Striking an Expert Witness in Texas Insurance Indemnity Lawsuit

File: 061624F – From documents transmitted: 04/24/2008
AFFIRMED and Opinion issued April 24, 2008
In The
Court of Appeals
Fifth District of Texas at Dallas
……………………….
No. 05-06-01624-CV
……………………….
WILLIAM BOBBORA AND JAMES THEODORE JONGEBLOED, Appellants
V.
UNITRIN INSURANCE SERVICES F/K/A TRINITY UNIVERSAL
INSURANCE COMPANY, Appellee
…………………………………………………….
On Appeal from the 160th Judicial District Court
Dallas County, Texas
Trial Court Cause No. 04-12458-H
…………………………………………………….
OPINION
Before Justices Moseley, FitzGerald, and Mazzant
Opinion By Justice Moseley
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Unitrin Insurance Services f/k/a Trinity Universal Insurance Company sued William Bobbora and James Theodore
Jongebloed for breach of indemnity agreements, and obtained a jury verdict against Jongebloed. In his first issue, Jongebloed
contends the trial court erred by striking his expert witness. In his second issue, Jongebloed challenges an instruction in the
jury charge. For the reasons set forth herein, we conclude Jongebloed has failed to preserve his first issue for review, and we
resolve Jongebloed’s second issue against him. We affirm the trial court’s judgment.
I. BACKGROUND
Boborra and his wife owned some convenience stores that sold motor vehicle fuel. The stores bought bonds from
Unitrin under which Unitrin, as surety, guaranteed the payment of motor vehicle fuel taxes owed by the stores. Bobbora and
Jongebloed signed indemnity agreements by which they agreed to indemnify Unitrin for “any and all disbursements made by
[Unitrin] in good faith” under those bonds. At issue here are three of these indemnity agreements.
The State claimed that the stores failed to pay their fuel taxes, and the State seized some store accounts and assets. Later,
the State sought payment from Unitrin under the bonds for more than $500,000 for unpaid fuel taxes. Unitrin sought
indemnity from Bobbora and Jongebloed and investigated the amounts owed. The State eventually sued Unitrin. Unitrin
settled the suit regarding some of the stores. The State obtained a judgment regarding other stores, and Unitrin reached a
settlement with the State as to that judgment.
Unitrin sued Bobbora and Jongebloed alleging breach of the indemnity agreements, seeking just over $500,000 for the
amounts it paid the State under the bonds. It also sought expenses in connection with the settlement of the claims under the
bonds, prejudgment interest, and attorney’s fees. Bobbora and Jongebloed initially answered, asserting “defenses and pleas.”
They also asserted counterclaims, one of which was “breach of duty of good faith and fair dealing,” arising from Unitrin’s
“failure to properly evaluate and investigate [the State’s] claim . . . and the amount of credits and offsets due [their
companies] . . . .” Another counterclaim was “bad faith/fraud.”
Bobbora filed for bankruptcy protection, automatically staying the suit. The suit was abated and closed, but
subsequently was reopened and returned to the docket. See Footnote 1 Jongebloed alone filed a second amended answer in
which no counterclaim was asserted. However, Jongebloed asserted the “defenses” of bad faith, lack of good faith, and
breach of the duty of good faith and fair dealing, and he asserted a “credit for payments made.” Before trial, Jongebloed
designated Terry McGee as an expert witness. Unitrin objected and challenged the admissibility of his opinion. After a
hearing, the trial court signed an order striking McGee. See Footnote 2
The case proceeded to a jury trial. The jury found that Unitrin acted in good faith in making payments to the State under
the bonds and that Jongebloed failed to comply with the indemnity agreements. (No liability question was submitted as to
Bobbora.) The jury awarded Unitrin just over $500,000.00 as damages for Jongebloed’s failure to comply with the indemnity
agreements and just over $29,000.00 for investigating and settling claims under the bonds. The trial court rendered judgment
on the jury’s verdict in favor of Unitrin and against Jongebloed in the amount of $529,948.02; the trial court also awarded
pre- and postjudgment interest and attorney’s fees. Appellants’ motion for new trial was denied. This appeal followed. See
Footnote 3
II. EXCLUSION OF EXPERT WITNESS
In his first issue, Jongebloed challenges the trial court’s order striking his expert witness, McGee. Jongebloed argues his
designation of McGee was “procedurally correct” and that McGee was qualified to testify and his testimony was both
relevant and reliable. Unitrin argues, in part, that Jongebloed failed to preserve this error for review by failing to make an
offer of proof of McGee’s testimony.
