First Bank v. DTSG, LTD. and Richard Brumitt , 2015 Tex. App. LEXIS 5480 ( 2015 )

Affirmed as Modified and Opinion filed May 28, 2015.
In The
Fourteenth Court of Appeals
NO. 14-13-00694-CV
FIRST BANK, Appellant
V.
DTSG, LTD. AND RICHARD BRUMITT, Appellees
On Appeal from the 334th District Court
Harris County, Texas
Trial Court Cause No. 2009-64498
OPINION
In this lender-liability case, a company that sought to purchase the stock of
another company sued a bank alleging the bank failed to provide promised
financing for a stock-purchase transaction. Both the company and the owner of the
stock asserted various claims against the bank. The jury answered liability and
damages questions in favor of the company and the stockowner based on each
claimant’s breach-of-contract and negligent-misrepresentation claims, and the trial
court rendered judgment on the jury’s verdict. On appeal, we conclude that (1) the
trial court abused its discretion by allowing the stockowner’s lead trial counsel to
testify as an expert as to the company’s attorney’s fees; (2) none of the bank’s
other arguments challenging the breach-of-contract claims of the company or the
stockowner have merit; and (3) the company and the stockowner may not recover
under a negligent-misrepresentation claim because, as a matter of law, neither
party showed an injury independent from economic losses recoverable under a
breach-of-contract claim. Accordingly, we modify the trial court’s judgment to
delete the award of (a) attorney’s fees to the company, and (b) negligent-
misrepresentation damages and exemplary damages to the company and the
stockholder. We affirm the trial court’s judgment as modified.
I. FACTUAL AND PROCEDURAL BACKGROUND
In September 2007, Don Oprea, President of DTS Group, LLP approached
appellant/defendant First Bank seeking to obtain a United States Small Business
Administration (“SBA”) loan to provide funds to be used to purchase the stock of
two companies from appellee/intervenor Richard Brumitt. Oprea, who had a
banking relationship with First Bank, met with Tim Duffy, who was then the
president of First Bank’s SBA loan group. Later, DTSG 1 decided that it would
seek to purchase the stock of only one these companies—Southway Systems, Inc.
1
Appellee/plaintiff DTSG, Ltd., a Texas limited partnership was formed on July 23, 2008, after
the occurrence of many of the events on which this suit is based. Nonetheless, DTSG, Ltd. filed
this suit as successor in interest to DTS Group, LLP; and the distinction between these entities is
not material to our analysis in this opinion. For ease of reference, in this opinion both DTS
Group, LLP and DTSG, Ltd are referred to as “DTSG.”
2
According to Oprea, on various occasions, First Bank promised to fund a loan for
the purchase of the stock, with the proposed loan amount varying. According to
Oprea, Duffy made the promises in oral statements, in emails, and in three
commitment letters. First Bank never funded any loan to DTSG. DTSG did not
obtain a loan from any other lender nor purchase any of Southway’s stock. And,
Brumitt never sold the Southway stock.
In October 2009, DTSG sued First Bank asserting various claims, including
breach of contract and negligent misrepresentation. Brumitt intervened and
asserted various claims against First Bank, including negligent misrepresentation
and breach of contract as a third-party beneficiary of the alleged contracts between
DTSG and First Bank. Following a trial, the jury answered liability and damages
questions in favor of DTSG and Brumitt based on each claimant’s breach-of-
contract and negligent-misrepresentation claims. The jury also found the amount
of reasonable and necessary attorney’s fees for DTSG and Brumitt. After finding
that the harm to DTSG and Brumitt resulted from First Bank’s gross negligence,
the jury assessed exemplary damages against First Bank and in favor of DTSG and
Brumitt.
The trial court denied First Bank’s motion for judgment notwithstanding the
verdict and rendered judgment on the jury’s verdict, awarding each claimant actual
damages and attorney’s fees based upon the breach-of-contract claim, actual
damages based upon the negligent-misrepresentation claim, and exemplary
damages. On appeal, First Bank challenges the legal sufficiency of the evidence
supporting various jury findings.
II. ANALYSIS
When conducting a legal-sufficiency review, we consider the evidence in the
3
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, 823
(Tex. 2005). We must credit favorable evidence if a reasonable jury could and
disregard contrary evidence unless a reasonable jury 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 jury is the only judge of
witness credibility and the weight to give to testimony. See id. at 819.
A. Did the trial court err in submitting the question of DTSG’s damages to
the jury because the evidence of DTSG’s damages allegedly should not
have been admitted into evidence?
In its first issue, First Bank asserts the trial court abused its discretion by
submitting questions regarding DTSG’s damages to the jury because DTSG’s
evidence of damages was subject to the exclusionary rule contained in Texas Rule
of Civil Procedure 193.6(a). See Tex. R. Civ. P. 193.6(a). First Bank argues that,
because DTSG failed to disclose certain matters that it was required to disclose by
applicable discovery rules, the trial court had no discretion except to exclude any
evidence of DTSG’s damages. First Bank states that it objected during trial to
various attempts by DTSG to offer evidence of damages other than evidence of the
value of DTSG as of December 31, 2007, and that the trial court sustained various
objections by First Bank to evidence regarding DTSG’s damages. Though the trial
court sustained these objections, First Bank argues that the trial court erroneously
rejected its complaints that no question regarding DTSG’s damages should be
submitted to the jury because evidence of such damages was inadmissible. 2
2
First Bank states that it obtained a pre-trial ruling granting its motion in limine based on this
argument. But, this ruling did not preserve error, nor did it preclude First Bank from waiving its
evidentiary objections by failing to object to evidence or testimony during trial. See In re Toyota
4
We presume, without deciding, the following: (1) First Bank preserved
error regarding these complaints; 3 (2) upon timely objection, the trial court should
have excluded all evidence of DTSG’s damages due to DTSG’s failure to comply
with applicable discovery rules; and (3) if First Bank had made a timely
evidentiary objection to all evidence of DTSG’s damages offered at trial, the trial
court could have determined that no question regarding DTSG’s damages should
be submitted to the jury or that any answer to such a question should be
disregarded. 4
Motor Sales, U.S.A., 407 S.W.3d 746, 760 (Tex. 2013); Underwriters at Lloyds v. Edmond,
Deaton & Stephens Ins. Agency, Inc., No. 14-07-00352-CV, 2008 WL 5441225, at *6, n.7 (Tex.
App.—Houston [14th Dist.] Dec. 30, 2008, no pet.) (mem. op.).
3
First Bank asserts that it presented these complaints in a motion for directed verdict, objections
during the charge conference, and a motion for judgment notwithstanding the verdict. We
presume First Bank preserved error as to such complaints at the charge conference and in the
motion for judgment notwithstanding the verdict. First Bank moved for directed verdict after
DTSG and Brumitt rested their cases-in-chief, but this motion did not preserve error because
First Bank presented evidence after the trial court denied this motion and First Bank did not
renew the motion for directed verdict at the close of all of the evidence. See Liberty Mut. Ins.
Co. v. Heitkamp Swift Architects, Inc., No. 14-12-00873-CV, 2014 WL 261010, at *1 (Tex.
App.—Houston [14th Dist.] Jan. 23, 2014, pet. denied) (mem. op.); Dalbosco v. Seibert, No. 14-
11-00429-CV, 2012 WL 1795108, at *4–5 (Tex. App.—Houston [14th Dist.] May 17, 2012, pet.
denied) (mem. op.).
4
First Bank relies upon the Third Court of Appeals’s opinion in Robinson v. Lubbering. See No.
03-09-00605-CV, 2011 WL 749197, at *2–9 (Tex. App.—Austin Mar. 2011, no pet.) (mem.
op.). In that case, the defendants objected throughout trial to all evidence of the plaintiff’s
damages on the grounds that the evidence should be excluded based on the plaintiff’s failure to
comply with discovery rules. See id. Rather than expressly overrule or sustain these objections,
the trial court “opted to carry [defendants’] objections and motions to exclude through trial and
ultimately to submit, over objection, [plaintiff’s] damages claims to the jury.” Id. at *2. After
the jury answered and found liability and damages as to one of the claims, the trial court
disregarded the damage finding on the ground that the evidence of plaintiff’s damages should
have been excluded based on the objections the trial court had “opted to carry.” See id. at *2–3.
The court of appeals affirmed this ruling, thus indicating that a jury’s answer to a damage
question may be disregarded on the ground that all evidence of damages should have been
excluded at trial, even though this evidence was not excluded. See id. at *9. We presume,
5
First Bank does not assert, and the record does not reflect, that (1) First Bank
obtained a running objection to the admission of any evidence of DTSG’s damages
based on these complaints, or (2) First Bank timely objected to all trial evidence of
DTSG’s damages.5 Under its first issue, First Bank does not assert that the trial
evidence is legally insufficient to support the jury’s damages findings regarding
DTSG’s claims. Even under the above presumptions, the trial court did not err in
submitting damage questions to the jury over these complaints or in refusing to
disregard the jury’s damage findings based on these complaints if First Bank failed
to timely object to all trial evidence of DTSG’s damages. See Grohlman v. Kahlig,
318 S.W.3d 882, 888 (Tex. 2010) (noting that Texas Rules of Civil Procedure
require the submission of jury questions raised by the pleadings and the trial
evidence and that a court may refuse to submit a question if there is no trial
evidence warranting the submission of a question); Bay Area Healthcare Group,
Ltd. v. McShane, 239 S.W.3d 231, 235 (Tex. 2007) (noting that any error in the
admission of evidence is waived if the complaining party allows the evidence to be
introduced without objection). Accordingly, we overrule First Bank’s first issue.
