Peisner Johnson & Company, L.L.P. v. Eagle Construction and Environmental Services, L.P.

Opinion filed May 11, 2006

The Court on this day, June 8, 2006, has withdrawn this opinion and judgment dated May 11, 2006, and substituted the opinion and judgment dated June 8, 2006.

Opinion filed May 11, 2006

                                                                        In The

    Eleventh Court of Appeals

                                                                   __________

                                                          No. 11-05-00226-CV

                                                    __________

                   PEISNER JOHNSON & COMPANY, L.L.P., Appellant

                                                             V.

      EAGLE CONSTRUCTION AND ENVIRONMENTAL SERVICES, L.P.,

                                                        Appellee

                                          On Appeal from the 91st District Court

                                                        Eastland County, Texas

                                             Trial Court Cause No. CV-03-39456

                                                                   O P I N I O N

This is a Deceptive Trade Practices Act claim.^[1]  Eagle Construction and Environmental Services, L.P. sued Peisner Johnson & Company, L.L.P. alleging that it misrepresented the services that it would provide in connection with a sales tax audit conducted by the Comptroller for the State of Texas. Following a bench trial, the trial court found that Peisner Johnson violated the DTPA and awarded Eagle Construction $65,915.84 in damages and conditional attorney=s fees in the event of an appeal.  We modify and affirm in part, reverse and render in part, and reverse and remand in part.

                                                               Background Facts

Eagle Construction is an environmental firm which performs solid waste removal and remediation work.  The Texas Comptroller=s Office audited Eagle Construction in 2000 for the period of March 1, 1995, through September 30, 1998.  Following the audit, the comptroller assessed Eagle Construction $239,206.26 in taxes, penalties, and interest.

Eagle Construction hired Peisner Johnson, a CPA firm, to review the assessed tax deficiency. Peisner Johnson offered audit representation services and represented that it could reduce or eliminate a client=s sales tax liability.  Eagle Construction agreed to pay Peisner Johnson 50% of any tax savings, which included refunds of overpayments or reductions in the audit assessment, that resulted from Peisner Johnson=s work. 

After reviewing the comptroller=s audit and researching the relevant factual and legal issues,  Peisner Johnson found no basis for reductions in audit assessments or for a refund, and it withdrew from its engagement with Eagle Construction.  Eagle Construction paid the comptroller=s full assessment in February 2002.

The comptroller then audited Eagle Construction for the subsequent four-year period. Eagle Construction hired Gary Snapp to work on the second audit.  He identified several exemptions that might apply to specific jobs included in the first audit.  Eagle Construction then hired a tax attorney and filed a refund claim for the first audit. This resulted in a $47,000 refund. Eagle Construction=s refund claim did not cover the entire period of the first audit because of a four-year statute of limitations for refund claims.  See Overhead Door Corp. of Tex. v. Sharp, 970 S.W.2d 74, 76-78 (Tex. App.CAustin 1998, no pet.)(explaining how to determine tax code=s limitations period).

Eagle Construction filed suit against Peisner Johnson alleging negligent misrepresentation, fraud, breach of contract, and violation of the DTPA.  The trial court held a bench trial.  The court found that Peisner Johnson violated the DTPA by representing that its services had characteristics, uses, and benefits that they did not have; by representing that its services were of a particular standard, quality, or grade when they were of another; by advertising its services with the intent not to provide them as advertised; and by failing to disclose information concerning its services with the intent to induce Eagle Construction into a contract.  The trial court awarded Eagle Construction $21,399.22 in actual damages, which was the amount of sales tax the trial court found Eagle Construction paid in error on the first audit; $42,798.44 in additional damages; and interest.  It did not award Eagle Construction attorney=s fees for trial but did conditionally award appellate attorney=s fees.

                                                                         Issues

            Peisner Johnson challenges the trial court=s judgment with four issues.  Peisner Johnson alleges that the evidence is insufficient to establish (1) that its conduct was the cause of Eagle Construction=s damages; (2) the actual damage award; (3) that Peisner Johnson knowingly and intentionally violated the DTPA; or (4) the appellate attorney=s fees award.  Eagle Construction asserts two cross issues.  Eagle Construction contends that the trial court erred by refusing to take judicial notice of its file for the purpose of awarding attorney=s fees and by refusing to award attorney=s fees for the trial of this cause.

                                                              Standard of Review

Findings of fact in a bench trial have the same force and dignity as a jury=s verdict.  Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994).  When, as here, those findings are challenged for factual or legal sufficiency, we apply the same standards as are used for reviewing jury verdicts.  David L. Smith & Assocs., LLP v. Advanced Placement Team, Inc., 169 S.W.3d 816, 819 (Tex. App.CDallas 2005, no pet.).

We review a legal sufficiency or no-evidence challenge by considering only the evidence and inferences that tend to support the finding and by disregarding all evidence and inferences to the contrary.  Lenz v. Lenz, 79 S.W.3d 10, 19 (Tex. 2002).  If more than a scintilla of evidence exists to support the finding, the no-evidence challenge fails.  Id. 

We review a factual sufficiency challenge by considering and weighing all of the evidence, not just that evidence which supports the verdict.  Ortiz v. Jones, 917 S.W.2d 770, 772 (Tex. 1996).  We may set aside the trial court=s finding only if it is so contrary to the overwhelming weight of the evidence that the verdict is clearly wrong and manifestly unjust.  Mar. Overseas Corp. v. Ellis, 971 S.W.2d 402, 406-07 (Tex. 1998).

                          Was the Evidence Sufficient to Support a DTPA Cause of Action

                                                as Opposed to a Breach of Contract?

Peisner Johnson argues that it was retained to identify or assist Eagle Construction in obtaining sales tax refunds, that Eagle Construction=s suit is essentially based upon the failure to identify refund claims, and that, thus, this is simply a breach of contract action. Eagle Construction argues that Peisner Johnson=s precontractual misrepresentations induced it into a contract and that these misrepresentations were, therefore, outside the contract and actionable under the DTPA.

Peisner Johnson contends that any misrepresentation it may have made was no more than a statement that it would fulfill its contractual duties.  The parties agree that a mere breach of contract is insufficient to establish a DTPA violation.  See Crawford v. Ace Sign, Inc., 917 S.W.2d 12, 14 (Tex. 1996).  Courts have struggled to identify the line separating conduct sufficient to support a DTPA claim from that creating only a breach of contract.  If the misrepresentation amounts to no more than a promise to perform under the contract, no DTPA violation is shown.  Id.  Courts have, for example, held that the failure to include a yellow page ad does not constitute a DTPA violation.  Helms v. Sw. Bell Tel. Co., 794 F.2d 188, 191 (5th Cir. 1986).^[2]  Representations outside the contract, however, can support a DTPA claim.  See, e.g., Bekins Moving & Storage Co. v. Williams, 947 S.W.2d 568, 577 (Tex. App.CTexarkana 1997, no pet.)(misrepresentations by a moving company that it would use different methods than those actually employed was actionable under the DTPA).

