Jeffrey May v. Ticor Title Insurance

Affirmed in Part, Reversed and Remanded in Part and Opinion filed January
14, 2014.
In The
Fourteenth Court of Appeals
NO. 14-12-00588-CV
JEFFERY MAY, SHARON MAY, GILBERT APODACA, JEANETTE
ALEJANDRO, MARK BOGOSIAN, JANA BOGOSIAN, DAVID BOYD,
SENA BOYD, H.M BURLESON, JR., JAMES WARD, ROBERT
CAMPBELL, CHERYL CAMPBELL, JOHN COON, BARBARA COON,
FENOGLIO, LACEY FENOGLIO, JOHN GOLDEN, SANDRA GOLDEN,
DOROTHY JAWORSKI, JOEY KING, RACHELLE KING, CRAIG
LAUGHLIN, DEANN HARMON-LAUGHLIN, PAULA MCCLURG,
GRANT MELHORN, AMY MELHORN, JASON QUINN, DONNA QUINN,
JOSHUA RUSK, REBECCA RUSK, HERMAN SALGADO, GREG
SEELEY, JULIE SEELEY, SCOTT SEESE, MARCIA SEESE, DWIGHT
SMITH, MIRIAM SMITH , LINDA SPAULDING, DAVID SOLT, LINDA
SOLT, AND THE VOTH TRUST, Appellants/Cross-Appellees
V.
TICOR TITLE INSURANCE, CHICAGO TITLE INSURANCE COMPANY,
COMMONWEALTH LAND TITLE INSURANCE COMPANY, LAWYERS
TITLE INSURANCE CORPORATION, AND ALAMO TITLE COMPANY,
Appellees/Cross-Appellants
On Appeal from the 367th District Court
Denton County, Texas
Trial Court Cause No. 2009-50072-367
OPINION
The May Appellants1 sued the Ticor Appellees2 for breach of contract and
breach of the duty of good faith and fair dealing. The claims, asserted in five
cases, were predicated on a contention that the Ticor Appellees offered insufficient
compensation for mineral interests that were (1) reserved by the sellers when the
May Appellants purchased certain properties, and (2) not excluded from title
insurance policies on those properties issued by the Ticor Appellees to the May
Appellants.
The jury determined the fair market value of the lease signing bonus and
royalty for one full net mineral acre as of July 1, 2008; the trial court then used the
jury’s findings to compute the value of the lost mineral interests covered by the
Ticor Appellees’ title insurance policies. In conformity with the jury’s
determination, the trial court found the Ticor Appellees to be in breach of the title
insurance contracts as a matter of law based on the parties’ stipulations. The trial
court denied the May Appellants’ request to award attorneys’ fees and to charge
their expert fees as costs of court.
1
The May Appellants are Jeffrey May, Sharon May, Gilbert Apodaca, Jeanette
Alejandro, Mark Bogosian, Jana Bogosian, David Boyd, Sena Boyd, H.M Burleson, Jr., James
Ward, Robert Campbell, Cheryl Campbell, John Coon, Barbara Coon, Fenoglio, Lacey
Fenoglio, John Golden, Sandra Golden, Dorothy Jaworski, Joey King, Rachelle King, Craig
Laughlin, DeAnn Harmon-Laughlin, Paula McClurg, Grant Melhorn, Amy Melhorn, Jason
Quinn, Donna Quinn, Joshua Rusk, Rebecca Rusk, Herman Salgado, Greg Seeley, Julie Seeley,
Scott Seese, Marcia Seese, Dwight Smith, Miriam Smith, Linda Spaulding, David Solt, Linda
Solt, and The Voth Trust.
2
The Ticor Appellees are Chicago Title Insurance Company, Commonwealth Land Title
Insurance Company, Lawyers Title Insurance Corporation, and Alamo Title Company.
2
The May Appellants challenge the trial court’s denial of attorneys’ and
expert fees, arguing that the trial court (1) abused its discretion when it sanctioned
the May Appellants by preventing their attorney from testifying as an expert; (2)
abused its discretion when it denied the May Appellants’ request to award
attorneys’ fees; and (3) erred when it denied the May Appellants’ request to award
expert fees as costs of court.
In their cross-appeal, the Ticor Appellees argue that the trial court erred
when it (1) signed a judgment in favor of the May Appellants on their breach-of-
contract claim; (2) awarded costs to the May Appellants; (3) chose an
inappropriate date for the calculation of prejudgment interest; and (4) failed to
award the Ticor Appellees litigation costs under Texas Rule of Civil Procedure
167.4.
We affirm the trial court’s judgment in part, reverse in part, and remand for
modification of the trial court’s judgment in accordance with our holdings.
