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Preliminary Notice to Original Contractor in Texas Construction Contracts– Fort Worth, Texas Construction Attorneys

Private Form #3 – PRELIMINARY NOTICE TO ORIGINAL CONTRACTOR
[Date]
(1) Certified Mail
____________________ Return Receipt Requested
____________________
Re: Job: (2)
Owner: (3)
Location: (4)
Dear Sir:
We have furnished (5) on the above job to your subcontractor, (6) . Our books show an
unpaid balance due us on this job of $ (7) through the end of (8) .
We are giving you this notice in order to protect our rights under the mechanic’s lien laws of Texas.
We wish to cooperate with both you and our customer in any way that would be helpful. Should you desire any
additional information, please advise us.
Sincerely,
(9)
(10)
cc: (11)
* * * * *
(1) Letter addressed to the original contractor under whom you are working sent certified mail.
(2) Name of project.
(3) Owner’s name.
(4) Address of job–street, city and state.
(5) Indicate generally what has been furnished.
(6) Your customer.
(7) Amount due.
(8) Date of last billing.
(9) Your firm name.
(10) Name and capacity of person signing letter.
(11) Your customer.

Williams, McClure & Parmelee is dedicated to high quality legal representation of businesses and insurance companies in a variety of matters. We are experienced Texas civil litigation attorneys based in Fort Worth who know Texas courts and Texas law. For more information, please contact the law firm at 817-335-8800. The firm’s new office location is 5601 Bridge Street, Suite 300, Fort Worth, Texas 76112.

Jul 11th, 2015 Construction Law, Contracts and Commercial Litigation

Notice of Specially Fabricated Item in Texas Construction Contracts– Texas Construction Attorneys

Private Form #2 – NOTICE OF SPECIALLY FABRICATED ITEM
[Date]
(1) CERTIFIED MAIL:
____________________ RETURN RECEIPT REQUESTED
____________________
Dear Sir:
Our firm is pleased to be involved in the construction of your (2) at (3) under an agreement with
(4) your (5) . Our part of this project will be to fabricate and furnish (6) for use as a component part
of the construction as called for in the plans. This component will be reasonably unsuitable for use elsewhere. The
order for this item has been received and accepted and the price to be billed to our customer is $ (7) .
We are advising you of the foregoing so that you will have the information and notice specified by law.
If you have any questions, please call us.
Yours very truly,
(8)
(9)
cc: (10)
* * * * *
(1) Letter addressed to the owner of the property being improved.
(2) Indicate type of improvement.
(3) The address of the job, with street and city.
(4) Name of company for whom you work.
(5) Status of the person under whom you are working, such as “general contractor” or “roofing subcontractor”,
etc.
(6) General description of the item being fabricated.
(7) Contract price for the item being fabricated.
(8) Name of your company.
(9) Person signing letter and capacity.
(10) Copy to original contractor by certified mail unless the order was direct from the original contractor.

Jul 11th, 2015 Construction Law, Contracts and Commercial Litigation

Notice of Retainage Agreement for Texas Construction Contracts– Fort Worth, Texas Construction Attorneys

Private Form #l – NOTICE OF RETAINAGE AGREEMENT
[Date]
(1) CERTIFIED MAIL:
____________ RETURN RECEIPT REQUESTED
Dear Sir:
Our company is pleased to be involved in the construction of your (2) at (3) under an agreement with
(4) your (5) . Our part of this project will be to furnish the (6) called for by the plans.
Our agreement provides that a portion of the contract price is to be retained until (7) .
The amount to be retained is (8) .
We are advising you that we have commenced supplying labor or material to your project and of the above
terms of our agreement so that you will have the information and notice required by law. If you have any questions,
do not hesitate to call us.
Sincerely,
(9)
(10)
cc: (11)
* * * * *
(1) Letter addressed to the owner of the property being improved.
(2) Indicate type of improvement.
(3) Address of job.
(4) Name of firm under whom you are working.
(5) Status of that firm, such as “general contractor,” “roofing subcontractor”, etc.
(6) Describe the labor and/or material that you will perform.
(7) Insert time for paying retainage.
(8) Amount or percentage of retainage.
(9) Your firm name.
(10) Name and capacity of person signing letter.
(11) Copy the original contractor by certified mail unless you have a contract directly with the original
contractor.

Jul 11th, 2015 Construction Law, Contracts and Commercial Litigation

Texas Law on Piercing the Corporate Veil and Imposition of Liability on a Parent Corporation–Fort Worth, Texas Collections Attorneys

When a plaintiff in Texas wants to pierce the corporate veil in order to impose liability upon a parent corporation for the obligations of
a subsidiary, the primary factors that Texas courts will look to include the following:
(a) common stock ownership between parent and subsidiary;
(b) common directors and officers between parent and subsidiary;
(c) common business departments between parent and
subsidiary;
(d) consolidated financial statements and tax returns filed by
parent and subsidiary;
(e) parent’s financing of the subsidiary;
(f) parent’s incorporation of the subsidiary;
(g) undercapitalization of the subsidiary;
(h) parent’s payment of salaries and other expenses of subsidiary;
(i) whether parent is subsidiary’s sole source of business;
(j) parent’s use of subsidiary’s property as its own;
(k) combination of corporations’ daily operations;
(l) lack of corporate formalities by the subsidiary;
(m) whether directors and officers of subsidiary are acting
independently or in the best interests of the parent; and
(n) whether parent’s employee, officer or director was connected
to the subsidiary’s action that was the basis of the suit.

A leading case, below, is the Texas Supreme Court case of Castleberry v. Branscum

Castleberry v. Branscum :: 1986 :: Supreme Court of Texas Decisions :: Texas Case Law :: Texas Law :: U.S. Law :: Justia

Castleberry v. Branscum

721 S.W.2d 270 (1986)

Joe A. CASTLEBERRY, Petitioner, v. Byron BRANSCUM et al., Respondents.

No. C-4536.

Supreme Court of Texas.

July 2, 1986.

Rehearing Denied January 14, 1987.

*271 Bill Liebbe, McKool & Vassalo, Dallas, for petitioner.

Allen R. Morris, Dallas, for respondents.

SPEARS, Justice.

Joe Castleberry sued Texan Transfer, Inc. and Byron Branscum and Michael Byboth, individually, on a promissory note signed by the corporation for Castleberry’s shares in the closely held corporation. The jury found that Branscum and Byboth used Texan Transfer as a sham to perpetrate a fraud. Based on the jury findings, the trial court rendered judgment against Texan Transfer, disregarding its corporate fiction to hold both Byboth and Branscum individually liable. The court of appeals reversed and rendered, holding: (1) there was no evidence to support the jury’s findings; (2) the instruction submitted to the jury was defective; and (3) the issues should not have been submitted to the jury because disregarding the corporate fiction is solely a question of law. 695 S.W.2d 643. We reverse the court of appeals judgment and affirm the trial court, because under the applicable law there was some evidence to support the jury’s verdict, the objection to the instruction was improper, and disregarding the corporate fiction is a fact question for the jury.

Disregarding the Corporate FictionThe corporate form normally insulates shareholders, officers, and directors from liability for corporate obligations; but when these individuals abuse the corporate privilege, courts will disregard the corporate fiction and hold them individually liable. Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex.1975); Bell Oil & Gas Co. v. Allied Chemical Corp., 431 S.W.2d 336, 340 (Tex.1968); Pace Corp. v. Jackson, 284 S.W.2d 340, 351 (Tex.1955).

We disregard the corporate fiction, even though corporate formalities have been observed and corporate and individual property have been kept separately, when the corporate form has been used as part of a basically unfair device to achieve an inequitable result.[1]Bell Oil & Gas Co. v. *272 Allied Chemical Corp., 431 S.W.2d at 340. Specifically, we disregard the corporate fiction:

(1) when the fiction is used as a means of perpetrating fraud;[2] (2) where a corporation is organized and operated as a mere tool or business conduit of another corporation; (3) where the corporate fiction is resorted to as a means of evading an existing legal obligation; (4) where the corporate fiction is employed to achieve or perpetrate monopoly; (5) where the corporate fiction is used to circumvent a statute; and (6) where the corporate fiction is relied upon as a protection of crime or to justify wrong.[3]Pacific American Gasoline Co. of Texas v. Miller, 76 S.W.2d 833, 851 (Tex.Civ.App. Amarillo 1934, writ ref’d). See also Roy E. Thomas Const. Co. v. Arbs, 692 S.W.2d 926, 938 (Tex.App.Ft. Worth 1985), writ ref’d n.r.e. per curiam, 700 S.W.2d 919 (Tex.1985); Roylex, Inc. v. Langson Bros. Const. Co., 585 S.W.2d 768, 771 (Tex.Civ. App.Houston [1st Dist.] 1979, writ ref’d n.r.e.); Wolf v. Little John Corp. of Liberia, 585 S.W.2d 774, 778 (Tex.Civ.App. Houston [1st Dist.] 1979, writ ref’d n.r.e.); Sutton v. Reagan & Gee, 405 S.W.2d 828, 837 (Tex.Civ.App.San Antonio 1966, writ ref’d n.r.e.).

Many Texas cases have blurred the distinction between alter ego and the other bases for disregarding the corporate fiction and treated alter ego as a synonym for the entire doctrine of disregarding the corporate fiction. See, e.g., William B. Roberts, Inc. v. McDrilling Co., 579 S.W.2d 335 (Tex.Civ.App.Corpus Christi 1979, no writ); Dunn v. Growers Seed Ass’n, 620 S.W.2d 233, 236-37 (Tex.Civ.App.Amarillo 1981, no writ). However, as Pacific American Gasoline Co. of Texas v. Miller indicates, alter ego is only one of the bases for disregarding the corporate fiction: “where a corporation is organized and operated as a mere tool or business conduit of another corporation.”

Alter ego applies when there is such unity between corporation and individual that the separateness of the corporation has ceased and holding only the corporation liable would result in injustice. First Nat. Bank in Canyon v. Gamble, 134 Tex. 112, 132 S.W.2d 100, 103 (1939). It is shown from the total dealings of the corporation and the individual, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporation, and whether the corporation has been used for personal purposes. See Lucas v. Texas Industries, Inc., 696 S.W.2d 372, 374 (Tex.1984); Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d at 573-75. Alter ego’s rationale is: “if the shareholders themselves disregard the separation of the corporate enterprise, the law will also disregard it so far as necessary to protect individual and corporate creditors.” Ballantine, Corporations § 123 at 294 (1946).

The basis used here to disregard the corporate fiction, a sham to perpetrate a fraud, is separate from alter ego. It is sometimes confused with intentional fraud; however, “[n]either fraud nor an intent to defraud need be shown as a prerequisite to disregarding the corporate entity; it is sufficient if recognizing the separate corporate *273 existence would bring about an inequitable result.” Fletcher, Cyclopedia Corporations § 41.30 at 30 (Supp.1985); Cary & Eisenberg, Corporations 101 (5th ed. 1980); R. Clark, The Duties of the Corporate Debtor to its Creditors, 90 Harv. L. Rev. 505, 543, 44 (1977); 1 Hildebrand, Texas Corporations § 5 at 40 (1942); 2 G. Hornstein, Corporation Law and Practice § 755 (1959); See also Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d at 573 (1975); Pacific American Gasoline Co. of Texas v. Miller, 76 S.W.2d at 840, 849; Rose v. Intercontinental Bank, N.A., 705 S.W.2d 752, 756 (Tex.App.Houston [1st Dist.] 1986, writ ref’d n.r.e.); Tigrett v. Pointer, 580 S.W.2d 375, 385 (Tex.Civ.App. Dallas 1979, writ ref’d n.r.e.); National Marine Service, Inc. v. Thibodeaux, 501 F.2d 940, 942 (Fifth Cir.1974). Thus, we held in Pacific American Gasoline Co. of Texas v. Miller that note holders could disregard the corporate fiction without showing common-law fraud or deceit when the circumstances amounted to constructive fraud. 76 S.W.2d at 840, 849. In Tigrett v. Pointer, the Dallas Court of Appeals disregarded the corporate fiction, stating correctly that “[w]hether [the individual] misled them or subjectively intended to defraud them is immaterial … [f]or the action was so grossly unfair as to amount to constructive fraud.” 580 S.W.2d at 385.

To prove there has been a sham to perpetrate a fraud, tort claimants and contract creditors must show only constructive fraud. We distinguished constructive from actual fraud in Archer v. Griffith:

Actual fraud usually involves dishonesty of purpose or intent to deceive, whereas constructive fraud is the breach of some legal or equitable duty which, irrespective of moral guilt, the law declares fraudulent because of its tendency to deceive others, to violate confidence, or to injure public interests.390 S.W.2d 735, 740 (Tex.1964).

Because disregarding the corporate fiction is an equitable doctrine, Texas takes a flexible fact-specific approach focusing on equity. Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d at 575; First Nat. Bank in Canyon v. Gamble, 132 S.W.2d at 103; Pacific American Gasoline Co. v. Miller, 76 S.W.2d at 851; Tigrett v. Pointer, 580 S.W.2d at 381-82. For example, in First Nat. Bank in Canyon v. Gamble, this court held that we would disregard the corporate fiction when the “facts are such that adherence to the fiction would promote injustice and lead to an inequitable result.” 132 S.W.2d at 105. More recently, in Gentry v. Credit Plan Corp. of Houston, we again took an equitable approach, holding that the purpose in disregarding the corporate fiction “is to prevent use of the corporate entity as a cloak for fraud or illegality or to work an injustice, and that purpose should not be thwarted by adherence to any particular theory of liability.” 528 S.W.2d at 575. Dean Hildebrand, a leading authority on Texas corporation law, stated well the equitable approach: “When this [disregarding the corporate fiction] should be done is a question of fact and common sense. The court must weigh the facts and consequences in each case carefully, and common sense and justice must determine [its] decision.” Hildebrand, Texas Corporations § 5 at 42 (1942).[4]

*274 The EvidenceIn this case, the court of appeals found no evidence to support the jury verdict. The jury instruction presented alternative bases for disregarding the corporate fiction, including using Texan Transfer as a sham to perpetrate a fraud. We turn first to see whether there is some evidence to support this basis, since it is Castleberry’s strongest. Under the no evidence test, we consider only the evidence and inferences supporting the jury’s findings and disregard the evidence and inferences to the contrary. Sagebrush Sales Co. v. Strauss, 605 S.W.2d 857, 859 (Tex.1980).

In June 1980, Branscum, Byboth, and Castleberry formed a partnership to move furniture. Three months later, they incorporated as Texan Transfer, Inc. They each owned one-third of the closely held corporation’s shares. Byboth was president; Castleberry was vice-president; and Branscum was secretary-treasurer. Soon thereafter Branscum formed a competing business, Elite Moving. When Castleberry found out about Elite Moving, he filed an assumed name certificate. Castleberry testified that when Branscum found out about the assumed name certificate:

A He [Branscum] became very upset, [stating] that it was his company and his name, and that if he wanted to start a moving company that it was his prerogative, he could do whatever he wanted to do. Q Okay. A And that if I did not sign the name, sign the company name over to him that he would see to it that I would never get anything out of Texan Transfer. Q I’m sorry, could you repeat that last part? A That he would see that I never got anything out of Texan Transfer. He would take whatever it had out of it, anything he could to make sure I had nothing.Branscum made similar statements later to Texan Transfer’s bank.

In July 1981, at Byboth’s suggestion, Castleberry sold his stock back to the corporation, receiving a corporate promissory note for approximately $42,000. Byboth signed the note as Texan Transfer’s president. Texan Transfer made the initial installment payment of $1,000 and then defaulted on the remaining $41,000.

Castleberry testified that after the buy-out, Elite Moving began to take over more and more of Texan Transfer’s business. Branscum testified that after the buy-out Texan Transfer, Elite Moving, and later Custom Carriers were all in the same business and all operated out of his residence. Controlled by Branscum and Byboth, Texan Transfer allowed Elite Moving to use its employees and trucks. Texan Transfer supposedly loaned Elite Moving its trucks, but Branscum admitted that the companies had no written rental agreement and that no mileage records were kept to show how much Elite Moving owed Texan Transfer. Elite advertised for furniture-moving business in the phone directory and in newspapers, but Texan Transfer did not. Branscum also conceded that Texan Transfer could do Elite Moving’s work. While Texan Transfer’s business declined, Elite Moving’s prospered.

Ken Warren, CPA for Texan Transfer, Custom Carriers, Byboth, and Branscum, testified to Byboth and Branscum’s financial handling of Texan Transfer and Elite Moving. For the eighteen months prior to the buy-out agreement, Texan Transfer had a net income of $65,479. After the agreement in 1981, Texan Transfer’s annual net income fell to $2,814 and in 1982 it lost more than $16,000. In contrast, the newly formed Elite Moving declared an income in 1982 of $195,765. Castleberry maintained that Texan Transfer’s losses were caused by Byboth and Branscum’s manipulations, while Byboth and Branscum argued that they were simply natural business losses. The jury was entitled to believe either inference.