The determination of whether a DTPA violation C as opposed to a mere breach of contract C has been shown is a fact-driven inquiry.  Munawar v. Cadle Co., 2 S.W.3d 12, 18 (Tex. App.CCorpus Christi 1999, pet. denied).  But when the facts are ascertained, the determination of whether a DTPA violation is shown is a question of law.  Head v. U.S. Inspect DFW, Inc., 159 S.W.3d 731, 743 (Tex. App.CFort Worth 2005, pet. denied).

The Texas Supreme Court has recognized that there is a duty separate and apart from the duties established by the contract to abstain from inducing others into entering contracts through the use of fraudulent misrepresentations.  Formosa Plastics Corp. USA v. Presidio Eng=rs & Contractors, Inc., 960 S.W.2d 41, 46 (Tex. 1998). The trial court made several findings of fact relative to Peisner Johnson=s representations.  The court found that Peisner Johnson represented that:

$ ninety-two percent of all audits were over-assessments;

$ Peisner Johnson would reduce or eliminate its client=s liability;

$ state auditors only looked for items in businesses where taxes should have been paid;

$ state auditors never took the time to look for instances where a party may have overpaid taxes;

$ Peisner Johnson almost always found items that should not have been paid or that were overpaid;

$ by calling Peisner Johnson a party would know that it would be getting the lowest possible assessment;

$ Peisner Johnson would pursue every last penny;

$ Peisner Johnson would identify payments that were previously made in error;

$ Peisner Johnson would come to Eagle Construction=s facilities to review its books as part of its representation for the appeal of the audit; and

$ Peisner Johnson would identify every exemption available.

The trial court further found that Eagle Construction relied upon these representations. The trial court found that Peisner Johnson did not do many of the things it promised it would do and failed to disclose essential limitations on the scope of its services that created a conflict of interest between Peisner Johnson and the client.^[3]  The trial court found that Peisner Johnson did not look at files at Eagle Construction=s facility; that Peisner Johnson would decide which exemptions to pursue based upon their profitability to itself and would not investigate or pursue items that would cost it more time than would be worth; that, although it told customers that it would attempt to find payments that were made in error, it did not do so; and that Peisner Johnson did not attempt to find exemptions for contractors because, from its past experience, contractors are not entitled to exemptions, although it did not tell contractors this.

This conduct is sufficient to support a DTPA claim because it involves misrepresentations beyond the contract.  The trial court did not merely find that Peisner Johnson failed to perform as promised, it found that Peisner Johnson failed to disclose a conflict of interest and that Peisner Johnson promised to perform activities that it knew would not be performed.  Promising to perform an action in the future that the actor has no intention of performing is a species of fraud.  See T.O. Stanley Boot Co. v. Bank of El Paso, 847 S.W.2d 218, 222 (Tex. 1992).

                                      Was the Evidence Sufficient to Support a Finding

                             that Peisner Johnson Caused Eagle Construction Damages?

Peisner Johnson argues that the evidence is insufficient to establish that its conduct caused Eagle Construction any damage.  The DTPA requires proof that a defendant=s conduct was a producing cause of the plaintiff=s injury.  Tex. Bus. & Com. Code Ann. ' 17.50(a) (Vernon Supp. 2005).  This requires proof that the defendant=s action was a substantial factor in bringing about the plaintiff=s injury without which the injury would not have occurred.  Doe v. Boys Clubs of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex. 1995).  Producing cause is similar to proximate cause because both require causation in fact. Prudential Ins. Co. of Am. v. Jefferson Assocs., LTD, 896 S.W.2d 156, 161 (Tex. 1995). However, unlike proximate cause, producing cause does not require proof of forseeability.  Bekins Moving & Storage Co., 947 S.W.2d at 579. Because Eagle Construction=s damages were its alleged sales tax overpayment, it was required to prove that Peisner Johnson=s conduct was the producing cause of this overpayment.

            A. What Was Eagle Construction Required to Prove to Establish Producing Cause?

Peisner Johnson contends that Eagle Construction was required to establish on a job-by-job basis that it was entitled to a sales tax exemption that, if properly pursued, would have been granted by the comptroller.  Because sales tax issues are beyond common understanding, Peisner Johnson contends further that Eagle Construction was required to make this showing with expert testimony.         Eagle Construction disputes this characterization of its burden and the need for expert testimony contending that, because this is a DTPA claim, it was unnecessary to prove what the comptroller would have done.  It relies upon Latham v. Castillo, 972 S.W.2d 66 (Tex. 1998), a suit filed against an attorney alleging unconscionable action under the DTPA.  In Latham, the attorney was hired to prosecute a medical malpractice action and falsely represented to his clients that he had filed suit and was actively prosecuting the claim.  Plaintiffs contended that their attorney acted unconscionably when he lied about his actions and that he took unfair advantage of their trust.  The attorney argued that this was essentially a Adressed-up legal malpractice claim@ and that plaintiffs were required to prove that they would have won the medical malpractice case to establish a DTPA cause of action.  Id. at 69.  The supreme court disagreed, noting that the DTPA was created to provide an additional remedy to consumers when the common law fails. Id.  Plaintiffs did not allege negligent conduct, which would have limited them to a negligence action, but deceptive conduct.  Consequently, plaintiffs were not required to prove the viability of their malpractice action to establish unconscionable action.  Id.

The supreme court=s holding does not mean that Eagle Construction is excused from proving that a timely filed refund claim would have been successful simply because they alleged a DTPA cause of action.  In Latham, the supreme court noted that a DTPA plaintiff=s claim is for the actual damage caused by the deceptive conduct.  Id. at 69-70.  There, the DTPA claim was not for the recovery plaintiffs would have received in a successful medical malpractice action but for the mental anguish they suffered because of their attorney=s false statements.

But, in this instance, Eagle Construction=s damage model was exactly what it contends would have happened but for Peisner Johnson=s deceptive conduct.  Consequently, Eagle Construction was required to show that it would have received a tax refund if Peisner Johnson had properly filed and prosecuted a refund claim.

The next question is what case was Eagle Construction required to show that it would have won.  Peisner Johnson focuses in its analysis upon what the comptroller would have done administratively and argues that Eagle Construction was required to prove that the comptroller would have agreed with its position.  This is incorrect because, even though the comptroller=s probable actions and statutory construction are highly relevant, the comptroller does not have the final word. A dissatisfied taxpayer can appeal an adverse decision.  See, e.g., Fleming Foods of Tex., Inc. v. Rylander, 6 S.W.3d 278 (Tex. 1999)(appeal by taxpayer of sales tax assessment). The exemptions upon which Eagle Construction relies were created by the legislature.  Eagle Construction=s obligation, therefore, was to show that it performed work which is nontaxable because it falls within one or more of the legislature=s sales tax exemptions.

B.  Did Eagle Construction Establish that Peisner Johnson=s Deceptive

                 Conduct Deprived It of a Sales Tax Refund?