BACKGROUND
The May Appellants own property in Argyle in Denton County, Texas.
Their predecessor in title is Wynne/Jackson Lakes Development, LP.
Wynne/Jackson reserved an undivided one-half interest in all oil, gas, and other
minerals under the May Appellants’ properties. The May Appellants purchased
title insurance policies from the Ticor Appellees when they purchased their
properties. These policies did not list the Wynne/Jackson reservation of mineral
interests as an exception to coverage. Beginning in September 2008, the May
Appellants filed notices of claims with the Ticor Appellees under their respective
title insurance policies seeking compensation for loss of the reserved
Wynne/Jackson mineral interests.
3
The Ticor Appellees accepted coverage of the May Appellants’ claims;
investigated; agreed to pay compensable losses under the May Appellants’
respective title policies; and obtained an appraisal of the mineral interests at issue.
This appraisal valued the mineral interests at $1,900 per net mineral acre. Based
on this appraisal, the Ticor Appellees (1) notified the May Appellants that the
compensable loss under the policies was based on $1,900 per net mineral acre; and
(2) offered to pay compensable losses by prorating the $1,900 net mineral acre
figure according to the size of each of the May Appellants’ lots. The May
Appellants disputed the Ticor Appellees’ appraisal; they asked for compensation of
$25,531.09 per net mineral acre plus $10,000 in attorneys’ fees.
The May Appellants subsequently sued for breach of contract and breach of
the common law duty of good faith and fair dealing in five separate proceedings.
The trial court granted the Ticor Appellees’ motion to consolidate and set March 1,
2010, as the trial date. When none of the parties appeared for trial on that date, the
trial court dismissed the consolidated case for want of prosecution. The May
Appellants filed an unopposed motion to reinstate the consolidated case, and the
trial court granted the motion.
The trial court scheduled trial for July 26, 2010. The second scheduling
order required parties seeking affirmative relief to designate their expert witnesses
by June 4, 2010; all other parties had to designate expert witnesses by June 25,
2010. The trial court reset the trial date to October 18, 2010. The parties
stipulated to the following facts, among others: (1) the names of the parties; (2) the
acreage owned by each of the May Appellants; (3) the mineral interest reserved by
Wynne/Jackson; and (4) the relevant valuation date for calculating the fair market
value of bonuses and royalties.
Before the case was called for trial, the May Appellants submitted a motion
4
for continuance seeking to amend pleadings, supplement expert designations to add
attorney Lahr as an expert witness, and pay the jury fee. The Ticor Appellees
objected to the continuance. The trial court granted the May Appellants’ motion
for continuance to pay the jury fee; it further ruled that the deadlines in the agreed
scheduling order would remain unless the parties submitted another agreed
scheduling order. No subsequent agreed scheduling order was submitted to the
trial court. The May Appellants paid the jury fee and requested that the case be
reset to January 18, 2011, and the trial court granted the request.
The May Appellants, on November 29, 2010, filed a motion for leave to
designate attorney Lahr as an expert witness on attorneys’ fees. The May
Appellants failed to obtain a ruling on this motion before the case was called to
trial.
A jury was empanelled on January 18, 2011, and returned its verdict three
days later. The jury answered “no” to a question asking whether the Ticor
Appellees failed to comply with a common law duty of good faith and fair dealing
owed to the May Appellants. The trial court did not submit a jury question asking
whether the Ticor Appellees had breached their contractual obligations. The jury
determined that as of July 1, 2008, the fair market value of the lease signing bonus
per net mineral acre was $2,500; the fair market value of royalty per net mineral
acre was $3,125. These amounts exceeded the Ticor Appellees’ $1,900 valuation
of the mineral interests at issue.
After trial, the May Appellants filed a supplemental motion for leave to
designate attorney Lahr as an expert witness pursuant to Texas Rule of Civil
Procedure 193.6. At a hearing on March 11, 2011, the trial court granted the May
Appellants’ motion, swore in Lahr as an expert witness, and allowed her to testify
as an expert about attorneys’ fees. The Ticor Appellees cross-examined Lahr at
5
the hearing.
At the same hearing, the trial court asked each party to submit case law
supporting their position on whether the Ticor Appellees had breached their
contracts with the May Appellants. According to the trial court’s findings of fact,
the trial court determined that the parties’ stipulations established that the Ticor
Appellees breached their contractual obligations.
The Ticor Appellees filed a motion to reconsider the March 11, 2011 ruling
granting the May Appellants’ motion for leave to designate Lahr as an expert
witness. After a hearing, the trial court granted the Ticor Appellees’ motion; it
determined that no good cause existed for the May Appellants’ failure to timely
designate their attorney as an expert witness, and that granting such leave would
cause prejudice and surprise to the Ticor Appellees. The May Appellants also filed
an affidavit on June 10, 2011, giving notice to the court of the May Appellants’
expert fees.