B. Did the trial court abuse its discretion in allowing Brumitt’s lead trial
lawyer to testify as an expert regarding DTSG’s attorney’s fees?
Under its second issue, First Bank asserts the trial court abused its discretion
by allowing Brumitt’s lead trial counsel to testify as an expert as to DTSG’s
attorney’s fees.
without deciding, that this case was correctly decided and would be followed by the Fourteenth
Court of Appeals.
5
First Bank’s failure to object to all of the evidence of DTSG’s damages is one of the factual
distinctions between today’s case and the Lubbering case. See Lubbering, 2011 WL 749197, at
*2–9.
6
We presume, without deciding, the following: (1) First Bank preserved
error regarding these complaints; 3 (2) upon timely objection, the trial court should
have excluded all evidence of DTSG’s damages due to DTSG’s failure to comply
with applicable discovery rules; and (3) if First Bank had made a timely
evidentiary objection to all evidence of DTSG’s damages offered at trial, the trial
court could have determined that no question regarding DTSG’s damages should
be submitted to the jury or that any answer to such a question should be
disregarded. 4
Motor Sales, U.S.A., 407 S.W.3d 746, 760 (Tex. 2013); Underwriters at Lloyds v. Edmond,
Deaton & Stephens Ins. Agency, Inc., No. 14-07-00352-CV, 2008 WL 5441225, at *6, n.7 (Tex.
App.—Houston [14th Dist.] Dec. 30, 2008, no pet.) (mem. op.).
3
First Bank asserts that it presented these complaints in a motion for directed verdict, objections
during the charge conference, and a motion for judgment notwithstanding the verdict. We
presume First Bank preserved error as to such complaints at the charge conference and in the
motion for judgment notwithstanding the verdict. First Bank moved for directed verdict after
DTSG and Brumitt rested their cases-in-chief, but this motion did not preserve error because
First Bank presented evidence after the trial court denied this motion and First Bank did not
renew the motion for directed verdict at the close of all of the evidence. See Liberty Mut. Ins.
Co. v. Heitkamp Swift Architects, Inc., No. 14-12-00873-CV, 2014 WL 261010, at *1 (Tex.
App.—Houston [14th Dist.] Jan. 23, 2014, pet. denied) (mem. op.); Dalbosco v. Seibert, No. 14-
11-00429-CV, 2012 WL 1795108, at *4–5 (Tex. App.—Houston [14th Dist.] May 17, 2012, pet.
denied) (mem. op.).
4
First Bank relies upon the Third Court of Appeals’s opinion in Robinson v. Lubbering. See No.
03-09-00605-CV, 2011 WL 749197, at *2–9 (Tex. App.—Austin Mar. 2011, no pet.) (mem.
op.). In that case, the defendants objected throughout trial to all evidence of the plaintiff’s
damages on the grounds that the evidence should be excluded based on the plaintiff’s failure to
comply with discovery rules. See id. Rather than expressly overrule or sustain these objections,
the trial court “opted to carry [defendants’] objections and motions to exclude through trial and
ultimately to submit, over objection, [plaintiff’s] damages claims to the jury.” Id. at *2. After
the jury answered and found liability and damages as to one of the claims, the trial court
disregarded the damage finding on the ground that the evidence of plaintiff’s damages should
have been excluded based on the objections the trial court had “opted to carry.” See id. at *2–3.
The court of appeals affirmed this ruling, thus indicating that a jury’s answer to a damage
question may be disregarded on the ground that all evidence of damages should have been
excluded at trial, even though this evidence was not excluded. See id. at *9. We presume,
5
court gave First Bank a running objection to the entirety of the testimony of
Brumitt’s counsel and allowed Brumitt’s counsel to testify to the reasonableness of
the attorney’s fees charged for the services DTSG’s attorneys rendered.
Texas Rule of Civil Procedure 193.6, which governs the consequences for
failing to timely respond to written discovery, provides in pertinent part as follows:
(a) Exclusion of Evidence and Exceptions. A party who fails to make,
amend, or supplement a discovery response in a timely manner may
not introduce in evidence the material or information that was not
timely disclosed, or offer the testimony of a witness (other than a
named party) who was not timely identified, unless the court finds
that:
(1) there was good cause for the failure to timely make, amend, or
supplement the discovery response; or
(2) the failure to timely make, amend, or supplement the discovery
response will not unfairly surprise or unfairly prejudice the other
parties.
(b) Burden of Establishing Exception. The burden of establishing
good cause or the lack of unfair surprise or unfair prejudice is on the
party seeking to introduce the evidence or call the witness. A finding
of good cause or of the lack of unfair surprise or unfair prejudice must
be supported by the record.
Tex. R. Civ. P. 193.6.
On appeal, DTSG suggests that it did not need to designate Brumitt’s
counsel as its expert because he was testifying based on his personal knowledge of
the work he did with DTSG’s attorneys. But, even if some of the testimony dealt
with the work Brumitt’s counsel did with DTSG, the core of the testimony at issue
is Brumitt’s expert testimony as to a reasonable fee for the necessary services of
DTSG’s attorneys, and this testimony is expert testimony for which an expert
designation is required. See E.F. Hutton & Co. v. Youngblood, 741 S.W.2d 363,
364 (Tex. 1987) (per curiam).
8
DTSG also argues that it did designate Brumitt’s counsel as its expert based
on the following language in its expert-designation document:
[DTSG] express[es] [its] intention to possibly call witnesses
associated with adverse parties and any other party’s experts.
...
[DTSG] hereby designate[s], as adverse parties, potentially adverse
parties, and/or as witnesses associated with adverse parties, all parties
to this suit and all experts designated by any party to this suit . . . .
We conclude that this language was insufficient to designate Brumitt’s counsel as
an expert regarding attorney’s fees or to satisfy DTSG’s obligations to update its
responses to First Bank’s requests for disclosure. 6 See American Cyanamid Co. v.
Frankson, 732 S.W.2d 648, 655–56 (Tex. App.—Corpus Christi 1987, writ ref’d
n.r.e.) (concluding that an expert designation in which a party reserved the right to
call all experts designated to testify as witnesses by other parties was insufficient).
By overruling First Bank’s objections and allowing Brumitt’s counsel to
testify on direct examination as DTSG’s attorney’s fees expert, the trial court
implicitly found that either (1) there was good cause for DTSG’s failure to timely
make, amend, or supplement the discovery response; or (2) the failure to timely
make, amend, or supplement the discovery response did not unfairly surprise or
unfairly prejudice First Bank.7 See Tex. R. Civ. P. 193.6. Though the burden of
6
DTSG relies upon this court’s opinion in Missouri Pacific Railroad Company v. Lemon. See
861 S.W.2d 501, 531 (Tex. App.—Houston [14th Dist.] 1993, writ dism’d by agr.). The part of
that opinion on which DTSG relies involved discovery responses regarding persons with
knowledge of relevant facst, rather than expert-witness designations, and in Lemon the objecting
parties themselves had designated the fact witnesses to which they objected. See id. We
conclude that Lemon is not on point. See id.
7
On appeal, DTSG argues that the record supports the trial court’s implied finding as to unfair
surprise or unfair prejudice; DTSG does not argue that the record supports the trial court’s
implied finding as to good cause.
9
At trial, DTSG attempted to call its lead trial counsel as an expert witness to
testify as to what a reasonable fee would be for the necessary services of DTSG’s
attorneys. First Bank objected that DTSG had not designated any expert witness as
to attorney’s fees in response to First Bank’s request for disclosure. The trial court
noted that DTSG had not designated an expert witness for attorney’s fees. Brumitt
had designated his lead trial counsel as an expert regarding Brumitt’s attorney’s
fees, and First Bank objected to the sufficiency of Brumitt’s disclosure regarding
this expert’s opinions. After the trial court indicated that it would overrule First
Bank’s objection to Brumitt’s expert and allow him to testify as to Brumitt’s
attorney’s fees, DTSG asked the trial court to allow DTSG to call Brumitt’s lead
counsel as an expert regarding DTSG’s attorney’s fees. DTSG noted that it had
sent its attorney’s fees invoices to First Bank. DTSG also relied upon a statement
in its expert designations that DTSG claimed was sufficient to designate the
experts of all other parties as experts for DTSG.
First Bank admitted receiving the invoices a couple of days before trial.
Nonetheless, First Bank stated that (1) DTSG did not designate an attorney’s fees
expert or provide any information regarding any expert’s opinions and (2) First
Bank did not know what amount DTSG was claiming to be a reasonable fee for the
necessary services of DTSG’s attorneys. After the trial court first indicated that it
would allow Brumitt’s counsel to testify only as to a reasonable fee for the
necessary services of Brumitt’s attorneys, the trial court then stated it would allow
Brumitt’s counsel to testify as to what DTSG disclosed to First Bank.
Brumitt’s counsel then testified regarding the contents of the attorney’s fees
invoices to DTSG. DTSG offered these invoices into evidence, but the trial court
sustained First Bank’s objection, and these invoices were never admitted. The trial
7
court gave First Bank a running objection to the entirety of the testimony of
Brumitt’s counsel and allowed Brumitt’s counsel to testify to the reasonableness of
the attorney’s fees charged for the services DTSG’s attorneys rendered.
Texas Rule of Civil Procedure 193.6, which governs the consequences for
failing to timely respond to written discovery, provides in pertinent part as follows:
(a) Exclusion of Evidence and Exceptions. A party who fails to make,
amend, or supplement a discovery response in a timely manner may
not introduce in evidence the material or information that was not
timely disclosed, or offer the testimony of a witness (other than a
named party) who was not timely identified, unless the court finds
that:
(1) there was good cause for the failure to timely make, amend, or
supplement the discovery response; or
(2) the failure to timely make, amend, or supplement the discovery
response will not unfairly surprise or unfairly prejudice the other
parties.