The parties= dispute concerns eighteen jobs.  The trial court found that sixteen involved the removal of hazardous waste from real property and two were instances where no taxable event occurred.  One instance was an improperly billed invoice.  Eagle Construction billed the wrong company.  It issued a credit memo and then billed the correct company. Despite the credit memo, Eagle Construction was assessed sales tax on the original invoice.  The second instance involved a company that went into bankruptcy without paying its invoice.  Eagle Construction was assessed sales tax on this invoice even though it was not paid.

The trial court=s characterization of Eagle Construction=s work on the sixteen jobs as hazardous waste removal is critical to the determination of whether a taxable event occurred.  The removal of Agarbage, rubbish, or other solid waste@ is a taxable service unless it involves the removal of:

(A) hazardous waste;

(B) industrial solid waste;

(C) waste material that results from an activity associated with the exploration, development, or production of oil, gas, geothermal resources, or any other substance or material regulated by the Railroad Commission of Texas under Section 91.101, Natural Resources Code;

(D) domestic sewage or an irrigation return flow, to the extent the sewage or return flow does not constitute garbage or rubbish; and

(E) industrial discharges subject to regulation by permit issued pursuant to Chapter 26, Water Code.

Tex. Tax Code Ann. ' 151.0048(a)(3) (Vernon Supp. 2005).  If the trial court=s characterization of Eagle Construction=s services as hazardous waste removal is correct, then the services were not taxable.

1. Was Expert Testimony Required?

Peisner Johnson contends that the distinction between taxable and nontaxable waste removal activities is a technical, fact-specific process.  Peisner Johnson contends further that the taxpayer bears the burden of establishing an exemption by clear and convincing evidence.^[4]  Consequently, Peisner Johnson concludes that Eagle Construction necessarily needed expert testimony to establish that, but for Peisner Johnson=s misconduct, it would have prevailed. Because Eagle Construction offered no expert testimony, Peisner Johnson contends that the evidence is insufficient to support the trial court=s causation finding.

Eagle Construction concedes that, when the causal link is beyond the common understanding of the fact-finder, expert testimony is necessary. But, it contends that this case does not present such a situation because it is a DTPA claim involving misrepresentations and the relevant concepts are not beyond the fact-finder=s ordinary experience.  Eagle Construction relies upon Chapman v. Paul R. Wilson, Jr., D.D.S., Inc., 826 S.W.2d 214 (Tex. App.CAustin 1992, writ denied).  In that case, the claimant sued dentists for damages arising from wisdom teeth extractions.  The trial court struck the claimant=s expert designation as a discovery sanction and then granted defendants= motion for summary judgment.  The Austin Court of Appeals affirmed the discovery sanction and defendants= summary judgment on all grounds save the claim that defendants violated the DTPA because of misrepresentations about the pain claimant would experience during extractions.  Id. at 220.  The court noted that expert testimony is not necessary when the alleged acts and injuries are plainly within the common knowledge of laymen. The court concluded that a jury could, without the help of an expert, determine whether the defendants= misrepresentations were the producing cause of the claimant=s pain. Id.  This does not mean that expert testimony is never needed in a DTPA case.  The Austin Court remanded the DTPA claim, not because it was a DTPA claim but because the alleged damages were within a jury=s ability to understand without expert testimony. Whether Eagle Construction needed expert testimony, therefore, requires that we look beyond the label attached to its claim and examine the substance of that claim.

Eagle Construction contends that Peisner Johnson made specific representations to induce it to enter into the contract; that it relied upon those representations; and that, because of this reliance, it waived items which could have otherwise been timely challenged.  The trial court found that Peisner Johnson made several misrepresentations about its services.^[5]   However, Peisner Johnson does not challenge these findings but instead challenges the trial court=s finding that Eagle Construction=s reliance resulted in tax overpayments.

When Peisner Johnson reviewed the comptroller=s first audit, it identified no sales tax exemptions for Eagle Construction=s waste removal activities.  When Eagle Construction received the second audit notice, it hired Gary Snapp to review the project files and the previous audit for information which would show the comptroller that these jobs were not taxable. Snapp identified potential exemptions for hazardous waste removal.  Eagle Construction then hired a tax attorney who filed a claim for taxes paid on jobs performed during a portion of the period covered by the first audit that involved the removal of hazardous waste and industrial solid waste.  The tax attorney recovered approximately $47,000 for Eagle Construction.  That action did not encompass eighteen jobs involved in the first audit because of limitations.  This is sufficient to create at least an inference that Eagle Construction would have received a larger refund if Peisner Johnson had performed its services as advertised.

2.  MetLife and Merchants Freight Jobs.

That inference was confirmed for at least two jobs that did not require expert testimony and did not require construction of the statutory sales tax exemptions for hazardous and industrial solid waste removal.  Eagle Construction Vice President Marc Walraven testified that Cura Emergency Services, an environmental broker, hired Eagle Construction to excavate industrial solid waste for their client MetLife.  Eagle Construction incorrectly billed MetLife directly.  After the mistake was identified, Eagle Construction issued MetLife a credit memo and billed Cura.  Eagle Construction was assessed $652 in taxes and $412.64 in interest on the MetLife invoice C even though there was actually no invoice to MetLife.  The second job was for Merchants Freight.  This client went into bankruptcy, and Eagle Construction was never paid.  Nonetheless, Eagle Construction was assessed $49.21 in taxes and $70.16 in interest.

Peisner Johnson argues that this evidence is legally or factually insufficient to establish producing cause.  Peisner Johnson contends that Eagle Construction did not make a sufficient showing that the MetLife transaction involved a double taxation problem because it did not provide evidence that it paid sales tax when the invoice was corrected and resubmitted to Cura.  Eagle Construction was not required to show that it paid sales tax on the corrected Cura invoice, but was obligated to show that sales tax was assessed when no tax was owed.  Whether Eagle Construction did in fact pay tax on the Cura invoice is relevant because, if not, Peisner Johnson could have used this evidence as a defense.  If in fact Eagle Construction only paid sales tax once on this transaction, then the error could be described as harmless. However, Peisner Johnson=s failure to present a defensive matter does not establish a no-evidence point because Eagle Construction was not required to respond to challenges that may have been raised by the comptroller but that were not presented by Peisner Johnson to the trial court.

Peisner Johnson contends that Eagle Construction never billed Merchants Freight for any sales tax and that this job does not meet the State=s test for a bad debt.^[6]  Peisner Johnson=s argument that Eagle Construction never billed Merchants Freight for sales tax is immaterial.  The evidence established that Eagle Construction was not paid for this job and, therefore, should not have been assessed sales tax for it.  

When Eagle Construction=s evidence is reviewed using a no-evidence standard, we find that it is legally sufficient.  Eagle Construction provided more than a scintilla of evidence to establish that neither transaction constituted a taxable event.  Formosa Plastics Corp. USA, 960 S.W.2d at 48.

When all the evidence is reviewed using an insufficient evidence standard, we cannot say that the evidence supporting the trial court=s decision is so weak as to be clearly wrong and manifestly unjust.  Mar. Overseas Corp., 971 S.W.2d at 407. Peisner Johnson introduced no evidence contradicting Eagle Construction=s testimony for either job.  Instead, Peisner Johnson has consistently argued that the evidence was too cursory to sustain Eagle Construction=s burden of proof.  Because the trial court had uncontradicted testimony that Eagle Construction paid sales tax on two jobs that did not constitute taxable events under the Texas Tax Code, the evidence is legally and factually sufficient to establish that Peisner Johnson=s conduct was the producing cause of damage.