The trial court found the Ticor Appellees to be in breach of the title
insurance policies and on March 6, 2011, signed a judgment in favor of the May
Appellants awarding a total of $14,716.69.3 The trial court assessed prejudgment
interest at $2.02 per day from March 23, 2008, and assessed postjudgment interest
at five percent per annum. The trial court’s final judgment did not include an
award of attorneys’ fees.
The May Appellants requested findings of fact and conclusions of law with
3
Under the judgment, the May Appellants are entitled to recover from the Ticor
Appellees $2,500 per net mineral acre for lost bonus and $3,125 per net mineral acre for lost
royalties for a total of $5,625 per net mineral acre. The May Appellants collectively hold 5.2326
mineral acres. Therefore, the $14,716.69 amount awarded in the final judgment represents the
collective value of the one-half mineral interest lost by the May Appellants computed as $5,625
multiplied by 5.2326 and then divided by two.
6
respect to (1) attorneys’ fees, and (2) expert fees pursuant to Texas Rule of Civil
Procedure 296. The trial court signed findings of fact and conclusions of law.
The May Appellants filed a motion to modify the judgment and,
alternatively, a motion for new trial, arguing that the trial court erred when it failed
to award the May Appellants attorneys’ fees and expert fees. The Ticor Appellees
filed a motion for new trial, arguing that the trial court erred when it (1) found the
Ticor Appellees to be in breach of contract based upon the parties’ stipulations; (2)
assessed court costs against the Ticor Appellees pursuant to Texas Rule of Civil
Procedure 167; (3) assessed prejudgment interest against the Ticor Appellees; and
(4) failed to award litigation costs to the Ticor Appellees pursuant to Texas Rule of
Civil Procedure 167. The Ticor Appellees’ motion for new trial was overruled by
operation of law under Texas Rule of Civil Procedure 329b. Tex. R. Civ. P. 329b.
The May Appellants filed a timely notice of appeal, and the Ticor Appellees filed a
timely notice of cross-appeal. The case was transferred to this court from the
Second Court of Appeals.4
ANALYSIS
I. The Ticor Appellees’ Cross-Appeal
We address the Ticor Appellees’ Cross-Appeal first because it raises
threshold liability issues.
4
The May Appellants initially appealed to the Second Court of Appeals in Fort Worth.
Pursuant to its docket equalization authority, the Supreme Court of Texas transferred the May
Appellants’ appeal to this court. See Tex. Gov’t Code Ann. § 73.001 (Vernon 2013). We are
unaware of any conflict between precedent of the Second Court of Appeals and this Court on any
relevant issue. See Tex. R. App. P. 41.3. This case originally was filed in the Second Court of
Appeals of Texas as 02-12-0225-CV, and was transferred by an order of the Supreme Court of
Texas issued June 18, 2012. See Misc. Docket No. 12-9107.
7
A. Breach of Contract
The Ticor Appellees argue in their first issue that the trial court erred by
signing a judgment against them awarding damages for breach of contract because
(1) the May Appellants waived this claim under Texas Rule of Civil Procedure 279
when they failed to submit a question on breach of contract in the jury charge; (2)
the parties never stipulated to a breach of contract or to damages; and (3) the
verdict does not support a breach of contract finding.
We first address the Ticor Appellees’ assertion that the May Appellants
waived their breach of contract claim under Rule 279, which governs omissions
from the jury charge
Rule 279 provides that any issues excluded from the jury charge that are
“not conclusively established under the evidence and no element of which is
submitted or requested are waived.” Tex. R. Civ. P. 279. A claim is not waived
under Rule 279 when the evidence conclusively establishes the necessary elements,
even if none of the elements are submitted to the jury for consideration. Bank of
Tex. v. VR Electric, Inc., 276 S.W.3d 671, 677 (Tex. App.—Houston [1st Dist.]
2008, pet. ref’d). When the evidence conclusively establishes a claim, it may be
part of the judgment even if a jury question on the claim was not submitted. Id.
(citing City of Keller v. Wilson, 168 S.W.3d 802, 814-15 (Tex. 2005)).
