Arthur's Garage v. Racal-Chubb Sec. Sys.

• Citation: 997 S.W.2d 803
• Decision Date: 15 July 1999
• Docket Number: RACAL-CHUBB,No. 05-96-00556-CV,05-96-00556-CV
• Parties: (Tex.App.-Dallas 1999) ARTHUR'S GARAGE, INC. A/K/A ARTHUR'S MERCEDES BENZ, Appellant v.SECURITY SYSTEMS, INC., RACAL CORPORATION, and CHUBB SECURITY SYSTEMS, INC., Appellees
• Court: Texas Court of Appeals

Page 803

997 S.W.2d 803 (Tex.App.-Dallas 1999)

ARTHUR'S GARAGE, INC. A/K/A ARTHUR'S MERCEDES BENZ, Appellant v. RACAL-CHUBB SECURITY SYSTEMS, INC., RACAL CORPORATION, and CHUBB SECURITY SYSTEMS, INC., Appellees

No. 05-96-00556-CV

In The Court of Appeals Fifth District of Texas at Dallas

July 15, 1999

On Appeal from the 14th Judicial District Court Dallas County, Texas, Trial Court Cause No. 93-3835-A

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Before Justices Ovard, Whittington, and Moseley

O P I N I O N

Opinion By Justice Moseley

Arthur's Garage, Inc. a/k/a Arthur's Mercedes Benz (Arthur's Garage) sued Racal-Chubb Security Systems, Inc., Racal Corporation, and Chubb Security Systems, Inc., (Racal-Chubb) for damages it sustained when a smoke detector failed to operate during a fire on the garage premises. The trial court granted summary judgment in favor of Racal-Chubb on the ground that Racal-Chubb's liability was contractually limited to $350. The trial court also granted summary judgment in favor of Racal-Chubb on its claim for indemnity from Arthur's Garage against third-party claims. The trial court held a bench trial on the amount of damages arising from the failure to indemnify. On appeal, Arthur's Garage contends the trial court erred in granting Racal-Chubb's motions for summary judgment and in awarding "expenses" beyond the award of attorney's fees and court costs. We affirm the trial court's judgment in part and reverse and remand in part.

BACKGROUND

In August 1983, Arthur's Garage, a Mercedes-Benz repair business, contracted with Andrews Alarm Systems, Inc., to transfer and reinstall existing burglar alarm equipment from its old location to a new location. On August 25, 1983, Arthur's Garage amended the contract to include installation of a fire alarm system, which included smoke detectors. Arthur's Garage also contracted with Andrews for monitoring and servicing the entire alarm system. Arthur's Garage continued its contract with Andrews to service and maintain the alarm system until Andrews was acquired by Racal-Chubb in 1989 in a stock-purchase acquisition. After the acquisition, Racal-Chubb continued servicing existing Andrews contracts, including the contracts with Arthur's Garage. According to the summary judgment evidence, Arthur's Garage paid Racal-Chubb fifty-one dollars per month to monitor the alarm system.

On April 13, 1991, a fire occurred at Arthur's Garage. The fire did not set off the smoke detector; however, as the fire grew, it set off the burglar alarm. Arthur's Garage sustained damages of $458,057.28 to inventory, furniture, fixtures, equipment, and miscellaneous items.

Investigators later discovered that the smoke detector was improperly wired. Arthur's Garage sued Racal-Chubb alleging breach of contract, negligence, breach of implied and express warranties, and violations of the Texas Deceptive Trade Practices-Consumer Protection Act (DTPA). Under its DTPA claims, Arthur's Garage alleged Racal-Chubb made material misrepresentations, breached express and implied warranties, and engaged in an unconscionable course of conduct. Frank LaBarba, the landlord of the burned premises, also joined in the suit against Racal-Chubb. (Arthur's Garage and LaBarba also sued Andrews but later dropped it from the suit.)

Racal-Chubb counterclaimed against Arthur's Garage asserting it was contractually obligated to indemnify Racal-Chubb against LaBarba's claims. After LaBarba voluntarily nonsuited his claims, Racal-Chubb amended its counterclaim and alleged, based on the indemnity provision in the contract, that Arthur's Garage was liable for Racal-Chubb's attorney's fees in defending the LaBarba lawsuit and prosecuting its counterclaim for indemnity.

Racal-Chubb moved for summary judgment against Arthur's Garage on all asserted causes of action contending that (1) Arthur's Garage's damages were contractually limited to $350 by a clause in the installation contracts¹ entitled "Liquidated Damages and Indemnification," and (2) Arthur's Garage's claims were barred by the doctrine of successor liability. Racal-Chubb alternatively moved for partial summary judgment on two specific DTPA claims, asserting: (1) Texas law does not recognize an implied warranty to install and/or maintain a fire alarm system in a good and workmanlike manner; (2) Racal-Chubb could not have breached an implied warranty that repairs or modifications of existing tangible goods be performed in a good and workmanlike manner because it never performed any repairs or inspection of the smoke detector; and (3) Arthur's Garage was not aware of any misrepresentations made by Racal-Chubb.