(b) Burden of Establishing Exception. The burden of establishing
good cause or the lack of unfair surprise or unfair prejudice is on the
party seeking to introduce the evidence or call the witness. A finding
of good cause or of the lack of unfair surprise or unfair prejudice must
be supported by the record.
Tex. R. Civ. P. 193.6.
On appeal, DTSG suggests that it did not need to designate Brumitt’s
counsel as its expert because he was testifying based on his personal knowledge of
the work he did with DTSG’s attorneys. But, even if some of the testimony dealt
with the work Brumitt’s counsel did with DTSG, the core of the testimony at issue
is Brumitt’s expert testimony as to a reasonable fee for the necessary services of
DTSG’s attorneys, and this testimony is expert testimony for which an expert
designation is required. See E.F. Hutton & Co. v. Youngblood, 741 S.W.2d 363,
364 (Tex. 1987) (per curiam).
8
C. Was the testimony of DTSG’s expert unreliable?
In its sixth issue, First Bank asserts that the testimony of DTSG’s expert,
Anthony DeBenedictis, was unreliable and thus legally insufficient to support the
jury’s verdict. Because of DTSG’s failure to timely disclose all of the matters on
which DeBenedictis planned to testify at trial, the trial court indicated that, though
DeBenedictis could testify as to his opinion regarding the value of DTSG on
December 31, 2007, DeBenedictis could not testify as to his opinion regarding the
value of DTSG on any other date or regarding the amount of damages DTSG
allegedly sustained. At trial, DeBenedictis testified regarding his opinion that the
value of DTSG on December 31, 2007 was $493,873. First Bank argues that this
testimony was not based upon specialized knowledge, did not have a sufficient
basis, and was not reliable.10 In support of its argument, First Bank asserts the
following:
• DeBenedictis became a Certified Public Accountant in 2010, and his
testimony at trial was only the second time that he had testified in court.
• DeBenedictis was unfamiliar with the opinions of recognized experts in his
field with regard to the “order of magnitude” that should be used when
comparing companies to determine value.
• During direct examination, DeBenedictis changed a percentage used in his
calculation from 7.2% to 6.0% as he was presenting his calculation to the
jury.
• DeBenedictis admitted that his workpapers and calculations contained
typographical errors for which he was responsible.
• Although the Statement of Standards of Valuation Services Number 1
10
First Bank raised these issues in a pre-trial motion to exclude DeBenedictis’s testimony. The
trial court denied the motion.
12
recommends using the income approach, the asset approach, and the market
approach in valuing a business, DeBenedictis used only the income and
market approaches.
• Though DTSG is not a publicly traded company, DeBenedictis used publicly
traded companies in his valuation analysis.
• When confronted with the fact that DTSG, Ltd. did not exist on December
31, 2007, DeBenedictis testified that he performed the valuation presuming
that DTSG, Ltd. was a successor company to DTS Group, LLP.
• First Bank’s expert, Richard Claywell, testified that DeBenedictis’s opinion
was not supported by sufficient relevant data and was unreliable because
DeBenedictis did not follow the professional standards that certified public
accountants are required to follow in performing business valuations.
• The “analytical gap” between the data upon which DeBenedictis relied and
his opinion as to the value of DTSG on December 31, 2007, was too great.
• DeBenedictis’s opinion as to value was not reliable because it was based on
a flawed methodology and mathematical errors.
For an expert’s testimony to be admissible, the expert must be qualified to
testify about “scientific, technical, or other specialized knowledge,” and the
testimony must be relevant and based upon a reliable foundation. See Tex. R.
Evid. 702; TXI Transportation Co. v. Hughes, 306 S.W.3d 230, 234 (Tex. 2010).
An expert’s testimony is relevant when it assists the jury in determining an issue or
in understanding other evidence. See Tex. R. Evid. 702; TXI Transportation Co.,
306 S.W.3d at 234. But, expert testimony based on an unreliable foundation or
flawed methodology is unreliable and does not satisfy the requirements of Texas
Rule of Evidence 702. See Tex. R. Evid. 702; TXI Transportation Co., 306
S.W.3d at 234.
When the reliability of an expert’s testimony is challenged, courts should
ensure that the expert’s opinion comports with the applicable professional
13
standards. See TXI Transportation Co., 306 S.W.3d at 235. To aid courts in
making that determination, the Supreme Court of Texas has suggested several
factors to consider when assessing the admissibility of expert testimony under Rule
702. See id. These factors include the following: (1) the extent to which the
theory has been or can be tested; (2) the extent to which the technique is dependent
upon the subjective interpretation of the expert; (3) whether the theory has been
subjected to peer review or publication; (4) the technique’s potential rate of error;
(5) whether the underlying theory or technique has been generally accepted as
valid by the relevant scientific community; and (6) the non-judicial uses of the
theory or technique. See id. at 235, n.2. The high court has emphasized, however,
that these factors are non-exclusive, and that they do not fit every scenario. See id.
at 235.
Expert testimony is unreliable when there is simply too great an analytical
gap between the data upon which the expert relies and the opinion the expert
offers. See id. at 239. Expert testimony is also unreliable if it is not grounded in
scientific methods and procedures, but rather is based upon subjective belief or
unsupported speculation. See id. The court’s ultimate task, however, is not to
determine whether the expert’s conclusions are correct, but rather to determine
whether the analysis the expert used to reach those conclusions is reliable and
therefore admissible. See id.
DTSG sought to recover damages based upon the decline in value of DTSG
that allegedly resulted from First Bank’s breach of contract. In question two of the
jury charge, the trial court asked the jury to determine the amount of money, if any,
that would fairly and reasonably compensate DTSG for its past consequential
damages that resulted from First Bank’s failure to comply with one or more of the
14
establishing good cause or the lack of unfair surprise or unfair prejudice was on
DTSG, that party did not expressly argue prior to this expert’s testimony that either
of these exceptions applied, nor did DTSG submit evidence to the trial court in an
attempt to establish either of these exceptions. An expert may testify that a
reasonable fee for the necessary services of a party’s attorneys is less than, equal
to, or more than the amount of fees charged by those attorneys. DTSG’s sending
to First Bank copies of its invoices a few days before trial did not communicate to
First Bank that DTSG intended to call any expert witness, or that any expert
witness would opine that any amount was a reasonable fee for the necessary
services of DTSG’s attorneys.
DTSG listed Brumitt’s counsel on its original witness list, but did not refer
to him testifying as an expert. Two weeks before trial, DTSG listed Brumitt’s
counsel on its amended witness list and referred to him as “expert witness on
attorneys’ fees.” But, DTSG did not state that counsel would be an expert witness
on DTSG’s attorney’s fees, and these lists did not constitute discovery responses or
provide the information about experts requested in First Bank’s request for
disclosure. DTSG correctly states that it has sought to recover attorney’s fees
throughout this case, but a party’s seeking to recover attorney’s fees does not
necessarily mean that the party will submit expert testimony regarding these
attorney’s fees. DTSG asserts that First Bank apparently anticipated DTSG would
call an expert witness regarding attorney’s fees because, more than a year before
trial, First Bank designated expert witnesses to testify regarding the reasonableness
and necessity of any attorney’s fees that any party in the case sought to recover.
But, designating a potential expert to testify as to whether the fees sought by
DTSG or Brumitt are reasonable and necessary does not mean that First Bank
knew that DTSG would call an attorney’s fees expert.
10
non-litigation purposes.
• The asset approach is based on converting the assets of a business to cash.
DeBenedictis considered using this approach but decided it would be
inappropriate to use this approach because DTSG is a service provider.
DeBenedictis explained how he calculated DTSG’s value on December 31,
2007, based upon the income approach using a discounted-cash-flow method.
DeBenedictis also testified regarding his calculation of DTSG’s value on
December 31, 2007, based upon the market approach using a public-company
model and a mergers-and-acquisitions model. DeBenedictis explained how he
weighted the three values to come up with a final valuation of $493,873.
After reviewing the record under the applicable standard of review, we
conclude that DeBenedictis’s testimony regarding his opinion of DTSG’s value on
December 31, 2007, was based upon specialized knowledge and was reliable. See
Von Hohn v. Von Hohn, 260 S.W.3d 631, 634–38 (Tex. App.—Tyler 2008, no
pet.) (rejecting argument that valuation expert’s testimony was irrelevant and
unreliable); In re Marriage of Rice, 96 S.W.3d 642, 647–48 (Tex. App.—
Texarkana 2003, no pet.) (rejecting argument that valuation expert’s testimony
was unreliable). We overrule First Bank’s sixth issue.
D. Is there merit in any of First Bank’s challenges under its eighth issue to
the jury’s breach-of-contract findings in favor of DTSG?
There was evidence at trial that at all material times Don Oprea has been the
owner of DTSG and that he was the owner of DTS Group, LLP, the predecessor to
DTSG. There was also evidence that First Bank sent an undated commitment
letter to Oprea of “DTS Group” in February 2008 (the “First Letter”). Oprea
signed the First Letter and then returned it to First Bank within the time period
specified in the First Letter.
16
There was evidence that First Bank sent a second, undated commitment
letter to Oprea of “DTS Group” in April 2008 (the “Second Letter”). The text of
the Second Letter is substantially similar to the text of the First Letter, except that
the amount of the loan and of the life-insurance policy was reduced from
$1,250,000 to $800,000. Oprea signed the Second Letter and returned the signed
letter to First Bank within the time period specified in the Second Letter.