The essential elements of breach of contract are (1) the existence of a valid
contract; (2) performance or tendered performance by the plaintiff; (3) breach by
the defendant; and (4) damages as a result of breach. Rice v. Metro. Life Ins. Co.,
324 S.W.3d 660, 665 (Tex. App.—Fort Worth 2010, no pet.). Determining
whether a party has breached a contract is a question of law for the court rather
than a question of fact for the jury when the facts of the parties’ conduct are
undisputed or conclusively established. Grohman v. Kahlig, 318 S.W.3d 882, 887
8
(Tex. 2010) (citing Sullivan v. Barnett, 471 S.W.2d 39, 44 (Tex. 1971)); see also
Orix Capital Mkts., L.L.C. v. Washington Mut. Bank, 260 S.W.3d 620, 623 (Tex.
App.—Dallas 2008, no pet.) (“Where the evidence is undisputed regarding a
party’s conduct under a contract, the judge alone must determine whether it shows
performance or breach of its contract obligation.”) (citing Lafarge Corp. v. Wolff,
Inc., 977 S.W.2d 181, 186 (Tex. App.—Austin 1998, pet. denied)).
The Ticor Appellees rely on Southern Bell Telephone Co. v. DeLanney, 809
S.W. 493, 495 (Tex. 1991), to support their waiver contention. In Delanney, the
plaintiff alleged negligence and Deceptive Trade Practices Act violations based on
a telephone company’s failure to publish a Yellow Pages advertisement. Id. at
493. The jury found the telephone company liable for negligence, and the trial
court assessed actual damages for past and future lost profits. Id. at 494. The court
of appeals affirmed the judgment. Id. The supreme court reversed, reasoning the
consumer’s damages arose only from the telephone company’s failure to publish
the advertisement as required by contract, and that such failure is not a tort. Id. at
495. The court held the claim was based solely in contract; because the consumer
did not allege breach of contract or request jury questions on the issue, the
recovery awarded under the negligence claim was reversed and a take-nothing
judgment was rendered. Id.
Delanney does not control here because the Ticor Appellees properly alleged
and conclusively established breach of contract. According to the parties’ written
stipulations, the May Appellants were issued title insurance policies from the Ticor
Appellees in connection with the purchase of their respective properties. In
stipulation number 12, the parties agreed that the May Appellants timely filed
notices of claims for loss of mineral interests with the Ticor Appellees under their
respective policies. The parties agreed that the lost mineral interests were covered
9
under the title insurance policies.
The parties further agreed in stipulations number 13 and 14 that the Ticor
Appellees (1) accepted coverage of the May Appellants’ claims; (2) agreed to pay
compensable losses under the May Appellants’ respective title polices after an
investigation; and (3) obtained an appraisal of the mineral interests putting the
value of the mineral interests at issue at $1,900 per net mineral acre.
The parties agreed in stipulation number 16 that the May Appellants
disagreed with the Ticor Appellees’ assessment and valued the mineral interests at
$25,531.09 per net mineral acre. It is undisputed that the Ticor Appellees failed to
tender payment after the investigations and before trial.
In light of the stipulations, the only disputed issue for the jury to determine
was the value of the mineral interests at issue. Once the jury did so, there were no
further fact disputes to be decided with respect to the elements of a claim for
breach of the title insurance policies. Therefore, we hold that the May Appellants
were not required to submit a question to the jury asking whether the Ticor
Appellees breached their contractual obligations. See Cooper v. Cochran, 288
S.W.3d 535-36 (Tex. App.—Dallas 2009, no pet.); see also Legacy Motors, LLC v.
Bonham, No. 2-07-065-CV, 2007 WL 2693863, at *6 (Tex. App.—Fort Worth
Sept. 13, 2007, no pet.) (mem. op.) (“[A] stipulation serves as proof on an issue
that would otherwise be tried, is conclusive on the issue addressed, and estops the
parties from claiming to the contrary.”).
The Ticor Appellees additionally argue that the jury verdict does not support
a judgment for breach of contract because the jury answered “No” to a question
asking whether the Ticor Appellees failed to comply with their common law duty
10
of good faith and fair dealing.5 We reject this argument because breach of contract
and breach of the duty of good faith and fair dealing are two distinct claims.
Texas law recognizes a common law duty of good faith and fair dealing in
this first-party insurance context. Rice, 325 S.W.3d at 672 (citing Arnold v. Nat’l
Cnty. Mut. Fire Ins. Co., 725 S.W.2d 165, 167 (Tex. 1987)).6 The duty arises from
the special relationship that is created by the unequal bargaining power and the
exclusive control that the insurer exercises over the processing of claims and the
canceling of insurance contracts. Id.
A common law claim for breach of the duty of good faith and fair dealing is
separate from a claim for breach of the underlying insurance contract. Hudspeth v.
Enter. Life Ins. Co., 358 S.W.3d 373, 389 (Tex. App.—Houston [1st Dist.] 2011,
no pet.). The threshold of bad faith is reached only when the breach of contract is
accompanied by an independent tort. Id. To prevail, the insured must prove that
the insurer had no reasonable basis for the denial or delay in payment of a claim
and that the insurer knew or should have known of that fact. Id.