Sometime after Castleberry filed suit in April 1982, Branscum told Sue Campbell, *275 then his wife, that Castleberry “would never get a dime, that he would file bankruptcy before Castleberry got any money out of the company … [that] “he would open the company in another name so that Joe [Castleberry] wouldn’t get paid.” Shortly thereafter in September, 1982, Byboth and Branscum started another furniture moving company, Custom Carriers, Inc. At trial Byboth conceded that Custom Carriers was formed because of this lawsuit. Moreover, according to Joe Freed, owner of Freed Furniture Company, Byboth and Branscum terminated Texan Transfer’s contract with Freed Furniture, with whom Texan Transfer did the majority of its business; and they obtained for Custom Carriers the same contractdoing the same deliveries at the same rate. Freed also testified that he had had no problems with Texan Transfer. Freed was at that time the father of Branscum’s girlfriend and is now Branscum’s father-in-law.

Byboth and Branscum also sold Texan Transfer’s means of doing business and its only assetsits trucksto “independent contractors” of Custom Carriers. With the money, they paid themselves “back salaries.”

We hold that this is some evidence of a sham to perpetrate a fraud. A jury could find that Byboth and Branscum manipulated a closely-held corporation, Texan Transfer, and formed competing businesses to ensure that Castleberry did not get paid. Castleberry had little choice but to sell his shares back to the corporation. While this evidence may be no evidence of intentional fraud, constructive fraud, not intentional fraud, is the standard for disregarding the corporate fiction on the basis of a sham to perpetrate a fraud.

In determining if there is an abuse of the corporate privilege, courts must look through the form of complex transactions to the substance. The variety of shams is infinite, but many fit this case’s pattern: a closely held corporation owes unwanted obligations; it siphons off corporate revenues, sells off much of the corporate assets, or does other acts to hinder the on-going business and its ability to pay off its debts; a new business then starts up that is basically a continuation of the old business with many of the same shareholders, officers, and directors. Blank v. Olcovich Shoe Corp., 20 Cal.App.2d 456, 67 P.2d 376, 379 (2nd 1937); Plaza Express Co. v. Middle States Motor Freight, Inc., 40 Ill. App.2d 117, 189 N.E.2d 382, 384-85 (1st Dist.1963); Team Central, Inc. v. Teamco, Inc., 271 N.W.2d 914, 923 (Iowa 1979); Addison v. Tessier, 65 N.M. 222, 335 P.2d 554, 557 (1959); Dairy Co-Operative Ass’n v. Brandes Creamery, 147 Or. 488, 30 P.2d 338, 342 (1934); Culinary Workers and Bartenders Union v. Gateway Cafe, Inc., 91 Wash.2d 353, 588 P.2d 1334, 1343 (1979); Dummer v. Wheeler Osgood Sales Corp., 198 Wash. 381, 88 P.2d 453, 456-458 (1939); Soderberg Advertising, Inc. v. Kent-Moore Corp., 11 Wash.App. 721, 524 P.2d 1355, 1361-62 (1st 1974).

The InstructionThe court of appeals also held that the jury instruction on alter ego was reversible error. The trial court submitted the following issue separately for both Byboth and Branscum: “Do you find from a preponderance of the evidence that Texan Transfer, Inc. was the alter ego of the defendant?”[5] This instruction accompanied the issue:

You are instructed that a corporation may become an “alter ego” or mere extension of the individual if the individual controls the corporation and conducts its business affairs without due regard for the separate corporate nature of the business; or that such separate corporate nature ceased to exist; or if the corporate assets are dealt with by the individual as if owned by the individual; or if corporate formalities are not ad-hered *276 to by the corporation; or if the individual is using the corporate entity as a sham to perpetrate fraud or to avoid personal liability. You are further instructed that in determining whether the corporation adhered to corporate formalities and maintained a separate existence, you may consider whether the corporation maintained separate offices; maintained separate books; maintained separate employees; had separate stationary; issued stock; held regular meetings of its shareholders and Board of Directors; kept and maintained written records of the proceedings of meetings of the shareholders and Board of Directors; filing of tax returns, entering into contracts, maintenance of bank accounts, holding title to property, and other indicia of a separate corporate entity. You are instructed that the existence of one or more of these factors may or may not make Texan Transfers, Inc. the alter ego of (defendant). Whether or not Texan Transfer, Inc. was the alter ego of (defendant) should be determined from the total dealings of (defendant) and Texan Transfer, Inc. (Emphasis added.)The court’s charge defined fraud as constructive fraud: “Fraud is any act, omission, concealment that involves a breach of legal duty, trust, or confidence justly reposed and that is injurious to another person, or by which an undue and unconscionable advantage is taken.” The constructive fraud definition was not objected to and thus was tried by consent.

The court of appeals found the last part of the instruction defective: “that the existence of one or more of these factors may or may not make Texan Transfer, Inc. the alter ego of (defendant).” “One or more factors” is ambiguous; it is not clear if “one or more factors” refers to the alternative grounds for disregarding the corporate fiction or to the list of corporate formalities. If “one or more factors” refers to the list of corporate formalities, the instruction is incorrect because no one item alone would justify disregarding the corporate fiction. See Lucas v. Texas Industries, Inc., 696 S.W.2d at 374; Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d at 573.

The instruction is also incorrect if “one or more factors” refers to the alternative bases for disregarding the corporate fiction. As noted above, a proper alter ego instruction should include all the relevant factors and consider the total dealings of the corporation and the individual. Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d at 573. This instruction, however, treats the several alter ego factors as if each factor alone were a sufficient basis for disregarding the corporate fiction (without due regard for the separate corporate nature of the business, or whether such separate corporate nature ceased to exist, or if the corporate assets are dealt with by the individual as if owned by the individual, or if corporate formalities are not adhered to).

Although the instruction is erroneous, the defendants have waived error by not properly objecting. Tex. R. Civ. P. Rule 274 provides:

A party objecting to a charge must point out distinctly the matter to which he objects and the grounds of his objection.The purpose of Rule 274 is to afford trial courts an opportunity to correct errors in the charge, by requiring objections both to clearly designate the error and to explain the grounds for complaint. Brown v. American Transfer & Storage, 601 S.W.2d 931, 938 (Tex.1980); Davis v. Campbell, 572 S.W.2d 660, 663 (Tex. 1978). An objection that does not meet both requirements is properly overruled and does not preserve error on appeal.

The defendants objected: [T]o the use of the conjunctive word “or” in the special issue as submitted in that same issue. It may confuse the jury or, in the alternative, prejudice the Defendant and the jury may find any one element would necessarily warrant a finding of “we do” to Special Issues No. 1 and No. 2.*277 This objection fails both requirements of Rule 274. The objection does not distinctly and separately point out the instruction’s errors, because it is unclear whether the “any one element” complaint refers to the alternative grounds for disregarding the corporate fiction or to the list of corporate formalities. Moreover, the objection complains of “elements,” but the instruction mentions only “factors.”

The objection also does not adequately explain its grounds. The grounds given here, that the instruction “may confuse the jury” or “prejudice the defendant,” are too general since they do not explain why the instruction is legally incorrect or how it would confuse the jury or prejudice the defendants. Motor 9, Inc. v. World Tire Corp., 651 S.W.2d 296, 301 (Tex.App.Amarillo 1981, writ ref’d n.r.e.); Quarles v. Smith, 379 S.W.2d 91, 93 (Tex. Civ.App.Houston 1964, writ ref’d n.r.e.).

Jury QuestionFinally, the court of appeals held that disregarding the corporate fiction is solely a question of law and, therefore, should not be submitted to the jury. We disagree. The different bases for disregarding the corporate fiction involve questions of fact. Except in very special circumstances, fact questions should be determined by the jury. Tex. Const. Art. I, § 15; State v. Credit Bureau of Laredo, Inc., 530 S.W.2d 288, 293 (Tex.1975). Therefore, we hold that the controlling issues, based on pleadings and some evidence, of the alternative bases for disregarding the corporate fiction should be submitted to the jury. See Tex. R. Civ. P. 279.

We reverse the court of appeals’ judgment and affirm the trial court’s judgment.

GONZALEZ, J., files a dissenting opinion in which CAMPBELL, WALLACE and ROBERTSON, JJ., join.

GONZALEZ, Justice, dissenting.

Castleberry sued Branscum and Byboth under the doctrine of alter ego. I agree with the court that Castleberry incurred a legal injury. However, I disagree that Castleberry should be able to recover for that injury under the doctrine of alter ego or any other theory which was submitted to the jury. Those theories simply do not apply to the facts of this case. Thus, despite the court’s commendable attempt to set guidelines for disregarding the corporate entity, I dissent because I do not agree with all of its statements on the law or with its application to the facts of this case.

The Sham to Perpetrate a Fraud TheoryWhile I agree with most of the court’s statements on the law for piercing the corporate veil, its standard for disregarding the corporate entity when used as a sham to perpetrate a fraud is far too broad. Prior to this decision, this court consistently held “that personal liability should be imposed on a stockholder only in extraordinary circumstances.” Sagebrush Sales Co. v. Strauss, 605 S.W.2d 857, 860 (Tex. 1980). See also Lucas v. Texas Industries, Inc., 696 S.W.2d 372 (Tex.1984); Torregrossa v. Szelc, 603 S.W.2d 803 (Tex.1980); (recent cases where this court recognized that disregarding the corporate fiction is an extraordinary equitable remedy). Under the court’s current analysis, the corporate entity may be pierced, as a sham to perpetrate a fraud, anytime recognition of “the separate corporate existence would bring about an inequitable result.” This standard is so broad that it is not a standard. It fails to provide any guidance on the necessary elements to assert a cause of action under this theory. Presumably, a party only needs to assert that it would be unfair or inequitable to recognize the corporate existence; the corporate veil will be pierced whenever the courts do not like the outcome, irrespective of the type of alleged misconduct by the parties. Piercing the corporate existence whenever a party does not receive a “complete” or “fair” recovery is an unworkable approach.

*278 The Application of the TheoryI also disagree with the court’s holding that there was some evidence for piercing the corporate veil based on the grounds of recovery pleaded and submitted to the jury. The court of appeals held there was no evidence on any theory which would allow “piercing the corporate veil.” Thus, in our review of this no evidence point, we must examine the record in its most favorable light to Castleberry, considering only the evidence and inferences which support the findings, and rejecting the evidence and inferences contrary to the findings. Sagebrush Sales, 605 S.W.2d 857; Garza v. Alviar, 395 S.W.2d 821 (Tex.1965).

Generally, the courts will not disregard the existence of the corporate entity. Lucas, 696 S.W.2d at 374; First Nat. Bank in Canyon v. Gamble, 134 Tex. 112, 132 S.W.2d 100, 103 (1939). The courts, however, will “pierce the corporate veil” under appropriate circumstances. In his attempt to disregard the corporate entity in this case, Castleberry only pleaded an alter ego theory.

The alter ego doctrine applies when: (1) there is such a unity between the corporation and the individual that the separateness of the corporation has ceased; and (2) the facts are such that holding only the corporation liable would promote injustice. First Nat. Bank of Canyon, 132 S.W.2d at 103; Mortgage & Trust, Inc. v. Bonner & Co., 572 S.W.2d 344, 348 (Tex.Civ.App. Corpus Christi 1978, writ ref’d n.r.e.). See Gentry v. Credit Plan Corp. of Houston, 528 S.W.2d 571, 573 (Tex.1975). Thus, the alter ego doctrine may be used to disregard the corporate fiction where a corporation is organized and operated as a mere tool or business conduit of an individual. Pacific American Gasoline Co. of Texas. v. Miller, 76 S.W.2d 833, 851 (Tex.Civ.App. Amarillo 1934, writ ref’d). Under the alter ego doctrine, the corporate existence, or lack thereof, is the cause of the injustice. See Lucas, 696 S.W.2d at 376.

In this case, the instruction submitted to the jury on alter ego stated that “a corporation may become an `alter ego’ or mere extension of the individual … if the individual is using the corporate entity as a sham to perpetrate fraud.” Byboth and Branscum failed to object to the inclusion of this theory as a factor for finding alter ego. This court has held that individuals can be liable when it appears they are using the corporate entity as a sham to perpetrate a fraud. Torregrossa v. Szelc, 603 S.W.2d 803, 804 (Tex.1980); Pace Corp. v. Jackson, 155 Tex. 179, 284 S.W.2d 340, 351 (1955). Therefore, even though the sham to perpetrate a fraud theory for piercing the corporate entity was not pleaded, such a theory was before the jury in the charge. Castleberry, then, had to produce some evidence either under an alter ego theory or under a use of the corporate entity as sham to perpetrate a fraud theory.

Texan Transfer was formed by Branscum, Byboth, and Castleberry as a business partnership for the delivery of furniture. In 1980, Texan Transfer was incorporated with each of the partners owning one-third of the corporation’s stock. Shortly after the incorporation of Texan Transfer, Branscum started a moving business, Elite Moving, as a sole proprietorship.[1]

While a stockholder in Texan Transfer, Castleberry found out about Elite Moving, and filed an assumed name certificate for Elite. Castleberry testified that after Branscum found out about the filing:

A He [Branscum] became very upset, that it was his company and his name, and that if he wanted to start a moving company that it was his perogative, he could do whatever he wanted to do. Q Okay. A And that if I did not sign the name, sign the company name over to him that he would see to it that I would never get anything out of Texan Transfer. *279 Q I’m sorry, could you repeat that last part? A That he would see that I never got anything out of Texan Transfer. He would take whatever it had out of it, anything he could to make sure I had nothing.Texan Transfer allowed Elite Moving to use its employees and trucks. Branscum admitted the companies had no written rental agreement and that no mileage records were kept to show how much Elite Moving owed Texan Transfer. Furthermore, Elite advertised in the phone directory and newspapers, Texan Transfer did not.

Castleberry eventually became dissatisfied with the business arrangement; he, Branscum and Byboth agreed that the corporation would purchase his stock. A stock purchase agreement and promissory note were executed by Byboth, signing for the corporation as President. The stock sale included two cash payments and the promissory note. Neither Branscum nor Byboth signed the agreement or note in their individual capacity.

The court holds that the above facts and testimony are some evidence either of alter ego or use of the corporate entity as a sham to perpetrate a fraud. I submit that Branscum’s statements and actions in forming Elite Moving, while constituting some evidence of usurption of corporate opportunities, are not evidence of alter ego or use of the corporate entity to perpetrate a fraud.

In the six months prior to the stock purchase agreement, Texan Transfer’s income dramatically dropped. Castleberry attributed this drop in income to the fact that he, Byboth, and Branscum were no longer working the trucks, but had hired employees to work the trucks. After the stock purchase, Texan Transfer experienced financial difficulties and its assets were sold. Texan Transfer made the first of the two cash payments to Castleberry but did not make the second payment, nor did it make any payments on the promissory note.

In 1982, Branscum and Byboth formed a new corporation, Custom Carriers, Inc. Custom Carriers had the same business address as Texan Transfer and Elite Moving. Branscum and Byboth terminated Texan Transfer’s contract with its main customer, Freeds Furniture. Custom Carriers received the contract with Freeds. Branscum and Byboth sold Texan Transfer’s only assets, its trucks, to individuals who later became independent contractors for Custom Carriers. Branscum and Byboth paid themselves “back salaries” with the proceeds.

Sometime after Castleberry filed suit, Branscum told his former wife, that “he would open another company … so that Joe [Castleberry] wouldn’t get paid.” Byboth also conceded that Custom Carriers was formed because of this lawsuit.

The above statements and actions by Branscum and Byboth in forming Custom Carriers constitute some evidence under either the trust fund doctrine or a theory of denuding the corporate assets. The statements also show that Branscum did not intend to pay the debt. Clearly, Castleberry could assert a claim against Byboth and Branscum for their actions in dealing with the corporate assets. The above statements and evidence, however, are not evidence that Texan Transfer was the alter ego of Branscum and Byboth and are not evidence that the corporate entity (Texan Transfer) was used as a sham to perpetrate a fraud on Castleberry.

An additional factor to consider in determining whether Texan Transfer is the alter ego of Byboth and Branscum is that the underlying suit is based in contract and not in tort. Lucas, 696 S.W.2d at 375; Gentry, 528 S.W.2d at 573; Bell Oil & Gas Co. v. Allied Chemical Corp., 431 S.W.2d 336 (Tex.1968). In contract cases, as opposed to tort cases, the courts are less willing to disregard the corporate entity. This result follows because a plaintiff in a contract case ordinarily has an opportunity to investigate the financial strength of the corporation while dealing with it in a business transaction. Lucas, 696 S.W.2d at 375; *280 Gentry, 528 S.W.2d at 573; Hickman v. Rawls, 638 S.W.2d 100, 102 (Tex.App. Dallas 1982, writ ref’d n.r.e.). Castleberry asserts that Byboth and Branscum should be personally liable on a promissory note (a contract) executed by Texan Transfer. As an incorporator, however, Castleberry was more fully aware than other creditors of the potential viability of the corporation; still, he chose to contract only with the corporation and not with Branscum and Byboth in their individual capacities.