There was evidence that First Bank sent a third, undated commitment letter
to Oprea of “DTSG, Ltd.” in August 2008 (the “Third Letter”). The text of the
Third Letter is substantially similar to the text of the Second Letter, except that (1)
the amount of the loan and of the life-insurance policy was increased to $923,000;
(2) the borrower was described as “DTSG, Ltd.”; and (3) the guarantors were
different. Oprea signed the Third Letter and returned the signed letter to First
Bank within the time period specified in the Third Letter.
In the jury charge, the trial court defined “Agreements” to mean “the loan
commitment issued by First Bank in February 2008, the loan commitment issued
by First Bank in April 2008, and the loan commitment issued by First Bank in
August 2008,” thus defining “Agreements” to mean the First Letter, the Second
Letter, and the Third Letter (collectively the “Letters”). In response to the question
one, the jury found that First Bank failed to comply with “any Agreement with
DTSG,” thus finding that First Bank failed to comply with one or more of the
Letters.
1. DTSG’s alleged failure to satisfy each condition precedent
Under its eighth issue, First Bank argues that the evidence is legally
insufficient to support the jury’s finding that First Bank failed to comply with one
or more of the Letters because DTSG did not satisfy its burden of proving that each
17
of the conditions precedent listed in the Letters was satisfied.
In its live petition, DTSG pleaded that all conditions precedent to its claims
for relief had been performed or had occurred. Therefore, DTSG was required to
prove only the conditions precedent that First Bank specifically denied. See Tex.
R. Civ. 54; Community Bank & Trust v. Fleck, 107 S.W.3d 541, 542 (Tex. 2002)
(per curiam). First Bank’s live answer to DTSG’s petition does not contain any
specific denials as to the alleged conditions precedent asserted by First Bank.11
Because First Bank did not specifically deny that any condition precedent had been
performed or had occurred, DTSG did not have to prove at trial that any condition
precedent was satisfied. 12 See Tex. R. Civ. 54; Community Bank & Trust, 107
S.W.3d at 542; Bencon Management & General Contracting, Inc. v. Boyer, Inc.,
178 S.W.3d 198, 203–05 (Tex. App.—Houston [14th Dist.] 2005, no pet.).
The only argument First Bank briefs in support of its contention that the
evidence is legally insufficient to support the jury’s finding that First Bank
breached one of the Letters is its argument that the evidence is legally insufficient
to support a finding that DTSG satisfied each of the applicable conditions
precedent. Because DTSG did not have to prove at trial that any condition
precedent was satisfied, this argument lacks merit. See Tex. R. Civ. 54; Community
Bank & Trust, 107 S.W.3d at 542; Bencon Management & General Contracting,
Inc., 178 S.W.3d at 203–05. Accordingly, we overrule First Bank’s eighth issue to
the extent First Bank argues that the evidence is legally insufficient to support the
11
The answer contains a general denial and does not mention anything about conditions
precedent. On appeal, First Bank does not assert that it specifically denied that any condition
precedent had been performed or had occurred.
12
First Bank cites several cases involving conditions precedent, but none of these cases involve
application of Texas Rule of Civil Procedure 54.
18
jury’s finding that First Bank failed to comply with one or more of the Letters.
2. Existence of evidence showing that any damages to DTSG resulted from
First Bank’s failure to comply with one of the Letters
In the second section under its eighth issue, First Bank asserts that there is
no evidence that its alleged breach of contract caused any injury to DTSG.
Specifically, First Bank contends that there is no evidence showing that its failure
to fund the loan caused damages to DTSG. In this part of its briefing First Bank
makes several statements about some of the evidence in the record. 13 First Bank
cites testimony from Oprea that DTSG entered into a three-year lease for a larger
space in anticipation of the acquisition of Southway, that DTSG hired an
acquisition consultant, and that DTSG moved a key salesperson to Southway. First
Bank notes that this activity all occurred in January or early February 2008, before
any of the Letters were issued. 14
First Bank does not mention in its briefing that, in response to question two,
the jury found that $300,000 would fairly and reasonably compensate DTSG for its
past direct damages that resulted from First Bank’s failure to comply with one or
more of the Letters and that $493,873 would fairly and reasonably compensate
13
First Bank cites Oprea’s testimony regarding (1) the current status of DTSG’s business, (2) the
status of DTSG’s business in 2007, (3) losses that DTSG suffered in 2008, 2009, 2010, and
2011. First Bank cites evidence indicating that (1) the Stock Purchase Agreement was never
rescinded, canceled, or breached; (2) after taking his loan file from First Bank, Oprea continued
to seek financing from other banks in 2009 to consummate the Stock Purchase Agreement; (3)
the Stock Purchase Agreement did not require First Bank to provide any financing; and (4)
DTSG’s obligation to close under the Stock Purchase Agreement was contingent upon DTSG
obtaining financing.
14
First Bank also states that DTSG did not deliver a copy of the final Stock Purchase Agreement
to First Bank until June 2008, and that this delivery was one of the conditions of the loan
commitment. As discussed in the previous section, DTSG did not have to prove at trial that any
condition precedent was satisfied.
19
DTSG for its past consequential damages that resulted from this failure to comply.
First Bank does not mention the trial court’s instructions to the jury regarding the
legal standard for the jury’s determination of direct damages and consequential
damages. At the charge conference, no party objected to either of these
instructions or to the form of question two. Therefore, the sufficiency of the
evidence supporting the jury’s damage findings is to be measured using the charge
given. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). First Bank does not
assert that the evidence is legally insufficient to support the jury’s finding in
response to question two.15 First Bank does not state that the evidence is legally
insufficient to support the jury’s finding that $300,000 in direct damages or
$493,873 in consequential damages resulted from First Bank’s failure to comply
with one or more of the Letters. The reporter’s record contains more than 830
pages of testimony from witnesses at trial and more than 6,900 pages of trial
exhibits. This court has no duty to search a voluminous record without guidance
from First Bank to determine its argument. See Marsh v. Livingston, No. 14-09-
00011-CV, 2010 WL 1609215, at *5 (Tex. App.—Houston [14th Dist.] Apr. 22,
2010, pet. denied) (mem. op.). Even under a liberal construction of this part of
First Bank’s appellate briefing, we conclude that First Bank is only arguing that
there is no evidence that any damage to DTSG resulted from First Bank’s alleged
breach of contract by failing to fund the loan to DTSG.
Oprea testified that in reliance on First Bank’s promises to fund a loan to
DTSG that predated the Letters, DTSG hired an acquisition consultant in January
15
At one point in this section of its brief, First Bank states that the evidence is legally
insufficient to support the “jury’s answer to the breach of contract question for DTSG.” But, that
question (question one) did not involve causation or the issue of whether any damage resulted
from First Bank’s failure to comply.
20
2008, and agreed to pay him $72,000 per year. Oprea also testified that in late
January or early February 2008 (approximately one month before the First Letter
was issued), DTSG moved a key salesperson over to Southway to begin the
transition that would occur when DTSG purchased the stock of Southway.
According to Oprea, moving that senior salesperson to Southway decreased
DTSG’s sales revenues, and DTSG also paid this employee a salary of $45,000 per
year to work at Southway while not creating any revenue for the company.
Though DTSG took these actions approximately one month before First Bank
issued the First Letter, under the applicable standard of review, the trial evidence
would enable reasonable and fair-minded people to find that, after First Bank
issued the First Letter, DTSG continued to pay the acquisition consultant and
continued to pay the salesperson to work at Southway in reliance upon the First
Letter and that damage to DTSG resulted from First Bank’s breach of contract by
failing to fund the loan to DTSG. Therefore, First Bank’s argument in the second
section under its eighth issue lacks merit.
3. First Bank’s challenges in support of its assertion that there was no
evidence of DTSG’s damages
In the third section under its eighth issue, First Bank asserts that there is no
evidence of DTSG’s damages. In support of this assertion, First Bank states that
DTSG’s only evidence of damages is DeBenedictis’s testimony. But, the
voluminous record from trial contains other evidence regarding damages, some of
which is discussed in DTSG’s appellate briefing. First Bank does not address this
evidence; rather, it presumes that DeBenedictis’s testimony as to DTSG’s value on
December 31, 2007, is the only arguable evidence supporting the existence of any
21
damages to DTSG resulting from First Bank’s breach of contract. 16
First Bank states in a conclusory manner that there is no evidence of any lost
profits, lost business opportunities, or any actual or consequential damages of any
kind caused by First Bank as a result of the failure to close and fund the loan
commitments. Though First Bank provides a few record cites and cites one case, it
does not evaluate or dissect the voluminous evidence admitted during trial or
present argument and analysis to show that under the applicable standard of
review, none of this evidence would enable reasonable and fair-minded people to
find that any damage to DTSG resulted from any failure of First Bank to comply
with any of the Letters. First Bank briefly outlines what would have happened if
the closing had occurred under the Stock Purchase Agreement, but this argument is
only relevant to benefit-of-the-bargain or expectancy damages. First Bank
correctly notes that its failure to fund any loan to DTSG did not cause DTSG to be
in breach of the Stock Purchase Agreement, which was conditioned on DTSG
obtaining financing. Though this conclusion means that DTSG did not suffer any
damages by being in breach of the Stock Purchase Agreement, it does not mean
that DTSG suffered no damages at all. In this short section, First Bank has not
sufficiently briefed an argument showing that, under the applicable standard of
review, the voluminous trial evidence would not enable reasonable and fair-minded
people to find that any damage to DTSG resulted from any failure of First Bank to
comply with any of the Letters. See Marsh, 2010 WL 1609215, at *5.
In light of our sustaining, in part, of the second issue, we need not address
16
First Bank also refers back to its arguments under the sixth issue. We already have addressed
and overruled this issue.