To preserve error concerning the exclusion of evidence, the complaining party must actually offer the evidence and
secure an adverse ruling from the court. See Fletcher v. Minn. Min. & Mfg. Co., 57 S.W.3d 602, 607 (Tex. App.-Houston [1st
Dist.] 2001, pet. denied). While the reviewing court may be able to discern from the record the nature of the evidence and the
propriety of the trial court’s ruling, without an offer of proof, we can never determine whether exclusion of the evidence was
harmful. See id. at 608 Thus, when evidence is excluded by the trial court, the proponent of the evidence must preserve the
evidence in the record in order to complain of the exclusion on appeal. Id. at 606. See Tex. R. Evid. 103(a), (b). An offer of
proof preserves error for appeal if: (1) it is made before the court, the court reporter, and opposing counsel, outside the
presence of the jury; (2) it is preserved in the reporter’s record; and (3) it is made before the charge is read to the jury.
Fletcher, 57 S.W.3d at 607. When no offer of proof is made before the trial court, the party must introduce the excluded
testimony into the record by a formal bill of exception. See Sw. Country Enters., Inc. v. Lucky Lady Oil Co., 991 S.W.3d 490,
494-95 (Tex. App.-Fort Worth 1999, pet. denied). A formal bill of exception must be presented to the trial court for its
approval, and, if the parties agree to the contents of the bill, the trial court must sign the bill and file it with the trial court
clerk. Bryan v. Watumull, 230 S.W.3d 503, 516 (Tex. App.-Dallas 2007, pet. denied). See Tex. R. App. P. 33.2(c). Failure to
demonstrate the substance of the excluded evidence results in waiver. See Sw. Country Enters., Inc., 991 S.W.2d at 494. See
also Tex. R. App. P. 33.1(a)(1)(B).
As noted above, the record on appeal does not contain a reporter’s record of the hearing on the challenge to McGee. The
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clerk’s record contains an unsworn “Expert Report Prepared by Terry L. McGee” that was attached to Jongebloed’s Second
Supplemental Disclosure Responses. Jongebloed attached this discovery as part of his filed response to Unitrin’s challenge to
McGee. However, filing a document with the trial court is not a sufficient offer of proof. See Malone v. Foster, 956 S.W.2d
573, 577 (Tex. App.-Dallas 1997) (holding deposition on file with trial court not sufficient to make proper bill of exception;
citing McInnes v. Yamaha Motor Corp., U.S.A., 673 S.W.2d 185, 187 (Tex. 1984)), aff’d, 977 S.W.2d 562 (Tex. 1998). There
is nothing in the record showing an offer of proof, a bill of exception, or that the expert report was brought to the trial court’s
attention. Without an offer of proof, Jongebloed has failed to preserve his complaint for review. See Tex. R. Evid. 103; Tex.
R. App. P. 33.1(a)(1)(B); Fletcher, 57 S.W.3d at 607. We need not address Jongebloed’s first issue.
III. JURY CHARGE INSTRUCTION
In his second issue, Jongebloed argues the trial court gave an improper instruction in Question No. 1, specifically, the
italicized language below:
Did [Unitrin] act in good faith in making payments to the State of Texas under the respective bonds?
“Good faith”refers to conduct which is honest in fact, free of improper motive or wilful ignorance of the
facts at hand. It does not require proof of a “reasonable” investigation by the surety.
A.
Applicable Law and Standard of Review
A trial court must submit “such instructions and definitions as shall be proper to enable the jury to render a verdict.”
Tex. R. Civ. P. 277. An instruction is proper if it: (1) assists the jury, (2) accurately states the law, and (3) finds support in the
pleadings and evidence. In re Commitment of Almaguer, 117 S.W.3d 500, 502 (Tex. App.-Beaumont 2003, pet. denied)
(citing Union Pac. R.R. Co. v. Williams, 85 S.W.3d 162, 166 (Tex. 2002)). Rule 277 affords the trial court considerable
discretion in deciding what jury instructions are necessary and proper. Id. (citing Williams, 85 S.W.3d at 166). We review a
trial court’s decision to submit or refuse a particular instruction under an abuse of discretion standard. Shupe v. Lingafelter,
192 S.W.3d 577, 579 (Tex. 2006) (per curiam).
B.