5
The jury answered “No” to the following question:
Did DEFENDANT INSURANCE COMPANIES fail to comply with its duty of good
faith and fair dealing to PLAINTIFF HOMEOWNERS?
An insurer fails to comply with its duty of good faith and fair dealing by —
Failing to attempt in good faith to effectuate a prompt, fair, and equitable settlement of a
claim when the insurer’s liability has become reasonably clear; or Refusing to pay a
claim without conducting a reasonable investigation of the claim.
This submission conforms to the formatted wording set forth in the Texas Pattern Jury
Charges. See Comm. on Pattern Jury Charges, State Bar of Tex., Texas Pattern Jury Charges:
Business, Consumer, Insurance, Employment PJC 103.1 (2012).
6
Texas law no longer recognizes a common law duty of good faith and fair dealing in the
workers’ compensation context. Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 451 (Tex. 2012)
(overruling Aranda v. Ins. Co. of N. Am., 748 S.W.2d 210 (Tex. 1988)). In Ruttiger, the supreme
court reasoned that the 1989 amendments to the Workers’ Compensation Act “effectively
eliminate[d] the need for a judicially imposed cause of action outside the administrative process
and other remedies in the Act.” Id.
11
Because breach of contract and breach of the duty of good faith and fair
dealing are separate claims, we disagree with the Ticor Appellees’ contention that
the jury’s failure to find a breach of the duty of good faith and fair dealing defeats
a claim for breach of contract. See id. Accordingly, we overrule the Ticor
Appellees’ first issue raised on cross-appeal.
B. Court Costs
In the Ticor Appellees’ second issue, they argue that the trial court erred in
assessing court costs against them because the May Appellants did not prevail on
their claims; alternatively, they assert that neither party was wholly successful.
Texas Rule of Civil Procedure 131, the general rule governing recovery of
costs, provides that “[t]he successful party to a suit shall recover of his adversary
all costs incurred therein, except when otherwise provided.” Tex. R. Civ. P. 131.
When determining whether court costs are appropriate, a court should consider the
judgment rather than the verdict. See Intercontinental Grp. P’ship v. KB Home
Lone Star L.P., 295 S.W.3d 650, 656 (Tex. 2009). We review a trial court’s
allocation of costs under an abuse-of-discretion standard. In re Estate of
Frederick, 311 S.W.3d 127, 130 n.6 (Tex. App.—Fort Worth 2010, no pet.).
The May Appellants successfully prosecuted their breach of contract claim
and recovered damages on that claim. The court signed a judgment in favor of the
May Appellants collectively for $14,716.69 and assessed pre- and postjudgment
interest. The judgment supports an award of court costs under Rule 131 because
the May Appellants prevailed on the breach of contract claim. See Mag
Instrument, Inc. v. G.T. Sales Inc., 294 S.W.3d 800, 808 (Tex. App.—Dallas 2009,
pet. denied) (“[T]he prevailing party is typically the party who either successfully
prosecutes the action or successfully defends against it, prevailing on the main
issue.”). Thus, the trial court did not abuse its discretion in awarding costs to the
12
May Appellants. We overrule the Ticor Appellees’ second issue raised on cross-
appeal.
C. Prejudgment Interest
The Ticor Appellees’ argue in their third issue that the trial court erred in
assessing prejudgment interest against them. To support this contention, the Ticor
Appellees assert that “for the same reasons that costs of court should not be
assessed against them, prejudgment interest should also not.” For the reasons
stated above, we overrule this contention. Alternatively, the Ticor Appellees
challenge the court’s use of March 23, 2008, as the beginning date from which
prejudgment interest began to accrue. We agree with the Ticor Appellees’
assertion that the trial court used the wrong date in calculating prejudgment
interest.
Prejudgment interest is defined as “compensation allowed by law as
additional damages for lost use of the money due as damages during the lapse of
time between the accrual of the claim and the date of judgment.” Town of Flower
Mound v. Teague, 111 S.W.3d 742, 763 (Tex. App.—Fort Worth 2003, pet.
denied). Prejudgment interest begins to accrue on the earlier of (1) 180 days after
the defendant receives written notice of the claim, or (2) on the date the suit is
filed. Tex. Fin. Code Ann. § 304.104 (Vernon 2006); Town of Flower Mound, 111
S.W.3d at 763 (citing Johnson & Higgins of Tex., Inc. v. Kenneco Energy, Inc.,
962 S.W.2d 507, 532 (Tex. 1998)).7
The May Appellants filed suit on March 31, 2009. The Ticor Appellees first
received written notice of a claim from the May Appellants on or about September
7
We have no occasion to consider the application of Texas Finance Code § 304.105
because the parties have not addressed it in their appellate briefs. See Tex. Fin. Code Ann.§
304.105 (Vernon 2006).