22
DTSG for its past consequential damages that resulted from this failure to comply.
First Bank does not mention the trial court’s instructions to the jury regarding the
legal standard for the jury’s determination of direct damages and consequential
damages. At the charge conference, no party objected to either of these
instructions or to the form of question two. Therefore, the sufficiency of the
evidence supporting the jury’s damage findings is to be measured using the charge
given. See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000). First Bank does not
assert that the evidence is legally insufficient to support the jury’s finding in
response to question two.15 First Bank does not state that the evidence is legally
insufficient to support the jury’s finding that $300,000 in direct damages or
$493,873 in consequential damages resulted from First Bank’s failure to comply
with one or more of the Letters. The reporter’s record contains more than 830
pages of testimony from witnesses at trial and more than 6,900 pages of trial
exhibits. This court has no duty to search a voluminous record without guidance
from First Bank to determine its argument. See Marsh v. Livingston, No. 14-09-
00011-CV, 2010 WL 1609215, at *5 (Tex. App.—Houston [14th Dist.] Apr. 22,
2010, pet. denied) (mem. op.). Even under a liberal construction of this part of
First Bank’s appellate briefing, we conclude that First Bank is only arguing that
there is no evidence that any damage to DTSG resulted from First Bank’s alleged
breach of contract by failing to fund the loan to DTSG.
Oprea testified that in reliance on First Bank’s promises to fund a loan to
DTSG that predated the Letters, DTSG hired an acquisition consultant in January
15
At one point in this section of its brief, First Bank states that the evidence is legally
insufficient to support the “jury’s answer to the breach of contract question for DTSG.” But, that
question (question one) did not involve causation or the issue of whether any damage resulted
from First Bank’s failure to comply.
20
damages to DTSG resulting from First Bank’s breach of contract. 16
First Bank states in a conclusory manner that there is no evidence of any lost
profits, lost business opportunities, or any actual or consequential damages of any
kind caused by First Bank as a result of the failure to close and fund the loan
commitments. Though First Bank provides a few record cites and cites one case, it
does not evaluate or dissect the voluminous evidence admitted during trial or
present argument and analysis to show that under the applicable standard of
review, none of this evidence would enable reasonable and fair-minded people to
find that any damage to DTSG resulted from any failure of First Bank to comply
with any of the Letters. First Bank briefly outlines what would have happened if
the closing had occurred under the Stock Purchase Agreement, but this argument is
only relevant to benefit-of-the-bargain or expectancy damages. First Bank
correctly notes that its failure to fund any loan to DTSG did not cause DTSG to be
in breach of the Stock Purchase Agreement, which was conditioned on DTSG
obtaining financing. Though this conclusion means that DTSG did not suffer any
damages by being in breach of the Stock Purchase Agreement, it does not mean
that DTSG suffered no damages at all. In this short section, First Bank has not
sufficiently briefed an argument showing that, under the applicable standard of
review, the voluminous trial evidence would not enable reasonable and fair-minded
people to find that any damage to DTSG resulted from any failure of First Bank to
comply with any of the Letters. See Marsh, 2010 WL 1609215, at *5.
In light of our sustaining, in part, of the second issue, we need not address
16
First Bank also refers back to its arguments under the sixth issue. We already have addressed
and overruled this issue.
22
as conferring any benefits on nonsignatory parties. 18 See id. at 652. Though the
MCI court could have crafted a legal standard limited to the determination of third-
party-beneficiary status in the context of a contract containing such a clause, the
MCI court did not do so. See id. at 651–52. Instead, after articulating the general
rules for third-party-beneficiary status, the MCI court indicated that the intention of
contracting parties to confer a direct benefit on a third party must be “clearly and
fully spelled out” in the contract itself. See id. at 651–52 (stating that “[t]here is
simply no contractual language to indicate that MCI and MoPac entered into the
contract directly for TU’s benefit. Thus, TU is not a creditor or donee beneficiary
of the contract and, at best, is an incidental beneficiary of the contract” and that
“[t]he contract between MCI and MoPac does not contain any such indication.
Therefore, TU is not a third party-beneficiary”) (citations omitted, emphasis
added).
The Supreme Court of Texas and a number of intermediate courts of appeals
have construed the MCI opinion as limiting the scope of the third-party-beneficiary
analysis to the four corners of a written contract. See Stine v. Stewart, 80 S.W.3d
586, 589 (Tex. 2002) (citing the MCI case for the proposition that the agreement in
question “must clearly and fully express an intent to confer a direct benefit to the
third party”) (per curiam); Ortega v. City Nat’l Bank, 97 S.W.3d 765, 773 (Tex.
App.—Corpus Christi 2003, no pet.) (citing the MCI case for the proposition that
“[t]he intent of the contracting parties to confer a direct benefit to the third party
must be ‘clearly and fully’ expressed in the agreement itself”).
We now consider whether two opinions issued by the Supreme Court of
Texas in 2011 changed this rule. See Sharyland Water Supply Corp., 354 S.W.3d
18
None of the Letters contain any such provision.
25
at 420–21; Basic Capital Management, 348 S.W.3d at 899–901. In Basic Capital,
the high court quoted various principles of third-party-beneficiary law from the
MCI opinion. See Basic Capital Management, 348 S.W.3d at 899–900. The Basic
Capital court then noted that the construction of an unambiguous instrument is a
question of law for the court. See id. at 900. The court did not state that the
determination of the third-party-beneficiary issue is a question of law for the court.
See id. at 899–901. The court then analyzed the contract in question and
concluded that, if the parties did not intend to benefit the third parties directly, then
the contract had no purpose whatsoever. See id. at 900. The court noted that the
contract did not contain an express statement of an intention to benefit the third
parties. See id. Nonetheless, the court concluded that the contract “‘clearly and
fully spelled out’ the benefit to [the third parties] because their role was basic to
[the contract].” 19 Id. at 901 (emphasis added). The Basic Capital court held that
there was no need to obtain a jury finding as to the third-party-beneficiary issue
because the contract was unambiguous and because “[t]he [contract] itself, and the
undisputed evidence regarding its negotiation and purpose, establish that [the third
parties] were third-party beneficiaries.”20 Id. at 901 (footnote omitted). In
determining that two plaintiffs were third-party beneficiaries entitled to recover
under an unambiguous loan-commitment contract, the Basic Capital court did not
limit its review to the four corners of the unambiguous contract; rather, the court
19
The Basic Capital court did not state that the contract “clearly and fully spelled out” the
contracting parties’ intention to confer a direct benefit on the third parties. Basic Capital
Management, 348 S.W.3d at 900–01.
20
Though the extrinsic evidence in Basic Capital was undisputed, the Basic Capital court
nonetheless considered it. See Basic Capital Management, 348 S.W.3d at 901. Thus, the reason
given by the Basic Capital court for why no jury finding was needed in light of the extrinsic
evidence was not that extrinsic evidence may not be considered, but that the extrinsic evidence in
that case was undisputed. See id.
26
considered evidence regarding the negotiation and purpose of the contract.21 See
id. We conclude that, after the Basic Capital decision, extrinsic evidence may be
considered in determining whether a person is a third-party beneficiary of the
contract, even if the contract is a written, unambiguous contract. See id. at 899–
901.
Six months after it decided Basic Capital, the Supreme Court of Texas
issued its opinion in Sharyland. See Sharyland Water Supply Corp., 354 S.W.3d at
420–21. Though the high court agreed with the court of appeals’s conclusion that
Sharyland was not a third-party beneficiary of the agreements as a matter of law,
the high court did not employ the same analysis. Compare Sharyland Water
Supply Corp., 354 S.W.3d at 420–21, with City of Alton v. Sharyland Water Supply
Corp., 277 S.W.3d 132, 148–52 (Tex. App.—Corpus Christi 2009), aff’d in part,
rev’d in part by Sharyland Water Supply Corp., 354 S.W.3d at 412–24. The court
of appeals applied the legal standard from the MCI line of cases, under which a
person is not a third-party beneficiary of a contract unless the contract itself shows
the contracting parties’ intention to confer a direct benefit on the person. See City
of Alton, 277 S.W.3d 132, 149–50. The high court in Sharyland indicated that
extrinsic evidence should be considered in determining whether a person is a third-
21
The Basic Capital court cited Banker v. Breaux, 128 S.W.2d 23, 24 (Tex. 1939) and described
this case in a parenthetical as “stating that the contracting parties’ intention, which is of
controlling importance, must be ascertained from their agreement ‘in the light of the attending
circumstances.’” Basic Capital Management, 348 S.W.3d at 901, n. 24. Nonetheless, the Basic
Capital court did not describe the extrinsic evidence it considered as evidence of “attending
circumstances”; rather the court described the extrinsic evidence as “evidence regarding [the
contract’s] negotiation and purpose.” Id. at 901.
27
party beneficiary of the contract:
Sharyland does not meet the criteria necessary to confer third party
beneficiary status. Sharyland is neither mentioned in the contracts
themselves, nor is there evidence that [the contracting parties]
intended to confer a direct benefit on Sharyland.