              Was the Trial Court=s Actual Damage Award Supported by Adequate Evidence?

Eagle Construction introduced evidence that it paid sales tax of $21,399.22 and interest of $14,255.31 on the eighteen contested jobs.  The trial court accepted Eagle Construction=s sales tax overpayment claim but not its interest claim and awarded Eagle Construction actual damages of only $21,399.22.  Eagle Construction does not challenge the trial court=s failure to include the interest it paid the State as damages.  Peisner Johnson argues that the evidence is legally and factually insufficient to support the trial court=s actual damage award.  Peisner Johnson=s argument falls into two categories. First, Peisner Johnson reviews each job individually and argues on a job-by-job basis that the evidence is insufficient to support a damage finding for that job.  Second, Peisner Johnson argues that the parties had a 50% contingency fee contract and that, therefore, even if it violated the DTPA, that error did not cost Eagle Construction all of the tax it ultimately overpaid, but only one-half of that tax overpayment.

A.  Was the Evidence Legally Sufficient on Each Individual Job?

Walraven was Eagle Construction=s Vice President and General Counsel and testified about the eighteen disputed jobs. He did not testify as a sales tax expert but as a lay witness.  The trial court took judicial notice of the relevant tax exemptions and allowed Walraven to provide a lay interpretation of the statutes and to discuss the various transactions.

We have previously found that the evidence was legally and factually sufficient to support a damage award on the MetLife and Merchants Freight jobs.  We turn now to the remaining sixteen jobs.  Walraven testified that each job fell within the State=s exemption for hazardous waste and industrial solid waste removal.  He testified that he was familiar with the relevant sales tax laws in Texas and that the disputed jobs were for the removal or collection of hazardous waste or industrial solid waste.  For each job, he identified the customer, the service provided, and the amount of tax and interest paid.  He testified that each of these was contained within the audit presented to Peisner Johnson, that Peisner Johnson found no exemption, and that Eagle Construction paid the tax assessed by the comptroller for each job. Because Walraven was testifying as a fact witness and not as an expert, this testimony alone is insufficient to support the trial court=s judgment.  We are, therefore, required to review the evidence on each individual job.

B.  Was the Evidence Legally and Factually Sufficient on Each Individual Job?

Peisner Johnson contends that Eagle Construction failed to produce sufficient evidence that each individual transaction was exempt because of inadequate or insufficient paperwork, insufficient explanation of the job performed, or inconsistencies in record keeping.  Peisner Johnson also challenges the trial court=s damage calculations on individual jobs.

1. Geraghty & Miller

Walraven testified that Eagle Construction was retained to remove Class II nonhazardous waste from a building in Abilene.  The project involved the removal of chromium, mercury, and other metals from a shut-down Lockheed facility.  The trial court concluded that this was nontaxable under the hazardous waste exemption. Peisner Johnson argues this finding is erroneous because the waste-tracking forms characterize the waste as nonhazardous waste.  Peisner Johnson argues further that no evidence was introduced showing that the waste was incidental to a process of industry or manufacturing, as required by Tex. Health & Safety Code Ann. ' 361.003(16) (Vernon 2001), or that the waste was not municipal solid waste.

Much of Peisner Johnson=s argument is premised upon a narrow construction of the relevant statutes by the comptroller.  Statutory exemptions from taxation are strictly construed.  Quorum Sales, Inc. v. Sharp, 910 S.W.2d 59, 61 (Tex. App.CAustin 1995, writ denied).  A party claiming an exemption bears the burden of showing that the activity clearly falls within that statutory exemption; any doubt must be resolved in the comptroller=s favor.  Id.

Peisner Johnson introduced no contradictory evidence for any of the challenged jobs. Nor did it offer any explanation for why Eagle Construction could obtain a $47,000 refund on the more recent jobs but not on the earlier jobs. To support its construction of the relevant tax provisions, Peisner Johnson relies upon publications and pronouncements from the comptroller=s office.  The record does not indicate that this material was provided to the trial court. Because it involves statutory construction and because the comptroller=s office has the exclusive jurisdiction to interpret the scope of taxable services subject to a reasonableness standard, we will consider it for guidance on the proper construction of the relevant provisions.  See  Hammerman & Gainer, Inc. v. Bullock, 791 S.W.2d 330, 333 (Tex. App.CAustin 1990, no pet.)(if the comptroller=s interpretation of a statute is reasonable, that interpretation will be accepted over other reasonable interpretations). However, because this material was not presented to the trial court, we cannot consider it as evidence of what the comptroller would have done in response to a timely filed refund claim.

Even though the comptroller is entitled to deference, Texas Courts have disagreed with the comptroller=s construction of the hazardous waste exemption.  In Rylander v. Associated Technics Co., 987 S.W.2d 947 (Tex. App.CAustin 1999, no pet.), the Austin Court of Appeals was faced with a dispute over asbestos removal.  The comptroller contended that the removal of asbestos from a building involved two steps:  separation of the asbestos from the structure that was taxable as remodeling services and disposal of the asbestos after removal that was nontaxable.  The trial court disagreed and found that asbestos removal services including the removal of the asbestos from a building were not taxable.  Id. at 949.  The Austin Court of Appeals affirmed, finding that the comptroller=s interpretation of the statute was inconsistent with legislative intent.  Id. at 951.  The court concluded that the legislature intended to encourage the removal of hazardous wastes and, therefore, exempted these services from the state=s sales tax.  Id. at 950.

We find the Austin Court=s analysis persuasive.  Section 151.0048(a)(3) plainly exempts hazardous and industrial solid waste removal.^[7]  AHazardous waste@ is defined in the Health and Safety Code as Asolid waste identified or listed as a hazardous waste by the administrator of the United States Environmental Protection Agency under the federal Solid Waste Disposal Act.@^[8]  Walraven=s testimony established that at least a portion of the job involved the removal of chromium.  This has been recognized as a hazardous waste by the State of Texas and the EPA.  Slott v. State, 148 S.W.3d 624, 626-27 (Tex. App.CHouston [14th Dist.] 2004, pet. ref=d).  Peisner Johnson correctly notes that Walraven described the waste as AClass II nonhazardous waste.@  (emphasis added).  But, he also testified that this job fell within a Section 151 exemption^[9] and that the waste it removed included chromium.  Even if this evidence is characterized as inconsistent, it was the trial court=s role to resolve any conflicts in the evidence. Dresser Indus., Inc. v. Lee, 880 S.W.2d 750, 754 (Tex. 1993).  We must assume that the trial court resolved all conflicts in accordance with its verdict. Gen. Motors Corp. v. Sanchez, 997 S.W.2d 584, 592 (Tex. 1999).  We find that the evidence was legally and factually sufficient to support the trial court=s finding that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s tax overpayment for this job.