13
23, 2008. The May Appellants’ claims were received by the Ticor Appellees at
different times during the period of September 23, 2008 to January 21, 2009.
However, we do not address the effect of the various dates of receipt because the
May Appellants ask us to calculate prejudgment interest from the later date of
March 31, 2009. Thus, the May Appellants are not arguing that prejudgment
interest should start 180 days after September 23, 2008, which is about one week
before the date the suit was filed. The trial court incorrectly assessed prejudgment
interest starting from March 23, 2008, preceding both the date the suit was filed
and 180 days after the date the May Appellants’ last claim was submitted. See
Tex. Fin. Code Ann. § 304.104. The May Appellants do not offer any argument in
support of the trial court’s use of the March 23, 2008 date. We conclude the
judgment must be modified to reflect a beginning date of March 31, 2009 (the date
of filing of the suit), for the accrual of prejudgment interest. We sustain the Ticor
Appellees’ third issue raised on cross-appeal.
D. Litigation Costs
The Ticor Appellees contend in their fourth issue that the trial court erred in
failing to award them litigation costs as an offset to the judgment.
Texas Rule of Civil Procedure 167 governs the award of litigation costs
against a party who rejects an offer made substantially in accordance with the rule.
See Tex. R. Civ. P. 167.1. If a settlement offer is made and rejected and the
judgment is significantly less favorable to the rejecting party than the settlement
offer, then the offering party shall recover litigation costs from the rejecting party
from the time the offer was rejected to the time of judgment. See Tex. R. Civ. P.
167.4.
A judgment is significantly less favorable to the rejecting party when: (1) the
rejecting party is a claimant and the award will be less than 80 percent of the
14
rejected offer; or (2) the rejecting party is a defendant and the award will be more
than 120 percent of the rejected offer. Id. In cases filed before September 1, 2011,
any award of litigation costs may not exceed one-half of the economic damages to
be awarded to the claimant in the judgment. Id.
Here, the Ticor Appellees attempted to settle all monetary claims for
$26,250.8 The trial court’s judgment awarded $14,716.69 in actual damages. The
Ticor Appellees contend that the trial court’s judgment was less than 80 percent of
the rejected offer. Thus, they contend that the trial court erred in failing to award
the Ticor Appellees litigation costs as an offset to the judgment. The May
Appellants argue that all damages awarded to them must be taken into account,
including attorneys’ fees and prejudgment interest.
Because the May Appellants are not entitled to attorneys’ fees, as discussed
below, such fees may not be included as part of the judgment awarded. See id.
Further, even if prejudgment interest is included, the trial court’s award is still less
than 80 percent of the rejected offer. Thus, we agree with the Ticor Appellees that
the trial court erred in failing to award litigation costs. See id. Because this case
was filed before September 1, 2011, any award to the Ticor Appellees may not
exceed one-half of the economic damages that were awarded to the May
Appellants. See Tex. R. Civ. P. 167.4. We sustain the Ticor Appellees’ fourth
issue, and remand this issue to the trial court to determine the appropriate amount
of litigation costs to award the Ticor Appellees.
We now turn to the May Appellants’ issues on appeal.
8
The May appellants do not dispute that this settlement offer was made in full
compliance with Texas Rule of Civil Procedure 167.2. See Tex. R. Civ. P. 167.2.
15
II. The May Appellants’ Appeal
A. Rule 193.6 Motion
In their first issue on appeal, the May Appellants argue that “the trial court
erred in sanctioning [them] by denying [their] rule 193.6 motion for leave to
designate attorney Lahr as an expert on attorney’s fees.” The May Appellants
argue that the Ticor Appellees were not surprised or prejudiced by the late
designation of Lahr because they had notice of the May Appellants’ intention to
seek attorneys’ fees.
If a party fails to timely designate a witness, then testimony from that
witness will be excluded unless the trial court determines that the party seeking to
introduce the evidence establishes either (1) there was good cause for the failure;
or (2) the failure to designate the witness will neither unfairly surprise nor unfairly
prejudice the other parties. Tex. R. Civ. P. 193.6(a); Fort Brown Villas III Condo.
Ass’n v. Gillenwater, 285 S.W.3d 879, 881 (Tex. 2009).
The burden of establishing good cause or lack of unfair surprise or unfair
prejudice is on the party seeking to call the witness. Tex. R. Civ. P. 193.6(b). A
finding of good cause or lack of unfair surprise or unfair prejudice must be
supported by the record. Id. A trial court’s decision to exclude an expert who has
not been properly designated to testify is reviewed for abuse of discretion.