The court never states, nor can I determine, how Texan Transfer was the alter ego of Branscum and Byboth or how the corporate entity (Texan Transfer) was used to perpetrate a fraud. I agree with the court that Castleberry was wronged. However, he should not recover under the theories pleaded and submitted to the jury. Castleberry simply did not assert the proper cause of action. Castleberry did not sue because Texan Transfer was a sham, he sued because it stopped doing business and he did not get paid. The corporate entity, Texan Transfer, did not cause Castleberry’s legal injury. Therefore, the court of appeals reached the correct result since there was no evidence on any theory for piercing the corporate veil that was either pleaded or submitted to the jury in the charge.

The InstructionFinally, I disagree with the manner in which the court handles the submitted instruction. The trial court separately submitted the following issue for both Branscum and Byboth: “Do you find from a preponderance of the evidence that Texan Transfer, Inc. was the alter ego of [Branscum or Byboth]?” Additionally, the trial court submitted the following instruction:

You are instructed that a corporation may become an “alter ego” or mere extension of the individual if the individual controls the corporation and conducts its business affairs without due regard for the separate corporate nature of the business; or that such separate corporate nature ceased to exist; or if the corporate assets are dealt with by the individual as if owned by the individual; or if corporate formalities are not adhered to by the corporation; or if the individual is using the corporate entity as a sham to perpetrate fraud or to avoid personal liability. You are further instructed that in determining whether the corporation adhered to corporate formalities and maintained a separate existence, you may consider whether the corporation maintained separate offices; maintained separate books; maintained separate employees; had separate stationary; issued stock; held regular meetings of its shareholders and Board of Directors; kept and maintained written records of the proceedings of meetings of the shareholder and Board of Directors; filing of tax returns, entering into contracts, maintenance of bank accounts, holding titles to property, and other indicia of a separate corporate entity. You are instructed that the existence of one or more of these factors may or may not make Texan Transfers, Inc. the alter ego of [defendant]. Whether or not Texan Transfer, Inc. was the alter ego of [defendant] should be determined from the total dealings of [defendant] and Texan Transfer, Inc.The submitted instruction contains two errors: (1) it allows the jury to affirmatively answer the issue on theories for piercing the corporate entity which are not included under the alter ego doctrine; and (2) it allows the jury to find alter ego simply because Branscum or Byboth failed to meet one of the “indicia of a separate corporate entity”any one of the elements in the list of corporate formalities.

The first problem with the submitted instruction is that it allowed the jury to consider theories of recovery which are not included under the doctrine of alter ego. However, Branscum and Byboth failed to object to the inclusion of the improper theories. These theories, then, were “subsumed” in the alter ego issue even though they are not theories under alter ego. Therefore, the sham to perpetrate a fraud theory for piercing the corporate entity *281 was included in the “alter ego” issue. This error in the trial court’s instruction was waived.

Branscum and Byboth, however, objected to the second error in the instruction, stating that the instruction “may confuse the jury or, in the alternative, prejudice the Defendant and the jury may find any one element would necessarily warrant a finding of `we do’ to Special Issues No. 1 and No. 2.” Thus, Branscum and Byboth objected to the submission of the instruction because it allowed the jury to find alter ego based on failure of Texan Transfer to maintain any of the “elements” in the list of corporate formalities.

The court states that: The objection does not distinctly and separately point out the instruction’s errors, because it is unclear whether the “any one element” complaint refers to the alternative grounds for disregarding the corporate fiction or to the list of corporate formalities.721 S.W.2d at 277. The court’s interpretation of defendant’s objection is hypertechnical. Clearly, Branscum and Byboth stated that the instruction was erroneous because it allowed the jury to find alter ego based on a violation of any one of the “elements” in the list of corporate formalities. In other words, if the jury found that Texan Transfer failed to “maintain separate stationery” (one of the elements in the list of corporate formalities), it could then find that Texan Transfer failed to “adhere to corporate formalities” or failed to “maintain a separate corporate existence” (two of the five alternative grounds for disregarding the corporate fiction”factors”). Thus, the jury could answer “we do” merely on failure to maintain separate stationery. Because the jury’s answer could be based on an affirmative finding of a violation of only one of the listed corporate formalities, the instruction was erroneous. I simply cannot comprehend how this court can render against Byboth and Branscum on an issue which allows the jury to find alter ego merely because Texan Transfer and Branscum and Byboth did not maintain separate stationery.

In holding that the error in the instruction does not require reversal, the court ignores the fact that the submitted instruction is framed in the disjunctive, while its own definition of alter ego is found in the conjunctive. The court states that alter ego:

is shown from the total dealings of the corporation and the individual, including the degree to which corporate formalities have been followed and corporate and individual property have been kept separately, the amount of financial interest, ownership and control the individual maintains over the corporation, and whether the corporation has been used for personal purposes.The court, then, states that alter ego may be found by looking at one factor and another factor and yet another factor. The submitted instruction, however, tells the jury to look at factor one, or, factor two, or, factor three. Thus, the submitted instruction is clearly an erroneous misstatement on the law of alter ego.

This court has repeatedly reversed the trial court for errors in the charge, including erroneous instructions. Gulf Coast State Bank v. Emenhiser, 562 S.W.2d 449 (Tex.1978); Jackson v. Fontaine’s Clinics, Inc., 499 S.W.2d 87 (Tex.1973). See also Washington v. Reliable Life Ins. Co., 581 S.W.2d 153 (Tex.1979); Dutton v. Southern Pacific Transportation, 576 S.W.2d 782 (Tex.1978); Scott v. Atchinson, Topeka & Santa Fe Ry., 572 S.W.2d 273 (Tex. 1978). In Gulf Coast State Bank, we held that the instructions given to the jury constituted a misstatement of law. In reversing, we stated that “[a] trial court’s charge which does not instruct the jury as to the correct law is improper…. The erroneous charge constituted error which was reasonably calculated to cause and probably did cause the rendition of an improper judgment.” 562 S.W.2d at 453-54. Here, as in Gulf Coast State Bank, the erroneous instruction constituted a misstatement of *282 law. We should remand this case to the trial court for a new trial.

Finally, the court takes a unique approach in its review of “preserved error.” The court of appeals held that:

the court’s charge as a whole permitted the jury to find that Texan Transfer was [Byboth and Branscum’s] alter ego based upon the existence of only one of the factors listed above. Under the court’s charge, the jury could have found Texan Transfer to be [Byboth and Branscum’s] alter ego upon a finding that “one or more” of the above quoted factors existed.695 S.W.2d at 645. The court of appeals then held that the erroneous instruction constituted harmful error. The court of appeals reversed the judgment and rendered for Branscum and Byboth, holding there was no evidence of alter ego.

Castleberry, the adversely affected party, had to assert, by point of error on motion for rehearing at the court of appeals, any complaints he had in regard to that court’s opinion. In his motion for rehearing and in his writ application before this court, Castleberry only complained that “[t]he Court of Appeals erred in holding that the Court’s charge to the jury on the issue of alter ego was fatally defective because the issue and explanatory instruction fairly submitted the controlling issues.” Nowhere does Castleberry assert that Branscum and Byboth failed to object to the instruction or that their objection was insufficient. The rule is well established that to raise a point of error before this court, the complaining party must have raised the point on motion for rehearing in the court of appeals. Albright v. City of Houston, 677 S.W.2d 487, 488 (Tex.1984); Smith v. Baldwin, 611 S.W.2d 611, 618 (Tex.1980).

The court of appeals never had a chance to address whether Branscum and Byboth’s objection was sufficiently specific. No complaint was lodged against the objection. The court of appeals is authorized to correct errors in the judgment of the trial court. The court of appeals did not have an opportunity to address this “alleged” error; this entire argument was initiated by the court. Branscum and Byboth were never given an opportunity to respond that their objection was sufficient. This court is authorized to review errors in the judgment of the court of appeals, it is not authorized to assert, on its own initiative, errors that occurred at the trial court.

Ironically, in affirming Castleberry’s recovery, the court broadly construes the “alter ego” instruction to include a theory that was not pleaded and that has very little in common with the alter ego doctrine. At the same time, the court strictly construes Branscum and Byboth’s objection to the instruction, holding that it insufficient to preserve error, presumably because it fails to specify in which sentence the error occurred. The inconsistency in this approach is apparent.

I agree with the court that the court of appeals incorrectly held that alter ego was a question of law which should not be submitted to the jury. For the above reasons, I would remand this cause to the trial court.

CAMPBELL, WALLACE and ROBERTSON, JJ., join this dissent.

NOTES[1] Other doctrines besides disregarding the corporate fiction have been used in cases similar to this: fraudulent conveyance, Texas Sand Co. v. Shield, 381 S.W.2d 48, 52-53 (Tex. 1964) and Tex. Bus. & Comm. Code ch. 24 (Vernon Supp. 1986); the trust fund doctrine, Henry I. Siegel Co., Inc. v. Holliday, 663 S.W.2d 824 (Tex.1984); breach of fiduciary duties, International Bankers Life Ins. Co. v. Holloway, 368 S.W.2d 567, 577 (Tex. 1963); and the denuding theory. World Broadcasting System, Inc. v. Bass, 328 S.W.2d 863, 866 (Tex.1959).

These four doctrines and disregarding the corporate fiction have different elements and remedies, and they protect different parties and interests at different times; but they serve very similar ideals and principles. R. Clark, The Duties of the Corporate Debtor to Its Creditors, 90 Harv. L. Rev. 505, 540-54 (1972). In practice, the doctrine of disregarding the corporate fiction functions to “loosen up the level of proof and the atomistic nature of the analyses required in a fraudulent conveyance action explicitly denominated as such.” Id. at 552.

[2] The phrase, “a sham to perpetrate a fraud,” comes from Pace Corp. v. Jackson, 284 S.W.2d at 351.

[3] Inadequate capitalization is another basis for disregarding the corporate fiction. Torregrossa v. Szelc, 603 S.W.2d 803 (Tex.1980); Tigrett v. Pointer, 580 S.W.2d 375, 381-82 (Tex.Civ.App. Dallas 1979, writ ref’d n.r.e.). It is instructive to compare the six categories in Pacific American Gasoline Co. of Texas v. Miller with the categories in 2 Hornstein, Corporation Law and Practice §§ 752-758 (1959) (same basic categories, but labeled somewhat differently).

[4] All other major authorities support an equitable approach as well. Ballantine, Corporations § 122 (1946) (disregard when there is misuse of the corporate privilege or injustice); Cary & Eisenberg, Corporations 80-81 (5th ed. 1980) (disregard when “the facts warrant the application of equitable principles”); 1 Fletcher, Cyclopedia Corporations § 41 at 413 (Perm.Ed. 1983) (disregarded in the interests of justice and equity); 19 Hamilton, Business Organizations § 237 at 247 (Texas Practice 1973) (“notions of simple justice and fairness”); Henn and Alexander. Laws of Corporations § 146 at 344 (3rd ed. 1983) (“Corporateness will not be recognized to produce unjust or undesirable consequences inconsistent with the purpose of the concept [allowing incorporation]”); 2 Hornstein, Corporation Law and Practice § 751 at 262 (1959) (disregard when corporation becomes “vehicle for injustice”); Latty, Subsidiaries and Affiliated Corporations 191 (1936) (“What the formula comes down to, once shorn of verbiage about control, instrumentality, agency and corporate entity, is that liability is imposed to reach an equitable result”).

[5] Each basis for disregarding the corporate fiction should be pleaded separately. Tex. R. Civ. P. 45, 47. Castleberry only pleaded alter ego, but because Byboth and Branscum did not object to the charge for a lack of pleadings, any error was waived. Murray v. O & A Express, Inc., 630 S.W.2d 633, 637 (Tex. 1982).

[1] Ostensibly, Texan Transfer and Elite Moving were not in competition with one another. Texan Transfer was in the furniture moving business and Elite Moving was in the general moving business.

Jul 11th, 2015 Collections and Foreign Judgments, Construction Law, Contracts and Commercial Litigation, Employment Law Defense, Insurance Defense Litigation

Attorney’s Fees and Section 38.001 of the Texas Civil Practice and Remedy Code–Fort Worth, Texas Contracts Law Attorneys

Even in the absence of entitlement to attorneys’ fees under the contract, a party in a Texas case can still recover attorneys’ fees as a prevailing party under the Texas Civil Practice and Remedy Code.

Section 38.001 of the Texas Civil Practice and Remedy Code provides that a person may recover reasonable attorney’s fees, in addition to the amount of a valid claim and costs, if the claim is for rendered services, performed labor, furnished materials, a suit on a sworn account or . . . an oral or written contract.” Tex. Civ. Prac. & Rem. Code 38.001. It is significant that the claim must be a valid one.

A party must (1) prevail on a cause of action for which attorney’s fees are recoverable, and (2) recover damages. Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 390 (Tex. 1997).

The claimant must present the claim to the opposing party or to a duly authorized agent of the opposing party and payment for the just amount owed must not have been tendered before the expiration of the 30th day after the claim is presented. See Tex. Civ. Prac. & Rem. Code Ann. 38.002.

The prevailing party is the one “vindicated” by the judgment rendered. See Taylor Elec. Servs., Inc. v. Armstrong Elec. Supply Co., 167 S.W.3d 522, 532 (Tex. App.-Fort Worth 2005, no pet.). In determining the prevailing party, the focus is on the successful party on the merits of the case. Id. A party can be the prevailing party and thus entitled to attorney’s fees even where the amount recovered is offset by an amount awarded to the opposing party. Id. at 533 (citing Blizzard v. Nationwide Mut. Fire Ins. Co., 756 S.W.2d 801, 806 (Tex. App.-Dallas 1988, no writ)).

Jul 11th, 2015 Collections and Foreign Judgments, Construction Law, Contracts and Commercial Litigation

Texas Sample Construction Warranty, Short Form– Fort Worth, Texas Construction Law Attorneys

Warrants all Work completed under the

Contract Agreement

between _________________________________

and , dated _______________, for a period of

TWO YEARS from date of substantial completion of the Work.

This warranty is valid only for those named above while they occupy the address below and provided normal cleaning and maintenance procedures are followed, and excludes changes due to wear, tear, normal weathering and defects that result from characteristics common to the materials used. Other limitations apply as indicated on the back of this document. By signing below you declare you have read the reverse side and both understand and accept these limitations.

Any guarantees, warranties, understandings, or representations made by (or expressed by) any employee, subcontractor or supplier not set forth specifically in this document is NOT to be considered an extension of this warranty.

This limited warranty is the only express

Warranty provides.

Job Address: _____________________________________________

Date of Substantial Completion: ____________________

Owner Signature(s): ____________________________Date_________

____________________________Date_________

Rep.: _________________________Date_________

Jul 11th, 2015 Construction Law

Duty to Indemnify in a Personal Injury Lawsuit in Texas– Fort Worth, Texas Insurance Defense Attorneys

Tutle Trucking v EOG Resources, Inc.Court of Appeals of Texas, Waco.Opinion delivered and filed November 15, 2012

From the 18th District Court Johnson County, Texas Trial Court No. C2010–0679

Before Chief Justice Gray, Justice Davis, and Justice Scoggins

(Chief Justice Gray dissenting)

REX D. DAVIS Justice

O P I N I O N

In one issue, Appellant Tutle & Tutle Trucking, Inc. complains about a summary judgment granted in favor of Appellee EOG Resources, Inc. In its summary-judgment order, the trial court concluded that, based on language contained in a Master Services Contract (MSC) between Tutle and EOG, Tutle owes duties to defend and indemnify EOG and its contractor, Frac Source Services, Inc., in the underlying personal-injury lawsuit. We will affirm.

I. BACKGROUND

This dispute arose after Archie Henderson, a Tutle employee, sued Tutle and Frac Source to recover damages for injuries that he allegedly sustained on the job. FN1 Henderson alleged:

FN1. In its summary-judgment motion, Tutle acknowledged that Henderson works for Tutle and that the injuries were suffered while working on the project as an employee for Tutle, though the project was supervised by EOG.