Peisner Johnson also argues that the evidence is legally and factually insufficient to support the trial court=s finding that Eagle Construction sustained $14,600.70 in damages for this job. The comptroller=s office issued a report dated June 23, 2000, which summarized the first audit.  That report included auditor notes which provided information on specific invoices.  These notes identified invoices by client name, location, work description, taxable amount, and sales tax assessed.  The comptroller scheduled several Geraghty & Miller invoices.  Five of these were identified as decommission building and equipment services from September 11, 1996, through December 31, 1996.  The notes indicated that sales tax of $14,600.71 was assessed on these invoices.  This is also the amount Walraven testified was paid to the comptroller for this job.  Peisner Johnson did not controvert any of this evidence.

We have previously held that Eagle Construction provided sufficient evidence to establish that this job was exempt from sales tax.  We also find that the evidence was sufficient to establish that it was overcharged $14,600.71 in sales tax.

2. Morrison Knudson

Walraven testified that this was an EPA-ordered removal action under a CERCLA closure of an old hazardous waste landfill.  Eagle Construction introduced into evidence the removal action work plan.  The plan indicated that the project involved the removal and cleanup of arsenic-containing soil to an action level of 100 parts per million.  Peisner Johnson argues this evidence is insufficient because Eagle Construction did not present any evidence of the arsenic level in the soil and, therefore, did not establish that the soil qualifies as a hazardous waste.  

The documentation established that this was an EPA-ordered cleanup site, that the soil was being remediated to meet EPA established levels, and that the cleanup was being done to reduce the potential for arsenic contamination or exposure. The evidence is factually sufficient to establish that the soil was contaminated with arsenic; that arsenic is a hazardous waste; and, thus, that Eagle Construction=s work was a nontaxable service.

Peisner Johnson also contends that the evidence is insufficient to support the trial court=s damage finding.  The trial court found that Eagle Construction was overcharged $2,824.90 for this job.  However, the total of applicable invoice amounts in the auditor=s notes is $2,779.52.  We will modify the trial court=s judgment to reflect an overcharge of $2,779.52. As modified, the trial court=s damage finding is supported by legally and factually sufficient evidence.

3. Parsons Engineering

Walraven testified that Eagle Construction removed PCBBcontaining transformers for Parsons Engineering.  Peisner Johnson argues that Eagle Construction did not establish an exemption for this job because a representative of Eagle Construction=s client signed the waste manifest certificate which provided: “I certify that the waste materials removed from the above premises contains no hazardous materials.”  The same manifest also indicates Eagle Construction was removing a “PCB containing Transformer.”

As noted previously, we leave the resolution of conflicting evidence to the trial court and assume the trial court resolved all conflicting evidence in accordance with its verdict.  Gen. Motors Corp., 997 S.W.2d at 592; Dresser Indus., Inc., 880 S.W.2d at 754.  We assume, therefore, that the trial court concluded Eagle Construction removed a transformer containing PCB, a hazardous waste. See Carter-Jones Lumber Co. v. Dixie Distrib. Co., 166 F.3d 840 (6th Cir. 1999)(CERCLA action involving the improper disposal of PCBBcontaining transformers).  The evidence is legally and factually sufficient to establish that Eagle Construction=s removal of this transformer was a nontaxable service and, therefore, that Peisner Johnson=s conduct was the producing cause of damage for taxes paid in error on this job.

4. Quaker Oats

Walraven testified that Eagle Construction was hired to provide an emergency response to a sodium hydroxide spill in a chemical storage room.  Eagle Construction collected and removed the sodium hydroxide and cleaned the spill site.  Walraven testified that this was a cleanup of hazardous waste on real property and, therefore, was exempt from sales tax.  The trial court found that this job was tax exempt pursuant to the hazardous waste exemption.

We are aware of no authority classifying sodium hydroxide as a hazardous waste, and Walraven offered no other testimony to support a hazardous waste exemption. Incorrect conclusions of law do not require reversal if the facts support the judgment under a correct legal theory.  Westech Eng=g, Inc. v. Clearwater Constructors, Inc., a Div. of Phelps, Inc., 835 S.W.2d 190, 196 (Tex. App.CAustin 1992, no writ). 

Section 151.0048(a)(3) also exempts the removal of industrial solid waste.  The Health and Safety Code defines A[i]ndustrial solid waste@ as Asolid waste resulting from or incidental to a process of industry or manufacturing, or mining or agricultural operations.@^[10] Peisner Johnson argues that the comptroller excepts from this definition anything that falls within the Health and Safety Code=s definition of A[m]unicipal solid waste@ which is Asolid waste resulting from or incidental to municipal, community, commercial, institutional, or recreational activities, includ[ing] garbage, rubbish, ashes, street cleanings, dead animals, abandoned automobiles, and other solid waste other than industrial solid waste.@  Tex. Health & Safety Code Ann. ' 361.003(20) (Vernon 2001).

The record does not indicate for what or how the sodium hydroxide was being used. Consequently, we find that the evidence is legally insufficient to support a finding that this job meets the requirements for a tax exemption.  We reverse the trial court=s judgment as it relates to this job and render judgment that Peisner Johnson=s conduct was not the producing cause of any tax overpayment for this job.

5. Coca-Cola

Eagle Construction was hired to remove a hydrochloric acid spill from a drainage ditch. Walraven testified that hydrochloric acid was a hazardous waste and that this was a tax-exempt transaction. Hydrochloric acid has been classified as a hazardous waste.  New W. Urban Renewal Co. v. Westinghouse Elec. Corp., 909 F. Supp. 219, 226 (D. N.J. 1995)(applying New Jersey=s Environmental Cleanup Responsibility Act); Dana Corp. v. Am. Standard, Inc., 866 F. Supp. 1481, 1534 (N.D. Ind. 1994)(applying CERCLA).  The evidence is legally and factually sufficient to establish that this transaction was tax-exempt and, therefore, that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s damage for this job.

6. Air Products and Chemicals

Walraven testified that Eagle Construction removed Class III industrial solid waste from the client=s property.  The company=s records described this material as bituminous asphalt and demolished reinforced concrete.  The client signed a certification that this material was not a hazardous waste.

Bituminous asphalt and demolished reinforced concrete are not hazardous waste. Peisner Johnson argues that the evidence is insufficient to establish the industrial waste exemption because Eagle Construction failed to establish that the waste material was incidental to a process of industry or manufacturing or to mining or agricultural operations or that it was not municipal solid waste.  We agree.  Walraven=s classification of the material as Class III industrial solid waste, without more, is factually insufficient to bring this transaction within an exemption.  Walraven=s description of this as industrial solid waste is, however, some evidence this was a tax-exempt job.  We reverse the trial court=s judgment as it relates to this job and remand for further proceedings.

7. Albert Halff & Associates

Eagle Construction removed industrial solid waste, Class II soil borings, for this client. Eagle Construction=s documentation indicates that the soil borings were obtained while drilling for samples during the investigation of a mop-water disposal site.  The documentation indicates that no spent solvents were found.  Peisner Johnson argues this does not show the disposal of a hazardous waste and is insufficient to establish the industrial waste exemption. We agree.  We reverse the trial court=s judgment as it relates to this job and render judgment for Peisner Johnson.