Gillenwater, 285 S.W.3d at 881.
The May Appellants contend that the Ticor Appellees were not unfairly
surprised or unfairly prejudiced by their failure to timely designate Lahr.9 Trial
9
The May Appellants cite a number of cases in support of the argument that no unfair
surprise or unfair prejudice occurred. See City of El Paso v. Parsons, 353 S.W.3d 215, 230 (Tex.
App.—El Paso 2011, no pet.) (trial court acted within its discretion in finding no unfair surprise
when it allowed the late designation of an expert witness but provided six additional weeks of
discovery); In re M.H., 319 S.W.3d 137, 147-48 (Tex. App.—Waco 2010, no pet.) (trial court
16
originally was scheduled for July 26, 2010. A second scheduling order was signed
by counsel on April 30, 2010, and required the May Appellants to designate their
expert witnesses by June 4, 2010. The court reset the trial date to October 18,
2010. The Ticor Appellees were notified that the May Appellants were seeking
attorneys’ fees on October 14, 2010, in a response letter to the Ticor Appellees’
settlement offer. On October 18, 2010, the May Appellants submitted a motion for
continuance to amend pleadings, designate Lahr as an expert witness, and pay the
jury fee. The trial court granted the continuance. However, the trial court further
ruled that the deadlines in the second Agreed Scheduling Order would stand.
On November 29, 2010, six months after the expert designation deadline and
approximately six weeks before trial, the May Appellants filed a motion for leave
to designate Lahr. The trial began on January 18, 2011, and the jury returned its
verdict on January 21. The May Appellants’ motion for leave was heard on March
11, 2011. The trial court found that the Ticor Appellees were neither surprised nor
unfairly prejudiced by the May Appellants’ late designation of Lahr and allowed
her to testify. The Ticor Appellees filed their motion for reconsideration of the
Ticor Appellees’ objections to the May Appellants’ motion for leave on May 2,
2011. The trial court reversed its March 11, 2011 ruling and granted the Ticor
acted within its discretion in finding no unfair surprise when expert witness was identified on the
list of expert witnesses); Llanes v. Davila, 133 S.W.3d 635, 640 (Tex. App.—Corpus Christi
2003, pet. denied) (trial court acted within its discretion in finding no unfair surprise when party
timely identified expert witness in response to requests for disclosure but failed to provide
summary of mental impressions); Beard Family P’ship v. Commercial Indem. Ins. Co., 116
S.W.3d 839, 850 (Tex. App.—Austin 2003, no pet.) (trial court acted within its discretion in
finding no unfair surprise when it allowed late designation of expert witness and granted a
postponement of testimony to allow opposing party to depose the expert witness). These cases
are distinguishable because they do not address circumstances in which a trial court excluded an
expert when (1) the plaintiff failed to timely designate the expert pursuant to any agreed
scheduling order; (2) the plaintiff failed to obtain a ruling on a motion for leave to designate an
expert prior to commencement of trial; and (3) the defendant was denied the opportunity to
depose the expert.
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Appellees’ motion for reconsideration without specifying its reasons for doing so.
The May Appellants failed to timely designate pursuant to multiple agreed
scheduling orders filed with the trial court and failed to timely designate in
response to discovery requests. The trial court acted within its discretion when it
sanctioned the May Appellants by denying their rule 193.6 motion for leave to
designate Lahr as an expert on attorneys’ fees. See Gillenwater, 285 S.W.3d at
882 (trial court did not abuse discretion by striking expert’s affidavit when
nonmovant failed to timely designate the expert pursuant to scheduling order
deadlines). We overrule the May Appellants’ first issue.
B. Attorneys’ Fees
In their second issue, the May Appellants argue that the trial court erred in
failing to award them attorneys’ fees in light of Lahr’s unrebutted testimony at a
post-trial hearing. To support this contention, the May Appellants cite
Northwestern National County Mutual Insurance Co. v. Rodriquez, 18 S.W.3d 718
(Tex. App.—San Antonio 2000, pet. denied).
In Rodriquez, the insured identified her attorney as one of the persons
expected to testify about damages during discovery. Id. at 722. Because the
insured timely identified her attorney, the court found good cause to admit the
attorney’s testimony on attorneys’ fees as a fact witness despite the attorney not
being specifically identified as an expert witness. Id.
Rodriquez is distinguishable because the May Appellants failed to timely
identify Lahr as an expert witness, fact witness, or a person expected to testify at
trial. Consequently, the May Appellants’ argument that Lahr’s testimony stands as
factual testimony, despite having not been designated as an expert or fact witness,
is unpersuasive. Accordingly, we overrule the May Appellants’ second issue.