On or about September 5, 2007, Plaintiff ARCHIE HENDERSON, an employee of Defendant TUTLE & TUTLE, was, in the course and scope of his employment, assisting FRAC SOURCE personal [sic] unloading sand from a FRAC SOURCE “Sand King” to a truck. The Sand King being used as [sic] the time of the incident was owned, operated, and controlled by Defendant FRAC SOURCE. As Plaintiff was assisting with unloading sand from the Sand King and as FRAC SOURCE personnel operated the Sand King, Plaintiff HENDERSON was struck by a falling conveyor that was part of the Sand King. This incident caused Plaintiff HENDERSON to suffer severe and permanent head, shoulder, and back injuries. Upon information and belief, Defendant FRAC SOURCE had modified or removed a safety device from the Sand King, thus rendering the equipment unreasonably dangerous. In addition, Defendant FRAC SOURCE employees failed to properly utilize the Sand King conveyor’s secondary safety system.

After learning that it was sued in the Henderson suit, Frac Source made a demand on EOG to defend and indemnify it under a separate master service contract between EOG and Frac Source. EOG then made a demand on Tutle for defense and indemnity in the Henderson suit, even though Henderson did not sue EOG.

In asserting that Tutle has a duty to defend and indemnify it, EOG relied on several provisions contained in the MSC. Those relevant provisions are:

6A. CONTRACTOR [Tutle] AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD COMPANY [EOG], ITS PARENT, SUBSIDIARY AND AFFILIATED COMPANIES AND ITS AND THEIR CO–LESSEES, PARTNERS, JOINT VENTURERS, CO–OWNERS, AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES (HEREINAFTER COLLECTIVELY REFERRED TO AS “COMPANY GROUP”) HARMLESS FROM AND AGAINST ALL DAMAGE, LOSS, LIABILITY, CLAIMS, DEMANDS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING COSTS OF LITIGATION, ATTORNEYS’ FEES AND REASONABLE EXPENSES IN CONNECTION THEREWITH, WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF, INCLUDING BUT NOT LIMITED TO STRICT LIABILITY OR THE UNSEAWORTHINESS OR UNAIRWORTHINESS OF ANY VESSEL OR CRAFT, OR THE NEGLIGENCE OF ANY PARTY, INCLUDING BUT NOT LIMITED TO THE SOLE OR CONCURRENT NEGLIGENCE OF THE COMPANY GROUP, ARISING IN CONNECTION HEREWITH IN FAVOR OF CONTRACTOR’S AGENTS, INVITEES AND EMPLOYEES, AND CONTRACTOR’S SUBCONTRACTORS AND THEIR AGENTS, INVITEES AND EMPLOYEES ON ACCOUNT OF DAMAGE TO THEIR PROPERTY OR ON ACCOUNT OF BODILY INJURY OR DEATH.

6B. COMPANY AGREES TO PROTECT, DEFEND, INDEMNIFY AND HOLD CONTRACTOR, ITS AGENTS, OFFICERS, DIRECTORS AND EMPLOYEES (HEREINAFTER COLLECTIVELY REFERRED TO AS “CONTRACTOR GROUP”) HARMLESS FROM AND AGAINST ALL DAMAGE, LOSS, LIABILITY, CLAIMS, DEMANDS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING COSTS OF LITIGATION, ATTORNEYS’ FEES AND REASONABLE EXPENSES IN CONNECTION THEREWITH, WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF, INCLUDING BUT NOT LIMITED TO STRICT LIABILITY OR THE UNSEAWORTHINESS OR UNAIRWORTHINESS OF ANY VESSEL OR CRAFT, OR THE NELIGENCE OF ANY PARTY, INCLUDING BUT NOT LIMITED TO THE SOLE OR CONCURRENT NEGLIGENCE OF THE CONTRACTOR GROUP, ARISING IN CONNECTION HEREWITH IN FAVOR OF COMPANY’S AGENTS, INVITEES AND EMPLOYEES, COMPANY’S CONTRACTORS (OTHER THAN CONTRACTOR) AND THEIR AGENTS, INVITEES AND EMPLOYEES, AND SUCH CONTRACTORS’ SUBCONTRACTORS, OR THEIR AGENTS, INVITEES OR EMPLOYEES ON ACCOUNT OF DAMAGE TO THEIR PROPERTY OR ON ACCOUNT OF BODILY INJURY OR DEATH.

The language contained in paragraphs 6A and 6B of the MSC between EOG and Tutle is set forth in all capital letters and in an apparently slightly larger font than the rest of the contract. Another relevant provision of the MSC—paragraph 6E—was not capitalized or differentiated using an apparently larger font. Paragraph 6E provides:

6E. The terms and provisions of this Paragraph 6 shall have no application to claims or causes of action asserted against Company or Contractor by reason of any agreement of indemnity with a person or entity not a party to this Agreement in those instances where such contractual indemnities are not related to or ancillary to the performance of the work contemplated under the Agreement or are indemnities uncommon to the industry. The terms and provisions of this Paragraph 6 shall expressly apply to claims or causes of action asserted against Company or Contractor by reason of any agreement of indemnity with a person or entity not a party to this Contract where such contractual indemnities are related to or ancillary to the performance of the work contemplated under the Agreement and or Company’s project and are indemnities not uncommon in the industry.

When demanding that Tutle defend and indemnify it in the Henderson suit, EOG relied on paragraphs 6A and 6E of the MSC.

After receiving EOG’s demands for defense and indemnity, Tutle filed a declaratory-judgment action against EOG, Frac Source, and Tutle’s insurer, Carolina Casualty Company, seeking a declaration that Tutle owed no defense or indemnity obligation to EOG in the Henderson suit. In the alternative, Tutle sought a declaration that Tutle’s insurance policy with Carolina covered any indemnity obligation that Tutle owed to EOG as an “insured contract.” EOG counterclaimed for a declaratory judgment that it was entitled to defense and indemnity from Tutle in the Henderson suit based on the MSC and because Henderson was an employee of Tutle who was furnishing services to EOG at the time of the accident. EOG also made a demand upon Tutle for indemnity that EOG owes to Frac Source under the “pass through” provision (paragraph 6E) of the MSC. In addition, EOG sought a declaration that Carolina owed a duty to EOG as its primary liability policy as a matter of law.

EOG moved for partial summary judgment, arguing that: (1) Tutle breached its contract with EOG; (2) Carolina had a contractual obligation to provide a defense and indemnity to EOG and Frac Source with regard to the claims asserted in the Henderson suit; (3) Tutle had a contractual obligation to provide a defense and indemnify EOG and Frac Source with regard to the claims asserted in the Henderson suit; and (4) Tutle and/or Carolina have a contractual obligation “to pay all costs, expenses, and reasonable attorney’s fees incurred by or on behalf of EOG/Frac Source in the defense of the Underlying Lawsuit from at least April 2, 2008 through the present date and for all such future costs, expenses, and attorney’s fees.”

Tutle filed its own motion for summary judgment, asserting that, as a matter of law, it owed no contractual duty to defend or indemnify Frac Source under the MSC because the applicable provisions did not satisfy Texas law’s “fair-notice” requirements—the express-negligence test and conspicuousness. Tutle also contended that it did not owe a duty to defend or indemnify EOG under the MSC for obligations that EOG owed to Frac Source in the Henderson suit.

The trial court denied Tutle’s motion and granted EOG’s motion. In granting EOG’s motion, the trial court specifically declared that Tutle: (1) breached the MSC it had with EOG; (2) has a contractual duty to defend and to indemnify EOG and Frac Source in the underlying Henderson suit; and (3) owes EOG reimbursement for all defense costs, expenses, and indemnity incurred in the Henderson suit. Thereafter, the trial court granted EOG’s motion to sever all claims brought against EOG into a separate cause number, and this appeal followed.

II. STANDARD OF REVIEW

We review the grant or denial of a traditional motion for summary judgment de novo. See Creditwatch, Inc. v. Jackson, 157 S.W.3d 814, 816 n.7 (Tex.2005). To be entitled to summary judgment, the movant must demonstrate that no genuine issues of material fact exist and that it is entitled to judgment as a matter of law. See TEX.R. CIV. P. 166a(c); Am. Tobacco Co. v. Grinnell, 951 S.W.2d 420, 425 (Tex.1997). When both parties move for summary judgment and the trial court grants one motion and denies the other, we review the summary-judgment evidence presented by both sides, determine all questions presented, and render the judgment the trial court should have rendered. Tex. Workers’ Compensation Comm’n v. Patient Advocates of Tex., 136 S.W.3d 643, 648 (Tex.2004).

III. THE FAIR–NOTICE DOCTRINE

In its sole issue, Tutle contends that the trial court erred in granting summary judgment in favor of EOG because the provisions in the MSC that EOG relies on do not meet the fair-notice requirements established by the Texas Supreme Court for interpreting the validity and enforceability of a contractual-indemnity obligation. And, because the MSC provisions allegedly do not meet the fair-notice requirements, Tutle asserts that the trial court erred in concluding that Tutle breached the contract and owes EOG and Frac Source duties to defend and indemnify them in the underlying Henderson suit. EOG counters that the provisions meet the fair-notice requirements and that Tutle judicially admitted that they did in the trial court.

Indemnity provisions are valid and enforceable if they satisfy two fair-notice requirements. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.1993); see Storage & Processors, Inc. v. Reyes, 134 S.W.3d 190, 192 (Tex.2003). One fair-notice requirement, the express-negligence doctrine, requires that the intent of the parties be specifically stated within the four corners of the document. Reyes, 134 S.W.3d at 192; see Dresser, 853 S.W.2d at 508 (noting that, under express-negligence doctrine, a party’s intent to be released from all liability caused by its own future negligence must be expressed in unambiguous terms within contract’s four corners).

The other requirement, conspicuousness, requires that something appear on the face of the contract to attract the attention of the person looking at it. Reyes, 134 S.W.3d at 192. Language may satisfy the conspicuousness requirement by appearing in larger type, contrasting colors, or otherwise calling attention to itself. Id. The purpose of the conspicuousness requirement is to protect the buyer from surprise and an unknowing waiver of his or her rights. Littlefield v. Schaefer, 955 S.W.2d 272, 275 (Tex.1997). Whether an agreement meets the conspicuousness requirement is a question of law. Dresser, 853 S.W.2d at 509.

Indemnity agreements are construed under the normal rules of contract construction. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex.2000). The primary goal is to determine the parties’ intent. Id.

A. Conspicuousness

On appeal, Tutle complains that paragraph 6—the section of the MSC at issue in this case—is not conspicuous as a matter of law. To analyze this complaint, we must examine the entire MSC. It provides that Tutle was a contractor on EOG’s project. Paragraphs 6A and 6B, as shown above, outline the parties’ duties to defend and indemnify “AGAINST ALL DAMAGE, LOSS, LIABILITY, CLAIMS, DEMANDS AND CAUSES OF ACTION OF EVERY KIND AND CHARACTER, INCLUDING COSTS OF LITIGATION, ATTORNEYS’ FEES AND REASONABLE EXPENSES IN CONNECTION THEREWITH….” Compared to the remainder of the MSC, the language in paragraphs 6A and 6B is capitalized and appears to be a larger font size. Paragraph 6, however, contains three additional sections that further clarify the indemnity provisions. In demanding that Tutle defend and indemnify EOG regarding Frac Source’s alleged liability, EOG relies heavily on paragraph 6E. This paragraph is not capitalized, and the font size is similar to the remainder of the MSC, though the numbering for it—6E—and its location in the MSC indicate that its purpose is to clarify the duties outlined in paragraph 6. Tutle admits that paragraphs 6A and 6B are conspicuous, but it argues that paragraph 6E, the “pass through” provision, is not conspicuous. FN2

FN2. EOG asserts that Tutle waived its conspicuousness argument with respect to paragraph 6E. We disagree. A review of Tutle’s motion for summary judgment shows that Tutle argued that paragraph is inconspicuous because the font is not bolded, capitalized, or otherwise written in such a way “that would capture the attention of a reasonable person.”

Although the Business and Commerce Code defines “conspicuous” to include language in which both the heading and text are in larger or contrasting type, it does not require both the heading and the text to be in larger or contrasting type. See TEX. BUS. & COMM.CODE ANN. § 1.201(10) (West 2009). Further, the Business and Commerce Code specifically provides that a contractual provision is “conspicuous” if it is written, displayed, or presented in such a way that a reasonable person ought to have noticed it. See id. Case law echoes that statute. See Reyes, 134 S.W.3d at 192; Dresser, 853 S.W.2d at 509, 511; see also Sydlik v. REEIII, Inc., 195 S.W.3d 329, 332–33 (Tex.App.—Houston [14th Dist.] 2006, no pet.).

We conclude that paragraph 6E is sufficiently conspicuous to provide fair notice. The numbering for the “pass through” provision is capitalized and is different from other provisions in the MSC. And, perhaps more importantly, the location of paragraph 6E, being numerically linked to paragraphs 6A and 6B, is such that a reasonable person ought to have noticed it. Paragraph 6E is not buried within the contract or located away from paragraphs 6A and 6B, which establish the defense and indemnification duties. In fact, paragraph 6E is on the same page as the last couple of lines of paragraph 6B, which, as stated earlier, is written in all-capital letters and in apparently slightly larger font. It is not the case that the complained-of language appeared in small, light type on the back of a form and was surrounded by unrelated terms. See, e.g., Dana Corp. v. Microtherm, Inc., No. 13–05–00281–CV, 2010 WL 196939, at *6–7 (Tex.App.—Corpus Christi Jan. 21, 2010, pet. granted, judgm’t vacated w.r.m.) (mem.op.) (concluding that liability-limiting provision was inconspicuous because statement on front of document, “REFER TO REVERSE SIDE FOR TERMS AND CONDITIONS OF SALE,” does not suggest liability-limiting provision was on reverse side); Am. Home Shield Corp. v. Lahorgue, 201 S.W.3d 181, 185 (Tex.App.—Dallas 2006, pet. denied) (concluding that indemnity provision was not conspicuous because it appeared “on the back of the contract in a series of numbered, uniformly printed and spaced paragraphs without headings or contrasting type”); Safway Scaffold Co. v. Safway Steel Prod., Inc., 570 S.W.2d 225, 228 (Tex.Civ.App.—Houston [1st Dist.] 1978, writ ref’d n.r.e.) (determining that indemnity provisions were not conspicuous because they were located on back of document among series of numbered paragraphs without headings or contrasting type and not specifically identified as indemnity provisions on front of document); see also Enserch Corp. v. Parker, 794 S.W.2d 2, 9 (Tex.1990) (concluding that indemnity provision was sufficiently conspicuous to afford fair notice of its existence when entire contract appeared on one page and language was on front side of contract, not hidden under separate heading or surrounded by unrelated terms). Accordingly, we reject Tutle’s assertion that paragraphs 6A–6E do not satisfy the conspicuousness requirement.

B. The Express–Negligence Doctrine

Tutle also argues that paragraphs 6A and 6E fail to meet the express-negligence test and thus do not obligate Tutle to indemnify EOG for EOG’s contractual obligation to indemnify Frac Source. Specifically, Tutle asserts that paragraph 6E “is vague, ambiguous, and if enforced, violates the express [-]negligence test where there is nothing within [p]aragraph 6E that indicates that Frac Source is seeking to be indemnified by Tutle from the consequences of its own negligence.” EOG counters that the express-negligence doctrine does not apply when an indemnitee does not seek indemnity for its own negligence and that the “pass through” indemnity provision in paragraph 6E is neither vague nor ambiguous.

As stated earlier, the express-negligence test states that if a party intends to be released from its own future negligence, it must express that intent in clear, unambiguous terms within the four corners of the contract. Reyes, 134 S.W.3d at 192; Sydlik, 195 S.W.3d at 333. The purpose of “the express [-]negligence rule is to require scriveners to make it clear when the intent of the parties is to exculpate” a party for that party’s own negligence. Quintana v. Crossfit Dallas, L.L.C., 347 S.W.3d 445, 450 (Tex.App.—Dallas 2011, no pet.) (quoting Atl. Richfield Co. v. Petroleum Personnel, Inc., 768 S.W.2d 724, 726 (Tex.1989)).

Several courts, however, have stated that the express-negligence doctrine does not apply when an indemnitee, such as EOG here, does not seek indemnity for its own negligence. See Paragon Gen. Contractors, Inc. v. Larco Constr., Inc., 227 S.W.3d 876, 889 (Tex.App.—Dallas 2007, no pet.) (citing MAN GHH Logistics GMBH v. Emscor, Inc., 858 S.W.2d 41, 43 (Tex.App.—Houston [14th Dist.] 1993, no writ)); Transcon. Gas Pipeline Corp. v. Texaco, Inc., 35 S.W.3d 658, 669 (Tex.App.—Houston [1st Dist.] 2000, pet. denied). FN3 In this case, EOG seeks indemnity from Tutle for Frac Source’s alleged negligence. Thus, EOG argues that the express-negligence doctrine does not apply in this case.