Discussion
At trial, Jongebloed objected as follows to the inclusion of the second sentence:
[W]e have an objection to the definition of good faith that’s being used. We believe the good faith is
defined only by the first sentence that’s there . . . .
The language which is included after that, although it is referenced by the State of Texas, by the Texas
Supreme Court in the Associated Indemnity case [that is, Associated Indemnity Corp. v. CAT Contracting,
Inc., 964 S.W.2d 276, 285 (Tex. 1998)], it seems to be only instructive. It’s not a definition. . . .
The trial court overruled this objection. In his motion for new trial, Jongebloed argued that the second sentence was an
incorrect statement of the law, and, even if correct, it was an improper comment on the weight of the evidence because it was
surplusage.
The instruction in Question No. 1 was taken verbatim from Associated Indemnity Corp. In that case, the supreme court
considered a surety’s duty of good faith to its principal. It concluded that, although no such duty existed at common law, such
a duty did exist as a contract condition in the indemnity agreement before it where the indemnitee was given express
authority to settle claims made in good faith. See id. at 278. The issue before the court was a sufficiency of the evidence
challenge to the trial court’s finding that the surety “acted in bad faith in investigating and settling the claims” with the owner.
Id. at 282. The court analyzed “the appropriate definition of ‘good faith’ (and conversely, ‘bad faith’) under these
circumstances.” Id. at 284. The court considered whether a reasonable investigation was required and rejected that argument,
stating, “[I]n the surety context[,] bad faith requires more than an unreasonable or negligent investigation; it requires wilful
misconduct or improper motive.” Id. Relying on cases concerning settlement of claims by indemnitees in the commercial
paper context, the court said:
We hold that “good faith” in the surety agreement before us refers to conduct which is honest in fact, free
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of improper motive or wilful ignorance of the facts at hand. It does not require proof of a “reasonable”
investigation by the surety. Stating the proposition conversely for purposes of our evidentiary review for this
particular case, “bad faith” means more than merely negligent or unreasonable conduct; it requires proof of an
improper motive or wilful ignorance of the facts.
Id. at 285 (emphasis added).
Here, Bobbora and Jongebloed agreed to indemnify Unitrin for “any and all disbursements made by [Unitrin] in good
faith” under the bonds. The trial court’s submission assisted the jury in understanding the legal meaning of “good faith” in the
surety context and accurately stated the law from Associated Indemnity Corp. See id. Also, it is supported by Jongebloed’s
pleading that Unitrin settled the claims with the State giving rise to the claims at bar “without proper justification and that
such settlements were unreasonable when made” and evidence of Unitrin’s investigation of the amounts owed. Accordingly,
we conclude that, under the facts of this case, submission of the second sentence meets the standard for submitting a proper
instruction or definition. See In re Commitment of Almaguer, 117 S.W.3d at 502.
In reaching this conclusion, we necessarily reject Jongebloed’s argument that the second sentence “directly contradicts
the court’s definition of good faith.” He posits “what is wilful ignorance if it is not the failure to make a reasonable effort to
learn the facts?” The Texas Supreme Court has answered this question adversely to Jongebloed in the surety context, holding
that the indemnitee’s discretion is “limited only by the bounds of fraud.” Assoc. Indem. Corp., 964 S.W.2d at 284 (quoting
Cent. Sur. & Ins. Corp. v. Martin, 224 S.W.2d 773, 776-77 (Tex. Civ. App.-Beaumont 1949, writ ref’d)). As explained more
fully in outlining the standards for good or bad faith in the commercial paper context:
(1) The test is good or bad faith and not diligence or negligence. ([2]) Knowledge of facts merely sufficient to
cause one of ordinary prudence to make inquiry, with failure to make such inquiry, is not evidence of bad
faith. (3) Even gross negligence is not the same thing as bad faith, although it may be evidence tending to
prove bad faith. (4) To constitute evidence of bad faith, the facts known to the taker must be such as
reasonably to form the basis for an inference that in acquiring the instrument with knowledge of such facts he
acted in dishonest disregard of the rights of defendant. (5) Wilful ignorance is the equivalent of bad faith and
bad faith may be shown by a wilful disregard of and refusal to learn the facts when available and at hand.