Sharyland Water Supply Corp., 354 S.W.3d at 421 (emphasis added). Though the
high court also noted that the contracts did not clearly and fully spell out any
intention by the contracting parties’ to confer a direct benefit on Sharyland, the
high court did not say that this was necessary for third-party-beneficiary status or
that the inquiry was limited to the four corners of the contract. See Sharyland
Water Supply Corp., 354 S.W.3d at 420–21. The Sharyland court distinguished
the facts of the Basic Capital case from the facts in Sharyland; nonetheless, the
Sharyland court did not express any disagreement with Basic Capital’s legal
standard. See id. We conclude that the Sharyland court did not abrogate or modify
the rule in Basic Capital that extrinsic evidence may be considered in determining
whether one is a third-party beneficiary of the contract, even if the contract is a
written, unambiguous contract.22 See id. The parties have not cited and research
has not revealed any case from the Supreme Court of Texas decided after Basic
Capital in which the high court disagrees with Basic Capital regarding the
consideration of extrinsic evidence. We conclude that under current law extrinsic
evidence may be considered in determining whether a person is a third-party
22
Though the opening paragraph of the third-party-beneficiary analysis in Sharyland contains a
sentence emphasizing the contents of the contracts, the court does not say that extrinsic evidence
should not be considered, and as quoted above, the court later indicates that extrinsic evidence
should be considered. See Sharyland Water Supply Corp., 354 S.W.3d at 420 (stating
“[b]ecause the contracts entered into between [the contracting parties] make no reference to
Sharyland and indicate no intention to confer a benefit on it, we agree with the court of appeals
that Sharyland was not a third party beneficiary of those contracts”).
28
beneficiary of the contract, even if the contract is a written, unambiguous contract.
See Basic Capital Management, 348 S.W.3d at 899–901. Therefore, the trial court
did not err in overruling First Bank’s objection that no third-party-beneficiary issue
should be submitted to the jury because the third-party-beneficiary analysis is
limited to the four corners of each of the Letters and because construction of the
unambiguous Letters is a matter of law for the court.
F. Is the evidence legally sufficient to support the jury’s finding that
Brumitt is a third-party beneficiary?
Under its third issue, First Bank focuses on the extrinsic-evidence argument
addressed in the previous section. We presume, under a liberal construction of its
briefing, that First Bank also is arguing the trial evidence is legally insufficient to
support the jury’s finding in response to question four that Brumitt is a third-party
beneficiary of one of the Letters. First Bank preserved error in the trial court on
this issue only by means of its motion for judgment notwithstanding the verdict.23
At the charge conference, no party objected to the legal standard submitted in
question four for the jury’s use in finding whether Brumitt was a third-party
beneficiary of one or more of the Letters. 24 Therefore, this court measures the
23
First Bank moved for a directed verdict after DTSG and Brumitt rested their cases-in-chief,
but the motion did not preserve error because First Bank presented evidence after the trial court
denied the motion and First Bank did not renew the motion for directed verdict at the close of all
of the evidence. See Liberty Mut. Ins. Co., 2014 WL 261010, at *1; Dalbosco, 2012 WL
1795108, at *4–5. Though First Bank presented objections to question four at the charge
conference, First Bank did not object that the evidence was legally insufficient under either the
legal standard submitted in question four or under the legal standard provided under Texas law.
24
During the charge conference, First Bank arguably objected to the part of the trial court’s
instruction that allowed the jury to consider extrinsic evidence in making this determination.
Nonetheless, this instruction was correct, as explained in the previous section of this opinion, and
this instruction addresses what the jury may consider in making its finding rather than the
substantive legal standard under which the jury was to make the finding.
29
sufficiency of the evidence to support the jury’s finding using the charge given.
See Osterberg v. Peca, 12 S.W.3d 31, 55 (Tex. 2000) (holding that appellate court
could not review the sufficiency of the evidence based on a particular legal
standard because that standard was not submitted to the jury and no party objected
to the charge on this ground or requested that the jury be charged using this
standard); Hirschfeld Steel Co. v. Kellogg Brown & Root, Inc., 201 S.W.3d 272,
283–86 (Tex. App.—Houston [14th Dist.] 2006, no. pet.) (reviewing sufficiency of
evidence based on unobjected-to jury instruction and rejecting various arguments
based on different legal standards).
In response to question four’s query “[d]id [First Bank] fail to comply with
any Agreement with Brumitt, as Third Party Beneficiary?” the jury answered
affirmatively. 25 For this question, the trial court instructed the jury as follows:
A “Third Party Beneficiary” is an intended, and not just an incidental,
beneficiary of a contract. If the intent to benefit a third party is not
expressed in the contract, then intent may be shown using other
evidence. The nature of the agreement, the identity of the alleged
intended beneficiaries, and the specific duty said to have been created
toward them are all factors for consideration. The beneficiary may
recover if he can show that he is one of a class of persons for whose
benefit the contract was made.
Under this instruction, a person would be a third-party beneficiary of a contract if
the person is an “intended beneficiary” of the contract.
25
Question four combined the issue of whether Brumitt is a third-party beneficiary of one or
more of the Letters with the issue of whether First Bank failed to comply with its obligations to
Brumitt as a third-party beneficiary of one or more of the Letters. At the charge conference, no
party objected to this aspect of question four. Even so, we note that, despite this aspect of
question four, the jury’s response to it still constitutes a sufficient jury finding that Brumitt is a
third-party beneficiary of one or more of the Letters.
30
The term “intended beneficiary” is not defined in the jury charge, so we
measure the sufficiency of the evidence against the commonly understood meaning
of “intended beneficiary.” See Barnhart v. Morales, —S.W.3d—,—, 2015 WL
1020869, at *7 (Tex. App.—Houston [14th Dist.] Mar 5. 2015, no pet.). Merriam-
Webster’s Collegiate Dictionary defines “beneficiary” as “one that benefits from
something” and “intend” as “to have in mind as a purpose.” Merriam-Webster’s
Collegiate Dictionary 114, 768 (11th ed. 2004). We conclude that the commonly
understood meaning of “intended beneficiary of a contract” is a person whom the
contracting parties intended to benefit from the parties’ agreement. The trial court
instructed the jury that, in determining whether there was an intent to benefit
Brumitt, the jury could look beyond the language of the Letters to extrinsic
evidence. The trial court mentioned factors the jury could consider but, in listing
these factors, the trial court did not address the standard by which the jury should
decide whether Brumitt was a third-party beneficiary of any of the Letters. The
trial court then stated that the beneficiary may recover if he can show that he is one
of a class of persons for whose benefit the contract was made. Based on the
commonly understood meaning of the words contained in the trial court’s
instruction, we conclude that the charge allowed the jury to find Brumitt was a
third-party beneficiary of one or more of the Letters based solely on a finding that
First Bank and DTSG intended Brumitt to benefit from one or more of the Letters.
In its argument under the third issue, First Bank asserts that (1) to be a third-
party beneficiary of a contract, the contracting parties must have entered into the
contract directly for the third party’s benefit; (2) a party’s status as a third-party
beneficiary should not be created by implication; (3) there is a presumption that a
non-contracting party is not a third-party beneficiary; (4) the contracting parties’
intent that another person be a third-party beneficiary of the contract must be
31
“clearly and fully spelled out”; (5) to be a third-party beneficiary of a contract, a
person must either be a donee beneficiary or a creditor beneficiary; and (6) a
person cannot be a third-party beneficiary through the person’s status as a creditor
beneficiary unless the contract shows an intent to confer a benefit on the person
and the intent that the person has a right to enforce the contract. Regardless of
whether any of these propositions are correct expressions of Texas law, none of
them were submitted to the jury, and no party objected to the omission of any of
these propositions from the jury charge. Therefore, we do not apply any of these
propositions as part of the standard by which we measure the sufficiency of the
jury’s third-party-beneficiary finding. See Osterberg, 12 S.W.3d at 55; Hirschfeld
Steel Co., 201 S.W.3d at 283–86. Instead, we review the trial evidence to see if
there is legally sufficient evidence that First Bank and DTSG intended Brumitt to
benefit from one or more of the Letters.
At trial Brumitt testified as follows:
• The Letters were for Brumitt’s benefit.
• Tim Duffy of First Bank appeared at Brumitt’s office one day
unannounced. Brumitt had never before met Duffy.
• After Duffy introduced himself, Brumitt invited Duffy into Brumitt’s
office.
• Duffy reassured Brumitt that Duffy “was going to get this thing done”
and that Oprea and Brumitt would be happy.
• Duffy stated that the loan would close the following Saturday and that
the funds would be available the following Monday or Tuesday.
• Duffy called Brumitt later that day and asked some questions about
the Bank loan.
At trial Oprea testified as follows:
• Southway had a line of credit with Wells Fargo Bank.
32
• Brumitt signed as a guarantor of this line of credit.
• Neither Wells Fargo Bank, nor Oprea, nor Brumitt was concerned that
this line of credit be paid off as part of the stock-purchase transaction.
• First Bank said it would not fund the loan unless this line of credit was
paid off as part of the stock-purchase transaction.
• After First Bank made the pay-off of this line of credit a requirement,
this pay-off was made a requirement of the parties’ agreement.
At trial Duffy testified as follows:
• Brumitt, as the “seller of Southway,” was going to get some of the
proceeds of the loan from First Bank.
• If the First Bank loan had funded, the Wells Fargo line of credit would
have been paid off.
• Duffy agreed that Brumitt would benefit from the Wells Fargo line of
credit being paid off.
After reviewing the trial evidence under the applicable standard review, we
conclude the evidence is legally sufficient to support a finding that First Bank and
DTSG intended Brumitt to benefit from one or more of the Letters and to support
the jury’s finding in response to question four. See Khan v. Safeco Surplus Lines,
No. 14-13-00024-CV, 2014 WL 3907976, at *5, n. 5 (Tex. App.—Houston [14th
Dist.] Aug. 12, 2014, pet. denied) (concluding there was sufficient evidence that
person was a third-party beneficiary of a contract). Accordingly, we overrule First
Bank’s third issue.
G. Does section 26.02 of the Business and Commerce Code apply to
Brumitt’s breach-of-contract claim?