8. Benchmark

Walraven testified that Eagle Construction cleaned industrial solid waste from a 1,600-barrel storage tank at Cargill=s facility.  Eagle Construction=s documentation indicates that it recovered 470 gallons of industrial wastewater which contained gasoline.  Gasoline is not classified as a hazardous waste. Walraven=s testimony is some evidence that the industrial solid waste exemption applies, but it is not factually sufficient to establish the exemption.  We reverse the trial court=s judgment as it relates to this job and remand for further proceedings.

9. Enprotech Engineering

Eagle Construction removed Class I industrial solid waste from the client=s facility.  AClass I industrial solid waste@ means:

[A]n industrial solid waste or mixture of industrial solid waste, including hazardous industrial waste, that because of its concentration or physical or chemical characteristics:

(A) is toxic, corrosive, flammable, a strong sensitizer or irritant, or a generator of sudden pressure by decomposition, heat, or other means; and

(B) poses or may pose a substantial present or potential danger to human health or the environment if improperly processed, stored, transported, or otherwise managed.

Tex. Health & Safety Code Ann. ' 361.003(2) (Vernon 2001).  Eagle Construction=s documentation indicated that this waste material consisted of pads used to clean a hydraulic oil spill.  Hydraulic oil is not a hazardous material.  The record does not support a finding that the industrial waste exemption or the oil and gas exploration and production exemption applies to this job.  We reverse the trial court=s judgment as it relates to this job and render judgment for Peisner Johnson.

10. F & D Head

Walraven testified that Eagle Construction removed hazardous waste from a 1,000-barrel storage tank at F & D=s storage facility.  Eagle Construction provided documentation executed by the waste generator and waste disposal facility confirming that this material was indeed hazardous waste. Peisner Johnson correctly points out that this particular form had preprinted language which certified that the waste had no hazardous material and that the generator signed this certification.  The form also had handwritten notations that stated that the material was hazardous waste. The handwritten notes appear to have been made by the same person who signed the certification on behalf of the generator.

To the extent this created a conflict in the evidence, we must assume the trial court resolved that conflict in favor of its verdict.  This evidence is sufficient to establish that the tax exemption for hazardous waste removal applied and, therefore, that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s damage for this job.

11. E.A.P. Engineering Asphalt

Walraven testified that on this job Eagle Construction removed industrial waste from a 1,200- barrel storage tank.  Eagle Construction=s documentation indicates that this was a diesel storage tank, that rust scale was removed, and that the tank was steam cleaned.  Rust scale is not a hazardous waste.  Walraven=s testimony is some evidence that the industrial solid waste exemption applies, but it is factually insufficient to support the trial court=s judgment.  We reverse the trial court=s judgment as it relates to this job and remand for further proceedings.

12. ENSR

Eagle Construction removed contaminated soil which Walraven testified was a Class I industrial solid waste.  Eagle Construction produced documentation from both the generator and waste treatment facility confirming that this was petroleum-contaminated soil.  The generator=s documentation consisted of executed copies of TWC-0332 forms used by the Petroleum Storage Tank Division of the Texas Water Commission.  The trial court found that this job was exempt pursuant to the hazardous waste exemption.  Petroleum is not a hazardous waste; but this evidence is sufficient to establish the exemption for waste resulting from exploration, development, or production of oil and gas.  There was, therefore, legally and factually sufficient evidence that this job was tax exempt and that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s tax overpayment.

13. Cummins Southern Plains

Walraven testified that Eagle Construction removed Class II industrial solid waste from Cummins=s gas facility.  Eagle Construction=s documentation indicated that this waste was nonhazardous material.  Neither Eagle Construction=s documentation nor Walraven=s testimony explained exactly what this material was; therefore, the evidence is insufficient to establish the hazardous or industrial waste exemptions.  However, because this waste was removed from a gas facility, it is sufficient to establish the oil and gas exemption.  The evidence is, thus, factually sufficient to establish that this job was tax exempt and that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s tax overpayment.

14. Entrix

Walraven testified that Eagle Construction removed contaminated soil from a Ford dealership in Bryan, Texas.  Walraven was personally involved in this project.  Walraven did not testify with what the soil was contaminated.  Nor did Eagle Construction produce any documentation from this job.  Eagle Construction did prepare a summary of the disputed jobs which indicated that the soil was contaminated with petroleum.  That document was offered for the limited purpose of summarizing the audit and Eagle Construction=s exhibits for the disputed jobs.  The trial court admitted it for that limited purpose.  Consequently, it cannot be used to establish an evidentiary point outside Eagle Construction=s other exhibits.  We find that the evidence was legally insufficient to establish that this job was tax exempt.  We reverse the trial court=s judgment as it relates to this job and render judgment for Peisner Johnson.

15. Baker Performance Chemicals

Eagle Construction removed ethyline dichloride from a 5,000-barrel storage facility at the client=s Witco facility.  Ethyline dichloride is a hazardous material.  See Geraghty and Miller, Inc. v. Conoco Inc., 234 F.3d 917, 929 (5th Cir. 2000).  Peisner Johnson complains that Eagle Construction did not produce a permit issued under Chapter 26 of the Texas Water Code.^[11]  Peisner Johnson confuses a safe-harbor provision for the requirements of the entire statute itself.  While Section 151.0048(a)(3) provides an exemption for work done pursuant to a Chapter 26 permit, that is in addition to the other exemptions provided by the statute. The other exemptions are not conditioned on the presence of a permit but on the nature of the work performed. This evidence is factually sufficient to establish that Eagle Construction was engaged in hazardous waste removal and that the job was tax exempt.  The evidence is, therefore, factually sufficient to establish that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s tax overpayment for this job.

16. USPCI

Walraven testified that Eagle Construction cleaned a frac tank for this client.  Eagle Construction did not provide any contemporaneous documentation for this job.  Instead, Walraven referred to notes from the auditor=s exam.  These notes, which were prepared by Peisner Johnson,  indicated that the work involved a large frac tank.  The trial court found that the hazardous waste exemption applied.  The evidence is insufficient to establish that any hazardous wastes were removed from the frac tank.  The trial court could, however, have reasonably determined that cleaning a frac tank B which is used in connection with completing an oil well B falls within the oil and gas exemption. We conclude, therefore, that the evidence was factually sufficient to establish this was a tax-exempt transaction and that Peisner Johnson=s conduct was the producing cause of Eagle Construction=s tax overpayment for this job.