Citizens Bridge Co. v. Guerra, 152 Tex. 361, 371, 258 S.W.2d 64, 69 (1953) (quoted in part in Associated Indemnity Corp.,
964 S.W.2d at 285).
We also necessarily reject Jongebloed’s argument that the complained-of sentence in the charge is surplusage because
the jury was not asked, in Question No. 1, whether Unitrin conducted a reasonable investigation. The issue being tried was
Unitrin’s good faith, and the instruction as worded informed the jury that whether the surety conducted a reasonable
investigation was not part of that inquiry.
Finally, Jongebloed argues the italicized sentence in the charge is a comment on the weight of the evidence. However, as
noted above, Jongebloed did not object to the charge on this ground before the court read the charge to the jury. Rule of civil
procedure 272 requires a party to object to the court’s charge, either orally or in writing, before the court reads the charge to
the jury. Tex. R. Civ. P. 272; Mitchell v. Bank of Am., N.A., 156 S.W.3d 622, 627 (Tex. App.-Dallas 2004, pet. denied) (citing
State Dep’t of Highways & Pub. Transp. v. Payne, 838 S.W.2d 235, 241 (Tex. 1992)). If the party does not present the
objection to the court before the court reads the charge to the jury, he waives his objection. Tex. R. Civ. P. 274; Mitchell, 156
S.W.3d at 627; Kirkpatrick v. Mem’l Hosp. of Garland, 862 S.W.2d 762, 769 (Tex. App.-Dallas 1993, writ denied). We
conclude Jongebloed has failed to preserve this complaint for review.
We conclude the complained-of sentence meets the standard of a proper instruction or definition. Therefore, we
conclude the trial court did not abuse its discretion in including this sentence in the definition of “good faith.” We resolve
Jongebloed’s second issue against him.
IV. CONCLUSION
Having concluded Jongebloed failed to preserve his first issue for review and resolved Jongebloed’s second issue against
him, we affirm the trial court’s judgment.
JIM MOSELEY
JUSTICE
061624f.p05
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Footnote 1
In an Order Granting Relief from Stay, the bankruptcy judge modified the automatic stay “to authorize and permit [Unitrin]
to proceed to trial in [this case] against Defendant James Theodore Jongebloed.” The bankruptcy judge further ordered “that
if the Trustee elects to pursue the Debtor’s counterclaims against [Unitrin] or abandons the counterclaims or sells the
counterclaims to third party [sic], [Unitrin] shall have the right without further order of this Court to liquidate its claim for
purposes of offset.” The bankruptcy judge also ordered that Unitrin “may take the deposition of [Bobbora] in [this suit] under
the provisions of the Texas Rules of Civil Procedure without further order of this Court.” The case was reopened and
returned to the active docket “so that [Unitrin] can proceed against Defendant James Theodore Jongebloed.”
Footnote 2
No record of this hearing was made.
Footnote 3
Although the style of the case continued to include Bobbora, the only defendant specifically mentioned in subsequent
pleadings was Jongebloed. The judgment states that Jongebloed appeared for trial; it does not so state as to Bobbora, and
indeed does not mention Bobbora. The judgment recites that “it finally disposes of all claims and all parties and is
appealable” and “[a]ll relief not expressly granted herein is denied.” We conclude from the record Bobbora was not part of
the case that was tried and that the judgment is final. See Moritz v. Preiss, 121 S.W.3d 715, 719 (Tex. 2003) (applying
presumption of finality to judgments following trial on merits to judgment not naming all defendants). Both Bobbora and
Jongebloed are listed on the notice of appeal and in appellants’ brief as appellants. Therefore, we retain the style of the case,
as they do, but our opinion addresses the complaints on appeal only as to Jongebloed because no error would result in harm
to Bobbora.
File Date[04/24/2008]
File Name[061624F]
File Locator[04/24/2008-061624F]
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