The trial court granted Racal-Chubb's motion for summary judgment on Arthur's Garage's liability claims and awarded Arthur's Garage $350 in satisfaction of all claims against Racal-Chubb. In its order, the trial court specified it was granting summary judgment on the limitation of liability clause in the contract and held that the clause was not a penalty and was therefore enforceable against Arthur's Garage.

Subsequently, Racal-Chubb moved for summary judgment on its remaining counterclaim seeking indemnity for its attorney's fees and expenses incurred in defending against LaBarba's claim. The trial court granted Racal-Chubb's summary judgment motion on liability only and held a bench trial on the amount of attorney's fees incurred. Following trial, the court awarded Racal-Chubb $8,470 in attorney's fees and $952.57 in expenses. This appeal followed.

CONTENTIONS ON APPEAL

Arthur's Garage contends the trial court erred in granting Racal-Chubb's first motion for summary judgment because: (1) the liquidated damages clause is unenforceable against Arthur's Garage's DTPA claims; (2) Racal-Chubb failed to prove all the elements of its liquidated damages affirmative defense; and (3) the liquidated damages clause is an unenforceable penalty. Arthur's Garage also contends the trial court erred in granting Racal-Chubb's second motion for summary judgment because the indemnity provision does not meet the "express negligence" test or the "conspicuousness" test. Finally, Arthur's Garage contends the trial court erred in awarding "expenses" of $952.57 because expenses are not recoverable as a matter of law.

Racal-Chubb raises two cross-points on appeal. First, Racal-Chubb asserts the trial court erred in denying its motion for summary judgment on the DTPA implied warranty claim because Texas law does not recognize an implied warranty to install and/or maintain a fire alarm system in a good and workmanlike manner. Racal-Chubb also asserts the undisputed summary judgment evidence shows it never performed any repairs or modifications on the alarm system; therefore, it could not have breached any existing implied warranties as a matter of law. Second, Racal-Chubb argues the trial court erred in denying its motion for summary judgment on Arthur's Garage's DTPA laundry list claims because Arthur's Garage did not establish a causal link between the alleged misrepresentations and its damages.

STANDARD OF REVIEW

In reviewing a summary judgment record, this Court applies the following standards:

1. The movant for summary judgment has the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law.

2. In deciding whether there is a disputed material fact issue precluding summary judgment, evidence favorable to the nonmovant will be taken as true.

3. Every reasonable inference must be indulged in favor of the nonmovant and any doubts resolved in its favor.²

For the defendant, as movant, to prevail on a summary judgment, it must either disprove at least one element of the plaintiff's theory of recovery or plead and conclusively establish each essential element of an affirmative defense, thereby rebutting the plaintiff's cause of action.³ We do not consider evidence that favors the movant's position unless it is uncontroverted.⁴

LIABILITY ISSUES

A. Limitation of Liability

In its first point of error, Arthur's Garage contends the trial court erred in granting summary judgment limiting Racal-Chubb's liability to $350 on all asserted causes of action. Arthur's Garage specifically contends that: (1) the "liquidated damages" clause is not enforceable against its DTPA claims; (2) Racal-Chubb failed to prove as a matter of law all of the elements of its "liquidated damages" affirmative defense; and (3) the liquidated damages clause constitutes an unenforceable penalty. Racal-Chubb argues that, despite its name, the "liquidated damages" clause is really a limitation of liability and therefore a penalty analysis does not apply. Racal-Chubb also asserts the limitation of liability clause is enforceable against the DTPA claims.

The alarm installation contracts between Arthur's Garage and Andrews (assumed by Racal-Chubb) contain the following provision under the title "Liquidated Damages and Indemnification":

It is expressly understood and agreed that seller is not an insurer and that insurance, if any, covering personal injury and property loss or damage on purchaser's premises shall be obtained by the purchaser; that the payments provided for herein are based solely on the value of the system and/or service as set forth herein, and are unrelated to the value of the purchaser's property or the property of others located on purchaser's premises; that seller makes no guarantee or warranty including any implied warranty of merchantability or fitness that the system or service supplied will avert or prevent occurrences or the consequences therefrom which the system or service is intended to detect or avert.

Purchaser acknowledges that it is impractical and extremely difficult to fix the actual damages, if any, which may proximately result from a failure to perform any of the obligations herein or a failure of the service and/or system to operate...