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C. Expert Fees
In their third and final issue, the May Appellants challenge the trial court’s
failure to award expert fees as court costs. The May Appellants first contend that
expert fees are recoverable because “the parties stipulated expert’s fees would be
taxed as costs of court in favor of the prevailing party.” Alternatively, the May
Appellants argue that expert fees are recoverable under the terms of the title
insurance contracts.
Texas statutes and case law define which items the court may include as
taxable costs. Hatfield v. Solomon, 316 S.W.3d 50, 66-67 (Tex. App.—Houston
[14th Dist.] 2010, no pet.). Rule 131 provides that “[t]he successful party to a suit
shall recover of his adversary all costs incurred therein, except when otherwise
provided.” Tex. R. Civ. P. 131. “Costs” usually refers to fees and charges
required by law to be paid to the courts or some of their officers, the amount of
which is fixed by statute or the court’s rules, for example filing and service fees.
Hatfield, 316 S.W.3d at 66. Costs within the meaning of Rules 125 through 149
are those items in the clerk’s bill of costs. Id.; see also Tex. R. Civ. P. 125-49.
The allocation of costs is reviewed for abuse of discretion. Hatfield 316 S.W.3d at
66-67.
Rule 141 provides that the trial court has discretion, for good cause stated on
the record, to allocate costs otherwise than as provided by law or the Texas Rules
of Civil Procedure. See Tex. R. Civ. P. 141. However, the power to allocate costs
does not encompass the power to tax as costs items that are not allowed as taxable
court costs. Hatfield, 316 S.W.3d at 67; Whitley v. King, 581 S.W.2d 541, 544-45
(Tex. App.—Fort Worth 1979, no writ). Generally, in Texas, expert fees are not
recoverable as court costs. See Bundren v. Holly Oaks Townhomes Ass’n, 347
S.W.3d 421 (Tex. App.—Dallas 2011, pet. denied); Whitley, 581 S.W.2d at 544.
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The May Appellants rely on the following exchange to assert that they
agreed by stipulation with the Ticor Appelles that expert fees would be awarded as
court costs to the prevailing party. At the formal charge conference, the May
Appellants’ counsel stated, “We’ve also agreed to the extent Plaintiffs are entitled
to recover expert fees, those fees will be taxed as a cost of court.” The Ticor
Appellees’ counsel added, “And, additionally, on the — with respect to the
application of expert witness fees as court costs, Plaintiff — I would ask that that
would be determined for both parties, not just Plaintiffs, if applicable.”
Because of the phrases “to the extent Plaintiffs are entitled to recover expert
fees” and “if applicable,” it is uncertain that the parties were agreeing to allow
expert fees as court costs in this stipulation. Expert fees are not court costs, and this
stipulation is insufficient to make expert fees collectable as court costs. See
Whitley, 581 S.W.2d at 544 (“[R]egardless of any good cause shown, costs of
experts are merely incidental expenses in preparation for trial and not
recoverable.”).
Second, the May Appellants argue that expert fees are awardable to them
under the terms of the insurance contract. However, the May Appellants did not
present proof of expert fees during the jury trial, and the jury made no findings in
this regard. On this record, the trial court did not err in failing to award the May
Appellants expert fees because the trial evidence did not support such a recovery.
See Hatfield, 316 S.W.3d at 67 (trial court abused its discretion by awarding costs
as damages under the contract because plaintiffs did not present any evidence at
trial to prove these costs); Flint & Assocs. v. Intercontinental Pipe & Steel, Inc.,
739 S.W2d 622, 626-27 (Tex. App.—Dallas 1987, writ denied) (trial court erred in
awarding non-taxable court costs under the parties’ contract because the parties
seeking these costs did not prove that they were entitled to recover them during the
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jury trial and did not obtain a stipulation to try this issue separately). Accordingly,
we overrule the May Appellants’ third issue.
CONCLUSION
Having sustained the Ticor Appellees’ third and fourth issues on cross-
appeal and having overruled the May Appellants’ and the Ticor Appellees’
remaining issues on appeal and cross-appeal, (1) we reverse the trial court’s
judgment as to prejudgment interest and remand this cause to the trial court to
calculate prejudgment interest using March 31, 2009, as the accrual date; (2) we
reverse the trial court’s judgment with regard to litigation costs and remand this
cause to the trial court to determine the appropriate amount of litigation costs to
award the Ticor Appellees; and (3) we affirm the remainder of the trial court’s
judgment.
/s/ William J. Boyce
Justice
Panel consists of Chief Justice Frost and Justices Boyce and Jamison.
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