FN3. In Transcontinental Gas Pipeline Corp. v. Texaco, Inc., the First Court of Appeals noted the following with respect to the express-negligence doctrine:

Transco asks this Court to expand the express[-]negligence doctrine to cover any indemnity provision that is ambiguous, despite the obvious refusal of our sister courts to expand the doctrine. The Texas Supreme Court declined to extend the express[-]negligence doctrine to an insurance-shifting provision. Getty Oil Co. v. Insurance Co. of N. Am., 845 S.W.2d 794, 806 (Tex.1992). More recently, the Texas Supreme Court held that the express-negligence doctrine applies to releases that relieve a party of its own negligence, but the court expressly limited its holding. Dresser Indust., Inc., 853 S.W.2d at 509. “It is important to note that our discussion … is limited solely to those types of releases which relieve a party in advance of liability for its own negligence.” Id. at 507. Furthermore, it is not extraordinary or unjust to shift the risk of economic damages resulting from a breach of contract, particularly when both parties are experienced contractors and familiar with industry customs regarding risk shifting. Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 387 (Tex.1997).

35 S.W.3d 658, 669 (Tex.App.—Houston [1st Dist.] 2000, pet. denied) (internal footnotes omitted).

Tutle responds that paragraph 6E constitutes an extraordinary transfer of risk to which the express-negligence doctrine applies. See, e.g., Reyes, 134 S.W.3d at 193; Green Int’l v. Solis, 951 S.W.2d 384, 386 (Tex.1997) (“We held that such extraordinary risk-shifting clauses must meet certain fair notice requirements.”). Both parties acknowledge that there is scant Texas case law addressing the fair-notice requirements as it relates to a “pass through” provision such as the one in this case. Nevertheless, assuming that Tutle is correct, we do not believe that the language of the provision is vague and ambiguous as to violate the express-negligence doctrine.

In arguing that paragraph 6E is neither vague nor ambiguous, EOG relies heavily on EOG Resources, Inc. v. Badlands Power Fuels, L.L.C., 677 F.Supp.2d 1143 (D.N.D.2009). In this case, the North Dakota federal district court analyzed a “pass through” identical to the one in this case. Id. at 1146. Also, the facts in Badland Power Fuels are substantially similar.

EOG, the owner and operator of the Zacher Oil Well in Mountrail County, North Dakota, entered into identical master service contracts with its contractors, Petroleum Experience, B.O.S. Roustabout & Backhoe Service, Inc., and Badlands Power Fuels. Id. at 1145. The federal court included the relevant language of the master service contracts in its opinion, and the contracts are virtually identical to the MSC in this case. Id. at 1145–46. EOG’s contractors were performing a flow-back operation on the Zacher Oil Well. Id. at 1145. During this operation, a fire occurred and injured Badlands Power Fuels employee Ted Seidler and employees of another contractor. Id. Seidler sued, and Petroleum Experience and B.O.S. tendered their defenses and requested indemnification from EOG. Id. at 1146–47. Similar to the case at hand, EOG tendered its defense and request for indemnification to Badlands Power Fuels, the employer of the injured employee, arguing that the “pass through” provision in the master service contract (also paragraph 6E) required that Badlands Power Fuels defend and indemnify EOG in the Seidler suit. Id. After applying Texas law, the federal court granted EOG’s summary-judgment motion and held that “Badlands Power Fuels must also defend and indemnify EOG under paragraph 6E of its master service contract from claims that Petroleum Experience and BOS have made against EOG for the claims that Ted Seidler has made against them.” FN4 Id. at 1155.

FN4. We recognize that the federal court in Badlands Power Fuels did not analyze the “pass through” provision under the Texas fair-notice doctrine, but we are persuaded by the fact that the federal court, by granting summary judgment in favor of EOG and concluding that Badlands Power Fuels has a duty to defend and indemnify EOG under the “pass through” provision, implicitly concluded that the “pass through” provision was not vague or ambiguous. See 677 F.Supp.2d at 1155. Furthermore, the federal court’s ruling indicates that such a “pass through” provision is not uncommon in the oil and gas industry. See id.

Thus, at least one court has approved the “pass through” provision at issue. See id. Furthermore, we do not believe that the “pass through” indemnity provision of the MSC was required to have the specificity that Tutle suggests or else run the risk of being deemed vague and ambiguous. Tutle and EOG, both sophisticated business entities, entered into a contract in which Tutle agreed to defend and indemnify EOG under paragraph 6E, which required the duties of defense and indemnification with regard to non-parties to the MSC for claims or causes of action “related to or ancillary to the performance of the work contemplated under the Agreement and[/]or Company’s project and are indemnities not uncommon in the industry.” We conclude that the language of paragraph 6E is neither vague nor ambiguous.

As a final argument, Tutle asserts that EOG did not tender sufficient evidence demonstrating that the MSC is applicable to the facts of the Henderson suit. In particular, Tutle contends that the record contains no evidence indicating that Henderson was injured while “transporting dry bulk commodity,” as stated in the MSC. For several reasons, we disagree with Tutle’s interpretation.

First, the MSC states in paragraph 1:

This Agreement shall control and govern all work performed by Contractor for the Company, under subsequent verbal and/or regular work orders, and any agreements or stipulations in any such work order, delivery ticket, or other instrument used by Contractor not in conformity with the terms and provisions hereof shall be null and void.

Tutle judicially admitted in its summary-judgment motion that Henderson was injured while working for Tutle on EOG’s project.

Second, in making its argument that the MSC does not apply to Henderson’s injuries, Tutle relies on the recital in the MSC stating that Tutle is in the business of “transporting dry bulk commodity.” Texas courts have held that recitals in a contract will not control the operative clauses thereof unless the latter are ambiguous. See City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699, 722 (Tex.App.—Fort Worth 2008, pet. dism’d); see also Beckham Res., Inc. v. Mantle Res., L.L.C., No. 13–09–00083–CV, 2010 WL 672880, at *9 (Tex.App.—Corpus Christi Feb. 25, 2010, pet. denied) (mem.op.). Paragraph 1 is an operative clause describing the extent of the agreement, while the provision relied upon by Tutle merely describes Tutle’s business and its intent to work as an independent contractor for EOG from time to time. See, e.g., Enter. Leasing Co. v. Barrios, 156 S.W.3d 547, 549 (Tex.2004) ( “Although we recognize that in certain cases, courts may consider the title of a contract provision or section to interpret a contract, ‘the greater weight must be given to the operative contractual clauses of the agreement.’ ”) (quoting Neece v. A.A.A. Realty Co., 159 Tex. 403, 322 S.W.2d 597, 600 (1959). Based on the record, we conclude that Henderson’s injuries are within the scope of the MSC.

Based on the foregoing, we conclude that the trial court did not err in declaring that the MSC covers the injuries sustained by Henderson. Furthermore, we hold that the MSC satisfies the fair-notice doctrine. The trial court did not err in granting EOG’s summary-judgment motion. Accordingly, we overrule Tutle’s sole issue and affirm the judgment of the trial court.

[CV06]

No. 10–11–00062–CV

TUTLE & TUTLE TRUCKING, INC., Appellant

EOG RESOURCES, INC., Appellee

From the 18th District Court Johnson County, Texas Trial Court No. C2010–0679

TOM GRAY Chief Justice

Dissenting opinion delivered and filed November 15, 2012

DISSENTING OPINION

After studying this several different times, I have concluded that, based on what is briefed, I would have to reverse due to lack of evidence to conclusively establish the second predicate fact, that the indemnity agreement is common to the industry (which may include which industry, oil and gas, or sand and gravel). The only basis the Court relies upon to support this factual determination is that the provision appears in one other reported case, a federal case from North Dakota (see Maj. Op. footnote 4). But that case involved the same party, EOG. Contrary to the Court’s conclusion, I think the fact that this type provision shows up nationally in only one other case and that case involved the same company is a clear indication the provision is not widely used in the industry.

I also think EOG, and the Court, has misapplied the concept of a judicial admission to the other predicate fact needed for the concept to apply. A statement in a pleading is an admission, but it can be controverted. It is a binding judicial admission only if it is a factual allegation in a live pleading and there is no unobjected-to evidence contrary to the allegation in the summary judgment record.

In any event, it appears that conflicting evidence may have been offered on the issue of whether the employee was injured in the process of transporting bulk dry material.

For either of these reasons, the result would at least be a reverse and remand for fact development.

But I have some issue with paragraph 6E, the pass through provision, as well. I think the issue here is very wide open, especially in Texas. If 6E has to meet the Express Negligence or the fair notice doctrine – it fails; particularly since the pass through provision EOG is relying upon is buried at the end of a provision that does nothing to highlight it and addresses another topic as well.

Further it seems to be a very unusual provision in that it essentially provides “you agree to indemnify me for anything I have agreed with another contractor for which to indemnify them.” You probably cannot bury another company’s agreement to indemnify for an act of negligence much deeper than that.

But I am not at all sure that the doctrine applies, because it is an indemnity of contractual indemnity, which may include a negligence claim but at the pass through level is only a contract claim.

This case also seems to potentially have some huge policy implications in it that I do not understand. Specifically, how workers compensation coverage and limits on recovery will be implicated, if at all. Does this now pit a workers compensation carrier against a general liability carrier?

For the foregoing reasons, I respectfully dissent to the judgment of the Court to the extent it does not reverse the trial court’s judgment and remand the proceeding to the trial court for further development. FN1

FN1. Recognizing that I have not garnered a second vote for my position, I have provided this quite informal dissent rather than delay the ultimate disposition of this proceeding. See In the Interest of S.A.P., 135 S.W.3d 165, 177 (Tex.App.—Waco 2004) (Gray, C.J., dissenting), rev’d and remanded, 156 S.W.3d 574 (Tex.2005)

Jul 10th, 2015 Construction Law, Contracts and Commercial Litigation, Insurance Defense Litigation

Resolving Competing Claims For Attorney’s Fees in the Final Judgment–Fort Worth, Texas Contracts Law Attorneys

IN THE SUPREME COURT OF TEXAS
════════════
NO. 14-0279
════════════
FARM BUREAU COUNTY MUTUAL INSURANCE COMPANY,
PETITIONER,
v.
CRISTIL ROGERS, RESPONDENT
════════════════════════════════════════════════════
ON PETITION FOR REVIEW FROM THE
COURT OF APPEALS FOR THE SIXTH DISTRICT OF TEXAS
════════════════════════════════════════════════════
PER CURIAM
This case presents the familiar issue of whether a trial court’s order, issued without a full trial and containing a Mother Hubbard clause, is final for purposes of appeal. In this declaratory judgment action involving insurance coverage, the court of appeals held that the trial court’s order denying the insurer’s motion for summary judgment is not final because the insured did not file a cross-motion for summary judgment. We agree that the order is not final, but for a different reason: it did not resolve the parties’ competing requests for attorney’s fees. We therefore affirm the court of appeals’ dismissal of this appeal.
Farm Bureau County Mutual Insurance Company filed this declaratory judgment action against its insured, Cristil Rogers, seeking a declaration that it had no duty to defend or indemnify her in an underlying tort action (the Dominguez suit)1 and requesting an award of court costs and
1 The plaintiffs in the Dominguez suit sought damages for injuries they sustained when they were thrown from their horses while riding along FM 906 in Lamar County, Texas. Their petition alleged that, as Rogers drove past them in a pickup truck, a dog leaped from the bed of the truck and charged at the horses, causing them to buck and throw the plaintiffs. The plaintiffs alleged that Rogers proximately caused their injuries by negligently failing to secure her dog. Rogers sought coverage of these claims under her automobile insurance policy with Farm Bureau.
2
attorney’s fees under the Uniform Declaratory Judgments Act (UDJA). See TEX. CIV. PRAC. & REM. CODE § 37.009 (authorizing courts in a declaratory judgment action to award “costs and reasonable and necessary attorney’s fees as are equitable and just”). Rogers answered the suit and prayed for recovery of her court costs and attorney’s fees under the Texas Deceptive Trade Practices Act (DTPA), even though she asserted no claims for relief under the DTPA.
Farm Bureau later moved for summary judgment. Rogers opposed the motion but did not file a cross-motion seeking summary judgment in her favor. After a hearing on Farm Bureau’s motion, the trial court entered an “Order Denying Plaintiff Farm Bureau[’s] . . . Motion for Summary Judgment.” The order decreed that (1) Farm Bureau “has a duty to defend [Rogers] in or as to” the Dominguez suit; (2) Farm Bureau “has a duty to indemnify [Rogers] in or as to” the Dominguez suit; (3) “[a]ll court costs are taxed against the party incurring same”; and (4) “[a]ny and all relief sought in this cause which is not expressly granted herein is DENIED.” The order did not expressly address the parties’ claims for attorney’s fees.
The court of appeals dismissed Farm Bureau’s appeal for want of jurisdiction, holding that an order denying a motion for summary judgment cannot be final and appealable unless the opposing party filed a cross-motion for summary judgment. Farm Bureau petitioned for this Court’s review. Relying on our decision in Lehmann v. Har-Con Corp., 39 S.W.3d 191 (Tex. 2001), Farm Bureau argues that the trial court’s order is a final and appealable judgment because it disposed of all parties and claims, even though Rogers did not file a cross-motion for summary judgment seeking that relief. Rogers responds by arguing that the order is not a final judgment because it did not dispose of the parties’ competing claims for attorney’s fees. In reply, Farm Bureau argues that Rogers’ request for attorney’s fees under the DTPA was defective and the trial
3
court implicitly denied both parties’ requests for attorney’s fees by expressly taxing court costs to each party and denying “[a]ny and all relief . . . which is not expressly granted herein.”2
We agree with Farm Bureau that the fact that Rogers did not file a cross-motion for summary judgment did not preclude the trial court from entering a “final” judgment. As we explained in Lehmann, “the language of an order or judgment can make it final, even though it should have been interlocutory, if that language expressly disposes of all claims and all parties.” Lehmann, 39 S.W.3d at 200. If the trial court’s intent to enter a final judgment is “clear from the order, then the order is final and appealable, even though the record does not provide an adequate basis for rendition of judgment.” Id. In that case, “the judgment is final—erroneous, but final.” Id. But we agree with Rogers that the order at issue here did not dispose of all parties and claims, because neither the language taxing court costs nor the Mother Hubbard clause disposed of the parties’ claims for attorney’s fees.
In Lehmann, we held that “a judgment issued without a conventional trial is final for purposes of appeal if and only if either [1] it actually disposes of all claims and parties then before the court, regardless of its language, or [2] it states with unmistakable clarity that it is a final judgment as to all claims and all parties.” Lehmann, 39 S.W.3d at 192–93. We explained that “[a]n order does not dispose of all claims and all parties merely because it is entitled ‘final’, or because the word ‘final’ appears elsewhere in the order, or even because it awards costs.” Id. at 205 (emphasis added). “Rather, there must be some other clear indication that the trial court intended the order to completely dispose of the entire case.” Id. Attempting to resolve decades of confusion,
2 We need not consider Farm Bureau’s argument that Rogers’ claim for attorney’s fees is defective because, even if it is, Farm Bureau’s own claim for attorney’s fees remains pending. See Barshop v. Medina Cnty. Underground Water Conserv. Dist., 925 S.W.2d 618, 637–38 (Tex. 1996) (holding that failure to “substantially prevail[ ]” on a declaratory judgment claim does not preclude recovery of attorney’s fees under the UDJA).
4
we held that “the inclusion of a Mother Hubbard clause—by which we mean the statement, ‘all relief not granted is denied’, or essentially those words—does not indicate that a judgment rendered without a conventional trial is final for purposes of appeal.” Id. at 203–04. Mother Hubbard clauses are problematic because they are open to interpretation. Id. at 204. Sometimes a Mother Hubbard clause “mean[s] only that the relief requested in the motion—not all the relief requested by anyone in the case—and not granted by the order is denied,” and sometimes it “may also have no intended meaning at all, having been inserted for no other reason than that it appears in a form book or resides on a word processor.” Id. We thus rejected the notion that a Mother Hubbard clause gives “any indicia of finality in any order not issued after a conventional trial.” Id.
After Lehmann, we confirmed that the disposition of a claim for court costs does not dispose of a claim for attorney’s fees, even when doing so would also dispose of all parties and claims. See McNally v. Guevara, 52 S.W.3d 195, 196 (Tex. 2001). In McNally, the defendants filed a motion for summary judgment but failed to request summary judgment on their counterclaim for attorney’s fees. Although the trial court’s order granted the motion and taxed court costs against the plaintiff, we concluded that “[n]othing in the trial court’s judgment, other than its award of costs to the defendants, suggests that it intended to deny the defendants’ claim for attorney fees. The award of costs, by itself, does not make the judgment final.” Id. Consistent with our statement in Lehmann, we held that the resolution of a claim for court costs did not dispose of a claim for attorney’s fees and did not serve as an indicium of finality. See id.; Lehmann, 39 S.W.3d at 205.
This case is slightly different from McNally because, although Farm Bureau failed to expressly request attorney’s fees in its motion for summary judgment, it argues that the Mother Hubbard clause, not just the disposition of court costs, effectively denied the claim for attorney’s
5
fees. However, the reasoning of Lehmann and McNally control our decision here. Interpreting Mother Hubbard clauses in the manner Farm Bureau urges would necessarily run afoul of Lehmann because it would allow such clauses to serve as indicia of finality for purposes of appeal—the very function we prohibited in Lehmann. Thus, Mother Hubbard clauses do not, on their face, implicitly dispose of claims not expressly mentioned in the order, including claims for attorney’s fees. Instead, there must be evidence in the record to prove the trial court’s intent to dispose of any remaining issues when it includes a Mother Hubbard clause in an order denying summary judgment. See Lehmann, 39 S.W.3d at 205–06; McNally, 52 S.W.3d at 196. To hold otherwise would simply resurrect the issues we put to rest in Lehmann and McNally, albeit in a slightly different form.
Like the movant in McNally, Farm Bureau failed to request an award of attorney’s fees in its motion for summary judgment or to attach evidence supporting its claim for fees. Thus, as in McNally, there is no reason to presume that the trial court considered the issue when ruling on Farm Bureau’s motion. The order’s language taxing court costs is of no import because our decision in McNally established that such language does not, alone, evince a trial court’s intent to dispose of attorney’s fees. And most importantly, the parties presented no evidence from the record suggesting that the trial court intended the Mother Hubbard clause to deny attorney’s fees to either party.3 In the absence of evidence of the trial court’s intent with respect to the parties’ claims for attorney’s fees, we find that the trial court’s order did not dispose of all parties and claims.
3 As noted above, Farm Bureau did not need to “substantially prevail[ ]” in a suit under the UDJA to receive attorney’s fees. See Barshop, 925 S.W.2d at 637–38. Thus, the trial court did not dispose of the issue simply by ruling against Farm Bureau with respect to its duty to defend and indemnify Rogers.
6
Accordingly, without hearing oral argument, we affirm the court of appeals’ judgment dismissing the appeal for want of jurisdiction. TEX. R. APP. P. 59.1.
OPINION DELIVERED: January 30, 2015