C. Summary of Individual Job Findings

We find that the evidence was factually and legally sufficient to support the trial court=s findings with respect to the following jobs: MetLife; Merchants Freight; Geraghty & Miller; Parsons Engineering; Coca-Cola; F & D Head; ENSR; Cummins Southern Plains; Baker Performance Chemicals; and USPCI.  We find that the evidence was legally sufficient, but not factually sufficient, to support the trial court=s findings that Peisner Johnson=s conduct was the producing cause of damage on the following jobs:  Air Products and Chemicals; Benchmark; and E.A.P. Engineering Asphalt.  We find that the trial court=s liability finding on the Morrison Knudson job was supported by legally and factually sufficient evidence, but we modify the trial court=s judgment to reflect a tax overpayment of $2,779.52.  We find the evidence was legally insufficient and, therefore, reverse and render judgment for Peisner Johnson for the following jobs:  Quaker Oats; Albert Halff & Associates; Enprotech Engineering; and Entrix.  Peisner Johnson=s first issue is sustained in part and overruled in part.

D.  Did the Trial Court Apply the Correct Measure of Damage?

Peisner Johnson also challenges the trial court=s damage award, contending that it erroneously awarded Eagle Construction a greater recovery than it would have achieved absent any DTPA misrepresentation. The DTPA provides two direct measures of damage for misrepre-sentations.  One is out-of-pocket, which measures the difference between the value the claimant paid and the value he received.  The second is benefit-of-the-bargain.  This measures the difference between the value as represented and the value received.  A DTPA claimant may recover under the theory which provides the largest recovery.  See Arthur Anderson & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 817 (Tex. 1997).  Because Eagle Construction did not pay Peisner Johnson for its services, the applicable measure of damage is benefit-of-the-bargain.

Peisner Johnson argues that, if it had identified every exemption claim raised by Eagle Construction and if the comptroller had agreed on each claim, Eagle Construction would not have received the total amount of the tax it paid but, pursuant to the parties= contract, only one-half of that amount. The remaining one-half would have been paid to Peisner Johnson as compensation.

Eagle Construction contends that, because this was a DTPA claim, it was entitled to the full amount of its economic damages despite the terms of the contract.  Eagle Construction cites cases such as Fidelity & Casualty Co. of New York v. Underwood, 791 S.W.2d 635 (Tex. App.CDallas 1990, no writ), overruled on other grounds by American Manufacturers Mutual Insurance Company v. Schaefer, 124 S.W.3d 154 (Tex. 2003), for the proposition that DTPA damages are not limited to contractual damages.  We agree. However, Eagle Construction did not offer any evidence of extra-contractual damages, and Peisner Johnson is not relying on any liability-limiting provision of the parties= contract.

The thrust of Eagle Construction=s DTPA claim was that Peisner Johnson misrepresented the services it would provide to lower Eagle Construction=s sales tax liability.  Peisner Johnson did not perform as represented; consequently, Eagle Construction erroneously paid $21,399.22 in sales tax.  Eagle Construction further contends that, had it received the benefit of its bargain, Peisner Johnson would have identified these overpayments and Eagle Construction would have received a larger refund.  Eagle Construction, however, would have realized only one-half of this refund.   We find that the trial court employed the wrong measure of damage when it awarded Eagle Construction all of its tax overpayment.  We reverse and remand to the trial court for further proceedings on actual damage calculations.  Because the trial court=s actual damage award impacts additional damages, we reverse the trial court=s additional damage award and remand that to the trial court for further proceedings as well.  Peisner Johnson=s second issue is sustained in part and overruled in part.

                         Was the Evidence Sufficient to Support the Trial Court=s Findings

                     that Peisner Johnson Knowingly and Intentionally Violated the DTPA?

Peisner Johnson argues that the evidence is legally or, alternatively, factually insufficient to support the trial court=s findings that it advertised services with the intent not to sell them as advertised and that it failed to disclose information concerning its services so as to induce Eagle Construction to enter into a transaction that it would not have entered had the information been disclosed.  Peisner Johnson argues the evidence is insufficient because these findings require evidence of Peisner Johnson=s intent at the time of the transaction.

Failure to perform a promise does not constitute a DTPA violation unless the promisor had no intention of performing the promise at the time it was made.  Kuehnhoefer v. Welch, 893 S.W.2d 689, 693 (Tex. App.CTexarkana 1995, writ denied).  This determination can be inferred from the nature of the promise and the surrounding circumstances.  Id.

Peisner Johnson represented that it would reassess previous tax statements and determine if there was any overpayment.  Peisner Johnson=s representative, however, testified that Peisner Johnson might decide not to do this if it did not feel it would be helpful. The representative also testified that he did not feel required to tell clients that he was not reviewing certain transactions.  Peisner Johnson represented to Eagle Construction before entering into a contract that it would pursue every last penny, would identify payments that were previously made in error, and would identify every exemption available.  In reality, Peisner Johnson did not normally look at a contractor=s purchases to see if there had been an overpayment of sales tax and only looked at transactions when it was profitable for Peisner Johnson to do so.  As noted previously, this created a conflict of interest because Peisner Johnson placed its own financial interest ahead of the client despite representations indicating that its conduct was geared to achieving the best possible result for the client. 

This evidence is legally and factually sufficient to establish that, when Peisner Johnson solicited Eagle Construction=s business, it made material misrepresentations about its services because it promised to perform services it knew would not be performed.  The evidence is also sufficient to establish that Peisner Johnson failed to disclose significant limitations and qualifications on its services before entering into the contract.  There was no testimony that the employees involved in the audit violated company policy by not providing key information to Eagle Construction prior to entering into the contract.  The testimony supports only the opposite conclusion.  The pre-contract written representations sent by Peisner Johnson to Eagle Construction were apparently all authorized. Peisner Johnson employees= decisions to not look at certain transactions, to concentrate only on transactions that financially benefitted Peisner Johnson, and to not explain any of this to Eagle Construction were all well within company policy.  The trial court could reasonably conclude that these misrepresentations and omissions were made to induce Eagle Construction into a transaction that it would not have otherwise entered into and that they were done knowingly and intentionally.  Peisner Johnson=s third issue is denied.

                 Is the Award of Appellate Attorney=s Fees Supported by Sufficient Evidence?

The trial court conditionally awarded Eagle Construction $10,000 in attorney=s fees in the event it was successful on an appeal to the court of appeals and an additional $10,000 in attorney=s fees in the event of a successful appeal to the Texas Supreme Court.  Peisner Johnson contends that the evidence is legally and factually insufficient to support this award.  Because this part of this case is remanded to the trial court for further proceedings, the interest of justice is better served by affording the trial court the opportunity to examine this award in light of subsequent events.  Accordingly, Peisner Johnson=s fourth issue is sustained to the extent that the trial court=s conditional attorney=s fee award is reversed, and this issue is remanded for further consideration.  We express no opinion on the appropriateness or amount of an award of appellate attorney=s fees.

         Did the Trial Court Err When It Denied Eagle Construction Attorney=s Fees for Trial?

Eagle Construction argues that, because it prevailed on a DTPA claim, the trial court was required to award attorney=s fees for the underlying trial.  Eagle Construction=s claim rests on Tex. Bus. & Com. Code Ann. ' 17.50(d) (Vernon Supp. 2005) which provides that A[e]ach consumer who prevails shall be awarded court costs and reasonable and necessary attorneys= fees.@  A prevailing party is one who pleads and proves a DTPA cause of action and is awarded actual damages.  Indust-Ri-Chem Lab., Inc. v. Par-Pak Co., 602 S.W.2d 282, 295 (Tex. Civ. App.CDallas 1980, no writ). 

