuries alleged are only for the economic
loss to the agreement’s subject. See Southwestern Bell Tel. Co. v. DeLanney, 809
S.W.2d 493, 495 (Tex. 1991) (explaining the two-pronged analysis); see generally
Montgomery Ward & Co. v. Scharrenbeck, 146 Tex. 153, 204 S.W.2d 508, 510 (1947);
Jim Walter Homes, Inc. v. Reed, 711 S.W.2d 617, 618 (Tex. 1986).
Like its other no-evidence complaints, this issue was not preserved in the trial court
and therefore presents nothing for appellate review. TEX. R. APP. P. 33.1(a); Equistar
Chems., L.P. v. Dresser-Rand Co., 240 S.W.3d 864, 867 (Tex. 2007) (economic loss rule
complaint not preserved by objection to jury charge damage question); Caldwell v. Wright,
No. 10-14-00244-CV, 2016 Tex. App. LEXIS 8633 (Tex. App.—Waco 2016, no pet.)
(mem. op.) (same). JEM’s third issue is overruled.
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In its fifth issue JEM challenges the award of attorney’s fees to Warner. Its first
argument here is predicated on the correctness of its evidentiary sufficiency challenge to
Warner’s DTPA claim. It argues if Warner was not a prevailing consumer under the DTPA
it is not entitled to an award of attorney’s fees. See TEX. BUS. & COMM. CODE ANN.
§ 17.50(d) (West 2011) (“Each consumer who prevails shall be awarded court costs and
reasonable and necessary attorneys’ fees”); Gulf States Utils. Co. v. Low, 79 S.W.3d 561,
567 (Tex. 2002) (“Without an actual-damages recovery, a party is not entitled to an
attorney’s fees recovery”). But we have overruled JEM’s challenge of Warner’s DTPA
recovery.
JEM further argues the reasonableness of an award of attorney’s fees under the
DTPA was not shown because “at least 80% of the attorney’s fees awarded were incurred
during a period in which no DTPA cause of action was even being pursued.” Warner’s
case began with a breach of contract claim, for which attorney’s fees are recoverable. 6
Some thirty days before trial it added a DTPA claim. Warner’s attorney testified at trial of
fees and expenses supporting an award under the DTPA, breach of contract, and breach
of warranty claims. He segregated as unrecoverable $2,500 for defense of JEM’s
quantum meruit counterclaim. The attorney supported his testimony by placing in
evidence detailed billing statements and a spread-sheet summary of fees and expenses.
JEM did not raise objection to the legal or factual sufficiency of the evidence supporting
an award of attorney’s fees. Nor did it otherwise make the argument in the trial court it
now urges on appeal. The issue was therefore waived and nothing is preserved for our
review. TEX. R. APP. P. 33.1(a). Moreover, based on our review of the record, we believe
6 See TEX. CIV. PRAC. & REM. CODE Ann. § 38.001 (West 2015).
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legally and factually sufficient evidence supported the reasonableness of an award of
attorney’s fees to Warner under the DTPA. As an aside, we note that Warner sought fees
through trial of $72,960 while JEM sought fees through trial of $94,429.25. The amount
of an opponent’s fee request is a “surer indicator[] of a reasonable fee.” El Apple I, Ltd.
v. Olivas, 370 S.W.3d 757, 766 (Tex. 2012) (Hecht, J., concurring). We overrule JEM’s
fifth issue.
By its sixth issue JEM asserts Warner obtained a double recovery because it did
not pay the full sales price for the robotic system yet was permitted to retain it. We will
assume, only for this discussion, that JEM preserved the issue through the argument in
its post-trial motion that the damages were manifestly too large in favor of Warner and
manifestly too small as to JEM. See TEX. R. CIV. P. 320. The argument’s merit, however,
depends on the efficacy of JEM’s post-trial theory that the jury made a clerical error by
failing, after unanimously reaching a verdict, to write “yes” rather than “no” in response to
the question asking whether Warner breached the contract and failing to enter an amount
of damages in response to the corresponding damage question. The trial court denied
JEM’s motion for a new trial based on that ground and JEM has not challenged its denial
on appeal.
Alternatively, JEM argues a finding of zero damages for Warner’s alleged breach
of the contract was against the great weight and preponderance of the evidence. This
claim of error was not preserved in the trial court. Additionally, the pertinent damage
question was conditioned on a “yes” finding to the question inquiring of Warner’s liability
for breach of contract. Because the jury answered “no” to the breach of contract question
it rightly did not answer the damage question. JEM’s sixth issue is overruled.
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By its seventh issue, JEM seeks reversal and remand for an award of reasonable
attorney’s fees. The argument depends on it first prevailing on the precedent issue that
Warner breached the contract, entitling JEM to a monetary award. Because we have
overruled JEM’s breach-of-contract issue we overrule its seventh issue as moot.
Conclusion
Having overruled each of JEM’s issues we affirm the judgment of the trial court.
James T. Campbell
Justice
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