Jul 10th, 2015 Collections and Foreign Judgments, Construction Law, Contracts and Commercial Litigation, Insurance Defense Litigation

The Doctrine of Forum Non Conveniens in Texas Civil Litigation–Fort Worth, Texas Civil Litigation Attorneys

IN THE SUPREME COURT OF TEXAS

NO. 12-0946

IN RE BRIDGESTONE AMERICAS TIRE OPERATIONS, LLC, RELATOR

ON PETITION FOR WRIT OF MANDAMUS

Argued November 5, 2014
JUSTICE LEHRMANN delivered the opinion of the Court.
Before us once again is the Texas-resident exception to the forum-non-conveniens statute.
We consider whether the exception—which allows a plaintiff residing in Texas to maintain a lawsuit
here even when the suit would otherwise be subject to dismissal for forum non conveniens—applies
in a case in which two nonresident minors sue by a next friend who is a Texas resident. The minors
themselves reside in Mexico with their grandparents, who are the minors’ legal guardians under
Mexican law. We hold that the Texas-resident exception does not apply and that the trial court
abused its discretion in refusing to dismiss the case on forum-non-conveniens grounds. Accordingly,
we conditionally grant mandamus relief.
I. Background
This case arises from a June 2009 car accident in Mexico. Armando Alvarado was driving
a 1996 Ford Explorer on a highway near Monterrey in the State of Nuevo Leon. His wife, Maria
Isabel Rodriguez, and their two minor children were passengers. The Explorer’s left rear tire
allegedly failed, causing a rollover that killed Armando and Maria and injured the children. At the
time of the accident, the family resided in Nuevo Leon. The children’s maternal grandparents
became the children’s legal guardians by operation of Mexican law and took custody of the children
in Nuevo Leon.
Gilberto Rodriguez, a Texas resident who is the children’s maternal uncle, filed a wrongfuldeath
lawsuit “as next friend” of the children in Texas against Bridgestone Americas Tire
Operations, LLC (Bridgestone), a Delaware company that manufactured the allegedly defective tire.
Other defendants included Gutierrez Brothers, Inc., doing business as Gutierrez Auto Sales, and that
company’s individual owners, brothers Juan, Jaime, and Manuel Gutierrez.1 Gutierrez Auto Sales,
which is in Hidalgo County, Texas, had purchased the used Explorer from a New Jersey Acura
dealership through a New Jersey auction house on July 12, 2007.2 Approximately two weeks later,
Gutierrez Auto Sales sold the Explorer to wholesaler Librado Leal, a company based in Nuevo Leon,
“For Export Only.” The accident occurred almost two years later. The record does not reflect when
or where the tire at issue was put on the Explorer, and nothing in the record suggests that the tire was
manufactured in Texas.
Bridgestone filed a motion to dismiss for forum non conveniens, arguing that the case
belonged in Mexico, not Texas. The trial court denied the motion, and Bridgestone filed a petition
1 The original petition named only Bridgestone and Jaime Gutierrez d/b/a Gutierrez Auto Sales as defendants.
The operative Third Amended Petition names Gutierrez Brothers, Inc., and all three Gutierrez brothers.
2 The Explorer’s first two owners were New Jersey residents.
2
for writ of mandamus in the court of appeals. In denying relief, the court of appeals held that the
case may not be dismissed on forum-non-conveniens grounds because the plaintiff, next-friend
Rodriguez, is a Texas resident. 387 S.W.3d 840, 848 (Tex. App.—Beaumont 2012). Bridgestone
now seeks mandamus relief in this Court, arguing that the trial court abused its discretion in denying
Bridgestone’s motion to dismiss.
II. Analysis
The doctrine of forum non conveniens, which originated in the common law and is now
codified in Texas, “comes into play when there are sufficient contacts between the defendant and the
forum state to confer personal jurisdiction upon the trial court, but the case itself has no significant
connection to the forum.” In re Pirelli Tire, LLC, 247 S.W.3d 670, 675–76 (Tex. 2007). Texas’s
forum-non-conveniens statute provides:
If a court of this state, on written motion of a party, finds that in the interest of justice
and for the convenience of the parties a claim or action to which this section applies
would be more properly heard in a forum outside this state, the court shall decline to
exercise jurisdiction under the doctrine of forum non conveniens and shall stay or
dismiss the claim or action.
TEX. CIV. PRAC. & REM. CODE § 71.051(b).3 Notwithstanding this mandatory language, courts “may
not stay or dismiss a plaintiff’s claim [on forum-non-conveniens grounds] if the plaintiff is a legal
resident of this state.” Id.§ 71.051(e). This so-called Texas-resident exception “ensure[s] access to
Texas courts for Texas plaintiffs.” In re Ford Motor Co., 442 S.W.3d 265, 269 (Tex. 2014).
3 The statute applies to actions for personal injuries or wrongful death. TEX. CIV. PRAC. & REM. CODE
§ 71.051(i).
3
We have held that a trial court’s erroneous denial of a forum-non-conveniens motion cannot
be adequately remedied on appeal and therefore warrants mandamus relief. In re Gen. Elec. Co., 271
S.W.3d 681, 685 (Tex. 2008). We review the trial court’s forum-non-conveniens ruling for an abuse
of discretion. Id.
A. Application of the Texas-Resident Exception
When the Texas-resident exception outlined in subsection 71.051(e) applies, a case may not
be dismissed on forum-non-conveniens grounds no matter how tenuous its connection to Texas. In
this case, as discussed above, Texas-resident Rodriguez brought a wrongful-death suit on behalf of
two nonresident minors to recover damages for their parents’ deaths. Rodriguez may not assert a
personal cause of action under Texas’s wrongful-death statute and has sued solely in his capacity as
next friend of his nephews. See TEX. CIV. PRAC. & REM. CODE § 71.004(a) (“An action to recover
damages as provided by [the wrongful-death statute] is for the exclusive benefit of the surviving
spouse, children, and parents of the deceased.”). Bridgestone argues that Rodriguez’s Texas
residency does not foreclose dismissal for two reasons: (1) Rodriguez lacked authority to sue as the
children’s next friend because they had a legal guardian, and (2) even if the children could sue by
next friend, a next friend is not a “plaintiff” whose residency may trigger the exception. We address
these contentions in turn.
1. Next-Friend Representation
We first address whether Texas Rule of Civil Procedure 44 allowed the children to sue
through a next friend. When we analyze Texas’s procedural rules, we apply the same rules of
construction that govern the interpretation of statutes. Ford Motor Co. v. Garcia, 363 S.W.3d 573,
4
579 (Tex. 2012). That is, we look first to the rule’s language and construe it according to its plain
meaning. In re Christus Spohn Hosp. Kleberg, 222 S.W.3d 434, 437 (Tex. 2007). At the same time,
we bear in mind that the rules are given a liberal construction in order to obtain “a just, fair, equitable
and impartial adjudication of the rights of litigants under established principles of substantive law.”
TEX. R. CIV. P. 1.
Rule 44, which is derived from a statute that was originally enacted in 1893,4 governs the
institution of suit by next friend and provides:
Minors . . . who have no legal guardian may sue and be represented by “next
friend” under the following rules:
(1) Such next friend shall have the same rights concerning such suits as
guardians have, but shall give security for costs, or affidavits in lieu thereof, when
required.
(2) Such next friend or his attorney of record may with the approval of the
court compromise suits and agree to judgments, and such judgments, agreements and
compromises, when approved by the court, shall be forever binding and conclusive
upon the party plaintiff in such suit.
TEX. R. CIV. P. 44.5 The only other procedural rule to mention next friends is Rule 173, which
requires the court to appoint a guardian ad litem for a party represented by a next friend or guardian
if “the next friend or guardian appears to the court to have an interest adverse to the party” or if the
parties agree. TEX. R. CIV. P. 173.2(a). Bridgestone argues that Rule 44’s plain language allows suit
4 Act approved Feb. 11, 1893, 23d Leg., R.S., ch. 6, § 1, 1893 Tex. Gen. Laws 433 (former TEX. REV. CIV.
STAT. art. 3498u) (repealed) (“[A]ny minor having a sufficient cause of action, and who has no legal guardian, can bring
suit in any of the courts of this State by next friend.”).
5 The federal rule governing next-friend representation uses similar but not identical language: “A minor or
incompetent person who does not have a duly appointed representative [which includes a general guardian, a committee,
a conservator, and a like fiduciary] may sue by a next friend or by a guardian ad litem.” FED. R. CIV. P. 17(c).
5
by a next friend only when the minor has “no legal guardian” and that the minor plaintiffs in this case
have legal guardians: their grandparents.
The parties do not dispute that, under the law of the State of Nuevo Leon where the children
reside, the children’s grandparents automatically became the children’s legal guardians upon the
death of their parents.6 However, the court of appeals concluded that, because no Texas court had
accepted the grandparents’ guardianship established in Mexico, “the minors had no legal guardian
in Texas,” and next-friend representation was appropriate under Rule 44. 387 S.W.3d at 846.
Bridgestone contends that this interpretation improperly adds words to the rule and that “no legal
guardian” means just that: “no legal guardian.”
Bridgestone’s argument has appeal, but it leaves out a very important inquiry. The
significance of a minor’s having a legal guardian in the context of Rule 44 is that, when a minor
already has a guardian who may sue on his behalf, the minor does not need next-friend representation
in order to litigate his claims. For Rule 44 to make sense, it must be construed to enable minors to
prosecute their claims—through a next friend—when they otherwise could not through a legal
guardian. It follows that, if a legal guardian has been appointed or recognized in another jurisdiction,
6 At oral argument, Rodriguez’s attorney asserted that the grandparents had executed an affidavit renouncing
their status as guardians for health reasons. That affidavit was executed on December 12, 2011—seven months after the
underlying lawsuit was filed—and is a bit unclear. The grandparents aver that they have custody of the children and
“have provided them with all care required for the welfare of the children,” but also that they “are in total agreement”
that Rodriguez “take charge” of the children. Nothing in the record suggests that the children have ever lived with
Rodriguez or that Rodriguez has petitioned any court for guardianship. Further, Bridgestone’s Mexican-law expert
testified without opposition that the grandparents would be required to petition a competent court to be excused from
their guardianship duties, and the record does not reflect that such action was taken. Finally, we note that Rodriguez
submitted, with a post-submission brief, copies of two federal tax returns purporting to show that he claimed the children
as dependents in 2009 and 2010. We grant Bridgestone’s motion to strike this evidence, which is not in the mandamus
record.
6
but that guardian lacks authority to sue on the minor’s behalf in Texas and has no legal basis for
obtaining such authority, the minor may sue by next friend under Rule 44.7 In this case, then,
whether the children could sue by next friend turns on whether their grandparents could have filed
suit in Texas on the children’s behalf as their guardians. If they could not, Rule 44 steps in.
Bridgestone summarily argues that the grandparents’ guardian status entitled them (and only
them) to bring the underlying suit, but Bridgestone fails to address the potential limitations on a
guardian’s authority outside the jurisdiction in which he was appointed or otherwise designated. The
U.S. Supreme Court recognized long ago that “[t]he authority of a guardian, like that of an executor
or administrator, appointed by a court of one state, is limited to that state, and he cannot sue in a
court . . . held within any other state, except so far as authorized to do so by its laws.” Morgan v.
Potter, 157 U.S. 195, 197 (1895) (noting that “[t]he statutes of Kansas do authorize executors or
administrators appointed in another state to sue and be sued as such in Kansas,” but “they confer no
such general authority upon guardians appointed in another state”); cf. Faulkner v. Reed, 241 S.W.
1002, 1007 (Tex. Comm’n App. 1922, holding approved) (“An administrator, appointed by the
courts of Ohio, could not, by virtue of said appointment sue or be sued in the courts of Texas, or in
any way act as a legal representative of said estate in Texas. An administrator is the agent solely of
the court appointing him, clothed with authority to administer only such assets as are within the
jurisdiction of the court making such appointment.”).
7 Nothing in the rule prevents the foreign guardian and the next friend from being the same person.
7
Our courts of appeals have recognized this principle over the years in addressing challenges
to next-friend representation, starting with Bonner v. Ogilvie, 58 S.W. 1027 (Dallas 1900, no writ).
In that case, a child’s mother appointed as his legal guardian in Louisiana sued on his behalf in her
capacity as guardian. Id. at 1028. The court held that the mother’s appointment as guardian in
Louisiana “would not give her authority to sue as such guardian in Texas, but it would not deprive
her of the power to sue in this state as next friend.” Id.
As Bridgestone points out, Bonner was decided before this Court adopted the Texas Rules
of Civil Procedure. However, Rule 44’s “no legal guardian” language tracks the 1893 statute from
which the rule is derived, and courts have relied on Bonner to interpret Rule 44. In Henderson v.
Shell Oil Co., for example, a guardian appointed by a Missouri court sued in Texas on behalf of his
ward, also a Missouri resident, regarding a tract of land in Texas that the ward owned. 179 S.W.2d
386, 386 (Tex. Civ. App.—Fort Worth), rev’d on other grounds and dismissed for want of
jurisdiction, 182 S.W.2d 994 (Tex. 1944). The court noted that “the only capacity in which [the
Missouri guardian] could be recognized as having the right to bring the suit is that of ‘next friend.’”
Id. at 388. This conclusion was reiterated in Herrin v. Falcon, in which the court of appeals held
that a father appointed by a Louisiana court to be his minor son’s guardian properly brought suit in
Texas “as next friend” where no ancillary or original guardianship proceeding had been brought in
Texas. 198 S.W.2d 117, 122 (Tex. Civ. App.—Beaumont 1946, writ ref’d n.r.e.).
8
Evaluating these decisions requires an examination of the Texas Guardianship Code, which
includes provisions governing guardians’ authority to file suit on behalf of their wards.8 In Texas,
the term “guardian” encompasses both a “guardian of the person” and a “guardian of the estate” of
a minor or other incapacitated person. TEX. EST. & G’SHIP CODE § 1002.012(b). “A guardian of the
estate of a ward appointed in this state” has authority to sue for damages on the minor’s behalf. Id.
§ 1151.104(a)(1) (emphasis added). However, like the Kansas statute at issue in Morgan, Texas’s
guardianship statutes confer no such general authority on guardians appointed or recognized in other
jurisdictions. In limited circumstances in which a nonresident ward owns property in Texas, the
Code provides a mechanism by which a guardian appointed in another jurisdiction may “be
appointed and qualified as guardian or coguardian” of the ward’s estate located here. Id.
§§ 1252.051–.053. But a nonresident guardian of a nonresident ward with no connection to Texas
beyond a possible lawsuit simply has no authority to sue on behalf of the ward in Texas in his
capacity as guardian.9
8 The Legislature recently amended and recodified Texas’s guardianship statutes, which were formerly housed
in the Probate Code but, effective January 1, 2014, are now contained in the Estates and Guardianships Code. Act of
June 17, 2011, 82d Leg., R.S., ch. 823, § 1.02, 2011 Tex. Gen. Laws 1917. Because the amendments do not affect our
analysis, we will cite the current versions of the statutes in this opinion.
9 We note that we disagree with Bonner and Herrin to the extent they hold that a child’s parent is not a legal
guardian qualified to sue on his child’s behalf in that capacity. Under Texas law, a parent has the right to represent his
child in legal proceedings and the duty to manage the child’s estate unless a guardian of the estate has been appointed.
TEX. FAM. CODE § 151.001(a)(4), (7). A parent thus typically qualifies as a legal guardian for purposes of Rule 44, and
his minor child may not sue by next friend. See In re KC Greenhouse Patio Apartments LP, 445 S.W.3d 168, 172 (Tex.
App.—Houston [1st Dist.] 2012, orig. proceeding); see also R.H. v. Smith, 339 S.W.3d 756, 759, 764 (Tex.
App.—Dallas 2011, no pet.) (holding that a father had no right to represent his minor child in a lawsuit when the child’s
grandparents had been appointed the minor’s managing conservators).
9
Accordingly, in this case, although the children’s grandparents are recognized as the
children’s guardians under the law of Nuevo Leon where they reside, they have no authority to sue
in that capacity on the children’s behalf in Texas. To avoid depriving the children of the ability to
pursue their claims before they turn eighteen, Rule 44 allows them to do so by next friend.
Accordingly, we agree with the court of appeals that, for purposes of Rule 44, the children could sue
by next friend. We therefore turn to whether Rodriguez, as a next friend, qualifies as a “plaintiff”
who may take advantage of the forum-non-conveniens statute’s Texas-resident exception.
2. Status of Next Friend
As noted above, a plaintiff’s claim may not be stayed or dismissed on forum-non-conveniens
grounds if the plaintiff is a legal resident of Texas. TEX. CIV. PRAC. & REM. CODE § 71.051(e). In
determining whether Rodriguez is a plaintiff for purposes of this provision, we focus on the specific
statutory definition of “plaintiff,” but we also consider that definition in the context of the entire
forum-non-conveniens statute and chapter 71 as a whole. See CHCA Woman’s Hosp. v. Lidji, 403
S.W.3d 228, 232 (Tex. 2013) (“We analyze statutory language in context, considering the specific
section at issue as well as the statute as a whole.”). We presume the Legislature enacted the statute
“with complete knowledge of the existing law and with reference to it.” Acker v. Tex. Water
Comm’n, 790 S.W.2d 299, 301 (Tex. 1990).
The forum-non-conveniens statute defines the term “plaintiff” as follows:
“Plaintiff” means a party seeking recovery of damages for personal injury or
wrongful death. In a cause of action in which a party seeks recovery of damages for
personal injury to or the wrongful death of another person, “plaintiff” includes both
that other person and the party seeking such recovery. The term does not include a
counterclaimant, cross-claimant, or third-party plaintiff or a person who is assigned
10
a cause of action for personal injury, or who accepts an appointment as a personal
representative in a wrongful death action, in bad faith for purposes of affecting in any
way the application of this section.
TEX. CIV. PRAC. & REM. CODE § 71.051(h)(2). In the context of this case, we consider whether
Rodriguez, as a next friend, qualifies as “a party seeking recovery of damages for personal injuries
or wrongful death.” We hold that he does not.
The status of a next friend under Texas law is well settled. “In a suit by a ‘next friend,’ the
real party plaintiff is the child and not the next friend.” Gracia v. RC Cola–7-Up Bottling Co., 667
S.W.2d 517, 519 (Tex. 1984); accord Safeway Stores of Tex. v. Rutherford, 111 S.W.2d 688, 689
(Tex. 1938). Indeed, we long ago stated that “the next friend is not a party to the suit instituted by
a minor by his aid.” Martin v. Weyman, 26 Tex. 460, 468 (1863) (citation omitted); see also Gulf,
C. & S. F. Ry. Co., 1 S.W. 161, 163 (Tex. 1886) (“When it appears with certainty . . . that the action
[by next friend] is based on the right of the minor; that the relief sought is such as the minor alone
would be entitled to on the facts pleaded, and that this is sought for the use and benefit of the minor;
then we are of the opinion that the minor is the real plaintiff, whatsoever may be the formula used.”).
The U.S. Supreme Court has similarly stated:
It is the infant, and not the next friend, who is the real and proper party. The next
friend, by whom the suit is brought on behalf of the infant, is neither technically nor
substantially the party, but resembles an attorney, or a guardian ad litem, by whom
a suit is brought or defended in behalf of another.
Morgan, 157 U.S. at 198. This is consistent with our longstanding recognition that a minor’s lack
of capacity to sue, unlike standing, is not a jurisdictional defect and that a challenge to capacity may
be waived. Austin Nursing Ctr. v. Lovato, 171 S.W.3d 845, 849 (Tex. 2005).
11
In light of this well-settled law, we cannot conclude that a next friend is “a party seeking
recovery of damages for personal injury or wrongful death.” TEX. CIV. PRAC. & REM. CODE
§ 71.051(h)(2). That description fits the persons who are authorized to bring a wrongful-death action
under section 71.004, but not the person serving as a conduit when the ones authorized to bring the
action are minors. As such, a next friend’s legal residency in Texas does not trigger the forum-nonconveniens
statute’s Texas-resident exception. So interpreted, the statute’s plain language serves
its purpose of “ensur[ing] access to Texas courts for Texas plaintiffs.” In re Ford Motor Co., 442
S.W.3d at 269. Texas courts have no responsibility to protect the interests of next friends, who
themselves must protect and advance the interests of the minors suing through them. That is, next
friends have no interest in keeping a case in Texas beyond the interests of the minors they represent.
If the minors whose wrongful-death claims are being prosecuted are not Texas residents, their right
to access Texas courts does not trump a defendant’s right to dismissal for forum non conveniens.
The court of appeals interpreted the statute differently, relying principally on the language
excluding personal representatives appointed in bad faith from qualifying as plaintiffs. The specific
language at issue states: “The term [plaintiff] does not include . . . a person . . . who accepts an
appointment as a personal representative in a wrongful death action, in bad faith for purposes of
affecting in any way the application of this section.” TEX. CIV. PRAC. & REM. CODE § 71.051(h)(2).
The court concluded, and Rodriguez argues, that this exclusion demonstrates that the Legislature
intended a next friend to qualify as a plaintiff for purposes of the Texas-resident exception unless
the defendant shows the next friend was appointed in bad faith. We disagree.
12
Considering this language in the context of chapter 71 as a whole, as we must, we read this
exclusion to apply to the prosecution of a wrongful-death action by an executor or administrator
under subsection 71.004(c). Section 71.004 provides:
(a) An action to recover damages [for wrongful death] is for the exclusive benefit of
the surviving spouse, children, and parents of the deceased.
(b) The surviving spouse, children, and parents of the deceased may bring the action
or one or more of those individuals may bring the action for the benefit of all.
(c) If none of the individuals entitled to bring an action have begun the action within
three calendar months after the death of the injured individual, his executor or
administrator shall bring and prosecute the action unless requested not to by all those
individuals.
An executor or administrator thus has express statutory authority to bring an action that wrongfuldeath
beneficiaries could have brought but chose not to. When that happens, the executor or
administrator—i.e., the personal representative—is the only possible party plaintiff.10 See In re Ford
Motor Co., 442 S.W.3d at 281 (noting that a personal representative qualifies as a party “seek[ing]
recovery of damages for personal injury to or the wrongful death of another person” (quoting TEX.
CIV. PRAC. & REM. CODE § 71.051(h)(2))). In turn, the bad-faith exclusion precludes such a plaintiff
from taking advantage of the Texas-resident exception when he accepted the appointment “in bad
faith for purposes of affecting in any way the application of this section.” Id. § 71.051(h)(2).
10 Section 71.012 is also instructive. Entitled “Qualification of Foreign Personal Representative,” section 71.012
provides that, when an executor or administrator of a nonresident’s estate “is the plaintiff” in a wrongful-death action,
that “foreign personal representative” need not apply for letters testamentary “to bring and prosecute the action” so long
as he has complied with the statutory requirements for the probate of a foreign will. TEX. CIV. PRAC. & REM. CODE
§ 71.012. This lends further support to our interpretation of “personal representative,” as used in the Texas-resident
exception, to apply to executors or administrators exercising their authority to sue under subsection 71.004(c). See also
TEX. EST. & G’SHIP CODE § 22.031(a) (defining “personal representative” to include: an executor and independent
executor; an administrator, independent administrator, and temporary administrator; and their successors).
13
The court of appeals’ overly broad reading of the bad-faith exclusion stretches the definition
of plaintiff beyond the breaking point. If the term “personal representative” as used in section
71.051 were broad enough to include a next friend, we see no principled reason why it would not
also include a guardian ad litem, an attorney ad litem, or an amicus attorney.11 See Morgan, 157 U.S.
at 198 (noting that a next friend resembles a guardian ad litem). Yet it would be absurd to classify
a guardian ad litem as a plaintiff, and, for the reasons discussed above, it makes no more sense to
so classify a next friend. We note that, had the children at issue been adults when suit was filed, the
Texas-resident exception clearly would not have applied. Allowing them to take advantage of the
exception and maintain a suit in Texas merely because they are minors who lack capacity to
represent themselves in litigation defies logic as well as the statute’s plain language and purpose.
In sum, we hold that the Texas-resident exception does not foreclose dismissal of this action
for forum non conveniens. Accordingly, we turn to whether the forum-non-conveniens factors
mandate dismissal.
B. Application of Forum-Non-Conveniens Factors
As noted above, the forum-non-conveniens statute mandates the stay or dismissal of a
personal-injury or wrongful-death action when the court “finds that in the interest of justice and for
the convenience of the parties [the action] would be more properly heard in a forum outside this
state.” TEX. CIV. PRAC. & REM. CODE § 71.051(b). In short, the statute requires dismissal of a case
11 Next friends generally are not appointed. They simply act on behalf of the minor unless and until the court
steps in to protect the minor in the event of a conflict of interest. TEX. R. CIV. P. 44, 173; see also Saldarriaga v.
Saldarriaga, 121 S.W.3d 493, 498 (Tex. App.—Austin 2003, no pet.) (noting that Rule 44 “does not provide for any
kind of procedure for the appointment of a next friend,” but “merely gives minors and incapacitated persons the ability
to sue and appear by a representative”).
14
that “has no significant connection to the forum.” In re Pirelli Tire, LLC, 247 S.W.3d 670, 675–76
(Tex. 2007).
The statute lists six factors for consideration in evaluating a forum-non-conveniens motion.
Specifically, the court must consider whether:
(1) an alternate forum exists in which the claim or action may be tried;
(2) the alternate forum provides an adequate remedy;
(3) maintenance of the claim or action in the courts of this state would work
a substantial injustice to the moving party;
(4) the alternate forum, as a result of the submission of the parties or
otherwise, can exercise jurisdiction over all the defendants properly joined to the
plaintiff’s claim;
(5) the balance of the private interests of the parties and the public interest of
the state predominate in favor of the claim or action being brought in an alternate
forum, which shall include consideration of the extent to which an injury or death
resulted from acts or omissions that occurred in this state; and
(6) the stay or dismissal would not result in unreasonable duplication or
proliferation of litigation.
Id. § 71.051(b)(1)–(6). Our decision in Pirelli Tire guides the application of these factors to this
case.
The facts of the two cases are strikingly similar. Pirelli Tire involved an alleged tire failure
leading to a rollover accident in Mexico that caused the death of a Mexican resident who was in the
truck at the time of the accident. 247 S.W.3d at 673. Two years before the accident, a Texas
dealership had purchased the truck at an auction in another state and sold it eleven days later to a
Mexican citizen who imported it into Mexico the same day, where it was used and serviced until the
15
accident. Id. The tire was not manufactured in Texas, and the tire’s manufacturer, Pirelli Tire, was
not formed in Texas, nor did it maintain its principal place of business here. Id. The decedent’s
family sued Pirelli Tire for negligence and strict liability in designing and manufacturing the tire.
Id. Pirelli Tire filed a motion to dismiss for forum non conveniens, which the trial court denied. Id.
Applying the factors listed above, we granted Pirelli Tire’s petition for writ of mandamus.
We held that Pirelli Tire had demonstrated the availability of an adequate forum by stipulating that
it would submit to personal jurisdiction in Mexico and would not assert a statute-of-limitations
defense, and that Mexico was not rendered an inadequate forum merely because its laws may have
been “less favorable” to the plaintiffs. Id. at 677–78. We also held that private-interest factors
favored a Mexican forum, noting that “key evidence and witnesses concerning damages [were] in
Mexico,” including a witness to the accident, the accident investigators and medical personnel,
witnesses most likely to be familiar with the condition and maintenance of the truck and the tire, the
truck’s owner, and the accident scene itself. Id. at 678–79. We also noted that evidence concerning
the tire’s design and manufacture was in Georgia or Iowa, not Texas. Id. at 679. Finally, we held
that the public interests involved “strongly favor[ed] Mexico,” as Mexico has a “paramount” interest
in seeing that its citizens are compensated for their injuries as well as interests in the safety of
Mexican highways and products within its borders. Id. We concluded that “it is unfair to impose
upon the citizens of [the Texas forum county] the cost and administrative burden of a complex
products-liability suit with no significant connection to Texas.” Id.
Like Pirelli Tire, this case involves: Mexican citizens and residents involved in a car accident
in Mexico; an alleged failure of a tire manufactured in the United States, but not in Texas; and brief
16
ownership of the subject vehicle by a Texas dealership approximately two years before the accident,
followed by ownership and maintenance of the vehicle in Mexico. Also like Pirelli Tire, key
evidence and witnesses relating to the accident, the vehicle, the tire, and damages are in Mexico, and
the evidence concerning the tire’s design and manufacture may be in the United States, but it is not
in Texas. These similarities would seem to render Pirelli Tire dispositive of the forum-nonconveniens
analysis.12 However, Rodriguez argues that this case is distinguishable from Pirelli Tire
because of the presence of Texas defendants in the suit. As noted above, in addition to Bridgestone,
the plaintiffs sued the Texas dealership—and its individual owners—that had owned the Explorer
for two weeks in 2007 before selling it to a wholesaler for export to Mexico.13 The petition alleged
that the dealership was liable for selling the vehicle with a recalled tire.
Rodriguez asserts that Mexico’s courts lack personal jurisdiction over these defendants—one
of whom has affirmatively stated that he will not submit to such jurisdiction—rendering Mexico an
inadequate alternate forum. See TEX. CIV. PRAC. & REM. CODE § 71.051(b)(4) (requiring
consideration of whether “the alternate forum, as a result of the submission of the parties or
otherwise, can exercise jurisdiction over all the defendants properly joined to the plaintiff’s claim”).
We need not address whether a showing that the Mexico courts lack jurisdiction over the Gutierrez
12 We found that the trial court had abused its discretion in Pirelli Tire even though the applicable version of
the forum-non-conveniens statute permitted, but did not require, the trial court to dismiss for forum non conveniens when
it found no significant connection to Texas under the enumerated factors. See Act of May 27, 1997, 75th Leg., R.S., ch.
424, § 1, sec. 71.051, 1997 Tex. Gen. Laws 1680, 1680, amended by Act of June 2, 2003, 78th Leg., R.S., ch. 204,
§ 3.04, sec. 71.051, 2003 Tex. Gen. Laws 847, 854. As amended in 2003, the current version of the statute requires
dismissal upon such a finding. TEX. CIV. PRAC. & REM. CODE § 71.051(b).
13 The plaintiffs in Pirelli Tire initially sued both Pirelli and the Texas dealership that had briefly owned the
vehicle. 247 S.W.3d at 673 n.1. However, the plaintiffs nonsuited the dealer in exchange for Pirelli Tire’s agreement
not to remove the case to federal court. Id. The dealer thus played no role in our forum-non-conveniens analysis.
17
defendants would be dispositive of the forum-non-conveniens analysis because the only record
evidence on the subject is that such jurisdiction exists.14 Bridgestone’s Mexican-law expert testified
that the Mexico courts would have jurisdiction over all defendants, both because Bridgestone had
agreed to submit to Mexico’s jurisdiction and because the “denial of justice” doctrine allows a
Mexico court to “seize jurisdiction” if a foreign court has rejected a case on forum-non-conveniens
grounds. Rodriguez did not designate an expert to counter these conclusions and thus presented no
evidence to support his interpretation of Mexican law. Accordingly, the presence of the Texas
defendants does not meaningfully distinguish this case from Pirelli Tire for purposes of evaluating
the adequacy of the alternate forum as part of the forum-non-conveniens analysis.15
As they did in Pirelli Tire, the forum-non-conveniens factors “clearly and overwhelmingly
favor a Mexican forum for resolution of this dispute.” 247 S.W.3d at 679. Accordingly, we hold
that the trial court abused its discretion in denying Bridgestone’s motion to dismiss.
14 Factually, Rodriguez’s inclusion of claims against the dealership does not provide much of a distinction from
Pirelli Tire. Notably, neither the New Jersey dealer that sold the Explorer to the Texas dealership nor the wholesaler
that imported the car to Mexico were sued, even though it is unclear when the tire at issue was put on the Explorer. The
principal claims in the case involve the allegedly defective design and manufacture of the failed tire. As in Pirelli Tire,
“[t]he happenstance that the truck was in Texas for [less than a month] before it was sold and imported to Mexico is
simply insufficient to provide Texas with any interest in this case.” Id. at 679.
15 To the extent Rodriguez claims Mexico is an inadequate forum because the defendants have not waived any
limitations defenses, we agree with Bridgestone that the record does not support this assertion. Leaving aside that
Rodriguez did not make this argument in the trial court, nothing in the record suggests that Mexican law differs from
Texas law on the running of limitations on a minor’s claim. TEX. CIV. PRAC. & REM. CODE § 16.001(a)(1), (b) (stating
that the statute of limitations on a minor’s claims does not begin to run until the minor turns eighteen). While we do not
necessarily presume that the laws of Mexico and Texas are identical, at best the absence of evidence in the record renders
us unable to evaluate Rodriguez’s implied assertion that statute-of-limitations issues affect the forum-non-conveniens
analysis.
18
III. Conclusion
We hold that Texas law allows minors to sue by next friend when they have a legal guardian
who is not authorized to sue in Texas in that capacity. We also hold that a next friend is not a
plaintiff for purposes of the forum-non-conveniens statute’s Texas-resident exception. Finally, we
hold that application of the forum-non-conveniens factors mandates dismissal of this case as a matter
of law. Accordingly, we conditionally grant Bridgestone’s petition for writ of mandamus and order
the trial court to vacate its order denying Bridgestone’s motion to dismiss. We further order the trial
court to “set terms and conditions for . . . dismissing [this] action . . . as the interests of justice may
require, giving due regard to the rights of the parties to the claim or action,” in a manner that is
consistent with this opinion. TEX. CIV. PRAC. & REM. CODE § 71.051(c). The writ will issue only
if the trial court fails to comply.
_________________________________
Debra H. Lehrmann
Justice
OPINION DELIVERED: April 24, 2015