In its ninth issue, First Bank asserts the evidence is legally insufficient to
support the jury’s verdict as to Brumitt’s breach-of-contract claim. Under this
issue, First Bank asserts that section 26.02 of the Business and Commerce Code
applies to his breach-of-contract claim and that there is no evidence of a loan
33
agreement between Brumitt and First Bank that would satisfy the statute-of-frauds
requirement contained in this statute. See Tex. Bus. & Com. Code Ann. § 26.02
(West, Westlaw through 2013 3d C.S.). Section 26.02 reads in its entirety as
follows:
(a) In this section:
(1) “Financial institution” means a state or federally chartered bank,
savings bank, savings and loan association, or credit union, a holding
company, subsidiary, or affiliate of such an institution, or a lender
approved by the United States Secretary of Housing and Urban
Development for participation in a mortgage insurance program under
the National Housing Act (12 U.S.C. Section 1701 et seq.).
(2) “Loan agreement” means one or more promises, promissory notes,
agreements, undertakings, security agreements, deeds of trust or other
documents, or commitments, or any combination of those actions or
documents, pursuant to which a financial institution loans or delays
repayment of or agrees to loan or delay repayment of money, goods,
or another thing of value or to otherwise extend credit or make a
financial accommodation. The term does not include a promise,
promissory note, agreement, undertaking, document, or commitment
relating to:
(A) a credit card or charge card; or
(B) an open-end account, as that term is defined by Section 301.002,
Finance Code, intended or used primarily for personal, family, or
household use.
(b) A loan agreement in which the amount involved in the loan
agreement exceeds $50,000 in value is not enforceable unless the
agreement is in writing and signed by the party to be bound or by that
party’s authorized representative.
(c) The rights and obligations of the parties to an agreement subject to
Subsection (b) of this section shall be determined solely from the
written loan agreement, and any prior oral agreements between the
parties are superseded by and merged into the loan agreement.
34
(d) An agreement subject to Subsection (b) of this section may not be
varied by any oral agreements or discussions that occur before or
contemporaneously with the execution of the agreement.
(e) In a loan agreement subject to Subsection (b) of this section, the
financial institution shall give notice to the debtor or obligor of the
provisions of Subsections (b) and (c) of this section. The notice must
be in a separate document signed by the debtor or obligor or
incorporated into one or more of the documents constituting the loan
agreement. The notice must be in type that is boldface, capitalized,
underlined, or otherwise set out from surrounding written material so
as to be conspicuous. The notice must state substantially the
following:
“This written loan agreement represents the final agreement between
the parties and may not be contradicted by evidence of prior,
contemporaneous, or subsequent2 oral agreements of the parties.
“There are no unwritten oral agreements between the parties.
……………………………… ………………………………
“Debtor or Obligor Financial Institution”
(f) If the notice required by Subsection (e) of this section is not given
on or before execution of the loan agreement or is not conspicuous,
this section does not apply to the loan agreement, but the validity and
enforceability of the loan agreement and the rights and obligations of
the parties are not impaired or affected.
(g) All financial institutions shall conspicuously post notices that
inform borrowers of the provisions of this section. The notices shall
be located in such a manner and in places in the institutions so as to
fully inform borrowers of the provisions of this section. The Finance
Commission of Texas shall prescribe the language of the notice.
Tex. Bus. & Com. Code Ann. § 26.02 (emphasis added) (West, Westlaw through
2013 3d C.S.). First Bank asserts that section 26.02 applies to the Letters and that,
35
because none of the Letters satisfy the statute-of-frauds requirements of section
26.02, Brumitt may not enforce any of the Letters. See id. § 26.02(b), (c), (d).
Brumitt argues that section 26.02 does not apply to any of the Letters because First
Bank failed to give the notice required by subsection (e). See id. § 26.02(e), (f).
A holding from the Second Court of Appeals and an obiter dictum from this
court support Brumitt’s construction of the statute. See Scott v. U.S. Bank Nat’l
Ass’n, No. 02-12-00230-CV, 2014 WL 3535724, at *10–11 (Tex. App.—Fort
Worth Jul. 14, 2014, no pet.) (holding that “if the notice required by subsection (e)
is not given on or before execution of the loan agreement or is not conspicuous,
section 26.02 does not apply to the loan agreement) (mem. op.); Comisky v. FH
Partners, LLC, 373 S.W.3d 620, 641, n. 25 (Tex. App.—Houston [14th Dist.]
2012, pet. denied) (stating in an obiter dictum that for section 26.02 to apply, the
financial institution must have given notice under subsection (e)). But, the Third
Court of Appeals has held that, if the financial institution fails to comply with
subsection (e), the statute-of-frauds requirement in subsection (b) still applies to
the loan agreement, although subsections (c) and (d) do not apply. See Maginn v.
Norwest Mortgage, Inc., 919 S.W.2d 164, 168 (Tex. App.—Austin 1996, no writ.).
The parties have not cited and research has not revealed any precedent from the
Supreme of Texas or any holding from this court addressing the effect of a failure
to give the notice required by subsection (e). 26
26
Though this court previously has applied section 26.02 to loan agreements, in these cases,
there was no issue as to the effect of a failure to comply with subsection (e). See BACM 2001-1
San Felipe Road Ltd. P’ship, 218 S.W.3d 137, 144–45 (Tex. App.—Houston [14th Dist.] 2007,
pet. denied); 1001 McKinney Ltd. v. Credit Suisse First Boston Mortgage Capital, 192 S.W.3d
20, 26–28 (Tex. App.—Houston [14th Dist.] 2005, pet. denied).
36
We review the trial court’s interpretation of applicable statutes de novo. See
Johnson v. City of Fort Worth, 774 S.W.2d 653, 655B56 (Tex. 1989). In
construing a statute, our objective is to determine and give effect to the
Legislature’s intent. See Nat’l Liab. & Fire Ins. Co. v. Allen, 15 S.W.3d 525, 527
(Tex. 2000). If possible, we must ascertain that intent from the language the
Legislature used in the statute and not look to extraneous matters for an intent the
statute does not state. Id. If the meaning of the statutory language is
unambiguous, we adopt the interpretation supported by the plain meaning of the
provision’s words. St. Luke’s Episcopal Hosp. v. Agbor, 952 S.W.2d 503, 505
(Tex. 1997). We must not engage in forced or strained construction; instead, we
must yield to the plain sense of the words the Legislature chose. See id.
We conclude that, under the unambiguous language of subsection (f), if the
notice required by subsection (e) is not given on or before execution of the loan
agreement or is not conspicuous, section 26.02, including subsection (b), does not
apply to the loan agreement. See Tex. Bus. & Com. Code Ann. § 26.02(f); Scott,
2014 WL 3535724, at *10–11. Neither subsection (f) nor any other part of the
statute states that a failure to comply with subsection (e) means that only
subsections (c) and (d) do not apply to the loan agreement. No other part of
section 26.02 conflicts with the plain language in subsection (f). See Tex. Bus. &
Com. Code Ann. § 26.02. The Legislature could have provided that subsection (b)
applies to a loan agreement, as defined in section 26.02, regardless of whether the
financial institution gave notice under subsection (e). The Legislature chose not to
do so. See Tex. Bus. & Com. Code Ann. § 26.02; Scott, 2014 WL 3535724, at
*10–11; Comisky, 373 S.W.3d at 641, n. 25. But see Maginn, 919 S.W.2d at 168.
First Bank does not assert that it gave the notice required by subsection (e)
37
of section 26.02 as to any of the Letters. There was no jury finding that First Bank
gave such notice, nor does the trial evidence prove this proposition as a matter of
law. 27 Therefore, under the unambiguous language of the statute, section 26.02
does not apply to any of the Letters. See Tex. Bus. & Com. Code Ann. § 26.02;
Scott, 2014 WL 3535724, at *10–11; Comisky, 373 S.W.3d at 641, n. 25. But see
Maginn, 919 S.W.2d at 168.
Under its ninth issue, First Bank also asserts that there is no evidence (other
than evidence related to Brumitt’s claim as a third-party beneficiary of the Letters)
of any contract between First Bank and Brumitt, and Brumitt was not a third-party
beneficiary to any of the Letters as a matter of law. In Section II. F. above, we
concluded that First Bank’s legal-sufficiency challenge to the jury’s third-party-
beneficiary challenge lacked merit. This finding provided Brumitt with a basis to
seek recovery against First Bank for its failure to comply with one or more of the
Letters. See Khan, 2014 WL 3907976, at *5, n. 5.
Having addressed all of First Bank’s complaints under its ninth issue, we
overrule that issue.
H. Did either DTSG or Brumitt suffer any injury independent from
economic losses recoverable under a breach-of-contract claim?
In its fourth issue, First Bank asserts that the trial court erred in submitting
DTSG’s and Brumitt’s negligent-misrepresentation claims to the jury because
these tort claims were “subsumed” by the claimants’ breach-of-contract claims.
Under this issue, First Bank argues that neither DTSG nor Brumitt can recover
under a negligent-misrepresentation claim because neither party suffered any
27
Indeed, there does not appear to be any trial evidence that First Bank gave such notice.
38
injury independent from economic losses recoverable under a breach-of-contract
claim. First Bank further argues that, because neither party may recover based on
a tort claim, neither party may recover exemplary damages.28
Under the independent-injury requirement for negligent-misrepresentation
claims, to recover damages for negligent misrepresentation, a plaintiff must show
that it suffered an injury independent from economic losses recoverable under a
breach-of-contract claim. See D.S.A., Inc. v. Hillsboro Indep. Sch. Dist., 973
S.W.2d 662, 663–64 (Tex. 1998); Owen v. Option One Mortgage Corp., No. 01-
10-00412-CV, 2011 WL 3211081, at *8 (Tex. App.—Houston [1st Dist.] Jul. 28,
2011, pet. denied); Esty v. Beal Bank, S.S.B., 298 S.W.3d 280, 301–02 (Tex.