The record does not indicate that the trial court denied Eagle Construction=s entitlement to attorney=s fees.  Instead, the record reflects that the trial court found that Eagle Construction failed to prove attorney=s fees. The trial court=s judgment provided for Aattorneys= fees in the amount of 0.@ Eagle Construction designated an expert witness to testify on attorney=s fees; however, the trial court sustained  Peisner Johnson=s motion to strike that designation as untimely.  Eagle Construction asked the trial court to take judicial notice of attorney=s fees under Tex. Civ. Prac. & Rem. Code Ann. ' 38.004 (Vernon 1997), but the court refused to do so beyond counsel=s hourly rate.

The first question is does Section 38.004 apply to a DTPA action?  This statute provides:

The court may take judicial notice of the usual and customary attorney=s fees and of the contents of the case file without receiving further evidence in:

(1) a proceeding before the court; or

(2) a jury case in which the amount of attorney=s fees is submitted to the court by agreement.

Tex. Civ. Prac. & Rem. Code Ann. ' 38.003 (Vernon 1997), however, provides that A[i]t is presumed that the usual and customary attorney=s fees for a claim of the type described in Section 38.001 are reasonable.@ DTPA claims are not included in Tex. Civ. Prac. & Rem. Code Ann. ' 38.001 (Vernon 1997).  No court has found that Section 38.004 applies to a DTPA action; several have held exactly the opposite.^[12]  Eagle Construction notes that the supreme court approved of the use of Section 38.004 in a sanction situation in Cire v. Cummings, 134 S.W.3d 835, 844 (Tex. 2004).  Because sanctions are beyond the scope of Section 38.001, Eagle Construction argues the supreme court is signaling that trial courts may take judicial notice of attorney=s fees in a variety of circumstances and that it would be appropriate to do so in a DTPA action.

We do not read the supreme court=s holding so broadly.  Because the legislature specifically addressed attorney=s fees for a DTPA action in Section 17.50 but did not list the DTPA in Section 38.001 and because every intermediate court to consider this issue has held that attorney=s fees must be proven in a DTPA action, we find that the trial court did not err when it declined to take judicial notice of Eagle Construction=s attorney=s fees.  In the absence of any evidence of attorney=s fees, we hold further that the trial court did not err when it refused to award fees for the trial of this action.  Eagle Construction=s cross-issues are overruled.

                                                         Conclusion

The trial court=s judgment is modified and affirmed in part, is reversed and rendered in part, and is reversed and remanded in part. The trial court=s judgment is affirmed to the extent it found that Peisner Johnson violated the DTPA and that its conduct was the producing cause of damage.  The tax overpayment findings are affirmed for the following jobs:  MetLife; Merchants Freight; Geraghty & Miller; Parsons Engineering; Coca-Cola; F & D Head; ENSR; Cummins Southern Plains; Baker Performance Chemicals; and USPCI.  The tax overpayment calculation for the Morrison Knudson job is modified to reflect $2,779.52. 

The trial court=s judgment is reversed, and judgment is rendered for Peisner Johnson on the following jobs:  Quaker Oats; Albert Halff & Associates; Enprotech Engineering; and Entrix.  This case is remanded to the trial court for further proceedings on the following jobs: Air Products and Chemicals; Benchmark; and E.A.P. Engineering Asphalt. The trial court=s damage awards including appellate attorney=s fees are also reversed and remanded for further proceedings as explained in this opinion.

RICK STRANGE

JUSTICE

May 11, 2006

Panel consists of: Wright, C.J., and

McCall, J., and Strange, J.

---

     ^[1]Tex. Bus. & Com. Code Ann. ' 17.41 et seq. (Vernon 2002 & Supp. 2005).

     ^[2]See also Cont=l Dredging, Inc. v. De-Kaizered, Inc., 120 S.W.3d 380, 390 (Tex. App.CTexarkana 2003, pet. denied) (misrepresenting that contract has been completed, when in fact it has not, is not a DTPA violation because the representation was within the bounds of the contract).

     ^[3]Because Peisner Johnson did not disclose that it only pursued claims when it made economic sense for them to do so, a client would not realize that Peisner Johnson=s best interest, rather than its own, was the driving factor.

     ^[4]In North Alamo Water Supply Corp. v. Willacy County Appraisal District, 804 S.W.2d 894, 899 (Tex. 1991), the court held that tax exemptions will be strictly construed because they place unequal burdens on taxpayers and that the taxpayer bears the burden of clearly showing its entitlement to the exemption.

     ^[5]The trial court found, for example, that Peisner Johnson misrepresented that it would come to Eagle Construction=s facility and review Eagle Construction=s books, that Peisner Johnson represented that it would review all of Eagle Construction=s transactions to look for refunds but in fact that it did not review transactions which would cost Peisner Johnson more time than it was worth, and that it failed to advise Eagle Construction that it never looked for exemptions when it comes to contractors because it has been its experience that contractors are not entitled to exemptions.

     ^[6]At first blush, a claim discharged by bankruptcy would appear to be a bad debt by definition.  However, Peisner Johnson cites Tex. Tax Code Ann.  ' 151.426 (Vernon 2002) and 34 Tex. Admin. Code  ' 3.302(d)(4) (West 2006)(Sales Tax Rule 3.302(d)(4))  for the State=s bad debt test and argues that Eagle Construction did not offer sufficient evidence to meet this test. These rules relate to transactions which are booked as income and are later reclassified as bad debts.  The record does not establish that either provision is even applicable.  Peisner Johnson notes that Eagle Construction is liable for Athe sales tax due on its receipts.@  The testimony is clearly sufficient to establish that for this job there were no receipts.

     ^[7]Tex. Tax Code Ann. ' 151.0048(a)(3)(A), (B) (Vernon Supp. 2005).

     ^[8]Tex. Health & Safety Code Ann. ' 361.003(12) (Vernon 2001).

     ^[9]The trial court allowed Walraven to testify as a lay witness but not an expert.  In light of his testimony that Eagle Construction removed chromium, it is unnecessary for us to determine if his statement that the job was subject to a Tex. Tax Code Ann. ' 151.0048 (Vernon 2002 & Supp. 2005) exemption is opinion or fact testimony.

     ^[10]Tex. Health & Safety Code Ann. ' 361.003(16) (Vernon 2001).

     ^[11]Tex. Water Code Ann. ch. 26 (Vernon 2000 & Supp. 2005).

     ^[12]See, e.g., Manon v. Tejas Toyota, Inc., 162 S.W.3d 743, 752 (Tex. App.CHouston [14th Dist.] 2005, no pet.); Nelson v. Schanzer, 788 S.W.2d 81, 88 (Tex. App.CHouston [14th Dist.] 1990, writ denied); Kaiser v. Nw. Shopping Ctr., Inc., 544 S.W.2d 785, 788 (Tex. Civ. App.CDallas 1976, no writ).