Jul 10th, 2015 Collections and Foreign Judgments, Construction Law, Contracts and Commercial Litigation, Employment Law Defense, Insurance Defense Litigation

Suits to Collect on McGregor Act Footnote Payment Bond in Texas Construction Law– Fort Worth, Texas Construction Law Attorneys

United Fire & Casualty Company v. Boring & Tunneling Company of America (pdf)
(Tex.App.- Houston [1st Dist.] Feb. 11, 2010)(Keyes) (construction bond, notice provisions of the
McGregor Act substantially complied with; sworn statement was defective in that notary signature and
seal was missing, but issue overruled as a technicality)
AFFIRM TC JUDGMENT: Opinion by Justice Evelyn Keyes
Before Justices Keyes, Hanks and Sharp
01-08-00487-CV United Fire & Casualty Company v. Boring & Tunneling Company of America d/b/a
Bortunco Appeal from 270th District Court of Harris County
Trial Court Judge: Hon. Brent GambleO P I N I O N

On cross motions for summary judgment in a suit to collect on a McGregor Act Footnote payment
bond, the trial court granted summary judgment in favor of appellee, Boring & Tunneling Company of
America (“Bortunco”), and denied the motion of appellant, United Fire & Casualty Company (“United
Fire”). In two issues, United Fire argues that (1) Bortunco failed to substantially comply with the notice
provisions of the McGregor Act; and (2) it did not waive its right to, nor is it estopped from, asserting
notification defects.We affirm.

BACKGROUND

Golf Services Group contracted with Harris County and the City of Houston to complete two different
water line projects and, in compliance with the McGregor Act, obtained a payment bond through United
Fire to ensure that any subcontractors would be paid if Golf Services defaulted. Golf Services
subcontracted with Bortunco in May 2004 to complete the boring and tunneling work on the projects.
Bortunco completed all work and fully performed its obligations under its agreement with Golf Services,
but Golf Services failed to pay Bortunco for its work.

Bortunco sent notices to United Fire that it was seeking to collect against the payment bond for the
services it had provided. Among the notices that Bortunco sent was one dated October 14, 2005,
relating a claim for work and material expenses incurred in July and August of 2005. Bortunco sent the
notice on a “sworn statement form,” and an agent for Bortunco signed the statement, but the notary did
not attach a seal or signature. Bortunco’s notice comported with the statute in all other respects.
Bortunco’s notice also requested that United Fire notify Bortunco if the claim was deficient in “any way.”
United Fire received the notice and sent a letter acknowledging receipt of the claim and informing
Bortunco that it would investigate the claim. The letter United Fire sent Bortunco stated, “Neither this
letter, or any investigation by the Surety, should be construed to be a waiver of any rights under the
bond.” United Fire did not object to the missing notary signature and seal.

On December 14, 2005, nearly two months after the claim filing deadline, Bortunco noticed that the
original sworn statement was missing a notary seal and sent an identical sworn statement with a notary’
s signature and seal. United Fire responded on January 11, 2006 with the same letter it had sent the
first time.

Neither Golf Services nor United Fire, as the surety on Golf Service’s payment bond, paid Bortunco for
the work it completed, and, on February 7, 2006, Bortunco filed suit against both Golf Services and
United Fire seeking recovery of the contract balances on both projects in the amount of $438,389.74.
Subsequently, Bortunco and United Fire settled the majority of Bortunco’s claims except for work and
material expenses Bortunco incurred in July and August 2005. United Fire moved for summary
judgment on the ground that Bortunco was not entitled to recover the remaining expenses because it
had failed to give proper notice, specifically arguing that the October 14, 2005 notice lacked a sworn
statement of account as required by the McGregor Act. United Fire supported its motion for summary
judgment with copies of the October 14 and December 14 notices.

Bortunco filed its own motion for summary judgment and response to United Fire’s motion, arguing that
its notice substantially complied with the McGregor Act notice provisions, or, alternatively, that United
Fire “waived strict compliance with the notice provisions of the McGregor Act” and should be “estopped
from demanding strict compliance.” In addition to copies of the relevant notices and United Fire’s
responses, Bortunco supported its motion for summary judgment with the affidavit of Joe Gibbs
averring that the notary had placed him under oath and that he had sworn to and signed the sworn
statement of account dated October 14, 2005 in the notary’s presence, and that the notary’s oversight
resulted in the missing signature and seal. Bortunco also provided the affidavit of the notary averring
that Gibbs did swear to the contents of the sworn statement under oath and signed it in her presence
and stating, “[T]he absence of my signature is solely indicative of a clerical error committed by me; Mr.
Gibbs swore to and signed the Sworn Statement of Account under oath and in my presence and I
simply neglected to place thereon my signature and seal as notary before mailing it to the surety and
contractor. . . .”

On December 12, 2007, the trial court granted Bortunco’s motion for summary judgment, awarding
Bortunco the $142,542.75 it claimed for the July and August 2005 work, and denied United Fire’s
motion without an opinion. United Fire appeals.

Standard of Review

We review a trial court’s grant or denial of summary judgment de novo. Provident Life & Accident Ins.
Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). To prevail on a traditional summary judgment motion,
the movant has the burden of proving that it is entitled to judgment as a matter of law and that there
are no genuine issues of material fact. Tex. R. Civ. P. 166a(c); Cathey v. Booth, 900 S.W.2d 339, 341
(Tex. 1995). When both parties move for summary judgment and the trial court grants one motion and
denies the other, the reviewing court should review the summary judgment evidence presented by both
sides, determine all questions presented and render the judgment that the trial court should have
rendered. Tex. Workers’ Comp. Comm’n v. Patient Advocates, 136 S.W.3d 643, 648 (Tex. 2004).

McGregor Act and Substantial Compliance

United Fire contends that the notice Bortunco sent did not include a “sworn statement” as required by
the McGregor Act because the notice did not have a notary seal or signature. Therefore, United Fire
contends Bortunco failed to adhere to notice provisions in the McGregor Act and is not entitled to
payment. Bortunco avers it substantially complied with the McGregor Act because the document was
only defective as a result of the notary’s clerical error.

The legislature passed the McGregor Act to ensure payment to subcontractors because they may not
place a lien against a public building. Suretec Ins. Co. v. Myrex Ind., 232 S.W.3d 811, 813 (Tex. App.—
Beaumont 2007, no pet.); Ramex Constr. Co. v. Tamcon Serv. Inc., 29 S.W.3d 135, 139 (Tex. App.—
Houston [14th Dist.] 2000, no pet.). It was not intended to set up “technical tricks, traps, and stumbling
blocks to the filing of legitimate notices of claims,” but “to provide a simple and direct method of giving
notice and perfecting claims.” Agree Corp. & Seaboard Sur. Co. v. Solis, 932 S.W.2d 39, 52–53 (Tex.
App.—Beaumont 1995), rev’d on other grounds, 951 S.W.2d 384 (Tex. 1997). The notice requirements
were also intended “to protect the prime contractor from incurring double liability [and to relieve them
of] liability for claims not asserted before retainage is paid in full.” Commercial Union Ins. Co. v. Spaw-
Glass Corp., 877 S.W.2d 538, 540 (Tex. App.—Austin 1994, writ denied).

The McGregor Act requires general contractors to secure a bond from a surety, allows a subcontractor
to sue the surety for unpaid balances for work and materials, and awards reasonable attorneys’ fees.
Id.; see Tex. Gov’t Code Ann. §§ 2253.021, 2253.073 (Vernon 2008). To recover under the act, a
claimant or subcontractor must provide notice to the general contractor and the surety in writing. Tex.
Gov’t code § 2253.041. The McGregor Act further provides that the notice must conform to the
following requirements:

(b) The notice must be mailed on or before the 15th day of the third month after each month in which
any of the claimed labor was performed or any of the claimed material was delivered.

(1) the amount claimed is just and correct; and

(2) all just and lawful offsets, payments, and credit known to the affiant have been allowed.

(d) The statement of account shall include the amount of any retainage applicable to the account
that has not become due under the terms of the public work contract between the payment bond
beneficiary and the prime contractor or between the payment bond beneficiary and a subcontractor.

Tex. Gov’t Code Ann. § 2253.041(b)–(d) (Vernon 2008).

The McGregor Act is remedial in nature, and, therefore, “[t]he statute is to be given the most
comprehensive and liberal construction possible.” Ramex, 29 S.W.3d at 139; see also City of LaPorte
v. Taylor, 836 S.W.2d 829, 832 (Tex. App.—Houston [1st Dist.] 1992, no writ). As a result, case law has
established that adherence to notification deadlines requires strict compliance, but substantial
compliance is adequate for the other notice provisions. Cf. Commercial Union Ins., 877 S.W.2d at 540
(holding that claimants could not recover when they failed to give any notice); Suretec Ins. Co., 232 S.
W.3d at 816 (failure to provide notice by 15th day of month not saved by substantial compliance);
Capitol Indem. Corp. v. Kirby Rest. Equip. & Chem. Supply Co., 170 S.W.3d 144, 147 (Tex. App.—San
Antonio 2005, pet. denied) (holding “sworn certificate” that did not precisely comport with statutory
language sufficient); U.S. Fid. & Guar. Co. v. Parker Bros. & Co., 437 S.W.2d 880, 881–82 (Tex. Civ.
App.—Houston [1st Dist.] 1969, writ ref’d n.r.e.) (claimant substantially complied with notice provisions
although sworn statements were sent to general contractor and unsworn statements sent to surety).
Substantial compliance has been defined as “compliance with the ‘essential requirements of a statute’”
and occurs when an actor’s deviation does not seriously impede the legislative purpose of the statute.
See Stratton v. Austin Indep. Sch. Dist., 8 S.W.3d 26, 30 (Tex. App.—Austin 1999, no pet.).

United Fire cites several cases which have held that late notification did not substantially comply with
the McGregor Act. See, e.g., Laboratory Design & Equip., Inc. v. Brooks Dev. Auth., No. 04-07-00284-
CV, 2008 WL 36614, at *3 (Tex. App.—San Antonio, no pet.) (holding that notice mailed one year late
and failure to provide any sworn statement whatsoever with notice prevented subcontractor from
recovering against payment bond). However, the issue here is not one of late notification. United Fire
argues that Bortunco’s notice was deficient because it lacked the notary signature and seal, not
because the notice was untimely. Nor did Bortunco’s notice fail to provide any sworn statement
whatsoever. Therefore, Laboratory Design and the other cases United Fire relies on are
distinguishable. Footnote

We conclude that this case is similar to Acme Brick. In Acme Brick, the claimant sent an otherwise
correct notice with the affiant’s signature in the wrong place on the sworn statement. Acme Brick, a Div.
of Justin Indus., Inc. v. Temple Assoc., 816 S.W.2d 440, 441 (Tex. App.—Waco 1991, writ denied). The
document contained a notice of claim, factual statement that the claims were just and correct, the
signature of the affiant, and the notary’s certification of the statement with a seal. Id. The court held
that the document did qualify as an affidavit, but stated, “Moreover, even if the statement was not an
affidavit, the McGregor Act requires only substantial compliance with its notice provisions. . . . We find
the notices sent by Acme to [the prime contractor and surety] substantially complied with the notice
provisions of the McGregor Act.” Id. (citing Featherlite Bldg. Prods. Corp. v. Constructors Unlimited,
Inc., 714 S.W.2d 38, 69 (Tex. App.—Houston [14th Dist.] 1986, writ ref’d n.r.e.).

Here, although Bortunco’s sworn statement is missing the official certification by the notary to qualify
as a affidavit, it is uncontested that Bortunco’s agent swore to the statement before an “officer
authorized to administer oaths” and signed the statement in the notary’s presence. Likewise, the notice
otherwise supplies the statutorily required statements and information and was delivered by the
required deadline. Bortunco’s notification was only deficient because of the nortary’s clerical error in
failing to attach her signature and seal before mailing the document.

We also note that United Fire received actual notice within the statutory deadline Footnote and that, as
soon as Bortunco noticed the clerical omission, it sent an identical notice and sworn statement, this
time with the notary’s signature and seal. Bortunco’s notary’s failure to affix a seal and signature to the
sworn statement did not expose the prime contractor or the surety to increased liability, nor did it
prevent United Fire from having actual notice of the claims Bortunco was making against the payment
bond, especially in light of the fact that Bortunco apparently submitted numerous notices in compliance
with the McGregor Act in the course of its dealings with United Fire.

Because Bortunco’s sworn statement met the essential requirements of the statute in providing actual
notice to United Fire of Bortunco’s claims against the bond and adequately protected both Golf
Services and United Fire from undue liability, we hold that the document substantially complied with the
McGregor Act’s notice provisions. To hold otherwise would require that we set up “technical tricks,
traps, and stumbling blocks to the filing of legitimate notices of claims” rather than providing “a simple
and direct method of giving notice and perfecting claims” as the legislature intended. See Agree Corp.,
932 S.W.2d at 52–53. Therefore, Bortunco met its burden of proving that it was entitled to judgment as
a matter of law and that there were no genuine issues of material fact. See Tex. R. Civ. P. 166a(c);
Cathey, 900 S.W.2d at 341.

We overrule United Fire’s first issue.

Because we have determined that Bortunco’s notice substantially complied with the requirements of
the McGregor Act, we do not need to address United Fire’s argument that it is not estopped and did not
waive its right to assert notification defects.

CONCLUSION

We affirm the judgment of the trial court.

Evelyn V. Keyes

Justice

[FN] Chapter 2253 of the Texas Government Code is commonly referred to as the“McGregor Act.” See Tex. Gov’t Code
Ann. §§ 2253.001–.079 (Vernon 2008 &Supp. 2009). The McGregor Act requires general contractors to secure payment
bonds on public works projects because subcontractors cannot secure liens on public buildings and provides the
procedure for collecting on the bonds. Id.

[FN] A surety’s actual notice has been discussed and used in some cases to establish substantial compliance. See
Redland Ins. Co. v. Sw. Stainless, L.P., 181 S.W.3d 509,512 (Tex. App.—Fort Worth 2005, no pet.) (holding that because
surety received actual notice, need of subcontractor to comport with statutory requirement that noticebe sent certified
mail was negated); Tex-Craft Builders, Inc. v. Allied Constructors of Houston, Inc., 465 S.W.2d 786, 792 (Tex. Civ. App.—
Tyler 1971, writ ref’d n.r.e.)(discussing possibility that surety’s actual knowledge and notice of details of claim could be
sufficient to establish substantial compliance with McGregor Act).

Jul 10th, 2015 Construction Law