App.—Dallas 2009, no pet.). Without this independent-injury requirement for
negligent-misrepresentation claims, every contract-interpretation dispute would
potentially be converted into a negligent-misrepresentation claim. See D.S.A., Inc.,
973 S.W.2d at 663–64.
In their respective contract claims, DTSG and Brumitt sought to recover
economic damages that allegedly resulted from First Bank’s failure to comply with
its contractual obligation to provide a loan to DTSG to be used to fund DTSG’s
purchase of Brumitt’s Southway stock. There is no distinction in the evidence
between damages allegedly resulting from First Bank’s failure to comply with one
or more of the Letters and damages caused by First Bank’s alleged negligent
misrepresentation. In its closing argument, DTSG asserted that this case was about
28
First Bank preserved error in the trial court as to this complaint by means of its motion for
judgment notwithstanding the verdict and, in part, by means of objections at the charge
conference.
39
“broken promises” and that despite at least nineteen promises by First Bank,
including the three Letters, no loan was funded. DTSG argued that, as a result of
First Bank’s broken promises, DTSG was harmed and was seeking damages.
DTSG described each of the nineteen promises as an agreement and asserted that
DTSG suffered damages in various respects by relying on these promises. Yet, in
discussing the liability question for negligent misrepresentation, DTSG’s counsel
stated that each of these broken promises also was a negligent misrepresentation
and that First Bank had misrepresented that the loan was going to be funded. In its
closing argument, DTSG did not distinguish between the breach-of-contract
damages it was seeking and the negligent-misrepresentation damages it was
seeking. Likewise, in closing argument Brumitt’s counsel did not distinguish
between First Bank’s acts that allegedly constituted breaches of contract and First
Bank’s acts that allegedly constituted negligent misrepresentations, and Brumitt’s
counsel urged the same damage amount for both of Brumitt’s claims.
DTSG argues on appeal that its negligent-misrepresentation claim does not
relate to First Bank’s failure to comply with any of the Letters, but rather to many
false promises that First Bank made about its ability to close and fund the loan on a
particular date. DTSG asserts that, because none of the Letters expressly state a
closing or funding date for the loan, First Bank’s false representations about its
ability to close and fund the loan are not based on the contractual terms of the loan.
But, the failure of the Letters to specify a closing or funding date does not mean
that the date on which the loan would close or fund is outside the scope of the
Letters; rather, in the absence of a specified time for performance in the Letters,
the court will construe the Letters as implying a reasonable time for First Bank to
perform. See Hall v. Hall,158 Tex. 95, 308 S.W.2d 12, 16 (Tex. 1957) (stating that
40
beneficiary of the contract, even if the contract is a written, unambiguous contract.
See Basic Capital Management, 348 S.W.3d at 899–901. Therefore, the trial court
did not err in overruling First Bank’s objection that no third-party-beneficiary issue
should be submitted to the jury because the third-party-beneficiary analysis is
limited to the four corners of each of the Letters and because construction of the
unambiguous Letters is a matter of law for the court.
F. Is the evidence legally sufficient to support the jury’s finding that
Brumitt is a third-party beneficiary?
Under its third issue, First Bank focuses on the extrinsic-evidence argument
addressed in the previous section. We presume, under a liberal construction of its
briefing, that First Bank also is arguing the trial evidence is legally insufficient to
support the jury’s finding in response to question four that Brumitt is a third-party
beneficiary of one of the Letters. First Bank preserved error in the trial court on
this issue only by means of its motion for judgment notwithstanding the verdict.23
At the charge conference, no party objected to the legal standard submitted in
question four for the jury’s use in finding whether Brumitt was a third-party
beneficiary of one or more of the Letters. 24 Therefore, this court measures the
23
First Bank moved for a directed verdict after DTSG and Brumitt rested their cases-in-chief,
but the motion did not preserve error because First Bank presented evidence after the trial court
denied the motion and First Bank did not renew the motion for directed verdict at the close of all
of the evidence. See Liberty Mut. Ins. Co., 2014 WL 261010, at *1; Dalbosco, 2012 WL
1795108, at *4–5. Though First Bank presented objections to question four at the charge
conference, First Bank did not object that the evidence was legally insufficient under either the
legal standard submitted in question four or under the legal standard provided under Texas law.
24
During the charge conference, First Bank arguably objected to the part of the trial court’s
instruction that allowed the jury to consider extrinsic evidence in making this determination.
Nonetheless, this instruction was correct, as explained in the previous section of this opinion, and
this instruction addresses what the jury may consider in making its finding rather than the
substantive legal standard under which the jury was to make the finding.
29
825 S.W.2d 439, 440–43 (Tex. 1991). The Sloane court addressed whether the
prospective borrowers’ negligent-misrepresentation claims against a bank were
barred by the statute-of-frauds requirement in section 26.01 of the Business and
Commerce Code and whether the prospective borrowers could recover mental
anguish or lost profits under these claims. See id. The prospective borrowers did
not assert breach-of-contract claims or allege that the bank agreed to loan them
money; rather, they alleged that the bank did not agree to loan them money yet
negligently represented that the bank had made such an agreement. See id. at 442.
The Sloane case is not on point. See id. at 440–43.
As a matter of law neither DTSG nor Brumitt showed an injury independent
from economic losses recoverable under a breach-of-contract claim; accordingly,
neither party may recover damages under the tort claim of negligent
misrepresentation. See D.S.A., Inc., 973 S.W.2d at 663–64; Owen, 2011 WL
3211081, at *8; Esty, S.S.B., 298 S.W.3d at 301–02; Cessna Aircraft Co. v.
Aircraft Network, LLC, 213 S.W.3d 455, 466–67 (Tex. App.—Dallas 2006, pet.
denied). And, because DTSG and Brumitt are only entitled to recover under their
respective breach-of-contract claims, they are not entitled to recover exemplary
damages. See D.S.A., Inc., 973 S.W.2d at 663–64. Therefore, we sustain First
Bank’s fourth issue.
I. In First Bank’s argument under the seventh issue, has First Bank shown
that the trial court erred in rendering judgment in favor of Brumitt?
In its seventh issue, First Bank asserts the testimony of Brumitt’s damages
expert, Anthony DeBenedictis, is unreliable and thus legally insufficient to support
the jury’s verdict regarding Brumitt’s damages. Though First Bank does not
specify any jury question in its argument, because we have sustained the fourth
42
issue, the only damages finding at issue would be the jury’s damages finding as to
Brumitt’s breach-of-contract damages in response to question number five. Under
its seventh issue, First Bank presents argument in support of the proposition that
DeBenedictis’s testimony is unreliable and conclusory and thus legally insufficient
evidence of Brumitt’s damages. First Bank asserts that, because DeBenedictis’s
testimony is legally insufficient, this court should reverse the trial court’s judgment
and render judgment that Brumitt take nothing. In essence, First Bank argues that
the trial court erred in rendering judgment in Brumitt’s favor because
DeBenedictis’s testimony is legally insufficient.
First Bank does not assert or present argument that (1) the trial evidence
(which is voluminous) is legally insufficient to support a finding that Brumitt
sustained any damages or to support any particular damage finding by the jury; (2)
DeBenedictis’s testimony is the only testimony at trial regarding Brumitt’s
damages; or (3) expert testimony was necessary to prove Brumitt’s damages.
Presuming, without deciding, that DeBenedictis’s testimony is legally insufficient,
we conclude that First Bank still has not shown that the trial court erred in
rendering judgment in favor of Brumitt as to his breach-of-contract claim. See
Riggins v. Hill, —S.W.3d.—, —, 2015 WL 293270, at *3 (Tex. App.—Houston
[14th Dist.] Dec. 23, 2014, no pet. h.). Accordingly, we overrule First Bank’s
seventh issue.
III. CONCLUSION
The trial court reversibly erred in allowing Brumitt’s lead trial counsel to
testify as an expert as to DTSG’s attorney’s fees. But, there is no merit in First
Bank’s challenges to the breach-of-contract claims of either DTSG or Brumitt.
The trial court did not err in overruling First Bank’s objection that no third-party-
43
beneficiary issue should be submitted to the jury because the third-party-
beneficiary analysis is limited to the four corners of each of the Letters and
because construction of the unambiguous Letters is a matter of law for the court.
The trial evidence is legally sufficient to support a finding that First Bank and
DTSG intended Brumitt to benefit from one or more of the Letters and to support
the jury’s finding in response to question four. Under the unambiguous language
of section 26.02 of the Business and Commerce Code, this statute does not apply to
any of the Letters.
As a matter of law, neither DTSG nor Brumitt showed an injury independent
from economic losses recoverable under a breach-of-contract claim, so neither
party may recover under the tort claim of negligent misrepresentation. Because
DTSG and Brumitt are entitled to recover only under their respective breach-of-
contract claims, they are not entitled to recover exemplary damages.30
Accordingly, we modify the trial court’s judgment to delete (a) all recoveries
of attorney’s fees in favor of DTSG, and (b) all recoveries under the negligent-
misrepresentation claims of DTSG and Brumitt, and (c) all exemplary damages.
We affirm the trial court’s judgment as modified.
/s/ Kem Thompson Frost
Chief Justice
Panel consists of Chief Justice Frost and Justices Donovan and Brown.
30
Based on the disposition, we need not and do not address First Bank’s fifth, tenth, and eleventh
issues.
44